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It’s rare to see the stuff of science fiction take off in the real world, but our story on “biochipping” in the February 2019 issue of Fortune magazine might be one of those occasions.
In November, I traveled to Sweden’s second city Gothenburg and watched people line up to have Biohax International founder Jowan Österlund inject tiny microchips into their hands. The chips, about the size of a grain of rice, allows people to unlock their front doors or gym lockers, operate office printers, pay for lunch, or validate train tickets, all with a simple wave of their hands. Goodbye keys and credit cards, and no need to remember endless passwords. That made me wonder: Is this just a whim by a few thousand tech lovers, while most of us regard biochips as creepy, sci-fi technology? Or it is the start of something huge?
Monday’s news cycle brought a clue that biochipping is poised for significant growth. Österlund announced that Biohax had established a strategic partnership with ICON Capital Reserve SA, a $ 300 million software company, founded in 2013, that trades in gold on the blockchain for high-net-worth private clients around the world.
Under the arrangement, ICON acquires a 5% stake in Biohax in exchange for Österlund receiving “some very valuable shares” in ICON, according to Bradley Hall, ICON’s founder and chief executive. (In an interview with Fortune, Hall declined to specify exactly how much.) ICON will also also begin using Biohax technology to quickly validate individuals’ identities as they make huge trades. “They can provide immutable ID,” Hall says of Biohax. “If you have a chip in your arm, you cannot challenge that. And when you have immutable ID, all of a sudden you have the ability to move value around the world, with transactions that happen within seconds.”
Hall says he decided to partner with Österlund after a 90-minute phone call with him made it clear that each had something the other badly needed. For Hall, it was Biohax’s technology. For 38-year-old Österlund—who once ran a piercing parlor and has minimal revenues for his tiny startup—ICON brings with it a roster of global clients. “I said, ‘Hey man, stick in there, you are in quite early,’” Hall says. The two plan to discuss specifics of the partnership in a meeting in Malta on Friday.
Partnering with a more conservative company like ICON will likely mark a huge shift in style for Biohax, which operates out of shared office space in the small Swedish coastal city of Hilsenborg. When Fortune followed founder Österlund around Sweden in November, he was injecting new clients himself from a tattoo parlor down a side street in Gothenburg.
But appealing to the masses, not to mention financial institutions, will require a different approach. It could even lead to a change of name for Biohax, which Hall believes is “cool for Gen Y” but maybe not for older, wealthier clients who might object to the hacking reference. Hall says he aims to counsel Österlund on how to position the company as it begins courting more corporate clients—something ICON’s investment will likely accelerate, he says.
“We like to think about it as a massive injection of credibility for him, from a team with extensive global experience,” Hall says, adding that he plans to give “subtle guidance” to Österlund about positioning his startup for huge growth. “It could be ubiquitous,” Hall says. By then Biohax might have staff around the globe, and perhaps permanent office space.
SYDNEY (Reuters) – Online retail giant Amazon.com Inc, whose entry into Australia last year rattled established bricks-and-mortar retailers, posted a modest loss in its earliest days in the country, corporate filings show.
FILE PHOTO: Amazon boxes are seen stacked for delivery in the Manhattan borough of New York City,U.S., January 29, 2016. REUTERS/Mike Segar/File Photo
Amazon’s foray into Australia was met with fevered attention from investors and a steep selldown in traditional retail stocks.
The U.S. company launched its website on Dec. 5, though it ran preparatory operations through the year, racking up a modest loss of almost A$ 9 million ($ 6.6 million).
In the Christmas trading weeks from the launch to Dec. 31, it turned over A$ 6.3 million in direct sales versus total Australian retail sales of A$ 26.3 billion that month.
These figures, however, are unlikely to be indicative of the future performance of a company that reported losses and roller-coaster results for years, but is now the second-biggest company in the world and closely watched on Wall Street.
The Australian trading period was too short for meaningful analysis, said Evan Lucas, chief market strategist at fund manager InvestSmart.
“Amazon is not the kind of company that accepts failure – they have a longer term goal.”
Amazon hit logistical snafus in Australia’s vast interior and handed eBay Inc – market leader in Australia – some victory after a move last month to block Australians from shopping on its foreign websites drew customer backlash.
A spokesman for Amazon declined to comment on the filing and directed Reuters to previous commentary about record Australian sales during a promotion in July without quantifying them.
