Value Investing in my Circle of Competence, Hurdle Rate

Hurdle Rate

Value Investing in my Circle of Competence

The name “Hurdle rate” was inspired by none other than Mark Leonard of Constellation Software, and their prolific use of a fixed hurdle (discount) rate for their investments. Had you invested into Constellation Software at the time of their IPO as an Australian Investor you would of seen your investment multiply by >100x or (>35% CAGR), an enviable record (Updated March 2023).

Equity Bottom-Up

<ul><li>Selfwealth is an ASX-listed online broker Selfwealth is ironically the domestic broker the trust uses with me having used it for over 6 years with great satisfaction.</li><li>Comparing ASX pricing of Selfwealth to some of its primary competitors it is worthwhile to note that the cheapest broker I could find is Superhero which just this month introduced $2 brokerage fees on ASX trades up to $20,000 as it engages in a price war with Stake.</li><li>Selfwealth at a price of $9.50 might seem monumental in comparison, but I would say that Selfwealth has a $9.50 regardless of trade size, making trades &gt;$95,000 cheaper than both Stake and Superhero.</li></ul>

Selfwealth is an ASX-listed online broker Selfwealth is ironically the domestic broker the trust uses with me having used it for over 6 years with great satisfaction.Comparing ASX pricing of Selfwealth to some of its primary competitors it is worthwhile to note that the cheapest broker I could find is Superhero which just this month introduced $2 brokerage fees on ASX trades up to $20,000 as it engages in a price war with Stake.Selfwealth at a price of $9.50 might seem monumental in comparison, but I would say that Selfwealth has a $9.50 regardless of trade size, making trades &gt;$95,000 cheaper than both Stake and Superhero.

Director, RaaS Research Group, Research as a Service (RaaS)

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Director, RaaS Research Group

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<h2>SelfWealth Ltd</h2>
<h3>The Millennials’ Trading Choice?</h3>
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<p>SelfWealth (SWF) was established in 2012 and listed in November 2017. The group offers a range of services to investors and advisers including flat fee brokerage in Australia and the US, portfolio and trading analysis based on community trends. SWF attracts both sophisticated investors and younger investors who may not have existing relationships with large financial institutions and other first-time investors. The platform allows investors to benchmark portfolios and trades against SelfWealth community positions and absolute measures highlighting popular investment choices and comparing risk levels. SWF launched an ETF (ASX:SELF) in Nov 2019 which is now capitalised at $108m. The group undertook a $11.7m placement and share purchase plan in July to fund further investment in broadening the product offer requiring further Marketing and IT investment. In FY21 SWF served 100k active direct investors, 62 AFSL licensees and 130 financial advisers with the number of trades in the year up 147% to 1,630,180 and an annual operating cashflow surplus of $1.1m. The board appointed a new CEO, Cath Whitaker, in March 2021 with Robert Edgley stepping back to non- executive Chairman (Anthony Ward, the founder stepped down in May 2020).</p>
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<p><strong>Business model</strong><br>SWF generates revenues from trading commissions and fees associated with managing client money via ETF and other platforms. SWF’s success is contingent on growth in funds held under the SWF CHESS HIN and to increase those client’s propensity to trade via education and providing social feedback regarding popular and widely held positions. Additional services provided are beginning to attract subscription fees and these (E.g., US market access) may become an important part of the revenue model. Increased penetration of the Financial Adviser segment may also drive revenues. The group launched iOS and Android Apps in FY21 along with the launch of US trading for Australian clients.</p>
<p><strong>Moving toward profitability while challenging incumbents</strong><br>In FY21 SWF overhauled systems and processes improving robustness and delivering efficiencies which assisted in improving gross margin from 33.4% to 41.4%. Growth was strong with Revenue up 135%, take-up of the US trading product by 29% of Active Traders in the first six months and an increase in Equities Under Administration (via HIN) from $2.5bn to $6.0bn. The company added capability, expanding the Product and IT teams in preparation for further growth. SWF remains focused on diversifying revenue streams by offering a broad product portfolio to retail investors.</p>
<p><strong>Challenging in an increasingly crowded Fintech market</strong><br>SWF is still at an early stage of development relative to similar firms such as Netwealth (ASX:NWL) and Hub24 (ASX:HUB). A more comparable peer in terms of market capitalisation could be Raiz Invest (ASX:RZI). SWF has focused directly on retail investors, particularly those new to share markets. Individual’s flexibility relative to institutions is driving a relatively fast take-up of the SWF offer with SWF ranked fourth in trading market share.</p>
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SelfWealth Ltd
The Millennials’ Trading Choice?





