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KEY POINTS
OVERALL MARKET
Despite the less-than-expected GDP growth, the market indices ended the days with record highs.
The market indices ended the day in the green.
A report by the Department of Commerce was released today, showing a 6.5% increase in the GDP, which is lower than expected. This could be a sign of struggles with inventory and supply chains, or just a slight pullback in growth. Regardless of the reasons, investors seemed to remain optimistic and brought the indices to record highs. GET THE DAILY MARKET RECAP
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Celebrating Robinhood’s IPO (#HOOD)
Before Robinhood's IPO analysis, I'd like to pause a second and celebrate the company’s Initial Public Offering.
Robinhood's IPO is in a sense, a celebration of the entire individual investor community. My fellow Stock Cardians, and even other individual investors that haven't found Stock Card yet, it’s a big day for you all! Today Robinhood went public. There is so much controversy around Robinhood and retail investing these days that it casts a shadow on the significance of this event. Robinhood's IPO is a huge milestone for all of us who believe in owning our financial destiny. We are passionate about investing. We like the thrill of discovering new investment ideas, and we embrace the responsibility that comes with managing our money. I even dare to say we enjoy it! Today, we tip our hats to the Robinhood team and its 22 million+ users. Congratulations! THE GOOD, THE BAD, AND THE UGLY
A deep dive into Robinhood’s growth, revenue, volatility, and regulation worries.
Now, celebrations aside, it's time to take a look at the stock and find the good, the bad, and the ugly. First up: The Good: Robinhood’s branding is a large part of its success. It is one of the more prominent fintech companies, widely known for its accessibility and ease of use for retail investors. The name Robinhood is practically synonymous with retail investing, and that’s a valuable asset. In terms of user engagement, Robinhood's zero fees model and easy-to-use design have led to a highly engaging product. It has more than 17 million monthly active users, and more than 80% are acquired either organically or through user referrals. The company has grown its revenue 245% year-over-year in 2020, and an even greater 309% year-over-year by this March. The company uses rebates from other financial institutions, premium subscriptions, and its own investments to generate revenue. It's a rapidly growing start-up. Overall, Robinhood clearly understands how to benefit from trends and retain customers. The Bad: Pessimism is Robinhood’s greatest enemy. As soon as the market opened, share prices dropped. Although it almost broke even around 1:00 EDT, it was dragged further down into the red during the rest of the session. By closing time, the price had fallen to $34.82. It seems investors are not as excited about Robinhood. The volatility of HOOD stock is worth understanding. The company kept about 20-35% of its shares for sale to retail investors, which I might add, is quite on brand. However, this is higher than most companies, which according to CNBC, tend to keep more of their stock invested with institutions like hedge funds. This allows more volatility, which investors should be aware of. Also, profit-wise, the company is not quite there yet, and may not get there anytime soon. According to Robinhood's S1 document, it "incurred operating losses each year since its inception in 2013 through 2019, including net losses of $6.1 million, $57.5 million and $106.6 million for fiscal 2017, 2018 and 2019, respectively." The Ugly: The sustainability of revenue is a concern of mine. One thing that bothers me about Robinhood's revenue is how reliant it is on options trading revenue, dogecoin trading revenue, and general hype. If you look at the distribution of revenue on its S1 document, the majority of revenue in 2020 comes from Options trading. And, similarly more than half are coming from the 2020 users. Coincidentally, the trading of options has also caused one of the company’s biggest missteps. At the end of June, FINRA fined Robinhood a record $70 million for customers’ losses during the “outages” like during the Gamestop (GME) squeeze, misleading customers, and for approving options trading for customers the company knew should not be trading options. Overall, there is a lot of backlash against the so-called order flow revenue model. If that wasn’t enough, the CEO of Robinhood is currently under FINRA investigation as well for not being registered with FINRA. This is showing the company in a bad light at a time where it needs good publicity the most, but it seems the CEO Vlad will not be found in violation, since he does not directly oversee the brokerage, only the parent company. This may mean the company has to find a FINRA-registered CEO so the two co-founders can step further back from brokerage operations. Can Robinhood maintain the revenue growth? That is the question I'm pondering as I consider investing in the IPO. For now, I think I’ll stay out of the fray. Good brands and well-managed companies stay for a long, long time, and there will be plenty of opportunities to invest. I won't rush in, and let Robinhood hash out some of the ugly regulation and revenue challenges it's currently facing. IPO days are some of my favorites. It’s exciting to watch a company enter the world of public trading. Want to find all the latest IPOs in one spot? Type in "2021 IPO" in the search bar, and click on the “2021 IPO” collection to get a list of all the IPOs this year. FREEDOM PORTFOLIO
Check out Paul Essen’s portfolio, our featured investor and partner of the week.
