What Is DSCR and How To Calculate It?

A debt-service coverage ratio (DSCR) is a financial metric that analyzes an entity’s ability to pay its debt. The basic formula to calculate the DSCR is:

DSCR = Net Operating Income / Debt Obligation 

A DSCR of 1.0 reveals that a borrower has just enough cash flow to pay off its debt obligations. A DSCR of greater than 1.0 shows that a borrower has more than enough cash flow to repay their debt. And, a DSCR of less than 1.0 shows that a borrower does not have enough cash flow to repay their debt. Lenders will examine the DSCR when determining whether or not to approve a loan. DSCR loans are based almost entirely on the DSCR.

With that in mind, let’s examine the two most common scenarios where DSCR loans are used: real estate investing and business. 

Real Estate DSCR Loan

DSCR loans are common in the real estate industry as they can help investors qualify for loans without relying on their personal income. Traditional mortgages require borrowers to disclose personal financial information like pay stubs, employment history, and W-2 tax returns. However, DSCR loans don’t ask for any of this. Instead, lenders issue DSCR loans based on the projected profitability of the deal.

Real estate DSCR loans follow this formula:

DSCR = Net Operating Income / Debt Obligation 

In this example, “net operating income” is the projected revenue from a real estate rental, and “debt obligations” are all of the costs associated with owning that property (mortgage payment, taxes, upkeep, HOA fees, etc).

For example, let’s say you want to buy a rental property and project that this investment will generate $5,000 per month or $60,000 annually in rental cash flow. If your debt obligations from the property are $50,000 annually then your DSCR is:

$60,000 / $50,000 = 1.2

A DSCR of 1.2 tells the lender that your property should generate enough cash to cover all expenses. Most real estate lenders consider a DSCR of 1.2 or greater to be acceptable and will likely approve a loan if you can prove this metric. However, lenders may still have other requirements like a good credit score or a minimum loan amount. 

To get a better idea of why lenders use this metric, it’s helpful to think of the opposite scenario. Imagine that you’re a real estate investor who is applying for a DSCR loan. Your projected revenue is $60,000 annually. But, your debt obligations will be $80,000. This means that your DSCR will be 0.75% ($60,000 / $80,000 = .75%). In other words, your property will not generate enough cash flow to pay the property’s mortgage and expenses. In this scenario, lenders will not want to lend you money as you’ll have a tough time being able to repay it. If this is the case, you may want to reexamine your calculations and maybe even the deal itself. 

DSCR loans are not reserved for real estate investors. They can also be used in the business world.

Business DSCR Loan

A DSCR loan can also measure how much cash flow a business has to generate in order to repay the required principal and interest on a loan during a given period. Calculating the DSCR ratio for a business loan is a bit trickier than for real estate loans. It starts with the same basic formula: 

DSCR = Net Operating Income / Debt Obligation 

But, in this scenario, “net operating income” is a company’s revenue minus operating expenses not including taxes and interest payments. “Debt obligations” refers to all short-term debt, interest, principal, sinking fund, and lease payments that are due in the coming year.

For example, if your company’s net operating income is $1,000,000 annually and your total debt is $250,000 then your DSCR would be 4. This means your business has 4 times the amount of cash it needs to cover its current debt obligations. 

Lending requirements are a bit more complex when it comes to business DSCR loans. However, lenders will still view your DSCR as an indicator of loan risk. Businesses with a lower DSCR are considered riskier than those with a higher DSCR. Having a low DSCR could impact your company’s ability to raise money or force you to take on debt with less favorable terms.

Pros and Cons

Since they have less strict requirements, DSCR loans can make it easier to raise capital for your business or an investment project. For example, it can be easier to buy a rental property using a DSCR loan since the loan is based on the profitability of the project – not your personal income.

Pros:

• Easier to get approved: A DSCR loan can be an easy way to raise capital for both real estate investors and businesses in good financial standing. There are usually fewer hoops to jump through when compared to other forms of financing.
• Financial forecasting: The DSCR metric can also be beneficial for companies and investors as a way of analyzing their financial health. Consistently monitoring your DSCR will let you know if your ability to repay debt is improving, getting worse, or staying the same over time.

For some investors, the concept of a DSCR loan may sound too good to be true as it allows you to qualify for a loan without having a high income. However, there are a few downsides to this form of financing.

Cons:

• Less favorable terms: DSCR loans often come with less favorable terms, such as a higher interest rate or shorter repayment schedule. 
• Higher fees: This form of financing may charge origination fees and other fees that can increase your cost of borrowing.
• Fewer protections: DSCR loans are less popular than other forms of financing, which means there tend to be fewer protections in place.

I hope that you’ve found this article valuable when it comes to learning about DSCR loans. If you’re interested in learning more then please subscribe below to get alerted of new investment opportunities from InvestmentU.

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What’s an ETF?

As a quick reminder, an exchange-traded fund (ETF) is a financial product that tracks an underlying index, sector, or asset class. If a stock were a fruit then buying an ETF is a bit like buying a fruit basket, you get many small pieces from lots of different fruits.

Many investors prefer buying ETFs because they help you easily diversify your portfolio. Buying shares of an ETF essentially means you never have to worry about picking the right stocks.

