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Yahoo
an hour ago
- Yahoo
This Under-the-Radar AI Stock Could Double Your Money by 2028
Key Points Upstart's business is rebounding as interest rates go down and it improves its model. It has an edge in disrupting the traditional credit evaluation space as its AI model approves more loans without adding risk. Upstart stock is trading at an attractive price. 10 stocks we like better than Upstart › Artificial intelligence (AI) has been a major market driver for nearly three years already, but interest hasn't abated. AI is changing how people do nearly everything, speeding up processes and making many actions cheaper and easier. Many popular AI stocks continue to climb, including Nvidia and Palantir Technologies, up 36% and 147% respectively. But there are also smaller stocks that offer incredible opportunities, perhaps even more compelling than the stocks that have already caught market attention. Consider Upstart Holdings (NASDAQ: UPST). The AI-based lending platform was a market favorite before its business seemed to implode, and investors have lost interest in it. It's up only 4% year to date, despite an outstanding second-quarter report. But as the business rebounds, Upstart stock could soar a lot higher. A better way to lend money Upstart's platform uses AI and machine learning to evaluate credit risk. It uses millions of data points and many different criteria and offers nearly instant approvals -- a modern version of the traditional credit score, which has a limited scope. It says that its model approves more loans without adding risk to the lender, which puts more money to work for lenders and gives borrowers greater financial freedom. Although it was growing by leaps and bounds when interest rates were at zero, the good times came to an end when interest rates were raised, since it was more challenging to identify good borrowers when default rates were climbing. Although interest rates have started to come down, management says its return to growth is unrelated to the decline. It's leaned into its business over the past few years, rolling out new products, expanding the platform, and improving its algorithms. There was major progress in the second quarter. Revenue more than doubled from last year, and transaction volume was up 159%. It also returned to positive net income on a generally accepted accounting principles (GAAP) basis a quarter earlier than expected, with $5.4 million in the second quarter. A huge opportunity The credit evaluation industry is huge, but it's been dominated by a small number of leaders for several decades. Upstart says that $25 trillion is originated in loans globally among all categories, including personal, home, credit card, and more. It claims that at least $1 trillion goes to whoever originates and services the credit. Upstart offers a better and cheaper experience for everyone involved along the service line, which is how it has entered this space and captured market share. Since it started, customer acquisition costs have been halved despite sales growing fivefold, it has reduced its workforce by 66%, and it approves loans at 36% lower rates. As it continues to train its models with more data points, they're improving, offering an even better value proposition. And as it continues to enter new categories, the opportunity expands. Originations from its newest product, a home equity line of credit, increased ninefold from last year in the second quarter. A better entry point Upstart stock had risen to astronomical valuations before it plunged, but the price is looking reasonable today. It trades at a forward, 1-year P/E ratio of 25 and a price-to-sales ratio of 7. That gives it room to expand as the market gains more confidence in its chances. The market found what to worry about in the second quarter update despite the strong performance, including Upstart holding too many loans on its books, the health of its funding pipeline, and an outlook that included a lowering of full-year net interest income. But if you can zoom out and focus on the bigger picture, Upstart could be a lot bigger and more profitable over the next three years. It's hard to come up with a potential growth rate over the next three years because the business is in flux. Last year at this time, revenue decreased 6% from the year before. But interest rates are likely to keep coming down, and Upstart's improvements make it likely that it will get more business as they do. If it can manage a compound annual growth rate of 30% over the next three years, revenue would more than double, and keeping the price-to-sales ratio constant, so would the stock. Should you buy stock in Upstart right now? Before you buy stock in Upstart, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Upstart wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $668,155!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,106,071!* Now, it's worth noting Stock Advisor's total average return is 1,070% — a market-crushing outperformance compared to 184% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 13, 2025 Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Palantir Technologies, and Upstart. The Motley Fool has a disclosure policy. This Under-the-Radar AI Stock Could Double Your Money by 2028 was originally published by The Motley Fool
Yahoo
an hour ago
- Yahoo
Vanguard's global chief economist offers ways to sharpen your investing strategy for the future
