This Cathie Wood Fintech Stock Just Hit a New 52-Week High—But I’m Not Selling a Single Share

Cathie Woods Ark Invest offers several popular exchange-traded funds (ETFs), and they tend to be fairly concentrated, all holding three dozen or fewer stocks. And one stock that wood seems to have a lot of faith in is SOFI technologies (Sophie -0.61%). The bank innovator is the sixth largest holding in Ark FinTech Innovation ETF (Archf 0.47%)that make up 5% of the fund’s total assets.

You’ll also find about $95 million worth of SOFI stock in the flagship Ark Innovation ETF (Arch -0.57%)and it is also worth noting that the SOFI app is the exclusive distribution partner of Ark Venture Fund (Archivx -0.23%)which allows investors to gain exposure to companies like SpaceX and Openai before their initial public offerings.

To say Sofi’s recent performance has been strong would be an understatement. The stock is up more than 140% over the past six months and just hit a new 52-week high. But here’s why I don’t plan on cashing in anytime soon.

Latest tailwind

One of the most encouraging recent developments is an increase in demand for SOFI personal loans. It started with a $350 million investment from PGIM Fixed Income in mid-2024, but it was just announced that PGIM closed an additional $525 million personal loan securitization deal with SOFI. PGIM, which manages about $860 billion in assets, called Sofi’s personal loan an “attractive investment opportunity.”

This is a big deal, since SOFI doesn’t necessarily want to have billions of dollars of personal loans on its balance sheet (about $17 billion was on its balance sheet at the end of the third quarter). Loan origination and securitization is a much more appealing business from a risk/reward standpoint, and SOFI is also rapidly expanding its capabilities as a third-party loan origination platform, which should generate a growing stream of capital-light fee income.

In addition, SOFI could be a major beneficiary as interest rates come down as well as from political tailwinds. While the pace of Federal Reserve rate cuts is likely to be slower than initially expected, the most likely direction for interest rates in the next few years is still lower. This can help SOFI with lower deposit costs and increased demand for loans (both from customers and from asset managers).

Plus, the Trump administration clearly favors looser regulations for banks as well as lower corporate taxes, both of which could certainly benefit SOFI.

Sofi’s momentum has been impressive

We’ll get another look at SOFI’s latest earnings when it reports its 2024 earnings on Monday, January 27th. But in the third quarter, Sofi’s member base grew by 756,000, its highest single-quarter new member additions ever.

It continues to grow impressively on both sides of its business – lending and financial services. Overall, revenue grew 30% year-over-year, and SOFI produced $214 million in net income compared to a net of $301 million loss a year before.

Not only that, but Sofi’s newer loans are outperforming older vintages, and its banking platform continues to attract customer deposits at an impressive pace.

I do not plan to deposit

Sofi stock certainly looks more expensive than six months ago, but the move is well deserved. Not only does it continue to grow and become more profitable, but its core personal loan business is also starting to gain serious interest from the asset management industry.

In short, Sofi does exactly what I wanted it to do when I first bought the stock, and I have no intention of selling anytime soon.