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20 Stocks That Could Double Your Money in 2020

It might be hard to believe, but in just seven weeks we’ll be saying our goodbyes to 2019. Although investors have endured a couple of short-lived rough patches, it’s been an exceptionally strong year for the stock market. The broad-based S&P 500 is up 23%, the iconic Dow Jones Industrial Average has gained 18%, and the tech-heavy Nasdaq Composite has returned almost 27%.

How good are these returns? Well, let’s just say that the S&P 500, inclusive of dividends and when adjusted for inflation, has historically returned 7% annually, with the Dow closer to 5.7% a year, on average, over its 123-year history.

And it’s not just these indexes that stand out. Of companies with a market cap of $300 million or larger, 124 have gained at least 100% year to date, through Nov. 5. Just because the calendar is about to change over to a new year doesn’t mean this optimism can’t carry over.

If you’re looking for a number of intriguing investment ideas for next year, consider these 20 stocks as possible candidates to double your money in 2020.

1. Innovative Industrial Properties

Yes, cannabis real estate investment trusts (REIT) are a real thing, and they can be quite lucrative! Innovative Industrial Properties (NYSE:IIPR), the best-known marijuana REIT on Wall Street, is already profitable and growing at a lightning-quick pace. After beginning 2019 with 11 medical marijuana-growing and processing properties in its portfolio, it now owns 38 properties in 13 states that span 2.8 million square feet of rentable space.

The beauty of Innovative industrial Properties’ business model is that it creates highly predictable cash flow. The company’s weighted-average remaining lease term is 15.6 years, and its average current yield on its $403.3 million in invested capital is a cool 13.8%. At this rate, it’ll net a complete payback on its invested capital in just over five years.

As long as marijuana remains illicit at the federal level in the U.S., access to capital will be dicey for cannabis cultivators. That makes Innovative Industrial’s acquisition-and-lease model a veritable green rush gold mine for 2020.

A user pinning interests to a virtual board while using a tablet.

Image source: Pinterest.

2. Pinterest

If you missed out on the Facebook IPO and have been kicking yourself for the past seven years, don’t fret. Social media photo-sharing site Pinterest (NYSE:PINS), which allows users to create their own virtual boards based on their interests, could be your second chance to profit.

Like most brand-name social media sites, Pinterest has seen exceptionally strong user growth. Monthly active user (MAU) count rose to 322 million by the end of September, up 71 million from the prior-year period. What’s most notable about this growth is that it’s mostly coming from international markets (38% MAU growth vs. 8% in the U.S.). Even though ad-based revenue is minimal in foreign markets, it nevertheless demonstrates that Pinterest has global appeal.

The company is also making serious strides to monetize these users by boosting average revenue per user (ARPU) globally. In recent quarters, Pinterest has simplified its ad system for smaller businesses, focused its efforts on boosting ARPU in overseas markets, and pushed for video, which has a much higher repost rate than static images. These efforts appear to be paying early dividends, with international ARPU more the doubling to $0.13 from $0.06 over the past year.

With Pinterest forecast to push into recurring profitability next year, a doubling of its stock is certainly not out of the question.

A biotech lab researcher using multiple pipettes to fill test tubes.

Image source: Getty Images.

3. Intercept Pharmaceuticals

Never overlook a first-mover advantage — especially when it pertains to a $35 billion indication!

Nonalcoholic steatohepatitis (NASH) is a liver disease that affects between 2% and 5% of all U.S. adults, has no cure or Food and Drug Administration (FDA)-approved treatments, and is expected to be the leading cause of liver transplants by the midpoint of the next decade. And according to Wall Street, it’s a $35 billion untapped disease.

In late September, Intercept Pharmaceuticals (NASDAQ:ICPT) submitted a new drug application for Ocaliva, a treatment for NASH. While the high dose of Ocaliva did lead to an unsettling number of pruritus (itching)-based dropouts in late-stage studies, it also produced a statistically significant reduction in liver fibrosis levels, relative to baseline and the placebo, without a worsening in NASH at the 18-month mark. Even if Intercept’s Ocaliva only secures a small subset of the NASH market, it has the potential, if approved by the FDA, to quickly earn blockbuster status of $1 billion or more in annual sales. Suffice it to say that 2020 could be a banner year for this midcap biotech stock.

A Redfin for sale sign on the front lawn of a home, with a black sold sign attached.

Image source: Redfin.

4. Redfin

With interest rates and mortgage rates on the rise throughout much of 2018, it looked as if the fun had come to an end for a hot housing market. But following a trio of Federal Reserve rate cuts and a big drop in Treasury yields, the housing industry is hotter than it’s been in more than a year. That, along with low mortgage rates, could be the perfect recipe for online real estate brokerage company Redfin (NASDAQ:RDFN) to double in 2020.

Unlike some of the companies you’ll see on this list, profitability isn’t a near-term priority for Redfin. Rather, scaling its tech-driven platform and taking real estate service market share are its primary goals. One way Redfin is doing this is by undercutting traditional real estate agents with its salaried agents. With a listing fee of just 1%, Redfin cuts out costs that generally irritate buyers and sellers.

More so, Redfin is looking to infiltrate the high-margin servicing business to make the buying and selling experience less of a hassle. It’s expanding nationally and consolidating tasks, such as title, appraisal, and home inspection, into a single package that consumers can designate the company to handle, thereby removing a key buying or selling objection. Perhaps it’s no surprise that this real estate disruptor grew sales by 39% in the second quarter and saw its market share rise 11 basis points to 0.94% of U.S. existing home sales from Q1 2019.

Two smiling young women texting on their smartphones.

Image source: Getty Images.

5. Meet Group

The online dating industry is worth, by some accounts, $3 billion in annual revenue, and Meet Group (NASDAQ:MEET), which specializes in livestreaming and social media interaction (including online dating), is a company that growth and value investors should be swiping right on.

Whereas most of the tech world focuses on bigger names with broader brand recognition, Meet Group’s mobile portfolio of apps, which includes MeetMe, Lovoo, Skout, Tagged, and Growl, has done an admirable job of growing the business. More specifically, the company’s laser focus on bolstering its video business is really paying dividends. During the second quarter, daily active video users increased to 892,000, representing 21% of total users where Live is available on their app. This is important given that video revenue per daily active user grew to $0.26 in Q2 2019 from $0.15 in the prior-year quarter.

Furthermore, Meet Group’s big spending on security enhancements is now in the rearview mirror, according to a third-quarter preliminary update. This mobile livestreaming site is growing at a double-digit rate, has a focus on high-margin video, and sports a forward price-to-earnings ratio of eight (yes, eight!). This multiple, and stock, could both easily double and still have room to run.

A prescription drug capsule with a boxing glove coming out of it that's knocking out a cancer cell.

Image source: Getty Images.

6. Exelixis

In all fairness, Exelixis (NASDAQ:EXEL) has had an incredible run on the coattails of lead drug Cabometyx. Following its approval to treat second-line renal cell carcinoma (RCC), and first-line RCC, the company’s share price rose from $4 to $32 between Jan. 2016 and Jan. 2018. Now, back at $16, Wall Street is wondering, what’s next?

In the early months of 2020, Exelixis and partner Bristol-Myers Squibb may have that answer. The duo are expected to reveal results from the CheckMate 9ER late-stage trial that combines Cabometyx with Bristol-Myers’ blockbuster immunotherapy Opdivo, which also happens to be an RCC rival. If this combination therapy dazzles, the duo could snag an even greater share of the RCC market, further boosting Cabometyx’s case as a blockbuster drug.

Investors should also know that Exelixis offers a rare value proposition in the highly competitive and often money-losing biotech space. This is a company offering double-digit sales growth, a forward P/E of 16, and a PEG ratio of a minuscule 0.36. With patent cliffs remaining challenging for Big Pharma, Exelixis, in addition to potentially notching a win with CheckMate 9ER, might find itself as a buyout candidate in 2020.

A person inserting a credit card into a reader in a retail store.

Image source: Getty Images.

7. StoneCo

Although Warren Buffett is best known for buying value stocks, the fastest-growing stock in Buffett’s portfolio (at least from a revenue perspective), StoneCo (NASDAQ:STNE), could be primed to double in 2020.