The filing was lodged in April but the results were not reported at the time. They were first reported on Friday by the Sydney Morning Herald newspaper.
Last week, Amazon forecast strong fall sales for its overall operations and posted a $ 2.5 billion quarterly profit that was double Wall Street targets on the back of its younger businesses – cloud computing and advertising.
($ 1 = 1.3569 Australian dollars)
Reporting by Tom Westbrook; Editing by Sayantani Ghosh and Manolo Serapio Jr.
This research report was jointly produced with High Dividend Opportunities authors Julian Lin and Philip Mause.
Royce Value Trust (RVT) is a legendary closed-end fund (‘CEF’) started by a giant fund manager in the small-cap investing world, “The Royce Funds”. In fact, RVT is the first small-cap CEF ever created 32 years ago.
RVT recently traded at $ 15.76 per share, representing a 9.2% discount to its net asset value (‘NAV’) of $ 17.80 and a 7.7% dividend yield based on its trailing 12 months distributions. RVT is a solid pick for those wanting exposure to both the high alpha small-cap space as well as a high dividend yield.
Small Caps Have A Little More Alpha
Stocks of small-cap companies are well known to potentially have higher return potential than their larger cap counterparts. This is generally due to the fact that smaller companies have more room to grow, they tend to grow more quickly, leading, of course, to share price appreciation.
In fact, from 1927 to 2009, small-cap stocks greatly outpaced large-cap stocks by a wide margin.
In 2018, small-cap stocks are taking the leadership position compared to their large-cap counterpart with the small-cap Russell Index (IWM) returning 10.3% year-to-date compared to the S&P 500 index returning only 3.8% for the same period.
One Of The Best Time To Have Exposure To Small Caps
It is one of the best times to be invested in small-cap stocks. Small-cap companies will be the biggest beneficiaries of the recently enacted corporate tax cuts. Larger companies will also benefit, but not as much, because they usually hire expensive tax accountants and use complex strategies to reduce their effective tax rate down; so the biggest tax impact will be felt in smaller cap stocks. According to a recent Invesco study, the companies in the S&P 600 Small Cap Index had an average effective tax rate 4.3% higher than that of the S&P 500 companies. This means that small-cap stocks have been more positively impacted by the recent corporate tax cuts because they will be able to save more taxes.
U.S. stocks are set to strongly outperform their foreign counterparts. With the U.S. economy being the healthiest large economy on the globe, it provides a “safe haven” for investors. Small-cap stocks on average generate more than 78% of their revenues from the U.S. compared to 70.9% for the S&P 500 companies. Since their revenues are mainly generated domestically, they are set to grow faster.
Despite the recent rally, small-cap stocks continue to have PE ratios which are very attractive relative to the S&P 500.
At current ratio levels, the increased potential for growth inherent in small-cap stocks is not really “priced in.” As a result, in addition to earnings growth potential, there is also significant potential for multiple expansion – this is a recipe for strong shareholder returns. No wonder small-cap stocks are seeing such a strong outperformance.
Getting To Know RVT
RVT was the first small-cap closed-end fund ever at its inception in 1986, and its manager, Chuck Royce, has managed it for its 32 years of existence since inception. Royce is naturally known as a legend in the small-cap investing universe. The focus is on small-cap stocks generally with market capitalization up to $ 3 billion. The fund has about $ 1.46 billion in net assets and 437 total holdings, and employs a tiny bit of leverage, with its leverage ratio at around 3.7%. This is relatively modest for an equity CEF.
A Solid Management
The managers of RVT, “The Royce Funds”, are pioneers in small-cap investing. It’s been their specialty for 40+ years. What sets them apart is their depth of small-cap knowledge, experience, and a single focus in their area of expertise.
The core approach of management is to combine multiple investment themes through small-cap companies that are set to generate high returns on invested capital or those with strong fundamentals and/or prospects trading at what management believes are attractive valuations.
This strategy has paid off well over the years. RVT has seen 10.7% average yearly returns since inception (through March 31, 2018).
Their top ten holdings are seen below (as of 3/31/2018):
RVT mainly focuses on U.S. based stocks with 87% invested domestically. It has 18.1% in international exposure out of which 7.7% in Canadian stocks. So, RVT has an overwhelmingly North American exposure.