For example, let’s say that you’re bullish on the future of AI. But, you aren’t sure which company(s) will emerge as leaders in AI over the coming years and you don’t want to risk investing in the wrong companies. In this case, you could simply invest in an ETF that tracks a range of AI stocks instead of trying to handpick certain companies.

You can read more about how ETF investing works here. Now, let’s discuss Schwab US Dividend Equity ETF (SCHD).

What is SCHD?

The Schwab US Dividend Equity ETF is a passive ETF whose goal is to “track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Dividend 100™ Index.” This means that SCHD tracks the top 100 biggest, most reliable dividend-paying companies in America.

Buying shares in this fund is a low-cost and tax-efficient way for investors to get access to some of the most financially stable companies that pay consistent, reliable dividends. If you buy shares in SCHD then you won’t have to worry about researching individual dividend stocks. 

Additionally, an expense ratio of 0.06% means you will only pay $0.60 in fees for every $1,000 that you invest. This is much lower than many actively managed funds. But, still not as cheap as doing your own research.

The SCHD focuses on the quality and sustainability of dividends, mainly looking for companies that increase their dividends over time. Its five biggest holdings are:

1. Cisco Systems (Nasdaq: CSCO) which makes up 4.12% of the index
2. AbbVie (NYSE: ABBV) which makes up 4.11% of the index
3. Home Depot (NYSE: HD) which makes up 4.06% of the index
4. Amgen (Nasdaq: AMGN) which makes up 4.04% of the index
5. Chevron (NYSE: CVX) which makes up 4.04% of the index

This stock-based index is most concentrated in the following five industries:

1. Financials which makes up 17.42% of the index 
2. Healthcare which makes up 15.71% of the index 
3. Consumer Staples which makes up 13.89% of the index 
4. Industrials which makes up 13.51% of the index 
5. Energy which makes up 12.84% of the index 

Should You Buy SCHD?

This depends on your investment strategy and goals. However, if you’re an investor looking to get exposure to a wide range of high-quality dividend stocks then SCHD certainly presents a good solution. This fund has a long and proven history of consistently increasing its dividend payout. 

Here’s a quick snapshot of its dividend payments over the past few years (it pays dividends quarterly):

• Q1 2024: $0.8241 per share
• Q1 2023: $0.5965 per share
• Q1 2022: $0.5176 per share
• Q1 2021: $0.5026 per share
• Q1 2020: $0.4419 per share

You can see that the fund has consistently increased its dividend payments over the years. However, there were a few quarters where dividend payments dipped (mainly, in the wake of the 2020 pandemic). 

Since 2020, SCHD’s stock price has also increased by roughly 34%. This shows the year-over-year dividend and stock appreciation growth that you can expect to experience from this fund. But, remember that past performance is not a guarantee of future results.

That said, a dividend ETF like SCHD might not be the best choice for investors with a longer time horizon. If you plan to keep your money invested for a longer period of time (say, 10 years or more) then you might be better off sticking with a regular ETF. 

Dividend ETFs Vs Stock Market ETFs

Dividend ETFs are popular for their ability to reliably pay money to investors via dividends. Some investors rely on these dividends for income. But, many investors choose to reinvest the dividends back into the fund. If your goal is long-term capital appreciation then you might be better off going with a general stock market ETF.

Stock market ETFs can often outperform dividend ETFs. For example, consider an ETF like the SPDR S&P 500 ETF Trust (Nysearca: SPY) which tracks the overall performance of the S&P 500. Or, the Fidelity NASDAQ Composite Index ETF (Nasdaq: ONEQ) which tracks tech-centric NASDAQ index. Here’s how these two ETFs have fared against the SCHD since 2020:

• SCHD: 34%
• SPY: 70%
• ONEQ: 101%

Dividend ETFs are great because they reliably pay dividends. But, they also tend to track later-stage companies whose high-growth periods are behind them. This means that they could miss out on sector-specific rallies – such as the recent artificial intelligence rally. This is why dividend ETFs can often underperform the broader market, in terms of stock price appreciation. However, keep in mind that the above returns do not factor in reinvested dividends, so it’s not entirely an apples-to-apples comparison.

Ultimately, SCHD is a great choice for investors who are looking for an ETF that reliably pays increasingly growing dividends. But, it might not be the best idea for investors who prioritize stock price appreciation and have a longer time horizon.

You can learn more about ETF investing here:

1. 5 Monthly Dividend ETFs for Income Portfolios 
2. ETFs That Short the Market
3. ETFs: Pros and Cons

I hope that you’ve found this article valuable when it comes to learning about SCHD and whether or not you should buy it. If you’re interested in learning more then please subscribe below to get alerted of new investment opportunities from InvestmentU.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor. Ted also did not own shares of SCHD at the time of writing.

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In December 2023, CRISPR received approval from the FDA to treat sickle cell disease (SCD) and beta-thalassemia with its landmark drug, CASGEVY. However, despite this breakthrough, CRSP stock is down 15% in 2024. 

