Is an Alzheimer’s Drug a Good Investment?
The Alzheimer’s drug, aducanumab, has been given a new lease on life after a phase III trial was previously halted. Unlike other treatments for Alzheimer’s disease, aducanumab has the potential to halt the progression of the disease instead of just treating symptoms. The drug was discovered by Neurimmune and is licensed by Biogen Inc. The medical significance if this drug passes all trials and becomes available for treatment is great. But, is an Alzheimer’s drug a good investment?
Aducanumab
Aducanumab is a human monoclonal antibody. Unlike antibodies that the body produces to fight infections, aducanumab targets beta-amyloid which is the material that is found in the brains of patients with Alzheimer’s disease. The plaques are toxic to nerve cells in the brain. The rationale for aducanumab is that it can stop the buildup of beta-amyloid and therefore the progression of Alzheimer’s. The drug had progressed to a stage III FDA trial. This means that it had been demonstrated not to cause any bad side effects and that it helped in animal studies. In stage III the goal is to prove that it has a statistically significant effect on the progression of Alzheimer’s disease.
Likely FDA Aducanumab Approval
Stage III testing of this drug was halted in March of 2019 when it was believed that it would not meet expectations and fail testing. However, re-evaluation of the study results showed that it might work after all. Thus phase III trials have been resumed. So far studies show that patients taking a high dose of this drug have a 23% reduction in their rate of decline from Alzheimer’s disease. Now the FDA has indicated that the drug is safe and effective which will clear the way for its FDA approval as a treatment for Alzheimer’s.
Current Alzheimer’s Drug Treatments
The Mayo Clinic website lists four drugs currently available to manage symptoms of Alzheimer’s. Three cholinesterase inhibitors that help symptoms in mild to moderate disease are Donepezil (Aricept), Galantamine (Razadyne) and Rivastigmine (Exelon). These drugs help until the reduction in viable brain tissue reduces the amount of cholinesterase to inhibit. The other drug which is used on more severe stages of the disease is Memantine (Namenda). This drug also helps symptoms but does nothing to slow the progression of or cure the disease.
Increasing Incidence of Alzheimer’s Disease
The number of Americans currently with Alzheimer’s is 5.8 million.
Millions of Americans have Alzheimer’s or other dementias. As the size and proportion of the U.S. population age 65 and older continue to increase, the number of Americans with Alzheimer’s or other dementias will grow. This number will escalate rapidly in coming years, as the population of Americans age 65 and older is projected to grow from 55 million in 2019 to 88 million by 2050.
The current incidence of Alzheimer’s in people aged 65 and older is 10%. As the number of people in the older age group increases so will the number of people suffering from Alzheimer’s. Treatment of Alzheimer’s will be for the rest of the person’s life and so long as the medication helps. Thus treatment with aducanumab could be for decades. This would be a significant income stream for a company like Biogen.
Biogen
Biogen is an American multinational biotech company that currently trades for $324 a share on NASDAQ. Its primary focus is treatments for neurological diseases but the company has many other types of drugs. Their current list of drugs includes treatments for multiple sclerosis, chronic lymphocytic leukemia, spinal muscular atrophy, psoriasis, hemophilia A, and hemophilia B. Drugs in development by Biogen include treatments for acute optic neurites, lupus nephritis, idiopathic pulmonary fibrosis, neuropathic pain, and amyotrophic lateral sclerosis (Lou Gehrig’s Disease) along with aducanumab.
Biogen stock has had a very bumpy ride over the last seven years as investors have alternately loved and hated the stock due to the success or failure of its drugs in clinical trials. While it currently sells for $330 a share the price has been as high as $380 a share in 2015 and as low as $234 a share in 2019. Investors who got in by 2000 saw the stock go from $40 a share to its current price. The stock has a P/E ratio of 10.98, does not pay a dividend, and would see a nice addition to its income stream if aducanumab becomes a mainstay for Alzheimer’s treatment.
However, their Alzheimer’s drug will only be part of their product line, albeit a profitable one for a long, long time.
