Month: November 2024

How to Invest in Starlink and SpaceX Before They Go Public

by Fred Fuld III

Many investors are interested in jumping on the Elon Musk bandwagon by investing in the companies he is involved with, other than Tesla (TSLA). With the success that Musk has been having with rockets and satellites, many investors see the growth potential in those areas.

Fortunately, there are a few ways to participate in the growth of those companies, even though they are not yet public.

Before I cover those ways, I want to relay a story to you about Apple (AAPL). Why Apple you may ask? Well let me explain.

Buying Apple Before It Went Public

Many, many years ago, before Apple went public, I was using an Apple II computer with the VisiCalc spreadsheet program to create financial planning worksheets. I couldn’t believe that calculations could be done so easily on a small machine and then printed out. I was working for an investment management firm at the time and wanted to invest in this little Apple Computer company. (That was the name of the company before it was changed to Apple Inc.) 

Unfortunately, it wasn’t publicly traded. But fortunately, I read in a Forbes article that a publicly traded venture capital company called the Nautilus Fund, which was a closed end fund, had an equity interest in Apple. The fund held share of mostly public companies but also some shares of a few private companies. So to make a long story short, I bought some shares of the Nautilus Fund, Apple went public, and Apple shares were spun off to the Nautilus Fund shareholders. The rest is history.

Investing If Not Accredited

So you can see why investors, including myself, want to find some way to get access to Starlink and SpaceX shares.

If you are an accredited investor, you are probably aware of the services available to you for buying shares in private companies, and where there might be a minimum investment of $25,000. These services include Hiive, Forge, Microventures, and even NASDAQ Private Market.

An individual accredited investor is someone who has a net worth over $1 million, excluding primary residence (individually or with spouse or partner) and/or has an income over $200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years, and reasonably expects the same for the current year. There is one other qualification that can allow you to meet the accredited requirement. If you are an investment professional with a Series 7, a Series 65, or a Series 82, then you may qualify. There are different rules for organization investors.

But if you are not an accredited investor, there are still ways for you to participate. 

First, let’s discuss Starlink and SpaceX and their connection to each other.

SpaceX

Space Exploration Technologies Corp., commonly known as SpaceX, is a private aerospace manufacturer and space transportation company founded by entrepreneur Elon Musk in 2002. Musk established SpaceX with the ambitious goal of reducing space transportation costs to make space exploration and colonization more accessible, ultimately aspiring to enable human settlement on Mars. 

Headquartered in Hawthorne, California, the company quickly gained attention for its innovative approach to rocket design and its focus on reusability, a concept that has transformed the aerospace industry.

SpaceX made history in 2008 when its Falcon 1 rocket became the first privately developed liquid-fueled rocket to reach orbit. This success was followed by a series of groundbreaking achievements, including the development of the Falcon 9 rocket, which features reusable first-stage boosters, and the Dragon spacecraft, capable of carrying cargo and crew to the International Space Station (ISS). 

In 2012, Dragon became the first commercial spacecraft to dock with the ISS, marking a significant milestone in public-private partnerships in space exploration.

In 2020, SpaceX achieved another historic milestone with its Crew Dragon spacecraft, which carried NASA astronauts to the ISS as part of the Commercial Crew Program. This made SpaceX the first private company to launch humans into orbit. 

Beyond crewed missions, the company has developed the Starship rocket, intended for deep-space missions and capable of transporting cargo and passengers to the Moon, Mars, and beyond.

SpaceX has also revolutionized global communications with its Starlink project, a satellite internet network designed to provide high-speed internet access worldwide. By combining technological innovation with a vision for humanity’s future in space, SpaceX continues to play a pivotal role in advancing aerospace technology and shaping the future of space exploration.

Starlink

Starlink Services, LLC, a subsidiary of SpaceX, was established to provide high-speed satellite internet to underserved and remote regions across the globe. Launched in 2015 as part of Elon Musk’s vision to create a global broadband network, Starlink operates a constellation of low Earth orbit (LEO) satellites that communicate with ground stations and user terminals to deliver high-speed internet access. Its mission aligns with SpaceX’s broader goals of advancing space exploration and connecting humanity, particularly in areas lacking reliable internet infrastructure.