StoneCo isn’t exactly a household name, but this $10 billion payment solutions and business management software developer is finding plenty of interest for its fintech offerings in Brazil. During the second quarter, which StoneCo reported in mid-August, the company saw total payment volume for its merchants rise 61% year over year, while active clients increased 80% to 360,200 from the prior-year period. Since Brazil remains largely underbanked, there’s a long-tail opportunity for StoneCo to make its mark with small-and-medium-sized businesses in the country.

StoneCo is also investing heavily into its software subscription model. On a sequential quarterly basis, subscribed clients more than doubled to approximately 70,000 in Q2 from 32,000 in Q1 2019. While StoneCo won’t appear cheap in 2020 due to its aggressive reinvestment strategy, its Wall Street-estimated top-line growth rate of 38% may have enough firepower to double this stock.

The facade of the Planet 13 SuperStore in Las Vegas, Nevada.

Image source: Planet 13.

8. Planet 13 Holdings

Although legalizing marijuana across the U.S. would make life easier for vertically integrated multistate operators (MSO), it’s not exactly a problem for Planet 13 Holdings (OTC:PLNHF), which approaches its seed-to-sale model a bit differently than other MSOs.

Planet 13 is all about creating the most unique experience imaginable for cannabis consumers. The company’s SuperStore in Las Vegas, Nevada, just west of the Strip, spans 112,000 square feet and will feature a pizzeria, coffee shop, events center, and consumer-facing processing site. At 112,000 square feet, it’s the largest dispensary in the U.S., and is actually 7,000 square feet bigger than the average Walmart. The company is also developing a second location that’ll open next year in Santa Ana, Calif., just minutes from Disneyland.

Aside from its sheer size and selection, Planet 13’s transparency and technology stand out. The company is utilizing self-pay kiosks in its stores to facilitate the payment process, and provides monthly updates on foot traffic and average paying ticket size for investors. Maybe most striking, Planet 13 has about 10% of Nevada’s entire cannabis market share. It could have its investors seeing green in 2020.

An up-close view of a shiny one ounce silver ingot.

Image source: Getty Images.

9. First Majestic Silver

Precious-metal mining isn’t exactly known as a high-growth industry. However, following years of conservative spending, and after witnessing gold and silver spot prices soar in 2019, miners like First Majestic Silver (NYSE:AG) are suddenly sitting pretty.

Even before gold and silver moved higher by a double-digit percentage in response to falling U.S. Treasury yields, First Majestic was making waves. In May 2018, it closed a deal to acquire Primero Mining and its flagship San Dimas mine. Between incorporating the low-cost San Dimas into its portfolio, and looking at ways to bolster its existing assets (e.g., modifying the roasting circuit at its La Encantada mine to add up to 1.5 million ounces of silver production per year), First Majestic has seen its silver equivalent ounce (SEO) production grow from 16.2 million ounces in 2017 to perhaps north of 26 million SEO in 2019.

First Majestic should also benefit from a return to historic norms in the gold-to-silver ratio (i.e., the amount of silver it takes to buy one ounce of gold). Historically, the gold-to-silver ratio has hovered around 65, but is currently at closer to 84. This would suggest silver has the potential to outperform gold in the intermediate-term; and no mining company has greater exposure to silver as a percentage of total revenue than First Majestic Silver.

A veterinarian with a stethoscope around her neck examining a small white dog.

Image source: Getty Images.

10. Trupanion

According to the American Pet Products Association, an estimated $75.4 billion will be spent on our pets in 2019, with $19 billion alone on veterinary care. Given that 63.4 million U.S. households have a dog, and 42.7 million have a cat, the opportunity for the pet insurance market is huge. That’s where Trupanion (NASDAQ:TRUP) comes in.

Trupanion is a provider of lifelong insurance policies for cats and dogs. Like any insurance company, Trupanion is built for long-term profitability. Most insurers offer predictable cash flow and have exceptional pricing power, which is a necessity if they’re to cover claims. But Trupanion is going where few insurers have gone before. U.S. and Canadian pet insurance market penetration is just 1% and 2%, respectively, which is providing some learning curve bumps along the way, but also giving Trupanion an incredibly long runway to growth.

Trupanion is currently unprofitable, but it appears close to turning the corner to profitability. Sales grew by 26% in the second quarter, and are expected to romp higher by 20% in 2020, according to Wall Street. If the company continues to find success with referrals, it’s very possible it could surprise in the earnings column next year.

A hacker wearing black gloves who's typing on a keyboard.

Image source: Getty Images.

11. Ping Identity

What do you get when you combine some of the hottest tech trends into one company? None other than identity solutions provider Ping Identity (NYSE:PING), which recently IPO’d in September.

While there are plenty of cybersecurity providers, Ping’s uniqueness derives from its use of artificial intelligence and machine learning to attempt to identify users and computers as trusted. Being able to operate within the confines of traditional enterprise networks, or being tasked with securing cloud networks, Ping offers an assortment of products that should be able to meet the needs of small, medium, and large-scale businesses. Not surprisingly, it should be capable of double-digit sales growth in the near-term, like its peers.

What also can’t be overlooked in the fast-growing security space is that Ping’s valuation is a modest $1.3 billion. After being acquired by private equity firm Vista Equity for $600 million in 2016, Ping delivered a doubling of that value in three years, following its IPO. This demonstrates the potential of focused individual security, and makes it all the more likely that Ping Identity could be quickly scooped up by a larger rival.

A woman checking her blood glucose readings on a connected device.

Image source: Livongo Health.

12. Livongo Health

As you’ve probably caught on by now, this list of stocks that could double in 2020 is full of disruptors, and Livongo Health (NASDAQ:LVGO) certainly fits the bill.

Livongo is a developer of solutions that helps people change their health habits. By supplying testing kits that connect to smartphones, and utilizing data science, Livongo works to change the behavior of diabetics, and can also be used to assist patients with hypertension. Given that over 30 million people have diabetes (most being type 2 diabetics), and a number of these folks could use some serious help managing their symptoms, Livongo Health’s products are exactly the disruptor needed in this space.

According to the company’s second-quarter results, the number of clients in Livongo’s ecosystem nearly doubled on a year-over-year basis to 720, while the number of enrolled diabetes members did more than double to 192,934. More importantly, Livongo’s triple-digit sales growth rate cannot be overlooked. While profits are highly unlikely in 2020, a year of market-topping revenue growth is very possible.

An assortment of couch sectionals pushed together in a living room.

Image source: Lovesac.

13. Lovesac

When the calendar changes to 2020, relax, put your feet up, and let small-cap Lovesac (NASDAQ:LOVE) do the heavy lifting for your portfolio.

Lovesac, the home furnishings company that sells beanbag chairs, sectional couches, and a host of other in-home decorations, has struggled in 2019 amid trade-war concerns. It’s been hit hard by higher tariff costs, and that’s clearly brought investor worry to the forefront.

However, a quick look at Lovesac’s second-quarter operating results should relieve most worries. By passing along modest price hikes to consumers, as well as reducing its reliance on China from 75% to 44% of its manufacturing, the company has, in a very short time frame, reduced the impact of the trade war going forward.

What’s more, these price hikes don’t appear to be adversely impacting the company’s fast-growing and niche furnishings business. Lovesac reiterated full-year sales growth of 40% to 45%, with comparable store sales growth coming in at 40.7% in the second quarter, and noted that new customers and repeat clients are driving growth. Although profitability is still probably two years away, sales growth of at least 40%, with a price-to-sales ratio of right around 1, could be more than enough to send this stock rocketing higher.

A lab researcher in a white coat holding a vial of blood in his left hand while reading from a blue clipboard in his right hand.

Image source: Getty Images.

14. Amarin

The biotech industry is always a good bet for a volatility, and Ireland-based Amarin (NASDAQ:AMRN) might have a real shot to grow from a midcap to a large-cap valuation in 2020 thanks to its lead drug, Vasecpa.

Vascepa, a purified fish oil derivative, was approved by the FDA all the way back in 2012 to treat patients with severe hypertriglyceridemia (SHTG). But it’s not Vascepa’s potential in treating SHTG patients that’s got Wall Street excited. Rather, it’s a supplemental new drug application stemming from a five-year Harvard study in 8,179 people with milder (but still high) triglyceride levels. The results showed that Vascepa lowered the aggregate risk of heart attack, stroke, and death in these patients by 25%. In other words, if Vascepa were to be approved for an expanded label indication to reduce the risk of major adverse cardiovascular events, its potential pool of patients could grow tenfold, as would its sales potential.

