Category: Stock

Stocks



February 23rd, 2024

13min to read

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The Hot Stocks Outlook uses VantagePoint’s market forecasts that are up to 87.4% accurate, demonstrating how traders can improve their timing and direction. In this week’s video, VantagePoint Software reviews forecasts for SPDR SPY($SPY), Costco ($COST), Walt Disney ($DIS), Boston Scientific ($BSX), Eastman Chemical ($EMN), Cummins ($CMI), 3M ($MMM)

SPDR SPY ETF ($SPY)

Hello again, Traders, and welcome back to the hot stocks outlook for February 23rd, 2024. Hope you all had a nice week out there in the financial markets. As always, we’ve got plenty to cover here in this week’s hot stocks Outlook and a very exciting week having Nvidia earnings and the broader markets move higher throughout the week. So let’s take a look at that SPY ETF to get a sense of where these markets have been over these given blocks of time.

Here, we’re pushing up close towards 8% on the year-to-date mark now, SPDR SPY ETF ($SPY). Obviously, we’ve seen a very nice week even without that Monday trading from the Monday holiday. So before we go ahead and jump into these individual predictive forecasts from Vantage Point, make sure you go ahead and click on that link in the description below. What you can do is get a live demonstration and learn all of the specifics about how these predictive tools can help you make much better trading decisions based on the markets and style of trading that you’re doing.

And so what we’re going to do is we’ll take a look at Costco here, we’ve got Walt Disney, 3M, we’ll revisit BSX which we looked at last week so we can look at those short-term predicted highs and lows there, then we’ve got Eastman Chemical, and lastly, Cummins here. So a lot to look at but all in the same sort of vein of how is Vantage Point’s predictive forecast getting us ahead of these moves.

Costco ($COST),

What we have here with Costco (COST) is daily price action. Each one of these candles that you see on the chart that’s representing a full and complete trading day. And so it is right up against all that price data, what you’re going to notice is there is a black line and also a blue line value. And so what that black line value is, is what we referred to as the actual simple moving average. And that’s exactly what it is, it’s a simple moving average looking back at the previous 10 closes. And what that’ll do is I’ll add all those closes together, divide by 10, and it plots that value to give us a measure of where market prices have already been, right, more as a baseline letting us know what’s already occurred in the past. And many predictive indicators like that or non-predictive indicators, we should say, do exactly that, they just gather the information from the past and have no predictive capability here. And so what we want to do is actually compare that black line, we can think that as a price value, and compare this to this proprietary predicted moving average. And so for that blue line to get plotted on the chart, this is where Vantage Point’s technology of artificial neural networks are performing what we’d call intermarket analysis, specifically on Costco. And so what that means is it’s going to look at dozens of markets that are known to drive and influence specifically Costco stock. And so this can be things like that broader Market ETF, the Spy or the S&P futures as well as of course the NASDAQ futures. It’s also going to look at broader markets like the dollar Index or Global interest rates, and it even has the ability to look in those individual ETF groups or individual stocks and identify some of those important Market relationships. And by analyzing those relationships, well, we’re able to pull out very important price clues that are used to generate these highly predictive forecasts. And so what we’re able to do is whenever we see that blue line cross above the black line, it’s essentially forecasting that average prices are expected to move higher and you therefore would expect the trend to go higher. And this is what we look at each week as we look at these different predictive indicators and predictive forecasts. And so we can see that since that blue line crossed above the black line, Costco stock specifically is up about 6.4%. But that’s not the entirety of these predictive forecasts, right? We’re also given this indicator at the bottom of the bar that goes from green to red and back to green, this is the Vantage Point predicted neural index, and it’s tuned to solve a different problem for Traders. And that problem is short-term strength or weakness over just a couple of trading periods, really two trading days moving forward.

Lastly, you’re given a predicted high and a predicted low range. And so you’re given the overall trend direction, short-term strength or weakness, predicted highs and predicted lows, and all of these indicators are tuned to solve these very specific trading problems that may come up throughout your trading day and week. And so what we’re able to do here is look at the entirety of these forecasts and what we’re going to do is get a situation where okay the overall trend is up but every day you’re presented with these predicted high and low ranges before the trading day occurs. So what we’ll do is the actual trading day will fill in here, it won’t change what those predictions are. And so what we’re seeing is how accurate all of these predictions were the day before the trading day. So you had all of these levels before that candle appears and this is what allows traders to be ahead of the market, establish good positions and also maybe more importantly manage those positions as time moves forward. So as this Market moves up about six/ 7% you’re able to pull more and more out of it with some of that short-term trading and adding to the market.

Walt Disney ($DIS)

Now here’s Walt Disney ($DIS) and this has been an interesting one because the stock was so beaten down but we started to see the blue line cross above the black line signaling that the overall trend is now up in Disney. Right in the middle of this mess we have earnings and we’ve seen a lot of that especially the past few weeks here. We have in Nvidia a lot of the tech earnings getting a lot of attention but this is why this is so important is you see that weeks before the earnings there’s multiple opportunities for Traders to establish a position at extremely advantageous prices before we start to get that advance. And what’s really great about vantage point is even after all this volatility comes into play right after an earnings event which you know the technology here doesn’t know it doesn’t know that there’s earnings there but it’s able to look at not only what happen in Disney but all these other Market relationships that affect Disney and get those predicted forecasts right back on track. So you see here that the very next day we’re moving down to these predicted lows tapping up against the predicted highs and those ranges again doing an excellent job of indicating how Traders should manage that opportunity. Now most recently we’ve actually seen this cross over to the downside here in Disney and so there’s plenty of opportunities throughout the market for Traders to get involved where we see a lot of bullishness in these forecasts but here you see about a 21% rally and that’s about it right 21% over 25 trading days and there’s much better places to get some exposure in the marketplace, a really nice move there at Disney just over a very short period of time, it’s about a month on the calendar a 20% rally.

3M ($MMM)

Now here’s almost 3M ($MMM) the exact opposite big company 3M well here you see this Blue Line crossing below the black line again earnings right in the middle of that but look how this forecast has been pretty spot-on day after day after day and again through earnings so even as that huge volatility Catalyst comes in shakes around prices we’ve had a 15% decline over the past 33 trading days but a bunch of numerous opportunities where these predicted highs and lows have been guiding you day-to-day as the market moves forward but if you understand hey if you want to get some short positions maybe hedge some in the portfolio try to do that toward these predicted highs and as long as that blue line remains below the black line well we should expect the market to continue lower and again look at all this volatility around earnings and look how quickly the software looks at those in Market relationships generates those short-term predictive forecasts and offers all of this guidance moving forward for the Trader to to even add to those short positions at some of these prices so this is what’s very important is understanding also which markets are in downtrend because as markets start to shift and we’re you know running some of these nightly scans with Vantage points features like the intelliscan we can identify where these fresh shifts are happening whether to the downside or new opportunities to the upside so this has been really important in like Tesla and Apple you know haven’t really performed all that well compared to many Boston Scientific ($BSX) of those other stocks they’re extremely strong and and reaching new highs here.

Boston Scientific ($BSX),

So here’s Boston Scientific and I actually wanted to bring this through because we looked at this opportunity last week and clearly we can see blue line over Blackline a lot of strength as far as those predicted forecasts and really what I want to do here is just update this right and say okay well if you have the Vantage Point predictive indicators and you understand that BSX is in an uptrend well how should we use some of those shorter-term predictive indicators to manage the opportunity and so we have about a 19% rally over the past 39 trading days but what’s interesting about this with this abbreviated week that we have well how have the short-term forecasts been guiding you well this is actually Tuesday Wednesday Thursday and you see here going into the week what’s it telling you look down towards these predicted lows to you know take on a position and look up towards these predicted highs to take some off and you actually see this quite a bit is you’re moving right up to that previous predicted high right so even when it looks like things are a little bit off all that’s happening is it’s getting ahead of this and saying expect the market to trade up here expect the range to potentially trade down here but the overall trend is very much still bullish so even just this week if we wanted to take a look uh just at this move from predicted low to predicted high it’s another one and a half 1.8% move just in one single trading day so really nice opportunities both on the longer term Eastman Chemical ($EMN) but also these shorter-term windows.

Eastman Chemical ($EMN)

Eastman here I wanted to bring this in because this is an opportunity we looked at along with I believe Huntsman and a lot of the energy stocks earlier in the chart so there’s really excellent opportunities to go ahead and get long but this is sort of like 3M now right you get these crossovers to the downside you want to know when to avoid the stock but also we need to understand when those shifts are coming in right and have that confirmation from Vantage Point is okay now we can get re-involved and what I wanted to do here is again just highlight here’s where the market turns lower here’s where the market turns higher and we can look at those predicted high and low ranges so from this point forward it’s only giving you the indication like you want to short up towards these predicted highs and expect price declines until we start to see hey there’s that reversal well now this week you’d want to be a buyer from those predicted lows you’ve already seen a few dollar advance there in shares of Eastman Chemical and this may do quite well here as we’re seeing again some of the energy stocks and certainly the chemical side of this start to perk up here so just this past week here in Eastman from some of those previous predicted lows you’re already up about two and a half almost 3% just in the past few trading days.

Cummins ($CMI)

Lastly here Cummins ($CMI) shares of Cummins really straightforward example here Blue Line crossing above the black line we have earnings right here in the middle of all of this noise but despite that you know volatility around the earnings look how accurate all of these predictive indicators are so if there’s not a huge surprise necessarily around earnings you often get the market just trading within the predicted ranges you’d expect and actually I mean you see this you get that predicted trading range moving lower some volatility around the earnings but the trend is very much to the upside right if you want to get through that earnings announcement before you take on a position well again these predictive indicators will update and say okay now we can go ahead and get involved without all that noise is on the chart from earnings and again just a really nice move here from Cummins and still looking to move a little bit higher here so about a 10 and a half percent rally over just the past 20 trading days and of course as we see the spy and the cues and the broader markets moving higher there’s going to be some tremendous opportunities within the individual stocks but if you don’t have the right tools and you’re wrapped up in the wrong opportunities we’re going to end up wasting a lot of time not making a lot of money and probably getting very frustrated so once again this has been our hot stocks outlook for February 23rd 2024 thank you all for watching best of luck out there in the markets and bye for now.

