Investor's Playbook

📖Today’s Agenda

• Stock Market : Airbnb Stock Jumps In Heavy Volume Toward Buy Point

• Entrepreneurship : TOP 3 AI TOOLS OF THE WEEK

• Personal Finance : Investment Approaches in an Increasing Interest Rate Environment

📈Stock Market

Airbnb Stock Jumps In Heavy Volume Toward Buy Point

Shares of Airbnb (ABNB) rallied in heavy trading volume Friday. The gains pushed Airbnb stock near a 154.95 buy point from a long consolidation pattern.

The San Francisco-based online travel platform is reportedly adding an additional guest fee for cross-currency booking. Starting in April, the guest service fee on Airbnb will increase from 14.2% to 16.5% on cross-currency transactions, as Airbnb explained on its website. Bloomberg reported the change Friday afternoon.

The changes comes as Airbnb is pushing further into international travel. While North America still represents the majority of its bookings, Airbnb's fastest growing markets in its third-quarter earnings report were the Asia-Pacific region and Latin America. Cross-border nights booked grew by 17% in the third quarter compared to a year ago, the company said in November.

In a note to clients Friday, BTIG analyst Jake Fuller estimated the change could add $290 million in revenue for Airbnb in 2024, based on estimated 111 million nights booked cross-currency. Fuller holds a neutral rating on Airbnb stock.

Overall, analysts project Airbnb will have about $11 billion in total revenue for 2024, according to FactSet.

ABNB stock climbed 5.3% to close at 149.62 on Friday.

Airbnb Stock: Consolidation Pattern

Airbnb stock racked up big gains in the first half of 2023, landing itself a spot in the S&P 500.

Since then, shares have settled into a long consolidation pattern that dates back to July. A 52-week high of 154.95 reached in July is the current buy point on the pattern, according to investors.

Airbnb has not set a date for its fourth-quarter earnings yet but is expected to report in mid-February, according to FactSet.

🎯Entrepreneurship

TOP 3 AI TOOLS OF THE WEEK

1. Wand

DATA TO DATA

Wand is an AI business assistant designed to revolutionize your workflow. Wand utilizes advanced artificial intelligence to give users access to data, insights, and automation, elevating the speed, simplicity, and effectiveness of their work. This tool eliminates the complexities of data integration with its easy-to-use interface. Connecting wand to your data sources, including prevalent file formats, websites, and SaaS databases, takes just a few quick clicks.

2.Leap

DATA TO APP / TEXT TO DATA

Leap is an innovative AI tool designed to expedite the creation of next-generation AI workflows. It offers a visually appealing, intuitive platform to coordinate AI automations for internal use without the need for heavy code-writing, offering unparalleled efficiency and convenience to its users. Not only is Leap a haven for crafting intricate automations, but its integration API also allows you to infuse your applications with revolutionary features.

3. Html.to.design

WEBSITE TO IMAGE

Html.to.design is an innovative platform that’s committed to simplifying the web designing journey by converting any website into easily editable design elements for use in Figma. Cast aside the tedious task of creating each element from scratch and import HTML directly to Figma, setting path for a more efficient, resourceful, and creative design process.

💸Personal Finance

Investment Approaches in an Increasing Interest Rate Environment

Investors haven't had to deal with rising interest rates like this since the Rubik's Cube and Post-it Notes were novel in the 1980s. But rates are soaring now, forcing generations of puzzled investors who've never seen rates rise to rip up their outdated playbooks.

Talk about turning investors' plans upside down. Money has been practically free to borrow for years. But we've gone from "lower for longer" to "higher for longer" fast.

The yield on the 10-year Treasury is pushing 4.14%, trading around its highest in 16 years. And back then, rates were falling from greater heights — not rising fast from longtime low levels like they are now.

Rising interest rates might seem like an interesting sideshow to the stock market. But no one dares to fight the Fed for a reason. Suddenly, lowly savings accounts paying 4% or more challenge the motivation to buy stocks. Investing in a rising interest rate environment calls for a whole different approach.