Is an Alzheimer’s Drug a Good Investment? – Slideshare Version
Post-election Stock Market Rally
What are the chances of a significant post-election stock market rally? A Biden victory coupled with Democratic control of the senate will stimulate the economy but will it stimulate the market? The stock market has gone up 650 points to start Election Day and futures indicate a likely rally post-election according to Investor’s Business Daily.
Dow Jones futures and S&P 500 futures jumped early Tuesday, while Nasdaq futures rose modestly. With a market correction in force, a new stock market rally attempt is underway with Election 2020 finally here, with the latest IBD/TIPP Trump vs. Biden poll showing a tighter race.
There are two pieces to the issue of who will be governing the country over the next years. Biden appears to have the edge over Trump but that will not be certain until all votes are counted and all court challenges have been dealt with. A more likely case is that Democrats will probably gain control of the US Senate by a few votes. This by itself could lead to stimulus payments before the start of the next year and would be a boost for both the economy and the markets.
Investing Government Spending on Infrastructure
We have written about the sorry state of US infrastructure and how infrastructure spending on everything from roads and bridges to 5 G will drive the US economy. Interest rates are extremely low and likely to remain so for years. Thus, any government borrowing will be subject to low interest rates. A Democratic Congress along with a Democratic President will likely invest in a Made in America program focusing on infrastructure, green energy, bringing more manufacturing back to the USA, and driving consumer spending higher.
The shape of the economic recovery has been starting to look like an “L” or really wide “U” instead of the hoped for “V”. We could be looking at a recession that lasts for years, like the Great Depression, if a stimulus does not happen. A new administration with the same party in control of Congress will likely spend without concern for the budget until they get the economy moving and healthy again. This would provide a stimulus similar to WWII spending that forklifted the US economy out of the Great Depression.
Investing in a Post-election Stock Market Rally
If there is a strong post-election stock market rally, which sectors will benefit the most? If stimulus checks resume it will put money in consumers’ hands at the base of the economy and the result will a surge of spending on consumer goods. When infrastructure spending starts it will benefit construction and materials suppliers as well as the general economy because there will be more jobs. For many years the big tech stocks have been the best bet but that will no longer be the case. As such, the FAANG stocks may not fall but they may cool off. If we see a positive economic result from infrastructure spending, it will be repeated. That bodes well for long term investors in the sectors that will benefit.
Post-election Stock Market Rally – Slideshare Version
Doji Candlestick Trading
The Doji is one of the dozen major Japanese Candlestick trading signals. It describes a trading session that opens and closes at virtually equal prices. It is a reliable indicator of market uncertainty but does not tell you the direction that the market is going next. Depending on how high the market goes or how low it falls before returning to the opening price, it can be described as a Gravestone Doji, Long legged Doji, or Dragon Fly Doji. These describe sessions with a run above the open, equal high and low prices, and a market that falls impressively before its return to the base price.
Different Types of Doji
In addition to the Gravestone, Long Legged, and Dragon Fly Doji signals there are several different types of Doji and each renders a different description of market movement and information about where the market might be going next. The Bearish Evening Doji Star, Bullish Morning Doji Star pattern, and Cross Doji are just a few of these. In each case the Doji tells us that the market is conflicted with both up and down forces at work. However, the extended Doji patterns give us a bit more information about what to expect next.
2 Doji Pattern
The 2 Doji pattern is exactly what it sounds like. The market produces two Doji signals back to back. This indicates continuing market uncertainty and is an even stronger indication that the market is about to move. At this point in Doji candle trading, traders wait for the next Candlestick signal to guide their actions. The breakout can be significant after this signal but many traders not only wait for the next Candlestick signals but confirming market action as well before trading into a rising, or falling, market.
Bearish Evening Doji Star
This is a three part Candlestick signal. The middle signal is the Doji. It is preceded by an up day (white candle) and followed by a down day (black candle). This is a bearish indicator. The specifics include the body of the Doji being above the previous day’s body but the limit of the Doji falls below at least the high price of the previous day. The following signal has its candle body below that of the Doji and the closing price below the midpoint of the first candle in the pattern. The Doji still indicates market indecision. The complete three-part signal is an extremely bearish indicator.
