Over the past decade, many fintech stocks have performed extraordinarily well. These investments combine the enormous financial securities markets with the rapid growth rates of technology stocks.

The only problem is that it can be difficult to determine when to buy fintech stocks. Their valuations are often outrageous and require investors to pay a high price for growth.

Luckily, two of the best fintech stocks on the market are now on sale. If you’re looking for fintech deals with great benefits, these companies are for you.

Follow Warren Buffett by investing in this growth machine

Warren Buffett is one of the greatest investors of all time, and he’s worth paying attention to what is he buying. Buffett’s holding company Berkshire Hathawayholds a roughly $1.3 billion position in a little-known fintech stock called Nu Holdings (NYSE:NU).

Despite a market capitalization of $56 billion, most US investors haven’t heard of Nu. That’s because it operates entirely out of the United States. Its main focus is Latin America, where it is present in Brazil, Colombia and Mexico.

What kind of fintech business is Nu? On the surface it is a traditional bank. Users can open a checking or savings account through Nu or even purchase insurance and brokerage products.

The trick is that all these services are available via smartphone. This is a big problem in Latin America, where a few powerful banks have controlled the market for decades. These incumbents charged high prices for simple financial products both because of their market power and because they operated large and expensive infrastructures, such as physical branches.

With a digital-first approach, Nu can offer its services to a huge number of people at a lower cost. Plus, it can launch new services much faster than its competitors. All its customers have to do is click a few buttons.

Nu already has an incredible track record of success. In the last ten years we have gone from practically zero customers to almost 100 million. Sales skyrocketed, causing the company’s price-to-sales ratio to drop dramatically.

At recent prices, shares are trading around 9 times sales. That’s expensive for a bank stock. But Nu is actually a fintech stock. It’s the perfect example of how fintech stocks can combine the reach of the financial sector with the rapid growth of technology companies.

This year, analysts expect the company to grow sales by an astonishing 43%. In 2025, sales are expected to increase by 22%. With a proven business model and huge growth runway, it’s no surprise that Berkshire and Buffett are long-term stock holders.

The story continues

NU PS report graph

PS NU report data of YCharts

Bet on Bitcoin with these cryptocurrency stocks

Do you want to bet on the increase of Bitcoin? Of course, you can buy Bitcoin directly. But there are other ways to get involved. Investing in To block (NYSE: SQ) is a great opportunity. Its current rating just demands attention.

As the name suggests, Block focuses on the growth of blockchain technologies like Bitcoin. Its Square payment platform, for example, allows merchants to accept cryptocurrencies as a form of payment. Its peer-to-peer lending service Cash App, meanwhile, already has millions of users buying, selling and transacting cryptocurrencies. It also operates TBD and Spiral, two business segments focused specifically on the long-term adoption of Bitcoin.

Finally, Block acquired a controlling stake in music streaming service Tidal in 2021. While obviously not related to blockchain, the creator sector is one of the biggest opportunities to implement blockchain-enabled micropayments. All this to say, Block is all in on Bitcoin and blockchain in general.

SQ PS ratio graph

PSSQ Report data of YCharts

Just like Nu, Block has a strong history of revenue growth. But between the end of 2021 and the beginning of 2022, revenue growth slowed briefly. The company also went from generating profits to reporting quarterly losses. The market punished the stock for these developments, bringing the price/sales ratio from over 10 to just 1.7. Also during that time period, sales of Bitcoin to customers began appearing on Block’s income statement as revenue. Bitcoin’s revenue explosion is a great thing for the company’s long-term future, but this shift in mix toward lower-margin sales has also contributed to the market’s decision to price the stock lower based on the selling price.

Founder Jack Dorsey was brought back as CEO to right the ship in 2023, and in the latest quarter, Block returned to profitability. Growth rates have also seen some recovery, but the company’s valuation remains low.

Block is certainly exposed to some attractive sectors that should maintain high growth for years, if not decades. It also has a portfolio of quality companies that, if managed well, produce profits. The market, however, has not yet understood the success of the company’s turnaround.

Don’t be surprised to see Block stock perform very well in 2024 if it can rack up consecutive quarters of growth and profitability. If the market doesn’t reward this success, it only adds further long-term upside to the stock.

Should You Invest $1,000 in Nu Holdings Right Now?

Before you buy Nu Holdings stock, consider this:

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Ryan Vanzo has positions in Bitcoin. The Motley Fool has positions and recommends Berkshire Hathaway, Bitcoin and Block. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.

These two Fintech stocks are set to rise in 2024 and beyond was originally published by The Motley Fool

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