Category Archives: investing

Concentration vs Diversification: Stock Market Investing

“Diversification may preserve wealth, but concentration builds wealth.” – Warren Buffett

When buying stocks, one question that must be asked is, how many should I own? This is especially true for people who are wanting to build wealth and not just preserve wealth. It’s also a tough question. There’s an obvious answer at first, but there is also a ton of caveats to the answer.

If one had one stock or one industry that could consistently beat the market overtime, it would obviously make sense to concentrate on investing into that one stock or industry. It would create the most wealth. The issue, however, is what if the stock or industry one is concentrating on ends up underperforming? What if they get it wrong?

While concentrating on one or few stocks or industries is the smarter choice when done right, it is also far riskier. Because when it isn’t done right, it can be costly.

Diversification, on the other hand, can also be risky. One runs the risk of losing potential gains. Let’s say one has a diversified portfolio. They have a couple stocks that overperform the market while the rest of their stocks vastly underperform. They end up underperforming the market because their losers negate their winners. If they had concentrated their money into just the winners, they would have been in a much better financial position.

My portfolio is pretty diversified. A lot of my money is in exchange traded funds (ETFs), and these ETFs are very diversified. I then have my individual brokerage account that is pretty concentrated into select, mostly small-cap, stocks that I believe will beat the market over a long period of time.

While concentration, when done right, is the best way to increase wealth. My hatred of losing money is slightly greater than my wanting to make money even though I do believe that my portfolio will beat the market.

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Fiserv Inc. Analyst Expectations: Projected Revenue and Growth Outlook

Disclaimer: This analysis is not financial advice and is for informational purposes only. Please conduct your own research or consult a financial advisor before making any investment decisions.

About Fiserv Inc.

Fiserv Inc. is a global leader in payments and financial services technology. The company provides a wide array of services including electronic payments processing, point-of-sale services, and financial data management. Fiserv’s innovative solutions cater to both financial institutions and businesses, helping them enhance their operational efficiencies and customer experiences.

Stock Valuation

When evaluating Fiserv Inc. stock, several key metrics stand out. The stock currently has a price-to-earnings (P/E) ratio of 28.07, indicating how much investors are willing to pay per dollar of earnings. Fiserv’s market capitalization, or the total market value of its outstanding shares, is $88.08 billion. This valuation suggests strong investor confidence and significant market presence.

Fiserv is trading at 3.08 times its book value, reflecting a premium investors place on the company’s assets and growth potential. Financially, Fiserv holds $1.21 billion in cash against a debt load of $24.54 billion, resulting in a current ratio of 1.06. This ratio, a measure of the company’s ability to cover its short-term liabilities with its short-term assets, suggests a slightly tight liquidity position.

Analyst Expectations

Analysts hold a positive outlook on Fiserv’s growth trajectory. They project the company will grow its revenue by 6.7% this year, reaching $19.25 billion. Looking ahead to 2025, they expect revenue to increase by 9% to $20.98 billion. These projections indicate strong and sustained growth in Fiserv’s core business operations.

On the earnings front, analysts are optimistic about Fiserv’s profitability. They forecast earnings per share (EPS) to rise to $8.71 in 2024, up from $7.52 in 2023. By 2025, they expect EPS to further increase to $10.11. These anticipated earnings growth rates suggest robust financial health and an effective business strategy.

Conclusion

Fiserv Inc. presents an intriguing investment opportunity with its solid market position and promising growth outlook. Despite the high debt level, the company’s consistent revenue and earnings growth projections underline its potential for long-term value creation. Investors should weigh these factors and consider their own risk tolerance and investment goals when evaluating Fiserv as a potential addition to their portfolio.

As always, it’s crucial to conduct comprehensive research and consult with a financial advisor before making any investment decisions.

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AssetMark Financial Holdings, Inc. Stock Analysis

AssetMark Financial Holdings (Ticker: AMK) is a wealth management company based in the U.S. They currently manage around $55.2 billion in client funds and has around 344,000 clients. This stock has been on my watchlist for a while now, and in this article, I want to answer the question, is the stock a buy?

AssetMark is currently trading at a market cap of ~$2.6 billion. They have a p/e ratio (price/earnings per share) of 21.09 and are trading at 2 times their book value. The company currently has $235.68 million in cash and $124.36 million in debt. This gives them a current ratio (calculates how well a company can pay their debt) of 3.84 which means that the company could pay its debt 3.84 times over. Judging by its trading multiple of 21.09 times their earnings per share, this is a company that needs to be growing well for me to consider buying it, so with that in mind, let’s look at the growth.

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Analysts are expecting AssetMark to make $2.60 per share in 2024. They are also expecting the company to grow earnings per share to $2.75 in 2025. In 2023, the company earned $2.30 per share. Analysts are also expecting the company to generate $610.64 million in revenue in 2024, and they are expecting that to grow to $657.96 million in 2025. In 2023, the company generated $546.08 million. This represents 11.8% growth in 2024 and 7.70% growth in 2025. These numbers, however, are projections and there is no guarantee that AssetMark will hit these. Although, AssetMark has managed to grow both revenue and earnings every year over the last four years.