CRISPR’s Breakthrough Treatment

To start, investors should be careful buying CRSP stock as its success depends almost entirely on CASGEVY over the short term. CRISPR currently has 5 other drugs in clinical programs. But, CASGEVY is its only FDA-approved therapy. For investors, this means that CRISPR’s price will likely be very volatile in the short term. Any good news around CASGEVY will likely send the stock soaring, while bad news could do the opposite.

Despite its limited portfolio of approved drugs, CRISPR’s future seems very strong. Its approved drug, CASGEVY, is a potential cure for sickle cell, a debilitating and life-threatening disease. The company also has 15 more drugs in its pipeline including therapies for hemoglobinopathies, oncology, and regenerative medicine.

Additionally, the company is led (and co-founded) by Emmanuelle Charpentier. Emmanuelle received the Nobel Prize in Chemistry for her work on the CRISPR/Cas9 gene-editing system. This just goes to show how cutting-edge CRISPR’s treatments are.

We also can’t discuss CRSP stock without also talking about Vertex Pharmaceuticals (Nasdaq: VRTX). 

CRISPR and Vertex Pharmaceuticals (Nasdaq: VRTX)

Vertex Pharmaceuticals owns 60% of CRISPR’s gene editing therapy for CASGEVY.

Right now, CASGEVY is in a bit of an exploratory phase. It has been approved by the FDA for use in the United States and the United Kingdom. In the US FDA trial, the drug was administered to 31 patients with 93.5% experiencing no major ill side effects. Now, it’s on doctors across the US and UK to recommend this treatment to their patients. When that happens, Vertex will own 60% of all sales and CRISPR will receive 40%.

On one hand, this will undoubtedly take a bite out of CRISPR’s potential profits. However, Vertex and CRISPR plan to charge $2.2 million for CASGEVY treatments. CRISPR’s cut of any prescribed treatments would presumably be 40% of $2.2 million or $880,000 per treatment – still incredibly high for one product.

Additionally, from what I’ve read, Vertex has significantly better commercialization abilities than CRISPR. It’s a bigger company with a much wider influence which will help bring CASGEVY to market and make it more readily available for patients. So, this partnership may actually work out in CRISPR’s favor.

Crispr Technologies Most Recent Quarter

As a cutting-edge biotech company, Crispr Technologies’ income has been all over the place over the last three years.

1. 2023: Annual revenue of $371.2 million and a net loss of $153 million
2. 2022: Annual revenue of $1.2 million and net loss of $650 million
3. 2021: Annual revenue of $914.9 million a net income of $377 million

This type of variability is not uncommon for early-stage biotech companies. These types of companies often spend years churning through investors’ money while they work to develop cures. However, once they’ve developed a viable treatment, revenue and income can go parabolic. Could this be what’s in store for CRSP stock?

Should You Buy CRSP Stock?

Buying early-stage biotech companies is a bit of a gamble.

On one hand, CRSP stock certainly seems poised for a breakout. The company received critical approval for a life-changing drug and yet the stock is down YTD. The company also has a Nobel Prize-winning CEO in charge, which is a great sign of things to come. Crispr Technologies has the potential to do amazing things in the medicinal field over the coming years. If its gene-editing treatments are successful then the stock will undoubtedly soar.

Red Flags to consider. 

For example, how many people will actually buy CASGEVY? According to the FDA, sickle cell impacts just 100,000 people in the US, or 0.0003% of the population. And, for those who have sickle cell, how many will be able to actually afford CASGEVY given its immense price tag of $2.2 million dollars? These questions are difficult to estimate, especially given the US healthcare system’s convoluted use of insurance policies to pay for treatments.

Finally, it’s worth mentioning that CRISPR already trades at a valuation of $4.75 billion. Some could argue that the company is immensely overvalued, considering its reported revenue of just $504,000 last quarter. On top of that, sickle cell affects a small portion of the US population. An even smaller percentage of those impacted will actually be able to afford CASGEVY. Finally, when CASGEVY revenue starts coming in, CRISPR will only receive 40%.

CASGEVY approval could be a sign of positive things to come.

It’s important to remember that CASGEVY is just one treatment for a handful of diseases. But, CASGEVY is also based on cutting-edge gene-editing technology. If CRISPR can use its gene-editing therapies to treat more common diseases – cancer, heart disease, etc – then the company’s $4.75 billion valuation might seem incredibly cheap. Who knows how long this type of diversification might take. But, it’s a very positive sign that CRSP stock has upward potential over the long run.

If you’re interested in buying CRSP stock, it might be wise to consider doing so slowly over time. This can help protect you from dramatic swings in the stock’s price. 

I hope that you’ve found this article valuable when it comes to learning about CRSP stock. If you’re interested in learning about other gene editing stocks click here, or please subscribe below to get alerted of new investment opportunities from InvestmentU.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor. Ted also did not own CRSP stock at the time of writing.

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What is Kendu Inu Coin? 

After diving into Kendu Inu’s website and social media pages, there really isn’t much to say about the coin itself. That’s because this crypto project isn’t working on a larger mission. There is no white paper outlining the project’s roadmap or new technology being built. The whole point of the project is just to attract users so that the coin’s price surges.

