💲Cash is King, Only in USD.

  1. What’s in it for me?
  2. Why is
  3. Can you benefit from the high exchange rate?

You’ll learn about Apple’s fall, SoFi’s rebound, and the Naira’s devaluation this week. Enjoy this with a glass of chilled apple juice.🙊

What’s happening in the markets? 📈🙂

Global Markets as of 11:00am Monday 16/05/22.
Global Markets data as of Monday, 16th of May, 2022 (11:00am GMT+1).

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⛽ Saudi Aramco Now World’s Best.

Now that tech stocks are down, how can I benefit from the surge in oil prices..

Energy stocks and prices have surged incredibly fast over the last few months. Once an object of ridicule for investors, a barrel of oil plummeted to less than $1 at the height of the pandemic. That barrel of oil now stands at $110 and has caused several oil companies to turn in great profits this year.

With this in play, Saudi Aramco’s market capitalization increased to $2.47trn and the Arabian company has taken back its crown from Apple, Inc . ($AAPL) and is now the world’s most valuable publicly-traded company.

What does this mean for my assets?

The current situation only reinforces the pre-existing conception that tech stocks, especially growth stocks have suffered the most from several unfavorable macroeconomic conditions. Estimates show that the Nasdaq composite has lost value worth 87% more than that which was lost in the Dot-Com bubble. Even a value stock like Apple which lost about 20% of its value was not spared.

What’s in it for me?

Goldman Sachs thinks oil would be priced at around $135/barrel by the end of the year, and some hedge funds even think oil may even hit $200/barrel. Although it is uncertain how feasible these estimates are, here’s how we think you can be well-positioned:

  • Take a position in Oil & Gas Stocks: Energy Select Sector SPDR ($XLE), Marathon Oil Corp ($MRO), Chevron ($CVX), and Occidental Petroleum ($OXY) are some of this year’s best-performing ETF and stocks with an average upside of 68% YTD.
  • Look at the alternative: With oil & gas now in more demand than supply, alternatives have also been thriving. You can take a position in coal through Peabody Energy ($BTU), Nuclear Energy through Cameco Corp. ($CCJ), Renewables through Vistra Energy ($VST).

These are the oil and gas stocks that have been on our watchlist, and we think there might be still more upside in a few months for these stocks.

💎 Could SoFi be a Hidden Gem?

Upgraded to ‘overweight’, is there a rebound opportunity for SoFi?…

SoFi Technologies, Inc. ($SOFI) provides services across three major segments — Lending, Financial Services (e.g. cash management, investment services) through its products - Apex and Technysis, and Financial Technolgy Services through its product - Galileo.

Today May 16th, an analyst at Piper Sandlers upgraded the stock’s rating from neutral to overweight, meaning they believe SoFi will perform better in the future. They, however, reduced their price target to $10, but that’s still a 48% increase from its current price. The stock shot up 6% immediately after the U.S. stock market opened. Other investment research companies follow the same recommendation as Piper Sandlers, with 8 out of 14 research analysts giving a buy rating to the stock.

Why is SoFi highly rated among analysts?

It’s unsurprising as the company has shown steady growth, one quarter after it went public in June 2021. For Q1 2022, SoFi reported better than expected earnings, even better than they expected at the company.

  • Revenue: Earlier this year, SoFi issued company guidance of $282.5 million in revenue for Q1 2022, and analysts expected $284 million. Actual reporting was $321.7 million, beating its expectations by 13.8% and analysts’ estimates by 13.2%.
  • Earnings per share: For the quarter, SoFi reported a loss of $-0.14/share, compared with an expected loss of $-0.15/share.

According to the company’s CEO: “Strong results were achieved despite volatile markets and the changing political, fiscal and economic landscape. This demonstrates how our strategy of building a full suite of products has created a uniquely diversified business that can outperform across market cycles.”

What’s the bottom line?

SoFi’s lending business contributed as much as 50% to its overall revenue in Q1 2022. Student loans contribute largely to this number.

