3 Stocks to Watch on Tuesday: LendingClub Corp (LC), Twitter Inc (TWTR) and Agilent Technologies Inc (A)
A surge in oil prices and news of Warren Buffett’s investment in Apple Inc. (NASDAQ: AAPL ) gave the stock market a lift on Monday, with the S&P 500 and the Dow Jones Industrial Average each gaining a full percent for the day.
The action didn’t stop after the bell, though. Thanks to some after-hours headlines, Agilent Technologies Inc (NYSE: A ), LendingClub Corp (NASDAQ: LC ) and Twitter Inc (NYSE: TWTR ) are all stocks that should be on your watch list today.
LendingClub shares sank in Tuesday’s premarket trade as the company announced that a lawsuit against it appeared imminent.
LC on Monday evening said it had received a grand jury subpoena over “non-comforming sales” in the wake of former CEO Renaud Laplanche’s resignation, as well as the departure of other senior managers. An internal review of the company found that LC was not conforming to its own rules regarding loans.
According to USA Today:
“Company officials on Monday declined to discuss what testimony or records the subpoena sought. The company said it has also been in contact with the SEC after acknowledging Laplanche also failed to inform its board he held personal interests in a third-party fund in which Lending Club itself was considering an investment.”
LC shares were off 12% in early Tuesday trading.
Agilent Technologies shares rose in after hours trading Monday following the company’s earnings call.
The laboratory equipment supplier reported earnings of 44 cents per share for its most recent quarter, beating estimates of 39 cents per share. Additionally, Agilent topped Wall Street’s revenue projections of $981.8 million, posting revenue of $1.02 billion in its most recent period. That was led by strength in the company’s CrossLab Group.
The current quarter’s earnings are expected to be in line with expectations at around $1.04 per share, but better for investors was the company raising its full-year guidance for core revenue growth and non-GAAP earnings per share, among other metrics.
A stock is up 3.7% after the bell Monday.
Twitter reportedly is considering a move that would please many of its existing users — namely, excluding links and photo URLs from tweets’ 140-character counts.
As it stands, URLs — regardless of length — take up 23 characters.
The change is being reported by Bloomberg, attributing a person familiar with the matter, who said it could happen within the next two weeks. Twitter itself has yet to comment on the matter.
While this would alter one of Twitter’s longest-standing rules, the change should come as no surprise if it comes to pass. TWTR has been throwing a number of initiatives at the wall in recent months to try to stem the tide of continued losses and massive share declines since early after its 2013 IPO. Twitter shares have been in free fall for 2016, off nearly 40% for the year-to-date.
As of this writing, Karl Utermohlen did not hold a position in any of the aforementioned securities.
Lending Club – 10 Months After with 5 Figures Invested
After 10 months, and multiple 5 figures invested with Lending Club, here are more thoughts on this alternative investment.
I’ve been thinking about and gathering notes for this article for a while now. Partly because many of you actually wrote to me with questions after my initial Lending Club review, and also because of the concerns of whether our reviews are even genuine.
The following represent what I think you need to know about Lending Club before you invest with them.
Lending Club. I would love to say that writing about this has absolutely nothing to do with the compensation, but the fact of the matter is that it at least subconsciously affects my decisions, whether I like it or not. Keep that in mind while you read the rest of the article.
Make sure you understand every point below before you start investing with Lending Club.
- Fees – Not sure if many people actually read the prospectus, but Lending Club charges a 1% fee for their service, which cuts into your returns. On top of that, if you were to sell the notes before they mature, you are charged another 1% of the note amount by the company that handles the transaction.
- Keep Reinvesting – People pay off their loans early all the time, and some of the loans don’t even start. It’s not really a set it and forget it type investment that most people think it is. If you don’t reinvest your funds, the money will sit in your account collecting no interest.
- Play by the Numbers – Most people think they can pick the winners from the losers, but in reality, all they are doing is making emotional decisions based on someone’s “story”. The most successful way to invest with Lending Club is to have as many loans as you are allowed so your returns come close to the average returns and just accept that. (Remember that each note needs to at least be $25 dollars, so you can only have a maximum of 100 loans with $2,500 invested).
- Prime Account – If you have $10,000 or more in your balance,
Lending Club actually has a service where they will help you invest your funds. The system isn’t perfect (for example, they don’t reinvest your funds every day and their notes are generally $100 each, but it’s a good alternative for those who don’t want the hassle of keeping up with the administrative side of this type of investment).
