Featured

Aerospace Manufacturing Stocks Has One Silent Winner

The Aerospace industry is one of the industries I am very bullish on over the next 10-15 years. The commercialization of space travel and as well as the need for faster forms of military defense as technology grows will only amplify the industry. Aerospace manufacturing stocks are companies who typically make the products for the companies who embark on these lofty goals for space travel. While there are many household names such as Boeing ($BA), Lockheed Martin ($LMT), and Raytheon ($RTX), one company has the ability to go to toe to toe with the big names, but is often overlooked. Northrop Grumman ($NOC) has the contracts, missions, profitability and liquidity to be a big time player over the next decade as the aerospace industry – takes off.

plane aerospace travel

What is Northrop Grumman All About?

Northrop Grumman is a global aerospace, defense, and security company, focusing business operations with the Department of Defense and intelligence community in the U.S. government.  The company was originally founded in Denver in 1994 and its current CEO is Kathy Warden, acting since January 2019.  With over 90,000 employees and several contracts with the United States Government, Northrop Grumman is one of the major players in the Aerospace Manufacturing industry.  Governments in various countries tend to be their target market, however the U.S. accounts for about 86% of its revenue, and the rest is allies of the U.S, sold through the Department of Defense.

The operations of Northrop Grumman can be divided into four segments: Aeronautics Systems, Defense Systems, Mission Systems, and Space Systems.  The mission statement of North Grumman is “to be at the forefront of technology and innovation, by delivering superior capability in tandem with maximized cost efficiencies.  The security solutions we provide help secure freedoms for our nation as well as those of our allies.”  They provide their customers with various aircraft, spacecraft, and aerial vehicles, as well as missiles, chain guns, and other military weapons.   

Competitive Advantages

Strengths: A strategically balanced portfolio of products, strong focus on innovation and development, and growth in revenue.
Weaknesses: High dependence on one customer which amplifies business risks.
Opportunities: Global aerospace and defense market, growing C4ISR systems market, worldwide increase in cyber security spending.​
Threats:  Stringent environmental and regulatory obligations for its nuclear-related operations could aversely affect financial position, changing technology, intense competition from well-established firms may negatively impact operations and financial condition.

Northrop Grumman’s focus on innovation is a strong reasoning for them remaining at the top of the Aerospace Manufacturing stocks list.  Northrop continues its research in homeland and defense security through partnerships with several institutes and universities on the matter. In the fiscal year 2020, they spent over 1 billion dollars on their innovation and development activities, accounting for about 2.9% of their revenue allocated to propelling the company to higher heights.  When you combine this with their attempts for low cost products compared to the industry, Northrop Grumman has a strong business strategy.  Textron ($TXT) is a company also focused on low cost products, but it cannot keep up with the revenue of Northrop Grumman,  In addition, an 8.7% growth in revenue from Fiscal Year 2019 to Fiscal Year 2020 shows a growing cash pile for a company strong already in operations.

Profitability

Consistency is not a bad thing, as long as complacency has not set in.  Over the past 5 years Northrop Grumman has pretty much stayed the same among all its profitability figures.  In addition this consistency, Northrop Grumman  has very good numbers, especially with a Gross Profit Margin over 20% in every year. 

Final Thoughts

The nations of the Asian-Pacific have increased their focus on aerospace and defense in the past few years, and will continue to in the coming years.  This is very important as it will open up for more customers for the industry, with some very pivotal nations in terms of military capability.  Linchpin believes that low focus on innovation, especially risky innovation will continue in the future.  This creates a solid window of opportunity for Northrop Grumman, considering their heavy focus on innovation.  With a couple correct moves from research and development, Northrop could start to distance itself from some of the competition.  Fuel has continued to climb in price, so it can be expected that the industry collectively looks to electric options for their vehicles.  

Northrop Grumman is currently trading at about $360, with plenty of room for growth if Aerospace Manufacturing stocks rise with the growing space travel trend.

Featured

A Disciplined Trading Strategy to Change Your Gains

The life of a trader has been glorified with social media such as TikTok, but with a proper strategy, the life you see on the internet is possible. In the past we have discussed a trading strategy that involved profiting from low capital options that didn’t need a big move between strike prices. That article will be attached below. This strategy however has a different target, it only concerns with the percentage gain of the position, and it is a prime example of a disciplined trading strategy.

This is a different kind of article, it will not be calling on facts or recent market news or creating predictions. It’s purpose is to open your vision to a confident way to strive to grow wealth in the markets, and is very good for young traders.

What is the Strategy?

The strategy calls for taking profits at a strict 7% gain. Once you reach 7% in profits, whether it is 5 minutes or 5 hours, you exit your position.

Ideally this strategy is for day traders, however swing traders can use it as well. This strategy helps those who are a little too optimistic, like myself, and always ponder if more could be gained. Sometimes this leads to more green, or a drawback in profits. 7% doesn’t seem like much profit, but it depends on the scale, and how often you make 7% which is the main part of the strategy.

chart gains profit trading strategy

Beautiful Compounding

If you make 7% every day, 7% will begin to feel like a lot very soon. In a $1,000 account, 7% the first day would be $70. The next day, 7% would become $1,144.90. After 5 days of this method, you make a little over $400. It may not seem like much, but if you stick with this disciplined trading strategy, the return will be exponential, literally.

Ideally this method would be done by trading options, similar to the first strategy we discussed. Options trading gives you the easiest opportunity to see 7% on a daily matter. Although, with precise day trading of equities, this 7% mark is also quite possible. The point is to not be diminished by small gains at first, and trust the process, until 7% is more than your original starting point!

Drawbacks

This kind of strategy doesn’t favor smaller accounts. The growth will be the same with a strict 7%, but it doesn’t account for slippage. With small option buys, there are small costs like commissions that can actually heavily affect percent gains. If you are on a platform like Robinhood, which has no commissions, you can avoid this luckily.

Also, this strategy becomes much tougher if you cannot day trade. If you are up 7% the same day but you cannot day trade, you have to wait and hope you don’t lose your gains the next day. If you factor this ideology into your trade, it can be avoided, but can be annoying at times. However, it could gain you more profit, if you’re trade continues to work in your favor the next day.

Obviously, the largest drawback is that it is very unlikely you will be right everyday. Trades can’t always be right, meaning sometimes you will return negative. This is okay, as long as you nip your losses quickly. A solid number to take losses at would probably be between -5% to -10%. If you are confident in your moves, your number of wins will outweigh your losses.

Final Thoughts

If you find yourself to be undisciplined when trading, this strategy could be perfect for you. There are other strategies out there that could work better for you, but no strategy is never the way to go. Find what works best for you!

Featured

Netflix Stock: Is It A Buy?

We all know Netflix, one of the most revolutionary inventions of the 21st century thus far. Netflix completely changed the movie industry, and wiped the movie rental business clean. As of July 20th, the company harnesses 209 million subscribers worldwide, an incredible number. Few things in this life are true household names, yet Netflix is one of them. But can Netflix, and the Netflix stock, bank on continuing to see the same rise in success it has over the past 15 years?

The Stock Price Is at a Standstill

Over the past 5 years, Netflix stock is up 500%, flat out incredible. But in the past year it is only up 7%. This not a terrible figure, but when compared to other stocks of it caliber such as Apple, Microsoft, and Google, it lags behind in year growth. The quarterly financials all have great growth year-over-year and its EPS beat expectations by 28%.

The choppiness of the stock over the past year has left investors questioning. Why pay such a high share price of $550+, just for 7%. With one Netflix share, an investor could almost 4 full shares of Apple. This buy would yield higher percentage gains, and less choppiness. Every stock is choppy to some degree, but usually trends upwards, Netflix stock has not seen a drastic enough upward trend for its capability. What could be causing this?

Heavy Competition

What was once a space absolutely dominated by Netflix alone, streaming services are very popular now. From Hulu, to Peacock, to Amazon Prime, and not to mention almost every TV network has their own platform. The CW, TBS, Disney+, just to name a few.

While it is common for people to have multiple streaming platforms, all the options provide consumers with an advantage they haven’t had. Before, it was search around Netflix until you found something to watch. Now, its look on Netflix, then look on other platforms until you find something best. If you do this enough, you will eventually ponder whether or not you need Netflix. If enough people do this, we see slowed subscriber growth, like Netflix reported this past quarter.

The Near-Future is Vital

Netflix is at a very important point in its business journey. To keep up revenues they have pulled out what I believe is a few shots in the dark. One is there look into the growing gaming industry. In our discussion of Nvidia, we talked about how the gaming industry is changing. Netflix claims to want to offer video games as well as movies, downloadable like they are on consoles. It could work, but takes Netflix away from their core image.

A rumor that has also floated is Netflix considering short ads on their platform. The one pride of Netflix has always been never showing ads. However, ads could boost profits tremendously, as Netflix already loses out on hundreds of millions of dollars every year from shared accounts. The day an ad is shown on Netflix, I believe will be a poor day for the company. It will prove they gave in, and sacrificed their quality for profit, and they are aware.

Is it a Buy?

Personally, I think there is not enough potential in Netflix right now to trigger a buy at its current price of $590.53. This is a very high price for a stock that could be potentially just hoping to match revenue numbers quarter to quarter for the next year. On the other hand, I don’t believe it should be sold either. Stocks can’t go up 500% for 5 years forever. Maybe we expect too much from Netflix stock because of its recent past. Also, financially the company is in a good spot, which isn’t always easy to come by. Don’t jump ship on Netflix, but don’t get on the ship just yet.

Featured

Why Cardano is Making Waves in The Crypto Space

The fast and volatile market where cryptocurrencies trade is seeing a new player rise to the top. Cardano, or ADA by its ticker, is its own public and decentralized blockchain. Over the past year Cardano has seen a price rise from $0.12 to $2.89 as of August 29th, 2021. This is a nearly 2400% gain! Not only is Cardano’s growth impressive but it also has a Market Capitalization of $93 Billion. This makes ADA the third largest cryptocurrency by market capitalization. Bitcoin in first with $912 Billion, Ethereum in second with $375 Billion, and Dogecoin holding in fourth at $37 Billion. However, a coin that has grown a lot doesn’t mean much by itself. So let’s look into the why and how Cardano is becoming such a popular coin in the crypto space.

Functionality 

One of the reasons Cardano is becoming an established coin is because of its similar functionality to Ethereum. Ethereum uses smart contracts which can be used to power decentralized finance (DeFi) products, apps, NFTs, etc… Cardano does not yet have its smart contract feature but its developers have expressed it may come out this year. If Cardano has smart contracts then it would, arguably, be as useful as ethereum. The idea ADA might be as functional as ethereum has lead many to buy into ADA.

What a smart contract does is basically act as the middleman. A smart contract is a set of rules and conditions that a computer monitors. When these conditions are met, the contract executes and both parties receive what they signed for. For example, let’s say you wanted to buy an orange from a farmer. To ensure the farmer doesn’t take your money and run, you would get a middleman. The middle man would take your money and take the farmer’s orange. Then they would give you your orange and the farmer the money. In essence, a smart contract functions as a middleman but without the need for a human.  

PoW vs. PoS

Another reason Cardano is popular right now is because it runs on a Proof of Stake (PoS) system instead of Proof of Work (PoW). To summarize these two in short: PoW forces blockchain validators to compete for transactions to verify. PoS has validators validate transactions based on how many coins they own. The great sentiment among the crypto community is that PoS is more efficient, fair, and uses less energy than the PoW system. To some extent, these points are valid. For instance, in PoW the validators have to compete with one another. Meaning, two validators could be validating the same transaction which wastes time and energy. 

Ethereum has yet to switch to a PoS system but has plans to do so. However, Cardano is more likely to introduce its smart contract functionality before Ethereum switches to PoS. This means Cardano will have both PoS and smart contracts before Ethereum does. This anticipation has led the price of Cardano to move blisteringly fast and is why so many crypto-enthusiasts have jumped aboard the Cardano train. 

All being considered, Cardano has only grown as much as it has because of anticipation not because of functionality. At the current moment, you cannot do much with ADA except trade someone else ADA. If smart contracts are introduced to the Cardano blockchain then this would give immense functionality and competitiveness. Ethereum would no longer be the reigning champion of smart contracts and would have to compete with Cardano to stay competitive. Overall, the rise of another blockchain with smart contract functionality is good for Defi. More functional coins support the process of Defi and make crypto as a whole more applicable.  

Check out the price of ADA!

Click on Another Article!    

Featured

2 Stocks Gaining Value, and Not Stopping Anytime Soon

In the choppiness of the past month in the market, two stocks have had record months. While the market has been trending upwards as it closes out the summer, everyday hasn’t been pretty. We remember a few Mondays ago when the Dow lost 725 points. Only to manage to end the week higher. Throughout all this though, one thing has been consistent: vaccinations. As of August 3rd, 189.0 million people have received at least one shot of the Covid-19 vaccine in the U.S. With a little more than half of the country on the road to full vaccination, Pfizer ($PFE) and Moderna ($MRNA) are two hot stocks gaining.

Pfizer’s Success

Pfizer is currently up 21.2% in the past month, crushing an all-time high set way back in 1999. With slowly becoming the more trusted solution out of all the vaccines, Pfizer has seen revenues and good publicity skyrocket. Revenue is up a whopping 60% over the past year and operating income compares with a 52% rise. To top it off, last week they had a great earnings estimate beat of 9.42%.

pfizer stock pfe

Moderna’s Success

The luxury price of Moderna might make it less appealing to average person, but the percentage changes must catch eyes. Moderna is up 90.84% this month, an almost astronomical increase. So much so, some analysts believe the increase is fundamentally unjustifiable. This may be true, but numbers do not lie. Revenues are up on the year 6,462%!!! For how catastrophic this pandemic has been to our world, some companies and people have cashed out.

moderna stock mrna

Why Success Will Continue

As of today, no vaccine has full FDA approval. It is theorized that once there is a full FDA approval, much more people will be willing to get vaccinated. Reportedly, Pfizer will be fully approved by mid-September, and Moderna would not be far behind. Makes sense why these are two stocks gaining momentum right now.

Additional news is the mandatory tags being put on the vaccines as well. A number of universities have made it mandatory for students to return to campus, and everyday more and more service places make it mandatory. This will only equal to more industries ordering vaccines, sending revenues through the roof, again.

Featured

Robinhood is Going Public, What Does That Mean?

Commonly known as an IPO, an Initial Public Offering is when a company decides it is time to go public. When a company becomes “public” they are listing themselves on one of the exchanges in the stock market. This could be the New York Stock Exchange (NYSE), or the Nasdaq, like Robinhood. Going public allows for a company to receive investments from everyday people like you and me.

The popular trading app Robinhood will be listed on the Nasdaq under the ticker symbol $HOOD, on July 29th. It will be priced in at $38 per share upon trading, valuing the company at $32 billion.

Why This IPO is Unique

Robinhood was once the saver of the everyday investor, or “the common trader” if I must. People were finally participating in the market in simpler ways they could understand. Robinhood made investing and trading so simple, kids could do it. Then came the hype stock fiascos, and when Robinhood had to regulate usage to cover themselves, the people were fed up. Looking back, Robinhood’s actions were somewhat understandable as they are not comparable in size to E*Trade or TD Ameritrade. They just couldn’t take on the amount of orders. Regardless, Robinhood now has a tainted image among investors and is seen only as a place for novices and those with low capital. This is not true, but it’ll be very hard for Robinhood to shake this image.

Still trying to put the retail investor first, Robinhood made their IPO a little special. Robinhood reserved up to 35% of the shares going public for their 22.5 million customers. Without being an accredited investor, it is very hard to participate on the front end of IPOs. An accredited investor is one who has a net worth over $1 million, or has made over $200,000 per year for the past two years. By doing this, Robinhood users have gained access to the IPO day without having to be an accredited investor.

Should You Buy Robinhood Today?

With the recent success of IPOs, it seems like a great idea to buy right away. According to University of Florida professor Jay Ritter, the average first day return of IPOs last year was 41.6%. That’s a sweet deal.

Robinhood on the other hand has some red flags to me. The company image being tainted makes me question if the user number can really grow. With competitors such as Webull, Public, and SoFi, what’s stopping people from taking their money elsewhere? Another red flag is the fire they’ve been under from the legal system. They already paid one $65 million settlement back in December for misleading investors on how they make their profits. Even after this settlement, Robinhood CEO Vlad Tenev is still scrutinized for profiting off of customer’s orders, by selling them to bigger companies, like Citadel.

The majority of Robinhood’s revenue comes from this practice. If new regulations come about barring this practice, their revenues will drop drastically. I think with some fine tuning of business processes Robinhood can last in this industry. IPOs can be exciting, but you don’t HAVE to buy on IPO day. With any stock, it’s probably best to wait a week or two, but with Robinhood, definitely wait.

Featured

All-Time Highs are Here, How Long Can They Last?

After a sharp drop on Monday, the market found a way to finish the week at ALL-TIME HIGHS. Each of the three major indexes experienced their highest closes ever. Obviously if the market closes Monday in the green, this will be another set of highs, but how long can the upward drive last? Fresh highs can never be a bad thing, but it certainly is coming at a peculiar time. We will dive in on what has caused the leg up, and why the market seems to be beating the odds right now.

This Earnings Season Couldn’t Be Better

TJ prepped the earnings season very well back on July 12th. Checkout what he had to say below!

Various different companies have been reporting great earnings. This results in their share prices receiving a boost as well. Technology has done very well so far, especially Twitter ($TWTR) and Snap ($SNAP). The photo-sharing app reported a .10 cent growth in EPS despite being expected to report a .01 cent loss. This was mostly attributed to Snap’s operation being unaffected by iOS 14.5 privacy regulations. Twitter on the other hand beat their expected .07 cent growth in EPS by a whole .13 cents! Already in the middle of a great year, Twitter jumps on earnings with rumblings of their first subscription based plan for users.

The grass is green and can certainly get greener this week, even after all-time highs. Look out for earnings results from notable companies such as Google on Tuesday with a 19.34 estimated growth in EPS, and Amazon on Thursday with a 12.25 estimated growth.

The World Isn’t In Great Shape

According to Fortune, 83.2% of Covid cases are at a result of the new Delta variant. Two weeks ago, the number was only around 50%. The fast growth of this new strain is very alarming, and mask mandates have come back already in some states. It feels weird to still be writing about the coronavirus’ effect on the market more than a year later, but here we are.

The virus originally sent businesses into a frantic standstill, and the economy struggled. Now though, it seems like everyone is trying to avoid the dangerous new strain. Maybe it is because the vaccine seems to combat the strain well. But not everyone is vaccinated. If one number catches up to the next number, the world could once again be in deep trouble. Ed Clissold, a strategist for Ned Davis Research says that because of the virus and unexpected new highs, days like last Monday will happen more frequently. On Monday, the market had a little “flash crash” dropping 725 points, its biggest 1-day loss since October.

The current shortage around the world is odd as well. Materials are hard to get, but those on the delivery end are charging high prices. The shortage is trickling down the supply chain, but as long as you are able to make a sale, you are alright. Let’s just hope things don’t get bottlenecked!

It’ll Be Rocky

The market was rocky this week, and that surely won’t end. It has to come off its all-time highs, but the earnings will push it higher. But worsening pandemic worries could bring it down. If supply chains survive and improve profit margins in an unorthodox way, earnings per share reports will rise.

I threw out a lot of different outlooks on the market for a good reason; there is a lot going on in the market right now. It can be hard to time the market, but not to pace it. Take extra caution with your market moves in the coming weeks.

earnings reports stocks beat all-time highs

Featured

How The Fed Influences the Markets

The Federal Reserve System, known as The Fed, is the U.S’s central banking system. At the root of all monetary transactions, The Fed makes sure it all goes smoothly. The main goals of The Fed are to manage the money supply and maintain stability of the financial system. Most of the time, The Fed does not have to utilize its toolkit to influence the financial system. However, in times of recession or sudden volatility, The tools will be used and indirectly, The Fed influences the markets. The main tools The Fed uses most often are: open market operations, the discount rate, and printing more currency. Let’s start with the most often used tool, open market operations…

Influence Tool #1 | Open Market Operations

Open Market Operations are used more frequently than the other tools at The Fed’s Disposal. This is because OMOs take effect more immediately. For The Fed to influence the money supply using this tool it just has to go to the open market. Market operations are generally when The Fed buys or sells government securities. When the Fed buys securities, it is increasing the inflow of money into the banking system. This action brings more cash into the money supply which tends to make markets go up in value as there is more excess cash. When the Fed sells securities, it creates an outflow of money from the banking system. As expected, this will decrease the money supply and tends to make markets go down in value.

Influence Tool #2 | Discount Rate

This tool is used much less often and really only changes significantly in times of economic crisis. In addition, the discount rate’s effectiveness occurs more slowly as The Fed is not directly increasing or decreasing the money supply. The Discount Rate is the interest rate the federal reserve charges on its loans. Who gets loans from the federal reserve? Banks.

So when the discount rate increases, banks get less loans which indirectly decreases the money supply, and decreases market values. The inverse happens when the discount rate decreases. When the discount rate decreases, more banks get loans from the Fed which creates an inflow of cash, and increases market values.

Example:

Let’s say a $1-million loan from the Fed has the Discount Rate of 3%. Let’s say Bank-A decides to get that loan and Bank-B decides not to. This means that $1-million dollars is given to Bank-A and thus there is a potential $1-million entering the money supply.

However, let’s say that same loan had a discount rate of 1% and both banks decide to get that loan. Now there would be a potential $2-million entering the money supply! In essence, the discount rate doesn’t stop money from flowing but restricts the flow itself.

Influence Tool #3 | Printing More Money

This tool is used the least frequently and is fairly self-explanatory. The dangers of this tool is that once the printed money is put into the money supply, it is possible for rapid inflation to occur depending on how the money is spent. Generally, when money is printed market valuations go up initially.

How “Printing More Money” actually works is a little less self explanatory. The Fed does not print physical money itself. Instead, it submits an order to the Treasury Department which can fulfill or deny the order. If fulfilled the money is printed and then promptly distributed. However, the Fed can circumvent the Treasury by buying assets and paying for those assets with electronic funds. The electronic funds were basically created out of thin air! Or by computer key strokes, whichever you prefer. This is how the Fed “prints money”. Once again, The Fed only does this in extreme economic and financial situations.

Click here to get a more in-depth explanation: HERE

Closing Thoughts

The Fed is an independent institution in the United States. This means that it is technically not part of the government and is thus less influenced by politics. In fact, The Fed tries to stay out of politics as much as possible. Which is very important when your responsibility is managing the financial system! The Fed’s actions influence the markets through their direct influence on the money supply. The Fed understands the power of its influence on the financial system and takes the responsibility very seriously.

In regards to the influences Fed tools have, understanding what each tools does can allow you to make some generic market predictions. Simply, if a Fed action increases money supply then markets go up. If decrease, then markets go down. These predictions are not precise but they are accurate. Overall, The Federal Reserve is a powerful institution in the world of finance and everyone should always be listening to what the Fed has to say!

Check out some predictions for specific stocks! : https://the-common-trader.com/2021/07/12/earnings-season-is-here-what-to-look-out-for/

Featured

Buy the Dip!: The Effectiveness of Dollar Cost Averaging

If every batter in Major League Baseball could just wait until they got a pitched they like, it would be very hard to be a pitcher. Thus, there is a strike zone and a count, to make the duel between the pitcher and the batter much tougher. In investing, there is no such strike zone, so you have the power to wait for the right stock to the come. When it does, take the biggest swing possible, and keep swinging.

In our recent post about Warren Buffett and Charlie Munger, we discussed this approach they take when they find a stock they love. When the two were fully sold on Coca-Cola ($KO), they bought shares every day, no matter if the stock went up, down, or sideways. They believed in the business plan and the financials of Coca-Cola, and wanted every piece of it they could get.

What is Dollar Cost Averaging Exactly?

By definition, Dollar Cost Averaging (DCA), is investing a specific amount of money into an asset, regardless of the price. For example, John Doe is lucky enough to buy 1 Bitcoin per month. He decides to buy a Bitcoin on the 10th of every month. By doing this, John has eliminated the volatile fears of Bitcoin. On August 10th, Bitcoin could $40,000, on September 10th it could be $70,000, and on October 10th it could be $50,000. No matter the price John buys his 1 Bitcoin because he strongly believes in the long term future of the project.

bitcoin hold

Another way to DCA is by doing the infamous buying of the dip. Unfortunately, stocks can not only go up. But just because a stock or cryptocurrency comes down, doesn’t mean its done. Apple, Microsoft, and Proctor and Gamble are not invincible, they have their red days too. If you take advantage of these low periods and consider them a discount and buy them, you are Dollar Cost Averaging. Buying the dip is sometimes taken in a joking manner, but is practiced by big time analysts.

