Fresh off writing about the three most undervalued fintech stocks to buy for February 2023, I’ve been asked to come up with the three best fintech stocks to buy this month. Compared with my undervalued picks, the best fintech stocks are well-known. While they aren’t necessarily mega caps, they have products and services that most investors would recognize.
Unfortunately, now is a tough time to be thinking about fintech investments. TechCrunch recently discussed how even well-funded fintech companies are laying off employees. For instance, on Jan. 31, PayPal (NASDAQ:PYPL), one of the largest fintech companies in the world, announced it would cut 7% of its staff, or about 2,000 workers.
With layoffs in the foreground, perhaps the best fintech stocks are large companies likely to weather the challenging macro environment much better than their smaller peers. You’ll find two of those below, plus a contrarian play. You’re also likely to note that the best fintech stocks to buy now have an international leaning.
|EMFQ||Amplify Emerging Markets FinTech ETF||$22.04|
Amplify Emerging Markets FinTech ETF (EMFQ)
My first pick is the contrarian one of the bunch. Not only am I going with an ETF with the Amplify Emerging Markets FinTech ETF (NYSEARCA:EMFQ), this one invests in companies operating in both emerging and frontier markets that derive at least half of their revenue from fintech.
Emerging markets are widely expected to outperform U.S. equities in 2023 and beyond. In fact, Morgan Stanley analysts expect emerging markets to outperform over the next decade.
“Every decade, there is a new leader in the market,” said Jitania Kandhari, deputy chief investment officer at Morgan Stanley Investment Management. “In the 2010s, it was U.S. stocks and mega-cap tech. Leaders of this decade can clearly be emerging-market and international stocks.”
Interestingly, my next pick, MercadoLibre (NASDAQ:MELI), is one of the EMFQ’s top 10 holdings with a 3% weighting. However, the 10 holdings’ weights narrowly range from 2.97% to 3.92%. That’s because it’s a modified equal-weight ETF that rebalances four times per year.
The weighted average market cap is $26.3 billion with a nice mix between large caps (25%), mid caps (35%), small caps (27%) and micro caps (13%).
“All in all, there’s no question that Amazon’s a great company,” I wrote. “However, when it comes to which is the better stock to buy, I have to go with MercadoLibre. It has a dominant position in a growing market and looks appealing despite the healthy gains it’s already made in 2013.”
Between May 8, 2013, and Feb. 10, 2023, MercadoLibre gained 864% compared with 624% for Amazon. So I wouldn’t put it past the Uruguay-based company to easily outdistance AMZN over the next decade.
In the short term, a $4 billion accounting scandal at Americanas SA — a Brazilian e-commerce company and competitor to MercadoLibre — has helped push MELI stock nearly 22% higher over the past month. Of the 21 analysts covering the stock, 18 rate it “outperform” or “buy,” with a median target of $1,300, 18% above the current price.
Not only is MercadoLibre one of the best fintech stocks, it knows how to keep track of its finances, unlike some of its competitors.
Why do I like the Amsterdam-based company behind one of the world’s largest payments platforms? That’s a good question, especially after its stock fell 15% on Feb. 8 due to its 2022 second-half results missing analyst estimates. Yet, while others are cutting jobs, it’s hiring, which could be a bullish sign.
“Amid a backdrop of widespread tech lay-offs and hiring freezes, we consciously grew our team in order to further scale the business,” the company’s latest shareholder letter read. “During this time, the labor market proved favorable for reaching our intended hiring speed.”
The shareholder letter goes on to explain the timeline for slowing its recruiting: “By the start of 2024, we expect our team to have reached its next maturity level. At that time, we will slow our hiring pace and allow the operating leverage inherent to our business model to kick in.”
This philosophy may spectacularly blow up in management’s face as we make our way through 2023. However, if it doesn’t, Adyen will be far ahead of its competitors. That’s an intangible you can’t put a dollar value on.
It seems Adyen has figured out that it’s better to find things for its staff to do to justify their jobs than cut employees that may need to be rehired 6-12 months down the road. Go Adyen!
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.