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How can investors spot the next SVB?

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2 years ago

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SVB’s share price collapsed in a single day and shareholders were wiped out, providing a nasty example of the biggest risk in holding an individual stock.Trifonenko/iStockPhoto / Getty Images

If you didn’t own shares in Silicon Valley Bank prior to its failure last week, you dodged a bullet. But can you dodge the next one?

The bank’s share price collapsed in a single day and shareholders were wiped out, providing a nasty example of the biggest risk in holding an individual stock: It can die. Fast.

There were plenty of reasons for the SVB collapse, but they may not have been obvious to the small investor – or any investor for that matter – before the crisis exploded.

SVB was a lender to the venture capital ecosystem, and tech startups have struggled over the past year as the U.S. Federal Reserve raised interest rates in a battle against inflation. This focus on a single sector stands out from more diversified lenders.

The bank also had an odd approach to deposits: It invested the money in long-duration securities, including long-term mortgage-backed securities. When these assets fell in value as the Fed raised interest rates, a wave of problems emerged.

As depositors withdrew money, SVB was forced to sell bonds at a loss to raise cash to meet redemptions. It then tried to issue additional shares to shore up capital. A full-fledged bank run followed, exacerbated by the fact that about 90 per cent of its deposits were uninsured – higher than a US$250,000 maximum for federal deposit insurance. That is a ratio well above that of most other banks – and, well, SVB is now no more.

These red flags may have put off some investors who knew their way around bank balance sheets, were well aware of SVB’s strong connection to the volatile tech sector or were just plain worried about the deteriorating economic climate.

Last year, as interest rates shot higher and technology companies floundered, SVB’s share price declined from about US$733 at the start of 2022 to about US$230 in December. The slide marked a dramatic shift from gains of 75 per cent in 2021, and it meant that a lot of investors were bailing out.

At the same time, short sellers – nimble investors who bet that a stock will decline – became active in SVB. A year ago, in March, the number of shares sold short in comparison with the total share count, was just 1.4 per cent, according to Nasdaq. But this short interest jumped to 6.7 per cent by the end of 2022.

But were any of these actions flashing a warning sign that SVB was heading for failure? Maybe not.

Despite the diminished share price, the collective wisdom of the market valued SVB earlier this month, prior to the collapse, at nearly US$16-billion, based on the value of outstanding shares. The share price actually rallied in January amid bets that the Fed was nearly finished raising rates.

There was also SVB’s impressive track record to consider.

It had been around for decades, surviving the bursting of the tech-stock bubble in 2000 and the 2008 financial crisis. And it had found a niche among startups and tech entrepreneurs that delivered enviable deposit growth when times were good.

“When others left the Valley in 2001/2002, SVB was the bedrock and played an instrumental role in the thousands of successful tech startups seen over the years,” Dan Ives, an analyst at Wedbush Securities, said in a note.

There were plenty of signals, then, tempting investors who like to buy stocks when they are cheap and unpopular, hoping for a big rebound. But that’s what makes SVB, and stocks like it, so dangerous.

The best lesson here for risk-conscious investors: Focus primarily on baskets of stocks that spread out the risk of any one of them blowing up. Yes, you’ll likely be saddled with a lot of underperformers, but they probably won’t harm your portfolio in any meaningful way, and you’ll get the winners too.

We live in a golden age in which exchange-traded funds offer exposure to just about any sector, strategy or index you can think of – from value stocks, growth stocks, banks and real estate investment trusts all the way up to emerging markets, developed markets and the S&P 500 Index.

If small banks are your thing, there’s even the iShares U.S. Regional Banks ETF, for example. It’s not doing well this year, but it’s no SVB.

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What Difference Will You Make to an Employer?

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8 hours ago

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October 21, 2024

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Ex-Employer (Job)

It’s common knowledge that companies don’t hire the most qualified candidates. Employers hire the person they believe will deliver the best value in exchange for their payroll cost.

Since most job seekers know the above, I’m surprised that so few mention their Employee Value Proposition (EVP). Most job seekers list their education, skills, and experience without substantiating them and expect employers to determine whether they can benefit their company; hence, most resumes and LinkedIn profiles are just a list of opinions—borderline platitudes—that are meaningless and, therefore, have no value. Job seekers need to better explain, along with providing evidence, how they’ll contribute to an employer’s success.

