Category: Stock Market

The Reserve Bank of Australia might be forced to break its promise and lift rates as soon as next year, if credit markets are right.

Interest rate traders are betting that our central bank will increase the cash rate to 0.25 basis points in late 2022 from its record low levels of 0.1% currently.

What’s more, these traders think interest rates will be at least 0.5% the following year, reported the Australian Financial Review.

Interest rate traders playing chicken with the RBA

That runs contrary to RBA Governor Philip Lowe’s commitment to keep rates at record lows until 2024, if not later.

Inflation fears are driving credit investors to undertake one of the boldest trades on the market – to bet against the central bank.

ASX investors should pay heed as interest rate expectations can derail the extremely popular investment in high-growth tech stocks.

ASX shares most at risk to rising interest rates

You only need to look at the meteoric rise of the Afterpay Ltd (ASX: APT) share price and Zip Co Ltd (ASX: Z1P) share price to see what I mean.

Such shares are more sensitive to rising rates than other parts of the share market as their valuations are highly leveraged to bond yields. More specifically, it’s the 10-year government bond yield that’s the focus as it sets the “risk-free” benchmark that risk assets are priced against.

While all shares would be impacted as the risk-free rate and valuations move in opposite directions, value stocks won’t be hit as hard as they haven’t run up as much.

Dividend paying stocks are also better protected as their generous distributions give investors a reason to stay onside.

Share allocation and interest rates

This means ASX shares like the National Australia Bank Ltd. (ASX: NAB) share price and Telstra Corporation Ltd (ASX: TLS) share price would fare better than the tech darlings as rates rise.

Meanwhile, other ASX shares could prove to be a good hedge against rising rates because their earnings increase with inflation.

These include our big resource companies, like the BHP Group Ltd (ASX: BHP) share price, OZ Minerals Limited (ASX: OZL) share price and Santos Ltd (ASX: STO) share price. Rates and commodity prices typically move in the same direction.

Investors, mind your head!

What’s prompting the credit market to forecast a rate hike are inflation worries. The mass COVID-19 vaccination programs rolling out around the world are fuelling speculation of a strong economic rebound.

The US president’s plan to stuff US$2 trillion into the pockets of Americans is also forcing inflation-fearing investors to scramble for cover.

Sure, credit markets could be wrong about the RBA. But given that the spike in bond yields are evident around the world, this is one risk you can’t afford to take your eyes off.

More reading

• Why the Austal (ASX:ASB) share price got torpedoed today
• Why Afterpay, Austal, Perenti, & SEEK shares are tumbling lower
• What does Citi think about ASX reporting season so far? 
• ASX 200 flat: SEEK CEO exits, Afterpay sold off, BOQ surges higher
• Smash term deposits with these high yield ASX dividend shares

Brendon Lau owns shares of BHP Billiton Limited, National Australia Bank Limited, OZ Minerals Limited, Santos Limited, and Telstra Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Hipages Group Holdings Ltd (ASX: HPG) shares are on the rise today after the company released its first financial results since listing on the ASX late last year. At the time of writing, the Hipages share price has climbed 3.11% to $2.32.

What’s driving the Hipages share price?  

The Hipages share price is on the move today after the company recorded a strong performance across all key metrics for its maiden report covering the period ending 31 December 2020 (1H FY21). 

Hipages delivered monthly recurring revenue in December of $4.6 million, up 31% and overall recurring revenue of $25.3 million, up 26%. 

It advised there had been no adverse impacts from COVID-19, with gross margins improving to 87% compared with 77% in 1H FY20. Margin expansion and increasing revenues translated into earnings before interest, tax, depreciation and amortisation (EBITDA) of $6.9 million compared to an EBITDA loss of $0.1 million in the prior corresponding period (pcp).

More surprisingly, with a market capitalisation of just $292 million, the company turned over an NPAT of $1.5 million, compared to the $5.3 million loss incurred during the pcp. Its strong financials were driven by a 12% increase in tradies on the platform to 28,800 and a 14% increase in job volumes to 0.8 million. 

What is Hipages?

Hipages is an Australian software-as-a-service provider with a platform designed to connect tradies and consumers. The company was formed with the goal of addressing the difficulties that arise out of organising home improvement projects.

