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Uber Share Price vs. Uber Service: The Truth About Big Companies, Popular Products, and Dying Stocks

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There seems to be so much confusion around the Uber IPO, Uber share prices, and Uber service…

The company’s popular around the globe, right? So why isn’t the stock soaring?

Let’s talk about 2019…

This year, a lot of well-known, popular companies had IPOs — Uber, Slack, and Peloton. These companies produce some of the public’s favorite products … but their stocks are complete garbage.

And all of them have underperformed. And traders still ask, “Is now the time to buy?” Let’s look at these ‘hot’ IPOs and Uber share prices to better understand why these stocks aren’t great for small accounts.

Don’t Fall in Love With a Product

Companies continuously produce new and improved products for the public to love. Once the public bites, media outlets jump on and overhype the companies. The results are huge overvaluations, and it just sets up stocks and traders for disappointment.

Just because a company makes a great product doesn’t mean the company itself is good. There can be a ton of things wrong with a company … But people will overlook huge red flags if they love a specific product. So they look for the right time to jump in.

And as these overvalued companies start to fade, that question keeps popping up: “Is now the time to buy?”

Dip buying on large companies isn’t the same as my dip-buy pattern. It’s challenging to know where the bottom actually is with larger companies. The price could continue to fall for months, like Uber share prices. Let’s check out some recent examples.

Slack Technologies, Inc. (NYSE: WORK)

uber share price vs. uber service: the truth about big companies, popular products, and dying stocks
WORK Chart: 1-year, daily candle — chart courtesy of StocksToTrade.com

Since its June IPO, WORK has basically gone straight down. Although it didn’t dump following its IPO, the stock has consistently declined for months. Specifically, it’s dropped roughly 10% every month since the IPO or nearly 50% from its highs.

I can’t tell you how many traders, investors, advisors, and articles I’ve seen calling every one of the dips the bottom. Like when it dropped from $42 to the $30s, according to the financial media, this was a good dip to buy.

And again, when it dipped from $35 to $31, people said it was absolute panic. They thought that was the bottom … only it continued to drop further.

People thought it was an excellent time to buy when WORK dumped to new lows thinking, “Okay … this is down from $42 to $26. This 100% has to be the bottom.

That mindset is a slippery slope. I always follow rule #1 and cut losses quickly. I don’t hold and hope. Anyone who believed in WORK as a company and bought at the “bottom” lost a lot of money.

Don’t get me wrong, I like Slack’s product. I know a lot of people who like Slack and use it every day. But you can’t judge a stock based on a product alone. You have to understand the company’s fundamentals. And even then, these big companies may not be the best investment. That’s just a small piece of the puzzle.

Uber Technologies, Inc. (NYSE: UBER)

Look at Uber share prices and you’ll see another bad IPO. So why is the stock so bad when so many people around the world use its service?

The stock’s down nearly 50% because they have a lot of issues with their cost structure, growth, management, and company culture. I mean, they have endless problems. Uber’s share prices and stock chart speak volumes.

uber share price vs. uber service: the truth about big companies, popular products, and dying stocks
UBER Chart: 1-year, daily candle — chart courtesy of StocksToTrade.com

But if you listen to mainstream media, Uber stock was the greatest buy of 2019. So many pundits and experts hyped UBER as a great buy. People and the media fell in love with the product…

… but they failed to look at all of Uber’s underlying issues. That’s a huge mistake.

Again, I love Uber’s product and will continue to use it. I don’t want to see Uber fail — I’m merely being realistic. Big companies with popular products usually aren’t the best investments.

None of my millionaire and six-figure students made their profits investing in these large, overvalued companies. They used predictable and repeatable patterns like the ones I teach in my Trading Challenge.

Peloton Interactive, Inc. (NASDAQ: PTON)

Uber and Slack aren’t the only failures. This pattern happens every year with several companies. Peloton, the indoor cycling company, was supposed to be a hot IPO this fall.

But what really happened?

uber share price vs. uber service: the truth about big companies, popular products, and dying stocks
PTON Chart: 1-year, daily candle — chart courtesy of StocksToTrade.com

Not much. It dipped a little off its IPO price and has been chopping around. It’s nearly impossible to grow a small account with this price action. That’s why I only trade penny stocks.

Again, don’t confuse the stock and the product. Here’s one last example for you…

Celsius Holdings, Inc. (NASDAQ: CELH)

I drink Celsius. I think it’s a great pre-workout drink, kinda like a healthy energy drink. A lot of health-conscience fitness professionals recommend their product.

