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Half Of Goldman’s Ultra Wealthy Clients Will Be Adding Crypto To Their Portfolio

Half Of Goldman’s Ultra Wealthy Clients Will Be Adding Crypto To Their Portfolio

A recent analysis by CapGemini found that there are now a record 21 million millionaires in the world who hold a total $80 trillion in wealth among them. The…

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Half Of Goldman's Ultra Wealthy Clients Will Be Adding Crypto To Their Portfolio

A recent analysis by CapGemini found that there are now a record 21 million millionaires in the world who hold a total $80 trillion in wealth among them. The number of millionaires grew by 7.6% in just the last year alone, despite - or rather thanks to - the coronavirus pandemic.

Some have said that if each of these high net worth individuals were to buy and hold just one bitcoin, there would be no more bitcoins in circulation. Of course, that can't possibly happen: we know that a handful of whale hold the vast majority of bitcoins. So much so that according to JPMorgan just 5% of the roughly 18.7 million bitcoin currently in circulation have actually changed hands in the past year, meaning that millions of bitcoin are held by a handful of accounts.

Naturally, we don't expect every millionaire in the world to want to own bitcoin... but many of those who don't currently will want some exposure. That's what Goldman Sachs found recently when a survey among its family office clients (read very reach clients) want to add digital currencies to their stable of investments.

Goldman found that just 15% of of the respondents in the survey — which polled more than 150 family offices worldwide — are already invested in cryptocurrencies (which is almost identical to how many Americans in total own crypto according to a recent survey released from Gemini.) But what is remarkable is that another 45% would be interested in diving into the space as a hedge for “higher inflation, prolonged low rates, and other macroeconomic developments following a year of unprecedented global monetary and fiscal stimulus."

Unlike hedge funds, family offices which manage the net worth of single individuals and/or their closest friends and family, are unregulated and have no obligations to diclose their holdings, something which Credit Suisse and Nomura learned the very hard way after the Archegos collapse. It also shows that while many hedge funds are loathe to admit they have an interest in buying cryptos - perhaps due to fears of spooking some of their more conservative LPs - family funds have no such qualms and are preparing to unleash a buying wave the likes of which the world has never before seen and will eclipse any retail buying interest observed in the past.

And yes: we are talking size - of the firms that participated in the survey, 22% had assets under management of $5 billion or more, and 45% oversaw $1 billion to $4.9 billion. In other words, two-thirds of family offices manage more than $1 billion and if just a half of these funds allocated a few basis points to bitcoin and ethereum which would amount to hundreds of billions in new capital... well, the sky's the limit.

According to Bloomberg, respondents in the survey also indicated interest investing in the “digital asset ecosystem.” The majority of families want to talk to us “about blockchain and digital ledger technology,” said Goldman's Meena Flynn, who helps lead private wealth management for the vampire squid which has been aggressively growing into the bitcoin space. There are many who think that “this technology is going to be as impactful as the internet has been from an efficiency and productivity perspective."

In other words, they are not only richer but far smarter than Paul Krugman, who of course hates bitcoin, calling it a "natural ponzi scheme."

Family offices have proliferated this century, partly due to the boom in tech billionaires. According to Bloomberg, more than 10,000 family offices globally manage the wealth of a single family, with at least half having started this century, according to EY. A 2019 estimate by researcher Campden Wealth valued family office assets at almost $6 trillion globally, larger than the entire hedge fund industry.

The firms vary markedly in size. Some manage hundreds of millions of dollars, while others oversee the fortunes of multi-billionaires such as Sergey Brin and Jeff Bezos. Many choose obscure names to operate out of the public eye. Alphabet Inc. founder Brin’s family office, Bayshore Global Management, gets its name from the location of the company’s headquarters. Charles and David Koch named theirs after the year their grandfather emigrated to America: 1888.

