Buy-the-Dip Brewing opportunity in FinTech
The fintech space looked promising on the 2021 horizon, but despite its recent descent, it offers investors a downside buying opportunity.
Digital payments were a hot commodity at the height of the pandemic in 2020, but a sense of risk that grows in 2021 may have been a game-changer. Investors expected contactless payments to push up fintech stock prices, and they did, but perhaps frothy valuations.
Thus, the sector has run out of steam in recent months, as evidenced by the BlueStar Fintech index. The index has fallen 17% in recent months.
Market leaders like PayPal and Square have seen their stocks tumble lately, but it could represent a bargain hunting opportunity. The introduction of the Omicron variant, in particular, could get investors to take a closer look at these fintech stocks.
“With speculative foam replaced by reduced expectations bordering on discouragement in PYPL cases and [Lightspeed Commerce Inc.], in particular, we believe it is worth revisiting the product-to-market adjustments that have allowed these companies to emerge as market favorites in the first place â, noted Mark Palmer, BTIG analyst.
A FinTech ETF to consider
Instead of looking at individual stocks, investors can gain full-scale fintech exposure by using the Global X FinTech ETF (FINX). FINX seeks to provide investment results that match the Indxx Global Fintech Thematic Index.
The index is designed to provide exposure to publicly traded companies in developed markets that provide financial technology products and services, including companies involved in mobile payments, peer-to-peer (P2P) lending and markets, financial analysis software and alternative currencies as defined by the index provider. The fund offers investors exposure to:
- High growth potential: In 2020, the number of active online banking users was approaching 1.9 billion worldwide. Forecasts suggest that number could grow to 2.5 billion by 2024, underscoring the vast reach of just one segment of this theme.
- Global Tail Winds: FinTech is a global theme, poised to benefit from expanding mobile internet and broadband penetration that coincides with rising middle class in historically poor developing markets served by traditional financial services.
- Shifting Consumer Preferences: While fintech companies have historically responded to the digital preferences of young consumers, they are increasingly competitive in terms of cost and convenience in a range of more established industries like lending and insurance .
For more news, information and strategies, visit the website Thematic investment channel.