Breaking Down the Numbers

The benefits of DCA don’t stop at position size, it can really help your wallet as well.

If John Doe is willing to buy Bitcoin at $35,000 on September 10th, and the price of Bitcoin falls to $33,000 on September 9th, he has now saved $2,000. If the price slides to $30,000 in October, John saves himself another $5,000.

Other people see downturns and start to get scared, but with Dollar Cost Averaging, downturns are opportunities. In those two months, John secured two Bitcoins and saved $7,000. Others would have stayed away because of the slide. In 5 years, if Bitcoin is well over $100,000, no one will remember that dip. But will regret not buying more. As the famous quote goes;

“Be fearful when others are greedy and greedy when others are fearful.” – Warren Buffett

Specific Shares or Specific Dollar Amount?

Truthfully, there is not much of a difference between these two. However, when putting a specific amount of money, in you run into having to bump the number up if the price outpaces your contribution. Conversely, specific shares might hold you back if you can comfortably put more than you are.

Generally, as always know your beliefs and your wallet, and constantly look in the mirror as an investor.

Featured

Earnings Season Is Here!- What To Look Out For In The Coming Weeks.

Earnings season in my opinion are the most fun and interesting times for investors like you and I. Giving us fresh news that spice things up from the previous boring weeks. Not to mention the higher volatility that comes with earnings which could give some juiced up gains…

Over the next 4 weeks major companies will be releasing their Q3 earnings reports which cover Q2 financials & data.

Here is a website that I use to see what dates companies release their earnings. This week reports are below.

Image
Photo from Earnings Whispers

What To Look For

Each earnings season has it’s own unique things that will be on the look out by Wall Street and other investors. For this season it’s 2 major points.

  • How have companies “bouced back” from the global pandemic 1 year ago? What changes have they made to adapt?
  • With cost of materials/goods being so high this year, have companies margins been squeezed?
    I will specifically be looking at profit margins and comparing them to past quarters.

“A company that can adapt to changes in the economy and envirnment, is a great company.”

– TJ Brescia

Retail companies will be under the spotlight as material costs are through the roof. I’m interested to see how the automakers report. Tesla, GM, and Ford specifically-($TSLA $GM $F). Since the semiconductor shortage threw a wrench into these business their reports should be interesting.

I will also be looking at AMD ($AMD) and Nvidia ($NVDA) closely because of the semiconductor issue. There entire business relies on it…

Why Profit Margins Will Be Extra Important

If you read my article on stock valuation tips you will know what I’m talking about.

Gross Profit=Revenue-Cost of Goods Sold (COGS)

Cost of goods sold takes into account the materials used to make a sale. Since lumber, metal, and other commodity costs are so high right now it could drastically lower Gross Profit.

Say Apple reports an increase in revenue from last quarter, but cost of goods increased more than revenue. On the surface it seems like everything is going well because revenue jumped. But in reality the higher cost of goods decreased profits. Which can be the case for many companies this time around. Profit means everything!!

Emerging Companies.

Companies that are still new and growing at fast paces will be looked at closely as well. Seeing how their business adapted to the pandemic changes can tell a big story moving forward.

For example, Uber ($UBER) recently made it known that they are charging higher rates on drives. Not only because of the labor shortage, but because they are ready to start being profitable. They recognized how many users they had which led them to raising rates. I will be looking to see how many users they are reporting for Q2, and forecasting moving forward.

Uber and Lyft to share banned drivers list - Intelligent Transport

Spotify $SPOT is another company that I want to keep an eye on. Their last earnings report was awful, showing poor user growth. The last three months has not been good for the company. I really like the product they give out but would like to see them add another piece to their business that will drive user growth. Right now subscriber fees and ad-revenue is not cutting it for me.

Volatility

Earnings can be scary sometimes with the increase in volatility. You can wake up one morning to see a stock you hold dropped 10% overnight.

Know this, just because a stock releases bad data does not mean it will continue to release bad data. It is big money managers over reacting to a piece of 3 month quarterly information.

If one of my stocks that I hold drops significantly from bad earnings I’ll more than likely buy that dip. You should think of doing the same..

Featured

The Labor Market is in a Wreck; Who is to Blame?

Despite a large reopening after the pandemic scares, the labor market has lagged heavily. If you’ve been going to stores and restaurants, you have seen a lot of help wanted signs. This seems like an easy problem to fix —- raise wages. On the surface, this is the answer, but when you dig deep, its not so easy. When you combine low wages with baby boomers leaving the workforce, you have the 2021 labor market. Today I will discuss why this is a problem and how it can be solved.

Boomers are Done

When the pandemic first hit almost everyone was out of work. This time period left everyone a lot of time to reflect, and many people changed their outlook on work. Yahoo Finance reports the number of people age 55 or older in the labor force is down since last fall, while other age groups have seen a rise. Many older people lost their jobs and figured they were better off retiring now than trying to find better work. God bless them, but this has caused turmoil to the labor market, and eventually to the economy.

Due to pandemic aid and unemployment benefits, Social Security claims have been low. But with so many early retirees, Social Security will not be ready for this many potential claims with less payments in the system. Triggers like this can potentially lower the value of financial assets, as the value of this fund is heavily sought after.

We need boomers working. In their later years they are willing to take on low intensity jobs before they hit retirement. With them hitting the boot early, combined with the following factors. We are left with the massive labor shortage we have today.

Unemployment Abuse

The hiked unemployment benefits people experienced over the past year due to the pandemic was a major reason for this labor shortage. The weekly dollar amount varies by state, but overall, the majority of people were receiving more money than they ever would working at a job. Personally, I can’t blame them, why work when you can make more money doing nothing? Although people ignore the potential tax stipulations of unemployment, but that’s a problem for another day.

But with this many people out of the force, companies have struggled to fill job openings. Restaurants that managed to survive a pandemic may lose out because no one wants to work. With low production some smaller stores simply cannot be open for their normal hours. When stores are closed, people have less opportunity to spend. If people aren’t spending the economy lags. When these benefits get slashed, people will spend much less at stores that are open for much less time. Do you see the potential snowball effect?

Is Raising Wages a Solution?

If wages were raised one month ago, this problem could’ve been fixed very easily. But they were not and the process has been sped up. Slashed unemployment will lead to people searching for work. It’s been proven that minimum wage really isn’t enough if you are renting. Workers now will be at a struggle with less money to spend. Businesses will be at a bind because if they raise wages, profit margins are affected. In turn, they will hire less people despite needing more, in order to protect profits.

If they opt to keep wages the same, those forced to work will work, but will not be as productive, making their role marginal. When something is marginal in the business world, it is basically just the bare minimum in terms of production. Had wages been raised earlier, the snowball could’ve been stopped, or given the business community more time to adjust to the inevitable employment shifts.

Now what we have for the labor market is a very scary future. Personally, I see a lot of ways it could play out poorly, and a few ways everything works out okay. Simply it all depends on the time things enact and if they do. As business cycles work, some companies will figure it out and some will falter.

broke unemployed
Featured

The Security That Isn’t Taxed

When it comes to finance, stocks are always at the center of everyone’s attention. Lately, cryptocurrency has entered the limelight as well. Both of these securities have strong connotations around them. Stocks and cryptocurrency are famous for their ability to build your wealth and infamously known for making some rich overnight! However, what is not often talked about is the taxes that are paid on stock and cryptocurrency gains. Ah yes, the dreaded capital gains tax always chips away at your returns. In this article, I’ll talk about an investment option that completely avoids federal, state, and local tax. This security that isn’t taxed is called a municipal bond

Bond Summary

Before we get into the municipal bond, let’s review what a bond is exactly. Unlike a stock, a bond has guaranteed return once you purchase it. The main aspects of a bond are the par or face value, the coupon rate, and the maturity date. Here’s a quick summary of what these are: 

  • Par or face value: The principal value of the bond. Generally, this value is $100 or $1,000, and this value is used when calculating the interest payments.
  • Coupon Rate: This is the rate of interest, on the face value, that will be paid to the investor over the life of the bond until maturity. Ie: a 4% coupon rate on a $1,000 bond would mean $40 gets paid to the investor every year. 
  • Maturity Date: The maturity date is the date on which the bond “expires” or matures, and on this date the investor is paid back the face value of the bond. 

Bond Example:

Let’s say you buy a bond at par value of $1,000 with a 5% coupon rate and 4 years to maturity. This would mean you would receive $50 every year for four years and at maturity you would be paid back your $1,000. In total, at maturity you would have received $1,200. 

Municipal Bonds

Now let’s get into Municipal Bonds. These bonds are special as they are not subject to federal, state, or local taxes (except in some cases). This is important because it means that the gains you get from the interest payments are completely tax-free. Gains from stocks are always taxed either with short term capital gains or long term capital gains. This creates the possibility for municipal bonds to be a safer investment option that can yield an equal return compared to a stock. 

Here’s an example: 

Let’s say you’ve held the S&P 500 for less than a year then sold. You got the average return of 8%. Since you held it for less than one year, you will be taxed at a short-term capital gains rate dependent on your tax bracket. Let’s say you’re in the 32% bracket. This means that your effective return is really 5.4%. An equal return with a municipal bond would be a municipal bond with a 5.4% return. 

Final Thoughts

All this being said, municipal bonds don’t often offer high yields above 2%. The municipal bonds that do offer a yield higher than this likely have a low credit rating. A bond with a low credit rating is riskier which removes some of the benefit of buying a bond, guaranteed return. The game between risk and reward is a hard balance to maintain. Everyone is different and at different points in their life, so all of those factors should also influence your investment decisions including your decisions on bonds. Overall, stocks often have more risk and reward than bonds do. Municipal bonds are special in that they even the playing field a little bit by removing taxes from the return equation giving some incentive to invest in them. Lastly, always consult a professional and consider your own investment options! 

Featured

3 Growing Industries and ETFs to Match

Buying ETFs (exchange traded fund) as opposed to regular stocks can help investors manage risk. An ETF tracks an index, sector, commodity, or another form of asset and can be bought and sold on any traditional platform. Buying an ETF for an industry rater than one stock in the industry is much safer. If that one company fails, your investment fails. But, if the industry does take off like you expected, the ETF will have you in full gear. The growing industries below are ones I believe have the potential to take off in the 1-3 years.

Aerospace – $XAR

When people hear Aerospace they think of spaceships and space hotels. There is much more to Aerospace than this. Aerospace has a wide functional opportunity as it is purposeful in military, industrial, and commercial aspects, which is what qualifies it to be one of the growing industries. This is not a small industry as it is valued at $838 billion, and has a wide range of companies. Boeing ($BA) and Airbus ($EADSY) are common names as they are responsible for most of the aircrafts and bus systems. The industry begins to draw me in though because of the new ideas that are soon to come.

e-VTOL stands for electric vertical takeoff and landing and these vehicles will be here before you know it. They are planning to be used by air taxis and will allow people to travel ideally city to city at a much faster speed. Uber ($UBER) had a division called Uber Elevate dedicated to this type of travel, but the pandemic forced them to sell to Joby Aviation. This kind of angle on commercial travel, as well as the goals of many such as Richard Branson to have commercial flights to space is what pulls me into Aerospace. If things like this can be accomplished, the commercial part of the industry alone will propel it higher.

$XAR is currently at $132.60, an All-Time High for the Aerospace ETF. The four major holdings of this ETF, are;

Axon Enterprises ($AXON), Maxar Technologies ($MAXR), Aerojet Rocketdyne Holdings ($AJRD), and Virgin Galactic Holdings ($SPCE).

Artificial Intelligence – $ARKQ

AI has been on the scene for awhile now, but its recent normalization is what attracts me to it. Self-driving cars are no longer a wild thought, and Artificial Intelligence has even been used to replace doctors in annual checkups. The use cases of AI does not stop there though, all the capabilities of it is very broad and why it is quickly taking over everyday life.

Everyone has experienced the odd feeling of talking about or looking at a product, then getting an ad for it. This is AI working, tracking what catches your eye and what doesn’t, then putting it in front of you. AI is also using machine learning to detect odd financial behavior by an individual and discovering fraud, well before any human could find it. These are two of the many examples of AI, and the broadness of these examples show you just how capable it is.

Cathie Wood is the genius behind Ark Investments, one of the best performing asset management companies in the past two year. Her Artificial Intelligence specific ETF ($ARKQ) has major holdings of Tesla ($TSLA), Trimble ($TRMB), and JD ($JD). In the past year ARKQ is up 68%, and has seen a high of $99.68. Currently it sits at $84.72

Cryptocurrency- $GBTC

We have discussed the power of cryptocurrency plenty of times here, and I will link some of those articles below. Cryptocurrency can be a game changer for data verification and the transfer of information. Analysts have said the strides cryptocurrency has made in the past five years will be trumped by its strides the next two years. Sounds like one of the best growing industries to me!

Grayscale is a cryptocurrency specific asset management firm, and $GBTC is their crypto large cap ETF. The contents of this ETF are Bitcoin, Ethereum, Cardano, Chainlink, Litecoin, and Bitcoin Cash. Grayscale holds 46% of all the Bitcoin that is held by publicly traded companies. So if $35,000 is a little too much for you to buy a bitcoin, buy some shares of $GBTC instead.

$GBTC sits at $28.58, and is considered to be at a 9% discount to its fair price according to MarketWatch. The ETF reached a high of $56.70 back in February, and can very well return there before year end. Grayscale added Cardano to this fund yesterday, and made it the third largest holding of it behind Bitcoin and Ethereum.

Featured

Higher Prices Are Here To Stay

Prices have increased everywhere. The most prevalent being gas, lumber, retail pricing, automobiles, real estate, and service costs. What intrigues me most is the rate at which stock market pricing is increasing. Take a look at the 5 year chart on the S&P 500.

Look at the rate of increase since the March 2020 drop. It appears to be going straight up rather that slowly increasing over time like the first 80% of the chart (July 2011-2019).

The amount the market has gone up in the short time frame from March 2020 looks concerning. You might be thinking….

“What goes up, must come down.”
“The market can’t go up forever.”
“The quicker the rise, the harder the fall”

I was thinking this at first, but I don’t think it is as bad as it seems and heres why.

  • The amount of money in our economy has gone up significantly. As of right now there is $2.18 trillion of US currency in circulation right now. In 2017 there was about $1.5 trillion.
Data from Ycharts.com

Looks similar to a graph of the stock market right?…

I’ll read you a headline from CNBC News on April 9th, 2021
– “Investors have put more money into stocks in the last 5 months than the previous 12 years combined”

Households Got Wealthier

Wall Street Journal quotes, “U.S. households added $13.5 trillion in wealth last year, according to the Federal Reserve, the biggest increase in records going back three decades.” 

Families did not spend as much money on cummuting expenses, eating out, services, and other retail items last year. Also, families recieved unemployment benefits. They put their extra money into the stock market. The American population “pumped” the stock market with their money.

Checking account balances throughout America increased during and after the pandemic. More specifically the lower income earners due to stimulus and unemployment checks.

If you’re wondering why the stock market has pumped so much here is the reason. It’s always a good feeling when changes in the stock market have a clear reason.

The Point

Picture yourself as a business owner, what would you do if all your customers had more money in their pockets to spend? Yup, you would raise your prices. This is the simplest explanation of inflation you’re probably telling yourself.

But let me ask you these questions….

  • Are the higher prices you’re paying for a problem if you have more money to spend? Did things really change?
    No, things are just changing on numbers you arent used to seeing.
  • Are your larger stock market returns significant if the prices of everything are going up?Probably not, so I wouldn’t worry too much on if the market seems euphoric right now.

Back To The Title of This Article

I think the higher pricetags on items are here to stay. The government and Fed have made a habit of increasing monetary stimulus (money printing) into the economy. It does not like like they will never do it again. This leaves Americans with more money in their pockets, and higher prices to go along with that. Its been going on for decades, why would it stop now?

Even the minimum wage is in talks of getting raised. Which only adds to the fact that higher prices will continue to stay.

Featured

What is a Stock Split and How to Capitalize From It

A stock split is one of the best ideas to ever enter the stock market. Without stock splits, buying one share of Apple ($AAPL) would cost you about $27,957.44, according to Business Insider. Instead, one share of Apple costs $133.38, a price people are much more willing to spend. Some people view splits as a signal to load up on shares, but others think its better to remain patient until after the split. Some take a split as a signal to stay away from a stock. Regardless of your outlook, a stock split gets everyone talking!

What Exactly is a Stock Split?

When a company deems its stock to be too high, they perform a stock split. This means they give shareholders more shares while reducing the price of the stock in relation. Last summer, Tesla did a 5-for-1 stock split. This means if someone had one share of Tesla, they now had 5 shares. At the time of Tesla’s split, the stock was about $2,300. When the split occurred it went to $460, which is just $2,300 divided by 5.

By creating this split, Tesla once again became more accessible to lower capital investors. Lots of people want to get some shares of Tesla, but $2,300 is a little too much. $460 might get more investors, and Tesla was aware of this when they made this decision. Doing this has no significant financial impact on a company or a shareholder since everything moves in relation.

Should You Buy Before or After the Split?

There is no definitive answers to this question. Recently we have seen stocks run up hard the month before their split. Although, after the split they have struggled a bit. Apple tapped $138 two days after its split, but 10 months later it is below this mark. Tesla is well over its split price, but hasn’t moved like it did the months before announcing the split. Still, both stocks are on the slow grind upwards.

The good thing about buying after the split is you can see how the stock reacts to the split. But if it shoots up, you’ve missed out on some dollars. Splitting up your planned investment in half for before and after might be your best bet.

Growth Invest Stock

Which Stock Will Split Next?

A stock we have talked about extensively before is set to split very soon. The chip maker Nvidia ($NVDA) is an industry leader in a high ticket market. Click here to read about our break down on this game changing stock.

Nvidia will issue a 4-for-1 split after the market closes on July 19th. Currently Nvidia trades at almost $800, so on July 20th, shareholders will see one share costing almost $200. This will be a great opportunity to get in on an industry leader in a growing market, an opportunity that does not come often.

Featured

How Many Stocks Should You Hold In Your Portfolio?

A common question once you start buying into stocks is, “How many stocks should I buy in my portfolio?” A lot goes into this answer…

The more stocks you hold, the more your portfolio tracks the entire market. With a small account the goal should be to outperform the entire market.”

– The Common Trader

Many people will tell you different things, myself included. Believe it or not my partners disagree with me a bit on what I think. I’m here to share WHAT I BELIEVE the best apporach is depending on account size.

My opinion, not advice.


Portfolio Under $10,000

You may hate to hear this but this amount of money won’t make you rich with stocks. Don’t act conservatively with this amount, BE HIGH-RISK.

The reason I say this is because say you have all $10K invested. The market dips a massive 20%, which is extremely unlikely by the way. you only lost about $2,000 depending on what you bought into. $2k is meaningless when you think 20 years out. You will do yourself a disfavor by not taking the risk now.

“You can invest with less risk and make more money in the stock market. All you have to do is not be an average investor.

– Robert Kiyosaki

5 stocks max is your best bet.

  • No total market ETF’s (Don’t own $SPY!!)
  • 1 Dividend, blue-chip, Stable Stock. (Not 1 of each…)
  • 2-4 High-growth stocks.
  • No Bonds
  • No REIT’s
Reasoning

1.) The reason I say no total market ETF’s is because they produce lower & more stable returns. These kinds of returns won’t propel the account by much. 8% a year on $10k is only $800… Your yearly contributions will be more than the returns. Take some risk.

2.) The high-growth companies will give very good returns if and only if they are solid business’s. If they don’t, you took a great risk and only missed out on an $800 opportunity cost if you invested into ETF’s as an alternative.

  • Some of my favorite high-growth companies that are currently in production/conducting service are Zillow $Z, Peloton, $PTON, AMD $AMD, and Nvidia $NVDA. These comapnies are growing at high rates while bringing in revenue. Meme stocks posted on Reddit that are projected to have revenue 5 years out don’t fall under this category.

3.) 1 blue chip company because this stablizes your portfolio, while it also gives you that chance to outerform the S&P 500. Which should be the goal with a small account. Tech has been hot and will continue to be hot for years to come. I like Microsoft the most $MSFT, then Apple $AAPL, and Google, $GOOG.


$10,000-$25,000

Now you have a solid amout of money in the market which can make some serious gains on a yearly basis. Age is a big factor in determining how this porfolio should be split up.

If you’re in your 30’s with this account, taking a more moderate approach is in your best interest. Allocate around 50% to total market ETF’s. Anywhere in your twenties, taking a very similar approach as a sub $10k account is what I believe is the best option. 20%-30% dedicated to total market ETF’s

8 stocks max is best suited for this amount.

  • 1-2 big ETF’s ($SPY, $VO, $FTEC)
  • 3-5 High-growth stocks
  • 2 Dividend, blue-chip, Stable Stock
  • No REIT’s
  • No Bonds

$25,000+

If you have this amount good for you! I sadly don’t have enough experience yet to give my opinion. I am not a licensed advisor and maybe you should seek one if you have serious questions on your portfolio diversity.

Remember this is not advice, just my opinion.

Subscribe to get access to a portfolio allocation sheet under the “Subscriber Content Tab.”

Featured

1 Method to Outpace the Market: The Barbell Approach

Investing in the market over a long period of time has proven to do well. However, if you can beat the market for a long period of time the returns can be incredible. Beating the market doesn’t always mean being in the green. Sometimes you might be in the red, but if you are less red than the market, it’s a win. The barbell approach will do just this when there is red, and yield higher or equal returns when green.

What is the Barbell Approach

Everyone has their own outlook on what should be in a portfolio. A barbell approach just decides how the contents of the portfolio is balanced. The barbell approach I will discuss has three contents: Bonds/Dividend Focused investments, growth focused etfs and stocks, and sectors with big potential in the near future.

barbell approach investing balance

For those of you who are not gym rats, the diagram above shows a common barbell, a popular tool used to lift weights. On either side of the barbell, you need equal weight to ensure a proper lift. But don’t forget, the bar itself has some weight to it too. Once you properly balance out your weight, you are ready to lift!

The point of the barbell approach is to be able to secure growth when the market is good, and to be able to rebound faster than the market after a large market downturn. This type of downturn is one of more than 10% in a couple of days.

How the Barbell Approach Works

Bonds/Dividend Producers (40%): In this part of the barbell, you have investment vehicles you are strictly looking to collect from. If these assets go up, down, or sideways, you don’t really care. You are just looking at the quarterly or monthly payments you collect from them. Ideally, these assets will not be affected much by a downturn. A good dividend producer is the etf $DVY, which pays $3.73 annually in dividends. One can also buy High Rated Corporate Bonds such as AAA or AA, or anything BB and above. These bonds hold their strength against the market well and pay favorable coupon rates (monthly payment for holding the bond).

Growth Stocks/ETFs (40%): On the other side of the barbell, you play a riskier game. These investment vehicles you are in search of long capital gains from. This can be the market itself by investing in the S&P 500 ($SPY), or $SCHG, a large-cap growth etf, or in specific stocks that have passed the test of time. These might be Apple ($AAPL), Amazon ($AMZN), or Berkshire Hathaway ($BRK.A). Even when the market dips, these assets have proven to recover and rise higher.

Individual Sectors (20%): The previous two parts of the barbell approach are the weight on each side. This last part is the actual bar, which holds the added weight in place. The individual sectors you hold will be smaller percentages of your portfolio, and you will ideally hold them for less than a year. This part will consist of any specific sector you believe will have a good 6-12 months because of current economic conditions.

An example of this would be buying $ONLN when the pandemic first happened, because online retail was sure to rise since people couldn’t shop in stores, which it did. Now, someone practicing the barbell approach might sell their $ONLN, and buy $JETS, an etf which follows airlines.

How to Max Out the Barbell Approach

The saying never fails, “Everyone is a genius in a bull market.” You don’t need a strategy when everything is going up. When the market begins to slide is when having a proper strategy pays off. The growth side of the barbell will be hit pretty good when there is a dip. Instead of taking all the weight off when things go south, use the income from the other side to strengthen your position. If you are invested in confident assets in the growth area, they will recover, and you will have more money than before the drop. This is called Dollar Cost Averaging (DCA), a common investing practice. The money will still come in from the safe side, its just a matter of getting the barbell back even.

This method has proven success to keep pace with the market in good times. The true power of the strategy comes with how well it combats the bad times. If you fear market dips and are waiting to time the market, try this method right away instead.

Featured

Chainlink is a Crypto at a BIG Discount

The crypto market has been somewhat stagnant since the crash in May. Since this crash, Bitcoin ($BTC) is still down 16%, but it has recently gotten over $40,000. Check out TJ’s latest post where he takes a deep dive into the whole crypto market. For a better understanding of Chainlink, watch the quick, 3 minute video from 2020 tagged at the bottom before or after you read.