They’ve also surged in number across Asia following booming fortunes of the region’s ultra-wealthy, with China’s Jack Ma and real estate billionaire Wu Yajun both establishing their own family offices in the past decade. Meantime, members of the ultra-wealthy based outside Asia including Bridgewater Associates founder Ray Dalio are increasingly setting up branches of their family offices in the area.

Tyler Durden Wed, 07/21/2021 - 13:00

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Will China Bail Out Evergrande?

Will China Bail Out Evergrande?

Submitted by Quoth the Raven at QTR’s Fringe Finance,

Markets took a shellacking on Monday as the world sits idly by and waits to see whether Chinese property developer Evergrande’s insolvency and leverage…

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Will China Bail Out Evergrande?

Submitted by Quoth the Raven at QTR's Fringe Finance,

Markets took a shellacking on Monday as the world sits idly by and waits to see whether Chinese property developer Evergrande’s insolvency and leverage come back to haunt the rest of the global financial markets.

The question that is going to drive the markets is whether or not the People’s Bank of China will eventually step in to provide some liquidity.

And while investors are worried that they may not, given the Chinese government’s new hawkish posturing with domestic companies, it is difficult for me to believe that they won’t help ring-fence the potential contagion from a credit event.

US investors are also on edge heading into what is believed to be a hawkish Fed statement on Wednesday, and few investors are considering what the Evergrande situation may actually mean: yet another excuse for US central banks and global central banks to delay or outright cancel a potential taper.

A complete scorched Earth default for Evergrande would be somewhere in the neighborhood of over $300 billion worth of unpaid bills and liabilities. While it’s certainly a sizable tranche of cash, and contagion from a major credit event would definitely ripple through markets, it isn’t going to be an unbearable shock that is going to seize up the entire global financial system. I know this sounds batshit crazy, but $300 billion simply isn’t what it used to be.

For example, the outstanding amount of money in all crypto markets right now is trillions of dollars being shuffled around trading assets that don’t even tangibly exist. I’m one of the few people that have noted that this may be cause for an eventual seizing up of global markets, but I don’t think $300 billion is a death blow.

The market isn’t seeing things my way Monday, but that’s fine: it’s the PBOC’s reaction this week that matters.

Sadly, part of my reasoning for thinking a bailout and/or ring-fencing is coming is simply the new climate (no pun intended) of central banking that we’re in. The pandemic has given central banks carte blanche to implement full-on MMT and saddle their respective nations with significant inflation as standard operating procedure.

The United States, for example, literally just papered over its entire economy for the entire year of 2020 by stacking $4 trillion onto the Fed’s balance sheet. What the hell is $300 billion?

Even if China wants to posture up and make a statement by not bailing out Evergrande, there’s no doubt in my mind it will help contain the contagion. And while China has been notoriously more careful with its Central Bank’s balance sheet and issuance of new money, something like $100 billion or $200 billion in liquidity - an amount that the Fed injects into the bond market in less than a week - isn’t off the table.

Putting aside what will be an obvious moral hazard disaster and one more step in the long-haul to the complete implosion of the entire financial system down the road, Evergrande right now seems like it may just be a blip on the radar and a quick problem that the Chinese central bank can “solve” to bring stability back to market in short order.

I would love your take on the situation.

  1. Do you think Evergrande will be bailed out?

  2. Do you think that if the Chinese government doesn’t build them out, it will still wind up bailing out the industry?

You can join the discussion on my blog "Fringe Finance", for free, by clicking here and scrolling down to the comments. 

Additionally, Zerohedge readers get 10% off an annual subscription to my blog by using this special link here.

Tyler Durden Mon, 09/20/2021 - 17:40

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Zoom Stock: Pandemic-Era Gains Likely to Fade

The post-Covid recovery has been anything but positive for Zoom Video Communications (ZM) stock.  In 2020, investors excited about the enterprise communications platform’s unexpected tailwind aggressively bid up its shares.
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The post-Covid recovery has been anything but positive for Zoom Video Communications (ZM) stock. 

