Hundreds of investing and finance newsletters hit my (and maybe your) inbox every week. This is the best of the best.
This week, we bring you
- The Fed’s Liquidity Conundrum
- The Adult Playground Trend: Soho House Meets Game Night
- BlackRock’s Strategic Move Into Infrastructure
- China’s Housing Bubble Is Bursting
- Battery Battle: BYD Eclipses Tesla
- Is Entrepreneurship Booming… Or Are People Just Ordering More Takeout?
- 3 Stocks To Consider
Table of Contents
The Fed’s Liquidity Conundrum
Despite the Federal Reserve’s efforts at Quantitative Tightening, there’s still a surprising amount of money in the financial system.
This ‘money mystery’ has supported the stock market and involves the Reverse Repo Facility, which could lead to major issues in the repo market if liquidity drops.
Why isn’t this on anybody’s radar?
The Adult Playground Trend: Soho House Meets Game Night
The adult playground scene is booming.
Dave & Busters and Topgolf are now billion-dollar businesses, the board game market has a CAGR of 10%, and Casinos keep having record years.
Why is this happening and where is this trend going?
BlackRock’s Strategic Move Into Infrastructure
Within days of announcing 600 layoffs, BlackRock made a historic move by acquiring Global Infrastructure Partners for $12.5 billion.
This massive deal, their largest since 2009, makes them the world’s second-largest infrastructure investor.
Read more details from the folks over at Short Squeez.
China’s Housing Bubble Burst Could Echo Globally
via Vitaliy Katsenelson’s Contrarian Edge
China’s massive housing bubble, which has grown for over a decade, is finally popping.
This burst could lead to a significant decrease in demand for industrial commodities, affecting countries that have thrived on China’s growth.
What will this mean for global markets?
Battery Battle: BYD Eclipses Tesla
Wang Chuanfu has propelled BYD from humble beginnings to the dominant force in the EV space.
The Chinese electric vehicle giant has officially dethroned Tesla, selling three million electric and hybrid cars in China in 2023 and becoming the global leader in EV sales.
Read more from the team at The Stock Market Rundown.
Is Entrepreneurship Booming… Or Are People Just Ordering More Takeout?
In December 2020, U.S. business applications soared to a historic 457,000, a dramatic rise driven by the COVID-19 pandemic.
This surge, predominantly in retail and professional services, raises an important question about the underlying data.
Are we witnessing a renaissance of genuine entrepreneurship, or is this surge just a misinterpreted reflection of the gig economy?
What I’m reading
I get a lot of mail asking where I find all this good stuff. Here are a few of my favorite newsletters, all of which are free to subscribe to:
The “IKEA instructions for investing” to help you become a better investor.
I write this every weekday. All the content you need to get your investing day started off right.
1440 – All your news. None of the bias.
1440 scours 100+ sources so you don’t have to. Culture, science, sports, politics, business, and more—all in a five-minute read.
Stock ideas
Let’s check back in with the Yellowbrick Road for three fresh stock ideas.
Analysis provided by public.com.
Remember to always DYOR.
Paycom ($PAYC)
Bull Case:
- Consistent Growth: Paycom’s revenue grew impressively with a 37% CAGR from 2014 to 2019, maintaining growth even during the pandemic.
- Attractive Valuations: The stock’s current low price-to-sales and price-to-adjusted-EBITDA ratios suggest it’s undervalued.
- Innovative Platforms: The introduction of the Beti platform positions Paycom for potential growth in the HCM market.
Bear Case:
- Economic Headwinds: Inflation, high-interest rates, and macroeconomic factors have impacted Paycom’s growth potential.
- Growth Slowdown: A projected slowdown in revenue growth of 10%-12% in 2024 raises concerns.
- Cannibalizing Risk: New platforms like Beti might impact revenue per customer and cannibalize legacy services.
nVent Electric ($NVT)
Bull Case:
- Market Leadership: nVent is a leader in electrical connection and protection, expanding into data centers and liquid cooling.
- Innovation: The company’s collaboration with Hyperview enhances its technological capabilities.
- Financial Strength: Consistent revenue growth and a recent 9% dividend increase highlight nVent’s financial stability.
Bear Case:
- Valuation Questions: While current valuation metrics like P/E ratio appear sound, they might not fully account for business cyclicality.
- Debt Management: The company’s debt-to-equity ratio and long-term debt levels are notable and need careful management.
Applovin Corporation ($APP)
Bull Case:
- Market Growth: Applovin is in the rapidly growing mobile gaming adtech market, an industry with significant expansion potential.
- Technology Edge: Utilizing Axon AI for its app discovery platform, Applovin enhances advertising efficiency.
- Earnings Growth: The company projects earnings growth from $0.88 to $1.58 per share, indicating a strong business model.
Bear Case:
- Economic Impact: The macro environment poses risks to consumer spending in mobile gaming, impacting Applovin’s growth.
- High Valuation: Applovin’s high PE ratio suggests potential overvaluation relative to its earnings.
- Competitive Landscape: Intense competition in adtech, including challenges from major mergers and acquisitions, could affect Applovin.
That’s it for this week.
If you write amazing content and want to be featured, please send it through for consideration.
Cheers,
Wyatt
Disclosures
- There are affiliate links above; we’ll get a couple of bucks if you take action after you click.
- This newsletter was brought to you by our friends at Alto and pdfFiller.
- Nothing above is financial advice. DYOR, you filthy animal.
