Quick Post: Super Micro vs. GameStop

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The US equity markets are on a tear this year with the S&P 500 up by over 5.5% year-to-date. Many individual stocks have shot up even more. A few have already doubled or grown by over 50%. And we haven’t completed two months in this year. One of the hot stocks of the AI-driven rally is the US-based chip company Super Micro Computer Inc (SMCI).

Stocks of SMCI crossed over $1,000 a share last week and reached a peak of $1,077 before falling 20% to end Friday at $803.22. Despite the loss, Super Micro has soared by 182% YTD. Currently it has a market cap of about $45.0 billion. Out of about 56 million shares outstanding, 33.5 million shares were traded on Friday.

I came across the below chart posted by Kerry of Market Index in The Weekly Wrap:

Click to enlarge

Source: Market Index

The surprising rise of SMCI brings back memory of another hi-flyer of the recent past – GameStop Corp(GME). The brick-and-mortar game store chain soared to astronomical during the covid-pandemic fueled by hype only to fall back to earth dramatically. Though the companies in entirely different industries the charts are indeed striking. It remains to be seen in Super Micro can continue the momentum and stay at elevated levels. One thing that differentiates Super Micro from the GME saga is that there are many other AI-hyped stocks that have shot up as well. However Super Micro is an outlier with outsized gains in a such as short period.

The following chart shows the 5-year return of GameStop vs. Super Micro:

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Source: Yahoo Finance

Disclosure: No positions

Social Media Influencers Are Disrupting Established Brands: An Example of Hershey Co

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The astonishing growth of social media in recent years has not only changed how we communicate with one another but also changed the dynamics of disruption. Social media influencers with millions of followers for example, can launch a product and disrupt an established player selling the same product. By selling the same product at a lower price or a higher price these new entrants can grab market share from the big companies. Last year, Prime energy drink that was launched by influencers Logan Paul from the US and Olajide “KSI” Olatunji, who is from the United Kingdom became popular especially in the UK. The craze for the drink led to soaring prices and some even imported from the US.

I recently came across an article where another social media influencer has disrupted the American candy giant Hershey Co (HSY). The following chart shows the impact of influencer Mr.Bean’s Feastables on Hershey’s stock price:

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Source: Inflation and market dynamics, Robeco

In May 2023, Hershey closed at over $276 per share. Since then the stock has fallen to as low as $182. Yesterday it closed at $193.72.

Though the full decline in stock prices cannot be attributed to the influencer it still shows the power of influencers and their ability to take on multi-billion dollar giants.

Disclosure: No positions

Sales Tax Rates by State 2024: Chart

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Sales taxes in the US are set by individual states. On top of the state taxes, local taxes are also levied by local authorities such as city, municipality or county. The combined state and local sales taxes vary by state. The following map shows the current rates as of Jan, 2024 according to The Tax Foundation:

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Source: State and Local Sales Tax Rates, 2024, by Jared Walczak, Tax Foundation

Not all the states collect sales taxes. Only forty five states and the District of Columbia (DC) collect taxes. Louisiana tops the list at 9.56% followed by Tennessee and Arkansas. The five states that do not charge sales taxes are Alaska, Delaware, Montana, New Hampshire, and Oregon.

The full article at the above link has more interesting details.

Kazakhstan’s First IPO on US Stock Exchange: JSC Kaspi.kz

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The first company from the Central Asian country of Kazakhstan to list on the NASDAQ exchange is Kazakhstan JSC Kaspi.kz. Kaspi is a fintech company that been in business for many years. JSC stands for Joint Stand Company. Kaspi started trading on the NASDAQ under the ticker KSPI with the IPO price at $92.00 per ADS and the total offering was 11.3 million shares.

Kaspi is the largest Payments, Marketplace and Fintech Ecosystem in Kazakhstan with millions of subscribers. The company’s one mobile app is a super app that offers many services all under one roof. Below is a note from the company’s IR site:

We are a fast-growing, transaction-driven, profitable and dividend-paying business with an aspiration to expand in mid-term across some countries of Central Asia and the Caucasus.

Source: Kaspi.kz

From a recent press release:

About Kaspi.kz

Kaspi.kz’s mission is to improve people’s lives by developing innovative mobile products and services. To deliver upon this we operate a unique two-sided Super App model – Kaspi.kz Super App for consumers and Kaspi Pay Super App for merchants.

The Kaspi.kz Super App is Kazakhstan’s most popular mobile app, with 13.5 million MAU in 3Q 2023, 8.8 million of whom access our services daily. The Kaspi Pay Super App is the digital partner of choice for businesses and entrepreneurs in Kazakhstan, with 565K merchant partners as of nine months 2023.

Through these Super Apps consumers and merchants can access our leading Payments, Marketplace, and Fintech Platforms. All our services are designed to be highly relevant to users’ everyday needs and enable consumers and merchants to connect and transact, using our proprietary payments network.

The combination of a large, highly engaged consumer and merchant base, best-in-class, highly relevant digital products and a capex lite approach, results in strong top-line growth, a profitable business model and enables us to continue innovating, delighting our users and fulfilling our mission.

Kaspi.kz has been listed on NASDAQ since 2024 and the London Stock Exchange since 2020.

Source: Yahoo Finance

According to Yahoo Finance, the forward dividend yield on the ADR is 7.39% and the 52-week high is about $96.00. The stock price close at $89.61 on Friday.

For Reference:

Disclosure: No positions

IMF: US Commercial Real Estate Remains a Risk

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The US Commercial Real Estate sector remains a risk despite despite investors’ hopes for a soft landing, according to an article by IMF posted last month. According to the Mortgage Bankers Association, some $1.5 Trillion of commercial real estate debt is maturing in the next two years. About one-fourth of this debt is in office and retail sectors. Most of this debt is held by banks and commercial mortgage-based securities. This is indeed a huge risk for the economy as whole. No wonder regional lenders are under tremendous pressure from CRE loans. The following an excerpt from the IMF piece:

The commercial real estate sector has been under intense pressure globally as interest rates have risen over the past couple of years. In the United States, with the largest commercial property market in the world, prices have tumbled by 11 percent since the Federal Reserve started raising interest rates in March 2022, erasing the gains of the preceding two years.

Higher borrowing costs tend to dampen commercial property prices directly by making investments in the sector more expensive, but also indirectly by slowing economic activity and reducing the demand for such properties. Nevertheless, the sharp decline in prices during the current US monetary policy tightening cycle is striking. As the Chart of the Week shows, contrary to the current policy cycle, commercial property prices remained generally stable or saw milder losses during past Fed rate hikes. Some of the earlier rate hikes, though, such as in 2004-06, were subsequently followed by a recession during which commercial property prices recorded notable declines as demand fell.

Source: US Commercial Real Estate Remains a Risk Despite Investor Hopes for Soft Landing, IMF

The recent plunge in New York Community Bancorp, Inc (NYCB) due to CRE loans and other factors is a cautionary tale for investors. Many regional and small lenders are on thin ice holding these loans and any declines in prices will further deteriorate their shaky balance sheets. Hence it is not wise to jump into these stocks at current levels. The following chart shows the dramatic decline in the stock price of NYCB year-to-date:

Source: Google Finance

Disclosure: No positions