The biggest challenge? Bonds, which usually offer a safety net, won't paper over stock drops when rates are rising. As interest rates increase, the prices of existing bonds drop.

Rising Interest Rates Challenge Stocks

Meanwhile, stocks, typically the growth engines of investors' portfolios, become less appealing. Suddenly, companies' profits can take a hit as they either pay more to borrow or borrow less. That leaves them with less money to grow their business. And relative to bonds, stocks can seem less attractive.

"Rising interest rate environments are often challenging for stocks," said Bob Johnson, the CEO of Economic Index Associates and a professor at Creighton University. "Berkshire Hathaway Chairman Warren Buffett has said that 'interest rates act on financial valuations the way gravity acts on matter. The higher the rate, the greater the downward pull. That's because rates of return that investors need from any kind of investment are directly tied to the rate they can earn from government securities.'"

Rising Interest Rates Restrain Expansion

And then there's the economy. Rising rates are equivalent to the Fed stamping on the economy's brake pedal. A rise in interest rates can dampen economic expansion — though that doesn't seem to be the case just yet.

"In the current rate and market environment, we are dealing with rising interest rates and a still growing economy," said Scott Bishop, a partner with Presidio Wealth Partners in Houston.

Higher Interest Rates Make Some Assets More Attractive

"With so much uncertainty in the economic outlook, it becomes all the more important to recognize and manage the risks inherent in the current environment, perhaps by shifting more assets into shorter-term, less-volatile assets like short-term Treasury bills or even cash" (which, thanks to higher interest rates, are yielding significantly more than they did up until recently), wrote Larry Swedroe, the head of financial and economic research at Buckingham Strategic Wealth.

Others share that point of view. Bishop recommends avoiding credit risk by holding shorter-term U.S. Treasury bills or higher yielding money market funds that have underlying assets of government securities.

Invest In Treasury Bills Directly

U.S. Treasury bills, also known as T-bills, are short-term government securities issued by the U.S. Department of the Treasury. They are regarded as one of the safest investments in the world because they are backed by the full faith and credit of the U.S. government.

Swedroe recommends investing directly in U.S. Treasury bills rather than government money market funds.

For one, no fees are associated with T-bills as compared to government money market funds. "Why own a money market fund?" Swedroe asked. "Just go buy T-bills yourself. Why do you need to pay even a low fee?"

Plus, he noted a potential tax issue for those investing in government money market funds. "A lot of these money market funds don't invest in Treasuries that are exempt from state and local taxes," he said. "They do repos."

Income from repos held in a government money market fund is subject to both federal and state income taxes, while income from direct ownership of government securities like Treasuries is exempt from state taxes.

A Fixed-Income Investment Strategy

George Padula, the chief investment officer of Modera Wealth Management, recommends a fixed-income investment strategy focused on quality, duration, diversification and income.

"Keep your quality high," he said. "By combining Treasuries, high-grade corporate bonds, high-grade foreign bonds and even adding in higher yielding bonds, one can still have a weighted average credit quality that is investment grade."

Others are also fond of this strategy. "To protect yourself in this environment where we may not have the 'soft landing' the market has predicted all year, it may be a great time to keep your duration low, your credit quality high and keep some 'dry powder' to invest on the other end," said Bishop.

Mankoff suggests looking at ultra-short-duration fixed-income investments "because they are far less sensitive to rising interest rates than longer-term fixed-income investments."

Duration is a measure of a bond's sensitivity to interest rate changes, according to a BlackRock blog post. The higher a bond's duration, the more its price will change when interest rates move.

The US Aggregate Bond Index has a duration of about six years. For every 1% increase in rates, the Aggregate Bond Index would decline in price by about 6%. "Keeping duration around five years means the portfolio will experience about 17% less interest rate risk than the index, all things being equal," Padula said.

Padula's advice: "Don't reach for risk."