My experiences are mainly on the lending side, but a borrower with high interest debt is crazy not to at least try getting a lower interest loan with Lending Club. It’s a legitimate business, and it’s borrower’s heaven to get a lower interest rate loan. I mean, don’t go check it out just because, but if you are paying high interest debt on your credit cards, you are doing yourself injustice by not taking advantage of this new alternative investment.
So far, my loans are working out which I’m extremely glad because while 5 figures may not be a lot of money for some of you, it is for me. What about you? Have you used the Lending Club service yet? Good or bad, help others learn from your experiences. At the very least, I will very much appreciate your thoughts as I’m a user and need to learn about it as much as possible too.
Editor's Note: I've begun tracking my assets through Personal Capital. I'm only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it's much easier to figure out when I need to rebalance or where I stand on the path to financial independence.
They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.
Lending Club is a peer-to-peer (P2P) loan service that brings reputable investors and small businesses together under one safe and secure lending platform. We compiled Lending Club reviews from our own website plus user reviews from around the web to determine what Lending Club customers think about the company. We also checked the fees that are most applicable for small business owners.
We scoured hundreds of reviews and found that Lending Club has a mixture of positive and negative ratings. Here’s what we found:
Since Lending Club is a P2P loan platform, positive reviews were happy that there were more options available compared to other lending institutions. For example, some investors were more lax than others, so it’s possible to get a loan even on bad credit.
Users who left negative reviews on Lending Club said that at times, the requirements were stricter than those found in banks and other financial institutions. Some even complained that they received invitations for pre-approved loans only to be denied later.
One user who left a 5-star review said that they got turned down several times by the bank because their business was relatively new. They applied for a loan through Lending Club and the process turned out to be quick and stress-free. The loan was approved within 24 hours and they received their funds within 3 days, which was helpful for their growing business.
“I understand that a company needs to verify your income, but this one is just ridiculous, they requested 2 recent check stubs and my last yr w2, which I sent. After all that, I received another email asking for a copy of my bank statement to show the deposits of the ck stubs I sent in. I don’t have direct deposit, so that didn’t make any sense at all for that request. I called and was told they just needed it to verify income, then I was asked ‘What do you do with your check when you get paid if you don’t deposit it in your account?’ Duh, I cash it and pay bills, deposit some also, if bills are not due (last time I check[ed], check stubs/ w2 were sufficient enough to verify income, well at least for banks, and other companies). Had I known this was going to be this much hassle, I would have never bothered to complete the application. People, take your business somewhere else, it’s not worth it! It almost make you think it’s a scam. ”
Other Lending Club User Reviews From Around the Web
Here are a few other resources for finding helpful Lending Club customer reviews. We rated the review sites on a scale from poor to excellent based on how trustworthy and useful the reviews seemed.
Lending Club Investor Review – Still a Good Investment?
Review of: Lending Club
Reviewed by: Larry Ludwig
Last modified: August 24, 2017
Lending Club is a P2P platform that allows you to invest in other people's debt with possible higher returns than traditional fixed income investments. However, investing with Lending Club is a long-term commitment, not without its risks and recent questionable news events about the service.
Did you ever wish when applying for a bank loan that you were the loan officer sitting on the other side of the table? Now you can be with Lending Club. Lending Club is a peer-to-peer (P2P) lending service that lets you invest your own money.
Lending Club promises a higher rate of return than many other traditional fixed-income investments. Compared to other types of investments, you have some ability to manage risk. It’s similar in class to bonds, but I like to think of it more as if you owned a bank and were the loan officer. You determine which loans you want to approve and which ones you want to pass on. Sound interesting? Keep reading for more details.
Note: We have updated this review in light of recent negative news events.
- iOS App (New) – You can now see the status of your Lending Club account via their mobile app.
- $1,000 Minimum (New) – Lending Club now requires at least $1,000 before you can start investing. I consider this overall a net positive because in reality you need at least $1,000 (some would suggest $5k or more) to be well diversified.
First, some background on borrowing from Lending Club. Applicants apply for a Lending Club loan online. The applicants must have a FICO score above 600. Over two-thirds of the loan applications get rejected by Lending Club. Only a small subset of individuals get approved, which is part of the risk management they perform.
