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This Stock Is My Best Investment Yet, and I Won't Sell a Single Share

By Matthew Frankel, CFP® – Oct 28, 2021 at 6:22AM

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Despite a gain of more than 2,000%, this stock could still have more upside ahead.

Fintech-giant Square (SQ 2.42%) has been quite the impressive growth story. Over the years, the company has evolved from a niche payment processor into a full-featured financial ecosystem, and early shareholders have been handsomely rewarded. In this Fool Live clip, recorded on Oct. 18, Fool.com contributor Matt Frankel explains why he's not planning to sell any Square stock, despite it being the best performer in his entire portfolio.

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Matt Frankel: Square, I never meant for this to be one of my biggest holdings. I bought Square about a month after its IPO [initial public offering]. My cost basis is about $11 a share. It's in the $250 range right now. I thought this was going to be a tiny position. This really just goes to show if it's a company you're not that sure about but you love its opportunity -- which is where I was with Square when I bought it -- a small position is enough to really create game-changing wealth in your portfolio. So don't think you have to go all-in on a company you are not terribly sure about. If you're right, a small position will still get you there.

Square, since its IPO, has evolved from a niche financial services provider. Remember the little original Square devices that stuck in people's iPhones, that you thought it was so cool when you went to a Farmers Market and you could pay with a credit card? They have evolved from that to a full-fledged financial ecosystem. I had co-founder Jim McKelvey on Industry Focus a couple of years ago. It my last interview before the pandemic hit when I was up at Fool HQ. He was telling me that it's a humble beginnings of the company and how they never really felt where it's going to be today. He actually won a Museum of Modern Art, a MOMA, award for the original Square reader. He's a lifelong artist and finds it really ironic that he won an award for that thing. But really interesting story and they've just really grown into a household name.

People don't even say Square anymore -- the Cash App is the household name. Forty million monthly active users, and they keep building out these adjacent services, which is where the real value is in this company. They've already grown Cash App profit from virtually nothing a few years ago. Now it's $55 per quarter for every monthly active user it's generating in gross profit. A little over 10% of the Cash App user base has bought a stock on the platform, for example. As they keep rolling out adjacent banking services, which will become much easier because Square just opened its own bank. Square Financial Services actually just got a banking charter. It can continue to monetize those users better.

It's not just about user growth -- it's about monetization, which will get much easier in the years ahead as they can continue to cross-sell services. I don't plan on selling a single share, even though I bought a long, long time ago.

Matthew Frankel, CFP® owns shares of Square. The Motley Fool owns shares of and recommends Square. The Motley Fool has a disclosure policy.

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