The Practical Islamic Finance Podcast

One Last Hurdle

Rakaan Kayali

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One Last Hurdle
In this episode, we will cover:

  • Introduction & Bitcoin Update
  • Market Performance Overview
  • Dollar Index & VIX Update
  • Anticipating a Year-End Rally
  • Geopolitical Risks: Israel & Iran
  • Tesla & Enphase Earnings Preview 
  • Oklo & ASMR: Modular Reactor Companies
  • Stock Movements: PLL & Hims 
  • Cryptocurrency Updates
  • Intelligence Leak & Israeli Attack
  • Bitcoin Inflows & ETF Growth 
  • MVRV Z-score & Stock-to-Flow Model
  • Enphase: Valuation & Investment Analysis
  • Similar Investment Opportunities 
  • Q&A: Trump Betting Odds vs Polls


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salam@practicalislamicfinance.com

ABOUT OUR PODCAST
Our podcast is about helping people ethically build wealth. We cover a broad range of topics including stock and crypto investing, product reviews, and general financial well-being.

DISCLAIMER
Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your due diligence before making any investment decisions.

As-salamu alaykum everyone, I hope you are doing well. Today is Monday, October 21st and Bitcoin is right around 67,000. We did get a pullback today in Bitcoin and some of the other names that have been running very strongly as of late. 

The Dow Jones is down less than one percentage point. Nasdaq is down 22 or 0.22 percent. The S&P is down 0.42 percent. 

Russell 2000 is down one and a half percent. Now, the Russell will move kind of like the underlying stocks that the Russell represents. It will move stronger in either direction, up or down. 

And the dollar index is up half a percentage point today. The big news story here. As-salamu alaykum Rashad, nice to see you. 

Thanks for the like. The VIX is up five percentage points today. And I really think the last hurdle here for the market to take off into this end of year rally, which I am anticipating strongly because of three things. 

Typically, you have a post-election rally in the market, you have an end-of-year rally and then you also have the easing monetary conditions. And so maybe one or two additional rate cuts by the end of the year. So I do think that we end this year strong. 

As-salamu alaykum Rashad, nice to see you. But we are waiting for that Israeli strike on Iran, which all indications seem to suggest that it is a matter of when, not if. And so that remains the major hurdle that the market is waiting for in the near term to get through and then have some clarity on what's that going to mean. 

Is it going to really develop into a longer conflict, into a more serious thing that affects the price of oil over a longer time horizon, perhaps affects world trade in some way? That's what the market needs answers for and perhaps why the VIX is up. We did get a intelligence leak, perhaps it was a leak, perhaps it was a leak over the weekend. And we'll talk about that in a second. 

Tesla is down today 1.2 percentage points. We are anticipating their earnings this week, October 23rd. As is Enphase, Enphase is down 2.44%. They also report October 23rd. 

Be very interesting to see how these companies or what these companies report. I think that Enphase now under 90 is really looking attractive. I'll give you my thoughts on that company towards the end of this live.

We did see continued strength in Oklo. We talked about that company last week. This is the modular reactor company, modular nuclear reactor company that saw some support on the heels of agreements by Amazon and Google to invest in that space. 

Now, I do think that today it's perhaps being lifted another 12 percentage points by the short squeeze that this stock is experiencing. Again, it's going to experience sharper moves upward and downwards because of how heavily shorted this name is. As is ASMR, which is another modular reactor company. 

Today, it's actually down less than one percentage point. If we look at some of the other names that we're following here, PLL is down 11% today. It's getting close to where I would consider buying again. 

For those who follow our PIF portfolios, they know we took profits from this name on its recent jump. It reached close to 15. Alhamdulillah, we did take profits while we were appreciating in this name.

Now, we have an opportunity to get back into it, but I'm holding off for now. We are getting to prices which make it quite attractive. Hims is up another two and a half percent. 

This has been a monster for us in terms of return. I think that it has more to go. This is one of those companies where I think could really 5-10x for us. 

Good news there. I also think that today, it may be bucking the herd here in terms of its price movement because of how heavily this stock is shorted as well. A lot of the heavily shorted stocks are doing well today, bucking the trend of the general market which seems to be down. 

As we mentioned, Bitcoin is at $67,000. We got up to $69,000 over the weekend. Doge is at $0.14 and Solana had a pretty strong weekend as well. 