Bullish Morning Doji Star Pattern
The bullish Morning Doji Star pattern has three parts. It starts with a down day (black candle) that indicates a substantial drop in price (long black candle). The Doji signal is the second in this set and gaps below the first signal. The third signal in this pattern closes within the body of the first candle. It is a strong bullish indicator showing negative sentiment on the first day, indecision on the second, and bullish sentiment on the third. As with many bullish indicators, smart Candlestick traders typically look for a confirming upward move before going “all in” on what will probably be a substantial rally.
Candlestick Doji Star
This two-part Candlestick is a bullish reversal signal. The Candlestick Doji Star starts with a downward day (black candle) followed by a Doji candlestick whose body lies well below the body of the first candlestick. The pattern occurs after a definite downward trend. This signal indicates that traders are rethinking the downward trend and wondering if a market bottom has been reached. Candlestick traders will ready themselves for upward movement at this point but wait for confirming movement before risking all of their trading capital.
Cross Doji
This signal is also called the Harami Cross Doji. The signal is an indication of a possible trend reversal and occurs at the end of both downward and upward trends. With a downward trend there is a substantial down day shown by a long black candlestick. The Doji in the following session occurs midpoint on the black candlestick showing that the market recovered partially from the low of the previous day and then remained undecided. When the signal occurs at the end of an upward trend, we see a substantial up day followed by a mid-point Doji.
Doji Candle Screener
Candlestick trading is popular because it is accurate and because the visual signals are easy to read. Nevertheless, the more-complicated Candlestick signals might be easy to miss as well and if you are following several stocks, the problem is multiplied by the number you are following. A good answer to this issue is to use a screening tool. A Doji Candle screener will alert you to moments of indecision in the market and give you the opportunity to take advantage of potential market reversals.
Doji Candlestick Trading – Slideshare Version
Doji Candlestick Trading – DOC
Doji Candlestick Trading – PDF
Is Exxon a Good Investment?
As the investing world has transitioned to more and more ESG investing, oil companies like Exxon have fallen out of favor with many. Is Exxon a good investment? After years as the leading oil company and a cash cow, Exxon’s revenue has fallen by a half and it was removed from the Dow Jones Industrial Average. It is planning to cut jobs and investments but is retaining its 8.7% annual stock dividend.
Investor’s Business Daily looks at Exxon and sees problems. They say the stock is not a buy at this time. On the other hand, Oil Price notes that oil demand is coming back a bit and will come back a lot more as the pandemic subsides. While other majors are backing out of oil and natural gas it will leave more room for Exxon. While the world switches to electric vehicles and solar power, there will still be a need for oil and natural gas far into the future. Although they do not see stellar growth, they believe that Exxon will not go away and will provide a healthy dividend for investors far into the future with its bet on oil.
Exxon as an Investment
If you had invested in Exxon in the 1980s, your shares today would be worth ten times what you purchased them for. Of course, if you had sold in June of 2014, before oil prices fell, your shares would have been worth thirty times as much as the 1980s price. During those years you would also have been receiving a dividend with a three to five percent yield. Today you would still be getting the same dividend although the yield is over ten percent as the stock price has fallen. Today Exxon trades for $34 a share. In regard to dividends, Exxon is one of the handful of companies that have paid dividends for more than a century and have either raised their dividend or kept it steady for nearly forty years.
Investing in Exxon for the Future
Exxon is developing newly discovered oil fields offshore from Guyana on the Northeastern coast of South America. The total recoverable oil reserves in the area come to 8 billion barrels. Exxon is still exploring as it is developing sixteen individual sites. By comparison the Prudhoe Bay oil field in Alaska originally had 25 billion barrels. Exxon is also a leader in extracting oil from shale deposits using fracking technology and plans to increase production in the Permian Basin in the coming years.