This Isn’t Just The Index
There are substantial differences in sector representation between RVT and the Russell 2000, the typical small-cap index. In particular, RVT has dramatically greater exposure to the industrial, materials, and information technology sectors and considerably lower exposure to health care and utilities:
In our opinion, this allocation makes a lot of sense in the current economic environment. We have previously discussed reasons for the industrials and materials sectors to outperform, namely in the form of a near-term catalyst in a large infrastructure bill in Washington, backed by long-term tailwinds of incessant demand for infrastructure spending. Furthermore, industrials and materials tend to do much better during periods of economic growth, inflation, and rising interest rates than other sectors such as utilities.
The information technology sector, despite the recent rally, is still quite attractively priced because of the potential for growth and major innovations. The recent tax reform which has allowed companies (especially large-cap tech companies) to repatriate foreign cash at lower tax rates greatly increases the potential Merger & Acquisition activity. Small-cap companies, such as the ones that RVT holds, have market caps which look like mere “pocket change” to companies like Apple (AAPL) which has over $ 200 billion in cash.
The weighted average price to earnings (‘P/E’) multiple of RVT portfolio companies was 22 and the price to book ratio (‘P/B’) was 2.2, versus 20.4 and 2.3, respectively, for the Russell 2000. The slight premium in valuation reflects management’s decision to emphasize positions with strong growth potential:
Share Price Performance
RVT has outperformed the Russell 2000 over almost every time frame, including by over 50 basis points since inception 32 years ago.
In addition to producing superior returns over time, RVT has also had less volatility (‘risk’) as well.
This management team clearly has a long track record of outperformance and also has the experience of managing through multiple economic cycles.
Low Expense Ratio
Whereas many CEFs have high expense ratios around 1.5% of assets, RVT is different and in a good way. RVT has an expense ratio of only 0.65% of net assets. This includes 0.54% in inclusive management expenses plus 0.11% in interest expenses. This low expense ratio is a significant plus because high expense ratios tend to eat away at shareholder returns over time and are considered an important reason why many funds underperform indices over the long run.
RVT uses a “managed distribution policy” in which they pay quarterly distributions at an “annual rate of 7% of the average of the prior 4 quarter-end “net asset values”, with the 4th quarter being the greater of these annualized rates or the distribution required by IRS regulations.”
RVT last paid an average of $ 0.305 in quarterly dividends and for the past 4 quarters paid a total of $ 1.22 per share in dividends, for an annualized yield of 7.7%. The fund has historically distributed dividends out of long-term capital gains and dividend income.
(Chart by Author)
While it is definitely a plus that RVT has rarely had to give distributions in form of “return of capital” (‘ROC’), we would like to remind readers that ROC is not necessarily a bad thing when it comes to equity CEFs. While ROC for fixed income CEFs is usually always destructive, in the case of equity CEFs, this is not always the case. Often, equity CEFs decide to distribute ROC as a tax advantaged way to return capital to shareholders.
Aside from trading at a 7.7% dividend yield, RVT also trades at a 9.2% discount to its NAV of $ 16.24 per share. With a 1-year Z-Score of 0, RVT is currently trading within its normal NAV discount. Note that during the bull market of 2002 through 2007, RVT traded mostly at a Premium to NAV.
We would not be surprised if RVT will start trading again at its NAV or a premium to NAV in the current bull market cycle. In all cases, the shares do not deserve such a steep discount to NAV considering management’s track record to outperform the index.
Risks To Consider
- Small-cap stocks tend to carry a higher risk and price volatility than their large counterparts. That said, this risk is mitigated by RVT through a high diversification among both sectors and companies through 437 stock holdings. While there may be some losers in the mix, these have been more than offset by very big winners.
- In the event of a market downturn, RVT, like all equity funds, will see its price decline. However, it has very low leverage which may make it comparatively stable. In addition, there are many reasons to believe that the outlook for equities is positive, considering the extra firepower for growth-related capital expenditures and investments being afforded as a result of corporate tax cuts.
RVT is possibly the best equity CEF with a focus on small-cap stocks. It has a proven track record of outperformance through its 32 years of existence. Because of its exposure to value small-cap stocks with growth potential, the fund is set to strongly outperform in the current economic cycle. RVT is recommended for income investors who are looking for a portfolio diversification in addition to a generous yield which is currently at 7.7%. RVT has also the potential to also generate a high level of capital appreciation. We rate RVT as a strong buy.
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Note: All images/tables above were extracted from the Fund’s website unless otherwise stated.
