Have you noticed something strange going on in certain stocks recently? Take GameStop. Not only has the stock more than quadrupled in January alone, but on Monday, Jan. 25, GameStop opened about 50% higher than its Friday closing price and briefly rose by more than 115% before sharply retreating to close up by "only" 18%.

Obviously, this level of volatility is highly unusual. The recent price action in GameStop and several other stocks can be attributed to a phenomenon known as a short squeeze. Here's a closer look at what that means, how it works, and why it can cause massive spikes in stock prices like we've seen this week.

What is a short squeeze?

There are hundreds of factors that could potentially move a stock's price, but on a short-term basis, stock prices are functions of basic supply and demand. If more shares are available for sale than people are willing to buy, the price will go down until enough buyers are interested. Conversely, if there are more investors who want to buy shares than the market can accommodate, the stock's price will move higher until enough shareholders are willing to sell shares to all of the interested buyers. The latter is the basic idea underpinning a short squeeze — but more on that later.

Short interest

Short squeezes are most commonly seen in stocks that have a lot of short-sellers betting against them. You can find this by looking up a stock's short interest, which is often included in a long-form stock quote you get from your broker.

Short interest is typically updated at the end of each month and tells you the quantity of shares sold short as a percentage of the stock's float, or the number of shares that are actually available to trade. For example, if a company has a float of 10 million shares and 2 million shares are currently sold short, it would have a short interest of 20%. 

Here's why hedge funds and other investors frantically try to cover short positions when stocks rocket higher like this. Let's say that you short 100 shares of a stock at $20 a share, meaning that the maximum you can profit is $2,000 if the stock goes to zero. If the stock goes to $40, you've lost $2,000, or 100% of what you hoped to make. If it goes to $60, you've lost 200%. And if it goes to $100 or more…well, you get the idea. The loss potential when a short position goes the wrong way is unlimited and can cost some of these large short-sellers billions. That's why we're seeing desperate buying in GameStop, AMC, and some of the other heavily shorted stocks that are spiking higher.

What's "normal" for short interest depends on the company, the overall economic environment, and several other factors. But generally, a short interest in the double digits indicates that there is quite a bit of pessimism about the stock. Here are a few stocks that currently have high short interest and some with relatively low short interest for comparison's sake.

Data source: TD Ameritrade.

Notice that all of the stocks on the left have been behaving very strangely in terms of rapid up-and-down movements in the recent short-squeeze environment. Those on the right haven't been unusually volatile.

How a short squeeze happens

Here's the basic idea of how a short squeeze happens:

• A stock is heavily shorted due to investor pessimism. For example, AMC Entertainment has been heavily shorted because many investors believed the movie operator wouldn't be able to survive the disruptive effects of the COVID-19 pandemic.
• Some event happens that creates optimism in the stock. This could take the form of actual company news, broader economic developments, or some other update. For example, AMC recently announced that bankruptcy was effectively "off the table" after raising fresh capital.
• Shares rise in response to the good news. As a result, short-sellers suffer losses, which could lead to margin calls (brokers forcing investors with short positions to either deposit more money or close out their positions).
• Because covering a short position involves buying shares, this creates even more demand for the stock. The price moves even higher, and more short-sellers are forced to close their positions.

For stocks with truly massive amounts of short interest relative to the volume of available shares, this effect can snowball for some time, leading to tremendous volatility and huge spikes in the share price. Looking at GameStop's short interest, it's no wonder why the stock has been so reactive to the recent wave of short squeezes.

The Foolish bottom line

One important thing for long-term investors to keep in mind is that a short squeeze has nothing to do with the long-term investment thesis. It can certainly be nerve-racking to deal with such high volatility, but it's important to tune out the noise and focus on the long-term case for owning the stock.

The post Short squeezes: Everything you need to know about the recent investing movement appeared first on The Motley Fool Australia.

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Matthew Frankel, CFP owns shares of Apple and Tanger Factory Outlet Centers and has the following options: short February 2021 $140 calls on Apple. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, and Microsoft and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Dr Deepak Chopra is known throughout the world as one of the top experts on wellness, so it might come as a surprise that he has decided to partner with a financial services firm, Personal Capital. However, wellness and finance have more in common than you might think.

