CELEBRATING 60 YEARS ON THE THRONE!
I am ending this week with a lighter, but no less important story.
The U.K.’s Queen Elizabeth marked her 60th year on the Throne and her 90th birthday this past Thursday, and the monarch has every reason to celebrate.
Not only has she beaten the average U.K. life expectancy by nine years, apparently she’s stinking rich! According to Bloomberg Billionaire list the Queen sits on about £20 billion, or US$28.8 billion, which is enough to rank her 25th in the world, and ahead of high rollers such as investment guru George Soros, Microsoft, CEO Steve Ballmer and Michael Dell.
However, the ranking isn’t exactly accurate. The queens billions are not actually all hers (yes I was just informed that her Royal Highness has been secretly embezzling gobs of UK government assets for decades – ok, I just made that up). But seriously, her rather impressive assets, including swathes of U.K. property owned by the Crown Estate, the Crown Jewels and the Royal Art Collection – which aren’t the Queen’s private property and not for her to sell or manage – as much as she may protest – and we are told she doth protest mightily. Instead, they are held in trusts for future generations and help pay the royal family’s expenses, such as staffing, travel, hand waving lessons, Harry’s extensive shoe collection and upkeep for Kate’s hair.
So contrary to popular belief, the original Queen B, personally, is no billionaire. Ironically, the current Queen B, Beyonce, is, when combined with Jay Z, her King. But I digress, last year her royal highness was actually kicked out of the list of the top 300 wealthiest people in the U.K., according to the Sunday Times Rich List. Her fortune increased by $14.4 million, but there was a dramatic rise in other millionaires and billionaires – London’s one tenth of 1%. The paper estimated that the highness’s net worth stood at a paltry$489 million, putting her at number 302.
While the details of the Queen’s personal finances are closely guarded, Bloomberg has taken a crack at laying out the particulars. The breakdown of her capital showed the majority of the monarch’s affluence comes from the Queen Mother’s legacy, property ownership a whopping $75 million stamp collection, investment and property holdings and a $10 million Royal Stud – on the latter we are left to speculate whether they were referring to a horse or Prince Harry.
SHARES IN LITTLE KNOW EBIX HAVE JUMPED 50% SO FAR IN 2016 – IS THERE ROOM FOR MORE?
While the Queens wealth may not be keeping up with the Jones’, with the NASDAQ Composite down 2.8% and shares of Ebix Inc. (EBIX:NASDAQ) up 50% so far in 2016, this unknown small-cap is running circles around its peers.
Ebix Inc. (EBIX:NASDAQ)
Industry: Technology – Software
Recommended: July 2015
Recommendation Price: $29.36
Current Price: $49.00
Market Cap: $1.7 Billion
Shares Outstanding: 33,678,000
Fully Diluted: 33,931,000
Ebix is a leading international supplier of software and e-commerce solutions to the insurance and financial industries. The company provides a series of application software products for clients ranging from carrier systems, agency systems, and exchanges to custom software development for all entities involved in the insurance and financial industries.
Ebix’s goal is to be the leading backend powerhouse of insurance transactions around the world. The company’s technology vision is to facilitate convergence of all insurance channels, processes and entities in a manner such that data can seamlessly flow once a data entry has been made. With a recurring revenue base of approximately 80%, Ebix strives to work collaboratively with clients to develop innovative technology strategies and solutions that address specific business challenges.
The company has been in KeyStone’s coverage since July 2015 when the stock traded below the $30 level. We are happy to report the stock is today trading in the $49.00 range after reporting a milestone contract win. Given the strong move, it is a prudent time to update readers on our current rating.
