These days it appears electric vehicles are all Wall Street cares about. But if investors truly care about the growth potential of their portfolios, it’s time to turn to fintech stocks.
Tesla (NASDAQ:TSLA). Nikola (NASDAQ:NKLA). Amazon (NASDAQ:AMZN) and its three mega-capitalization peers. The market is seemingly made up of a small universe of stocks right now. But reality dictates otherwise. Here is one sector investors really need to take a look at.
Fintech — or financial technology — stocks are at the cutting edge of how we make transactions and perform all facets of business. And this is part of a secular trend that’s nowhere near finished.
Let’s explore what three of these fintech stocks are up to, off and on the price chart, and how investors might position themselves more strategically for the long haul in each.
Fintech Stocks to Buy: Square (SQ)
The first of my fintech stocks to buy is Square. Once synonymous with its popular mobile credit card reader for smaller businesses, Square has come a long way. The card reader is still important, but these days the company offers a powerful suite of payment and loan solutions through its hardware and services. There’s more, too.
Square’s loan business is growing, and the company’s Cash App has 24 million active users. Also, despite initial fears Square would suffer amid a Covid-19 shutdown, the reality is looking much different. In fact, it looks more bullish than ever for investors.
Technically, the price chart is in full agreement that the best is still on the horizon for this $56 billion company. On the weekly perspective, this fintech stock is coiled inside a four-week symmetrical triangle pattern that’s followed a breakout to record highs from an irregular corrective W Base.
Earnings are due next week. The report is going to be a catalyst for shares. More importantly, with triangles of this type generally known as continuation patterns, an upside breakout looks strong. I’m favoring an out-of-the-money September $135/$145 bull call spread as a smarter way to deploy capital in Square today.
The next of our fintech stocks to buy is StoneCo. Unlike Square, you may not have heard of StoneCo. But legendary investor Warren Buffett certainly has. His investment firm Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) is a shareholder of this Brazilian-based digital payments giant. For many, that’s enough to buy shares.
Technically, I like what I’m seeing on the price chart as well. The weekly chart shows StoneCo is just clearing its prior all-time high out of its coronavirus corrective base. With two past breakouts to new highs ultimately leading to brief failures, I’m optimistic the third time will be a cleaner and more fruitful affair for investors.
Strategically, as this fintech stock has earnings a month out and its price history isn’t wholly agreeable with my immediate forecast, I’d recommend a flexible, limited and reduced risk collar position as part of a longer-term, core stock holding. One favored play of this type is the October $40/$65 combination.
Fintech Stocks: Tradeweb Markets (TW)
The last of today’s fintech stocks to buy is Tradeweb Markets. Have you heard of it? If not, there’s no reason to worry. Many investors are unfamiliar with the name, but one big-time billionaire is incredibly positive on it.
Tradeweb builds and facilitates electronic marketplaces in a range of asset classes for larger institutional clients. And this $12 billion company has businessman celebrity Mark Cuban’s attention. The Dallas Maverick’s owner and Shark Tank host sees the company helping produce “the world’s first trillionaires.”
To be fair, Cuban wasn’t talking about TW shareholders. Still, that type of support for its clients lends itself to obvious sales and earnings power. As much, I’d reckon today’s oversold and confirmed corrective pullback into a multi-layered support zone is an even stronger point of entry for longer-term Tradeweb investors.
Given this name is set to release earnings Thursday, price confirmation for a new bottom is likely imminent. Alternatively, there are no guarantees. What’s the bottom line? Well, taking this fintech to the bank could always take additional time and perseverance. As much, I’d recommend the October $40/$65 collar as a safer haven with capital market benefits.
Investment accounts under Christopher Tyler’s management own Tradeweb Markets (TW) and its derivatives, but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.