On its website, Kendu Inu’s mission statement says that Kendu

“Inspires his army of loyalists daily to sculpt a haven where hard work births prosperity, while striking fear in the hearts of jeets. Witness the epic rise of Kendu Inu, the next billion-dollar meme ecosystem.”

Huh. The website also states, “We don’t gamble. We work.” I wonder what they’re working so hard on since there doesn’t seem to be any type of roadmap at all.

Despite this lack of a roadmap, Kendu Inu’s price has soared recently. According to CoinGecko’s price data, Kendu Inu coin surged from $0.00005 in early June 2024 to $0.0002 as of mid-June – a movement of roughly 300%. The price movement started around June 4th, so I did some research to try and find a catalyst.

Through Kendu Inu’s Twitter, I learned that a few major events happened around June 4th:

• Kendu Inu bought a billboard on Times Square.
• Kendu Inu applied to get listed on Binance.

There’s a good chance that lots of people saw the billboard and bought Kendu Inu which is what caused the price run-up. Or, people saw the news about the Binance listing application and rushed to buy the coin.

Price run-ups could continue if Kendu Inu keeps gaining popularity. But, to be clear, Kendu Inu doesn’t seem to have any long-term roadmap outside of “grow the community” and “hopefully we all get rich.” If you buy Kendu Inu coin then you’re essentially making a bet that this coin could become the next Doge, Shiba Inu, or Bonk coin. But, that doesn’t mean that you shouldn’t buy it.

Leveraging Moonshot Investments

Investing in cryptocurrency still tends to get a bad reputation. If you bring up this topic in conversation, most people will likely give you a small eye roll and change the topic quickly. However, with BTC and ETH both getting approved for ETFs, more validity is coming to the space. It may only be a few more years until investing in lesser-known coins starts to be considered a legitimate investing strategy. It could even become similar to angel investing.

At its core, buying new cryptocurrencies is a moonshot investment. If you buy a meme coin, you’re doing so with the hopes that it can 10X or even 100X your money fairly quickly. This strategy is little different than angel investing, which involves investing in startups. With angel investing, venture capitalists place bets on dozens of early-stage companies. They know that  90% of the companies they invest in will fail. But, they’re hoping that just one startup out of ten will become the next Facebook (Nasdaq: META). Finding this one winner makes up for all the other startups that fail.

Of course, the biggest difference is that startups almost always have a mission statement, a product or service, and revenue (usually). Kendu Inu coin doesn’t have any of this and probably never will. But, you can still borrow the same investing strategy that angel investors use.

When it comes to buying meme coins, it’s a good idea to allocate a small percentage of your portfolio to early-stage coins in hopes of earning an outsized return. Getting in early on the next meme coin can immediately make up for money that you lose on other bad bets. But, this brings me to my most important point.

Only Invest Money That You Can Afford to Lose

The Kendu Inu community is small and growing incredibly quickly. It’s impressive that the coin is already this well-known despite its young age. If you’re looking to find the next big meme coin then it’s certainly a good bet. But, if you want to buy Kendu Inu coin it’s a good idea to only do so with money that you can afford to lose. Remember, any asset that can rise 300% in one month can fall 300% in one month just as quickly. 

Additionally, beware that the Kendu Inu community deliberately tugs at people’s FOMO (Fear of Missing Out). Its Twitter page is loaded with comments about how you “don’t want to miss out”, “buying Kendu Inu will make you rich”, and other quotes that sound like they’re straight out of the Stratton Oakmont Sales Manual. Even the Time’s Square billboard starts off with “Missed Shiba Inu?” All of this marketing is designed to try and manipulate investors into buying Kendu Inu in hopes of earning a massive return. Keep this in the back of your mind when doing your own due diligence.

So, How Do you Buy Kendu Inu?

Kendu Inu is traded on decentralized exchanges right now. The best way to purchase is to use uniswap and trade Shiba/ETH pairing. 

Simply, connect Uniswap with either your MetaMask, WalletConnect, or Coinbase wallet, select the sell amount for ETH and recieve your Kendu in your connected wallet.

Here’s a great video posted on reddit walking through the entire set up. 

I hope that you’ve found this article valuable when it comes to learning about Kendu Inu. If you’re interested in learning more then please subscribe below to get alerted of new investing opportunities from InvestmentU.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor. Ted also did not own Kendu Inu coin at the time of writing.

The post Should You Buy Kendu Inu Coin? appeared first on Investment U.

SYM’s Most Recent Quarter

Symbotic produces robotic arms and robots that can be programmed to fit specific needs, mainly in warehouses. By offering end-to-end systems, Symbotic helps other companies automate their supply chains for improved efficiency, speed and flexibility. To get an idea of whether or not to buy SYM stock, I dug into the company’s most recent earnings report (May 6th). Here’s what I learned:

• Q2 FY2024 Income:  Symbotic posted revenue of $424 million (+59% annually) and a net loss of $41 million.
• Annual Revenue Growth: Symbotic’s revenue is expanding quickly, growing at nearly 100+% annually over each of the past three years. Symbotic reported $252 million in revenue in 2021, $500 million in 2022, and $1.2 billion in 2023. 
• Guidance: Symbotic expects revenue of $450 million to $470 million next quarter. 
• Product Progress: In Q2, Symbotic deployed three new systems and completed three systems, bringing the company to 18 fully operational systems
• Backlog: Symbotic has an incredible backlog of committed contracted orders worth $22.8 billion.

