Here’s one of my favorite pieces of investing wisdom: It’s time in the market, not timing the market, that matters. So if you’re looking to build wealth, don’t waste your time day trading. Only 3% of day traders actually make money, and less than 1% make more than minimum wage, according to a recent study. Instead, aim to buy and hold high-quality stocks over long periods.
Building on that idea, Riskified (NYSE:RSKD) and SoFi Technologies (NASDAQ:SOFI) look like good candidates for your hard-earned dollars. These companies should benefit as trends like e-commerce and digital finance become more popular, and both stocks have significant upside potential.
Here’s why.
Image source: Getty Images.
1. Riskified
The e-commerce industry has grown rapidly in recent years, and while this trend has certainly been positive, it has made combating fraud more difficult. Today, many businesses rely on in-house systems to determine the legitimacy of online transactions, and these solutions are frequently slow and inaccurate, resulting in lost revenue due to false declines and increased costs due to fraud-related expenses (e.g. chargebacks).
That’s where Riskified comes in. Its platform leans on artificial intelligence to verify online transactions, automating the approval or denial process with 99.8% accuracy. Specifically, Riskified captures hundreds of data points per transaction, then correlates them with past transactions to quantify risk. And the results speak for themselves. The 10 largest merchants on its platform have seen an 8% uptick in revenue and a 39% decline in fraud-related expenses, but those figures are as high as 20% and 60%, respectively, for some merchants.
Moreover, Riskified actually assumes liability for all fraudulent transactions, while guaranteeing minimum approval rates. That value proposition has translated into strong growth.
|
Metric |
Q2 2020 (TTM) |
Q2 2021 (TTM) |
Change |
|---|---|---|---|
|
Revenue |
$140.1 million |
$205.5 million |
47% |
Source: Riskified SEC Filings. TTM = trailing 12 months.
Investors should also look at Riskified’s retention rates. In 2020, the company reported gross retention of 98% (meaning it lost 2% of its customers) and net retention of 117% (meaning the average customer spent 17% more). Those are strong numbers, but if you exclude businesses heavily impacted by the pandemic (e.g. ticket sales and travel), gross and net retention rates were 99% and 158%, respectively.
Looking ahead, Riskified should benefit from industrywide tailwinds. According to Juniper Research, e-commerce fraud will exceed $25 billion by 2024, meaning a significant number of illegitimate transactions will be approved. And on the flip …….
Source: https://www.fool.com/investing/2021/10/27/want-to-get-richer-buy-these-top-stocks-and-wait/