The fintech industry continues to evolve and that’s got investors looking around for the best fintech stocks to buy.
Recently, Umpqua Holdings (NASDAQ:UMPQ), the parent of Umpqua Bank, a smaller banking outfit based in Portland, Oregon, announced that it was selling Pivotus, the company’s innovation incubator that it launched in 2015, to Kony, Inc.
The bank collaborated with Kony, a fintech leader in digital banking solutions, to deliver a seamless experience for its customers. One of the bank’s core products is Engage, which allows a customer to chat online with a specific personal financial expert instead of having to go down to the bank.
What’s interesting is that Umpqua is handing off the incubator now that the digital technology’s been created and implemented bank-wide.
It’s not often that you see a small fintech buy an asset from a $4 billion market cap, but in the case of Umpqua, the bank feels Pivotus is in better hands at Kony, where innovations can thrive and grow, while allowing the bank to continue to benefit from Kony’s creative vision.
Fintech’s future is a bright one. These are the seven fintech stocks to buy now.
Fintech Stocks to Buy: Square (SQ)
Although Jack Dorsey’s other company is probably better known , Square (NYSE:SQ) is having the better year on the markets up 106% year to date — almost five times Twitter’s (NYSE:TWTR) year to date returns.
I’m a big fan of the company’s products which help businesses of all sizes carry out transactions through point of sale and payment processing systems.
I recently suggested that Square was a great stock to buy on the dip because its business was about more than Dorsey or Sarah Friar, its soon-to-be departing CFO, whose announcement she was departing hit the stock pretty hard.
“Square is one of the original fintech stocks. It remains an exciting growth story,” I wrote October 12. “If you’re in for the long haul, I don’t see how it can hurt to buy its stock on the dip.”
Since then it’s rebounded by about 8% but well below its 52-week high of $101.15 set in late September. Unless Square delivers some bad news between now and the end of the year, it likely will retest triple digits.
Fintech Stocks to Buy: S&P Global (SPGI)
Most investors are familiar with S&P Global (NYSE:SPGI) because of its index business. However, in its most recent quarter (Q2 2018), its Indices operating segment generated just 13% of its overall revenue. Leading the charge in the second quarter was SPGI’s Credit Ratings business with 48% of the revenue, followed by its Market Intelligence unit at 28%.
Regarding profits, its indices business delivered a 65% operating margin, significantly higher than any of its other three operating segments, so it’s not time to write that business off just yet.
SPGI is a Dividend Aristocrat, which means it’s increased its dividend for 25 years or more, making it an excellent buy for growth-oriented investors looking for a little income on the side — it yields 1.1% at the moment.
A year ago, I recommended SPGI suggesting it was one of the best non-bank financial stocks to own. A year later nothing’s happened to change my mind.
Fintech Stocks to Buy: CoreLogic (CLGX)
If you work in the real-estate industry, you’ve probably heard of CoreLogic (NYSE:CLGX) because it possesses one of the largest real estate databases in the U.S.
Using data that includes more than 900 million historical property transactions, over 100 million mortgage applications, and more than 150 million in commercial records, it provides clients with value-added data analytics services enabling them to be better owners, managers, and investors of real estate property.
Truth be told, I wasn’t aware of them until CoreLogic announced October 22 that it was acquiring the remaining 72% of Symbility Solutions that it didn’t own for $159.5 million CAD. Symbility’s various platforms help insurance companies modernize their claims process saving time and money.
“CoreLogic has been a supportive minority shareholder and data provider for a number of years and the combination of Symbility’s leading claims platform and development capabilities with CoreLogic’s unmatched property data and analytics is a natural evolution that will benefit our customers, employees and shareholders,” stated James Swayze, Chairman and Chief Executive Officer of Symbility.
On July 25, CoreLogic upped its 2018 adjusted EPS guidance from $2.45-$2.65 to $2.70-$2.85, an indication just how profitable the company is.
Symbility Solutions was wise to sell to CoreLogic because it will become a stronger company as a result. Long term, I’d look for CoreLogic to become even more profitable than it already is.
Fintech Stocks to Buy: Western Union (WU)
Western Union (NYSE:WU) is best known for its wire transfer business that allows people in the U.S. to send money quickly and efficiently to friends, relatives, and business associates in other countries.
