“Boring” is better: here’s why I’m not chasing trendy stocks
In a recent conversation, my editor told me how his wife recently opened an account with SmartyPig in order to save money for holidays and Christmas gifts.
“I think it’s a great idea,” he told me. “This money is now out of sight, so it’s hard to waste it on take out or a Amazon (NASDAQ:AMZN) the madness of spending. She didn’t have to go to a bank branch to open it or even talk to anyone on the phone. It even has a very good interest rate – and where can you find that again? “
He presented SmartyPig as an example of fintech… a short-term online savings account from Sallie Mae Bank. And I explained to him that this is an old idea in a new package. You remember the Christmas club accounts, don’t you?
It was quite a mundane conversation – the kind of stuff older guys talk about when they’re not talking about the playoffs or their latest home improvement project.
But that boredom was what made him stand out.
In the past few months, almost every investment conversation I find myself in has been about Reddit… or actions even … or You’re here… (NASDAQ:TSLA) Where Bitcoin (CCC:BTC-USD).
Frankly, I want to hear more boring stories about technological innovations that improve people’s lives. You can follow these stories to take advantage of opportunities with evidence and a proven track record to back them up.
The $ 56 trillion story ignored by the media
Bitcoin and many popular stocks today, on the other hand, require acts of faith from their followers. If that faith fades, everything collapses.
I’m not the only one feeling this. So today, let’s take a look at a report that presents the case for fintech over Bitcoin.
Additionally, I’ll show you some fintech investing ideas.
Why FinTech wins
Earlier this year, analysts at JPMorgan said Bitcoin is an “economic show” – and fintech is the future of banking and other financial services.
Even though Bitcoin hovers around a market cap of $ 1.2 trillion, analysts at JPMorgan have said cryptocurrencies may never become a mainstream asset. According to their research note:
“Bitcoin prices continued their meteoric rise with announcements from Tesla, BNY Mellon and Mastercard of greater acceptance of cryptocurrencies… digital platforms in credit and payments.
Before going any further, let’s define fintech.
The term refers to any new technology that improves or automates financial transactions. But increasingly, fintech has become a shortcut for any kind of disruptive technology focused on finance, from mobile payment apps to cryptocurrencies, yes.
Generally speaking, FinTech companies allow individuals and businesses to conduct financial transactions without having to use traditional banking channels.
Square (SQ) is one of them, and probably the most well-known “disruptor” in payment processing. The San Francisco-based company focuses on small businesses, allowing them to accept payments through a variety of point-of-sale mobile payment methods.
Millions of merchants use the Square app to process payments through their smartphones. You may have seen a taxi driver, for example, making a payment by swiping your credit card through a plug-in device on their smartphone. This taxi driver was probably using the Square app.
Square is a leading payment processor trying to become a leading digital bank, also known as a ‘digital wallet’.
Since its inception, Square has provided payment processing services to small merchants, primarily a mobile app that allows merchants to process credit card payments on their mobile devices.
The company also operates fast growing digital banking services through its Cash app. Because this company has seen triple-digit year-over-year growth, it now accounts for about a third of Square’s gross profits.
And based on the growth trajectory of this business, it should represent half of gross profits within two years.
Legendary analyst who called the tech wreck of the 2000s: Do This!
Cash App is a money transfer platform that allows users to send, store and / or receive money. But Square continues to add features to the platform to make it more competitive in the market.
And there is a lot of competition!
This is the biggest risk for the stock. Square competes with people like Venmo, Zelle, and Apples (NASDAQ:AAPL) Apple Pay.
Another risk is that the company prioritizes revenue growth and market share over profitability.
Despite this, it generated strong free cash flow. Assuming the company’s core payment processing business maintains slow and steady growth, while digital banking business generates high double-digit growth, Square will be a winner.
But it won’t be the only one …
No faith required
Long-term trends for fintech are on the rise. Adapt Insights pegged the market at $ 4.8 trillion at the end of 2019, and it says that figure will almost double to $ 10.1 trillion by 2024.
That’s because the companies that develop and use cutting-edge technology are growing to huge sizes faster than ever… capturing market share faster than ever… and changing the world faster than ever.
This exponential progress creates a technological chasm between companies that develop and use technology successfully… and those that do not.
We have seen the effects in my Fry’s investment report service.
One of our fintech investments, the Global X FinTech ETF (NASDAQ:FINX), has gained almost 70% since I recommended it on June 11, 2019, far surpassing the S&P 500 33% return over the same period.
And it’s not just because fintech has recovered faster than the market at large after the massive sale of Covid-19. S&P is up just over 16% from the same period last year, while FINX is up over 45%.
FINX companies use innovative technologies to improve or automate financial transactions.
These technologies include peer-to-peer lending, mobile payments, short-term instant loans, and cryptocurrencies – and the companies providing these services can be incredibly profitable.
Could this stock be the # 1 5G game?
Pay Pal (NASDAQ:PYPL), for example, is one of the oldest and best-known payment processing companies, facilitating e-commerce and even expanding to offer credit to customers. Today, it is more than 110% higher than its all-time high before the pandemic.
Square is 150% higher than its pre-pandemic peak.
Products from companies like this are used more and more thanks to the pandemic, and people are happier with their banks when they integrate peer-to-peer payment methods into their systems.
McKinsey research shows that 6% of American consumers joined my colleague and opened a new fintech account during the pandemic. Mobile banking traffic grew 85% in April 2020, and older Americans are increasingly comfortable with online banking.
I expect these new habits to continue, giving FinTech companies an edge for the future.
As they become more accessible, more and more people will adopt them. Because the pandemic has made these technologies more necessary, it has only accelerated their widespread adoption.
Although I know a lot of Bitcoin speculators, I know very few Bitcoin users. On the other hand, almost everyone I know uses fintech, even if they don’t realize it.
This tells me that the fintech industry will likely continue to grow rapidly over the next several years. Meanwhile, Bitcoin has very little but the faith to back up its value.
I’m always on the lookout for new fintech stocks – and others Investments related to Technochasm – bring to my Investment report the subscribers. Learn how to join us here.
PS Today I reveal to you how this $ 56 trillion industry is the result of decades of rapid technological convergence. Learn more here.
At the date of publication, Eric Fry had (directly or indirectly) no position on the securities mentioned in this article.
Eric Fry is a award-winning stock picker with many “10-bagger” calls – in the good markets AND the bad. How? ‘Or’ What? By finding powerful global megatrends… before they take off. In fact, Eric has recommended 41 different scholarship winners over 1000% over the course of his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he reveals his next potential 1000% winner for free, here.