Anybody who has seen the digital revolution propelling the likes of Facebook, Amazon and Google into becoming household names will know that the online realm represents a smart investment opportunity.
And whilst the recent Snapchat IPO showed how a simple social media app can generate millions, there are plenty of other success stories in the online gaming realm.
Thanks to the proliferation of mobile technologies, online gaming has become incredibly popular with a vibrant development scene packed with innovative start-ups and small businesses who are able to keep overheads low, whilst reaching global audiences through app stores.
When a Swedish office worker quickly created the ground-breaking world-building game, Minecraft, on a coffee break, he could have had little idea that his creation would be sold to Microsoft for $2.5 billion.
And whilst we might not all be able to use programming skills to catapult ourselves to the height of luxury, there are many other ways that we can get involved in the potentially lucrative online gaming scene.
Girl Smartphone Technology Woman Mobile Texting
All investors will know how important it is to be aware of growing social trends and changes in behaviour to anticipate which areas are going to be most profitable.
Whether it’s catching up on Lucky Nugget Casino’s guide to how millennials and their smartphone dependence could lead to a mobile casino boom, or even seeing how video games are starting to compete with traditional sports thanks to the eSports phenomenon, it all shows how there’s plenty of exciting opportunities ahead of us.
Perhaps it’s because online gaming is so new that it’s helped many overnight success stories. Companies like Finland’s Supercell now enjoy yearly revenues of $2.3 billion merely by creating simple multiplayer smartphone games like Clash Royale. And through an innovative ‘freemium’ pricing structure, Supercell have encouraged a climate where a one-off payment is no longer the standard for the online gaming realm.
And it’s not just Supercell who are heralded the Finnish gaming revolution, as their compatriots Next Games are expected to have a $30 million IPO in the coming weeks that could prove to be a very shrewd investment opportunity for many.
So whilst we may all recognize that the mobile gaming revolution has given us the chance to play anything from puzzle games to online casino titles with ease, it looks like there are many other ways that we can all reap the benefits from video gaming.
Oh boy! It’s my click-baitest title ever!
Now before all you kids pelt me with soft, over-ripened tomatoes, allow me to explain. OH GOD WHY WON’T YOU ALL LET ME EXPLAIN.
Many people (myself included) think reading is a huge part of one’s success. A book is one of the best investments you can possibly make. For a price as low as zero dollars (thanks library!), you can get lessons it took great men decades to learn condensed down into a chapter or two. All it costs is a little time, which probably would have been squandered anyway.
What a fantastic return on investment.
There’s just one problem. Books promote a culture of inactivity. There’s an army of people who are nose deep in a book right now, trying to discover the true secret to getting rich. If only they read enough, they say, they’ll figure it out. It’s gotta be in here somewhere.
It won’t be. No book will ever contain the true secret to getting rich. Because ultimately, getting rich involves one thing.
There’s definitely a correlation between reading and becoming wealthy. There’s no doubt about that. Buffett reads a ton. So does Charlie Munger, Bill Gates, Charles Koch, and most other billionaires.
But there are notable exceptions. Let’s start at the top.
“Well, you know, I love to read. Actually, I’m looking at a book, I’m reading a book, I’m trying to get started. Every time I do about a half a page, I get a phone call that there’s some emergency, this or that. But we’re going to see the home of Andrew Jackson today in Tennessee and I’m reading a book on Andrew Jackson. I love to read. I don’t get to read very much, Tucker, because I’m working very hard on lots of different things, including getting costs down. The costs of our country are out of control. But we have a lot of great things happening, we have a lot of tremendous things happening.”
Yes, that quote is from the leader of the free world.
Much as we crap on Donald Trump, and much as Trump deserves it, he has been remarkably successful in his life. After becoming the most famous real estate developer in the world, the guy became a best-selling author (despite not even writing the damn book!). He followed that up by becoming one of the biggest stars on reality TV. And then, as an encore, the dude became the president of the freaking United States.
Trump’s secret to getting rich wasn’t reading or waiting for the best opportunity to strike. He simply went out and did stuff.
There’s an old expression about overnight successes. It takes 20 years of toiling in obscurity to become an overnight success. Guys like Donald Trump may have accelerated the process a little, but the point is still valid.
Here’s what happens. Somebody works hard at something, and then they get a little success. They keep on going and get a little more momentum. They keep building and building until these small successes start becoming medium-sized. And so on. By the time any of us notice, this person has already moved up to big things.