Disclosure: I am/we are long RVT.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Small satellite makers have promised to do a lot of things: change the way we communicate, change the way we see our planet, change the way we predict the weather. They’re cheaper, faster to develop, and easier to update than their bigger and more sophisticated counterparts. But for all the revolution and disruption, they tend to keep their focus close, and largely cast their eyes down.
A new NASA program, called Astrophysics Science SmallSat Studies, aims to turn their gaze outward, toward the cosmos. Early this year, NASA asked scientists how they would turn smallsats into tiny (but mighty) telescopes. Answers are due by July 13.
While the space agency has other smallsat science programs, they have mostly hemmed themselves within the solar system. “The Earth is bright; the sun is bright,” says Michael Garcia, the program officer. “So small telescopes can see things very easily.” But trying to see the dim light from objects beyond our neighborhood usually demands much bigger telescopes. See: Extremely Large Telescope, Very Large Array, Large Binocular Telescope.
In space, above the blurring of the atmosphere, telescopes don’t have to be quite as huge to do the same job as an Earthbound observatory. But they are usually bigger than smallsats. That’s why, in the call for proposals, NASA emphasizes that the new smallsat program “is intended to capitalize on the creativity in the astrophysics science community.” And, indeed, it looks like that community does have some ideas for how to do more science with less instrument.
Last year, NASA sent a call out to scientists, asking if they had ideas that required more funding than a suborbital project, and less satellite than the smallest orbital missions. The agency wasn’t offering money, or collaboration, or anything. They just wanted a five-page paper about what astrophysicists would hypothetically do if, say, they hypothetically found a wallet containing between $ 10 million and $ 35 million and had to build an astro-studies smallsat with it. “We got 55 responses,” says Garcia. “We realized, ‘Wow, people really are interested in this.’”
Scientists, for instance, could use smallsats to do time-domain astronomy: watching for bursts and flares and flashes and pulses and all the other kinds of light-waves that appear and then vanish. Those phenomena work well for smallsats because, as their names connote, they’re often bright. Astronomers could also use the instruments to do surveys—to look at the whole sky in one wavelength band, for example—or to give brighter or nearby objects the attention that other telescopes may lavish on more distant and foreign bodies.
Knowing the interest was there, the agency pushed forward and put out this February request for proposals. The winners—six to 10 of them—will together get a total of $ 1 million of sweet NASA cash and six months to design a smallsat that could get astrophysical.
“We wanted to prime the pump,” says Garcia. Because next spring, soon after the six-month study of studying ends, the agency will ask tiny telescope dreamers to submit another proposal—but this time to actually build something.
That’s already three agency requests, before anyone gets started building. But this is still faster than NASA’s normal timelines. Its bigger missions can take many years in development, and have to work exactly as planned—or else. And when you know a complicated scientific instrument has to work or else, you’re going to use tried and true technology in tried and true ways.
On smallsats? Worth mere millions? With mere months of development? “You can take more risk than something that’s big and expensive,” says Garcia. For the suborbital program, which shot instruments to near-space, for instance, the agency aimed for an 85 percent success rate.
That’s not NASA’s usual goal. For more substantial observatories or human spaceflight, the agency needs to see A+s, not Bs. But the cool thing about these reckless smallsats is that they can carry aboard technology that may eventually make it into premier missions. They can test experimental new circuitry and sensors and software. And if they fail—oh well, there goes a few million. But if they work, engineers can bring them aboard fancier missions, faster, and perhaps disrupt some of our current understanding of the cosmos.
More Great WIRED Stories
Tax time is no one’s favorite time of year. But for small business owners, this year’s filing deadline at least comes with the promise of better rates ahead: Many of the changes included in the Tax Cuts and Jobs Act, passed by Congress in December, are going into effect.
As entrepreneurs, we should expect to benefit–at least, temporarily–from the new tax plan. My company, Manta, conducted a poll in January and found that 83 percent of business owners anticipate their companies will be positively impacted by the changes. Nearly as many, 80 percent, said they support the Tax Cuts and Jobs Act.
Some are already feeling the benefits of having more money in their pockets, according to another poll we conducted last month. 34 percent of small business owners said their business income had increased as a result of the tax reform, just three months into the year. 42 percent have already changed their budgeting or financial planning because of the new tax law.
It’s time to start preparing for the changes–if you haven’t already.
For the most part, the provisions of the Tax Cuts and Jobs Act that benefit small businesses go into effect this tax year — meaning they won’t impact the returns that are due this month.