There’s little doubt that Symbotic is already growing quickly. But, I’m mainly excited about SYM stock due to its industry: supply chain management and automation.

Opportunity in the Supply Chain Sector

Symbotic is a company that’s likely in the right place at the right time for expansive growth. This is because many companies are prioritizing their supply chains in the wake of the Covid-19 pandemic. The pandemic uncovered the risks of having a non-optimized supply chain and many companies are investing heavily to ensure this does not happen again. According to a study by Project 44, executives are planning to prioritize supply chains in 2024 onward. 

• 89% of executives see supply chain disruption as the biggest short-term risk for their organization.
• 43% of executives say supply chain investment will increase in the next 12-18 months.
• 72% of executives say they’re looking to make significant technology investments to reduce long-term costs.

In other words, the sales team at Symbotic will likely see hefty commission checks over the coming months. At the same time, innovation in supply chain technology is rapidly advancing thanks to artificial intelligence. 

Symbotic’s Recent Innovations

In recent months, Symbotic has made significant advancements to its products such as allowing its robots to see and interpret live images. Their autonomous bots can “view” a box in front of them and make determinations on what to do with it. If the box is labeled correctly then the robot will move it to the next location. But, if the box is damaged then the robot will set it aside. You can watch Symbotic’s marketing video and see its bots in action for yourself.

In Symbotic’s own words, its robots are “equipped with advanced sensors and AI-driven software, that allow them to navigate complex warehouse spaces, pick and place items and manage inventory with remarkable precision”

Symbotic has also been incorporating Nvidia’s (Nasdaq: NVDA) chips into its robots. These chips allow the robot to “think” more strategically when compared to older models. For example, the bots can view irregularly shaped boxes and still identify them correctly so that production doesn’t shut down if a box gets a little bit crushed. Think of this like Google’s (Nasdaq: GOOG) algorithm still recognizing that you meant “stocks to buy” even if you typed “Stkcs to buy”

As of Q2 2024, Symbotic owns 401 patents with 203 pending. So, the company seems to be investing heavily in improving its product – which is almost always a good sign for the company.

Should You Buy SYM Stock?

SYM stock seems poised for growth, due to the industry that it operates in and the quality products. Symbotic’s massive $22 billion backlog of orders is a testament  that the company has way more demand than it can handle – a good sign.

As I write this, Symbotic is currently worth $21 billion. With 2023 annual sales of just over $1 billion, the company trades at 21X sales – fairly cheap considering how quickly the industry and company could grow in the coming years. 

However, while I like SYM stock’s prospects over the long term, I’d be careful buying too much at once in the short term. Since going public in 2022 (via SPAC), SYM stock has had a history of intense volatility, especially during earnings events. A good earnings report can send the stock shooting up 20%. But, a bad report (or poor guidance) can cause the stock to sink 20%. With this in mind, consider using Dollar Cost Averaging to avoid getting caught on the wrong side of a price swing.

I hope that you’ve found this article valuable when it comes to discovering whether or not to buy SYM stock. If you’re interested in learning more then please subscribe below to get alerted of new articles.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor. Ted also did not own shares of SYM stock at the time of writing.

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Let’s take a look.

Lulu’s Most Recent Quarter

I dove into Lululemon’s most recent quarterly earnings report (June 6th) to get an idea of how the company has been performing recently. Here’s what I learned:

1. Net Revenue: $2.2 billion, up 10% annually. 
2. Gross Profit: $1.3 billion, up 11% annually
3. Balance Sheet: The company ended the Q1 2024 with $1.9 billion in cash
4. Guidance: For Q2 2024, Lululemon expects net revenue of $2.4 – $2.42 billion, which would represent growth of 9% to 10%
5. Stock Repurchases: The Board of Directors authorized a $1 billion stock buyback program.

At first glance, these results are not bad at all. But, they’re also not overwhelmingly good – especially for a company that should still be growing fairly quickly. 

CEO Calvin McDonald stated that there was strong momentum in international markets last quarter. He also confirmed that the company left money on the table by not having enough products in stock to meet high demand. McDonald also stated that he’s confident in the company’s abilities moving forward. 

Looking ahead, the company is focusing on product innovation, guest experience, and market expansion. Lululemon also expects growth in these areas:

• Men’s Apparel 
• E-commerce
• International net revenue: International revenue currently makes up just 21% of the company’s sales. Lulu hopes to quadruple 2024 int’l revenue relative to 2021.

However, as far as bad news, Lululemon announced the departure of its Chief Product Officer, Sun Choe. According to a few reports I read, Choe was a driving force behind product innovation at Lululemon. The company will miss Choe and has had to reshuffle its internal structure following this departure. 

So, what does all this mean for investors?

Time to Buy Lululemon Stock?

With Lululemon stock down 40% YTD, it might seem like time to deploy Warren Buffet’s famous advice of “buy a great company at a good price.” But, I don’t think this applies to Luluemon stock right now. I believe that there is downside potential ahead for Lululemon thanks to three risk factors.

