5 Small Cap Stocks With Wide Moats

In this article, we will be taking a look at the 10 small cap stocks with wide moats. To skip our detailed analysis of stocks with wide moats, you can go directly to see the 10 Small Cap Stocks With Wide Moats.

5. Upstart Holdings, Inc. (NASDAQ:UPST)

Number of Hedge Fund Holders: 20

Market Capitalization as of December 27: $1.02 billion

Upstart Holdings, Inc. (NASDAQ:UPST) is a consumer finance company based in San Mateo, California. The company operates a cloud-based artificial intelligence lending platform in the US.

A Hold rating was reiterated on Upstart Holdings, Inc. (NASDAQ:UPST) shares on November 9 by analyst John Hecht at Jefferies.

Upstart Holdings, Inc. (NASDAQ:UPST) is a company in the finance sector with a strong moat since it offers an alternative for people looking to access credit. The company is different from others in the finance sector since it offers personal loans to consumers with no or limited credit history, opening up a largely ignored market for it to profit from. The company guided for revenues of $800 million by the end of 2022. Marco Atzeni at Investing Milestone expects Upstart Holdings, Inc. (NASDAQ:UPST) to see revenue growth of 25% from 2024 to 2027.

There were 20 hedge funds long Upstart Holdings, Inc. (NASDAQ:UPST) in the third quarter, with a total stake value of $81.4 million.

Vulcan Value Partners, an investment management firm, mentioned Upstart Holdings, Inc. (NASDAQ:UPST) in its second-quarter 2022 investor letter. Here’s what the firm said:

“Upstart Holdings Inc. was a material detractor for the quarter. It was a mistake, and we sold our position. Upstart is an artificial intelligence (AI) and cloud-based lending platform. The company uses AI models that are designed to underwrite superior loans with lower interest rates, lower default rates, higher approval rates, and increased underwriting automation. When we purchased Upstart, we believed the company had an excellent product and the addressable market was large.

Upstart’s results during 2021 were impressive. In the first quarter of 2022, the company reported solid results but lowered guidance and, more importantly, used its balance sheet to warehouse loans temporarily. The company’s decision to use its balance sheet to finance its growth surprised us and other market participants, and its stock price decreased dramatically. While we admire the management team, we are less confident in the company’s long-term prospects.

It will be more difficult than we anticipated for Upstart to extend its competitive advantages with smaller banks into adjacent markets such as auto loans and mortgages. As a result, our value for Upstart is unstable and the company no longer qualifies for investment. We are following our discipline and reallocating capital into companies with more stable values.”