SelfWealth (SWF) was established in 2012 and listed in November 2017. The group offers a range of services to investors and advisers including flat fee brokerage in Australia and the US, portfolio and trading analysis based on community trends. SWF attracts both sophisticated investors and younger investors who may not have existing relationships with large financial institutions and other first-time investors. The platform allows investors to benchmark portfolios and trades against SelfWealth community positions and absolute measures highlighting popular investment choices and comparing risk levels. SWF launched an ETF (ASX:SELF) in Nov 2019 which is now capitalised at $108m. The group undertook a $11.7m placement and share purchase plan in July to fund further investment in broadening the product offer requiring further Marketing and IT investment. In FY21 SWF served 100k active direct investors, 62 AFSL licensees and 130 financial advisers with the number of trades in the year up 147% to 1,630,180 and an annual operating cashflow surplus of $1.1m. The board appointed a new CEO, Cath Whitaker, in March 2021 with Robert Edgley stepping back to non- executive Chairman (Anthony Ward, the founder stepped down in May 2020).





Business model SWF generates revenues from trading commissions and fees associated with managing client money via ETF and other platforms. SWF’s success is contingent on growth in funds held under the SWF CHESS HIN and to increase those client’s propensity to trade via education and providing social feedback regarding popular and widely held positions. Additional services provided are beginning to attract subscription fees and these (E.g., US market access) may become an important part of the revenue model. Increased penetration of the Financial Adviser segment may also drive revenues. The group launched iOS and Android Apps in FY21 along with the launch of US trading for Australian clients.
Moving toward profitability while challenging incumbents In FY21 SWF overhauled systems and processes improving robustness and delivering efficiencies which assisted in improving gross margin from 33.4% to 41.4%. Growth was strong with Revenue up 135%, take-up of the US trading product by 29% of Active Traders in the first six months and an increase in Equities Under Administration (via HIN) from $2.5bn to $6.0bn. The company added capability, expanding the Product and IT teams in preparation for further growth. SWF remains focused on diversifying revenue streams by offering a broad product portfolio to retail investors.
Challenging in an increasingly crowded Fintech market SWF is still at an early stage of development relative to similar firms such as Netwealth (ASX:NWL) and Hub24 (ASX:HUB). A more comparable peer in terms of market capitalisation could be Raiz Invest (ASX:RZI). SWF has focused directly on retail investors, particularly those new to share markets. Individual’s flexibility relative to institutions is driving a relatively fast take-up of the SWF offer with SWF ranked fourth in trading market share.









SelfWealth Ltd: The Millennials’ Trading Choice?

Australia

SelfWealth Limited provides investment management services. The Company offers online trading, wealth management, financial advisory, and other investment services. SelfWealth serves customers in Australia.

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SelfWealth Ltd (SWF AU)

Selfwealth (ASX:SWF)

Selfwealth is an ASX-listed online broker Selfwealth is ironically the domestic broker the trust uses with me having used it for over 6 years with...

Hurdle Rate

SelfWealth Ltd: The Millennials’ Trading Choice?

SelfWealth Ltd The Millennials’ Trading Choice? SelfWealth (SWF) was established in 2012 and listed in November 2017. The group offers a range...

Research as a Service (RaaS)

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)