On April 15th, Ebix made its long awaited announcement regarding the details of the previously signed contract with Placing Platform Limited (PPL) to deploy a single insurance exchange across the entire London insurance marketplace which will facilitate electronic placement of insurance, while capturing and processing risks electronically. The PPL Board signed the contract on behalf of the International Underwriting Association (IUA), the London & International Insurance Brokers’ Association (LIIBA) and the Lloyd’s Market Association (LMA). A total of 26 subject matter expert practitioners, representing both carriers and brokers, were involved in the selection process, drawing up a detailed description of requirements. After a thorough evaluation process, PPL selected Ebix’s team and technology for the provision, governance and management of the platform.
Ebix also disclosed, in the April 15th news release, that its contract with PPL is primarily a subscription contract that is expected to generate upwards of $75 million over the next 5 years ($15 million per year) from the electronic placement exchange service, with more than 85% of that number coming from annual subscription fees payable to Ebix.
The details of EBIX’s PPL contract was a significant milestone for the company and the market rewarded the company with a 10% share price increase on the day the news was released. In addition to its direct financial benefits, this deal was also strategic in that the size and nature of the deal opens up opportunities for Ebix to showcase its technology to new customers.
Looking forward, the outlook continues to be positive with another year of growth expected in 2016 and compelling long-term opportunities. The stock is up over 65% since our initial recommendation in July 2015. Although this has made the valuation more expensive relative to earnings, the appreciation in the share price has largely been driven by earnings growth and the achievement of important milestones. The stock is not especially cheap at 19.5 times estimated 2016 earnings; however, relative to comparable companies in the U.S. market, we continue to view Ebix as reasonably valued when taking into account the company’s long track record of profitability and growth, recurring revenue model and positive outlook.
We have shifted our Short-Term Rating (traders with a time horizon of 6-months or less): HOLD. Our Long-Term Rating (investors with a time horizon of 1-5 year+): BUY. We would potentially look to upgrade the stock rating further if the opportunity were to arise to purchase the stock in the 15 to 17 times forward earnings range.
RYAN’S RANT – SIMPLIFY
One of my biggest pet peeves is how the broader financial industry pushes overly complicated investment strategies on individual investors.
It is utter nonsense that your average investor should even be contemplating trading derivatives. Derivatives are financial instruments (such as a future contract, option, or warrant) whose value is derived from and is dependent on the value of an underlying asset. I mean no disrespect by this, but the average investor has trouble defining what they are investing in when they buy a stock – and this is a relatively simple concept – shares in a company represent a tiny ownership stake in that company. Hell, symbol stunned professional traders can hardly tell you this. But give your average Joe Q Public an investment that is once or twice removed from an underlying asset and you are asking for confusion and loss.
Ladies and gentlemen, for the average investors, these products are not investing they are speculating and there is a big difference in risk between the two. But the strategy of trading derivatives is now casually slipped into the conversation for average investors as if it is as simple as buying a gun in America. It is not. Even the pro’s have a hard time consistently making money trading these potentially dangerous vehicles. Google the 1995 collapse of London-based Barings Bank which was the result of unauthorized derivatives trading by the bank’s well thought off head derivatives trader if you doubt me.
One of my favourite examples of how casually the financial industry tries to sell you on complicated strategies is a commercial that has run nationally on financial networks for years. To protect the innocent, the firm running the ad shall remain nameless. The point of the commercial is that the broker’s service is so simple and easy to use and profit from that with just the click of a mouse, you can be trading exotic derivatives. But, what really gets me is that about half way through this commercial, a well dressed client exclaims – and listen to this closely;
“When I can’t sleep at night, I trade S&P futures!”
Is it just me, or does that sound a little bit too casual to anyone?
When I can’t sleep at night, I walk into the kitchen, trip over the dog, grab a glass of milk, perhaps read a little and go back to bed. I am certainly not making investment decisions at 2:00am in a stupor, just because I can. But that is the way it is marketed to you. It’s frankly disgusting, overcomplicated, and completely unnecessary.
Our advice –the average investor who is looking for an edge that they can actually understand is better off educating themselves on buying good businesses (or have us do it for you) rather than trading stock symbols.
Simplify, stop overcomplicating your investments.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.