Theoretically, this should do very well. But, over the past two years, CELH has done nothing.

uber share price vs. uber service: the truth about big companies, popular products, and dying stocks
CELH Chart: 2-year, daily candle — chart courtesy of StocksToTrade.com

Even some of the world’s wealthiest people invested in Celsius, but it’s failed to perform. Li Ka-Shing, the world’s 30th richest person, is an investor who planned to bring the drink to Asia. Celsius should’ve been a big hit there. For whatever reason, it’s not taking off.

I can’t say this enough. Trading isn’t about the product or the quality of the company.

And if you’re trying to grow a small account, getting 10% growth a year (which is considered good on Wall Street) won’t help you much. What can work for your small account? Day trading penny stocks.

Need a place to start? Check out my free penny stock course here.

Stay Out of Dying Stocks

uber share price vs. uber service: the truth about big companies, popular products, and dying stocks
© 2019 Millionaire Media, LLC

You can’t hold and hope. Well … you can, but it’s not a strategy, and it doesn’t work.

I hate seeing traders fail. Trust me, I personally love a lot of the products these companies have created. I even use a lot of them, but that’s not enough for me to trade these tickers.

If trading has taught me anything, it’s that the stock market will never value a company based on people’s reaction to the product or service. I know people still think that’s possible because that’s maybe what happened in the market a few decades ago.

Unfortunately, after a 10+ year bull market, you can’t rely solely on a popular product.

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For example, if you want a company’s stock to go up, the company will have to come out with new products. Especially with big, multi-billion-dollar companies like Uber or Slack. Also, the product can’t be a fad, and the company also needs to be structurally sound. Even if a company has everything going for them, there’s no guarantee the company’s stock will spike.

I see this trend again and again. It’s challenging for people trying to get into the stock market. Many are busy and think…

“Hey … I just want to invest. I want to invest in what I know!”

That’s a popular adage in the market, “invest in what you know.” But people take it too literally. And sadly, it’s not that simple. People like to oversimplify things.

Popular Products, Good Companies

I’m not saying this strategy never works — sometimes it does. Starbucks is near its highs. Sometimes, people love the product and the stock, like Chipotle.

Chipotle had some food safety issues, and the stock got crushed 50%. But the company is solid, and people continue to love its product. Now it’s right back at all-time highs.

uber share price vs. uber service: the truth about big companies, popular products, and dying stocks
CMG Chart: 2-year, daily candle — chart courtesy of StocksToTrade.com

But there’s no discernible pattern with these big companies.

Nike (NYSE: NKE) is near its highs, but you don’t know what will happen next. A lot of people love and use Twitter (NYSE: TWTR) … but it’s been very choppy over the last two years. A huge portion of the business world uses Microsoft (NASDAQ: MSFT), which just hit all-time highs as of this writing. There are just too many factors to consider.

The Reality of Wall Street

uber share price vs. uber service: the truth about big companies, popular products, and dying stocks
© 2019 Millionaire Media, LLC

You can’t guess a company’s value solely based on personal experience. These simple assumptions don’t make for smart, self-sufficient trading.

Let’s say you pick your 10 favorite products and buy the stocks. Maybe you’d get lucky and buy the next Microsoft. But more times than not, you won’t grow your account that way.

If you look at Uber share prices now — and you bought in on day one — you probably already know this lesson firsthand.

Learn from that experience. Learn from my experience. Focus on how you can be a smarter trader and adapt to the market. That’s exactly what I teach my students in my Trading Challenge. Apply today.

Learn patterns like the ones I explain in my How To Make Millions DVD. These penny stock patterns are far less talked about and less counterintuitive.

What do you think about ‘hot’ IPOs? I love to hear from you!

The post Uber Share Price vs. Uber Service: The Truth About Big Companies, Popular Products, and Dying Stocks appeared first on Timothy Sykes.



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Youthful Canadians: $10,000 in Your TFSA Today Can Turn Into $1,791,931

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Young Canadians, you have the greatest investment advantage of all — the power of time. There is also the Tax-Free Savings Account (TFSA), arguably the best investment tool you have to help you grow your money. All your dividends, interest, and capital gains will not be taxed inside your account.

When combining the power of time with your TFSA, you can have astonishing growth in the long term. But it’s hard to see how this works, so let’s go through some examples.

