Been thinking about the fintech space lately, and there's this interesting dynamic playing out with the major players. Everyone was hyped on Block for years, but the momentum kind of fizzled when the company lost its way and valuations got out of hand. It's recovering now, sure, but honestly if you're looking at the broader fintech opportunity, there are some plays that might be more compelling right now.

Let me break down two that caught my attention. First up is StoneCo - this is basically the Latin American version of what Block was trying to do, but it's actually executing better in some ways. It's a Berkshire Hathaway holding, which is interesting since it doesn't fit the typical mold of their portfolio. This is a growth play, and it's had its share of rough patches with profitability, but the turnaround story is real.

The numbers tell the story. Last year StoneCo stock jumped 91%. They're doing the same hardware and software play for small businesses that Block pioneered, but they've expanded into banking and credit products. What's key is they're now targeting medium and large businesses too. In Q3 2023, revenue grew 25% year-over-year, their active payments client base was up 42%, and adjusted net income climbed over 300% with a 13.9% margin. That's the kind of inflection point you want to see.

They've had management chaos, regulatory headwinds, the whole thing. But they brought in a new CEO almost a year ago who's actually focused on turning it around. The strategy is smart - they're optimizing the platform and going after bigger customers, which drives better engagement and higher margins. Bigger customers that use the product more are more profitable. That's the flywheel they're building. Trading at a price-to-free cash flow of around 20, it's not a risk-free play, but there's real opportunity here.

Then there's Bill Holdings. This one's more of a niche ecosystem play - they built a back-end platform that handles accounting and payment automation for businesses. It's unglamorous but incredibly useful. Any small to medium business saves money on labor costs by using this.

They've got over 470,000 paying clients on their software, which is recurring revenue - that's the foundation. But they also make money from 5.8 million network members who pay processing fees. In fiscal 2023, revenue jumped 65% year-over-year, though it's slowing to 33% growth in the first quarter of fiscal 2024. That's normal when you're hitting scale and the economy's tight. What impressed me was gross margin actually widened from 80.4% to 81.6%, and they're getting disciplined about expenses while the net loss is shrinking.

Bill stock got hammered in 2023, down 25%, but it's trading at a price-to-free cash flow of 43 - basically the cheapest valuation it's had. As the economy loosens up and companies start spending again, this could run. The management team has a clear roadmap for growth through new member recruitment, higher engagement, and geographic expansion.

Looking at both of these, the fintech opportunity extends way beyond the obvious names. Jennifer Saibil and other analysts have been digging into these stories for a while now, and the more I look at the fundamentals, the more interesting the case becomes. Neither is a slam dunk, but if you're thinking about fintech exposure, these deserve more attention than they're getting.