Despite the pandemic, increased green energy production, and greater fuel efficiency, world energy demand will continue to grow.
In the near term, the pandemic and its economic effects will continue to depress demand of natural gas and oil for a year or more. But, as economies get back on track, demand will pick up and continue to grow for decades. During that time Exxon will find its revenues increasing which will drive profits and its stock price higher. Investors in Exxon will want to take the long view in terms of decades. Meanwhile, enjoy the dividend.
Is Exxon a Good Investment? – Slideshare version
Dividend Stock vs Growth Stock
Dividend stocks are stocks that pay you a share of company profits, usually every quarter. They are generally mature companies but not ones with a lot of growth potential. Growth stocks are newer and have a better chance of expanding rapidly and paying you for the risk of investing in a new company. However, dividend stocks can grow as well and growth stocks tend to offer dividends as the companies mature. Investors who do not want to pay taxes on their investments often choose growth stocks while retirees who need income commonly choose dividend stocks.
Tradeoff Between Dividends and Growth
Investors who focus on growth stocks are looking for companies that will grow rapidly. Investors who focus on dividend stocks are looking for security and cash flow. Growth stock investors accept risk in return for growth potential and dividend investors accept a slow rate of growth in return for income and safe investments. Young investors generally focus on growth and pivot to security and dividends as they approach retirement. While you are in your earning years, you generally do not want to be paying taxes on dividends but when you are retired and in a low tax bracket, the taxes are not so painful.
Best US Dividend Growth Stocks
You do not need to necessarily choose between dividends and growth. A good example is Apple, which resumed paying dividends in 2012 and has increased its dividends yearly ever since. At its peak in 2012, Apple traded for $25 a share. Today it trades for $117 a share. The stock split 7 for 1 in 2014 and 4 for 1 in August of 2020. Another choice is Home Depot which has paid dividends for thirty years, has a 2.3 dividend yield, and has grown from a $27 stock in 2010 to a $283 stock today.
Buying Protection With a Dividend Growth Strategy
When looking for dividend stocks, look for companies that have increased their dividends over the years. This tells you that the company is growing and is rewarding investors who stay the course. Dividend companies that increase their dividends over the years are making money, covering expenses, growing, and have healthy cash flow. This is a somewhat backward look at intrinsic stock value. These companies have strong product and service lines, manage their businesses well, and are likely to continue to grow and increase dividends for years to come.
Countering Slow Dividend Growth
When dividend growth is slow in your portfolio it is often slow across most dividend-paying stocks. If, like many investors, you are invested in a fund that tracks the S&P you might consider switching to a dividend-focused ETF such as iShares Select Dividend, SPDR S&P Dividend, or Wisdom Tree Total Dividend. If you are comfortable with choosing individual investments, consider the likes of Home Depot or Apple for their growth plus dividends. Alternatively, young investors who don’t rely that much on dividend income may simply choose to focus on pure growth stocks and forget the dividends.
Deep Value Dividend Growth Portfolio
Dividend growth stocks not only provide a quarterly dividend but tend to increase that dividend year by year. And, more importantly, they tend to outperform the market as a whole. Add to this the fact that such companies tend to be very secure investments. Seeking Alpha suggests a deep value dividend growth portfolio and provides specific investing options. Recent additions are UNH, MSM, and UPS. Their collection of stocks in this portfolio has been outperforming the S&P 500 by about 6% in the short term and is likely to continue this over the longer term.
Difference Between Direct Growth and Direct Dividend
Mutual funds offer various options in regard to dividends and growth. A direct growth plan focuses on growth stocks and cuts out the middle man so that your expenses are less. However, you will need to do all of the documentation that would otherwise be done by the mutual fund. In the case of a direct dividend plan you also cut out expenses compared to a regular plan but also need to complete all of the documentation required. In both cases you will decide whether or not to invest dividends and how to deal with things like mergers and takeovers.