In 2020, investors excited about the enterprise communications platform’s unexpected tailwind aggressively bid up its shares. Trading for around $115 per share pre-outbreak, it peaked at $588.84 per share shortly before COVID-19 vaccines began to obtain Emergency Use Authorization (EUA). Since the start of the vaccine rollout, shares have fallen by more than 52%.

After this decline in price, some may see this as an opportunity to “buy the dip,” ahead of this growth stock making a rebound.

The problem? After seeing mass adoption of its service, revenue growth is slowing down. Even worse, earnings growth is expected to be non-existent in the next fiscal year.

A slowdown in growth could in turn mean a continued move to lower prices. Its forward price-to-earnings, or P/E, ratio of around 57.6x may not be sustainable.

With the high chances it gets knocked down again due to valuation compression, I am bearish on the stock at today’s prices. (See ZM stock charts on TipRanks)

ZM Stock: Growth Story Slowing

As seen from its most recent quarterly results, Zoom Video may be continuing to grow on a year-over-year basis. For its fiscal second quarter (ending July 31, 2021), sales and earnings were up 54% and 65%, respectively, compared to the prior year’s quarter.

Sequentially though, the increase was not as substantial. Compared to the prior quarter (ending April 30, 2021), sales were up just 6.8%. Diluted earnings per share growth (from $0.74 cents to $1.04, or a 40.5% increase) may not have been anything to sneeze at.

Don’t expect this high level of earnings growth to carry on. The sell-side’s average estimate for ZM stock earnings in the current quarter is $1.09 per share. 

Looking further ahead, consensus calls for essentially zero earnings growth in the upcoming fiscal year (ending January 2023). Average estimates for earnings in FY23 come in at $4.85 per share, just a penny above the $4.84 projections for FY22.

Valuation

Admittedly, it could be shortsighted to write off ZM stock based on the analyst estimates mentioned above. Given that the company has consistently beat projections, it may continue to do so, even as its boom times have come and gone.

Then again, better-than-expected results in the quarters ahead may not save the day. Its current multiple of 57.6x could be sustainable if it was still able to grow earnings by 40%-50%, as it’s on track to do this fiscal year compared to last.

However, if earnings growth is falling to a still-solid but less exciting 10%-20% per year? That could mean a drop to a price that gives it a earnings multiple of 30x to 40x, on par with more mature tech companies like Microsoft (MSFT). In other words, a share price between $145.20 and $193.60 per share.

Worse yet, this potential fall in price is assuming that factors like the tapering of the U.S. Federal Reserve’s bond purchase program, and rising bond yields, don’t push overall markets lower.

What Analysts are Saying About ZM Stock

According to TipRanks, ZM stock has a analyst rating consensus of Moderate Buy. Out of 18 analyst ratings, 10 rate it a Buy, eight rate it a Hold, and none rate it a Sell.

The average ZM price target is $375.85 per share, implying around 33.9% upside from today’s prices. Analyst price targets range from a low of $304 per share, to a high of $460 per share.

Something Else

There may be something in the near-term that gives ZM a temporary boost: a termination of its proposed deal to acquire rival Five9 (FIVN) in a $14.7-billion all-stock transaction. 

News of this deal has also contributed to this stock heading lower. Why? Zoom was expected to see earnings dilution following the transaction close. Yet, with shareholder advisor Institutional Shareholder Services recommending that Five9 shareholders vote against the takeover, it may be soon off the table.

Even so, with a larger issue (earnings deceleration) still on the table, investors may find it best to wait for ZM stock to give up more of its pandemic-related gains.

Disclosure: At the time of publication, Thomas Niel did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

The post Zoom Stock: Pandemic-Era Gains Likely to Fade appeared first on TipRanks Financial Blog.

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Chipotle Stock: Valuation Leaves Little Room for Error

Chipotle Mexican Grill (CMG) has seen a significant increase in share price over the past year due to its improving fundamentals. The company owns and operates 2,724 Chipotle restaurants in the United States, 40 international Chipotle restaurants,…

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Chipotle Mexican Grill (CMG) has seen a significant increase in share price over the past year due to its improving fundamentals.