According to Hipages, its platform “provides an efficient, technology-driven model to connect consumers with qualified tradies, and facilitates the management of other elements of the home improvement process, such as communication, payment and ratings and recommendations”.

Macro trends driving growth

In other news boosting the Hipages share price today, the company highlighted a number of trends with the potential to drive further growth over the medium to long term. These include a growing addressable market of 9.9 million Australian households which spent around $80 billion on home improvement services in 2020 and around 257,000 trades businesses in Australia employing 1.1 million tradies. 

The company also pointed to growth in tradie ad spend, with expected spend by tradies on advertising in 2020 to be approximately $976 million. Looking ahead, Hipages forecast tradie ad spend to grow by approximately 8.8% per annum. 

Hipages share price snapshot

Hipages has experienced a strong start to the second half of FY21 with January revenue up 18% on the pcp. The company has advised this is ahead of expectations with, again, no adverse impact from COVID. Over the remainder of FY21, Hipages intends to reinvest cost savings into brand marketing, tradie acquisition, technology, and product development to accelerate growth. 

As mentioned, the company is a relatively new addition to the ASX, having debuted on 12 November 2020 at an initial public offering (IPO) price of $2.45 per share. On its first day of listing, the Hipages share price ran as high as $2.85, or around 16% higher than the offer price. However, Hipages shares have since drifted lower and have been hovering around their current levels since the start of this calendar year.

More reading

• Why is the Spirit Technology (ASX:ST1) share price lifting?
• Here’s why Oil Search (ASX:OSH) just slashed its dividend
• Adbri (ASX:ABC) share price soars on strong FY20 result
• Why the Estia Health (ASX:EHE) share price is swinging around
• Why the Uniti (ASX:UWL) share price just broke its record high?

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Spirit Technology Solutions Ltd (ASX: ST1) share price is up 1.3% in afternoon trading. This was slightly down, having been up more than 8% earlier today. At the time of writing, the Spirit Technology share price is sitting at $0.39. 

We take a look at the telecommunication and cloud services provider’s results for the financial year ending 31 December (H1 FY21) below.

What financial results did Spirit Technology report for H1 FY21?

The Spirit Technology share price got a boost from this morning’s ASX release, revealing revenue and other income of $44.0 million for the half-year. That’s a 253% increase from the prior corresponding period (pcp). Additionally, total recurring revenue leapt 99% from the prior corresponding period to $21.1 million.

Spirit indicated that securing higher value recurring revenue contracts for longer durations has helped drive the total revenue lift. Undoubtedly, this was credited to its ability to cross-sell its premium managed services and cybersecurity offerings atop its data offerings.

The company rebounded from a net profit after tax loss (NPAT) of $740,000 in H1 FY20 to report a positive NPAT of $508,000.

Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 176% year-on-year to $4.4 million.

Spirit Technology reported a positive operating cash flow for the half-year of $4.3 million. Additionally, with $23.3 million of cash and available debt as at 31 December.

Comments from the Director

Regarding the half-year results, Sol Lukatsky, Spirit Technology’s Managing Director, said:

It is particularly pleasing to deliver a profitable H1 21 in a period of investment in scaling up the business, building a national brand and integrating multiple acquisitions. We’ve been able to adeptly respond to the changing needs of business, as their IT&T needs become increasingly complex by delivering a comprehensive bundled offering across cloud, voice, data, managed services and cyber security with a strong customer focus.

Looking ahead, Lukatsky added, “We have further growth in our sights as we launch new products, continue to expand our reseller network and realise the benefits of the investments made over the past year and during 2021.”

Spirit Technology share price snapshot

The Spirit Technology share price has been an outperformer over the past 12 months, with shares up 95%. That compares to a 0.4% gain on the All Ordinaries Index (ASX: XAO) over that same time.

Year-to-date the Spirit Technology share price is down 2%.

More reading

• Why the Hipages (ASX: HPG) share price is even higher today
• Here’s why Oil Search (ASX:OSH) just slashed its dividend
• Adbri (ASX:ABC) share price soars on strong FY20 result
• Why the Estia Health (ASX:EHE) share price is swinging around
• Why the Uniti (ASX:UWL) share price just broke its record high?

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of SPIRIT TC FPO. The Motley Fool Australia has recommended SPIRIT TC FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Oil Search Ltd (ASX: OSH) share price is on fire today. At the time of writing, it is up 6.3% to $4.31 a share. OSH shares closed at $4.07 each yesterday, but opened at $4.21 this morning and rose as high as $4.42 just after open. However, the share price has settled this afternoon to the current price.

The catalyst for these moves higher was the release of the company’s earnings report covering the full 2020 calendar year this morning before the market open.

What did Oil Search report this morning?

2020 was a rough year for oil companies, and this is reflected in Oil Search’s results today. The company reported that revenues of US$1.074 billion, down 32% from 2019’s US$1.585 billion. Despite that drop in revenues, Oil Search managed to increase oil production to 29.02 MMboe (million barrels of oil equivalent). This is up 4% from 2019’s 27.95 MMboe.

Earnings Before Interest, Taxes, Depreciation, Amortization, and Exploration Expenses (EBITDA) came in at US$721.1 million, down 37% on 2019’s US$1.146 billion. That swung Oil Search’s net profit after tax (NPAT) metric to a loss of US$320.7 million for the year. This was down 203% from a net profit of US$312.4 million in 2019.

On the ‘core NPAT’ metric, the company reported a profit of US$22 million. This was down 93% from 2019’s US$320.9 million.

However, Oil Search has managed to put a dent in its net debt over the year. The company reported net debts of US$2.983 billion in 2019. In 2020 this figure was reduced by 20% to US$2.376 billion.

Even so, investors might be disappointed with the final dividend Oil Search is putting on the table. The company has announced it will pay a final dividend of 0.5 US cents per share. That’s down 89% on the 4.5 US cents per share final dividend Oil Seach paid out last year. If annualised, that dividend would equate to a forward yield of roughly 2.9% on the current share price and exchange rate.

The company reports that this dividend represents a payout ratio of 47% of core NPAT. Oil Search’s dividend policy is to return between 35-50% of core NPAT to shareholders.

Looking forward to 2021

Managing Director of Oil Search, Dr. Keiran Wulff, had a few interesting things to say about the company’s outlook for 2021:

We have entered into oil price hedges to reduce the Company’s downside exposure to oil prices over the balance of 2021. We have locked in a floor price of US$55 per barrel covering nine million barrels of oil equivalent production over the period from May to December 2021… With this hedge arrangement, we have not limited our exposure to further oil price appreciation…

Whilst we are encouraged by the recovery in the oil price over the last few months, particularly given our strong cash flow and earnings leverage to higher prices, the Company remains focused on maintaining discipline in both our capital management and in cost control across our operations.

More reading

• Why Bank of Queensland, MNF, Oil Search, & Starpharma are charging higher
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Friday
• Oil’s recovery is happening faster than you think: Citigroup
• Fossil fuels vs renewables: What’s ahead for ASX energy shares?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Adbri Ltd (ASX: ABC) share price is up more than 7% after the construction business announced its FY20 result to the market.

FY20 result highlights

Adbri reported that its revenue had declined by 4% to $1.45 billion. The company said that the impact of lower residential activity affected cement and concrete volumes, offsetting improved sales of lime and concrete products.

The construction business also said that its underlying net profit after tax (NPAT) fell 6% to $115.6 million. However, this was ahead of the market guidance that was withdrawn in April 2020. The company said it prudently responded to pressures from slowing markets, rising input costs and challenges posed by COVID-19.

Adbri said that the earnings reflected the benefit of cost reductions achieved as a result of the group’s cost-cutting and business improvement programs which exceeded initial targets as well as stronger than anticipated volumes in the second half, particularly in Western Australia.

Reported net profit after tax of $93.7 million was up from $47.3 million in FY19. This reflected non-cash impairment charges totalling $15.2 million after tax and significant items totalling $6.7 million after tax.

Cashflow from operations increased by 32.6% to $256.2 million with improved working capital and lower income tax payments offsetting reduced distributions from joint ventures and higher interest payments.

Balance sheet

Adbri said that its balance sheet remains strong with net debt reduced by $51.2 million to $372.1 million at 31 December 2020.

The Adbri board decided to declare a final dividend of 7.25 cents per share, bringing the full year dividend to 12 cents per share, representing a payout ratio of 68% of underlying earnings.

Adbri’s current focus

The company outlined a number of initiatives to create shareholder value over the long-term.

It’s looking to continue reducing costs and improve its operational performance. It’s looking to restore lime volume and earnings after the end of the Alcoa lime contract from 30 June 2021. Adbri is targeting downstream integration and diversification with its businesses. It’s looking to increase exposure to infrastructure and maximise value creation opportunities across its land holdings.

Outlook

Adbri said that its 2020 performance demonstrated the quality of its vertically integrated business and the value of its balanced geographic and sector exposure.

Stimulus measures from all levels of government, particularly fast-tracking of construction projects including infrastructure spending, home-building grands and stamp duty relief are anticipated to benefit demand for construction materials in 2021. The improvement in housing approvals in the second half of 2020 is translating to commencements. Planned infrastructure projects are moving to the construction phase at varying levels of speed.

However, Adbri said that trading conditions are expected to remain challenging until the stimulus measures completely offset underlying softness in east coast construction markets.

Adbri said that it’s making progress in evaluating strategic initiatives to unlock opportunities for the lime business.

In 2021, Adbri is expecting earnings to be impacted when the Alcoa contract concludes and by the anticipated start-up of a competing cement terminal in NSW with an expected after-tax impact of $16 million for 2021.

However, Adbri is expecting earnings will be supported by increasing demand for cement and lime from a growing number of mining projects as the resources sector continues to operate largely uninterrupted.

It’s targeting $20 million in cost savings to counter cost headwinds of $10 million in 2021. Capital expenditure is anticipated to be around $200 million, including approximately $75 million for the Kwinana Upgrade Project and approximately $40 million in development capital.

Surplus land sales are expected to generate $20 million to $30 million in proceeds over the next two years.

More reading

• These were the worst performing ASX 200 shares in January

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Estia Health Ltd (ASX: EHE) shares popped this morning following the company’s release of its FY21 half-year (1H21) results. In the first hour of trade, the Estia share price jumped nearly 5% to an intraday high of $2.13. However, it’s been fluctuating since and is currently trading at $2.05, up 0.99% for the day so far.

Let’s take a look at what the aged care services provider reported.

What did Estia Health report?

The Estia share price is in positive territory today despite the company reporting a $5.3 million loss for 1H21 compared to the $14.3 million profit it achieved at the end of 1H20.

Revenues totalled $322.5 million for the half, 2% higher than the $316.1 million reported for the prior corresponding half.

Estia Health noted the impact that coronavirus had on the business during the period. It advised that the pandemic added approximately $20.1 million in additional costs over 1H21.

The extra spending was attributed to additional staff and workforce costs, infection prevention and control (IPC), personal protective equipment (PPE), cleaning, waste disposal, and staff and family welfare support.

The company received $8.5 million in temporary government funding support during the period to help it manage the impacts of COVID-19.

Estia’s earnings per share (EPS) dropped from 5.49 cents in 1H20 to negative 2.02 cents for the six months ended 31 December 2020.

The aged care services provider posted net liquidity of $240 million at the end of 1H21.

No interim dividend was declared.

CEO comments 

Estia Chief Executive Ian Thorley talked about how COVID-19 affected operations during 1H21. He said: 

The second wave COVID-19 outbreak in Victoria from July to October tested the sector in a way never previously experienced and we again thank our residents, their families and employees for their ongoing support during this difficult time…

It is evident that the impact of COVID-19 on the entire Australian economy and community will continue to be experienced for the foreseeable future, at least until the benefits of the vaccine program are evident.

Thorley also mentioned that Estia Health is well-positioned to respond to future COVID-19 outbreaks following the increased training and process improvements carried out by the business during the half.

Estia Health share price snapshot

The Estia Health share price has lost nearly 11% over the past year period but has rallied more than 27% over the last six months.