Okay, let's wrap up by stopping by Paul Essen's portfolio. You can find it on Stock Card's Stock Picks page. Paul and his Freedom portfolio are the Featured investor and partner of the week. He is one of the best long-term investors I like to follow on Stock Card. He and I had a chat about his investment strategy earlier this week. I’ll leave a link to that conversation in the show notes. Drop by Pauls' Freedom portfolio and follow him to get notified of his buys and sells.
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KEY POINTS
OVERALL MARKET
The DOW has its biggest drop since October as COVID variant fears stunt markets worldwide.
All the market indices ended the trading session today in the red.
The delta variant renewed COVID fears and drove the market down today. The DOW Jones, for example, hasn’t dropped this far since October. The bearish sentiment was worldwide, withmarkets across the globe registering losses to kick off the week. Transportation and energy stocks dipped, with the devastating shutdowns still going on. It’s not a huge surprise to see a pullback today. GET THE DAILY MARKET RECAP
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Small cap companies with strong operations that you should consider for your long-term portfolio.
This weekend, I got inspired by a Twitter thread where quite a few experienced investors shared small-cap stock ideas to own for the next 10 years.
Some ideas from that thread that grabbed my attention were Fathom Holdings (FTHM), Vinci Partners (VINP), and Dermtech (DMTK). All interesting companies, especially Dermtech. The thread inspired me to create a watchlist on Stock Card for small cap companies worth buying now. We can call them small hidden gems to buy now. Before jumping into two of my favorite stocks from the new watchlist, here's how I created it: On the screener page, I added a new filter and plugged in these criteria: Small cap, $500 million to $2 billion, Growing market, Growing sales, and No cash concerns. I also focused on NYSE and NASDAQ exchanges to reduce the size of the watchlist. The result is a watchlist of hidden gem stock to buy now. You can take a look at my watchlist by clicking here! HIDDEM GEM #1
MGP Ingredients (MGPI) has built growing operations with strong fundamentals.
One of the more intriguing tickers on the hidden gems watchlist is MGP Ingredients (MGPI). MGP earns most of its revenue from distillery operations. This includes the production and sales of industrial alcohol spirits, for food or otherwise. MGPI also operates warehouses for the company itself, and storage services. Apart from this, it also supplies wheat and starch ingredients. We came across this stock once already when we created the Plant-based food watchlist. So, not only is it benefiting from plant-based trends, it also meets criteria for potential small caps to buy now.
Let’s head to its Stock Card for more info. Off the bat, I can see that its financials are looking great. It has green ratings for every aspect of its operations! This includes Sales Growth, Profitability, Cash Availability, and Management Effectiveness. If you click into any of these sections, the sections are broken down further. Here, it’s still green everywhere. The only exceptions are 3-year compounded growth rate and Quarterly Profit Margin, which are both sitting at fair levels. MGP Ingredients has established solid growth that is setting them up well for the future. In terms of market performance, there were better stocks to have been holding the past 5 years or so, but MGP Ingredients blew the S&P out of the water over the last 10 year period. The agricultural inputs and plant-based food sectors are expecting to see plenty of growth in the coming years. Judging by the factors we just saw on its Stock Card, I’m feeling optimistic about MGPI. Add it to your watchlist to research it more. HIDDEN GEM #2
TechTarget Inc (TTGT) is capitalizing on a growing Internet Content & Information industry.
The second stock I’m covering today from the new watchlist is TechTarget Inc (TTGT). TechTarget is an experienced company that uses browsing data to help companies promote content that influences potential IT buyers and customers. It serves tech businesses to refine marketing and sales pipelines. Its business model is to charge IT and tech sales teams to get access to better and more qualified IT buyers.