Later this month, on Nov. 14, an AdCom meeting will take place to discuss Amarin’s marketing application for Vascepa, as well as to vote on whether or not the members of the committee favor approval. By January 2020, at the latest, Amarin should have the FDA’s official decision on Vascepa (the FDA isn’t required to follow the AdCom’s vote, but it often does). If I were a betting man, I’d count on positive reviews all around.

A large city canvased by blue dots, representative of a wirelessly connected society.

Image source: Getty Images.

15. CalAmp

In Aug. 2018, Bain & Co. predicted that the Internet of Things global market would more than double from $235 billion in spending to $520 billion in just four years’ time (between 2017 and 2021). That global opportunity is too lucrative to overlook for small-cap CalAmp (NASDAQ:CAMP).

CalAmp, which provides software and subscription-based services, as well as cloud platforms that support a connected economy, has been hurt in recent quarters by the trade war with China, as well as sales weakness in its Telematics segment that’s been tied to a few core customers. However, CalAmp has reduced its Telematics product sourcing from China to around 50% from 70% to 80% earlier in the year, thereby minimizing the pain it feels from the trade war. Also, a number of customers blamed for its sales slowdown in Telematics (e.g., Caterpillar) are on the cusp of ramping up production as upgrades are made from 3G to 4G.

As Telematics growth picks back up, the company has seen record sales from its software subscription segment. Sales rose 65% year over year in the latest quarter, and now account for a third of total quarterly revenue. In short, the CalAmp growth story is just getting started, and 2020 could feature some very favorable year-on-year comparisons.

A female physician high-fiving a young child sitting on her mother's lap.

Image source: Getty Images.

16. Aimmune Therapeutics

Another biotech stock with a potential first-mover advantage in 2020 is Aimmune Therapeutics (NASDAQ:AIMT).

Aimmune’s lead drug is Palforzia, an oral drug that’s designed to lessen the symptoms associated with peanut allergy in children and teens. There is no FDA drug currently approved to treat peanut allergy in adolescents, and an estimated 4% to 6% of all children in the U.S. have some form of allergy to peanuts.

Now, here’s the great news: Palforzia looked like a star in late-stage clinical trials. Patients aged 4 to 17 were administered increasingly larger doses of peanut protein during the study, and 67.2% taking Palforzia completed the study without needing to discontinue the trial. This compared to a mere 4% on the placebo who completed the trial.

More good news: Palforzia has already been given the thumbs up by the FDA’s Allergenic Products Advisory Committee. Even though the FDA isn’t required to follow the vote of its panel of experts, it does so more often than not. It appears likely that Palforzia will get a green light in January, and it could be on track for more than $470 million in annual sales (by Wall Street’s consensus) by 2022. With other treatments in development for egg and walnut allergies, Aimmune looks well on its way to carving its own niche in the biotech space, and potentially doubling its stock in 2020.

Oil and gas pipeline leading to storage tanks.

Image source: Getty Images.

17. Antero Midstream

Midstream is the unsung hero of the energy infrastructure space. While drillers retrieve fossil fuels and refiners process them, it’s midstream providers that are the essential middlemen providing transmission, storage, and a host of other services that ensure these products make it to refineries for processing. Antero Midstream (NYSE:AM) may be just one of many midstream operators in the U.S., but it also might hold the distinction of being the cheapest and most likely to rebound in 2020.

Antero Midstream acts as the middleman for Antero Resources, a producer of natural gas and natural gas liquids (NGL) operating out of the Marcellus Shale and Utica Shale region in the Appalachia. This region is known for its natural gas and NGL production, which is worth noting given that LNG demand in North America could quadruple between 2018 and 2030, according to estimates from the McKinsey Energy/Insights Global Energy perspective model. This should provide a solid foundation of fee-based revenue for Antero Midstream.

Antero Midstream also recently announced a $300 million share repurchase program, suggesting that its board feels its stock is too cheap. If fully executed, this share buyback would remove about 8% of the company’s outstanding shares, and it shouldn’t impact the company’s jaw-dropping, yet seemingly sustainable, 17% dividend yield. Including this payout, Antero Midstream could very well double next year.

A gloved individual holding a full vial and dropper of cannabinoid-rich liquid in front of a hemp plant.

Image source: Getty Images.

18. MediPharm Labs

Marijuana stocks throughout Canada have suffered through supply issues since day one of adult-use legalization more than one year ago. But one ancillary niche that should be immune to these struggles is extraction services. The company you’ll want to know in this space is MediPharm Labs (OTC:MEDIF).

Extraction-service providers like MediPharm take cannabis and hemp biomass and produce resins, distillates, concentrates, and targeted cannabinoids for their clients. These are all used in the creation of high-margin derivatives, such as edibles and infused beverages, which were just legalized in Canada on Oct. 17, and will hit dispensary shelves in a little over a month. Since derivatives offer much juicier margins than dried cannabis flower, demand for cannabis and hemp extraction services should remain strong.

What’s more, extraction providers like MediPharm often secure contracts ranging from 18-to-36 months, leading to highly predictable cash flow. With MediPharm’s Barrie, Ontario, processing facility eventually on its way to 500,000 kilos of annual processing potential, and the company already profitable, it would not be the least bit surprising if MediPharm doubled in 2020.

A woman opening up a personalized box of clothing.

Image source: Stitch Fix.

19. Stitch Fix

Even high growth stocks can hit a rough patch; just ask the shareholders of online apparel company Stitch Fix (NASDAQ:SFIX). Following poorly received fourth-quarter results and weaker-than-expected sales guidance for the first quarter, Stitch Fix is a lot closer to its 52-week low than 52-week high at this point. However, things could change in a big way in 2020.

For starters, Stitch Fix is a potential retail disruptor that can capitalize on consumers in two ways. First, there’s the subscription side of the business that includes a stylist who picks outfits and accessories out for customers, who then to decide to keep (buy) or return these items. Secondly, but more recently, Stitch Fix has also been finding success with its direct buy program, which allows its members to skip the stylist and purchase highly curated and personalized product directly off its website. The company believes this dual-growth approach will play a key role in revenue growth reacceleration. It’s worth noting that despite its fourth-quarter report being poorly received by Wall Street, active clients grew 18% to 3.2 million from the prior-year period.

Stitch Fix is also planning to expand its offerings to men and children, and would be expected to bolster advertising as these new lines roll out. The company pointed out in its most recent quarter that fiscal first-quarter sales guidance is weaker because it lifted its foot off the gas pedal with regard to advertising. That’s an easy fix that should have Stitch Fix mending its weakness pretty quickly in 2020.

A white prescription generic drug tablet with a dollar sign stamped on it.

Image source: Getty Images.

20. Teva Pharmaceutical Industries

Not every stock that doubles has to be growing at 20%, 30%, or more, per year. Sometimes, it just requires Wall Street and investors to readjust their outlook.

Brand-name and generic drug giant Teva Pharmaceutical Industries (NYSE:TEVA) has had a miserable go of things for nearly four years. A combination of generic-drug pricing weakness, opioid lawsuits, bribery allegations, high debt levels, and the shelving of its once-hefty dividend, have sunk Teva’s stock by almost 90%. But a renaissance of sorts may be on the horizon.

You see, Teva lost more than half of its value in 2019 after 44 U.S. states sued the company, and many of its related peers, over the manufacture and sale of opioids. However, Teva appears to be making progress on these lawsuits by offering free medicine to select states, and, more importantly, not having to outlay much of its precious cash. If these opioid suits are resolved, it’s not crazy to think Teva regains pretty much all of the ground it lost when they were announced.

At the same time, Teva’s turnaround specialist, CEO Kare Schulze, has reduced annual operating expenses by $3 billion and lowered net debt by $8 billion in a couple of years. Teva has the potential to really change some opinions in 2020, and that could lead to a doubling in its share price.

A man in a tie who's holding a stopwatch behind an ascending stack of coins.

Image source: Getty Images.

Don’t forget the most important “secret” to wealth creation

While it’s possible that many, or only a small number, of these 20 companies doubles next year, the important thing for investors to remember is that great ideas often take time to develop. The grandiose secret to wealth creation isn’t going to be found by day-trading or trying to time the market. Rather, it’s discovered by investing in high-quality businesses that you believe in, and allowing your investments to grow for five, 10, or even 20 years, if not longer.

