It’s easy for investors to take big bets on companies like Google and Facebook. It’s much more challenging to find the fledgling startup that is set to become the next industry titan.
For decades, hedge funds have dominated public markets, through activists demanding major changes at blue-chip stocks or quants supercharging the speed of trading. Now managers are turning toward private markets, investing billions into top startups.
Managers like Tiger Global are pumping so much into private markets that traditional venture capitalists are grumbling that they can’t find any deals for their own clients, and more firms are expected to get in.
Insider compiled a list of the top 20 dealmakers at the most important shops.
After weeks of a sideways “chop” in certain stock sectors, August could be the month risk-on mode returns for the market, Fundstrat’s Tom Lee said in a note on Friday.
Lee highlighted that since early June, epicenter stocks collapsed while a handful of names in the technology sector moved higher and propped up broad market indices. The steep drop in financial, energy, and hotel/cruise stocks came amid a surge in COVID-19 cases caused by the delta variant.
Historically, not much money has been made in stocks in the month of August, especially when markets delivered strong gains in the first half of the year.
“August is not generally a great month for stocks. The win-ratio is low at 54% overall,” Lee said, citing an analysis of data going back to 1928. And when the S&P 500 is up more than 13% in the first half of the year, August returns average -0.50%, according to the analysis.
But these 3 reasons suggest to Lee that the stock market can buck its historical trend and enter risk-on mode.
1. “Seasonal analysis suggests USA Delta spike could end in next 10-12 days, or sooner.”
Lee highlighted that low vaccinated areas are seeing far worse seasonality in COVID-19 spread than higher vaccinated areas. An analysis of COVID-19 in the 5 largest counties in Florida suggest that a peak could be right around the corner, within the next week or two, according to Fundstrat.
“Florida has been among the worst USA Delta outbreaks. Thus, this is a positive inflection, if the cases turn down next week,” Lee said.
2. “Pfizer just released data showing 3rd shot significantly boosts delta antibody response by 5x.”
Data from Pfizer suggests that a third dose of its COVID-19 vaccine leads to a 100-fold increase in Delta neutralizing antibodies relative to a non-vaccinated person,, and a 5-fold increase relative to the second dose, Lee highlighted.
“The case for boosters is very high and is a sound policy strategy,” Lee said, while acknowledging the main challenge is convincing about a third of the US that has yet to be vaccinated to get their shots.
“But this should not change the fact that the Delta risk to the US is strongly diminished. And thus, we are seeing positive tilt on the Delta variant risk,” Lee explained.
3. “Bitcoin, the global non-US ‘risk-on’ proxy is pushing above $40,000 = risk on!”
Bitcoin is set to post its first positive monthly gain in four months, and its best week since February, as the cryptocurrency rallied more than 30% from $30,000 to $40,000. And Lee still expects bitcoin to close above $100,000 in 2021, representing potential upside of 163% from current levels.
“Bitcoin is the risk-on asset for emerging market investors, more than equities. Risk appetite seems to be returning in the past week,” Lee said, adding that the rally is occurring as a lot of bad news is priced in following China’s crackdown.
“So for now, we are upgrading our baseline expectations for August. Instead of ‘chop’, it’s ‘upside bias,” Lee concluded.
LendingClub’s revenue soared 406% year-over-year and massively beat analyst estimates, along with its earnings per share.
Here are the key numbers:
Revenue: $204 million, versus analyst estimates of $129 million. Earnings per share: $0.09, versus analyst estimates of -$0.40.
LendingClub expects the surprise profit in the second quarter to spill over into the third quarter, as it guides for third quarter net income of $10 million-$15 million.
LendingClub expects $9.8 billion to $10.2 billion of loan originations in its fiscal year of 2021, along with net revenue of $750 million to $780 million. That’s higher than its previous revenue guidance of $500 million to $530 million. Analysts were only expecting $583 million in revenue for the year.
Analysts were impressed with the results, with many increasing their price targets on the company. Credit Suisse, which increased its price target to $28 per share but remained Neutral on the company, said interest income from LendingClub Bank could represent the start of an “enhance earnings trajectory for the business.”
While shares hit a three-year high on Thursday, surging to $25.56, they were still down 83% from its record high of $146 reached shortly after its IPO in 2014.
In the broadest sense, a broker is a licensed mediator between a buyer and a seller. Broker services are used across a range of industries, including real estate, insurance, and of course, investing.
Investment brokers, or stockbrokers, act as an intermediary between investors and security exchanges, or marketplaces where stocks are bought and sold.
Historically, investment brokers held the keys to Wall Street and were the only way for everyday individuals to buy and sell stocks. But with the rise of discount brokers, the need for brokers by their traditional definition have declined.
Here’s what you need to know about the investment brokerage industry, and how online brokers have changed the landscape of investing as we know it.
A stockbroker is a type of broker that allows you to buy and sell stocks, bonds, and other securities. When you choose a broker, you open a brokerage account, which is a fundamental step to becoming an investor.
Securities are bought and sold on stock exchanges, like the New York Stock Exchange and Nasdaq. Because these exchanges require special access or membership to trade, investors need brokers to facilitate transactions.
Broker firms and individuals become members of specific exchanges by meeting certain regulatory standards set by the Financial Industry Regulatory Authority (FINRA).
In addition to executing orders, brokers also provide a range of educational resources and investing advice. There are three main types of brokers:
Full-service brokers: Traditional full-service brokers offer managed accounts that are overseen by a professional advisor. With a managed account, you agree to give the broker authority to make decisions on your behalf. Full-service brokers also offer a variety of perks including specialized market research and personalized advice. All of that, however, comes with fees, which is why they typically cater to well-heeled individuals.
Discount brokers: Discount brokers execute trades on your behalf but do not offer tailored advice. While they once were the exception, they’re now the norm, preferred by investors because they’re more affordable and charge zero commission fees. What they lack in specialized advice, they usually make up with a vast array of tools and educational resources.
Robo-advisors: Robo-advisors are automated investing platforms that select and manage investments on your behalf, typically in the form of ETFs or index funds. Robo-advisors appeal to those new to investing or those who prefer to be hands-off.
“In my experience, everybody wants full-service advice, but they just don’t want to pay for it,” says Winnie Sun, managing director at Sun Group Wealth Partners. “If all things were equal, if both costs were the same, without a doubt, people prefer full-service.”
A brief history of brokers
What do you picture when you think of an investment broker? Chances are, you might imagine a person in a suit, making frantic phone calls on the floor of a bustling stock exchange – which isn’t too far off from how things used to be.
In the past, only affluent investors could afford access to stock exchanges. Why? Because only high-net worth individuals – people with at least $1 million in liquid assets – were able to afford the service.
But with advancements in technology and the growth of the internet came the rise of online brokerages, which paved the way for a new kind of investor: the self-directed investor, or those who are willing to manage their own investing portfolios.
Today, the brokers most people are familiar with are discount brokers, which include names like Robinhood, SoFi, and WeBull. Many of these smaller firms offer online platforms that have made investing and trading more accessible than ever before.
The overall shift has led to larger brokerage firms – including Charles Schwab, E-Trade, TD Ameritrade, and Fidelity – to slash commission fees in recent years in the hopes of capturing a greater market share of self-directed investors.
Full-service brokers vs. discount brokers
Keep in mind that just because you can manage your own portfolio, doesn’t necessarily mean you should. There remain instances in which an investor, specifically a high-net worth individual or one with advanced financial needs (who doesn’t mind paying for the extra perks), may still wish to work directly with a full-service broker.
Deciding whether to work with a discount or full-service broker depends on factors like an individual’s investment knowledge and financial status. Most discount brokers who specialize in the stock market are able to charge low commission fees by operating through online platforms with low overhead costs.
“I don’t think one [strategy] is necessarily better than another, it’s just where you are in your life,” says Sun.
Though the lower cost is the major lure to working with a discount broker, it should be noted that they don’t offer investment advice, tax planning, or personal consultations on their clients’ behalf. Discount brokers simply execute orders for clients, offering lower fees by sidestepping the money otherwise spent closing deals for clients with a high net worth.
Broker regulation: What you need to know
Entrusting another individual or firm with your investment proceedings is a major responsibility, so it’s important that your broker meets certain criteria.
Sun advises those seeking to work with an investment professional to work with someone with this fiduciary designation. “It’s so important because you know that when someone’s giving you advice, they’re doing [with] your best interest [in mind], and they’re required to based on the licenses that they have,” she says.
In the US, registered brokers are required by the FINRA to pass the General Securities Representative Exam, a 125-question, multiple-choice test which comes with FINRA Series 7 certification when completed. The Series 7 gives a broker the authority to buy and sell most securities, but it doesn’t necessarily end there.
The Series 63 and Series 66 exams are also required by the FINRA to become a registered broker in various states, and the Series 53 exam permits brokers to buy and sell municipal bonds.
The financial takeaway
A broker is an individual or firm that buys and sells stocks on behalf of clients.
Stockbrokers, in particular, have evolved considerably with time, and now most commonly come in the form of online discount brokers.
Whether they’re rags-to-riches entrepreneurs or old-money heirs, many of the wealthy have created their own family offices to oversee their assets.
Citi estimates that as many as 15,000 family offices have been created in the past two decades alone.
Insider spoke with more than a dozen family-office professionals to find out who the wealthy go to when deciding to set up their own shops. Whether they’re lawyers or wealth managers, here are 21 must-know family-office experts.
Alphabet blew past Wall Street’s second-quarter earnings expectations as the company continued benefit from the massive uptick in digital commerce during the pandemic.
Google’s parent company brought in $61.9 billion in total revenue during the quarter, up 62% year-over-year, versus $56.1 billion expected by analysts.
A year after its first-ever revenue decline, Google’s ad business skyrocketed in Q2 2021 with $57.1 billion in revenue, up 69% year-over-year, driven largely by Google search ads, which brought in $35.8 billion in revenue.
The company said advertising revenue at its YouTube division rose 84% year-over-year to $7 billion.
Google Cloud earned $4.6 billion in revenue and cut its operating loss to $591 million in Q2, its third-straight quarter of revenue growth since Google started separately reporting the financial performance of its cloud division in Q4 2020.
Here’s what Alphabet reported, compared to what analysts expected, according to Bloomberg.
Total revenue: $61.88 billion (Expected $56.03 billion, according to Yahoo Finance)
Revenue minus TAC: $50.95 billion (Expected $46.08 billion)
Google services revenue: $57.07 billion
Google Cloud revenue: $4.63 billion (Expected $4.34 billion)
Net income: $18.53 billion (Expected $13.05 billion)
Earnings per share (GAAP): $27.26 per share (Expected $19.35)
Tuesday marked Google’s first earnings report since announcing in March that it would make a major shift away from precisely tracking individual users based on their internet activity, viewed by some experts as a move to entrench its dominance of the digital ads market.
Investors approach the stock market with a variety of goals. Many invest for the long-term, seeking to build wealth over time, while others trade for short-term profits – and many people do both. There are a variety of strategies for trading, but one of the most accessible to newcomers is swing trading.
Unlike day trading, where trading is extremely fast paced, swing trading is slower. This strategy is a great way to understand market movements and dip your toe into technical analysis. Here’s what the curious trader should know.
What is swing trading?
Swing trading is a trading strategy where investors buy a stock or some other asset and hold it – known as holding a position – for a short period of time (usually between a few days and up to a several weeks) in the hopes of turning a profit.
The goal of the swing trader is to capture a portion of any potential price movement or “swing” in the market. Individual gains may be smaller as the trader focuses on short-term trends and seeks to cut losses quickly. However, small gains achieved consistently over time can add up to an attractive annual return.
How does swing trading work?
The swing trader analyzes patterns in trading activity to buy or sell a stock in order to capitalize on price movements and momentum trends of stocks, typically, focusing on large-cap stocks since they are the most heavily traded. Because these stocks have high trading volumes, they offer investors insight into how the market perceives the company and their security’s price movements. This active trading offers the information necessary for what’s called technical analysis, which we’ll cover in the next section.
As with any style of trading, swing trading carries plenty of risk. Swing traders are exposed to several types of risk, the most common being gap risk, where a security’s price rises or falls significantly based on news or events that occur while the market is closed, whether overnight or during a weekend.
The opening price will reflect the shock of any unexpected news. The longer the market is closed, the greater the risk. Abrupt changes in the market’s direction also pose a risk, and swing traders may miss out on longer-term trends by focusing on shorter holding periods.
Example of swing trading
Let’s take a look at a real-world example of how a swing trader may analyze Amazon’s stock and determine when to buy or sell.
The candlestick chart above illustrates the “cup and handle” consolidation pattern, where the cup is u-shaped and the handle points slightly downward. This pattern is considered a bullish signal.
If a swing trader wants to make a profitable trade in Amazon, they would likely purchase the stock at the top of the “cup,” at or above the most recent high of $3,555. They should place a stop-loss order at the most recent low in the cup handle ($3,395). Therefore, the risk – the maximum loss on the trade – is $160 ($3,555 – $3,395 = $160).
At the recommended reward/risk ratio of 3:1, which is considered good, you’d need to sell at $480 (3 x $160 = $480) above the entry price, or $4,035 ($3,555 + $480).
Why risk management is critical in swing trading
Risk management is the most essential component in a successful swing trading strategy. Traders should choose only liquid stocks and diversify positions among different sectors and capitalizations.
Mike Dombrowski, head of capital markets at InterPrime Technologies, emphasizes the importance of risk management, saying that “each position should be roughly 2%-5% of total trading account capital. The most aggressive and professional traders may go up to 10% per position. That means a portfolio of five concentrated swing trades would represent 10%-25% of total trading account capital on average.
Having cash in reserve allows you to add to the best-performing trades to help generate larger winners. As always, the key to swing trading is to minimize losses.” He also notes that a desirable reward/risk ratio is 3:1, or 3 times the amount at risk.
Stop-loss orders are a vital tool in managing risk. When a stock falls below the stop price (or rises above the stop price for a short position), the stop-loss order converts to a market order, which is executed at the market price. With stop losses in place, the trader knows exactly how much capital is at risk because the risk of each position is limited to the difference between the current price and the stop price.
A stop loss is an effective way to manage risk per trade
Swing trading strategies
Traders can deploy many strategies to determine when to buy and sell based on technical analysis, including:
Moving averages look for bullish or bearish crossover points
Support and resistance triggers
Moving Average Convergence/Divergence (MACD) crossovers
Using the Fibonacci retracement pattern, which identifies support and resistance levels and potential reversals
Traders also use moving averages to determine the support (lower) and resistance (upper) levels of a price range. While some use a simple moving average (SMA), an exponential moving average (EMA) places more emphasis on recent data points.
For example, a trader may use 9-, 13- and 50-day EMAs to look for crossover points. When the stock price moves above, or “crosses” the moving averages, this signals an upward trend in price. When a stock price falls below the EMAs, it’s a bearish signal and the trader should exit long positions and potentially put on shorts.
Market extremes make swing trading more challenging. In a bull or bear market, actively traded stocks do not exhibit the same up-and-down movements within a range as they do in more stable market conditions. Momentum will propel the market up or down for an extended period. “[Traders should] always trade in the direction of the trend, taking long positions in bull markets and shorts when the markets trend downward,” says Dombrowski.
Swing trading vs. day trading
Swing trading and day trading have many similarities, but the most marked difference is the frequency of trades. Swing traders focus on short-to-medium term positions while day traders close out their positions at the end of each trading day. Day trading is a full-time job, requiring the trader to monitor market movements throughout the day and trade frequently. A swing trader can manage and trade on the side while still maintaining a full-time job.
Let’s look at the principal differences.
Mulitple trades per week
Multiple trades per day
Time required to trade
Can be done periodically
Requires constant attention
Number of transactions
Many intra-day transactions
Gains and losses accumulate slowly
Gains and losses accumulate more quickly
Specialized trading software
The financial takeaway
Swing trading is an easy way for new traders to get their feet wet in the market, with traders typically starting with $5k-$10k, although less is acceptable. The cardinal rule though is that this capital should be money the investor can afford to lose. Even with the strictest risk management, the unexpected is always possible.
More importantly, swing trading doesn’t demand the same level of active attention as day trading, so the swing trader can start slowly and build the number of trades over time. But it does require the investor to take a deep dive into technical analysis, so an aptitude for charts and numbers is necessary.
For traders willing to spend time researching stocks and developing an understanding of technical analysis, swing trading offers the potential to accumulate attractive profits, slowly but steadily, over time.
Cathie Wood’s Ark Invest is rapidly shedding its positions in Chinese technology stocks amid an ongoing regulatory crackdown by Beijing.
On Friday, Ark Invest sold the last remaining shares of its stake in Tencent, and is quickly shedding KE Holdings, an online property website based in China, and JD.com, according to Ark’s daily trading updates. KE Holdings fell as much as 26% on Monday.
The latest regulatory crackdown in China hit education and tutoring companies on Friday, with companies like TAL Education, Gaotu Techedu, and others plunging more than 50%. China said it is banning tutoring on holidays and weekends for students to lessen the burden of schoolwork, which makes up a big chunk of the tutoring companies business.
All in all, the uncertain regulatory environment for Chinese stocks has led to an investor exodus from popular names like Tencent and Alibaba, which were both down as much as 10% and 7% in Monday trades, respectively.
Mainstream retail investors are trying to get into private market investments.
Wealth and asset management firms are trying to meet clients’ demand with new products and hires.
Here are some of the people connecting firms and investors with alternative investments.
Investors are flocking to the growing world of private markets.
Asset managers and wealth management businesses have been scrambling to keep up with the demand from investors seeking alternatives to mainstream mutual funds and ETFs and looking to tap into big names staying private for longer.
Asset managers are increasingly focused on developing new alternative investments, namely private equity and credit, and getting those out to wealth-management firms, financial advisors, and their clients.
Wealth managers are also seeking to bolster their menus with products that were previously considered too risky or expensive for client access.
From private equity giants like Apollo Global Management to massive money managers like BlackRock, firms have been ramping up their distribution efforts.
In May, Apollo Global Management formed a unit to sell more of its products to wealth managers and individual investors. That month, Pimco hired executives from Blackstone and Wells Fargo to lead similar efforts. In June, T. Rowe Price poached a Pimco executive to oversee alternatives distribution. And KKR’s private-wealth team has tripled in size in the past year.
Insider has pinpointed key leaders pushing asset managers’ alternatives products to clients.
Analysts expect wealth managers’ allocations to alternatives for their clients to continue to grow. Morgan Stanley and Oliver Wyman pegged illiquid assets and alternative assets for the ultra-high-net-worth set to increase to $24 trillion in 2024 from $16 trillion in 2020.
Meanwhile, the US government has worked to get private equity and credit into the hands of small-time investors by loosening restrictions on what qualifies a person to invest in the space and allowing private equity in some retirement funds.
An enormous amount of due diligence and risk management is required when allowing more exotic investments into the hands of financial advisers’ clients as they can often be illiquid and less transparent.
Insider has identified major wealth managers’ top executives responsible for overseeing the menu of alternative investments that firms and their advisers can choose for clients.