Ready for the next new investing start-up idea? It’s “customer stock ownership plans” from Loyal3. Basically, companies encourage consumers to buy shares of their stock with only three clicks of the mouse, in the hopes that this will ownership will garner loyalty (get it?) and thus higher sales. Think Apple, where shareholders of AAPL are more likely to buy MacBooks. [Via Bits]
You’ll be able to buy in increments of as little as $10 via fractional shares, all with no transaction fees at all (they’re covered by the company). Loyal3 hasn’t actually announced the stocks available, but one would guess they’d be brand name makers of consumer goods like clothing, electronics, or food.
My initial impression is lukewarm. Sounds like an easier version of DRIPs. But the stocks will be likely limited to visible brand names, so it won’t really provide investors with actual diversification. Otherwise, I can’t think of any brand I like that much. I have a hard time being emotionally attached to a corporation. The one thing I do like is that they promote individual shareholder activism, which can keep management on their toes.
The other thing that caught my eye was the fact that they accepted credit cards for the stock purchases. Given their “no fees whatsoever” mantra, without fees this means you can get cash back/points/miles from your stocks purchases, kind of like getting a commission instead of paying it :). (The most you can invest per company is $2,500 a month.) Stocks are likely too volatile to easily profit from this, but perhaps someone can figure out a way to take advantage of this feature.
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Interesting concept. But what they should do is partner with the companies to provide a promotion that grants a free nominal ($10 to $20) worth of stock when someone purchases a product like a laptop. That way it is like a coupon but with some upside (see post on lotteries) that may incent someone to buy their branded product. Like Groupon but with stock awards rather than straight discounts. Once the person owns the stock they are then more likely to be loyal to the company, as you explain above, so it helps in customer retention. In high churn or high cost of customer acquisition businesses this could be useful if it works.
Between no fees and possibly getting 2% back from credit card rewards I’d consider investing with them if they carried companies I was interested in. The cash back works out to $600 a year if you invest the max each month and get 2% back which is not bad if you were going to buy certain stocks anyway. The only company I’m particularly brand loyal to that would possibly fit in their business model is 3M.
This could be interesting depending on what companies they have available. If they offer companies I want to invest in at no fees and I can put the investment on the CC and earn 2% I will definitely do it.
If/when you do figures out how to take advantage and rack up miles please write a post about it thanks.
I like Andy’s idea. It was also something I thought about when I read the site. Seems like a worthwhile idea for a company to explore, especially from a marketing angle.
Loyal3 is not live yet, correct? I was trying to buy stock from the site but there did not seem to be an option.
nice concept, but still… easier in purchase doesn’t mean easier getting a net profit right?
I am thinking of this as more of a hedging strategy:
1) purchase $2500 of stock X, lets use Gap Inc. as an example, on loyal3.com. GPS is currently trading around $18. I am able to buy 138.89 shares.
2) Use my 2% cashback Schwab visa to net $50 in cashback
3) To protect my investment, I go into the market and sell a call option on my shares at $21 (dec-11 exp.) for a current mid-market price of .50 which should net me $44 after commission (tradeking/zecco commission rate). I now have 94 dollars in extra capital. I use this money to purchase a put option on the shares @ $16 (dec-11 exp.) for the mid-market price of .88. That will cost $94 after commission. This is not a 100% hedge as I own 138 shares but covers the majority of my shares.
4) so, using my cashback and investing it into my hedging, i am able to limit my downside and have higher upside to my stock purchase. Not a bad way to invest and be able to sleep at night knowing that your positions are protected.
This is a brilliant idea, and for the next few years (while it is interesting to people) they’ll make a lot of money at it I bet.
Companies are right about the concept. I remember a few years ago looking carefully into O’Reilly Automotive and buying their stock. Owning it did make me more inclined to think of them for purchases. Even at the time I knew it didn’t really make sense, that I should always look for the cheapest vendor, but the emotional connection is real.
Many people suggest introducing children to the concept of stocks through the purchase of recognizable brands. This might be a good platform for that.
Actually SublimeBri’s idea sounds really good. Buy $2500 worth of stock in Loyal3, get 2% discount = $50. Then short the stock in another account. Close the trade, then rinse and repeat. Until schwab stops giving you points for that or Loyal3 stops accepting credit cards.
By the way, I did not see anything on the site about the company being SIPC insured. What happens if it goes bankrupt? Would you ever see your stocks then ?
Maybe there’s a reason to be skeptical. Came across two posts today on a site called Investoruprising.com about this company.
Turns out a court found the CEO guilty of fraud some years ago, and I guess he also tossed out the guy who founded the company.
interesting stuff. You can read it here http://bit.ly/kjw7oN
and here http://bit.ly/iEPq6V
It is easy enough to rack up airline miles if you use an airline credit card like
Frontier or any of them. You just have to decide if miles or points are better depending on the different cards you have. They (Frontier) had a trecent promotion to get either 30k or 40k miles when signing up. Thats why Isigned up. But their flight schedules are not always conducive to me using my miles.
I’ve been investing with Loyal3 since the beginning and had some pretty good results. I just wrote an article about how I racked up 100,000 miles and $200 with Loyal3.