Borrowers can apply for a loan amount of from $1,000 to a maximum of $40,000. The interest rate is determined by Lending Club and based upon the applicant’s credit rating. Rates are very competitive when compared to traditional banks and start as low as 5.32% APR. The highest possible rate is 34.68% APR. The best APR is available to borrowers with excellent credit.
The interest rate is fixed for the term of the loan. There are three- and five-year loans available. All loans are unsecured lines of credit and no different than credit card loans. Also like credit cards, any defaults are reported to the three credit rating agencies (Equifax, TransUnion and Experian).
Since this is a blog about investing, let’s discuss how to get started. Signing up as an investor is simple and takes a few minutes to complete. You can fund your account either via an electronic transfer from your bank or by mailing a check.
Once set up, Lending Club requires you to invest at least $25 per note. Notes are graded from A1 (lowest risk/lowest rate) to G5 (highest risk/highest rate), with subgrades per rate.
Lending Club isn’t available to everyone as an investor either. As per requirements by the SEC and each state, Lending Club has net worth and income requirements. Though Lending Club did not perform any means testing to ensure I fit the requirements, I still was accepted.
- Income Level — In most states, you must have a gross annual income of $70,000 or more and have a net worth of $70,000 or more. In the state of California, investors must have a gross annual income of $85,000 and a net worth of $85,000.
- Approved States — You can invest if you are you a resident of any state (as well as the District of Columbia) except the following: Arizona, New Mexico, North Carolina, Ohio and Pennsylvania
- Net Worth — If your total net worth is greater than $250,000, there is no annual income requirement. In the state of Kentucky, investors must qualify as an “accredited investor” under the Securities Act of 1933.
- Asset Allocation — Lending Club investors must not deposit more than 10% of their net worth in Lending Club notes.
- $1,000 Initial Deposit — $1,000 is needed to start investing.
With any investment, even “secure” ones, you have risk. In summary, here are some possible risks when investing with Lending Club:
- Default Risk — Investments are neither FDIC insured nor equivalent to bank CDs or Treasury notes.
- Inflation Risk — Similar to bonds since it’s a fixed rate, you have the risk of inflation eating at your returns. Though with the high rate of return, this risk is reduced.
- Management Risk — Lending Club’s annual fee is 1%. This rate has already increased from, I believe, an initial fee of 0.5%. This fee could increase in the future.
- Marketplace Risk — The risk that Lending Club goes bankrupt. While this is improbable given the history of Lending Club, it’s not impossible. Lending Club does have contingencies in place should they go bankrupt (an orderly dissolve of the marketplace), but this has never tested.
- Callable Risk — Loans can be paid in full early, which will affect your return. The downside is you will need to find another loan to replace it.
- Diversification Risk — If you have a small amount of loans (less than 100), one default can dramatically affect your overall return. Ideally, you should have more than 400 notes (in other words, $10,000 or more) invested with Lending Club.
- Liquidity Risk — Loans can be sold on the secondary market, but it can take some time to unwind every single note. Lending Club is a long-term investment.
- Pricing Risk — Will Lending Club properly assess the borrower’s risk to default and price the loan accordingly?
With the last issue, you can minimize this risk by specifically picking the loans you want to fund. You don’t think it’s a good loan? Don’t invest in that note.
It should be clearly noted that Lending Club investments are not considered passive investments by the U.S. government. This means you cannot lock in the long-term capital gains tax rate. Therefore, the IRS taxes any profit as ordinary income.
If possible, you are best in a self-directed IRA. It is much more tax efficient than in a taxable account like I currently have. Lending Club does offer IRA investment accounts. A $5,000 minimum deposit is required to open a no-fee IRA. It is also possible to roll over your existing 401(k) or IRA into Lending Club.
Here’s what I do to maximize my return while minimizing risk. Use how you see fit and do your own research before investing.
- Minimum Length of Employment — Greater than 1 year. The longer the employment, the better. 10+ years being ideal.
- Government Job — Look for someone who holds some sort of government position at a local, state or federal level.
- Low Debt to Income ratio — Make sure it is low (sub 30%).
- Debt Refinance — Go primarily for people looking to pay off higher interest rates, rather than the riskier types of loans (like new businesses).
- Many Small Loans — Build up a portfolio of at least 200 notes. The more notes you own, the more even your portfolio’s performance will be. More notes help spread the risk out to many loans, should one default. This means a recommended minimum of $5,000 invested. A total of 800 notes is the ideal investment strategy, which means $20,000 to invest.