Now Western Union is perceived as old technology, but when it first started its money transfer business in 1871, it was revolutionary.
Today, Western Union has over 550,000 agents and 150,000 ATMs and kiosks in over 200 countries around the world. In 2017, it transferred more than $300 billion in principal from one place to another transacting in more than 130 currencies.
It’s indeed a global company.
To remain a global fixture, Western Union has partnered with Paykii and TransferTo to provide U.S. residents the ability to pay the bills and top-up the cell phones of relatives and friends in Mexico, making WU truly a cross-border, cross-currency, mover of money.
“We are pleased to merge technologies to shape a new form of user experience paving the way for even more convenience for our customers,” said Western Union Global Payments president Jean Claude Farah.
“Through the Western Union mobile app, online at wu.com or in person at Western Union agent locations, customers can now pay their bills, or the bills of a loved one, from utility to phone providers in Mexico.”
Little by little, Western Union’s using technology to help families stay connected, and that’s an excellent thing.
Fintech Stocks to Buy: Worldpay (WP)
The reason: The combined company is running on all cylinders, a major participant in the world’s transition away from cash.
In August, Worldpay raised its full-year guidance for both the top and bottom lines. Revenues are expected to be at least $3.9 billion, significantly higher than the $2.1 billion last year due to the merger. On the bottom line, it expects to generate at least $3.93 in adjusted earnings per share in 2018, 17% higher than a year earlier.
“Just two quarters after closing the Worldpay transaction, our combination is already delivering superior results through accelerating organic revenue growth and significant earnings accretion,” said Charles Drucker, chairman and co-chief executive officer and Philip Jansen, co-chief executive officer at Worldpay. “With our leading global ecommerce and integrated payments capabilities, we are uniquely positioned to capitalize on the most significant areas of secular growth across the payments industry.”
The reality is that the winners in fintech will be companies like Worldpay that make the transition away from cash a painless one.
Five to ten years from now, WP shareholders should be rewarded handsomely for their loyalty and patience.
Fintech Stocks to Buy: Envestnet (ENV)
I spent a few years writing about the financial advisory industry in Canada. I learned how vital technology is to a financial advisors’ practice. So the fact that Envestnet (NYSE:ENV) does nothing else but provide independent financial advisors with the tools they need to be successful suggests the company’s got a winning business.
Starting in 2001 by introducing the first web-based wealth management platform for fee-based advisors, Envestnet has grown the business both organically and through strategic and bolt-on acquisitions. Always with the vision of delivering innovative products for its clients.
What’s also great about the Envestnet business model is that it’s following trends in the industry.
An early innovator in the fee-based world, the statistics don’t lie. Advisors are moving to fee-based accounts — $3.6 trillion moved in 2009; it was up to $9.7 trillion in 2017 — suggesting that Envestnet’s got a long runway for growth.
Using long-term subscription agreements and licensing contracts, Envestnet generates 96% recurring revenue, a number that any CEO would be envious.
Since 2007, it’s grown annual revenues and adjusted EBITDA by 24% and 27% a year respectively on a compounded basis.
Profitable growth is a nice problem to have. I recommend you take a closer look at the Chicago-based company.
Fintech Stocks to Buy: Virtu Financial (VIRT)
So far this month, the S&P 500 is down almost 184 points or about 6.3%.
Yet Virtu Financial (NASDAQ:VIRT) is up more than 13.5% in that same time, great news for long-time shareholders, who’ve seen its stock go on a rollercoaster ride in 2018 from below $20 at the start of the year to the high $30s in April and then back down into the low $20s where it currently trades.
Where to next?
The company is said to be talking with Investment Technology Group (NYSE:ITG) about a deal, but nothing is certain at this point. ITG provides brokers and asset managers with trading tools that can improve the profitability of their trades.
Thanks to the acquisition of KCG Holdings in 2017, Virtu’s latest earnings were significantly higher than last year — adjusted net income increased 235% in Q2 2018 to $59.6 million — providing the platform for future growth.
Of these seven fintech stocks, VIRT would be the most speculative of the bunch.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.