Risk #1 – Increased Competition

Years ago, Lululemon was virtually alone in the athleisure space. This wasn’t all too surprising, since the company essentially created athleisure. Sure, you could argue that Nike (NYSE: NKE) or Adidas (OTCMKTS: ADDYY) were semi-competitors. But, Lululemon was always in a vastly different space than these two all-in-one athletic apparel giants. Lulu goes after a much more niche, high-end market.

Lulu’s days of monopolistic power are quickly coming to an end. Today, Lululemon faces steep competition from companies like Alo, Vuori, Gym Shark, Fabletics, and many smaller brands. Granted, none of these companies have grown to the size of Lululemon (yet). But, they’re all still formidable opponents:

1. Vuori: This San Diego-based brand is worth an estimated $4 billion and is considering an IPO. It has also differentiated itself from Lululemon by mainly targeting men (an area that Lulu is looking to for growth). For what it’s worth, I (a 28-year-old male) own clothes from both brands and prefer Vuori for a handful of reasons.
2. Alo: Alo is worth an estimated $10 billion. It gained popularity thanks to its savvy influencer-first approach to marketing.
3. Fabletics: Fabletics considered an IPO in 2021 that would have valued it at $5 billion. I couldn’t find any numbers more recent than this.
4. Gymshark: Gymshark is valued at just under $2 billion. It’s also based in the United Kingdom which could hinder Lulu’s international expansion plans.

With a market cap of just under $40 billion, these companies still pale in comparison to Lululemon. But, that’s not the point. The point is that roughly 10 years ago Lululemon was the only name in high-end athletic apparel. Today, there are plenty of places where customers can buy a $128 pair of leggings or pants. Two of these competitors (Vuori and Gymshark) also operate in verticals that Lulu is looking to for growth.

Sales data for the four competitors listed above is largely private. So, I used another metric to compare them to Lululemon: Instagram followers (Nasdaq: META). Here’s how they stack up:

1. Gymshark: 7 million followers (Gymshark Women has 3.5 million)
2. Lululemon: 5 million 
3. Alo: 2 million 
4. Fabletics: 2 million
5. Vuori: 1 million

If you’re thinking of buying Lululemon stock, you have to consider how this competition could eat into Lululemon’s growth over the next 5-10 years. Lululemon has such a head start so it’s unlikely that it’ll get fully dethroned from its top position. But, the company also won’t enjoy the monopolistic position that it had over the past year. Plenty of former-Lulu male customers may start opting for Vuori while overseas athletes may choose Gymshark.

Risk #2 – Dupe Culture 

The rise of dupe culture is another issue that could hurt Lululemon stock in the coming months. A “dupe” or duplicate is just a knockoff of an existing product. 

The cost of living in the US has risen dramatically in the past few years. In response, US consumers are turning to dupes more than ever. In Lululemon’s case, more people are buying off-brand yoga pants for $40 instead of shelling out $128 to buy Lulus. If you search for #Lululemondupe on TikTok, you’ll see tons of videos on the subject that routinely get millions of views. I also took a look at Google Trends data, which showed that internet searches for “lululemon dupe” have been consistently trending higher since 2020. 

Lululemon isn’t the only company that has to deal with dupes. In fact, most high-end brands can expect their products to get copied. For example, Nike (Nasdaq: NKE) has always had an issue with fake Air Jordans but it has never seemed to hurt the company’s revenue.

Right now, it’s hard to tell if dupe culture is hurting Lululemon’s sales. But, it is a big enough issue that Lululemon felt the need to addressed it. Either way, dupes are another risk factor for Lulu moving forward.

Risk #3 – Gen Z’s Baggy Pants Trend

Lululemon has made a living off of its skin-hugging yoga pants. But, from what I’ve seen, Gen Zers show a preference for baggier sweatpants, hoodies, and t-shirts.

 A 5-year Google Trends chart for “baggy pants” supports this thesis. But, other than that, I don’t have much tangible data to point to for this trend. It’s just something I’ve observed on social media and in my own life. In my experience, tighter clothes seem to be on their way out while overly baggy clothing is in. I scanned Lululemon’s website and didn’t find anything that looked like they’ve caught on to this trend. Lululemon also launched in 1995 and had a stranglehold on consumers in the 2000s and 2010s. But, by this point, Lulu might not resonate as much with younger shoppers. If this doesn’t change, I wouldn’t be surprised if Lululemon started to get stereotyped as an “older people brand” in the coming years and lost ground to “cooler” upstarts (like the aforementioned Vuori, Alo, Gymshark, etc). That said, fashion trends vary by region and can change quickly. 

This is admittedly the weakest risk on this list. But, it’s still a potential risk nonetheless. 

Now, back to the question at hand.

Should You Buy Lululemon Stock?

I wouldn’t. It seems like Lulu is facing quite a few headwinds over the coming months. The company just lost a key executive in Sun Choe. It’s also facing steep competition in the exact verticals where it’s hoping for growth (men’s wear and international markets). The stock has also been getting punished so far this year, which is a sign that investor sentiment has changed for Lululemon – perhaps the toughest obstacle to overcome. 

