In this article, we discuss the 10 best fintech stocks to buy now.
There is little doubt that the COVID-19 pandemic accelerated the wider adoption of fintech around the world. However, figures from the Global Fintech Adoption Index reveal that fintech adoptions had already been doubling every two years on average before the advent of the coronavirus crisis. Between 2015 and 2019, the fintech industry grew by 48%. According to a report by Research and Markets, the global fintech market will reach $190 billion in size by 2026, growing at a compound annual growth rate of over 13%.
Digital payments and software firms are expected to lead this growth. However, it has become abundantly clear that cryptocurrencies are also likely to play a huge role in the market in the coming years. Investors eager to take advantage of this boom in the fintech universe should check out some top firms in the industry. Some of the best fintech stocks to buy now include PayPal Holdings, Inc. (NASDAQ:PYPL), Sea Limited (NYSE:SE), and Square, Inc. (NYSE:SQ), among others discussed in detail below.
Photo by Clay Banks on Unsplash
Our Methodology
Here is our list of the 10 best fintech stocks to buy now. These were picked based on their basic business fundamentals, hedge fund sentiment, and analyst ratings.
The hedge sentiment around each stock was gauged using the data of 873 hedge funds tracked by Insider Monkey.
Why pay attention to hedge fund holdings? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Fintech Stocks To Buy Now
10. Affirm Holdings, Inc. (NASDAQ:AFRM)
Number of Hedge Fund Holders: 25
Affirm Holdings, Inc. (NASDAQ:AFRM) has recently struck two partnerships that will help it expand business and improve brand recognition. In late October, the company announced that it would be partnering with American Airlines to allow customers of the latter a new, more flexible way of paying for airline services using the platform of the former. On November 1, the firm revealed a partnership with ACI Worldwide that integrated the platform of Affirm into the software ecosystem of ACI.
Affirm Holdings, Inc. (NASDAQ:AFRM) stock has soared on the back of these announcements. Morgan Stanley, Mizuho, and Barclays are all bullish on the stock in the long term with Overweight, Buy, and Overweight ratings, respectively.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Thrive Capital is a leading shareholder in Affirm Holdings, Inc. (NASDAQ:AFRM) with 3.9 million shares worth more than $265 million.
Just like PayPal Holdings, Inc. (NASDAQ:PYPL), Sea Limited (NYSE:SE), and Square, Inc. (NYSE:SQ), Affirm Holdings, Inc. (NASDAQ:AFRM) is one of the top fintech stocks to buy now.
9. Futu Holdings Limited (NASDAQ:FUTU)
Number of Hedge Fund Holders: 31
Futu Holdings Limited (NASDAQ:FUTU) owns and runs an online brokerage and wealth management platform. Although the stock has pulled back in recent weeks amid a Chinese government crackdown against dual listed firms, the fundamentals of the company remain strong as ever. On August 31, the company posted earnings for the second quarter, reporting a revenue of $203 million over the period, up more than 129% year-on-year.
A new data privacy law in China, which came into effect at the beginning of this month, has put fintech stocks like Futu Holdings Limited (NASDAQ:FUTU) under pressure from regulators, a report in a leading Chinese newspaper revealed in October.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in Futu Holdings Limited (NASDAQ:FUTU) with 3.4 million shares worth more than $621 million.
8. Opendoor Technologies Inc. (NASDAQ:OPEN)
Number of Hedge Fund Holders: 35
Opendoor Technologies Inc. (NASDAQ:OPEN) features on our list of the top fintech stocks because the firm has built a solid business around a digital platform for residential real estate trades. Filings from early October show that the company has accumulated total debt facilities of close to $9 billion, enough to buy 40,000 homes across the US at an average price of $350,000 per home. The stock is also outperforming competitors like Zillow Group by over 20 percentage points on a year-on-year basis.
Citi analyst Nicholas Jones recently resumed coverage of Opendoor Technologies Inc. (NASDAQ:OPEN) stock with a Buy rating and a price target of $40, noting that the firm could grow in a real estate market that favored home sellers.
At the end of the second quarter of 2021, 35 hedge funds in the database of Insider Monkey held stakes worth $765 million in Opendoor Technologies Inc. (NASDAQ:OPEN), up from 33 in the preceding quarter worth $1 billion.