It can be fun to predict next year’s top performers and potentially find yourself a proverbial gold mine, but don’t take your eyes off the horizon, which is where the big money is being made.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sean Williams owns shares of Exelixis, First Majestic Silver, Intercept Pharmaceuticals, and Teva Pharmaceutical Industries. The Motley Fool owns shares of and recommends Facebook, Livongo Health Inc, Pinterest, Stitch Fix, and Trupanion. The Motley Fool owns shares of Stoneco LTD. The Motley Fool recommends CalAmp, Exelixis, Innovative Industrial Properties, Intercept Pharmaceuticals, and Redfin. The Motley Fool has a disclosure policy.

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Blackstone To Buy Russian Billionaire’s Bumble Stake After Forbes Investigation Into His Companies

Russian billionaire Andrey Andreev will sell his majority stake in MagicLab, the company that owns online dating apps Bumble, Badoo and others, to private equity firm Blackstone Group in a deal that values the entire group at $3 billion, according to a statement issued Friday by Blackstone and MagicLab.

Andreev, who founded MagicLab, will step down as CEO of the company as part of the deal. Whitney Wolfe Herd, founder and CEO of Bumble, the dating app that markets itself as empowering women, will take over as CEO of the entire group. Before the news of this transaction, Forbes pegged Andreev’s net worth at $1.5 billion. Forbes estimates that the deal will boost Andreev’s net worth to $1.7 billion.

“My aim now is to ensure a smooth and successful transition before I embark on a new business venture in search of innovative leaders with new and exciting ideas,” Andreev said in a statement. “I wish MagicLab and Blackstone every success.”

Today In: Billionaires

In July, Forbes published an investigation into the work culture at Badoo’s London headquarters. Thirteen former employees described a work environment that was  toxic and misogynistic. After Forbes published the article, Andreev and MagicLab announced they would launch an internal investigation into the London office.

Wolfe Herd met Andreev in 2013 while she was an executive at dating app Tinder. Shortly after, she left Tinder and sued the company, alleging her ex-boss and ex-boyfriend Justin Mateen had sexual harassed her. The suit was confidentially settled for an estimated $1 million. She launched Bumble with funding and support from Andreev, at the end of 2014. Wolfe Herd is selling part of her stake in MagicLab to Blackstone as well, according to the Wall Street Journal, which first reported the deal.

“This transaction is an incredibly important and exciting moment for Bumble and the MagicLab group of brands and team members,” Wolfe Herd said in a statement. “We will keep working towards our goal of recalibrating gender norms and empowering people to connect globally, and now at a much faster pace with our new partner.”

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Angel Au-Yeung has been a reporter on staff at Forbes Magazine since 2017. She covers the world’s wealthiest entrepreneurs and tracks how they use their money and power.

 

Source: Blackstone To Buy Russian Billionaire’s Bumble Stake After Forbes Investigation Into His Companies

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On dating app Bumble, the ladies are required to make the first move. Once those women make a match, the app gives them 24 hours to reach out and start a conversation. The company launched at the end of 2014, gaining more than three million users. Now, Bumble is heading into the “friend zone” with Bumble BFF. The app uses its algorithm to help people find friendship. Founder and CEO Whitney Wolfe, who was a co-founder of Tinder, joins “CBS This Morning” to discuss the new venture.

Robinhood Glitch Lets Traders Borrow Unlimited Funds To Buy Stocks

Robinhood, the mobile trading app that has more than 6 million users, is contending with a glitch in its platform that enables some traders to use unlimited borrowed money to purchase stocks.

Known as “infinite leverage,” traders took to Reddit forums like WallStreetBets earlier this week to brag about the funds they were able to borrow despite the low amounts of cash in their accounts.

One trader boasted being able to get $1 million in borrowed funds with just $4,000. Another trader claimed to be able to borrow $50,000, purchase shares of Apple and subsequently lose the money. Robinhood traders also posted videos and screenshots showing how they were able to manipulate the platform including providing directions.

First spotted by Bloomberg, the glitch enables traders to inflate their account balances when borrowing money on margin. A common practice among traders, traders borrow money from the brokerage to purchase stocks. The firm, in this case Robinhood and its banking partner, acts as the lender issuing the money based on account balances, creditworthiness, and other criteria. By artificially increasing the account balance the traders were able to get their hands on more money to purchase stocks. In media reports Robinhood said it’s aware of what it called “isolated situations,” saying it’s communicating directly with the customers.

Today In: Money

This isn’t the first time Robinhood has had to contend with missteps since launching in 2013. Last year it made a PR blunder when it was forced to pull its new checking and savings account off the market. It boasted an interest rate of 3% but the product ran afoul of regulators. It held off until October in finally rolling out a cash management account, which now has a 1.8% APY. Despite that misstep and the glitch its dealing with now, Robinhood should continue on its meteoric rise. Since launching in 2013, it has amassed more customers than E*Trade and has a valuation of $7.6 billion.

Venture capitalists can’t get enough of the startup, throwing hundreds of millions of dollars it’s way. In July it raised $323 million giving it the hefty valuation it now commands. It also has aspirations beyond trading. It recently applied for a national bank charter with the Office of the Comptroller of the Currency. Its not clear how far those efforts will go given the OCC is losing its power to grant nonbank entities bank charters.

Robinhood isn’t the only high profile fintech to suffer from technical issues in recent weeks. In mid-October Chime, a popular challenger bank, experienced an outage that lasted more than 24 hours, preventing many of its more than 5 million customers from making payments and accessing their cash. Chime blamed its payment processor, saying it was experiencing problems that brought down Chime’s website and mobile app. In September Chime suffered a similar, albeit briefer, outage.

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A journalist for more than fifteen years, I am a freelance writer reporting on personal finance, entrepreneurship, investments, fintech and technology for a variety of media outlets. What sets me apart from my peers is my ability to take complex topics and explain it to the masses. After years of covering the equities markets as a technology reporter and special contributor to the Wall Street Journal, I embarked on a freelance career providing my readers with invaluable advice on everything from investing to landing a job. With the intersection between personal finance and technology getting blurred, cutting through the fintech noise and getting to the bottom of the story is becoming increasingly important to readers around the globe.

Source: Robinhood Glitch Lets Traders Borrow Unlimited Funds To Buy Stocks

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FAANG (Facebook, Amazon, Etc.) Stocks Have Lagged This Year. Here’s Why

Topline: The once high-flying FAANG stocks—Facebook, Apple, Amazon, Netflix and Google parent Alphabet—have mostly lagged the broader S&P 500 index over the past year, signaling that the market may turn to new leadership for the next leg of its advance.

  • With the recent exception of Apple—which reached a new record high last week, the FAANGs have been in somewhat of a slump, as high price volatility takes a toll on their long-time status as momentum stocks.
  • Amazon and Facebook are both 13% off their record highs, while Netflix is down 31% from its peak last year; Google, on the other hand, is just 4% from its record high.
  • These popular, high-profile names have driven the bull market to new heights in recent years, and as a result were increasingly treated as parts of a whole when it came to trading patterns.
  • But over the last 6 to 12 months, the FAANGs have not been leading the market as they once did, with Wall Street now pricing in slower growth rates, rising costs and the potential for more government oversight.
  • “These stocks have made people a lot of money, but they won’t trade as a group the way they did for several years,” says Charles Lemonides, chief investment officer of ValueWorks LLC.
  • Lemonides predicts that Wall Street will increasingly stop talking about the FAANGs as a group, as they go from being growth stocks absolutely adored by the investing public to companies that are perceived to have their own different business challenges.
Today In: Money

Key background: Analyst recommendations are increasingly varied on each of the FAANGs, which adds to the notion that they aren’t viewed as a group anymore. Most Wall Street analysts still assign “buy” ratings, though: 52% for Apple, 87.5% for Alphabet, 69% for Netflix, 96% for Amazon and 87% for Facebook, according to Bloomberg data.

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I am a New York—based reporter for Forbes, covering breaking news—with a focus on financial topics. Previously, I’ve reported at Money Magazine, The Villager NYC, and The East Hampton Star. I graduated from the University of St Andrews in 2018, majoring in International Relations and Modern History. Follow me on Twitter @skleb1234 or email me at sklebnikov@forbes.com

 

Source: FAANG (Facebook, Amazon, Etc.) Stocks Have Lagged This Year. Here’s Why

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Jim Cramer explains his latest take on the FAANG stocks, plus Microsoft.

