Knowledge is Power: Frontier Markets, Emerging Markets, Power of Disruption Edition

Global equity markets were soaring high thru April this year only to stumped by the US-China trade dispute. Volatility has returned to the markets with some investors heading for the exit while others remain bullish hoping the current dispute can be resolved quickly. Despite the recent fall, the S&P 500 is up by about 13%. Overseas the DAX and CAC-40 have increased by around by double digit percentage points as well. The FTSE 100 is up by about 8% with the Brexit chaos still haunting the bumbling British government. Investors may want to selectively take advantage of opportunities as markets wobble.

With that said, below are some interesting reads for the weekend:

Bali, Indonesia

Quick Note: 3 Biotech IPOs This Week

The Biotech sector used to be red hot a few of years ago with stocks in the sector soaring to astonishing levels. However investors’ attraction towards the sector waned in more recent years due to various factors including political pressure on high cost of drugs produced by biotech firms. This year investors’ enthusiasm for biotech stocks seems to be picking up again.

Currently over 600 biotechs trade on the NASDAQ. Newer innovative companies come to the market all the time. Next week three companies are planned to launch their IPOs on the NASDAQ.

The three companies slated to go public are :

1.Peloton Therapeutics

Ticker: PLTX

2.Bicycle Therapeutics Plc

Ticker: BCYC

3.Ideaya Biosciences, Inc.

Ticker: IDYA

Note: The above tickers will be active on the 1st day of trading

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Disclosure:No Positions

On the Power of Compounding on Returns

I have written many times before about the power of compounding. For example, even when dividend yields are small at say 2% reinvesting any dividends received over many years will multiple the yield many times over with compounding. I came across the a thoughtful piece on the magic of compounding by Richard C. Young at Young Research. From the article:

Here’s an excerpt: “As each rate of return doubles, your profit more than doubles. When you compound at 2% for 20 years, your profit is 2.2X your profit when compounding at 1%. And when you compound at 8% for 20 years, you have more than 3X the profit that you do when you compound at 4%. Double your return again, which is admittedly unrealistic over a 20-year period, and your profit is 5X your profit when compounding for 20 years at 8%.”

That logic doesn’t only apply to dividends, but it illustrates well the benefits of higher yields. On the chart below, you can see the differences in profit as returns move from 2% to 4%, and from 4% to 8%. It is astonishing how your money will pile up when given time to compound.

Source: Avalanche! It Is Astonishing How Your Money will Pile Up, Young Research

As clearly demonstrated above, the effect of compounding cannot be understated.