Starlink officially began beta testing its services in October 2020 under the program “Better Than Nothing Beta,” offering Internet speeds between 50 Mbps and 150 Mbps. It quickly garnered attention for its ability to provide connectivity in rural and remote areas, where traditional cable or fiber infrastructure is often unavailable. The service expanded rapidly, reaching customers in over 50 countries by 2023. Starlink has since developed specialized products, including maritime and aviation solutions, to cater to various industries beyond residential consumers.

Known for its user-friendly hardware, Starlink employs a compact satellite dish and modem for easy setup. Its advancements in satellite technology have included innovations like phased-array antennas and laser inter-satellite links to improve latency and bandwidth. 

By leveraging a network of thousands of satellites, Starlink aims to overcome the limitations of geostationary satellites, providing lower latency and more stable connections for applications like video conferencing, gaming, and remote work. As of recent reports, Starlink continues to grow its satellite constellation and improve its service capabilities, making it a key player in the global push for universal Internet access.

Ways to Invest

Alphabet (GOOG) (GOOGL), more commonly referred to as Google, has a division called Google Ventures, which invested in SpaceX almost ten years ago, giving it a reported 7.5% ownership of the company. However, Google is such a huge company that the value realized from the growth of SpaceX will have a very small effect on Google’s stock. 

The same thing is true of Bank of America (BAC), which also invested in SpaceX almost seven years ago, in the amount of $250 million.

Some articles suggest investing in competitors of SpaceX, but be careful. Look what happened to all the new electric car competitors to Tesla (TSLA). Fortunately, there are some other alternative ways to jump on the SpaceX bandwagon.

There is a closed-end fund called ARK Venture Fund (ARKVX), which reportedly has over 10% of it’s assets in SpaceX, in addition to ownership of shares in a couple more Musk companies, X and xAI. 

At the time this article was written, an individual investor would have to buy the stock through SoFi. 

According to the fund prospectus:

“Unlike an investor in many closed-end funds, Shareholders should not expect to be able to sell their Shares regardless of how the Fund performs. An investment in the Fund is considered illiquid.”

It also says, “Unlike many closed-end funds, the Shares are not listed on any securities exchange. The Fund intends to provide liquidity through quarterly offers to repurchase a limited amount of the Fund’s Shares (expected to be 5% of the Fund’s Shares outstanding per quarter).”

The fund has a management fee of 2.75%. The price of the fund has gone up by 27.26% over the last twelve months.

There is one other closed-end fund that owns SpaceX, called Destiny Tech100 Inc. (DXYZ),which trades on the New York Stock Exchange. It currently has 22 companies in its portfolio with SpaceX making up the largest share at 36.9%. Other stocks in the portfolio include Axiom Space, OpenAI, Instacart, Stripe, and Discord. The company has a management fee of 2.5%. In the last six months, the stock has gone up by 189%.

Any of the above ways will give you some participation in the growth of SpaceX or Starlink, but there is one more play in Starlink.

A company called KVH Industries (KVHI) is a Starlink authorized hardware and airtime reseller. This is a microcap stock with a market cap of $108 million, and is therefore extremely risky. The stock, which is currently generating negative earnings, has a favorable price to sales ratio of 0.91, and is selling for 76% of book value.

If you are considering investing in SpaceX or Starlink, even indirectly, you may think your portfolio will go to the moon (or Mars). Just be aware that there are extensive risks involved. 

Disclosure: Author owns TSLA, KVHI, and DXYZ.

Stocks Going Ex Dividend in December 2024

The following is a short list of some of the many stocks going ex-dividend during the next month, which can be helpful for traders and investors interested in the stock trading technique known as “Buying Dividends” or “Dividend Capture.” This strategy involves purchasing stocks before the ex dividend date and selling them shortly after the ex-date at a similar price, while still being eligible to receive the dividend payment.

Although this technique generally proves effective in bull markets and flat or choppy markets, it is advisable to exercise caution and consider avoiding this strategy during bear markets. To qualify for the dividend, it is necessary to buy the stock before the ex-dividend date and refrain from selling it until on or after the ex-date.

However, it is important to note that the actual dividend may not be paid for several weeks, as the payment date can be delayed by up to two months after the ex-date.

For investors seeking a comprehensive list of stocks going ex-dividend in the near future, WallStreetNewsNetwork.com has compiled a downloadable list containing numerous dividend-paying companies. Here are a few examples showcasing the stock symbol, ex-dividend date, periodic dividend amount, and annual yield.

