How I Found Our Next Bet On A Fintech Future…
Did you know that legendary Fidelity money manager Peter Lynch found some of his biggest winners by taking his daughters on frequent trips to the mall?
It’s true. Lynch would use his keen powers of observation to observe teenagers in their natural habitat. Where did they eat? What clothes were fashionable? Which stores had the longest checkout lines?
You never know where or when investment inspiration will strike.
Lynch took charge of the Fidelity Magellan mutual fund in 1977 and retired in 1990 after turning the $18 million portfolio into $14 billion. During his tenure, he bought more than 100 stocks that went on to deliver 1,000% gains. Lynch crossed paths with many of these 10-baggers during his daily routine, such as Dunkin Donuts (he liked the coffee).
Of course, the retail world looks a lot different these days. Good luck gleaning actionable intel from a group of kids staring at their phones. Still, considering it accounts for two-thirds of GDP, it never hurts to have your finger on the pulse of consumerism. And Lynch’s core mantra is just as applicable today as it was back then: Invest in what you know.
You might have heard a similar story about Warren Buffett. Buffett famously drinks five cans of Coke (or cherry coke) daily. No wonder Berkshire Hathaway owns 400 million shares of the beverage giant.
This philosophy goes deeper than just what’s in your fridge. Your occupation can be a valuable source of insight into a specific market corner. Who better than a house painter to spot early trends for a company like Sherwin Williams (NYSE: SHW)? But even a casual association with a product or service can often lead to your next potential portfolio candidate.
For example, I’ve been studying German language tutorials for a planned trip to Oktoberfest in Munich next year. That’s how I discovered Duolingo (Nasdaq: DUOL), which just happens to be a new publicly-traded entity.
The foreign language app is one of the most popular mobile downloads, having already attracted nearly 50 million monthly active users (MAUs). The company collected $88 million in revenues from advertising and subscriptions last quarter. Bookings bode well for continued growth, increasing 50% versus a year ago.
Those are certainly impressive numbers, but Duolingo will have to stay on the radar for now.
Instead, the inspiration for my most recent recommendation over at Takeover Trader came from a humble source: a mailbox flyer.
How My Latest Pick Came From The Mailbox
You see, I’ve received two or three flyers in our mailbox from a certain bank. As the co-signor for my oldest son (now a college sophomore), I am always looking for better rates. Unfortunately, like many of you, we aren’t eligible for much in the way of federal aid. Uncle Sam barely lets us borrow enough for textbooks.
So the only resort to bridge the gap is private loans from an outfit like Ascent or College Ave. There are currently about $140 billion in private student loans outstanding. While nowhere near the scale of $1.6 trillion in federal loans, this is still a colossal amount of money. And it’s growing faster than the U.S. auto loan or credit card markets.
You’ve no doubt heard of President Biden’s student loan forgiveness program. Here’s the thing: it doesn’t apply to private student loans. They are excluded. So private borrowers are understandably feeling a little miffed.
The Biden administration also announced that the payment moratorium would be lifted in a few months. Politics aside, this development could be a positive catalyst for our online bank. The average borrower has racked up $37,000 in student loan debt. Many owe $50,000 or more. Needless to say, there is little incentive to lower your monthly payment when you aren’t even making monthly payments.
I’m a fan of this sector, which is not only fertile ground for M&A activity but also benefiting from rising rates and widening profit margins.
Not to mention that the bank just so happens to be an online bank. And after doing some digging, even calling it that is a bit of a disservice because it’s really more of a Fintech play.
My Next Bet On A Fintech Future
In case you aren’t familiar, fintech is shorthand for financial technology. It refers to things like software, apps, or other technological solutions that help improve efficiency and the overall experience for customers (and institutions) in the financial world (think payments, banking, etc.)
Some well-known fintech innovators have already upended the existing electronic payments infrastructure. Perhaps the most notable of these fintech innovators is PayPal (Nasdaq: PYPL), which spun off from eBay (Nasdaq: EBAY) in 2015. Square (NYSE: SQ) is another powerful player in this arena.
Both of these players probably have a good deal of growth ahead. But as I’ve written in the past, a whole host of smaller, lesser-known names are poised to disrupt banking and finance in the months and years ahead, too.
My latest pick over at Takeover Trader has grown by leaps and bounds over the past decade without the operating overhead from maintaining costly brick-and-mortar branches. Over the past two years, its customer base has ballooned from 1.2 million to 4.3 million – an increase of 250%.
This online financial supermarket offers a full suite of traditional products and services … checking accounts, credit cards, mortgage loans, and commission-free investment platforms. But its bread-and-butter happens to be student loan refinancing – which is why that flyer was addressed to me in the first place.
Once the student loan payment moratorium is lifted, that will likely mean triple-digit growth across almost all of its product lines. In the meantime, investors can pick this stock up for just a fraction of what it was worth just several months ago.
Right now, the market is valuing this stock like it’s a lender. But it’s much more than that – which is why I think it has triple-digit upside potential. And if an acquirer comes knocking (JP Morgan, for one, has been a consolidator in this space), then that potential could be reached sooner than you might think.
And while I can’t share the name of this pick with you today, I want you to understand that you will be hearing a lot more about the fintech revolution in the months and years ahead. In fact, I predict a significant share of the market’s biggest long-term winners over the coming years will be fintech names.
In the meantime, I just recently made a prediction that retail giant Amazon will look to take on the credit card giants by acquiring a name in this space.
And if that happens, then investors in the target company could enjoy a massive payday. My new report reveals what you need to know about this one-of-a-kind takeover opportunity. Go here to learn more now.