Many may be puzzled as to why we are taking opposing positions on Ford (NYSE:F) and Tesla (NASDAQ:TSLA); However, there is a significant disparity between the majority of automakers and Tesla due to the lifecycle of the industry and how investors value the respective stocks.

This article covers Tesla’s outlook given a surge in commodity prices. There has been a contentious debate where some have taken a stand and asserted that rising metal prices will increase variable costs and lead to less growth, while others argue that rising fossil fuel prices will trigger a buying spree for electric vehicles. This article takes a bird’s nest view and dissects both sides of the argument structurally and in reduced form.

Recent growth

Efficiency

I was quite surprised when I came across these measurements. I’ve analyzed the business segments of a few large companies over the course of my career, and we typically look at segment revenue and cash flow relative to CapEx while considering the level of CapEx relative to the past. I will, however, talk about Tesla’s company-wide metrics.

Tesla’s CapEx, which is its internal reinvestment rate, increased by 14.97x year-over-year as production ramps up, expansion into Texas with headquarters, factory expansion in Germany, and Chinese market penetration .

That being said, Tesla’s cash flow to CapEx has increased 3.4x over the past year, its Capex to revenue has improved by 62.80% and its operating margins improved 2.1 times. Keep in mind this was during a time of rising input costs.

Expansion

It is also clear that Tesla management anticipated an increase in demand with an increase in finished products. You typically want to look at the entire pipeline of raw materials, work in progress, and finished goods and look for alignment when determining demand. It’s obviously an internal way of looking at things, but it gives substance.

Finally, for this section, I would like to provide an overview of business expansion in China. Although Tesla’s sales in China fell by 5.6% month-over-month for February, it still produced 200% year-over-year growth, suggesting it is entering a robust consumer market with a vengeance. It is critical for a business to grow globally when it is susceptible to sales volatility; in effect, it allows it to no longer rely on the health of a single geographic consumer base and, in turn, to reduce the risks associated with the outlook for its stock. I see huge benefits for Tesla’s expansion into an economy with a huge GDP to say the least.

Commodity Price Analysis

Much has been made of the commodity price spike and its impact on Tesla shares. While this will impact the company’s variable cost, I don’t think it will have a massive impact on its share price.

Historically speaking, Tesla investors didn’t hesitate much when metal and mineral prices rose, in fact there was a positive correlation.

Why could this be? Well, the stock market is looking forward and probably separating Tesla’s hypergrowth model from transient/highly elastic inflation. Don’t get me wrong, I think rising metal prices will have a massive impact on many auto stocks, but Tesla’s “best in class” status could prevent it from being correlated with other auto stocks. .

Additionally, Tesla’s status is still that of a Veblen product that serves a niche market, allowing its sales to be less susceptible to negative macroeconomic factors than more traditional automakers. Many analysts have argued that rising fossil fuel prices are a reason consumers are turning to electric vehicles. I think this is invalid because I don’t see how the masses would refinance a new vehicle when they are already financially stressed in the first place. Moreover, non-core inflation is more elastic than core inflation; most people who can finance vehicles have enough life experience to know that energy prices will trade in equilibrium over the lifetime of their car ownership (assuming they don’t change in any way maniacal). Thus, I see Tesla as a trend rather than its efficiency contributing to mass purchases; otherwise, we would have also seen the previous electric vehicles selling like hotcakes?

To wrap up this section, I’d like to touch on a few macro factors. First, the commodity price spikes ex-post and in their current form have been mostly driven by push factors. I believe there was a massive overreaction during Covid-19 and subsequently with the Russian-Ukrainian conflict. I’m not saying in a linear way that commodity prices won’t be high for the foreseeable future, however, commodity prices tend to top in the short term and stay down in the long term, and that Won’t surprise me if traders soon overreact on the downside.

Let’s look at purchasing power and reopenings to provide a potential trade-off scenario.

First, consumer purchasing power has declined significantly over the past year, suggesting that we are likely to experience lower demand for industrial and precious metals in the near term, as they are directly tied to general consumption expenditure. To contextualize, you will only produce items at a rate that you expect consumers to buy, unless you are in a niche market like Tesla.

Second, we are seeing less stringent Covid policies. Reopenings will likely increase capacity for metal producers, which will likely contribute to price headwinds.

So, to sum up, I’m not implying that commodity prices will be cheap (relative to break-even point) over the next few years; however, I would argue that current price levels are overblown, and it’s clear that Tesla’s stock is forward-looking, meaning it’s unlikely to be as sensitive to transient commodity costs as it is. other industrial/consumer discretionary goods.

Evaluation

Many look to Tesla’s price/earnings ratio and its other price multiples to conclude that Tesla is overvalued, but that’s too simplistic a way to go about it. First, let’s justify the company’s PE.

Source: Alpha Research

Yes, Tesla’s PE ratio is outrageous, but if we look at its PE versus earnings growth, it’s actually still an undervalued metric. The PEG ratio has a value threshold of 1.00 and, in the case of Tesla, suggests that its earnings growth is currently outpacing its stock growth by about 3.85 times, leaving investors plenty of room to maneuver. to capture value.

The second argument is for an asset-based valuation, which gives us a fair value of $863.25. That in itself suggests the stock is undervalued based on past results, let alone future growth. If you see a stock trading at its current net asset value, you know it is valued by the market and trading rationally; however, Tesla is undervalued.

