Undervalued Compounders With Insider Purchases and Buybacks
- Rupam Deb
- May 5, 2022
- 5 min read
Negative news is still coming in thick-and-fast.
The stock market seems to be still worried about inflation fears, Ukraine-Russia political tension, COVID-related lockdown in China, a possible recession in 2023 as predicted by Larry Summers, and so on.
The steady stream of dreary news has affected sentiments of investors (or should we say traders?).
Year-to-date, the S&P 500 index is down 13% while the Nasdaq has fallen 21%.
However, we (Rupam, Fun Liang, and Sudhan) at MoneyWiseSmart are unfazed as we are investors with the long term in mind. Warren Buffett’s quote on macro events and investing is worth highlighting at this juncture.
In his 1994 Berkshire Hathaway shareholders’ letter, Buffett wrote at lengths (it’s worth reading and internalising every single sentence below):
“We will continue to ignore political and economic forecasts, which are an expensive distraction for many investors and businessmen. Thirty years ago, no one could have foreseen the huge expansion of the Vietnam War, wage and price controls, two oil shocks, the resignation of a president, the dissolution of the Soviet Union, a one-day drop in the Dow of 508 points, or treasury bill yields fluctuating between 2.8% and 17.4%.
But, surprise – none of these blockbuster events made the slightest dent in Ben Graham’s investment principles. Nor did they render unsound the negotiated purchases of fine businesses at sensible prices. Imagine the cost to us, then, if we had let a fear of unknowns cause us to defer or alter the deployment of capital. Indeed, we have usually made our best purchases when apprehensions about some macro event were at a peak. Fear is the foe of the faddist, but the friend of the fundamentalist.
A different set of major shocks is sure to occur in the next 30 years. We will neither try to predict these nor to profit from them. If we can identify businesses similar to those we have purchased in the past, external surprises will have little effect on our long-term results.”
We are seeing the current macroeconomic situations as opportunities to deploy more of our hard-earned money into high-quality compounders. Such compounders have fallen in share price over the last many months, but their businesses have not faltered.
Since there are opportunities abound with the companies, we are ramping up our research to give our subscribers more value.
Fintech Meets E-Commerce
We are happy to announce that we have released a new company research to our Multibagger Research Series (MRS) subscribers.
That company is Singapore-listed fintech firm iFAST Corporation (SGX: AIY).
iFAST is a wealth management fintech platform headquartered in Singapore. It provides a wide range of investment products and services to financial advisory companies, financial institutions, banks, internet companies, multinational companies, as well as retail and high net worth investors in Asia.
Currently, iFAST offers access to over 14,000 investment products including funds, bonds, stocks, exchange traded funds (ETFs), insurance products, and services including online discretionary portfolio management services, research and investment seminars, fintech solutions, investment administration and transactions services.
From 2017 to 2021, iFAST’s total net revenue grew from S$49.4 million to S$113.2 million, translating to an annualised growth of 23% while its free cash flow surged 34% annually during the same period.
iFAST is currently working on a four-year plan to grow its business even further. Its recent acquisition of a UK-based bank is part of its plan to have a truly global business model.
We are also organising an Ask-Me-Anything (AMA) session for our MRS subscribers to ask any iFAST-related questions to its senior management team. We will notify you of the event details in a separate email at a later date.
Meanwhile, we are also working on a deep dive into Canadian multinational e-commerce company Shopify (NYSE: SHOP) (TSE: SHOP).
Shopify is a Canadian e-commerce company offering simple software solutions for people to build their e-commerce website easily, and run their omnichannel retail business centrally from Shopify’s platform, including managing and fulfilling the orders for their offline retail, online website, marketplaces (like eBay, Amazon, JD.com, etc), and social media stores (like Facebook, Instagram, TikTok, etc), easily all from a single platform.
It has two million merchants now (at end 2021), with US$175 billion of gross merchandise value facilitated by its platform, making it the second-largest online retailer in the United States (after Amazon). This allows Shopify to negotiate, on behalf of all the small merchants (and empower them with), good rates for the various services that they need (like shipping, fulfilment, payments processing, etc), which otherwise are accessible only the large enterprise merchants.
Driven by the shift of retail to e-commerce tailwind (which was accelerated by the Covid-19 pandemic), from 2016 to 2021, Shopify has grown its revenue and gross profit by 64% a year to US$ 4.6 billion and US$ 2.5 billion, respectively, in 2021. This has made Shopify to be the largest player among its competitors providing online e-commerce platforms (like Wix, Squarespace, GoDaddy, and BigCommerce).
Interestingly, Shopify’s share price right now is way below its pre-Covid peak seen on 14 February 2020, despite it having attracted much more merchants to use its platform and various other merchant services during the Covid period.
Source: Google Finance
While this in itself may sound like a great buying opportunity to scoop up Shopify shares, stop! As always, you have to thoroughly understand a business’ ins-and-outs before putting your hard-earned money into it. Our in-depth research will help you cut short your research time since we have already done most of the heavy-lifting for you.
Over to Our YouTube Channel
Another company whose share price has been hammered of late is Meta Platforms (NASDAQ: FB).
The parent company of Facebook saw its share price crash after it announced its 2021 fourth-quarter earnings in early February 2022.
The market was spooked by a dismal forecast by the company, blaming Apple Inc’s (NASDAQ: AAPL) privacy changes and increased competition from social media platforms such as TikTok.
However, here at MoneyWiseSmart, we believe that the market grossly misunderstands Meta’s overall business, and the steep fall in its share price is unwarranted.
In this video, we highlight topics such as Meta’s business model, financials, and growth prospects. We also explore whether the share price collapse presents a buying opportunity.
Option Series Tutorials for Our Subscribers
Every month, Options Series (OS) program subscribers have a tutorial where Rupam will go through some of the options strategies and concepts.
Last month’s tutorial had to be postponed to this month as Rupam was at a tucked-away location with no proper internet connection (in a remote village in the Himalayas).
(Photo from Rupam from his holiday)
So for the month of April, we conducted two OS tutorials (one on 14 April and the other on 28 April).
We also held Part 5 of the ATM Strategy tutorial for our Diamond-level OS subscribers. Rupam went through the 10 Commandments of the ATM Strategy and many more during the interactive session.
You can catch up on the recordings from the respective OS courses if you had missed them.
Free Resource: Learn to Generate Cash Flows When You Need it the Most
There are a vast number of discounted opportunities available in the stock market right now. But one stumbling block could be the lack of cash to take advantage of them.
Fret not!
At our Option Series Program [Free Preview], we teach you how to generate cash when you need it the most.
In the course, you will learn:
Ways of using options to fund your long term investments
How to position yourself to be able to acquire more shares of your chosen businesses at attractive prices
And many more
Get started now and generate the cash flows when you need it the most!
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