Here’s Why The Stock Market Got Crushed Today

Topline: The stock market was off to a rough start on Tuesday, and although it rebounded slightly in the afternoon, rising uncertainty over trade talks with China—set to start Thursday—took a huge toll and prompted a further sell-off.

  • With fading optimism around U.S.-China trade negotiations, the S&P 500 dropped 1.56%, while the Dow Jones Industrial Average was down 1.19%.
  • The CBOE Volatility Index spiked 9.5% following Tuesday’s reports that both sides were ramping up trade tensions.
  • Every sector of the market was in the red, with all but 2 out of 11 sectors falling by more than 1%.

Here are all the latest trade developments roiling the markets:

  • Just days before trade talks were scheduled to resume, the Trump administration again escalated tensions on Monday, moving to blacklist eight more Chinese technology companies and reportedly discussing limits on pension investments in Chinese stocks.
  • A Chinese Foreign Ministry spokesman on Tuesday said to “stay tuned” for China’s retaliation, followed by the Ministry of Commerce saying it “strongly urges” the U.S. to remove sanctions and stop accusing China of human rights violations.
  • The South China Morning Post also reported that the Chinese delegation is toning down expectations and already planning to cut short its stay in Washington.
  • Later on Tuesday, the Trump administration reportedly implemented new visa restrictions on a slew of Chinese officials over alleged abuses of Muslim minorities in Xinjiang.

What to watch for: The all-important trade talks on Thursday and Friday. If no progress is made, the U.S. will go ahead with its planned tariff hike on $250 billion worth of Chinese goods, from 25% to 30%, on October 15.

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Source: Here’s Why The Stock Market Got Crushed Today

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Late-Inning Heroics? Stocks Hint At Friday Rally As Trade Talk Optimism On the Rise

  • Stocks down for the week so far but trade optimism gives positive tone early
  • Micron shares fall on disappointing forecast
  • Wells Fargo gets a new CEO, helping lift shares

Friday dawns after a week that didn’t provide much direction for investors. Stocks have generally chopped around in reaction to the latest geopolitical or domestic political news, and stayed in a tight range.

The question Friday might be whether the major indices can propel themselves to a victory for the week, because they start the session slightly down from a week ago thanks to positive trade vibes and solid durable goods data. That data looked really nice, up from the previous month and rising for the third month in a row. We’ll have to see if that’s sustainable because a lot of it was from the defense sector in the form of planes and parts. Either way, the trend can sometimes be your friend, as the old market saying goes.

Today In: Money

Also, the Personal Consumption Index (PCE)—the Fed’s preferred inflation metric—rose 0.1%, roughly in line with expectations. The core index, which strips out the often-volatile food and energy prices, also rose 0.1% to an annualized rate of 1.8%. It’s an uptick for sure, but still below the Fed’s stated target of 2% inflation. Might this be enough to shift the Fed’s thinking from dovish to neutral?

Whether or not stocks make a last-minute run here, it’s been hard to find much of a theme in the last few days. Hopes for progress in trade negotiations got reinforcement yesterday with an October 10 date set for new talks, but the noise out of China since then has mostly been about how willing they are to buy more U.S. products.

That’s all good, but it doesn’t get at the intellectual property and other issues that U.S. negotiators say are at the heart of the matter and apparently were a sticking point when the last round of talks broke down. It’s hard to see these talks getting much further without movement on these issues.

Another focus is the impeachment drama in Washington. Two big bombshells came out this week, but stocks didn’t show much reaction. As we’ve said, it’s important to keep your emotions out of trading, and impeachment is an emotional issue. It’s likely to be a long process and a constant background noise over the next weeks and months, but investors might serve themselves better by watching earnings and data.

It’s interesting to hear some analysts saying that the impeachment situation might actually be bullish because it could put pressure on the administration to get a trade deal done on the sooner side. This school of thought suggests President Trump might be keen to get some positive headlines to counter the negative ones. That remains to be seen and is just speculation for now.

On the earnings front, bad news came at the end of the week from Micron (MU), as the semiconductor firm issued guidance that Wall Street didn’t seem to like too much. Shares were down 5% in premarket trading. Revenue and earnings beat third-party consensus views, but were way down from a year ago as the company continues to struggle with demand for its memory products. It wouldn’t be too surprising to see the weakness in MU shares work their way into the entire chip sector, maybe putting pressure on Technology stocks today.

And Wells Fargo (WFC) is back in the news today after the financial company hired a new CEO. This ended a six-month search and means investors won’t have to approach WFC’s earnings call next month with more questions about who would head the company. Shares rose in premarket trading.

Quarterly Market Gains Not Much To See

The old quarter is just about over, and it’s been a wild one that basically didn’t go much of anywhere if you look at the major indices. Sure, they surged to new peaks at times, but also retreated. It ended up being almost a wash, with the benchmark S&P 500 (SPX) closing Thursday up just 1% from where it finished at the end of June.

The choppy trade that marked most of the quarter continued on Thursday, with the market giving up early gains, clawing back to flat and then losing more ground by the closing bell. Some of the “risk-on” trading we saw on Wednesday didn’t really carry into Thursday, with small-caps in the Russell 2000 (RUT) drifting lower and Financials having a rough day.

Instead, some caution appears to be coming back into play late this week, with Utilities and Real Estate near the top of the leaderboard Thursday. Those aren’t places people tend to go when they’re feeling gung-ho about the economy. Bonds—another defensive area—also rallied, but gold didn’t share in the fun.

Though every day seems to have a different theme, there’s a lot of concern out there about the fundamental picture. It’s good to hear that new trade talks begin October 10, as we found out Thursday, but a resolution doesn’t seem all that close.

One concern is that new tariffs announced last month on Chinese goods could start having an impact on consumer spending, which would possibly cause companies to get even more cautious. If companies stay in a holding pattern, it’s hard to see any significant rally on the horizon. Earnings growth is already expected to fall year-over-year in Q3 after sinking in Q1 and Q2.

When you get right down to it, earnings drive the market. If investors continue to see earnings grow at slower rates, at some point the market could start to reflect that. FactSet, a research firm, predicts a nearly 4% earnings loss for S&P 500 companies in Q3. Earnings fell 0.4% in Q2 and also fell in Q1, making this potentially the first three-quarter stretch of falling year-over-year earnings since late 2015/early 2016.

No Fun for FAANGS

Some of the FAANG stocks, including Amazon (AMZN), Netflix (NFLX) and Facebook (FB), also are having tough weeks. Again, it’s regulatory issues dogging FB, but the others could be under pressure from changing money flows as the FAANG sector seems to be losing some of its mojo, according to an article this week on MarketWatch.

Next week will be October, after Monday at least, so let’s look at what the market’s going to be grappling with beyond the China trade and impeachment stories. We’re still a few weeks out from earnings, meaning volatility could be a factor and the market could move up or down quickly based on the latest headlines or tweets. It could still do that after earnings start in mid-October, too, but earnings give people something solid to point at in times of turmoil.

One thing we’ll be pointing to next week is a monthly payrolls report for September. A lot of eyes are likely to be on the numbers a week from today, wondering if those relatively modest job gains back in August were a one-time deal or maybe a sign of something more serious. Even before August, job growth had been slowing this year, but it’s still above the level economists think we need to keep unemployment low.

Other data aren’t so exciting next week, but Chicago PMI on Monday might be interesting when you consider recent data where manufacturing activity appears to be slowing down. Chicago PMI surprised to the upside last time and came in above 50. Anything below that would indicate economic contraction, according to how the report is structured. It was 50.4 in August.

Volatility can sometimes tick up the last days of the quarter, but the Cboe Volatility Index (VIX) has dropped below 16 this morning after topping 17 earlier this week.

Company Caution Crimps Quarter: Normally, the government’s report on gross domestic product (GDP) gets lots of attention. That wasn’t the case yesterday because a few other things were going on (there’ve been some political headlines, if you haven’t noticed). A check of the data showed 2% growth in Q2, which means the slowdown that began early this year continued. As a reminder, gross domestic product was nearly 3% in 2018. To some extent, this downturn probably reflects the trade war with China. Many companies appear to be in a holding state because they’re putting off decisions on business plans. You can’t continue to have companies putting decisions off, because it could start affecting the longer curve of growth. It may already be doing that.

Crude Concerns: The fundamental concerns mentioned above aren’t any easier to dismiss when you consider how crude’s behaved recently. Remember when U.S. crude rose above $60 less than two weeks ago in a 15% one-day rally? Seems like a long time ago, with crude back down in the mid-$50s by Thursday. Rising U.S. inventories apparently caught some market participants by surprise and raised questions about demand. It’s just a week or two of data, so you don’t want to make any broad conclusions, but falling crude demand would possibly be a sign of a slowing economy if it continues. That remains to be seen, but for the moment it’s hurting the Energy sector, which suffered more than a 1% loss yesterday.

Batting 3000: The first time the S&P 500 (SPX) crossed the 2000 level was on Aug. 26, 2014. But it traded below 2000 on an intraday basis 22 months later, on June 27, 2016. The lesson here? Just because an index crosses a big round-number benchmark doesn’t mean you can put that magic number in the rearview mirror and forget about it. We’re getting a reminder of that now, with the SPX struggling to get its head above 3000 after first hitting that mark back in July. At this point, the late July intraday high of 3027 remains the peak, and the SPX has fluttered back and forth above and below 3000 ever since.

This doesn’t necessarily mean we’ll still be wrestling with 3000 in mid-2021, though that can’t be ruled out. And while we’re talking scenarios, one can’t rule out a major test to the downside either. In the near term, it’s very hard to see any move above 3000 lasting long without a China deal. Anticipated weak earnings are another major barrier, because without earnings growth, it gets harder and harder to justify rallies.

TD Ameritrade® commentary for educational purposes only. Member SIPC.

I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I’ve also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van Der Moolen, USA. In 2006, I joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE. My licenses include the 3, 4, 7, 24 and 66

Source: Late-Inning Heroics? Stocks Hint At Friday Rally As Trade Talk Optimism On the Rise.

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How Snapchat Became The Best-Performing Tech Stock In 2019

Topline: After its stock market debut two years ago floundered, Snapchat has made a strong comeback: Its shares have risen nearly 200% in 2019, outpacing the broader market and easily eclipsing the rest of its peers in the technology sector.

  • Now valued near $23.5 billion, Snapchat sits at $17 per share, up from a $7.2 billion valuation and an all-time low of $4.99 per share last December, according to Bloomberg data.
  • Snapchat’s stock has eclipsed its peers in the tech sector this year: It is far and away the best performer in the iShares U.S. Technology ETF. While rival companies like Facebook and Pinterest are up 40% and 23%, respectively, they can’t compare with the triple-digit growth in Snap’s share price.
  • Strong earnings in recent quarters (with fewer losses than Wall Street had expected), new revenue opportunities and improved profitability have all helped drive Snap shares higher this year.
  • After being written off two years ago, the social media company’s user base and engagement is finally growing again. When Snap had its IPO in March 2017, valued at $31 billion, it hoped to become the next Facebook. But the app never really caught on with the masses—instead, it appealed mostly to younger users, as many adults and advertisers found it difficult to use.
  • Over the last year and a half, the company has transitioned to focus on its younger users again, exploring new revenue opportunities like Snap Games, which was rolled out in the spring. Some Wall Street analysts already predict that the new gaming business could be a big growth driver for Snapchat going forward. Evercore ISI analyst Kevin Rippey, for instance, sees it bringing in as much as $350 million in revenue each year by 2022.
  • Snap has ten “buy” ratings, 25 “hold” ratings, and 4 “sell” ratings from Wall Street analysts, according to Bloomberg data.

What to watch for: Third-quarter earnings, due in November, will be an important indicator. The company’s second-quarter earnings, released in July, saw revenue increase 48% year-over-year to $388 million.

Today In: Money

Surprising fact: Despite growth prospects, it’s still important to remember that Snapchat is losing money: Free cash flow dropped by 32% between the first and second quarter, the first such decline in a year.

Tangent: Since Snapchat stock started its comeback, CEO Evan Spiegel’s net worth has grown from just over $1.4 billion to $3.7 billion.

Critic: While Susquehanna Financial Group’s Shyam Patil remains optimistic about the company’s continued momentum in the short term, Patil highlights that the stock’s “valuation remains elevated,” compared to peers like Facebook and Twitter, and points out competition with Instagram as another potential downside risk, writing that “SNAP must hold onto the key 18-34 demographic to attract advertisers.

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I am a New York—based reporter for Forbes, covering breaking news—with a focus on financial topics. Previously, I’ve reported at Money Magazine, The Villager NYC, and The East Hampton Star. I graduated from the University of St Andrews in 2018, majoring in International Relations and Modern History. Follow me on Twitter @skleb1234 or email me at sklebnikov@forbes.com

Source: How Snapchat Became The Best-Performing Tech Stock In 2019

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Stock Market Looking Up Amid Some Trade-Related Optimism

Key Takeaways:

  • Fed’s Bullard says U.S. manufacturing appears to be in recession
  • China lowers its benchmark lending rate
  • U.S., China set to conclude second day of lower-level talks today

Welcome to quadruple witching day. It happens every quarter on the day when futures and options on indices and stocks all expire on the same day.

Maybe it’s not as ominous as its name might suggest, but these remain days when investors might want to exercise special care as there could be some heightened volatility as people unwind baskets of stocks or futures.

On Wall Street, investors this morning seem to be a bit upbeat, heartened by developments on the trade front and by yet another major economy cutting interest rates.

Today In: Money

China cut its one-year lending rate, joining the Federal Reserve and the European Central Bank in dovish steps designed to help stimulate economies by reducing borrowing costs. The moves come amid rising worries about global economic growth as the trade war between the United States and China drags on. (See more below.)

On the trade front, China and the United States are scheduled today to conclude two-day negotiations that began yesterday, seemingly with the aim of paving the way for higher level discussions next month.

The discussions come as there has been a bit of a thaw recently in the chilly trade relationship between the world’s two largest economies. Among recent developments, the Trump administration has excluded hundreds of Chinese items from a 25% tariff.

Resistance Near Record Highs

We’ve been talking for a while about how the U.S.-China trade war seems to be creating a cap that the stock market may not be able to meaningfully breach until the dispute between the world’s two largest economies comes to some sort of definitive conclusion.

That narrative seemed to be in play Thursday with stocks near all-time highs but losing momentum throughout the day. The S&P 500 Index (SPX) closed above 3000 after making it above 3,020. But without a catalyst to push stocks into record territory, this area between 3000 and the all-time high of 3027.98 looks to be an area of resistance.

True, the Fed didn’t give market participants much to get really excited about this week when the central bank delivered an as-expected rate cut. But it seems like the unresolved trade issue could be the bigger weight here.

While optimism around the two-day negotiations may have helped boost the market early Thursday, that sentiment may have been tempered by comments from a White House adviser in a media report that the United States could escalate the trade conflict if a deal isn’t reached soon. Meanwhile, a tweet from the editor of the official newspaper of the Communist Party of China said that “China is not as anxious to reach a deal as the U.S. side thought.”

Reading the Fed Tea Leaves

With mixed signals on the trade front, the market was left to scratch its head about what the Fed might do after its latest rate cut—not exactly a recipe for a rip-roaring day of gains in equities.

It’s arguable that the Fed has left the market in a holding pattern as investors seem unconvinced that the current central bank trajectory is as pro-growth as they want it to be.

But even though there seems to be wariness about the Fed’s language when it comes to interest rates, there could be some percolating excitement about a different type of stimulus that the central bank might have up its sleeve.

Still, without clear direction or conviction, investors seem to be holding off from making a big rotation into any one style of equities, leaving cyclicals still in play even as market participants may also be eyeing defensive sectors.

Today, investors and traders are likely looking to a slate of Fed speakers to try to gain some clarity on the central bank’s thinking. Additionally, Federal Reserve Bank of St. Louis President James Bullard posted a note explaining his dissent in the Fed’s recent decision to cut its key rate by 25 basis points. Bullard had wanted a 50-basis-point cut, citing expected slowing U.S. economic growth, trade policy uncertainty, rising recession probability estimates, and a U.S. manufacturing sector that “already appears in recession.”

Next week could offer the market further direction on the economy as investors and traders are scheduled to see data releases on consumer confidence and sentiment, new home sales, personal spending, and durable goods orders, as well as the government’s third estimate of gross domestic product.

A Firming Foundation: It’s been a pretty good week for housing market data. Yesterday, figures on existing home sales for August came in at a seasonally adjusted annual rate of 5.49 million. That was up from 5.42 million in July and beat a Briefing.com consensus of 5.36 million. That came after figures showing August housing starts and building permits came in above expectations. Briefing.com pointed out that lower mortgage rates were behind the strength in existing home sales. “The August sales strength cut the inventory of homes for sale,” Briefing.com said. “That will keep upward pressure on home prices, which in turn is likely going to necessitate the need for mortgage rates to stay down to drive ongoing sales growth.”

Will King Consumer’s Crown Stay Shiny? With the health of the U.S. consumer one of the top issues on the minds of investors and traders along with the trade war and Brexit, market participants are likely to be eyeing next week’s reports on consumer confidence and consumer sentiment with some interest. From the data we’ve been seeing, the U.S. consumer has been helping the economy continue to power along. GDP isn’t going gangbusters, but it’s still pretty solid, and the consumer has a lot to do with that. This could be a comforting sign to investors even as the trade war continues to drag on. If prices at the retail level move up due to tariffs and other cost pressures, consumer resilience could help cushion the U.S. economy.

Global Economic Outlook Darkens: While the U.S. consumer has been one of the backstops to the domestic economy, worries about the global economy in the face of the continued trade war are ratcheting up. The OECD is projecting that the global economy will expand by 2.9% this year and 3% next year, which would be the weakest annual growth rates since the financial crisis. And downside risks continue to mount, the group said Thursday. “Escalating trade conflicts are taking an increasing toll on confidence and investment, adding to policy uncertainty, aggravating risks in financial markets, and endangering already weak growth prospects worldwide,” the OECD said.

TD Ameritrade® commentary for educational purposes only. Member SIPC.

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I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I’ve also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van Der Moolen, USA. In 2006, I joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE. My licenses include the 3, 4, 7, 24 and 66.

Source: Stock Market Looking Up Amid Some Trade-Related Optimism

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It was a big week for the bulls as optimism for a new trade deal gained steam. With CNBC’s Melissa Lee and the Fast Money traders, Tim Seymour, Brian Kelly, Dan Nathan and Guy Adami.

Datadog Stock Surges 39%: Its CEO Recounts When The Company Was An Underdog In New York

Shares of New York-based Datadog rose 39% to close at $37.55 after opening at $40.35 in the cloud company’s market debut Thursday. The successful IPO cements Datadog’s position as an East Coast counterweight to Silicon Valley’s dominance of the enterprise software realm.

“Initially when we started fundraising for Datadog, it was really not that easy,” CEO Olivier Pomel told Forbes after the market closed Thursday. “We were not based where most of the companies were based, so it was hard to get trust from investors on the West Coast. And the investors in New York were not really specialized in the type of company we were building.”

Pomel said this underdog tale worked to the advantage of Datadog. By relying on small checks and angel investors at first, the company was forced to build an efficient business, he said. That’s become a huge asset to the nine-year-old company as it ballooned to a $10.9 billion valuation at the end of Thursday. It reported a net loss of $10.8 million, after posting a $2.6 million loss the year prior—good numbers for a fast-growing company of its stature.

Higher net losses usually accompany recent enterprise tech IPOs with comparable revenue figures, such as with Medallia ($82 million), Dynatrace ($116 million) and Crowdstrike ($140 million). “One thing investors reacted to was the fact that we run a healthy business from a profitability perspective,” Pomel said.

Today In: Innovation

“What helped the most by being in New York was that we’re a little bit closer to customers—there’s more of them here. And, you’re out of the echo chamber in the Silicon Valley so here you can get ahead on what the customers think,” he said. One early investment came from Index Ventures, which has backed Datadog beginning with the Series A funding round. Shardul Shah, a partner at the firm who also sits on Datadog’s board, says he bought in because of Pomel’s “relentless focus on delivering customer value from the very beginning.”

The successes of MongoDB and now Datadog could spur the growth of an enterprise ecosystem in New York. Prior to its market debut, Datadog had raised $147.9 million on what Pitchbook estimates as a $640 million valuation. The IPO is New York’s largest venture capital-backed tech IPO in two decades, according to Renaissance Capital.

Now trading on Nasdaq under the “DDOG” ticker, the company priced 24 million shares at $27 on Wednesday. That’s higher than the $24-to-$26 estimated IPO price listed in its latest filing to the Securities and Exchange Commission, which was already a huge boost from the $19-to-$22 range the company originally set. At its IPO price, Datadog raised $648 million to bring its valuation to $7.8 billion. Pomel said the added cash on hand will offer the company the flexibility to continue making acquisitions. He said he’s happy with Datadog’s acquisitions so far, including application tester Madumbo.

At Datadog’s opening stock price, CEO Olivier Pomel was on the cusp of billionaire status. Forbes calculates that the stock would need to surpass about $43 per share for Pomel’s net worth to cross the $1 billion mark—at the stock’s high point of $41.44, Pomel was $35 million short. After the stock price declined slightly over the course of Thursday, Pomel’s net worth settled at $874 million at the time of market close, but that doesn’t seem to bother him: “The stock, it’s up a good amount, but not too much. I think that’s what we were looking for.”

Datadog offers a cloud analytics platform that also provides log management and monitors infrastructure and application performance. Its software is primarily used by IT and developer teams and cuts across industries—it boasts customers including Samsung, 21st Century Fox, the University of Pennsylvania and the Washington Post. In its S-1, the company identified IT operations management as its primary opportunity market. Research firm Gartner predicts the market will be worth $37 billion by 2023.

The IPO reflects continued investor demand for cloud analytics and monitoring. In August alone, application performance management company Dynatrace’s stock jumped 49% in its public debut, while cloud monitoring vendor SignalFx was acquired by Splunk for more than $1 billion. In its S-1 filing, Datadog lists both Dynatrace and Splunk as direct competitors. The company also counts IBM, Microsoft, Cisco, New Relic and Amazon as rivals across fields such as infrastructure monitoring, application performance management and cloud monitoring.

Datadog jumped to No. 5 on this year’s Forbes Cloud 100 list, which was released last week, up from the No. 19 spot in 2018. As of last Wednesday, half of last year’s top 20 sold or went public, with eight taking the latter route amid a busy couple of months for cloud IPOs. Although most of these stocks—such as Zoom, Slack and Crowdstrike—had strong public debuts, some including Slack and Eventbrite have failed to maintain this momentum. Stripe, the No. 1 company in 2018 and 2019, announced a new funding round Thursday that brings its valuation up to $35 billion.

Datadog filed with the SEC in anticipation of its IPO at the end of August. Revenue increased 97% to $198 million in 2018, according to its S-1 filing. The cloud company reportedly rejected an eleventh-hour acquisition offer from Cisco at a figure “significantly higher” than $7 billion, according to Bloomberg. The move would have paralleled Cisco’s 2017 acquisition of AppDynamics for $3.7 billion, just two nights prior to the application performance management company’s IPO.

This article was updated to include the closing stock price, additional context on finances and comments from Pomel and Shah.

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I am a San Francisco-based assistant editor for technology and innovation. As my beat, I cover Juul Labs. I also write other general tech news. Previously, I made stops at The Ringer and the Raleigh News & Observer. I graduated in 2019 from Duke University, where I spent time as news editor for The Chronicle, the university’s independent news organization.

Source: Datadog Stock Surges 39%: Its CEO Recounts When The Company Was An Underdog In New York

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The Watch List: Jonathan Lehr came on The Watch List to discuss what the Datadog IPO means for NYC’s enterprise tech ecosystem.

Sell Stocks And Pay Off Your Mortgage

It’s hard to borrow yourself rich—especially when you can’t deduct the interest.

A friend from Connecticut tells me she and her husband were recently inspired to sell some securities and pay off their mortgage. She figures the market is due for a correction.

A clever move, I say, and not just because stocks are richly priced. Mortgages, even though rates are at near-record lows, are expensive. And there’s a tax problem.

The tax angle relates to what went into effect last year—something Trump called a tax cut, although it raised federal taxes for a lot of people in high-tax states like Connecticut. For our purposes what matters is that the law made mortgages undesirable.

Used to be that people would say, “I took out a mortgage because I need the deduction.” That doesn’t work so well now. The new law has a standard deduction of $24,400 for a couple, and you have to clear this hurdle before the first dollar of benefit comes from a deduction for mortgage interest.