The 58 percent of small business owners who have not yet adjusted their budgets should get started, however. While that big refund check may be a year away, it’s not too early to plan accordingly and make sure you take full advantage of the potential savings.
The first step is to review your company’s legal structure and determine how it will affect your taxes. One of the most important changes in the new tax law allows pass-through entities (such as S corporations and LLCs) to deduct up to 20 percent of their business income.
However, this doesn’t apply to certain professional services firms. Review your situation with a tax professional or attorney–you might be able to adjust your business structure to take advantage of this deduction.
Make the most of your company’s tax savings.
The Tax Cuts and Jobs Acts allows businesses to immediately write off the full cost of new equipment and other property, instead of depreciating the expense over five or more years. The new law also protects these write-offs from being rescinded in the future.
This is great news for business owners who want to invest in their growth. According to our polls, 28 percent of small business owners plan to use their tax savings to invest in new technology and 21 percent plan to open a new location or expand. The immediate write-off should make these investments (and your cash flow) much more manageable in the short term.
Just check with your tax advisor before making a major purchase–you could run into unforeseen obstacles. For example, the depreciation rules for “heavy” SUVs–those with a gross vehicle weight above 6,000 pounds–are different than for light trucks and vans. You want to be prepared for the potential impact on your taxes.
Streamline your expense tracking and tax prep.
Make sure you accurately track and document all business expenses. Our polls found that 21 percent of small business owners still use paper receipts to track expenses.
Think about that for a second. It’s messy and inefficient, and you risk losing receipts or miscategorizing expenses.
Hiring a pro is probably the best way to ensure that you take full advantage of the new deductions and stay on the right side of the law. The U.S. tax code is confounding to even the most experienced business owners–20 percent of poll respondents told us they didn’t understand all the deductions available to them. Whatever else Congress accomplished with the Tax Cuts and Jobs Act, they definitely didn’t simplify things.
Use a mobile application or accounting software to scan and save digital copies of your receipts and categorize the expenses. Then, when tax time rolls around, you can output a well-organized report or import the data directly into your tax prep software. And if you use an outside accountant or tax preparer, they’ll greatly appreciate you providing a digitized expense report instead of handing over shoeboxes full of paper receipts.
BEIJING/NEW YORK (Reuters) – Walmart Inc has opened its first small high-tech supermarket in China, where smartphones can be used to pay for items that are mostly available on the U.S. retailer’s store on Chinese online marketplace JD.com, it said on Monday.
The world’s largest retailer, known for its hypermarkets, is expanding in China as shopping with mobile devices gains popularity in the country, and as retailers and technology companies such as Alibaba Group Holding Ltd and Tencent Holdings Ltd cut deals to integrate online and offline shopping.
Walmart is also targeting more online shoppers, who spend twice as much in the United States when buying on its website.
Walmart had run smaller Walmart Express stores in the United States, with 12,000 to 15,000 square feet, compared with about 105,000 square feet for its typical supermarket. But the concept did not take off and the retailer was forced to shut them down in 2016.
Walmart did not specify the size of the China store, in the southern city of Shenzhen. The company did not immediately respond to a request for comment.
The outlet will stock more than 8,000 items ranging from stir-fried clams to fresh fruit, 90 percent of which will be available online, it said in a statement. Items can be delivered within a 2 kilometer (1.2 mile) radius as quickly as 29 minutes, said Walmart, which owns a stake in JD.com.
Customers can opt to pay with their smartphone using a program on Tencent Holding Ltd’s WeChat messaging.
In March, Walmart said it would expand its grocery home deliveries in key markets to reach more than 40 percent of U.S. households, or 100 metro areas from six currently.
Reporting by Pei Li and Brenda Goh in Beijing and Nandita Bose in New York; Editing by Muralikumar Anantharaman and Richard Chang
Understanding how electronics actually work can be pretty confusing. Often, inquisitive students succeed or fail in creating small electronic projects by simple trial and error. Thankfully, you can offer some structure to your pursuit of electronics knowledge with the SainSmart UNO for Arduino microcontroller board. It’s on sale right now for only $ 53.99 (19 percent off) from TNW Deals. This powerful board is the “sandbox” for inventive tinkerers to create their own electronics projects — then bring them to life. Powered by the open-source versatility and extensive library of Arduino, you can use the SainSmart UNO to build handfuls of simple electronic…
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