Based on the current share price, Estia Health has a market capitalisation of $530.4 million and 261.3 million shares outstanding.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why BHP, Estia Health, HUB24, & South32 shares are dropping lower

Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Uniti Group Ltd (ASX: UWL) share price is climbing strongly today as the company announced its half-year results. Shares in the telecom company surged to 5.82% today, rising to a new all-time high of $2.11. At the time of writing, the Uniti share price has retreated back to $2.08.

The company operates under three business units of wholesale & infrastructure, consumer & business enablement, and specialty services. Uniti currently boasts a market cap of 1.412 billion.

Uniti reports record results

The Uniti share price is rising strongly today after the company posted record results across the board. Uniti delivered record numbers in every key financial measure in the half-year report. Moreover, Uniti claims that the results position the business for an acceleration in long term organic growth. This is due to a large proportion of results already being ‘locked in’ by the growing contracted portfolio.

Regarding the company’s financial performance, there was a 148% increase in revenues against the prior corresponding period (pcp). As such, revenue for the period stood at $54.6 million. This takes the company’s revenue run rate at the end of December 2020 to a total of $200 million.

Remarkably, earnings before interest, taxes, depreciation and amortisation (EBITDA) saw an even larger rise. Overall, EBITDA grew by 307% to $29.3 million. This was aided by the impressive operating free cash flow result of $18.3 million, making up 62% of EBITDA.

After the first half of FY21, Uniti now holds $45.5 million in cash. Notably, this is before the receipt of its $20 million share purchase plan undertaken in January.

Other highlights

Over the half, Uniti released a number of significant announcements. Namely, 3 acquisitions including OptiComm, Harbour ISP, and the Telstra Velocity network assets.

Moreover, the company claims that all three of its business units are benefiting from strong tailwinds. Including greater digital services uptake, consumption, technology, and strengthening residential property markets.

Management comments

Uniti’s CEO, Michael Simmons, said of Uniti’s H1 FY21 performance:

We are privileged to be operating in a segment of the telecommunications industry experiencing once-in-a-lifetime favourable market and economic conditions and investing in fibre infrastructure, which delivers a highly demanded essential commodity to consumers and business, which is able to accommodate very long term demand growth with minimal incremental capital or operating expenditure.

More reading

• Why the Estia Health (ASX:EHE) share price is swinging around
• Why the Western Areas (ASX:WSA) share price is crashing 10% lower
• Why the Dubber (ASX:DUB) share price is surging 6% higher
• Reddit’s ‘Roaring Kitty’ doubled his stake in GameStop (NYSE:GME)
• Why the Bank of Queensland (ASX:BOQ) share price is up 10% to a 52-week high

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Western Areas Ltd (ASX: WSA) share price has been a very disappointing performer on Tuesday.

In afternoon trade, the nickel producer’s shares are down a sizeable 10% to $2.49.

This means the Western Areas share price is now down 20% from the 52-week high of $3.10 it reached in January.

Why is the Western Areas share price crashing lower?

Investors have been selling Western Areas shares today following the release of its half year results.

According to the release, the company reported a 21.5% decline in revenue to $122.7 million and a 65.5% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to $24 million.

On the bottom line, Western Areas recorded a loss after tax of $12 million. This is down from a profit of $24.7 million a year earlier.

Management advised that its poor performance was driven by lower production and recoveries, higher cash costs, and a slightly softer nickel price.

Outlook

Also weighing on the Western Areas share price today was its guidance for FY 2021.

Management commented: “In light of the first half performance, the Company has adjusted guidance to account for the nickel production that has been deferred into FY22, primarily from Flying Fox.”

Western Areas now expects production of 16,000 to 17,000 tonnes of nickel concentrate at a unit cash cost of $3.75 to $4.25 per pound. This compares to its previous guidance of 17,000 to 19,000 tonnes with a unit cash cost of $3.50 to $4.00 per pound.

In respect to its higher costs, management explained that this is the result of the lower grade forecast for its mines and fixed costs relating to mine maintenance.

How does this compare to expectations?

According to a note out of Goldman Sachs, its analysts were expecting EBITDA of $26 million and a loss of $11 million. So Western Areas has fallen a touch short with its result.