Let’s head to the Stock Card. On its “Growth Potential” rating, the Communications Services sector isn’t expected to have much growth, but there is a very optimistic outlook on the Internet Content & Information industry. A possible concern with the stock is its current valuation. The share price has risen 751% in the past five years, partly to blame for the “Overvalued stock” rating it holds on the company’s Stock Card. Despite this, TechTarget is on the new watch list for a reason. The company is doing great in an industry that is growing with each passing day. I recommend you have a look at it when you log in back to your Stock Card account. WANT TO RECEIVE THIS DAILY STOCK MARKET RECAP IN YOUR MAILBOX?
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KEY POINTS
OVERALL MARKET
The market ends mixed despite good earnings reports.
The stock market indices ended the day mixed, with only the DOW finished the green.
18 companies in the S&P 500 this week beat analysts' earnings expectations, yet the index was still not able to beat its previous record. A slightly weaker-than-expected Chinese GDP growth may have given investors the indication of slower global recovery in the rest of the world. GET THE DAILY MARKET RECAP
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Watch it, Listen to it, Or, read it. Sign up for a free Stock Card account to get the report in your mailbox every day. AMC STOCK ANALYSIS - SHORT SQUEEZE
Is the AMC stock squeeze over?
Folks, an interesting question came through our private Facebook community the other day that I want to dedicate today's episode to discussing with you.
A fellow Stock Cardian asked, is the AMC Entertainment (AMC) short squeeze over? To answer the question, let's step back for a second. 2021 has been quite an interesting year in the stock market, and the rise of “meme stocks” is definitely part of it all. Reddit forum Wallstreetbets began the meme mania with Gamestop (GME), and it has since spread to other companies. If you’ve been paying any attention to headlines, AMC Entertainment (AMC) has been the other favorite stock of retail traders banking on hype and short interest. Unfortunately, as time has gone on, things haven’t panned out quite as cleanly. On Wednesday, for example, AMC's share prices dropped 15%, bringing it down to half the price of its record high only a few weeks before. Let’s take a deeper look into this stock to find out where it might be headed. The mystical short squeeze was the goal of many recent meme stocks, AMC included. Hoping to capitalize off of cheap and heavily shorted stocks, retail traders piled on to push the stock price high enough to trigger the so-called short squeeze. This is the point when institutional investors who have bet against the stock have to buy the shares at the new and higher price to cover their short bets. That consecutively drives the stock price further up. But, that strategy seems to not be working anymore. Let’s explore three big factors that need to be considered:
From my perspective, the odds are high that the boat has already sailed if you were wanting to benefit from the short squeeze excitement. The pressure on short sellers to cover their positions fades by the day, and I’m not sure if AMC can gather enough steam to break out into new highs. The only wild card here is exciting news. For example, if AMC manages to partner with a large corporation, or some new large investor comes in to invest or buy the company. So, the short squeeze probability is low but you never know whether a wild card is around the corner or not. For full transparency, I have some shares of AMC, which I bought at $15 and am still holding just to have a stake in this phenomenon. AMC STOCK ANALYSIS - FUNDAMENTALS
An educated look at the future of AMC stock.
We can't talk about stocks and not do fundamental analysis. If you were considering owning AMC stock for the long run, here’s a cautious reminder that analysts are giving out a price target of $5.25, under the “Fair share price estimate” tab on its Stock Card. Investors and hedge funds alike recognize that the current price is not sustainable or reflective of the real value in the company. This might not matter in the short term when emotions are running high, but over time it’s inevitable that it will cool down and revert back to a realistic price.
To understand why analysts' price target is so low, let's do some stock analysis. I headed to AMC’s Stock Card again. Under the company's operational section, I'm curious about how long AMC can hold and fund its operations. I noticed the debt situation. Clicking on “Cash Availability” gives me more in-depth data. Its debt to equity ratio and debt affordability ratio are both quite poor. Clicking into “Profitability” raises another red flag- the company’s Earnings Per Share are terrible as well. The management is aware of this hole it’s in but is still crafting a strategy to climb out. One of these strategies included being able to raise capital by selling 25 million more shares,but this move was voted down by current shareholders. So, the strategy for AMC is a bet on a possible wild card, like a possible good piece of news that changes the current trend, that's all. There is no fundamental to support the stock and the short squeeze probability is low based on measurable information. I would be wary of entering into the stock this late in the game. MEME STOCKS TO BUY NOW
What are the Potential Meme Stocks that are worth buying now?