Two of our Fool.com contributors, Matt Frankel, CFP, and Jason Hall recently had the opportunity to speak with Dr Chopra on The Wrap. Here's the entire 8 JanuaryFool Live interview – you don't want to miss this. 

Matt Frankel: You're obviously a very well-known expert on wellness. But I was surprised to hear you were partnering with Personal Capital on a financial matter. Because a lot of people don't normally make the connection between finance and overall wellness. Would you care to expand what led you to partner with Personal Capital and the connection that you see?

Dr Deepak Chopra: There are many reasons. One is that I have always believed in abundance as a natural experience of life, abundance in all its forms, which means health, relationships. My definition of success is only one thing, joy. If you don't have joy, you don't have success. It doesn't matter how much money you have.

I started my career in this country with nothing, zero. When I came to this country I didn't have a dollar. I got seduced by a culture where you're able to buy things that you didn't need with the money that you hadn't earned to impress people that you didn't like. I realised [laughs] that money was the core source of all stress in the world. I also realised that money is a human construct, just like latitude and longitude, Greenwich Meridian Time, Wall Street.

We made it up. How do we negotiate our relationship with abundance is why I joined this effort to show people that money is very important. But it's how you spend the money, how you earn the money, [laughs] and is it bringing joy to you. If it's not, then it's useless.

Jason Hall: The Motley Fool's mission I think is appropriate to share with you, Dr Chopra. It's to help people be smarter, happier, and richer. There's an obvious connotation for a company that makes a living selling people subscriptions to pick stocks.

But I can tell you it has a deeper meaning for most of us here. I would love to hear your thoughts on talking about finances and wellness and that tension between using finances as a source of abundance versus the things that you were talking about, and how it can be a source of pain and problem. I would like to hear your thoughts about the idea of wealth and richness, and what those terms really mean to you.

Chopra: I've been on the scientific advisory board of the Gallup organisation where we look at well-being in all its different aspects, in all its different buckets. One of the buckets of well-being is financial well-being.

The other buckets of well-being include career well-being, meaning and purpose in your job well-being, social well-being, friends, family, professional well-being, physical well-being, community well-being, and ultimately, emotional and spiritual well-being, which are the most important anyway.

But in that context, if you look at the data on financial well-being, you find that people who are financially secure are the ones who are actually not only making wise decisions in how they save money, earn money, and spend money, but they are also enjoying their money. People who are financially secure, first of all, they have safety. They feel safe. They have insurance, they have disability, they have retirement, they have vacation benefits, and all that. That's number one. They have different mechanisms in their financial management where they don't have money as a source of stress, number one.

Number two, financially secure people spend more on experience than on products. Because it's been realised that you can buy this iPhone 9, and then after six months iPhone 10, and after seven months iPhone 11, and the only difference is the camera. [laughs] I'm sure a lot of you don't even know the difference. People who are wise and secure about money don't spend that much money on products or redundancy. They spend money on experiences, on a vacation, on going out for a night with your family and friends, entertainment, on courses, on seminars, on education, on their children, on their grandchildren, on philanthropy. This gives people much more financial security and also enjoyment from their money. They like to spend money.

They also save money, but they don't hoard it. I know a lot people, for example, who are hoarders. They just hoard, hoard, hoard, hoard. That becomes a source of anxiety, a lot of people who confuse net-worth with self-worth. Depending on the stock market in the evening is everything that is about life, whether they have sex in the evening or whether they go to a restaurant [laughs] or whether they smile or whether they scream at their spouse, all depends on what happened in the stock market. Self-worth and net-worth is totally confused. There's also research that shows that money is an important part of our, what we call happiness experience, but not the most important part.

