This article looks at the 10 best fintech stocks to buy now. If interested, you can also read our piece on the 12 Best Financial and Fintech ETFs to Buy.
Fintech services have become an integral part of our lives in recent years, greatly changing the finance sector. Consumers no longer need to queue up in banks to get their statements, be involved in money transfers, or carry heavy wallets to pay for their groceries in cash only. Mobile banking, credit cards, and digital wallets have revolutionized how people manage their finances.
Global Fintech Industry
A report released in May last year by the Boston Consulting Group (BCG) has projected the fintech industry to grow by over six times to reach a size of $1.5 trillion by 2030, from its current level of $245 billion. The sector’s share of the financial services industry is also forecast to jump from 2% to 7% during this period, with Asia-Pacific set to go past the United States to become the world’s largest fintech market.
The fintech industry in Asia-Pacific is set to grow 27% between now and then, with China, India, and Indonesia leading the drive due to their sizable unbanked population, and a large number of small businesses in these countries. North America, in particular, the United States will, however, continue to remain a critical market and lead innovation in the industry. The market is also projected to significantly grow in the emerging economies of Latin America and Africa.
That said, while the market is set to grow over the coming few years, 2023 was a difficult year in comparison to the boom in the preceding years. According to KPMG, it was the slowest year in the global fintech industry since 2017, with around $114 billion in worldwide investments across 4,547 agreements. Financial experts say high inflation and ongoing military conflicts in Ukraine and the Middle East led investors to become cautious with their spending.
The decline in fintech investments was noticed across various regions, with Asia-Pacific experiencing its biggest slump from $51 billion in 2022 to just under $11 billion in 2023. Investments also halved in Europe, the Middle East, and Africa from $49.6 billion to $24.5 billion. In the Americas, investment slowed 22% during the period. For 2024, the American credit rating agency Fitch Rating anticipates mixed results for fintech companies in North America and Europe, with revenue growth expected, but EBITDA margins likely to remain muted.
Rise of Gen AI in Fintech
Generative AI, or Gen AI, has taken much of the global financial services industry by storm. According to McKinsey, the technology is likely to add between $200-340 billion to the market over the next few years. Fintech firms are actively keeping up with the trend, and making sure they adapt to Gen AI’s capabilities and risks, both. Between 2022 and 2023, the share of fintech corporations that had improved their artificial intelligence capabilities had increased from 30% to 70%. On the other hand, about 90% of the fintech companies surveyed in March this year by McKinsey stated that they had established centralized Gen AI functions. According to experts, the use of this technology is poised to make firms in the fintech industry more agile and efficient over the coming years.
Methodology
Insider Monkey’s database of 920 hedge funds was assessed, as of the first quarter of 2024. We have chosen the 10 best fintech stocks to buy now based on the hedge fund sentiment towards each stock. The stocks are ranked in ascending order of hedge fund holders in each company.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Let’s now head over to the 10 best fintech stocks to buy now.
10. StoneCo Ltd. (NASDAQ:STNE)
Number of Hedge Fund Holders: 41
We begin with StoneCo Ltd. (NASDAQ:STNE), a financial technology solutions provider that connects merchants and partners to conduct e-commerce both in-store and online. The company, headquartered in the Cayman Islands, has well over 3.7 million active payment clients – a majority of them in Brazil. According to Insider Monkey, 41 hedge funds were bullish on StoneCo Ltd. (NASDAQ:STNE) as of Q1 2024, an improvement from 37 during the fourth quarter of 2023.
It is among the best fintech stocks to buy now. Earlier this year in January, Goldman Sachs’ analyst Tito Labarta upgraded the outlook for StoneCo Ltd. (NASDAQ:STNE) to Strong Buy from Hold and anticipates its one-year price target at $21 per share. It is currently trading at $11.72.
The company’s financial results during the first quarter of the year have been impressive as well. Pedro Zinner, the CEO, shared the following remarks in StoneCo Ltd. (NASDAQ:STNE) Q1 2024 Earnings Call:
Our consolidated revenues grew 14% year-over-year (during Q1 2024), which combined with lower other and administrative expenses, led to an increase of 75% in adjusted EBITDA, despite an increase in selling expenses due to the seasonality of investments in marketing and provisions for loan losses. These factors resulted in adjusted net income increasing by almost 90% year-over-year, reaching an adjusted net margin of 14.6%, up around 650 basis points. Our payments active client base increased 33% year-over-year, reaching almost 3.7 million active clients.
9. Global Payments Inc. (NYSE:GPN)
Number of Hedge Fund Holders: 52
Next up is Global Payments Inc. (NYSE:GPN), an American fintech company that offers payment services to merchants, suppliers, and buyers. In 2021, it was named among the Fortune 500 companies and currently ranks 410th in the list. Earlier this month, Zacks Equity Research declared Global Payments Inc. (NYSE:GPN) as a high-rank value stock.