Nike, Inc. (NKE)12/2/20240.402.07%
PepsiCo, Inc. (PEP)12/6/20241.3553.35%
The Travelers Companies, Inc. (TRV)12/10/20241.051.60%
Thermo Fisher Scientific Inc (TMO)12/13/20240.390.30%
Phillips Edison & Company, Inc. (PECO)12/16/20240.10253.13%
Southwest Airlines Company (LUV)12/26/20240.182.25%
Xerox Holdings Corporation (XRX)12/31/20240.2511.06%

To access the entire list of over 100 ex-dividend stocks, subscribers will receive an email in the next couple days with the full list. If you are not already a subscriber, you can sign up using the provided signup box below. Don’t miss out on this valuable information, and the best part is that it’s free!

Dividend Definitions

To better understand the dividend-related terms, let’s define them:

Declaration date: This refers to the day when a company announces its intention to distribute a dividend in the future.
Ex-dividend date: On this day, if you purchase the stock, you would not be eligible to receive the upcoming dividend. It is also the first day on which a shareholder can sell their shares and still receive the dividend.
Record date: This marks the day when you must be recorded on the company’s books as a shareholder to qualify for the dividend. Typically, the ex-dividend date is set two business days prior to the record date.
Payment date: This is the day on which the dividend payment is actually made to the eligible shareholders. It’s important to note that the payment date can be as long as two months after the ex-date.

Before implementing the “Buying Dividends” technique, it is crucial to reconfirm the ex-dividend date with the respective company to ensure accuracy and avoid any unexpected changes.

In conclusion, being aware of the stocks going ex-dividend can be advantageous for traders and investors employing the “Buying Dividends” strategy. WallStreetNewsNetwork.com provides a convenient resource to access a comprehensive list of such stocks, allowing individuals to plan their investment decisions effectively. Remember to stay informed and consider market conditions before employing any investment strategy.

Disclosure: Author owns PEP.

Is Your Stock Manipulating Its Earnings? Easy Way to Check Tesla, Super Micro Computer Computer, and Many Others

by Fred Fuld III

The Beneish M-Score is a financial metric designed to identify the likelihood that a company has engaged in earnings manipulation. Developed by Professor Messod Beneish of Indiana University, the M-Score uses a combination of financial ratios and variables to flag irregularities in accounting practices. Since its introduction in the late 1990s, it has become a critical tool for auditors, investors, and analysts who aim to evaluate the authenticity of a company’s financial reporting.

At its core, the Beneish M-Score combines eight variables, derived from publicly available financial statements, to create a composite score. These variables include metrics like the Days Sales in Receivables Index (DSRI), which measures changes in the relationship between receivables and sales, and the Gross Margin Index (GMI), which compares a company’s gross margin over time. Others, like the Asset Quality Index (AQI) and the Total Accruals to Total Assets Ratio (TATA), further analyze a firm’s asset structure and discretionary accounting practices.

The calculation results in a score that typically falls into one of two categories: firms with an M-Score less than -2.22 are considered less likely to manipulate earnings, while those with an M-Score higher than this threshold warrant further scrutiny.

I want to make sure you understand completely how this score works. It is always calculated as a negative number. The lower the negative number, the less likely the accounting is being manipulated. The higher the number, in other words, the smaller the negative number, the chances are greater that manipulation is involved.

A rule of thumb is that if the M-Score is -2.00 or lower, a greater NEGATIVE number, such as -2.50 or -3.00, the company is not a manipulator. If the score falls into the range of -2.00 to -1.78, the company is a possible manipulator. If the score is -1.78 to zero, it is a likely manipulator.

Although the M-Score does not definitively prove manipulation, it raises red flags, signaling that a company’s financial activities may require deeper investigation.

One of the most famous cases illustrating the power of the Beneish M-Score involved Enron. Retrospective analyses revealed that the M-Score flagged the company as a high-risk manipulator well before its infamous collapse. This case demonstrated the score’s potential as a forward-looking tool, though it also highlighted its reliance on accurate and consistent data from company filings.

Despite its utility, the Beneish M-Score has limitations. It is primarily designed for manufacturing or industrial firms and may be less effective in service-oriented or financial sectors, where the nature of financial reporting differs significantly. Furthermore, the M-Score is sensitive to accounting anomalies, which may not necessarily indicate deliberate manipulation but rather reflect differences in industry practices, acquisitions, or rapid growth.

