Day: October 7, 2024

(Bloomberg) — One of the best measures for gauging demand for cryptocurrencies suggests that some Chinese investors are shifting away from digital assets and back to the nation’s surging stock market.

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While China banned crypto trading in 2021, many mainland residents have continued to use overseas accounts and exchanges to buy and sell digital currencies, in part to avoid capital controls and move assets offshore.

Tether’s USDT stablecoin, the world’s most used cryptocurrency, has been trading at a discount at times relative to the dollar since the end of September, according to Dessislava Aubert, senior research analyst at blockchain data firm Kaiko. The emergence of the discount coincided with a series of easing measures by China’s central bank designed to stem a worsening economic outlook that sent stock prices soaring.

Stablecoins are cryptocurrencies whose value are usually pegged 1-to-1 to assets such as the dollar. They’re used to conduct transactions and as a refuge from the often volatile price swings seen in tokens such as Bitcoin.

“If the traders are rushing to exchange back into fiat currency, it can be inferred that they are panic buying Chinese stocks,” said Livio Weng, chief executive officer of Hong Kong-based crypto exchange Hashkey.

The absence of USDT/Chinese yuan trading pairs on crypto exchanges because of the ban has made the dollar the de facto barometer for measuring activity, Kaiko’s Aubert said. The slight discount suggest more demand for dollars and selling of Tethers.

While it’s difficult to measure on exchanges how much of the USDT selling pressure has come from Chinese investors, other platforms present a clearer picture. Binance’s peer-to-peer marketplace shows that Chinese yuan merchants are giving over-the-counter price quotes in the range of 6.78-6.98 per yuan for USDT, while the offshore yuan trades at 7.07 per dollar in the traditional currency market.

We “can see the correlation there with demand to trade onshore A shares,” said Annabelle Huang, managing partner at digital-asset investment firm Amber Group in Singapore. Some brokerage firms were even open during China’s recent Golden Week holidays to “onboard new customers,” she said.

The demand isn’t just being driven by retail investors, according to Laura Vidiella del Blanco, the New York-based head of business development and strategy at crypto hedge fund MNNC Group. Some of the firm’s institutional investors are shifting allocations to Chinese stocks.

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The Shanghai Composite Index jumped 21% from Sept. 23 to Sept. 30, the day before China’s market closed for the holiday.

“These are mostly allocators in Asia who are familiar with the market and have multiple strategies besides digital assets,” Vidiella del Blanco said.

Blockchain intelligence firm Chainalysis Inc. estimates show that China’s over-the-counter brokers are attracting “unprecedented” inflows this year, a sign of the strong demand from Chinese investors on cryptocurrencies despite the ongoing ban.

“First time people wish the national holiday is shorter perhaps, pretty incredible move,” Amber’s Huang said.

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Investors looking for a quick and easy way to invest in the biggest and fastest-growing technology stocks in the world have flocked to the Invesco QQQ Trust ETF (NASDAQ: QQQ).

The ETF tracks the Nasdaq-100 index, which consists of the largest non-financial companies listed on the Nasdaq stock exchange. The Nasdaq is historically the exchange of choice for tech companies, so it should be no surprise that the majority of the index consists of technology stocks.

The Invesco fund has dramatically outperformed the S&P 500 index over the past decade, producing a total return of 435% compared to just 248% for the broader index. Still, investors should consider a few other options before putting their money into the popular ETF. Here are three to try.

1. QQQ’s little sister

Invesco launched a new ETF in 2020 called the Invesco Nasdaq 100 ETF (NASDAQ: QQQM). It tracks the same Nasdaq-100 index as QQQ, but it offers investors a 5 basis point discount on the new shares versus the older ETF.

Where QQQ charges 0.20% of assets each year, the new Nasdaq-100 ETF charges just 0.15%. While that difference might not seem like much, it adds up over time, and there’s no reason for investors to leave money on the table.