I don’t necessarily think that Lululemon stock will tank over the coming months. But, it’s likely that Lulu will underperform the market or at best break even. Even if Lulu hits its goal of 10% revenue growth in 2024, I don’t see investors getting particularly excited. 

That said, fashion trends can change on a dime. All it takes is the blowout success of one product to change the narrative – a feat that Lulu has accomplished many times.

I hope that you’ve found this article valuable when it comes to discovering whether or not to buy Lululemon stock. If you’re interested in learning more then please subscribe below to get alerted of new articles.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor.

The post Lululemon Stock Battles Competition & Dupes: Time to Buy? appeared first on Investment U.

Right now, stock market plumbing stocks could be that rare opportunity that other investors aren’t talking about. Hear me out real quick…

The Bull Case For Plumbing

Aging Baby Boomers = More Home Maintenance

One economic megatrend that could spur investment in plumbing stocks is the aging Baby Boomer population. At 73 million people, Baby Boomers make up the second-largest generation behind Millennials. Over the next two decades, this generation will slowly start to retire – a trend known as the “Silver Tsunami.” Traditionally, an aging couple would downsize into a smaller home. But, it doesn’t look like many Boomers are doing this.

Many Baby Boomers locked in record-low mortgages during the pandemic when interest rates were at nearly 0%. Right now, many Baby Boomers are refusing to sell their home and downgrade to a smaller living space. After all, why would they? If you’re locked into a 2 or 3% mortgage then it makes no sense to move and take on a mortgage closer to 6% or 7%. Baby Boomers aren’t the only ones contributing to this trend. But, they’re playing a big role.

So, with this in mind, we can expect many Baby Boomers to age in place over the coming years. This inevitably means they’ll need to upgrade their existing homes, which could lead to a surge in demand for plumbing (along with home repair services in general). 

But, this isn’t the only trend that could cause demand for plumbing services to skyrocket.

Commercial-to-Residential Conversions = High Plumbing Demand

Another tailwind for stock market plumbing stocks is in the commercial real estate market. Specifically, the fact that many office buildings could be converted into housing over the coming years.

Ever since the pandemic, remote work has surged in popularity. This has had a chain reaction for the commercial real estate market.

1. The value of office space has tanked: With so few people working in person, office space values have dropped. The exact percentage drop depends on the market. But, CoStar estimates that office values have dropped 15% in the past two years. I personally feel that office values are dropping much more rapidly. But, lower prices have not been realized yet because so few people are buying/selling office buildings. 
2. Developers are looking to repurpose office space: Instead of sitting on assets that are losing value, many owners of office space are converting them into something more useful: apartments. Some cities, like Boston, have already announced hefty tax incentives to get the wheels moving on these conversions.

So, the problem is that office buildings are losing value rapidly. The solution is to turn these now-useless assets into something valuable: affordable housing. By doing this, developers could kill two birds with one stone. But, there’s just one problem: It’s hard to convert office space to apartments. 

This conversion process requires tons of maintenance including installing dozens of new bathrooms. After all, an office normally only has one or two bathrooms per floor (depending on the size of the office). But, if you are converting one office space into 20 apartments then you’ll need 20 different toilets, showers, and sinks. Now, multiply this by all of the office buildings across the country in the process of converting office space. Now you know why I’m bullish on the plumbing sector.

With all that said, let’s explore some of the top stock market plumbing stocks that could benefit from these megatrends.

Ferguson PLC (NYSE: FERG)

Ferguson PLC is a British plumbing and heating products distributor that primarily operates in North America. This company specializes in infrastructure, plumbing, and HVAC. It has been making big moves in the plumbing industry as the company recently acquired two other plumbing companies:

1. Yorkwest Plumbing Supply Company: A leading distributor of plumbing, municipal, hydronics, institutional, HVAC, and industrial products in the greater Toronto area
2. Grove Supply Inc: A NJ-based plumbing and HVAC distributor that serves the residential trade, builder, and remodel markets.

Ferguson’s stock is up 13% so far through the year. The company also reported 2023 annual revenue of $29.7 billion (+4% annually) and $1.89 billion in net income (-11% annually). Keep an eye on Ferguson PLC to be one of the top stock market plumbing stocks in the coming years.

Emcor Group (NYSE: EME)

Emcor Group is an American mechanical and electrical construction, industrial, and building services company. It’s not as much of a pure-play plumbing stock as Ferguson is. But, this all-in-one construction company could still benefit from the two trends that I highlighted in the beginning.

So far through the year, Emcor’s stock has risen roughly 80%. The company also reported 2023 annual revenue of $12.6 billion (+13% annually) and $633 million in net income (+56% annually).

Comfort Systems USA (NYSE: FIX)

Comfort Systems is a leading building and service provider for mechanical, electrical and plumbing systems. The company is composed of 43 operating companies who operate in 173 locations across the US. This diversification is crucial as it will help Comfort Systems take advantage of the above trends on a nationwide scale.

Comfort System’s stock is up nearly 60% so far through the year. The company also reported 2023 annual revenue of $5.2 billion (+26% annually) and $323 million in net income (+31% annually).