- Loan Term — 36 months only. The additional 2%+/- return for 5-year notes in my opinion isn’t worth the additional risk.
- Interest Rate — Loans D through G only. I used to look at higher-quality loans with lower returns, but in my opinion, the risks didn’t justify the returns.
- Loan Purpose — I tend to focus on customers looking to get a better rate and reducing their debt.
- Maximum Debt-to-Income Ratio — 30%.
- Credit Score — Greater than 678.
- Interest Rate — All. Though I trend toward selecting the higher rates. You should own a mixture of loan grades to increase and stabilize returns.
- Delinquencies (last 2 years) — None.
- Reviewed by Lending Club — Yes. I prefer that Lending Club has checked them over. It gives a better chance the loan information is legit.
- Verified Income — Yes. At least as the initial search filter I perform. I also look at unverified income applications.
While I do make exceptions to this filtering, I tend to look at the big picture. The questions you should always ask are: “Will the individual pay back the loan?” and, “Are they a good credit risk?” If you have any doubt in an application, skip it and find a better note.
If currently, no good applications exist, wait a few days and check again. There is no need to rush the process. Take your time picking what you consider the cream of the crop, rather than getting stuck with a bad note. Once you purchase a note, it’s not so easy to unload it, though there is a secondary market. In most cases, the goal of buying the note is to hold it for the life of the loan.
Lending Club itself has plenty of statistical information, and so does LendStats.com. Analyzing borrowing trends is something I recommend.
Should you want to unload a loan, there is a secondary market from Lending Club called FOLIOfn. This is great if you have a poorly performing loan or need cash for other investments. It’s also a great way to pick up notes from others.
In my opinion, though, this section of the Lending Club site is not too usable in its current form and needs drastic improvement. The search options are simplistic at best, unlike their new-loan search. If this section were improved, it could definitely increase the liquidity of Lending Club notes. There are some third-party services that make this section of their service easier to use.
- Potentially Higher Returns — Possible to get higher returns than other types of traditional fixed income investments.
- Many Filtering Options — You determine which notes to invest in or which to pass on.
- Automated Investing — If you don't have the time or the knowledge you can hire Lending Club to do the leg work for you and invest your money automatically. You can also automatically invest based upon the custom filters you create. A plus is this costs nothing additional.
- Questionable Past History — Recent scandals at Lending Club have called the company and its business model into question.
- Untested Investment — While the notes are similar to consumer credit card debt, which we do have a lot of data on, it's still a new type of investment.
- Long Term Investment — Because notes are not liquid and the secondary market is just OK, it's slow to move out of Lending Club investments.
- Returns Are Not Fixed — Unlike a bank CD, returns are not fixed over the life of the note. Typical investors yield higher returns the first 1–2 years as notes mature. Note defaults will decrease returns.
- Not Everyone Can Invest — Unfortunately, Lending Club is not available in every state, and you must have specific income and net worth in order to participate.
- Gains Taxed as Ordinary Income — This is perhaps the biggest issue especially if you are in a high tax bracket. You are best to place Lending Club investments in an IRA account since you are taxed at ordinary income rates.
- 1% Annual Fee — Lending Club charges 1% annually per note you own within their marketplace.
I started with Lending Club in May 2009 with just $1,000 ($925 deposited, $75 in sign-up bonus) in my account. As of September 2015 I stopped adding new money. At the time I had over $22,000 invested and ROI was 9.34%. I stopped adding new money to the service because of concerns about the economy and length of economy growth. It was not related to any news about Lending Club or questioning Lending Club’s business model at the time.
As of August 18, 2016, I have $9,541.19 remaining in my account with an ROI of 8.50%. I have been slowly winding down my account as the notes are paid back. Again, this has nothing to do with the scandals but simply feeling we are nearing the tail end of an economic cycle.
Of course, my returns with Lending Club might be unique and your specific results may vary.
In light of recent events, I have removed Lending Club as a recommended service in the peer-to-peer investing space. I don’t question the viability of the business model, though the scandals put a major hindrance in the space for at least the short term. Because of the scandals, I have decreased the rating to 3 stars from the previous 4 stars.
If you do invest with Lending Club do so in a limited matter, which is something I would recommend for any possible investment. Invest only what you can afford to lose.
Disclosure: I have over $9,000 invested in Lending Club notes.