Small-cap stocks are generally an ideal investment for investors which a high-risk appetite. Small-cap stocks have a market capitalization of under $3B.
These companies provide a higher rate of return as they are generally driven by high growth prospects. These shares are also more volatile compared to mid-cap or large-cap stocks.
The Vanguard Small Cap ETF [VB] which is a broad indicator of the small-cap space, declined over 3.3% last week. Here we look at small-cap stocks that underperformed the market significantly in the first month of Oct. 2018.
GoPro [GPRO] shares fell 13% last week to close trading at $6.26. The stock has burnt significant investor wealth over the last two years due to a decline in product shipments.
GoPro launched the highly anticipated Karma drone two years back but had to recall shipments shortly after the product launch. The company then decided to discontinue the production of Karma and exited the drone market.
Earlier this year, GoPro has launched several products across price points to target different customer segments. It will be interesting to see if this will improve device sales and result in revenue growth for the company.
Market Cap: $931.5M
Year-to-date Return: -17.3%
Last week decline: $139M
This telecom company has had a horrendous run in the last two years. Windstream [WIN] shares have declined 51% this year after slumping 76% in 2017. The stock declined 8.2% last week.
Some analysts believe the rising debt levels of Windstream might drive the firm to bankruptcy. Earlier this year, Michael Rollins from Citigroup [C], reduced Windstream’s price target to $1.
According to Rollins, Windstream is in a “precarious operating position and faces rising financial risks.”
Market Cap: $193.2M
Year-to-date Return: -51.35%
Last week decline: $17M
Similar to Windstream [WIN], Frontier Corp. [FTR] continues to underperform the markets significantly. The stock is up marginally by 0.7% this year. It has however declined 22% in 2016 and 87% last year. Shares fell 5% last week.
Though this initially resulted in cost savings, the cord-cutting phenomenon coupled with the demand for a cable-based internet impacted the company’s revenue.
FTR has to discontinue its dividend payouts and impose a reverse stock split to continue trading on NASDAQ.
Market Cap: $720.57M
Year-to-date Return: -0.74%
Last week decline: $37M
Pandora shares have had an impressive run in 2018, as the stock has risen close to 86%.
Market Cap: $2.41B
Year-to-date Return: 86%
Last week decline: $140M
Fitbit [FIT] too has burnt significant investor wealth in the last two years. This stock fell 73% in 2016 and 25% in 2017. Shares have slipped close to 12% in 2018 as well.
Fitbit shares were recently impacted by the launch of the Apple Watch Series 4. The company’s shares have declined driven by Fitbit’s loss in the wearable market. Fitbit shipments have fallen in a growing wearable space.
Market Cap: $1.24B
Year-to-date Return: -12%
Last week decline: $70M
Will Cloud Gaming Drive The Next Big Gaming Transition?
The global gaming industry has always been a disruptive one. Nuclear physicist Edward Condon developed the first computer game in 1941 called Nim, one which pretty much saw the computer win 90% of the time.
The disruption didn’t fizzle out. Soon afterwards, the first programming guidelines were written for a chess game developed by Claude Shannon, while a decade later the US Department of Defense created a war game — STAGE.
This really set the stage for what was to come later — video games. American investor Ralph Baer wasted no time and conceived the idea of playing video games on TV, and the world’s first gaming console was released. The rapid evolution of gaming consoles coupled with gaming design and the introduction of graphics cards have taken the global gaming industry by storm.
In the last decade, the evolution of smartphones opened up a totally new segment known as digital gaming. In 2016, Activision Blizzard paid close to $6B to acquire King Digital- a digital gaming behemoth. Not one to trail far behind, the eSports segment, despite its nascency, proved to be a long-term revenue driver for top gaming firms.
Will cloud gaming be the next key driver in global games?
Now companies such as Microsoft [MSFT], Google [GOOG] and Electronic Arts [EA] aim to create a market for cloud gaming. So what exactly is cloud gaming? It’s similar to online streaming services such as Netflix [NFLX] and Amazon Prime [AMZN], but with games.
Cloud gaming will allow users to play games on their computer or mobile devices. A remote server will send players video feed and receive controller inputs. This now means that players no longer need to purchase gaming consoled to play the latest games. All you need is a stable internet connection.
Google’s cloud gaming project is called Project Stream and the company launched a beta test last month. Players required a Google Chrome browser and an internet connection of 25 Mbps or higher.
Microsoft which also manufactures the Xbox consoles announced its cloud gaming platform known as Project xCloud. It has confirmed several Xbox games for beta testing such as Halo, Minecraft, and Gears of War.
The tech giant is hoping for growing interest in cloud gaming to offset any declining sales in gaming consoles.