Enterprise Value (EV)	$880.34 billion
Cash (NYSE:C)	$17.71 billion
Market value of debt (NYSE:D)	$8.90B
Outstanding shares (NYSE: N/A)	1.03 million
The formula	(EV – D + C)/SO

Source: Alpha Research

Risks Explained

Although I have argued that rising commodity prices will not have a massive effect on Tesla stock, there is still a need to discuss the risks associated with it. I’m going to skip the obvious of rising variable costs, and I’m going to address hedging activities. To our knowledge, Tesla is not hedged against commodity prices, and that’s a bit of a rookie mistake; as a manufacturer, you would always want to hedge against input costs. I don’t know if Tesla has initiated any hedges since publishing its 10-K report in February. However, failure to do so could harm the effectiveness of the company’s financial management.

Also, from a stock perspective, Tesla has a worse Sharpe ratio than last year. The Sharpe ratio is a function of expected return relative to overall market volatility.

Why should this matter? Because you are essentially invested in a risky asset that does not justify the returns as well as in the past, therefore switching to an investment with more positively biased returns could be a valid option.

Last word

Tesla shares have a history of fending off rising input costs. The company has produced robust growth efficiently over the past year, which has also driven prices higher. Its expansion into China bodes well, given that it is less dependent on a single economy. The stock is also still undervalued, contrary to popular opinion.

We remain bullish on Tesla despite rising input costs.

It is one of the most popular real estate investment trusts (REITs) in the market today and pays a high yielding monthly dividend. It also operates in a sector poised for a serious rebound in the coming months. So maybe retail oriented Real estate income (NYSE:O)currently priced at just over $66 per share, may reach $100 before the end of this year.

That could be a tall order, though. In its nearly 30-year history as a publicly traded entity, the REIT’s all-time high stock price was just under $80 per share. Here’s my take on possibly breaking that much-vaunted $100 level by next New Year’s Eve.

A true commercial power

There’s no doubt that Realty Income has the size, reach, and notoriety to jump into the triple-digit club. That’s huge, even by the standards of the well-capitalized REIT segment, with a dizzying portfolio of 11,136 properties in its portfolio as of December 31 last year and a market capitalization of $39 billion.

It is also a model retail REIT in the way it manages to grow its business. Regular rent increases are built into her rental agreements, and she has the financial muscle to not only maintain that portfolio, but to constantly expand it. Last year alone, it invested more than $6.4 billion in 911 properties, many of which were under development or expanding.

Realty Income also has the dosh for doing a bit of shopping in addition to building portfolios. Last year, for example, it completed the acquisition of another REIT, Vereit, in an all-stock deal.

The problem with being such a big player, however, is that it becomes exponentially harder to achieve significant growth (one of the reasons big companies like to make acquisitions; they add size quickly).

For 2021, Realty Income was, as always, profitable and growing. The full year saw the REIT increase revenue by 26% compared to the 2020 tally. Meanwhile, normalized funds from operations (FFO, widely considered the most important profitability metric for REITS) lagged only slightly, at a clip of 23%.

We must bear in mind that the latter part of 2021 has seen the world slowly emerge from what we hope is the decline of the coronavirus pandemic. Year-over-year comparisons were expected to be favourable. Still, the company has done a good job of growing its business over the years, albeit not usually at such high rates.

New month, new payment

For REIT investors, stock fundamentals are only part of the equation. Since REITs, with their relatively high dividend yields, are popular with income investors, their payouts really matter. Realty Income is way ahead of the pack here, as it distributes its distribution monthly as opposed to the much more standard quarterly of so many other dividend-paying stocks.

Since it goes by the name of “The Monthly Dividend Company”, this frequency – and the payment itself – are fundamental. Realty Income is a dividend aristocrat and more, as it has declared dividend increases multiple times a year since 1998 (a company is only required to do so once a year to achieve aristocrat status).

While being a monthly-paying aristocrat is a very attractive quality in a dividend-paying stock, that in itself doesn’t make Realty Income payout superior, however.

The company’s all-important dividend yield is 4.3% at the moment, which is good relative to non-REIT income stocks, but more or less in the middle of the REIT spectrum. He beats Federal Real Estate Investment Trustis 3.6% and Digital Real Estate Trustis 3.4%, for example. But it is eclipsed by the nearly 5% of Domestic commercial properties and WP Careyis muscular 5.4%.

Crossing the $100 barrier

So, given all of this, does Realty Income have a good chance of hitting the $100 mark this year?

For all its benefits, power and dividend appeal, I would say no. I think the recovery in the retail sector due to the apparent waning of the coronavirus pandemic is already priced into the stock price. I don’t think that in the next three quarters Realty Income’s business will grow dramatically and unexpectedly high enough to drive its value more than 50%.

Don’t get me wrong, I really like Realty Income. I would be very happy for the company and its many shareholders if it reached unprecedented price levels. But it’s a massive operator in a retail sector that, aside from the occasional frightening global pandemic, rarely sees monster growth spurts/recovery.

So, if I were to look into my crystal ball, I would probably witness the stock price rise…but not to heights as high as $100. At least not by the end of this year.

Be sure to use your tax refund wisely.

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Key points

• Many Americans will receive a large tax refund this year.
• This lump sum payment represents a great opportunity to improve your finances.
• Paying off debt, building an emergency fund, and investing are some smart ways to use your tax refund.

