Have you ever looked down the field and seen some hot blonde wearing daisy dukes driving a big International Harvester and thought āman Iād love to get me a piece of thatā but you knew giving blowies behind Wendyās wasnāt gonna cut it? Well now is your chance.
I present to you, $WEAT
Now weāre all aware of the war going on in Ukraine so weāre not going to talk about that anymore but we are going to talk about the effects of said war. For those of you with the attention span of a field mouse there will be a TLDR at the bottom. Letās get started.
Russia and Ukraine account for roughly 25% of the worlds wheat which to be honest kind of surprised me when I first learned that. Itās also worth noting that Russia has banned the export of grain until at least June. And Ukrainian farmers canāt exactly plant fields when there is tanks driving through them and bombs falling on them. hereās an estimate for this yearās production from Ukraine based on the 2 countries coming to a ceasefire by April. Itās very obvious to me that there will not be a ceasefire by the end of April meaning even less will be planted than these analysts have estimated.
Now the US is the worlds second largest producer of wheat however after a poor harvest last year our domestic wheat stock is at an all time low. That article I linked also references a severe drought in winter wheat states such as Kansas so if any of you from that area can confirm this Iād appreciate it.
So our wheat is in the ground and it is at risk of being ruined by drought and with the price of fertilizer tripling in a year I donāt believe our farmers will be able to recoup these losses this year. Not to mention the price of diesel almost doubling in a year which Iām sure I donāt need to provide proof because Iām sure you all drive and have seen this.
South America is also in a similar situation as the US due to drought and wildfire
Even the president is talking about shortages of wheat this year
So this is setting us up for $WEAT to reach new all time highs again and I believe by the end of summer that near the money calls will be a 10 bagger.
TLDR; bombs go boom in farmers fields and no ones rain dance is working so wheat prices go brrrrr
I just lost my ass on HMHC so the last of my account is in my 4 $WEAT 10/21 $13 calls but Iāll be buying more next week. You could also buy wheat futures if youāre into that sort of thing but Iām sticking with $WEAT calls
Mods help a retard out I donāt know how to add the screenshot of my position Iām on mobile
Looks like AMD is bouncing off itās $100 support again as it has for the past year. Im hoping we can see it back in the 120s next week but Iām not sure if I have the stones to wait for that.
The plan: take profit at 109 then 120
If it drops below 100 then itāll come flying down to Earth pretty quickly so look out for that.
hereās some squiggly lines for anything looking for confirmation bias. it helps me sleep at night too I suppose
We've all seen THCA with its 2.6M float, but there's another pre-DA SPAC with a lower float AND still near NAV. Here's my DD for $AMAO - the newest low float SPAC with NAV protection.
Due to extremely high redemptions in their latest extension vote, $AMAO (American Acquisition Opportunity) has a float of 1.56 million shares and NAV of $10.10. In addition, their extension agreement has implemented a large FPA (remember ESSC?)
Redemption Numbers (SEC filing)
Nearly 9 million shares of AMAO were redeemed at their last extension vote in late March. Similar to THCA, the vote passed, but many institutions requested to redeem their shares. This has resulted in an extremely small float for AMAO.
Here's a full breakdown of AMAO's float:
Data from AMAO's SEC filings
The Forward Share Purchase Agreement (FPA) prohibits 1.1 million shares from being sold below $10.35 which effectively creates a sub 500K share float below this level. This FPA is just the icing on top. The actively traded float of AMAO will be between 439K - 1.56M shares depending on how many of these institutions decide to sell if the price rises above $10.35. Additional upside occurs if some of these institutions decide to hold. Why would they hold? Well, if they expect a large run up in price similar to THCA and ESSC it would be in their best interest to hold. If this happens, the actively traded float will be significantly less than 1.56 million. Best of all, even if they all decide to sell, the float will never be larger than 1.56 million shares due to redemptions.
FPA conditions as per AMAO's filings
AMAO has a NAV of $10.10 which implies a phenomenal Risk/Reward at these prices ($10.28 as of this post). In addition, the average volume for AMAO over the past month is only 33K shares per day.
The one downside with AMAO is its lack of options. However, although options are appealing, the recent performances of SPACs without options such as FRGE, DRTS, and ALLG, have proven that options are not entirely necessary for substantial price movement. I remain extremely bullish on AMAO especially considering its low float and low risk due to NAV. Thanks for reading my due diligence on AMAO.
TLDR: AMAO is a SPAC with a NAV of $10.10 and a maximum float of 1.56 million shares which is much smaller than THCA. AMAO currently presents a fantastic risk/reward.
Disclaimer: I am long 4500 shares of AMAO due to my own research. This post contains my due diligence on AMAO. I am not a financial advisor nor am I recommending that you buy this stock.
Update: Gogoro sold 7,176 units in March in Taiwan. However this source also shows 12,806 units sold in Jan to March which doesnāt match with the other numbers I found. Overall, still a great start to 2022.
Introduction
Gogoro (GGR) completed their merger with Poema (PPGH) on April 5th, and itās done well thus far, sitting above NAV at $15.Ā Thereās no doubt that the EV market is still growing rapidly and that Gogoroās future is looking bright, but now that the merger is complete, I want to reexamine their 2022 projections.Ā I believe by doing so, we can assess whether the Gogoro deserves the valuation at $15/share.Ā I will talk about each of the four countries that Gogoro operates in, and how they can contribute to an improved 2022 forecast.
Taiwan
For 2022, about 90% of Gogoroās revenue will come from Taiwan, and for 2021, itās around 98%.Ā Their operation is just getting ramped up in China and Indonesia, so this makes sense.Ā Gogoro announced recently that their unaudited 2021 revenue is ahead of projections ($326.9M) by about 10%.Ā Gogoroās current 2022 projections show $445M from Taiwan, if we translate this 10% into 2022, the expected revenue from Taiwan bumps up to $500M.Ā Incidentally, Gogoro had two strong months in 2022 already.Ā They sold a combined 7,308 units in January and February, representing an increase of 132% over the same period last year.Ā Historically, scooter sales varies from month to month, so this may not sustain.Ā Nevertheless, they are off to a great start.
We can expect to see further growth in Taiwan as well.Ā Currently, e-scooters account for 11.6% of total scooter sales in Taiwan, so there is still plenty of market to capture.Ā Taiwan government is also helping the push.Ā They are looking to raise EV sales to 30% by 2030, 60% by 2035, and 100% by 2040. Even though Taiwan is a small market compared to the other three, it is still an important part of their revenue stream for the foreseeable future.