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Guests: Wes Gray is the founder, CEO and Co-CIO of Alpha Architect. Robert Elwood is the co-founder of Practus, LLP, a business law firm that focuses primarily on investment funds.

Recorded: 1/18/2024  |  Run-Time: 47:02 

Summary: Wes and Bob just helped complete a separately managed account to ETF conversion of $770 million, so we had to get them on the show to walk through the process! They walk through the process of doing an SMA to ETF conversion via Section 351 from start to finish. They share some of the more nuances involved in the process and answer some common questions they hear over time.

While the most popular ETF story so far this year is the Bitcoin ETF, this is arguably a bigger long-term story and a trend to watch in the next few years.

Sponsor: YCharts enables financial advisors to make smarter investment decisions and better communicate with clients. To start your free trial and be sure to mention “MEB ” for 20% off your subscription, click here (new clients only).

Comments or suggestions? Interested in sponsoring an episode? Email us [email protected]

Links from the Episode:

Transcript:

Welcome Message:

Welcome to the Meb Faber Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer:

Meb Faber is the Co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit CambriaInvestments.com.

Meb:

What is up everybody? We have a truly fantastic and wonky show today. Our many time returning friend of the podcast Alpha Architects, Wes Gray, is joined by Bob Elwood, a business lawyer with a focus on investment funds. Wes and Bob just complete a separately managed account to ETF conversion of almost a billion dollars across thousands of accounts. So we had to get them on the show to walk us through how this all went down. They detailed the process of doing this SMA to ETF conversion via section 351 from start to finish. They share some of the more nuances involved in the process and answer some common questions they hear over time, like, why isn’t everyone doing this? While the most popular ETF story of this year so far is the Bitcoin ETF race, this is arguably a bigger long-term story and a trend to watch in the next few years. Stick around to the end. We get into some interesting ideas and implications for the future. Please enjoy this episode with Wes Gray, Bob Elwood. Wes, Bob, welcome to the show.

Wes:

How we doing, Meb? Glad to be back.

Meb:

So, Wes, you’ve been on probably more than anyone. Bob, you’re a newbie. You’re a Meb Faber show first. I figured we would start, get a little update from Wes, what’s going on in the world and then we want to get into this topic that I was pestering you guys about that I’m really excited to talk about. What’s going on at Alpha Architect ETF Architect Headquarters, Wes? You guys seem to have ton of stuff going on. Give us an update.

Wes:

Funny enough, literally right now, January 18th, we are launching the biggest 351 conversion that I know of on record into the marketplace. Today’s been an interesting day, same old stuff. Last time we talked about box, which we thought was a good idea and it almost has a billion dollars in it and we haven’t even marketed it really, and with the help of Bob and his team, this conversion business is just crazy. Just a matter of triaging the demand to figure out who’s serious and who’s not and bring them to market and let them join our fun ETF game that we all know and love.

Meb:

Let’s go ahead and cannonball right in because I pinged you guys. Bob, you can get us into this and I’d love to hear a little bit of your background and how you joined this Motley crew. What’s a 351, by the way? Let’s start there.

Bob:

So a section 351 transfer, you can do this with a private fund. You can do it with a group of separately managed accounts. You can do it with a lot of different inflows of assets, but the idea is, and I’m not going to use a lot of technical terms here, it’s a capital contribution to a newly formed corporation, which in this instance is an ETF. So to take an example, let’s say the three of us decided that we wanted to create our own ETF and let’s say that Wes had a portfolio that was heavy on tech stocks. Let’s say I had a portfolio that was heavy on old world economy stocks, oil and gas stocks, for example, and let’s say, Meb, you had mid-cap stocks that you thought were particularly suited to growth. We could combine our assets and what Wes would do is to cause all of his assets to be transferred in kind to the ETF. Same for you, same for me. And so for a moment in time, the ETF owns all of Wes’ portfolio, all of your portfolio, and all of my portfolio. Now you’d say, who cares?

We could do this in a private fund. We could do this in a lot of different ways. We can do all this inflow on a tax-free basis if we satisfy some requirements, which I’ll tell you about in a minute. But the really cool thing is obviously we’ve got a little bit of a shaggy dog of a ETF here because we’ve got tech stocks, old world economy stocks, and mid-cap stocks. And let’s say the manager says, wow, we’ve got this mix of different assets. I’d like to start rebalancing it or diversifying it in a way that makes a little bit more sense and maybe has a view toward maybe once out of a strategy that says, I’d like to find 25 names that will outperform the market going forward. If this were an ordinary mutual fund, if this were a private fund or if this was an SMA, the only way to do that is to basically do market sales. You could sell some of my old world economy shares, which might be underperforming in the future, but you’ve got a taxable gain or loss there and that obviously is a drag on performance.

What ETFs can do, and this is really cool, is they can do an in kind redemption. I’ll use my portfolio as the least attractive portfolio you could take out through the form of a party that’s called an authorized participant, makes an investment in the ETF, let’s pretend it’s just $10 million or $1 million, whatever it might be, and then does a redemption request. And instead of redeeming them out by paying them the million dollars in cash, what we do is send them in kind 1 million dollars of my portfolio of old world economy shares. And you would think what’s the difference? The difference is that there’s no tax at the fund level if we do this in kind redemption. So what we’ve managed to do is take out perhaps some of the losers in our portfolio and then we could do the flip side of that. We could say, hey, Wes’ portfolio, which is hot with tech stocks, let’s do an in kind transfer from the authorized participant that’s heavy on tech stocks. So what we’ve managed to do is diversify the portfolio in a way that we like without incurring any meaningful tax.

So we’ve got a lot of nice advantages here and we can continue to do that going forward. Each one of us has to satisfy two tests. One is that combined we own 80% of the ETF. That’s almost always going to be easy. In our example, we should own a hundred percent of the ETF, but we could have whatever the transfer or group is, it could be the three of us. In the deal that Wes is talking about, we have 5,000 transferors so it can get gargantuan, but the transferor group as a whole needs to own more than 80%. That’s usually easy to satisfy the part that’s hard to satisfy, and we do this person by person, transferor by transferor, the top position has to be less than 25% of, let’s say, Wes’ portfolio. And Wes’ top five positions need to be less than 50% of his portfolio.

And we do this transferor by transferor. So just the fact that you have a portfolio that is uncorrelated with his, that doesn’t count. We’re just going to look at your portfolio, my portfolio, and Wes’ portfolio and I’ll give you a little bit of a war story with respect to the deal that’s closing today. A decent number of the transferors were heavy on some big name tech stocks and as you may know, there was a big run-up in value in tech talks yesterday and I got calls from one of Wes’ and my colleagues yesterday saying in effect, holy (beep), we’re suddenly over 25%, what are we going to do? And we came up with a variety of strategies to do that, but let’s say for example, one of the customers was at 24.7% Apple two days ago, all of a sudden they were at 25.7% Apple. And what we did was essentially draw back some of the Apple shares to make sure that we satisfied the 25% test and the 50% test.

Meb:

So for the listeners, this reminds me a little bit of the exchange funds of yore where the Morgan Stanleys of the world would do on a private basis something somewhat similar, charge absolutely astronomical fees, lock you up, there were certain requirements, lock you up for like seven years. Is it a roughly similar structure except in this case you end up with an exchange traded very tax efficient vehicle?

Bob:

The reason that the Morgan Stanleys of the world charged so much was that they had to essentially match a lot of different transferors to end up with an ultimate combined portfolio that made sense. Let’s say for example that Wes had worked at Facebook and had 90% of his net worth in Facebook shares and let’s say, Meb, that you had worked at Google and 90% of your value was there. That’s great. Everybody likes Facebook and Google, but maybe what we want to do is create a diversified portfolio of 25 different tech stocks. That means you’ve got to find 45 different transferors who are all willing to put in their shares and then end up with a nice thing and of course managing all those different transferors. And of course Wes might have $10 million of Facebook shares. You might have a million dollars of Google shares and you don’t end up having the parody that you’d like. And so it takes work and I don’t begrudge Morgan Stanley the money they charge because it’s a hard business to manage all those sort of moving pieces.

Plus there’s a big lockup because of a special rule that applies to partnerships but doesn’t apply to ETFs. In contrast, what we do, and Wes is especially good at this, is he finds typically private funds that have a strategy or investment in advisors that have a particular strategy and let’s just take the investment advisor because this is the deal that we’re closing today. They have a strategy that is very much value-based, but they have a group of, in this instance, 5,000 customers who more or less all have portfolios that are vaguely speaking the same. So then we combine them all together, we end up with a portfolio that is at least close to the ideal portfolio and we don’t have to worry about some of the things that exchange funds have to worry about.

The other really cool thing is that in contrast to an exchange fund, which then has lockup periods and has constraints on how it rebalances its portfolio, we don’t have any lockup periods and we don’t have any real constraints about rebalancing the portfolio. So going back to the example I had before, if Wes has a portfolio that’s heavy on Facebook and you have a portfolio that’s heavy on Google, we can very soon after closing harmonize it in a way that is consistent with the vision of the investment manager as to, for example, how heavy he or she wants to be on Facebook versus Google versus anything else in the portfolio. So we’ve got a lot more freedom and latitude in contrast to the exchange funds.

Meb:

I had a tweet about a year and a half ago, I said, is it me or does this totally obliterate the entire high fee exchange industry? Every investment advisor in my mind who has a similar situation, particularly with appreciated securities and taxable, why wouldn’t they all do this? And maybe they are. Wes, give us a little insight on the ones you’ve done so far.

Wes:

It’s like any good ideas that go against the status quo. You need true innovators and people that embrace value creation. So this group that we’re talking about here, the other big issue that advisors usually have is like, but right now my clients have these 20 little shiny rocks in their portfolio. We could talk about them and I add value and you’re like, it’d be way better for the client to have it in one ETF to get capital compound deferred and the fees are tax deductible, blah, blah, blah. And so what you really need is a true fiduciary. A lot of advisors hold themselves out as fiduciaries but they’re beholden to their own, let’s just say, need to keep the client in the seat. So once you identify a counterparty that actually cares generally as a true fiduciary to their clients and they’re like, yes, I’m going to have to educate my clients, but this is just better for them, let’s do it, then it’s perfect.

