Veteran trader Peter Brandt has warned that U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler should not be trusted. He stressed that Gensler “has a long history of not looking out for the interests of investors.” Brandt further emphasized that the SEC chairman “was instrumental in the bankruptcy” of a major company and was […]
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My late father was under the impression that he and my stepmother had an irrevocable trust set up. He was wrong. He passed away in September and now we have learned it is actually a revocable trust. It was a mistake. My stepmom is letting her son handle things for her, and has talked her into changing the trust so that he will get everything when she passes, so he can help take care of her sister who has mental-health issues.
This will effectively cut me and my siblings out of any part of my father’s estate. Everything, including their home was supposed to go into the trust, and when both my father and stepmother ended up passing, the home was supposed to be sold and all proceeds split evenly between all of their beneficiaries, including my siblings and me. Is there anything we can do to assure my father’s wishes are granted?
Daughter/Stepdaughter
Related: My estate is worth millions of dollars. How do I stop my daughters’ husbands from getting their hands on it?
MarketWatch illustration
It is stories such as this that give all the wonderful stepmothers out there a bad rap.
There are a few possibilities here: 1) Your father set up a revocable trust by accident and did not properly understand the difference between the two trusts; 2) he set up a joint trust where only his portion of the assets became irrevocable upon his death; or 3) he at some point changed his mind and set up a revocable trust, and left his assets for his second wife to distribute to his respective heirs. Even if #1 occurred, it would be up to you to prove this in a court of law, with the help of an attorney, in the event you contested the terms of this trust. Keep in mind, there are many variables that go into creating a trust, so it highly depends on the terms laid out.
But many obstacles lie ahead. The burden of proof lies on your doorstep, and you should be cognizant of the statute of limitations in your state. “Trust contests must be brought within a certain period following the grantor’s death,” says Brian Liberis, senior estate planner at EP Wealth Advisors, based in Boston, Mass. “So if a court action is necessary, it should be undertaken as soon as possible. In addition, you would likely have the burden to prove that the trust did not reflect your father’s intentions and that a mistake was indeed made.”
“However, some revocable trusts are drafted so that they continue to be revocable until the death of the second spouse,” Liberis told MarketWatch. “If that were the case here, then your stepmother would likely have the authority to change the entire trust and redirect the assets to her children. If that is how this trust was drafted, then your only recourse would be to contest the trust in court, on the grounds that it should be modified/reformed due to a ‘mistake.’ That is, the trust as drafted did not reflect your father’s intentions.”
Obtain a copy of the trust, so your attorney can review the terms, and see if there was any evidence that it was poorly constructed and/or if only a share of the assets are revocable. “You would be asking the court to modify/reform the trust on principles of ‘equity,’ or fairness,” Liberis adds. “If, at the time it was executed, it was intended that, upon the death of the second spouse, the property passed 50/50 to the children of each spouse, then principles of fairness would dictate that the trust be reformed to ensure that result — or, at least, so you would argue.”
Your stepmother appears to be intent on ensuring the assets in the revocable trust — or the part of the trust that is revocable — will be inherited by her son. That may be an expensive lesson for you and your father; the surviving spouse will not always adhere to their late partner’s wishes. Whether it’s a large or a small amount of money, the second wife or husband can come to believe that they deserve or are entitled to their late partner’s entire estate. We could argue about the ethics of cutting you out of the picture, but your focus should be her legal entitlement.
If you are successful in your endeavors, be aware that assets deposited in a revocable trust typically receive a step-up in basis, so any capital gains are effectively wiped out. That would, of course, benefit your stepmother. So if he left a $1 million home that was originally purchased for $500,000, any capital gains would be calculated on the home’s value at the time of your father’s death, thus saving her money if she sold it. However, assets in an irrevocable trust may not receive a step-up in basis if they were not included in your father’s taxable estate.
If men were more likely to outlive their wives — women tend to outlive men by about six years, a gap that could narrow or widen depending on the age gap between a couple — step children would be writing more letters about their stepfather. In this column, letters about stepmother’s emptying bank accounts are more prevalent than stepfather’s doing the same thing. But children are also likely to disagree with their father’s wishes, if they believe he has been too generous to his second wife. In the meantime, I wish you a painless resolution to your trust debacle.