Mutual Fund Growth vs Dividend Plan
In a mutual fund, you invest your money and choose an option. Then the fund follows your instructions in regard to the investments. When you choose a growth plan, they pick stocks with growth potential and if these include dividend stocks, the dividends are reinvested. But, if you choose a dividend plan, they will pick all dividend stocks and pay you dividends on a quarterly basis. If dividends are reinvested or if they are paid out, you will owe taxes on the dividends. In general, younger investors will go with growth plans and those nearing or in retirement will choose a dividend plan.
Dividend Stock vs Growth Stock – Slideshare version
Double Top Investment Risk Signal
The stock market has largely recovered while the Covid-19 pandemic has driven the US economy down. A recent double peak investment risk signal warns of a coming market crash or correction. The double top or double peak is an extremely bearish technical reversal pattern according to Investopedia. By itself, it is not enough to guarantee a market correction or crash, but along with a market that is ignoring the economy, the Covid-19 crisis that is likely to worsen before improving, and uncertain market sentiment, it is a warning sign to be heeded. It is especially of note that the Fed chairman is repeating his comments about congress needing to act on more stimulus measures as the Fed can only do so much.
Double Top Investment Risk Signal
On the basis of the recent double top signal and the many other factors affecting the economy and the market, Forbes predicts a severe October selloff. They provide a long list of things to worry about including the flu season on top of Covid-19, increasing layoffs, the end of stimulus support money, the inability of the Fed to carry the day all by itself, banks expecting a prolonged recession, overvaluation of big tech stocks, and whole industries expecting the need to go into survival mode. Their advice is to hold cash and see what happens.
On top of all this, the level of global debt is dangerous. Without a healthy global economy to service debts, there is a danger of the credit system collapsing across the globe. When this happens, trade will grind to a standstill and we could be looking at a prolonged “L-shaped” economic recovery.
How Bad Will the Correction Be?
The stock market has gotten detached from fundamentals and is overpriced. When market sentiment swings to the negative, it could precipitate a substantial downturn. Although fundamentals are always the cause of crashes and technical signals like the double top help predict them, it can be something otherwise insignificant that starts the ball rolling. Once that happens it would not be surprising to see the market fall as badly as it did at the onset of the Covid-19 crisis and not recover as well as the Senate is opposed to any more stimulus measures.
How Long Will the Correction Last?
Our concern is that when the next correction occurs, the recovery may take a long time. If we fall into bear market territory, the recovery could resemble that of the 1929 to 1932 crash and not the Financial Crisis. It should be noted that the US economy and market did not really come out of the Great Depression until the government ramped up spending (and borrowing) to fight World War II. US infrastructure improvements from roads and bridges to airports to a 5G network upgrade are all necessary and long past due. The way out of the Covid-19 driven recession will be to get the virus under control and then start borrowing and spending to fix infrastructure. The improvements will help the economy and the job created will put money at the hands of consumers from where it will drive a recovery.
In the meantime, beware and consider converting some of your market gains to cash.
Double Top Investment Risk Signal – Slideshare version
Your Investments and the US Economy
Although the US economy has come back a bit from the early days of the Covid-19 recession, it has a way to go. It is time to consider your investments and the US economy. How long will the Covid-19 pandemic last? Will central banks and governments continue to support credit and send stimulus payments? And, how will the combination of virus-induced recession, recovery measures and the state of the US economy affect your investments?
Investing During a Long Recession
Although things look better than they did when the virus first shut down the world economy, there is a long way to go to a complete recovery. The International Monetary Fund predicts only partial and uneven economic recovery into 2021. They note that things have not gotten worse because of “extraordinary” measures taken.
We have reached this point, largely because of extraordinary policy measures that put a floor under the world economy. Governments have provided around $12 trillion in fiscal support to households and firms. And unprecedented monetary policy actions have maintained the flow of credit, helping millions of firms to stay in business.
The four key measures that will be necessary to sustain and propel a recovery going forward are these:
Continuing the fight against Covid-19
Avoiding a premature drawback in stimulus measures
Institution of forward-thinking economic policies
Support of indebted countries, states, and municipalities
The relationship between your investments and the US economy will depend largely on how successful the fight is going forward.