If you look at what people call happiness formulas, that 50 percent of your happiness comes from your attitude to life. Do you see the world as a problem or as opportunity? Now, that has about to do with how you trade in the stock market. Are you seeing problems? Are you seeing opportunities? That's a very big difference between successful investors and unsuccessful investors. People who are happy have a set point that looks for opportunities instead of problems. The second component is the money itself. If you win the lottery, you'll be ecstatic. You'll be very happy. But after six months, you'll return to your set point, and after a year, you may be actually unhappier because now you're all concerned about taxes and [laughs] all the things that go with money being your identity. Money adds about 12-15 percent of your total happiness experience.

The third part of the happiness quotient, formula, equation is what we call daily personal choices, sum up of personal pleasure: sex, food, entertainment, alcohol, shopping. Do they make you happy? Yes, but only transiently. If you went on a shopping spree, you'll be excited today. Tomorrow you may be regretting. Three days later you may be depressed. But if you find meaning and purpose in your life, if you have the ability to make other people happy, and if you're generous in how you spend money, generosity of spirit, that makes you very happy. That puts money in context, about 15 percent of your daily happiness experience.

Hall: Matt.

Frankel: I want to get back to what you were saying about how people confuse their net-worth and self-worth. One thing that people struggle with a lot, especially on our shows, that we've heard from listeners, is failures when it comes to money. How do you get past failures? For example, if I make a bad investment, which pretty much everyone that's listening has done at one point or another. If I spend money foolishly, not the Motley Fool foolishly, but the bad way, how do you get past that and move forward? How would you advise people to deal with financial failure and move forward in a positive way?

Chopra: I think any failure can be reframed as a learning experience so you don't repeat the same [laughs] mistakes. But you don't say I'm never going to make a mistake again, because if you don't make mistakes and you don't take risks, you're never going to have an adventure, and life should be an adventure. Otherwise, life becomes an algorithm. I think human existence is based on enjoyment. Enjoy. Take risks, make mistakes. Don't make the same mistakes over and over again, that's being a fool. Otherwise, reframe failure as a learning lesson.

Hall: Dr Chopra, can you share some practices that people can use in their daily lives maybe to help find balance or maintain a healthy attitude or maybe reframe those things that can be viewed as struggles?

Chopra: In my daily practice, I have four intentions every day that I start my day with. The first is a joyful, energetic body. If I haven't a joyful, energetic body, I'm good for nothing. The second is loving, compassionate heart. If I don't have that, I'm disconnected from the world. The third is a reflective, alert mind. If I don't have that, I make stupid decisions. The fourth is likeness of being. If I don't have unprovoked joy, then I don't have any connection with my spirit. Those are my four intentions every day.

Now I also know, as a physician, that 95 percent of chronic illness is actually related to inflammation, anxiety, depression, and things like that. I have seven pillars of practice as well-being. Depressed, go to sleep.

Number 1, stress management. Number 2, exercise. Number 3, healthy relationships. Number 4, being very mindful of my nutrition as a basis for a good healthy body. Number 5 and number 6, connected to nature. Number 7, self-awareness.

In that context, I also bring in what I call simple laws of managing financial security, and that is, if you're not an expert, get an expert to deal with it. Then make sure that you have enough savings for a crisis. By in large, ever since I became an intern resident from those days, didn't matter. My salary at one point in 1970 was $202 a month. But I still saved 10 percent of the money because [laughs] my mother said that's what you do, when I was a kid. I never stopped doing that, but it was just $202 a month [inaudible] many times more than that. It's always been there, and it's been a habit. I don't manage money myself, I get professionals to do it.

Hall: One of the things you mentioned there from very beginning talking about when you came to the United States essentially flat broke. You have been both fortunate and through a product of an immense amount of work and effort that you've put in, you've had tremendous financial success. But a lot of our viewers don't know a lot about your background and history. I think it would be really interesting if you could share, and there's things you shared in the books you've written, but if you could share with our audience maybe one or two things that happened financially early in your time in the US that elucidate how mistakes happen and maybe they seem like just big boneheaded things, but then you move forward and eventually they become irrelevant.

