I’m currently at the Finovate conference in London. It’s an annual gathering of the world’s latest financial technology (fintech) companies. Each year it throws up one or two exceptionally great companies, who go on to become huge success stories.
For example, back at Finovate 2012 an unknown company demonstrated their business lending tech. This company, OnDeck, would go on to become a billion dollar public company.
Listing on the NYSE in December 2014 OnDeck [NYSE:ONDK] would IPO with a valuation of around $1.2 billion. Since then the stock has fallen. But they still have a market cap of $477 million.
Or perhaps you’ve heard of Xero [ASX:XRO]? The New Zealand company that went from NZ$2.80 at the start of 2012 to NZ$41.80 by the start of 2014.
Xero demonstrated their online accounting software suite at Finovate in 2011.
The companies I’m here to see today are the Xero’s of tomorrow. They’re raising capital and doing deals today that make them an investor’s dream in another two or three years’ time.
Some of them are already public. All of them are small companies…for now. That makes them hugely exciting. You see small companies — small-cap stocks — hold greater opportunity than large-caps, or blue chip stocks.
Small companies, like the ones I’m seeing today, have the chance to double or triple overnight with a big contract or licensing agreement. One simple catalyst can turn a small-cap company into a large-cap overnight. And if they’re public and you’ve got skin in the game, they can make you a fortune.
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Find them early, profit from them when the rest catch on
As an investor you want stocks you can invest in today that will double, triple or even make you ten times your money. But it takes years of research to find those companies. To unearth companies like Xero you have to be at events like Finovate to see them coming before the mainstream — before they’re public.
You have to find them early so investors like you can profit later on. And I’ve already seen a number of small private companies demonstrating their fintech, who are going straight to my watch list.
Take for instance a cracking company I came across, Capitali.se. Based out of Tel Aviv, Israel, they’ve developed one of the best trading systems I’ve ever seen.
Their tech lets you use natural language to fulfil your investment ideas. It lets the novice investor make complex trades by using simple language to turn your ideas into automated trades.
Now this might sound a little complicated, so let me explain how it works.
Let’s say you want to buy ANZ shares. But you only want to do it if their annual report shows revenue growth of at least 4% and net profits increase by a minimum of 2%. Furthermore you only want to buy if the stock moves up at least 2%, but not if it moves up more than 7%. Then once your order is executed you want to exit the position after a 7% gain from your purchase. Oh, and then you want to make sure that if it falls, you exit the position too. So you also want to place a stop loss at 10% below your entry price.
That’s one complicated trade. That’s the kind of trading that supercomputers do. The kind of trade that multi-billion dollar asset managers make with a whole team of analysts and researchers.
For the private investor like you, that’s not an easy trade to make. In fact, it’s possible that you simply don’t have the resources to make it at all.
But what if you could?
What if you could say,
‘Buy 100 ANZ shares if their Annual Report shows minimum 4% revenue growth and a minimum 2% net profit growth and the stock rises by 2% and less than 7%.’
Then you could also add,
‘Sell ANZ if the price falls by 10% or more below my entry price.’
That’s it. That’s all you have to do. You wouldn’t need to place complex conditional orders on top of limit orders for ANZ. You wouldn’t have to scrawl through the annual report looking for the information you need. You wouldn’t have to do anything apart from write what you want.
This is how Capitali.se works. It’s so simple, so easy. And exactly what the future of share trading looks like. You just write what you want to do in simple language.
In their demonstration today the founders, Shahar Rabin and Amir Shiovich, gave a simpler demo.
Their example was, ‘Buy 500 SBUX shares if the price breaks $60 and the price of coffee futures decreases by more than 1% by the end of the day.’
They then showed how the trade goes live and waits until the conditions are met. Once all conditions are met, the trade is executed. Simple.
For your average trader this is a revelation. You can perform and access complicated trades based on any kind of information you want. I was speaking with Shahar after their demo and he said you can use any kind of metric you want.
Weather, news, major events, company financials, stock prices, futures, commodities, you name it and the technology can use it.
This is how I see the future of trading platforms looking. I picture something like E*TRADE integrating this technology into their online platform. You’d simply log in to your account, type in what you want to do and let the tech do all the work. The process then is automated and simple for you.
The next generation of cards is three-in-one
Capitali.se is one of many different fintech companies on demonstration here. I also saw a new payment card with integrated buttons from Dynamics. These guys have already raised $110 million and have key partnerships with MasterCard.
Their payment card is a computer in a card. They have a new product, which is a three-button card. By pressing a button on the card you can choose between three different currencies.
For example, say you’ve got a travel card for an overseas holiday. Your bank issues you with one of these cards. You load pounds, euros and US dollars into your card. You visit a shop in the UK, simply press the ‘£’ and use your pounds. You then might be in France. Press the ‘€’ button on the same card and use your euros. Then you might finish your trip in L.A. Press the ‘$’ button and start using your USD.
Dynamics tout this as the next generation of payment cards. And they might be right. I think long term the physical ‘card’ will fade into insignificance. But that might be further away than I think. Banks are notoriously slow at rolling out tech like card free payments. In the meantime, aggregating three cards into one cuts down costs by a third.
And it’s not just currency that banks could apply to the Dynamics card. You could program it to use a debit card, credit card and loyalty card. The possibilities are significant, and a big opportunity for banks to create a better user experience and cut down on costs.
These two companies are standouts. But there was another company I met with and spoke about. These were the only Aussie company demonstrating their tech at Finovate. I’ll tell you more about them in Saturday’s Money Morning, along with the other pioneering tech companies I speak to today.
Tomorrow I’m off to the IoTExpo, also here in London. This conference is all about the ‘Internet of Things’ and the opportunities it’s creating in our world. I’ll tell you more about that in the coming weeks, too.