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How To Invest Like A “High-Yield” Venture Capitalist

Most regular investors haven’t heard of a guy named Jim Breyer. But Silicon Valley insiders know him as one of the most powerful venture capitalists around.

Back in 2005, his venture capital firm Accel Partners plunked down $12.2 million for a stake in a little-known startup run by a college dropout by the name of Mark Zuckerberg — a name I’m sure you’re familiar with.

By the time May 18, 2012 came around, both men made an absolute mint. That’s the day Facebook (Nasdaq: FB) went public, allowing early financial backers a way to put a dollar value on their stake and eventually cash it out. Breyer was one of the biggest early backers of Facebook, at a time when some thought he was crazy to put that much cash in an untested and little-known social networking website.

But the risky wager paid off with astronomical returns.

By the time Facebook made its debut on the Nasdaq seven years later, it had 800 million users worldwide and was worth approximately $100 billion, making Accel’s 10% ownership stake worth around $10 billion. You sometimes hear about 2-baggers or 3-baggers that double or triple in value. This one was an 830-bagger, turning every $1,000 invested into $830,000.

Facebook’s epic run may not be over. As of this writing, analysts have a consensus price target of $386 on the stock, which implies further growth from current levels. That’s an attainable goal. But even if the stock hits that level, it will never again come close to duplicating its unbelievable performance during the early years.

Sadly, that is the case for many publicly-traded stocks. By the time it hits the market and is available to regular investors, the biggest gains have already been cashed out. Like Facebook, most start-up businesses experience their sharpest growth long before they go public.

History is littered with examples of Silicon Valley investors taking a chance on an unknown business and then hitting it big when the company takes off. And occasionally — when business valuations soar from seven-digit to 11-digit territory — they strike gold.

A recent example is Airbnb (Nasdaq: ABNB), whose website links travelers with homeowners who have a spare house, apartment or bedroom to rent. In 2012, the up-and-coming company already had an estimated value of $2.5 billion. A few years later, it entered into financing talks that implied a valuation of $10 billion. Today, the company has a market cap in excess of $90 billion, more than 30 times what it was worth less than a decade ago.

Needless to say, investors who got on board early were able to cash out life-changing gains.

Of course, this isn’t the only path to riches. Thriving young businesses attract attention and are often scooped up by larger companies looking for an earnings jolt. They are bought out before they can even reach the market.

That was the case with WhatsApp, a mobile messaging service purchased by Facebook for a staggering $19 billion. One of the biggest winners was Sequoia Capital, whose $8 million investment in 2011 blossomed into $3.5 billion. Incidentally, this same venture capital firm was also an early investor in Apple (Nasdaq: AAPL), Yahoo (Nasdaq: YHOO) and Google (Nasdaq: GOOG).

I don’t have to tell you what those three companies have done. The point is venture capitalists aim big. Depending on what stage of businesses development they enter, it’s not uncommon for these guys to take out anywhere from three to 10 times what they put in. Of course, not every investment pans out. Some fail spectacularly. But the big boys win far more than they lose.

How To Invest Like A Venture Capitalist

So how do ordinary investors participate? Well, the truth is many of us simply can’t — not exactly, anyway. Investing in a fund managed by Sequoia Capital or another VC outfit is restricted. Only accredited investors with an annual income above $200,000 or net worth over $1 million are allowed in.

In other words, this was a secret club with closed doors. But obscure legislation passed in 1980 has opened doors to an extent. And while you may not bank 10-bagger gains, you will find what just might be the last hidden bastion of 10%-plus dividend yields.

I’m talking about business development companies (BDCs).

First established in 1980 to grease the flow of capital into small businesses, BDCs are publicly traded entities that invest in privately held companies. There are a couple dozen members of this unusual class, each employing different tactics and assuming varying amounts of risk.

BDCs enjoy some unique perks, one of which is exemption from federal income taxes, provided the company distributes at least 90% of its investment profits to shareholders. In that regard, they are structured much like a real estate investment trust. They also carry some of the highest yields around — in this group, payouts of 8% are considered stingy.

What’s the catch? Well, because these companies don’t retain any profits, they must borrow or issue new shares to raise funding if they want to keep growing. That’s not always easy to do, particularly in uncertain times. But most have rainy day funds and know how to survive unsettled markets.

BDCs typically provide financial assistance to small and medium-sized businesses that are still developing and expanding and don’t always have access to traditional bank lending. The proceeds are normally used for growth projects and other operating needs, although sometimes the cash is needed for leveraged buyouts or other big transactions.

This financing can take many forms, from simple unsecured loans to collateralized senior debt to hybrid convertible bonds. It’s not uncommon for some loan packages to have an equity component that gives the BDC an ownership stake in the borrowing company — and thus an opportunity to profit handsomely.

Closing Thoughts

In that sense, this isn’t too different from what venture capital firms like Sequoia are doing. Of course, BDCs may not necessarily have the next Facebook in their portfolio. But you will find smartly-managed portfolios that throw off some of the best income you’ll find in the market.

