Latest news with #CatalystFunds
Yahoo
03-07-2025
- Business
- Yahoo
Fintech: Why Robinhood is superior to Mara Holdings
Catalyst Funds co-founder, chief investment officer, and senior portfolio manager David Miller joins Market Domination to discuss a stock he thinks is worth buying: Robinhood (HOOD), and a stock he recommends avoiding: Mara Holdings (MARA). Robinhood keeps climbing, helped by insider buying and product launches like tokenized stocks. Mara Holdings, on the other hand, charges high bitcoin mining costs, trades at a high premium, and lacks a competitive edge. To watch more expert insights and analysis on the latest market action, check out more Market Domination here. Welcome to Good Buy or Good Bye. Our goal is to help cut through the market noise to navigate the best moves for your portfolio. I'm here with Catalyst Funds co-founder, chief investment officer, and senior portfolio manager, David Miller. So, let's get right to what you like, David, and that is Robinhood. So, this is one that's already done very well over the past year. I think it's up some 300% and it's more than doubled this year alone. So, let's talk about why you still like it, even with that. So, one of the things that you watch in your portfolios is insider buying. And so we've seen some insider buying here for Robinhood, right? Yeah, absolutely. Uh Christopher Payne, a director at Robinhood, he uh fairly recently bought uh $1.9 million uh in stock in Robinhood. And when, you know, a director already has significant holdings in the company and they have some compensation tied to that company, they want to take more money out of their own pocket to buy more. That's always a good sign. Yeah, and let's talk about some of the other catalysts here. Robinhood like the a number of products that this company has introduced over the past year has been pretty incredible. You're focusing in on tokenized stocks in particular. And this is basically like uh I mean I guess it's self-explanatory. It's a stock, but you can buy a a token tied to that stock. Why is that an attractive thing for investors? It really makes it so that Robinhood, rather than being a typical brokerage, is more the exchange themselves and fully dominating that market. Now, this isn't particular to the US yet, but this is a really interesting innovation that they have going on in Europe and where they recently launched in the UK, uh and also uh in Spain, and then they're likely to be doing that in the near term in Germany. And Germany doesn't have uh free stock trading at the moment. So, they're really coming in in a position where they have some clear competitive advantages. Why would you want to buy a token of a stock versus a stock? Well, then you can trade in fractions, you can trade how you want, it's very open to the retail market. And it frankly makes it more like a video game. They've really figured out how to That's just what we need. stocks as entertainment. Whether or not people need it, they they like it. They do like it. It's worked for Robinhood. And then there's the consistent growth. As it's come out with these new products, as it's gained new users, the company has grown. Absolutely. I mean, they they grew 60% on revenue uh last year. They did over 300 million in earnings on over 900 million revenue last quarter. Uh they're developing in a huge way because they've been able to offer 3% on credit cards that, you know, competitors can't because they don't get the brokerage business uh on the side through cross-selling. It it's just been a tremendous growth story. All right. Let's talk about what could be an obstacle. And it's what coming back to the beginning, it's the valuation. After we have seen that stock just scream higher over the past year, but it hasn't really stopped it, right? Yeah, frankly, likely the valuation is fair or might even be cheap at probably about 35-40 times forward if they can keep growing in the way that they are. Now, consumers love Robinhood, and they'll probably continue to love Robinhood. The real question is what happens when we hit a bear market. And that's where the valuation may not be justified because this isn't something like AI where it'll just keep growing through a bear market. People aren't going to be so thrilled when they're messing around with tokenized stock and it's going down. And also just a quick follow-up question here. There has been some speculation that Robinhood might enter the S&P 500. The latest round of announcements for inclusion did not include Robinhood and the stock uh is down a little bit on that. Is that something that you think is necessary for the stock to continue to go higher to be included in the S&P? Regardless if the company keeps growing revenue, keeps growing earnings, they keep launching new products that consumers love, they will eventually be in the S&P 500. It's more just a question of when, not if. Okay. Let's get to the stock that you do not like as much, and also in the fintech realm. That's Mara Holdings. It's a Bitcoin miner. And that stock is down some 15-16% over the past year. So let's talk about why you don't like this one. Um it is not cheap to mine Bitcoin, but this company pays more than its peers, or has higher costs. What's going on there? So, the issue with Bitcoin mining is it's frankly a kind of crummy competitive business where no one has some specific competitive edge unless you get free power. If you have free power and you're tapping into a dam in China, or you're in Iceland and you have tremendous geothermal power, you can have a unique competitive advantage. The big problem with Bitcoin mining is the higher the price of Bitcoin goes, the more it costs to mine Bitcoin, uh the more compute that has to go in uh to each transaction. And that's actually a pretty big net negative. And frankly, if Mara's not doing better while Bitcoin's over 100,000, you can only imagine if Bitcoin uh fell in terms of prices uh that what could happen to their operating leverage. And you know, it's trading at a premium to its Bitcoin holdings. Now, this is not necessarily unusual. If you look at Strategy, whose whole strategy is being a Bitcoin treasury company, it also trades at a premium. Why is that a problem for Mara? They've really figured out a bit of a weird infinite money loop until it breaks. So read Strategy or Microstrategy, uh largely because they have this ability to keep issuing more uh convertible notes uh without having interest payments uh tied to those uh directly. Mara doesn't have the ability to do that because they frankly lost a lot of money historically, uh Bitcoin mining. So, people prefer uh being in uh Microstrategy from that perspective. It's not that I'm necessarily negative on Mara if Bitcoin prices go way higher. It's just you'd be much better off owning Bitcoin itself or or owning, yeah, you know, Strategy. Gotcha. And um you know, we kind of touched on this, but you say no unique competitive edge. It's not in Iceland, for example. Sure, that there really is none. You can think about it like any other mining business. There's no, never been this mining business. It's been a tremendous business because anybody can do it. There there's no ability to be better. It's a similar concept to if you own a bus company or an airline, uh you can't do anything that's unique or better that creates real customer loyalty and higher margins. And then let's talk about what could go right for Mara in your view. They could get out of Bitcoin mining entirely and maybe just do Bitcoin treasury, or maybe lease some of their space to hyperscalers, for example. Yeah, I mean frankly, I think the thing that could go right in the biggest way is if they dump all the Bitcoin mining, take the money they're allocating that, buy more Bitcoin, tell the market they're doing the same type of thing that Microstrategy is doing and Bitcoin prices go up. That that'd be the the main scenario where it could do well. Gotcha. Well, they're not doing it right now, so this is what we have. And you do not own Mara in any of your strategies, and you do own Robinhood through some of your portfolios, correct? That's right. Yeah. All right, David, thank you so much, and thank you so much for watching Good Buy or Good Bye. Sign in to access your portfolio
CNBC
02-07-2025
- Business
- CNBC
Catalyst Funds likes Robinhood: David Miller breaks down why
David Miller, Catalyst Funds co-founder and CIO, joins 'Power Lunch' to discuss Miller's thoughts on Robinhood.
