In this article, we will be looking at the 10 best digital money stocks to invest in. You can skip our detailed analysis of the digital payments sector, and go directly to the 5 Best Digital Money Stocks to Invest In.
Just like the COVID-19 pandemic changed how people shop, study, and work, it also drastically transformed the way we pay for products and services. As people started gravitating towards online payment methods and mobile wallets like Apple Pay, the payments sector went through unprecedented digitization. According to Insider Intelligence estimates, digital payments boomed in the retail, real-time mobile P2P payments, remittances, and business payments areas, while the volume of mobile proximity payments reached $131.36 billion in 2020.
With this unforeseen but very real and rapid growth of digitization in the payments, sector, digital money and fintech companies are becoming a more attractive investment opportunity. The growth of the market from 2020 to 2025 is expected to be about 20%, reaching a market cap of $305 billion by the end of the forecast period. Despite, or perhaps because of, the outbreak of the pandemic, venture capital investment in the payments sector and fintech remained strong in 2020. According to KPMG, fintech companies managed to bring in $42.3 billion in venture capital investments during 2020, with the digital banking sector reporting the highest amount of venture capital investment for the year. Additionally, the strategic nature of venture investments in fintech resulted in $75 billion being poured into the sector by corporations in the US. KMPG has commented that because of the enforced move to a virtual and digital setting in light of the pandemic, the value of fintech sub-sectors and the like became more evident, with investors expecting more growth from the sector.
In light of the above, and other developments where notable investors like Warren Buffett and Berkshire Hathaway Inc. have been seen pouring money into companies like Nubank, a fully digital "neobank" in Latin America, one may be tempted to consider the digital payments sector as the next big investment opportunity. According to Bloomberg, Berkshire Hathaway invested $500 million into Nubank while dumping about 84% of its holdings in The Goldman Sachs Group, Inc. (NYSE: GS), marking a clear change in investment preference when it came to the payments sector. Thus, as notable investors begin to shift their attention to the digital payments market, companies like Visa Inc. (NYSE: V), PayPal Holdings, Inc. (NASDAQ: PYPL), JPMorgan Chase & Co. (NYSE: JPM), and Square, Inc. (NYSE: SQ), alongside others with a digital payment sector presence, are bound to benefit. As such, we have compiled a list of the best digital money stocks to invest in.
Investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Without further ado, let's look at the 10 best digital money stocks to invest in. The stocks added to our list below were selected on the basis of hedge fund sentiment, analysts' ratings, fundamentals, and growth potential based on core business strengths.
Sea Limited (NYSE: SE) is a company operating in the digital entertainment, e-commerce, and digital financial services businesses in Southeast Asia, Latin America, and internationally. The company ranks 10th on our list of the best digital money stocks to invest in.
This July, Morgan Stanley reiterated its Overweight rating and $300 price target on Sea Limited (NYSE: SE), while this June, Sea Limited (NYSE: SE) was upgraded to Buy with a $340 price target by BofA, in light of the company's Shopee platform exceeding growth expectations. In the same month, New Street initiated coverage of the shares with a Buy rating and a $325 price target while Bernstein initiated coverage with an Outperform rating.
In the first quarter of 2021, Sea Limited (NYSE: SE) had an EPS of -$0.62, missing estimates by -$0.05. The company's revenue was $1.76 billion, up 92.98% year over year and surpassing the $1.57 billion revenue of the previous quarter, and it has a gross profit margin of 32.95%. The stock has gained 27.46% in the past 6 months and 36.62% year to date.
As of the end of the first quarter of 2021, 98 hedge funds out of the 866 tracked by Insider Monkey held stakes in Sea Limited (NYSE: SE), with a total stake value of roughly $10.43 billion. This is compared to 115 hedge funds in the previous quarter with a total stake value of approximately $10.86 billion.
Like Visa Inc. (NYSE: V), PayPal Holdings, Inc. (NASDAQ: PYPL), JPMorgan Chase & Co. (NYSE: JPM), Square, Inc. (NYSE: SQ), and The Goldman Sachs Group, Inc. (NYSE: GS), Sea Limited (NYSE: SE) is a good stock to invest in.