The Chart

Chainlink ($LINK) was first mentioned by us at around $3 in April of last year. Since then Link has reached a peak of $52.99 in the early days of May! It now rests at $23.75 after the crash, and shows strong resistance at $20. Only briefly did it slip under $20 when the crash first occurred.

Looking at the chart alone, Link is looking like a very strong buy. Whenever you look at a crypto chart, you almost have to look at Bitcoin’s. The first ever crypto currency heavily decides which way the overall market goes. Link has touched over $30 since the crash a handful of times, but has struggled to remain over it. However, the longer it can build strength in the mid 20s, the more of a buy it becomes.

Chainlink Crypto Market
Chainlink 1 year chart

Use Cases

Chainlink has some revolutionary use cases for an already revolutionary technology in blockchain. Use case is a term in crypto for what purpose a coin holds. I prefer to buy coins which have specific use cases, as I believe when there are specific goals for a project, it is easier to hone in. If a coin has a broad use case such as “developing NFTs” there isn’t enough there for me.

The main focal point of Chainlink is smart contracts and oracles. Chainlink can take real world data, which is considered “off-chain” and bring it on-chain, by way of the oracle. For instance, if a company wants to collect and analyze the attitude and behaviors of their employees and adjust their payroll accordingly, Chainlink can bridge this connection and adjust the payroll, extremely efficiently. The agreements made between the data and the payroll adjustment is considered the smart contract.

Chainlink also has dabbled into the highly popular NFT market. Recently, professional basketball player, Lamelo Ball of the Charlotte Hornets, partnered with Chainlink. He created four NFTs tied to different aspects of his play such as points, steals, etc. As his career progresses and his stats improve, Chainlink will take this data and apply it to the NFT, making it a dynamic NFT. Consider the dynamic being almost like a software update. The better Lamelo Ball does and the accolades he gains, theoretically the more valuable the NFT becomes. It is almost like a digital trading card. This can only be accomplished, by the power of Chainlink.

What The Future Holds

Chainlink is at a discount right now. Its use cases are practical and revolutionary. Its chart shows proof of potential. Even with the crash, Link is up 478% in the past 1 year. The next two points could make Link replicate that 1 year gain again this year.

Gas fees in cryptocurrencies is basically transaction costs in simple terms. Exchanges such as Ledger and Metamask charge a gas fee in purchases and sells, paid in Ethereum. This means even if you are buying Dogecoin, you still need some Ethereum in your wallet to pay the gas fee. There have been a number of reports coming out you will soon need Chainlink to pay the gas fee, and not Ethereum. This will directly lead to just more people holding Link in their wallets.

Chainlink will also undergo staking in the next 1-2 years as well. To simply put it, staking is similar to a dividend in the stock market. Right now you can earn interest on Link and other coins in certain exchanges, but this is not the same as staking. With staking you will be rewarded for the amount of a coin you hold, and will earn interest on the staked amount of the coin. Right now your actual holdings are put for collateral on the interest, but when staking is live your holdings will be safe, and the staked coins are what will be risked for the interest. All in all, accumulate your coins now, so you have a high staking priority when it comes time.

This is not the first and last time we have discussed Chainlink, there is a reason for this. As Warren Buffett and Charlie Munger said, when you see your perfect pitch, swing!

Featured

What Is Going On With Crypto & Bitcoin?!?!

Crypto has taken a giant hit since late April. Bitcoin has been spending significant time down as much as 40%-50% from its Februrary highs of $65,000. Other coins like Chainlink and Ethereum have been down over 50%!!

So whats going on? There is no clear answer as to why crypto has been down so much. Some say its because of Elon Musks tweets about Bitcoin being very energy inefficient. Others will claim the “Crypto Bear Cycle” or “Crypto Winter” has just begun.

Elon Musk on Twitter: "To be clear, I strongly believe in crypto, but it  can't drive a massive increase in fossil fuel use, especially coal"

This is what crypto does. Major market swings are not uncommon at all. In my opinion, it was just a big dip, then a lot of panic selling, to make a MAJOR DIP. The fundamentals of Bitcoin and other major coins have not changed, which is what everyone needs to know.

What Is A “Crypto Bear Market?”

Simply put, it is a time period where Crypto is in a severe downtrend. Usually lasting several months to even 2 years. There are hardly ever any green months, just flat or downward price action. Since Bitcoins creation in 2009, crypto has seen 4 bear markets. The last 2 being in 2013 and 2018.

BITCOIN The Golden 51%-49% Ratio! 600 days of Bull Market left! for  BITSTAMP:BTCUSD by TradingShot — TradingView
Picture From Trading View

Crypto Is Still Young

Bitcoin has been around for only 12 years!! You were born before Bitcoin…

The point I am making is that there is such a small amount of data and past history to determine whether or not we are in a bear market for crpyto. An asset class this young is going to have massive dips, high volatility 24/7, and small market caps no matter the cycle timing.

People say 2 years after the halving the bear cycle begins, Bitcoin will hit $100k then the bull cycle ends. Or price has to bounce off this moving average or else it’s bad news for crypto, other technical chart analysis, and more profound statements. The fact of the matter is there is not enough past history to make clear cut statements about what Bitcoin will do for the next 12-24 months.

No one person is educated enough to predict prices on an asset class that is not even 2 decades old.

What is Bitcoin? - Young Academy
Picture From-Young Academy

Here Is What We Do Know

Bitcoin and other cryptocurrencies are being adopted like never before. Major banks and institutions are buying or thinking about buying coins as assets on their balance sheets.

  • Tesla
  • Square Inc.
  • MicroStrategy
  • Microsoft
  • Bank of America
  • JP Morgan
  • Grayscale
  • ARK Invest

Companies are starting to see how useful cryptocurrency & the blockchain are. They not only see the price value, but the use case as well.

  • More wallets than ever before hold crypto.
  • Smart contracts & the blockchain are being used for real world events.
  • NFT’s serve a real world purpose.
  • Stores are accepting crypto as payment.

Crypto Investing Rules.

  1. The crypto market is NOT like the stock market.
    – Crypto is more volatile.
    – Crypto will give higher returns, but can also give higher losses if you’re not careful.
    – Stocks move 0%-3% a day on average, crypto moves that much in 20 minutes…

  2. If you won’t buy more of your crypto if it’s down 50%, don’t buy any at all.
    – As a crypto investor you must come to terms with 50% swings in your portfolio and be unfazed by it.
    – If you can’t follow this rule on any of your assets, then they are not good assets. Goes the same way for stocks.
    – If you buy solid crypto projects you will have no problem buying back at lower prices.

  3. Have plenty of patience.
    – 90% of crypto coins are in development mode, meaning they aren’t being used for real life actions. You’re buying into speculation and future predictions for now.
    – The reason to invest in crypto now is because you believe crypto will be an everyday. use case in 10 years.
    – Suffer the 50% down months now, for a future of prosperity.

  4. Don’t overallocate yourself.
    – Buying too much crypto puts your net worth at a huge risk.
    – Make sure you put in an amount you are comfortable losing. The stock market is not like this.

Is Now A Good Time To Buy?

I’m not saying the bottom is right here this very moment. But I will say now is a tremendous buying opportunity.

I bought more because I like my crypto assets still. Nothing about their fundamental changed, only the price changed. I see it as a 50% discount, so i went shopping.

Even if we are in a “bear market,” buying at 50% off the highs is still a great price point. All you can do as an investor is research your assets, buy the dips if no fundamentals change, and be patient.

Featured

House Flipping Can Be Very Profitable, Here’s What You Need To Know

The common story line you hear from young investors is they want to make it big in the stock market, then use that money to flip houses. I am in no way saying this is a bad plan, it is actually a good string of goals for a young person. What I will say is this is not easy, and doesn’t happen as fast as people think. However, it is possible. Flipping houses is a very attractive investment vehicle because of the large sums of profit, with high profit margin. If you renovate properly and sell at a good time, your returns can easily be upwards of $150,000. I will discuss aspects of house flipping, and what to do or not to do to achieve the massive gains.

What is House Flipping?

The act of house flipping is purchasing a home, making various improvements to it, then putting it back on the market at a higher price. House flipping is sometimes confused with purchasing rental properties. Someone who has rental properties is renting all or parts of a home and using this cash flow to pay off mortgages or for profit. The major difference here besides the cash flow is time. Rental properties are to be held for years and becomes more like passive income, while house flipping is to be done ASAP, making it active income.

When house flipping, most are looking for “Fixer-uppers”. These homes are run down and often foreclosed. However, with effective improvements to the home, it can look like new, and drastically raise the value. Sounds simple enough, right?

70% Rule

The 70% Rule is a common rule amongst house flippers when factoring costs to purchase and fix a home. Knowing how much to spend on a home will help guarantee you are putting your money in the right place. By estimating the after repair value (ARV) of a home using surrounding home prices and other factors and multiplying it by .70, and subtracting the repair costs, the rule gives you the maximum price you should pay. Example below:

After you spend $25,000 to repair a home, it will be worth an estimated $150,000. By rule, you should spend no more than $80,000:

$150,000 x .70 = $105,000 – $25,000 = $80,000

Now, you know exactly how much you can invest into the home. Theoretically, the remaining 30% is considered to be profit. This can’t be farther from the truth, as there are many hidden costs in house flipping that start to add up…

Financing

If you had to take a second look when I said to spend no more than $80,000 on the home, I don’t blame you. $80,000 is not chump change; house flipping is a very expensive investment. Unless you are lucky enough to be a cash buyer, you will take out a mortgage to buy the home. Most mortgage require a 20% down payment, meaning you must pay 20% of the home value you right away. If a home costs $100,000, the bank expects $20,000 from you at the start. The remaining $80,000 is what makes up your mortgage, and the monthly break down of it is your mortgage payment. While the mortgage payment can be tax-deductible when you sell your home, the interest payments are not. The longer you take to fix and sell the home, the more the interest payment eats at your 30%.

Hiring a contracting team to fix the house can be a hefty check as well. A good way to avoid this is by being able to do the work yourself, or a small group. If you are blessed with the ability to fix homes, this is definitely the better route.

Another cost when flipping a house is agent fees. If you hire a real estate agent to help you buy or sell property, you will have to cover their payments. If you decide to sell on your own, you will have to pay to advertise your home so others are aware you are selling. Another cost to factor is your capital gains tax, which is taxed depending on your income bracket and the size of the gain. However, there is a way to avoid this tax! A 1031 Exchange allows someone to reinvest their real estate gains into a likewise investment, tax-free. So once you sell your property, if you actively look for a new property, you can duck the capital gains tax.

Time is Not Your Friend

I have alluded to this many times already, but being a house flipper has to be quick. The interest payments will stack up for sure. Your personal time will be affected as well, especially if you are fixing the home yourself. Also, once the house is ready to sell, you will have to be available to show the house to prospective buyers. If you work a 9-5, consider your weekends and nights gone when you are trying to flip a house.

Don’t think it is impossible though! There’s 168 hours in a week, you will be able to find time!

Knowledge On the Housing Market

Picking the right house isn’t easy. A good way to measure the value of a home is comparing it’s lot size, number of bedrooms and bathrooms, and price to that of nearby homes. If you can find a run down home in a nice neighborhood, the profit margin can be huge. This is why having a real estate agent with you can help, as they probably have more knowledge on the subject than you. They will also help you to remain patient. Taking your time to find the right property will lead you to more profit than buying the first house you see.

My father has been a Real Estate Broker for more than 15 years in New York and Connecticut, and he says there’s no better tool than patience when purchasing a home. I got my Real Estate license this past January and have seen the importance of having patience first hand for both parties. The payout and lack of headaches makes the wait worth it!

Final Thoughts

The tone of this article sounds like I am against house flipping. I am all for it! The profit margin can easily exceed 20%, something that is hard to replicate in the stock market. The amount of money and time liability that must be taken for house flipping though makes it a big process. It’s not like buying a stock today and selling it next week. As long as you are prepared, you can be the next great house flipper.

Featured

A Plan To Fight Inflation Is Finally Here!!

The most pressed economic issue over the last 2-3 months has not only been inflation fears, but in fact, inflation effects. Prices have surged, supply chains have been bottlenecked, and unemployment is still higher than it should be.

Recent CPI reports have shown clear data that inflation is in fact here. Both April and March are subject to this. CPI is the “Consumer Price Index.” It measures price changes in everyday goods, such as gas, grociers, services, etc.

  • April 2021 CPI data up 4.2% from April 2020
  • March 2021 CPI data up 2.6% from March 2020

The CPI report for May is this Thursday June 10th, investors will be watching. If inflation is foreign to you, check out an article we published a few weeks ago.

Bidens Plan

What worried me the most was the ignorance of the Federal Reserve and US Government. They saw inflation was here but took no action to combat it. Yes, it will work itself out over time, but some initative should have happened earlier.

  • Unemployment benefits should’ve and still should be lowered, giving people incentive to return back to work.
  • Interest rates rising or not is out of my realm of fully understanding. I won’t say they should have risen or not.

Nevertheless, Biden wants to combat supply chain issues by bringing more manufacturing into the US. He plans to do this through funding. I love the idea of America being the main plant for manufacturing & production, thus providing more jobs, which are needed in these times. However, Bidens future plans for the most part are only being carried out through massive funding, which I am weary of.

“The administration will establish a supply-chain disruptions task force to address near-term bottlenecks that can affect the economic recovery.”

– Jenny Leonard, Bloomberg
  • $50 billion in funding for semiconductor research and production in the US.
  • $60 billion in funding for pharmaceutical production in the US.
  • Agriculture funding to fight US food production slow downs.

Everything Is Subject To Inflation

Everything with a pricetag is affected by inflation. Real estate arguably less because of the land value. Stocks are especially subject because of how many companies have loans to pay off. So what should you do with your money…?

Inflation Definition: Formula & How to Calculate
Investopedia
  • Move some money into value stocks. If you have a bigger portfolio, I would move some money into giant companies that are “too big to fail.” My favorites are Microsoft ($MSFT) and Disney ($DIS). The little to no debt these companies have means less inflation worries for them. And their products will always be in demand since they’re top of the line. They have nothing to worry about.
  • Move money into Gold or other commodities. Real, physical items are always in demand no matter what.

If your account is smaller it might not be worth putting money into these low-growth, low-risk value stocks. Just do want you can to increase your income and buy into your high-growth companies. Your portfolio number now will be insignificant compared to 10 years from now.

Does Inflation Scare Me Right Now?

After what I just said you might think so. I believe for the rest of the summer and even into some of the fall season the market has a high chance to remain flat, or trend slightly downward. There is nothing happening right now that could push the market to all time highs.

I still look at the bigger picture though. If the market dips, buy more. 10 years from now you’ll thank yourself for buying the dips.

Featured

Cruise Line Stocks Are One of the Last to Recover

When the March 2020 crash happened, many investors preached about a “V-Shaped Recovery”. When we were at the bottom, I thought they were just trying to sell the public a pipe dream. For how ugly the market had looked for about two weeks, I was sold there would be another leg down, especially with no businesses open. Nonetheless, I was quite wrong. 15 months later and the market overall is higher than before the crash. Most businesses have been able to now look past the pandemic, or have found a way to use it to their benefit. Cruise line stocks have not seen this complete recovery though. They have grinded higher over the 15 months, but still have substantial room.

Figures in this previous post will be attached at the bottom

This post from December 12th shows an excel analysis of stocks that hadn’t covered their drop but would benefit from the vaccine. In this analysis we discovered the cruise line sector was the most opportunistic, at the time they were missing on average 50.23% from year highs. Norwegian Cruise Line Holdings ($NCLH) was the best individual stock as it still needed 55.67% to close its 88.24% drop.

Where The Cruise Lines Are At

Seeming that air travel is more of a necessity than cruises, airlines have erased losses a little more. Although, cruise lines have recently begun to rise. In the past month Royal Caribbean ($RCL) is up 11.6%, currently sitting at $94.07. $NCLH is at $32.12 and is up 12.78% this month, with Carnival Cruise Lines not too far behind at $30.54, up 14% this month.

If you were lucky enough to buy all three of these right after the blog post on December 12th, you would be up on average 35%! Having this confidence of proven recovery with room to go still makes each cruise line a buy. The vaccine has lowered worries around Covid-19. Even though cruises can be a hot spot for a virus, most are planned to resume globally sometime in mid-summer.

Recovery = Good Quarters

The recovery is not complete yet, and it is certainly not too late. According to USA Today, people have been booking cruises 6+ months in advance, just waiting for restrictions to be lifted. Plenty of cruises have been burning cash trying to stay alive during this pandemic. When the revenue starts coming the quarterly reports will be incredibly improved.

Sometimes the market can be what I like to call automated. If a company can beat earnings expectations one quarter, the stock price has a little surge. But how is this expectation formed for the most part? By performance over the past few quarters, fundamentals are not tied into the expectation enough. Analysts won’t factor in enough how much consumers will react to the resumption of cruises and they will continue to look at the burned cash. All the cruise line stocks will have low expectations, and when there’s a big beat, things can get rocking!

Recovery cruise airline stocks
Featured

Best Numbers To Look At For Stock Valuation

Ask yourself this, “What do I look at before I buy a stock?” Chances are you don’t look at what you should be loking at. Just looking at a stocks chart, revenue, profits, and what tik tok says is not a good valuation. Once you start investing with bigger sums of money, you can’t afford to make mistakes as often.

Looking at more in depth metrics and numbers gives a better understanding if a stock is expensive or not. The metrics I am about to share are not complex, so don’t run away too early. In fact, they are based off of what you’ve been looking at already. The revenue, profits, and growth percentages.

Most metrics can be found easilly on yahoo finance.

Keep This In Mind

The best way to determine whether a stock is cheap or expensive is to compare it with it’s closest competitors. If one company’s numbers are inflated when compared to the other it could mean the stock is overvalued. Not always, but it could.

Comparing analytics on Starbucks ($SBUX) vs. Tesla ($TSLA) for example, may steer you in the wrong direction. Their business models are incredibly different. The profit margins, sales numbers, etc. are going to be far different numbers. Selling coffee vs. selling cars are very different fields and shouldn’t be compared the same way.

Enterprise Value

This one is really easy. Enterprise value (EV) is the true value of a company. It is the market capitalization, with debt and cash included.

Market cap = share price x number of outstanding shares

Enterprise value = (Market cap + debt) – cash on hand

Enterprise value portrays what the company is worth if someone were to buy out the entire company. They take on the debt as part of the company, but cash is pocketed.

If a company has too much debt it isn’t a bad thing per say. As almost all high-growth companies have substantial debt because they are trying to grow their business at a faster rate. They have to take on loans to do so.

If a company thats been around for a long time has a lot of debt, then it may be a bad thing. Since, after all these years they still can’t shake of debt… thats a poor business.

Gross Profit Margin

(Total gross profit/total revenue)x100. This is one of my favorite numbers to look at because it shows if a company is growing faster than its competitor.

Gross profit margin - Formula, meaning, example and interpretation

Take Zillow ($Z) vs. Redfin ($RDFN) for example.

  • Zillow has a gross profit margin of 51%. (A reason I love this company)
  • Redfin has a gross profit margin of 27%.

I own a lot of Zillow stock because they are an industry leader in real estate advertising growing 51% year over year. It’s rare to see industry leaders growing at that high of rates.

Enterprise Value/Gross Profit

Enterprise value/gross profit. This number determines how many dollars of enterprise value are made for every $1 dollar of profit. A lower number could indicate a more undervalued stock and vise versa.

Lets compare Nike ($NKE) vs Lululemon ($LULU)

  • Nike has an EV/gross profit of 12.96
  • Lululemon has an EV/gross profit of 15.62

In this case Nike is cheaper than Lululemon.

Enterprise Value/EBITDA

This is by far the best way to compare and evaluate companies/stocks. EBITDA stands for, earnings before interest, taxes, depreciation, and amortization.

EBITDA measures how well a company can generate raw income before they pay off debts. Comparing this number to another company tells who is better at producing income from the same business field. Once we take EBITDA and include the enterprise value, it takes into account the share price to see if a stock is “cheaper” than other.

  • EBITDA= Operating income + Depreciation & Amortization. (The easiest way to calcualte when looking at a companies 10-Q on Bamsec)

Lets compare NVIDIA ($NVDA) vs. AMD ($AMD)

  • NVIDIA has an EV/EBITDA of 62x
  • AMD has an EV/EBITDA of 44x

A lower number could mean the company is “cheaper” than the other. (Remember other metrics must be taken into account too). This would make sense because NVIDIA just had a big run up over the last week. Makes sense it would be at an overvalued price right now.

Keep in mind that both these numbers are very high when compared to the overall market. The S&P 500 has an EV/EBITDA of 14x…The chip sector is a high growth industry, so the EV/EBITDA will be higher.

A good note to have as well is high-growth companies will often not display an EV/EBITDA. Or what they do show is not a good representation of the company as most of their profits are being reinvested into the company for faster growth.

Featured

Warren Buffett and Charlie Munger: A Century of Investing

Over the past few days, I have read articles and listened to videos on two of the greatest investors America has ever known. Warren Buffett and Charlie Munger stand at the ages of 90 and 97 respectively. Despite staring the century mark in the eye they are still Co-Chairmen of Berkshire Hathaway ($BRK.A). This is a multinational conglomerate holding company headquartered in their hometown of Omaha, Nebraska.

With them each beginning their investing journeys in their 20s, they both have quite the track record. Coming from next to nothing, Charlie Munger is now worth $2.03 billion, and Warren Buffett is worth $109.5 billion. In their lives they have learned plenty about investing, but their experiences are applicable to life as a whole. I will be sharing briefly about my favorite takeaways and how I will apply them to my portfolio/life. Links to some of the medias will be provided below.

Warren Buffett Charlie Munger
Charlie Munger (Left) and Warren Buffett

Paying Mind to The Strike Zone

No, neither Munger nor Buffett were baseball players. But they did keep a close mind to their batting averages, and swung very carefully. For those unfamiliar with baseball, a player’s batting average is the average number of times they got a hit when they go up to bat. If a player has a .300 batting average (30%), they are almost guaranteed to be a hall of famer. Due to the count in baseball, batters cannot just wait until they get a pitch they know they can hit, ones in their “sweet spot”. If they did, strikes in other areas of the zone would fly by them, and they would strike out. This forces them to swing at pitches they don’t like, lowering their batting average.

As investors, Warren Buffett and Charlie Munger are not forced to swing out of their sweet spots. They have the power to always wait on the right pitch, and swing big when they are ready. What the geniuses intend with this thinking is to do your research, and trust it. When you find a company with a great business plan and preferable financials, go big. Don’t buy once, buy whenever you can. Buffett said when decided to swing big on Coca-Cola ($KO), he was buying thousands of shares every day, no matter if it was up or down. Today, 1.8 billion ounces of Coca-Cola are consumed everyday and it is one of the best dividend stocks.

While this is not a knock on diversification, it is an emphasis on swinging big. It is okay to buy other stocks to balance your portfolio. If you find a grand slam opportunity, swing!

Know Your Competency

My favorite takeaway from what the two investors discussed was knowing your competency. Knowing your competency is being aware of all you know about a subject, showing what you need to know more of and what you can speak on. Warren Buffett can not talk to you about every single stock in the market. Charlie Munger cannot go as in depth about $AMC as he can about $KO. The catch is, they are aware they don’t have this knowledge, and they are okay with us. This reminds me of a quote that was said by another genius.

“If you are the smartest person in the room, you are in the wrong room.”- Confucius

This quote speaks to Warren Buffet and Charlie Munger and their desire to gain more knowledge. They spoke on how they strive to surround themselves on those hungry for knowledge and success, and not with people who want to be average. However, the quote also speaks to recognizing your competency, and not ever getting a huge ego. Even if you make $10,000 in one day, you cannot think you are the best investor to walk the Earth. You must appreciate your success and developed knowledge, and use it to grow.

Final Thoughts

There are plenty of other teachings provided by Warren Buffett, ones we will certainly discuss more in the future. For their lifetimes of success, we can talk all day about their many accomplishments. Gathering knowledge about investing is a crucial part of being an investor. Who better to learn from then some of the best to ever do it!

Links to Warren Buffett and Charlie Munger Content:

Featured

Biden Is Going Shopping On America – His $6 Trillion Play

The Biden Administration just came out with next years budget (2022) last Friday, May 28th. It’s a massive $6 Trillion dollar funding plan targeting certain sectors!! This plan could give some insight on what stocks & sectors are ramping up during Bidens tenure.

The budget includes funding to the following areas…

  • Health
  • Clean Energy
  • Defense
  • Immigration
  • Transportation
  • Agriculture
  • Justice Departments
  • Cybersecurity
  • Space

“Mr. Biden’s budget blueprint serves to advance some of his administration’s most ambitious goals: Reducing disparities in incomes and wealth through the tax code, curbing greenhouse gas emissions and putting the U.S. on a stronger footing to compete with China in the global battle for economic and technological supremacy.”