Federal Stimulus Measures and Your Investments
Market Watch looks at the US economy and sees a risk of a setback.
The U.S. likely grew at a record 30%-plus annual pace in the third quarter, recovering much of the historic damage caused by the coronavirus pandemic in the spring.
But, many are worried.
Many are increasingly worried the economy will suffer another lapse, pointing to a fresh round of corporate layoffs and an uptick in coronavirus cases just as the fall flu season gets underway. A slew of companies led by Disney DIS, -0.85%, American Airlines AAL, 1.15% and others have said they will cut thousands of jobs without any more aid.
Consumer spending, the lifeblood of the economy, would be in danger of faltering again if unemployment rises or people are prevented by the virus from going back to work, they say. And if consumer spending goes, so does the economy.
The initial stimulus payments, combined with historic efforts by the Federal Reserve, rescued the US economy from falling into the abyss. But, political gridlock has stalled any further help just as parts of the economy have begun to falter.
While congress dithers, the Fed and a whole host of economists have joined the chorus of those suggesting more stimulus payments. If, nothing happens during this term of congress, will there be help in the next? And, how will your investments and the US economy do in the meantime?
Intrinsic Value of Your Investments
We return again and again to the use of the intrinsic value calculation as a guide to rational and successful investing. Consumer spending is at the base of the intrinsic value pyramid. When there is money to spend it helps build the investment pyramid and when there is no money to spend the pyramid crumbles. Our expectation is that the next administration and congress will embrace a robust infrastructure program in the USA. This will drive the US economy and your investments. What happens before next year is anyone’s guess as a lame duck president and senate may or may not do anything to help the economy and your portfolio.
In the meantime, be careful with over-priced stocks at a time when the market could take another hit before heading back up.
Your Investments and the US Economy – Slideshare Version
Sentiment Analysis of the Stock Market
The broad set of appetites, fears, and beliefs of those investing in and trading the stock market are referred to as market sentiment. This crowd psychology or tone of the market drives prices up and down. At its extreme, it is manifested by fear in falling markets and greed in rising ones. Successful sentiment analysis of the stock market provides extra and early insight for successful stock investing and trading. Common indicators of market sentiment include the put to call ratio, the VIX “fear” index, the breadth of stock prices, the degree to which the market is seeking safe haven assets, the high/low market index, and the CNN Fear and Greed Index.
Sentiment Analysis in Financial Markets
Standard analysis of financial markets always includes important moving averages and other ways to make sense of market data. But, sentiment analysis of financial markets can give you insights before the standard market data shows you anything. An interesting finding some years ago was that Google searches for a company name have a high degree of correlation with price changes of that company’s stock the following week! Sentiment analysis in the stock market has to do with getting into the minds of investors before they start driving prices up or down.
Stock Market Sentiment Indicators
Stock market sentiment indicators that precede stock price movement include information from the options market. The VIX index is based on volatility of S&P 500 options prices over a month. When the VIX goes up, it indicates market uncertainty (and fear) and when it goes down, it indicates a relaxed and secure market. Another simple and useful indicator is when the market swings to safe haven assets. When this happens, the VIX also tends to be high. Other indicators like the CNN Fear and Greed Index generally reflect the same swings in market sentiment.
Trading Market Sentiment
Technical stock traders follow technicals when planning and executing their trades. The rationale is that the market takes into consideration all available data and reacts accordingly. And, by reading the data, one can predict near-term changes in the market. Market sentiment information can be added to the mix to give the trader a heads-up as to where to watch for profitable trades. Because market sentiment indicators precede market changes, successful traders use the info to direct their research but rarely to guide specific trades.
US Stock Market Sentiment
Because the stock market always looks forward, US stock market sentiment does not always match the state of the economy or recent events that should be driving stock market prices. We have seen this in 2020 when the Covid-19 pandemic crashed the stock market and then tech stocks came roaring back. Although much of this was based on continued or improved earnings, it was also based on positive market sentiment. Investors are looking past the pandemic to a positive future. This is why the market has seemed to be ignoring the economy.