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Many Americans get thousands of dollars back from the IRS after filing their tax returns. The lump sum payment that results from a tax refund presents a great opportunity. Rather than spending the money on purchases that won’t pay off, you can use the funds to improve your long-term financial situation.

While there are plenty of ways to put your refunded tax money to good use, here are three of the best things to do with the money the IRS sends you.

1. Pay off the debt

If you have high-interest debt, such as credit cards or payday loans, you can use your tax refund to pay off as much of your debt as possible.

By making a large payment, you can reduce your principal balance. This will reduce the interest you pay over time and bring you closer to permanent debt relief.

2. Boost your emergency fund

An emergency fund helps you avoid financial disaster if you face unexpected expenses or loss of income. When you have money set aside for emergencies, you have a financial cushion so you don’t have to borrow if you face an unexpected cost that you didn’t budget for. If you lose your job, get big medical bills, or can’t work due to illness, you can use the money you’ve saved to cover bills so you don’t face foreclosure, repossession or other serious consequences.

Unfortunately, many people have too little savings for emergencies. The standard recommendation is to have three to six months of living expenses set aside, but it’s common for people to have much less – or even nothing at all.

A large tax refund allows you to create an emergency fund or increase yours if it is too small. By being better prepared for unpleasant surprises, you will have a calmer mind and a more secure future.

3. Invest for the future

If you don’t have high-interest debt and your emergency fund is fully funded, investing for long-term financial goals can be a great use of your tax refund.

You can do this in different ways. If you’re saving for a major purchase, such as a down payment on a house, you can deposit the money paid back directly into your savings account. You can also contribute to a tax-efficient retirement plan, such as an IRA with a brokerage firm.

By investing for retirement in a plan with tax relief, you can actually reduce next year’s tax bill with this year’s refund.

Which option is right for you?

Ultimately, the best place to put your tax refund will depend on your current financial situation.

The important thing is to figure out how you can leverage that money to grow your net worth in the best possible way, based on what you currently owe and your current and long-term financial goals.

You can’t go wrong with any of these three suggestions, so think about which one will have the most impact so that your refund can benefit you for a long time.

The Travelers Companies, Inc. (NYSE:TRV) is one of the largest P&C insurance companies in the country. Although the P&C insurance industry is highly fragmented and competitive, its unique nature allows insurers to realize economic benefits. The industry has shown positive results despite struggling with a return from non-catastrophic losses to pre-pandemic losses. Travelers is an elite player in the industry, with healthy underwriting profits and investment income providing the foundation for creating shareholder value. Management’s interests are aligned with those of investors and they have returned money to investors in the form of dividends and share buybacks at aggressive rates. Travelers’ free cash flow is substantial and supports the company’s dividend and stock buyback program. Free cash flow is also undervalued, as well as the company as a whole.

Insurance: where competition does not harm profitability

Peter Thiel rightly argues that “competition is for losers”. Competition pushes returns toward the cost of capital, making it difficult, if not impossible, to create economic value. At first glance, the insurance industry should be a very unprofitable industry. According to the National Association of Insurance Commissioners (NAIC), Travelers is the sixth largest P&C insurance company in the United States, with just 3.96% market share. The insurance industry is highly fragmented. The NAIC’s 2020 Market Share Report lists 125 leading P&C insurers offering products and services across all lines.

Among travelers Filing 10-K 2021, they cite statistics from AM Best showing that there are about 1,100 P&C insurance groups in the United States, comprising about 2,600 P&C insurance companies. In 2020, the top 150 insurers account for around 94% of the sector’s total net premiums written. If competition is for losers, then on the face of it, the insurance industry is an industry of losers.

However, the insurance sector is unique. Insurance is required by law, so the business tends to be relatively stable. Regardless of the economic cycle, individuals and businesses need insurance. This gives insurers pricing power that they would not otherwise have.

Insurance products lack real differentiation. Success is earned through a combination of agent referrals, cost, and brand awareness. Agent referrals are important because most people get their insurance through an agent. Insurers need agents to run business as they please. Because differentiation doesn’t really exist, insurers need to be able to price their products at lower rates than their competitors. Brand awareness is important because insurance is about trust and strong brands tell consumers they can trust the insurer.

P&C insurance recovers from the pandemic

The sector posted good premium growth and strong financial results in 2021, despite the disruptions the sector has suffered.

The industry has accelerated its adoption of new technologies, spurred by the pandemic and the need to adapt to supply chain disruptions. These innovations aim to help insurers improve their pricing policies, improve their efficiency and reduce their costs.

According to Aon (NYSE: AON), total premium growth in the first nine months of the year was 9.5%, up 7.3 points from the same period in 2020. Commercial lines increased by 9.8 %, compared to personal lines which increased by 4.8%. As the economy recovered, the sector also saw growth in commercial and personal autos as well as workers’ compensation. Travelers is the market leader in workers’ compensation, with 6.84% of the market. It is also the second largest insurer in total commercial auto, with a market share of 6.22%. It is the tenth largest passenger car insurer overall, with a market share of 1.96%.

The industry has experienced a Net underwriting loss of $5.6 billion due to a return of non-catastrophic losses to pre-pandemic levels. However, the industry’s net income grew 8% in the first nine months of 2021, from $35.5 billion in 2020 to $43.5 billion in 2021, fueling surplus growth. 73% politics. The total expense ratio remained at 38.4%.

