The WallStreetBets group on Reddit has taken the investing world by storm, bringing the full force of their power to bear and hitting major institutional investors hard in their wallets. Massive moves higher for GameStop (NYSE:GME), AMC Entertainment Holdings (NYSE:AMC), and others have defied the reasoning of the many short-sellers who’ve bet against their shares.
The message from WallStreetBets’ members seems to be that mainstream Wall Street financiers have had their day in the sun, and it’s time for regular investors to take back what belongs to them. Yet if that’s their goal, there are better companies to focus their attention on than a dying video game retailer and a pandemic-crushed movie theater. I’ll give three candidates that could actually help further their stated mission of democratizing finance for all.
Social Finance, better known as SoFi, is currently a privately held company. However, it’s entered into an agreement with special purpose acquisition company Social Capital Hedosophia Holdings V (NYSE:IPOE) to merge in the coming months, which will result in SoFi’s going public. Already, investors have plowed into the stock, doubling its share price in just a month.
SoFi’s mission is to help people reach financial independence. To do so, the company offers student loans, personal loans, and home mortgage financing. It also more recently added its SoFi Money and SoFi Invest platforms to help people with their banking and brokerage needs. All of these services are available in an integrated app.
SoFi’s technology is attractive to customers, especially younger users who’ve grown accustomed to having full-service functionality at their fingertips. From a business perspective, SoFi has a huge opportunity with its one-stop shop of financial services. The company has already seen considerable success in cross-selling existing customers with new products, and it sees that potential growing in the years to come.
Some are upset with app rival Robinhood for clamping down on stock trading during the past week. That could drive customers to SoFi — and boost the prospects for the SPAC shares that will eventually represent ownership interests in this fast-growing company.
Already among the ranks of publicly traded companies, Lemonade (NYSE:LMND) is aiming to tackle another much-hated area of the financial industry: insurance. In an arena where customers often find themselves completely opposed to the interests of their insurance company, Lemonade is doing things differently.
Lemonade starts by making the user experience as painless as possible, with AI-assisted chatbots that let you buy a policy in minutes or file a claim in seconds. More importantly, Lemonade passes on most of the insurance risk in the policies it writes to reinsurance carriers. That aligns Lemonade’s interests with those of its customers.
Lemonade also has a charitable bent. It reserves enough of a margin to ensure a reasonable profit. But if there’s money left over, Lemonade gives it to worthy causes that its customers help select.
You can find other insurance companies trying to take advantage of digital technology. But Lemonade’s unique combination of features makes it a worthy partner for ordinary people and could well disrupt the entire industry — something WallStreetBets should love to see.
3. Silvergate Capital
Lastly, Silvergate Capital (NYSE:SI) is the sort of financial institution you can see WallStreetBets getting behind. Silvergate has become a specialist in cryptocurrency financing, having built its own real-time payment network that crypto traders and exchanges have flocked to recently.
Silvergate prides itself on lending to clients who’d been turned away by more traditional banking institutions. Even fintech companies beyond the digital currency realm have turned to Silvergate for business banking services. Moreover, with its technological prowess, Silvergate has growth potential that far exceeds what you’d get from a company focusing entirely on banking transactions.
Cryptocurrencies are a controversial area, with some seeing the entire realm as a bubble waiting to happen. However, others see value in the innovation in the area, and Silvergate has found a willing audience for its services. You’d think WallStreetBets would be interested in seeing the company succeed.
Invest in how you want the world to be
It’s always easiest to invest when you believe in the companies whose shares you own. For WallStreetBets, buying shares of GameStop and AMC doesn’t really connect with the message its members are trying to convey. These three stocks would be a better fit — and they stand a better bet of producing gains for their investors in the long run.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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