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Diversified Financials Play - BUY Recommendation!
- Mohit Kumar
- Dec 21, 2021
- 3 min read
Market Summary:
The major indices are all sporting healthy gains at midday as yesterday afternoon's bounce continued in earnest this morning on Wall Street, thanks to the easing COVID fears. The U.K. decided not to enact stricter restrictions, for now, despite the surging case numbers, adding to the hope that the Omicron variant won’t prove as dangerous as initially thought. The most virus-sensitive issues gained ground in early trading amid the improving investor sentiment, with cyclical stocks and Treasury yields also enjoying tailwinds following three rough sessions.
Stock Pick Summary:
With our portfolio well poised for continued long term success and the market dipping significantly, we continue to add quality stocks to our portfolio. Today, we are doubling down on one of our recent picks. Nothing has changed in our thesis since the time we recommended it last time except that it is at a much more attractive price. The stock will likely stay volatile in the short term, but we want to look much beyond.
The company provides a proprietary, cloud-based, artificial intelligence lending platform. The platform aggregates consumer demand for loans and connects it to the network of AI-enabled bank partners. The revenue of the company is primarily comprised of fees paid by banks. It reported third-quarter earnings recently, and in our view, the company reported stellar numbers. Q3 revenue of $228 million was an improvement of close to 250% from a year ago, and the company reported a net income of $29.1 million for the quarter, against just $9.7 million for the corresponding quarter last year. However, the market was disappointed with the projections for the next quarter which did not meet the lofty (and perhaps unreasonable) street expectations.
Source: Q3 Earnings presentation
As economy gets back to the normal habits, Americans will look for credit facilities as they used to before the pandemic. And if the macroeconomic environment continues to improve from here on, we believe the company is likely to drive aggressive growth. Being a data-driven company, its success is highly dependent on its ability to maintain its already-proven credit verification model. To stay ahead of competition, the company has to feed a tremendous amount of data to its AI model, which is exactly what the company has been doing over the last four quarters. The auto-loan origination business, launched late last year, has continued to impress. It has originated more than 4,000 auto loans across 47 states, and tripled the number of auto dealers on its platform. The management is looking to launch a small dollar loan product, that may help connect millions of borrowers to its platform. That said, this a high risk investment in a potentially disruptive company which is not short of risks. Patient investors will need to digest volatility along the way for possibly a promising outcome as the thesis plays out.
Risk Meter:
Allocation Guidelines:
We don't recommend over investing in any stock. Consider starting with a small amount, say 2-3% of your portfolio's overall value, and add a little at a time.
You could invest as low as $200-$500 on a pick, and even buy just 1 or 2 shares, if you are new to investing, low on cash or just prefer going slow.
For best results, have an intention to hold your position for at least 2 - 3 years in general. However, you can always lock profits sooner if you prefer as every investor has a unique portfolio and different goals.
Consider investing in our multiple stock picks (the more the better).
The most successful members look to mirror our portfolio as much as possible.
Besides the new stock pick, you may also consider diversifying amongst some of the earlier picks from our market crushing portfolio.
Be patient and don't allow daily market swings to unnerve you. Remember, we have a pristine track record over last 10 years, so Buzz with confidence and patience.
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