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets he cannot reply to questions individually.
Previous columns by Quentin Fottrell:
‘I grew up pretty poor’: I got an annual bonus. After I pay off my credit cards, I’ll have $10,000. What should I do with it?
‘I received an insurance-claim check for $22,000’: Why on earth does it take five days for my check to clear?
‘I want to protect my family’: My wealthy father, 49, is marrying his third wife. How do I broach the subject of my inheritance?
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.
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The unlikely trio of Nvidia Corp. Chief Executive Jensen Huang, Super Bowl legend Joe Montana and former Walt Disney Co. Chairman Jeffrey Katzenberg do have something in common.
They’re all backing enterprise AI startup Alembic, fresh off $14 million in series A funding led by WndrCo, the venture-capital firm started by DreamWorks founder Katzenberg, and others including Liquid 2 Ventures, the venture-capital firm started by Montana.
“Alembic has a breakthrough solution for a problem I’ve seen throughout my career: Measuring results from marketing initiatives,” Katzenberg said in an interview. “I look at it as both the Holy Grail and Fountain of Youth” in determining what you’re spending and what you’re getting.
Alembic’s software predicts revenue and ROI from marketing and sales cycles by analyzing and evaluating unstructured data from TV, radio, social media and digital marketing that is anonymous and privacy-protected. Its customers include Nvidia Corp.
NVDA,
Texas A&M University and nautical company North Sails.
“Our technology is like a full-body MRI machine,” Tomás Puig, co-founder and chief executive of Alembic, said in an interview. “Our customers say, before Alembic, what they used to evaluate marketing was like an ultrasound that only looked at one part of the body.”
Company officials estimate the market is more than $1 trillion.
Added San Francisco 49ers great Montana, who is managing director of Liquid 2 Ventures: “In sports and in business, it’s difficult to predict outcomes, but Alembic enables enterprises to accurately predict revenue and ROI from all the components of their marketing mix.”
Binance has announced a competition through its crypto derivatives arm, Binance Futures, offering participants the chance to win a Tesla Model Y. According to the crypto exchange, the contest will unfold over four weekly challenges spanning from Feb. 18 to Mar. 17, 2024. Binance Futures Unveils Tesla Model Y Challenge and Daily Crypto Rewards Beginning […]
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Innovation in financial advice is sometimes met with this feeling of existential anxiety from financial advisers who worry that new technology will negatively affect their jobs — or at the very least, reduce their value. We’ve experienced this hype cycle repeatedly in financial advice, as fledgling technologies tend to create anxiety for advisers by automating or modifying legacy processes and services they historically managed.
While the concerns around job security are understandable, advisers can’t let that unease cloud the good that technology has brought to the advice industry — especially the ways it’s enhanced how advisers serve their clients. Technology has helped lower advisers’ costs and overhead by delivering efficiencies, including streamlining client onboarding and portfolio construction. And it has fundamentally improved their ability to deliver a more personalized experience for clients — cementing the durable value of coaching and guidance from human advisers.
Fast forward to today, and the technology driving headlines is generative AI. This rapidly evolving technology has the promise and potential to change the ways we interact with nearly everything, including financial advice. As GenAI becomes prevalent in technology solutions across the industry, advisers would be well-served to consider its meaningful benefits and the accompanying risks, instead of viewing it as a fad or threat.
There are many ways GenAI can provide value, but for advisers, most notable are the ways in which the technology can help streamline and augment administrative tasks. Here are three time-scaling benefits GenAI can provide advisers so they can prioritize more valuable tasks to help their clients reach their goals:
1. Content generation: GenAI can lend a hand with content generation for the routine communications that advisers often spend their time agonizing over — helping deliver personalized communications like standard client check-ins, meeting reminders and market updates.