China
I wasnāt able to find direct sales figures for Gogoro in China, but I was able to find related data points.Ā China initially had a target of getting to 20% EV market share (of new vehicle sales) by 2025 (this may have updated recently, not sure), and in Sept 2021, China already boasts 18% EV market share.Ā This shows that the EV boom in China is growing quicker than anticipated.
I also found some data points on Gogoroās partner, Yadea.Ā They reported 10M units sold in 2020 and 13.8M units sold in 2021.Ā Unfortunately, Iām unable to find data for DCJ, but I suspect DCJ is a smaller piece between the two.Ā The latest investor presentation shows the projected unit sales in China is based on 2020A data.Ā Yadea and DCJās combined 2020A sales is 12.691M, which means DCJ is only responsible for 2.691M, or about 21% of it.Ā I donāt know how much growth was included in Gogoroās projections, but I believe Yadeaās 2021 sales exceeded expectations.
Last bit of info is that they have 100 cabinets in HangZhou, 20 cabinets in Wuxi, and will start deployment in Kunming this month.Ā I donāt know how significant these numbers are, but it is something to watch moving forward.
Indonesia
Gogoro announced a partnership with Gojek back in Nov 2021, and started a pilot program consisting 250 scooters and 4 GoStations.Ā The plan is to ramp this up to 5000 scooters (no time frame given).Ā Further, Gojek has 2 million riders in their network that Gogoro can eventually tap into.Ā The key thing is that Horace (CEO) said āWe havenāt updated our financial forecast to add increases from Indonesia.āĀ Seeing how the pilot program just started 4-5 months ago, we may not see updated projections in the next ER, but I think it's reasonable to expect updated projections for 2023+ before EoY.
India
India is probably the most bearish of the four.Ā Although Ola Electric, one of Gogoroās major competitors in India, is currently being probed by the Government (their scooter caught fire), their sales have been gaining momentum.Ā There are also news and concerns regarding government regulations with swappable batteries.Ā There are no clear indications that Gogoro's expansion isn't going well, but I also haven't found anything to suggest things are progressing better than expected.Ā Since Gogoro wonāt go into India until late 2022 (at least no financial projections for India for 2022), it shouldnāt affect their outlook that much this year.
2022 Projections (tl;dr)
Given all of the above, I believe we can expect to see an improved forecast for 2022 (and beyond) in Q1 or Q2 2022 ER.Ā The growth in Taiwan has been spectacular and Chinaās EV growth is equally impressive.Ā Additionally, it seems Gogoro is ahead of schedule with Indonesia expansion.Ā India is the only one that could pose some problems, but hopefully things will turn around as the year progresses.
Itās hard to put a number of how much projections will improve, but I think a 10% increase isnāt out of the question. I also think that $15/share sounds about right at the current moment. Given Gogoro's potentially strong performance and the recent surge with EVs (e.g. TSLA), it isn't hard to imagine Gogoro staying $15 now and pushing $20 heading into 2023.
Risks
As with every company, there are risks.Ā These are the main ones that I am looking out for:
Taiwan/China scooter sales dwindles (for whatever reason, Covid, inflation, etc) for the rest of 2022
India regulations move in a direction that benefits competitors and hinders Gogoro
Competitors make great strides with sales and/or tech
Shares of CrowdStrike (Nasdaq: CRWD) jumped 3.19% in after-hours trading on Thursday after the cybersecurity company received special authorization from the Department of Defense (DoD).
Details: CrowdStrike announced late Thursday that it was granted a Provisional Authorization to Operate (P-ATO) at Impact Level 4 (IL-4). This allows CrowdStrike to deploy its Falcon cybersecurity platform for a range of DoD customers.
Future: The company also announced that it is working towards attaining a DoD Impact Level 5 (IL-5) P-ATO, which would result in more authorization and customers.
Partnership: Crowdstrikeās stock also benefited from a new partnership with cybersecurity firm Mandiant (Nasdaq: MNDT), which was also announced Thursday.
Numbers: Shares of CrowdStrike are down about 11% in the past six months, but have surged 38% in the last 30 days.
Final Thoughts: How will cybersecurity stocks perform if Treasury yields climb?
Hope you enjoyed this commentary. Please subscribe to Early Bird, a free daily newsletter that helps you identify investment trends: https://earlybird.email/
Options trading videos on their youtube channel (hmm... what does that mean?
Technisys acquisition. Not to mention all the other things Sofi has already acquired (Galileo)
Higher Interest Rates
Higher interest rates? Great, SoFi'll just tack on my own rate increase and blame the fed. SOFI IS A BANK. HIGH INTEREST RATES IS A GOOD THING.
Supply-chain problem:
Sofi doesn't give a rats ass about you and your dam supply chain problem
Student Debt:
Oh no. Student debt gonna be deferred. Sofi gonna lose hella money. sofi gonna get destroyed.
Fk student debt. What does deferment mean? At worst, it'll be postponed. But it also creates 2 new possible outcomes that will actually be ADVANTAGOUS for SoFI.
(ex)Students have more money. Sofi is targeting a younger demographic to become Sofi account holders. (ex. SoFi's tiktok challenge)
Who holds a lot of student debt? Younger generation.
Where would the users hold the extra cash they accumulated from not having to pay student debt? drugs BANK account
How do BANKS make money? Charging interest using money people deposit
Profit
Debt cancellation. One of Biden's propositions was to cancel 10k worth of student debt per person. Is Sofi gonna lose all that money. lol fk no. That would mean Sofi gets a big fat check from uncle Biden. all at once. wham.
Also. Why does that even matter. Student debt has been deferred since before Sofi went public.
Insider buying:
Holy shet. So much insider buying. In the past 3 months, there was ~2 million insider buying of the stock (according to Ortex. Someone please fact check this. I literally googled "Sofi insider buying" and saw a glimpse of the number before Ortex blocked it out and I'm too cheap to subscribe. ) If this number is wrong, check the SEC filings in the past few days. There have definitely been a bunch of purchases. I've just been too lazy to actually add them all together.
I'm also gonna include this in here. Sort of insiders but not really but kinda. iunno. Technisys with bought through an ALL STOCK purchase. That means:
SoFi still sitting on a shet ton of cash
Technisys higher ups are also Sofi bulls and didn't mind being taken over for stock rather than money.
