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Have Tencent Shares Bottomed Out After Losing $150B This Year?

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Tencent [TCEHY] investors have had a rough year so far as shares of China’s internet giant have declined close to 30% this year. The stock has declined due to the trade wars between China and the United States, declining margins and gaming regulations.

China is the biggest gaming market in the world and Tencent is the largest gaming company. So are these fears overblown? Have Tencent shares bottomed out? Is there significant upside potential for Tencent investors?

Gaming regulations

Chinese government departments approve video game licenses. However, certain departments are in a restructuring phase according to this Bloomberg report. This has led to a temporary freeze in gaming approvals.

The report states that while the National Radio and TV Administration has not issued licenses for 4 months now, the Ministry of Culture and Tourism has made registering games difficult.

Government interference and regulations are a part and parcel of the Chinese markets. There is always a potential risk of uncertainty for investors here. Tencent is yet to receive the necessary approvals for the new genre of gaming that has taken the world by storm – the battle royale.

Games such as Fortnite and PUBG have gained immense popularity and impacted stocks of top gaming companies such as Activision Blizzard [ATVI] and Electronic Arts [EA]. Further, Tencent was asked to recall one of its highly anticipated games – Monster Hunter: World just a few days after it debuted.

The game was pulled out after people raised objections to its content. Tencent is not concerned over this delay and expects the regulatory issues to be resolved quickly.

Trade war fears

The ongoing trade wars between China and the United States have driven several Chinese and domestic stocks lower. The two governments have been battling out since the start of 2018 and this is unlikely to abate in the near future.

However, such a reaction to the trade wars does not make sense, especially for Tencent as it generates almost 96% of revenue from domestic markets.

Declining margins

In Q2 2018, Tencent’s operating profits rose 11% year-over-year driven by a 30% rise in sales. However, the company’s operating margin fell to 30% from 35%. Profit margins were impacted due to the ongoing gaming ban. Tencent is unable to monetize two of its key video games.

The Chinese government is also increasing regulations on digital payment products.

Is Tencent’s growth story over?

The answer is NO. Despite these headwinds analysts expect Tencent’s sales to rise 29% to a whopping $78B in 2020. Tencent also owns China’s most popular messaging app known as WeChat. This is similar to WhatsApp and has over a billion users.

Its growing ecosystem of Mini Programs (these are apps that are a part of the core application) makes the WeChat platform more powerful. Mini-programs include a scan-to-buy function used by retailers, a pre-ordering restaurant app and a transport payment solution.

WeChat also has a digital payment system known as WeChat Pay and can be accessed by third-party apps as well as physical retail stores.

Once the regulatory issues are sorted, Tencent shares will continue to move higher driven by a growing gaming market. Don’t forget Tencent has generated absolute returns of a monstrous 34000% since 2004.

Money

CHART: How Blockchain Powers Bitcoin

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Blockchain, Bitcoin. Bitcoin, blockchain.

The two terms go hand in hand—and have become almost ubiquitous with this year’s insane rise (and fall) of Bitcoin.

But what does it all really mean? How does it come together? In this week’s chart, our friends at CB Insights break down exactly how blockchain powers Bitcoin.

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Business

This Mogul Became America’s 1st Black Billion-Dollar Businesswoman

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Sheila Johnson.

Where to start?

She’s the first black billion-dollar businesswoman. Before Oprah Winfrey.

She started as a TV executive, founding Black Entertainment Television (BET), the first TV network targeting African Americans. She then became a real estate mogul.

Oh, she also owns a stake in three major sports franchises, the NBA Wizards, NHL Capitals and the WNBA Mystics, the African American, period, to boast that claim.

In honor of Black History Month, let’s dive into her remarkable career.

FAST FACTS:

  • Born Sheila Crump in McKeesport, Pennsylvania, Johnson co-founded BET in 1979 with then-husband Robert Johnson. The couple sold it to Viacom in 2000 for $2.9B
  • Sheila Crump Johnson became the first African American woman on the Forbes’ Billionaire list in 2000—beating Oprah Winfrey to the distinction.
  • Per Forbes, Johnson has an $820M net worth as of 2019

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Foray into real estate…

After closing the sale to Viacom, Robert and Sheila pocketed around $1.5B each. Johnson used that windfall as seed money to build a hospitality real estate empire in 2005.

“There’s a disparity in paychecks between whites and blacks,” she told the Wall Street Journal. “I will never forget that.”

As CEO of Salamander Hotels and Resorts, Sheila controls a spectacular portfolio of six luxury hotels in Florida, Virginia and South Carolina. And she’s built it from the ground up—literally—in her own spirit.

“I’ve been to many hotels, not only in the US, but all over the world,” she told Forbes last year. “And I wanted to find something that was going to really make Salamander stand out beyond all of these hotels.”

So what does that mean?

“You have to understand, there are a lot of people, investment companies, with very deep pockets,” she says. “They can do it, but they don’t have the experiences that we’re able to bring. I am constantly trying to find a way to help Salamander Resort & Spa stand out head over heels above any other hotel — not only in the area, but in the nation.

“I want them to leave that resort wanting to come back and not just say, ‘I’ll be back in six months.’ I want them to come back all the time.”

And so far it’s worked. In fact, on Forbes Travel Guide’s 61st list of Star-Rated hotels, Johnson’s Salamander Resort & Spa outside of Washington, DC earned a Five-Star distinction.

Image Credit: Salamander Resort & Spa

Forbes: “Everything [she] touches turns to gold.”

That’s a real quote. From Forbes. Last year. It’s also true.

BET? Billion-dollar exit. Washington Capitals? Stanley Cup.

And Roma. Won 10 Oscars. Who showed it before a single soul started caring? Johnson’s Middleburg Film Festival. (Which, by the way, has 32 films and counting in Academy Award contention.)

Remember her golf resort at Innisbrook? Oh, yeah. Hosts the Valspar Championship, one of the PGA calendar’s most-anticipated tournaments.

Becoming a billionaire comes with a new level of clout as well. “When you don’t have money, you’re not invited to special events; you really don’t matter,” she told WSJ. “It’s a society thing.”

So instead, she’s turned to giving back. Her Sheila Johnson Fellowship’s paid for more then 40 scholarships at Harvard University for students who otherwise wouldn’t afford to attend.

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Breaking glass ceilings. 

There’s an alarming statistic in business and diversity—especially as it pertains to women. According to research by investor Richard Kerby, 18% of all VCs are women—and only 3% are black. In addition, less than 50 black women ever have raised $1M in funding.

“When I got started,” Johnson says, “I couldn’t get a loan. I had to use my own money to get Salamander Resort and Spa.”

She explained to WSJ last year that men can go to any bank with a bank proposal. And no matter how “wacky” the idea is, she said, “they’re going to get the financing. Women do not have that ability.”

Johnson’s taken it upon herself to do something about that, becoming one of the founding partners of WE Capital, an investment firm that invests in female entrepreneurs.

“I started out in a very unique position where I had my own capital to be able to get started,” she says. “But there have got to be banks and investors that believe in helping women who want to be entrepreneurs in the hospitality business.

“And it’s just really, really important that they really take a look at this.”

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Money

VIDEO: How Far Does $150K A Year Get You In New York City?

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Source: HuffPost

No matter what metric or list you look at, it goes without saying: New York City is one of the most expensive places in the world to live in.

In this video, CNBC spoke to a Millennial who runs her own brand consulting agency and wants to #WealthHACK her way to retirement by 40.

She makes $150K a year. But how far does that actually get her? Check it out.

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