Running on fumes?

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Above is the chart that I am watching for the Dow Jones Industrial Average. The market seems to be going up on fumes right now, and I am very cautious about the stock market in general.

I have been out of the market for some months now, and my strategy is to accumulate cash for what I think is a significant top that should last for a long time. Looking at the sentiment in the market, everyone is way too optimistic right now is my guess!

A few tips on buying gold

My analysis tells me that most assets could see a drop in value compared to cash, and thus I am not fond of investing in gold either. However, depending on which currency you are holding there can be a reason for having some gold anyway as diversification.

Now, how do you go about investing in it? Well, you could buy an ETF like GLD but if the storm hits you will not really have any physical gold anyway so that is not a good idea.

If you don’t want to store your precious metal yourself you can use a service like www.goldmoney.com where you pay a fee for the storage and a spread for your purchase. With this service though the spread is only 0.5% which is good enough but then you also have to pay for storage. Overall Gold Money is a good service which I have used myself and I recommend it.

If you would like to store your own gold and be able to look at that shiny piece of art each day then you can find various services on the web. Beware though for service providers that want to fool you on the spread. Living in Sweden I have looked at a few suppliers and the cost varies quite a bit.

One example is Gold Direct where you pay a spread of 3.18% for a 100g bar and above 11% spread on coins. Coins are more expensive than bars and for pure investments, you should always go with the bars!

Another example is Norsk Svensk Guld AB where the spread is 2.56% on the 100g bar.

Happy investing!

 

Keep your money machine going with minimal exposure to the stock market

The stock market is less attractive

The US stock market continues to make new all time highs and I have continued to lessen my exposure. I have secured profits by selling stocks into the climb. I am now focusing my investment capital on alternative investments like lending to companies and individuals. I am doing this through Kreditborsen.com and I am accumulating cash.

Gold is not a good alternative in a deflationary environment

I have previously made a few investments in physical gold through Goldmoney who offers a service for this. If we would end up in a deflationary period any investments in gold or other commodities will be bad alternatives. All assets except pure cash depreciates in value in a deflationary environment. Because of this risk I have also closed my gold investments.

The risks with investments in loans

I do not recommend that you place all your investable capital in peer to peer loans. Sweden and Finland are however very good alternatives for these activities since they have a functioning government collection agency. If the economy gets worse it will obviously impact a lot of borrowers who will not be able to pay down their loans at the agreed pace. As long as creditors and loan agents have done their homework before approving loans the payment plans will be possible to extend in order to solve the situation. It is very important to use personal guarantees and other form of security when working with corporate lending.

Focus on absolute returns and compound interest

My general reasoning for investments are very similar to the writings of the sound investor Per H Börjesson.

Focus on absolute returns and compound interest over time in order to grow the investment capital exponentially. My goal is a return of 10-15% per year where loan investments are an important building block.

By using a service like Kreditbörsen (The Credit Exchange) where income is paid out to my account daily and automatically invested in new loans I receive great diversification. This is taken care of without me having to do a lot of work like having to evaluate which loans to participate in.

I recently participated in an interview at  Kreditbörsen where I spoke about our history and how the service works which you can read here.

If you save 100 each month for 30 years with a return of 10% per year and you obtain interest at least one time per month your capital will appreciate to 230,000. The chart below shows how quickly this grows in the end with the increased exponential effect.

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When your capital is at 230,000 you are making almost 1,900 per month from interest.

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It is never too late to start and the more capital you save the quicker the effect.

Selling some stocks, shorting bonds and investing in peer to peer loans

The stock markets are continuing to raise and the US is shooting for a new top.

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I took some profits today in order to reduce my risk for my trading positions and re-allocate some capital. An example is Atlassian (TEAM) where I removed the larger position which I established at the last dip during the end of February.

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During August 2016 I started to initiate a short position in bonds through the ETF with the symbol TLT since I am convinced that the interest levels will rise quite a bit. It turned out to be quite a good trade when the first wave down started for the bonds and since December I have been flat in TLT. A few days ago I initiated a short position again around 124 but I had not participated that the fall would come so fast since I wanted to establish a larger position so now the trade is relatively small.

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The capital that became available from the stock sales I have allocated towards peer to peer loans which I am a big proponent of and I use Kreditborsen (the credit exchange) for these investments. Through the service I get 10 – 15% returns per year which is hard to compete with when measuring the associated risks of other investments. I work with focused investments but I like to spread my bets a bit.

