High Conviction Concentrated Growth Investing, Fallacy Alarm

Fallacy Alarm

High Conviction Concentrated Growth Investing

High conviction concentrated growth investing. Blends single stock, macro and thematic research into powerful long and short ideas. I am convinced that a robust and comprehensive investment process requires macro and micro considerations. And it requires a deep understanding what you are looking for and what you are invested in. Digitization has changed the dynamics both how businesses operate and how investors compete for returns. Ideas can scale much faster and fail much faster than before. The biggest value creation happens before it can be spotted in financial statements. As a result, my approach can be best summarized as high conviction, high concentration growth investing, embedded into a macro framework built on the realization that our current demographic set-up, monetary paradigm and innovation cycle will likely deliver a strong decade for nominal and real returns of productive assets.

Equity Bottom-Up

<ul><li>Fiscal spending has been the key driver for this bull market as it reaccelerated in late 2022 following the inflation and subsequent interest rate shock.</li><li>This impulse will likely diminish over the next months. It will be replaced by a credit impulse from rate cuts, the first few of which will be very powerful.</li><li>Market mechanics will be accommodating. Leverage in the system is low. In fact, the pain trade is still higher.</li></ul>

Fiscal spending has been the key driver for this bull market as it reaccelerated in late 2022 following the inflation and subsequent interest rate shock.This impulse will likely diminish over the next months. It will be replaced by a credit impulse from rate cuts, the first few of which will be very powerful.Market mechanics will be accommodating. Leverage in the system is low. In fact, the pain trade is still higher.

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/amtd-digital" target="_blank" data-smartkarma-citation="entities:36214:1" rel="noopener">AMTD Digital (HKD US)</a> shares are up 230x since its listing at US$7.80 per ADS on 15 July. Its market cap is a staggering US$334 billion.</li>
<li>
<a href="https://www.smartkarma.com/entities/amtd-idea-group" target="_blank" data-smartkarma-citation="entities:28137:1" rel="noopener">AMTD Idea Group (AMTD US)</a> accounts for 99.4% of the voting power. In January 2022, it increased its AMTD Digital shareholding to 97.1% of outstanding shares at US$1.2 billion valuation.</li>
<li>AMTD Digital’s financials are uninspiring and cannot justify the share price ramp. No sane valuation methodology can support the share price.    </li>
</ul>



AMTD Digital (HKD US) shares are up 230x since its listing at US$7.80 per ADS on 15 July. Its market cap is a staggering US$334 billion.

AMTD Idea Group (AMTD US) accounts for 99.4% of the voting power. In January 2022, it increased its AMTD Digital shareholding to 97.1% of outstanding shares at US$1.2 billion valuation.
AMTD Digital’s financials are uninspiring and cannot justify the share price ramp. No sane valuation methodology can support the share price.    


Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>We believe that Upstart's share price has been excessively oversold since October 2021. Since its highs in October 2021, Upstart's share price has declined significantly by nearly 72%.</li>
<li>The combination of buying back shares, more attractive valuations, and a much stronger sales growth than its peers is likely to result in Upstart outperforming the market this year.</li>
<li>Our base case valuation of Upstart is implied market cap of $13.8 billion and target price of $165 per share, which is 47% higher than current share price.</li>
</ul>


We believe that Upstart's share price has been excessively oversold since October 2021. Since its highs in October 2021, Upstart's share price has declined significantly by nearly 72%.
The combination of buying back shares, more attractive valuations, and a much stronger sales growth than its peers is likely to result in Upstart outperforming the market this year.
Our base case valuation of Upstart is implied market cap of $13.8 billion and target price of $165 per share, which is 47% higher than current share price.