And of course, anybody can invest in a BDC, not just accredited investors.

If you find yourself frustrated by the lack of high-yield options in today’s market, I recommend giving BDCs a look. In a yield-starved world, BDCs have proven to be some of the best securities around for income-oriented investors.

In fact, I recently released a report on my three favorite BDCs to readers of my High-Yield Investing premium advisory.

You can go here to learn how to get it now.

Best Performing Stocks To Invest In 2021

JPMorgan Chase set a €54.00 ($65.85) price objective on Leoni (ETR:LEO) in a report released on Thursday. The brokerage currently has a neutral rating on the stock.

Other analysts have also issued research reports about the stock. Oddo Bhf set a €73.00 ($89.02) price objective on shares of Leoni and gave the stock a buy rating in a research report on Monday, January 29th. Warburg Research set a €74.00 ($90.24) price objective on shares of Leoni and gave the stock a buy rating in a research report on Friday, February 9th. Hauck & Aufhaeuser set a €74.00 ($90.24) price objective on shares of Leoni and gave the stock a buy rating in a research report on Thursday, February 15th. Berenberg Bank set a €75.00 ($91.46) price objective on shares of Leoni and gave the stock a buy rating in a research report on Thursday, March 29th. Finally, Nord/LB set a €57.00 ($69.51) price objective on shares of Leoni and gave the stock a buy rating in a research report on Tuesday, April 10th. Two research analysts have rated the stock with a sell rating, eight have issued a hold rating and five have assigned a buy rating to the company. The company presently has an average rating of Hold and a consensus price target of €58.60 ($71.46).

Best Performing Stocks To Invest In 2021: AquaVenture Holdings Limited (WAAS)

AquaVenture Holdings LLC is a provider of Water-as-a-Service (WAAS) solutions. The Company offers its solutions in North America, the Caribbean, Latin America and the Middle East. The Company operates in two water sectors: desalination and commercial water filtration. The Company has two segments that align with its operating platforms: Seven Seas Water and Quench. The Company’s Seven Seas Water is a multinational provider of desalination and wastewater treatment solutions, providing approximately seven billion gallons of potable, industrial grade and ultra-pure water per year to governmental, municipal, industrial and hospitality customers. The Company’s Quench is a United States-based provider of point-of-use (POU) filtered water systems and related services to approximately 40,000 institutional and commercial customers. The Company also offers a selection of coffees, teas and other break room supplies.
Advisors’ Opinion:

  • [By Logan Wallace]

    Shares of AquaVenture Holdings Ltd (NYSE:WAAS) have earned a consensus rating of “Buy” from the ten ratings firms that are currently covering the firm, MarketBeat reports. Eight investment analysts have rated the stock with a buy rating and one has issued a strong buy rating on the company. The average twelve-month target price among analysts that have updated their coverage on the stock in the last year is $25.75.

  • [By Stephan Byrd]

    Get a free copy of the Zacks research report on AquaVenture (WAAS)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

  • [By Ethan Ryder]

    Get a free copy of the Zacks research report on AquaVenture (WAAS)

    For more information about research offerings from Zacks Investment Research, visit Zacks.com

Best Performing Stocks To Invest In 2021: Facebook, Inc.(FB)

Facebook, Inc. operates as a mobile application and Website that enables people to connect, share, discover, and communicate each other on mobile devices and personal computers worldwide. Its solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile and Web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application. The company also develops Oculus virtual reality technology and content platform, which allow people to enter an immersive and interactive environment to play games, consume content, and connect with others. As of December 31, 2015, it had 1.04 billion daily active users (DAUs) and 934 million DAUs who accessed Facebook from a mobile device. Facebook, Inc. was founded in 2004 and is headquartered in Menlo Park, California.

Advisors’ Opinion:

  • [By Motley Fool Transcribers]

    Facebook Inc (NASDAQ:FB)Q12019 Earnings CallApril 24, 2019, 5:00 p.m. ET

    Prepared Remarks Questions and Answers Call Participants
    Prepared Remarks:


  • [By ]

    With major S&P 500 companies from Facebook (Nasdaq: FB) to Netflix (Nasdaq: NFLX) now reassigned, the change is simply too big to be ignored. That goes for passive investors — ones who rely on an index-tracking approach — and active investors like us who frequently screen sectors and indices for ideas.

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    More impressively, Tran accomplished this without hiring a single salesperson or spending a cent on advertising. Even today, his company doesn’t have a Twitter (Nasdaq: TWTR) handle or Facebook (Nasdaq: FB) account.

  • [By Money Morning News Team]

    The site is completely free to use, but you need an account to get moving. Luckily, Pinterest makes this simple by allowing you to integrate your Google and Facebook Inc. (NASDAQ: FB) logins.