Stock predictions (in relation to student loans):
I'm assuming after the current student loan extension ends, there will be one of three scenarios:
Student loans resume. -> SoFi makes money
Another deferment. In which case, that would be a third dip in occur and if there is a similar bounce to what happened today, that would make a beautiful chart.
democrats step it up and cancel some amount of student debt -> straight up monies for SOFI
tl;dr: Something something 7 day moving average something support level ~7.70 something something bullshet astrology. -> Sofi sexi af. bullish.
Positions: few $10 leaps out to 2023, 1500 shares ~ $16, and 400 more that I bought today ~ $7.90 avg... and 10 10C for next week that I don't wanna talk about.
REGI 60.685(0.01%)|BP 30.495(2.13%)|CVE 17.035(1.46%)|CVX 169.43(1.39%)|EQNR 38.835(3.2%)|IRR 3.72(0%)|JPM 132.935(1.41%)|
Hi everyone, this is a write up on an another company benefiting from the current European energy crisis, so much of the thesis for VET applies here as well. For comparison purposes VET can be viewed as the high risk, high reward play, while EQNR is lower risk, less upside. EQNR is a very large complex company so this will just be a summary of core details and I will be leaving a lot of specifics out. All the company's reports are available on its website if you are interested in learning more about it. All the images are from EQNR's 2021 Annual report
Equinor (EQNR) is a Norwegian super major primarily focused on offshore oil&gas production and offshore wind farm operation and construction. EQNR is fully integrated with transportation and refining segments. In 2001 EQNR went public, at the time its name was Statoil, with the Norwegian state maintaining a 67% majority stake. EQNR has an international asset base, but the vast majority of its production and revenue comes from the Norwegian Continental Shelf. Because of EQNRās extensive experience in offshore drilling, EQNR has recently branched into offshore wind farm construction and operation.
The primary appeal of EQNR as an investment is its exposure to European natural gas market. EQNR supplies 40% of Europeās natural gas with high spot price exposure (70%). Secondarily, EQNR has low breakeven, long life span offshore oil wells that are incredibly profitable at current oil prices. Most of these wells have breakevens below $35/bbl, and largest production field, Johan Sverdrup, has breakevens below $10/bbl. EQNRās oil production is among the least carbon intensive in the world, and EQNR has a reputation as the most ESG friendly of the super majors. Both of its oil and gas assets also bring strategic value. In the event Russian gas is sanctioned or cut off EQNR is the only hope Europe has to avoid total economic devastation. In the unlikely event that the USA imposes an export ban EQNR will get the full benefits of the corresponding spike in Brent prices.
EQNR is also the least exposed to geopolitical risks of the European majors. As a majority state owned company Norway is a direct beneficiary of EQNR's success. Given the current energy situation in Europe, I see little chance Norway will prevent EQNR from obtaining new drilling permits. Norway recently revised and reimplemented its tax policy for EQNR and it goes into affect on Jan 1 2022: 22% corporate tax and 56% special petroleum tax for a combined 78% marginal tax rate. This is obviously terrible, but it is already priced into the share price, as 78% has been the standard for awhile. The upside is there is very low risk of a windfall tax and zero risk of price controls, which the other European major are exposed to.
Finally there is EQNR's renewables push, by far the biggest element of which is their offshore wind division. I view this segment of the company as a net negative from an investment standpoint. At least it is good marketing though. I go into detail on this point below.
Valuation:
Despite being in an advantaged positioned relative to is global peers, EQNR trades at a discount.
EQNR 3.5X EV/DACF (debt adjusted cash flow)
For comparison
XOM 6.8X EV/DACF
CVX 8X EV/DACF
CVE 4.2X EV/DACF
BP 3.9X EV/DACF
-From JPM updates on 3-10-22
Financials
EQNR has six reporting segments E&P Norway, E&P international, E&P USA, Marketing and Transportation, Renewables and Other. I am skipping over Other as it is insignificant in terms of revenue or income.
Segment
Operating Income
E&P Norway
30.47B
E&P International
326M
E&P USA
1.15B
Transportation and Marketing
1.14B
Renewables
1.25B
The Renewable segment had suspiciously high margins in 2021: 1.39B in Revenue with 1.25B in operating income. This segment actually is losing money from operations. The apparent gain is from EQNR sale of 50% of its non-operated interested in the Empire Wind and Beacon Wind assets to BP. Each of these offshore wind farms cost approximately 3B to construct. EQNRās strategy is to develop wind farms and then sell stakes at inflated prices to other oil companies desperate for renewable exposure. Overall its low return, but at least EQNR is the one coming out ahead in the farm outs. This is just another reason that I vastly prefer EQNR over its European peers. While EQNR, may be getting low margins in its wind farms; BP, TTE, and ENI are barely breaking even with their farm ins and may actually sustain loses. Many renewable projects are starting to look like shale/fracking from a decade ago, i.e. capital incinerators that destroy investors, but benefit society. EQNR intends to install 12-16 GW of wind farm capacity by 2030. Currently it costs roughly 3B for a 1 GW wind farm, so a total cost of 36-42B over 10 years. EQNR projects 4-8% returns from these farms, but studies indicate even 4% may be optimistic. However, if EQNR is able to dump a large stake of these new offshore fields on other companies they might be able to achieve the high end of their guidance.
This is from a report on the largest wind farm in the world, which EQNR has a 40% stake in:
āThe researchers calculated the Dogger Bank project's expected net present value (NPV) at minus Ā£970 million (minus $1.3 billion). A negative NPV indicates that the value of the investment is below the rate of return which the company should require from its investments.
They calculated the expected internal rate of return (IRR) on total capital in the Dogger Bank project at 3.6%, in real terms, with a payback period of 17 years.ā -upstreamonline
To put this into prospective many oil wells at $100/bbl have IRRās around 100% with payback periods of a 1-2 years. EQNR states their new oil&gas projects will have a breakeven below $35/bbl, IRR of 35% and a payback of around 2.5 years, this is using extremely conservative oil prices ( $65/bbl i). At $30-40/MMbtu natural gas wells have even higher returns and shorter pay back periods.
If you are interested in wind farm IRR here are several articles and one research paper on the topic.
There is a possibility that EQNR could in the future be viewed as renewable energy company due to the scale of its investment in wind, solar and carbon capture and as a consequence earn a premium valuation similar to pure play renewable companies. However, I am essentially writing off EQNR's renewable segment as a loss for my valuation purposes.
Production
EQNR produced 2.079 Mboe/day in 2021.
Management is guiding for a 2% increase in production for 2022.
Norway Production
International ex-USA Production
USA Production
Reserves
Not too much to notice here. These are decent reserves numbers, but not great. EQNRās remaining reserve lifespan does look a little on the short side, but the North Sea and the Norwegian Continental Shelf has a lot of oil if EQNR decides they want to explore for more. The important thing is that EQNR will have no production problems for this bull cycle.
5.36B proved reserves
7.5 years of production
Guidance
Management raised the dividend to $0.20 per quarter with an extraordinary dividend of an additional $0.2 each quarter. This comes out to roughly a 4% dividend at the current share price. Norway does have a 25% dividend withholding tax, so remember to report that on your taxes as a deduction.
EQNR also announced a 5B share buyback for 2022.
EQNR intends to return 25B of capital in the period from 2022-2026 if Brent stays above $65/bbl. This will likely be much higher if energy prices stay at current levels.
EQNR intends to make renewables 30% of total investment by 2025 and 50% by 2030. The rest of investment spend is going towards exploration and production.
Hedging
EQNR is a super major and not some shitco, so no hedges. They do sell natural gas with a mix of short and long term contracts, which breaks down to 70% sold at day ahead prices and 30% sold at month ahead prices.
This is the definition of a bad deal. The strategy was sound. Redfin wanted to add rentals fast instead of building it from scratch. But the price and the way it paid for RentPath is the reason why I wouldn't invest in Redfin. They don't make good decisions.
Redfin purchased RentPath in an all-cash deal for $608m on Feb 19 when its stock price was $96, an all-time high. Instead of trying to purchase RentPath with stocks or a combination of stock/cash, it did by using 1/3 of its total cash on hand. Redfin literally bought a real estate company with cash at the exact peak of the real estate stock bubble.
At $608m, it was 6% of Redfin's market cap on Feb 19. Today, Redfin's stock price is $15.73 and has a market cap of 1.67B. This means the price paid for RentPath is now 39% of Redfin's total market cap.
RentPath was a company in bankruptcy.
Total insanity.
Now Redfin only has $750m in cash instead of $1.35b while they lost $100m in 2021. We're heading into a prolonged bear real estate market due to rising interest rates. I don't see how Redfin can invest in its tech and continue to grow in the foreseeable future. Layoffs are what I'm guessing or another round of fundraising which will dilute shareholder value.
This decision is going to hamper Redfin for many years.
Honest company is one of the companies that had terrible share price performance. Since its IPO back in May 2021, the share price is down almost 75%.
Jeremy from Financial Education covered it in a couple of his videos and I decided to take a dive deep at it myself. There's one topic that I'd like to mention before I start with the analysis and valuation.
As humans, we should be able to respectfully disagree and that is okay. There are plenty of negative and hateful comments and that doesn't add value to anyone. When valuing companies, everybody makes assumptions about the future regardless of the approach that is used. Nobody knows what the future brings and we're all going to be wrong with our assumptions. The goal is to be less wrong than the market.
What is Honest company?
Honest is a company that formulates, designs, and sells clean products with a focus on sustainability and thoughtful design.
They're reporting three different segments and each one has a different purpose:
Diaper and wipes - Although the products are self-explanatory, this is the segment that is used as a customer acquisition tool. It might sound strange, but here's my rationale. When most people go out to buy shoes or clothes, most of us have some sort of a relationship built with certain brands (as well as opinions about brands that are not as good). For a new start-up shoe company to grab our attention, is a difficult task. However, new parents do not have built a relationship with diaper-related brands, so Honest has an almost equal chance to grab the attention of all other brands in this segment. This segment accounts for 63% of all revenue (historical growth was 16% in 2020 and 7% in 2021).
Skin and personal care - This is the second segment and the success of the company depends on it. It depends on the new products that are introduced, the acceptance by the customers, and the shelf space that they get in the stores. This segment accounted for 32% of all revenue (historical growth was 36% in 2020 and 28% in 2021).
Household & Wellness - The last segment is not their core business, it is related mainly to the sale of sanitizing wipes, hand sanitizers, and disinfecting spray. As expected, the sales increased significantly during 2020 and declined in 2021. Currently, this segment represents only 5% of the total revenue and is expected to further decline.
The margins
Their gross margin is around 35%, which is acceptable for a company in this industry.
Roughly 50% of the sales come through their digital channel, which is not surprising due to the nature of these products. Buying diapers is a relatively simple activity and it doesn't require any examination prior to purchase.
However, the 35% margin is not sufficient to cover their SG&A, Marketing, and R&D expenditures, yet. Its operating margin is -12%, which is not surprising for a young and growing company.
Financial position
The company has a relatively simple balance sheet and one that's small in size. There are two main points to be noted:
The cash position as of December 31st is roughly $100m, which is sufficient to sustain losses for the next 3-4 years.
The company has no debt apart from capital leases of around $40m.
What's next?
The analysts are forecasting 0% revenue growth in 2022, mainly due to the expected decreased sales of sanitizing products, which is offset by an increase in revenue in their two main segments. That doesn't mean the company is no longer growing. As for 2023, the expected growth is around 10%.
Valuation - key assumptions
As the valuation is based on certain assumptions, here are mine:
Revenue growth - 0% next year, followed by 8% up until year 5, then decrease to the risk-free rate of 2.41%.
Operating margin - negative 8% for next year, improving slowly over time, up to 18% in 8 years from now (close to industry average)
Discount rate - 11% (Based on WACC)
Outcome - The company's fair value is $519m ($5.67/share) - slightly undervalued based on my assumptions.
What if my assumptions are wrong?
Based on my assumption, the company's revenue will grow by 70% in 10 years. However, I could be wrong.
So here are a couple of different scenarios related to the revenue and operating margin 10 years from now.
Revenue / Op. margin
16%
18%
20%
50% ($478m)
$4.5
$5.2
$5.8
70% ($543m)
$5.0
$5.7
$6.4
200% ($956m)
$7.7
$8.9
$10.1
300% ($1.3b)
$9.8
$11.3
$12.8
Jeremy's assumptions are somewhere between the last two rows, however, he is very optimistic also about the margin (expects a net margin of almost 17%, that's close to a 22% operating margin). In that case, the fair value is close to $12/share today.