While the company is trading at a decent premium to its earnings, I do think that the company will continue to grow. I most likely will be buying shares of this stock, but this is not financial advice and is for informational purposes only so do your own research before buying the stock.

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Trump Media and Technology Group Went Public Via SPAC

In a move that has stirred both curiosity and skepticism, the Trump Media and Technology Group recently made headlines by going public through the acquisition of blank check company Digital World Acquisition Corp.

Trump Media and Technology Group, led by former President Donald Trump, is the owner of social media site Truth Social. According to searchlogistics.com, Truth Social boasts approximately 2 million users, positioning itself as a platform for conservative voices in an increasingly polarized digital landscape.

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However, despite the buzz surrounding its flagship app, Trump Media’s financial performance leaves much to be desired. In the first nine months of 2023, the company reported a mere $3.4 million in revenue—an underwhelming figure considering the lofty expectations set by its ambitious valuation. With the company trading at almost an $8 billion valuation, it’s evident that the market is assigning a premium to Trump’s name rather than evaluating the company’s actual business fundamentals.

The disparity between Trump Media’s valuation and its revenue raises red flags for investors. As an investor, I would exercise caution when considering Trump Media’s stock. While I believe the company is vastly overvalued, I would hesitate to short the stock, as the market has proven time and again its propensity for irrationality over extended periods.

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In conclusion, the Trump Media and Technology Group’s entrance into the public markets has, so far, been very successful for investors of the stock. The company is trading at a very large premium relative to its revenue and is nowhere near profitability. It’ll be interesting to see where the stock goes from here.

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The Value of Small Cap Stocks

A big advantage that individual investors have over Hedge Funds and Mutual Funds is that large funds cannot buy small-cap stocks at least it wouldn’t make sense for them to. The average Hedge Fund has $26 billion under management. A small-cap stock is one with a market cap between $300 million – $2 billion. If a Hedge Fund wanted to buy a stake in a small cap stock, it’d be such a small part of their portfolio that the stocks return wouldn’t really matter. This is why these funds mostly don’t buy stocks of this size.

That is one of the reasons small cap stocks are such an advantage to the average investor. They get to buy into these companies before all the institutional money even can. If one buys a small cap stock and the stock keeps growing, it will eventually be big enough where institutional investors can deploy enough capital into the business for its returns to matter, but it can be very beneficial to buy into these companies first.

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Also, small-cap stocks have more opportunity. It is much easier for a stock trading at $2 billion dollars to become a company worth $200 billion than it is for a company worth $200 billion to become worth $2 trillion. Investors looking to 10x their investment have a much better chance in small-cap stocks than large-cap stocks.

Now, this isn’t to say that small-cap stocks don’t have disadvantages as well. First, they are far more volatile. They also have a much better chance of going bankrupt than a large-cap stock.

Not all small-cap stocks are created equal either. We look for small-cap stocks that are growing year-over-year while trading at a reasonable premium relative to its earnings. There are other important factors to look at as well when buying a stock, but we look for stocks that are growing both revenue and earnings year-over-year.

I don’t believe that anyone should only invest in small-cap stocks, but it can be very beneficial to include them in a portfolio.

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How to Find Stocks to Invest In

If one decides to start investing in stocks, the question then becomes: well, what stocks should I buy? More importantly, how do I find stocks worth buying? There are thousands of stocks out there, so it can be hard to choose. One thing that I believe is that because one can buy funds that replicate the market itself, there is no reason to buy any stock that one believes isn’t going to beat the market. This sounds obvious, but I have noticed that when people start investing, they are very focused on not losing money and will often put their money in companies that they believe are safe and won’t lose them money. Thing is, if that stock doesn’t beat the market, then they shouldn’t have bought it since they could have just bought the market itself. With this in mind, the question then becomes: how do I find stocks that can beat the market?

There are multiple ways that I find stocks. I try to find stocks that are trading at a reasonable premium relative to their earnings, are growing year over year, and aren’t in a bad amount of debt relative to their assets. This is the criteria for stocks that I am willing to buy. I believe that stocks that do these things will beat the market. Now, how do I find these?

Unfortunately, I’ve never been able to find a full list of market beating stocks. I’ve had to find stocks on other lists and compare them to my investment criteria. It doesn’t happen often. My strategy has always been to just find tickers and look at their numbers to see if they fit. There are stock research companies out there like, for instance, Zacks. They put out research on tons of stocks, and I try to take those tickers and compare them to my investing criteria. Most, of course, don’t fit, so I don’t buy. Every now and then, however, I find one that does, and I buy it.

Another thing that I do is look in funds. I can see what stocks funds are buying, so I will take those stocks and look at their numbers to see if they fit my investing criteria. Again, it takes a long time to find a stock that fits what I’m looking for, but when I do, I buy it.

I think the important thing to do is to make a list of characteristics you want your investments to have. After that, study as many tickers as you can to try to find stocks matching those characteristics.