Let's wrap up discussing the best way you can find other potential meme stocks that are actually worth buying now. I told you last week about the launch of the "potential meme stocks" on Stock Card. Type in meme stocks in the search bar and get the full list of almost 300 companies.
We created the meme collection for you to know why some stocks fluctuate so rapidly, and you can also use the list to find some good investments. Just because something is a meme stock doesn't mean it's a bad company. So, I go to the screener page, create a new filter, add meme stock collection, and filter the list for stocks with high growth potential, strong sales growth, and no cash concerns. Those are some of the indicators that a growth stock can keep growing despite the high volatility that comes with a possible short squeeze. Click apply and voila, a list of 22 meme stocks worth buying. This is of course a starting point, add your own criteria and get to the final list. I’ll save my watchlist for you and you can get the list here: Get the watchlist of meme stocks to bu now! WANT TO RECIEVE THIS DAILY STOCK MARKET RECAP IN YOUR MAILBOX?
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KEY POINTS
OVERALL MARKET
The market indices ended the day mixed, with bond yields dropping, and a slowing in service sector growth.
The stock market indices ended the day with a mix of red and green. The story is quite the opposite of last week, with the DOW and S&P closing in the red while the NASDAQ took it’s turn ending the day in the green.
One factor dragging the market may be yesterday's report about the bond yields dropping. This could mean investors are wary of the future. Another analysis to consider is the Institute of Supply Management Services Report. This indicator gauges the service sector's growth. May held a record high of 64%, but ISM’s June report today shows a slowdown in growth to 60.1%. There is still a strong upward trend, but this may be a sign that growth is peaking and investors didn't like that possibility. GET THE DAILY MARKET RECAP
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Tom Gardner, co-founder of The Motley Fool, shares some of his “high conviction” stocks, including Paycom (PAYC) and Docebo (DCBO)
During the long weekend, I was scrolling through Twitter and came across a thread by one of my favorite investors, Tom Gardner. Tom is one of the co-founders of The Motley Fool, and he shared five of his high conviction stocks. Several hundred investors chimed in and shared their ideas. While the responses below his tweet are great as well, I found his top picks very interesting. Two of the stocks are not very well known tickers that I thought you'd be interested to learn about.
Paycom (PAYC) is one of his picks. This company is one of the first to bring payroll systems completely online. As you can see on the company's Stock Card, the company operates in a few high growth markets such as Workforce payment products that is expected to grow by more than 10% in the next few years. As I scroll further down, I notice Paycom's strong operations. Last fiscal year revenue growth was 14%, and the company is expected to grow more than 21% this year. It's profitable and has a strong balance sheet and generates free cash flow. I love it, and am going to follow the stock to learn more in the next few weeks. The next high conviction stock from the Twitter thread is Docebo (DCBO). Docebo provides digital training platforms and programs to employers. Even if employees go back to physical offices, employee training is one of those activities that can be conducted fully online. Just like Paycom, the company boosts a solid growth potential and strong, cash-generation operations. Both these stocks are worth following and adding to your watchlist. One thing you may have noticed is that both stocks have two green boxes or growth potential and operations, but unknown past performance and valuations. This is quite common among younger companies and recent IPOs that have a lot of potential. So, let's create a 2-greener watchlist for companies similar to Paycom and Docebo. I go to the Screener page, start a new filter, and choose “high growth potential” and “strong operations” filters. I also make sure the past return and valuations are unclear just like those two stocks, and finally, look for companies with overexcited investors. And, viola, I have a list of 37 stocks that could be your watchlist for your high-conviction, less known companies. Get the list 2-greener high conviction watchlist by clicking here! WHAT'S DOWN?
U.S.-listed Chinese stocks take a hit from fears over government regulator investigations. DiDi Global (DIDI) and Pop Culture Group (CPOP) closed with big losses.
For the loser stocks of the day, let's talk about last week's news that the Chinese government is investigating the brand-new IPO DiDi Global (DIDI) for data security concerns. DiDi is known as "theUber (UBER) of China." In the process, they barred any new customers from downloading the app, and shares unsurprisingly plummeted. This of course led to many investors rethinking how safe their money was in U.S.-listed Chinese stocks. Fearing that the crackdowns would be applied to other companies, the sell-off spread to other listings.