Following Google and Microsoft, top gaming publisher Electronic Arts has forayed into this space, with a project known as Project Atlas.
Will this move garner global attention?
The shift to cloud gaming is going to be as disruptive as any in the gaming space. Players can now subscribe and stream games online instead of spending over $300 for the latest gaming console. The cloud gaming space is expected to grow at a compound annual growth rate of 26% between 2017 and 2023.
While Netflix and Amazon have changed the consumption of entertainment via cord cutting, it is very likely that cloud gaming will soon be a hit among players in a few years time. Is this the end of the gaming console?
10 Stock Terms Every Newbie Investor Should Know
Investing in the financial markets can seem quite tricky. There are far too many stories where people tried to play the stock market without much success. When the markets are on a roll, everyone wants a piece of the pie.
Here are 10 terms every investor cannot afford to miss.
1. Market Cap
The market capitalization of a stock is simply the total number of outstanding shares multiplied by the share price of the company. Companies are generally differentiated on the basis of market cap.
Small cap companies generally have a market cap of between $300M and $2B, while mid-caps are between $2B and $10B. Any company with a market cap over $10B is considered a large-cap. While small-cap and mid-cap stocks have historically outperformed large caps, they are also way riskier.
Being A Millionaire: What Does It Actually Mean?
You’re dreaming about luxury vacations and nice cars. OH, you can’t wait to be a millionaire.
But I’m here to tell you to think again.
While having more money is never a bad thing, what you’ve probably envisioned and what the reality is don’t match up. Let me explain.
What is the Definition of a Millionaire?
By definition, a millionaire is a person or family who has a net worth in excess of $1 million dollars. This answer is very U.S. centric as different countries have their own versions of this answer. For example, it takes 117 Japanese Yen to make 1 USD, so $1 million Yen doesn’t get you very far!
Even though in the U.S. the concept of a millionaire is static, what those million dollars gets you over time can change dramatically.
An example of that is the effect of inflation. A million dollars in 1950 is worth about $10.5 million in today’s dollars. But, the definition of a “millionaire” didn’t change. So, Today’s millionaires have 1/10 the amount of money that millionaires had when your parents were born.
So, the idea of “millionaire” status is really less meaningful than it was decades ago.
Another thing that messes with the definition of a millionaire is the fluctuation of exchange rates and purchasing power.
Let’s go back to the example above with Japan. We know that 1 US Dollar can get 117 Japanese Yen. We know that $1 can get you a chicken sandwich at a fast food restaurant. If you can go to Japan and get a similar sandwich for ¥ 117 then your purchasing power hasn’t changed.
The reason why I bring this up is to show that having a million dollars may be worth a lot in one place in the world but not worth much elsewhere depending on purchasing power.
How Many Millionaires in the U.S.?
There are roughly 325 million people in the U.S. which means that around 4.6% of the US population are millionaires. In other words, around 1 in 20 people are millionaires.
When you go to the mall, a huge number of cars in that parking lot are owned by millionaires.
In your child’s classroom, chances are one of those children were born to a millionaire family.
Chances are, one of your friends or family members is a millionaire and you don’t even know it.
But, if so many people are millionaires, where are all the Lambos and mansions?
It’s Not What You Think
Net Worth is not cash in the bank. You can’t spend $1m when it’s coming from the value of your home or 401k. Even if it was cash in the bank, it’s not even a lot of money.
$1m doesn’t get very far. You can buy a decent house with it but that comes with expensive maintenance, lawn care, repairs, and a crap ton of new furniture to fill up 5x more space than you’re used to having.
It can get a foreign sports car, but that comes along with $500 oil changes and $1,000 for a new tire (remember, you need 4).
$1,000,000 invested conservatively could earn you around $40,000-$50,000 per year in interested. That’s hardly enough to retire on especially as old age comes with added costs of health care.
But, if most of that $1m is in your home, which is true for most people, it’s not earning any interested. Even if it was, you’d have to sell your home to get that money. Then what?
Don’t Focus on Becoming a Millionaire
Of course, anyone would rather have $1m than not have it. But, don’t make it your focus. Having it isn’t going to get your cars or vacations. Net worth is one thing to measure, but it’s more important to focus on cash flow.
Yearly passive income will buy you anything you want. It’s money you can spend. It’s cash in the bank. Net worth is money locked up somewhere. You need assets, but assets don’t buy you things. If that asset doesn’t produce cash flow, you can only use it by selling it and that’s not a good place to be.
What’s more important is focusing on building up passive sources of income from real estate, side businesses, stocks, or other ventures.
Focus on building up $40k or $100k in passive income rather than focusing on having $1m in net worth.