Best Performing Stocks To Invest In 2021: Applied DNA Sciences Inc(APDN)

Applied DNA Sciences, Inc. provides botanical DNA-based technologies for supply chain security, brand protection, and law enforcement applications in the United States, Europe, and Asia. Its principal anti-counterfeiting and product authentication solutions include SigNature DNA markers are an ingredient that can be used to fortify brand protection efforts and strengthen supply chain security, as well as mark, track, and convict criminals; SigNature T DNA markers for use in brand protection efforts and raw material source compliance programs; and fiberTyping, a test of native cotton fiber, which determines whether the intended cotton DNA is present in fiber, yarn, or fabric. The company also offers DNAnet, a DNA marker that can be used to link evidence and offenders to specific crime scenes in home asset and vehicle marking; Sentry intruder tagging systems that enables linking of criminals to crimes; digitalDNA, a software platform that enables customers to manage the security of company-marked goods from point of marking to point of authentication or validation to end of life; and SmokeCloak DNA for protecting staff, customers, and assets in pharmacies, banks, commercial, and retail locations. It offers its solutions for use in industries, including microcircuits and other electronics, cash-in-transit, textiles and apparel, home asset marking, automotive, printing and packaging, homeland security, law enforcement, identity cards and other secure documents, industrial materials, agrochemicals, pharmaceuticals, consumer products, food and beverage, fine wine, and art and collectibles. The company was formerly known as Datalink Systems, Inc. and changed its name to Applied DNA Sciences, Inc. in 2002. Applied DNA Sciences, Inc. was founded in 1983 and is headquartered in Stony Brook, New York.

Advisors’ Opinion:

  • [By Stephan Byrd]

    Applied DNA Sciences Inc (NASDAQ:APDN) shares rose 5.3% during mid-day trading on Wednesday . The company traded as high as $1.84 and last traded at $1.60. Approximately 2,707 shares were traded during mid-day trading, a decline of 98% from the average daily volume of 165,954 shares. The stock had previously closed at $1.52.

  • [By Logan Wallace]

    Media coverage about Applied DNA Sciences (NASDAQ:APDN) has trended somewhat positive on Monday, Accern Sentiment Analysis reports. The research firm rates the sentiment of press coverage by analyzing more than 20 million news and blog sources in real-time. Accern ranks coverage of public companies on a scale of -1 to 1, with scores closest to one being the most favorable. Applied DNA Sciences earned a daily sentiment score of 0.04 on Accern’s scale. Accern also assigned press coverage about the technology company an impact score of 47.7961768116482 out of 100, indicating that recent press coverage is somewhat unlikely to have an impact on the stock’s share price in the next several days.

  • [By Ethan Ryder]

    NV5 Global (NASDAQ: NVEE) and Applied DNA Sciences (NASDAQ:APDN) are both small-cap business services companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, profitability, analyst recommendations, institutional ownership, risk, valuation and dividends.

Best Performing Stocks To Invest In 2021: Allstate Corporation (ALL)

The Allstate Corporation was incorporated under the laws of the State of Delaware on November 5, 1992 to serve as the holding company for Allstate Insurance Company. Its business is conducted principally through Allstate Insurance Company, Allstate Life Insurance Company and other subsidiaries (collectively, including The Allstate Corporation, “Allstate”). Allstate is primarily engaged in the property-liability insurance and life insurance business. It offers its products in the United States and Canada. The Allstate Corporation is the largest publicly held personal lines insurer in the United States. Allstate’s strategy is to serve distinct customer segments with differentiated offerings. The Allstate brand is widely known through the “You’re In Good Hands With Allstate庐” slogan. Allstate is the 2nd largest personal property and casualty insurer in the United States on the basis of 2014 statutory direct premiums written according to A.M. Best. In addition, according to A.   Advisors’ Opinion:

  • [By Max Byerly]

    Get a free copy of the Zacks research report on Allstate (ALL)

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  • [By Joseph Griffin]

    HL Financial Services LLC raised its holdings in Allstate Corp (NYSE:ALL) by 7.1% during the fourth quarter, according to the company in its most recent Form 13F filing with the Securities & Exchange Commission. The fund owned 9,953 shares of the insurance provider’s stock after acquiring an additional 660 shares during the period. HL Financial Services LLC’s holdings in Allstate were worth $822,000 at the end of the most recent quarter.

  • [By Shane Hupp]

    Allion (CURRENCY:ALL) traded flat against the US dollar during the twenty-four hour period ending at 7:00 AM ET on February 10th. During the last seven days, Allion has traded flat against the US dollar. One Allion coin can now be purchased for approximately $0.0003 or 0.00000008 BTC on major exchanges including YoBit, CoinExchange and Cryptopia. Allion has a total market cap of $1,800.00 and $0.00 worth of Allion was traded on exchanges in the last 24 hours.

  • [By Motley Fool Transcribing]

    Allstate (NYSE:ALL) Q4 2018 Earnings Conference CallFeb. 6, 2019 9:30 a.m. ET

    Prepared Remarks Questions and Answers Call Participants
    Prepared Remarks: