MarketBites Daily Investment Commentary: Swanky IPO: Poshmark l BlackRock Grows To $8.7T In Assets

Stock Market Commentary for 1/15/2021:
  • The General Theme:
    U.S. stocks edged lower on Thursday, as investors carefully awaited president-elect Joe Biden’s plans for a fresh coronavirus relief package. Later that evening, Mr. Biden announced a $1.9 trillion plan that called for direct payments of $1,400 to most Americans and an increase of the federal minimum wage to $15, among other things. Shares of smaller companies outperformed the broader market Thursday. Small cap stocks tend to be sensitive to changes in the economy, making them large beneficiaries of any spending package.
  • Stock Talk:
    – Johnson & Johnson rose 1.9% after it said its experimental Covid-19 shot generated immune responses from a single dose, rather than two.
    – GameStop shares surged over 90% in the last two days. For weeks, the oracles at Reddit’s popular WallStreetBets forum encouraged others to buy the shares.
    – Petco surged 63% during its first trading day.
  • The Data Room:
    – Earnings Season Is Upon Us!- Per Johns Hopkins, the U.S. reported 236,631 new Covid-19 cases yesterday. So far, 11.1 million Americans have been vaccinated.

– By Raymond Kanyo

 


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Top Investment Story #1: Poshmark IPO Success

What is Happening?

Yet another hot IPO on tap! Shares of online clothing reseller Poshmark surged more than 141% in the company’s market debut Thursday. Poshmark trades under the ticker $POSH.

Why does this Matter?

Poshmark, founded in 2011, is an internet marketplace for second-hand clothing, shoes, and accessories. Poshmark is an online, techy-version of Ross Stores ($ROST) or TJX ($TJX), but with one exception; it doesn’t own any inventory! The entire business is built on a “social commerce” app that lets users buy and sell used-clothes from peers. Poshmark operates as a middle-man, taking a hefty 20% cut of every transaction. The company now has 6.2 million active buyers and 31.7 million active users.

Poshmark faces indirect competition from the likes of eBay, OfferUp, and Etsy. A more direct threat to to their business could come from virtual thrift store ThreadUp and luxury consignment site TheRealReal.

Poshmark had $192.8 million in revenue in the first three quarters of 2020, an increase of 28% from the same period last year. They also turned a profit of $20.9 million over that period, after losing $33.9 million a year ago.

The Takeaway:

Poshmark is yet another successful IPO. While they still have a lot to prove, the company operates in a fast-growing segment of the e-commerce world. Based on the long-term stock performance of $ROST and $TJX, it is clear the discount apparel market can be very lucrative.

– By Raymond Kanyo

– Published in MarketBites Daily Newsletter


Top Investment Story #2: The Latest From BlackRock

What is Happening?

BlackRock reported earnings; beating analyst’s expectations by 19% and topping $4.5B in revenue for the fourth quarter of 2020. $BLK ended Thursday’s session down 4.65%.

Why does this Matter?

The world’s largest asset manager is becoming even bigger. BlackRock’s monster quarter was fueled by multiple business segments and client types. Pensions and endowments lead the way, digging in on bullish outlooks for a post-covid economy. In a stroke of luck, the firm benefitted from timely investments surrounding United States elections.

BlackRock has enjoyed significant resilience is in their iShares offering. Wit the continual compression of investment management fees, many smaller firms have had to compromise their bottom lines to compete. Since BlackRock has a plethora of other business segments, they have been able to seamlessly conform to market norms without interruption; replacing lost fee revenue with other segments.

As an example, BlackRock sells a risk assessment tool, Alladin, to banks and financial firms on a subscription basis. This segment filled in the gap left by shrinking fees on ETFs and Indexes. BlackRock is planning to expand this offering by acquiring Clarity AI.

For more about BlackRock, read here.

The Takeaway:

BlackRock has built its business to not just withstand a low fee environment, but to be one of the primary beneficiaries. As margins continue to shrink for smaller firms, expect BlackRock to continue to accumulate assets.

– Written By Jack Dunne

– Published in MarketBites Daily Newsletter


Meet the Authors

Raymond grew up in Budapest, Hungary, where he played tennis for the Hungarian Junior Davis Cup team. At the age of 16, he received the Davis United World College Scholarship, which was established by legendary investor Shelby Cullom Davis, allowing him to attend the Taft Boarding School in Watertown, CT. After Taft, Raymond received a Presidential Scholarship to the Robins School of Business at the University of Richmond, where he studied Quantitative Economics and Finance. Raymond is a CFA Level III Candidate. Prior to joining Taylor Hoffman, Raymond worked at various financial institutions in the insurance, asset management, and financial consulting space. Outside of the office, Raymond enjoys playing tennis at ACAC and Westwood Country Club.

Raymond Kanyo
Product Manager & Investment Analyst

Jack graduated from the Robins School of Business at the University of Richmond with concentrations in Marketing and Finance in 2019. Prior to joining Taylor Hoffman, he worked in high-growth B2B SaaS marketing; assisting Fortune 100 firms to improve their web performance experience. A Long Island New York native, Jack’s hobbies include passionately supporting the Mets and Islanders, and he enjoys skiing whenever he can.

Jack Dunne
Investor Education Specialist
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