In its Q1 2021 investor letter, Baron Fund, an asset management firm, highlighted a few stocks and Opendoor Technologies Inc. (NASDAQ:OPEN) was one of them. Here is what the fund said:
“The sales of Opendoor Technologies Inc. was a trim for position-sizing purposes after orders-of-magnitude type stock returns over the last year for these investments. We continue to believe the company is a disruptive innovator with open-ended long-term opportunities.”
7. SoFi Technologies, Inc. (NASDAQ:SOFI)
Number of Hedge Fund Holders: 39
Morgan Stanley analyst Betsy Graseck recently initiated coverage of SoFi Technologies, Inc. (NASDAQ:SOFI) stock with an Overweight rating and a price target of $25, underlining the “powerful revenue growth story” of the company. The stock has soared in the past few days as reports suggest that the company will soon obtain a bank charter for the business. SoFi had acquired Golden Pacific Bancorp for the purpose earlier this year.
SoFi Technologies, Inc. (NASDAQ:SOFI) recently announced that it had partnered with Pagaya Technologies, another fintech firm, to improve the financial services it offers to users. Under the partnership, SoFi Technologies will add artificial intelligence to its platform.
At the end of the second quarter of 2021, 39 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in SoFi Technologies, Inc. (NASDAQ:SOFI).
In its Q2 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and SoFi Technologies, Inc. (NASDAQ: SOFI) was one of them. Here is what the fund said:
“We invested in SoFi Technologies, Inc., an online consumer finance company or “neobank,” through a SPAC-PIPE transaction. The company was founded in 2011 to refinance student loans into lower interest rates and has since expanded into other financial services, such as bank accounts, debit and credit cards, brokerage, and cryptocurrency trading. We believe that SoFi now has the broadest product suite of any neobank in the U.S., and we view the core lending segment as a differentiated product line that few other neobanks offer. With most competitors targeting un-banked and under-banked individuals, we believe SoFi’s focus on a higher-income demographic coupled with its wide range of products positions it to be one of the leading digital banks. The company’s product breadth enables it to serve customers throughout their lives, such as offering student loan refinancing for new graduates or brokerage accounts when those graduates accumulate savings. SoFi seeks to cross-sell products to existing customers, driving higher customer engagement and retention. SoFi also owns a technology platform called Galileo that is used to power many other neobanks. We believe Galileo gives SoFi attractive exposure to the broader universe of fast-growing consumer FinTech companies. Over time, we expect SoFi to continue adding members and cross-selling additional services, which should drive improving unit economics and earnings growth.”
6. Coinbase Global, Inc. (NASDAQ:COIN)
Number of Hedge Fund Holders: 49
Coinbase Global, Inc. (NASDAQ:COIN) has rallied the past few weeks after a lean spell over the summer. The rally is attributed to the increase in price of cryptocurrencies. The company has also inked an agreement with the National Basketball League (NBA), although the terms of the deal have not been disclosed. As part of a plan to push further into blockchain, there are reports that the company plans to launch an NFT platform soon.
On October 26, investment advisory Citi initiated coverage of Coinbase Global, Inc. (NASDAQ:COIN) stock with a Buy rating and a price target of $415, highlighting that the stock offered direct exposure to cryptocurrency adoption.
Among the hedge funds being tracked by Insider Monkey, New York-based firm ARK Investment Management is a leading shareholder in Coinbase Global, Inc. (NASDAQ:COIN) with 5.6 million shares worth more than $1.4 billion.
In addition to PayPal Holdings, Inc. (NASDAQ:PYPL), Sea Limited (NYSE:SE), and Square, Inc. (NYSE:SQ), Coinbase Global, Inc. (NASDAQ:COIN) is one of the fintech stocks that hedge funds are buying.
5. Fiserv, Inc. (NASDAQ:FISV)
Number of Hedge Fund Holders: 72
Fiserv, Inc. (NASDAQ:FISV) stock has jumped in recent weeks after ValueAct Capital, an activist hedge fund, acquired a stake in the company, with Bloomberg reporting that the hedge fund believed that the firm was a direct rival of payments firm Square and growing at a faster rate. The fund predicts that the company could be worth $185 billion by 2024. For context, the market cap of the firm is presently around $65 billion.