Why the TFSA is so great

Here’s an illustration of why the TFSA is so great. Suppose you have two investment accounts. One of them is your TFSA; the other is a taxable account. Now imagine that you invest $10,000 in each of the accounts today, with an annual rate of return of 7% and an income tax rate of 30%.

By the end of 40 years, your taxable account will be worth $67,767. What do you think your TFSA will be worth? It will be worth $149,745. This is a huge difference, over double the amount of the taxable account, just due to taxes. This highlights the power of compounding interest and the benefits of starting to invest young.

Build massive wealth in your TFSA

Let’s take a look at how holding a stock like Fortis (TSX:FTS)(NYSE:FTS) can build enormous wealth in your TFSA.

Fortis, an electricity and natural gas distribution utility company, is a top Canadian TSX stock.

Fortis is part of the utility sector, which is defensive in times of recession and a dependable dividend payer. Companies that produce electricity and deliver natural gas are among the safest investment choices, as demand is relatively constant.

Fortis earns 99% of its revenue from regulated operations, therefore cash flows are stable and somewhat predictable. The business model offsets the risk. Demand for electricity and natural gas will not go away, even in times of recession.

Fortis is also one of two Canadian utility companies with the longest record of consecutive dividend increases, sitting at almost a half-century of 47 years. The stock pays a dividend of 3.65%, with a low payout ratio of 49.59%.

Had you invested $10,000 in Fortis 20 years ago, it would be worth $134,196 today, with dividends reinvested. This equals a 13.85% return per year, or about 13 times as much.

If you invest $10,000 in Fortis for the next 40 years instead of 20, and annual returns hold constant at 13.85%, it would be worth an insane $1,791,931, or 179 times as much as the initial investment!

These high returns are not guaranteed to repeat for the next 40 years, of course, but it gives you a good idea of how investing young can affect your investment outcomes.

Conclusion

If you’re young and earning money, start investing some of it in your TFSA. Buy great investments like Fortis stock, and sit back, relax, and watch the dividends roll in while you are saving up for retirement. You could be surprised, and that $10,000 that you invest today could be worth millions by the time you retire.

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Fool contributor Christopher Liew has no position in any of the stocks mentioned.



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Should Shareholders of This 1 Top Canadian Banking Stock Be Worried?

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With the earnings season back in full swing, Canada’s Big Five stirred up a lot of excitement with the release of the fourth-quarter fiscal 2019 results. The Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is leading the charge with the release of its earnings report in the past week.

The bank posted remarkable earnings of $2.23 billion in Q4 2019 – far more than the expectations of analysts and the $2.17 billion reported in the same period last year.

Decent results

Scotiabank’s Canadian market segment posted earnings of $1.14 billion in the latest quarter. At the same time, the revenue for domestic operations increased by 4% to reach $3.57 billion. Residential mortgages, personal loans, and overall loan growth played an essential role in the surge in domestic operations.

As far as international operations are concerned, BNS has a diversified portfolio that can help it against any slowdown in domestic markets. The Pacific Alliance nations include Columbia, Chile, Mexico, and Peru.

The sector saw substantial gains in the past quarter, with earnings amounting to $823 billion. The bank’s profits in Chile, alone, climbed up by 25% in Q4 2019.

Cause for worry

The Bank of Nova Scotia’s Latin American operations accounts for a fifth of its net income. You can consider it an integral part of the company’s overall performance.

A significant presence in the Pacific Alliance nations shields BNS from domestic market downturns. However, it doesn’t account for any issues in operations in Latin America.

Geopolitical situations have a significant role in affecting any company’s value, mainly if it operates in a troublesome region. The unrest in Latin America continues to increase with civil unrest, spreading across Ecuador and then Chile. There are concerns that the disorder can extend as far as the third-largest economy in the region, Columbia.

BNS has a significant presence in both Columbia and Chile, and there’s reason to believe that continued unrest in both countries can affect Scotiabank’s performance.

The world’s largest copper producers

The country is the world’s largest copper producer. Chile’s finance minister has warned that the civil unrest in the country can adversely impact the country’s GDP growth to fall to as low as 2% every year from 2.6%. It could become a worry for the Bank of Nova Scotia.

A key factor for the success of a bank in any market segment is the performance of the regional economy. Chile accounted for 5% of BNS’s overall net adjusted income in Q4, 2019. If the GDP growth falls, it can cause a decline in Scotiabank’s performance moving forward.