So this group literally did that hard work where they did something that is complicated and it’s going to make them look weird ’cause they have one ticker in the account but they went to every single one of their clients and explained this is better for you in the end and it’s going to be weird. Let’s do this. And they put in the effort and now after the fact, it’s going to be obvious. And so I think it just takes someone who’s a leader at scale to present this and say, hey, it’s okay to actually be a fiduciary and do the right thing for your clients if you just educate them and explain. And I think now you’re going to start seeing more bowling pins fall down as people are like, oh crap, those guys did it. Now we got to do it.

Meb:

So to date, have you guys done more fund to ETF conversions or is it more separate account to ETF conversions?

Bob:

Roughly a third have been mutual fund into ETF, private funds into ETFs, and separate accounts into ETFs and uptake and forth family offices into ETFs. I’ll share a quick little story about a family office. It was a family office that had a really clever idea around 1980. They decided a company called Berkshire Hathaway and a guy named Warren Buffett were really good at this so long before he was as famous as he is now, they went down, and this was a family office that had wealth at the top generation, but the younger generations were school teachers, firemen, ordinary people. You ended up, thanks to Berkshire Hathaway, appreciating like crazy, turning a lot of these sort of ordinary middle class people into millionaires, multimillionaires and so forth, but they had a portfolio that was heavy on Berkshire Hathaway and had the problem that how could we diversify if for example Warren Buffet passes away and Berkshire Hathaway isn’t the cash cow that it has been.

We took that family office’s portfolio and took a lot of analysis of those 25% and 50% tests that we did and we turned it into an ETF and now everybody’s pretty happy. And now if you don’t mind me continuing and I’m going to channel my inner Stephen A. Smith and take a really hot take here. You mentioned that maybe this obliterates the exchange fund business. I’m actually going to go a step further and say that this makes more sense than just about any other existing structure. I think that because of this ability to do diversification effectively, it’s better than an ordinary mutual fund because ordinary mutual funds can do this, but the logistics are a killer. Private funds can’t do these in kind redemptions, generally speaking. SMAs can’t do it. Family offices can’t do it. And it’s funny, Wes and I brainstorm all the time about how we can proselytize this, but I’m thinking about writing an article that might be why aren’t you in an ETF? Because everything else has a disadvantage and an ETF doesn’t have a corresponding disadvantage.

Meb:

There was a couple of things I was thinking about as you’re talking. Family offices tend to be pretty independent and forward thinking. The ones they’re concerned about their portfolio and that’s about it. They’re not really managing for the most part other people’s money and all the various interests involved in that. I’m not surprised you’re seeing a lot of those. I’m not surprised you’re seeing a lot of mutual fund ones. On the separate account, RIA side, as you guys do more and more, it becomes that country club mentality where someone sees a big name to it and they’re like, oh, they’ve blessed it, maybe I need to look into this.

You guys mentioned the one thing that a bunch are nervous about is, hey, I launched this. I roll up 5,000 of my clients into it now they just have an ETF. What am I here for? They can sell it and maybe assets are going to go down and assets come out. On the flip side, there’s the opposite scenario where, hey, I launched this ETF, oh, now it’s in the marketplace. People may like the idea and assets may come in. So I feel like that’s exposed to an entire audience that may not know about the strategy and it may go from a hundred million or billion to a billion or 10 billion so that there’s both sides to that.

Wes:

That’s always a conversation. What about the stickiness of the assets? And I say, you ever heard of this thing called Vanguard and iShares? Get used to having a value prop and playing in a competitive game ’cause if you don’t have a value prop, the money’s leaving anyways. And so what does that mean? Okay. You launch this ETF. They’re now in an ETF. Yes. It’s technically less sticky than an SMA because you could just sell it in your Schwab account, but in particular if you do a 351 and you bring in low basis, it’s not like you’re going to want to sell the ETF because you have to pay the taxes.

So you already have the tax basis issue that keeps it real sticky. And then the other thing is this is a good thing. Now you’ve separated, hey, there’s an investment thing I deliver and then there’s the tax, the planning, the CFP business I deliver. We can now transparently, as a client identify what I pay for what service and that might suck, but if you’re in the business of being competitive, being transparent, and getting with the program of the 21st century in asset management, you have to do this anyways. You don’t have to but you’ll just die because there’s other people that will. So I just say, hey, long game, this is just required and have a value prop.

Meb:

And also if you think about it, if you’re an RIA and we used to do this where you have a separate account business with various strategies and dozens or hundreds or thousands of clients and you got to do block trades and it’s just an absolute nightmare. People are calling and asking about things. So not only does that, it simplifies your life to focus on the value add things you should be doing in the first place, which is whether it’s insurance or trusts or behavioral coaching and handholding or concierge offerings, whatever, the wealth management taxes, obviously this is a part of it.

I would love to hear from both of you guys. You’ve done a bunch of these already. Feel free to talk about any conversations, pros and cons of things that people ask you, that come up, how much does this cost? Why shouldn’t I do this? Who is this? I’m sure there’s a hundred million dollar, billion dollar RIAs is listening to this saying this sounds actually awesome. I’ve never heard of this before. I’m interested. Who is it not right for? And talk just about some of the considerations of having done this a bunch to where maybe you have some war stories too about ones that may not work.

Wes:

I’ll give you a few off. The top specific with respect to family offices and private folks is you’re in our fun business of being regulated to no end. You’re going to create a registered fund with the SEC, which means you just signed up for the biggest compliance regulatory burden that the world could ever invent, which means everything’s transparent. Everything in your life is now monitored and there’s third parties everywhere and some people are just not up for signing up for that party, especially family offices ’cause this is now bringing everything into the light and that’s just sometimes even the tax benefit’s not worth the brain damage. That’s a big one for private people.

Meb:

And also if you have a garbage strategy, all of a sudden it’s out there. Even if it’s not a garbage strategy, if you have a strategy, one of the things about separate accounts is you don’t have to publish gifts performance. You can just be like, here’s your account. People don’t even know if the exact returns per year. Now you can go to Morningstar and be like, wait a minute, we were only up 10% and the S&P was up 15.

Wes:

SMAs are like private equity mini. They can hide performance in what you’re doing. Where the ETF is you cannot hide because every second of the day someone is telling you what they think your stuff is worth. You’ve definitely got to manage around behavior, but the good news again is taxes enforce good behavior. You probably deal with a bunch of real estate people all the time. They hate taxes more than they like making money, I found and I’m like how did this guy get so rich? The guy hate taxes.

So all they do is even though they may not like this real estate, they may not like this or that they hate paying the taxes worse than making a bad behavioral decision. So sometimes just the fact that I got to pay taxes is going to be like I’m not going to transact or do anything, which actually weirdly enforces good behavior because you just own the ETF forever to let it compound tax deferred even though you want to sell this thing and buy this thing because you’re usually an idiot when you’re watching CNBC. So it corrects itself via the tax wrapper. It forces good behavior at least for those who are in a taxable situation.

Bob:

I’ll come at this from a slightly different perspective and I’ll use the deal we’re closing today as a case study, and this is going to sound a little bit like hyperbole, but I probably got a phone call a day for about four months with the client asking a specific question about a specific investor’s situation. And there were, over four months, 120 different questions. Some of them had to do with esoteric one-off things like there was a customer who had Indian securities that were only traded on the Indian Stock Exchange. And it turns out in that case there’s not an easy solution around that. We just pulled them out of the portfolio. There were other situations such as a complicated situation in which person one was the beneficiary of a trust set up by his father, also had a joint marital account, also had a personal account, and then applying these 25 and 50% tests turns out to be, well, are those three different accounts or are they one account? And how do you deal with the fact that at least one of them, the spouse has an interest in the account?

So we handled that. We’ve dealt with just about every sort of weird asset and or weird investor situation that’s come along. And in addition to the one that we’re talking about today, all told, I’m counting just myself, I’m not just ETF Architect plus other clients. We’ve done about 55 or 60 of these. I don’t want to be arrogant and say we’ve seen everything that could possibly go wrong, but we’ve seen enough that we have a way of figuring out if there’s a bump in the road, how do we deal with it? And how do we avoid any sort of unexpected thing? Because ultimately this is a business about trust and you got to make sure that the ultimate client who is really the investor, not the RIA or not the private fund manager, that the investor has faith in the RIA or the private fund manager who has faith in Wes, who has faith in me that everything is going to go smoothly, no hiccups. And in particular Wes’ team has people that sweat the details like crazy. That conscientiousness really makes a big difference.

Meb:

I imagine there’s people, I’m just thinking in my head, Ken Fisher, $250 billion RIA because the ones that are particularly investment focused, it seems like a perfect structure. The ones that are a little more bespoke family planning, particularly on the smaller side, maybe not as much, but I’m going to give you guys a lead. You ready? There’s this guy in Omaha. He’s got, what is it, a 200 billion plus portfolio. The big problem is it’s pretty concentrated. So one stock is the majority of the portfolio and that’s Apple. Theoretically, could Warren Buffet transition his portfolio to an ETF? Now he’s not, to my knowledge, registered investment advisor. It’s a corporation but is it at least theoretically possible?

Bob:

I love the question and I’m going to jump on it. A corporation as a transferor, particularly a so-called C corporation, presents a bunch of tax issues and distilled to its essence it’s almost always going to be a no. Because a corporate transferor presents the obvious problem. You don’t want to achieve this get out of jail free card in a situation where ultimately, even though Berkshire Hathaway is managed in a way that is very tax efficient given its overarching structure, you can’t very easily do it with a corporation as they transfer or due to some technical tax reasons.

Meb:

But I didn’t hear it’s a no. So if anyone could figure it out, it’d be Uncle Warren. Well, I said it’d be his best trade ever. This idea of potential tax savings is monumental. Do you guys have some research we could point to on how dramatic and important this is versus just continuing to chug along in a separate account or mutual fund or family office, et cetera?

Bob:

So I wrote an article for Wes’ blog maybe six months or so ago. It’s not particularly long, six or seven pages or so. Wes could probably supply the [inaudible 00:24:49] a little bit more smoothly than I could. But it goes through that and with all of us, we want to do it like what you see is what you get. There’s requirements. There are technical things that you have to master, but the end result is in most cases this is a really good thing.