Measuring Market Sentiment
Without accurate ways to measure the sentiment of the market, market sentiment assessment is a lot like stock tips. They may be useful but you need to do your own homework before acting on them. In the case of market sentiment, this involves using the standard market sentiment indicators like the VIX or flight to safe haven assets. Because these measures of market sentiment do not have a one to one correlation with subsequent stock prices, investors need to follow up with standard measurements of market data and technical indicators.
Weak Market Sentiment
When investors do not see much hope for market gains you see weak market sentiment. It is not negative sentiment in which investors expect to see the market fall but rather the sense that there will be little or no market growth for the foreseeable future. At times of weak market sentiment, you can expect to see short term investors and traders move into cash or cash equivalents. On the other hand, dedicated long term investors will assess long term intrinsic stock value and adjust their portfolios accordingly.
What Is Sentiment Analysis in Marketing?
Sentiment analysis is not limited to the stock market. It is commonly used in marketing. The point is to look past what customers say about a brand and understand what they want. While traditional data includes clicks and shares, sentiment analysis in marketing looks at the quality of customer to brand interactions. This information is of the sort that experienced salespeople come to understand over the years but can be arrived at by analyzing internet data instead of accumulating insights over many years.
Sentiment Analysis of the Stock Market – Slideshare Version
Sentiment Analysis of the Stock Market? – DOC
Sentiment Analysis of the Stock Market – PDF
Invest in Space X?
The United States is again launching astronauts from US soil to the International Space Station. Since the Space Shuttle program was retired, the USA had to pay Russia to launch US astronauts from the Baikonur Cosmodrome in Kazakhstan. The credit goes to Space X and eventually to Boeing as Space X has passed all of NASA’s tests, including a test flight with two astronauts to the Space Station. Boeing is fixing a glitch that has put them back a step or two. You can easily invest in Boeing, but can you invest in Space X? The quick answer is that you cannot invest directly in this private company but it is still possible to do so indirectly.
Space X and Rocket Boosters That Can Be Used Again and Again
One of the keys to success in exploration of space, keeping the Space Station going, returning to the moon, or going to Mars is reducing the cost of launching a rocket. According to CNBC sixty percent of the cost of a big rocket is the booster. With the exception of the space shuttle, rocket boosters were always allowed to fall back to earth after a launch. But, Space X changed that by launching rockets, turning off the booster before all of the fuel was used, and then re-igniting the booster to fly back to earth and land! This has become standard for Space X launches and makes their system hugely more efficient than those used by anyone else.
Goals of Space X
This private company was founded in 2002 with the stated purpose of reducing the costs of space exploration and eventually going to Mars. It has succeeded in reusing boosters and has a contract to bring astronauts to the Space Station. Mars is still in sight but a ways off.
Can You Invest in Space X?
According to WFMJ, the original money for Space X came from the private equity group, Founder’s Fund. A later investment came from the DFJ investment group. The third round of funding came from Fidelity and Google. Since Fidelity is private the only way to invest in a company that has equity in Space X is to invest in Alphabet, Google’s parent company.
It is unlikely that Elon Musk, who is the driving force for Space X as well as Tesla will ever want the company to go public despite the huge windfall that would mean for the original investors. That is because Musk still wants Space X to accomplish its ultimate goal of going to Mars. Diluting the control of the original investors, including Musk, would endanger the fulfillment of that dream.
Alphabet has a market cap of just over $1 trillion dollars. Alphabet’s share of Space X would be worth a couple of billion or more if the company went public. Thus, if you were to invest in Alphabet to get a piece of Space X, your Space X investment would only be 0.2% of your Alphabet investment. Nevertheless, Alphabet is a pretty good investment for the long term.
Invest in Space X – Slideshare Version
Is Fractional Investing Good?