Foolish takeaway

Scotiabank’s performance in the recent quarter exhibit positive signs for the bank and shareholders. The increasing unrest in its primary market segments in Latin America could create problems for the bank, however.

A presence in Chile, Columbia, Peru, and Mexico was built over the past two decades to protect the bank from a recession in domestic operations.

Between the civil unrest potentially having a profound impact on economic growth and a downturn in local operations, BNS shareholders, might have something to worry about in the coming few years.

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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA. Bank of Nova Scotia is a recommendation of Stock Advisor Canada.



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November 2019: MoneyWorks4me Outlook

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Review

Nifty Total Return Index (Nifty including dividends) earned ~12% Year to date Nov’19 and ~15% CAGR in the last 3 years from demonetization lows.

Nifty continues to remain steady thanks to a handful of stocks making all-time highs while the rest of the market is at 52-week lows or even 3-year lows. This has led to underperformance for most advisors and MFs.

Overall the sentiment remained negative due to no uptick from festive demand. The economy remains sluggish due to credit squeeze, lack of employment growth and no increase in demand. 

Outlook

As on date, the average upside of our coverage universe is likely to be less than 10% CAGR over the next 3 years. Given quality companies are trading at steep price multiples & our coverage mostly has quality companies, expensive valuation is getting reflected in average upside potential too.

Just a handful of companies are delivering moderate earning growth due to slow economic growth. These companies are enjoying high valuation as more and more investors are chasing them.

4 out of 5 stocks reported below 10% growth and but arrested operating profit as raw material costs were favorable in general.

Some pockets of the market like consumer staples, consumer discretionary and now insurance and AMCs are trading at stretched valuation.

As consumption acts like defensive, it is natural that consumer stocks were sought over economically sensitive stocks. Temporary problems in NBFCs and smaller private banks led to money chasing insurance and AMC.

We expect below-average returns from these baskets over the next 3 years even if earnings growth is good. Starting valuation plays an important role in long term returns.

Barring a few, auto companies may have run ahead of their valuation due to positive sentiments from festive period sales.

We will be reducing exposure to stocks that are not showing signs of improvement in the near term due to economy slowdown or company-specific issues.

Even if the overall market doesn’t look cheap, we don’t mind buying stocks with low valuation and good future prospects. 

We are looking at companies that have good earning triggers over the next 2 years as we are not certain whether broad-based recovery will happen immediately.

Incrementally we are deploying funds in companies that have individual stories rather than economy sensitive.

We are investing in companies i) coming out of sector consolidation, or ii) introducing new products, or iii) commissioning new capacities or iv) executing the order in hand.

These can help us sail through the current environment and generate above-average returns.

An investor can consider investing in value and high dividend yield stocks like Infra & Infra-related companies like capital goods, high-quality PSUscorporate banks, pharmaceuticals, and select NBFCs.

Incrementally consider investing in stocks that show promise of better growth over the medium term from company-specific triggers discussed above.

We have included stocks meeting the above criteria with Green Flag in our “Stocks in Buy Zone”.

We are also evaluating ‘Credit Risk funds’ as they might have become cheap, due to herd’s negativity, even after considering the risks they carry.

If we find any merit, we will share our recommendations and analysis with our subscribers. Maybe the aggressive risk profile investors would be interested.

We are still working on it, and not in hurry to board the bus as they won’t be moving up in a hurry. We will be waiting for better liquidity conditions before jumping into Credit Risk funds.

Few advisors are recommending small and mid-cap companies as they have seen a free fall in stock prices. However, we believe that small and mid-cap are not cheap yet to make risk-adjusted returns over an entire cycle.

Growth in small-cap stocks is poorer than large-cap stocks as they can’t wither the storm.

The price fall doesn’t indicate anything about valuation. As of now, less than 33% of small and mid-cap companies have reported more than 10% net sales growth.

Even if they rise from here, long term returns won’t be commensurate for the risk one takes investing in small and mid-cap companies today.

SIP product may work in such a situation but we recommend caution on lump-sum purchases till we don’t see broad-based earnings recovery in mid and small-cap companies.

Risks

India

GDP Slowdown

GDP growth averaged around 4.75% in the first half of FY20. This was the lowest in almost 8 years. One will also notice that the slowdown is entrenched from large size purchases to small ticket items.

Private investment grew at only 1 percent. Nominal GDP growth fell to a new low of 6.1 percent. As we know that equity returns have strong co-relation to the nominal GDP growth rate, the equity market has been underperforming.