Meanwhile, the voracious reader is stuck at square one, still searching for the magic bullet. If only he read more books! Then he’d find the true secret to getting rich! It’s gotta be in one of these books somewhere…
There’s no secret to getting rich
Look, you all aren’t stupid. You’re smart people who are ambitious enough to try and improve your lives. You’re the best people, and I’m not just saying that because y’all read my thoughts every day.
Everyone reading this knows how to get rich. The secret is no secret. You have to create capital and put it to work in interesting opportunities. That might be through an index fund. Or it could be buying a trailer park, investing in private mortgages, or starting your own business. Part of the fun of this whole exercise is there’s no set path. There are just a number of similar guidelines everyone follows.
The closest thing there is to a secret is to just go out there and do stuff. If you already have the tools, it all comes down to execution. Don’t be the person who doesn’t do anything, paralyzed with his nose in a book. Research is encouraged, but all the research in the world doesn’t matter without taking risks.
It was Daylight Savings a little over a week ago, that magical weekend where clocks go back an hour for no good reason and everyone notices what a difference an hour less sleep makes.
I could maybe understand the thought process back in the 1920s when electricity was scarce and light bulbs actually made a difference. But a lot has changed in 160 years, including the ability to do basic math. There’s no need to try to save electricity today. Energy saving measures are already doing that without us.
Which is why I was happy to hear the ruling NDP party in Alberta is considering abolishing the practice and leaving the province on central standard time all year round, which is the same as Saskatchewan. The party plans to vote on the bill soon (which will likely pass), making it two things the NDP has done I like.
The other was banning most door-to-door sales. If those guys keep going, I might have to vote for them.
(Realizes the Carbon Tax is still a thing)
(Shakes fist wildly)
Like I could vote for the socialists. How would I sleep at night? I normally sleep on a pile of money but the NDP wants to take it away.
Links I liked
1. Holy Potato weighs in on the fiasco that is the Home Capital Group fraud case, which a lot of fingers being pointed at CMHC. But as much as I want to see Home Capital fall, and much as Home Capital deserves it, I’m mostly bored of the whole exercise. I want it to be over with. It’s just the same people shouting the same arguments back and forth to each other. There’s more independent thought at a Trump rally.
2. Freedom Thirty Five Blog points out just how much better it is to live in Canada versus the United States. As much as I ideologically like the idea of free market health care, the U.S. is proof such a thing just doesn’t work. Socialized medicine is a huge plus for Canada.
3. The Federal government is getting ready to tax the living hell out of y’all with its next budget, which comes out next week. Potential changes include a 75% inclusion rate for capital gains, taxing stock options differently, higher taxes for small corporations, and more. Garth Turner has all the ugly details.
4. Here’s a story about how a convicted fraudster tricked a small town into giving him a bunch of money for a reality show. I’ll give the guy credit, it’s at least 47% more clever than most frauds.
5. Here’s a great interview with billionaire real estate mogul Michard LeFrak, from my new favorite Youtube channel, Investors Archive. Look for a lot more of these links over the upcoming weeks.
6. It’s not very often I enjoy a book review post, but Paul from Asset-Based Life could write an entertaining post on his grocery list. He reviews a Japanese decluttering book that’s far better than you’d think.
7. Barry from Money We Have asks an important question that needs to be brought up more often. What exactly is your money for? What are you working towards? There’s no point in having a goal if there isn’t a why attached.
8. Roadmap 2 Retire outlines why he recently bought TD Bank on the heels of its sales controversy. I agree with his thinking completely. People have already forgotten about it. It’ll be such a non-issue a year from now.
9. Interesting post from The Rational Walk, which thinks that investors shouldn’t share ideas with each other, saying that good investments are rare and should therefore be guarded. I prefer a hybrid approach, which is buying a full position and then sharing it with you guys.
10. Here’s how Peter Cundill, an extremely underrated Canadian deep value investor, approached investing.
Stuff Nelson wrote
1. A lot of people seem to think you need a minimum of $1 million to retire today. I disagree, outlining how retirees with significantly less can still avoid eating cat food.
2. I also pointed out four reasons why your “can’t miss” marijuana stock investment could turn out very badly.
3. Finally, I wrote about Target, which recently announced a $7 billion investment in its stores. Very little of that cash is going towards its digital business. This is a colossally dumb decision to make in 2017.
Tweet of the week
What am I supposed to do, not make fun of St. Patrick’s Day? What a useless holiday. Screw you and your green beer.
