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While it is now common to criticize Cathie Wood, the fund manager of the popular ARK Innovation ETF (ARKK), she was undoubtedly one of the most defining figures of the brief period of investing in the pandemic era. In retrospect, this period has now come to be defined by the excess of euphoric animal spirits over stock market valuations. That would see SoFi shares soar to just over $25 per common share, a level that now seems so foreign and high to current shareholders. But neither the ARK Innovation ETF, its largest fund, nor the most relevant ARK Fintech Innovation (ARKF) has SoFi (NASDAQ: SOFI). Why is that?

Indeed, Coinbase (COIN) and Block (SQ) are both appearing. But Cathie’s mandate to invest in “disruptive innovative companies” has ruled out SoFi. To be clear here, this is a positive for current SoFi shareholders. While I will refrain from criticizing ARKF’s performance, SoFi’s exclusion from the fund perhaps reflects one of the longer-term bull cases for the company.

SoFi Business Lines


SoFi trading segments are not inherently high-risk, “sexy” trading lines that attract the attention of fast-and-loose traders looking for the next momentum-driven high. Personal loans, real bank, refinancing and insurance. The company’s lines of business are in established sectors that have historically been in demand, are subject to little regulatory scrutiny and will be needed long into the future. Households will need banking services ten years from now, but the same cannot be said for some of the industries supported by Ark.

Stable businesses wrapped in an ecosystem conducive to growth

There is a certainty that accompanies such lines of operations as they are unlikely to be beset by catastrophic industry collapse or regulatory risk. The disintegration of bitcoin and the broader crypto industry, for example, caused Coinbase’s revenue to drop nearly 64% year-over-year for its latest quarter. SoFi does not depend on a single “disruptive” and volatile industry for the bulk of its revenue. This means that even in the general context of economic and stock market chaos since the beginning of the year, the company was able to increase its revenue by almost 54% year-over-year for its last quarter. SoFi’s business operations ecosystem spans a diverse number of stable industries that have been around for centuries, long before the United States was even established as a country. These aren’t inherently sexy, but they are structurally consistent and will be in constant demand. SoFi’s initial acquisition of Golden Pacific Bancorp and the successful decision to obtain a traditional banking license cements its position.

The company remains one of the only major fintech companies after the 2008 financial crisis to swap its non-bank lender moniker for a banking license and essentially join the hat of the same group with which it originally sought to compete. Not a bad move, steady and boring JPMorgan Chase (JPM) reported 10.4% revenue growth with earnings above consensus estimates. This rush to stability attracts a more stable investor base, reduces risk to SoFi’s long-term investment thesis, and increases the likelihood that the company will eventually achieve consistent profitability.

Not all investments have to be disruptive

It is important for shareholders to occasionally review their investment ratings and question their initial belief about an investment. The inherent avoidance of SoFi by one of the biggest celebrity investors of the past decade is not a negative. Additionally, SoftBank (OTCPK:SFTBY) closed its stake in SoFi due to its internal disruptions due to catastrophic losses its Vision Fund suffered following a series of bad back-to-back investments.

The fact that SoFi’s operating segments are not involved in trading non-fungible tokens or the latest cryptocurrency supporting a metaverse bolstered my initial investment conviction. Additionally, while SoFi is not profitable, the company operates in more stable sectors of the economy that are not subject to the capricious whims of the animal spirits of inexperienced retail traders. This greatly increases the likelihood of achieving short-term profitability through non-volatile earnings.

The previous investment environment that pushed SoFi to its previous highs and made Cathie such a popular and dominant investor is likely all but dead with low interest rates a thing of the past. Furthermore, the influx of liquidity resulting from excessive fiscal interventions during the pandemic was unprecedented and unlikely to recur. Therefore, the kind of excessive euphoria that has seen a large influx of retail investors into every Ark trade is now likely a footnote in pandemic history.

A brutal recession, inflation and an increasingly hawkish Fed await us all. Of course, all of this would have an impact on SoFi’s growth, either by dampening demand for loans and banking or by increasing delinquencies. But the fact that the company is not doubly exposed to macro and micro risks is a good thing for its shareholders. I keep buying stocks with the stock price showing great potential over a long-term holding period.