In this article, we discuss the 5 fintech stocks to buy according to Cathie Wood. In order to read our detailed analysis of Wood’s hedge fund performance, stock selection and history, go directly to 10 FinTech Stocks to Buy According to Cathie Wood.
5. Bill.com Holdings, Inc. (NYSE:BILL)
ARK Investment Management’s 13 Portfolio: 0.15%
ARK Investment Management’s Stake Value: $35.94 million
Number of Hedge Fund Holders: 65
Up next on the list of best fintech stocks to buy according to Cathie Wood is Bill.com Holdings, Inc. (NYSE:BILL). The firm operates a cloud-based software which digitizes and automates financial operations for small and medium-sized companies around the world. The company’s list of clients also includes financial institutions and accounting firms.
ARK Investment Management owned roughly 158,000 shares of Bill.com Holdings, Inc. (NYSE:BILL) worth $35.9 million at the close of the first quarter of 2022, representing 0.15% of its total portfolio.
On May 6, BTIG analyst Matt VanVliet maintained a ‘Buy’ rating on Bill.com Holdings, Inc. (NYSE:BILL) shares and lowered the firm’s price target to $300 from $375. The analyst noted that the firm’s business performance is better than nearly every company in the market, with a 179% growth in revenue, 74% organic core growth, and above expectations cash flow and customer additions reported in the quarter.
Bill.com Holdings, Inc. (NYSE:BILL) reported its first quarter earnings on May 5, recording EPS at -$0.08 which beat estimates by $0.08. Revenue stood at $166.9 million for the quarter, above estimates by $9 million and up 179% year-on-year.
Out of all the hedge funds tracked by Insider Monkey, 65 were long Bill.com Holdings, Inc. (NYSE:BILL) at the close of Q4 2021, with combined stakes worth $3.8 billion. The same number of hedge funds were bullish on the company shares a quarter earlier as well.
Alger, an investment management firm, talked about Bill.com Holdings, Inc. (NYSE:BILL) in its Q4 2021 investor letter. The fund said:
“Bill.com Holdings, Inc., was among the top detractors from performance. Bill.com provides cloud-based software solutions that simplify, digitize, and automate complex back-office financial operations for small and medium size businesses. Its software helps customers to generate and process invoices, streamline approvals, send and receive payments, synchronizing data with their accounting system and manage their cash.”
4. Silvergate Capital Corporation (NYSE:SI)
ARK Investment Management’s 13 Portfolio: 0.3%
ARK Investment Management’s Stake Value: $72.04 million
Number of Hedge Fund Holders: 37
Silvergate Capital Corporation (NYSE:SI) operates as a bank holding firm with sizeable interests in fintech products and services. It enjoys a unique dominance in the bitcoin trading market, and recently acquired blockchain-based payment system project called Diem.
B. Riley analyst Steve Moss on May 12 reiterated a ‘Buy’ rating on Silvergate Capital Corporation (NYSE:SI) shares and revised the price target to $235 from $260. The Diem acquisition has the potential to drive substantial growth in earnings, and the analyst holds that the recent sell-off creates an attractive entry point as the current valuation assigns limited value to the Diem acquisition.
For the first quarter of 2022, Silvergate Capital Corporation (NYSE:SI) recorded an EPS of $0.80, outperforming estimates by $0.33. Quarterly revenue grew 92.7% year-on-year to come in at roughly $60 million, beating estimates by $5.1 million.
Cathie Wood, according to the 13F filings for the first quarter of 2022, owned approximately 479,000 shares of Silvergate Capital Corporation (NYSE:SI) worth $72 million, showing an increase of 17% in holding from the previous quarter. In total, 37 hedge funds were long on the company shares at the close of Q4 2021, showing a positive trend from the preceding quarter where 32 hedge funds held positions in the company.