For investors and analysts, the Beneish M-Score should be viewed as a starting point rather than a definitive verdict. It is most effective when used alongside other analytical tools and qualitative assessments. When combined with careful evaluation of a company’s leadership, industry trends, and broader financial metrics, the M-Score can serve as a valuable part of a due diligence process.

If you want to try the M-Score on a stock you are interested in, you can go to the M-Score Calculator, which is hosted by Indiana University, and try it on your own.

I tried it with a couple of stocks and this is what I came up with.

First, I started with Tesla (TSLA).

Tesla ended up with an M-Score of -2.112, a score of less than -2.00 (a greater negative number that -2.00), which means it falls in the green Not a Manipulator category.

Then I tried Super Micro Computer (SMCI):

You have probably seen the news lately about SNCI.

  • Accounting Firm Resignation: In October 2024, Ernst & Young resigned as Super Micro’s auditor, citing concerns about transparency and internal controls related to financial reporting.   
  • Delayed Annual Report: Super Micro delayed the filing of its annual report, leading to a significant drop in its stock price.   
  • Hindenburg Research Report: Hindenburg Research published a report alleging that Super Micro continued to engage in accounting manipulation, sibling self-dealing, and potential sanctions evasion.   

These recent events have raised serious concerns about the accuracy and reliability of Super Micro’s financial reporting. Investors and analysts are closely monitoring the situation as the company works to address these issues and regain credibility.

So what did the M-Score Calculator show for Super Micro? It displayed an M-Score of -0.844, a higher number than -1.78 (lower negative number), based on the. This puts it well in the range of red Likely Manipulator.

In today’s complex financial landscape, where trust in corporate reporting is paramount, tools like the Beneish M-Score play a crucial role. By offering a quantitative approach to identifying irregularities, it empowers stakeholders to make informed decisions, promoting greater accountability in corporate governance.

Disclosure: Author owns a small amount of TSLA.

Dressing for Success: Why Apparel Stocks Could Be a Holiday Season Winner

by Fred Fuld III

Reading time: 2 minutes

As the holiday season approaches, investors may want to consider adding apparel and clothing retailer stocks to their portfolios. This sector often sees a boost during the holiday shopping season, as consumers seek out festive attire and gifts for loved ones. Let’s delve into three potential investment opportunities within this space: American Eagle Outfitters (AEO), Buckle (BKE), and Gap (GAP).   

American Eagle Outfitters (AEO)

American Eagle Outfitters, known for its trendy and affordable apparel, has a strong track record of appealing to young consumers. The company’s diverse brand portfolio, including Aerie, has contributed to its consistent growth. 

With a market cap of $3.42 billion, a P/E ratio of 15, and a forward P/E of 9, AEO presents an intriguing investment opportunity. The stock has a very favorable price to sales ratio of 0.63 (remember, the lower the number, the better), and pays a dividend of 2.57%.

Buckle (BKE)

Buckle, a specialty retailer focused on denim and casual apparel, has a loyal customer base and a strong brand reputation. The company’s focus on quality products and excellent customer service has driven its success.

With a market cap of $2.27 billion, a P/E ratio of 11, and a forward P/E of 12, BKE could be a solid choice for investors seeking exposure to the denim market. The stock has a price sales ratio of 1.85 which is a bit on the high side, and a trailing dividend yield of 3.1%.

Gap (GAP)

Gap, a well-established retailer with a diverse portfolio of brands, including Gap, Old Navy, and Banana Republic, has been undergoing a transformation to adapt to changing consumer preferences. The company’s efforts to improve its online presence and offer more fashionable and inclusive clothing have shown promise.

With a market cap of $8.35 billion, and a trailing and a forward P/E of 11, GAP could benefit from the holiday shopping season and its ongoing turnaround efforts. The stock sports a couple of excellent financial ratios, a price/sales of 0.55, and an outstanding price to earnings growth ratio of 0.23. The yield is 2.67%.

Key Considerations

While the apparel and clothing retail sector holds promise for the holiday season, it’s essential to consider the following factors before investing:

  • Economic Conditions: A strong economy and consumer confidence are crucial for the sector’s performance.
  • Competitive Landscape: Increased competition from online retailers and fast fashion brands can impact sales and profitability.
  • Inventory Management: Effective inventory management is vital to avoid markdowns and excess stock.   
  • Consumer Preferences: Staying updated on evolving fashion trends and consumer preferences is essential.

By carefully evaluating these factors and conducting thorough research, investors can make informed decisions about investing in apparel and clothing retailer stocks during the holiday season.