Usually, slowdown stays for 2-4 quarters after which the low base effect kicks in thereby leading to above-average growth and sentiment improvement. So it is a wait and watches mode to see how it pans out.

We expect sectors like Agri, rural-based economy and small ticket goods companies to show the first signs of revival. These are the purchases that won’t be postponed for long.

Only post that we would see some growth recovery in companies selling large items. Housing, cars and commercial vehicles will have a lag effect.

Out of the four critical components of GDP growth i) consumption ii) private & housing capital investment iii) exports and iv) government capital investment. If we observe recent data, all the four pockets have slowed synchronously.

Prior to 2019, consumption and government capital investment were growing but that too have slowed down substantially due to i) liquidity issues in the financial system, ii) government’s control on expenditures to meet fiscal deficit target and iii) drop in state government’s revenue from the slow growth of past few years.

Government’s role

There are some obvious bottlenecks like existing capacities in bankruptcy court, real estate starved of capital even for viable projects, etc that have affected normal business sentiment.

Besides, delay in the release of payments from government organizations and tax disputes with tax authorities are causing a strain on businessmen. If these issues get relief temporarily, the dwindling sentiment can be arrested.

To set India on a growth trajectory in the future, the government needs to take large structural measures.

Source: MoneyWorks4me analyst team

The consensus expects the government to increase its borrowing (/breach it fiscal deficit target) and use the proceeds to i) spend heavily on infrastructure, ii) lend to low return but productive projects and iii) bring down personal income taxes.

This would lead to a rise in salaries/wages and a rise in employment. The intention is to increase spending power and ultimately pick up in consumption like cars/housing/renovation.

Rising demand would encourage the companies to expand their capacities and they would see a rise in sales/employment. This will start an economic cycle that will become self-sustaining.

The government can again get back its funds via taxes/GST on increased sales and profitability of corporates.

Hon. FM Nirmala Sitaraman announced cuts in corporate tax to lure corporates to invest in new capacities. But with so much existing capacity in bankruptcy court with hardly any demand, this incentive is not sufficient to kick off the animal spirits.

Recent announcements indicate that developed market companies are likely to make investments (also called, Foreign direct investment FDI) with the government’s assurance of good infrastructure facility, lower tax rate, and easy financing.

This could help to boost employment, however, the quantum of the same is unknown.

The government is proactively fixing some of the bottlenecks that led to a drop in business and consumer sentiments like release of payments, real estate slowdown and NBFC crisis; however, the timeline of the resolution is uncertain.

Some customers did ask us, “shall we redeem our funds from the market and wait for a better price”. Very valid question but isn’t this question obviously asked by everyone?

If we see share price data from 2018, more than 80% of the stocks are at least 25% below their peak price. This has already factored in a slowdown.

If the slowdown is severe and extended there could be more drop but no so much in stocks that have already fallen.

November 2019 MW4ME Outlook 1

We have written in our previous blog that how GDP and the stock markets do not move in sync. Often market return leads or lags GDP movement.

We can’t time either GDP growth trajectory nor can we time the markets. We can wait for stocks to get cheaper but once they are cheaper we find no sense in avoiding stocks just to save ourselves from the temporary drop (10-20%) in value.

Equity is meant to be volatile, we can’t expect linear returns whatsoever.

Opportunity for long term investors

Markets may remain subdued until the time earnings growth kick in. But this doesn’t mean stocks won’t rise. Those that are underpriced can rebound even of expectation that the worst scenario is behind us.

We are seeing a lot of NBFCs and banks recovering as the government’s push to resolve the liquidity crisis has brought some hope.

Near term uncertainty in structural growth, story spells an opportunity for long term investors. Stocks are beaten down from short term fears.

We do not find any merit in second-guessing what’s going to happen in the next 6months-1year. We leave this field open for speculators, fear mongers, and punters.

We also recommended sticking to one style of investing and not hop one style to another just because is it not working temporarily.

We are getting persistent queries on richly valued consumer stocks, we recommend to avoid this pocket and focus on reasonably valued companies.

We are managing only long term money and predicting near term events is futile. Asset allocation has taken care of several such uncertainties like we have gold almost 5% in our client’s portfolio which has performed well thereby protecting the downside.

Beyond this, tinkering asset allocation will only reduce long term returns thereby missing one’s target corpus. Equity returns often give surprises, we wish to stay invested to enjoy such surprises.

MoneyWorks4me Outlook:

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