Nobody knows exactly what the stock market will do in 2025. But you may be able to stack the odds in your favor by adding the two fintech companies below to your portfolio. Investment sage Warren Buffett owns both of them -- and when it comes to maximizing upside potential, these stocks are some of the best you can consider now.
But there are a few risks to be aware of before jumping aboard. So let's dive in and take a closer look at both.
Never sell this fintech stock
The best investments are the ones you can buy and hold for decades at a time. Nu Holdings (NU -0.29%) is one of those investments. There's a strong chance that the company will continue to grow by leaps and bounds for the rest of your lifetime. That's because its business model is structured to take advantage of a long-term opportunity in an area of the world where it faces little competition from other fintech providers.
In a nutshell, Nu is a bank. But it's not just any bank. Unlike nearly all of its competitors, Nu operates solely through a smartphone, delivering banking, checking, credit card, debit card, insurance, crypto trading, and a whole host of other financial services. Don't other banks do that same thing? Not in the geography where Nu operates: Latin America.
Nu was founded by David Velez, a former employee of Sequoia Capital, one of the most successful venture capital firms in history. When scouting for investment opportunities in the Latin America region, he discovered that the financial services industry was controlled by a handful of stodgy competitors. These banks operated a huge network of costly physical branches, passing on their excess costs to consumers.
In response, Velez founded Nu with the goal of offering its services directly through smartphones. This cut out a lot of costs, and those savings were passed onto its customers.
There was clearly pent up demand for a company like Nu. Over the past decade, it has gone from essentially zero customers to more than 100 million. With more than 650 million residents, Latin America provides a long runway for growth. Competition will heat up over time, and newer markets may not be as lucrative as Brazil, Mexico, and Colombia -- Nu's first three markets. But this is a company that has a recipe for growth, with a proven record of doing so.
Need more proof that Nu is built for the long haul? Warren Buffett has owned more than $1 billion in shares since its initial public offering (IPO). And despite the stock's heavy volatility, he has yet to sell a single share. Shares look pricey at 37 times earnings. But this growth story is just getting started.
Warren Buffett also loves this iconic stock
Speaking of Warren Buffett, the Oracle of Omaha has another fintech stock in his portfolio that all investors should be taking a closer look at now. This company is one of the most iconic American businesses of all time: Visa (V -0.70%).
Visa is the perfect example of a business that benefits from network effects. The more people who use Visa cards, the more valuable the card becomes to merchants. And the more merchants who accept Visa, the more valuable the card becomes for consumers. It's a virtuous cycle that has propelled Visa to a dominant market position.
According to data compiled by Statista, the company has 61% market share in the U.S. Just three companies control the remainder of the market -- one of the most concentrated markets you'll find at this scale.
Because Visa's business model largely runs off software, it has become incredibly profitable as it has scaled. Profit margins are above 50%, while returns on equity are also around 50%. The valuation, however, is quite cheap at 35 times earnings -- only a small premium to the S&P 500's valuation.
Visa isn't without its challenges. The Department of Justice recently opened a case against the company, charging it with anticompetitive practices. But large credit and debit card operators have dealt with similar legal challenges in the past. None of these challenges have derailed them from their dominant market positions.
Does Visa have as much upside potential as Nu? With a $600 billion market cap, likely not. But this is still a wonderful business to own for 2025 and beyond. And besides, betting alongside Buffett is usually a wise move.