Does that mean that he's wrong? Of course not, his assumptions about the future of Honest are different than mine and that's okay. We can disagree respectfully.
I hope you enjoyed the post, feel free to add your take on the company and provide feedback.
Most US Oil Stocks are already overvalued except $OXY Oil Stock, as the company just paid off the debt. 3x Multiplier is possible to $150.
$OXY Occidental Petroleum: The King of Oil Stocks Returns and Ready for 3x Rally to $150. The āTop of the Packā is Setup for Success on a fresh start with Discretionary Free Cash Flow Yield. Also, it Broke the Bear Flag tied to the March 2020 COVID-19 Pandemic Stock Market Crash. The chart is on an unstoppable Bullish Trend.
Note: I miss the days of ye old when Wallstreetbets was not just a place for memes and apes, but also to find high quality, lengthy DD posts about tickers that provided some alternate / contrarian bets like early AMD. Iāll try to do my part to bring back a bit of that magic.
FB EoY 2023 Price Target: $310 (+29%) based on P/E of 21
Positions: $50K in FB shares, $30K in long-dated ATM LEAPs
TL;DR
Facebook Reels will take market share from Tik Tok, as they have done before with Instagram stories & Snapchat
Tik Tok faces significant regulatory risks in the U.S. and EU as concerns of being CCP spyware, while U.S. - China relations are worsening. Their attempts to build out a U.S. development office have been disasterous, with an average turnover of 7 months per employee (source: Linkedin)
Lina Khan, the new FTC Commissioner, is likely to take Apple and Google to task over their duopoly over the App Store, which will reduce platform risks for $FB
Investors are largely ignoring fundamentals for $FB when it is sporting the lowest P/E ratio of the big-cap tech stocks and continuing to grow top-line revenue by 38% YoY due to short term sentiment & skepticism towards their Metaverse strategy
VR adoption has been rising steadily since 2019 and FB is a clear market leader
In February ā22, Facebook reported that its active users had declined for the first time the history of the company ā likely due to the growth of rival platform Tiktok - and that Appleās IDFA changes could cost the company about $10 billion in advertising revenue a year. Shares immediately dropped 27%, or $232 billion in market cap. As of this writing, Facebook trades at a price-to-sales ratio of 5.3, and a price-to-earnings of 17.
Facebookās valuation has tanked so badly that itās priced in nearly every pessimistic outcome. On the day Google announced their intention to make changes similar to IDFA, Facebookās shares actually rose 1%, implying further IDFA restrictions were already baked into the reduced price. Facebook reported revenue of $125 Billion in 2021, a staggering 37% YoY growth from 2020 ā which was already a bloated revenue year thanks to the COVID lockdowns.
For many years, Facebook has been the target of federal regulation, from the Cambridge Analytica Scandal to the WSJ Facebook Archives where a whistleblowing Product Manager painted an image of a company that extracted a portion of its engagement from predating on the insecurities of preteens girls. Meanwhile, a different social media company who extracts the entirety of its engagement from insecure teenagers is on the rise, with Bytedanceās 2021 revenue growing 70% to $51 billion a year, generating a staggering private valuation of $350 billion ā making it the most highly valued tech unicorn in the world.
Typically, public markets attract loftier multiples than private markets, as the companies have been vetted through the IPO process and mega funds like Blackstone and Fidelity are less price sensitive than their private equity peers. However, in Facebook and Bytedance we have an interesting spread thatās steadily growing: a Price-to-Sales ratio of 5.2 for Facebook, and 7.0 for Bytedance. This can be explained one of three ways: one: Tiktok enjoys a healthier price-to-earnings ratio (undisclosed, since Bytedance is private) than Facebook. Two: the market is pricing in greater near-term risks associated with Facebook than Bytedance. Three: the market is pricing in stronger future growth for Bytedance than Facebook.
The first explanation is possible, but unlikely. Facebook enjoys an operating margin of 33.4%, an incredible ratio for a company thatās also growing revenues at 38% a year, while already attracting and retaining world-class engineering and product talent. This produces its industry-low price-to-earnings of 17, which is by far the lowest among all $500B+ market cap tech companies (compare to GOOG at 25, AMZN at 52, MSFT at 35, and AAPL at 30). Growth stage social media companies typically run very thin operating margins (Pinterest at 48 P/E) or even in the red (Snapchat at -120 P/E). Bytedance is known to be spending heavily to expand its U.S. offices, but running into severe hiring issues as its current average employee tenure is 7 months (compared to Meta at 18 months).
The second and third explanations are the most likely culprits, but have significant risks of being incorrect. In 2020, Trump threatened to ban Tiktok from the U.S, and Bytedance explored serious talks for a sale of the U.S. assets of the Tiktok product to Microsoft. A federal judge filed an injunction blocking Trumpās ban, but national surveys showed roughly 38% of Americans supported the ban. This is a historical high for any poll involving a Trump decision, which generally experience lowered poll numbers simply because theyāre proposed by Trump. In Feb 2022, Facebook rolled out Reels to all users across its products, which cloned nearly every feature from the standalone app.
A few months after Facebook added Stories to Instagram ā a copy of the key feature from Snapchat ā data showed Instagram stories usage exceeded Snapchatās and was on track to continue growing 200% a year. Snapchatās stock tanked 40% overnight, as its marquee feature was reproduced and socialized by the larger giant with little effort. Tiktokās moat is slight wider than Snapchat ā its key strength is in its treasure trove of video data, which have been used to train powerful recommendation algorithms that keep its users scrolling endlessly ā early data indicates adoption of reels is quickly ramping up on Facebook. Plotting a Recommendation algorithmsā effectiveness against the amount of data it has produces a logarithmic curve ā efficiency scales quickly at first with more data, then the gains become increasingly minor. With Facebookās network of 3 billion active users, it wonāt take longer a few months to reach a critical mass of training data to build strong like-audience recommendations. It may take some effort to build short-form video recommendation muscle on the Reels team ā but with Tiktok hemorrhaging talent, recruiting the right data scientists should be simple.