Home Depot (NYSE: HD)

Although not specifically a plumbing stock, Home Depot could also benefit from the trends listed above. Home Depot is the go-to store for most DIY homeowners. But, this massive construction supply company has been trying harder to attract “pro” customers in recent years. This includes contractors or small businesses who need supplies for paid projects.

According to Yahoo Finance, the “pro” consumer makes up roughly 50% of Home Depot’s customer base, compared to 25% for Lowe’s (NYSE: LOW). In all honesty, Lowe’s and Home Depot are incredibly similar companies. But, the fact that Home Depot attracts more pro customers gives it a leg up over Lowe’s. 

Home Depot’s stock is up 1% so far through the year. The company also reported 2024 annual revenue of $153 billion (-3% annually) and $15.1 billion in net income (-11% annually).

It’s also a great stock to add to your dividend portfolio with it’s 2.69% yield.

I hope that you’ve found this article valuable when it comes to discovering the top stock market plumbing stocks to buy. If you’re interested in learning more then please subscribe below to get alerted of new articles.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor. 

The post 4 Stock Market Plumbing Stocks: Take Advantage of Two Megatrends appeared first on Investment U.

When it comes to crypto, one strategy for investing success is to look for coins that are backed by an exciting project or have a clear mission. These coins separate themselves from the pack because people actually have a reason to buy them and get invested in the community. If enough people become interested in the coin’s mission then more people will buy in over time – which will likely send the coin’s price up and to the right.

The flip side of this strategy is meme coin investing. For the most part, meme coins really have no project or reason for people to buy them. There’s no real reason why someone would want to buy a coin like DogeCoin. They are either trying to make some cash by anticipating rally or they just think it’s funny.  DogeCoin isn’t working on any major projects and doesn’t have a real mission statement. But, this isn’t the case with a coin like Pi Coin.

Latest Pi Coin News

I dug through Pi Coin’s entire white paper and learned a few key takeaways. Pi Coin aims to offer a better take on Bitcoin by improving it in two main areas:

1. Making mining easier: One big complaint with BTC is that it has become too hard to mine. The mining industry has become consolidated into a few major players and requires immense computing power which makes it hard for regular people to compete. This eliminates one of the big benefits of participating in the Bitcoin network. Pi Coin wants to offer a better alternative by letting its users mine Pi Coin from their phone.
2. Creating less scarcity: Another issue with BTC is that people treat it more like “digital gold” as opposed to “digital money.” In other words, people hoard it instead of spending it. Pi Coin wants to solve this problem by creating a wider supply of coins. This will ideally create a more stable price which will encourage people to spend their Pi Coin freely without missing out on massive price swings.

Another main benefit of Pi Coin is that it’s designed to be mobile-friendly. This isn’t true for a lot of coins. The creators of Pi Coin want to help people capitalize on the time that they spend online. Instead of using their attention to scroll Instagram (NASDAQ: META) users can spend time in Pi Coin’s community where they can mine their own Pi Coin. So, instead of giving Mark Zuckerberg money by scrolling through his app, users can take control of their online presence back. Like almost all crypto projects, Pi Coin is all about taking control back from major finance and tech companies.

Pi Coin was founded by two Stanford graduates and currently has 55 million members in its network. The team is focused on building the world’s most inclusive peer-to-peer ecosystem and online experience. 

Is Pi Coin a Scam?

While researching, I noticed a lot of Pi Coin updates calling it a scam. In particular, Pi Coin has been heavily criticized on Reddit. I do not think Pi Coin is a scam. I think that it’s simply an ambitious cryptocurrency project with lofty goals that may take time to achieve (if they ever achieve them at all). If some investors are buying Pi Coin expecting a huge price pump then they might not understand what they’re investing in.

You should view buying Pi Coin like buying shares of a startup. Most startups are on a mission to achieve a goal of some sort. For the most part, the founders have the best intentions on reaching their mission. But, most startups also fail because…well…changing the world is hard. Pi Coin seems to be in a similar position. 

The management clearly put tons of thought into the white paper which is a telltale sign that it’s not a scam. But, that also isn’t a guarantee that Pi Coin’s price will surge. It’s also important to be wary of Pi Coin’s leadership team. As long as the team’s intentions remain pure then there’s nothing to worry about. But, if it feels like the leadership team is starting to mislead their community then it’s time to find another crypto project to be apart of.

Should You Buy Pi Coin?

Based on their white paper, the goal is for Pi Coin to be used as currency – not an investment. I checked its price history and the coin is up roughly 100% in the past year. In the crypto world, this actually isn’t very much at all. Additionally, the coin’s price seems fairly stable except for a few spikes and dips. So, I wouldn’t recommend buying Pi Coin unless you were invested in joining the community.

If you’re trying to anticipate the next meme coin rally then Pi Coin is the wrong coin (instead, you could check out coins like Bonk Coin). Pi Coin seems to be a legitimate project that’s focused on creating a legitimate alternative to Bitcoin. If this is something that interests you then, by all means, buy as much Pi Coin as you want.

I hope that you’ve found this article valuable when it comes to learning the latest Pi coin news. If you’re interested in learning more then please subscribe below to get alerted of new articles as I write them.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor. 

The post Pi Coin News: The First Crypto You Can Mine on Your Phone appeared first on Investment U.