My Investing Update

The stock market had been going strong so far this year. However, Trump looks to now have poured cold water on things, in threatening a trade war with China. The S&P 500 is down 3% in two weeks, and my favourite Technology Index fund is down 6% so I’ve bought more of that, as I said I would.

There have been some big technology IPOs in Pinterest, and Uber yesterday but I’ve steered clear of both of those. Instead, I’ve been looking at start-ups to invest in.

If you’re interested in investing in a start-up but not sure how to go about it read my previous post first

Start-up Investing

My interest was piqued by Brewdog who are, once again, raising money. Clearly, Brewdog has built an amazing brand and it’s easy to draw parallels between them and Camden Town Brewery who were acquired by ABInbev in 2015. However, at this stage, with Brewdog valuing themselves at £1.8bn, I personally don’t believe there is any great return to be made by investors at the point of flotation / Brewdog being acquired. Further, whilst I enjoy a bottle of Punk IPA, it’s premium craft ale, it’s not a beer for the masses, and so Brewdog is a not poised to become the Coca-Cola of the beer market.

Investing in an investment platform

A friend recently introduced me to a new investing platform, Freetrade. Unlike Hargreaves Lansdown, who I’ve used for many years, and who charge £11.95 to place a trade deal on individual stocks, Freetrade (as the name would suggest) impose no such fee.

Freetrade is exclusively a mobile app platform, currently only for iOS but they are building an Android version. If you compare their app and branding to that of Hargreaves Lansdown, it’s a stark contrast of user interfaces. Freetrade is very clean and simplistic. It’s very evident that, as a mobile-first company, they’re targetting the younger generation. This is the exact same strategy that challenger banks like Monzo and Revolut have employed and executed against to good effect.

Where’s the moat?

I’m a big fan of value investor Phil Town over at Rule One Investing. Something that Phil harps on about when making an investment decision is “finding the moat”. What he’s talking about here relates to being able to identify the company’s competitive advantage that makes customers stay. In theory, Hargreaves Lansdown or AJ Bell could introduce commission-free trading on stocks tomorrow. However, you can’t be all things to all people and HL’s brand appeals to an older generation. I believe Freetrade’s moat lies in the clear positioning of its brand and the community it’s building.

It’s a Freetrade future

Revolut have made it known they too will introduce commission-free stock trading as part of their platform. In one regard, this represents additional competition for Freetrade. However, at the same time, from my perspective, this might put pressure on the other challenger banks; Monzo, Monese, Starling etc. to do the same. Surely that puts Freetrade in a great position for either a takeover or partnership.

Conclusion

So I’m looking to invest around £1,500 into Freetrade as part of their Series B for which they are crowdfunding via Crowdcube. When this launched on 25th April, there was so much demand that the Crowdcube site went down. That’s got to be a good sign, right?

They have decided to recommence the funding round in June but I have reached out to Crowdcube and been in touch with their CEO directly.

Finally, I wanted to give a shout out to Curtis and his Youtube channel, Infant Investors. He’s got some really insightful videos that I’d encourage my readers to subscribe to, including this one about whether he will be investing in Freetrade.

 

 

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