Invesco isn’t offering a lower-priced ETF to investors out of the goodness of its heart. The company faces a lot more competition than it used to when it launched the QQQ Trust back in 1999. While it could easily rack up assets under management at any price in the early 2000s, it needs to offer much more competitive pricing today.

But there are billions locked into the older ETF. Investors with substantial unrealized capital gains may be willing to give up a few basis points in order to delay taxes by not selling. Additionally, the larger asset base makes the fund more liquid, which is attractive for big investors or frequent traders.

If you plan to buy and hold an ETF tracking the Nasdaq-100 index, though, QQQM is a no-brainer compared to QQQ.

2. A contrarian ETF focused on fundamentals

If you take a look under the hood of the Invesco QQQ Trust, you’ll find a heavily concentrated portfolio. The top 10 holdings account for over 50% of the entire fund. What’s more, many of the biggest holdings trade at high prices that aren’t aligned with their fundamental financial performance.

One way to offset the high concentration and prices found in the QQQ Trust is to invest in the Schwab Fundamental U.S. Large Company ETF (NYSEMKT: FNDX). The ETF tracks an index that ranks and weights securities by fundamentals — adjusted sales, operating cash flow, and cash returned to shareholders. The result is a portfolio with far less concentration and a lower overall price relative to the fundamentals.

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The Schwab fund sports a P/E ratio of just 19.4 times compared to the Invesco fund’s 39.5 times P/E. While it still has substantial stakes in some of the biggest names in the Nasdaq-100, it also integrates more value stocks into the portfolio. In fact, the focus on fundamentals tilts the fund toward more large-cap value stocks than the growth-stock-focused Invesco fund. But that diversification may pay off for investors in the long run.

The Schwab ETF sports an expense ratio of 0.25%, higher than the Invesco QQQ ETF. But the contrarian play could pay off for patient investors.

3. A small-cap value ETF

The biggest draw of the Invesco QQQ Trust ETF is its strong track record of returns. But one group of stocks has an even better track record than the large-cap growth stocks found in the Nasdaq-100. Small-cap value stocks have historically produced the strongest returns out of any segment of the stock market. The S&P 600 index, which tilts toward small-cap value, has outperformed the Invesco QQQ Trust ETF since its inception in 1999, despite the Nasdaq ETF’s incredible performance over the past decade.

The Avantis US Small Cap Value ETF (NYSEMKT: AVUV) is one of the best ways to invest in small-cap value stocks. Instead of investing blindly in all small-cap stocks trading at a valuation metric in the lower half of a small-cap index, the fund screens stocks based on profitability to weed out those that may be value traps. It then invests in the remaining companies based on market capitalization. With over 700 stocks in the portfolio, no single investment makes up more than 1% of the fund.

While the Avantis fund is technically an actively managed fund, it shares many more characteristics with passive indexing than active management. The strategy has a great track record of performance based on the founder’s previous experience at investment firm Dimensional. The Avantis fund has nearly doubled its benchmark index’s return since its inception in 2019.

For long-term investors seeking exposure to a piece of the market that can offer stronger returns than the S&P 500 or the Nasdaq-100 for many years to come, the Avantis US Small Cap Value ETF could be a great option.

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*Stock Advisor returns as of September 30, 2024

Adam Levy has positions in American Century ETF Trust-Avantis U.s. Small Cap Value ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Before You Buy the Invesco QQQ ETF, Here Are 3 Others to Try First was originally published by The Motley Fool

Conventional wisdom is that Nvidia (NASDAQ: NVDA) will continue to dominate the artificial intelligence (AI) chip market, as it has since the introduction of ChatGPT. Yet, there’s a barrage of competition coming not only from merchant competitors and cloud giants producing their own in-house accelerators but also from AI chip start-ups.

One such start-up, Cerebras, just filed a prospectus ahead of an impending initial public offering (IPO). After reading, I think Cerebras is a name every Nvidia investor should monitor closely. But is it really a threat to the graphics processing unit (GPU) giant?