Last year, the company generated $9.78 billion in revenue, with an EBITDA of $4.17 billion, and diluted earnings per share (EPS) of $5.03. Global Payments Inc. (NYSE:GPN) is not just among the best fintech stocks to buy now but also made it to Insider Monkey’s list of the 10 Best Digital Payments Stocks To Buy Now.
8. Nu Holdings Ltd. (NYSE:NU)
Number of Hedge Fund Holders: 63
As of the first quarter of 2024, 63 hedge funds were bullish on Nu Holdings Ltd. (NYSE:NU), an increase from 50 during Q3 and then 54 in Q4 2023. The Brazilian-based digital banking company provides financial services in multiple countries, most notably in Brazil, Mexico, and Colombia.
Nu Holdings Ltd. (NYSE:NU) is among the most promising stocks to buy now across various sectors, with its share price rising 40% over the last year, and is now three times the value it had in January 2023. According to NASDAQ, a primary reason behind this growth has been the company consistently growing its net income for each of the last five quarters.
Baron FinTech Fund stated the following regarding Nu Holdings Ltd. (NYSE:NU) in its first quarter 2024 investor letter:
Nu Holdings Ltd. (NYSE:NU) is a digital bank with operations in Brazil, Mexico, and Colombia. Shares appreciated during the quarter after the company reported strong balance sheet growth and improving margins. New product launches and expansion in newer countries are yielding favorable results. Nu also benefited from inclusion in the MSCI Brazil Index, which prompted buying from passively managed funds. We continue to own the stock because Nu is disrupting the financial services industry in Latin America with its digital distribution and intense focus on user experience. The company has grown to serve over 90 million customers in less than 10 years, largely through word-of-mouth referrals. We believe the company’s superior product offering will drive continued share gains in large and growing markets.
7. Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 65
Block, Inc. (NYSE:SQ) is one of the best fintech stocks to buy now, with 65 hedge funds bullish on its shares, according to Insider Monkey’s data for Q1 2024. This month, Goldman Sachs also upgraded its outlook for the company by reiterating its Buy rating, and analyst Will Nance forecasted a share price target of $80. This was after Block, Inc. (NYSE:SQ)’s outstanding financial performance in the first quarter in which it beat analyst estimates on both total revenue and EPS, posting $5.96 billion and $0.85 respectively against expectations of $5.89 billion and $0.71.
6. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 66
During the first quarter of 2024, 66 hedge fund holders were bullish about American Express Company (NYSE:AXP). It is one of the best fintech stocks to buy, with its share price having risen by close to 40% from $165.95 a year ago on June 22, to its current level of $230 per share. The company’s financial performance remains robust, and its rapid dividend growth makes the stock even more attractive for investors interested in passive income. Earlier this year in March, the American Express Board authorized a further 17% dividend increase, which raised the dividend per common share to $0.70.
Artisan Select Equity Fund highlighted American Express Company (NYSE:AXP), in the first quarter 2024 investor letter in the following words:
American Express Company (NYSE:AXP) shares rose 22% this quarter. This is an interesting case study given our earlier discussion about inflation. American Express operates one of the largest credit card networks in the world. Its revenue is largely a function of a fee rate applied to the dollar value of goods and services that are transacted through its network. That dollar value is, of course, nominal. As inflation pushes up the value of those goods and services as it has for the past few years, American Express will capture that value through its fee structure. The past few years inflation has clearly been a benefit. Aside from its inherent inflation protection, the business is a very strong one. Payments continue to shift toward electronic forms, benefiting American Express. It also has a strong brand that attracts loyal and highly profitable customers that are the envy of the industry. Recent results have been strong with revenues moving nicely ahead of GDP.
5. Fiserv, Inc. (NYSE:FI)
Number of Hedge Fund Holders: 69
American financial technology and services company Fiserv, Inc. (NYSE:FI) is fifth on our list of the best fintech stocks to buy with 69 hedge fund holders, according to Insider Monkey. The company provides financial services to clients across various financial sectors, including but not limited to banks, credit unions, thrifts, mortgages, insurance companies, leasing firms, and retailers. In September last year, the Fortune 500 firm, landed the top spot at the 2023 IDC FinTech Top 100 Ranking of Global Financial Technology Providers.
Over the last year, Fiserv, Inc. (NYSE:FI) has seen multiple ups and downs. While its revenue and operating margins have increased on one hand, on the other, its share price has remained volatile and marred with fluctuations, having dipped 7% since April 1. Analysts cite growing inflation and cut-throat competition in the fintech space as reasons for the volatility. However, they remain optimistic about the company’s financial future, with at least 35 analysts maintaining a ‘Strong Buy’ rating for Fiserv, Inc. (NYSE:FI).
4. Mercadolibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Holders: 79
Next up is Argentine firm Mercadolibre, Inc. (NASDAQ:MELI), which is headquartered in Uruguay but incorporated in the United States. The company operates online marketplaces to facilitate online auctions and e-commerce. Some of its main platforms include Mercado Libre Marketplace, Mercado Pago FinTech, Mercado Fondo (investments), Mercado Credito (loans), and Mercado Envios (logistics).
It is one of the best fintech stocks to buy with 79 hedge funds optimistic about the trajectory of its shares. Mercadolibre, Inc. (NASDAQ:MELI)’s share price has grown 34.96% over the last 52 weeks, enabled by its solid financial performance and business growth. The first quarter of the year has also been impressive, in which the company posted a gross merchandise value growth of over 30% year-on-year in both Brazil and Mexico.
Harding Loevner Emerging Markets Equity Strategy stated the following regarding MercadoLibre, Inc. (NASDAQ:MELI) in its first quarter 2024 investor letter:
Another prime example of how alternative payment systems can boost a company’s core offering is MercadoLibre, Inc. (NASDAQ:MELI), Latin America’s largest online retailer, which we added to the portfolio during the quarter. Since we last wrote about the company four years ago, its management has done a great deal to further differentiate its offerings from those of rivals in a highly competitive industry, leading to market-share gains across the region. In the same way that the company built its own fulfillment infrastructure to improve the customer experience in areas where third-party delivery services were lacking, it has built its own payments and credit infrastructure to offer better shopping experiences to its customers and reduce barriers that have otherwise discouraged e-commerce adoption.
3. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 82
PayPal Holdings, Inc. (NASDAQ:PYPL) is one of the best fintech stocks to buy now. The company is arguably the leader going around in the industry as far as online payments are concerned. During the first quarter of 2024, it generated a free cash flow of $1.8 billion, which will allow the company further flexibility to pursue opportunities that come its way.
It has already been venturing into the complementary side of its business. In 2020, PayPal Holdings, Inc. (NASDAQ:PYPL) acquired e-commerce company Honey for $4 billion. The American fintech giant has also made successful investments in several other big corporations, including a $750 million strategic stock purchase in MercadoLibre in 2019, and a $500 million investment in Uber during the same year.
2. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 148
At the second spot is Mastercard Incorporated (NYSE:MA), the American card payment services corporation, which had a brilliant first quarter in the ongoing fiscal year. Baron Funds is an investment management company whose fund grew 6.33% during the quarter, and credited the gain to double-digit growth in shares of Mastercard Incorporated (NYSE:MA) and Fiserv, Inc. (NYSE:FI).
According to Insider Monkey’s data, 148 hedge funds are bullish about Mastercard Incorporated (NYSE:MA), up from 141 during the fourth quarter of 2023. The company recently announced that it had beaten earnings expectations during Q1 2024, reporting $3.31 per share against the forecast of $3.25.
1. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 166
Visa Inc. (NYSE:V) is the best fintech stock to buy now. According to Insider Monkey’s database, 166 hedge funds are bullish on Visa. The payment technology company is widely acclaimed across the world for processing transactions through its VisaNet network.
The company’s share price has increased 22% over the last year, with one share worth over $275 now. Visa Inc. (NYSE:V)’s financial performance continues to remain robust. In April this year, the company announced that it beat estimates for the quarter, posting $4.66 billion, or $2.29 per share against the projected $4.26 billion, or $2.03 per share.
Wedgewood Partners shared optimism for Visa Inc. (NYSE:V)’s future trajectory in its Q1 2024 investor letter:
In the first quarter, the Company grew earnings per share +11% as payment volume growth was up +8% and cross-border payment grew a solid +16%, adjusted for currency. Beyond their consistent growth and execution, recent regulatory trends have caught considerable investor attention. The Company’s networks and value-added services drive enough economic value to bank customers and retailers that the addressable market for payments should continue growing at a healthy rate for many more years, regardless of recent regulatory changes. Visa’s value-added services can be extended to less-sophisticated, emerging non-Visa networks to help grow the overall payment ecosystem that makes up the vast global payment addressable market. For example, not long after debit interchange rates were regulated last decade, Visa began an aggressive push to allow non-bank 2inancial institutions access to Visa’s networks, which helped drive more interchange volume to banks and offset lower interchange rates. This was a key element that spawned the massive “Fintech” industry that exists today. We continue to expect Visa’s scale and breadth of service offerings will help them drive attractive growth at stellar margins along with the overall payments ecosystem.
Overall, Visa Inc. (NYSE:V) ranks first as the best fintech stock to buy. You can visit 10 Best Fintech Stocks To Buy Now to see the other fintech stocks that are on the hedge fund radar. While we acknowledge the potential of fintech companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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