Upstart Holdings: Focus on the Share Buyback & Outstanding Growth of AI Driven Lending Platform

<p><a href="https://www.smartkarma.com/entities/policybazaar-insurance-web-aggregator" target="_blank" data-smartkarma-citation="entities:33470:1" rel="noopener">Policybazaar Insurance Web Aggregator (1569999D IN)</a>/PB Fintech operates the <em>Policybazaar</em> and <em>Paisabazaar</em> platforms in India. <em>Policybazaar</em> is India’s largest digital insurance marketplace with a 93.4% market share based on the number of policies sold in FY20, according to Frost &amp; Sullivan. <em>Paisabazaar</em> is India’s largest digital consumer credit marketplace with a 53.7% market share, based on disbursals in FY21, according to Frost &amp; Sullivan. PB Fintech’s shareholders include SoftBank Vision Fund, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>, Tiger Global and <a href="https://www.smartkarma.com/entities/info-edge-india-ltd" target="_blank" data-smartkarma-citation="entities:14461:1" rel="noopener">Info Edge India (INFOE IN)</a>.   </p><p>PB Fintech will launch its IPO on 01 November at an indicative price range of Rs940-980. The IPO comprises a primary raise of Rs37,500 million ($502 million) and a secondary raise up to Rs19,600 million ($262 million). The main secondary seller is SoftBank Vision Fund which aims to sell up to Rs18,750 million ($250 million) worth of shares. </p><p>In <a href="https://www.smartkarma.com/insights/pb-fintech-policybazaar-ipo-initiation-insurance-policy" target="_blank" data-smartkarma-citation="insights:55735" rel="noopener">PB Fintech (Policybazaar) IPO Initiation: Insurance Policy</a>, we stated that <em>Policybazaar</em>, which is India’s largest digital consumer credit marketplace, is a direct play on the rising insurance penetration rates in India. PB Fintech operates an asset-light capital model and does not underwrite any insurance or retain any credit risk on loans. The business is well-positioned to benefit from the post-COVID-19 recovery in insurance policies sales and loan disbursals by its partners. Helped by strong brand recognition and retention rates, the favourable unit economics also suggest that medium-term profitability is within reach. </p><div class="content-highlight"><p>In this note, we look at the updated prospectus which outlines the 1QFY22 results (for the quarter ending June) and recent developments. Overall, the recent results reinforce our view that PB Fintech has attractive fundamentals. We will discuss valuation in our next note.  </p></div>

Policybazaar Insurance Web Aggregator (1569999D IN)/PB Fintech operates the Policybazaar and Paisabazaar platforms in India. Policybazaar is India’s largest digital insurance marketplace with a 93.4% market share based on the number of policies sold in FY20, according to Frost &amp; Sullivan. Paisabazaar is India’s largest digital consumer credit marketplace with a 53.7% market share, based on disbursals in FY21, according to Frost &amp; Sullivan. PB Fintech’s shareholders include SoftBank Vision Fund, Tencent (700 HK), Tiger Global and Info Edge India (INFOE IN).   PB Fintech will launch its IPO on 01 November at an indicative price range of Rs940-980. The IPO comprises a primary raise of Rs37,500 million ($502 million) and a secondary raise up to Rs19,600 million ($262 million). The main secondary seller is SoftBank Vision Fund which aims to sell up to Rs18,750 million ($250 million) worth of shares. In PB Fintech (Policybazaar) IPO Initiation: Insurance Policy, we stated that Policybazaar, which is India’s largest digital consumer credit marketplace, is a direct play on the rising insurance penetration rates in India. PB Fintech operates an asset-light capital model and does not underwrite any insurance or retain any credit risk on loans. The business is well-positioned to benefit from the post-COVID-19 recovery in insurance policies sales and loan disbursals by its partners. Helped by strong brand recognition and retention rates, the favourable unit economics also suggest that medium-term profitability is within reach. In this note, we look at the updated prospectus which outlines the 1QFY22 results (for the quarter ending June) and recent developments. Overall, the recent results reinforce our view that PB Fintech has attractive fundamentals. We will discuss valuation in our next note.  

PB Fintech (Policybazaar) IPO: Signs of Life

<header id="article-header_2-0"><p data-tooltip="Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder." data-inline-tooltip="true" data-tooltip-position-x="left" data-tooltip-position-y="top">Founded in 2013, <a href="https://www.smartkarma.com/entities/moneylion-inc" target="_blank" data-smartkarma-citation="entities:34686:1" rel="noopener">MoneyLion (ML US)</a> is a fintech company that provides lending, mobile banking, cash advances, financial advisory, and investment services including crypto trading to its users. The company aims to empower mobile banking and other financial products through machine learning and artificial intelligence technologies. Since its launch in 2013, MoneyLion has engaged with nearly 8.7 million users. </p></header><p data-tooltip="Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder." data-inline-tooltip="true" data-tooltip-position-x="left" data-tooltip-position-y="top">In February 2021,<a href="https://www.reuters.com/technology/mobile-bank-moneylion-go-public-via-blank-check-merger-29-bln-deal-2021-02-12/" target="_blank" rel="noopener"> MoneyLion</a> agreed to go public through a merger with a blank-check firm Fusion Acquisition Corp <a href="https://www.reuters.com/companies/FUSE.N" target="_blank" rel="noopener">(FUSE.N)</a>, that would value the equity of the combined company at $2.9 billion. As of 26 October 2021, MoneyLion's market cap is $1.4 billion. MoneyLion completed its public listing on the NYSE in September 2021.</p><div class="content-highlight">
<h2>Valuation</h2>
<p>Our base case valuation of MoneyLion over the next year is $9.5 per share, which would be 59% higher than current share price. Our base case valuation is based on EV/S of 7.5x using our estimated sales of $257 million in 2022. We took a 10% discount to the company's guidance sales in 2022 to be more conservative. </p>
<p>The EV/S multiple of 7.5x is about 50% discount to the average EV/S multiple of its peers, which is mainly due to its lower operating margins and size effect. However, if the company is able to generate higher sales growth and more sizeable improvement to operating margins than its peers in the next several quarters, this valuation discount is likely to decline considerably. </p>
<p>Unlike in 2H 2020 to 1Q 2021 when there was a much positive sentiment on SPACs and SPAC related mergers, this sentiment has worsened considerably in the past six months. This is probably one of the reasons why the stock has taken such a beating since going public in the past month. We would argue that the fundamentals of the company is improving and the financial metrics of MoneyLion remain solid. Therefore, we would be a Buyer of <a href="https://www.smartkarma.com/entities/moneylion-inc" target="_blank" data-smartkarma-citation="entities:34686:1" rel="noopener">MoneyLion (ML US)</a> shares at current depressed levels.</p>
</div>

Founded in 2013, MoneyLion (ML US) is a fintech company that provides lending, mobile banking, cash advances, financial advisory, and investment services including crypto trading to its users. The company aims to empower mobile banking and other financial products through machine learning and artificial intelligence technologies. Since its launch in 2013, MoneyLion has engaged with nearly 8.7 million users. In February 2021, MoneyLion agreed to go public through a merger with a blank-check firm Fusion Acquisition Corp (FUSE.N), that would value the equity of the combined company at $2.9 billion. As of 26 October 2021, MoneyLion's market cap is $1.4 billion. MoneyLion completed its public listing on the NYSE in September 2021.
Valuation
Our base case valuation of MoneyLion over the next year is $9.5 per share, which would be 59% higher than current share price. Our base case valuation is based on EV/S of 7.5x using our estimated sales of $257 million in 2022. We took a 10% discount to the company's guidance sales in 2022 to be more conservative. 
The EV/S multiple of 7.5x is about 50% discount to the average EV/S multiple of its peers, which is mainly due to its lower operating margins and size effect. However, if the company is able to generate higher sales growth and more sizeable improvement to operating margins than its peers in the next several quarters, this valuation discount is likely to decline considerably. 
Unlike in 2H 2020 to 1Q 2021 when there was a much positive sentiment on SPACs and SPAC related mergers, this sentiment has worsened considerably in the past six months. This is probably one of the reasons why the stock has taken such a beating since going public in the past month. We would argue that the fundamentals of the company is improving and the financial metrics of MoneyLion remain solid. Therefore, we would be a Buyer of MoneyLion (ML US) shares at current depressed levels.


MoneyLion - An Oversold Fintech Stock Following a SPAC Merger

United States

Horace Mann Educators Corporation is an insurance holding company.  The Company markets and underwrites personal lines of property and casualty insurance, retirement annuities, and life insurance.  Horace Mann markets its products primarily to educators and other employees of public schools and their families.

National Western Life Group, Inc. operates as a life insurance company. The Company offers life and term life insurance products. National Western Life Group serves customers throughout the United States.

Goosehead Insurance, Inc. operates as an insurance agency. The Company offers home, auto, motorcycle, umbrella, flood, landlord, life, business, commercial auto, product liability, and recreational insurance services. Goosehead Insurance serves customers in the United States.

Stewart Information Services Corporation provides title insurance and related services through locations in the United States and several international markets. The Company meets the needs of real estate and mortgage industries through the electronic delivery of services required for settlement. Stewart's services include title reports, flood determinations, and credit reports.

Employers Holdings, Inc. provides workers' compensation insurance.  The Company focuses on small businesses involved in low to medium hazard industries.

Safety Insurance Group, Inc. provides personal lines property and casualty insurance focused exclusively on the Massachusetts market.  The Company's principal product line is private passenger automobile insurance.  In addition, Safety Insurance offers commercial automobile, homeowners, dwelling fire, umbrella and business owner policies.

Argo Group International Holdings, Ltd. offers property casualty insurance and reinsurance. The Company offers excess and surplus lines, select markets, and international specialty insurance.

HCI Group, Inc. offers property/casualty insurance.  The Company offers homeowners', condominium owners', and tenants' insurance.

SiriusPoint Ltd. operates as a global insurance and reinsurance company. The Company offers services in insurance lines which includes environmental, property, energy, workers compensation, and aviation and space, and reinsurance lines includes life, accident and health, property, marine and energy, casualty, and credit and bond. SiriusPoint serves customers worldwide.

AMERISAFE, Inc. provides workers' compensation insurance focused on small to mid-sized employers involved in hazardous industries, principally construction, trucking, logging, agriculture, oil and gas, maritime, and sawmills.

Hanwha Life Insurance Co., Ltd. offers life insurance services and reinsurance services.  The Company also does insurance against loss business, beverages business, real estate rental, and securities investment business through its subsidiaries.

Wuestenrot & Wuerttembergische AG is a financial services company.  The Company offers housing finance and building society savings accounts, as well as life insurance, real estate, and investment products. W&W is the result of the merger between Wuestenrot Beteiligungs-AG and Wuerttembergische AG VersicherungsBeteiligungsgesellschaft.

Just Group PLC provides financial services. The Company specializes in de-risking solutions, retirement income products, mortgages, financial advice, and guidance services to individual customers, financial intermediaries, corporate clients, and pension scheme trustees. Just Group serves customers worldwide.

Protector Forsikring ASA underwrites casualty insurance throughout Norway.  The Company focuses on delivering standard insurance products to the SME market, the public sector and the affinity market (grouped arrangements).

Vaudoise Assurances Holding SA, also known as Vaudoise Versicherungen Holding, is an insurance holding company, offering, through its affiliates, life, health, accident, property, commercial, motor vehicle, liability and legal protection insurance services, among others. The Company operates through a network of Swiss offices and affiliates in Spain and Italy.

Bao Viet Holdings, through its subsidiaries, engages in insurance, reinsurance, financial investment, fund management, securities, banking, and real estate services businesses in Vietnam. The Life Insurance segment offers a range of whole life, pure endowment, term life, endowment, bancassurance, annuity, universal life, healthcare and personal accident riders, and other life insurance products, as well as reinsurance assumed and ceded in life, healthcare insurance, and personal accident. The Non-life Insurance segment provides health and personal accident, property, cargo, hull-P&I, general indemnity, aviation, automobile, fire and special risk, agriculture, and other insurance products; and assumes and cedes reinsurance for various non-life insurance products. The Financial Services segment offers fund management, investment portfolio management, security brokerage and trading, investment consulting services, etc.; investment management services to policyholders; and security brokerage, securities underwriting and issuance agency, securities trading, custody, investment, and financial consulting services. The Banking Services segment provides various banking services, such as handling individual customer deposits, and deposit and current accounts for corporate and institutional customers; and provision of consumer loans, overdrafts, credit card facilities, and fund transfer services. The Real Estate Operations and Other Activities segment is involved in the rental and development of various real estate projects. The company also engages in the real estate investment and consulting activities; provision of machinery and equipment; and vocational driving training operations. It offers its services through approximately 150 branches in 63 cities and provinces. Bao Viet Holdings was founded in 1964 and is headquartered in Hanoi, Vietnam.

PSC Insurance Group Limited provides insurance brokerage services. The Company offers services such as risk management, workers compensation, business protection, worth insurance, claims settlements. PSC Insurance Group conducts its business globally.

Anadolu Hayat Emeklilik AS is a life insurance company offering its services in Turkey. The Company is active in both private pension and life insurance markets and operates through regional sales offices in Turkey.

Momentum Metropolitan Holdings operates as a holding company. The Company, through its subsidiaries, provides financial services such as individual life assurance, group life assurance, employee benefits, health insurance, and credit life products. Momentum Metropolitan Holdings serves customers in South Africa.

Mercuries Life Insurance Co., Ltd. offers diversify life insurance products and services.

Lemonade, Inc. operates as an insurance company. The Company offers artificial intelligence (AI) based technology for fire, property, liability, and other related insurance policy issuing and claim settlements. Lemonade serves customers in the United States.

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Lemonade Inc (LMND US)

Fallacy Alarm's Elevator Pitch Party

Fiscal spending has been the key driver for this bull market as it reaccelerated in late 2022 following the inflation and subsequent interest rate...

Fallacy Alarm

AMTD Digital: Irrational Frenzy 2.0

The shares are currently up 143% today. AMTD’s financials are uninspiring and cannot justify the share price ramp. No sane valuation assumption can...

Arun George

PB Fintech (Policybazaar) IPO: Signs of Life

PB Fintech (Policybazaar) will launch its IPO on 01 November to raise up to $764m. The updated prospectus reinforce our view that PB Fintech has...

Arun George

MoneyLion - An Oversold Fintech Stock Following a SPAC Merger

MoneyLion is an oversold fintech stock following a SPAC merger. Our base case valuation of MoneyLion over the next year is $9.5 per share, which...

Douglas Kim

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Fallacy Alarm's Elevator Pitch Party

Fiscal spending has been the key driver for this bull market as it reaccelerated in late 2022 following the inflation and subsequent interest rate...

Fallacy Alarm

AMTD Digital: Irrational Frenzy 2.0

The shares are currently up 143% today. AMTD’s financials are uninspiring and cannot justify the share price ramp. No sane valuation assumption can...

Arun George

Upstart Holdings: Focus on the Share Buyback & Outstanding Growth of AI Driven Lending Platform

The combination of buying back shares, more attractive valuations, and a much stronger sales growth than its peers is likely to result in Upstart...

Douglas Kim

PB Fintech (Policybazaar) IPO: Signs of Life

PB Fintech (Policybazaar) will launch its IPO on 01 November to raise up to $764m. The updated prospectus reinforce our view that PB Fintech has...

Arun George

MoneyLion - An Oversold Fintech Stock Following a SPAC Merger

MoneyLion is an oversold fintech stock following a SPAC merger. Our base case valuation of MoneyLion over the next year is $9.5 per share, which...

Douglas Kim