Disclosure: Author didn’t own any of the above at the time the article was written.

Drilling for Oil Drilling Stocks

by Fred Fuld III

Reading time: 4 minutes

The oil and gas industry has experienced significant fluctuations in recent years, influenced by various factors such as geopolitical tensions, fluctuating demand, and the rise of renewable energy. Despite these challenges, oil and gas remain crucial components of the global energy mix, particularly for emerging economies.

Global oil demand is projected to remain robust, driven by factors like increasing population and industrialization in developing nations. Additionally, the Organization of the Petroleum Exporting Countries (OPEC) and other major producers have shown a commitment to maintaining price stability, which can benefit oil drilling companies.

Technological advancements, such as hydraulic fracturing and horizontal drilling, have unlocked new reserves and improved production efficiency. Deep-sea exploration and production capabilities continue to evolve, expanding the potential resource base.

Many oil drilling companies offer substantial dividend yields and share buyback programs, which can enhance shareholder value.

While the oil and gas industry is inherently volatile, subject to fluctuations in commodity prices and geopolitical events, there are also significant risks associated with environmental concerns and the long-term transition to renewable energy sources.

For investors considering oil drilling stocks, it is essential to carefully evaluate the risks and rewards. Major drilling companies, oilfield service providers, and independent oil and gas producers are key players in the industry.

Helmerich & Payne (HP):

Helmerich & Payne is a leading provider of drilling solutions and technologies. The company operates a fleet of advanced drilling rigs, primarily focused on the North American market. HP’s strong focus on technological innovation and operational efficiency has positioned it as a key player in the oil and gas industry.

The stock trades at 11 times trailing earnings and 10 times forward earnings. The stock has a dividend estimate for the current fiscal year at 4.0%.

Noble Corp. (NE):

Noble Corp. is a global offshore drilling contractor, operating a fleet of high-specification drillships and semisubmersible rigs. The company serves a diverse customer base, including major international oil and gas companies. Noble Corp. is known for its commitment to safety, environmental responsibility, and operational excellence.

The stock has a trailing and forward price to earnings ratio of 10, and earnings per share are expected to grow by 14% next year. Noble pays a dividend yield of 5.1%

Patterson-UTI (PTEN):

Patterson-UTI is a leading land drilling contractor, providing drilling services to oil and gas exploration and production companies in the United States. The company operates a fleet of high-performance drilling rigs and offers a range of complementary services, including pressure pumping and rental tools. PTEN’s strong focus on customer service and operational efficiency has contributed to its success.

The company has been generating negative earnings, and has a sky high forward PE ratio of 283. The stock’s yield is 3.7%.

Sable Offshore (SOC):

Sable Offshore is a relatively smaller player in the offshore drilling industry, specializing in providing services to the Brazilian offshore market. The company operates a fleet of modern drilling rigs and has a strong track record of delivering safe and efficient drilling operations.

The stock has been generating negative earnings but has a forward PE of 10. The company does not pay a dividend.

Why Invest in Oil Drilling Stocks?

  1. Strong Demand and Price Stability:
    • Global Demand: Despite the growth of renewable energy, global oil demand is projected to remain robust, driven by factors like increasing population and industrialization in developing nations.
    • Price Stability: The Organization of the Petroleum Exporting Countries (OPEC) and other major producers have shown a commitment to maintaining price stability, which can benefit oil drilling companies.   
  2. Technological Advancements:
    • Enhanced Recovery Techniques: Innovative technologies like hydraulic fracturing and horizontal drilling have unlocked new reserves and improved production efficiency.   
    • Offshore Exploration: Deep-sea exploration and production capabilities continue to evolve, expanding the potential resource base.
  3. Dividends and Share Buybacks:
    • Attractive Returns: Many oil drilling companies offer substantial dividend yields and share buyback programs, which can enhance shareholder value.   

Potential Risks and Considerations:

  • Volatility: The oil and gas industry is inherently volatile, subject to fluctuations in commodity prices and geopolitical events.   
  • Environmental Concerns: Growing environmental awareness and stricter regulations can impact operations and costs.
  • Transition to Renewable Energy: Long-term, the transition to renewable energy sources could reduce demand for fossil fuels.

In conclusion, while the future of the oil and gas industry is evolving, there remains a strong case for investing in oil drilling stocks, particularly for investors with a long-term perspective.

Disclosure: Author didn’t own any of the above at the time the article was written.