Employers don’t hire opinions (read: talk is cheap); they hire results.

You’re not offering anything tangible when you claim:

 

  • I’m a great communicator.
  • I’m detail oriented.
  • I’m a team player.

 

Tangible:

 

  • “At Global Dynamics, I held quarterly town hall meetings with my 22 sales reps, highlighting our accomplishments, identifying opportunity areas, and recognizing outstanding performers.”
  • “For eight years, I managed Vandelay Industries IT department, overseeing a staff of 18 and a 12-million-dollar budget while coordinating cross-specialty projects. My strong attention to detail is why I never exceeded budget.”
  • “While working at Cyberdyne Systems, I was part of the customer service team, consisting of nine of us, striving to improve our response time. Through collaboration and sharing of best practices, we reduced our average response time from 48 to 12 business hours, resulting in a 35% improvement in customer feedback ratings.”

 

These examples of tangible answers provide employers with what they most want to hear from candidates but rarely do; what value the candidate will bring to the company. Typically, job seekers present their skills, experience, and unsubstantiated opinions and expect recruiters and employers to figure out their value, which is a lazy practice.

Getting hired isn’t based on “I have an MBA in Marketing and Sales,” “I’ve been a web designer for over 15 years,” “I’m young, beautiful and energetic,” blah, blah, blah. Likewise, being rejected isn’t based on “I’m overqualified,” “I’m too old,” “I don’t have enough education,” blah, blah, blah. Getting hired depends entirely on showing employers that you can add value and substance to their company; that you’ll serve a purpose.

When you articulate a solid value offer, the “blah, blah, blah” doesn’t matter. Job seekers focus too much on the “blah, blah, blah,” and when not hired, they say, “It’s not me, it’s…” The biggest mistake I see job seekers make is focusing on the “blah, blah, blah”—their experience and education—believing this is what interests employers. Hiring managers are more interested in whether you can solve the problems the position exists to solve than in your education and experience.

 

Not impressive: Education

Impressive: A track record of achieving tangible results.

 

You aren’t who you say you are; you are what you do.

 

If you want to be somebody who works hard, you have to actually work hard. If you want to be somebody who goes to the gym, you actually have to go to the gym. If you want to be a good friend, spouse, or colleague, you have to actually be a good friend, spouse, or colleague. Actions build reputations, not words.

The biggest challenge job seekers face today is differentiating themselves. To stand out and be memorable, don’t be like most job seekers, someone who’s all talk and no action. Any recruiter or hiring manager will tell you that the job market is heavily populated with job seekers who talk themselves up, talk a “good game” about everything they can “supposedly” do, drop names, etc., but have nothing to show for it.

More than ever, employers want to hear candidates offer a value proposition summarizing what value they bring. If you’re looking for a low-hanging fruit method to differentiate yourself, do what job seekers hardly ever do and make a hard-to-ignore value proposition.

  1. Increase sales: “Based on my experience managing Regina and Saskatoon for PharmaKorp, I’m confident that I can increase BioGen’s sales by no less than 25% in Winnipeg and the surrounding area by the end of 2025.”
  2. Reduce cost: “During my 12 years as Taco Town’s head of purchasing, I renegotiated contracts with key suppliers, resulting in 15% cost savings, saving the company over $450,000 annually. I know I can do the same for The Pasta House.”
  3. Increase customer satisfaction:“During my time at Globex Corporation, I established a systematic feedback mechanism that enabled customers to share their experiences. This led to targeted improvements, increasing our Net Promoter Score by 15 points. I can increase Dunder Mifflin’s net promoter score.”
  4. Save time: “As Zap Delivery’s dispatcher, I implemented advanced routing software that analyzed traffic patterns, reducing average delivery times by 20%. My implementation of this software at Froggy’s Delivery can reduce your delivery times by at least 20%, if not more.”

 

If you want to achieve job search success as soon as possible, structure your job search with a single thread that’s evident and consistent throughout your résumé, LinkedIn profile, cover letters and especially during interviews; clearly convey what difference you’ll make to the employer.

_____________________________________________________________________

 

Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to artoffindingwork@gmail.com.

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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4 days ago

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October 17, 2024

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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All Magic Spells (TM) : Top Converting Magic Spell eCommerce Store

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4 days ago

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October 17, 2024

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