ClearBridge Investments, an investment management firm, mentioned Sea Limited (NYSE: SE) in its first-quarter 2021 investor letter. Here's what they said:
“Singapore-based Sea maintains leading positions in Southeast Asia in video games and e-commerce and operates an emerging digital payments and banking business. While the company is investing heavily into e-commerce and payments, this growth is being funded by its highly profitable gaming segment. We see a long runway for growth across Sea’s businesses with multiple opportunities like e-commerce expansion in Latin America not fully factored into the valuation today. The company also has a well-respected management team that has successfully executed in expanding its total addressable market. Along with existing holding Alibaba, Sea provides exposure to secular growth trends in emerging markets that are harder to replicate through U.S. stocks.”
Coinbase Global, Inc. (NASDAQ: COIN) is a provider of financial infrastructure and technology for the crypto-economy. The company offers primary financial accounts for the crypto-economy, a platform to invest, store, and spend, or otherwise use crypto assets, and a range of other services. It ranks 9th on our list of the best digital money stocks to invest in.
This July, Oppenheimer raised its price target on Coinbase Global, Inc. (NASDAQ: COIN) from $434 to $444, while keeping its Outperform rating on the stock, and the month before that, Cathie Wood's ARK Investment purchased over 214,000 shares in the company. Canaccord also has a Buy rating on Coinbase Global, Inc. (NASDAQ: COIN) as of this June.
Like Visa Inc. (NYSE: V), PayPal Holdings, Inc. (NASDAQ: PYPL), JPMorgan Chase & Co. (NYSE: JPM), Square, Inc. (NYSE: SQ), and The Goldman Sachs Group, Inc. (NYSE: GS), Coinbase Global, Inc. (NASDAQ: COIN) is a good stock to invest in.
Futu Holdings Limited (NASDAQ: FUTU) is an online brokerage and wealth management platform based in Hong Kong and operating internationally. The company offers trading, clearing, and settlement services, alongside margin financing, securities lending, and stock yield enhancement services. The company's Futu Money Plus brand gives users access to mutual and private funds, bonds, market data, and other services as well. It ranks 8th on our list of the best digital money stocks to invest in.
This April, Futu Holdings Limited (NASDAQ: FUTU) was initiated with a Buy rating and a $195 price target at BofA. In light of the company's positive first-quarter results, especially with the 349.4% revenue growth year over year, its stock gained this May. Futu Holdings Limited (NASDAQ: FUTU) was also dubbed as a "long best idea" by Hedgeye analyst Felix Wang, due to the foreseen growth of new online brokers. In the first quarter of 2021, Futu Holdings Limited (NASDAQ: FUTU) had an EPS of $1.03, beating estimates by $0.42 in the first quarter of 2021, while the company's revenue was $283.56 million, beating estimates by $65.52 million, and it has a gross profit margin of 85.09%. The stock has gained 156.16% in the past 6 months and 200.59% year to date.
As of the end of the first quarter of 2021, 26 hedge funds out of the 866 tracked by Insider Monkey held stakes in Futu Holdings Limited (NASDAQ: FUTU), worth roughly $1.014 billion. This is compared to 17 hedge funds in the previous quarter, with a total stake value of about $334 million. Like Visa Inc. (NYSE: V), PayPal Holdings, Inc. (NASDAQ: PYPL), JPMorgan Chase & Co. (NYSE: JPM), Square, Inc. (NYSE: SQ), and The Goldman Sachs Group, Inc. (NYSE: GS), Futu Holdings Limited (NASDAQ: FUTU) is a good stock to invest in.