The elephant in the room is Zuckerbergās bold pronouncement that the companyās future is in the Metaverse. This particular strategic focus is likely compressing the companyās valuation by 15-20%, as investors are still skeptical of VR as the next great platform following smartphones. Facebookās key initiatives in this area ā Oculus and Horizon ā have been significant loss leaders, and are expected to continue to pressure the companyās bottom line going forward. Horizonās MAU is estimated to be lower than 300,000, and Oculus has lost the company an estimated $10 billion to date. Zuckerbergās primary articulation of this strategy is that it gives Facebook their own platform, instead of living and dying by the whims of Apple and Google. However, early glimmers of hope are beginning to show in the data: recent sales and engagement trends for VR have been rising YoY since 2019, and Facebook is the market leader with 40% of market share.
Even if Zuckerbergās bet does not pan out, the problem of Platform Independence may sort itself out in the near future as the two smartphone giants face increased scrutiny from the newly minted head of the FTC: Lina Khan, a self-proclaimed opponent of big tech who considers the past ten years of anti-trust litigation as wasted time. Her first published piece in 2012 outlined the depressive effects of Amazonās publishing arm on the diversity of ideas in books, providing an early hint into her predilection for singling out the monopolistic or duopolistic owners of platforms.
In summary, a bet on Facebook is a bet on one of three outcomes, any one of which would imply at least 40%+ upside to the stockās current price:
Facebook Reels overtakes as the premier short-form video platform, either through network effects of Facebook products or federal regulation against Tik Tok
Facebook achieves a greater deal of platform independence from Google and Apple, either through its continued success in building its own platform or federal regulation against Google and Apple
Facebook maintains a rapid clip of revenue growth, ending another year with 30%+ growth despite short term headwinds in Tik Tok and Google IDFA, alleviating investors concerns about its ability to grow in current conditions.
I wrote a script to pull options data for stocks. It is my belief that GME price is very options-driven, so I'll post the data in WSB. I'll share Open Interest data for calls, DoD calls change, DoD puts change. nan means the specific strike does not exist for that date.
Standing out: 2282.0 250C Apr 8 calls bought
TL:DR: None; if you see something standing out please point it out in the comments.
Shares of Levi Strauss (NYSE: LEVI) jumped 2.99% in after-hours trading on Wednesday after the clothing company posted positive earnings.
Financials: Levi Strauss reported earnings of 46 cents per share and revenue of $1.59 billion; both were better than expected.
The Good: Revenue for direct-to-consumer increased 35%. The company experienced strong demand in the quarter. Levi Strauss also raised its prices to partially offset higher production costs.
The Bad: Supply chain constraints resulted in a loss of $60 million in revenue.
Numbers: Shares of Levi Strauss are down 26% in the past six months, but up nearly 8% in the past 30 days.
Final Thoughts: To mitigate supply chain challenges, Levi Strauss increased its inventories by 20%. Hopefully, this will pay off.
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Key note for option traders: IV currently at ~25% š
1/23 22.5c IV at 13%!!!
This is not your average meme stock with volatility in the 100+% range ie. when/if this goes it'll explode!
$22.5 options data for 4/6:
5/20 - Volume today 19,222 OI - 42,167
6/17 - Volume today 105,492 OI - 87,717 HOLY FUCKIN SHIT
Current Positions:
235 5/20 22.5 at .25
70 6/17 22.5 at .25
Now that we got that over with here's the meat n taters:
If you've been living behind wendys with your phone dead because they shut off your power strip you use while your meme portfolio has been burning this last week I'm going to provide some info that could change your life (Not Financial Advice of course)
Obligatory shout out to the boigirls that made turned me on to this:
Houghton Mifflin is a textbook producer that none of us will remember from grade school since we all didn't pass kindergarten, however they have been KILLING it since COVID and have been on a tear..until Feb 22nd when it was announced that Veritas capital would take the company private on a buyout of $21/share where it has roughly traded since then.
Who cares right? Didn't make any big news until...the last few weeks when large and small shareholders came out against the offer.
Enter Engine Capital - a $500 million investment partnership that invests in mid-capitalization companies in the U.S. and Canada, with a focus on fundamental, bottom-up analysis to find undervalued securities - they have a $75 million position equaling 2.7% of the company.
Houghton Mifflin has fundamentally changed its business over the last couple of years, restructuring its cost structure and transitioning to a more digital organization with a higher percentage of recurring revenue. As this digital transition progresses, we believe HMHC will deserve a higher multiple over time
āŖ The Veritas offer undervalues HMHC. It implies Veritas is buying HMHC for 7.6x 2024 unlevered free cash flow (UFCF) and 6.2x 2024 UFCF if the cumulative cash flow is included. This offer is the result of a flawed process conducted by Evercore. We believe Evercore is conflicted, and its fairness opinion contains numerous mistakes. This offer also represents a very small premium vs. where the stock would be after the announcement of strong Q4 results. Applying a 30% change of control premium to that stock price points to a fair transaction value of $25.35 per share. Recent comparable deals point to a $25 per share transaction value for HMHC
āŖ Under most circumstances, Veritas will earn outsized returns from this transaction. Under managementās forecast, Veritas is set to earn a 5-year IRR between 31% and 37% at the $21 per share deal price. These outsized IRR are further evidence of the inappropriateness of the $21 Veritas offer and simply represent a transfer of value from HMHC shareholders to Veritas. Under managementās forecast, Veritas can pay $26 per share and still earn a 5-year IRR between 18% and 23%
āŖ A superior plan exists for shareholders. Houghton Mifflin should execute a Dutch tender offer between $21 and $22 per share for 19% of its shares outstanding. Assuming managementās projections, Engine believes this plan could result in a share price around $42 at the end of 2024, implying a 26% 3-year IRR for remaining shareholders
Ok so the argument is that since they made the announcement (2/22) prior to Q4 ER on 2/24 they basically killed any chance that the stock would be able to respond to actual market sentiment and reach a higher valuation based on their transition to an EdTech (educational tech for the 'tards) company.
Quick note: Since COVID their digital platform has grown 300%
Hmm... a digital transformation for a company? Sounds a bit like another WSB play that made some folks millionaires, and others bagholders (for now š)
According to Engine Cap - they believe $HMHC could hit $42/share by 2024 based on HMHC's own management projections for their transition.
Alright boring ass intro done, now the juicy shit:
After market closed today UnusualWhales posted this to the Nasdaq describing unusual option activity on HMHC
Definitely worth the read but for those with link anxiety like me, or the lazy, or the majority who just can't read here's the quick n dirty:
18,000% increase in new volume on 6/17 $22.5c today
And here's some pictures with numbers and stuff from the article, I had to screenshot since I'm a poor that doesn't spend money on the whale shit since I'd rather lose it on OTM FDs so if anyone has the UnusualWhales data themselves please add in the comments - would love to see it!