In 2020, President Trump’s enacted a moratorium that defers student loan repayments and suspends interest accrual on these loans. This law has been extended three times by President Biden, with the latest being August 31st. Companies like SoFi are directly affected by this.

In fact, SoFi lowered its guidance for Q1 2022 (even though the fintech actually surpassed it by far). Q2 2022 revenue guide has also been reduced to $335 million, missing analysts’ expectations by 1.2%.

With several growth plans already in action, SoFi has a bold future ahead of it, and for long-term investors, we think this is worth watching.

💲 Cash is King, Only in Dollars.

In April, Nigeria’s inflation rate rose to a staggering 16.82%. Compared to the U.S’ 8.1%, this should be a big cause for concern. For the average Nigerian, this wouldn’t come as a surprise, as essential food items had an average inflation rate of 18.37% in April 2022.

With the global economy slowing down from a myriad of issues — including the spike in energy prices, dissipation from the Russia-Ukraine conflict, and plaguing supply chain issues — these inflation numbers may continue to increase, at least for the foreseeable future.

How does this affect my assets?

The Naira has suffered largely from these high CPI figures since Nigeria relies majorly on its imports. In February, one Naira had a black market value of N530/$1 — an already discouraging ratio. 3 months later, one Naira has been further devalued toN604.

This status quo confirms the conception that the only way the average Nigerian can safeguard against the falling Naira value is to invest in dollar-based assets.

Can you benefit from the high exchange rate?

Investing in dollar assets here does not only mean buying U.S. equity or debt assets. Instead of keeping their savings or cash in Naira, some financially savvy people take the option of converting their Naira cash stash to U.S Dollars.

If you have a low-risk appetite, here are some perfect ways you can hedge your funds:

  • Convert your Naira to USD, and invest your funds in stable stocks, value stocks, ETFs, etc. Although these assets offer very little growth returns, they outperform the market in volatile times and some of them give out dividends to investors.
  • Convert your Naira to USD, and leave it. Some people earn some exchange rate benefits by simply selling or reconverting their USD to a higher price than they bought it. Investors who converted their Naira to USD at N565/$1 in January would earn at least N18/USD when they reconvert to Naira at N583/$1. This would be about N103,000 withdrawn after funding N100,000 in January. Low risk and safe.

Start hedging your cash the right way.

Notable companies reporting earnings💸:

Retail companies are sharing Q1 2022 earnings this week. Check your favourite stocks here:

  1. Monday: Before the market opens — Wix.com ($WIX), Clear Secure ($YOU). After the market closes — Sundial Growers ($SNDL), Stratasys Ltd. ($SSYS).
  2. Tuesday: Before the market opens — Walmart, Inc. ($WMT), The Home Depot ($HD), Sea Ltd. ($SE), JD.com, Inc. ($JD), AerCap Holdings ($AER), Allot Communications. ($ALLT). After the market closes NextGen Healthcare ($NXGN), Lululemon Athletica ($LULU).
  3. Wednesday: Before the market opens — Target ($TGT), Zim Integrated Shipping Service ($ZIM), Lowe’s ($LOW), TJX Companies. ($TJX). After the market closesCisco Systems ($CSCO), Analog Devices ($ADI), Hawkins ($HWKN), Synopsis ($SNPS).
  4. Thursday: Before the market opens — Lightspeed POS ($LSPD), Kohl’s ($KSS), BJ’s Wholesale Club($BJ).
  5. Friday: Before the market opens — RLX Technologies Inc. ($RLX), Anterix Inc. ($ATEX).

That’s all for this week, savvy investor. See you soon! 😉

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Disclaimer: Chaka’s Investor Brief is only intended to be used for informational purposes. Newsletters from Chaka only reflect the opinions of Chaka Technologies Ltd’s associated persons. Third-party information contained therein does not reflect the views of Chaka Technologies Ltd. or any of its affiliates. Please note that this newsletter is not an investment recommendation or advice, and its content is not a substitute for financial advice from a licensed professional. All investments involve risk, and past performance does not guarantee future results.