Fiserv, Inc. (NASDAQ:FISV) recently posted earnings for the third quarter, reporting earnings per share of $1.47, beating market estimates by $0.02. The revenue over the period was $4.1 billion, up close to 10% year-on-year and beating predictions by $60 million.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in Fiserv, Inc. (NASDAQ:FISV) with 12 million shares worth more than $1.2 billion.
In its Q1 2021 investor letter, Madison Funds, an asset management firm, highlighted a few stocks and Fiserv, Inc. (NASDAQ:FISV) was one of them. Here is what the fund said:
“This quarter we researched several new stock ideas, but because of high prices, acted on only one. Thus, a new portfolio name is Fiserv, with corporate headquarters in Brookfield, WI, just down I-94 from us. Fiserv is a technology company serving financial institutions (“FIs”) and retail merchants. It has two main business lines. In the first, it’s a market leader in outsourced IT solutions for banks and credit unions, online and mobile banking technology, digital money movement solutions, and card issuing services. Fiserv’s second core business is merchant acquiring and processing, where it’s a leader in providing a variety of solutions to help all types of merchants accept digital payments. They entered this business through the acquisition of First Data in 2019.
Within the first business, Fiserv’s software is critical to the daily operations of FI clients. Their solutions not only provide the vital central processing systems, but also enable services such as electronic bill pay and digital money transfers at both large institutions and local banks and credit unions alike. As such, it is an incredibly sticky business that is resilient through economic cycles. On the merchant acquiring side of Fiserv, they process trillions of dollars annually for millions of merchant clients. Their solutions cater to all types of merchants and optimize for seamless acceptance and high authorization rates while also limiting fraud. Similar to the IT outsourcing business, Fiserv’s merchant solutions are critical to their customers’ daily operations. Furthermore, we are especially encouraged by their investments in new solutions, particularly Clover and Carat. Clover is a small and midsize business merchant acquiring platform and Carat is an e-commerce acquiring platform. Both these products hit the bullseye in terms of the way people are interacting with the retail industry, and both are growing at above market rates, which we believe will sustain into the future.
In addition to Fiserv’s favorable business characteristics and competitive positioning, the management team, led by CEO Frank Bisignano, has a track record of successfully investing for growth, improving profitability, and intelligently allocating excess capital. We believe these value-creating activities will continue going forward.
Financial institutions are increasingly making investments to digitize…” [read entire letter here]
4. MercadoLibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 74
MercadoLibre, Inc. (NASDAQ:MELI) features on our list of top fintech stocks because it owns and runs one of the biggest and most profitable fintech platforms in Latin America. Although the firm is famous for ecommerce services, it has over the years built a payments ecosystem that rivals the top fintech firms in the world. Credit Suisse analyst Stephen Ju recently raised the price target on the stock to $2,100 from $2,050, keeping an Outperform rating on the shares.
MercadoLibre, Inc. (NASDAQ:MELI) recently announced that it would be acquiring a $25 million stake in Aleph, a digital media firm. The firm plans to collaborate with Aleph to monetize advertising space on different digital platforms.
At the end of the second quarter of 2021, 74 hedge funds in the database of Insider Monkey held stakes worth $4 billion in MercadoLibre, Inc. (NASDAQ:MELI), up from 69 in the previous quarter worth $5 billion.
Baron Funds, in its Q1 2021 investor letter, mentioned MercadoLibre, Inc. (NASDAQ:MELI). Here is what the fund has to say in its letter:
“MercadoLibre, Inc., a Latin American e-commerce and FinTech platform, declined in the quarter despite reporting very strong fourth quarter results. MercadoLibre falls into a category of businesses that were net beneficiaries of last year’s lockdowns and reduced consumer gatherings that fell out of favor this quarter as investors looked toward economic reopening and normalization. We are confident in MercadoLibre’s ability to create substantial long-term value as it grows into a regional powerhouse across e-commerce and financial services.”
3. Square, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 94
Square, Inc. (NYSE:SQ) has had a lot of positive international coverage in recent weeks after announcing a new partnership in France and fresh digital tools for United Kingdom-based businesses. Even though the founder of the firm, Jack Dorsey, has warned of “hyperinflation”, the stock has rallied on the back of a dramatic increase in the prices of cryptocurrencies and reports that stock trading app Robinhood will soon launch a crypto wallet.
Atlantic Equities analyst Kunaal Malde recently upgraded Square, Inc. (NYSE:SQ) stock to Overweight from Neutral with a price target of $300, noting that the growth prospects of the firm remained “substantial”.
