Fintech’s Up-and-Comers? 3 Latin American Stocks to Buy Now.
A February article from Bloomberg about Stark Bank, the Jeff Bezos-backed startup, got me thinking about Latin American fintech stocks. There are plenty of options in this arena.
According to Bloomberg, Stark handled $31 billion in payments in 2023, three times more than a year earlier. At the same time, it doubled its net income to $14.4 million.
“While a lot of tech companies are trying to stop losing money, we’re posting high levels of profitability,” stated Stark Bank founder Rafael Stark. “There’s no need to keep raising money and diluting my stake. It’s better to grow and create much more value further down the road.”
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The founder expects to go public sometime around 2029. In the meantime, here are three other Latin American fintech stocks you can buy now.
Nu Holdings (NU)
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If São Paulo-based Nu Holdings (NYSE:NU) were an S&P 500 company, it would be the 27th largest financial stock by market capitalization out of 72 companies. Founded in 2013, it’s expected to have more than 90 million customers by 2023. That’s not bad for a decade’s work. One of the products it offers is Nucripto, which enables the bank’s customers to buy and sell more than a dozen cryptocurrencies.
As the Motley Fool recently pointed out, Warren Buffett may not like Bitcoin (BTC-USD), but he still benefits indirectly through Berkshire Hathaway’s (NYSE:BRK-A, NYSE:BRK-B) nearly $1 billion investment in Nu Holdings, a Brazilian digital bank.
Nu Holdings’ highlights for Q4 2023 include adding 19.3 million customers year-over-year (YOY), increasing adjusted net income to $360 million, and bringing in revenues of $2.4 billion. Revenue was considerably higher than in 2022, increasing 57% YOY. In Q4 2023, its net interest income (NII) was $1.35 billion, double its NII in Q4 2022. NII increased sequentially in all four quarters in 2023.
Of the 17 analysts covering its stock, 11 rated it a Buy, with a $12 target price, about 7% higher than where it’s currently trading. As far as Latin American fintech stocks are concerned, NU has the numbers and the internal support to be a smart potential play for investors.
PagSeguro Digital (PAGS)
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PagSeguro Digital (NYSE:PAGS) is one of the much smaller Latin American fintech stocks, with a market cap of $4.5 billion. The company operates a payments platform for both merchants and consumers. It’s also a bank with customer deposits that it lends out for secured and unsecured credit products such as payroll loans, working capital loans and credit cards. The year ahead looks promising for PAGS.
Highlights of its 2023 results include a net income of 1.8 billion Brazilian real (USD $363 million), the highest in its history, from revenue of 15.9 billion Brazilian real (USD $3.2 billion). Net income is up 11% YOY and revenue is on par with where it was this time last year.
PagSaguro, the company’s payments business, processed 394 billion Brazilian real (USD $79.5 billion) in total payment volume (TPV) in 2023, up 11% over 2022. But the company is moving beyond micro-merchants, and in Q4 2023, its TPV for small and medium-sized businesses increased 31% YOY while TPV from large accounts grew 11% YOY. Micro accounts were up 14% YOY. The average TPV per merchant grew 32% YOY to 17,200 Brazilian real (USD $3,469).
PagBank, the company’s neobank, hit 31.1 million customers in the fourth quarter, up 12% from Q4 2022. The company’s active clients were 16.7 million. Its total deposits hit 27.6 billion Brazilian real (USD $5.57 billion), up 33% YOY.
Its credit portfolio remains a small part of its business. In Q4 2023, it was 2.53 billion Brazilian real (USD $510 million), up from Q3 2023 but down slightly from Q4 2022. Of this, 66% is secured.
Vinci Partners Investments (VINP)
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Vinci Partners Investments (NASDAQ:VINP) isn’t a fintech company in the traditional sense, but I couldn’t help but include the small-cap alternative asset manager based in Rio de Janeiro. Last October, it announced a strategic partnership with Ares Management (NYSE:ARES), one of the largest alternative asset managers in the world. The companies are collaborating to grow the private capital markets in Latin America. Ares will invest USD $100 million in Vinci’s new convertible preferred shares.
“Latin America is in the very early innings of the adoption of private market strategies, and we believe there are market forces that will accelerate the growth of these asset classes over the coming years,” stated Ares CEO Michael Arougheti. Latin America is long overdue to receive the attention it deserves from the world’s largest investors, and this partnership recognizes this reality.
As for Vinci’s business, its fee-related earnings were 433.2 million Brazilian real (USD $87.4 million), 10% higher than in 2022. Its performance fees were 10.6 million Brazilian real (USD $2.1 million), 32% higher YOY. Its segment distributable earnings were 238.9 million Brazilian real (USD $48.1 million), 7.6% higher than a year ago. At the end of December, its assets under management were 32.96 billion Brazilian real (USD $6.65 billion). Approximately 90% of these assets were earned fees, up 18% from 2022.
The partnership between Ares Management and Vinci Partners is a win-win and could lead to VINP becoming one of the next top Latin American fintech stocks.
On the date of publication, Will Ashworth did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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