The company owns and operates 2,724 Chipotle restaurants in the United States, 40 international Chipotle restaurants, and four non-Chipotle restaurants. 

In Q2, sales grew 31.2% and margins improved as well. Although the future of the company looks bright, we remain neutral on CMG. (See Chipotle stock charts on TipRanks) 

Industry Analysis, Growth Catalysts 

Pre-pandemic, the global fast food and quick service restaurant market size was valued at $257.19 billion, and was forecasted to grow at a compounded annual growth rate (CAGR) of 5.1% from 2020 to 2027. 

The expected market growth is due to an increasing global preference for fast food among Generations X, Y, and Z, an increase in the number of fast-food restaurants, and technology advancements.

Of course, the pandemic disrupted things in 2020, but the underlying trend remains intact. Advancements, and the increasing adaptation of technology, have made it easier for people to get the meals they want. 

Think of apps like Uber Eats or SkipTheDishes, or curbside pickup options. People value convenience, and will pay for it by eating at restaurants such as Chipotle. 

Speaking of convenience, Chipotle is investing in it through opening more “Chipotlanes,” which are essentially drive-thrus. The good thing about Chipotlanes is that their unit economics are better than regular restaurants. 

Here is what Chipotle’s CFO, Jack Hartung, had to say about Chipotlanes in the most recent earnings call: 

“New Chipotlanes are opening with about 20% higher sales compared to the non-Chipotlanes opened during the same time period. Over the trailing 12 months, Chipotlanes restaurant continues to drive about a 15% higher overall digital sales mix compared to non-Chipotlanes, and it's skewed heavily towards order ahead, our highest margin transaction.” 

Chipotle anticipates that adding Chipotlanes will improve the company’s returns on capital. This makes sense because as mentioned in the quote above, Chipotlanes generate higher margin revenue, which should give a boost to overall margins going forward. Management also expects margins to increase in the long-term. 

Besides Chipotlanes, Chipotle opened a digital kitchen location in 2020 that offers only pickup and delivery. If CMG finds that it is worth it to add more of these locations, then it can be another growth catalyst going forward. 

With the opening of new locations and an expected increase in average unit volume (from $2.41M to $3M), CMG’s revenue is forecasted by analysts to increase by 25.7% in 2021, and 13.9% in 2022. 

Main Risks 

CMG’s stock is currently near all-time highs. It's up 42.8% year-to-date and 58.2% in the past year, versus 17.8% year-to-date and 27.8% in the past year for the S&P 500.

A lot of optimism could currently be priced into the stock, as one might be able to tell from the stock’s runup, 71.4x EV/FCF multiple, and 8.2x EV/Sales multiple, which is the highest this multiple has ever been with data going back to 2006. 

The high optimism leaves little room for error, and makes the stock vulnerable to large price drops on any disappointing news. 

As well, particularly from 2015-18, CMG had been involved in many food illness outbreaks which hurt the company’s reputation and financial performance.

If you are a Chipotle investor, keep in mind that another outbreak can happen at any time, and if it gathers lots of media attention, then it will certainly hurt the stock price. Nonetheless, this doesn’t seem to be a problem for now.  

Wall Street’s Take 

Turning to Wall Street, 23 analysts offered 12-month price targets for Chipotle in the last three months. Chipotle has a Moderate Buy consensus rating, based on 16 Buys and seven Holds. 

The average CMG price target is $1,913.45, with a high forecast of $2,600 and a low forecast of $1,600. The average price target represents 1% upside from current levels.

Final Thoughts 

Chipotle can continue to execute going forward, but the risk/reward is not great, as the stock is near all-time highs, and has an extended valuation.  

Disclosure: At the time of publication, Stock Bros Research did not have a position in any of the securities mentioned in this article.

​Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

The post Chipotle Stock: Valuation Leaves Little Room for Error appeared first on TipRanks Financial Blog.

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