At the end of the second quarter of 2021, 94 hedge funds in the database of Insider Monkey held stakes worth $10 billion in Square, Inc. (NYSE:SQ), up from 92 the preceding quarter worth $9 billion.
In its Q1 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Square, Inc. (NYSE:SQ) was one of them. Here is what the fund said:
“We established a position in leading Financial Technology provider Square during the quarter. Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).
The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown
from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.
We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of Square’s future value will be from its Cash App business.”
2. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 104
Sea Limited (NYSE:SE) operates as a diversified technology company and has significant interests in the fintech business. The firm is based in Singapore. It recently announced plans to raise $6 billion through a record equity offering. The offering is one of the biggest equity deals of the year. The firm will invest the funds for business expansion. Barclays, Citi, and DZ Bank are all bullish on the company in the long term.
In August, Sea Limited (NYSE:SE) had posted earnings for the second quarter, beating market estimates on earnings per share and revenue by $0.06 and $260 million respectively. It also raised full year guidance numbers.
At the end of the second quarter of 2021, 104 hedge funds in the database of Insider Monkey held stakes worth $12.2 billion in Sea Limited (NYSE:SE), up from 98 the preceding quarter worth $10.4 billion.
In its Q4 2020 investor letter, Hayden Capital, an asset management firm, highlighted a few stocks and Sea Limited (NYSE:SE) was one of them. Here is what the fund said:
“Sea Ltd (SE): When I wrote our Q4 2019 letter about Shopee launching a Brazilian business, it seemed very few investors or competitors knew or cared.
A year ago, I wrote: “This is the first test for the ecommerce marketplace outside of its Southeast Asia home base. Will the platform’s fun and addicting features overcome a lack of local knowledge and presence? It’s hard to predict consumer behavior and how accepting users will be to a platform – especially one that’s a foreign culture and 10,000 miles away. The only way to know is to experiment and watch the results closely.
Empirically though, it seems that what consumers find entertaining in Asia, generally translates well to Brazil (and Shopee really is as much an entertainment platform, as an ecommerce one).
For example, just look at the top 10 free apps in Brazil. Two are utility messaging apps, so we’ll ignore those (WhatsApp and
Facebook Messenger). But among the remaining eight apps, they’re all entertainment based and overwhelmingly Asian. Four are from China (Kwai, TikTok, VStatus, TikTok Lite), two from Singapore (Free Fire and Shopee, both Sea Ltd apps), and one from the US (Instagram). The commonality is that all these apps are experts at creating addictive habits, as evidenced by their personalized recommendations, avg usage time, number of logins per day per user, etc.” (LINK)
I distinctly remember having conversations with several Brazilian hedge funds as recently as last summer who were investors in Sea Ltd. When the topic of Brazil came up, many of them didn’t even know Shopee was operating in their own backyard!
Part of this stems from the fact that Shopee..”[read the entire letter here]
1. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 143
PayPal Holdings, Inc. (NASDAQ:PYPL) has quickly become one of the biggest payments firms in the world as more countries adopt the digital economy. The stock is a favorite of institutional investors like hedge funds. With solid fundamentals and strong growth forecasts, analysts are also bullish on the company. Famous investor Jim Cramer also recently touted the power of “neo banks” and payments firms like PayPal, pushing the stock higher.
Even though PayPal Holdings, Inc. (NASDAQ:PYPL) stock has pulled back in recent weeks amid a broader lull around fintech companies, it is still outperforming the benchmark S&P 500 by nine percentage points.
At the end of the second quarter of 2021, 143 hedge funds in the database of Insider Monkey held stakes worth $16.3 billion in PayPal Holdings, Inc. (NASDAQ:PYPL), the same as in the preceding quarter worth $14.7 billion.
In its Q4 2020 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and PayPal Holdings, Inc. (NASDAQ:PYPL) was one of them. Here is what the fund said:
“For the full year 2020, one of the top performers was PayPal, which we purchased in 2019, the company continues to take market share in digital payments and has seen an acceleration in user adoption and engagement, especially within their “silver tech” or older user demographic. We expect many more years of ongoing double-digit growth from their various business segments and new initiatives.”
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Disclosure. None. 10 Best Fintech Stocks To Buy Now is originally published on Insider Monkey.