What is Cerebras?

Cerebras was founded in 2016 by current CEO Andrew Feldman and a group of technologists who had founded and/or worked at a company called SeaMicro over a decade ago. SeaMicro made efficient high-bandwidth microservers and was later acquired by Advanced Micro Devices in 2012.

Cerebras sold its first AI chips in 2019 and has recently seen a big acceleration in demand, leading to this recent IPO filing.

Cerebras’ giant chip

Cerebras’ big differentiator is that its AI chips, which it calls wafer-scale engines (WSEs), are huge. And by huge, we’re talking a chip that takes up an entire semiconductor wafer. A foundry usually produces many chips per wafer, some of which have defects and are discarded. But Cerebras goes for one giant chip per wafer.

The result is a massive processor 57 times larger than an Nvidia GPU, with 52 times more compute cores, 880 times the on-chip memory, and 7,000 times more memory bandwidth. One Cerebras WSE has a remarkable 4 trillion transistors — that’s 50 times the 80 billion transistor count of Nvidia’s H200! Like Nvidia, Cerebras’ chips are produced by Taiwan Semiconductor Manufacturing.

The theory behind making a giant chip is that by doing more processing on the chip, the WSE does away with the need for the Infiniband or Ethernet-based networking connections that string hundreds or thousands of GPUs together. According to Cerebras, this architecture allows WSEs to achieve over 10 times faster training and inference than an 8-GPU Nvidia system.

In a recent interview, Feldman said recent tests showed Cerebras chips were 20 times faster for inference than Nvidia’s. Sound impressive? When Feldman was asked at a summer conference how much market share Cerebras planned to take from Nvidia, he answered, “All of it.”

Financials show a big acceleration

Not only does Cerebras talk a big game, but it’s also shown impressive revenue acceleration and improving profitability this year, as you can see:

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Data source: Cerebras S-1. H1 = first half of the corresponding year.

As you can see, between the first half of 2023 and the first half of 2024, Cerebras’ revenue jumped a whopping 1,474%. While gross margin technically declined, from 50.5% to 41.1%, that was mainly because virtually all of last year’s revenue came from higher-margin services. Cerebras’ hardware gross margins actually went up over that time. Even better, operating losses narrowed by $40 million, a great indication that the company will be profitable if it scales.

That exponential scaling should continue into next year. According to the filing, Cerebras’ largest customer, Abu Dhabi’s G42, agreed to purchase $1.43 billion of equipment through the end of 2025. That’s sixfold growth over the current 2024 run rate.

Risks to the Cerebras story

There are a couple of risks to the Cerebras story, however. One is that producing one massive chip can lead to lots of defects. Whereas Nvidia or any other chipmaker can throw out all the bad chips on a wafer, Cerebras has to take the whole thing, opening its WSEs to imperfections.

To get around this, Cerebras says it has created “redundant” cores and interconnects on its chips, as Cerebras assumes many chips will have defects. “Flaws are designed to be recognized, shut down, and routed around,” the filing says.

However, building redundancy also means Cerebras can’t get all the potential the surface area of its chip could otherwise get. Obviously, management believes the “big chip” architecture more than makes up for this inefficiency.

A second risk, and likely the biggest, is Cerebras’ customer concentration. Right now, AI company G42 from the United Arab Emirates accounts for 87% of Cerebras’ sales in the first six months of 2024. G42 and affiliated entities are also behind next year’s $1.43 billion order, meaning that concentration will only grow.

Concentration is somewhat expected in the early stages of a company’s growth. But should anything go wrong with the relationship or G42 itself, it could seriously derail Cerebras’ plans. G42’s close affiliation with a foreign government — the UAE’s national security advisor is the company’s founder and largest shareholder — certainly poses a risk should there be a geopolitical flare-up.