However, the broker was not surprised by the guidance downgrade. It commented: “We already forecast 16.0kt at A$4.21/lb, at the bottom end of the revised guidance range for production and the top end for costs.”

At present, Goldman has a neutral rating and $2.40 price target on Western Areas shares.

More reading

• These are the 10 most shorted shares on the ASX
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• Why Bubs, Kogan, Lake Resources, & Western Areas shares are sinking lower
• ASX 200 up 0.6%: ResMed Q2 update, Kogan sinks, NAB acquires 86 400

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Dubber Corp Ltd (ASX: DUB) share price is climbing higher today on news the company has launched its products across the AT&T network.

In early afternoon trade, the cloud-based software-as-a-service (SaaS) company’s shares are up 6.27% to $1.78.

Dubber is a cloud call recording and data capture company that provides unified communication products to its clients. The company’s technology enables voice calls to be analysed and turned into data for process improvement.

What’s driving the Dubber share price higher?

In today’s release, Dubber advised that AT&T Inc has deployed its unified call recording and voice intelligence solutions on three networks. These include AT&T’s IP toll-free network, hosted voice service, and Cisco Webex Calling with AT&T Business in the United States.

The AT&T network is a session initiation protocol (SIP) trunking service (a method of sending voice and other unified communications services over the internet) that enables inbound toll-free calls.

Dubber said that more than 3 million business customers around the world used AT&T’s network. This includes Fortune 500 companies operating in the financial services, retail, healthcare, insurance, and manufacturing industries.

The partnership signifies Dubber’s importance to the AT&T network as the technology can easily connect voice data to big data sets. The company will offer unified call recording and voice artificial intelligence feature to new and existing customers on AT&T IP toll-free.

What did management say?

Dubber CEO Steve McGovern commented:

AT&T Business is again bringing industry-leading innovation to customers. By eliminating the costs of legacy on-premise and application- specific call recording and then automating compliance, customer experience and call centre activity enterprises can gain an immediate reduction in capital expenditure and drive increased productivity.

AT&T Business vice president of voice & collaboration Rich Shaw added:

Voice data is one of the last great untapped resources for companies. By making data and insights from conversations more accessible, we unlock the potential to drive digital and customer experience transformation through voice.

With the pandemic and acceleration of remote work, moving to network-centric and unified call recording has never been more important. Together with Dubber, we can help answer these customer needs on a global scale.

The Dubber share price has gained close to 80% over the past 12-month period.

More reading

• Here’s why the Dubber (ASX:DUB) share price is surging today

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Dubber. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The Reddit stock trader who launched an insurrection against hedge funds trying to short GameStop (NYSE: GME) into oblivion is serious when he says he’s bullish on the video game retailer.

The Wall Street Journal reported last week that Keith Gill — known as Roaring Kitty on his YouTube — channel doubled his stake in GameStop to 100,000 shares for a position that was worth $4 million.

The mouse that roared

Gill got the short-squeeze ball rolling last month after posting his bullish take on the video game retailer and noting hedge funds had overplayed their hand and shorted more stock than there was available to trade.

It quickly became clear that small retail investors acting in concert to buy GameStop shares and options could cause the stock price to rise. In doing so, short-sellers would start covering their positions, leading to further increases in the share price.

What Gill perhaps didn’t realize was that a torrent of pent-up emotion would be unleashed in the process, and not only would GameStop be caught in a “gamma squeeze,” but that other heavily shorted stocks would get sucked into the vortex. 

AMC Entertainment (NYSE: AMC), Bed Bath & Beyond (NASDAQ: BBBY), and Nokia (NYSE: NOK) were among the companies that saw their stock prices soar hundreds if not thousands of a percent higher in the course of just a few days.

Gill was called to testify before Congress on his actions that precipitated the stock trading frenzy, along with the heads of hedge funds and the Robinhood online trading app. Gill testified essentially that he liked GameStop’s stock, and he has apparently backed up that sentiment with money, purchasing an additional 50,000 shares.

GameStop stock was up over 7% in midday trading Monday, which would have added approximately another $290,000 in value to Gill’s position.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The post Reddit’s ‘Roaring Kitty’ doubled his stake in GameStop (NYSE:GME) appeared first on The Motley Fool Australia.

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