After a two-year bull market run, many US-listed shares now look overvalued. Nonetheless, there’s one development inventory that appears too good to go up, regardless of it rising 80% 12 months thus far.

Right here’s why I’m including it to my ISA.

A fintech big

The inventory in query is Nu Holdings (NYSE: NU). This can be a Brazilian fintech that operates Latin America’s largest digital financial institution (Nubank). The agency offers varied monetary providers by way of its mobile-first platform, together with no-fee banking, bank cards, loans, insurance coverage, and extra.

Extremely, Nu now has 105m clients, regardless of solely working in three nations (Brazil, Colombia, and Mexico). Whereas up 80% 12 months thus far, the inventory, at $15, isn’t that a lot above the price it went public at in late 2021.

What I search for

Like many traders, I’ve a guidelines of traits I search for in a development firm earlier than investing a big quantity. Consider them as inexperienced flags or a set of necessities.

There are competing investing frameworks, and none function a magic formulation for locating successful shares. However the six traits of rule-breaker shares set out by David Gardner, co-founder of The Motley Idiot, has helped me rather a lot.

Right here they’re:

• Prime canine and first mover in an essential, rising trade
• Sustainable aggressive benefit
• Sturdy previous share price appreciation
• Good administration and sensible backing
• Sturdy client attraction (branding)
• The inventory is taken into account ‘overvalued’ by the monetary media

Shopping for shares with these traits then holding them over the long run can produce fantastic outcomes. Well-known rule-breaker shares embody Amazon, Netflix, Nvidia, and Tesla.

Aggressive market

Now, I’m not saying Nu Holdings will emulate the efficiency of these shares (although I hope it does). I word the agency’s market-cap is $71bn so it’s no minnow, and there are dangers.

One is that the branchless financial institution faces stiff competitors from the likes of MercadoLibre, PagSeguro, and Revolut. Whether or not Nubank’s aggressive benefit is really sustainable isn’t apparent to me but.

Additionally, because it expands its credit score portfolio throughout Latin America, it might face an increase in non-performing loans. That might hit earnings.

Ticking bins

Nonetheless, the corporate possesses almost the entire traits listed above. It’s Latin America’s main digital financial institution (prime canine), and is using a smartphone/fintech increase by providing monetary merchandise to the tens of hundreds of thousands of underbanked and unbanked individuals throughout the area.

Income elevated from $1.7bn in 2021 to $8bn final 12 months! And it’s forecast to surge a lot greater.

The inventory is up 269% since January 2023 (sturdy price appreciation), and has been held by billionaire investor Warren Buffett’s Berkshire Hathaway (sensible backing) since 2021.

Nu’s co-founder is David Vélez, a former associate at enterprise capital agency Sequoia Capital. He has a deep understanding of Latin America’s distinctive monetary challenges and is dedicated to addressing them (good administration).

In the meantime, Nubank has constructed a robust model and buyer loyalty in a market with traditionally poor banking experiences. The exponential development in clients speaks for itself.

Lastly, with a price-to-sales ratio of 10.1, the inventory could seem overvalued. The ahead price-to-earnings a number of is 25. However given the unimaginable development fee, I reckon the inventory will finish up seeming low-cost at $15.

Nu Holdings ticks all my bins, so I’m shopping for some shares in November.