SoFi Til I Die
Welcome to the Schmoozeletter Blog. Your source for weekly water cooler wisecracks from the world of finance. If you have an opinion different than mine or a topic you want to hear about, let me know!
This week, we’re talking about:
SoFi Til I Die
I recently talked to a member of the SoFi Syndicate. They had company tattoos on each forearm, and every hour on the hour they would rise from their chair, look west to SoFi headquarters, and shout:
SoFi ‘Til I Die!
Big fan.
I wondered, had the fandom struck from being the Country Music Association’s presenting partner for this summer’s unforgettable CMA Fest?
Or maybe they are an enthusiast of the cool new Tech Golf League presented by SoFi.
Nah, it was more that they nailed it buying SOFI.
Got in at the lows and now they’re up bigger than an Inglewood stadium.
I get that. But is it still at a good value? Is it time to take some profits off the table, or should I too join the SoFi Syndicate and roll with SOFI ’Til I Die?
SOFI is a one-stop shop for digital financial services. They want to be your platform for everything and anything digital money.
They want to get you in their hamster wheel and keep you running with them for a lifetime. Not the best mental image? Okay, then how about a financial services productivity loop?
They started out offering online student loan refinancing and mortgages and personal loans but really took off in 2019 when they added Financial Service Products. Check out their fun little timeline.
Compared to their revenue:
In an incredible oversimplification of their business, they want to get more members in and charge them fees. And they have been crushing it!
That is astonishing quarter-over-quarter membership growth. Nothing gets me going like a chart straight up and to the right like that. What gets Chargers quarterback Justin Herbert going?
SoFi!
He has a multiyear partnership with the company.
Why? What did you think I was going to say…
Anyway.
As those of you Netflix and Chill’en know, getting more members with more fee-based revenue scales really well.
So they’re shifting towards more of that high-margin, capital-light, fee-based revenue. And this is showing up in the financials. They’ve turned the corner of profitability.
And the balance sheet is getting stronger.
More cash and less debt is what you want there.
This is definitely a company trending in the right direction, and the valuation is pretty reasonable if they can keep growing at their current trajectory.
So is it a Schmoozeletter buy?
Nah, they operate in a competitive space with a ton of regulation, and I just don’t see the edge SoFi has over anybody else.
They certainly could keep getting more and more profitable and turn into a huge success, but that statement could be made for any company. SoFi is just a big question mark as of now for me.
So should the SoFi Syndicate disband?
The answer comes down to one thing:
Portfolio allocation.
We are talking about SOFI here, but you can apply this same advice to any stock.
If your long-term assets look like this:
And you’re maxing your 401(k) and IRA, which are invested in low-cost market index funds…
Then let it ride.
If your long-term assets look like this:
And you’re not doing those things…
It’s time to trim.
At the very least, take your original capital out. If you bought in for $100 and now it is $1,000, just sell off $100 worth.
That way if the company goes broke in the future, then all you’ve lost was time, energy, emotional capital, and an unblemished patch of skin on your forearm.
Final Thought
My Grammy Award–winning diss track, Crypto Bonfire, continues to age like a fine wine.