There are two common reasons for fractional investing. One is that you have a limited amount of money to invest and the individual shares of stocks that you want are too expensive. The other, related, issue is that you want to diversify and don’t want to wait a year or two to purchase one share each of several stocks. In a world where individual stock prices have gone higher and higher, one option is to buy fractional shares. But, is fractional investing good or just a compromise? Today you can just as easily buy and sell fractional shares as individual shares and the benefits are the same (fractionally) as if you own individual shares. In fact, if you are in a dividend reinvestment plan, you have already been receiving fractional shares with your reinvestments.
What Is Fractional Share Investing?
Investopedia tells us that a fractional share is anything less than a full share of stock. Traditionally, fractional shares come from stock splits, dividend reinvestment plans, and other actions by a corporation. Until recently, fractional share investing was not available to investors. However, today a brokerage firm can “repackage” stock investments in order to provide a market for fractional shares. The advantages include better diversification and the risks include higher fees per individual purchase.
instead of the Whole Pie
Is Fractional Ownership a Good Investment?
This brings us to the question, is fractional ownership a good investment? First of all, fractional ownership is not limited to buying stocks. It is a common approach to real estate investing. As with fractional investing for stocks, fractional investing for real estate lets you get into expensive investments with the capital that you have instead of being left out. Fractional ownership of vacation property lets you and your family enjoy locations that would otherwise be too expensive. And, when prices rise over the years, your investment can also appreciate.
Investing in Fractional Shares
If investing in fractional shares sounds like a good idea for you, where do you go, and how do you proceed? Although you have probably heard of Robinhood because they advertise a lot, there are more options. Here are a few, courtesy of Clark.
Acorns allows you to start for $1 a month, has no trading fees, and no minimums.
Bumped has no fees, no minimum investment, and, occasionally, free fractional shares.
Fidelity has no minimums or account fees, lets you in for as little as $1 a trade, and gives you access to more than seven thousand ETFs and stocks.
Robinhood has no commissions, fees, or minimum investment and lets you invest from your smartphone.
Schwab charges on commissions when you buy stocks and lets you buy fractional shares for as little as five dollars.
Stash allows you to buy shares of ETFs for as little as five dollars a month without commissions.
Stockpile offers access to more than a thousand ETFs and stocks for ninety-nine cents a trade without minimums, monthly fees, or a sign-up fee.
Is Fractional Gold a Good Investment?
When gold started the 1970s at $32 an ounce, there was no need for fractional gold investments. But, today, at about $2,000 an ounce, it has become popular. But, is fractional gold a good investment? The first answer is that gold may or may not be a good investment, depending on your timing. The other has to do with how you want to invest in gold. Gold ETFs track the price of gold without your having to store the shiny stuff. Fractional shares of a gold ETF let you into the gold market at a reasonable cost.
Fractional Trust Deed Investing
A trust deed is used in many states in place of a mortgage on property. For expensive properties, money may come from several sources. Any one individual has a fractional share of the trust deed. Fractional trust deed investing is secured by the property and can be a profitable way to invest. However, real estate investing has its own pitfalls and opportunities. Those who know the ropes generally do well and those who naively think that profits come easily often live to regret their investment decisions. The same applies to fractional trust deed investing.
Fractional Ownership Investment
Any fractional ownership investment gives you a partial share of an asset. This can include income sharing, priority access, usage rights, and lower rates. In the case of vacation properties, the benefits are similar to those enjoyed by timeshare owners. This sort of arrangement gets you into luxury cars, aircraft, and vacation homes for less than if you purchased the entire property. The drawback is that whoever is setting up the fractional ownership investment will typically take their profit off of the top. Thus, your return on investment will commonly be less than if you made the deal entirely on your own.
Stockpile Fractional Investing
For those who would like to get into stock investing but have very little capital, Stockpile fractional investing is one of the ways to go. These folks let you start out with investments of as little as $5 and give you access to more than 1,000 ETFs and stocks. Because there are no minimums or monthly fees, this is an easy way to dip your toe into the stock market. Their handy app lets you make investments directly from the internet and even make gifts of stocks to others.
The one question that folks interested in fractional share investing need to ask themselves is why not just diversify by purchasing shares in an ETF that tracks the S&P 500.
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