Aon’s reports also show that direct loss ratios across most lines in the first nine months of 2021 were lower than in the same period a year earlier.

The path to profitability

According to Travelers Fourth Quarter 2021 Results, in 2021, Travelers had a loss and loss adjustment ratio of 65.1%, unchanged from 2021, and an underwriting expense ratio of 29.4%, compared to 29.9% in 2020, for a combined ratio of 94.5% compared to 95% the previous year. As an indication, according to a report from Veriskthe P&C insurance industry had a combined ratio of 99.5% in the first nine months of 2021.

An insurer derives its income from its underwriting and investment activities. Premiums paid by policyholders constitute a float that insurers can use to invest. Underwriting profits arise when the insurer receives more in premiums than it pays in claims.

Travelers earns a profit from its underwriting activities and invests those profits in a portfolio consisting largely of fixed income instruments. Travelers has grown its premiums from more than $28 billion in 2018 to nearly $30.9 billion in 2021. During this period, net investment income has grown from approximately $2.5 billion to over $3 billion.

The company’s combined ratio reflects the profitability of the business and its technical margin of 5.5%.

The company’s underlying combined ratio, which represents fewer catastrophic losses, was 90.3%, showing that the company’s editorial was particularly good, having improved an already impressive underlying combined ratio of 90.7% the previous year.

The interests of management are aligned with those of shareholders

The company’s 2004 incentive plan resulted in a performance share reward program. Under this program, performance share grants are linked to the achievement of an adjusted return on equity (ROE) over a three-year period. When management does not achieve these objectives, it cannot acquire performance shares. When he reaches or exceeds these objectives, a range of performance shares is acquired (50% to 150% for grants in 2020, 50% to 200% for grants in 2021 and 2022), depending on the ROE achieved. .

Although ROE is an imperfect measure, and I prefer return on invested capital (ROIC), it is useful for aligning the interests of management with those of shareholders. By doing so, shareholders know that management will make decisions that will create value for the company, or at least aim to do so.

The History of Traveler Profitability

Travelers increased its revenue from $27.6 billion in 2016 to $34.2 billion in 2021. During this period, it increased its net operating income after taxes (NOPAT) by nearly 2.9 billion to nearly $3.6 billion.

Travelers’ NOPAT margin was 10.4% in 2016, falling to 7.9% in 2017, averaging 8.15% between 2017 and 2020, before returning to 10.4% in 2021. The results show an invested capital turnover of 1.02, showing excellent capital allocation efficiency. The combination of these two elements resulted in an improvement in ROIC from 9.7% in 2016 to 10.6% in 2021.

The profitability of travelers allows it to generate significant free cash flow (FCF). However, FCF has been erratic, growing from nearly $2.8 billion in 2016 to over $1.8 billion in 2021, for a cumulative FCF of over $10.4 billion, or 25% of its market capitalization.

Travelers’ ability to generate substantial FCF has enabled it to increase its common stock dividends for each of the last 18 yearsfrom $1.16 in 2004 to $3.49 in 2021.

The company’s FCF has always been attractively priced, which speaks to the company’s overall state of undervaluation. Significant FCF generation and attractive pricing suggest the company’s economics are strong and future stock price performance will be good. Currently, the company has an attractive FCF yield of 4.2%.

Travelers has a generous dividend payout ratio of 24.24%, which reflects its ability to grow without major investments. The company’s FCF can support the company’s dividend policy, which currently yields 2.04%. In April 2021, the company implemented a stock repurchase authorization that added $5 billion in repurchase capacity. In 2021, Travelers repurchased 13.9 million shares under its $2.16 billion stock repurchase authorization. As of December 31, 2021, Travelers’ had $4.01 billion of capacity remaining under its stock repurchase authorization.

Evaluation

Not only is the company’s FCF attractively priced, but the company itself is undervalued. Travelers has a price/earnings ratio (P/E) of 11.77 and a 5-year P/E ratio of 14.11. In comparison, the S&P 500 has a P/E ratio of 24.87. The implication is not only that investors can buy the company at an attractive price, but that shareholders can also earn attractive returns from this same undervaluation.

Conclusion

Industry effects govern a firm’s ability to sustainably earn economic profits. Despite the competitive nature of the P&C insurance industry, the fact that it is both broadly mandated by law and essential to mitigating the risk of economic loss, makes the industry not only non-cyclical, but one in which rivals can achieve economic benefits. . Additionally, the insurance sector showed signs of recovery, despite the disruptions in the sector, as non-catastrophic losses returned to pre-pandemic levels. The result is that Travelers operates in a favorable competitive landscape. In this landscape, the company has shown its ability to grow profitably and generate returns above the opportunity cost of capital. The insurer’s profitability enables it to generate free cash flow, the price of which has been attractive on the market. Additionally, the company remains undervalued relative to the broader market, making it a very attractive stock to buy.

Shares of Google’s parent company Alphabet fell 9% from $3,019 – hitting their per-share high in early November before tech stocks plunged on fears of Fed tightening to fight the coronavirus. ‘inflation.

With the details of the Fed’s strategy priced into the market, investors should turn their attention to the companies most likely to sustain faster-than-expected growth.

And that means Google’s stock is about to go up. How? ‘Or’ What?

• Stunning Fourth Quarter Report
• Leadership in digital ads, catch-up in the cloud
• Cash inflow from retail investors

(I have no financial interest in any securities mentioned in this post).

Fourth quarter Boffo report

Investors always like stocks of companies that exceed expectations and increase forecasts. It’s no wonder Alphabet shares rose about 11% to an all-time high in premarket trading.

The catalyst is the company’s fourth-quarter revenue and earnings, which beat investor expectations. Alphabet’s revenue rose 32% to $75.33 billion, $3.17 billion more than expected, while its earnings per share of $30.69 were 12% higher, according to CNBC. to the Refinitiv consensus.

CNBC reported that Google exceeded expectations in many key business areas:

• Ad revenue – which accounted for 81% of revenue – rose 33% to $61.24 billion;
• YouTube ad revenue was light – at $8.63 billion – $240 million below expectations
• Google Cloud revenue up 45% to $5.54 billion, $70 million more than expected

MarketWatch reported that Alphabet did not provide guidance for the first quarter, which does not appear to be of concern to investors.

Digital advertising market leadership, cloud catch-up

Alphabet is a leader in digital advertising and is expanding its share of the cloud computing industry in an effort to become less dependent on it.

U.S. digital ad spend grew 38.3% in 2021 to over $200 billion. According to eMarketer, Google leads the industry with 28.6% market share in 2021, ahead of Facebook (24.2%) and Amazon (11.6%). By 2023, eMarketer predicted that Google’s share would decrease by 26.4% while Facebook (24.1%) and Amazon (14.6%) would increase their market share.

For investors keen to see how Alphabet will make up for this decline, Google’s strategy to increase its share of the $164 billion cloud computing industry could take comfort. According to the Wall Street Journal, Google lags – with 6% of the market – behind Amazon (41% share) and Microsoft (20%).

Still, Google’s 45% revenue growth rate compares favorably to what Synergy Research estimates to be the industry’s 27% growth. Google’s investment in CME Group and other cloud computing customers has helped it book long-term cloud contracts. “However, costs contributed to the cloud business posting a loss of $1.45 billion for the period,” according to the Journal.

Possible inclusion in the Dow Jones Industrial Index

Alphabet has another advantage when it comes to increasing its stock price: most people around the world use its services multiple times. These satisfied customers might be inclined to follow the saying of ex-Fidelity Magellan honcho Peter Lynch and invest in what they know.

Unfortunately, this has been difficult in recent years due to Alphabet’s high stock price. But that problem could be alleviated with Google’s plan for July 15 “a 20-to-1 stock split in the form of a one-time special stock dividend,” according to Bloomberg.

That would bring the price per share down to around $140 – where the stock hasn’t been since 2005. As Ed Clissold, chief US strategist at Ned Davis Research, told Bloomberg “Institutional investors can buy in size and the price per share does not matter, but for a small investor, a lower price per share makes it easier to buy a reasonable number of shares.

The split could increase the chances of Alphabet shares being added to the Dow Jones Industrial Average, which could bring a lot more capital into the stock. As Bloomberg explained, the DJIA is a price-weighted index, and a four-digit price makes a company’s stock price too high to add to the index, “without overwhelming it. all other members”.

Morningstar says Alphabet stock is trading 31% below its fair value estimate of $3,600. Senior equity analyst Ali Mogharabi is optimistic about its potential for profitable growth, citing expansion into “search advertising, further monetization of YouTube through the strengthening of its network-effect moat source and the ‘Google’s Cloud Growth Acceleration’.

While he warns of a decline in margins in 2022 due to “aggressive investments in the cloud offering”, he expects a return to margin expansion in 2023.

A new study from Boon Brokers has discovered that 83% of people across the country are unaware of certain activity on their bank statements, which could be a red flag for a mortgage lender.

A survey of 2,863 UK residents conducted by TLF on behalf of the mortgage broker also found that 58% of respondents had never considered gambling transactions on their account to cause problems.

One in two people (47%) have gambled in the past month, but many don’t know that doing so could jeopardize their chances of getting a good mortgage.

When given a list of transactions that might give lenders reason to take a closer look, 55% didn’t think payday loans would be a cause for concern, and 58% didn’t. considered being constantly exposed to be a red flag.

According to Boon Brokers, three in four (72%) didn’t think having multiple payouts without a clear reference to their usefulness would raise alarm bells.

Gerard Boon, Partner at Boon Brokers, said: “Not all lenders will scrutinize your bank statements, but if you are considered a higher risk, perhaps with a smaller deposit or as a self-employed lender, lenders are more likely to take a closer look. Anything that shows the account holder may be having trouble getting into debt or controlling spending is likely to create questions.

He continued: “Our research revealed that the equivalent of 1.38 million current homeowners would consider trying to hide transactions on their bank statement to ensure their mortgage was approved – which we would not recommend. certainly not.

“If you’re considering applying for a mortgage or remortgage within the next six months, it’s worth being aware of which may lead to further inquiries – although in many cases it’s completely harmless. and easy to explain.”

He added that this could lead to unnecessary delays in your mortgage application, which could prevent you from getting the property you want.

However, not all things that could cause a problem are as easily identified as gambling, payday loans or overdraft, but there are others as well.

Boon Brokers’ research found that deals people were least likely to know about could be red flags for a mortgage lender.

Work for a family business

Only three percent of people realized this could be a problem. Lenders may suspect that a family member employed a relative for the purpose of getting a mortgage.

