Stockbroker confesses to duping families in $5 billion investment scandal
Thousands of families around the world may not know it yet, but their life savings might have gone missing.
It appears they were tricked into thinking they were getting an early tip on stocks that were about to be listed. Truth is, those stocks still haven’t listed.
In an explosive confession on 60 Minutes, stockbroker Kris Ridgway admitted to taking part in this multibillion-dollar global financial scheme he claims was masterminded by Britain-based Andy Turner and Australian David Sutton.
Ridgway confessed to the con he played on his clients, including friends and clients who trusted him with their hard-earned money.
“I knew it was wrong. They said ‘we’ll pay you a decent commission’. I guess I was greedy. I was desperate for money, and I made a decision to let them sway me,” he told Adele Ferguson.
Ridgway ran the operation off the books while he was employed as a senior financial advisor at a reputable Brisbane investment firm, Shaw and Partners.
When the firm found out, Ridgway was immediately questioned, then fired.
No one at Shaw and Partners knew about Ridgway’s activities.
“I told the clients what I was told, so they felt as though they were having an investment that continued to be more and more prosperous,” he said.
Andy Turner’s response to questions via email
“I was not a founder of any of the companies mentioned, and the only renumeration (sic) that I have received for services provided from any of the companies mentioned was in shares of the companies,” Andy Turner wrote in an email.
“As far as I am aware [the shares] were all sold to sophisticated investors who were fully aware of the risks involved in purchasing shares at a deep discount to net asset value. Unfortunately, due to Covid and the subsequent financial markets turmoil of the past 18 months the market for IPOs has dried up with London recording its worst market for IPOs for 14 years.
“The investors should be fully aware that any public offering is subject to market conditions.”
Investors, he said, can sell their shares on a secondary placing market.
Statement from Shaw and Partners
“Without our knowledge or approval, Mr Ridgway introduced parties to investments that now appear to be fraudulent. He deliberately circumvented all internal processes, systems and procedures to deceive us and his clients. This was all done outside of Shaw and he worked with external parties to facilitate his disgraceful activities.
“On becoming aware of Mr Ridgway’s side activities, we terminated his engagement with us, reported his illegal conduct to the regulator and committed to a comprehensive remediation program designed to compensate the impacted parties concerned and we are working with them to make good and uphold our corporate responsibilities which we take extremely seriously.
“It is our hope that the regulators and other authorities use the full force of their powers, and quickly, to hold those ultimately responsible to account and bring this to all to an end with justice being served.”
Statement from the Australian Securities and Investments Commission (ASIC)
“This matter is complex and multijurisdictional, involving companies and conduct across multiple countries. It is important that ASIC undertakes its investigation in a thorough and comprehensive manner. We commenced our investigation into this conduct in March 2022 and announced our first administrative outcome on 13 April 2023.
“It said it has permanently banned Kristofer Ridgway from having any involvement in financial services and that its investigation into David Sutton, as well as companies associated with Sutton and Ridgway, continues.”
Is AGNC Investment's Stock a Buy? – The Motley Fool
Times are tough in the mortgage space right now. Rising interest rates led to a collapse in mortgage originations, and mortgage-backed securities have been out of favor among investors for the past 15 months or so. Mortgage real estate investment trusts (mREITs) were beset by declining asset values and have had to cut dividends. These factors explain mREITs’ massive share price underperformance since the Fed started hiking rates last year.
Under these circumstances, is AGNC Investment (AGNC 0.62%) — the best known mortgage REIT — a buy?
Mortgage REITs are different than traditional REITs
Most REITs invest in physical properties like office buildings, malls, or apartment complexes, and then lease out space to tenants. It is an easy-to-understand business model. Mortgage REITs use a different model: Rather than investing in properties, they invest in real estate debt — in other words, mortgages. Instead of collecting rent payments, they collect interest payments. In many ways, they look more like banks or hedge funds than landlords.
AGNC Investment focuses on mortgage-backed securities (MBS) that are guaranteed by the U.S. government, so it has minimal credit risk. If a borrower fails to pay their mortgage, the government ensures that AGNC Investment gets paid on its investment. These securities tend to pay low interest rates because of the government guarantee — low risk equals low returns. This means that mortgage REITs generally must borrow a lot of money to turn a bunch of securities that pay interest rates in the mid-single-digit percentages into dividend yields in the teens.
