Posted May 05, 2021
By Ray Blanco
3 Fintech Stocks to Buy in May
Its deceptively simple advice.
Just buy whats working.
Buying what was working in the face of the COVID-19 sell-off steered us to 77% average gains on Nvidia (NASDAQ: NVDA),Amazon.com(NASDAQ: AMZN)andMicrosoft (NASDAQ: MSFT) between last April 8, when we first started pounding that drum, and today.
Thats more than half again the performance of the S&P 500 in that time span.
And now, with anxious investors wondering about the markets next move, the advice is the same buy whats working!
Buying whats working is effective because it helps you avoid losers.
For instance, after a market correction, stocks that have done well for the last six months are 50% more likely to wind up profitable a month later versus those that have underperformed.
Part of that is because markets trend. Stocks that are performing well tend to keep on performing well. But thats not the whole story
Owning whats working does a better job of selecting winners,but almost more importantly, it does an incredible job of disqualifying losers.
Over the last three decades, avoiding stocks withnegativesix-month performance steers you clear of 97% of the names that shed 10% or more in the following month!
Just eliminating that junk means youre in a drastically better position to outperform the market than you would be otherwise.
So whats working now?
The standout sector is financials:
And within financials, its financial technology, or fintech, stocks that are soaring.
Established fintech stocks like Square Inc. (NYSE: SQ) and PayPal (NASDAQ: PYPL) are having great years and they could get even better as an onslaught of fintech IPOs helps buoy what passes for a sane valuation in 2021.
And tech-heavy incumbents like Visa Inc. (NYSE: V), which just spent $5.3 billion acquiring fintech firm Plaid last year, are roaring too.
Now looks like as good a time as any to add a little fintech tilt to your technology stock portfolio.
As I mentioned a moment ago, theres a large stable of now-private fintech firms looking to hit the public markets this year (and a handful of recent IPOs). These upstarts trade for some pretty wild valuations right now. And we wont be able to say if theyre working for a while yet.
Thats why it makes sense to focus on established financial tech names that are in uptrends.
Meanwhile, were also seeing a shift toward strong performance in smaller tech stocks this year. More on that soon. Stay tuned!
Jonas Elmerraji, CMT