Take my idiot motley
E-commerce stocks have crashed this earnings season, as more people are back in store shopping. But one e-commerce stock gave a standout report for the first quarter: GXO Logistics reported 14% year-over-year revenue growth, doubling its net income.
GXO is the world’s largest contract logistics company, operating high-tech warehouses for multinational companies such as Apple, Nike, Nestle and Whirlpool. The company is bullish on e-commerce, and its investments in areas such as reverse logistics (return processing) make it attractive to online retailers.
The company is a subsidiary of transportation giant XPO Logistics. It is headquartered in Connecticut but has operations in Dallas-Fort Worth.
In the event of a recession, the company is ready and will aim to capture market share. Roughly 40% of its contracts are “cost plus”, which means that GXO charges clients a price based on a flat profit rate on its own costs. This insulates it from inflationary pressures and also helps protect its profit margins. The company also has minimum volume requirements in many of its contracts to protect itself and uses pickup or payment terms, ensuring customers pay a fee if they don’t ship the volumes they’ve committed to.
GXO penetrates an accessible market of $430 billion with a double-digit growth rate. The stock has recently looked good, trading at a forward-looking P/E ratio near 19. With other e-commerce stocks facing headwinds, GXO looks to be in a good position, and should win no matter what companies are thriving at the retail level. (Motley Fool recommended GXO Logistics.)
ask the fool
From BH in Honolulu: What is hyperinflation? Are we testing it now in America?
The fool responds: not at all. It’s true that the annual US inflation rate in March was 8.5%, the highest in 40 years and well above the 3.1% average annual rate – but that’s nowhere near hyperinflation.
Hyperinflation is considered extreme, fairly rare, and usually short-lived when it occurs. Tariffs vary, but they are often defined as a monthly inflation rate of at least 50%; It has also been used to describe a three-year cumulative inflation rate of 100% or more. In an environment of hyperinflation, prices for public goods can double in a matter of days — or even hours.
People at Ernst & Young Global recently saw that the following countries were experiencing hyperinflationary economies: Argentina, Iran, Lebanon, South Sudan, Sudan, Suriname, Turkey, Venezuela, Yemen and Zimbabwe.
From TW in Columbia, Mo: When investing in stocks, how much profit should I make before selling?
The fool responds: It is best not to seek specific gains but to invest in financially strong companies that appear to have promising growth prospects in the long term. Once you do, plan to stay on for at least five years, if not a decade or two – keeping up with the progress and developments of those companies, keeping an eye out for any red flags and making sure they’re still promising.
Yes, you can sell after making a 50% or 100% gain, but that could mean you lose out on a much bigger gain. Imagine selling Apple or Microsoft stock years ago after your money doubled: many investors regret doing so. The vast wealth that is created through the stock market often occurs over many years.
school of fools
Don’t spend any time regretting not being able to invest in hedge funds, because, in general, you don’t miss out on much.
Hedge funds are somewhat similar to mutual funds – both feature the pooled money of many people which is then invested by professional money managers.
But while mutual funds are regulated by the Securities and Exchange Commission and provide leaflets detailing their investment strategies, hedge funds are generally regulated as limited partnerships and face fewer restrictions on how they invest their shareholders’ money. For example, hedge funds can use more complex (and often risky) strategies such as investing with borrowed money, and they can invest in a wide variety of things, such as derivatives and even currencies.
Some mutual funds charge a one-time “load” fee when buying or selling shares, but many funds “without loading.” Mutual funds get their income by charging a fixed annual fee, which averaged 0.47% of assets in 2021, down from 1.04% in 1996.
On the other hand, hedge funds have long been known for their 2 and 20 fee structure, where they charge shareholders 2% of assets each year, and also take 20% of annual profits – with some funds charging more fees, such as 3% and 30% . (These fees have decreased, on average, in recent years, but are still significantly higher than the fees for most mutual funds.)
Exorbitant fees may be acceptable if the fund managers are investing the money so skillfully that the shareholders are still doing very well. But this is not often the case. Some hedge funds have made notable gains for investors, but many do not. a Forbes The article earlier this year noted that in 2021, the year the S&P 500 rose nearly 27%, hedge funds gained an average of 10.4%.
Fortunately, ordinary investors can’t invest in hedge funds even if they wanted to. Only institutional investors (such as pension funds) or “accredited investors” (high net worth and/or high-income individuals) can do this. Ordinary investors can still do a very good job, though, by investing in low-fee index funds.
My stupidest investment
From RL Online: My stupidest investment was in Black Elk Energy Bonds. total loss. I learned that bonds are not as safe as stocks after all.
The fool responds: The story of Black Elk Energy is quite a cautionary tale. The company was found guilty of eight offenses related to the 2012 explosion of an offshore oil production platform that killed three subcontractor workers and seriously injured others.
Meanwhile, hedge fund Platinum Partners loaned millions to the company and helped it borrow more by selling bonds. The hedge fund itself does not appear to be the best in quality, as it has reportedly invested (among other things) in cash stocks, payday lenders, and a diamond mine. In fact, some of its executives ended up being indicted on securities fraud charges. Black Elk investors like you didn’t have much of a chance.
Bonds are basically loans. Many of them, such as those issued by the US government, are safer than stocks, but generally offer lower returns in the long run. There are other types of bonds, including corporate bonds, which are issued by companies to raise money. Premium corporate bonds with low risk of default are fairly safe but offer relatively low interest rates; Risky companies need to offer high rates for their bonds, which are thus known as junk bonds.
If you’re buying corporate bonds, research companies first, and know interest rates that are too high as potential warning signs.
who am I?
I trace my roots back to 1912—just nine years after the Wright brothers’ famous voyage—when a man founded a company after building an airplane in a chartered church, and a pair of brothers began building seaplanes. The two companies were merged in 1995, and they were born. Today, headquartered in Bethesda, Maryland, I am a leading aviation and security company, recently valued at nearly $120 billion. I employ about 114,000 people around the world. I develop everything from satellites to missiles, missile defense systems, radar systems, sea systems, tactical aircraft and Sikorsky helicopters. I have IT operations too. who am I?
Don’t remember last week’s question? You can find it here.
Last week’s trivia answer: BWH Hotels Group (originally Best Western Hotels & Resorts)