Using rude or joking references for payments to family and friends

Only one in 10 (9%) said they thought it might delay a mortgage application, but using ‘funny’ references that could be misinterpreted can mean a lender needs to investigate further.

Have multiple payments for luxury items

Only nine percent thought it might be a potential concern. Lenders will worry if they feel the expenses are out of control and beyond what they would expect based on the applicant’s income

Have a lot of PayPal transactions

While PayPal transactions themselves aren’t a problem, as it’s not always clear who is being paid, having a lot of vague PayPal transactions can raise concerns.

Catalog or on payment on credit

Buy now, pay later options can signal to a lender that you are unable to prepay for common items or that you are buying things beyond your means – which only 13% of people have achieved.

play bingo

Playing once in a while for fun with friends won’t be a problem, but a regular habit with larger sums could be classified as gambling, which can raise a red flag.

Multiple store cards

Store cards by themselves aren’t a problem, but if you’re struggling to pay off the balance each month, given their notoriously high interest rate, it could be a warning sign for the lender.

Frequent payments to unknown third parties

There are many obvious reasons for making frequent third-party payments, but whenever possible, it’s best to spell out the reason to minimize any risk of red flags.

Large cash deposits or cashier work

Surprisingly, only 20% of people thought this would be of interest to a mortgage lender, who will want to see proof of a stable, reliable and legitimate income.

Take out a recent credit card

Only one in five (22%) have realized that applying for new credit can cause your credit score to drop, something all lenders will look at to assess your eligibility.

To read the 15 red flags that could affect your mortgage application, visit the Boon Brokers website here.

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Advertising is undergoing a fundamental shift from traditional mediums to programmatic, omnichannel and digital formats. Digital advertising encompasses mobile ads, connected television (CTV), video, search, and more. The trading post (NASDAQ: TTD) operates on the demand side of the equation, working with advertisers and their agencies. PubMatic (NASDAQ: PUBM) occupies the sales side, working with publishers and developers. Together, these two companies are at the forefront of this changing landscape.

The case of The Trade Desk

With a market capitalization of $36 billion, The Trade Desk is larger and more advanced in its development than PubMatic, which is a small-cap stock. Although both companies are around 15 years old, The Trade Desk has been public since 2016, while PubMatic only debuted in late 2020.

Both companies are rapidly increasing their revenues. The Trade Desk posted more than $301 million in revenue for the third quarter of 2021, along with adjusted EBITDA of $122.7 million. Those numbers were up 39% and 59% year-over-year, respectively, and the adjusted EBITDA margin jumped five percentage points to 41%, a terrific sign for the scalability of the business. It marked another record earnings report for the company ahead of what could be a blowout fourth quarter. Due to holiday publicity, fourth quarter revenues are typically much higher for adtech companies. The Trade Desk achieved at least $388 million in sales for that period, which would easily surpass the prior year quarter, marking another record for the company.

The Trade Desk product is very sticky and customers love it. Its 95% retention rate is proof of this. Nor is the retention rate a new phenomenon. According to the company, it has been above 95% for seven consecutive years. Its earnings are also diversified across industries, with no sector accounting for more than 20% of the pie. This shows the broad appeal of programmatic advertising. By the end of the second quarter, The Trade Desk had a reach of 87 million households and 120 million CTV devices in the United States alone.

Growth stocks have had a rocky start to 2022, and The Trade Desk is not immune to this. The stock is currently trading more than 30% off its 52-week high. Due to this decline, the company is trading at a forward price-to-sales (P/S) ratio of 18.5 based on 2022 estimates. Given the company’s growth rate and huge potential , it is not unreasonable. In fact, the company has spent much of 2021 trading at a forward P/S ratio well above 20.

The case of PubMatic

PubMatic is an up and coming adtech company. The release of its third-quarter results saw its revenue jump 54% year-over-year. This is largely due to an excellent net revenue retention rate (NRR). An NRR greater than 100% means that existing customers are increasing their spending with PubMatic faster than any churn rate. For the last 12 months that ended with the third quarter, that figure was an incredible 157%. This clearly shows how much customers value PubMatic’s service. It also bodes well for the company’s “build and grow” strategy and underscores management’s competence. PubMatic reports that over 60,000 advertisers place ads on its platform. The company sees huge potential in the streaming TV market and has seen its revenue grow sevenfold over the past year.

PubMatic is also profitable under GAAP, unlike The Trade Desk. The company posted net income of $13.5 million on just $58.1 million in revenue in the third quarter, representing a net margin of 23%. That’s impressive for a company that continues to grow so rapidly.

The company also trades at very reasonable valuation multiples, given its growth. The forward price-to-earnings (P/E) ratio is slightly below 33, while the P/S ratio is below five. Still, not everyone believes in the stock. PubMatic has always had a high amount of short-term interest, and the stock price has hit highs of nearly $77 per share and lows of nearly $21 per share over the past year. It is important to remember that this business is still in its infancy and is subject to massive price fluctuations. It is also thinly traded, which can increase volatility.