Kate Davidson, Wall Street Journal

I will only go over the biggest spending areas and/or what I think is most important to note.

Health

If the past 16 months have taught us anything, it’s that our health is a top priority. The budget includes $132 billion for the Department of Health and Human Services. Mainly for pandemic related objectives.

I like this, but think more money should go toward health related services. After all, we need it badly.

Stocks I believe will reap the benefits in the healthcare sector are United Health ($UNH) Anthem ($ANTM) and Abbvie ($ABBV). These are larger cap stocks, but excellent companies.

Clean Energy

It’s no secret The Biden Administration put an emphasis on creating a better quality of life for our planet. They want to do so by reducing carbon emissions, fossil fuels, climate change, etc.

But Biden wants to do so by creating more jobs, insteading of decreasing them. Which would have happened if he just tried to eliminate coal mines, pipelines, factories, etc. and leave it at that.

The plan calls for roughly $220 billion dispursed in various areas. The biggest contributors are…

  • $36 billion to fight climate change.
  • $171 billion to efforts reducing the useage of fossil fuels.

At the moment I don’t know of any real players in the clean energy stock space. I will update soon once I find something. Biden is pushing HARD to make an environmentally friendly country. This would be a great idea for your portfolio.

Agriculture

Improvements for rural lands, waterways, rural infrastructure, and new technology expansion make up this section. What strikes me the most is improvements & funding in agricultural technology.

Tech being an already high demand field paired with agriculture leads me to one company… JOHN DEERE ($DE)!!!

John Deere is an industry leader in farming and agriculture, they have virtually no American competition. They produce quality products that sell incredibly fast no matter the economic conditions. A great place to park your money is in this stock.

Where Is All This Money Coming From…?

Yup, you guessed it. Taxes!!

  • Biden wants to raise the corporate tax rate from 21% to 28%.
  • Increase capital gains tax on the wealthy to 43%!!
  • High-Income households will give significantly more money to Uncle Sam.

Nothing Is Set In Stone Just Yet

Bidens budget plan is just a proposal for the time being. The plan has to be passed through Congress and be approved in order to be set in action.

Personally, I think there will be a lot of changes to it, considering all the Congress members are wealthy and don’t want to give even more of their money away to taxes.

The bill will probably be cut by a significant margin. I could easilly see this bill being a 3.5-4 trillion dollar bill as opposed to $6 trillion.

Featured

Is Ford The New Tesla?

Ford ($F) has been making a name for themselves over the last 12 months. This is a shock for me and many other investors because the automanufacturer has performed terribly since since 2014.

Their stock price has been on a steady decline from $18 in mid 2014 all the way to a March 2020 low of $4 per share! Now the stock sits at $14.60.

What has held Ford back for so long? And what is changing?

Fords Past Setbacks

There are many things that can be attributed, but 2 stand out the most to me.

  1. Poor management team in the mid 2010’s

It is no secret that Ford vehicles had many problems lauching over the years. A lot of lemon cars and poor customer satisfaction. “Lemons” are cars that come with manufacturing defects and safety issue right off the assembly lines. One of the worst problems a car manufacturer can go through for sure.

  1. Lack of innovation

Other than the Ford F-150 being the most sold vehicle in the US for years, Ford has done nothing to excite investors. One key aspect big investors look for is promise in inovation. Can this company grow and expand with new ideas? They want to be the first ones to buy the next big stock, Ford was never it. The company never showed signs of growing or expanding.

Ford did try their hand in the EV sector but never saw major revenues from it. However that may seem to be changing…

What is Ford Doing Now?

Jim Farley the new CEO since October 2020 is highly liked on Wall Street. He has clear intentions to turn Ford around and is doing so already. He stated at the latest investor meeting Ford is shifting to a “Technology driven growth company”

  • Expects 40% of all auto sales to be elctric by 2030
  • Investors are confident Ford will hit their 8% profit margin goal by the end of the year. Pre-pandemic was only 4%
  • The new F-150 “Lightning” Truck seems to be a hit in the media.
  • Summer 2020 Ford announced the return of the Bronco, which was a media favorite.
  • Q1 2021 revenue beat expectations
  • Partnership with Google
  • 30% revenue growth in China during the 4th quarter 2020
The 2022 Ford F-150 Lightning EV Has Frunking Fantastic Storage
Picture from MotoTrend

Risks

Ford and many other companies around the country are facing chip shortage issues. If they plan to become a real player in the EV sector they need to act fast, the chip shortage is no help.

However, Tesla ($TSLA) the king of electric is facing issues as well. They have major supply chain issues right now and cant meet the demand for their vehicles. The backloging on their best selling vehicles is hurting them and gives other auto makers a chance to catch up, or make a statement. Ford is taking this opportuinty right now and stealing the hadlines from Tesla.

Ford's F-150 electric truck sales hit 70,000: CEO Jim Farley | Fox Business
Picture From Fox Business
Price

It’s no secret electric vehicles have higher pricetags compared to their gas counterparts. No exception with the F-150 Lightning

“The company said the F-150 Lightning will have a starting price of $39,974 when it arrives in showrooms next year, significantly below that of some other electric trucks slated to hit the market. That is before tax credits are factored in.”

– Mike Colias, Wall Street Journal

A 40k starting price is a high price, but not as high as I expected it to be. Ford says the truck also qualifies for a $7,500 tax write off because of the weight of the truck. The gas F-150 is the same way which is the reason I believe Ford has the best selling trucks.

I don’t believe the price is an issue at all, but some others may.

Bottom Line

I think Ford is heading in the right direction. I love the look of the F-150 lightning, it comands a strong truck presence like trucks should. The price point is great and the tax write off is why I think the Lightning will be a smash hit.

Jim Farley is pouring billions of dollars into production for growing the company. He continues to do great things in his new role.

Is the stock a buy? I won’t be buying because I like to invest in higher growth companies right now because of my age and small portfolio size. But I love what Ford is doing and think they have a strong chance at being a quality company like they once were.

Featured

Maximize Your Small, Long-Term Account

I highly recommend using this for your long-term account, or whatever account you have with positions you plan to hold for 5+ years. If you don’t have a long-term account… GET ONE NOW.

If you are on this page it is likely you have give or take around $5,000 in your long-term account. With this kind of money it is very hard to see the gains you are wishful for. Even if you are up 50% on a position… It’ll probably only be a few 100 dollars. If you had a lot of shares for that 60% move. That $100 profit should be over $1,000

With the strategy I’m about to share you can see the 100% return on your position you want to. Which is an incredible return that shouldn’t be taken for granted no matter the account size.

LEAP Option Contracts.

The strategy is very simple I promise. All you do is buy an in the money option that is 8-12 months out in expiration. Meaning it expires in around a year.

If you are still unfamiliar with option contracts I recommend going over some of our pasts posts and wathching a few youtube videos.

Example

Take a look at the option chain for $UBER. Uber is a company that I want to own in my long-term portfolio, because I think they have a high growth business in an innovative world. But the issue is, I don’t have enough capital to buy 100 shares, which is what I want. Buying 100 shares would cost me $5,000, which I can’t shell out right now.

Instead, I will buy a call option for around $1,100. The contract still allows me to control ownership of 100 shares of stock, but for 1/5th of the price. However, only for the next 8 months.

The reason I want an in the money contract (the strike price is lower than the current share price for call options) is so my break even price is lower. The break even is the strike price + the price you paid for the contract.

Say I buy the Jan 21st 2022 call with a strike price of $45 at 10.25 (equal to $1,025). 45+10.25 is 55.25. If Ubers share price is at 55.25 at expiration, I break even profit wise.

All Uber has to do is move 10% from it’s current share price of $50.46 for me to break even. Any share price above this i’m in profit.

What Advantage Do Options Have?

Options give you opportunity to control 100 shares of stock, for a fraction of the price it would cost to actually buy 100 shares. The catch is, you only have ownership for x amount of time. The time is the risk you incur.

If you are right with your option contract, you reep all the benefits of owning 100 shares but you never had to cough up all the capital to buy the shares. If you are wrong, you lose all or most of the money you paid for the contract.

Minimize Risk With LEAP Contracts.

LEAP contracts should only take up 10-15% of your entire long-term portfolio. Over allocating you account with options, will only hurt you in the lon run.

When you have a small account it is good to take risks because your losses won’t mean much when thinking of the longer time frame of your life. Buying LEAPS can propel your account in the right direction much faster than buying straight up shares.

Pick The Right Stocks To Buy Options For

If you do want to buy LEAPS you have to do EXTRA RESEARCH PRIOR. Because if you are wrong, you will feel it hard on expiration.

The reason I like Uber is because I believe the summer will be tremendous for them. The combination of vaccine rollouts, warm weather, more things to do, and the population tired of being inside will give them a great quarter. Also, in the fall a lot of colleges are requiring studetns to get a vaccine in order to be on campus. If all students are vaccinated, that means college bars will do well. How do students get to the bar…yup you guessed it UBER!!

I’m still waiting to buy the contract for Uber because of an uncertain market right now, but it’s on my radar.

Do your due dilligence and make an educated decision for your account.

The Hidden Plus of LEAP Contracts

You buy the contract, then forget about it. Most of the time when owning an option contract. You have to be glued to the market all day long every single day. If the contract is 10 months out, the intraday market swings mean nothing. Check it and forget it!

Closing

If you’re lost or want to learn more. Message me on instagram @tj.brescia!! I also recommend watching one of my favorite youtubers explain this strategy. He is called “InTheMoney.”

Featured

Will Hype Stocks Make You Rich?

We’ve all been hearing it with these hype stocks. “This stock is the next Tesla!” “We can beat Wall street with this stock!” “This stock will give you 10x gains!”

But the question remains, do these stocks acually do what the media says they will?

I’ll be going over 5 of the last “hype” stocks the media has pumped out over the last 6-12 months. The results are something that does not shock me, but will shock you.

1. Virgin Galactic ($SPCE)

Virgin Galactic was one of the lesser known pumped up stocks. Being one of the first to be on Reddit. But it for sure had a strong media presence, especially for the tik-tok community.

Virgin Galactic is a company that plans to create space tourism by 2022. Their business plan is to fly people and researchers into space for tourism and leisure purposes. Something that has never been done before, for good reason.

Truth is, right now they have no revenue which means no profit, no test flights, just speculation. The company’s balance sheet is just one big number of debt. They are fundamentally a bad stock.

Will they be a success? Maybe. Are you going to risk a lot of money into a highly speculative stock? I know I’m not. Take a look at their 1 year chart.

Look at where they are now. Yup, near all time lows. No matter where you bought in, youre down a lot.

2. AMC ($AMC)

AMC is an entertainment business. Their main source of income is from their movie theatres. In which they are the largest movie theatre chain in America. We all remember the AMC and Gamestop hype from Reddit. How it was the hedge fund shorters vs. the public. Ultimately, the hedge funds won.

But where is AMC at right now? They are a HEAVILY day traded stock which is what moves their price so much. Almost no big investers or institutions are buying this stock. Which should tell you the smarter indiviuals of the world do not like this company. Lets be honest here the movie theatre chain is dying out, especially because of the pandemic. This is not a great long-term stock compared to all the other stocks you could be buying.

Although the chart does say they are trending upward, I think it’s because of the day traders. Stock could fall to $5 tomorrow, no one knows.

3. Nikola Motors ($NKLA)

Nikola is claimed to be the next Tesla. They provide a zero emission vehicle using hydrogen and electric variants. The only problem is, they have not started production and won’t start for a very long time… 2023 is when they plan to start production!!

This one is similar to Virgin galactic. A great idea on paper, but no proof yet to back it up. The stock price is solely based off speculative decisions by retail investers. Again, their balance sheet is just a fat number titled… DEBT.

Look at the stock chart, its just awful to look at. No matter were you bought at, I bet you’re down money right now.

4. Lucid Motors ($CCIV)

This one is actually the most legit out of all the other hype picks. Lucid is another elctric vehicle company. They are currently in production of their cars right now, aiming to make about 7,000 this year. They have a clear business plan of being a high-end electric sports car brand.

Churchill Capital ($CCIV) is a SPAC acquiring Lucid Motors (Special Purpose Acquisition Company). SPAC’s take on less debt than traditional IPO’s because all their capital raised through the stock, not typical private equity lending. Which is great for this time of inflation because less debt, means less exposure to inflation.

This stock is still high risk-high reward because they don’t have any revenue and have not tested the market yet. If I were to choose one stock that I’m talking about today, it would be this one. But please don’t put a large sum of money into this, the odds are against you.

5. Gamestop ($GME)

A stock that needs no introduction. Everyone knows about this one so I’ll keep it short. My concern with gamestop is I think they’re the next blockbuster. Everything they sell can either be bought online for the same, or cheaper price. There is no need to go into gamestop anymore, it’s too much of a hassle for people. Also, their online store is just as much of a ghosttown as their retail store.

The stock price is just influenced by day traders now. It has no correlation to the fundamentals of the company at all. It’s the same exact thing as a casino right now.

At the present price , maybe you made some money. But a lot of people felt the burn on this.

My Thoughts You Must Know

More often than not these hype picks you see on your socials are the equivalent to walking into a casino and throwing everything on black. Might even be worse, because if you do make money you seem like a genius since it’s the stock market. And now you do it again on the next stock, but lose this time.

People just want to drive the price up, then pull out when they make a profit. They don’t care whether you make make one or not. Sure, maybe you made some money off these stocks. But just know it’s not sustainable down the line. Don’t throw all your money away into these stocks when it could be used to buy legit long-term assets.

If you really want to put money into fundamentally awful companies, the stock market is not for you. I won’t even say put a small amount of meaningless money into them for fun. Because then you hate yourself for not putting more in if you do go up. Know who is recommending these stocks and do your own research. It pays in the long run.

Featured

A Week of Red For A Summer Of Green; Get Ready For a Crypto Boom

The stock market wasn’t the only market seeing flashes of big red drops. The crypto market took big percentage dips 3 different times this week. The market had looked very strong going into the week, mostly due to Ethereum ($ETH) absolutely crushing its All-Time High (ATH). Ethereum reached a new high of $4,384 on May 12th, capping off an almost three week run from $2,000 to the ATH. These dips are not signaling an end to a crypto boom however, they’re just giving its investors a chance to buy in before the takeoff.

Why Will There Be a Boom?

The answer to this question is simple. Usually I like more than just a simple answer before I invest my money. Although, this simple answer has some years to back it up. The answer is; A crypto boom happens every summer. A trend like this is similar to how last summer we noticed the Dow Jones always opened down on Thursday because of the abysmal weekly job report. People were not back to work yet, but every week the market seemed to overvalue this report, and sell off in premarket trading when the report came out. Crypto also usually enjoys the holiday season and sees a decent spike around the change of the new year.

For this analysis we can use the charts of Bitcoin ($BTC), as it is a solid indicator of the rest of the crypto market. In the summers of 2017, 2019, and 2020 we have seen considerable spikes in the Bitcoin chart. At some point from May to August of these years, Bitcoin experienced a significant price run compared to its performance the rest of the year. This is not however a signal to sell once the summer is over, this just presents us with a good buying point right around now. If your plan is to hold (a good plan), buy right now and hold (hodl) all the way to those ATHs!

bitcoin chart boom

Is it Only Bitcoin?

It certainly is not. The reason that Bitcoin is a good indicator of the market is because of Bitcoin traders. When Bitcoin’s price runs high, traders take their gains and put it into smaller coins since the gains allow for high total coin purchases. This immediate reinvestment makes it seem like the coins are just following right after Bitcoin, but it is actually just traders pumping with their gains. This used to be a crypto standard but in the past few months we have seen coins take off on their own and hold strength against large Bitcoin moves. Recently, Cardano ($ADA) spiked high while Bitcoin consolidated, and held its highs while Bitcoin slid.

The large majority of cryptos will ride high this summer. Personally, I believe if the coin doesn’t take off, its probably not a good project. With most cryptocurrencies being relatively young, it is important to make sure you are investing into a good project with goals, and not just a crypto that was recently on the top movers. Some coins I believe have great projects that are growing are Chainlink ($LINK), VI-D ($VIDT), and Phala Network ($PHA). In the near future I will go into depth about these projects and others as well.

How Should You Prepare For This Boom?

A crypto boom can be prepared for in two simple steps:

  1. Do your research
  2. Get your cash ready

As I said before, understand which projects you can believe in and trust it will impact the crypto world. Then, get your cash together. If you only have $200 right now, know where you want to put $50 and where you want to put $100, or put it all in one coin. If you have $6,000 to use, put it to use. Diversifying is key, but over diversifying right away can some times limit gains. Find good projects, collect from them, and then begin to branch out. Summer 2021 will be one to remember, don’t remember it because you didn’t buy!

Cash Bitcoin Summer Boom
Featured

What Affects Your Credit Score?

One of the many taboo topics to talk about in personal finance is the dreaded credit score. Though credit isn’t often talked about, it is an important part in everyone’s finances. Credit helps you take out loans on nearly everything! Cars, homes, business loans, or even groceries by using a credit card. Credit extends your financial leverage so it is important to know what can make your credit score go up or down. I’ll go through all factors that can affect your credit score and then give my personal opinion on which are the most important. 

The Factors

Before going in-depth on each factor here are all of the factors and the weight they have on your credit score: 

  • Payment History (35%)

+

  • Amount of Debt (30%)

+

  • Credit History (15%)

+

  • Credit Mix (10%)

+

  • New Credit (10%)

————————————-

                100%

Payment History (35%)

Payment history is simply the ongoing record of all your credit payments. These payments include credit cards, mortgages, car loans, and a few other kinds of credit. The record tracks whether your payments were on time or late. Late scores will negatively impact your score while consistent on-time payments will improve your score. FICO, the company that created the FICO score puts a heavy 35% emphasis on your payment history so it is very important to always pay your credit bills on time! 

Here’s an example of how payment history can affect your score:

Say your only credit line is your credit card. You’ve had your card for 12 months and you’ve made 11 payments but missed 1 payment. Your payment history score would be calculated by using (# of payments paid)/(# of total payments). So in this case, 11/12, which is equal to 91.67% “paid on-time rate”. For reference, most credit score calculator sites, such as CreditKarma, suggest having a 99% “paid on-time rate”.

Amount of Debt (30%)

Another heavy hitting factor is Amount of Debt. This factor is basically how much you utilize your credit. Higher utilization is riskier for lenders so this hurts your credit score. So to get the best Amount of Debt score you would want to have a big credit line with low utilization. The lower your utilization rate the better your credit score! FICO recommends having a utilization rate lower than 30%. I personally try and keep it below 20% but this doesn’t always happen, it is an ideal goal.

Here’s an example of utilization rate: 

Say you have a credit card with a $10,000 limit per month limit. In order to keep below a 30% utilization rate, you would have to use less than $3,000 per month on your card. Since $3,000 is 30% of $10,000. 

Credit History (15%)

Your Credit History is simply how long you have had a credit line for. The older the credit line and the more lines you have, the better your credit history. Opening a new credit card will open a new credit line and since the new line is not very old it could hurt your score in the short term. That being said, multiple old credit lines will significantly help your credit history score. 

Yes, Credit History is a paradox. Want to improve your credit history? Open a new credit card! But, that new credit card will hurt your credit score. It is an odd factor but an important one. You should consider your own scenario and whether opening a new credit card would be good for you.

Tip for those wanting to get a credit card: 

It can be hard to get a credit card when you have no credit history. But to get credit history you need a credit card (or other credit line). Another paradox. Don’t lose hope! Look into secured credit cards and authorized users on existing credit cards. This can help you build up enough credit history to get your first credit card!

Credit Mix and New Credit (20% total)

Credit Mix: This is the different types of credit you have. Various loans and credit cards. Having a more diverse set of credit types will be beneficial to your score. However, this factor only accounts for 10% of your overall credit score so don’t beat yourself up over this one.

New Credit: New Credit is when you open up a new type of credit. Opening multiple new credit lines within a short period of time will hurt your credit score. So be careful when considering those promotional credit cards! 

My Thoughts

Well, to keep it short and sweet without wasting time, I think all of the factors are important! Credit is a delicate and powerful financial tool many of us use but don’t think about. I think each factor is equally important to your credit score despite the weighting FICO gives to the score. I know each factor rewards good credit behavior and that is why I treat each factor equally. Of course, I don’t let it rule my life. I do let the factors influence my credit behavior so I am more responsible with my credit. Overall, credit is a common financial tool we don’t think about often and with good credit habits you won’t ever have to!

To learn more about credit scores visit: https://www.myfico.com/credit-education 

Featured

How To Hedge – Taking Your Investing To The Next Level

Hedging

A hedge is a position to reduce downside potential or loss. The best investers will always hedge their long-term positions when the market shows signs of uncertainty. Mark Cuban did this during the crash at the start of the pandemic in March 2020.

In stocks hedging is mainly done 2 ways…

1. Buying Market Inverse ETF’s

These are stocks/funds that go the opposite direction of the market. When the market is going down like we have been seeing, these stocks go up. Some examples are…

$SPXS- Goes the opposite of the S&P 500
$SQQQ- Goes Opposite of the NASDAQ

Buy and hold these for the time being, then sell when you think the time is right. Right now I would buy $SQQQ as the NASDAQ is getting hurt more than the S&P. Due to all of the tech & high growth stocks within the NASDAQ.

2. Buying Put Options On Stocks You Hold In Your Portfolio.

Put options are leverage contracts on certain stocks. Each contract you buy gives you exposure to selling 100 shares of stock at a certain price, without owning 100 shares. You pay a fraction of the cost it would be to own 100 shares, but only for a specified period of time. When you buy a put, you make money as the stock goes down.

Here is an option chain for Square ($SQ) with contracts expiring June 4th, 2021. I know it looks confusing but hear me out. There are only a few things that you must look for when buying put options for hedging. Puts are on the right side, calls are on the left.

  1. Strike Price
    This is the price you would agree to sell 100 shares of stock, if you were to exercise the contract. Don’t worry too much about what that means just yet. The lower you want to buy for a strike price, the cheaper the option contract. Because it is further away from the current share price of the stock. The goal for any option is for the current share price to reach the strike price before expiration.
  2. Bid vs. Ask
    The bid is the price you pay to buy the contract, the ask is the price you would sell at. The bid and ask are always the current number x100. In this case for the 190 strike put. You would pay $720 (7.20 x 100=720). The reason is you are paying for the right to 100 shares of stock for the time being.
  3. Expiration Date
    The further out date you buy the less volatile and risky the play is. You have more time for the stock to move the way you intend. Time decreses value on option contracts. Which is why contracts with further expiration dates are more expensive than ones expiring next week. I always recommend buying with at least 6 weeks till expiration. Most of the time I will buy 3 month out contracts, or longer.
  4. What Is Excercising an Option?
    It is not in your best interest to excercise unless you want to buy 100 shares of the stock. The community here likely does not have enough to purchase 100 shares so know this. Always sell the option back to the market before your expiration date. If the stock falls while you own the put, your contract is now worth more than what you bought it at. So take your profits and sell it to somebody else on the market.

If you dont understand options, dont worry. Buying shares of stock will serve all your needs. But if you want to take your investing to the next level, options are amazing. Leave a comment if you want us to go more in depth on options!!

Best Strategy For Hedging

If you have experience with options, than put options are for you. But I 10/10 recommend you buy the index ETF’s I listed above if you want to hedge your portfolio. They get the job done in the simplest way possible.

I say use about 5%-10% of your entire portfolio to buy your hedge. You NEVER want to overexpose your hedge. Holding it for a long time or a big portion will get you into trouble. Do not try and be a hero and save all your loses coming to your positions. If the market bounces back you will be kicking yourself.

Remember, the profits you make from your hedge are only meant to minimize loses. Don’t try and make up all the loses your stocks get, you will end up losing more!

Use Your Hedge Profits To Buy More Long-Term Positions

If you don’t see dips as buying opportunities than you will be a below average investor. Make sure to buy at the low prices, it’s the best thing you can do.

Dollar Cost Average into positions over the coming weeks/months. It’s the best way to get the best positions.

Featured

How To Take Advantage of Market Dips & Market Update

BUY BUY BUY!!

That is what I will be doing over the coming weeks during these market dips. The stock market has obviuosly gone a new path, not only on inflation fear. But clear inflation data.

“The Consumer Price Index, which measures a basket of goods as well as energy and housing costs, rose 4.2% from a year earlier. A Dow Jones survey had expected a 3.6% increase. The month-to-month gain was 0.8%, against the expected 0.2%.”

CNBC News 5/12/2021

In April inflation numbers which are shown in all types of consumer prices, rose significantly. This has investers worried if the FED has everything under control. The FED stated last week they are mindful, but honestly this number is higher than I anticipated. More downside is expected in stocks

Check out a post I did last week, when it was just inflation FEAR running the market. Not data.

