Return on Investment (ROI)

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Return on Investment

A Method of Comparing Investment Opportunities

Any investment has the potential for rewards and risk. Regardless if you are a small investor of a large bank’s portfolio manager, how one approaches the task of evaluating potential opportunities can make the biggest impact on the success of that individual or fund. Today we are going to examine one of the most commonly used ways to quickly assess Return on Investment (ROI) in order to examine its performance as well as compare to similar business models.

What is ‘Return On Investment?

Return on Investment is a performance measure that is used to evaluate how efficient an investment is, or for efficiency comparisons of numerous investments. ROI measures how much return you will receive on an investment relative to the cost of the investment.

To work out the return on investment as a percentage or ratio, you divide the return or benefit of an investment by the cost of the investment.

The formula is as follows:

ROI= (Gain from Investment- Cost of Investment) / Cost of investment

In this case, ‘Gain from investment’ means the proceeds that have been obtained from selling the investment in question.

Because ROI is expressed as a percentage, it allows for easy comparison against returns from other investments, which means you can measure a range of types of investments against each other.

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Ether Euphoria fades as I am Cutoff by Coinbase! Drats!

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coinbaseWhat could be worse than your current speculative cryptocurrency investment suddenly seeing the micro-bubble pop out from underneath it? How about your wallet and exchange suddenly changing policies and forcing you to update your bank and identification information through a live webcam. That is apparently what has just happened to be as  Ethereum has fallen from the massive rally on Thursday that saw the price soar as high as $50 early Friday morning. When the price suddenly fell later into the pre-dawn hours, the exchange stopped allowing me to do my regular traded between Bitcoin and Ether and promoted me with the now

When the price suddenly fell later into the pre-dawn hours, the exchange stopped allowing me to do my regular traded between Bitcoin and Ether and promoted me with the now notorious update screen!

I will keep you updated on the events to come but remember that this is an example of why we not to give your personal information to centralized exchange!

 

Google AI Can Create Its Own Crpyto

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Recently it was discovered that the artificial intelligence experts of The Google’s Brain project were able to create A.I. that is capable of developing its own secure secret language or cryptography.

The accomplishment is leaving some with more questions than answers currently available.

It seems that nobody at Google has any idea how this extra layer of encryption actually works, not even the A.I.

In an experiment, the A.I. networks were created, two were instructed to communicate securely with each other using a shared secret key, while the third was assigned the task of intercepting and decrypting those communications.

The result, the two communicating networks were able to develop their own crypto layer that the third network was unsuccessful at cracking.

Importantly, the AIs were not told how to encrypt stuff, or what crypto techniques to use: they were just given a loss function (a failure condition), and then they got on with it. In Eve’s case, the loss function was very simple: the distance, measured in correct and incorrect bits, between Alice’s original input plaintext and its guess. For Alice and Bob the loss function was a bit more complex: if Bob’s guess (again measured in bits) was too far from the original input plaintext, it was a loss; for Alice, if Eve’s guesses are better than random guessing, it’s a loss. And thus an adversarial generative network (GAN) was create

via Google AI invents its own cryptographic algorithm; no one knows how it works | Ars Technica UK

What is Preferred Stock?

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For anyone attempting to do their due diligence on a potential investment opportunity, the task can be a daunting experience. Many investors often misunderstand the confusing legal speak within the SEC filings that publicly traded companies are required to issue. This guide is intended to help investors better comprehend the practice of a preferred stock issuance.

Preferred Stock is something of a hybrid between common stock and bonds or debt. Typically, those shares are paid a regular cash dividend, regardless of company’s financial position to issue a regular dividend to the common shares. Commonly, these types of stocks sell in large blocks, purchased by financial institutions who has several tax advantages over retail investors.

When an investor buys preferred shares, they do so at the par value, a set price that determines the amount the issuer is obligated to pay as a preferred dividend. To determine the preferred dividend’s annual payout, multiply the dividend’s percentage by the par value.

5% preferred stock x $100 par = $5 per year annual dividends

Although preferred shares typically do not show much appreciation they can provide financial institutions with an incentive to stay vested in the underlying security. This type of scenario is the most common example of a Non-Participating Preferred Stock. What this means for the above example is that if 10,000 non-participating shares were issued, regardless of the company’s performance the annual dividend payout will never yield more than the set $50,000. Sounds boring, right?

A simple way to understand the difference between preferred stock and other investment vehicles is to look at how shareholders get treated if the issuer becomes financially distressed. If an issuer does file for bankruptcy and their assets are liquidated to satisfy the bondholders, the preferred stockholders are entitled to any left-over monies before the common shareholders.

Publicly traded companies often need flexibility when it comes to acquiring capital. Preferred stock is issued based on the issuer’s creditworthiness and other related factors. Preferred stock serves as a middle-ground between equity-based common shares, and the debt obligations to bond holders.

Sometimes to entice buyers and compensate for the lack of appreciation in the par value, Participating Preferred Stock is issued for dividend payments more than the price set by the par value.

All preferred stock is either Cumulative or Non-Cumulative. Cumulative is the most characteristic of the preferred stock and derives its name from the accumulation of all delinquent dividend payments owed to the owner

While it is non-cumulative dividends are rare, they do get produced in situations where a company has a previously established history of making the regular dividend payments to the common shareholders.If the issuer cannot pay the preferred dividend, those shareholders are owed their dividend before the common shareholders can receive any expected profit sharing. Those missed payments are known as “in arrears”  and take priority to the common shares claim to the issuer’s assets.

This financial instrument gives investors the opportunity to be shareholder and creditor.The promise of a preferred dividend entitles the preferred stockholders to preferential treatment, second only to the bondholders. Unlike bonds, failure to pay the dividend does not result in default or bankruptcy.

Preferential Treatment Where it Gets Tricky

The motivations for a publicly traded company to issue preferred shares can lead to uncommon occurrences in the issuing terms.

Preferred shareholders can also be granted votings rights if the dividends are in jeopardy of being paid. Often these rare occurrences can lead investors to a better insight into the overall financial picture of a potential investment. That is why it is important always to investigate the motivates of the issuer for offering the preferred shares.

 

 

 

 

 

 

 

 

 

 

 

 

Camping World IPO Holding Early Returns

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Camping World Holdings met Friday’s opening bell with its IPO that placed 11.4 million shares placed at $22, raising $251 million.

At its peak, the stock reached $24.35 but by 2 P.M, the company’s ticker, CWH, was holding a %5 return on 10 million in volume but closed at $2.50 or %2.27.

The company believes they have a competitive edge due to their diverse holdings and claims says to the largest network of RV-focused retail locations in the U.S.

Driven by top and bottom line growth spread throughout 36 states with a total 120 outlets the company has increased its annual revenue to $3.33 billion in 2015. With less consistent growth, Net Profit has also shown a steady annual increase, up from $5.4 million in 2011, to $178 million in 2016.

The Recreational Vehicles market has seen steady growth as recession-riddled millennials and retired baby boomers look for alternative leisure activities.

While it is estimated that in the largest transfers of wealth the baby boomer generation will be left behind $30 trillion to their Gen X and Millennial children.

This may help CPW begin to look like a candidate for a potential Millennial themed portfolio and we will continue to watch this one from the sidelines.