Wes:

It’s really hard to quantify as you know, Meb, because it’s so contingent on how long you hold it, how often you trade, all these other things. I guess the best piece of research to point to is Robert Arnott and his team at research affiliates have that article comparing on average across all active funds, what’s the average net present value annually of the benefit of just the tax wrapper? And I think it’s in the 70, 80 bips a year type thing. You don’t have to do a lot of math, but if you compound at 70, 80 bips in addition to the benchmark over 20, 30 years, that’s the difference between millionaires and billionaires. And then there’s also the tax deductibility of the fee within a 40 Act structure. So most of the time when you pay an advisory fee, unless you got crazy structuring, which some rich people do, it’s non-deductible. So if you charge me 1%, I got to pay that with after tax money.

That sucks. Whereas an ETF, if I’m doing the same thing, the ETF only has to distribute the net dividends and income. So instead of paying out 2% income because I’m charging 1% fee, I only have to distribute 1% income. I’ve implicitly made the fee tax deductible, depends on the mix of whatever you’re distributing. That could be a 20, 30% savings just on the fee without even doing anything. And again, maybe that’s 20, 30 bips, but 10 bips there, 20 bips there start to add up, especially in a compounding sense. But again, going on the other extreme, if you come to us and say, hey, I’m running an S&P 500 Fund that never trades or changes stocks ever, the marginal benefit of the ETF tax mechanisms are basically worth zero because you’re not trading or transacting. You’re buying, holding forever anyways. So obviously a passive index is not that big, but if you’re doing any level of turnover, active management, the benefits start to get crazy. You get a compound on the money you didn’t send to the government and then you only pay it 20, 30 years from now.

Meb:

So is this equities only or could it theoretically also involve ETFs, fixed income?

Bob:

The asset has to be a security. So we couldn’t, for example, do this with dirt law, real property interest. We can’t do this with collectibles or other things like that. But as long as it’s security, I did one that was primarily debt instruments and we’ve done a couple that have involved, for example, esoteric things like South American equities and other kind of strategies like that. So there’s a pretty wide range of strategies that make sense as long as there’s things that you can imagine are someplace covered in, I’ll call it, like the Morningstar universe, that there would be a bond fund. There’s trillion bond funds out there. There aren’t that many collectible funds or other kind of things like that. One cool thing that we did recently, and Wes you may have a better handle on whether this is fully closed or just about to close, we were one of the first to launch a Bitcoin fund and I think that closed a week or so ago, but it’s got the chance to sort of do an asset class that hadn’t been done before.

Meb:

Can you explain that it’s a Bitcoin fund that owns what securities or is it owned actual spot Bitcoin or futures or what?

Bob:

I’m going to try to keep this simple ’cause I don’t want to get too deeply into the weeds. What we typically do is the ETF creates a Cayman subsidiary that represents 25% of the total portfolio and then the Cayman subsidiary can in fact own actual Bitcoin or Bitcoin futures or Bitcoin derivatives and things. But typically you put an awful lot of Bitcoin itself into the subsidiary. But because the subsidiary is treated as a corporation, it’s then treated when the ETF owns it as owning a corporation, of this case, a foreign corporation. So you get direct exposure through the Cayman subsidiary.

Then with respect to the other 75% of the portfolio, generally what you do is use the mix of cash and derivatives to mimic the exposure of Bitcoin or it can be other cyber currencies. There’s a chance to do things. In that instance, we did not do a section 351 transfer. I think that will eventually come, but the logistics of handling custodians, taking things from somebody’s wallet and holding Bitcoin into the fund and keeping everything straight and keeping things like holding periods and tax basis correct, if we have a podcast like this a year from now, two years from now, I wouldn’t be surprised if we’re one of the first to do that. And I think it is doable, but it is a challenge that’s a little bit more than an ordinary challenge.

Wes:

I got an idea, a live idea that I’m sure listeners on here would be very interested. There’s this thing called Grayscale Bitcoin trust that charges 10 x more than the other funds, but they got you stuck because of tax liability. So how the heck do we 351 and what’s the limitations of dumping all that and a 351…

Meb:

Go from an ATF to an ETF?

Wes:

Yeah. But with one tenth the fee, there’s probably a limitation. Right? So you could contribute 2499 in Grayscale trust plus a diversified portfolio of other stuff. But I know there’s a lot of people that are in that predicament. They got billions upon billions of dollars stuck in Grayscale Bitcoin trust and they’re like, I would love to buy the iShares one for 20 bips, but I’m stuck because I don’t want to pay the taxes to get out of the damned thing.

Bob:

So let’s just tease the episode six months from now when we figure that one out and we close it.

Wes:

Got it. But it’s open invite to anyone out there who’s got this problem, reach out, let’s try to solve it. There’s probably a solution.

Meb:

There’s a potential upside in current events for you guys because you guys got all sorts of different partners on the ETF side, I see names people will recognize like ARC and other names like Bridgeway who is a podcast alum, a really awesome shop, but also I see Strive. You guys potentially could have had the president of the country as the owner of one of your ETF partners. Are you glad he dropped out of the race?

Wes:

Yeah. As I discussed, Vivek is an amazing character regardless of your politics. I vouch for the guy personally. The problem in a personal selfish interest as we were discussing is he was the best salesman of all time for Strive funds. But obviously once you get the conflict of interest, you have to get separated from your business. That’s great if he wants to go fix the country. That’s obviously more important than helping us grow a better ETF company. So I’m conflicted here to be frank. I don’t want him to lose, but if he loses and comes back and runs Strive and goes on Fox News every night, I’m a fan.

Bob:

You and your viewers probably know him mostly through TV and other sort of public persona things and I don’t know him inside and out, but I have had the opportunity to meet him in person and he really is full of charisma. He’s got ideas flowing. If you had the chance to spend three hours at dinner with him, not talking about politics, not talking about economics, talking about British literature or the greatest comic book of all time, you name it, he’d have an interesting take on it and it’d just be fun to hang out with him.

Meb:

So you guys got a lot of pretty interesting esoteric funds. Are there any in particular that come to mind that you think are interesting, not case studies, but you want to talk about or talk about the process or stories from converting them that might’ve either been interesting or painful? As people marinate on this episode and think about moving some stuff to the structure, is there any stories that come to mind? How many do you guys have? I’m scrolling on its ETFArchitect.com. There must be 50 at this point.

Wes:

I think we’re 49 officially right now, but he’s saying it’s every week we launch our fund it seems. So Bob’s going to have way more interesting stories because obviously on our platform, because the whole function here is how do we Vanguard-ize this stuff? We need people to fit in a box, not do anything crazy, and be focused on something. So all the deals we’ve done are generally, it’s the same situation. Hey, I got low basis and a bunch of equities. I’d like to get rid of this stuff someday. Can we somehow move it into an ETF, get in the business of the ETF, and move on in life? So they’re all not boring, but it’s not general US equity portfolios are not that exciting. I’m sure Bob has way more exciting stories of conversions.

Meb:

Let me interject one question real quick. How often do you guys have these conversations? And the inquiry is maybe the RIA or investment advisor reaching out, but how often is it where they’re like, I have this client. He listened to Meb’s show or he heard this from you guys to where he said, look, I have this highly appreciated portfolio. If I sell, I’m going to get murdered. Why don’t you think about converting? The show gets a fair amount of individual listeners that I imagine after this drops, are going to pick up their phone, email their advisor, and be like, hey, this could save me millions and millions of dollars. Can you please convert my account to an ETF? Does that happen or is it mainly at this point too we are an esoteric?

Wes:

Let me give you the hit list because we do a lot of screening because people get ideas and they don’t actually listen to the podcast as much as they probably should. So there’s three no-go criteria. There’s a bunch more. But the big one, I get the call, hey, I heard you guys can deal with single stock issues. I got a bunch of Tesla, can I turn an S&P 500? No. Can’t do that.

Meb:

Could they theoretically, by the way, I was going to ask you this question earlier. Let’s say your account is 70% Tesla and then 50 other stocks. Could you only convert the amount to where Tesla is 25% in the other stocks?

Wes:

Yeah.

Meb:

I mean that’s still better than nothing.

Wes:

It can solve part of your problem, but most people are hoping for a pipe dream. They’re like, God, I just want to get rid of my a hundred mil Tesla stock. I don’t really have any other wealth, my IRA with 50 grand or something. So you can’t do that. The other thing is, oh, I don’t want to deal with all this regulation and I don’t want to be transparent. I’m like, no, that ain’t going to work either. And then the third thing is, oh man, I’m really good at stock pick and I’ve been running this prop trading strategy and I’m like, dude, it’s an ETF. It’s not a prop trading instrument.

Meb:

Meaning they’re super active.

Wes:

They want to do 10 trades intraday. And I’m like, you understand that in order to facilitate customer rebalances, I need a 24 hour trade cycle, bro. And so no day trading. Yes, you got to get regulated. Yes, you got to be compliant. And, no, I can’t diversify your single stock position in Tesla. But outside of that, which is 90% of inquiries, of like how do you give me a magic secret sauce without doing anything, we’re open for business. Go for it, Bob.

Bob:

Well, I have fourth criteria, which more or less answers a question that you had had, Meb, a moment ago. You also need a certain size and ETF is not economically viable unless you’ve got X number of millions, and Wes would probably have a better idea about what that is. But obviously if somebody comes to you with, oh, I’ve got this idea and it’ll be 5 million AUM, just have to say, it’s not going to be economically viable for you. But I will double back to a question you were starting to ask, Meb. Could an individual investor do this? And could we end up having an ETF that is owned by, let’s just say, one or two people? And I did one, and it required a fairly substantial amount of wealth for obvious reasons. But I did one which was essentially a family.

It was primarily the patriarch of the family, and then there were two other members of the family and combined, they had round numbers, $50 million of personal wealth that was in fact diversified and they created an ETF simply to take advantage of that tax advantage diversification strategy that I talked about at the very beginning. But it was three people and they decided they really had no interest in marketing this. They didn’t want to grow this to other people. They actually wanted to try to keep this on the down low as much as they could. I said, obviously the SEC is going to be aware of you. People can Google you. They can find out about you. Given that you’re on a platform, you may have buy orders coming in, but they wanted to do it on the down low. But again, if you have an individual investor or perhaps a group of individual investors that can get to the magic number that gets us to an economically viable size for the fund, you can definitely do almost, I’ll call it, bespoke ETF, for just your family. And it works pretty well that way.

Wes:

Just to add a little bit to that, and Bob failed to mention this, but in all those situations, we always convince them that there’s also a business case here. Why wouldn’t you do the basics? There’s obviously a tax motivation here, but there’s clearly a business case. And so you definitely want to at least consider that and put some minimal efforts in there because if anyone buys your ETF, because anyone with a Schwab account can click the button, you make free money. Right? Because they’re going to pay your management fee. And the marginal cost production is pretty low. So in every single deal we’ve done in every single deal that Bob’s done, in the end, even at the family office, more individual ETF, they get convinced of the business case to do it as well. And everyone’s like, oh yeah, at least we’ll have a fact sheet. We’ll have a website. We don’t have to have wholesalers. This makes sense to least hold ourselves out there a little bit because who knows what’ll show up.

Bob:

There’s another nice thing that has developed, which is that I have not had anybody, again, like I said, I think I’ve done about 55 of these. No one has had any meaningful regrets. And actually quite the opposite. A lot of the clients who have done this are proselytizing on our behalf. I get calls, I got one actually literally about an hour before this podcast began saying, so-and-so told me about what you did on an ETF. We’d like to do exactly the same thing. And as a law firm, we do a little bit of marketing, but we don’t do a lot of marketing.

We certainly don’t move marketing like we are the grand poobah of Section 351. But the word of mouth becomes so powerful because all 55 of these managers who have done it are out there saying, I would do it again. And if he’s talking to a colleague, they’re calling us or they’re calling Wes and they’re raring to go. So it’s been a lot of satisfied customers, and again, it’s a testament to Wes and his team. They sweat the details. They make sure everything takes place effectively at a logistics level.

Meb:

Where are you guys in total assets now?

Wes:

So as of today, it’s going to be around 7 billion. And then Alpha Architect obviously has its own asset base, but just on the ETF Architect is seven bil. And honestly, I would not be surprised if it’s potentially double that by the end of the year.

Meb:

I had a tweet, here it is. Four or five years ago, I said, mark my words, I think these guys will be a 10 billion shop in the next five to 10 years. And you guys were probably like, I don’t even know, a hundred million at that point. January 31st, 2019, so exactly five years ago.

Wes:

We were probably five, 600 mil.

Meb:

2019?

Wes:

We had a run before value totally blew up. Actually, we actually hit a billion in 2017. I thought I was going to be rich and then the value just (beep) the bed, and then I went back to being broke.

Meb:

Don’t jinx it. So I said within five, 10 years. So, you’re just a couple billi away at this point.

Wes:

We’ll get there. Give me the end of this year.

Meb:

Another idea that I was thinking of, Tony Robbins has a new book coming out and not to sideways this conversation because the topic is the holy grail of investing.

Wes:

Private equity? Yeah. I was like, oh God.

Meb:

Yeah. I was going to make you guess what the holy grail was, but it turns out its private equity, which God bless you, Tony. I think you do a lot of good for the world, but if this doesn’t mark the top of private equity, I don’t know what will. But anyway, he put out his first book on money, which was 2014, and he was promoting this portfolio. It was kind of risk [inaudible 00:40:55], totally reasonable ETF portfolio. But the way that he recommended it was that you go through an advisor for 75 basis point fee.

And I said, why wouldn’t you just do an ETF and charge, he doesn’t need the money, 10 basis points and then you could donate all your fees to Feeding America, which is one of the big charity he supports. And you give people a low cost, tax efficient way better than in a separate account. And he’d responded to me, he said, I gave you the Dalio portfolio in the books. You could do it for yourself, if you want to. Work with a fiduciary, if you want more options. And I was like, no, you missed the point. The ETF structure is more tax efficient than both, much cheaper than the advisor. So here we are almost, I guess, that is a decade later. You should ring up Tony.

Wes:

Dude, you literally wrote the best book of all time with Eric. The Ivy Portfolio outlined this pitch, I don’t even know, 15 years ago, but you spelled this out in a book 15 years ago. I don’t know why people don’t read the book and just say, let’s do this.

Meb:

Gentlemen, it was a blessing. Where do we find more information? What’s the best place to go? All right. If you’re an advisor, individual, and you want to contact Bob and Wes about starting a fund or you’re just curious about buying their funds, what’s the best places?

Wes:

So ETF Architect for shovel selling and Bob’s great tax advice. And then if you want to talk about geeky factor stuff AlphaArchitect.com.

Meb:

Do you have an email or is there a place that goes?

Wes:

Unfortunately, I’ll give it to you, but I get a million spam emails a day, [email protected]. Please avoid spamming me more than I already to get spammed, if you can afford it.

Meb:

Be thoughtful, listeners. Bob and Wes, thanks so much for joining us today.

Bob:

Thank you so much. Bye, everybody.

Meb:

Podcast listeners, we’ll post show notes to today’s conversation at MebFaber.com/Podcast. If you love the show, if you hate it, shoot us feedback at [email protected]. We love to read the reviews. Please review us on iTunes and subscribe the show anywhere good podcasts are found. Thanks for listening, friends, and good investing.

There’s a lot of funny business going on. Both in the street and on my TV. Things that just don’t make sense.

Our bizarre energy policy, our cultural chaos, vehement debates and protests about things that don’t impact us, immigration policy that nobody wants but everybody is getting, housing shortages while builders go bust, children that claim to have actually become animals rather than just behaving like ones, gas shortages during a gas export boom, supranational treaties that supersede democratic will, excess deaths that nobody wants to talk about, politicians vying for who can be the most incoherent criminal, and so much more.

It’s all just getting a bit too weird for my liking. And it’s my job to write about this stuff!

Pointing any of it out has become a risky business. Put a foot wrong these days and you might find yourself the subject of an international cancel campaign, protestors outside your office, your customers boycotting you, billion-dollar companies deplatforming you, your employer announcing your retirement, your friends ‘unfriending’ you, or the police are at your door asking about someone else’s social media posts.

It’s become a high stakes game of mob rule, and nobody has explained the rules. What happened to the good old complaints department and letter writing?

But if you feel like the world has gone mad, you may just be missing the right perspective. Not that it hasn’t gone mad. But there may be a way to explain and understand what’s really going on. What’s behind the change we’re undergoing?

Today, I’d like to offer you one such prism that unlocks the more bizarre things we see on the news and in our lives each day. I just haven’t figured out what to call it. Maybe you can help?

Here’s how it works though…

When we look at the world, different people see completely different things. The distinction is that some of us think in terms of groups and some in terms of individuals.

If you think in terms of individuals, you believe people carry personal responsibility and that they can only be held responsible for their own actions. Similarly, they are entitled to be treated equally, without bias, because they are an individual.

For those who think this way, making the world a better place is all about giving individuals freedom to choose for themselves. Because, being individuals, nobody else can possibly know what they want or need. Nobody else knows their dreams or intentions.

The only guidance individuals need are the harsh teachers of success, failure and the consequences of taking personal responsibility for themselves.

Those individuals who need our help should get it, on an individual level. And it should be given by individuals choosing to provide it, from their own pocket, not someone else’s.

Institutions like health care, government and education are there to serve us, as individuals. We are not there to serve them. Nor do we serve some greater good like a leader, country or ideology. Everyone has their own beliefs, held as an individual.

The fact that individuals seeking to improve their own lives leads to a society which is harmonious and prosperous is an important discovery we only made a few hundred years ago. Cooperation, not coercion, is the only way to interact, if you believe in the individual.

The hand that guides us in our everyday decision making isn’t invisible. Adam Smith was very clear that it’s ‘as if guided by an invisible hand,’ because there isn’t one. Those who believe in the individual argue nobody should be in charge of anyone else’s life. That’s because the individual is the sovereign over their own life.

That’s one side of the story — one way of looking at the world.

Those who think in terms of groups see the world very differently…

Each person belongs to a segment of society. Your race, you gender, your wealth, your education, your profession, your family history and countless other classifications all define you. They determine how you see the world had how you live in it. They define your decisions by constraining them.

Reality is what you perceive from the context of the group you belong to. There is a different reality for each group.

Because these groups have very different histories, beliefs and face very different conditions and constraints, making the world a better place means correcting for these differences in order to ensure a fair outcome between the groups.

Those who belong to historically oppressed or disadvantaged groups must be given a helping hand, as a group. Those who belong to historically advantaged groups must be disadvantaged, as a group. Then things can be “fair” between the different groups. This is a correction — the right thing to do and the purpose of government.

Feminism perceives everyone as being in two groups, for example. It is about making women and men equal, or correcting for the historical inequalities in various ways.

This way of thinking only makes sense in the context of sweeping generalisations and characterisations of people. And there can be plenty of debate about who really is disadvantaged and who is advantaged. Not to mention what should be done about it.

But there’s no doubt there’s plenty of truth to the idea that society is full of groups of people who are unequal, once you accept that way of looking at the world. In fact, once you accept it, the unequal groups are all you can see.

It’s where the idea leads that worth noting: it’s righteous to intervene in people’s lives because of the way the world looks when you think in terms of groups. It looks unfair in a way that you can fix. You just need to treat people as groups that need uplifting and bringing down to a fair level.

My theory for what is going on in our culture, which explains some of the stranger things we see each day, is that people are increasingly looking at the world ever more in terms of groups and ever less in terms of individuals. The chaos follows from this characterisation.

We are constantly being “asked” to sacrifice our ability to be individuals who make our own choices and decisions in favour of doing so in groups. We were forced into lockdowns to protect our health services and the vulnerable. The same for vaccinations, which risked harm to some individuals, but supposedly protected the group.

We are asked to pay vast shares of our income to the government for redistributing amongst needy groups like EV buyers, the defence industry and solar panel installers.

We are asked to deny biological reality to make an oppressed group of people feel more welcome when competing in a sport.

Protests in favour of the individual’s rights during the pandemic were not allowed. But protests in favour of a suppressed group were allowed.

The individual’s freedom of speech is denied if it makes an oppressed group feel bad, and I don’t mean physically. But an oppressed group can say what it likes about a group or an individual who are privileged. In fact, they can do what they like to that group. Looting from big companies’ shops, for example, is ok when it is done by an oppressed group.

The rights of migrants, a disadvantaged group, are superior to the rights of those unfairly advantaged enough to already live in a stable place.

All around us, the individual’s rights are giving way to group entitlement.

Perhaps the best way to describe all this is collectivism. Although that has a “we are all in this together” feel about it, historically speaking, it descended into just the same sort of chaos.

Countries that attempted collectivism all featured vetting different groups of societies against each other. The farmers versus the factory workers. The intellectuals versus the oppressed. The rich versus the poor. Agriculture versus cities. The landowners versus the serfs. The capitalists versus the workers. That’s how revolutions were justified and empowered in the past — pitting arbitrary groups against each other.

The collectivist theory was just the lipstick on the pig. It was all about defining groups, dividing them and then demanding retribution for one group by dispossessing another.

As China and Russia went communist, it was popular for ideological mob trials to demand of their victims that they admit to the crime of being part of an advantaged class like the nobility, intellectuals or bourgeoise. These days, we must admit to white privilege and kneel. Academic high achievers must make way for those who didn’t achieve because of the group they came from. Those who can read and write must refrain from doing so to stop making those who can’t feel inferior. Spelling and grammar are in the eye of the beholder.

The problem with looking at the world in groups is the incentives it creates. As Warren Buffet’s right hand man Charlie Munger once said, ‘Show me the incentive and I’ll show you the outcome.’

The incentive for individuals who see themselves as taking personal responsibility for their lives is to improve their own lot by doing something useful, usually for others. We create products or perform services others want to buy.

But those who see only oppressed and advantaged groups have the incentive to ‘fix it’, by imposing a correction on others, whether they agree or not. That’s why collectivist societies go totalitarian. It’s the only way to reverse supposedly unfair inequality and enforce equality between groups.

But what is the incentive for the individual in a world dominated by those who see only groups, not individuals? If government policies, social norms and economic incentives are defined by thinking in terms of making groups equal, how do people begin to behave?

Do they take responsibility? Do they try to build and create something? Do they try to innovate? Are they productive? Do they work hard?

Or do they try to become politically powerful to lord over others? Do they try to play the victim to get benefits? Do they try to belong to disadvantaged groups and disavow being part of advantaged ones? Do they disavow ambition in favour of appearing oppressed?

Do athletes win races by training hard, or by changing their gender and complaining about it?

Do politicians win elections by appealing to people as individuals, or by dividing society into ‘groups’.

Do businesspeople compete by improving their products, or do they stage marketing campaigns pandering to victimised groups?

Are comedians funny, or just bullies the crowd is cheering on?

I think the incentive structure of our society is radically changing because of the world view we’ve adapted. I’d call it group-think, if that term wasn’t already taken. But you get the idea.

This is an understandable reaction in many ways. Young people face some rather large challenges should they think about their world as being made up of individuals who take personal responsibility for their own lives.

How many can afford to buy a house if they believe it is their own responsibility to secure one, not the government’s responsibility to do it for them, and their right to have one?

Can the people who have bought a house afford to save for retirement if they accept the premise it’s their own responsibility to do so? Wouldn’t it be easier to just claim that it’s the government’s job to help that disadvantaged group which can’t afford retirement?

Can people be entrepreneurial in a society so strangled in red tape? Better to forge a career adding to that red tape and then collect a safe pension.

If you feel like society is falling apart at the seams, I think you should acknowledge that it is merely changing in the way that the incentives we created demand it to change.

If you agree, there’s not much you can do to avoid the consequences. We have to let them play out and wait for people to wake up.

But some assets have a very long history of helping their owners protect their wealth during unstable times like this, when having any wealth at all puts you at risk.

When it’s all about financial survival, gold is one of the best places to be.

The only question is how to go about investing in it? Here’s one answer that could help you try to grow your wealth as society melts down around it.

Until next time,

Nick Hubble,
Editor, Strategic Intelligence Australia

Nick Hubble found us at Fat Tail Investment Research in 2010 after a stint inside Wall Street’s most notorious bank, Goldman Sachs, during the 2008 GFC. That’s where he saw the true nature of the investment banking business. Since then, he’s been the editor of the Daily Reckoning Australia and the UK-based Fortune & Freedom and Gold Stock Fortunes.

He’s delighted to work as Investment Director and Editor for Jim Rickards’ Strategic Intelligence Australia. Here he helps turn Jim’s big-picture views into specific actionable advice and ideas for Australian investors.

Enter your email address in the box below and you’ll get Fat Tail Daily every day…absolutely free.

In the fast-paced and complex world of online trading, selecting the right brokerage firm is not just a preliminary step but a critical decision that can significantly impact an investor’s journey and outcomes. Our review of Xeodis will cover its innovative approach and comprehensive suite of services.

This text delves into the unique offerings of the broker, highlighting how its dedication to technology, security, and personalised service creates a trading environment that is not only advanced but also supportive and secure.

Notably, Xeodis distinguishes itself through a commitment to excellence in all facets of its operation—from market access and trading technology to customer support and security measures.

By providing traders with access to a wide array of financial instruments, cutting-edge trading tools, and a robust security framework, the broker ensures that its clients are well-equipped to navigate the markets effectively. Subsequently, we arrive at the next highlight for our Xeodis broker review: its emphasis on personalised support. The customer service structure caters to the individual needs of each trader. Thus, the broker ensures that both novice and experienced investors can find value and success within its platform.

At the heart of the broker’s proposition is a deep understanding of traders’ needs for a reliable, intuitive, and flexible trading platform. This review explores how Xeodis meets these needs and more, setting a new standard in online brokerage services.

Whether you’re looking to diversify your investment portfolio, seeking fast and reliable trade execution, or require tailored support to navigate the complexities of the financial markets, the broker positions itself as a partner in your trading journey, offering the tools, resources, and expertise to help you achieve your investment goals.

Xeodis Review of Services

In this part of our Xeodis review, we will inspect the comprehensive market coverage. This cornerstone of its service offering provides traders with unparalleled access to over 2000 assets. Furthermore, this extensive selection includes everything from major world currencies and commodities to spot metals, catering to the diverse interests and strategies of its client base. The platform’s minimum requirement of $250 balances accessibility and commitment, enabling confident trading.

The technological backbone of the broker is equally impressive. The platform offers state-of-the-art encryption and security measures to ensure the safety of traders’ data and financial assets with the highest standards of online security. Furthermore, an execution speed of 0.02 seconds places the broker at the forefront of trade performance.

The next important property for our Xeodis review is its acknowledgement of the unique trading experience. It bolsters each trader by offering personalised support services. Whether it’s tailored trading advice or technical support, the broker team is crafted to meet the most specific requirements, ensuring that every trader feels supported and valued.

The flexibility of leverage up to 1:200 allows traders to magnify their trading positions, offering enhanced returns. However, Xeodis also emphasises the importance of responsible trading, providing tools and resources to help traders manage risk effectively.

The trading platform is a testament to its user-centred design philosophy. With a user-friendly interface, real-time data usage, advanced charting tools, and customisable alerts, the platform is designed to cater to both novice and experienced traders. Lastly, the absence of hidden fees or costs is also vital for our Xeodis review. It further underscores its commitment to transparency and fairness, ensuring that traders can focus on what matters most.

Xeodis Review: Is it Safe to Invest With?

In the realm of online trading, the security of a broker is as crucial as the trading opportunities it offers. The broker’s commitment to security is evident in its comprehensive approach, integrating advanced encryption technologies, rigorous account authenticators, and a stringent Know Your Customer (KYC) process. This also includes Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) measures. This multi-layered security strategy ensures the safety of traders’ personal and financial information, leading to a secure trading environment that clients can trust.

The operational backbone for our Xeodis.com review is its robust regulatory compliance, operating under license LIC0123445 granted by the overseeing regulatory authority. This license is a testament to the broker’s adherence to the standards set by the International Brokerage Act, underscoring its commitment to providing trading services that are reliable, ethically, and legally sound.

Xeodis reassures its clients of its legitimacy and dedication by aligning its operations with these stringent regulatory requirements. Furthermore, the broker upholds the highest standards of integrity and transparency in its trading services. The broker’s risk disclaimer provides a candid acknowledgement of the inherent risks associated with trading and utilising leverage, encouraging traders to evaluate their trading objectives, experience level, and risk tolerance before engaging in trading activities. This level of transparency empowers traders to make informed decisions.

Review of Accounts

The next highlight of our Xeodis review is its diversified account structure designed to cater to the varied needs and preferences of its global clientele, from beginners to seasoned traders. This tailored approach ensures that every trader can find an account that suits their trading goals and strategies, regardless of their experience level or investment size.

The Beginner account, with a minimum deposit of $250, is ideal for those new to trading. It offers basic market access, enabling new traders to explore financial markets without being overwhelmed by complexity. Features like one-click trading, mobile and web trading platforms, and free educational resources lighten the learning curve and enhance the trading experience for newcomers.

For more experienced traders, the Standard, Intermediate, Advanced, and Integral accounts progressively offer higher levels of market access and additional features, with minimum deposits ranging from $5,000 to $250,000. These accounts aim to provide traders with the tools and resources needed to execute more sophisticated trading strategies, including advanced charting tools and access to comprehensive market analyses.

At the pinnacle of Xeodis’s account offerings is the VIP account, designed for elite traders who demand the highest level of service, including exclusive access to cutting-edge features, unbeatable prices, and top-notch support. This account is a testament to the broker’s commitment to exceptional service and support for its most valued clients.

Each account type explored in our Xeodis.com review is characterised by a commitment to no extra fees, ensuring transparency and integrity in pricing. Additionally, features like mobile trading, web trading, and free education are standard across all accounts, reflecting Xeodis’s dedication to accessibility and trader education.

Account specifications at xeodis.com

Beginner

• Minimum Deposit: 250 USD
• Market Access: Basic
• Extra Fees: No
• One-click Trading: Yes
• Mobile Trading: Yes
• Web Trading: Yes
• Free Education: Yes

Basic

• Minimum Deposit: 5,000 USD
• Market Access: Basic
• Extra Fees: No
• One-click Trading: Yes
• Mobile Trading: Yes
• Web Trading: Yes
• Free Education: Yes•

Trader

• Minimum Deposit: 20,000 USD
• Market Access: Basic
• Extra Fees: No
• One-click Trading: Yes
• Mobile Trading: Yes
• Web Trading: Yes
• Free Education: Yes

Premium

• Minimum Deposit: 50,000 USD
• Market Access: Basic
• Extra Fees: No
• One-click Trading: Yes
• Mobile Trading: Yes
• Web Trading: Yes
• Free Education: Yes

Investor

• Minimum Deposit: 250,000 USD
• Market Access: Basic
• Extra Fees: No
• One-click Trading: Yes
• Mobile Trading: Yes
• Web Trading: Yes
• Free Education: Yes

VIP

• Unlock a world of benefits with the VIP management service
• Gain exclusive access to cutting-edge features and unbeatable prices, and receive top-notch support

Xeodis Platform

The trading platform covered in our Xeodis review is engineered to meet the demands of the modern trader, offering a comprehensive suite of features that enhance the trading experience across the board. For starters, the platform’s access to global financial markets is a significant advantage, providing traders the opportunity to engage with a wide array of markets worldwide. The global reach ensures traders can capitalise on market movements and opportunities across different time zones and asset classes.

The mobile trading feature is a testament to Xeodis’s commitment to flexibility and accessibility. Recognising the dynamic nature of the financial markets, the platform enables traders to execute trades from anywhere, at any time, ensuring they never miss a trading opportunity. The mobile platform is designed with the user in mind, featuring an intuitive interface that simplifies the trading process without sacrificing functionality.

Furthermore, another important feature we want to cover in our Xeodis review is leverage up to 1:200. This allows traders to amplify their trading positions, offering the potential for significant returns on their investments. This feature is particularly attractive to experienced traders looking to maximise their trading strategies. However, the broker also emphasises responsible trading, providing resources and tools to help traders understand and manage the risks associated with leverage.

In sum, the platform’s intuitive interface caters to both novice and experienced traders. Its simplicity ensures that newcomers can navigate the platform with ease, while its depth of functionality meets the needs of the most demanding traders. Real-time market data, advanced charting tools, and customisable alerts empower traders to make informed decisions based on the latest market trends and analysis.

Xeodis Review Conclusion

Xeodis stands out as a broker that not only provides a wide array of financial assets and advanced trading tools but also prioritises security and personalised support. Its commitment to offering a secure, user-friendly, and comprehensive trading platform positions it as a top choice for traders seeking a reliable and innovative brokerage service.

Whether you’re a beginner or a seasoned trader, the broker offers a tailored trading experience designed to meet the unique needs of its diverse client base. As such, we invite traders to explore the benefits and start their trading journey with Xeodis today.

Our hands-on TradingView vs. TrendSpider test resulted in Trendspider winning with 4.7/5 stars and TradingView with 4.5/5. Both are top charting tools; TradingView excels at live trading, community, and global data, and TrendSpider’s strength is AI pattern recognition.

As a certified market analyst and an active subscriber to both TrendSpider and TradingView, I believe I am uniquely positioned to compare the important strengths and weaknesses of these great chart analysis tools.

TradingView vs. TrendSpider Summary

Our testing of TradingView vs. TrendSpider reveals that TradingView is best for trading, social community, news, and screening. TrendSpider is better for AI-automated pattern recognition, scanning, backtesting, and auto-trading. Both platforms offer excellent charts and usability.

🏅TradingView vs. TrendSpider Ratings

TradingView scores 4.5/5.0 because it does everything well, but TrendSpider scores 4.7 because it has superior screening, newsfeeds, pattern recognition, backtesting, and live trading. TrendSpider excels at using AI to auto-detect trendlines, Fibonacci, and candlestick patterns on multiple timeframes on a single chart.

Let’s take a look at the outstanding features head to head.

⚡TradingView vs. TrendSpider Features

TradingView and TrendSpider cover stocks, Forex, futures, and crypto; the difference is that TrendSpider is US-only, and TradingView is global. TradingView features a news stream and 20 million active users sharing charts and ideas. TrendSpider has no social component.

Features	TradingView	TrendSpider
⚡ Features	Charts, News, Watchlists, Screening	Charts, Watchlists, Screening
🏆 Unique Features	Trading, Backtesting, Community	AI Automated Pattern Recognition
🎯 Best for	Stock, Fx & Crypto Traders	Stock, Fx & Crypto Traders
♲ Subscription	Monthly, Yearly	Monthly, Yearly
💰 price	$0-$59/mo	$149/m or $124/m on an annual plan
💻 OS	Web Browser	Web Browser
🎮 Trial	Free 30-Day	✘
🌎 Region	Global	USA
✂ Discount	-25% Discount Available	-40% Use Code “LIB40”
🏢 Visit	Try TradingView Free	Try TrendSpider Free

We independently research and recommend the best products. We also work with partners to negotiate discounts for you and may earn a small fee through our links.

💸 TradingView vs. TrendSpider Pricing

TradingView beats TrendSpider for the price, offering free and cheaper premium services. However, TrendSpider is an industry price leader for AI multi-timeframe pattern recognition.

TradingView pricing starts at $0 for the basic ad-supported plan: Pro costs $14.95, Pro+ $29.95, and Premium costs $59.95 monthly. Opting for a yearly subscription will reduce those costs by 16%, representing a significant saving. There is a $2 additional cost per exchange if you want real-time data. I recommend the Pro or Pro+ services as they strike the right balance of power and price.

TrendSpider has radically simplified its pricing model for 2024. A yearly prepay subscription costs $1,488 ($124/mo), or a monthly subscription of $149. There is only one tier, and it includes everything: real-time data, futures, AI-powered analysis, backtesting, news, options, crypto, and even automated bot trading with broker integration!

🥊 TradingView vs. TrendSpider Discounts

TrendSpider offers a 40% price discount when using code “LIB40”, TradingView offers discounts based on premium trials, and a big Black Friday 60% discount.

✂ Get TradingView Discounts

You can get a 25% discount on TradingView by following simple steps. Please find out more in our dedicated TradingView discounts article.

✂ TrendSpider Coupon Code

Trendspider discount coupon code “LIB40” is verified and valid, granting a 40% discount. Use coupon code “LIB40” at checkout.

💾 TradingView vs. TrendSpider Software

Both TradingView and TrendSpider offer powerful, easy-to-use software. TradingView has global market data and community, but TrendSpider’s data is US-only and lacks social interaction.

🚦 TradingView vs. TrendSpider: Trading

TradingView supports 50 high-quality brokers, meaning tight integration, so you can directly trade from charts and view your profit and losses directly in TradingView. TrendSpider integrates with 25 brokers, and you can launch trading bots to automate your stock, Forex, or crypto trading.

🎥 TradingView Review Video

Open A TradingView Chart Now

📡 TradingView vs. TrendSpider Scanning

TrendSpider’s scanning is more powerful and flexible than TradingViews. To demonstrate why TrendSpider is our winner for screening, the screenshot below encompasses the important elements of the power and flexibility of the platform. You can screen for any criteria related to price, indicators, patterns, earnings, dividends, analyst estimates, and stock splits. The financial news scanning is also impressive, providing the ability to scan for any article mentioning one or multiple keywords.

For example, you can scan for companies that release their earnings in the next seven days, where analysts expect a positive earnings surprise, and where the news reports mention “AI.” 

The TradingView stock screener comes complete with 160 fundamental and technical screening criteria; all the usual criteria are there, such as EPS, Quick Ratio, Pre-Tax Margin, and PE Ratio. But it also goes more in-depth with more esoteric criteria such as the number of employees, goodwill, and enterprise value.

TrendSpider’s Market Scanner enables you to scan a specific stock and the entire market for stocks matching your technical criteria; combining AI trend detection and analysis with the ability to scan the whole stock market is powerful.

🎥 TrendSpider Scanner Video

💡 TradingView vs. TrendSpider Chart Pattern Recognition

TrendSpider beats TradingView for automated AI chart patterns and indicator recognition. TrendSpider can analyze millions of data points across multiple timeframes, which gives you a unique edge as a pattern trader. TradingView is also no slouch, providing automated candlestick recognition and thousands of community-developed indicators.

TrendSpider’s automated trendline detection saves a lot of time for traders, speeds up morning trade review preparation, and improves accuracy. TrendSpider’s algorithm correlates all the bars on a chart and draws the trendlines automatically, ready for your review.

TrendSpider’s automated chart trendline detection and plotting do a better job than a human can. TrendSpider’s algorithms can detect thousands of trendlines and flag the most important ones with the highest backtested probability of success.

Multi-timeframe analysis means viewing multiple timeframe charts on a single chart with the trendlines plotted automatically. Another great feature is the advanced plotting of support and resistance lines into a subtlely integrated chart heatmap. TrendSpider’s multi-timeframe analysis is not just for trendlines; it works with 42 stock chart indicators to ensure you do not miss anything.

📰 TradingView vs. TrendSpider News & Social

TradingView beats TrendSpider for social community and financial news. TradingView is built with the community at the forefront and is best for social sharing and learning; forget StockTwits; Tradingview is the best. TradingView’s fully integrated chat forum and publishing system are excellent ways to share your charts and ideas. TrendSpider does not have a social community or a newsfeed.

Check out my published ideas on TradingView and follow me for stock market analysis ideas and commentary.

Chart, Scan, Trade & Join Me On TradingView for Free

Join me and 20 million traders on TradingView for free. TradingView is a great place to meet other investors, share ideas, chart, screen, and chat.

Join Me On TradingView

📈 TradingView vs. TrendSpider Chart Analysis

Both TrendSpider and TradingView offer broad, powerful chart analysis features. TradingView has 160 indicators and unique specialty charts such as LineBreak, Kagi, Heikin Ashi, Point & Figure, and Renko. TrendSpider has over 200 chart indicators and patterns and offers line, bar, candlestick, Heiken Ashi, and patented Raindrop charts.

