In this article, we will take a look at the 13 best fintech stocks to buy at a discount.
It seems nothing is going in the favor of the fintech sector since 2022, when things started to take a horrible turn for the industry that is highly vulnerable to high interest rates and economic volatility. The fintech sector was teeming with highly overvalued firms making big claims about their products and services. These companies had heavy debt loads and weak fundamentals. When easy money started to evaporate in 2022, so did their stock prices. The Global X Fintech ETF fell a whopping 52% in 2022, much higher than the losses recorded by the financial and tech sectors separately.
Major fintech firms were just not ready to face the harsh realities that changed the industry dynamics as the pandemic-induced trends started to recede. For example, companies like PayPal and Shopify, emboldened by the rising trend of online shopping, assumed the high growth trajectory of online shopping was here to stay. When in-store shopping made a comeback, these companies had to make painful adjustments. Another shock to these companies came after the retreat of retail investors. As tech stocks and the broader market started to collapse, retail investor activity slowed down, hurting companies like Robinhood, which had hired thousands of employees to keep up with the growth that came after the meme stock mania seen during the pandemic days. Eventually, Robinhood had to announce a 23% cut in its workforce.
Another blow to the fintech sector came amid the collapse of the Silicon Valley Bank.
However, this broader downturn in the fintech industry is exactly what makes certain stocks in the sector worthy of attention these days since they are currently trading at a discount and could rebound sharply once the economy begins to turn the corner.
An Opportunity in the Fintech Space
BMO Capital Markets Chief Investment Strategist Brian Belski recently said in a note that the selloff in the financials sector is overdone and based on unfounded fears.
“From our perspective, we believe these banking crisis and systemic risk fears are misguided as the recent bank failures were idiosyncratic in nature and ultimately self-inflicted by business mismanagement,” Belski thinks.
The analyst thinks the financial system is “quite stable.” He thinks that the sharp decline in the S&P 500 Financial is a “buying opportunity for investors, particularly given the attractive valuations, dividend attributes, and high quality tilt that continues to underpin the sector.”
Photo by Adam Nowakowski on Unsplash
Our Methodology
For this article we scoured the fintech industry and picked stocks that are down over the past one year, six months or one month and have strong growth catalysts or hedge fund sentiment. Some of these stocks are already on their path to recovery and can see more gains in the coming months as the Federal Reserve begins to pause and eventually cut rate hikes.
Best Fintech Stocks to Buy at a Discount
13. Wise plc (NYSE:WISE)
Number of Hedge Fund Holders: 0
UK-based fintech company Wise plc (NYSE:WISE)’s shares have lost about 20% in value over the past six months. Wise plc (NYSE:WISE) is gaining a lot of traction due to a growing freelance market and the shift of jobs from the US to Asia. These dynamics help Wise plc (NYSE:WISE) because the company’s platform allows easy money transfers usually at an exchange rate that is better than banks. As of 2022, Wise plc (NYSE:WISE)’s revenge stands at £560 million.
12. Green Dot Corporation (NYSE:GDOT)
Number of Hedge Fund Holders: 17
Texas-based fintech company Green Dot Corporation (NYSE:GDOT) shares have lost 38% over the past 12 months. Green Dot Corporation (NYSE:GDOT)’s PE Ratio is 14, which is attractive. In February, Green Dot Corporation (NYSE:GDOT) posted strong Q4 results.
Adjusted EPS in the quarter came in at $0.34, beating estimates by $0.12. Revenue in the quarter jumped 6.6% to reach $342.43 million, beating estimates by $22.14 million.
As of the end of last quarter of 2022, 17 hedge funds tracked by Insider Monkey had stakes in Green Dot Corporation (NYSE:GDOT). The total worth of these stakes is $156 million. The biggest stakeholder of Green Dot Corporation (NYSE:GDOT) is Jeffrey Smith’s Starboard Value LP which owns an $84 million stake in the company.
Here is what Sterling Partners Equity Advisors has to say about Green Dot Corporation (NYSE:GDOT) in its Q4 2021 investor letter:
“Green Dot is a consumer financial services providing a range of reloadable prepaid debit cards and cash reload processing services with a mission to provide a full range of affordable and accessible financial services to customers. Management believes that the company delivered a strong quarter with solid revenue growth. During the quarter Green Dot added to its leadership bench with a new COO and CFO. We own the stock on the thesis that the company would continue to gain market share with its no real estate, low-cost model and those customers would increasingly gravitate to the convenience of online commerce.
11. Payoneer Global Inc. (NASDAQ:PAYO)
Number of Hedge Fund Holders: 31
Over the past six months Payoneer Global Inc. (NASDAQ:PAYO) shares have lost about 19% in value. Payoneer Global Inc. (NASDAQ:PAYO) however jumped in February after the company posted solid quarterly earnings report. Jefferies started covering Payoneer Global Inc. (NASDAQ:PAYO) in February with a Buy rating. The firm likes Payoneer Global Inc. (NASDAQ:PAYO) based on what it calls a “first-mover advantage” in the industry. The firm also likes Payoneer Global Inc. (NASDAQ:PAYO)’s strong position as a leader in “multi-currency digital wallet enabling SMBs/freelancers/remote workers to conduct cross-border commerce, and the ongoing mix shift to B2B should drive a higher multiple over time.”
Insider Monkey’s proprietary database of 943 hedge funds shows that 31 hedge funds reported owning stakes in Payoneer Global Inc. (NASDAQ:PAYO). The biggest stakeholder of Payoneer Global Inc. (NASDAQ:PAYO) was Phill Gross and Robert Atchinson’s Adage Capital Management which owns a $35 million stake in the company.
10. Robinhood Markets, Inc. (NASDAQ:HOOD)
Number of Hedge Fund Holders: 32
Robinhood Markets, Inc. (NASDAQ:HOOD) shares are down about 12% over the past 12 months. Robinhood Markets, Inc. (NASDAQ:HOOD) remains one of the most popular stock and crypto trading platforms among retail investors. As of the end of February, Robinhood Markets, Inc. (NASDAQ:HOOD) had 12 million monthly active users. Robinhood Markets, Inc. (NASDAQ:HOOD) shares jumped in February after the company posted its Q4 report. Robinhood Markets, Inc. (NASDAQ:HOOD) saw an increase in average revenue per user in the period. Adjusted EBITDA in the quarter came in at $82 million, versus $47 million posted in the prior quarter.
As of the end of the last quarter of 2022, 32 hedge funds tracked by Insider Monkey had stakes in Robinhood Markets, Inc. (NASDAQ:HOOD), up from 24 hedge funds in the previous quarter. The biggest hedge fund stakeholder of Robinhood Markets, Inc. (NASDAQ:HOOD) was Catherine D. Wood’s ARK Investment Management which owns a $238 million stake.
9. Marqeta, Inc. (NASDAQ:MQ)
Number of Hedge Fund Holders: 36
Marqeta, Inc. (NASDAQ:MQ) provides card issuing and transactions processing services. Over the past 12 months Marqeta, Inc. (NASDAQ:MQ) has lost 60% in value. Earlier this month, Deutsche Bank analyst Bryan Keane started covering Marqeta, Inc. (NASDAQ:MQ) with a Buy rating. The analyst noted that the demand for Marqeta, Inc. (NASDAQ:MQ)’s services jumped in the fourth quarter of 2022.
“We believe remains on a strong path for bookings growth in 1Q23 and full year FY23,” Keane said.
A major chunk of Marqeta, Inc. (NASDAQ:MQ)’s revenue comes from Block, and after the Hindenberg’s short attack on Block, Marqeta shares fell because of this huge dependence. But Keane expects Marqeta, Inc. (NASDAQ:MQ) to soon start diversifying its revenue base.
As of the end of the fourth quarter of 2022, 36 hedge funds tracked by Insider Monkey had stakes in Marqeta, Inc. (NASDAQ:MQ).
8. Toast, Inc. (NYSE:TOST)
Number of Hedge Fund Holders: 47
Toast, Inc. (NYSE:TOST) operates a Cloud-based platform for the restaurant industry which offers payroll processing, PoS features, among other functionality. Toast, Inc. (NYSE:TOST) is down about 6% in value over the past 12 months. In February Toast, Inc. (NYSE:TOST) posted its Q4 results. GAAP EPS in the quarter came in at -$0.19, missing estimates by $0.01. Revenue in the quarter jumped about 50% year over year to reach $769 million, beating estimates by $15.87 million.
For the first quarter Toast, Inc. (NYSE:TOST) sees revenue in the range of $745 million to $775 million versus the consensus estimate of $751.15 million.
In February, Ritholtz Wealth Management’s Joshua Brown, who has invested in Toast, Inc. (NYSE:TOST), said that Toast is “rapidly growing and I think there is a secular growth story here that is much better than trying to buy any individual restaurant stock.”
7. Capital One Financial Corporation (NYSE:COF)
Number of Hedge Fund Holders: 55
Capital One Financial Corporation (NYSE:COF) has a PE ratio of 5.49 as of April 12. In February, UBS Group AG (NYSE:UBS) shared a list of top dividend stocks picked up by its machine learning model. Capital One Financial Corporation (NYSE:COF), which has a dividend yield of about 2.2%, made it to the list. UBS Group AG (NYSE:UBS) said that its model picked high quality dividend stocks with “strong relative dividend growth prediction over the next 6 months.”
Insider Monkey’s database of 943 hedge funds shows that 55 hedge funds had stakes in Capital One Financial Corporation (NYSE:COF). The total worth of these stakes was $3.4 billion. The biggest stakeholder of Capital One Financial Corporation (NYSE:COF) was Natixis Global Asset Management’s Harris Associates which owns a $1.2 billion stake.
Davis Financial Fund made the following comment about Capital One Financial Corporation (NYSE:COF) in its 2022 annual investor letter:
“Let’s consider our largest holding in Davis Financial Fund, Capital One Financial Corporation (NYSE:COF). The company’s two main consumer-facing lending businesses are credit cards and autos. Credit quality trends in both lines have followed a similar path, as seen in Figure 4. Delinquencies and charge-offs declined in 2020– 2021 relative to pre-COVID-19 levels, but more recently they’ve started to experience an uptick in delinquencies (which naturally would precede any increase in charge-offs). So, the trajectory does suggest that the credit environment is deteriorating from what it was, but the absolute level of the trend remains favorable relative to the longer-term past. As Capital One’s CEO Rich Fairbank recently noted, “It would be very abnormal if we were not seeing normalization.”
We try to avoid making forecasts about macroeconomic variables, though given the Federal Reserve’s desire to rein in inflation through tighter monetary policy, a recession within the next year or so remains the most plausible scenario. Regardless of exactly how the next six- to-eighteen months play out we’ve always assumed that our companies would need to live through a recession at some point during our holding period.
The important question is, how well prepared are the companies to get through it? Their first line of defense is the allowance for loan losses that has already been booked. Accounting rules require a company to make a “life of loan” estimate of total credit losses, so their existing allowance already reflects a consensus economic outlook that calls for a slowing economy and a gradual rise in the unemployment rate. The actual path taken by the economy can of course veer adversely from the current outlook, but the point is that banks’ reserves already incorporate a down payment on reversion to the mean of economic trends…” (Click here to read the full text)
6. Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 70
Over the past 12 months Block, Inc. (NYSE:SQ) shares have lost about 45% in value. Block, Inc. (NYSE:SQ) is however on the rise recently after a short report by Hindenburg Research failed to prove anything against the company and Block came up with solid rebuttals against the short report. On March 28, DA Davidson analyst Christopher Brendler reaffirmed his Buy rating on Block, Inc. (NYSE:SQ) and called the selloff after the short report a “compelling short-term buying opportunity.” SQ shares got hammered after the broader market downturn in 2022 and the stock could rebound when the market begins to turn the corner.
As of the end of the fourth quarter of 2022, 70 hedge funds tracked by Insider Monkey had stakes in Block, Inc. (NYSE:SQ).
5. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 74
The Goldman Sachs Group, Inc. (NYSE:GS)’ PE ratio stands at about 10 as of April 12. The Goldman Sachs Group, Inc. (NYSE:GS)’s dividend yield is over 3%. GS is down 5.4% year to date through April 12. In February, The Goldman Sachs Group, Inc. (NYSE:GS)’s board approved a new share repurchase program of up to $30 billion.
As of the end of the fourth quarter of 2022, 74 hedge funds tracked by Insider Monkey had stakes in The Goldman Sachs Group, Inc. (NYSE:GS). The biggest stakeholder of The Goldman Sachs Group, Inc. (NYSE:GS) was Boykin Curry’s Eagle Capital Management which owns a $1.1 billion stake in the company.
Manole Capital Management made the following comment about The Goldman Sachs Group, Inc. (NYSE:GS) in its Q3 2022 investor letter:
“Back in 2019, The Goldman Sachs Group, Inc. (NYSE:GS) made a splash in the card industry by working with Apple and MasterCard on a credit card. The actual card is fairly sleek (as you can see below), as customers names are etched into an Apple titanium card. The no-fee card generated a lot of hype, as many early users were quick to post their latest card on various social media sites.
The initial goal of Marcus (back in 2016) was to leverage Goldman’s wonderful name brand and build a full-service digital bank. This card was a large piece of GS’s ambitions to grow its retail banking franchise called Marcus. After 5 years, Marcus now has 14 million customers and $16 billion in loan balances. Surprisingly, Marcus now represents nearly 20% of the firm’s total revenue.
We thought it would be interesting to look how the Apple Card is doing in terms of loans and exposures. With over $100 billion in assets, this has been a successful source of cheap deposits for GS. Despite having an institutional / “white shoe” brand in the investment banking and trading world, GS’s Apple Card has been a disappointment.” (Click here to read the full text)
4. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 81
Over the past six months Citigroup Inc. (NYSE:C) shares are down about 6%. Citigroup Inc. (NYSE:C) ’s PE ratio stands at 6.64 as of April 12. In January Citigroup Inc. (NYSE:C) posted fourth-quarter results. Revenue in the quarter totaled $18 billion, beating estimates of $17.97 billion.
A total of 81 hedge funds tracked by Insider Monkey reported owning stakes in Citigroup Inc. (NYSE:C) as of the end of the fourth quarter of 2022. The biggest stakeholder of Citigroup Inc. (NYSE:C) was Warren Buffett’s Berkshire Hathaway (NYSE:BRK) which owns a $2.5 billion stake in the company.
3. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 100
Year to date JPMorgan Chase & Co. (NYSE:JPM) shares are down about 4.8%. JPMorgan Chase & Co. (NYSE:JPM) has an attractive PE ratio and dividend yield. Amid the SVB collapse, consumers started to exit smaller banks and deposit their money with major banks like JPMorgan Chase & Co. (NYSE:JPM). This would bode well for the bank and its stock performance in the coming weeks.
As of the end of the fourth quarter of 2022, 100 hedge funds tracked by Insider Monkey were bullish on JPMorgan Chase & Co. (NYSE:JPM). The biggest hedge fund stakeholder of JPMorgan Chase & Co. (NYSE:JPM) is Edgar Wachenheim’s Greenhaven Associates which owns a $643 million stake in the company.
2. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 100
Bank of America Corporation (NYSE:BAC) shares have lost about 14% in value in 2023 through April 12. Bank of America Corporation (NYSE:BAC)’s PE ratio stands at 9. It is one of the most popular stocks among the elite hedge funds tracked by Insider Monkey. As of the end of the fourth quarter of 2022, 100 hedge funds in Insider Monkey’s database had stakes in Bank of America Corporation (NYSE:BAC). The biggest hedge fund stakeholder of Bank of America Corporation (NYSE:BAC) was Warren Buffett’s Berkshire Hathaway which owns a $33.4 billion stake in the bank.
Recently, BMO Capital Markets Chief Investment Strategist Brian Belski gave favorable comments for Bank of America Corporation (NYSE:BAC), along with several other financial stocks, as the analyst believes the selloff in the sector after the SVB collapse is overdone and presents attractive buying opportunities.
Oakmark Equity and Income Fund made the following comment about Bank of America Corporation (NYSE:BAC) in its Q1 2023 investor letter:
“The Oakmark Equity and Income Fund has 29% of its equity portfolio in financials. This made the March sell-off painful, but we do not believe that this has meaningfully changed the value of most of our financial equity holdings. In fact, we were adding to financial positions throughout March. We believe that one way to analyze our financial holdings is to look at them in different buckets given their various business models and risk profiles. Almost 30% of our financial exposure is in insurance companies and insurance brokers. Insurance companies have very stable liability profiles, so the main risk is a change in asset values. We are comfortable with their investment portfolios and think these stocks are quite attractive. Around 5% of our financials are asset managers. This leaves a little over 40% of the financials exposure in a varied group of banks and lenders. About 5% of that portfolio is in Bank of America Corporation (NYSE:BAC) and State Street. These two banks are designated as Systematically Important Financial Institutions and are held to higher regulatory standards. Our largest single financials holding is Bank of America, which has grown deposits during March, and we believe it is one of the best managed companies in the sector.”
1. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 115
PayPal Holdings, Inc. (NASDAQ:PYPL) is one of the most prominent fintech stocks currently trading at a discount. PayPal Holdings, Inc. (NASDAQ:PYPL) has lost about 32% over the past 12 months. In February PayPal Holdings, Inc. (NASDAQ:PYPL) posted strong Q4 results. Adjusted EPS in the period came in at $1.24, beating estimates by $0.04. Revenue in the period increased by about 6.9% year over year to reach $7.4 billion, beating estimates by $10 million. PayPal Holdings, Inc. (NASDAQ:PYPL) also increased its 2023 guidance.
As of the end of the last quarter of 2022, 115 hedge funds tracked by Insider Monkey had stakes in PayPal Holdings, Inc. (NASDAQ:PYPL). The total worth of these stakes was $5.1 billon. The biggest hedge fund stakeholder of PayPal Holdings, Inc. (NASDAQ:PYPL) was Ken Griffin’s Citadel Investment Group which has a $481 million stake in PYPL.
Renaissance Large Cap Growth Strategy made the following comment about PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q4 2022 investor letter:
“Another underperformer in the quarter was PayPal Holdings, Inc. (NASDAQ:PYPL). Despite reporting solid third quarter operating results and announcing new payment agreements with both Apple and Amazon.com, the company guided for a slowdown in e-commerce activity, partly reflecting weakened consumers who are dealing with heightened inflation. However, we still expect growth in PayPal’s core payments platforms to improve in upcoming quarters, driven by easier year-over-year comparisons.”
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Disclosure: None. 13 Best Fintech Stocks to Buy at a Discount is originally published on Insider Monkey.