Take A Step Back

Remind yourself of what your investing goals are. For most, it will be to buy and hold for 5,10, 20 plus years. In that case, this is nothing to worry about at all.

It is just a small part of your big investing timeline.

Growth Stocks Are Getting Hurt The Most

If you take a look at all stocks you will see a clear descrepancy beween growth and value companies.

Growth Stocks

Growth stocks are stocks which are speculated to give higher percentage returns. Their market caps tend to be lower, which is why they have a lot more upside.

  • Spotify
  • Uber
  • Zillow
  • Square
  • Nvidia
  • Penn National Gaming
  • Roku

These companies need to take on a lot of debt/loans to propel their business. When inflating rises at high rates this debt becomes tougher to pay off. That is why these companies may struggle for the time being. Investers fear if the company will be able to pay back loans efficiently.

Values Stocks

Value stocks are ones that have been around for a long time. They have a commanding position in their sectors and are proven to be profitable year by year. Their returns are lower making them conservative investments.

  • Microsoft
  • Apple
  • Cocoa-Cola
  • Pfizer
  • Verizon
  • AT&T
  • Walmart
  • Johnjon & Johnson

These types of companies are GIANT brands. They dont have a lot of debt, so inflation does not matter as much compared to growth companies. But some are subject to concern depending on what kind of service they sell and how prices react to inflation.


How To Capitalize

Before you go and buy a ton of stocks there are some things you must consider.

  1. How long do YOU personally think this correction will last?
    If you think it’ll end this week, then buy now. In 3 months, then maybe take a back seat and see how things play out.
  2. How is the company you want to buy comparing to it’s competitors?
    This is an EXTREMELY IMPORTANT one. Look at how much the company is down percentage wise vs. competition. Since the top of the market. (May 10th.)

    This will give you some insight on how well a company is positioned. If your company is down worse than its predeseccors, maybe it isn’t the best choice. Maybe it’s business flaws are finally coming to fruition which investers are seeing and taking action of.

    Examples are… Zillow vs. Redfin, AMD vs. Nvidia, Roku vs. Netflix, cruiselines, airlines, Starbucks vs. Dunkin Donuts.
  3. Dollar Cost Average into positions. (DCA)
    This method is buying small portion sizes of a stock every week, month, 3 months. To try and get the best possible price. It is too stressful and difficult to predict the bottom of a stocks price and buy there. Instead buy a little bit every so often as this market mess continues. Ensuring you establish a good position.

STOP Looking At Your Portfolio Everyday!!

All this does is give you stress and anxiety seeing your returns drop. Are you in it for the long haul or not? Your returns will be INSANE in 20 years, dont let this bumb in the road detour you off course.

Featured

Saving Your Money the Right Way Can Go a Long Way

Saving your money the right way is something most people know they should do, but probably don’t. Some people have a system for how they save their money, and some people try to cut out spending in certain areas. Yes its great to save, but if you are not doing it right, you could be making it even worse for yourself. Today I will be going a purchase analysis I recently went through, and discussing why this person was actually fooling themselves, based on the numbers.

The Purchase

The man in question today is my brother, Rahhim Shillingford and his decision to buy a push cart for golfing. The push cart costs $159, and he says he wants to buy it for when he golfs by himself. The benefits of a push cart is that you don’t have to buy a real cart at the course but still do not have to hold your clubs on your person. You can just place the clubs on your small cart and push it as you walk.

Rahhim states he will only bring the push cart when he’s by himself because when he golfs with others he just gets a cart. He believes he will save money because he won’t be buying a push cart every time he plays by himself, or buying a real cart. He also will be getting exercise because he’s forced to walk more.

Saving Money Golf

The Logistics

Typically, buying a push cart at a course costs $3 per round and a cart costs $10. I asked Rahhim how many times he played a round by himself last year and he said 3 times. It is a fair assumption this number will remain the same as Rahhim is a NYS Real Estate Agent, a Personal Trainer, and a Football Coach, so his schedule remains busy. He simply just doesn’t have the time to golf a lot, let alone by himself.

If Rahhim golfs by himself 3 times this summer, buying a push cart would cost him $9 and a real cart would cost him $30. Obviously the push cart would save him $21, but Rahhim thinks he can be even more financially savvy by getting his own push cart. If he stays at this same rate, it would take him 17.6 summers to make his money back on the push cart. This number is called the Payback Period, which is the amount of time it takes for an investment to make its money back.

Analysis

Truthfully, 17.6 summers to make your money back on something that only costs $159 is really ridiculous to me. Fortunately for Rahhim, $159 is not make or break purchase for him, but this doesn’t mean it is not still a poor investment. $159 can get you a share of Apple ($AAPL) with some money left over or even more than 5 shares of Jumia ($JMIA). Thinking of the purchase on the other side, it would take Rahhim 17.6 summers before he could say, “Damn, I should’ve bought that push cart.”

In his defense, Rahhim believes he is saving his money by doing this, he is just not doing it the right way. Making a big purchase to solve such a tiny problem just puts a dent in the wallet. When making purchases, you have to wonder, “How will this purchase benefit me? And how will this purchase affect my purchasing power?” If I was Rahhim, I would just buy the push cart every time I play by myself. Even if every other summer he golfs 4 times, it’ll still be many years before he breaks even.

Conclusion

Saving your money the right way is more than just going to the clearance rack at stores because at the end of the day you still spend money. To save your money right is to understand if you really need something and if you don’t, don’t buy it. One important to trade off to note is that if Rahhim owns his own push cart, he will be less inclined to buy a cart when he’s by himself.

If you are wondering if Rahhim and I actually had this conversation, we did. He did not listen to me though, and bought the push cart. When the push cart came in the mail, it was too short for him. Another reason he should’ve never purchased it, but I digress.

Featured

My Biggest Mistake With The Stock Market

Over the last 8-12 months the stock market has become a more well-known understanding to many young adults. Every social media platform, especially Tik-Tok has been promoting the wrong agenda about the market. Many people are portraying the stock market as a “get rich quick phenomenon.” Or you are guaranteed to make insane returns if you listen to them.

Social media has treated the stock market like a casino, a game, a gamble. If you treat it as such, you will lose your money… GUARANTEED.

Today I will be sharing what happened to me when I was first introduced to the stock market. Spoiler… I lost all my money.


My Story

February 2020 is when I first started putting money into the stock market. My intentions were to try and make a side hustle for myself to earn some spending money. Within days I noticed my small $500 would not make any significant money just from buying shares. Then I learned about stock options…It was downhill from here.

I wont fully go over what stock options are because Darnel covered this last week. Essentially, options have potential to 2x, 5x, 10x, even 100x your inital investment. A $50 option investment could give you a $500 profit just by pressing a few buttons.

I would buy small weekly contracts, worth about $30-$50. Then I would realize a profit of $150-$300 each trade. It was the greatest feeling ever. Felt like I was a genius.

This was during the big market dip back in March 2020. Every single stock was falling hard. All someone had to do was buy put options on any stock, and they would make a ton of money. (Put options make money when the stock goes down). I would buy so many put options that would give me insane returns every morning.

My account went from $500 to $3500 in just one month.

I remember buying a $72 $MRO put with a strike of 6.50. Sold it the next morning for $741 profit. Didn’t even understand why I made that much. That’s how little I knew.

March 23rd, the bottom of the Corona-virus market crash is when I started losing all of my gains. I kept expecting the market to go back down. Thinking, “Oh this is just a small leg up, then it’ll have to go back down. I kept buying and buying put options thinking the market would reverse back downward.

I thought I was outsmarting the market because I just made a killing the last 3 weeks. Figuring I could beat the market, and cash out when I was right.

It took 2 months after that for me to stop buying option contracts. Because my account was now back at $500.

Lessons I learned

3 main lessons from my short endevours with daily trading.

  1. Have a risk tolerance.
  2. Do not just buy weekly call & put options.
  3. Don’t try and get rich quick.

1. Risk Tolerance

In every single trade you do, know exactly how much you are willing to risk. When I first started, I didn’t have a risk tolerance. My mindset was “sell when I make a profit, that’s it.” Or sell whenever I thought the trade had no chance of winning. By this time I was down over 50%.

Truth is, most of the trades you make will be wrong. But if you can minimize the losses, and take profits without greed. Then you will be succesful.

For example, lets say you open a position for $300. Set a risk for 10% loss and close the trade in x amount of time, if you are not over a 30% profit As soon as that trade loses 10% of it’s value, get out. You only risk $30.

Say you choose to exit the trade 3 days after you open it if you aren’t over 30% proftit. By day 3 you are in profit by 15%, close the trade and take your $45 profit.

“No one ever lost money taking a profit”

-Bernard Baruch

Having a risk tolerance for every trade allows you to minimize losses. If loses get out of control, it is significantly harder to get back to break-even. Break-even isn’t even the goal, the goal is to make profits.

2. The Truth Behind Call and Put Options

Stock options are a great tool to make money in the market, if used correctly. But are abused everyday by retail traders, in which they end up losing money. You must know options are the quickest and most effective way to lose money.

Fact. 70% of all option contracts expire worthless. Meaning 70% of the time if you buy an option and hold it till expiration, you lose your investment. The odds are not in your favor from the start.

**Weekly contracts are the most risky but you can see big gains FAST. This Is what makes them so attractive for new traders. Oh, and they’re cheap as hell to buy.

For example, you buy a call option that expires in 5 days. The day you bought it the stock goes up 3%. Your ROI that day would be an incredible percentage. But the day after the stock falls 1.5% and your contract is back at break-even price. Even though, the stock is up 1.5% since you purchased, time-decay killed your gains too fast. No one realizes time-decay will EAT AWAY your gains. Most don’t even know what time decay is anyway.

Another note is behind every contract you buy, there is a seller that is thinking the exact opposite of you. The seller thinks the stock will go the opposite direction you do. And 70% of the time, they gain money from it!!

Article I wrote about SELLING options instead of buying.

Often times, people with small accounts will buy short-term, weekly option contracts to try and get an insane ROI for themselves. It’s the only way to make crazy money from a small starting amount. They don’t research the trade, do their due dilligence, etc. Or the small amount of research they actually do, is just from seeing a tik-tok saying “this stock has 100x potential.”

With under 10 trades their account is blown up and their hopes of ever using the stock market again are gone with it. Which is sad because the market is an incredble way to grow wealth.

I am not hating on options trading at all. I use options often. But I buy my contracts with a lot of time, I do proper research, and I have a risk tolerance. Using options willy nilly will lose you hundreds of dollars.

3. Don’t Try to Get Rich Quick

This is something that takes a very long time to understand. What I am about to say won’t do enough justice. But hear me out…

We all want to make money, that’s why you’re reading this. Trying to make a days worth of income is EXTREMELY difficult to do. Not impossible, but unlikely. Anyone who trades for a living, is trading with $30,000+. All they have to do is make 2% a day to make $600. Making 2% a day is way easier said than done.

I once tried to use stock trading as my job. Quickly realizing it is impossible to do with my tiny amount of money. It took me losing $3500 in 2 months to realize I can’t trade as my job. I don’t want anyone to experience the same.

I have now shifted my mindset to long-term investing with lower risk trades if the opportunity is picture perfect. Let me tell you, I am much happier this way, and making more consistent returns. Granted they are small, but steps in the right direction for sure.

Once you start realizing it’s about growing your account, and not withdrawing for income. The game changes in your favor.

Featured

Recent Success From the Option Strategy, 83% wins

Recently I discussed my options trading strategy that limits capital risk yet allows for solid percentage gains. This will be a quick update on how the strategy has done for me over the past three weeks. It is important to note that only 6 trades have been used in this analysis, so it is a small sample size. I will be using Excel to display the recent success from the option strategy.

Small Dollars, Big Percentages

Right now as I continue to test out the strategy, the position sizes will remain small. The largest position I have taken thus far has been $80, and it also happened to be the only loss in the 6 trades. I’m with you, know is in the market looking to make, 15, 29, or 11 dollars, we want the big money wins. However there is a time and a place for that, and right now is not the time as we continue to test the strategy.

If the strategy continues to be a success, we will begin to look into taking on two or three contracts in the same. In this case of two contracts, everything would be double so if you paid $30 for a contract you would now be paying $60, and if you profited $20 before now its $40. Taking two contracts gives a trader freedom to sell one contract and keep the other.

What’s more important to note is the percentage gains the strategy has yielded thus far. Gains of 32%, 82%, and a crazy 170% aren’t very easy to get in high capital trades. In terms of investing as a whole, making 10% a year is usually the benchmark for investments. Right now the strategy is averaging a 50% return! If it holds this level for a whole year, it will outpace the market by a wide margin. With more and more trust built through trades in the strategy, the amount of money made will surely pickup.

What Stock Will I Use Next?

When picking stocks for the strategy, I sometimes look at higher capital stocks and pick stocks cheaper that move similar. For the most recent trade, I actually spent the majority of the time researching looking at Royal Caribbean ($RCL), before buying the Carnival Cruise Line ($CCL) call. Usually stocks in the same industry are going to move the same, and Royal Caribbean just finished a week of dropping kind of hard and touched a support of $80, making me believe it could have a decent bounce today. I then went right to Carnival, and got a $26.50 strike ending Friday May 14th, and this morning it was well over that strike price. I wasted profit theorizing if it could go higher, but still managed to leave with an 18.64% gain.

Right now I am currently looking at the marijuana ETF ($MJ) for a potential next play in the strategy. I believe the marijuana market can really get moving with another piece of positive news, and MJ is at a nice price right now of $21.36. It is currently up almost a $1 today though, so I will wait to see how it does on Monday before I look at it again. With Monday starting a new week, I will most likely try get contracts ending on May 21st to give myself ample time to watch how MJ moves and not feel pressured by expiration.

Subscribe to get access

Once you are subscribed you will see all the trades that have been made via Excel spreadsheet.

Important Note: It is a coincidence all the trades have been Calls this far, success from the option strategy has the same concepts for puts!

Featured

Inflation – Is It Controlling The Market?

If you follow the markets and the general economy daily. You have defiently been hearing a lot about inflation. Specifically things like…

“Prices are so much higher than they were!”
“The government can’t be printing so much money for free!”

I dont claim to be a macroeconomist, or the only person you should base your financial decisions off of. I want to shed some light on an extremely important topic along with some recent data about the current state of inflation.

The Country’s Current Bottleneck Situation

Right now a very obvious reason for inflated prices on the goods you are buying is due to supply & demand.

Wall Street Journal puplished an article recently about consumer demand being through the roof. Business’ like Apple, Dominoes, Temper Sealy, and several other restaurants are experiencing massive amounts of customer demand for their products.

This relates to the chip shortage we covered last week too.

The only issue is that supply is not meeting the demand. Supply-chain shortages are happening all over. When demand is higher than supply, guess what happens? Yep, prices go up, up, up.

Supply is short because of production cuts months back from the pandemic being rampant. And now all of a sudden people are going out a lot more, vaccines are out, warm weather is here, etc. The supply is taking longer to catch up with the demand. Partly due to unemployment being at large still (getting better, but still high). Furthermore, unemployment benfits are giving people more incentive to be jobless. The lack of employment means supply decreases.

The pandemic has shifted into phases INCREDIBLY fast. We saw the fastest market correction and recovery in recent times back in March-June 2020. Additionally, vaccine rollouts were quicker than expected, which caused people to go out quicker than expected.


When one thing moves fast (demand), another lags behind (supply). That is what is happening right now which is demand inflation.

Isn’t This Bad For The Economy?

Surprisingly, it likely is not. From a glance it may seem terrible, but think about it. People going out more, spending more, and returning to “normal” life is a good thing. It is a direct boost to GDP. The bottleneck situation is likely “transitionary inflation” Which is inflation that results from an emrging economy after a recession. It means spending is increasing at higher rates than normal due to the slight recession.

If the FED can control it and put an end to it at some point in the near future will be what most people look for. Jerome Powell, head of the FED said last week that he sees inflation, but as transitionary. He sees no need to change the current monetary stimulus of low interest rates yet.


This may be way over both of our heads. But, the main thing you need to know is the FED recognizes inflation right now, but is not worried because it won’ be long-lasting.

Is The Inflation Scare The Reason For Stocks Slipping?

I believe it is a factor here’s why. Companies reported incredible earnings the last few weeks. Multiple companies reported a significant increase in consumer demand, and anticipate higher demand for the rest of the year. Analyst’s are thinking these numbers may be inflated and cannot be sustainable for long periods of time.

“Will demand stay high with inflated prices?”
“If demand does not stay high, will the companies meet their expectations?”
“Are stock prices inflated, just like product prices?”

Questions like this are what I believe has Wall Street on edge right now.


Another important note to add is the uptick in commodity prices for April. Commodity’s often times rise with fears of inflation.

  • Spot Gold is up 6.5%
  • Spot Silver is up 11%
  • Spot Oil is up 11%
  • Copper is up 12%.

My Final Thoughts

I recently listened to a podcast with Graham Stephan and MeetKevin. 2 well known and intellegent investors. MeetKevin said some points I really like which I am about to summarize now…

Business’ want their customers to be happy and offer better prices than their competitors. Time will eventually fix the bottleneck situation. And companies will do what they have to in order to keep a high influx of customers post-pandemic.

The key thing is time. No one knows for sure what will happen, but what I see is nothing that is too out of hand.

Featured

1 Strategy to Make Consistent Gains From Trading Options

Trading options is where I originally started seeing respectable gain from the market. It helped me learn fast and learn to research the market everyday. While I don’t think I will be able to ever say I know everything about the market, trading options added knowledge, and money, quickly. When I first started, every morning at 9:30 am felt like I was walking barefoot into the jungle, and I loved every second of it. After seeing greater gains from holding crypto and finding sound companies, I have taken less frequent trips to the jungle. However, I have been using 1 solid strategy the past few months to make consistent gains from trading options.

The Basics For the Strategy

This strategy is extremely simple, but there are still areas of options I must clarify beforehand. For this strategy you must understand how option prices work, and how the strike price correlates. The strike price is what you predict the stock will be worth by your chosen expiration date. In the case of a stock like Penn ($PENN), there is a call option which has a strike of $91 ending Friday, 5/7/21 and it costs $305. Penn is currently at $90.47, so we are bullish on the stock for the week since we are buying a call. I use Penn as an example, for this strategy I most likely would not use an option costing this much.

Options Chain Investments Penn
Option Chain for $PENN

The figure shows that the $91 Penn strike for Friday is 3.05, to get the cost of $295, just multiply the 3.05 by 100. By paying this $305, you agree to buy a contract, believing the price of Penn will be over $91 by the end of the day Friday. We will always sell the option before it expires for this strategy, holding through is not a part of the plan at all.

Most stocks have a lot of different options they can pick from, with differing strike prices. As you can see in the figure, to buy a strike price of $90 for Penn would cost you $355. This costs more money than the $91 strike because it is much more likely to happen. If Penn didn’t move for the next 4 days it would still be over $90. Vice versa, the $91.50 strike costs less than the $91 strike, because Penn would have to move a lot higher to reach the strike.

The Strategy

The key to the strategy is looking at how the option prices change as the strike prices change. As you can see, the price of the options from the $90 strike to the $91 changes by $50. Theoretically, if the stock moves $1, you will make around $50, it is important to note that options do not have a strict movement.

Sometimes the change may vary, depending on how far away you are from the expiration. Since we are going to sell days before the expiration, the price variation won’t really affect us. In addition, I look to buy expirations with 2-3 weeks left so there is plenty of time for the stock to move before the last week.

The reason why I don’t use stocks like Penn for this strategy is because you would be risking $305 with the $91 strike hoping to make $50. This is too much money to risk for just a $50 gain. Even though the dollar is very likely, the risk is too much. In general, a rule of thumb for options is too only spend 5-10% of your account value. I won’t be a hypocrite, I often go over this but it is my own established risk. Once the option is at a 25% loss, I sell it as anymore could be too much too handle for my account. Sometimes waiting it out can payoff, but often times it just leads to a 100% loss. We are in no business of 100% losses, especially when trying to make consistent gains from options.

Solid Stocks for The Strategy

Ideally I like to use stocks that are under $60 for this strategy because they usually have cheaper option prices that move in higher percentage jumps. Spending $30 on an option and making $25 on a $1 move has a low risk for a still decent sized gain. Stocks I look at a lot for this are Gap ($GPS), Norwegian Cruise Lines ($NCLH), and Canaan ($CAN). Their sectors and recent news do not play into these choices more than they usually would, I simply pick them for their cheap option prices. Gap often has options right above the current price for $50-$70, and if you go just a little higher you can get options for $30.

It is important to remember that all options are risky. Just because they don’t cost you much doesn’t guarantee you more of a gain. This strategy just allows you to risk little for high percentage gains. Repeating the strategy with proper loss management allows you to make consistent gains from options. Options can get confusing, if you are confused about any facet of them, DM us or leave a comment about all your questions!

Featured

What is the Chip Shortage?

Cars, phones, and anything that uses processing power needs a computer chip. Before the pandemic, chip usage and supply was in balance and thus running smoothly. However, little did we know that the supply chain of semiconductor chips was so fragile. When the pandemic hit the world, it disrupted the careful balance of the computer chip industry. Since many companies rely on computer chips as a part of their business, their flow of operations were disrupted as well. This event has led into what is now being called “The Chip Shortage”. 

What has led to the chip shortage being so dire is that there is too much demand and the chips can’t be made fast enough. This situation occurred because companies believed the demand for their products would decrease during the pandemic, so they ordered less chips. This then led chip manufacturers to adjust their foundries and supply-chains accordingly. Supply chains can only move so fast to adjust to quickly changing demand. So when the world began to reopen earlier than expected, demand for chips exceeded the supply severely.

Can’t More Chips Be Made?

Chip manufacturing is complex, expensive, and time consuming. These factors make it difficult for manufacturers to rapidly produce chips at the snap of their fingers. Although, they likely wish they could because the unprecedented demand for chips is a large monetary opportunity for them. To make matters worse, most companies can’t ask another manufacturer for chips since their products require specific chips. Not to mention, a large majority of the world’s chips are made by a handful of manufacturers. Thus, chip manufacturers get swamped with orders but their chip foundries can only produce so many chips.

I’ll give an example to clarify. Say Apple wants 100 chips for their iphones from Intel in 1 week. Apple calls Intel and asks for the chips. Intel says they can do it but it is going to take 10 weeks since Microsoft, Ford, and other retailers’ orders are being processed. Now Apple has to either adjust its own operations or negotiate a higher price for quicker delivery of their chips. The other companies are facing the same decision to make and if they choose to negotiate, the price of chips will keep rising. In either case, companies’ operations are affected and the supply of chips remains constant. This kind of scenario has been happening across multiple industries for months now and everyone is feeling the pain.

When Will The Shortage End? My Thoughts

The chip shortage has revealed the delicate nature of chip manufacturing. With such unprecedented events occurring, it is almost impossible to definitively say when the shortage will end. A year or more could pass and we still might be feeling the shortage. That being said, I believe many companies have realized how reliant they are on their chip suppliers. In the near future, we may see some companies adjust their own supply-chains to alleviate their dependence. Also, if a company finds it feasible to produce their own chips then we may see an alleviation of supply that way as well.

A great example of this is Apple. Before the pandemic began, Apple announced its plans to produce their own chips for their devices. I am sure that the pandemic has sped up their plans to make their own chips and also given other companies the idea to do the same. Being reliant on your suppliers is one thing but being solely dependent on them is another. The shortage has created an opportunity for the chip manufacturing landscape to change. In the coming years, I feel we may see companies adapt or announce their own plans to manufacture chips. But for right now, how long will the shortage last? We will have to wait and see.

Featured

Plans For May!

April was a huge month for us! We plan to make May even better!! We will continue to expand on the quality of our content, and the frequency. Our next major shift will be the introduction of our blog posts categorized in the menu. Right now it is probably very hard to find the right article about crypto or compound interest when you have to sift through all of our old posts. With this categorization, if you want to study about lululemon stock right before you buy, you will know exactly where you can find it. H

However, some of these categories will only be accessible to those who are subscribed. We are doing this to reward our subscribers in another way besides trying to give them quality posts. So, if you are not subscribed, get subscribed now! If you are, tell your friends to subscribe real soon before they miss out on the categories.

If you have suggestions for what categories you want to see, leave a comment below. It’ll help us a lot more if we are providing categories our readers will deem useful rather than what we think breaks up our posts the best. The comments will be public for all to see, but feel free to second any suggestion someone has already made.

Featured

Wall Street Is Wrong! – Earnings Reports

The last 2 weeks major companies have reported their quarterly earnings reports. These include Facebook, Apple, Amazon, Microsoft, Tesla, Google, Qualcomm, Visa, and so many more.