2. Knowledge management: Another of GenAI’s core use cases for advisers is in synthesizing and distilling a lot of information quickly. For example, GenAI can summarize comparisons between products, helping advisers make educated decisions more quickly for their clients. And rather than spending hours parsing through projections, lengthy annual reports and commentary to understand the latest market conditions or outlook, advisers can use GenAI to immediately summarize key takeaways and translate those insights into value for clients. GenAI can even help to distill prior client correspondence into more easily digestible notes and prompts as advisers prepare for upcoming meetings.
3. Code generation: Just as GenAI can help develop and draft routine content, it can also generate web-page coding, helping advisers upload content on their websites for clients more quickly. And for larger advisory firms, GenAI-assisted code generation can help advisers and their software developers expedite custom technology solutions that assist with client onboarding and back-office tasks like data analysis, trading and operations. It can also support their ability to more seamlessly integrate internal systems for CRM, trading and portfolio management.
GenAI carries several risks if left unchecked, further reinforcing the importance of having a human adviser in the loop. While the time-scaling benefits of GenAI are attractive, advisers must have a framework in place to address risks, both to protect their practice and to safeguard private client information.
One risk, for example, is jumping into a GenAI-focused partnership without conducting sufficient due diligence. We’ve witnessed explosive growth in GenAI technology, and new tools and platforms are popping up every day that may, at face value, seem like a good fit. It’s critical that advisers develop guidelines to vet potential partners and their technology, focusing on expertise, experience, client set and information-security measures.
Another important risk advisers will need to guard against is any lack of awareness around the parameters of the GenAI platform they’re operating in. GenAI technology can be private, but some platforms are open to the public — like ChatGPT, for example — and advisers should consider oversight measures to ensure no confidential, proprietary or client information is shared.
Lastly, advisers should develop processes to spot risks related to hallucinations and biases. Hallucinations can occur when AI is prompted to provide a response to a question it hasn’t been trained to answer. Instead of not answering the question, AI can hallucinate and provide an incorrect response that sounds convincing. Additionally, GenAI tools can also suffer from racial and gender biases. For example, GenAI could recommend a lower investment-risk tolerance for women regardless of their actual appetite for risk. It is crucial that advisers understand the source data behind the AI they’re using, and have plans in place to check against unexpected hallucinations and biases that may perpetuate prejudices or stereotypes.
With GenAI, advisers can more effectively manage their time — their most scarce and valuable asset — and devote more energy to creating personalized experiences and building deeper relationships with clients. Vanguard research shows that relationship-oriented services are a key differentiator in delivering value for clients, and that value increases as advisers establish emotional trust. Advisers who welcome technology and incorporate it judiciously have the potential to deliver better results for clients.
Lauren Wilkinson is a principal at Vanguard and chief information officer for the firm’s Financial Advisor Services (FAS) division.
More: Saving too little? Spending too much? How to know if your money worries are rational (or not).
Also read: A rude awakening: Lack of financial literacy hurts the young. What about older people?
Norway boasts the highest electric vehicle adoption rate in the world. Some 82% of new car sales were EVs in Norway in 2023, according to the Norwegian Road Federation (OFV). In comparison, 7.6% of new car sales were electric in the U.S. last year, according to Kelley Blue Book estimates. In the world’s largest auto market, China, 24% of new car sales were EVs in 2023, according to the China Passenger Car Association.
“Our goal is that all new cars by 2025 will be zero-emission vehicles,” said Ragnhild Syrstad, the state secretary of the Norwegian Ministry of Climate and Environment, “We think we’re going to reach that goal.”
The Norwegian government started incentivizing the purchase of EVs back in the 1990s with free parking, the use of bus lanes, no tolls and most importantly, no taxes on zero-emission vehicles. But it wasn’t until Tesla and other EV models became available about 10 years ago that sales started to take off, Syrstad said.
Norway’s capital, Oslo, is also electrifying its ferries, buses, semi trucks and even construction equipment. Gas pumps and parking meters are being replaced by chargers. It’s an electric utopia of the future. Norway’s grid has been able to handle the influx of EVs so far because of its abundance of hydropower.
