The 3 Best Fintech Stocks to Buy for February 2023
Fresh to write about the three most undervalued fintech stocks to buy for February 2023, I’ve been asked to come up with the top three fintech stocks to buy this month. Compared to my undervalued picks, the best fintech stocks are well-known. Although they are not necessarily mega-caps, they have products and services that most investors will recognize.
Unfortunately, now is a tough time to think about fintech investments. TechCrunch recently discussed how even well-funded fintech companies are laying off employees. For example, on January 31, PayPal (NASDAQ:PYPL), one of the largest fintech companies in the world, announced that it would cut 7% of employees, or about 2,000 workers.
With layoffs looming, perhaps the best fintech stocks are large-caps that are likely to weather the challenging macro environment much better than their smaller peers. You’ll find two of these below, plus a contrarian play. You’ll also likely notice that the best fintech stocks to buy now have an international bent.
| EMFQ | Amplify Emerging Markets FinTech ETF | $22.04 |
| MELI | MercadoLibre | $1,104.95 |
| ADYEY | Adyen | $14.17 |
Amplify Emerging Markets FinTech ETF (EMFQ)
Source: shutterstock.com/ZinetroN
My first choice is the contrarian of the bunch. Not only do I go with an ETF with Amplify Emerging Markets FinTech ETF (NYSEARCA:EMFQ), this invests in companies operating in both emerging and frontier markets that source at least half of their own revenues from fintech.
Emerging markets are generally expected to outperform US stocks in 2023 and beyond. Actual, Morgan Stanley analysts expect emerging markets to surpass the next decade.
“Every decade there is a new leader in the market,” said Jitania Kandhari, deputy managing director of investments at Morgan Stanley Investment Management. “In the 2010s it was US stocks and mega-cap tech. Leaders in this decade can clearly be emerging markets and international stocks.”
Interestingly, my next choice, MercadoLibre (NASDAQ:MELI), is one of EMFQ’s top 10 holdings with a weight of 3%. However, the 10 holdings’ weights vary narrowly 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 capitalization is $26.3 billion with a nice mix of large (25%), medium (35%), small (27%) and micro (13%) companies.
MercadoLibre (MELI)
Source: rafapress / Shutterstock.com
I’ve been a fan of MercadoLibre (NASDAQ:MELI) for many years. I think I first wrote about MELI as a stock to buy May 2013 when I suggested it was a better buy than Amazon (NASDAQ:AMZN).
“All in all, there’s no doubt that Amazon is a great company,” I wrote. “However, when it comes to which is the best 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 has already made in 2013.”
Between May 8, 2013 and February 10, 2023, MercadoLibre achieved 864% compared to 624% for Amazon. So I wouldn’t put it past the Uruguay-based company to easily outperform AMZN over the next decade.
In the short term, a 4 billion dollars accounting scandal at Americanas SA — a Brazilian e-commerce company and competitor to MercadoLibre — has helped push MELI stock nearly 22% higher in the past month. Of the 21 analysts covering the stock, 18 rate it “outperform” or “buy,” with a median price 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.
Adyen (ADYEY)
Source: www.hollandfoto.net / Shutterstock.com
Adyen (OTCMKTS:ADYEY) the share is the fifth largest holding in Global X Fintech ETF (NASDAQ:FINX) with a 6.1% weighting.
Why do I like the Amsterdam-based company behind one of the world’s largest payment platforms? That’s a good question, especially after that the share fell 15 percent on February 8 due to second-half 2022 results missing analyst estimates. Yetwhile other cutters are working, it’s hiring, which could be a bullish sign.
“Against a backdrop of widespread technology layoffs and hiring freezes, we deliberately expanded our team to further scale the business,” the company’s latest shareholder letter said. “During this time, the labor market proved favorable to achieving our intended hiring rate.”
The shareholder letter goes on to explain the timeline for slowing recruitment: “In early 2024, we expect our team to have reached its next level of maturity. At that point, we will slow our hiring pace and allow the operational leverage inherent in our business model to kick in.”
This philosophy could spectacularly blow up in management’s face as we make our way through 2023. But if it doesn’t, Adyen will be way ahead of its competitors. It’s an intangible thing that you can’t put a dollar value on.
It seems that Adyen has figured out that it’s better to find things that employees can do to justify their jobs than to cut employees that they may have to rehire 6-12 months later. Go Adyen!
At the date of publication, Will Ashworth did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, with reservations InvestorPlace.com Guidelines for publication.