For those who dont know, every quarter a company must report their income, balance sheet, growth, etc. Top Wall Street analysts will set expectation numbers that these comapanies should achieve. Whether they hit them or not helps determine where the stock will move, and helps better understand how well a company is growing.

This quarter companies have blown their numbers out of the water!! Beating expectations… by A LOT Wall Street is wrong this time around.

Apple ($AAPL)

Apple reported Wednesday 4/28.

  • Revenue of $90 billion vs. expected $77 billion.
  • Earnings Per Share of $1.40 vs. expected $.99
  • Gross Margin 42.5% vs expected 39.8%
  • Iphone revenue of $48 billion vs. expected $41.5 billion.
  • Raised divendend by 7%

Apple is the largest company in the stock exchange, we all know why. No surprise Apple has proved themselves again. Apple stock is little changed due to earnings. Some say it’s because Apple is wary of slowed chip growth for the future. In the long run this wont matter, but the blow out earnings will.

If you invest your money here, you will grow your money no questions asked.

Microsoft ($MSFT)

Reported Tuesday 4/27

  • Earnings Per Share of $1.95 vs. expected $1.78.
  • Revenue of $41.71 billion vs expected $41.03 billion.
  • Revenue growth of 19% year over year.

Similar with Apple, Microsoft is another proven company. They continue to expand into new fields like cloud computing and AI. Their stock is also little changed, but dont think it is a big deal. It is Wall Street worried that these inflated numbers are due to coronavirus lockdowns, and aren’t sustainable. In the long run, this wont matter at all.

Qualcomm ($QCOM)

Reported Wednesday 4/28

  • Earnings Per Share of $1.90 vs expected $1.67.
  • Revenue of $7.93 billion vs. expected $7.62 billion
  • Revenue growth of 52% year over year.

Qualcomm is a stock that I believe gets no credit and is often overlooked. They are doing way more than you may think.

In summer 2020 Qualcomm replaced Intel as Apples #1 chip provider. Mid-major news at the time, but now no one seems to know just how big that partnership actually is.

A top 5 company in 5G development. Expanding networks all around the country for the future. This is an excellent growth opportunity for the company and it’s investors. This is the main reason I hold Qualcomm, for the 5G exposure.

Tesla ($TSLA)

Reported Monday 4/25

  • Earnings Per Share of $.93 vs. expected $.79 cents.
  • Revenue $10.39 billion vs. expected $10.29 billion.
  • Revenue up 74% year over year
  • Gross Income of $438 million
  • $101 million in profit from bitcoin transactions
  • Recorded record sales of Model 3 and Model Y vehicles.
  • Expects vehicle growth to grow 50% by the end of 2021

Tesla has beaten the odds so many times throughout the last 5 years. They are going on 2 years being profitable when so many said they never would would be. Elon Musk is slowly making Electric Vehicles a new normal for our world.

At this point, it is riskier to not hold Tesla in your portfolio, than to hold it in my opinon. What can hurt you is getting in at the wrong price. Often times people buy into Tesla when it runs up, never do this. Buy when everyone is doubting and when it falls big. I know I’ll be buying.

Spotify ($SPOT)

Reported Wednesday 4/28

Spotify is one that missed expectations, not by a lot however.

  • Monthly active users grew 25% since same time last year.
  • Missed user expectations. Reported 354 million vs. expected 365 million.
  • Growth in podcast listening hours.
  • Decreased guidance expectations.

Wall Street was expecting higher user numbers this quarter. That is why the stock is down significantly. I believe Wall street may have been wanting a larger user growth number due to pandemic lockdown situations. Spotify also gave lower guidance expectations for the rest of the year.

All in all, Spotify still reported year over year growth. As well as growth in other areas. But Spotify does need these big user numbers to prove themselves, since they are not a high profit company yet. I know I said I liked Spotify’s price over a month ago, but now I think they will go lower.

I still really like the products and services of this company though. They are one of the very few companies that competed with Apple, then went on to top them in some way. That being podcasts services. Long-term I really like this company, but lack of user growth and lack of different content can hurt them in the short term. If their dip is big enough, I will most likely scoop up a few shares.

More Noteable Reports

  • Google MASSIVELY beat earnings.
  • Amazon beat expectations.
  • Facebook record numbers.
  • Starbucks mixed feelings, but does report higher expecations in the coming months as reopenings begin.
  • UPS reports great numbers.
  • Catepillar on top.

What This Means Going Forward

Companies have proven themselves tremendously this time around. As uncertainty is still lingering, this hopefully decreased some of it. Moving forward though, how companies respond and report to the reopening of cities from the lockdown will be key. Can companies get back on their feet? Will they do better than expected? Key answers we need in the coming months.

Right now stocks are dipping even though they reported great numbers. The immidiate days after earnigns reports never tells the full story. Volatility is always higher, and everyone is on edge.

Some say Wall Street is now in fear that these high numbers are not sustainable once reopenigns happen. The companies that benefited from the lockdown have felt this reaction in their stock price.

As retail investors we must ride the waves of the market and analyze what we know. Buy dips, see how our holdings are reporting, what changes our companies are making, find other opportunities that are out there.

All date per https://www.cnbc.com/

Featured

How to Diversify Your Portfolio: Minimizing Market Risk Reaction

Diversification is a common mention when talking about investing. Holding just one stock, no matter how good the company is, is risky in case something really bad happens with the company. However, there is a lot more to diversification than just picking a bunch of different stocks. Having the right amount of stocks is also critical, because there comes a point where having more just doesn’t really mean much anymore. Knowing how to diversify you portfolio across sectors and the beta of stocks will protect you all different types of random market swings.

Where The Theory Comes From

In 1990, three men won a Nobel Peace Prize for their work in discovering how your portfolio and its risk correlates to the movement of the market. They found that as you added more stocks to your portfolio, the risk of it moved negatively exponential in relation. Shown in the figure below, William Sharpe, Harry Markowitz, and Merton Miller discovered that at 40 different positions in a portfolio, an investor has diminished risk. Although, after 40, the amount of risk you are diminishing does not change much.

Diversify Portfolio Manage Stocks

In the analysis, the three economists used one of the Greeks called Beta, which measures how much a stock moves in relation to a whole market movement. When they say “the market” they are considering indexes such as the S&P 500 or the Dow Jones. If a stock moves higher in comparison to the market, it will be given a beta higher than one. If it moves less than the market, it’s beta will be less than one. High beta stocks are deemed as riskier however they have higher potential returns.

Which Stocks Should You Pick

You should first pick stocks based on the sector they are in. If you have a lot of confidence in the future of the electric vehicle market, you should look at Tesla ($TSLA), Nio ($NIO), or Workhorse ($WKHS). If you think the Big Tech will never die down, you should have Apple ($AAPL) or Microsoft ($MSFT). What sectors you have should be diversified. On the average day, if one Big Tech stock is down, they are all down. Stocks in the same sector have a high correlation, meaning even if you have 10 different pharmaceutical stocks, you aren’t actually diversified. Everyday they are moving the same, so if you are down on one you are down on all.

By this logic, you should have a few sectors you like and 2-3 stocks in that sector, and maybe a couple random stocks after that. Perhaps you don’t really like the future of the banking industry anymore, but you got J.P. Morgan at a great price years ago. Just because it doesn’t fit in your target sectors doesn’t mean you have to sell. Using our previous posts, find the exact stocks in the sector you feel you can trust and have a plan for the future when finding how to diversify your portfolio.

Risk Is Not a Bad Thing

In my opinion, if you are looking for true, risk-free assets, the stock market is not the place for you. No matter how safe you are, you can never avoid occurrences in the market like when the pandemic first hit in March 2020, or when Greece’s debt situation brought rumblings in 2011. Catastrophic events like this will always happen, but as long as you don’t panic and have cash ready to buy, you will come out stronger. You do not have to be a risk seeker, (although this brings the most gains) you can easily just be risk-averse. This kind of investor doesn’t take risks unless they see a reward from the risk. You might miss out on some big gains from being risky, but you definitely won’t lose from a foolish move when you know how to diversify your portfolio effectively.

Featured

This Stock Is Poised for Gains

As investers we need ways to profit off of any opportunity that we see. Usually, people profit from real estate by buying and selling homes. But there are ways to do it in the stock market. What if we look at real estate related stocks, materials needed to build homes like lumber, roofing, paint, etc. What companies sell these directly? Thats for another day though. Today let me talk about Zillow ($Z).

Zillow ($Z)

Zillow is the industry leader in residential real estate buying and selling. Homeowners, agents, and property management companies, can list their properties for sale & rent on Zillows online platform. https://www.zillow.com/. From here, the buyers can view all the listings they desire for free.

How Does Zillow Make Money?

The business statement is split into 3 categories.
– Homes
– IMT
– Mortgage

Homes: As a company, Zillow will buy homes and flip them for a profit. Simple Enough.

IMT: Short for Internet, Media, & Technology. This section is ad-revenue generated from the company’s website, combined with Zillows Premier Agent Program.

The Premier Agent Program is a tool real estate agents & brookers use to track insights, leads, and better advertise on their home listings. This is what the majority of IMT profits come from.

Mortgage: Zillow Home Loans is the area where Zillow is a real estate lender. Since 2018 the company has been a licensed lender. Just like buying or refinancing a home from a bank, Zillow makes money on the interest of the mortgage they give to their home buyers.

The Numbers Don’t Lie

Numbers are in billions of $USD.

 20182019202020212022
Revenue $           1,334 $           2,743 $           3,340 $    5,453 $    7,992
Growth23.8%105.7%21.8%63.3%46.6%
      
Gross Profit $           1,184 $           1,311 $           1,589 $    2,014 $    2,599
Margin88.8%47.8%47.6%36.9%32.5%
2018-2020 numbers according to Zillow 10-K. 2021 & 2022 expectations according to Yahoo Finance.

Zillow is expected to increase reveneues in 2021 by 63.3% compared to 2020. I believe this has everything to do with the high price tag on residential homes right now, and for the rest of the year.

The higher home prices are, the more Zillow earns on interest from mortgages. Plus, the higher profit from their Premier Agent Program mentioned earlier.

Risks

My biggest concern, which is not a big deal to me is the profit margins Zillow is creating. They are decreasing margins, however profits are still increasing. Due to the fact, Zillow reinvests so much of it’s proft back into the company to try and expand at a faster rate. This is why Zillow can return 3-5x your money faster than other stocks will.

Decrasing margins could slow down operations. Other platforms with higher margins may seem more appealing to investers.

In Zillows 10-K they say a lack of technology limits them when compared to competition.

Competitive Advantage

Zillow is the industry leader when it comes to residential real estate advertising. They have the most users on their platform when compared to competitors. As investers, it is never a bad idea to invest in any industry leader. As the growth and stabalization of the company is proven.

Real estate app development: how much would an app like Zillow or Trulia  cost to develop? | ByteAnt
https://www.byteant.com/blog/real-estate-app-development-how-much-would-an-app-like-zillow-or-trulia-cost-to-develop/

Zillow owns the second largest platform, Trulia, along with HotPads.

The balance sheet is very strong for Zillow as well. They have $3.9 million in short-term liquid cash, and $2.3 million in debt as of 12/31/2020. Anytime cash is greater than debt, it is a good sign.

The Stock

Right now 4/26/2020 ($Z) is trading at $141 a share, with a market cap of $33.6 billion. I can easily see this stock being $170-$190 a share by the end of 2021. Especially with the real estate market being so one-sided to sellers as we mentioned yesterday. Furthermore, end of 2022 this can very well be a $250 dollar stock.

This company has every right to be north of a $120 billion in market cap, being they are an industry leader.

I established a small position last week getting 5 shares at $130. I recommend you do the same. Establish a small position now, since the overall market is high. Because Zillow is well off its all time highs, it has more upside than the entire market, that is why I bought. But it can easilly go down with the market when corrections come. Make sure you have cash reserves to buy the dips.

Previous post on the current real estate market: https://the-common-trader.com/2021/04/26/housing-bubble-2021/

Zillow 10-K: https://www.bamsec.com/filing/161764021000012?cik=1617640
Yahoo Finance: https://finance.yahoo.com/quote/Z?p=Z

Featured

Housing Bubble 2021?

Recently, housing prices have increased quite significantly. In a good real-estate market, a 3%-5% return per year on your property is considered good. As of March 2021 the median sale price of a house in the U.S. increased by 17.2% from last year! With the advent of the worldwide pandemic, many industries have been dramatically benefited or been hurt. The housing market is no exception. Since March of last year the housing market has faced lots of uncertainty regarding mortgage defaults, a short supply of houses, and an increased cost in building materials. All of these factors have created a market where housing price increases. So, with housing prices rising so high in such a short period of time it begs the question… Will it all come crashing down? 

Not Enough Homes on the Market

When the coronavirus hit the United States, many of homeowners were fearful and decided to wait-out the pandemic to sell their homes. This had a huge impact on the housing market. In April of 2020, the monthly housing supply was at 6.8 meaning that the housing market’s inventory would last for nearly seven months assuming no more homes were added to the supply. As March of 2021, the monthly housing supply is at 3.6, nearly a 50% decrease in supply. In addition to this, the U.S. government introduced forbearance which stalled supply further by preventing some homes from coming to market.

Not only did supply of the housing market decrease but demand actually increased. When the pandemic hit initially, the Fed reduced their lending rates to near zero. This in-turn caused mortgage loan rates to drop significantly as well. Which then led to more buyers coming into the housing market so they could utilize a low interest mortgage loan. So the pandemic indirectly caused a perfect storm in the housing market for prices to rise. Making supply decrease and demand increase only leaves the laws of supply & demand to take effect and increase the price. 

Will More Homes Come to the Market?

With so much demand in the housing market, it would make sense for property developers to build homes as quickly as possible to profit from the artificially high prices and also add supply to the market. However, the pandemic caused an obstacle for property developers. With covid restrictions, the demand for construction materials decreased which led producers to match demand and decrease their output. So when a sudden increase in demand for materials happened the producers were unprepared to meet the demand.

So once more, a high demand met a short supply and thus prices increased. According to the Bureau of Labor Statistics, prices from March 2020 to March 2021 for lumber have increased by 65.3%, steel mill products by 40.1%, and Materials for Construction by 13.5%. Plus, because of the sudden spike in demand for materials, producers haven’t been able to keep up. This has led to higher wait time for materials. In essence, more homes coming to the market is not going to happen quickly.  

Will The Market Crash? Here Are My Thoughts.

Although prices of homes have scarily increased in the past year and the entire market is in odd circumstances, a housing crash isn’t very likely. This spike in prices is very different from the crisis back in 2008. The current situation doesn’t have thousands of homeowners and buyers at risk of default. In fact, forbearance is being offered which protects homeowners that may have been affected by the pandemic from foreclosing. Overall, the current housing market is nothing like what happened in 2008. This event is its own unique situation and it should be treated as such.

What is happening now is similar to a bogged down shredder, there’s too much demand in the shredder for the shredder to clear. Covid has indirectly caused a short supply and high demand and also limited the ways to alleviate the supply problem. As soon as the economy re-opens and things “get back to normal”, the market will be able to add supply like it wants to do and clear up the “bubble”. This will bring prices back down to a more expected and comfortable level. That being said, this won’t happen overnight even if the U.S. were to fully reopen tomorrow. The market will level out gradually over time and I believe this is good. Since many of us get scared of sudden spikes up or down, a gradual change would be nice to see. 

The real-estate market is like the stock market, it will see its ups and downs. And like the stock market, you can benefit from being invested in real-estate… Come back tomorrow for our article that will teach you how to profit off of the housing market!

Featured

Buying Nvidia Stock is Worth The Price Tag

Nvidia ($NVDA) is a well known chip maker, serving customers such as Apple, Google, and Amazon. Since its founding in 1993, Nvidia has grown to an industry leader in computer graphics and improved their GPU architecture. They originally created chips for gaming and computer graphics purposes, but have since expanded to data center and automotive products. Fundamentally, the chip maker is a big buy despite its $614 price tag, and buying Nvidia stock will have you well prepared for the near future.

Gaming is Taking Over

In the past 10 years, the world of gaming has seen a rise like no other. Esports leagues have grown in rapid numbers, yielding plenty of gamers to turn in profits comparable to professional athletes. Even colleges are beginning to include Esports teams in their varsity sports including notable names such as Boise State and University of Akron. Universities who have invested in these teams have seen incredible returns on their investment. In 2017, the Esports market was valued at $1.5 billion, and is estimated to be at $2.3 billion at the end of 2022.*

A growing industry like gaming is perfect for the makers of these chips. Through the 2020 fiscal year, Nvidia brought in $2.5 billion in gaming revenue alone, a 67% increase from last year. Nvidia will continue to thrive as far as gaming goes, due to their significant market share of gaming chips. Streaming has made specific gamers like Ninja extremely popular, using platforms such as Twitch to allow avid gamer fans to watch him play games and earn revenue through watch time and donations. It sounds simple, but the more people game, the even more people stream, meaning even more chips Nvidia will sell.

An Elite Acquistion

Arm Limited was a company with a couple investment mishaps, but got lucky when Nvidia bought it for $40 billion this past year. Nvidia really showed its strong financial position with this acquisition and its plan for the future. Acquiring Arm will help Nvidia continue its growth in Artificial Intelligence technology as well as computing space. It is no lie that the world is advancing towards these technologies, and Nvidia has only positioned themselves to continue being at the forefront of the technology world.

By expanding their arsenal with Arm, Nvidia continues to punish its competition. Intel ($INTC) had a huge blunder back in the summer of 2020 when Apple decided they would no longer use them for their chips. Intel’s stock has been struggling somewhat since this announcement, as losing Apple is not an easy loss. AMD ($AMD) doesn’t have it as bad as Intel, but is not in any position to make a true run at Nvidia.

The Financials Are Nothing to Sneeze At

As aforementioned, Nvidia, saw a 67% increase in revenue from their gaming industry alone. In addition, they saw a 97% increase in data center revenues, leading to an overall 61% revenue increase in 2020. With revenue increases like this after such a crazy year, Nvidia is proving its dominance in generating sales. In a perfect world, chip usage will only increase, and I think that perfect world is the real world future.

As for stock performance, Nvidia has had quite the 5 year run going from $35 to $614 today. Buying Nvidia stock exactly one year ago would have returned you well over 100% in gains from its $286 mark in April 2020. Performance like this from a strong company in a growing industry should jump off the table at you. I’m no fool, $614 is a high price for 1 share, but a fool would say its not worth it. Innovation makes Nvidia clearly worth it, and it has significant revenue measures to back it up. If your brokerage allows it, get a fractional share of it, whatever you can do to be apart of the best chipmaker in the market.

*https://www.gamedesigning.org/schools/varsity-esports/

Featured

1 Way To Become A Millionaire

It’s called a Roth IRA. A different kind of investment vehicle you need to know about. You can open one on almost all brookerage platforms. One of the very few things I enjoyed learning about in high school was my economics teacher teaching me about one way he has become a millionaire. Through his Roth IRA

What Is It?

A Roth Ira is an investment account where you can buy stocks and funds just like an individual account. There are some major differences however…

  • Maximum contributions are $6,000 per year
  • The money you put in is considered “post-tax money.” Money that has been taxed by your income, then contributed to your Roth IRA.
  • Once you take the money out at 59.5 years old, you ARE NOT taxed on it.
  • At any point in time, though it’s not smart, you can pull out your principle contributions. The gains must stay, or you can take them out with a 10% penalty AND get taxed on top of that.

Why I Have One

Many people will say Roth IRA’s are a waste because you can’t take money out easily, and you can only contribute $6000 a year. While those points are true, I still have one, here is why.

  • I’m young and struggle to max out the $6,000 mark.
  • I make sure I have money stored away for emergencies, so I dont have to pull my Roth IRA money.
  • My account pairs nicely with my long term strategy.

The main part I love about a Roth is the tax free withdraw once you turn 59.5. The gains from comund interest plus tax free, can make you a millionaire.

My Roth IRA Strategy

In my account I buy very conservative and lower return stocks. But there are a few riskier ones. I know these stocks will go up in the long-term, and by a lot when I am 59.5 years old. Compound interest will do the gains for me, so I dont have to worry about picking the absolute best stocks. I contribute $150 every month, this will go up as my income increases over time. Check out my other post on compund interest (https://the-common-trader.com/2021/04/09/compound-interest-the-8th-wonder-of-the-world/).

I have a seperate individual account where I have a riskier strategy that returns more. In this account I also buy & sell more often, actively manage it, and contribute more each month. I use my Roth as a “safe haven” investment.

My Roth Holdings

I hold a lot of different index funds that M1 Finance, provided for me. For the most part, these track the overall market. The individual stocks I have are top 20 biggest companies in the stock market. So they are safe, but return more than the index funds.

I started my account 8 months ago, so my balance is low. I plan to have my principle balance around $2500 by the end of 2021.

Get Started

Roth IRA’s are a great tool to have in your investment portfolio. I like my approach, it works for my goals. I’m not saying you need to copy my exact formula. But take it into consideration.

Open your M1 Finance account today! https://m1.finance/-It9Yn7neCcV

Featured

Crypto Exchanges: What to Know and Who to Trust

Investing in cryptocurrencies has really picked up from everyday people, but it is still a relatively new concept for the majority of people. Picking one of the right crypto exchanges the first time can really help you in the long run. Ultimately, it depends on the capital you plan on using and the type of coins you are looking to buy. Additionally, it is important to factor in how long you plan to hold your assets.

Crypto
Bitcoin
Exchange
Currencies
Coinbase

Common Crypto Exchanges

Coinbase Inc, ($COIN) just recently went public, showing incredible revenue periods of $100 billion. This exchange is one of the most well known places for crypto buyers, especially new ones. While Coinbase tends to lack in the variety of coins you can buy, there are other benefits. Coinbase is insured by the FDIC, meaning all cash balances you have will be replaced if something goes wrong (up to $200,000). Another exchange that does this is Gemini. If I had to choose between the two, I would choose Coinbase every time, due to reliability. The customer service of Gemini has been known to be spotty. Binance is the last of the exchanges I will mention which is covered by the FDIC. One major perk of Binance is that it often has lower fees than most exchanges. Unfortunately, U.S. residents currently cannot open Binance accounts.

BlockFi is another commonly mentioned crypto exchange, however it resembles more of a bank. This is because the exchange is focused on providing interest to investors holding crypto on their platform, interest that accrues daily. This is similar to what a bank does as the more money you have in, the more you will benefit from the interest. However, a major downside of BlockFi is it is not insured by the FDIC. If something goes wrong, your money goes with it. Another downside is that BlockFi really lacks in the different coins you can buy. For U.S. investors, Coinbase and Gemini have a fairly small list, but BlockFi’s list is even smaller.

The Risks of Variety

If you are in search of buying the next crypto and don’t want to settle for the popular ones in the Top 20 of coinmarketcap.com, you probably should venture away from the exchanges I have already mentioned. Instead you should look at exchanges such as Metamask or Pancakeswap, which have almost every coin you could think of. There are probablu 100,000 different cryptos, and some of these can be scams or imitations of other coins. When using these exchanges, it is important to make sure you are using the correct address before you buy. To ensure you have the right address, you should copy the coin’s address from coinmarketcap.com and then paste it into the transaction on the exchange. Once this is done, you will be able to safely buy whatever coin it is you are wishing to purchase.

These exchanges tend to come with a hefty fee, but the fee is not a percentage of the purchase amount. That being said, if you want to buy $5,000 worth of Bitcoin the fee might be $65, but if you buy $50,000 worth the fee is still $65. On exchanges such as Coinbase, your fee moves higher the more money you spend.

Maximizing Security

Investing in cryptocurrency brings financials to a more decentralized feel, but theft can still occur. To counteract this, some exchanges give your wallet a seed phrase to exponentially enhance security. A seed phrase is a series of AI generated words that need to be used in a specific order to get into your wallet. Without these list of words, you cannot get in, so you must keep it safe! Metamask uses a 12 word seed phrase and Ledger uses a 24 word phrase. Ledger is GREAT for security, but I do not believe it is great for buying and selling cryptos. I would suggest buying on other exchanges like Coinbase, and then transferring it to Ledger.

In general, it is important to keep some level of privacy of how much crypto you have and possibly which ones you have too. While the transactions for crypto are safe, your holdings can never be 100% safe from theft. If the wrong person ends up with your password or seed phrase, things can go downhill fast. If you have any questions about exchange, feel free to comment or DM us!

Featured

Is The Stock Market Too High Right Now?

Indicies closed yesterday at new all time highs. The S&P 500 is at $4170 and the DOW is at $34,070. Whenever new highs happen the major question arrises, “Will there be a correction?” No one is capable of knowing the answer, and no one ever will be.

However, recent numbers and facts point to a positive outlook for the coming months. Will there be small corrections along the way? Absolutely, but nothing too major I believe. Let me tell you why.

