I heard of these 3 stocks from Chicken Genius on YouTube and was particularly interested in them including Tesla which he has a huge portion of his portfolio.
***Disclaimer: I have no position in any of the stocks mentioned in this
post and I am not advocating any buy positions for anyone. I am writing and listing information to understand more about them. Do your own due diligence
before initiating any positions.***
So I like to do some simple analysis to compare them and see how they are with Square (SQ) being the first.
SQUARE (SQ)
- Business Model
Square is an American financial service, mobile payment and provides ability to business to accept debit or credit card payments. The company is named Square as the payment device created is a square sized card reader.
So you can use their services to accept payments or appointments physically and online where they provide different services.
They also have a cash app which allows businesses to easily move their money around for payments ot transfers, the app is also to support bitcoin trading. There are no monthly fees and Square provides its magnetic stripe card readers to users for free. The Square app can also be downloaded free from App and Google play store.
They charge different amounts for card-present payments, Square gets 2.6% + 10¢ per transaction and for card not present payments (online), Square gets 3.5% + 15¢ and 2.9% + 30¢ if there is a invoice or through Square online app.
Square was co-founded by Jack Dorsey, Jim McKelvey and Tristan O’Tierney. They have done a number of acquisitions and also received a number of funding and GIC has also provided funding to them.
- Financials
For 2020 so far, Square has had a net income loss of 106 million. It should be noted that the income loss included a significant increase in reserves for transaction and loan losses. They also bought over Caviar, a startup that delivers high end restaurant meals.
Total net revenue and gross profit for them has been increasing year on year. Cash app has been a huge revenue for them, due to the virus situation, in-person payments was down but supplemented by online payments and egift cards.
- Overall outlook for business
More online stores popping up and payments is definitely one of the essential set up. I like Square as their business covers many aspects in terms of payment, covering both physical and online presence. Besides being in the payment space, they have also branched out to provide business solutions and services.
They are working to be an all-rounder covering every aspect that a business owner will face regarding their transactions and it is a very good coverage.
Below shows the performance of S&P 500 versus the performance of Square.
Part 2 - Illumina (ILMN) coming soon!
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References:
https://s21.q4cdn.com/114365585/files/doc_financials/2020/Q1/2020-Q1-Shareholder-Letter-Square.pdf
https://en.wikipedia.org/wiki/Square,_Inc.
These are so called high growth stocks. Their outperformance comes at the expense of greater volatility. Chart of Square highlights this very obviously -- much bigger moves both on the upside & downside.
ReplyDeleteBut very difficult to predict which specific companies will survive & thrive. E.g. apple, Microsoft, Amazon all crashed -80% to -90% before in their earlier years (sometimes more than once!). And thousands of other high fliers have zoomed up & then crashed & disappeared.
So I keep it simple by just using QQQ (a nasdaq 100 etf). There are many other etfs in sub-sectors like internet services, e-commerce, biotech, semiconductors, AI, robotics, EV, autonomous transportation etc etc. Too complicated for me. These are mainly to take speculative bets or overweight on certain industries.
Even for QQQ, I keep it no bigger than 1/3 of my overall portfolio.
Most of the US millennial millionaire FIRE'ers in the last few years achieved it by having large portions in these etfs. Hopefully they didn't panic sell during the covid crash (which has been relatively mild so far compared to previous economic crises).
Hey! Thanks for highlighting the volatility of these stocks. Understand that if there is a chance for high growth, there is definitely chance for the down side too.
DeleteOur portfolios should limit the amount of risks exposed so that we can have a peace of mind during violatile periods. Thanks for explaining and sharing :)
Tbh,these stocks are trading at multiples that are beyond your thinking. I only moved to the US market after I get familiarized with SGX.
ReplyDeleteOf course, high risks come with high return.