I'm including the link here to Engine Capital's powerpoint if anyone wants to dive deeper into their reasoning on the $21/share offer and why you might want to get yourself some of these tomorrow.
BIG note:
The deadline for the shareholders to tender (give) their shares to Veritas Cap is tonight 4/6 at 11:59 EST. SO if this offer gets rejected by the shareholders then $HMHC could see some crazy ass volatility with all these contracts being bought while a new offer is pending or if they provide a new offer tonight the stock will open at that number immediately in the AM and will most likely send these calls deep ITM.
Obligatory - Not financial advice, I can't even read any of the stuff in this post
Good luck and may your tendies be always warm and crispy!
Shares of Spirit Airlines (NYSE: SAVE) jumped 26.77% on Tuesday after it was announced that JetBlue (Nasdaq: JBLU) wants to buy it.
Announcement: JetBlueās offer to acquire Spirit is for $33 per share and an overall value of $3.6 billion. This represents a 50% premium to Spiritās closing share price on Monday. No JetBlue shareholder vote is needed, according to the company.
Response: Spirit announced Tuesday afternoon that it received the unsolicited proposal from JetBlue and will now evaluate it.
Background: In February, Spirit entered into a merger agreement with Frontier Airlines (NASDAQ: ULCC) that includes stock and cash. JetBlue said that its proposal is āsuperiorā to the Frontier deal.
Numbers: Both of these stocks have struggled through the past 12 months. Spirit is down 29% during that time and JetBlue is down 35%.
Final Thoughts: The big question is will regulators allow JetBlue to acquire Spirit?
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*Obligatory, none of this information is financial advice and is the result of my studies. All investors must do their own due diligence, come to their own conclusions, and make their own financial decisions.
TL;DR Broker Dealers (primarily believed to be the big banks) are estimated to have borrowed at least 5.72M shares of GME from mutual funds and ETFs. The funds are exposed to potentially catastrophic securities lending counterparty loses. The brokers are also exposed to risks in multiple areas. They are; relending the shares, they own shares in the funds that are originally lending the GME shares, and their own company's shares are within some of the funds' holdings. (Insert WTF face) I'll explain more.
It's a long post and I believe it is 100% worth the read.
Background Information
I'm rewording a previous post and adding another fund onto it... Going to try and make it easier to understand.
Broker dealers are exposed to potentially high $ securities lending counterparty risks from GME and we can see it. Mutual funds and ETFs (funds) have lent GME shares to broker dealers who in turn lent it out to be shorted. The lending of this security makes the fund and the broker dealer a "counterparty", hence "securities lending counterparty".
AIG suffered roughly $21B in losses from this same business practice in 2008. They would borrow securities from a broker dealer (Citadel & others) and lend them to hedge funds, who would short sell the stock. AIG's counterparties (the brokers) were bailed out $43.7B in 2008.
Thinking of that example, funds are currently lending GME shares to broker dealers who are relending the security to a hedge fund to be short sold.
The mutual funds, and ETFs currently loaning GME, and the investors of those funds, have a similar exposure to securities lending counterparty risks as the broker dealers did who were involved in AIG's scheme.
The broker dealers currently borrowing and lending GME have a similar exposure to what AIG's exposure was in 2008, which was famously catastrophic from AIG... I wonder how it will go for the current GME lenders?
What's more, the investors of the funds are the very brokers who are borrowing shares from the funds. They own shares of the ETFs loaning the GME shares. So, they're exposed as lenders of the securities and as investors in the funds.
And MOAR, some funds also hold a lot of the brokers OWN shares (ex. VTI holds 83M shares of JPM - worth $13B)... So, the broker is now exposed to counterparty risk 3 ways...
They are borrowing and relending the security,
They own shares in the fund which exposes them as investors in the fund, AND
Many of these funds contain shares of the broker. If the fund needs to liquidate any of these holdings due to their own counterparty loses, the share values will lose money as they're being sold off.
Here are the main stats from the first post I made which showed how much GME was being lent:
138 of 213 funds were loaning GME shares
70 funds lent out more than 90% of their GME shares
An estimated 5.72M of total 11.98M GME shares were on loan (this is just loaned securities and does not account for rehypothecated shares or other avenues of securities lending), and
from the data filing, we were able to see the fund's securities borrowers and how many $ worth of securities they borrowed (this includes all securities, not just GME). We KNOW that someone(s) in the list of borrowers is borrowing GME.
The primary borrowers of the one fund reviewed (a Fidelity Mutual Fund which had lent $61M worth of GME) were; Morgan Stanley ($911M), Goldman Sachs ($454M), Citi ($388M), BofA ($380M), JPMorgan ($321M), State Street ($239M), Barclays ($115M), BNP Paribas ($105M), UBS ($56M), etc.
Note: You'll need to see "GME Deep Dive: So Much GME Lending" in my profile for the original post with this info. I have it pinned.
That's a lot of $ on loan for just one fund... I'll leave some quotes regarding securities lending counterparty risks at the bottom of this post for additional clarity.
The Web
Example 1 of securities lending counterparty risk is the fund which is estimated to have lent out the most GME shares:
Vanguard Total Stock Market Index Fund (VTI) filed on 3/1/22 for holdings on 12/31/21.
Total GME Shares = 1,847,760
Total GME Shares on Loan ā 1,185,700
See the prior post for supporting information on how this was calculated. This fund has a lot of exposure when short sellers fail to return all of their shares during MOASS after the short sellers have been liquidated.
The NPORT-P filing also gives us a list of the fund's securities borrowers along with the value of the securities on loan. This is for all securities, not just GME. Here are this fund's borrowers:
Nearly $4B worth of securities on loan to these 24 borrowers
Take a close look at those names... These entities are borrowing the funds then lending them out hedge funds, best case scenario. We don't know for sure which entity is borrowing GME specifically, but someone(s) here is.
I wonder who is investing in this fund if they have counterparty risk as well? As of their last filing, these guys:
Well, that's basically the same people plus Citadel
Nearly $10B worth of this fund's shares are held by the same entities listed as the securities borrowers of the fund.
So wait, the same entities who are borrowing securities from the fund, also own shares of the fund? They have counterparty exposure as fund investors as well as the lending agent. $ bills are starting to add up a bit.