Cerebras is one to watch

When it goes public, Cerebras will be a new AI player on the block and will probably sell for a high valuation. So, investors should be cautious about how much they pay for the stock when it comes to market.

Nevertheless, the company has a differentiated architecture from the rest of the pack. Therefore, it’s certainly worth watching whenever it goes public — especially if you’re a big Nvidia or AMD shareholder.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $765,523!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 30, 2024

Billy Duberstein and/or his clients have positions in Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

Is This Company an “Nvidia Killer?” What to Know About Cerebras’ IPO was originally published by The Motley Fool

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Thousands of dividend stocks are trading on the market, and choosing specific stocks can be extremely overwhelming for beginner investors looking to generate a stable income. One way to know what’s working is to read success stories of dividend investors who started small and achieved success with patience and hard work.

About three years ago, a Redditor shared his success story in r/Dividends (now a community of 593,000 members) about how he “threw probably most of my savings” into dividend growth stocks and eventually reached a portfolio earning $13,470 per year.

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The Redditor said that before taking dividend investing seriously, he used to invest in growth stocks like Apple and wait for a few months, only to lose patience and sell them at a lower price.

“Because of this, I convinced myself that the only people that made money in the stock market were day traders,” the investor said.

However, once he decided to invest in dividend stocks for long-term gains, he kept putting small sums of money into these stocks, even during difficult times. The journey was far from smooth (remember, this experience was shared back in June 2021, when the market was still reeling from the pandemic effect).

“In 2020, March through May was obviously a hard set of months. My income went way down, but every penny I could get a hold of I used to buy the dip. Summer of 2020 when my income started going back up, I used some of that money to buy growth stocks. It was a distraction from my overall strategy of dividend stocks, but it certainly helped me grow my money quickly. This last year has been unlike any other, so I don’t really recommend buying growth/tech stocks the same way I did last year. I’ve since sold those things to put back into my dividend portfolio,” he added.

The investor said that he was generating $13,470 per year on about $350,000 invested, meaning the net yield of his portfolio (with 69 stocks in total) was about 3.84%.

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He shared his entire stock portfolio with fellow Redditors. Here are the top 12 biggest holdings in his portfolio.

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AvalonBay Communities

Virginia-based REIT AvalonBay Communities Inc (NYSE:AVB) was among the Redditor’s biggest holdings, earning about $13,000 per year in dividends. The stock is up about 18% so far this year.

Realty Income

It’s rare to find an impressive dividend income portfolio success story on Reddit without Realty Income Corp (NYSE:O) in it. The monthly dividend REIT yields about 5% and has an impressive track record of raising its payout for 30 straight years. Analysts believe Realty Income Corp (NYSE:O) is positioned well to benefit from interest rate cuts as its tenants, mostly retailers, are expected to see higher foot traffic in the coming weeks and months.

Exxon Mobil

Oil giant ExxonMobil Corp (NYSE:XOM) has raised its dividends for about four decades without a break. The stock has a dividend yield of over 3.1%. XOM gained about 17% this year.

 Enterprise Products Partners

Midstream energy company Enterprise Products Partners LP (NYSE:EPD) has a dividend yield of about 7% and 26 consecutive years of dividend increases. The stock has gained about 10% so far this year.

Chevron

Chevron Corp (NYSE:CVX) is one of the top high-yield dividend growth stocks in the Redditor’s portfolio. Chevron yields about 4.3%, and the company has raised its payouts for about 36 consecutive years. Chevron recently partnered with Honeywell to use AI-assisted technologies to improve oil refining.

Pembina Pipeline 

Pembina Pipeline Corp (NYSE:PBA) is a Canadian midstream energy company. The stock has a dividend yield of about 5%. In August, the company declared a quarterly dividend of CAD 0.69 per share, payable on September 27.

Altria Group

Despite concerns about the declining use of traditional tobacco products, Altria Group Inc (NYSE:MO) has been among the top favorite high-yield dividend stock picks of income investors on Reddit. The company has raised its dividends for over five decades, and the stock yields a whopping 8%.