The next decade is going to be a grind. In his new book, 'Coming Into View: How AI and Other Megatrends Will Shape Your Investments,' Joseph Davis, Vanguard's global chief economist and head of Vanguard's Investment Strategy Group, lays out how the coming decade is likely to shape how investors and retirement savers prepare for a range of economic scenarios — declining population growth, increasing geopolitical and trade tensions, and mounting national debt. 'These megatrends are more like tectonic plates,' he writes, 'grinding against each other rather than a seesaw balancing itself.' Davis reaffirms the wisdom of Vanguard's founder, Jack Bogle, and explains why it still resonates a half-century later. Here are edited excerpts of our conversation: Kerry Hannon: Can you tick off what you view as the megatrends? Joe Davis: Technology and how it improves our work and raises growth. Deficits and debt levels of governments, which can affect the bond markets and economic growth and inflation. The third is globalization. That's in the headlines for tariffs, but there are other aspects of globalization, such as where good ideas come from, an underrated part of globalization. The fourth is the two dimensions of demographics. It's population growth, which includes immigration, as well as the aging of society. Even if AI delivers extraordinary breakthroughs, there is still the real possibility that technology will not rescue us from the headwinds the economy faces. How does someone build a resilient retirement portfolio taking all that into account? There's a lot of change (coming) in the years ahead from the economic perspective. Focus on the things that you can control. Create clear, realistic investment goals for your portfolio, incorporating your time horizon and an honest assessment of your tolerance for risk. And stick with a research-based investment plan through good times and bad. Investing evokes strong emotions that can lead to impulsive decisions. Max out your savings and stay invested in the market. There's going to be a lot of concern in terms of what interest rates may do and what the stock market may do. But in virtually all scenarios, everyone will heavily benefit from compounding and staying invested in the markets. Maintain a diversified mix of broad investments across different kinds of investments to reduce a portfolio's exposure to the risk common to an entire asset class, such as stocks and bonds. Read more: Create a stock investing strategy in 3 steps What about fees? Minimizing cost and fees was perhaps Bogle's greatest contribution to investors and the financial services industry, and it's not going away. As Bogle often said, 'in investing, you get what you don't pay for.' Assume an annual return of 6%. With annual costs equal to 0.1% of assets, a $100,000 investment will grow to $557,383 after 30 years. If annual costs are 2.0%, the total will be just $317,081, some $240,000 less. When higher costs compound, the differences in your wealth can be staggering. How will Bogle's mantra 'stay the course' hold up? As someone who has spent over 20 years at Vanguard, I firmly believe in the power of 'staying the course' when navigating economic and financial uncertainty, but it doesn't mean that you never adjust your portfolio. It has been misinterpreted as "I should ignore all headlines and not care about risks that may emerge." Staying the course by being continually invested in the markets is correct, but be prudent. There's always risk in tilting your portfolio too far in one way or the other. Everything in moderation is good. Jack was clearly of that mind, and I try to channel that. You write that an aging society can be productive. Could you elaborate? Older consumers do not spend less as they age, although what they spend on changes — for instance, healthcare. Academic research and our analysis both show that over the past 20 years, as we moved more jobs in the United States to service-based ones — finance, education, healthcare, business services, where there's somewhat less of a physical demand — it opens the door to working longer for people. And that's a positive. Experience matters a lot, what economists call human capital. It's very valuable. For those choosing to work longer, it's a good thing for the economy. Economists are underestimating this aspect of the US labor force, which is its fastest growing segment at this very moment. Should alternative investments be held in retirement plans over the next decade? There's so much buzz with the president signing the executive order recently encouraging the use of these investments in our 401(k)s. Costs will have to be reduced to improve the odds of success investing in them. And secondly, I cannot index all private investments. I don't get the full pool. I can only buy individual strategies. Unlike the public markets, I can't buy all of the investments and diversify my risk. I have to put my eggs in a few managers, and that's going to be much like if I was just picking individual stocks. So these types of investments are not a great idea for the typical retirement saver? I'm not saying you shouldn't do it. What does this mean for investors? Eyes wide open. It's who you pick as the manager that determines your success along the way. Investors have to understand that. These can clearly add value, but not all boats rise in the ocean. If you select a manager that's not among the best, your investments are going to trail the public markets. Manager selection is really critical, and why we view these kinds of investments as an extension of active management. The good news is some private investments, based upon skill of the managers, can do exceptionally well in outperforming the broad public markets. That has been true for 20 years. It'll be true in the next 20 years. Read more: Retirement planning: A step-by-step guideWhen you consider that the top 20 stocks make up half of the market cap of the S&P 500 Index, what should investors like me be thinking? Should I be diversifying out of this index fund? If someone has only been invested in the S&P 500 in their retirement account, congratulations. It has done exceptionally well. I would not urge anyone to do drastic selling. This is where I say "stay the course," but start thinking about diversifying. It could be smaller-cap companies in the United States, which have trailed over the past 10 or 15 years, as well as non-US investments. Every market has trailed the United States almost without exception. Some of the next great companies may be small today, or may be located outside the US. That has not been the case in the past 10 or 15 years, but I don't think investing should be looked at through the rearview mirror. Parting thoughts? My goal is to demystify these trends and how they relate to investing, not sugarcoat it. Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including the forthcoming "Retirement Bites: A Gen X Guide to Securing Your Financial Future," "In Control at 50+: How to Succeed in the New World of Work," and "Never Too Old to Get Rich." Follow her on Bluesky. Sign up for the Mind Your Money newsletter