Mortgage-backed securities are under pressure
Over the past year, mortgage-backed securities have underperformed Treasuries as benchmark interest rates were raised. You can see the effect in the chart below, which looks at the difference between the prevailing mortgage rate and the yield on Treasuries. The higher the line goes, the greater the underperformance (“widening MBS spreads” in trader parlance) and the higher the risk of a dividend cut.
The underperformance of mortgage-backed securities results in the book value per share of mREITs declining, which puts them at risk of needing to cut their dividends. There have been three main drivers of MBS underperformance recently:
- The Fed’s ongoing policy of fiscal tightening.
- The exit of the Fed as a regular buyer of the securities.
- The supply of mortgage-backed securities from banks that saw big regional banks get into trouble because they held MBS that were underwater.
AGNC Investment held onto its portfolio of MBS, so their declines in value will translate into higher returns going forward. On the first-quarter earnings conference call, Chief Executive Officer Peter Frederico said that the expected return on its portfolio was a percentage in the mid-teens, and asserted that the company can support its dividend. That said, AGNC cannot ignore declines in book value per share, so, at some point, it might have to cut the dividend if mortgage-backed security underperformance continues.
The dividend is no sure thing
Investors who look at AGNC Investment now are probably going to be attracted to its dividend, which yields 15.2% (based on its current share price and recent distributions). However, the continuation of payouts at that level is no sure thing. The stock trades at a premium to book value per share. However, with the MBS spread increasing, its book value per share is probably declining. With mortgage REITs, it is important to remember that book value per share is a moving target.
Mortgage-backed securities are the cheapest relative to Treasuries they have been since the mid-1980s. There is no doubt that valuations are attractive. The problem is that the fortunes of AGNC Investment are tied to Federal Reserve policy, and while most strategists believe the central bank is near the end of its rate-hiking period, that is no sure thing either. Investors considering buying AGNC for the dividend should keep all of that in mind.
5 Best Growth Stocks to Invest in Now, According to Analysts – June 2023 – TipRanks
Growth stocks are enjoying huge gains in 2023 so far due to the hype surrounding artificial intelligence and expectations of a slowdown in interest rate hikes. Further, recent economic data reflects slowing inflation and a decrease in the yield on long-term government bonds. Interestingly, this makes for a favorable scenario for growth stocks.
To help investors choose the best growth stocks from the entire universe, TipRanks offers a Stock Screener tool. Using this tool, we have shortlisted five stocks that have received a Strong Buy rating from analysts, and whose price targets reflect an upside potential of more than 20%. Also, they carry an Outperform Smart Score (i.e., 8, 9, or 10) on TipRanks. Lastly, these companies’ revenues have witnessed a strong compound annual growth rate over the past three years.
According to the screener, the following stocks have the potential to grow and are analysts’ favorites.
Nvidia is up 163% this year and worth nearly $1 trillion—here's what to know before investing – CNBC
You’d be hard-pressed to find a hotter stock than Nvidia right now.
From the start of 2023 through June 8, the stock has returned more than 163% — a meteoric rise that has the chipmaker flirting with a $1 trillion market capitalization.
Currently, only four firms can say that the total value of their outstanding shares eclipses $1 trillion: Apple, Microsoft, Google parent company Alphabet and Amazon.com.
Nvidia differs from these firms in one key way: valuation.
Valuation is a blanket term that generally refers to the ways in which the market assesses a company’s worth. This is generally measured by comparing a firm’s share price with one of its underlying financial metrics such as earnings, revenue or cash flow.
When you buy a stock, you’re buying a share of a going concern that you expect to grow into the future, and stock prices typically reflect this potential growth. In essence, investors are willing to pay more for a company than what it’s worth today.
One way to measure this phenomenon is examining the company’s stock price compared to a fundamental measure, such as earnings or sales. If a company realizes $1 in earnings per share and trades for $10 a share, it’s said to have a price-to-earnings multiple of 10.
How a particular stock’s multiple compares to its own history (has it had this high a multiple before?), to peer companies (do tech companies tend to have high multiples?) and to the stock market at large (how does this firm compare to the average S&P 500 company?) determines whether investors consider a stock over- or undervalued.
Warren Buffett looks for stocks that trade cheaply compared with their underlying value — a strategy known as value investing. Other investors are willing to pay a large premium for a company they expect to deliver explosive growth.
Now, let’s get back to Nvidia and the trillionaires.