Franklin Resources 

Financial services company Franklin Resources Inc (NYSE:BEN) was among the highest-yielding dividend stocks in the $13,000 income portfolio. The stock yields about 6%, and the company has raised its payouts without a break for over four decades.

Main Street Capital 

Main Street Capital Corp (NYSE:MAIN) is a business development company that has never reduced its dividends since 2007. It’s a monthly dividend stock that yields over 2%.

Verizon Communications

Telecom giant Verizon Communications Inc (NYSE:VZ) has a dividend yield of about 5.9%, and the company has raised its payouts for 18 years in a row. Goldman Sachs recently said it expects Verizon to deliver strong results in the upcoming quarterly report amid wireless execution. However, the firm said lower-than-expected phone net additions could create a headwind for the stock through the end of the year.

Genuine Parts

Auto parts company Genuine Parts Co (NYSE:GPC) has a dividend yield of about 2.9% and a track record of 67 consecutive years of dividend hikes. Genuine Parts was among the Redditor’s biggest holdings, contributing to his $13,000 in annual dividends.

Wondering if your investments can get you to a $5,000,000 nest egg? Speak to a financial advisor today. SmartAsset’s free tool matches you up with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.

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This article Investor Who Spent All His Savings to Buy Dividend Stocks and Makes $13,000 Per Year Shares His Portfolio: Top 11 Stocks originally appeared on Benzinga.com

This has been another great year in the stock market, with the broader indexes roaring to new highs. But Warren Buffett’s commentary from Berkshire Hathaway‘s (NYSE: BRK.A) (NYSE: BRK.B) annual shareholder meeting and changes to the company’s public equity holdings indicate that Berkshire isn’t a net buyer in today’s market.

Berkshire has cut its stake in its largest public equity holding, Apple, by nearly 50%, trimmed its position in Bank of America, and more. In total, Berkshire has sold over $100 billion in stock this year and has built up a cash and Treasury bill position of over $300 billion.

However, Berkshire seems to remain confident in the utility and energy sectors, as evidenced by its sizable positions in Chevron and Occidental Petroleum, as well as a decision to buy the remaining 8% stake in Berkshire Hathaway Energy (or BHE, for short) — giving Berkshire total control of the entity.

Here’s a primer on how Berkshire Hathaway Energy fits into the broader business, the benefits of investing in dividend-paying utility stocks, and a low-cost exchange-traded fund (ETF) that’s worth considering now.

BHE fits nicely into Berkshire’s public and private portfolio

Berkshire is known for its public equity holdings. But a ton of additional value is baked into its insurance businesses, ownership of BNSF railroad, BHE, and other business units. Berkshire loves boring businesses that make money and can steadily grow earnings and their dividends — like Coca-Cola and American Express. BHE embodies this philosophy.

BHE contains various electric and gas utilities, pipelines, and other infrastructure assets. Its domestic regulated energy interests include four regulated U.S. utility companies and five U.S. integrated natural gas pipelines with 21,000 miles of operated pipeline, among other assets.

Unlike the exploration and production or refining side of oil and gas, whose profit margins are heavily dependent on oil and gas prices, the midstream oil and gas industry functions like a toll road — charging fees to move energy products across the country from areas of production to areas of consumption or export.

Regulated utilities work with government agencies to set prices that are fair to consumers. This can give utilities a return, allowing them to invest in more infrastructure and pay dividends to shareholders.

Investors can buy shares of Berkshire Hathaway to gain exposure to BHE. But a simpler and more direct approach may be to buy an ETF with broad-based exposure to the utility sector.

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The utility sector could have room to run

The Vanguard Utilities ETF (NYSEMKT: VPU) mirrors the performance of the utility sector. The fund is up an impressive 27.8% year to date — besting the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average.