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The Bitcoin Spot ETF Is Officially Approved

I have been waiting for this day for a long time. Companies have been trying to launch a Bitcoin spot ETF for a while now, but the SEC has never allowed it to happen. I always knew that they would one day have to approve one. Fortunately, they have…. along with 10 others.

Blackrock, Ark, WisdomTree, Invesco, Bitwise, VanEck, Franklin, Fidelity, Valkyrie, Grayscale, and Hashdex all got approved for a Bitcoin ETF, and these funds will start trading tomorrow, January 11th. Companies have been trying to launch a Bitcoin spot ETF for over a decade now as the first one proposed was back in 2013 by the Winklevoss twins. They got denied along with several others after them. Bitcoin Futures ETFs (doesn’t hold Bitcoin directly but instead buys Bitcoin futures contracts) were approved but never a Spot Bitcoin ETF (actually holds Bitcoin).

The reason that I am so excited for this and believe that this will be amazing for Bitcoin is due to several reasons. First, a Spot Bitcoin ETF makes it easier to start investing in Bitcoin. The reason for this is because one can now buy Bitcoin like a stock. They don’t have to worry about storing their crypto safely in a wallet (which can be difficult especially for people new to crypto). They can simply buy and sell Bitcoin in their brokerage accounts like any other stock or ETF.

Second, a Spot Bitcoin ETF makes it easier to store Bitcoin in a tax-free retirement account like a Roth IRA or 401k. This is something that I am very excited about, myself. I am a firm believer in Bitcoin, and I definitely want the asset in my Roth IRA. Since I believe that Bitcoin will keep increasing in value over the long-term, I want it in my Roth IRA so that when I do sell it one day, I won’t have to pay taxes.

Third, a Spot Bitcoin ETF makes it possible for people to trade option contracts on Bitcoin. This is something I have seen a huge demand for. Investors will now be able to place call and put options on Bitcoin through this ETF.

I am very excited for this news. While I don’t know how this will affect the price of Bitcoin in the short-term, I have no doubt that this will be great for Bitcoin in the long run. That said, this article is for information purposes only and should not be taken as financial advice.

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The Downsides of Money Managers and Mutual Funds

On this blog, I try to focus on providing analysis on companies to help people decide what to invest in. I also try to expose people to new companies that are not well known but could be good opportunities. That’s my goal. I have had people ask me if they should be trying to manage their own money and investments or if they should just get a money manager or invest in a mutual fund. I’m not going to answer that question as it depends on the person, but I do want to make known that going that route does have some negatives.

Before I get to the negatives, I do want to start off by saying that going the route of money managers and mutual funds is not necessarily a bad thing. I plan to get into money managing one day as I’d like to own a fund of my own. Some funds do really well. The issue is that most do not. According to Morningstar, only 26% of funds beat the S&P 500 over the decade ending December 2021.

There are several reasons most funds underperform. First, amount of capital. A lot of these funds have Billions of dollars in them which actually limits the kind of investing they can even do. Even if they find a good small company that’ll go up tremendously over the next decade, it’ll be such a small part of their overall portfolio that it’ll barely matter.

Second, fees cut into profit. Obviously, fund managers don’t work for free. They take a fee from the money that they manage. Most funds have a .25%-1% management fee with actively managed funds being highest. These fees cut into profits.

Again, mutual funds can be a good option for people looking to invest their money, but there are negatives people should realize. If one is committed to going the mutual funds route, it’s important to research as much as possible as there are thousands of funds out there and most don’t beat the S&P.

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Should Warner Brothers Discovery and Paramount Merge?

According to Axios, Warner Brothers Discovery (Ticker: WBD) and Paramount (Ticker: PARA) heads met to discuss a potential merger. The process is very early, and there’s a very good chance that this doesn’t amount to anything, but as a shareholder in Warner Brothers Discovery, I wanted to give my thoughts.

Looking at this potential deal from Warner Brothers Discovery’s point of view, this makes sense for several reasons. One, this would make them a lot bigger and better position them to compete with Disney and Netflix. Two, this would give them access to very big IP (Intellectual property) to fuel their content library. Three, Paramount owns a lot of kid shows which would help Warner Brothers Discovery tap into that market.

This also makes sense for Paramount. Paramount needs to get acquired. They’re in a lot of debt. They currently have a market cap of around $10 billion and $15 billion worth of debt. They have been in talks about an acquisition and a merger with Warner Brothers Discovery would make sense for them.

The issue is that Warner Brothers Discovery also has a lot of debt. They currently have $43 billion worth of debt in fact. They have been paying their debt down as they have gone from $55 billion to $43 billion, but they obviously still have a lot of debt. Merging with Paramount could cause a lot of problems for them. It could hurt their credit rating and some of that debt could become immediately redeemable.

In summary, as a Warner Brothers Discovery shareholder, I like the idea of a merger between these two companies as it would create a very strong company content wise. I am, however, nervous about the idea of this happening from a financial standpoint concerning debt.

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