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Catch a TIGR by the tail

December 2, 2022

There is something wonderfully symmetrical about this chart. UP Fintech Holdings is a smaller version of Futu Holdings so it is a duplication to buy them both but boy does this one move when it has the bit between. its teeth. In 11 months it rose from $2 to $38. Imagine having a piece of that action.

So far it has carved out a giant trading range roughly between $25 and $3.50. At around $5 it is near the bottom of the range but with a promising looking chart. The Coppock indicator peaked at plus 948 and is currently minus 127.5, having been lower. We have a valid Coppock buy signal so TIGR scores 3/9 on my system. We need the sector ETF (KWEB) and the Nasdaq 100 to turn higher to score nine but it still looks promising enough for me to have a nibble.

If you/ I start to build a few small positions like this and they start to run you can add to your holdings and small can become significant with surprising speed. There are quite a few shares now that look broadly like TIGR. They have had a sharp fall and appear to be building a base around an area of previous consolidation.

So what is the latest news from TIGR. First off they are still growing.

We added 22,700 funded accounts this quarter, total number of funded accounts also exceeded 750,000 by the end of this third quarter, an increase of 23.2pc from the same quarter last year. We have acquired over 80,000 new funded accounts in the first three quarters. So we are confident to deliver our annual guidance of acquiring 100,000 new funded accounts this year.

Q3 2022, 23 November 2022

Other measures of health also look encouraging.

Net asset inflows exceeded US$700 million this quarter. Funded account retention rate exceeded 98pc this quarter, demonstrating user’s confidence and trust in our platform.

Q3 2022, 23 November 2022

Like Futu, TIGR is becoming more international.

Our International division is progressing well. In the third quarter, above 20pc of funded accounts came from Mainland China, more than 60pc came from Singapore and nearly 20pc were Australia and New Zealand. We expect the trend of regional breakdown will remain fairly consistent in the fourth quarter and we will expect to see more users from Hong Kong region next year. 

Q3 2022, 23 November 2022

TIGR appears to be on a high rating with a PE ratio well up in the clouds but this is because brokerages like TIGR are highly leveraged businesses. In a bear market when income streams like commission come under pressure total revenue falls or struggles whereas much of the cost base is relatively fixed so profits disappear. In the latest quarter the group reported net income of $3.3m v $20.5m in the same quarter a year earlier.

This effect will work the other way when stock market activity recovers and everything then can turn positive, more clients doing more business and putting more funds into wealth management accounts generating higher income streams over that same relatively fixed cost base.

Another positive this time is higher interest rates. Many of TIGR’s clients, like me although I am not a client of theirs, trade on margin which means they need to pay interest. Higher rates mean this stream of income will likely be higher. The bottom line, to coin a phrase, is that when the next bull market gets under way, TIGR’s profits could move sharply higher.

Strategy

If you were to ask me and I expect you would, I would say that I am pretty sure that TIGR is shaping up to go higher. The shares have run up by two thirds in two months and as noted these Chinese shares are volatile so it could go anywhere from here. But longer term I think it is building a base and the next major trend will be up.

Back at the old peak over $35 the business would be valued at $5.5bn which is obviously a ludicrous amount for a company that had net income of $3.3m last quarter. But equally stockbroking businesses can grow very fast and either make big profits or plough those profits into client acquisition to build scale.

TIGR is playing in a big market. The world of global finance is enormous so it is perfectly feasible that the company could have revenues in the billions and profitability ranging up towards 20pc. Suddenly a valuation in the billions does not look so absurd, which is what gives the shares their speculative appeal. This is the kind of share I like to hold when all the stars (charts and fundamentals) are aligned in a bullish direction.

If you want to whittle that down to core essentials you could say that TIGR looks a great share to hold while the Coppock line is rising and that condition is fulfilled right now.

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