Investment firm Artisan Partners mentioned Silvergate Capital Corporation (NYSE:SI) in its Q3 2021 investor letter. The fund said:
“Silvergate Capital is the leading regulated provider of traditional banking solutions to the digital currency industry (DCI). Notable customers include Coinbase, Paxos, Circle, Binance, Gemini, Jane Street, Fidelity, ICE, PayPal and the CME Group. We believe the company is well positioned to grow as digital assets become an increasing part of the economy. As a bridge between regulated financial markets and the crypto industry, Silvergate has established itself as a core infrastructure layer for trading digital assets. The company provides regulated banking services to the DCI to capture low-cost funding deposits, which can be monetized through its securities and loan portfolio. As of Q3, the company had $11 billion of deposits from over 1,300 digital currency customers and processed $600 million in transaction volumes over the last 12 months through the Silvergate Exchange Network (SEN). Today, the majority of SEN transactions are not being monetized to reduce friction of growing the network; however, we believe this could become an additional profit cycle driver over time as new products are launched or if the technology is adopted for use cases such as cross-border remittance or commerce.”
3. Sea Limited (NYSE:SE)
ARK Investment Management’s 13 Portfolio: 1.31%
ARK Investment Management’s Stake Value: $315.05 million
Number of Hedge Fund Holders: 108
Sea Limited (NYSE:SE) is based in Singapore and deals in the provision of digital financial services, e-commerce and digital entertainment services in Asia, Latin America and around the world. The firm offers payment processing and digital bank services to customers through its brands ShopeePay, SPayLater, and SeaBank. It also owns and operates the e-commerce platform Shopee.
As of the end of the first quarter of 2022, Cathie Wood owned 2.63 million shares of Sea Limited (NYSE:SE) valued at $315 million. This signals a jump of 302% from the previous quarter where ARK Investment Management owned roughly 655,000 shares of the firm.
On May 4, HSBC analyst Piyush Choudhary maintained a ‘Buy’ rating on Sea Limited (NYSE:SE) shares and lowered the price target to $145 from $150. The analyst forecasts the firm’s adjusted revenue to grow 32% year-over-year in the first quarter and expects Shopee’s gross merchandise volume to rise by 40% from last year. The firm’s revenue for the fourth quarter was recorded at $3.22 billion, a jump of 105.68% year-on-year and above estimates by $234.4 million.
108 hedge funds out of the 900+ tracked by Insider Monkey were long Sea Limited (NYSE:SE) at the close of the fourth quarter of 2022. The total value of these holdings stood at $10.05 billion. In contrast, 117 hedge funds held $14.13 billion worth of positions in the firm a quarter ago.
Farrer Wealth Advisors, an investment firm, talked about many stocks in its Q1 2022 investor letter, and Sea Limited (NYSE:SE) was one of them. The fund said:
“Sea Limited had been selling off since its peak in early November of ~$363/share. This was driven by both a general sell off in tech, especially non-profitable tech, and a general belief that its gaming arm (Garena) was experiencing a slowdown due to its flagship game Free Fire. Free Fire has experienced a slowdown for three reasons: it is a victim of its own success, and by the end of Q321, nearly 10% of the world’s population already played the game, and thus reaching new users was difficult; A return to normal with people traveling/going out more and spending less time playing games; and the Indian market imposed a ban on the game due to anti-Chinese sentiment (Tencent is a large shareholder in Sea). We believed that these issues, while worth considering, were a bit overblown, and some of the data we saw from 3rd party sources showed that though Free Fire usage was dipping, it wasn’t too drastic. Thus, we marginally added to the position throughout the quarter. This was a mistake. During Sea’s earnings report in early March, the company guidance for Garena (down nearly 35% yoy) showed that the slowdown was far worse than predicted. Secondly, Shopee (Sea’s ecommerce arm) has pulled out of certain markets (in Europe and India), which long-term is probably the right strategy, but short-term hampers the optionality of the business. After considering this information and the guidance from earnings, we decided to significantly trim the position. In our opinion, management does have a bit of egg on its face from an overly aggressive expansion or as one investor called it, “bull market hubris.” We think management’s moves were mostly logical, it’s just that their failures came during an unforgiving market. While we believe that Sea’s future is still bright (especially with regards to their e-commerce and financial services), it will take a few quarters of strong earnings for them to regain their momentum, and for now the capital can be better spent elsewhere.”
2. Robinhood Markets, Inc. (NASDAQ:HOOD)
ARK Investment Management’s 13 Portfolio: 1.71%
ARK Investment Management’s Stake Value: $410.07 million
Number of Hedge Fund Holders: 24
Next up is Robinhood Markets, Inc. (NASDAQ:HOOD), in which Cathie Wood owns 30.35 million shares valued at roughly $410 million as of the end of the first quarter of 2022. The financial services company operates a popular platform which enables amateur investors to buy and invest in stocks, cryptocurrencies, gold and exchange-traded funds (ETFs).
