🇪🇺 Small stocks, big potential

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Hi Reader, here's what you need to know for February 26th in 3:10 minutes.

🖼 If you’re drawn to big-picture financial trends, you might just be a thematic investor at heart. So join the CEO of Roundhill Investments for The Power of Thematic Investing on Tuesday, and find out how to really lean into this whole new identity of yours. Get your free ticket

Today's big stories

  1. Australia passed a law that would make Big Tech pay for news, and other countries may well follow suit
  2. There are a handful of European small-cap stocks with a lot of potential that are going completely unnoticed right now – Read Now
  3. Best Buy posted mixed earnings, with the retail giant staring down the barrel of slower growth

Broken News

Broken News

What’s Going On Here?

Australia passed a law on Thursday forcing Big Tech platforms to pay news companies to show their content. What a scoop!

What Does This Mean?

It’s been a long time in the making and much contested by Google and Facebook, but Australia finally has the exclusive on regulating payment for content. So while other countries like France have taken baby steps toward the same measures, Australia will be the first where – if private talks fail – a government middle-man can set the price domestic media gets paid.

Still, eleventh hour talks with Facebook did lead to some concessions. For starters, the tech giants are free to decide which media outlets to go after and how much they pay them. And if the Australian government thinks they’ve given the local news industry enough money, it never has to get involved. And even if the government decides they haven’t, they’ll have time to strike more deals before being forced into arbitration.

Why Should I Care?

Zooming out: This could be a watershed moment.
Australia’s regulation might usher in a new era, with Google and Facebook having promised to each pay publishers $1 billion over the next three years. That’s a big step up from the $600 million Facebook’s spent since 2018, and an even bigger one for Google, which previously only pledged to spend $300 million (tweet this). Of course, it could’ve been worse for them if not for those last-minute amendments: the tech giants now have a lot more flexibility, which might be why both sides are claiming victory.

The bigger picture: The best laid regulations often go awry.
Global regulators’ legislative wishlist doesn’t end at payment for content: they’re keen to protect data, harvest taxes, and prevent anti-competitive tactics too. But that’s the irony: regulators might be acting in the best interests of the Average Joe, but the Average Joe could be the first to pay if the tech giants decide to pass the higher costs on…

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2. Analyst Take

One Small Stock For Europe, One Giant Leap For Your Portfolio?

What’s Going On Here?

At the risk of sounding repetitive, stocks are starting to look pretty expensive in some parts of the world. So it’s worth being more selective this year.

Enter European stocks: those with a market value of, say, under $10 billion, get less attention from investors, making errant pricing – and chances to profit – more likely.

See, small-cap stocks – whose earnings growth is highly sensitive to the state of the broader economy – tend to outperform during economic recoveries.

And sure, European small-cap stocks look expensive compared to overall indexes, which show them valued at a 15% premium to large-caps on a key price-to-earnings metric.

But strip away sector biases, and it’s a different story: Europe’s small-cap stocks are actually 34% cheaper than the continent’s large-caps.

So that’s today’s Insight: a screen of 28 cheap-looking smaller European stocks, and Goldman Sachs’ advice for buying UK and German small-cap indexes in particular.

Read or listen to the Insight here

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Boredroom

Boredroom

What’s Going On Here?

You might be tired of this work-from-home lifestyle, but Best Buy never wants it to end: the electronics retailer reported a better-than-expected profit and an uncertain post-pandemic outlook on Thursday.

What Does This Mean?

Folks have been kitting out their home offices and their, uh, kitchen table offices with screens, speakers, and laptops, and that’s been going well for Best Buy so far. But there are signs its luck is running out: the retailer’s revenue grew by a worse-than-expected 13% – a big drop from the 23% growth of the quarter before.

Best Buy isn’t sure how demand will look when economies reopen either, adding it to the list of retailers expecting shoppers to spend more on going out than staying in. So with the company keeping its sales outlook flat for the year, investors initially sent its shares down 8%.

Why Should I Care?

Zooming in: Retailers are never going to look quite the same.
Best Buy’s online sales represented 43% of its total sales last quarter – a significant bump from the 25% of the same time the year before. And since it reckons the shift toward ecommerce isn’t slowing down, it’s been rolling out some big changes: the company cut its workforce by 17% last year, and it’s testing a store design that’ll reduce the size of its sales floors so it has more space to fulfill online orders.

The bigger picture: Look for growth potential in your retail stocks.
You don’t need to tell Wayfair how important ecommerce is: the online furniture retailer benefited from the overlapping trends of online shopping and home improvement last quarter, posting a 54% surge in customers versus the year before. And while investors were worried this pandemic-driven boost would sputter out, Wayfair convinced them it still has plenty of opportunities for growth – from expanding its professional customer base to becoming a bigger player in appliances.

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💬 Quote of the day

“The price of hating other human beings is loving oneself less.”

– Eldridge Cleaver (an American writer and political activist)
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🌍 Finimize Events

🚿 Cleantech: it’s not what you think

Sure, cleantech sounds like Robocop after he’s had a bath or a Terminator with a feather duster, but it’s actually a whole sector of clean energy disruptors devoted to solving the climate crisis. And at our Invest Your Money, Save The Planet event, you’ll find out how you can put your money behind them.

🌈 Financial Planning for the LGBTQ Community: 2pm New York Time, February 26th
💪 Q&A with Finimize CEO, Max Rofagha: 1.30pm UK Time, February 26th
🔥 The Easy-Does-It Wealth-Building Strategy: 7pm Singapore Time, February 26th
💥 The 2020s: Boom Or Bust?: 1pm UK Time, March 2nd
💪 The Power Of Thematic Investing: 6pm UK Time, March 2nd
🌍 Investing In Biodiversity: 6pm UK Time, March 3rd
💆‍♀️ The Investor Mindset: 1pm New York Time, March 5th
👣 Invest Your Money, Save The Planet: 6pm UK Time. March 9th
📲 What’s Next For Tech: 6pm UK Time, March 10th
🏦 The Next Decade in Banking: 6pm UK Time, March 11th
🕶 Investing in Virtual Reality & 5G: 6pm New York Time, March 16th

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