We're at $164,000. Looking at some of the other macro influences on the market, it does seem like Donald Trump is pulling away here after the neck and neck race it has been earlier this month. The percentages or the likelihood of each candidate winning really diverge strongly and continue to diverge and continue to move in the direction of Trump gaining wider and wider margin over Kamala. 

I do think that it's not over until it's over, but all indications and certainly the money seems to be betting on Donald Trump winning as opposed to Kamala Harris. Now, the intelligence leak which perhaps may not be a leak if it was intentional and a way for the United States to express its dissatisfaction with Israel not really falling in line with what the current administration wants, they do show that Israel is planning to attack. It's making movements that suggest that it's going to be a rather strong attack against Iran. 

Perhaps the market is reacting somewhat to this news. I personally had no doubt that Israel was going to retaliate against Iran. I read today that they were asking for another battery of THAAD missiles to protect Israel from potential Iranian ballistic missiles.

Like I said initially when Iran attacked Israel that this was going to act as a vaccine. You're showing your cards, you're telling the opponent what they need to plan for, what they need to guard against and that's exactly what Israel is doing. After the vaccination that it received from the empty ballistic missiles that Iran sent its way, it is preparing its defenses accordingly. 

Once these defenses are in place, I think the attack will happen. It's just a matter of when, not if. In the meantime, Bitcoin continues to show bullish momentum despite this anticipation of a major geopolitical conflict. 

If we take a step back and look at the inflows into the BlackRock Bitcoin ETF, these inflows have been the third biggest in 2024 and the fastest growing ETF ever. If you look at the amount of inflows, they're basically in third place behind just the ETFs tracking the S&P and the Russell 2000. This is a big statement and that's just into the BlackRock Bitcoin ETF. 

To say that these ETFs were a success is really an understatement and I think there's a lot more to come from that. As I showed you guys, I think in the live on Friday, it took basically 20 plus years for gold ETFs to gain around $50 billion in assets under management and Bitcoin ETFs are already exceeding $20 billion in assets under management. They've only been live for 10 months, almost 10 months. 

The Bitcoin price is bound to go up a lot more than it already has. That's in my assessment at least. If we look at the MVRVZ score, since we have had a run up, it's important to look at these indicators to see are we at the top? Are we nearing the top? Should we get nervous? Should we start selling? The MVRVZ score is still relatively low compared to where it has topped in previous cycles. 

Typically it reaches close to seven or eight, sometimes even nine in earlier cycles when the price of Bitcoin reaches the top and now we're at two. There's a lot of room to run. This is what compares the market value to the realized value or what people paid for their Bitcoin. 

We're still only at two and therefore there's not enough incentive for holders, at least if we look historically, there's not enough incentive for holders to cause a major dip here. Now we could get a sharp dip after the Israeli attack on Iran, but I do think that that will be short lived. If we look at the Bitcoin stock to flow model, we are still way below where this model suggests the price of Bitcoin should be. 

At around this time, according to this model, we should be closer to at least a hundred thousand north of a hundred thousand. If you want to use this sort of plateau in price that this model suggests Bitcoin reaches, we should at least be north of a hundred thousand. And if we look historically, the actual price of Bitcoin has not really deviated as much as it has in recent history from the price suggested by this model.

And so the model has a really strong history to it that suggests that we are not overpriced here, not by any stretch. If you look at the stock, the income model that also takes into account the fees that are generated on the Bitcoin network and what that means for the supply of Bitcoin, we should, so this model is suggesting, you know, we should be closer to 80,000 on the price of Bitcoin. We're now just under 70, as I mentioned. 

But this model is also suggesting underpricing here. So I really think that once we get over this hurdle, inshallah, for the Israeli attack on Iran, and I hope no innocents are affected, but I'm sure there will be. But once we get through this, this news event, I think there'll be a stronger push higher for risk assets in general. 

Now, let's talk about Enphase. This is a company that I did have at one period of time in the past, but I ended up selling because its debt burden became such that no longer passed my halal criteria for investing. And this, subhanAllah, I mean, turned out really well selling it. 

When I did, it's now trading for less than $90 a share. I still think the company is really, it's a really good company. I really like their product.

Certainly the reviews that their product gets in terms of their net promoter score, it's very high and suggests a high quality product, have good margins, they have a good management. Right now they're, and I'll show you in a second, their valuation seems rather reasonable. And so I'll be listening in intently to their earnings report to see number one, if they still run in violation of my halal criteria. 

