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Markets have faced turbulence in recent weeks. The Standard & Poor’s 500 Index dipped as much as 10% in the first month of the new year, and many growth stocks took a hit.
However, it’s important to remember that investing is a long game, and growth stocks can see big up-and-down moves along the way. One area with tremendous growth potential for investors with a higher tolerance for risk is fintech stocks. That’s because these companies seek to disrupt the status quo, leveraging technology to change the way finance is done. Three fintech stocks you can buy today are Silvergate Capital (NYSE:SI), Upstart Holdings (NASDAQ:UPST), and BlackRock (NYSE:BLK).
1. Silvergate Capital
Silvergate Capital is a powerful growth stock because of its focus on serving cryptocurrency customers going back to 2013. The company has a first-mover advantage, serving as a partner to companies in the crypto industry early on, when the regulatory environment was complex and underdeveloped.
Silvergate’s early product for cryptocurrency companies was its Silvergate Exchange Network (SEN). The SEN is a payments network that allows customers — like Coinbase or Binance — to transfer U.S. dollars between exchanges regardless of the exchange.
Silvergate Capital is an important piece of the cryptocurrency ecosystem for this reason. It facilitates trades on these various platforms and helps them function smoothly. For example, when you trade on a platform like Coinbase or Binance, the dollars are essentially moved around in Silvergate accounts. This has also allowed it to grow noninterest-bearing deposits significantly — which should give the company an added boost in earnings from rising rates.
The company missed on estimates for both revenue and earnings per share in the fourth quarter, and its stock stumbled. Investors need to understand that there’s a strong relationship between Silvergate’s stock and Bitcoin prices. Although the company has worked to reduce the correlation between the two prices, the company’s business still fluctuates as cryptocurrency prices fluctuate. However, with Silvergate down about 50% from its peak reached in early November, now looks like a good time to add a little more of this fintech to your portfolio.
2. Upstart Holdings
Upstart Holdings is another beaten-down fintech. After peaking at more than $400 in October, the fintech has seen its stock shed more than 75% of its value.
Upstart is a company that makes loans to consumers. Its founders were tired of seeing millions of creditworthy individuals left out of the financial system and developed technology to allow them to participate.
The company aggregates consumers’ demand for loans through its website and app and then uses artificial intelligence (AI) to quantify the risk of those loans based on 1,600 variables. It then connects those loans to banks instead of holding them on its own books and servicing them. The company says 71% of its loans are processed automatically and approved in real time.
Upstart shareholders should pay attention to falling savings rates and rising credit-card balances. As credit-card balances grow, delinquencies could begin rising, putting Upstart’s AI consumer lending model to the test.
Upstart was one of many growth stocks taking a hit in recent months. Last September, the company traded at a price-to-sales ratio (P/S) of more than 60, while its price-to-book (P/B) value topped out at more than 40. In recent months, these have come down drastically, with a P/S of 13.4 and a P/B of 10.7. While many unprofitable companies have been battered in recent months, Upstart has been profitable every quarter since going public in late 2020 — and now could be a good time to add to your position in this stock.
You are likely familiar with BlackRock’s slew of exchange-traded fund (ETF) options in its iShares products. The company has dominated markets with its ETF options and recently crossed $10 trillion in assets under management.
However, BlackRock is an under-the-radar fintech opportunity, thanks to its technology product called Aladdin. Aladdin is one product that Chief Executive Officer Larry Fink is optimistic about, and for good reason. Aladdin is the technology at the core of BlackRock’s business and why the firm has been able to scale to such great heights. The technology is an investment- and risk-management system that BlackRock has used for decades, but it has only made this technology widely available for big investors in recent years.
BlackRock has made several investments building up its Aladdin offering. It added tools that let investment funds manage their risks for both public and private investments in the past few years. It also invested in technology that will allow investors to see the climate risk to their portfolios.
BlackRock still makes a vast amount of money from its ETFs, making it a solid stock to own already. However, with its Aladdin product, BlackRock is set up to capitalize on its fintech offering, which could propel the business even higher.
In 2021, the company earned $1.3 billion from technology services, with its Aladdin product as the main source of revenue. Not only that, but its technology products have grown at a 17.7% compound annual growth rate since it began breaking out these revenues separately in 2018. So while BlackRock may not be a young up-and-coming fintech, it has an under-the-radar fintech opportunity that makes the stock hard to ignore.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.