Has the rise of omicron caused you to spend more time at home than you would have otherwise? Even if all you have to work with right now is $200, your options are probably much better than you think.
Instead of buying a third of a new PlayStation, you could buy a small piece from two great companies. These actions won’t do much to entertain you, but they could help you retire with a lot more wealth.
Assets received (NASDAQ: UPST) is using artificial intelligence to create a holistic credit risk assessment and it’s time for the industry to have an update. It has been more than 30 years since banks started using the scores of Just Isaac (NYSE: FICO) to assess individual credit risk.
It’s hard to say exactly how many creditworthy borrowers who fall through Fair Isaac’s net end up with a personal loan through Upstart. It sure looks like Fair Isaac’s frontline started shrinking around the same time Upstarts started to surge.
Upstart began partnering with lenders in 2012 and will likely begin generating more revenue than Fair Isaac before the end of 2022. Upstart started with the limited personal loan market and has recently expanded its offerings to include the relatively huge car loans.
Banks rushed to hire Upstart to assess the credit risk of potential new borrowers. As of November 2020, the company was associated with only 10 lenders. Since then, the number of Upstart partner banks and credit unions has grown to 35.
Rapid growth isn’t the only sign that Upstart is eating Fair Isaac’s lunch. Four of Upstart’s partners have already stopped requiring FICO scores from new borrowers.
In addition to the initial fee, Upstart receives a small percentage of the loans it has helped originate in the form of an annual fee. This provides a reliable source of cash flow even if banks have to stop lending during an economic downturn.
There’s no guarantee that another lender won’t offer a better product, but that doesn’t seem likely. Upstart has already processed over 20 million repayment events for over 400,000 loans. Each of these events gives the company a bit more information that it can use to stay ahead of any potential competitor for the foreseeable future.
You probably know dozens of people who have tried to learn a foreign language, but how many maintain a level of fluency? The language learning market is clearly ripe for disruption and Duolingo (NASDAQ: DUOL) seems positioned to dominate space for the foreseeable future.
Duolingo made its stock market debut last July, but its track record is already starting to turn positive. In the 12 months ended September 30, 2021, the company reported $6 million of free cash flow.
Investors can expect a much bigger profit in 2022. Foreign language learners around the world are signing up for the free version of Duolingo in droves, and a growing percentage are subscribing to Duolingo plus, an ad-free version with premium features. The number of daily active users grew 16% year-over-year to 9.8 million in the third quarter. During the same period, the number of paid subscribers jumped 49% year-on-year to 2.2 million.
In addition to helping anyone with a smartphone learn a foreign language, the company is leveraging its popularity to sell an English proficiency test. Native English speakers rarely think about it, but students applying to English-speaking universities abroad must take a language proficiency test. Duolingo’s English Proficiency Test is already accepted by the top 25 US universities by foreign enrollment.
The Duolingo app isn’t going to end the need for in-person instruction. Used correctly, however, it can make face-to-face time with real instructors much more productive. It’s probably only a matter of time before academic institutions around the world deepen their relationship with the company. Makes it look like a screaming buy at the moment.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.