Did Warren Buffett Sell These Shares Too Soon?
Even though Buffett is selling, here’s why I’m sticking with this name.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
Does Warren Buffett know something the rest of us don’t know?
Earlier this year, Buffett closed his entire position in Nu Holdings NU, the parent company of Nubank, a Brazilian digital bank. Nu Holdings boasts over 118 million customers, located mostly in Brazil, Mexico, and Colombia.
If Buffett is selling this stock, should investors also sell? The answer might not be as obvious as it seems.
I don’t believe Buffett’s exit from Nu Holdings is necessarily related to anything specific to the company. Instead, it’s part of a pattern of divestiture from financial services stocks and into cash. Buffett’s Berkshire Hathaway BRK.A BRK.B holding company has been a net seller of stocks for 10 consecutive quarters, and now possesses cash and equivalents of about $350 billion.
Nu Holdings’ Bullish Chart
Nu Holdings has gained 47% since the April 7 open. On Tuesday, the stock closed at $13.54, gaining 3.6%. Last year, I recommended Nu Holdings at $14.34, so I’m down by about 6% since entering the trade on September 5.
However, that might be about to change. Over the past two months, Nu Holdings has formed a cup-and-handle pattern (shaded yellow). This pattern suggests a new price target of $16, for a potential gain of about 18% from Tuesday’s closing price.
That move would also place the stock near its all-time high of $16.15 (black dotted line), set in November of last year. Nu Holdings is currently trading above its 50-day (blue) and 200-day (red) moving averages.
Brazil’s Rough Ride
Brazilian stocks have had a rough ride of late. Brazil’s Bovespa Index has declined for seven consecutive sessions, after President Trump declared a 50% tariff on Brazilian imports. The Bovespa has had multiple closes beneath its 50-day moving average (blue) for the first time since April.
Coffee Is Percolating
Wholesale coffee prices have jumped by about 7% since that tariff declaration, but overall, coffee has fallen dramatically. Since peaking in late April (green arrow), coffee prices have declined by about 35%. About one third of the coffee imported into the U.S. comes from Brazil.
Bottom Line
Nu Holdings is similar in some ways to U.S.-based digital financial services platform SoFi Technologies SOFI, a stock that has gained 47% year-to-date. With little presence outside of Latin America, Nu Holdings is unlikely to be impacted by U.S. tariffs.
At the time of publication, Ponsi was long NU and SOFI.