Which stock is best will ultimately depend on your risk tolerance. PubMatic has huge upside potential, but is also quite risky given its size in an industry dominated by huge players. One question is whether it will have enough capital to continue to be competitive. As of last report, the company had just $137 million in cash and short-term investments. Also, while PubMatic’s revenue percentage gains are great, it’s not growing as fast as The Trade Desk on a dollar-to-dollar basis. On the other hand, The Trade Desk is a behemoth of a business that is expected to generate nearly $1.2 billion in revenue for the year 2021. Right now, The Trade Desk has a better risk-reward profile for long-term investors.

introduction

It appears that the butchering of stock prices for high growth stocks continues so far into 2022 and, as Sea (NYSE: SE) has been immune for quite a while, over the last few weeks that has changed as well. The stock is now trading down 49% from its high which was not reached until October 2021.

Just to give you a bit of context on the brutality of this sale, this is the first time since Sea went public in 2017 that the stock has gone down so much:

Of course, this has to do with the sale of a lot of high-growth stocks, but on Tuesday Sea was much more down because of news about one of its investors, Tencent.

What happened?

Tencent (OTCPK: TCEHY) on Tuesday announced that it would sell part of its stake in Sea Limited. This was hardly surprising after Sea already revealed on Monday that Tencent will convert all of its Class B shares into Class A shares. This means the company could sell those shares.

Like many technology companies, Sea has a two-class structure. Each Class B share is entitled to 3 votes … so far (more on this later).

Tencent was an early investor in Sea. She invested in 2010 when Sea was still only Garena. Tencent and Sea founder and CEO Forrest Li had an agreement (or proxy) that stated that Forrest Li had the right to vote for all of Tencent’s shares. With his own Class B shares, this resulted in Forrest Li owning more than 50% of the voting rights in Sea.

Now, with all of Tencent’s Class B shares converted to Class A shares (which only have one vote) and Tencent selling part of its shares, Forrest Li would no longer have absolute control over the votes. This is why Sea is proposing to change the voting power of class B shares (of which Forrest Li is now the sole holder) to 15 votes instead of 3. This is something that must be voted on at the general meeting. annual, to be held on February 14.

Tencent will sell 2.6% of the company, which will reduce its stake in Sea from 21.3% to 18.7% and the Chinese tech giant says it will keep “the substantial majority of its equity stake” at long term :

Tencent intends to retain a substantial majority of its stake in Sea for the long term and will continue its existing business relationship with the company.

(Source)

Within six months of the sale of the shares, there will be a lock-up period during which Tencent cannot sell any shares of Sea. But due to the conversion of class B shares to class A shares, Tencent’s voting power falls below 10%.

Why is Tencent selling?

Recently, Tencent announced the distribution of more than $ 16 billion in shares of JD.com (NASDAQ: JD) among its shareholders and now it sells over $ 3 billion of Sea shares, over 14 million shares between $ 208 and $ 212. Why?

To understand this, you have to know what is going on in China. You may have heard that the Chinese government is making it difficult for big tech in China: Alibaba (NYSE: BABA)Tencent, JD, etc.) One of the criticisms that the CCP (Chinese Communist Party) addresses to these large, very successful companies is that they do not distribute their wealth enough. This is why they are pushed to pay colossal sums for “charitable works”. Alibaba has already pledged $ 15.5 billion, Tencent itself $ 7.7 billion in April 2020.

These are, in fact, thinly veiled donations so as not to be banned by the CCP. This is why Tencent writes about the sale of Sea shares:

Divestment provides Tencent with resources to fund other investments and social actions

It’s not that Tencent doesn’t have enough money to pay for the forced charity projects, but it probably wants a bit of a war chest for whatever might happen. At the same time, handing out JD shares and giving up much of the voting power (more clearly than the proxy) is also a way of giving in to the Chinese government, which continues to hit the nail on the head of antitrust.

What does this mean for the sea?

When something does happen, the media always insist on the negative because they know it attracts worried readers. So, of course, immediately a link was made to Tencent and Sea’s contract for the distribution of Tencent games in Southeast Asia. In November 2018, Sea’s Garena was granted the first right to publish all Tencent games in Indonesia, Taiwan, Thailand, Philippines, Malaysia and Singapore, which is important because Tencent is the largest games company in the world. world. This contract still runs until 2023 but several commentators have tried to justify the sharp drop in prices by citing this higher risk.

I’m sorry, but 2.6% less with 18.7% remaining ownership of the company does not significantly change the relationship between Sea and Tencent. Yes, they are giving up the B shares with triple voting rights, but the voting rights were still granted to Forrest Li.

For Sea, it could be good. Now that Tencent has less than 10% of the voting rights, that’s one less argument for Indian sellers who say Shopee / Sea is “Chinese” owned and should be banned, just like Tencent’s games in the country. Although Forrest Li was born in China, he is a citizen of Singapore. With Tencent no longer having as much voting power, the argument becomes even weaker than it already was. Shopee only entered India recently and local unions weren’t happy with this as the company is known to sell cheaply and charge no commission up front.

Sea will also give Forrest Li majority voting power, as noted above. I definitely agree with that. He’s had this de facto privilege from the inception of the business until today, so why wouldn’t it be good, all of a sudden? The only difference was that Tencent had given them the right to vote. Making that clearer seems to me to reduce the risks.

What am I going to do now ?

With Tencent’s share price selling between $ 208 and $ 212, it’s normal for Sea to fall into this range. But since then the stock price has continued to plunge and even crossed the $ 200 line.

What I’m going to do is simple: I’ll just continue to increase my position at sea. None of this news shows a weakness in the business or a changed image no matter what you might hear there.