Chopra: Yes, when I finished medical school, there was no way to get out of India easily. You had to pass exams, you had to go to Sri Lanka to get an exam done. Foreign exchange regulations didn't allow you to leave India with more than $8. I had an uncle in England who lent me $100, so now I had 108. I thought in India [laughs] that's a very auspicious number. A hundred and eight is almost the holy number. A hundred and eight mantras on the bead and all that, 108, everything is 108.

So I thought I should do something auspicious. I went to the Moulin Rouge in Paris and spent it all in one night, [laughs] champagne and all of that. When I arrived in the United States, I had no money. I landed in JFK. Those days we didn't have cellphones or anything, I made a collect call to the hospital, which no longer exists. It was a run down, what do you call it? Community hospital in Plainville, New Jersey, with a lot of violence and very rundown place, run by the mob. I didn't know that before I arrived there, I said, "I don't have any money, can you pick me up?" I call the hospital, they were so desperate they sent me a helicopter. [laughs] So my first experience of the United States is lifting off a helicopter, JFK.

I thought this must be Disney (NYSE: DIS) World or if it isn't Disney World, [laughs] I guess Disney World is even better. Fifteen minutes later, I was in this little place called Plainville, New Jersey. Went to the emergency room, got totally involved there, after 24 hours, totally exhausted. Went to Main Street, stood outside the television store, because I'd never seen television in my life. When I came to this country, there was no TV in India. This was a colour TV, and I was fascinated and the salesperson came out, he said, "You like that?" I said, "Yeah." He said, "Why didn't you buy it?" I said, "I have no money." He said, "What do you do?" I said, "I'm training to be a doctor." He said, "At the hospital?" I said, "Yes." He said, "Oh, come on in doc, all you have to do is sign this yellow piece of paper, and you can have the TV set."

I walked out with the TV set, not realising there were 10 TV sets in my dorm. [laughs] I'd signed off months salary [laughs] over this TV set. But it didn't bother me. Next day I worked again 24 hours in the emergency room. Then I went to an automobile place. It was a Volkswagen dealership. I asked of the manager, I said, "Do you have that yellow piece of paper that I can sign because I'm a doctor and I want to drive that car over there?" I drove out, and $50 down-payment, I drove in a Volkswagen Middle out of the agency. I thought this is heaven, you don't have to spend any money. You can spend any amount of money even though you haven't earned it.

Then I got into this rat race of stress, which is basically the cause of illness in our society. Ninety five percent of illness is directly or indirectly related to stress. Money is a huge stress in people's lives other than health of course, and personal relationships. But they're all entangled. You need money to have a comfortable life. You need a comfortable life to have healthy relationships. It's all entangled with the rest of your life.

Hall: From a few of your interviews that I've viewed online before, I know that your personal mindfulness practice, your meditation, you spend several hours a day on those personal things, and a lot of people just don't have the time between work and family and managing those responsibilities. I'm just curious if you could offer some ideas or tips. I know you have a process called STOP that's not directly related to that, but we want to hear about STOP. But also I really want to hear about some ideas you have for people to develop practices that they can make part of their daily habit and routine to help them achieve some of these emotional well-being mechanisms that are so important. They're so tied to so many parts of our life.

Chopra: Well, the simpler practice like stop is, STOP is anytime you're stressed, you STOP. It's an acronym, S stands for stop. T stands for take three deep breaths and smile from your head to your toes. O, observe what's happening around you and inside your body, and P, now proceed with awareness, compassion and joy. That's the STOP formula.

The second is before you make any choice, you can ask yourself a question, "Is this going to bring joy?" If the answer is yes, go for it. If the answer is no, don't do it. [laughs] All it needs is a little self reflection. That's all it needs. A little pause, press the pause button, ask a question, and make sure the response, whether it's a sensation, an image, a feeling, a thought, an emotion it doesn't matter. Every question you'll get a response. All you have to do is ask yourself the question, [laughs] but quieten your mind a little bit. Now, having said that, you say a lot of people have made a lot of money this like the other, but in my tradition also, in the different stages of your life, different things are important.

