2 Stocks to Play Soaring Debt - InvestingChannel

2 Stocks to Play Soaring Debt

Proprietary Data Insights

Top Credit Services Stock Searches This Month

#4Ally Financial26,637

Piling Up Data, Piling Up Debt 

As The Juice continues to weave a narrative at the intersection of inflation and consumer debt, we have new data that further sounds the alarm alongside two stock picks one blue chip, one speculative to play the developing situation. 

First, the data to help us connect the dots. 

For most people, housing and transportation represent our two biggest expenses. 

The monthly payment to service both needs is at or near all-time highs: 

  • For housing, with the interest rate on a 30-year mortgage at 7.21%, the monthly payment on a $500,000 loan clocks in at $3,397. 
  • For transportation, as The Juice noted earlier this week, the average monthly payment for a new car financed in Q3 hit $703. Nationally, 14.3% of consumers agreed to monthly payments of more than $1,000. 

There’s a good chance the people who took the plunge on one or both of these expenses this year squeezed their monthly budgets. Not to mention their savings.

Maybe they secured that $500,000 loan with 20% down on a $625,000 property. That’s a $125,000 down payment. Par for the course across the country. 

At the same time, the typical down payment on that $703/month, 5.73% APR auto loan was $6,453 in Q3. 

Between folks biting off more than they could chew this year and others who blew through their pandemic savings already struggling to make ends meet, trouble is brewing in some segments of the consumer economy. 

  • Auto loans past due by 60 or more days hit 1.65% in Q3, the highest number in more than 10 years. You can attribute this data to less well-off consumers who might have paused loan payments during the pandemic.
  • In September, revolving debt (credit cards) rose by just $8.3 billion. The most modest increase in four months. But savings continue to dwindle and credit card debt remains at record levels. This September slowdown could indicate some consumers are getting into trouble with credit, prompting them to slow spending. 

Rising above it all are the more affluent, resilient consumers the big banks keep telling us about. They’re swiping debit and credit cards, making their payments on time, and spending ample disposable income on luxuries such as travel and entertainment. 

Scroll with us for two stock ideas to play both ends of this economic fiddle.


A Long-Term Visa?

Key Takeaways:

  • Debt continues to get more expensive to carry. 
  • For some consumers, there’s no such thing as good debt. But for some financial services companies, debt helps drive business. 
  • This leads The Juice to love a blue chip and a speculative stock in the broad space. 


It’s all interconnected. 

All types of debt mortgage, auto, credit card continue to get more expensive to carry as interest rates rise. 

We already told you about home and vehicle loans. And yesterday, our sister newsletter, The Spill, spoke about how credit card interest rates have hit a 30-year high of 18.7%

As some consumers crunch budgets amid these costs and others spend comfortably as if everything’s cool, the financially and strategically well-positioned are the ones who survive. At the individual and corporate levels. 

Which brings us to stock pick #1 and the credit services stock investors searched for most over the last month in our proprietary Trackstar database, the blue chip. Visa (V), which The Spill made the bull case for in the aforementioned story with several points: 

  • “More than 50% of the company’s sales are outside the U.S., making it one of the most globally recognized names.”
  • While most people don’t think of Visa as a growth company, it has nearly doubled its revenues in the last six years.”
  • “Meanwhile, the firm is rewarding investors along the way. Share repurchases and dividends have returned $2.9 billion of capital to shareholders.”

Visit the full story to see The Spill’s rating and additional thoughts on Visa. 

Now stock pick #2, the speculative play. SoFi Technologies (SOFI). 

On the one hand, we think it’ll be tough for new fintech firms to disrupt traditional banking. (One reason we like JPMorgan Chase (JPM) stock.) 

On the other, this doesn’t mean there’s no room for jack-of-all-trades personal finance companies geared towards millennials and Generation Z. 

That’s what SoFi is. And down roughly 77% over the last year, it’s speculative as hell. 


Source: Google Finance

But it’s also long-term attractive. 

Why? Because, amid the carnage in fintech, SoFi continues to grow and make the right strategic moves: 

  • It added 424,000 members in Q3, up 61% year over year. 
  • Regulators consider SoFi a “national bank,” meaning it can collect consumer deposits and directly fund loans with them. To this end, SoFi members continue to initiate direct deposits with the firm, with total deposits up 86% year over year to about $5 billion. Expect this number to skyrocket for the foreseeable future. 

The Bottom Line: We like Visa and SoFi because we think two things are certain. 

One, consumers will continue to swipe plastic, whether it’s to have fun or to survive. As The Spill explained, Visa takes on little risk here. The company doesn’t hold this debt. It simply takes a cut each time it processes a transaction. 

Two, consumers, particularly younger ones, will continue to seek alternative, one-stop-shop personal financial solutions as life gets more expensive and money harder to manage. SoFi does it all banking, personal loans, student loans, credit cards, and stock and crypto investing. 

The perfect choice for a young set who might not trust banks and prefers the digital alternative. 

The perfect portfolio contains the right mix of stable blue chips that pay growing dividends and long-term speculative plays with realistically attractive stories playing out. Visa and SoFi check the boxes on both ends of this investing fiddle.

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