The government cited possible issues with illegal stock trading and data privacy between these companies and other countries. Pop Culture Group (CPOP) is also one of the newer IPOs affected by this panic selling, losing nearly -41% by the end of trading today. Because the company is focused on building international relations with the U.S., it may be an investigation target. This may give us opportunities to pick up shares of Chinese stocks, if we can tolerate high volatility that hits these stocks every now and then. Type in "China" in the search bar and get the list of all companies listed in the U.S. that are head-quartered in China to start your research. GET THE DAILY STOCK MARKET RECAP IN YOUR MAILBOX?
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The NASDAQ stayed above water in a mixed market, with median prices of homes at record highs.
We ended the day with a mixed market. Both the S&P and DOW indices finished in the red, with the NASDAQ barely finishing above the green.
With uncertain and confusing Fed comments in the past week, investors look for more economic indicators to clarify the market's future. New data from the Commerce Department came out today. It tells us home buying has slowed, while the median price is as high as ever, another victim of supply chain issues and inflation. This serves as a reminder to the financial market that inflation is ever-present, possibly causing investor hesitation today. GET THE DAILY MARKET RECAP
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Started as a student loan platform, SoFi (SOFI) is now a challenger bank aiming to replace traditional banks with its one-stop-shop consumer finance products.
Today's winner stock of the day is another suggestion by Stock Card’s VIP members. SoFi Technologies (SOFI) is a SPAC IPO that finished Wednesday up by more than 2%. In the past, SoFi was known only for school loan services. With their new CEO Anthony Noto in charge, the business pivoted to create a challenger bank offering a one-stop-shop technical platform for all your financial needs, from investing to loans to financial education, and more.
The company has reported seven quarters of faster year-over-year growth in member base. What distinguishes SoFi from other banks is its ability to acquire users at a much lower cost. Users may join SoFi to trade crypto and then graduate to get a loan or open an account. We've seen a similar low-cost customer acquisition from Square (SQ). With almost no physical presence this new generation bank has much lower operating costs. You can see the evidence of it in its rapidly improving Adjusted EBITDA (Earnings before Interest, Tax, Depreciation, and Amortization). Despite all positive signs, let's not forget thatSoFi’s plan for future growth relies on generating more revenue from their existing customers down the road. While they want to bring more people into the service, they ideally want to benefit from being a “one-stop-shop” for their paying customers. Upselling more products to the existing base may not be as easy as everybody assumes and end up taking too long or too much. One thing that makes me worried about SoFi is that it is diversifying to new financial products too fast. Each of the companies product offerings can be an independent company by itself with regulatory challenges and operational complexities. It also makes it hard to understand SoFi's operation well enough to jump in now. I could be regretting it later, but this stock is still a watchlist candidate for me. WHAT'S DOWN?
Clover Health (CLOV) is slowly gaining ground but has a long way to go to reach its record high.
The second SPAC IPO suggested by VIP users is Clover Health (CLOV). Yesterday, the company saw a 20% jump in its share price, followed by another +9.5% today. Today though, we are stepping back to look at the bigger picture. Relatively speaking, this jump is only a fraction of the ground needing to be recovered from CLOV’s downtrend.
June 8th was the height of the short squeeze craze, with Reddit traders sending the value up to $22 before a massive sell-off led to a drop to $13.85 today. The gains we saw today come from discussions surrounding an SEC filing by the company acknowledging the possibility of a squeeze. Aside from the short squeeze drama, Clover's product is interesting. It uses data and machine learning to assist physicians to make better decisions when they are diagnosing. The company works with 2K physicians so far. It also uses the same data and AI technology to provide a more accurate and less costly Medicare Advantage health insurance plan in 34 countries and has about 60K users. Of course, the market opportunity in the U.S. The Medicare market is quite large. And, Clover's plan is currently addressing the needs of only 3 million patients. This means there is a large market opportunity, and at the same time, it means Clover still has a lot of work to do to grow and expand its share in the market. With 2K doctors and 60K Medicare Advantage members, it almost feels it was too early for Clover to go public and it still needed more time to establish its business. But, I guess, that's what SPAC mergers are for. You go public and get access to capital much sooner than a traditional IPO. For me, it just feels too early to assume Clover can take over shares from the likes of UnitedHealth (UNH). If it does, it would be an excellent investment for a long time. I rather wait a bit to let Clover grow a bit more before jumping in. WANT TO RECIEVE THIS DAILY STOCK MARKET RECAP REPORT IN YOUR MAILBOX?
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