The Vanguard Utilities ETF features an expense ratio of 0.1%, has a minimum investment of just $1, and yields 3%. Even after its run-up, it still sports a somewhat reasonable price-to-earnings (P/E) ratio of 25 — which is lower than the S&P 500 but high for a traditionally low-growth sector.

The sector has been a beacon of safety for value investors seeking passive income in an otherwise expensive market. But after its surge, investors may wonder if it is the best sector to buy now.

Context is critical in the stock market. The utility sector was down slightly from 2020 through the end of 2023 — lagging the broader indexes by a wide margin during those four years. So its recent rebound may be partially due to the sector being oversold.

Furthermore, higher demand for computing to power artificial intelligence models could be a boon for electric utilities and justify infrastructure investments.

Lower interest rates are adding even more fuel to the fire. The Federal Reserve just cut interest rates for the first time in four years. Lower interest rates reduce the cost of capital and increase the potential return on investment for capital-intensive projects, such as power generation, transmission, and distribution.

Many utilities also carry a significant amount of debt on their balance sheets. Lower borrowing costs could help these companies refinance debt and reduce their interest expense.

A boring yet effective way to boost your passive income stream

The utility sector isn’t the bargain-bin buy it was at the beginning of the year, but it remains a solid sector for passive income-oriented investors. The year-to-date gain looks massive and overextended at first glance, but a good amount of that is due to how beaten down the sector was going into the year.

Investors looking for safe, reasonably valued pockets of the market may want to consider the Vanguard Utilities ETF as a simple yet effective way to achieve diversification in the utility sector.

Should you invest $1,000 in Vanguard World Fund – Vanguard Utilities ETF right now?

Before you buy stock in Vanguard World Fund – Vanguard Utilities ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard World Fund – Vanguard Utilities ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $765,523!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 30, 2024

Bank of America is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

With Warren-Buffett Led Berkshire Hathaway Buying the Remaining Stake in Berkshire Hathaway Energy, Is It Time to Buy Utility Dividend Stocks? was originally published by The Motley Fool

Levi Strauss (LEVI) hopes a Beyoncé marketing campaign can upgrade brand growth.

The denim manufacturer announced its partnership with the music megastar, whose most recent “Cowboy Carter” album featured a song called “Levii’s Jeans,” just before reporting third quarter earnings results.

“We are honored that we are partnering with a global icon like Beyoncé, … somebody who stands for empowering women and somebody whose values align with ours,” Levi Strauss & Co. CFO Harmit Singh told Yahoo Finance on Thursday. “And so, our view is … this is a win-win for both Beyoncé as well as us.”

Levi Strauss stock moved 8% higher in the week after it teased the brand partnership with the all-time leading Grammy winner on Sept. 23. But shares of Levi’s dropped 7.6% in the trading session following its third quarter earnings report after the company dampened investor expectations for fourth quarter revenue and said it was looking to offload its struggling Docker’s pants business.

Beyoncé partnership ‘reinforces our focus’ on women’s apparel

Levi’s leadership hopes a new Beyoncé commercial will drive consumer appeal, especially for its women’s business, which grew by 11% during the third quarter and currently represents just over one-third of Levi’s current business.

“Our view is that this partnership reinforces our focus on women’s [business],” Singh said. “Our women’s business is having a solid year again, so I think this [partnership] continues to fuel that momentum.”

As part of the campaign, Beyoncé posted a series of photos and videos on Instagram that showed the artist and cultural icon wearing jeans and a denim 10-gallon hat at a laundromat. The accompanying captions read, “Give you these Blues, it’s in my Genes” and “Give you high fashion with a simple white tee.”

The company also said it hopes to expand from being a mainly denim bottoms brand to a “head-to-toe denim lifestyle brand,” as CEO Michelle Gass described during the Q3 earnings call.

Levi’s has accelerated its efforts to lean further into the product pipeline for denim, yoga, and tops.

“We want to get this [tops] business to be much higher,” Singh said. “We sell right now, I think, three bottoms to a top.”

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