If you look at the long-term assessment of an enterprise value-to-revenue ratio, you see that the sea has already fallen to pre-pandemic levels.

With fourth quarter earnings approaching, this will decrease further (as this is not a forward chart).

The company has a stable cash cow in Garena, its gaming division, which is funding the expansion of Shopee, Sea’s e-commerce business. Shopee was launched outside of Sea’s main market in Southeast Asia: Brazil, Mexico, Argentina, Chile, France, Spain, Poland, India and I may be missing -to be. On top of that, the company recently raised $ 6 billion through a stock offering and convertible notes. The stock was sold for $ 318 per share. The stock price is now $ 187, or 41% lower. Well timed.

If you look at the revenue estimates, you see that the business is poised to continue growing, albeit, of course, at a slower pace.

(From Alpha Premium research)

In a few markets (Thailand, Malaysia), Shopee is already profitable, because profitability comes with a scale. It also has a lot of levers for pulling to the left. Advertising, for example, is still in its infancy. This is very high margin income. Right now, it’s only 0.5% of the GMV (gross merchandise volume, the total dollar amount that an ecommerce site sells). Amazon (NASDAQ: AMZN)which is of course much more mature, owns 3.5% on a $ 390 billion GMV. With an expected GMV of $ 50 billion for 2021, Shopee, which only started in 2015, shows how quickly Sea can scale its business.

And advertising is just one of the many possibilities. Shopee Food (think Uber Eats) has already rolled out in a few countries, the company has a $ 1 billion venture capital fund, SeaMoney, its fintech, is growing like gangbusters, and more. For me, Sea has enormous potential for long term investors. With Potential Multibaggers, I try to find companies that can grow 10 times or more in the next 10 years. I think Sea still has that potential. I know that would make it a T $ 1 business, but I think it will get there.

Conclusion

Dips in stock prices aren’t pleasant, but in retrospect they often seemed like great opportunities to raise or add. Don’t let the fear that is now pervading you distract you from the long term goal.

In the meantime, keep growing!

Holdings reached (NASDAQ: UPST) caused a stir in 2021, entering markets in December 2020 with a moderate start before climbing over 750% in October 2021. Excitement cooled, but fintech stock still gained around 280% for the year. Management’s expectations for 2022 are also dampening some enthusiasm. What should investors do this year?

To buy?

There are many reasons to love Upstart. It has real disruptive potential in its artificial intelligence-based credit scoring platform, an alternative to the traditional FICO scoring model that groups people into boxes and denies credit to millions of potentially trustworthy borrowers. . Upstart challenges this by analyzing loan applicant information across thousands of data points that assess their personal creditworthiness. It uses many more variables than the standard scoring system, such as work history and education, which leads to more approvals while more accurately quantifying the risk to the lender.

The company says 80% of Americans have never defaulted on a loan, but less than half have access to the best interest rates. Obtaining loans to these “missing millions” provides more equity in the market and more business for the banks.

The history of Upstart makes this a reality. The company claims that 67% of loans are approved instantly and the total approval rates are higher than with the traditional rating system. More and more banking partners are using the Upsart platform to achieve these benefits. And as more partners arrive and more funds are loaned, more data is entered into the model for greater accuracy, resulting in a flywheel effect and more business all around. .

Third-quarter revenue increased 250% from a year ago to $ 228 million, which is pretty fantastic, but was a huge slowdown from the increase of over 1,000. % year over year in second quarter. This contributed to the decline in inventories. But the opportunity is still wide open. Management sees a potential market of $ 81 billion in its core personal lending business, and an addressable market of $ 672 billion in its new auto lending business. Finally, he has a $ 4.5 trillion mortgage opportunity, a market he plans to enter in 2022.

To sell?

With such a bright future ahead of us, what would be the reasons to sell? Not too. Even though it faces competition, Upstart is making gains in a huge potential market. The main risk is valuation, which has already declined.

These days, Upstart shares are trading around 157 times 12-month earnings, a huge drop from mid-2021, but still expensive. Management expects a 200% year-over-year sales increase in the fourth quarter, further decelerating growth from previous quarters. It’s still high growth territory, and if you pull your money back to find a faster growing stock, you could end up empty.

One of the reasons to sell would be if you are risk averse and the commute gives you an upset stomach. The stock price chart is a roller coaster ride, and investors need to be prepared to handle the ups and downs of this growth stock.

UPST data by YCharts

Hold?

If you are already an Upstart shareholder, hang in there. If you bought early and your winnings are evaporating now, stick with it; all stocks go through better and worse times, and high growth stocks tend to be more volatile than others. That’s their nature, and with the risk (sometimes) comes the reward.

If you have bought more recently, you might have a loss if you sell. You just need to put it away for a while and wait for the stock to increase over time. The huge opportunity, disruptive business and profitability make this stock a keeper.

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Ali Baba

and other US-listed Chinese tech giants traded lower on Friday, but only after surging in the previous session in an attempt to rebound from a difficult year.

Alibaba (ticker: BABA) fell 0.6% in pre-market trading on Friday after closing with a gain of nearly 10% on Thursday.

JD.com

(JD) fell 0.7% after jumping 7.3% on Thursday.

Baidu

(BIDU) fell 1.1%, after gaining 10.5% in the previous session, and

bilibili

(BILI) was down 3% after rising more than 12% on Thursday.