So for the first 25 years of your life, education is the most important thing. Period. Second 25 years of life, success in the way the world defines success. Progressive realisation of worthy goals, and climbing up the ladder of payment fortune, if that's what you want. That's the second phase of life, and you pay attention to that. Which doesn't mean you don't pay attention to the other aspects of life, but that becomes more important. The third phase of life, which is the third 25 years, so I'm 74 chronologically, although biologically I think I'm 35.

But as you get to 75, [laughs] between 50-75, that phase of life, you pay attention to giving back, to philanthropy and helping others get successful. Then the fourth 25 years of life, ideally speaking, you should live for about 100 years and die in peaceful meditation by choice not because you have a sickness, the fourth 25 years of life, which is what I'm entering right now in the next phase, is you explore reality beyond all these human constructs of money and old age, and infirmity and death. You explore what the heck is going on? Why is there existence? Why, [laughs] why do we exist?

Frankel: We know you're an incredibly prolific author, you've had over 90 books published, including a number of best sellers. First of all, I know there are at least a few people listening who have not read any of your books. If they wanted to learn more about what you are all about, your practices, what's the one that you would recommend that they start with? That's my first question. Go ahead

Chopra: The book that anyone can start with is called The Seven Spiritual Laws of Success. It's a very small book. It's my most popular book. It sold 30, 40 million copies ever. Anybody can relate to it, whether they are a teenager or an old person.

Frankel: The other thing I am curious about, are there authors and books that you read? Who's influenced you? What's a book you've read recently?

Chopra: Well, I'm reading actually a book right now, it's on my desk. It's by Frank Wilczek, who was a Nobel laureate, winner of the Nobel prize in physics. It's called Fundamentals: Ten Keys to Reality. That's the kind of book I enjoy reading. I'm reading this book. What is Science? I read a lot of books on spirituality and science and see where the two come together. My favorite authors are people like Jay [inaudible] . Then I have some romantic old novelists like [inaudible] and [inaudible] and many others.

Hall: That's great. I think being broadly read is a valuable trait, no matter what's your discipline is professionally or whatever you are trying to accomplish in life. I really appreciate that, Dr Chopra. We normally try to do Q&A. We didn't really open up our Q&A because we weren't sure how much time we would have, and we wanted to focus on hearing from you. But I do have a few things in our Slido chat that we use that I wanted to share with you. The first one is from one of our viewers who identifies as Oni, and Oni says that, "Deepak was instrumental in helping me through my wife's terminal illness." I wanted to share that with you. Thrive has one here. Actually, before I read that one, I want to ask you again, Avery Pemberton Smith is asking, "If you could, could you go through the 12 pillars once again?" Then we can put those in our chat for people to grab.

Chopra: Seven pillars.

Hall: Pardon me, seven pillars.

Chopra: Deep rest, as in sleep, good sleep, number 1. Number two, managing stress and stress could be managed through meditation, mindfulness, music, poetry, entertainment, comedy, massage, so many things that we don't take time to do. Whenever I used to be stressed as an intern, I would watch Candid Camera to manage stress. Third is exercise, but to add that, I add mind-body coordination, with breathing techniques and yoga. That's third, because mind-body coordination combined with exercise is much more effective. So let's say exercise. The fourth is emotions and emotional resiliency, but particularly paying attention to compassion, empathy, love, kindness, joy, and equanimity, fourth. Number 4 is nutrition. A diet that has maximum diversity of plant-based foods. That is organic and is not toxic, and actually decreased inflammation of the microbiome, which is the genetic population in your body, which is mostly bacteria. That would be nutrition, that would be five.

Six would be biological rhythms. The biological rhythm that we're most familiar with is circadian rhythm. When people have jetlag, for example, that's disruptive, but we have many biological rhythms, including seasonal rhythms, we have attentional rhythms, lunar rhythms. You can get yourself grounded and restore biological rhythms anytime you have interaction with nature, even walking barefoot on the ground, or on the beach, or on the grass will restore your biological rhythm. It's called grounding. The seventh is self-exploration or self-awareness, which is asking yourself, basically, who am I? What do I want? What's my purpose? What am I grateful for? What is life all about?

