E Huize Holdings - Right Market At The Right Time?

[TM Editors Note: This article discusses a penny stock and/or microcap. Such stocks are readily manipulated; do your own careful due diligence.]

The first fundamental of business is to be in the right market at the right time. Selling a luxury good like insurance into a market where incomes are rising strongly is exactly that.

As such there is a landrace going on, companies leaping to mark out their territory. This means expense in the short term but significant profit opportunities once a position is established. 

Huize Holdings (HUIZ) is right there in this position now. We've thus an interesting medium term speculation to look at.

(Huize Holdings stock price from Google)

This isn't the sort of stock chart we'd like to see if we were already holding this stock. A couple of bounces in an otherwise steady decline from the IPO price would not please. However, the question is rarely what has happened, rather, what will happen? This could be an interesting entry level for us.

Is there something here for that future? 

Business plans

Business success is really made of supplying the right product, at the right time, in the right market. The execution of the plan matters too, of course it does, but those basics need to be right first. Which gives us a way of testing whether a proposal makes sense. Is that base idea right for that time and place? 

There's an economic concept called "luxury goods". This is the idea that as our incomes rise we spend greater portions of those new incomes on these things. Inferior goods are when we spend smaller portions as incomes rise. Basic carbohydrate is an inferior good, meat a luxury one as our incomes rise. One of these luxury goods is insurance. 

So, if you're supplying insurance in a place that is rapidly getting richer you're in the right place at the right time. It's not just that people will have more to spend on that luxury good, the nature of it means that they'll spend a great portion of their total incomes on it. 

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William K. 5 days ago Member's comment

Quite an interesting take on the insurance brokering/sales business. And certainly a lot of profit to be made short term.  That explains the motivation. Selling a product without having to produce or hold the product is certainly an excellent business plan, no question there. No expense to buy or store the product, and not much shipping cost either.

The concept sounds almost too good to be true, or at least too good to be that simple.

Tim Worstall 5 days ago Author's comment

Execution does indeed matter, this is also all obvious enough that there are other people trying it too.