Before you run out and buy Walmart (NYSE:WMT) or Target (NYSE:TGT), I’ve got another group of retail stocks to buy that have little to do with retailing.
On May 17, Bank of America Securities Analyst Craig Siegenthaler upgraded Robinhood Markets (NASDAQ:HOOD) from “Underperform” to “Buy.” The analyst argued that retail investors were becoming more active in their stock buying and selling, generating more loan revenue, paying for order flow revenue and so on.
A combination of higher interest rates and declining stock markets in 2022 saw retail investors move to the sidelines. However, as we’ve seen in recent weeks, the crazy meme-stock trading that ratcheted up volumes in 2021 appears to be back.
While Robinhood is indeed one option to ride the retail resurgence, here are three other possibilities that will benefit from the increased attention retail investors are giving the markets as we head into summer.
Interactive Brokers (IBKR)
Interactive Brokers (NASDAQ:IBKR) is a good choice for retail investors interested in trading in other markets besides the United States. IBKR offers trading in stocks in 150 markets worldwide.
I follow a company in the UK, Fevertree Drinks (OTCMKTS:FQVTF), which makes high-end mixers for cocktails. You can buy them over the counter.
However, the volume is tiny compared to how many shares trade each day on the London Stock Exchange. Its 30-day average volume OTC is 106. On the LSE, it’s nearly 180,000. So, if liquidity is important, IBKR delivers for its customers.
Other things it provides, besides an extensive number of markets to trade, include fractional shares, the ability to buy more than 11,400 mutual funds, options and many other products.
I recommended Interactive Brokers and two other undervalued Nasdaq stocks in early May. The company increased its number of accounts in 2023 by 25% to 2.75 million. Based on an average of $170,000 per account, that’s $468 billion in assets held on its stock trading platform.
In 2023, it generated $1.55 billion in non-interest income and $2.79 billion in net interest income. The former is for trading fees and others, and the latter is for margin loans.
SoFi Technologies (SOFI)
Retail investors can invest in stocks through SofI Invest, SoFi Technologies’ (NASDAQ:SOFI) stock trading platform.
Investors can buy stocks, ETFs, Options, Mutual Funds and Alternative Funds through an active investing account. Alternatively, they can choose its automated service, which determines the securities in the account based on the portfolio that meets your specific needs.
SoFi’s vision is to attract members, educate them about money and increase the number of products — such as SoFi Invest — over the long haul.
In the latest quarter ended March 31, it had 8.13 million members holding 11.83 million products, an average of 1.46 products per member. If it consistently grows the number of members and the average products per member, revenues and profits will move higher.
One number that grew during Q1 2023 was its home loans. In the first quarter, it originated $336.1 million in home loans, 274% higher than Q1 2023. If it keeps this pace up, home loans will soon become a significant part of its lending portfolio.
In the first quarter, the company had 2.2 million SoFi Invest products, 1% higher than a year earlier. Again, even a 1% increase will make a big difference as the funds invested rise.
SoFi’s business model is how younger Americans will continue to handle their money in the future.
Block (SQ)
Block (NYSE:SQ) competes with SoFi for investment customers through its popular Cash App platform. In addition to buying stocks through Cash App, you can get paid, send money, file your taxes, buy Bitcoin (BTC-USD) and purchase other things using Cash App Pay or Cash App debit card.
An interesting service through Cash App is that you can send stocks as gifts. If you have a young niece or nephew, you can send $50 in Nike (NYSE:NKE) stocks or some other brand they’re into.
Like SoFi and Interactive, Cash App provides fractional shares, so you can set aside a set amount each month or week to buy, automating your investing without paying any fee.
In Q1 2024, Cash App’s gross profit was $1.26 billion, or 60% overall, up 25% from $1.01 billion a year earlier. Square overall had a gross profit of $820 million, 19% higher year over year. Block’s adjusted operating income was $364 million, 614% higher than a year earlier.
Block continues to get more profitable. Retail investors had something to do with that.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