In general I work with one trading portfolio where I act more actively with stocks and ETF’s. I also have long term stock portfolio with a few long term holdings in a Warren Buffet manner! Outside of this I am involved with a few companies and a lot of investments in peer to peer loans to get long term cash flow which I think works better than dividend stocks.

Good luck and remember to book some profits.

/Stefan

Weekend analysis

Intrinsic Value is a tool that I am using to value my long term portfolio holdings in order to arrive at a value of the free cash flow that a company is generating.

For a while I have thought about establishing positions in ICA, Hufvudstaden and Hennes & Mauritz. With regards to H&M I wanted to wait for the report that was released during the past week before executing any purchases.

Hennes & Mauritz

The stock has fallen in price since the start of 2015 where the worry about lower margins and growing inventory has escalated.

Management does not seem to stand by and watch and they are taking steps to correct the problem. If I conduct a simple calculation and use 18.5 billion as the rolling 12-month earnings and 4% as the annual growth rate for the next 12 years and then 1% growth for the future together with a risk free interest of 3% I get a stock value of more than 700 SEK. The value of the free cash that H&M is generating should be valued a lot higher than the current share price of 229 SEK per share.

ICA Gruppen

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The price of the ICA stock has consolidated since the beginning of 2015. The last report shows an annual profit of 3.4 billion. If I use an annual growth factor of 1% per year I arrive at an intrinsic value per share of 817 SEK. The stock closed at 305.80 this Friday and offers a very high margin of safety. I have started to acquire ICA for my long term portfolio.

Hufvudstaden

Hufvudstaden is the company within properties that I like the most currently. I both like their long term operational growth and the low leverage that they have. For my intrinsic value calculation I am using the annual operational income of 1.226 billion with a growth rate of 5% per year for the next 10 years and 1% per year after that.

The value per share that I arrive at is therefore 410 SEK per share which offers a great margin of safety compared to the current share price of 130 SEK.

Summary

The holdings in my long term portfolio is not there to be sold but to be owned. I do not care about short term fluctuations and the general stock market in the same way as I do for my shorter term trading portfolio. I have started to accumulate shares of the three companies mentioned above.

/Stefan

Breaking down the 4 main hurdles for FinTech companies

FinTech startups looking for a breakthrough in today’s marketplace are facing a few key hurdles that I am trying to address, and offer solutions to, in this article.

Having founded, operated and sold a few FinTech companies during the last few years I have faced most of the issues that come up along the way including technical, financial, legal, operational and sales related issues.

I founded my first company in 1998 where I published stock market research online through a web based service and became a writer of some premier periodicals in Sweden. I then built automated algorithmic trading systems and set up my US-based hedge fund in 2001 before opening a prop trading operation in Sweden in 2003.

In 2005 I founded and built the company that is currently called ayondo and is scheduled for a listing on the Singapore Stock Exchange during the first half of 2017 at a valuation of $158 million.

During 2010 I sold most of my stake in ayondo and founded Bricknode to develop a horizontal financial platform to work as a “Windows for finance” in order to support any future financial services that I wanted to build. Since then Bricknode has invested over $3 million of income from customers and over $2 million through our own investments into building the platform. In 2010 I also founded Willebrand Invest (publ) where we invest in FinTech companies and can help entrepreneurs to realize their dreams within the financial technology industry.

In 2011 I built the first financial service as a vertical on the Bricknode platform in order to offer peer-to-peer lending for consumers and companies through a company group that is now called LendyTech with 30,000 customers generating more than $3 million in revenues and more than $1 million in profits.

The lending software is offered by the company called Lendysoft who is a partner to Bricknode.

So, through this journey I can truly say that I have faced most issues that a FinTech entrepreneur will have to deal with and the key challenges, in my humble opinion, are the following.

  1. Time to market due to lack of a technical core platform
  2. Lack of access to customers and early adopters to verify the product
  3. Access to financing
  4. Access to support and education

Each time I wanted to build a new service I was faced with building a new core from scratch with the regular stuff like user management, accounts, transactions and then connecting add-on services like market access, credit lookup services, quote providers…and the list goes on.

With Bricknode Financial Systems (BFS) as the core a FinTech company can get access to a number of partners as illustrated by the image below and the standard objects needed to quickly build the user facing application by utilizing our open API.

FinTechInnovators

A recent example of this is Pensiono, a pension innovator in Sweden, who is using BFS to launch a whole new insurance company, Svenska Fribrevsbolaget, with a very short time to market.