Unemployment is lower

Every week the Department of Labor comes out with the number of individuals filling for unemployment relief/benefits. Last week, a total of 576,000 people filled for unemployment benefits. The lowest number since the start of the pandemic in March 2020. The week before, the number was 769,000. (https://www.dol.gov/ui/data.pdf)

The Consumer Confidence index increased significantly in March. This is a survey taken by consumers like you and I regarding our optimisim about the country’s economic state. The higher the number, the more confident people are about the state & growth of the economy for the coming months. Opinions on inflation, interest rates, stock prices, vacation plans, etc are accounted for. The number for March reported 109.7, the February number was 90.4!! (https://conference-board.org/data/consumerconfidence.cfm)

Increase in consumer spending

According to the Department of Commerce, retail sales increased nearly 10% by the end of March. The measurment analyzes retail stores, restaurants, and online stores numbers.

People are more confident going out and spending money. Not just going out for work and neccasary travels. Consumer spending is the #1 economic driver, if this is increasing, the economy is in a good place. Consumer spending is still low when compared to pre-pandemic times. There is still a lot of room to grow.

Warmer weather will also drive consumer spending. Historically, the summer months are when individuals spend the most. It only makes sense, people are sick of being stuck inside in the winter. This combined with the country starting to open up again…

Vaccine increase

As the weeks go on, more and more people are recieving the vaccine. Within the last 2 weeks all New York residents over 16 are eligible for the Pfizer vaccine. Not just individuals with a health issue are eligible.

It is also worth mentioning some states are lifting mask mandates, and loosing restrictions. A total of 12 states have lifted their mask mandates. Alabama, Arkansas, Indiana, Iowa, Mississippi, Montana, North Dakota, Texas and Wyoming. https://www.aarp.org/health/healthy-living/info-2020/states-mask-mandates-coronavirus.html#:~:text=To%20date%2C%2012%20states%20that,by%20court%20order%20(Wisconsin).

Herd immunity is something that often goes under the table. As time goes on, more and more people are exposed to the virus. The more people who get infected, the less people are avalible to get infected. Which then decreasing the number of cases.

MLB allowing fans?

The MLB is back and allowing fans to attend games. For both New York teams a Covid-19 test is required 72 hours prior to entering the stadium, or proof of vaccination. Both stadiums are under a 20% capacity limit however.

This is a huge step forward in a return back to pre-pandmeic life. It is a sign of normalcy that we all need.

What about the market?

As I mentioned earlier the market is at its highs. I hate it when this happens because there are very few stocks at good buying opportunities. I never buy during times like this, I wait for the small corrections. Whether they are weekly or monthly. I reccomend you do the same because we WILL see corrections. The best thing we can do as investers is not be greedy. Buy at the low points, and sell at the highs.

As far as a major correction goes for the next 3-6 months. I believe it is unlikely. The numbers state that the country is opening up, people are getting vaccinated, and consumer spending is going up.

Featured

I’m Buying This Stock!!

You have definetly heard of this one before, perhaps even bought their products. The Company is Lululemon ($LULU). A household name over the last few years, no questions asked. Lululemon also called Lulu, is mainly an athletic/gym clothing line, with other stylesand products included. Their main objective is to sell the highest quality materials & clothes, with an expensive price tag. That statement may scare you, but trust me it works. I’ll show you the numbers & tell you their social power to back it up.

The Numbers

Stats from: https://investor.lululemon.com/financial-information/annual-reports
Stats from: https://investor.lululemon.com/financial-information/annual-reports
Stats from: https://investor.lululemon.com/financial-information/annual-reports

Growth. The last 5 years Lulu has CONSISTENTLY grown its revenue and profits. All while not decreasing gross profit margins.

The earnings per share has also gone up significantly since 2016.

**I will not bore you to death with the numbers anymore. Just know the company is increasing sales numbers & profits, which is what makes a great company.

Expanding The Brand

Lulu plans to grow under their “The Power of Three” strategy.
1.) Product Innovation
2.) Omni-Guest Experience
3.) Market Expansion

1. Product Innovation

3 years ago Lulu was just a WOMAN’S athletic clothing line. Now they have an entire men’s line, ranging from shirts, shorts, pants, etc. In the companiy’s opinion, what really hurts them is being tremendously nieched toward woman’s attire. Using this as one of their key growth elements says a lot about who they are. Companies who have the means to expand their products/services to cater new customers, make excelent long-term investments.

  • Men’s section revenue increased 34% in 2019
  • Started a skin care product line

2. Omni-Guest Experience

This area is where the company aims to build a connection with their customers, not just sell products.

  • Membership programs in major cities like Denver, Chicago, NYC, Boulder, etc. The program is a combination of workout classes, yoga, locker rooms, meditation, and more.
  • Hosted 10k marathons in Toronto, San Diego, and Edmonton.
  • Sweatlife festivals in London, Paris, Berlin, and more

3. Market Expansion

Essentially this means growing a presence internationally.

  • Stores established in Germany, France, Netherlands, Norway, & parts of Asia,
  • International markets grew 34% in revenue in 2019.

The Products

Firstly, quality. Talk to anyone you know and they will say the materials of lulu clothing is one of a kind. All my friends who are girls say the leggings are better than any other brand. The products last a long time, and have a comfortabilty factor that no other company provides.

I have a pair of Lulu shorts and let me tell you. They are the most comfortable pair I own!! The comfort plus the style is something that can’t be beaten right now.

It’s no secret that any product from them is very expensive. Which might scare you away from investing in the company. But ask yourself these questions. Do people keep buying from them? Is the company more profitable year after year? The answer is yes to both of them, so be an invester rather than a consumer for your case.

As the saying goes, “If you have something people want, charge them for it.”

Social Factor

The social media era over the years has created “social norms” in the fashion world. Clothing, now more than ever, has the ability to give insight on your personality, characteristics, and genral persona. Whether you agree with this or not, you must realize, social media has given a spotlight for clothing brands. Right now Lululemon has solidifided themselves as a proven, stylish, top-tier clothing brand.

Celebrities like Addison Rae, Madison Beer, Kendall Jenner, and so many more are seen everday wearing Lululemon!!

The media era gives us as investors new ways to analyze stocks. If famous people keep posting themselves wearing specifc clothing, everyone else wants to buy it. If celebrities are eating a certain food, guess what the average person is gonna do?

The Stock

Right now ($LULU) is at $323 per share. Yes, I know this is a high price. But you don’t have to buy a full share everytime you buy. Fractional shares are avalible on certain brookerages, like my favorite M1 Finance. You can buy 1/2 a share or even 1/4 share.

In my opinion the share price is a bit overvalued at the moment. I want to buy when price goes lower, right around $300 per share.

As I’m writing this post the stock market is at all time highs. Which means I’m not buying anything right now and neither should you. Remember good deals will always present themselves, just be patient. I will be waiting for the next market dip to buy anything, but first on my list is Lulu. I will make sure to inform you when the market dips, and I start buying.

All stats are from Lulus annual report: https://investor.lululemon.com/static-files/8df91f4d-25a1-4e69-8b94-606f9c370440

M1 Finance link: https://m1.finance/-It9Yn7neCcV

Featured

Stock Market Risk is Avoidable, If You Know the Game

The number one reason why people don’t invest in the stock market is because they claim to not know enough about it. If you are reading this post and are subscribed to the blog, that excuse is out the window. The next reason why people sit on the sidelines is because they claim the market is too risky. While I would be lying if I said investing is risk-free, I would also be lying if I said there wasn’t a proven investing method that eliminates stock market risk.

You’ve Come Across this Method Before

If you have even the slightest experience in the stock market, you are fully aware of what I am about to tell you. Investing in the S&P 500 over the past 40 years has yielded a 12% annual return on average. Depending on experience, 12% might seem like nothing, but to sustain a number like this for 40 years was an unbelievable thought for many years. Although, the S&P has done just this, providing its investors with incredibly strong companies such as Johnson and Johnson ($JNJ) and Proctor and Gamble ($PG). Yes, the enhanced reason to invest in the S&P is the diversification it provides and the returns it brings, but I am about to show you exactly why if you plan to invest long term, the S&P 500 should be where the bulk of your money is.

There’s No Risk!

Yes you read that right, there is no risk when you invest in the S&P 500. How can this be? There were surely years where the S&P 500 dropped, like in 2008!

Yes it did, it actually dropped an incredible 38%. But if you don’t sell your investments, you theoretically have not lost a dollar, your assets just lost some value. Since 2008, the S&P 500 has 4x in value, so it is safe to say those who held, have done just fine with stock market risk after losing 38%.

Stock Market Risk Eliminated

One financial analyst I recently had the great chance to speak with ran an analysis of the S&P 500 over the past 70 years. In this time, the S&P 500 has had 55 years with a positive return, and 15 with a negative return! Not 100%, but for any given year you invested, there was a solid chance you left in the green. The analysis gets juicier though, and this where you will want to put all your savings into S&P 500. If you look at the S&P 500 in 5 year periods, meaning 1980-1984 and 1981-1985, there are only 7 periods with a negative return! However I’ll do you one better. Looking at the S&P 500 in 20 year periods (there are 51 of these periods), there are 0 periods with a negative return, not one!

All the stock market risk people fear has to be thrown out of the window now, it is almost proven if you stick to the plan, returns are guaranteed. TJ has recently made a post detailing potential returns utilizing compound interest, and now you see exactly how trustworthy these returns can be!

Balance the Portfolio

I could not sleep at night if I tried to tell you guys for the rest of my life every dollar I invested would be going right into the S&P 500, even after proving the absence of risk. Finding that next Apple or Amazon is just too exciting for me, and seeing the 100% gains in 2 months is too electric. Investing with these purposes is much, much more risky, but can payout much more. Even still, putting aside money to invest in the S&P 500, and even hopefully adding into your position monthly should be apart of the plan as well. A great way to attack this is through a Roth IRA, and letting the money blossom until you are ready to take it out during retirement.

The key to all parts of investing is starting early, and the point of our blog posts is to help you understand this and to believe in the potential gains. Don’t be stranger, DM us on Instagram or Twitter, or leave a comment if you have any questions or just want to share your investing experiences!

Featured

Compound Interest, The 8th Wonder of The World

I get it, you probably don’t have a ton of money to invest with right now. Chances are you don’t have a full time job, probably just a summer job. Interestingly enough, I’m in the same circumstance as you. But what I do have that you don’t, is the understanding of compound interest in the stock market. Compound interest WILL grow your money at a much bigger rate than you would expect it to. The only requirement is time.

What is compound interest?

You have defiantly learned what this is in the past, but let me explain in stock market terms. Compound interest is a growing rate on the money you put it, PLUS the returns you have already gotten. An example will explain better…

The overall stock market grows an average of 10% a year. If I invested $1,000 in a fund that tracks the overall market and never added any more money.

After one year I would earn 10%, so my balance would be $1,100. The second year I would earn 10% on that $1,100. Bringing my balance to $1,210.

  • Year 3 ending balance= $1,331
  • Year 4 ending balance= $1,464
  • Year 10 ending balance= $2,593
  • Year 20 ending balance= $6,727
  • Year 40 ending balance= $45,259
  • Year 50 ending balance= $$117,390
What if I add $150 a month to this account…?

Again, if I have an initial investment of $1,000 into a fund that tracks the overall market at 10% a year. EXCEPT this time I add $150 a month to it, lets see the returns.

  • Year 3 ending balance= $7,289
  • Year 5 ending balance= $12,600
  • Year 10 ending balance= $31,281
  • Year 20 ending balance= $109,822
  • Year 30 ending balance= $313,538
  • Year 40 ending balance= $841,925
  • Year 50 ending balance= $2,212,426
    Yes, 2 MILLION DOLLARS when all you do is invest $150 a month!!
More gains

A 10% yearly return is what the market has been giving for decades now. So to say, “What if this happens, what if that happens…” is nonsense. However, a 10% return is only if you invest in the most conservative and safe way possible. Nothing wrong with it, but there is so much more potential.

A 12% to even 15% yearly return is attainable if done right. 20% can be done some years, with a special skillset. It can make all the difference over time. Investing in individual companies as oppose to the overall market will make this happen. That is exactly what we do here. Personally, I hold about 15% of my stock portfolio in total market tracking funds. The rest is individual companies that I believe in. A lot are considered “riskier,” but I’m young and that’s what I should be doing.

Financial advisors all over will say the same thing. Young individuals with little money into the market, should be in riskier stocks. We don’t have a ton to lose, but so much to gain.

Keys to understand

From this post you should have concluded 3 very important things.

  1. Start investing now!!
  2. It is about time IN the market. The more time your portfolio is exposed, the more compound interest it will recieve.
  3. Investing a certain amount per month, returns you nicely later in life. It does not have to be $150 right now, maybe its $75. But, when you do have a stable income make it a few hundred… you deserve it.
Comparing

These 3 charts all have the same credentials…
– $1,000 initial balance
– 13% yearly return (Easily attainable return)
– 40 year time frame

$75 monthly contribution for the next 40 years

$150 monthly contribution for the next 40 years

$300 monthly contribution for the next 40 years

Want to visualize compound interest more? Check out this link: https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

Featured

Cents are the Difference, But the Difference Adds Up

Here we are with dividends again, but this time will focus on quarterly paying stocks and their annual dividend and P/E ratio. A P/E ratio of a company is derived from dividing its share price by its earnings per share. Using this ratio, you will see how a company trades compared to their earnings, and is a solid indicator for the true valuation of a stock. While no specific ratio is a lock to determine a quality investment, companies with a P/E ratio between 10 and 30 are usually strong. As the P/E ratio gets higher it means a stock’s share price is very large while the earnings they are putting out doesn’t compare.

Using our most recent dividend analysis, we have compiled quality findings on which stocks you could enter to today to start collecting hundreds in dividends every quarter from properly value or even undervalued companies!

Each stock on the bottom is measured by two figures, their P/E Ratio (Orange), and the amount of their Annual Dividend (Blue). Stocks where the blue is much higher than the orange are what we consider the ideal stocks of this analysis. $HD, $CLX, $ABBV, $ITW, $JNJ, $SHW, and $VZ are the 7 stocks fitting this criteria, but are not the only ones to pay mind too…

Familiar Faces

If you read our most recent post, (I would hope you did!) you would be aware of the strong performance Home Depot ($HD) showed in the growth department. Once again, Home Depot is a standout of the analysis, mostly due to its P/E ratio of 25. This may be leaning towards the higher end of our range, but the performance of the stock market in 2020 has a lot of major stocks riding very high. Based on the chart, Home Depot probably has the most blue area compared to any other stock, due to its incredible $6 annual dividend. We now see Home Depot has the growth behind it, and a proper valuation to it, to really trust it and take advantage of its rewarding $6 dividend.

In the last post, Verizon ($VZ) was also praised for its modest yet relative growth measures. Prior to seeing the analysis’ outcome, we knew this was going to be the area where Verizon would thrive. With an incredible P/E ratio of 14 while providing a $2.51 dividend, all while trading at $58, you can stack up on Verizon at a good price and know it is properly valued. Combine this with Verizon’s innovation with 5G, and you have one of the best and safest dividend buys on the market.

A Clean Investment

The household name cleaning company Clorox ($CLX) was a surprising addition to the list after posting non-enticing growth figures yesterday. However, its $4.44 annual dividend is making it extremely ideal for our analysis. Clorox also has one of the lower P/E ratios on the list at 20, creating a high dividend, fair value steal. Currently trading at $194, Clorox is in a sector of the market you do not have to worry about for future investing, people aren’t going to stop cleaning any time soon. For the past 6 months the stock is slightly down but has made a considerable jump the past month, potentially solidifying a bottom.

Big Names Lost

Everyone’s favorite growth investments of $AAPL and $MSFT are possibly one of the worst performers in this analysis. Their P/E ratios of 33 and 35 respectively ruined their case, and their annual dividends were not enough to counter the ratio. Compared to the price they trade at, their dividends arguably are just not enough, especially in the case of Apple. Their dividend yield, which is the share price divided by their annual dividend, is a mere .67%. Certainly nothing to tip your cap to, especially when you could look at Verizon which has a 4.27% dividend yield. This occurs because Apple is all about innovation and growth, making them better for capital gains, not so much dividends.

Abbott Laboratories ($ABT) was another big name with an atrocious performance, simply occurring because of its 49 P/E ratio. $ABT is extremely overvalued right now so it is best to stay clear of it if investing for dividend purposes.

Combining these analysis’ are great, but always remember to do your own research! Find what you value in your dividend stocks and compare with us or just even flat out ask us! Follow us on social media and subscribe to stay in the loop, there are not many places you can go to for free to get investing advice.

Featured

Best Dividend Stocks That Have Been Growing Right Before Your Eyes!

If you read the last post about dividend investing, you are fully aware why you need to see our analysis on the best dividend stocks right now, specifically those growing consistently and paying a quarterly dividend.

The figures related to these companies’ growths are based off their growth over the past 5 years. Could their growth in the future be completely different than what they did in the past 5 years? Yes, but the numbers do not lie. We will first talk about companies showing great growth opportunities with the dividend they have to offer.

Growth Stars

For growth measures we measured the share price growth to the dividend growth, and developed some unexpected findings. Of these stocks, only 7 of them had higher than a 100% share price increase while also having at least a 10% increase in its dividend. These stocks were $COST, $AAPL, $MSFT, $AWK, $HD, $ITW, $SHW. These figures are great, but you cannot write off the other stocks right away…

Table of Stocks and Their Respective Growths
Share Price Growth Over Dividend Growth

Apple ($AAPL) and Microsoft ($MSFT) are going to jump off the screen right away, as they should. Their growths are both above a whopping 340% over the past 5 years, and they both managed to increase their dividends at least 10% in the same time. Shares of these companies are rocking and the dividends are getting rolling, what more can you ask for if you are looking to get a solid dividend and growth?

Put the Tools to Work

Home Depot ($HD) is the more you could ask for. While the share price growth is not the same as the two tech giants, 130% is still a great figure for any stock. What sets Home Depot over the edge is the growth of its dividend, an outstanding 23%. The home improvement company offers a $6.00 dividend per share, leaving shareholders with a pretty, $1.50 every quarter, while Apple holders only get $.20 each quarter. Currently at $315.40, the hefty price is worth the dividend performance if you want to see the quarterly income rise quickly.

Iron Tool Works ($ITW) also makes a case for one of the best dividend stocks, with 114% share price growth and 18.5% dividend growth. At $222, Iron Tools is almost $100 cheaper than Home Depot with almost similar growth figures. The only knack is their dividend is $1.44 less than Home Depot’s, however a dividend of $4.56 is not something to complain about. Sacrificing some dividend money may be worth it to buy Iron Tool Works over Home Depot if you can grab an extra share.

Miscommunication Services

The telecommunication service industry is usually a fairly straightforward investment area, because the business plan of the industry can only vary so much over time. This is why we often do not see much movement in these stocks, but over a 5 year span there is enough time for a little change up. A popular dividend stock amongst The Common Trader writers has always been Verizon ($VZ). Only a 12% rise for the stock and a 2.4% dividend rise to pair with it is nothing to write home about, but when the stock currently costs $58, it’s something you live with. At this price you can get way more shares than you could with Home Depot or ITW, and really stack up on the $2.51 annual dividend, another attractive number.

Although, Verizon’s industry counterpart AT&T ($T), hasn’t had as peachy of a 5 years. AT&T’s stock has lost 20% of its value despite increasing its dividend 2%. Is this a huge red flag? No, especially since the stock only costs $30. But when you could have easily gained 12% investing in a similar company like Verizon, who also has a better dividend by about 40 cents, that 20% decrease will hurt over 5 years.

Despite the straightforwardness of the industry, 5G technology can propel the industry to another level. These companies connect everyday people like you and us to all the different capabilities 5G has, and as it gets used more and more, it could give these stocks a decent kick in the next couple years. Verizon has done consistent and worthwhile work with 5G already, with more on the way.

Priority in the Portfolio

Our analysis of dividends is only beginning. Today was just a look at the growth opportunities some stocks have to offer. As these posts roll in, take a look at all the stocks, not just the ones that are discussed. If you can’t put up $200+ for a dividend stock, pick ones that are right in your price range. The best part about dividend investing is that its strictly a long term move. If you don’t like something after one month or just like something better, move your money over and strengthen your portfolio while you have the time.

The next post will help to pick dividend stocks based on their P/E ratio (Market Price/Earnings) and the annual dividend that is paid. A P/E ratio tells how the stock is trading in relation to its earnings, with stronger companies falling around the 10-30 range. With greater depth in the next post, be ready to fully understand all the eye opening opportunities we have laid for investors with all different types of balances.

Featured

How To Start Investing

I was talking to a close friend of mine a few days ago and he told me this. “I want to start investing but I just don’t know where to start.” This is when I finally realized, we have been talking so much about strategies, news, and answering why you should invest. But, we have hardly ever spoken about HOW to start when it comes to the stock market!! To my friend, I hope you’re reading this right now…

What are stocks?

Stock or (shares) of a company is essentially a percentage of ownership for that company. 1 share of stock is part ownership in a company. Yes, when you buy Apple’s stock, you own an extremely small percentage of Apple. Do yourself a favor right now and search up, “Who owns Apple”? 40% of Apple is owned by investors like you and I, the other 60% is owned by the “higher ups” like Tim Cook, the CEO. This means 40% of Apples shares are owned by individual investors, the other 60% is owned by CEO’s, CFO’s, and COO’s.

Why put money into owning stocks?

To grow. your money

When a company decides to go public, they have a plan to GROW their business immensely. Public company: When a company goes onto the stock market and gives out shares to the public.

When people invest their money into a companies shares, this then gives the company more money to work with and grow themselves.

If a company is showing signs of growth & profitability, it is reflected into their share price. Because the shares now become a supply & demand case, driving the share price up. If more people want a companies stock, guess what the seller is gonna do? Yup, raise the share price.

Bottom line. If you investing into profitable & growing companies, your money will grow along with them.

Stocks are guaranteed to grow your money.

Look at a chart of any company that continues to expand their service/product & increase profits. If you just buy and hold their shares at any point, you will make money in the LONG-TERM.

The key is to NEVER SELL when investing for the long-term. When people lose their money in the stock market it is for the sole reason they sold early. Or invested into companies that decreased profits.

Talk to anyone with a general understanding of the stock market. They will always tell you the same thing. Buying and holding won’t loose you money.

Where to start

On our “Get Started” page we have a list of our favorite platforms to invest. For long-term investing, I recommend M1 Finance or TD Ameritrade. I use both for my 2 long term accounts where I hardly ever sell my shares. They’re super easy to use and display graphs of all your investments. Which is something I can’t seem to find on any other platform.

Once you make an individual account, fund it with money!

Things to do once your account is funded

1.) Invest into companies that you use regularly. I always recommend buying into companies that I use myself. For example, I have shares in Microsoft and Apple because I use their tech every day of my life.
– Put about 70% of what you initially funded into buying shares. Save the other 30% for buying opportunities and market dips.

2.) Make sure to have a percentage of your portfolio dedicated to an index fund or multiple. I recommend having about 15-25% invested into one or more of these funds. $VOO, $SPY, $QQQ, $VTI.

Index fund: A stock you buy which is a collection of companies put into one holding. When you buy a certain index fund, you are buying very tiny portions of several different companies. These are very safe and conservative assets, which will give your portfolio security.

3.) Follow our site every day to keep up with our personal stock picks, new strategies to follow, and our callouts for buying opportunities!

4.) Set up a payment plan every single month, funding your account with a certain amount of money. Every month I put a combined $300 into my stock portfolios. It’s an amount I am comfortable with, and I know I can sustain it.

5.) Have an open-mind to investing in companies you do not know about. In the future, we plan to fully analyze stocks we find. Showing why we think they will grow, as well as showing you the numbers and facts to back up our theories.

Investing Platforms

M1 Finance: https://m1.finance/-It9Yn7neCcV
TD Ameritrade: https://www.tdameritrade.com/home.page

Featured

Dividend Investing: The Forgotten Art of Powerful Investing

One of the more famous ways to build wealth is through dividend investing. Someone who participates in dividend investing picks certain stocks because of the dividend they give. A dividend is when a company provides shareholders with a small amount of cash per share periodically as a reward for just owning the shares. Companies will do this to keep their loyal shareholders happy as the company matures, and to keep new investors intrigued by the guaranteed cash.

Why Are Dividends Incredible?

Owning 1 share of Apple ($AAPL) this year will earn you about an $0.82 dividend. Split up into four, this will leave you with about $0.20 in additional cash every quarter. 20 cents may not seem like much, but if you are lucky enough to have perhaps 100 shares of Apple, you are now receiving $20 every quarter. Apple is currently at $122, let’s say it gets to $140 over the next 7 quarters. Someone who has 100 shares of Apple now has 101 shares if they choose to simply reinvest their dividend back into Apple, because 7 x $20 = $140. Another share without putting forth additional capital? I’m not sure it could get better than that.