“Electric cars are maybe a third of the price of gasoline because we have close to 100% hydropower. It’s cheap. It’s available and renewable. So that’s a big advantage,” said Petter Haugneland, the assistant secretary general of the Norwegian EV Association.
CNBC flew across the globe to meet with experts, government officials and locals to find out how the Scandinavian country pulled off such a high EV adoption rate.
Watch the documentary for the full story.
Almost a year after the mini banking crisis in the United States, it is worth revisiting the episode. Was it just a tempest in a teacup? Was there really a systemic threat, or was it just a problem with a few banks? Should the interventions by the U.S. Federal Reserve and Treasury worry or comfort us?
Recall that three mid-size U.S. banks suddenly failed around March 2023. The most prominent was Silicon Valley Bank, which became the second-largest bank failure in U.S. history, after Washington Mutual in 2008. Roughly 90% of the deposits at SVB were uninsured, and uninsured deposits are prone to runs. Making matters worse, SVB had invested significant sums in long-term bonds, the market value of which fell as interest rates rose. When SVB sold some of these holdings to raise funds, the unrealized losses embedded in its bond portfolio started coming to light. A failed equity offering then triggered a classic bank run.
It is convenient to think that these issues were confined to just a few rogue banks. But the problem was systemic.
When the Fed engages in quantitative easing (QE), it buys bonds from financial institutions. Typically, those sellers then deposit the money in their bank, and this results in a large increase in uninsured deposits in the banking system. On the banks’ asset side, there is a corresponding increase in central-bank reserves. This is stable, since reserves are the most liquid asset on the planet and can be used to satisfy any impatient depositors who come for their money. Unfortunately, a number of smaller banks (with less than $50 billion in assets) moved away from this stable position as QE continued.
Historically, smaller U.S. banks financed themselves conservatively, with uninsured demandable deposits accounting for only around 10% of their liabilities. Yet by the time the Fed was done with its pandemic-era QE, these banks’ uninsured demandable deposits exceeded 30% of liabilities. Though that level was still far below SVB’s, these institutions clearly had drunk from the same firehose.
Smaller banks were also more conservative about liquidity in the past. At the outset of QE in late 2008, banks with less than $50 billion in assets had reserves (and other assets that could be used to borrow reserves) that exceeded the uninsured demandable deposits they had issued. By early 2023, however, they had issued runnable claims (in aggregate) that were one and a half times the size of their liquid assets. Instead of holding liquid reserves, their assets were now more weighted toward long-term securities and term lending, including a significant share of commercial real-estate (CRE) loans.
Thus, as the Fed raised interest rates, the economic value of these banks’ assets fell sharply. Some of the fall was hidden by accounting sleight of hand, but SVB’s sudden demise caused investors to scrutinize banks’ balance sheets more carefully. What they saw did not instill confidence. The KBW Nasdaq Bank Index duly fell by over 25%, and deposits started flowing out of a large number of banks, many of which lacked the liquidity to accommodate the sudden outflows. The risk of contagious runs across smaller banks was real, as was the possibly of the problem spreading more widely.
“The Treasury essentially took bank runs off the table, while the Fed provided banks the funds to accommodate the continuing — though no longer panicked — depositor outflows. ”
Importantly, as private money flowed to large banks, very little flowed to small- and medium-size institutions. That is why the authorities had to come to the rescue. Soon after SVB’s demise, the Treasury signaled that no uninsured depositor in small banks would suffer losses in any further bank collapses.
The Fed opened a generous new facility that lent money for up to one year to banks against the par, or face value, of the securities they held on their balance sheets, without adjusting for the erosion in the value of these securities from higher interest rates. And the Federal Home Loan Banks (FHLBanks) — effectively an arm of the U.S. government — increased its lending to stressed banks, with total advances to the banking system having already tripled between March 2022 and March 2023 amid the Fed’s policy tightening. Borrowing by small- and medium-size banks from these official sources skyrocketed.
The Treasury essentially took bank runs off the table, while the Fed provided banks the funds to accommodate the continuing — though no longer panicked — depositor outflows. A potential banking crisis was converted into a slow-burning problem for banks as they recognized and absorbed the losses on their balance sheets.