Nvidia’s stock currently trades for 204 times the company’s earnings per share. That’s lower than Amazon’s multiple of 296, but Amazon has always been an outlier in this regard; the retail giant rakes in boatloads of cash that it could convert to earnings if it wanted to. Microsoft trades for 35 times earnings, Apple for 31 times, Alphabet for 27.
Compare stock prices to sales and the difference grows starker. Amazon trades at 2.4 times sales, pretty much in line with the average S&P 500 company. Alphabet’s price-to-sales ratio is 5.6, Apple’s is 7.5 and Microsoft’s is 11.7.
What Nvidia’s high valuation means for investors
Based on earnings and sales, Nvidia comes with a higher price tag than the four biggest stocks on the market.
That doesn’t mean you shouldn’t buy it, or that you should sell it if you already own it. Rather, any prospective investor in Nvidia should do two things, investing experts say.
1. Examine the hype
Nvidia is not a meme stock. Investors are piling in because they believe in the fundamentals of the chipmaker’s business.
Namely, they think Nvidia has a chance to be the largest beneficiary of a technological revolution: artificial intelligence.
Nvidia is the dominant player in graphics processing units — an essential component for running AI in the cloud. Tech investors have seen this as a compelling opportunity for years, and Nvidia got a boost when OpenAI released viral chatbot ChatGPT earlier this year.
“It was an iPhone moment,” says Angelo Zino, senior industry analyst at CFRA. It forced companies across a wide range of industries to rethink how and how much they’ll be investing in AI.
“That makes it really hard to look at those conventional valuation metrics when assessing the magnitude of this opportunity,” adds J.R. Gondeck, managing director with the Lerner Group at Hightower Advisors.
Basically, investors are paying big now in the belief that the company’s fundamentals will eventually justify the price tag, and even make it look cheap in hindsight.
“Given the growth opportunities we see ahead, we think the multiple is fairly reasonable,” says Zino.
2. Prepare for volatility
If you believe in the long-term potential of a hyper-growth stock like Nvidia, you have to be willing to stomach some big drops in the value of your investment to reap the benefits, say investing pros.
During broad market selloffs, companies trading at the highest multiples often get hit the hardest. When investors are betting huge on a company’s future, and that future suddenly looks bleaker, things can get scary in a hurry.
“No tree grows to the sky,” says Gondeck. “You look at Apple, which recently hit an all-time high, and there were plenty of entry points along the way.”
Of course, they’re only “entry points” — or, buying opportunities — with the benefit of hindsight. If you’ve held Apple stock for decades, you’ve likely made a pretty penny. You’ve also experienced two drawdowns of more than 80%, between 1991 and 1997 and between 2000 and 2003.
“If you’re a long-term investor in Nvidia, there’s going to be a lot of volatility along the way,” says Zino.
To keep these sort of downdrafts from derailing your portfolio returns, build a core portfolio of broadly diversified exchange-traded funds and mutual funds, financial pros say.
And keep your individual stock bets to a relatively small corner of your portfolio. If you pick right, it’s a cherry on top of your portfolio’s performance. If not, you’re still theoretically on track to meet your financial goals.
DON’T MISS: Want to be smarter and more successful with your money, work & life? Sign up for our new newsletter!
Get CNBC’s free report, 11 Ways to Tell if We’re in a Recession, where Kelly Evans reviews the top indicators that a recession is coming or has already begun.
Check out: Nvidia is worth nearly $1 trillion—here’s how much you’d have if you invested a decade ago
Mortgage Transfers Pick Up as a Way to Beat Rising Rates – The New York Times
Boris Johnson's bombshell exit from Parliament leaves UK politics reeling – National Post
Remaining residents urged to flee Tumbler Ridge immediately as crews continue to fight wildfire near townsite – CBC.ca
Silver investment demand jumped 12% in 2019
Iran anticipates renewed protests amid social media shutdown
Search for life on Mars accelerates as new bodies of water found below planet’s surface
Economy14 hours ago
People in China are so worried about the economy they’re asking for divine intervention
Media15 hours ago
How to Grow Your Business With Social Media
News14 hours ago
No Pleasing Everyone
Economy15 hours ago
Are we in a recession right now? What economists have to say
News14 hours ago
Are Canadian wildfires under control? Here’s what to know.
News13 hours ago
Global help arrives as Quebec fights ‘historic’ fires
News19 hours ago
Air Canada issues: Passengers to be compensated
Media19 hours ago
Judge in FTX bankruptcy rejects media challenge, says customer names can remain secret