The stock market has been extraordinarily strong over the past week with the S&P 500 (NYSE: SPY) climbing by 190 points. Some reasons for these gains are the beginnings of what seems like another strong earnings season, usual seasonal strength in Q4, and fund managers who are underexposed and underinvested and likely buyers of stocks into year-end.
These gains have come about despite some real challenges facing the economy. We have a surge in inflation which is actually starting to have a material impact on earnings and margins for companies in certain industries like restaurants. The labor shortage also continues to pose a challenge as several industries are in desperate need of workers.
Every time, the market advances, there tends to be leading stocks and sectors. Previously, we have seen leadership in various sectors like the 'FAANG' stocks, software companies, e-commerce, cloud computing, etc. This time, it's clear that many of the leading stocks in the market are fintech stocks.
To be clear, leading stocks refer to companies that are outperforming in terms of earnings and stock prices. Often, this is happening as their business is also making huge strides in terms of growth and awareness. The following are some of the best-performing fintech stocks:
UpStart Holdings (Nasdaq: UPST)
Upstart Holdings is up by more than 230% since mid-July. The company is a loan originator, so it doesn't take on any credit risk. It has an alternative method to find loan-worthy borrowers and so far has been able to deliver loans with higher than average payment rates.
Lending Club (Nasdaq: LC)
Lending Club is a company that was one of the original fintech companies with its pioneering, peer-to-peer loan system. It struggled out of the gate as the stock fell from its IPO price of $140 to a low of $4.5 in March 2020. Since then, the stock has staged a stunning turnaround and currently trades around $35.
Affirm Holdings (Nasdaq: AFRM)
Affirm is also one of the top-performing stocks in 2021 with a 135% gain since mid-July. The catalyst is that more major retailers like Amazon have adopted its "Buy Now Pay Later" at 0% system of which Affirm takes a cut of the revenue. Of course, there remains considerable doubt about how Affirm would perform in a rising-rate or recessionary environment but in the current climate, its stock and business are positioned to outperform.