Stake - 5 Stocks All Traders Are Watching
5 stocks all traders are watching

After a record breaking 2020, more traders than ever are poised for a big start to 2021. Check out what they’re looking at on Wall St.

SQ

Name: Square, Inc.
Ticker: $SQ
Founded: 2009
Price: $227
Market Cap: $102b

The payment processing company has graduated way beyond the small white POS squares littered across pop up shops. They are now providing a challenge to traditional banking and new ways to manage money.

How does Square make their money? By taking a clip of yours. Every tap or swipe on a reader involves a 2.6% merchant fee and 10c. That’s a pretty significant figure. In 2019, over US$3b in revenue was generated through transaction fees. On top of that, like any 21st century tech business they offer a subscription software for merchants. This started as Square’s core business but who knows how much longer this will be the case.

Then there’s CashApp. With 30million MAU and 90million downloads, Cash App allows users to spend, save, and invest from their phones.

While it is an ancillary service to customer’s traditional banks, holding a fraction of 30 million people’s bank balances leads to a huge amount of interest revenue but that’s only a part of the US$1.2b the app rakes in every year. Combined with pay to access features like instant transfers, 7 years into operation, is generating over US$280m in profits.

Given the decline in profit from payment processing, which is down 9.1% yoy to $315.7m, the growth of Cash App is essential to Square’s longevity. Cash App revenue is up 167% you.

JMIA

Name: Jumia Technologies
Ticker: $JMIA
Founded: 2012, Jim McKelvey and Jack Dorsey
Price: $39.29 (+196.33% in the last year)
Market Cap: $3.1b

Dubbed the African Amazon, Jumia is an eCommerce platform valued at just over US$3billion. Founded in Nigeria and the product of German entrepreneurs, the platform looks to replicate the eCommerce success stories we have seen globally.

At this stage the only comparable feature between Amazon and Jumia is their business line. It’s no easy task setting up a successful eCommerce platform across a 1.2b inhabitant continent but the opportunity is great. According to Nasdaq, Africa is home to 5 of the top 10 fastest growing world economies.

Historically, only mining stocks from African countries have really found success in foreign markets but there is by no means a lack of innovation. While mobile payment systems like Apple Pay may be a novelty for Australia, the UK and NZ, Kenyan innovation revolutionised the space in 2007. M-Pesa completely digitised banking. For 13 years Kenyans have been banking via mobile phone and since then the technology has spread across the continent, into India and even Eastern Europe.

It hasn’t been an easy first year on the NYSE for $JMIA which traded as low as $2 not long after its $50 peak in April last year but it has since gathered momentum and trades at $40. This sort of volatility isn’t without reason. The company battled through allegations of fraud and initially struggled through the early period of the coronavirus before the necessity of eCommerce during a pandemic has helped decrease losses as their profit per order begins to increase.

The volatility in price is enough to turn away many investors but the potential is too great for many Stake traders.

RUN

Name: SunRun Inc.
Ticker: $RUN
Founded: 2007
Price: $61.80
Market Cap: $12.2b

The Renewables Revolution has begun. As governments globally increase their clean energy targets, albeit slowly, the path to a world powered by renewables becomes clearer. Investors are buying into this future. Solar stocks have enjoyed the ride. $TAN, the aptly named, Solar ETF is up 188% so far in 2020. Included in it’s holdings is SunRun, the largest residential solar provider in the States.

Up 335% year to date, the US$12b company’s impressive year includes a merger with VivintSolar. The deal saw the 2 largest residential solar providers combine to now account for 15% of total market share.

Solar is becoming an increasingly viable power option for everyday people. The cost per kWh is down 82% since 2010 and is now cheaper than coal and natural gas. The high start up cost of solar panel and battery installation is the biggest barrier to mass adoption at this stage but those costs are falling too.

Other strong names in the sector include Solar Edge and Enphase Energy. Do your own research into their fundamentals.

ARKK

Name: Ark Innovation ETF
Ticker: $ARKK
Founded: 2014
Price: $123.95
Market Cap: $8.9b

$ARKK fills a very specific intersection for investors that has reinforced it as one of the most traded ETFs on Stake’s platform. ETFs are an investors best friend as they allow for cheap access to a whole index without the need to pick individual stocks.

Concurrently, many indices have been carried by tech and growth stocks in recent years. Those looking for simple investment into just the most disruptive companies of tomorrow, these same high return stocks, have found their answer.

$ARKK is an actively managed ETF targeting disruptive companies in 4 sectors: the genomic revolution, industrial innovation, next gen internet and fintech innovation. Their holdings include Tesla, Spotify, Teladoc and Zillow. Given Tesla spent most of 2020 outside any major index, $ARKK provided one of few options to gain ETF exposure to the company perhaps explaining its popularity.

The fund is up 145% in 2020.

PSTH

Name: Pershing Square Tontine Holdings
Ticker: $PSTH
Founded: 2020
Price: $25.02
Market Cap: $5b

Markets experienced a renaissance of sorts in 2020 as companies rediscovered ways to go public. While the IPO is the path to public life for most companies, Special Purpose Acquisition Companies, or SPACs, are publicly listed shell companies who then merge with established businesses. Names like Virgin Galactic, Draftkings and infamously Nikola Motors have all chosen to go public this way; it tends to be cheaper and quicker.

Bill Ackman has been well known on Wall St for decades but gained fame after a US$27m short of the market in early March turned is US$2.6b. Now he has turned his attention to the SPAC space. Ackman’s SPAC Pershing Square Tontine Holdings ($PSTH) is the largest in history. With US$4b on their books they are still searching for an acquisition target and traders have been piling in in anticipation. Ackman himself has said that Pershing Square will target a ‘mature unicorn’. Early rumours, which have since been quashed, included names like Stripe.

Certainly one to keep an eye on in 2021 although beware, SPACs aren’t like normal stocks. Read into their structure before buying to avoid heartbreak.