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Fintech: Boom or bubble?

I really hate buzzwords. And especially ones that are created by some clever so-and-so consultant to try to smarten-up something he’s selling.

Step forward ‘Fintech’.

Now, to be clear, I don’t hate (all of) the companies that are given that tag, I just hate the tag itself.

I hate it because it’ll cost investors money. Lots of it.

Remember ‘’, ‘graphene’, ‘lithium’, ‘pot stocks’? If you’re lucky, you don’t. Some of the companies in those categories did well: Amazon is now a 300-bagger, for the record.

But most did terribly. A label like that is how companies get you excited about their company, and buying their shares. It’s marketing 101, but it’ll probably hurt you.

So the new one is ‘Fintech’. And, as with all of those before it, there’s a heap of guff, but some gems amidst the gloom.

And like all of these sorts of bubbles/fads, there’s truth at the core. Software is revolutionising the world, especially when distributed through the cloud. Some of these companies are tomorrow’s winners. Some are tomorrow’s chaff.

Some of the better ideas are the newer businesses: think WiseTech Global Ltd (ASX:WTC), for example. And then look to 1-Page Ltd (ASX:1PG) to see what can go wrong.

Here’s my tip: ignore the label. Look at the business. The strategy. The future. The financial statements(!).

Then, tread carefully.

The opposite of ‘fly-by-night’ fintech hype might be dividend stocks. And for good reason.

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Motley Fool contributor Scott Phillips (TMFGilla) has no position in any stocks mentioned. The Motley Fool Australia owns shares of WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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