Hall: Thank you for that. I have two, if you have another couple of minutes, we're coming up on the half-hour mark. Thank you. The first one, Thrive asking, I think this is just really relevant to our audience. Thrive is saying, "I have followed your work for many years and participate in your meditations. During my daily contemplative practices, I have struggled with adding thoughts about money to that time, so I focus on intentions and what I will do with resources. What's a better way of approaching this?"

Chopra: Redefine your idea of success. Success is the progressive realisation of worthy goals. What are you passionate about? What's your PHD? PHD stands for passion, hunger, and drive. What is your passion? What is your hunger? What drives you? Then go do it and you'll make all the money you want. Find out what your unique strengths are, find out who is in need of them, and then go serve that strength for the betterment of the world.

Frankel: Right. A final one and then we will let you go. Let me see. Lynn asks, just to reiterate what you were saying before, "Money is 12 percent, daily choices are 15 percent. What are the other ingredients again?"

Chopra: Money? No. The first is 50 percent, which is your attitude, is, are you looking at life as a problem or life as an opportunity? Everything that happens, 50 percent is attitude. Twelve to 15 percent is money. The third is the choices you make. That's another 40 percent. Personal choices, which give you some joy. But then the other choice is called fulfillment, which is making other people happy by giving them attention, affection, appreciation, and acceptance. Finding meaning and purpose in your own life. That's actually the totality of experience.

Hall: I love thinking about it that way. I really do. There's the quote that, "You can't control what happens to you, but you can control your attitude and how you respond."

Chopra: Yeah. By the way, the key to life is how to respond in the present moment to what is happening. That's it. The meaning of life is a conscious response to what is happening now, that's it.

Hall: Thank you so much, Dr Chopra. Do you have any last words to share with us? I think that's a good way to end, unless you have having anything else you'd like to close with.

Chopra: My last words would be, if you come to my grave, and there won't be a grave because I don't have any bones. I will be a bunch of ashes. But what you should see and feel is only one thing, take it easy.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Wellness and finance: An interview with Dr Deepak Chopra appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Jason Hall owns shares of Walt Disney. Matthew Frankel, CFP owns shares of Walt Disney. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Walt Disney. The Motley Fool Australia has recommended Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

There's a clear trend toward a cashless society, not only in the United States, but all over the world. While cash isn't likely to go away entirely, at least not anytime soon, an increasing amount of financial transactions are taking place through credit and debit cards, mobile apps, and other non-cash methods.

When there's a clear trend like this, there are often interesting opportunities for long-term investors to take advantage of. And that's especially true when we're talking about a $185 trillion market opportunity, which is the current estimated volume of payments flowing around the globe.

Two particularly interesting companies that investors might want to take a look at are fast-growing fintech company Square (NYSE: SQ) and payment processing leader Visa (NYSE: V). However, while both are great companies, these are two very different investments. So here's a quick look at each one to help decide which is the better buy for your portfolio.

Square: A massive disruptor with lots of growth potential

To call Square a major disruptor would be like calling Amazon.com (NASDAQ: AMZN) a pretty successful retail company. The company has transformed the financial landscape by making it practical for all businesses, regardless of size, to seamlessly accept credit and debit card payments.

However, Square has evolved dramatically since it started selling those little card readers sticking out of merchants' smartphones. Its payment processing hardware is used by businesses of all sizes, and there is more than $100 billion in annualized payment volume flowing through its systems. The Square Capital business lending division has originated billions of dollars in small business loans, and the company has created a small business ecosystem.

The personal finance side of Square's business is becoming even more impressive. The company's Cash App now has 30 million active users and in addition to its core person-to-person payment functionality, Cash App now enables users to buy and sell bitcoin, invest in stocks, and much more. But Square isn't done yet -- its vision is to be a one-stop shop for its users financial needs. It could add things like personal loans, high-yield savings, insurance products, and more to the ecosystem over time, just to name a few.

Visa: The largest payment network in the world

If you're reading this, there's a good chance that there's at least one credit or debit card in your wallet that bears the Visa logo. The largest payment network in the world, there are nearly 3.5 billion Visa cards in existence and the company has about $9 trillion of annualized payment volume flowing through its network.