TradingView has an exceptional selection of chart drawing tools, including tools unavailable on other platforms like extensive Gann & Fibonacci tools, 65 drawing tools, and hundreds of icons for your charts, notes, and ideas. TrendSpider offers 23 different chart annotation tools.

TradingView’s innovative Buy and Sell gauges save you time by providing an instant readout of which stocks are bullish, bearish, or neutral.

TradingViews’s stock indicator ratings are well implemented because there are two critical technical analysis indicators: moving averages based on price and oscillators based on price and volume. Based on my observations, the TradingView buy and sell indicators are a good measure of sentiment and are featured in my Fear & Greed Index Dashboard.

You can click on “Technicals,” and you are presented with three gauges when you view a chart. The left gauge shows the oscillating indicators like relative strength, stochastics, and the Average Directional Index. On the right, you have a selection of Moving Averages, Simple, Exponential, and even Ichimoku Cloud.

With TradingView and TrendSpider, you will have everything you need as an advanced trader, day trader, or swing trader.

🔍 TradingView vs. TrendSpider Backtesting

Our backtesting test shows TrendSpider to be better than TradingView, but it is close. TradingView backtesting is more flexible than TrendSpider’s but requires Pine script knowledge. TrendSpider’s multilayered backtesting is point-and-click, which is much easier to use but is also incredibly powerful.

TradingView has a backtesting system called Strategy Tester, but you must develop scripting skills using the proprietary Pine code to develop original backtesting systems. I have even implemented my MOSES ETF Trading strategy into TradingView; I am no developer, but the Pine Script language is so natural anyone can do it.

TrendSpider has made this process much simpler, eliminating the need for coding by implementing a point-and-click system to develop scans that can be backtested.

TrendSpider has also implemented a strategy tester that allows you to type what you want to test freely, and it will do the coding for you. It was a smooth and powerful implementation that had me develop a strategy in minutes.

TrendSpider and TradingView have robust backtesting reporting showing trades, profit, loss, and capital drawdowns.

🖱 TradingView vs. TrendSpider Usability

TradingView and TrendSpider are incredibly easy to use, requiring zero installation or configuration. The biggest difference is that TrendSpider provides the personal touch with free one-to-one training with a support staff member.

🏁 Final Thoughts

TrendSpider won our head-to-head comparison over TradingView, but it was close. If you want intelligent AI pattern recognition, no-code backtesting, and bot trading for US markets, then TrendSpider is a great choice. TradingView is the best stock analysis and trading software for international markets, perfect for beginner and experienced traders, with a vibrant community and excellent charts, backtesting, scanning, and screening globally.

If you need real-time news, the best backtesting, and stock chart indicators, I recommend MetaStock. Stock Rover is the best software to build long-term value, income, and growth portfolios. Finally, if you want to use the power of AI for short-term day trading, then Trade Ideas is the best choice.

Frequently Asked Questions

Still undecided? Please look at our Top 10 Best Stock Trading Analysis Software Programs.

Top 10 Best Stock Trading Analysis Software Reviews 2022

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7 Best TradingView Alternatives for 2023

GPT Healthcare is coming up with its IPO issue of Rs. 525.14 Cr which will open on 22nd February 2024. The issue will close on 26th February and be listed on the exchange on 29th February 2024. In this article, we will look at the GPT Healthcare Limited IPO Review 2024 and analyze its strengths and weaknesses. Keep reading to find out!

GPT Healthcare Limited

About the Company

GPT Healthcare is a regional healthcare operator from Eastern India. The Company operates a chain of mid-sized full-service hospitals under the ILS Brand and provides integrated healthcare services. 

As of September 2023, the Company operates 4 hospitals in Eastern India, out of which 3 are located in West Bengal and another in Tripura. Collectively these 4 hospitals constitute 561 beds offering healthcare services across 35 specialties. 

The Company was founded and is managed by promoter Dr. Om Tantia. He has more than 40 years of experience as a medical practitioner and established ILS Hospitals in 2000. 

The Company strategically focuses on having its presence in the relatively under-penetrated healthcare market of Eastern India. The hospitals of West Bengal are located in the densely populated areas of Kolkata and Howrah enabling the hospital to maintain high occupancy rates across the year.

In terms of specialization, GPT has a well-diversified portfolio across Internal Medicine, Diabetology, Laparoscopic, general surgery, renal transplants, orthopedics, and joint replacements.

About the Industry

According to the Global Health Expenditure Database compiled by the WHO, in CY2021, India’s expenditure on healthcare was 3.3% of GDP. As of CY2021, India’s healthcare spending as a percentage of GDP has trailed behind developing countries such as Brazil, Vietnam, Sri Lanka, and Malaysia. 

India’s public spending on healthcare services remains much lower than its global peers. For example, India’s per-capita total expenditure on healthcare (at an international dollar rate, adjusted for purchasing power parity) was only $74.0 in CY2021 as compared to the United States of America’s $12,012. Health personal expenditure increased from Rs. 1.81Lakh Cr to Rs. 4.1Lakh Cr from FY21-22 supported by a rise in government schemes, health spending by the state, rise in income levels and rise in disease incidence. 

On a regional level, South India has 17.3 doctors per 10,000 individuals, which is the highest number on a regional scale. West India, North India, and  North East India have about 11.5, 5.3 & 6.9 doctors per 10,000 individuals. East India where GPT has its presence has only 5 doctors, 12.7 nurses, and 7 beds per every 10,000 individuals. Such is the state of eastern India where population-dense areas have shallow access to proper healthcare, which is an opportunity for GPT Healthcare.

GPT Healthcare – Financials

GPT Healthcare’s revenue from operations increased by just 7%, from Rs. 337 Cr in FY22 to Rs. 361 Cr in FY23. Since FY21, revenues have scaled from Rs. 243 Cr to grow by 22% CAGR. The half-yearly performance of GPT has been quite strong as revenue grew by 19%, from Rs. 172 Cr in H2FY23 to Rs. 204 Cr in H2FY24.

Along with slow revenue growth Net Profits of GPT Healthcare dropped by 6.4%, from Rs. 42 Cr in FY22 to Rs. 39 Cr in FY23. The drop in Net Profits came as a result of increasing Employee benefit expenses, which increased by Rs. 17%, and other expenses which increased by 22%.  Doctors’ payout, which is 65% of other expenses increased by 28% over the same period leading to a drop in Net Profits. On a half-yearly basis, net profits have shown a growth of 38% from Rs. 17 Cr in H2FY23 to Rs. 23.5 Cr in H2FY24.

GPT Healthcare- Key Players 

If we take a look at how GPT compares against its listed peers, we see that GPT is the smallest healthcare institution by revenue. Due to its low debt capital structure, GPT has a strong return on equity of 23.77% which is higher than the median ROE of 18% of its listed peers.

In terms of Price to Earnings ratio, GPT at the higher end of its price band of Rs. 186 and basic EPS of FY23 4.88 will be valued at 38.11x its earnings per share. This PE does seem high for any other listed company but is still lower than the industry median of 49x, calculated from the below-listed peers.

Strengths of the Company 

1. Key regional Presence: The Company has established a strategic presence across the densely populated yet under-penetrated market of Eastern India.
2. Asset Light Model: GPT operates its hospitals on an asset-light model whereby it enters into long-term lease agreements with landlords to set up its hospital. This allows for capex to be used for further expansions.
3. Diversified Specialty Mix: As GPT operates multispecialty hospitals, it caters to a variety of specialties with each of them not contributing to more than 20% of revenue.
4. Increasing ARPOB: The Average revenue generated per operating bed has been on the rise from Rs. 24,681 in FY21 to Rs. 32,979 as of September 2023. 
5. Professional Management: The Company is run by a founder & promoter who has 4 decades of experience in the healthcare industry. He also has a deep understanding of the healthcare market in Eastern India. 

Weaknesses of Company

1. Revenue Concentration: Three out of four hospitals operated by the Company are in the state of West Bengal. These hospitals generate 70% of their revenue, leading to a revenue concentration risk. Also, all the hospitals are located in Eastern India.
2. Reliance on multispecialty Treatments: The Company generates nearly 90% of its revenues from specialized treatments like diabetology, nephrology, laparoscopic, etc. A reduction in demand for such specialized treatment can significantly impact revenues.
3. Lower Bed Occupancy: Compared to competitors Global Health, KIMS, and Jupiter Life Line Hospitals which had a bed occupancy rate of 60%, 73%, and 62% respectively. GPT Healthcare’s bed occupancy rate remains slightly lower at 60%.
4. Concerns of Bad Debts: The Company suffers from its Trade Receivables turning to bad debt as 8.52% of its trade receivables as of September 2023 were Bad Debts. The percentage has jumped significantly from just 5.64% in FY21.

GPT Healthcare – GMP

As of the date of writing this article, the Grey Market Premium for the shares was GPT Healthcare has not yet been published. We will be updating the article with the respective expected as soon as its GMP gets updated.

Key Information

Promoters: GPT Sons Pvt Ltd, Dwarka Prasad Tantia, Dr. Om Tantia and Shree Gopal Tantia

Book Running Lead Manager: JM Financial Ltd

Registrar to the Offer: Link Intime India Pvt Ltd

The Objective of the Issue

1. Rs. 30 Cr from the proceeds of the issue will be used towards repayment of borrowings & other outstandings of the Company.
2. The remaining proceeds will be used for general corporate purposes.

Conclusion

GPT Healthcare is a regional healthcare player focused on the underserved market of Eastern India. The company operates an asset-light model and its hospitals cater to a treat a variety of specialized issues.

It is still a very small hospital chain with further room for growth. It could benefit from taking on more debt and expanding into finding better opportunities in Eastern India. In terms of its financials, the revenue growth figures of the recent year & drop in profitability should concern investors. 

Although the first half of FY24 showcased much stronger growth, investors must keep track that GPT is able to quickly scale its size to remain competitive amongst its peers. So to conclude, GPT Healthcare is an asset-light hospital business with an ROE & ROCE of 24% and 26% respectively trading at a Price to Earnings of 38x. Do you think the IPO is worth applying for? What are your thoughts? Let us know in the comments below.

Written by Nasir Hussain

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.