We are here to talk stocks, the world of business and finance and perhaps provide a little bit of entertainment. Each week, we will tackle some of the top stories in the financial world, but more importantly look at some stories and stocks that you may not hear about from mass-media, but should definitely pay attention to. We will also answer your questions from an analyst’s perspective on your stocks – so, feel free to send them in.
First off, I would like to welcome my cohost, KeyStone’s Senior Equity analyst, father of 1, and a man that I was recently informed secretly moonlights as the baritone in a local barbershop quartet known as the b-sharpe’s, Mr. Aaron Dunn. Welcome..
I am going to kick off this week with a lighter, but no less important story.
The U.K.’s Queen Elizabeth marked her 60th year on the Throne and her 90th birthday this past Thursday, and the monarch has every reason to celebrate.
Not only has she beaten the average U.K. life expectancy by nine years, apparently she’s stinking rich! According to Bloomberg Billionaire list the Queen sits on about £20 billion, or US$28.8 billion, which is enough to rank her 25th in the world, and ahead of high rollers such as investment guru George Soros, Microsoft, CEO Steve Ballmer and Michael Dell.
However, the ranking isn’t exactly accurate. The queens billions are not actually all hers (yes I was just informed that her Royal Highness has been secretly embezzling gobs of UK government assets for decades – ok, I just made that up). But seriously, her rather impressive assets, including swathes of U.K. property owned by the Crown Estate, the Crown Jewels and the Royal Art Collection – which aren’t the Queen’s private property and not for her to sell or manage – as much as she may protest – and we are told she doth protest mightily. Instead, they are held in trusts for future generations and help pay the royal family’s expenses, such as staffing, travel, hand waving lessons, Harry’s extensive shoe collection and upkeep for Kate’s hair.
So contrary to popular belief, the original Queen B, personally, is no billionaire. Ironically, the current Queen B, Beyonce, is, when combined with Jay Z, her King. But I digress, last year her royal highness was actually kicked out of the list of the top 300 wealthiest people in the U.K., according to the Sunday Times Rich List. Her fortune increased by $14.4 million, but there was a dramatic rise in other millionaires and billionaires – London’s one tenth of 1%. The paper estimated that the highness’s net worth stood at a paltry$489 million, putting her at number 302. Just outside of the 300 club, which bears no relation to the mile high club, of which we have been informed the Queen is actually a member of.
While the details of the Queen’s personal finances are closely guarded, Bloomberg has taken a crack at laying out the particulars. The breakdown of her capital showed the majority of the monarch’s affluence comes from the Queen Mother’s legacy, property ownership a whopping $75 million stamp collection, investment and property holdings and a $10 million Royal Stud – on the latter we are left to speculate whether they were referring to a horse or Prince Harry.
One of my biggest pet peeves is how the broader financial industry pushes overly complicated investment strategies on individual investors.
It is utter nonsense that your average investor should even contemplate trading derivatives. For those unfamiliar as to what Derivatives are (and you are not alone)- they are essentially financial instruments (such as a future contract, option, or warrant) whose value is derived from and is dependent on the value of an underlying asset. I mean no disrespect by this, but the average investor has trouble defining what they they have bought when they purchase shares in a public company – and this is a relatively simple concept. Hell, symbol stunned professional traders can hardly give you the simple answer. But give your average Joe Q Public an investment that is once or twice removed from an underlying asset and you are asking for confusion and loss.
Ladies and gentlemen, for the average investors, these products are not investing they are speculating and there is a big difference in risk profile between the two. But the strategy of trading derivatives is now casually slipped into the conversation for average investors as if it is as simple as buying a gun in America. It is not. Even the pro’s have a hard time consistently making money trading these potentially dangerous vehicles. Google the 1995 collapse of London-based Barings Bank which was the result of unauthorized derivatives trading by the bank’s well thought off head derivatives trader if you doubt me.
One of my favourite examples of how casually the financial industry tries to sell you on complicated strategies is a commercial that has run nationally on financial networks for years. To protect the innocent, the firm running the ad shall remain nameless. The point of the commercial is that the broker’s service is so simple and easy to use and profit from that with just the click of a mouse, you can be trading exotic derivatives. But, what really gets me is that about half way through this commercial, a well dressed client exclaims – and listen to this closely;
“When I can’t sleep at night, I trade S&P futures!”
Is it just me, or does that sound a little bit too casual to anyone?
When I can’t sleep at night, I walk into the kitchen, trip over the dog, grab a glass of milk, perhaps read a little and go back to bed. I am certainly not making investment decisions at 2:00am in a stupor, just because I can. But that is the way it is marketed to you. It’s frankly disgusting, overcomplicated, and completely unnecessary.
Our advice –the average investor who is looking for an edge that they can actually understand is better off educating themselves on buying good businesses (or have us do it for you) rather than trading stock symbols.