We can even take this to the next step. If you factor in the fact that if a company’s stock price rises substantially, they are very likely to increase the dividend as well, then you are now collecting gains in both ways. These stocks are what we like to call dividend growth stocks, they pay a solid dividend and the company’s share price is in a better position to grow. These companies often have a smaller dividend yield, which is the annual dividend divided by the share price. The yield is smaller because these companies are usually much more innovative, and with innovation comes risk. Keeping the dividend the same for 30 straight quarters is much better than decreasing it for 1 quarter in Wall Street’s eyes. Therefore, companies only increase their dividend when they are overly confident they can keep providing the dividend at this level.

What Is a Dividend Yield?

Proper dividend investing means understanding the yield, and also understands the innovation plans for the stock, as well as the industry they participate in. For instance, telecommunication service companies such as Verizon ($VZ) have a higher yield because the capabilities of their company are fairly straightforward; to provide cell and internet service around the nation. You are not going to see much innovation coming out of Verizon, enough to drastically change the stock (or maybe you will? Keep reading!).

What if 100 Shares Is Too Much?

Grabbing 100 shares of a sound dividend stock is not easy at all, but it is easy to invest early and let the dividends create shares for you, as shown in the example. Even if you can only get 1 share, most brokerages now allow fractional shares, meaning your couple cents a quarter can really add up. Even if a quarter is too long for you to wait, there are plenty of stocks that provide a monthly dividend, such as Main Street Capital ($MAIN). To know when a stock pays its dividend, look at its Dividend Date, and make sure you hold the stock before its Ex-Dividend Date, to ensure you receive the next dividend.

At this point, your dividends will start to look like a monthly paycheck. In a long term mindset, this is actually the goal of most who are dividend investing, to build a strong enough portfolio so they can live off their dividends during retirement.

What Are the Best Dividend Stocks?

The answer is it depends on your current investing position, and what you expect from your dividends. Are you looking to obtain more shares? Or do you just want a hefty monthly check? Do you have $250,000 to put into your dividend portfolio? Or do you only have $250 to put in? Everyone is different, and in an upcoming post, we will outline all of the best dividend stocks no matter what your end goal. This will be a stock analysis of 25+ well regarded dividend stocks, showing you comparative analysis of each stock against the other. A proper breakdown like this is not something you can find just anywhere, so make sure you are subscribed so you do not miss out on finding out the best dividend stocks!

Featured

Get a Credit Card… Now

Intro

Signing up for a credit card at 19 years old is by far one of the best decisions I have made. It’s taught me financial responsibility, the importance of building up my credit score (more on what that is as you read). As well as, earning myself some extra spending money. Yes, you heard that right, credit card providers will literally give you money. What’s great is you can easily do the same thing with almost no effort.

What is credit & what are credit cards?

Credit is simply money that you have borrowed. You see, when you purchase products on a credit card. The money for those products is actually covered and paid by your credit provider, until you pay back the provider.

For example, if I buy a sandwich for $7 with my Discover credit card on April 1st. Discover will instantly pay the Deli the $7. I have until May 1st, exactly 1 month to pay back my credit provider, Discover.

Essentially, when you buy things on credit, you do not spend your own money at the moment of purchase. You pay back your credit provider over time. For credit cards, it’s every month.

Stop using your debit card so much!

Making purchases on a credit card increases your credit score.

Credit score: An analysis of how good you are at paying back credit. Tells whether or not you are trustworthy when it comes to paying back borrowed money. Your score is a number from 300-850. 850 means you are as trustworthy as it gets. 300 however… not so much.

When you buy things on a debit card it is the same as buying something with cash, except with a plastic card. You are not improving your credit score.

Why you need good credit.

Having a high credit score leads to AMAZING benefits down the line in life.

  • Taking out a new car loan in the future, your interest rate will be lower. A score of 750 pays an average 5% interest, while a score of 550 pays 11%. Both on 5 year loans.
  • When you buy a house in the future, your mortgage rate will be lower.
    – Note. Buying a several hundred thousand dollar mortgage with bad credit, will lead you to pay tens of thousands of dollars extra in interest….
  • Loans for fun purchases like jetskis, boats, big home renovations will have a lower rate.

**It’s not a matter of “if” you take out loans in the future its a matter of “when you do.” You want interest rates to be as low as possible. High interest rates means you are paying 1,000s of extra dollars, when you don’t have to!! Why choose to pay more?

Start building your credit score right now
  1. Apply for a credit card.
    -I recommend Discovers Student Card if you’re just getting started. It has no annual fee, meaning you do not have to pay an upfront or ongoing fee to keep the card. I have this card and still use it to this day. Use my link and we both get a free $50 to spend. (This is what I meant by free money). https://refer.discover.com/s/tbrescia238
  2. Start making your everyday purchases with this card.
    -Food
    -Gas
    -Going out money
  3. Set up the recurring payment once you get accepted, so you have a set day of each month where your bill gets paid. Mine is the 10th of every single month for reference.
Things to avoid with a credit card
  1. NEVER make a late payment!!
    -This is the worst thing you can do with a credit card. It lowers your score drastically, and you have to pay interest on the money you owe. Good thing this is easily avoidable when you set up a recurring payment like I mentioned.
  2. Don’t spend over 30% of your total credit line.
    – Once you’re accepted to any card, they provide you with a limit of how much you can spend each month. The student card is lower than most, when I first got accepted my limit was $1,000.
    – Obviously I don’t spend $1,000 a month. But if I inch toward that line, credit providers get worried. So I can spend at most $300 on the card per month in this case.
  3. NEVER make a late payment. (I will keep saying this until the end of time)
More free money!!

Almost all credit cards offer cash back on certain purchases. Things like gas, groceries, Amazon purchases, Restaurants, etc. Usually from 1-6% cash back on purchases.

Cash Back: Credit providers give you a percentage on certain things you buy. Ex. Say your card gives a 2% cash back at gas stations. It costs $40 to fill your tank, the credit provider gives you a free 80 cents. It’s not much but its free money on purchases you regularly make.

Travel Rewards. Some cards offer points you can use to pay for airlines, hotels, etc. The more you use the card the more points you recieve. These points add up overtime. Maybe they can pay for next years spring break trip to Cabo…

Takeaway

It is time to enter the world of credit. It’s not nearly as scary as it sounds I promise. If you pay your bill every single month, you will see all the benefits credit cards offer. I ask that you please share this post with a friend, I know it will help them out a ton. If you have any questions DM me on Instagram @tj.brescia, I’ll be more than happy to help!!

-Get a free $50 when signing up for a Discover Student Credit Card https://refer.discover.com/s/tbrescia238

Featured

The Real World Adoption of Bitcoin?

No, you did not miss out on Bitcoin. Even despite costing $55,000, Bitcoin is on the rise. Many people reference the spike back in 2017, and say Bitcoin is destined to drop heavy from its previous high, noting the yearly charts both look very similar. However, I believe there is one major difference between Bitcoin in 2017, and Bitcoin in 2021: Real World Adoption.

The currency of the future, Bitcoin is being adopted by more and more organizations everyday.

In 2017, Bitcoin wasn’t much more than an easier way to hide your shady transactions. There was some crazy hype, but without any real substance to fuel hype, hype dies. Now, you can buy a Tesla with Bitcoin, make payments on Mastercard with Bitcoin, and pay for airline tickets with Bitcoin. There are professional athletes asking for part of their contracts in Bitcoin, such as NFL player Russell Okung.

Companies and athletes do not make these decisions for no reason, they believe in the purpose of Bitcoin. Transfer fees are dropping and real world adoption of the currency is growing, because moving Bitcoin from wallet to wallet is cheaper than ever. The potential is stacking up, don’t miss out!

Don’t Send the House

Now this is not a call to put the retirement fund fully into Bitcoin, or to take your tuition and leverage it in. There is still risks with Bitcoin, and you must to be able to handle its insane volatility. Although, the beauty of Bitcoin is you can buy the smallest fraction of one coin, literally .0000001 of a Bitcoin. This allows for easy scaling into Bitcoin, putting in a little amount of money each week and letting it scale up.

I was doing this over the summer when Bitcoin was between $10,000-$12,000, and now that money has gone up over 700% in 9 months. No amount of money is too little money, especially when it comes to Bitcoin. Be apart of the future, or get left in the past.

The future of Bitcoin is bright!
Featured

What Is The Blockchain? The Intro You Need

The blockchain is something that can change the financial and legal systems of the world as we know it. More and more entities around the globe are adapting to this system and buying into it. The best part is, you and I are easily able to profit off of this. But first, you need to know what the blockchain is, and why you need to invest in it. Let me explain.

What is it?

The blockchain is the most important aspect of cryptocurrency. Everything builds off of it in their own separate way. It is a public ledger containing a chain of transactions between parties. Everyone can see and validate each transaction through what is called a “peer-to-peer” network. This ensures that one person cannot have control over the system.

Block– A transaction between parties. This transaction can either be of currency or information. Each block has 3 vital things…
1). Data– Contains who is sending & who is receiving the transaction. Also, the amount of coin/currency.
2). Hash– A series of code that is so long and complex that you cannot copy or guess it. Unique to each block. (Check the 7 minute video below to better understand hashes)
3). Hash of previous block– The code of the previous block, creating the chain. This allows for the fact that fraud & hacking cannot happen. Since each block contains the information of the one behind it. If someone were to hack the system they would need to validate every single block in history.

Peer-to-peer network– Everyone who is using the blockchain, gets a copy of the chain. Hypothetically, if one block was altered it would have to alter every persons version of the chain. Thus, creating a more secure network.

**The concept of hashes and security is very confusing. Better to be visualized in video. Check out the short videos I linked below, it helped me better understand how crypto is so secure. For now trust me when I say it is secure.

The Key

What makes the blockchain so appealing is that no single person/institution can control or oversee transactions. Everyone in the world can see what is going on, and add to the chain. Banks have their downsides of having transfer fees, a cap on how much money can be sent, and issues with transferring funds to another country. Most importantly, bank accounts are more prone to being hacked than the blockchain is.

How does this help you and I?

What fascinates me most about the blockchain is the transaction of information. The transfer of money is good at all, but I see a bigger future that a bank cannot replicate. The transfer of information on the block chain are done so in what are know as “smart contracts.” In short, they are very similar to traditional contracts, an agreement between parties. Conditions must be drawn out, so one recipient gives something, while the other receives.

The example I like using most is this. What if rent payments were done so on the blockchain? The parties would make an agreement and connect their online crypto wallets. At the end of each month value from the tenants wallet goes to the landlords. This is so much better than a traditional contract because what if the tenant just doesn’t pay at the end of the month? Then everyone goes to court, legal troubles happen, and everyone is just unhappy. When the smart contract is agreed upon, there is no backing out, payments WILL go through. And the transaction is there for everyone to view. The landlord and tenant cannot lie and say someone paid or didn’t pay. Then take the other person to court on it.

Ways to invest in blockchain technology

Almost all of cryptocurrency aims to add value to the blockchain, some better than others. Here are the cryptos we value the most regarding blockchain.

Ethereum ($ETH): Chances are you have heard all the buzz around Ethereum before. It is the safest investment on here today. Because it has the second biggest market cap of all cryptocurrency, behind Bitcoin. All Ethereum is, is a network of blockchain. It is home to a giant, reliable, and proven blockchain. Their main goal is the advancement of smart contracts. The most projects and cryptos are built on Ethereum. Institutions like Amazon, Google, and Microsoft have all bought into Ethereum as an investment. They see the use case and store of value in it, you should too.

Check out Etherscan to view all blocks on the Ethereum network: https://etherscan.io/

Chainlink ($LINK): Here I am again talking about Chainlink on this page. Why would I be talking about it so much if I didn’t believe in it? Chainlink is a network that provides accurate data to smart contracts. Like any contract, factual data must be recognized by the parties involved so contracts can follow through. Real people called “nodes” would verify data in the real world so everything can hold true. Microsoft has also bought into this project, planning to use it in the future…

Phala Network ($PHA): I have covered this project before on this blog. Phala aims to make transactions private but verified. Here is the post! https://the-common-trader.com/2021/03/03/our-next-crypto-pick/

Conclusion

The concept of the blockchain is extremely complex. There is so much more to the system that I didn’t cover here. Don’t expect to know everything about it from just reading this post. I just wanted to give an overview of something that can truly change the world. Follow the blog for more in depth education on the blockchain, as we will be covering the in’s and outs of it. For now, research it a little more and watch the helpful videos linked below that I watched to first learn about the blockchain.

Buy Chainlink and Ethereum here! https://www.coinbase.com/join/bresci_4b
7 minute video on the blockchain- https://www.youtube.com/watch?v=yubzJw0uiE4
2 minute video on the security of blockchain- https://www.youtube.com/watch?v=5XtvHJbq5kw

Featured

Understanding the Time Value of Money

Everyone is very knowledgeable on the value of money such as what they deem as a lot of money. However, most are not aware of how time can affect the value of money. I am going to ask three questions, and after you develop an answer for each we will discuss them.

  1. Would you rather receive $1,000 today or $1,000 a year from today?
  2. Would you rather receive $1,000 today or $1,000,000 in 5 years?
  3. Would you rather receive $10,000 today or $12,000 in 6 months?

What Does This Mean?

These three questions show how any given individual will respond to monetary values. Most people will take $1,000 today because people want money now, they’re not going to wait when they can have it right away. Although, when they can wait longer to receive more money, they will wait every time. The last question is the tricky one, because its a matter of money making ability. Some people believe they can make more than $2,000 with that $10,000 in 6 months, while others rather guarantee themselves the $12,000 at a later date.

Your self-confidence for money making can be determined by your attitude to the last question, and it is important to not lie to yourself on this question. Knowing how well you make money is just as important as making money in general. Some people know how to make money often but only make $5 each time while others do not make it often but make $100 when they do. Overall, be efficient when making money, similar to the saying, “Work smarter, not harder.” Spending hours to make a low amount of money when you know other ways to make a lot more money without so much time is nonsensical. Once again, you must value your time on any given day, and never waste it on something you see little to no benefit from, once you are able to do this, you will truly understand the time value of money.

The Time is Now!

In a very recent post, I discussed how the most valuable thing in the world is time, because once you lose it, you can never get it back. When you relate money to this, you get the well-known saying, “Time is money.” This is all true, but you must know what to do with your time, because just having it is not enough. Educate yourself, do research, read our blog! Invest, start a business, get a mentor, do anything to find a way to start creating wealth. Think of all the times you have heard this, and you still have not done it! The time is now to make something of time you have before you no longer have it.

Featured

College Students, Stop Storing Cash In Your Checking Account

21% of all us dollars were printed in 2020
Source: Katusa Research

Before reading what I have to say about storing cash. I want you to first, look at the chart above and try to answer these two questions.
1. What am I looking at?
2. What does this mean?

Now that you have your answers, integrate them with what I am about to share with you. The money that is sitting in your checking account is losing value by the day. Yes, you read that right.

The Chart
This graph shows the total supply of US dollars in circulation. Over the last 40 years the Federal Reserve (The central bank for the US) has increased the money supply year by year. But since the 2008 financial crisis, the percentage at which the supply grows has increased dramatically. You can clearly see that because of Covid-19 relief packages and stimulus money. The Federal Reserve has printed an absurd amount of money in the last year.

What Does This Mean?
This means that each one of your dollars has now decreased immensely in value. You see the more there is of something, the less valuable it is. Think of gold & silver for example. The scarcity of the two makes them so valuable. Same for special release Jordan sneakers. Most shoes that are priced at thousands of dollars are priced that way because there are so few of them made. But what if the number of shoes doubled in production? The price per pair would drop right? Its the same thing for our money. The more dollar bills there are floating around in the country, the less valuable they are. This is called inflation. (I’m sure you’ve heard a “know it all” business student talk about this before).

Right now the US Dollar is what is known as a fiat currency. A form of money that only has value solely because a government says it does. The government can print as much money as they want, which decreases the value of your dollars.

What Does This Mean For YOU?
“Don’t work for money, make money work for you” -Robert Kiyosaki
I am a college student just like many of you. Last year as a freshman I had every single dollar I earned stored in my checking account. At the time I didn’t realize how much of a fool I was. This money was just sitting there, not growing. I didn’t have many expenses either, so it’s not like I was using say 60% of that money anyway. My only expenses were food on the rare occasion I didn’t eat at the dinning hall, going out twice a week, and other small things.

You and I are fortunate enough that our expenses are so low, we can invest a large sum of our money into assets. Take some money out of your checking account and buy things that will grow your wealth. I did this and increased my net worth substantially. In all honesty, I had about $3,000 to my name in March 2020. I worked 2 summers for this. I took some of that money and invested into assets. My biggest win so far was buying Chainlink ($LINK) in Spring 2020. It is a cryptocurrency that we have covered on this site before, and will discuss more. At the time it was in the $2-$5 range per coin. Now it is $27.00 per coin and I’m still holding. Darnel also has a big position in Chainlink.

My point here is not to brag, but rather tell you that you can do the same. Invest the money you don’t need in the short-term so you can make money work for you. You are not using all the money in your checking account. The more it sits there, the more it decreases in value. Learn to invest, and learn to budget the smaller sum leftover in your checking account.

-TJ Brescia

Past post about Chainlink: http://the-common-trader.com/2020/08/16/never-too-late-for-crypto/

Featured

The Stock Market Is Not A Bracket

March Madness got rocking today and is off to a splash early. One of the most exciting sporting events of the year didn’t go on last year due to the early stages of the pandemic, and is still not going on normally a year later with both the Men’s and Women’s tournaments in a bubble. Certain stocks to watch during the tournament would be, Capital One ($COF), Draftkings ($DKNG), and ViacomCBS ($VIAC) for advertisements, gambling, and television revenue purposes, respectively.

The reason for this article is to stress the importance of doing proper due diligence when you are investing. You cannot just pick stocks how you pick a bracket. Lines such as “My friend said this is a lock,” and “There’s no way this doesn’t work out.” are phrases you will always regret. Investing money into a stock should not be done lightly, proper research is necessary. One effective way to measure performance of a company is through the Du Pont Analysis. In this analysis, a company’s Net Profit Margin, Total Asset Turnover, and Equity Multiplier are all analyzed to find how the company is making its money. Respectively, each figure measures the terms profit, efficiency, and leverage used in order to show the company’s return on equity. An example of company XYZ would be:

5.0% Net Profit Margin X 1.0 Total Asset Turnover X 5.0 Equity Multiplier =

25% Return On Equity

This company had a very good profit margin, which is there ratio of revenues with a removal of their costs. Their total asset turnover was fairly standard at 1.0 which is a ratio of their revenue to their total assets. Lastly their equity multiplier represents the total assets divided by the total equity, and is an indicator of how the company leverages their debt, with a higher number showing greater risk. Based off these given figures of XYZ, their risky debt usage is not an alarming number, but it is something to take note of. Due to the total asset turnover being fairly standard, their ability to achieve a substantial 25% on their equity is quite remarkable, and if they can bring down the equity multiplier in the future while maintaining the return on equity, the company could reach a new level.

It is important to take note that the value of these figures are interchangeable. Just because a company has a high equity multiplier, such as 10.0, does not mean they are a bad company, they could just be a young company leveraging debt to grow fast. Or if they have a low net profit margin such as .2%, they could also just be young. Understanding a company’s goals and plans are just as important as understanding its Du Pont analysis.

The Du Pont analysis is one to use when looking for an investment you plan to hold for 5+ years. If you can find a company that shows substantial improvement in the Du Pont analysis while also showing efforts to innovate it might just be a golden investment.

-Darnel Shillingford

Featured

#1 Most Overlooked Stock Tip

Market Cap vs. Price Per Share

The price per share of stock or price per coin in crypto is not what should attract or distract you from that investment. Let me explain…

Market Cap = Total number of shares for an asset multiplied by the price per share. Take Cocoa-Cola for example ($KO). They have 4.3 billion outstanding shares, the price per share is $51.22. This gives Cocoa-Cola a market cap of $220 billion.

Beginner investors will look at the $51 share price and compare it to another stock like Grubhub ($GRUB) with a share price of $66. They may think they can get more shares of Coke than Grubhub with the money they are willing to spend. So their return will be higher. This couldn’t be farther from the truth.

Here’s the kicker. The higher the market cap, the harder it is to grow that company, making the share price harder to increase. It takes so much more money to say 2x an already hundred billion dollar business. Grubhub however, has a market cap of $6.4 billion. Far less than Cokes market cap. For Grubhub to get to Cokes market cap, the share price would have to 33x. This essentially would 33x your initial money invested into Grubhub. If Coke were to 33x it would have a market cap of $7 trillion. The highest company market cap in the stock market is Apple with $2 trillion… Grubhub has a more realistic route, with higher potential gains.

If you were to take one thing away from this post it is this. The higher the market cap, the harder it is to grow that company. Making the share price harder to increase, so your gains wont be as large!! However, lower market cap assets are riskier because it takes less invested money for them to go bankrupt. I cannot preach this enough though, if you are young, invest in some riskier assets. Chances are you don’t have a lot of capital invested anyway, so who cares if you lose a lot of it? You have a lot more time in life to earn that money back. Your reward is way higher as oppose to just investing in large cap, conservative assets. Make sure to look at the market cap before buying assets. Quantity of shares is meaningless.

-TJ Brescia

Featured

6.2% Labor Market

Utilizing the labor market can help develop entry points for long term investing, as specific points in the labor market can signal current market sentiment from investors. The optimal percentage of unemployment for America is usually between 2 and 4%, so this figure is high however it is misleading. Most people believe that high unemployment will bring the market down, but just look at the past year, the market has done more than recover from the March 2020 crash. The reason for this is because the labor market is not at a tipping point. Yes less people have jobs due to the pandemic, however jobs are not currently scarce. The way people work is changing, and during this turnover there will be high unemployment for a period of years, but if a lot of people aren’t looking for jobs during this change, the labor market is not in trouble. What does this mean for buying? It means this year has been a great time to buy, and the buying period is still going as long as jobs are out there.

– Darnel Shillingford

Featured

Phala Network Up 30%

If you remember about 10 days ago we notified about our new crypto pick, Phala Network ($PHA). Phala is a privacy coin that aims to make smart contracts confidential on the Polkadot blockchain. Reference my post on March 3rd at the bottom of this post for more details on the coin, smart contracts, and the blockchain. I said this was a slightly riskier investment. It still is, but as the gains go up, the risk dies down. With that being said, I am here to inform that we are still early on Phala for 2 big reasons.

  1. The market cap. Market cap in crypto is something that is often overlooked, but should never be. Market cap is the total money into an asset. The amount of Phala coins in circulation multiplied by the price per one coin. Phalas current market cap is $168 million as I’m writing this. Generally with crypto, coins will get to a $1-5 billion market cap, then the insane 10x, 20x, even 100x gains slow down. Simply because people know that at this stage the coin is considered a “high cap” coin. Meaning it is a more conservative asset that is safe, but less rewarding. Right now Phala is considered a “mid cap” coin. I believe this coin can absolutely get to a $1 billion+ market cap within the next year. If you invest now, you can still 6x your money this year.
  2. Phala is integrating with many different programs and other crypto projects. To name a few they partnered with this month alone. Apron Network, DEGO Finance, and Acala Finance. These platforms are all Polkadot projects that want Phala network to incorporate their trusted confidentially system in their smart contracts. It is not as important for you or I as investors to know every detail about the partners, just that Phala is growing.

Phala Twitter: https://twitter.com/PhalaNetwork?s=20
Phala Website: https://t.co/lRhuzFCDOh?amp=1
First Phala Post: https://the-common-trader.com/2021/03/03/our-next-crypto-pick/

-TJ Brescia

Featured

50 Million Dollars or 50 years?

On the surface, I am sure most people will answer this question with the choice of 50 million dollars, when asked along with it, “What is more valuable?” However, if you asked Warren Buffet this question, I can guarantee you he will pick 50 years every single time. When people hear assets they think of money, stocks, cars, homes, businesses, etc., but no one thinks of time as an asset. Time just might be the greatest asset anyone has because if you lose $100 you can always make it back, but if you lose 100 minutes you will never, ever get that time back again. Now obviously, 50 million isn’t much to Warren Buffet, but if it was any amount of money he would most likely say no, because if you gave Warren Buffet more time with the knowledge he has, the gains would be astronomical. We all need to value our time more; our time in the market, our time collecting funds, and our time gathering knowledge. We have discussed the power of compounding numerous times before, and how the earlier you start the better, and we have discussed how the best time to start something is today. Do your research and take the chance, and if anything, just ask us if you have questions!

-Darnel Shillingford