Forbes
an hour ago
- Forbes
Why The ‘Buy Europe' Trade Is About To Slam Into A Wall
Remember a few months ago, when the 'buy Europe' trade was red hot? Well, if you're like me, you're wondering where all the hype went! Now 'buy America' is back on, but European markets are still sky-high—well ahead of their American cousins. That spells trouble for anyone with a portfolio that's still tilted too much toward Europe. So today we're going to look into where things are headed (hint: back to the US in a big way!). We'll also delve into three funds with European exposure (two of which are closed-end funds sporting double-digit dividends) that I urge you to hold off on now. Headlines Drove 'Buy Europe,' But Corporate Profits Failed to Materialize The Financial Times was one of many outlets cheerleading a shift to Europe from America back in the spring. At the time, this sentiment was driven by tariffs, seemingly overextended US tech stocks and surging US markets. 'There's all sorts of reasons to like Europe, all sorts of reasons to hate the US,' contributor Katie Martin said in an April 25 FT podcast. The buy Europe trade was working well as recently as June, when the FT again reported that 'European small-caps outshine US rivals as investors bet on growth revival.' Note the phrase growth revival here: The idea was that European stocks were overlooked and would gain attention when their earnings grew. Except that didn't happen, with European firms posting disappointing earnings, as shown in the table below (more on this in a moment). Meanwhile in the US, companies saw 9% year-over-year earnings gains in Q2, meaning their average profit growth was much higher than the best sector in Europe (financials). And if you compare the best sector in the US—communication services (see chart below), which includes firms like Alphabet (GOOGL), Meta Platforms (META) and Netflix (NFLX)—to its cousins in Europe, the difference is staggering. As you can see at left above, the US sector's 40.7% earnings growth is many times greater than the best European companies can produce. Meantime, Europe's tech and telecom companies combined can't even muster more than 1% average growth between them. Where does that leave the European markets? Well, they're simply not reflecting this reality. With S&P 500 benchmark SPDR S&P 500 ETF Trust (SPY)—in purple above—far behind the Vanguard European Stock Index Fund (VGK), in orange, as of this writing, it's clear, based on our look at earnings, that European stocks are overbought. This makes VGK a fund to avoid. But ETFs aren't our main focus at CEF Insider. So let's turn to two CEFs that could face similar pressure. That, by the way, doesn't mean these are bad funds—quite the contrary. But now is not the time to buy them, as they do have significant European holdings likely to weigh on them in the coming months. The first one is a good example of a fund I've liked in the past and will surely like again at some point: the abrdn Global Infrastructure Income Fund (ASGI). This fund yields a rich 11.8%, and its payout has been steady—it's even moved up recently (though the dividend varies based on management's assessment of the market and other factors). Moreover, the fund isn't inherently European—in fact, it has 55% of its portfolio in US stocks, including cornerstone infrastructure players like Norfolk Southern Corp. (NSC) and NextEra Energy (NEE). Still, it has 22% of its holdings in continental European stocks, plus another 2.6% in the UK. That's enough to put a drag on the fund's portfolio when European stocks snap back to reality. Plus there's ASGI's rich valuation. ASGI has been riding the enthusiasm about foreign assets, causing its discount to net asset value (NAV, or the value of its underlying portfolio), which was averaging around 12% going into 2025, to evaporate. When European stocks correct, this fund will likely see a discount—and a consequent drop in its share price. Our second, and final, CEF to be wary of now is the PIMCO Income Strategy II Fund (PFN). This corporate-bond fund yields 11.5% and has held its payout steady since the pandemic days of 2021. However, as I write this, PFN trades at a 5.6% premium to NAV. And while it does have about 77% of its portfolio in the US, its largest allocations by country include European nations—France (3.2%), Spain (3%) and Germany (2.4%), to be precise—and Brazil (2.5%), which faces particularly steep tariffs from the US. To be sure, these are conservative allocations, but throw in PFN's premium and you get a real risk of a pullback, in both the fund's NAV and its market price, on any significant European selloff. And lower returns, especially in the fund's NAV, could put pressure on PFN's payout. The bottom line on all three of these funds? While geographic diversification is key for any portfolio, it's only a matter of time until European stocks drop to reflect their meager earnings growth. Until European firms start booking bigger profits, we're best to look elsewhere for growth. Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report 'Indestructible Income: 5 Bargain Funds with Steady 10% Dividends.' Disclosure: none
