This has been a tough year for holding stocks. Whether you got started with a stimulus check last year or you've been investing for decades, the current bear market has been inescapable.
In the second quarter, when markets were losing ground, billionaire hedge fund managers weren't running away. In fact, they were eager to scoop up their favorite picks at a relative discount.
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Here's why the world's best investors are confident a comeback is around the corner for these stocks.
1. SoFi Technologies
Shares of SoFi Technologies (SOFI 4.55%) shot up after their market debut in late 2020, but the good times didn't last very long. This stock has collapsed 76.5% from the peak it reached in early 2021.
Billionaire hedge fund manager Philippe Laffont and his fund, Coatue Management, clearly expect better times ahead for SoFi's stock. Laffont opened a new position in the all-digital bank during the second quarter, and now Coatue owns around 1.6% of the company.
SoFi got started around a decade ago as the first company to refinance student loans and has grown by leaps and bounds since. Now it has over 4.3 million members who use 6.6 million products.
These days, student loan refinancing is a minor part of SoFi's overall business. Instead, it's rapidly advancing into the lucrative markets for personal, auto, and home loans. Unlike many of its fintech peers, SoFi has a national banking charter that allows it to lend out capital derived from relatively low-interest deposits.
It's a lot more than just a bank. Its acquisition of Galileo in 2020 and Technisys this year have made it the go-to partner for fintech companies and any other type of business that want to set up customer accounts and manage payment systems.
At the end of June, SoFi's technology platform was managing over 117 million third-party accounts. That was 48% more than it had a year earlier. With a leading consumer bank and an industry-leading technology platform, it's no wonder Laffont expects market-beating gains from this stock.
2. Zoom Video Communications
Zoom Video Communications (ZM 3.49%) was the quintessential stay-at-home stock in the early days of the pandemic. It soared in 2020 when it seemed like none of us would ever see the inside of an office again. Now that most of us have returned to business as usual, the shares have plummeted 86% from their peak.
Billionaire fund manager Steven Cohen and his firm, Point72 Asset Management, made their first purchase of Zoom stock in the second quarter. Undaunted by the heavy losses, Cohen added 145,000 shares to the Point72 portfolio during the second quarter. Since the end of June, it's fallen even further.
Cohen's confidence in Zoom is rooted in its impressive profitability. During its current fiscal year, which ends on Jan. 31, Zoom expects $1.4 billion in adjusted operating income. That works out to around 33% of the company's topline revenue expectation.
New products that are increasingly popular among its expanding client base have put Zoom way ahead of the competition. For example, the company launched its cloud-business phone solution, Zoom Phone, in 2019, and it's already surpassed 4 million seats sold.
These days, COVID-related stay-at-home orders are a thing of the past, but this is hardly dampening demand. The company's trailing-12-month net dollar expansion rate for enterprise customers was 120% during its fiscal second quarter, ended July 31.
With plenty of companies still transitioning to hybrid work models, Zoom's bottom line will most likely climb to new heights. Following Cohen's lead and adding this stock to your own portfolio for less than Point72 probably paid looks like a good idea right now.