Just recently, New York Community Bancorp
NYCB,
which bought parts of one of the banks that failed in 2023, reminded us that this process is still underway when it announced large losses. With the Russell microcap index of small companies significantly underperforming the S&P 100 index
OEX
of the largest companies since March 2023, it appears that smaller banks’ troubles have weighed on their traditional clients: small- and medium-size companies.
Where does that leave us? Although the situation could have been much worse if the Treasury and the Fed had not stepped in, the seeming ease with which the panic was arrested allowed public attention to move on. Apart from die-hard libertarians, no one seems to care much about the extent of the intervention that was needed to rescue the smaller banks, nor has there been any broad inquiry into the circumstances that led to the vulnerabilities.
As a result, several questions remain unanswered. To what extent were the seeds of the 2023 banking stress sown by the pandemic-induced monetary stimulus and lax supervision of what banks did with the money? Did advances by the FHLBanks delay failed banks’ efforts to raise capital? Are banks that relied on official backstops after SVB’s failure keeping afloat distressed CRE borrowers, and therefore merely postponing an eventual reckoning?
It is not good for capitalism when those who knowingly take risks — bankers and uninsured depositors, in this case — pay no price when a risk materializes. Despite sweeping banking reforms over the past 15 years, the authorities have once again shown that they are willing to bail out market players if enough of them have taken the same risk.
“Too big to fail” was bad enough, but now we have “too many to fail.” The mini-crisis of March 2023 was much more than a footnote in banking history. We cannot afford to bury it.
Raghuram G. Rajan, a former governor of the Reserve Bank of India, is professor of finance at the University of Chicago Booth School of Business and the author, most recently, of Monetary Policy and Its Unintended Consequences (The MIT Press, 2023). Viral V. Acharya, a former deputy governor of the Reserve Bank of India, is professor of economics at New York University’s Stern School of Business.
This commentary was published with the permission of Project Syndicate — The Danger of Forgetting the 2023 Banking Crisis.
More: Regional-bank bondholders seem unworried by New York Community Bank’s problems
Also read: Recession in 2024? A quarter of economists think it will happen.
Bitcoin’s price retreated below $51,000 to retest critical support levels on Feb. 17 despite holding strong after stronger-than-expected CPI data over the past few days.
The flagship crypto was trading at $50,856 as of press time after touching a low of $50,625.
The decrease marks a 2.81% drop over the last 24 hours, with Bitcoin’s market capitalization now close to $997.31 billion, slightly below the $1 trillion mark.
The recent price action comes amid a backdrop of both bullish and bearish sentiments among investors.
Analysis from Changelly suggests that the market sentiment has been predominantly bullish, with a 76% bullish sentiment against a 24% bearish outlook, underpinned by a Fear & Greed Index score of 77, indicating a prevailing sense of greed in the market.
Despite this optimism, Bitcoin has experienced significant price volatility over the past month, with 19 out of the last 30 days closing in the green.
Bitcoin bulls suggest the price is testing support before surging to yearly highs, as it has already broken out of a critical price ceiling to form a bullish megaphone pattern.
Bitcoin, the world’s first decentralized crypto, continues to be a focal point of discussion among investors, policymakers, and the general public. Its energy consumption, security features, and potential for adoption as a legal tender in various countries remain hot topics.
The crypto’s journey from being perceived as a risky investment to becoming a primary reserve asset for major corporations like MicroStrategy and Bitcoin ETFs issued by major asset managers illustrates its growing acceptance and the changing attitudes toward digital currencies.
Furthermore, the legal and political landscapes around Bitcoin are evolving. Countries like El Salvador have adopted Bitcoin as legal tender, a move that has spurred discussions on the adoption of cryptocurrencies by other nations.
Meanwhile, environmental concerns related to Bitcoin mining continue to spur debates on the sustainability of cryptocurrencies and their impact on global energy consumption.
At the time of press 5:04 pm UTC on Feb. 17, 2024, Bitcoin is ranked #1 by market cap and the price is down 2.1% over the past 24 hours. Bitcoin has a market capitalization of $1 trillion with a 24-hour trading volume of $19.87 billion. Learn more about Bitcoin ›
At the time of press 5:04 pm UTC on Feb. 17, 2024, the total crypto market is valued at at $1.92 trillion with a 24-hour volume of $59.22 billion. Bitcoin dominance is currently at 52.24%. Learn more about the crypto market ›
The best-performing stock of the past three decades is not one of the tech titans you’d assume.
It’s actually an energy drink company: Monster Beverage.
Monster’s stock has climbed for decades, along with sales, which have grown consistently for 31 years straight.
Between Feb. 14, 1994, and Wednesday, Monster’s stock appreciated by about 200,000%. That means that if a consumer had invested $1,000 in 1994, the stake would be worth about $2 million today.
Analysts say several factors have driven Monster’s success. But a lot has to do with its leaders, co-CEOs and South African billionaires Rodney Sacks and Hilton Schlosberg, who capitalized early on a rather new market.
“Some of it is clearly right place, right time,” said Stifel consumer and retail managing director Mark Astrachan. “I think there’s an element to it as well of being really good at what you can do, because you can’t be as lucky as they’ve been for as long as they’ve been, without being really good at running a business.”
Monster Beverage is a holding company composed of subsidiaries that produce and manufacture drinks including energy, alcohol, teas and coffees.
In the third quarter of last year, the company posted net sales of $1.86 billion, a 14.3% increase from the same period a year prior. Its Monster Energy segment accounted for $1.71 billion of that.
Monster Beverage was founded as a family juice company, Hansen’s, in 1935. It was later named Hansen Natural Corporation.
Sacks and Schlosberg acquired it and took it public in 1990, after it had filed for bankruptcy in 1988. The company has since seen a complete transformation. Where it was trading for just pennies at that time, it closed at $55.02 a share on Friday.
Monster launched a few energy drinks in the 1990s under its previous name. But analysts said the company didn’t really take off until establishing an eponymously named drink in 2002.
“They built it the right way,” said RBC Capital Markets Managing Director Nik Modi. “They were very slow and methodical in how they built the distribution of the brand, making sure it was strong in every market that it was in, and every retailer that was in it was getting good velocity.”
Analysts said the leaders were good at knowing their customers, focusing on action sports and other events such as motocross, UFC, bullfighting and Nascar instead of traditional TV or magazine ads. It resonated with the younger blue-collar workers who attended those events.
“People are so passionate about this brand,” said Modi.
The company attracted the attention of beverage giant Coca-Cola, which entered into a strategic partnership with the company now called Monster Beverage in 2015.
At the time, Coke purchased a 16.7% stake in the company for more than $2 billion. That stake has grown to about 20% today.
Coke agreed to become Monster’s preferred global distribution partner, and the two companies traded the ownerships of several brands. Monster got energy drinks such as NOS, Full Throttle, Burn and Relentless, while Coke got Hansen’s Natural Sodas, Peace Tea and Hubert’s Lemonade.
“They’ve obviously been showing that they can grow globally,” said Modi. “And that’s effectively what they’ve been doing and what’s been driving most of the growth in the outperformance in the stock.”
Watch this video to learn more.
The markets have dealt with several headwinds over the past few years, yet the S&P 500 has pushed through all that turmoil and is again posting new highs. It’s another reminder that, regardless of how the markets perform in the near term, investors will eventually be rewarded for holding shares of growing companies.
The long-term performance of a stock is highly correlated with the growth of the underlying business. With that in mind, let’s look at three stock picks that Motley Fool contributors believe would make great additions to a long-term investor’s portfolio right now.
John Ballard: One way to grow your money is to look for companies with high growth and plenty of growth runway still ahead. There’s not many stocks that fit this criteria better than the leading e-commerce company in Latin America, MercadoLibre (MELI -0.17%).
A $1,000 investment in the stock 10 years ago would be worth over $17,000 right now. And the same factors that contributed to that growth are still in play. MercadoLibre reported accelerating revenue growth in the third quarter of 2023, growing 69% year over year on a constant-currency basis.
The company is posting such strong growth primarily because e-commerce penetration in three of its largest markets — Brazil, Mexico, and Argentina — is growing at high rates. Retail e-commerce sales across Latin America are projected to reach over $200 billion in 2028, according to Statista, up from just $41 billion in 2017. That’s a massive tailwind for the company.
After investing in its core marketplace business and fintech offerings for many years, the company is also starting to show an improving profit margin. This is a major catalyst to push the stock higher in the near term. Operating income reached $685 million in the third quarter, a year-over-year increase of 194% on a constant-currency basis.
The stock still trades 14% below its previous peak from a few years ago. Investors can expect the stock to hit new highs in the years to come and deliver wealth-building returns.
Jeremy Bowman: Airbnb (ABNB -3.29%) is no stranger to controversy, as the company has been criticized since its early days for taking housing stock away from local residents and operating as an illegal hotel business. More recently, joking criticism about Airbnb cleaning fees and chore lists has become something of a meme online.
However, it seems as though Airbnb is getting the last laugh. The company just reported a fourth quarter with a 17% year-over-year increase in revenue to $2.22 billion, and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin improved from 27% to 33%.
Airbnb also has adapted its product and business model to satisfy most of the complaints it’s faced. The company changed its pricing display so that guests see the total price upfront, eliminating the bait-and-switch feeling of the cleaning fees. Since it made that move, nearly 300,000 listings have removed or lowered their cleaning fees, and 40% of its active listings now charge no cleaning fee at all.
The company is also growing its supply at a brisk pace, putting to rest concerns of over-saturation that some had dubbed an “Airbnbust.” It topped 5 million hosts for the first time, and total listings rose 18% year over year to 7.7 million active listings, with particularly strong growth in the Asia-Pacific and Latin America regions.
Airbnb has also tamed the regulatory threat, as 80% of its markets had some form of regulation in place as of the end of the year. In New York City, where a strict ban on short-term rentals passed, the company found that stays in nearby areas like New Jersey spiked, and New York hosts have shifted to long-term stays. No city accounts for more than 2% of its revenue, showing how diversified the company is geographically.
Finally, Airbnb promised it would expand beyond the core this year, adding new products. The company will provide more details later in the year, but that could give the stock a jolt just as the broader business is building momentum.
Jennifer Saibil: After a rough 2022, 2023 got investors excited again about Amazon (AMZN -0.17%) and its latest earnings update demonstrated incredible progress. The tech giant is back onto its regularly scheduled growth path after a few bumps over the past two years. Sales increased 14% year over year in the 2023 fourth quarter to $170 billion, and they were up 12% for the full year to $575 billion. After reporting its first annual net loss in a decade in 2022 (a drop of $2.7 billion), Amazon completely wiped that out with $30 billion in net income in 2023.
Core e-commerce is back in action, with faster delivery times to its more than 200 million Prime members. That’s a breathtaking amount of people who rely on Amazon for their essentials, and as Amazon wows them and wins their loyalty by offering what’s probably an unmatched selection of merchandise faster than anywhere else, they’re likely to keep coming back.
Amazon Web Service (AWS) is holding steady, with revenue increasing 12% over last year in the fourth quarter. Although that’s still below its pre-inflation rates, management says that trends are moving in the right direction. It continues to ink long-range deals with companies like Nvidia and Salesforce. It has also launched an ambitious array of generative artificial intelligence (AI) tools to stay competitive and keep its dominant position in cloud computing, where it has 31% of the market.
Advertising is its fastest-growing segment right now, increasing 26% year over year in the fourth quarter, and that’s likely to remain a high-growth category. It’s a no-brainer business, as third-party sellers can find buyers when they’re looking to buy, and they benefit from Amazon’s top-notch AI, which brings the right product ads to the right shoppers.
Amazon stock is up 70% over the past year, and it has plenty of growth drivers to keep growing and gaining.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Ballard has positions in MercadoLibre and Nvidia. The Motley Fool has positions in and recommends Airbnb, Amazon, MercadoLibre, Nvidia, and Salesforce. The Motley Fool has a disclosure policy.