Zacks.com featured highlights include Nu Holdings, Amazon.com and Microsoft

Zacks highlights three momentum picks under a Driehaus 'buy high, sell higher' screen: Nu Holdings (NU), Amazon (AMZN) and Microsoft (MSFT). All three carry Zacks Rank #2 and Momentum Score B, with trailing four-quarter average earnings surprises of 5.3% (NU), 22.5% (AMZN) and 8.5% (MSFT); the screen emphasizes 50‑day moving average positivity and relative strength as core entry criteria. The note flags Nu as a Latin American digital-banking disruptor and classifies Amazon and Microsoft as Magnificent 7 momentum leaders, positioning them as tactical upside candidates for momentum-focused allocations.

Analysis

Market structure: Momentum in Nu (NU) and mega-caps AMZN/MSFT concentrates flows into fintech and cloud/ads winners while pressuring traditional banks and small-cap retailers. Expect incremental market-share shifts: digital-only lenders can take 200–500 bps share in key Latino markets over 12–24 months if funding and credit costs stay stable. Cross-asset: heavier tech flows likely lift risk assets and steepen the curve modestly (10–25bp) as equity risk premia compress; options skew will remain elevated around earnings and macro prints.

Risk assessment: Key tail-risks are regulatory (consumer protection/tax in LatAm for NU; antitrust/ad policy for AMZN/MSFT), sharp FX moves (BRL/MXN depreciation >10% in 3 months), or a macro slowdown that cuts ad spend by 20%+ in a quarter. Short term (days–weeks) momentum can persist, but 3–12 month outcomes hinge on Q1 earnings/inflation prints and regional loan-loss trends. Hidden dependency: NU’s growth is credit-fueled — rising funding costs or NPLs materially reduce FCF conversion.

Trade implications: Direct plays — size NU as a tactical high-beta position (small weight, FX-hedged), and hold AMZN/MSFT as core longs for 12–36 months to capture ad/cloud secular tailwinds. Use call spreads to express upside into earnings (6–9 month) and buy 3–6 month protective puts if holdings exceed 2–3% portfolio weight. Rotate modestly into Tech/FinTech, trimming cyclical retail exposure; target entry on pullbacks to the 50-day MA or a 5–10% drop.

Contrarian angles: Consensus downplays concentrated crowding in mega-caps — a 10–15% drawdown in AMZN/MSFT could cascade via deleveraging of momentum funds. LatAm political/regulatory risk is underpriced; NU may trade like a high-yield credit if funding tightens. Historical parallel: 2018–19 growth-to-quality rotations show momentum leadership can reverse quickly when macro surprises arrive. Maintain conviction but size defensively.

Key Decisions for Investors

• Establish a 1.5–2.0% long position in Nu Holdings (NU) as a tactical momentum high-beta play, hedged with a short BRL forward or BRL put that offsets ≥50% of FX exposure; enter on a pullback to the 50-day MA or any drop of ≥10% within 6 weeks, set a stop-loss at -20% and plan to take profits at +25% within 6–12 months.
• Add a 2–4% core position in Amazon (AMZN) for a 12–24 month horizon; express with a 6–9 month bullish call spread (buy ~5% OTM, sell ~15% OTM) into next two earnings to cap premium, target 15–30% upside and trim 50% of position at +20% gains.
• Increase Microsoft (MSFT) exposure by +1–2% as a defensive cloud growth hold for 12–36 months; if position size exceeds 2% of portfolio, buy 3–6 month puts ~3% OTM to limit tail downside, and consider selling covered calls at +10% to monetize rapid moves.
• Implement a relative-value pair: long NU (1.5%) vs short ITUB or a Brazil incumbent bank (0.75%) to play challenger bank share gains vs incumbents; monitor quarterly NPLs and BRL moves (cut pair if BRL weakens >10% or NU NPLs rise >150bp QoQ).