BFS is offered as a SaaS product where you only pay for what you use, simply navigate to the website and sign up with your credit card and you have the complete toolkit to build your next FinTech application starting at $60 per month!

Now what?

Well, once you have built your beta version, or your first full version for that matter, you need a way to try this on customers. With Bricknode you can publish your application in the Bricknode Marketplace or ask to be introduced to a few Bricknode customers that could try your application and submit feedback to you. This way you can structure a limited live test of your service and communicate directly with a select number of your prospective customers.

The third hurdle is financing, depending on your service you need staying power, or a HUGE amount of staying power!

If you have the resources the best way is to put your money where your mouth is and fund the company yourself initially. This way you show investors that you are assuming the most risk yourself and that you truly are putting both your finances and your standard of living on the line for this dream of yours.

If you don’t have enough resources you need to look for some initial funding or partner up with someone who can help you with this. I funded my first trading operation with $1,500 from my father, had a job during the day and worked nights on my own operation before I got accepted to a government program for people that wanted to start their own companies and got a minimum salary sponsored by the government for the first 6 months.

To help entrepreneurs through this step I am using my investment company, Willebrand Invest, who can make some seed investments and together with my loan platform Kreditborsen.com (Loan Exchange) we can also offer partial loan financing.

Bricknode also has a FinTech sponsorship program where you can get access to the whole platform in a sponsored way.

Finally, a new FinTech company usually needs support and education along the way and Bricknode has a huge Knowledgebase with information of how the financial marketplace works on the inside. If you get accepted into the sponsorship program you will also enjoy free admission into the educational events offered by Bricknode and free support with your use of the platform and its API.

To summarize, me and my teams have spent the last 7 years developing a platform and support system for bringing better financial services to the market for you and I to use and we are just now offering this publicly.

Consider where you are with regards to the four hurdles and I hope you get in touch with us if you have some crazy ideas!

/Stefan Willebrand

Trading update

The continued trading result has been very good, looking at Adobe I last wrote about the breakout from resistance when the stock was around $113 per share and I increased my position just above $113.

Adobe then had a run up to $122 and I have taken off my excess position size and I am only keeping my core position in Adobe while waiting for a correction in the stock.

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The next stock that I have been trading around is Atlassian where I sold my excess position just below $30 per share and then re-entered into the pullback at $29 and $28.50. The stock is now starting to turn up again with great fundamentals and I would be looking to take some profits again around $32.

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I have also started to establish a long position in Gold again since I think it is establishing a bottom in the short term.

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Finally I also have positions in Japan through the ETF called EWJ and I am looking to get back in to India through the ETF called INDA.

Through my public investment company, Willebrand Invest, I am also looking to enter into a new share offering from the FinTech company Pensiono who started their public funding round today at the crowd funding site Pepins. Pensiono is a platform customer to Bricknode (the financial platform and ecosystem provider for FinTech companies and financial institutions where I spend most of the time when I am awake, probably also when I am asleep…).

Best regards,
Stefan

Blow out move for Adobe

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Adobe (ADBE) sprinted through resistance today and obviously I am sorry that I took some profits yesterday. You can’t nail them all and its not good to be greedy 🙂

So, now I am sitting with my base position and awaiting the next pullback to add on again.

Adobe is pushing new highs

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Adobe (ADBE) has pushed above its previous high now and I took some profits on that move since I bought more share around 103.50. The area around 111 is a short term tell, if the stock can close around today’s high we might see a few more days with gains but if it closes below 111 I would bet on at least a short term pull-back where I can increase my position again.

Time for earnings release from Atlassian tomorrow

My favorite stock, Atlassian (TEAM) is due to report earnings after the bell tomorrow and the estimate is for -0.02 with the low estimate at -0.03 per share. I love the long term growth story here but I have increased my position on the way down with the latest entry around 24.5 and I am looking to take a little bit off prior to the report just to be prudent.

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Continued good news for Adobe and Gold is ready for a pullback

Adobe (ADBE) is continuing to raise from the bottom around 103 and has announced that its purchase of TubeMogul is finalized. This is a strategic acquisition for Adobe and as I wrote in my last post I am looking to hold Adobe for the long term. I am however trading around my core position which means that I am buying more when the stock drops and then I am selling some of that extra inventory when I get a short term appreciation in price.

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I am also looking at Gold (GLD) where the metal has had a good run to the upside lately and now I am looking for a pullback where I can establish a position again.

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