Tao Value, an investment management firm, mentioned Futu Holdings Limited (NASDAQ: FUTU) in its first-quarter 2021 investor letter. Here's what they said:
“Futu is a new “Opportunistic” position. It is an HK based online brokerage & wealth management platform with deep root in technology. Futu sits in the confluence of 3 strong favorable forces of Meteorology, Topography & Commander, yet was underpriced at the time of our entry. In terms of Meteorology, there is a huge addressable market of Chinese domestic middle to upper classes’ wealth being deployed to overseas assets allocation in the next decade. Additionally, the incumbents being disrupted are extremely weak in their digital transformation. On Topography, Futu’s user-centric product design built an intuitive front end and great user experience, while the digital native development framework built solid & reliable back end (including a self-developed order routing & execution system for HK market). This is a rare combination compared to both offline incumbents (who lack flashy front end & UX) & other new online disrupters (who lack solid infrastructure). On Commander factor, founder CEO Li Hua was a Tencent engineer in its early days with deep knowledge in product design and development. Li is said to be a fanatic product manager, to this day still at the front-line, alpha testing any new features. Based on analyses of these factors, I think Futu could compound its revenue at a very high rate with very high certainty and with strong operating leverage, putting our entry price very attractive compared to earning power in 3-5 years. Yet just as we finished building a small position, the price started to take off and more than tripled in a month. When such price action happens, it is obvious that Mr. Market has turned very euphoric to this name. I decided to trim but kept a reasonable position given its growth certainty.”
Green Dot Corporation (NYSE: GDOT) is a fintech and bank holding company in the US. The company has two segments: Account Services, and Processing and Settlement Services. It ranks 7th on our list of the best digital money stocks to invest in.
This June, in light of a collaboration with Walmart Inc. (NYSE: WMT) on the Walmart MoneyCard to provide demand deposit accounts for retail customers, Green Dot Corporation (NYSE: GDOT) gained about 4%. The stock was also among the top outperformers this June in the financial sector. As of this May, Truist has retained its Buy rating on Green Dot Corporation (NYSE: GDOT), while Barclays retained its Overweight rating on the stock up till the month before. In the first quarter of 2021, Green Dot Corporation (NYSE: GDOT) had an EPS of $0.83, missing estimates by -$0.04. The company's revenue was $379.81 million, up 9.6% year over year and beating estimates by $19.47 million.
As of the end of the first quarter of 2021, 26 hedge funds out of the 866 tracked by Insider Monkey held stakes in Green Dot Corporation (NYSE: GDOT), worth roughly $513 million. This is compared to 32 hedge funds in the previous quarter, with a total stake value of about $596 million. Like Visa Inc. (NYSE: V), PayPal Holdings, Inc. (NASDAQ: PYPL), JPMorgan Chase & Co. (NYSE: JPM), Square, Inc. (NYSE: SQ), and The Goldman Sachs Group, Inc. (NYSE: GS), Green Dot Corporation (NYSE: GDOT) is a good stock to invest in.
Paysafe Limited (NYSE: PSFE) is a provider of digital commerce solutions to online businesses, SMB merchants, and consumers through the Paysafe Network. The company offers digital wallet solutions under its Skrill and NETELLER brands, and other products and services as well. It ranks 6th on our list of the best digital money stocks to invest in.
This June, Paysafe Limited (NYSE: PSFE) was initiated with an Outperform at Cowen alongside being given a $15 price target. Analyst George Mihalos commented that the company's B2C revenue stream is a "key differentiator," setting the company apart from its competitors. The stock was also initiated with an Outperform and $15 price target at BMO Capital in the same month, while Susquehanna has a Positive rating and a $17 price target on the stock. Paysafe Limited (NYSE: PSFE) has also benefitted from positive attention on Reddit, in light of the stock's addition to the Russell 3000 Index. The company is also partnering with FOX Bet and Microsoft Corporation (NASDAQ: MSFT) currently and is helping the latter add online cash transactions on the Microsoft Store on Xbox through its paysafecard.
In the first quarter of 2021, Paysafe Limited (NYSE: PSFE) had revenue of $377.42 million, beating estimates by $11.08 million. The company has a gross profit margin of 61.47% and the stock has gained 13.07% in the past year. As of the end of the first quarter of 2021, 41 hedge funds out of the 866 tracked by Insider Monkey held stakes in Paysafe Limited (NYSE: PSFE), worth roughly $1.32 billion. Like Visa Inc. (NYSE: V), PayPal Holdings, Inc. (NASDAQ: PYPL), JPMorgan Chase & Co. (NYSE: JPM), Square, Inc. (NYSE: SQ), and The Goldman Sachs Group, Inc. (NYSE: GS), Paysafe Limited (NYSE: PSFE) is a good stock to invest in.