Have a good week, everyone.
As you kids have probably figured out by now, I’m a big fan of contrarian stocks nobody likes.
Other value investors will try to tell you the best opportunities are in stocks that are truly great businesses. That way you can buy and hold for a very long time, collecting some sweet profits.
But the world isn’t quite that simple. There are a lot of overpriced stocks today people think are great businesses. When stocks go down, they’ll get hit and get hit hard. And besides, there are a lot of business that look good during boom times.
It’s also hard to envision the average stock trading at 20x earnings doubling over any reasonable period of time. This would either mean valuations would have to get much higher (which has a snowball’s chance in hell of happening) or earnings would have to double. I don’t like either of those odds.
There aren’t many true value stocks available today, but I’ve found one that could very well be the cheapest stock I’ve ever seen.
- It trades at less than 3x free cash flow
- It trades at just 7x earnings
- The company is also cheap on a book value and price-to-sales perspective
- And it’s down 70% from its recent peak
I have confidence this stock could double. Or even more. If management figures out the turnaround, I think a triple is even possible. My target price is 2.5 times higher than Thursday’s close.
Want to get access to this new stock idea? No problem. It’s an exclusive offer for Financial Uproar newsletter subscribers. All you need to do is enter your name and email address in the form below, confirm your subscription (make sure to check your spam box!), and you’re in business.
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A fortnight or six ago, I told you kids about the passive income source which are junk bonds. Skip the next paragraph if you’re already well aware of said asset class. If not, prepare to get your face educated RIGHT OFF.
Junk bonds are debt instruments issued by companies that are down on their luck. Individually, they’re pretty risky, but can also lead to some pretty exciting profits when you get the trade right. They’re much safer as a group, so I usually suggest y’all buy a junk bond ETF or a closed end fund.
I own the Dreyfus High Yield Strategies Fund (NYSE:DHF) because it uses leverage to really goose the yield from its portfolio of junk debt. It currently pays a dividend of 9.6%.
One thing I didn’t focus on when talking about junk bonds before was the ideal time to buy. If you’re buying the asset class as an income play, you shouldn’t really care about underlying price movements. As long as you’re happy with the yield, just let the price flap around like the Simpsons watching Japanese cartoons.
That was short-sighted. It always matters what you pay for an asset. Getting yield is nice. Getting a sweet capital gain along with an outsized yield is even nicer. It’s like an extra scoop of ice cream. Nobody says no.
It turns out there’s a really easy way to predict the return of junk bonds going forward. Seriously, it’s uncanny.
Junk bond return indicator
Here’s how it works. Junk bonds will always trade at a premium yield versus other bonds, because they’re riskier. Duh, right?
You’d also think this premium would remain relatively steady over time, with junk bond yields rising and falling with interest rates. This happens a lot of the time, but there are also issues that only impact the junk bond market individually.
One example today is the energy sector. A lot of energy bonds have entered junk status because oil remains under $50 per barrel. If the price of oil falls, the entire junk bond sector can get hit.
Junk bonds also will rise or fall depending on the general economic outlook. Even though the asset class tends to perform pretty well as a group, when the economy suffers, investors run away, convinced every junk bond is going to go to zero.
Like with any investment, the key to buying junk bonds successfully is to get in when they trade at a huge premium to safer bonds and get out when the gap narrows.
The St. Louis branch of the Federal Reserve keeps track of the spread. Let’s take a look at the last 10 years worth of numbers.
We’re obviously not going to see 2009 numbers anytime soon, but let’s focus on late-2011 and early-2016. Both times, the spread between safe bonds and junk debt peaked at about 9%. It was a good time to get in.
Looking at a long-term chart of NYSE:JNK, the largest junk bond ETF, confirms it.
If you would have bought in October, 2011, and sold in 2014, you’d be looking at a capital gain of at least 10%. Plus the nice yield. The capital gain had you bought in early 2016 would have been similar.
You’ll notice that while today probably isn’t a good time to buy junk bonds, the spread in 2007 was even lower. You can see what happened next. It works as a contrarian indicator as well.
Yes, it really is that simple
Sometimes, investing can be easy.
To ensure capital gains when buying junk bonds, buy when the spread approaches 10%. It worked in 2011 and 2016, and even would have worked out well in 2008, assuming you didn’t panic and sell when the spread went over 20%.
With the spread being so low today, I’d recommend against buying. Getting a decent yield is nice. Getting a decent yield with upside is better. Remember, capital gains matter too.