And number two, if what their projections for the future will be. And maybe it is time to pick up a few shares here if the results are positive of that assessment. So if you look at their cash flow here, so it's trading at a market cap of $12 billion. 

It does have around $2 billion in, well, $1.65 billion in cash. So let's, let's assume it's $11 billion in terms of market cap minus cash. Now, if you look at the free cash flow here, $116 million and generated $100, let's say $125 million from operations. 

So cashflow positive here. And if we annualize that, this is quarterly, by the way. So if we annualize that, we're talking about around $500 million in cash generated in an environment which is considered, you know, sort of the trough of their cycle. 

So I think, you know, at this valuation, now, if you look at the PEG ratio for this company, it's currently at a PEG of around one. And as you know, I, you know, a PEG of around one or below one is really the ideal level for investing in growth stocks. And so PEG of around one seems fairly valued. 

If you look historically, typically the PEG ratio has been above one and, you know, comparatively speaking, we're at a relatively cheap, a cheap time here for Enphase stock. And I haven't really seen anything that suggests a secular, you know, shift in either demand for their microinverters or the industry in general. Obviously, they're hurting because of the higher interest rate environment. 

But, you know, we should be entering the later stages of that and the early stages of a lower interest rate environment. So I do think that this will turn around if you look at the PEG ratios, as I mentioned in previous quarters, higher than one. But now we get an opportunity to pick up some shares at around one. 

Profit margin, not the best at 9.12. Again, this is the profit margin, not the gross margin. A profit margin is not the best, but again, this is the sort of toughest time of the cycle for the company. And I think that, you know, moving forward, profit margins will improve. 

And so this is something that is quite interesting for me. Even if I don't pull the trigger on Enphase, there are a lot of similar companies that I think have been impacted by the same influences that have influenced Enphase, and that may be really attractive pickups at this time. All right. 

So Wa'alaikum Salam, facts and beyond. As that says, if I win a prop firm and they give me a funded account, by the way, like the video, like the live. If you haven't liked already, thank you. 

Let's get every live to at least 100 likes. That would be really awesome. Thank you. 

And the interest will be paid by the prop firm. Owner is the profit. So I don't, so I think margin, and I know that interest is haram. 

So I would avoid that. Brother Azad, As-salamu alaykum, brother Akram. Betting odds are giving a much higher chance of winning for Trump than the polls suggest. 

Which one of the two do you rely on more? Well, Wa'alaikum Salam, I think betting odds are more reliable because there's money behind it. Polls often, you know, skew in one way or another, depending on how the questions have been asked. And there's a lot of, you know, shenanigans that sometimes go into polls. 

And I also think that there's something here with regards to, okay, if let's say the polls are suggesting the split between Trump and Harris are 55, 55, 45. Does that translate into necessarily, does that translate into a probability of 55, 45 for a win for Trump? I'm not sure that that's like one to one. So, you know, if I'm certain that the, that the polls are showing 55 to 45, I'm certain that this is the, these are the results of, these results are reliable. 

Then do I think that there's a 55% chance that Trump wins or is it a higher percentage than that? So I hope that makes sense because Trump, all he needs is, you know, to, to win the electoral vote. And so, you know, one, one vote that gives him the electoral vote makes him the winner. So if I'm certain that he has that vote, even if it's, you know, just a few votes more than Harris, if I'm certain of that, then the probability of him winning may be a lot more than just, you know, the percentage lead that he has over Harris. 

And so I think that's reflecting itself somewhat in the betting odds. Ahmed Bashir says Nano is greater than Oclo. I haven't looked at Nano. 

I'm now I'm interested in looking at it. The issue of these nuclear reactors and nuclear companies, the issue of, of them, about them is that they still have years to go online. And so let alone be profitable. 

So this is, you know, years in the making. And I don't know how the stock is going to perform between now and when they actually go online and start earning a profit. And maybe, you know, United States citizens in their majority don't want to have nuclear reactors anywhere near their city, even if, you know, the science tells them that it's safe, even if, you know, there are some incentives that are given. 

Despite all this, maybe the US population just doesn't want nuclear reactors anywhere near their city, and they can't get the permits they need, they can't get the regulatory approvals they need. So there's a lot of questions here. I do think the technology works. 

It's being tried in other places. You know, China is operating some and building, I think, total numbers 300. So I think the technology works. 

I think it makes sense. I think that the energy needs of the future are going to far exceed the energy produced today. And so a build out of this infrastructure using different solutions is going to be needed. 

So I understand all of that. But there's just a lot of question marks around regulatory approval, timelines, profitability, that makes investing not really easy. And I always say, you know, the first rule of investing, don't lose money. 

That's the first rule of investing. And so when you're investing in a company like an Oclo, and there's no revenue there, it's very hard to see, okay, well, this is the floor on the investment. In my view, this is a money that I can put and basically be feel safe that I'm not going to lose. 

It's very hard to do that when you're dealing with a pre revenue company. So that's why I've stayed away. And I think I'm wiser than to see a stock go up and say, Oh, no, I should have invested because that's really not the right takeaway. 

When you see a stock go up, that doesn't mean you should have invested. It's very possible that you made the right decision based on the information that you had at the time. It's like, you know, give you an example, playing Russian roulette, playing Russian roulette, where, you know, there's one bullet in a revolver, and they spend a revolver. 

And, you know, if the bullet shoots, then basically, you're dead. If it doesn't shoot, well, you win money. Well, playing that is a stupid idea. 

Now, if you just if it turns out that, you know, the chamber that was going to be fired did not have a bullet, does that change the nature of the decision that you made? If you decided not to play it? No, you made the right decision. Whether the bullet fires or not is, it's completely irrelevant to the decision you made at the time. It's the same for stocks. 

You make a decision based on the, you know, the costs of being wrong and, and the upside of being right. And then, you know, what the and the probabilities for each and then what the actual outcome turns out to be does not impact the quality and the accuracy of the decision you made based on the information you had at the time. So that's something that I remind myself of all the time. 

And I hope this is food for thought for you as well. As-Salaam-Alaikum. As-Salaam-Alaikum. 

Should I be thinking about beginning of 2020, of 2025? And if there is a pullback after upcoming events, or am I overthinking it? Would I be thinking about beginning of 2025? I'm not sure what the question was, Rashad, but I think that, you know, from, I think that we will end the year with a strong rally, inshallah. That's what I think. Salaam, do you think I should buy calls for IAG for end of the year? I stay away from calls, brother. 

Zakir says, As-Salaam-Alaikum, thoughts on Flux? Perhaps we'll, we'll do a deep dive on it, inshallah. Brother Ahmed Bashir says, be careful. Okay.

What's your criteria for debt financing, burden coverage? Well, I try for interest income and interest expense not to exceed 2.5%. And that's based on, you know, the Zakat being 2.5%. So, I try for, you know, interest income and interest expense to be below that percentage in order to say, okay, this is a margin of error that's acceptable for me or not. Sheikh Adnan, As-Salaam-Alaikum, nice to see you, Sheikh Adnan, Wa-Alaikum-Salaam. Midas asks, What's been your biggest investing mistake so far? Well, I've made a lot of mistakes, to be honest. 

I think my biggest mistakes have been errors of omission as opposed to errors of commission. So, things that, and I say this fully understanding that hindsight is 20-20. But many times there are things that, you know, I've identified as good opportunities, but for whatever reason, I didn't pull the trigger on them.

And so, those, that's been sort of the general nature of the mistakes that I've made. Alhamdulillah, for the most part, I think my picks have been quite good. What's the maximum you think PLL could reach and when? It's hard to say because PLL is being distorted by shorts. 

So, it's been shorts on the upside are distorting it, on the downside are distorting it. It's tough. Which creates a lot of opportunities because, you know, on the upside, you get more upside. 

So, profit-taking opportunities and on the downside, you get more downside. So, there's a lot of buying opportunities. Dr. Bas, Wa'alaikum Assalam, nice to see you.

Is the consolidation rush by large institutions and companies to hoard BTC affecting the price? Yeah, absolutely. Yeah, absolutely. It does. 

I think there is a rush to hoard BTC and we're seeing that in the BTC ETF volumes and the amount of assets under management they're getting. So, I really think that, you know, BTC has a really strong pump waiting for it. Thanks, Bashir and thanks, I'm not sure how to pronounce that name, but Y-A-E, thanks for your question. 

I hope I answered it.