Today In: Money

Most middle-class homeowners aren’t itemizing at all. For them, the aftertax cost of a 4% mortgage is 4%.

If you are still itemizing, your interest deduction may not be worth much. You are probably claiming the maximum $10,000 in state and local taxes. (If you aren’t, you are living in an igloo in a state without an income tax.) That means the first $14,400 of other deductions don’t do anything for you.

A couple with $2,400 of charitable donations and $15,000 of interest is in effect able to deduct only a fifth of the interest. The aftertax cost of the mortgage depends on these borrowers’ tax bracket, but will probably be in the neighborhood of 3.7%.

Before 2018, your finances were very different. You no doubt topped the standard deduction (which was lower then) with just the write-off for state and local taxes (which didn’t have that $10,000 cap). So all of your mortgage interest went to work in reducing federal taxes. You could do a little arbitrage.

If your aftertax cost of a 4% mortgage was 2.7%, an investment yielding 3% aftertax yielded a positive spread. You’d hold onto that investment instead of paying off the mortgage. It was quite rational to sit on a pile of 3% tax-exempt bonds while taking out a 4% mortgage to buy a house.

Now that sort of scheme doesn’t make sense. The aftertax yield on muni bonds is way less than than the aftertax cost of a mortgage. This is true of corporate bonds, too: Their aftertax return, net of defaults, is less than the cost of a mortgage today.

So, if you have excess loot outside your retirement accounts, and it’s invested in bonds, you’d come out ahead paying off a mortgage.

What about stocks? Should you, like my friend, sell stocks held in a taxable account in order to pay off your mortgage? This is a trickier question. If your stocks are highly appreciated, perhaps not. You could hang onto them and avoid the capital gains.

If they are not appreciated, or if you have a windfall and you’re deciding whether the stock market or your mortgage is the place to use it, the trade-off changes.

Stock prices are, by historical measures, quite high in relation to their earnings. The market’s long-term future return is correspondingly less.

Financiers

In the short term, stocks are entirely unpredictable. Neither my friend, nor I, nor Warren Buffett can tell you whether there will be a crash next year to vindicate her decision or another upward lurch that will make her regretful.

For the long term, though, you can use earnings yields to arrive at an expected return. I explain the arithmetic here. A realistic expectation for real annual returns is between 3% and 4%. Add in inflation and you’ve got a nominal return not much more than 5%.

From that, subtract taxes. You’ve got a base federal tax of 15% or 20% on dividends and long-term gains. There’s also the Obamacare 3.8% if your income is above $250,000. You have state income taxes, no longer mitigated by a federal deduction for them (because you’ll probably be well above the $10,000 limit no matter what).

Add it all up, and you can look forward to an aftertax return from stocks of maybe 4%. That is, your expected return could be only a smidgen above the aftertax cost of your mortgage. Worth the risk? Not for my friend. Not for me.

What if I’m wrong about the market, and it’s destined to deliver 10%? Or what if you are a risk lover, willing to dive in with only a meager expected gain? Mortgages are still a bad way to finance your gamble.

You don’t have to borrow money at a non-tax-deductible 4%. I can tell you where to get a loan at slightly more than 2%, with the interest fully deductible.

The place to go is the Chicago Mercantile Exchange. Instead of buying stocks, buy stock index futures.

When you go long an E-mini S&P 500 future you are, in effect, buying $150,000 of stock with borrowed money. You don’t see the debt; it’s built into the price of the future. The reason the loan is cheap is that futures prices are determined by arbitrageurs (like giant banks) that can borrow cheaply. The reason the interest is in effect deductible is that it comes out of the taxable gains you report on the futures.

Futures contracts are taxed somewhat more heavily than stocks. Their rate is a blend of ordinary rates and the favorable rates on dividends and long-term gains. Also, futures players don’t have the option of deferring capital gains. Even so, owning futures is way cheaper than owing money to a bank while putting money into stocks.

One caveat for people planning to burn a mortgage: Stay liquid. Don’t use up cash you may need during a stretch of unemployment.

But if you have a lot of assets in a taxable account, it’s time to rethink your mortgage. Debt is no longer a bargain.

I aim to help you save on taxes and money management costs. I graduated from Harvard in 1973, have been a journalist for 44 years, and was editor of Forbes magazine from 1999 to 2010. Tax law is a frequent subject in my articles. I have been an Enrolled Agent since 1979. Email me at williambaldwinfinance — at — gmail — dot — com.

Source: Sell Stocks And Pay Off Your Mortgage

In many situations, paying off your mortgage early could potentially be costing you hundreds of thousands of dollars…and I’ll run the numbers to show this based off real world examples. Enjoy! Add me on Snapchat/Instagram: GPStephan Join the private Real Estate Facebook Group: https://www.facebook.com/groups/there… The Real Estate Agent Academy: Learn how to start and grow your career as a Real Estate Agent to a Six-Figure Income, how to best build your network of clients, expand into luxury markets, and the exact steps I’ve used to grow my business from $0 to over $120 million in sales: https://goo.gl/UFpi4c This is one of those subjects that’s not intuitive for most people – you would think that paying off your mortgage early would be a really good idea. But this isn’t always the case. The reason people think this way is because they haven’t really looked at the true cost of ownership, what their money is really worth, and they only focus on the end number. On our $400,000 loan example, your payment is $1956 per month and you wind up paying $304,000 in interest over 30 years. But there are three very important considerations here: 1. The first is the mortgage interest tax write off – this is what makes real estate extremely appealing, and why keeping a mortgage helps long term.For the average person in a 23% tax bracket, with a 4.2% interest rate, after you factor in your write offs, your ACTUAL cost of interest is only 3.23%. 2. The second factor is Inflation. Because the bank is holding the entire loan over 30 years and you get to pay bits and pieces of it over time, it should be safe to assume a 2% AVERAGE inflation rate over 30 years. This means that even though you’re paying a NET interest rate now of 3.23%, if we subtract 2% annually for inflation, this means that you’re really only effectively paying 1.23% in interest after tax write offs and inflation. 3. Finally, the third factor is opportunity cost. Can you make MORE than a 1.23% return ANYWHERE ELSE adjusted for inflation? The answer is pretty much always yes. This means that if you INVEST your money instead of paying down the mortgage, mathematically over the term of the loan you’d come out ahead than if you just paid off the loan early. So with these points above, we’ll take two scenarios. In scenario one, you have a 30-year, $400,000 loan at a 4.2% interest rate that you pay off in half the time – you increase your payments from $1956 to $3000 per month in order to make this happen. Then once the loan is paid off, you invest the full amount in the stock market for another 15 years. After an additional 15 years, that works out to be just over $1,000,000. So you now have a paid of house plus a million dollars. But what happens if you kept the 30-year mortgage and instead of you paying it off in half the time by increasing your payments to $3000/mo, you just invested the extra $1050 per month instead? Because you didn’t pay down your mortgage early and you invested that extra money instead, at a 7.5% return in an SP500 index fund…at the end of 30 years, you’ll have a paid off home PLUS $1,433,000.. This means that over 30 years, that’s a difference of $433,000…by NOT paying down your mortgage early, and instead investing the difference. Although keep in mind, if you have a really high interest rate on your loan, above about 6%, it’s probably better to pay it off. This is because the upside to investing gets smaller and smaller the higher your mortgage interest rate is. But the biggest advantage of paying it off early is that with the above example, we assume the person will actually invest the money rather than pay off their loan early. In order for this calculation to work, the person needs to be disciplined enough to actually invest the different and not spend it. But for anyone with the discipline to actually stick with an investing plan instead of paying down the mortgage, statistically and mathematically, you can often make more money paying it off slowly than paying it off early. For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness@gmail.com Suggested reading: The Millionaire Real Estate Agent: http://goo.gl/TPTSVC Your money or your life: https://goo.gl/fmlaJR The Millionaire Real Estate Investor: https://goo.gl/sV9xtl How to Win Friends and Influence People: https://goo.gl/1f3Meq Think and grow rich: https://goo.gl/SSKlyu Awaken the giant within: https://goo.gl/niIAEI The Book on Rental Property Investing: https://goo.gl/qtJqFq Favorite Credit Cards: Chase Sapphire Reserve – https://goo.gl/sT68EC American Express Platinum – https://goo.gl/C9n4e3

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