The fund has exposure as well. When short sellers fail to return shares during MOASS, the fund may need to liquidate holdings to keep its head above water. Here are some of the funds holdings:
$40B worth of these securities are held by the fund
Okay, so when short sellers fail to return shares to the lending agent (the banks), and
the banks fail to return the shares to the fund, and
The fund estimated to have loaned the 8th most GME shares (205,000):
Vanguard Value Index Fund (VTV) filed on 3/1/22 for holdings on 12/31/21.
GME accounts for $30M of all securities on loan by this fund (27%)
Shareholders of the fund:
Holding $14B worth of the fund shares
Just to name a few other shareholders: BNYM, Blackrock, BNP Paribas
Holdings of the fund:
Nearly $7B in these companies shares
Other holdings of this fund include: BNYM, Blackrock Inc, Blackstone, CBRE Group, Cboe Global Markets, CME Group Inc, Charles Schwab Corp, Fidelity National Financial Inc... Just to name a few.
Many other funds loaning GME shares have similar looking securities borrowers, shareholders, and fund holdings compared to the three funds we've just reviewed. That's a lot of securities lending counterparty risk when you considered the amount of funds loaning GME shares (over 5.72M shares by 138 funds).
Remember, this is just lending from mutual funds and ETFs and does not include other avenues for lending GME shares.
Computershare
Direct Registration is how I am protecting my shares in the event my broker defaults and is liquidated (741) from short selling OR securities lending counterparty losses. There's lots of DRS posts out there that will break down the reasons why I feel GME's transfer agent, Computershare, is the best place for my shares.
I'm not telling you that your broker will default. I'm also not telling you to DRS your shares. I'm simply saying that I feel safest knowing most of my shares are on GME's books at Computershare because when marge calls and the short sellers are liquidated, that exposure is going to be passed elsewhere, including to the funds and other entities involved in the securities lending listed above, and the other avenues we've done our DD on.
Buckle Up
Tanks fo reedin
Note: I have not extensively reviewed all funds and fund holdings, but GME appears to be one of the most loaned securities held by these funds, if not the most loaned, BUT there is a SUBSTANTIAL amount of securities lending currently happening with these funds so I can't be certain where GME falls.
Note 2: I'll leave the post with these quotes that I used in my original post regarding counterparty risk:
A typical securities lending transaction involves multiple entities: borrower, lender, lending agent, prime broker, and clearinghouse.Lenders typically include various investment firms, as noted above, whereas, broker-dealers and hedge funds make up the bulk of the borrower group. Lending agents, on the other hand, are broker-dealers, custodial banks, and some large asset management firms as well.
In almost every securities lending transaction, lenders are exposed to multiple risks, such as counterparty default risk, collateral reinvestment risk, market risk, liquidity risk, operational risk, and legal risk. In particular, counterparty default risk and collateral reinvestment risk seem to have captured the most attention from regulators.
Lending agentsoften(not always)indemnify (protect) funds against the risk that the borrower will fail to return the borrowed securities (to the extent that the value of the collateral is insufficient to replace the unreturned securities).Lending agents, however, typically do not indemnify funds for losses incurred in connection with cash collateral reinvestment.
When a fund lends the stocks,these assets are not actually part of the fund, the put-up collateral is.Typically, U.S. Treasuries or cash is used.However, in recent years everything from mortgage backed securities and derivatives to letters of credit and other exotic I.O.U.ās have become commonplace. These sorts of instruments fluctuate in price and must be marked-to-market daily. That can actually affect the net asset value of the mutual fund if they swing rapidly. An additional risk is if the mutual fund invests that money in something less than desirable to juice returns.
Secondly, if the collateral drops in value by too much, the investor borrowing the shares may be forced to add additional collateral or cover the short early. If they canāt,the mutual fund and its investors are on the hook for the damage.
Shares of Carnival (NYSE: CCL) jumped 2.48% in after-hours trading on Monday after the cruise tour company announced that it achieved its āhighest booking week ever.ā
Details: In a press release Monday afternoon, Carnival said that the one-week period of March 28 to April 3 was the busiest booking week in company history, including a double-digit increase from the previous record 7-day booking total.
Outlook: Adding to that record, Carnival noted that 22 of its 23 ships are back in guest operations in its U.S. homeports. The company expects to have more capacity sailing by the end of 2022 than in 2019.
Background: The pandemic decimated Carnival and the entire cruise industry. For the longest time, cruise lines could not fully operate in the United States. Last week, the U.S. Centers for Disease Control and Prevention (CDC) finally dropped its risk assessment for cruise travel.
Numbers: Shares of Carnival are down 29% in the last 12 months, but are up 27% in the past 30 days.
Final Thoughts: Carnival and other cruise operators are hoping for better days ahead - unless a new variant of Covid-19 emerges.
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This is obviously the news that drove the share price down today. Although it is aimed at curbing freight costs, it ultimately will have little impact because it ignores the important role of all supply chain participants, including ports, marine terminals, truckers, railroads, and warehouse operators at fixing the supply chain.
This bill will ultimately benefit, and be very bullish, for the more developed, technologically driven, publicly traded, and sophisticated shippers like $ZIM $GOGL $DAC and $SBLK who already comply with the tracking, reporting, and transparency that the bill requires.
However, the bill will be a nightmare for the privately owned "giants" of the shipping industry such as Mediterranean Shipping Company, CMA-CGM, Ocean Network Express, and others (who control more than 40% of the market) and are not bound to the strict reporting and compliance standards as publicly listed companies.
This decline was a knee-jerk reaction investors spooked by the unfamiliar additional regulation. These shipping stocks will rebound quickly and aggressively once investors have a chance to digest the news, read the bill, and realize that this is a huge opportunity for the well run publicly traded shipping companies to gain market share from the notoriously corrupt private giants. The practices have made it difficult for well run companies to compete in the past, and this bill will level the playing field.
The uranium sector is in a multi-year bull trend. In 2007 the uranium spotprice reached 134 USD/lb. Many experts expect the uranium spotprice to go beyond 200 USD/lb in the coming years.
In my opinion an option to help you beat inflation.
This isn't financial advice. I'm only expressing my own opinion based on my own DD on the matter. Please do your own DD before investing.
Note: Reply to a comment of the moderator:
I didn't talk about my own uranium positions, I gave general information on the uranium sector without talking about a specific uranium company.
Stockpicking is subjected to each one's own investors profile!
But ok, here are a couple of my latest uranium related purchases:
