In this article, we discuss the 10 fintech stocks Redditors are buying.
Financial technology companies have outperformed the wider banking sector in the past few years, registering growth numbers that have left even market experts stunned. According to a report by professional services company Deloitte, the global fintech market was valued at over $108 billion in 2018 and is expected to increase in value to more than $222 billion by 2024. The Asia-Pacific and the Americas are at the front of this boom, holding 40% of the global market share each. The Europe, Middle East, and Africa region accounts for the remaining 20%.
Retail investors, who have taken the stock market by storm since the pandemic, are increasingly predisposed to investing in disruptive technologies. These investors have helped push the valuations of fintech firms to record highs. However, the organic growth of the industry is also noteworthy. Deloitte estimates that the digital payments market has grown to command over 80% of the total revenues in the fintech universe. This growth has been made possible by the rapid digitalization of the world in the past few months.
Reddit forums, where retail investors gather to share stock ideas, are an important tool for stock monitoring these days. Some of the top fintech stocks that Redditors are buying include PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV), among others discussed in detail below. There is little doubt that the rise of fintech and cryptocurrencies have transformed the world of finance, with traditional power players struggling for relevance in a rapidly evolving space.
The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, 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 124 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 115 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.
Our Methodology
With this context in mind, here is our list of the 10 fintech stocks Redditors are buying. They were picked keeping in mind the hype around the companies on Reddit forums like WallStreetBets.
The hedge fund sentiment around the stocks was gauged using data of 873 hedge funds tracked by Insider Monkey. The list is compiled according to the number of hedge fund holders in each stock.
The analyst ratings of the companies and their basic business fundamentals are also discussed to provide readers with some more context for their investment decisions.
Fintech Stocks Redditors are Buying
10. Mogo Inc. (NASDAQ: MOGO)
Number of Hedge Fund Holders: 7
Mogo Inc. (NASDAQ: MOGO) is placed tenth on our list of 10 fintech stocks Redditors are buying. The company offers financial technology services and is headquartered in Canada.
On June 15, investment advisory BTIG initiated coverage of Mogo Inc. (NASDAQ: MOGO) stock with a Buy rating and a price target of $13, noting that the firm offered an attractive means for investors to gain exposure to the financial services industry and cryptocurrencies.
Out of the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Point72 Asset Management is a leading shareholder in Mogo Inc. (NASDAQ: MOGO) with 1.8 million shares worth more than $14 million.
Just like PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV), Mogo Inc. (NASDAQ: MOGO) is one of the trending fintech stocks on Reddit.
9. Upstart Holdings, Inc. (NASDAQ: UPST)
Number of Hedge Fund Holders: 21
Upstart Holdings, Inc. (NASDAQ: UPST) is ranked ninth on our list of 10 fintech stocks Redditors are buying. The firm operates a cloud-based artificial intelligence lending platform and is headquartered in California.
On September 8, investment advisory Piper Sandler maintained an Overweight rating on Upstart Holdings, Inc. (NASDAQ: UPST) stock and raised the price target to $300 from $191, predicting that the consumer loan department of the firm would continue outperforming.
At the end of the second quarter of 2021, 21 hedge funds in the database of Insider Monkey held stakes worth $2.1 billion in Upstart Holdings, Inc. (NASDAQ: UPST), up from 13 the preceding quarter worth $1.7 billion.
Alongside PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV), Upstart Holdings, Inc. (NASDAQ: UPST) is one of the stocks gaining the attention of investors on Reddit.
In its Q2 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and Upstart Holdings, Inc. (NASDAQ: UPST) was one of them. Here is what the fund said:
“During the quarter, we purchased Upstart Holdings Inc. Upstart is an artificial intelligence (AI) and cloud-based lending platform. The company uses AI models to underwrite superior loans with lower interest rates, lower default rates, higher approval rates, and increased underwriting automation. Consumers can access Upstart-powered loans through its banking partners’ websites; however, most of its loans are underwritten on Upstart.com. Upstart has a fee-based revenue model and retains only a small portion of the loans, while the majority of the loans end up on the balance sheets of its partner banks or are sold into the capital markets. We believe Upstart’s technology is superior to the FICO score, which is ubiquitous within the consumer credit markets. With an excellent product and a large total addressable market, we believe that Upstart’s prospects are bright.”
8. SoFi Technologies, Inc. (NASDAQ: SOFI)
Number of Hedge Fund Holders: 39
SoFi Technologies, Inc. (NASDAQ: SOFI) is a California-based company that owns and runs an online finance platform. It is placed eighth on our list of 10 fintech stocks Redditors are buying.
On June 15, investment advisory Rosenblatt initiated coverage of SoFi Technologies, Inc. (NASDAQ: SOFI) stock with a Buy rating and a price target of $30, noting that the firm had a “powerful cost advantage” over legacy banks.
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 addition to PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV), SoFi Technologies, Inc. (NASDAQ: SOFI) is one of the best fintech stocks according to Reddit.
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.”
7. Payoneer Global Inc. (NASDAQ: PAYO)
Number of Hedge Fund Holders: 40
Payoneer Global Inc. (NASDAQ: PAYO) is a New York-based firm that runs a cross-border payments and commerce platform. It is ranked seventh on our list of 10 fintech stocks Redditors are buying.
On July 28, investment advisory Cantor Fitzgerald initiated coverage of Payoneer Global Inc. (NASDAQ: PAYO) stock with an Overweight rating and a price target of $13, highlighting that it expected the firm to expand revenue by upto 30% annually in the coming years.
At the end of the second quarter of 2021, 40 hedge funds in the database of Insider Monkey held stakes worth $363 million in Payoneer Global Inc. (NASDAQ: PAYO).
PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV) are some of the top fintech stocks according to Reddit, along with Payoneer Global Inc. (NASDAQ: PAYO).
6. StoneCo Ltd. (NASDAQ: STNE)
Number of Hedge Fund Holders: 44
StoneCo Ltd. (NASDAQ: STNE) is placed sixth on our list of 10 fintech stocks Redditors are buying. The company provides financial technology services and is headquartered in the Cayman Islands.
On June 23, investment advisory New Street initiated coverage of StoneCo Ltd. (NASDAQ: STNE) stock with a Neutral rating and a price target of $82, noting that the value of the firm lied in bricks and mortar acquiring and prepayments.
At the end of the second quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $2.7 billion in StoneCo Ltd. (NASDAQ: STNE), up from 39 in the previous quarter worth $2.1 billion.
PayPal Holdings, Inc. (NASDAQ: PYPL), Sea Limited (NYSE: SE), Square, Inc. (NYSE: SQ), and Fiserv, Inc. (NASDAQ: FISV) are trending on Reddit, just like StoneCo Ltd. (NASDAQ: STNE).
In its Q2 2021 investor letter, JDP Capital Management, an asset management firm, highlighted a few stocks and StoneCo Ltd. (NASDAQ: STNE) was one of them. Here is what the fund said:
“StoneCo (NYSE: STNE) has been in our portfolio since early 2019 and has appreciated 225% since. In the first half of 2021 the stock was down nearly 20% and was a drag on the fund’s performance.
Stone is a leading fintec company in Brazil that provides back-office software, loans and other financial services to small and medium sized businesses (SMBs). We have discussed Stone in past letters and the company’s “ladder up” from a card processor to a supplier of enterprise software used to sell financial products on top of such as working capital loans.
The company generates a lot of cash that it reinvests to acquire or build new financial products for its customer base. Since we invested, the company has grown the number of SMB clients by 3x, revenue by 2.3x, and net income by 2.2×11.
The pandemic’s impact on SMBs in Brazil has been severe, especially for the many retailers who are only now adopting an e-commerce strategy. In the first half of 2021 Stone increased loss provisions on its lending product, and overall growth has slowed somewhat. The stock’s decline earlier this year was not surprising, but investors are now ignoring progress that has enhanced Stone’s position for coming out much stronger when the recovery begins.
StoneCo Q1 2021 Earnings Call: “Based on (i) our learnings with lockdowns last year, (ii) recent client transactional data and (iii) learnings from the dynamics of countries where vaccines are widespread, we expect that once vaccination scale (which we think will happen in the second half of 2021), the economic recovery will be fast and – although delayed – Brazil is moving in the right direction. For these reasons, we have made an informed decision to be ready for recovery by investing in growth…”
“…In the first quarter, we decided to increase our salesforce headcount by 24%, marketing investments by 33%, customer service and logistics headcount by 32% and technology headcount by 20% in order to be the fastest player when our economy comes back to normal levels.”
“I want to start our presentation by highlighting that Brazil went through a second wave of COVID in the first quarter of ’21, which imposed commerce restrictions in several cities throughout the country. Those restrictions were felt by our clients with average TVP reaching a low in the end of March…
…But similar to the behavior we saw in the comeback from the first lockdown in 2020, we already observed significant and quick recovery with average TPV in May achieving levels above January 2021. As Thiago mentioned, we expect that once vaccinations are scaled, the economy recovery of the country will be fast.”
In terms of COVID recovery opportunities within our portfolio, Stone might be the most “coiled” because the impact on Brazilian small businesses has been so traumatic. In addition, Stone is part of a much larger and fast-moving transition happening in Brazil around the digitalization of financial services. The speed of this transition is unique to Brazil because the Central Bank is actively trying to reduce the country’s previous dependency on a small handful of large banks. Important progress in the first half of 2021 included closing on the long-awaited acquisition of Linx, a mature provider of enterprise software with a large footprint across Brazil. The acquisition will provide Stone meaningful cross-selling opportunities and a more diversified customer base.”
5. Paysafe Limited (NYSE: PSFE)
Number of Hedge Fund Holders: 50
Paysafe Limited (NYSE: PSFE) is ranked fifth on our list of 10 fintech stocks Redditors are buying. The company provides digital commerce solutions and operates from Bermuda.
On August 12, investment advisory Bank of America initiated coverage of Paysafe Limited (NYSE: PSFE) stock with a Buy rating and a price target of $15, noting that the firm was “uniquely positioned” to capitalize on the iGaming market.
At the end of the second quarter of 2021, 50 hedge funds in the database of Insider Monkey held stakes worth $1.1 billion in Paysafe Limited (NYSE: PSFE), up from 41 in the previous quarter worth $1.3 billion.
4. Fiserv, Inc. (NASDAQ: FISV)
Number of Hedge Fund Holders: 72
Fiserv, Inc. (NASDAQ: FISV) is a Wisconsin-based financial technology company. It is placed fourth on our list of 10 fintech stocks Redditors are buying.
On August 17, investment advisory JPMorgan maintained an Overweight rating on Fiserv, Inc. (NASDAQ: FISV) stock and raised the price target to $145 from $142, noting that modern players in the payments sector were outperforming.
Out of 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 their customer facing products and digital payments are increasingly taking share from cash as a form of payment. As a result, demand for Fiserv’s solutions, should continue to grow nicely in the coming years. In our view, Fiserv offers a nice combination of above average growth, high profitability, business resiliency, and shareholder-friendly management. We do not believe these characteristics were fully reflected in Fiserv’s share price when we made our investment during the quarter at a discount to the market’s 2021 price-to-earnings (P/E) multiple, a valuation level well below Fiserv’s historical premium.
An offsetting trade was the sale of Cognizant Technology Solutions, which was sold around the time Fiserv was added to the portfolio. Cognizant had been held since 2018, and we had expected it to perform similarly to another portfolio holding in the same industry, Accenture. Alas, multiple years of below industry growth challenged the investment, and despite our belief that CEO Brian Humphries could materially improve operations, recent metrics regarding elevated employee turnover and still below-average revenue growth led us to conclude that there was more heavy lifting required at the company. We decided that our investors would be better served by being invested in Fiserv rather than Cognizant.”
3. Square, Inc. (NYSE: SQ)
Number of Hedge Fund Holders: 94
Square, Inc. (NYSE: SQ) is a California-based company that markets digital payments solutions. It is ranked third on our list of 10 fintech stocks Redditors are buying.
On August 17, investment advisory JPMorgan reiterated an Overweight rating on Square, Inc. (NYSE: SQ) stock and raised the price target to $320 from $300. Tien-tsin Huang, an analyst at the firm, issued the ratings update.
At the end of the second quarter of 2021, 94 hedge funds in the database of Insider Monkey held stakes worth $10.3 billion in Square, Inc. (NYSE: SQ), up from 92 the preceding quarter worth $9.2 billion.
2. Sea Limited (NYSE: SE)
Number of Hedge Fund Holders: 104
Sea Limited (NYSE: SE) is placed second on our list of 10 fintech stocks Redditors are buying. The company runs an online commerce platform but also has a large stake in the fintech business. It operates from Singapore.
On August 18, investment advisory Cowen maintained an Outperform rating on Sea Limited (NYSE: SE) stock and raised the price target to $355 from $345, noting that the topline growth of the firm was continuing.
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 tends to enter markets with a bottoms-up approach. Instead of going after urban, high disposable income users first (of which these hedge fund professionals were certainly part of), they tend to initially go after those with only a few hundred or thousand USD of annual disposable income. These users tend to reside outside of major cities, have fewer choices for recreational pastime (thus turning to gaming, short-form videos, or online shopping for entertainment), can’t afford “branded” items and thus are willing to take a chance on cheaper (but still good quality) un-branded goods, and are willing to wait several weeks for it to be shipped from Asian factories.
Anyone who has studied Pinduoduo (Nasdaq: PDD) in China, will recognize this strategy and just how large of a market these consumers can be. As Shopee gains popularity in a market, they will then start to slowly move “up-market”, and cater to more urban and higher-income consumers. They’ve already followed this exact strategy in Southeast Asia, and this is the point they’ve reached in Brazil over the past year.
Shopee made its first big social push last fall, hiring over a dozen influencers with 1M+ followers to promote Shopee’s Black Friday sale (LINK). In addition, they also released their first Brazilian TV commercial last year.
It seems these initiatives are working. Shopee now consistently ranks in Brazil’s top 5 apps (while sister app Free Fire, is also the #1 grossing app). In addition, Shopee also moved Pine Kyaw (LINK), one of their key lieutenants in Vietnam who successfully helped Shopee fight off competitors (Tiki, Lazada, Sendo), to Brazil last May.
For the past year, the company has insisted publicly that the Brazil initiative is still a “test” initiated by the cross-border team. While this may have been true at first, it’s clear this is no longer a “test”, but rather a strategic focus for Shopee and posed to be the next battleground. It’s likely the company has chosen to remain tight-lipped so as to not tip off competitors, while they quietly “position the troops” to prepare for a larger assault.
For example, Shopee is also starting to allow local sellers to join the platform and list their local inventory (LINK). By definition, this is no longer a cross-border initiative (i.e. allowing their Southeast Asian sellers to sell to Brazilian consumers, and then shipping the goods directly from Asia. This is the model Aliexpress follows.).
This is the start of a localized marketplace. And similar to their early days in Southeast Asia, the goal is to reach the “tipping point” at which the marketplace becomes self-sustainable (this concept is discussed in our Q1 2019 letter; LINK). The weapons of choice in reaching critical mass: social media influencers to drive rust & awareness, free shipping & discounts to acquire / convert these new customers, and gamification of shopping to drive continued engagement, habit building, and repeat purchases.
Given all of this, and the strong (but early) traction in the local Shopee Brazil marketplace, investors need to keep an eye on this development. It is the smallest GMV contribution among Shopee’s countries currently, but a large inherent call option in the valuation. Something that so far, seems greatly underappreciated. I suspect at some point in the near future, Shopee’s management team will disclose more on the initiative, and at which point investors will be surprised by how Shopee managed to quietly build one of the largest marketplaces in Brazil.”
1. PayPal Holdings, Inc. (NASDAQ: PYPL)
Number of Hedge Fund Holders: 143
PayPal Holdings, Inc. (NASDAQ: PYPL) is ranked first on our list of 10 fintech stocks Redditors are buying. The firm markets technology and payments solutions and is headquartered in California.
On September 8, investment advisory Citi maintained a Buy rating on PayPal Holdings, Inc. (NASDAQ: PYPL) stock with a price target of $350. Ashwin Shirvaikar, an analyst at the firm, issued the ratings update.
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 Fintech Stocks Redditors are Buying is originally published on Insider Monkey.
