Small-cap fund manager names two rapidly growing fintech stocks

Investors should take a look at two small companies that provide financial services through mobile apps, the neobank Dave and insurance marketplace Ethos Technologies, argues Brandon Nelson, a portfolio manager at Calamos Investments. He runs the Calamos Timpani Small Cap Growth Fund, which invests in small stocks with the potential to grow faster than the broader market and has returned 21.2% year to date. By comparison, the Russell 2000, a benchmark for smid caps, has gained 12.3%.

What sets Dave apart is that it offers customers a “less onerous” way to obtain services than traditional players, Nelson told MarketWatch. The company’s main business is short-term lending: it provides loans to customers who run short of money before their next paycheck, so they can avoid bank overdrafts. Dave assesses borrowers in real time using its proprietary CashAI system, without relying on credit scores.

In the second quarter, the company’s revenue rose 30% year over year to $171 million. The Wall Street consensus calls for revenue growth of 32% in 2026 to $730 million, according to MarketWatch. Thirteen analysts have "buy" calls on the stock, while only two rate it “hold.” The average target price of $445.30 per share implies almost 97% upside from the last close.

Life insurance marketplace Ethos Technologies, which sells policies through its mobile app and an app within ChatGPT, is “a new name for investors, probably under-owned and under-followed,” reckons Nelson. In the second quarter, the top line surged 113% year over year to $190 million. “They have a unique model,” Nelson notes. Purchasing life insurance can be a painful process not only for customers but also for agents, who may have to wait a long time to receive their commissions. “With Ethos, it is a quicker turnaround,” the portfolio manager added. 

The company completed a Nasdaq IPO only in January. Since then, its shares have risen 78% to $33.85 apiece. Ethos has nine ratings from Wall Street analysts, all of them “buy.” The average target price is $35.60 per share, just 5% above the last close.