My dog has recently discovered Freshpet (NASDAQ:FRPT). Freshpet is a company that is the “top dog” and first mover in a new pet food niche: refrigerated food. This is a fast-rising sub-sector that is threatening to upend the whole pet food industry. That’s because your average kibble is filled with artificial preservatives and chemicals that are bad for your dog and cat. By using refrigeration, Freshpet can make its food healthier for pets. And it also tastes a lot better.
My dog Vanna runs into the kitchen before I put it in her bowl. That’s how much she likes it. It’s right up there with people food, in her opinion. Freshpet’s dog food actually looks like people food. In fact, the company did a secret taste test with people, and they seemed to like it, too(!)
Since my dog thinks Freshpet is the best dog food ever, I decided to research the stock and discovered that it is publicly traded. What an amazing run this company has had. It’s one of those Peter Lynch stocks — a low-status “boring” company and one that even amateur investors can easily understand. Yet Freshpet has outperformed a lot of elite biotech stocks that are splicing genes, and a lot of brainiac stocks that involve writing computer code. It’s even outperformed some internet all-stars. You like FAANG stocks? Freshpet has been killing FAANG for years. It’s taken FAANG and buried it out in the backyard.
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One really nice thing about this stock is that it’s still very early in Freshpet’s story. While the company is the dominant player in refrigerated pet food, the vast majority of the estimated $90 billion worldwide market for pet food is not refrigerated yet. So there is room for fantastic growth, as refrigeration wins the battle for your dog’s food bowl. And as the first mover in “fresh” food for your pet, Freshpet has incredible advantages over any new competitors who try to follow.
When you shop for groceries, how many fridges do you see in the dog food aisle? Chances are the answer is going to be one or zero. If there is a refrigerator, it belongs to Freshpet. The company enjoys a near-monopoly in refrigerated pet food, at least in grocery stores. That’s because the company has provided thousands of fridges to retailers for free. So now the company dominates this valuable shelf space. For Purina or any other pet food manufacturer that wants to compete, they would have to convince grocery stores to add another refrigerator in the dog food aisle.
While shares are expensive, with a price-to-sales ratio of 16, Freshpet has a fantastic future. If you have any doubts, buy a bag for your dog, and see what happens.
Afterpay: here’s a stock that’s outperformed Freshpet
If I bought shares of Freshpet five years ago, that stock would have outperformed almost all of my other stocks, with a handful of exceptions. One of them is Afterpay (OTC:AFTPF), the top dog and first mover in the “buy now, pay later” category that is transforming retail check-out.
Afterpay only went public in 2017, in Australia. It’s returned 3,178% since then. That’s a 30-bagger in three years. The stock is not traded on a U.S. exchange, but you can buy shares of its American depositary receipt (ADR). The ADR for Afterpay was started in 2018, and it’s run up 1,100% in a little over two years.
Because of all this amazing growth, the Fools in Australia are talking about finding “the next Afterpay.” In Australia, Afterpay is old news, which is funny, because in the U.S., so many people have never heard of this company. Instead of trying to find the next Afterpay, Australians might want to buy shares of the first Afterpay. Despite the fantastic gains the stock has had so far, there’s still a huge runway of growth ahead internationally.
Afterpay is a fintech company but also a powerful consumer brand. If you have bad credit, or you just want to avoid using credit cards, Afterpay might be right up your alley. The company has declared war on credit cards. It provides free credit to people and runs no credit checks.
The company has very low defaults — 0.6% of underlying sales. How does Afterpay do it? The company only approves one loan at a time, and if you miss a payment, you’re not approved for any more debt until you’re paid up.
Afterpay makes its money by charging the retailer a small service fee. So far, retailers are signing up for the service in droves because consumers often use Afterpay to buy high-ticket items.
Growth has been so fantastic, companies like Shopify (NYSE:SHOP) and PayPal (NASDAQ:PYPL) are attempting to copy Afterpay’s business plan. Shopify is a $116 billion business. PayPal is a $226 billion business. And yet, it’s the $20 billion Afterpay that is the first mover in this space and the one that is transforming the way people shop. The Shopify and PayPal solutions appear to be just a virtual credit card, one requiring consumers to undergo a credit check, which can be annoying at the checkout counter.
Nonetheless, Afterpay has swiftly responded to these new competitive threats by aligning itself with Stripe, a privately held digital payments platform. This partnership will allow the millions of retailers that use Stripe to set up a payments system for their website to add an Afterpay option at checkout.
While internet retail is important for Afterpay, the company actually has bigger ambitions. It wants its service to be used in brick-and-mortar retail as well. It’s long been that way in Australia; now in the U.S., shoppers will start to have an Afterpay option in physical stores.
How fast is the company growing? The company reports that underlying sales volume in the U.S. jumped up 229% from the year-ago quarter.
Afterpay and Freshpet are two under-the-radar stocks that have stomped the market in the past and should continue to outperform over the next several years as these companies grow and expand their business. I’m very bullish on both these names.
Martin Lewis issues guidance on using credit cards to build ratings – best deals | Personal Finance | Finance
Martin Lewis regularly urges savers to use caution when utilising debt themed products but at the same time, he acknowledges the need for a decent credit rating to get by financially. Today, the Money Saving Expert was questioned by viewer Miranda on how one can build their credit rating in difficult circumstances.
“What I’d then like you to do is go and do £50 a month of normal spending on it, things you’d buy anyway.
“[Then] Make sure you pay the card off in full every month, preferably by direct debit so you’re never missing it because the interest rate is hideous.
“That way you won’t pay any interest.
“You do that for a year, you’ll start to build that credit history, showing them you’re a good credit citizen.
“Then you’ll be able to move into the sort of more normal credit card range.
“So, bizarrely, to get credit you need credit. What credit will you get? Bad credit, go get the bad credit just make sure it doesn’t cost you.”
Consumers of all kinds may not have the best options at the moment as recent analysis from moneyfacts.co.uk revealed.
In mid-November, they detailed that a number of high street banks have cut the perks and interest on a number of their current account deals.
On top of this, the Bank of Scotland and Lloyds Bank made credit interest cuts of up to 0.5 percent.
Rachel Springall, a Finance Expert at moneyfacts.co.uk commented on the few options consumers and savers currently have available: “Clearly, it is vital consumers decide carefully if now is the time to switch, but if they wait too long, they may well miss out on a free cash switching perk.
“At present, providers will be assessing how they can sustain any lucrative offers in light of the pandemic.
“With this in mind, we could well see more changes in the months to come and if this does indeed occur, consumers would be wise to review whether their account is still worth keeping.”
Should you use a balance transfer to pay off debt?
A balance transfer might be the solution if you have debts and want to gain control over your finances. But whether a balance transfer is right for you will depend on a number of factors.
Things to consider before using a balance transfer
The size of your debt
If you want to apply for a balance transfer credit card, be aware that most providers will allow you to transfer up to 90% of your credit limit.
Your credit limit will be dependent on your own personal circumstances, including your salary, your credit history and your residential status (homeowner or renter).
Be realistic about your debt. For example, if you earn £25,000 per year and you have a debt of more than £15,000, a balance transfer might not be cheapest way to pay the debt.
The time taken to pay the debt
The main advantage of a balance transfer credit card is that many offer an interest-free period on the balance. So, if you can pay off your balance in that period, you won’t accrue any further interest charges.
However, these periods typically range from 18 to 24 months, so if you think you will need more time to pay the debt, you may need to factor in additional interest charges when the interest-free period ends.
Whether or not a balance transfer is the right debt payment solution will depend on your personal circumstances. Check our balance transfer calculator if you want to work out how much a balance transfer could save you in interest payments.
Your credit score
The advantage of a good credit score cannot be underestimated in this situation.
When applying for a balance transfer credit card, the company will check your credit score. Based on this score, they could refuse your application.
Even if you are accepted, if you have a bad credit score they could reduce your credit limit. Ultimately, this will determine the benefit of a balance transfer as a suitable debt payment solution.
If you think your credit score might be a problem, it’s worth checking with the credit reference agencies before applying. That way you can avoid any nasty surprises.
Alternative solutions to balance transfers
You could still use a balance transfer even if the size of your debt is bigger than the credit limit.
Transferring part of the debt would enable you to benefit from any interest-free period, where applicable.
Alternatively, if you have multiple debts, you could consolidate all of your debts so that you can make a single regular payment. If necessary, you could do this using an unsecured personal loan over a period longer than 24 months.
Look at your own personal circumstances with a critical eye. Remember that you need to factor in living expenses when thinking about how long it will take you to pay off your debt.
Balance transfers are a useful method for debt repayment, but be aware that credit cards are an expensive way to borrow money. Take full advantage of any 0% deals wherever possible. Check out our list of the best 0% credit cards.
Some offers on MyWalletHero are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.
Turn credit declines into a win-win | 2020-11-20
The pandemic has left millions of people needing credit at a time when lending standards are tightening. The result is a lose-lose situation—the consumer gets a bad credit decline experience and the credit union misses out on a lending opportunity. How can this be turned into a win-win?
The case for coaching
Let’s start by deconstructing the credit decline process: The consumer is first encouraged to apply. The application process can be invasive, requiring significant time commitment and thoughtful inputs from the applicant.
After all that, many consumers are declined with a form letter with little to no advice on actions the applicant can take to improve their credit strength. It is no wonder that credit declines receive a poor Net Promoter Score (NPS) of 50 or often much worse.
On the flip side, forward-looking credit unions provide post-decline credit advice. This is a compelling opportunity for several reasons:
- Improved customer satisfaction. One financial institution learned that simply offering personalized coaching, regardless of whether or not consumers used it, increased their customer satisfaction by double digits.
- Future lending opportunities. Post-decline financial coaching can position members for borrowing needs even beyond the product for which they were initially declined.
- Increased trust. Quality financial advice helps build trust. A J.D. Power study noted that, of the 58% of customers who desire advice from financial institutions, only 12% receive it. When consumers do receive helpful advice, more than 90% report a high level of trust in their financial institution.
Provide cost-effective, high-quality advice
AI-powered virtual coaching tools can help credit unions turn declines into opportunities. Such coaches can deliver step-by-step guidance and personalized advice experiences. The added benefit is easy and consistent compliance, enabled by automation.
AI-based solutions are even more powerful when they follow coaching best practices:
- Bite-sized simplicity. Advice is most effective when it is reinforced with small action steps to gradually nurture members without overwhelming them. This approach helps the member build momentum and confidence.
- Plain language. Deliver advice in friendly, jargon-free language.
- Behavioral nudges. Best-practice nudges help customers make progress on their action plan. These nudges emulate a human coach, providing motivational reminders and celebrating progress.
- Gamification. A digital coach can infuse fun into the financial wellness journey with challenges and rewards like contests, badges, and gifts.
Virtual financial coaching, starting with reversing credit declines, represents a huge market opportunity for credit unions. To help credit unions tap into that opportunity, eGain, an award-winning AI and digital engagement pioneer, and GreenPath, a leading financial wellness nonprofit, have partnered to create the industry’s first virtual financial coach. To learn more, visit egain.com.
EVAN SIEGEL is vice president of financial services AI at eGain.
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