Simplify, stop overcomplicating your investments.
Your Stock/Our Take
RELIQ HEALTH TECHNOLOGIES INC. (Formerly Moseda Technologies Inc. Which was formerly
Shares Outstanding: 53,023,521
Share Price: $0.15
Market cap: $7.95 million
From their website RELIQ HEALTH which was formerly known as, Moseda, which was formerly known as, Golden Virtue Resources, states that they believe mobile technology, in combination with cloud computing and wearable devices, has reached the tipping point where critical security can be readily achieved and which ultimately creates a huge opportunity for entire market segments to increase their operational efficiency and efficacy. That is alot of buzzwords. From what we understand, Moseda developed a secure mobile platform that connects medical equipment so that, as an example, a doctor could have 20 patients using home-based testing equipment, which said doctor could monitor from his desk, rather than having each patient come into the office and self-report. Sounds interesting but does the company have any actual sales. In the last quarter we see $185,363, which is up from basically zero at the same time last year, but the company lost ($396,046) in the quarter. And $517,523, appears to be all the company has secured in sales in the last year.
For us, Moseda is so early stage – here is where we can really separate the worlds investing and pure speculation. With limited sales, no profitability, limited assets and a clear need for additional growth capital, the company is impossible to value based on existing or the prediction of future cash flows. At this stage, it is basically a gamble on management and the technology that has been developed to date. The company has some sales which is better than many, but to quote Kevin Oleary, they remain a tiny cockroach in their space. With only $597,331 in cash in the bank and the company losing over half that amount in the last quarter alone, it will likely be in need of more funds and sidling up to the investor trough, handing out more shares to try and fund growth. While its technology may have potential, potential does not pay the bills and Our Take is the stock is uninvestable.
One stock you heard about this week that you should ignore, another you did not hear about, but should pay attention to.
Essentially, we are flipping conventional or mass financial media on its ear. Pointing out the overreported stories or stocks that offer little value to you as an investor and highlighting underreported stocks and financial stories that can actually have a meaningful impact on your portfolio.
First we visit a story making headlines across Canada surrounding Bombardier Inc. (BBD.B.TSX), the embattled but always newsworthy manufacturer of planes, trains, and no automobiles. Rumours surfaced this week that Delta Air Lines and the Montreal-based airline manufacturer are close to a big deal for the company’s maligned C series plane. Apparently, the industry is abuzz with chatter about whether Bombardier has agreed to stretch the CS300 to include a plane for Delta that would offer as many as 175 seats.
An order from Delta it has been said would be a breakthrough – and I am doing air quotes – for the C Series. This is the same series which is more than two years behind schedule, more than $2-billion (U.S.) over budget and has put Bombardier in such difficulty that the Quebec government has paid $1-billion for an equity stake in the program, and the Montreal-based transportation giant is also seeking federal financial help – again. Please Mr. Trudeau, your Dad was so kind to us.
As a tax payer – perhaps this is will be a story if Justin opens the business slush fund – I believe strongly that in no handouts to businesses that cannot keep their own houses afloat. As an investor, who cares. Bombardier does not even pass the smell test. Because it continually needs cash, Bombardier has always had tons of coverage…every big bank and most mid-sized financial institution has covered it and recommended it for years. The company and its stock have been and absolute “tire fire” – from $26 dollars 15-years ago to close recently in the $1.80 range. Contract win or not, history has taught us that the company will find some way to miss-manage its way to long-term losses. Stay away from the stock!
Industry: Technology – Software Focus BUY Portfolio
Recommended: July 2015
Recommendation Price: $29.36
Current Price: $47.86
Market Cap: $1.7 Billion
Shares Outstanding: 33,678,000
Fully Diluted: 33,931,000
Ebix is a leading international supplier of software and e-commerce solutions to the insurance and financial industries.
This past week the company EBIX reported that it had officially signed a contract with Placing Platform Limited (PPL) to deploy a single insurance exchange across the entire London insurance marketplace which will facilitate electronic placement of insurance, while capturing and processing risks electronically.
The PPL Board signed the contract on behalf of the International Underwriting Association (IUA), the London & International Insurance Brokers’ Association (LIIBA) and the Lloyd’s Market Association (LMA). A total of 26 subject matter expert practitioners, representing both carriers and brokers, were involved in the selection process, drawing up a detailed description of requirements. After a thorough evaluation process, PPL selected Ebix’s team and technology for the provision, governance and management of the platform. Ebix also disclosed, in the April 15th news release, that its contract with PPL is primarily a subscription contract that is expected to generate upwards of $75 million over the next 5 years ($15 million per year) from the electronic placement exchange service, with more than 85% of that number coming from annual subscription fees payable to Ebix.\
Most importantly, the markets loved the news, sending the stock up 12% on the day and 20% for the week. For KeyStone clients, the stock is up 65% since we recommended it last summer.