On May 12, shares of Robinhood Markets, Inc. (NASDAQ:HOOD) jumped 5.03% in a single day after news broke that the CEO of crypto exchange platform FTX Sam Bankman-Fried acquired a 7.6% stake in the firm worth approximately $648 million. FTX is one of the world’s largest cryptocurrency trading platforms and is a competitor to Coinbase and Binance.
Mizuho analyst Dan Dolev on May 2 lowered the firm’s price target on Robinhood Markets, Inc. (NASDAQ:HOOD) to $14 from $19 and maintained a ‘Buy’ rating on the company shares. The analyst attributed the price target decrease to reflect lower market multiples, a cut in guidance, and disappointing execution. The company’s EPS for Q1 2022 was -$0.45, missing estimates by $0.09. Revenue of $299 million for the quarter was also under analysts’ forecasts by $58.2 million.
Hedge fund sentiment was up on Robinhood Markets, Inc. (NASDAQ:HOOD) at the close of the fourth quarter of 2021, where 24 hedge funds were long on the company shares. In comparison, 20 hedge funds held stakes in the firm a quarter ago.
Here is what Claret Asset Management had to say about Robinhood Markets, Inc. (NASDAQ:HOOD) in its Q4 2021 investor letter:
“Robinhood went public at $38 a share at the end of July of this year. After a oneday decline of 8%, it proceeded to rise to a peak of $85 in a matter of 4 days before settling down around $40 in September. Then, we found out that the company does not appear to understand the margin rules that apply to their client’s trades… and got fined by the Securities Exchange Commission. As of today, it is trading below $20, at 57 times earnings, approximately half of its IPO price. Caveat emptor… Buyer beware.”
1. Block, Inc. (NYSE:SQ)
ARK Investment Management’s 13 Portfolio: 4.7%
ARK Investment Management’s Stake Value: $1.12 billion
Number of Hedge Fund Holders: 96
Block, Inc. (NYSE:SQ) is a California-based fintech firm founded by Twitter boss Jack Dorsey in 2009. It provides the technology that enables small and medium businesses to accept credit cards and use tablets as POS (Point of Sale) systems. The company was formerly named Square Inc. Cathie Wood upped her stake in Block, Inc. (NYSE:SQ) by 35% over the previous quarter, and as of the end of the first quarter of 2022, owned 8.3 million shares of the firm valued at $1.12 billion. This makes Wood the largest shareholder of the fintech firm.
On May 12, Mizuho analyst Dan Dolev maintained a ‘Buy’ rating on Block, Inc. (NYSE:SQ) shares and lowered the firm’s price target to $135 from $215. Bitcoin represents less than 5% of the firm’s gross profit, and the analyst feels that identifying Block as a ‘crypto stock’ has prevented it from benefiting from strengthening fundamentals. As of May 12, shares of Block, Inc. (NYSE:SQ) are down 53.81% year to date.
96 hedge funds were long Block, Inc. (NYSE:SQ) at the close of the fourth quarter of 2021, as compared to 98 hedge funds a quarter earlier. The company posted revenue of $3.96 billion for Q1 2022, missing estimates by $179.6 million. EPS of $0.18 was also below consensus estimates by $0.02.
Investment firm Farrer Wealth Advisors talked about the prospects of Block, Inc. (NYSE:SQ) in its Q1 2022 investor letter, stating:
“Block (formerly Square): We ‘adopted’ Block’s stock after the company bought Afterpay, which we were investors in. We had been trimming the Afterpay position throughout 2021 and trimmed again after the acquisition, so the position was quite small. We held onto that small portion, as we did think the acquisition made sense and were excited to see the two companies integrate and for Block to create a closed loop network between merchants and consumers. However, the market punished most highly valued tech stocks over the last months, and we saw the position move against us by over 50%. We are firm believers that when a stock goes against you by 50%+, you need to do something about it. Either trim/sell and reinvest or buy more. In the case of Block, the original reason for holding was to see how the acquisition and integration with Afterpay panned out. The market did not give us the time to see this play out, thus we were not comfortable adding more to the position. Further for the stock to recover to our purchase price, we felt the company’s valuation would need to command a future exit multiple that the market would be unlikely to pay in this environment. Given this, we exited the remainder of the position.”
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