However, don't think because Visa is such a massive company that it is as big as it's going to get. For one thing, while most payment transactions in the U.S. are now cashless, that isn't the case in many parts of the world. Credit card acceptance isn't nearly as universal in many places, and it is estimated that as many as 80% of payment transactions around the world still take place in cash.

What's more, the $185 trillion global payments market includes things like person-to-person and business-to-business transfers, areas where Visa hasn't really tapped into yet. A few months ago, I wrote that Visa could become a $1 trillion market cap company in the not-too-distant future (currently it's less than half of that), and my opinion hasn't changed.

Don't think it has to be either-or

One of the most common questions I'm asked about the fintech world is to the effect of "should Visa be worried about having Square and other disruptors take their business?" And the answer is no. Square provides the systems that facilitate payment transactions and Visa runs the network that processes them. Both are needed for a transaction. And there's plenty of room for both to benefit from the cashless trend.

The biggest question you should ask as an investor is how much volatility you're willing to deal with and what your risk tolerance is. Square has tremendous growth potential, but is also a richly valued stock that is priced for significant growth going forward. On the other hand, Visa essentially dominates payment processing along with Mastercard (NYSE: MA) and is a much better fit for investors who are looking for steady and predictable gains.

In a nutshell, both are great stocks and you probably won't go wrong with either. As more of a growth-focused investor, I'd probably go with Square if I had to add one to my portfolio today (In full disclosure, I've been a Square shareholder since shortly after the IPO), but there's a solid argument to be made for both.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better Buy: Square vs. Visa appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

When Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) released its third-quarter earnings report, we learned that Warren Buffett and his team had quite an active quarter in the stock market. The cost basis of Berkshire's massive stock portfolio increased by about $9.6 billion, and it appeared that there had been some selling in the portfolio as well.

Well, on Monday afternoon we got a glimpse of what the Oracle of Omaha has been buying and selling with the release of Berkshire's Form 13F, which institutional money managers are required to file 45 days after the end of each quarter. Here's a breakdown of the recent moves investors should know about.

Here's what Buffett and his stock pickers have been buying

We already knew about a couple stock purchases Buffett and his lieutenants made – specifically that they spent more than $2 billion adding to their already large position in Bank of America and invested $720 million in Snowflake's recent IPO. But the company's quarterly report indicated that this was just a tiny fraction of Berkshire's stock buying activity.

With that in mind, here's a rundown of what stocks Berkshire Hathaway added to its portfolio in the third quarter:

Data source: Berkshire Hathaway SEC filings. Market value as of 16/11/2020.

The biggest story on the buying side was the addition of not one but four big pharma stocks. Buffett (or one of his stock pickers) initiated stakes worth nearly $6 billion altogether, including three large and nearly equal-sized positions in AbbVie, Merck, and Bristol Myers.

Aside from this, the initiation of a new position in T-Mobile US is also noteworthy, although a $318 million investment is rather small by Berkshire's standards. This isn't totally a surprise – Berkshire reportedly considered a large investment in Sprint (now a part of T-Mobile) in 2017.

In addition to the stocks in the chart above, it's also worth noting that Berkshire also repurchased more than $9 billion of its own stock during the quarter.

Berkshire also hit the sell button on a few stocks

While Berkshire was an active buyer of stocks in the third quarter, the quarterly report indicated that Buffett and company may have continued to pare back some of their other bank investments and that they may have taken some profits in their largest holding, Apple. Here are the particulars of these moves.

Data source: Berkshire Hathaway SEC filings. Market value as of 13/11/2020.

We knew Berkshire sold some Apple, and Berkshire's SEC filing confirmed it. The same goes for bank stocks, with the Wells Fargo, JPMorgan Chase, and other bank-stock sales adding up to nearly $6 billion.

On the selling side, the biggest surprise is definitely the sale of the company's entire Costco stake. This likely resulted in a big profit for Berkshire, as Costco stock is trading for about $380 per share right now, roughly 10 times what Berkshire likely paid for it.

Also surprising is that Berkshire sold more than 40% of its Barrick Gold investment, which was just initiated during the second quarter.

An active quarter that shows Berkshire is ready to put money to work

Between Berkshire's massive buybacks, this quarter's wave of other stock purchases, and some other investments Berkshire has made recently, it is crystal clear that Warren Buffett is now in capital deployment mode. And with about $140 billion in cash and equivalents still on the balance sheet, this could be just the beginning.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Here are the stocks Warren Buffett has been buying and selling appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Matthew Frankel, CFP owns shares of Apple, Bank of America, Berkshire Hathaway (B shares), General Motors, and Wells Fargo and has the following options: short January 2021 $23 puts on Bank of America and short November 2020 $22.5 puts on Wells Fargo. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), the conglomerate led by billionaire investor Warren Buffett, just announced a relatively large investment in five Japanese companies. The investment, which is meant to be a long-term holding, is the latest in a string of billion-dollar buys Berkshire has made that we've learned about in recent weeks.

With that in mind, here's what we know about Berkshire's investment and why shareholders should be excited about it.

Berkshire is putting billions to work in Japan

Berkshire Hathaway just announced that it has acquired a little more than a 5% stake in five Japanese companies: Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. All five trade on the Tokyo Stock Exchange, where Berkshire made its purchases over the course of the past year, according to the Berkshire press release. They're all trading companies (diverse conglomerates – known as "sogo shosha" in Japan) with operations in a variety of industries.

Just to name one example, Mitsubishi Corporation (not to be confused with the automaker of the same name) has operations in information technology, infrastructure, finance, metal mining, energy, heavy machinery, chemicals, and consumer products.

While we don't know how much Berkshire paid for its shares in each company, the current value of Berkshire's investment is roughly $6.5 billion (depending on how much more than 5% of the shares Berkshire bought).

Berkshire made it clear in its press release that these are intended as long-term investments, meaning that Buffett isn't simply attempting to capitalise on a short-term mispricing or anything like that. And Berkshire says that it may buy even more – up to 9.9% of each, with larger stakes possible with the permission of each company's board of directors.

It's also worth mentioning that although these are technically five separate investments, they are very similar in nature. Think of this in the same manner as Berkshire owning shares of several different bank stocks, or (until recently) all four major US airlines. Buffett seems to have identified a market opportunity, so instead of trying to pick a winner, he's using the idea that a rising tide will lift all ships and spreading his money around.

A relatively small piece of Berkshire, but here's why it matters

Now, an investment of more than $6 billion may sound like a large amount of money, and to most people and companies it is. However, it's important to point out that this represents just over 1% of Berkshire's total market capitalization. So even if they're very successful, these Japanese stock investments aren't likely to be a major needle-mover for Berkshire all by themselves. But that's not the point.

The key takeaway here is that this tells us a few things that Berkshire shareholders desperately needed to hear. First, it shows that the recent investments in Dominion's (NYSE: D) natural gas assets and Bank of America (NYSE: BAC) stock weren't just a blip – Buffett seems truly ready and committed to putting Berkshire's 12-figure cash hoard to work. After all, while this is technically five different investments, in terms of actual cash spent, this is the most Buffett has put to work in a single type of investment in some time.

Furthermore, it tells investors that when the US and world stock markets were in a tailspin earlier this year, Berkshire may not have been as inactive as it seemed. From the press release, we learned that the company had built these stakes over a period of about 12 months – it didn't just buy shares, it acquired them over a period of time, including the turbulent first half of 2020.

The bottom line is that investors have been frustrated by Berkshire's lack of investment action for some time, but this move just goes to show that Buffett has some tricks up his sleeves – even at 90 years old.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Warren Buffett just invested billions in Japan – here's why it matters appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Stagflation: How to position an ASX stock portfolio
• How to build massive wealth with ASX shares

Matthew Frankel, CFP owns shares of Bank of America and Berkshire Hathaway (B shares) and has the following options: short January 2021 $23 puts on Bank of America. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short September 2020 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Berkshire Hathaway (B shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.