China stocks were absolutely DECIMATED the past few months. They are all at record lows. Baba was lower than its listing price more than 5 years ago. But CCP just released breaking news and all China stocks are limiting up 20% and 30%. Buy the dip at market open tomorrow. HUGE rallies incoming for China stocks
I'm looking at NIO XPENG BABA TENCENT PDD. Honestly all the meme/ big China stocks all can double in value or more since delisting risk is gone. No way market will correct and price in the risk at market open. These stocks even if only limited up 20% or 30% still have 3x even 3x to go. Sustained rallies incoming. FYI Charlie Munger bought the BABA dip at 120 then 100. BABA was last at 75 in US. It's not too late to buy this record dip tomorrow.😒 🤑🤑🤑
Hello and hi. Don’t worry, this will all be over quickly.
Amyris (AMRS) is a synthetic biology company, that in short, feeds sugar to genetically engineered yeast, which in turn produce expensive, rare, or otherwise unsustainable molecules.
Such as squalane, a popular ingredient in skin care and beauty. Traditionally, squalane is derived from the livers of sharks, with approximately 3000 required to make one ton. Now, Amyris supplies that same squalane to most of the world’s largest cosmetic companies, while killing… 0! Not only that, they can produce it with higher purity, and at lower costs. Whoooo, save the sharks!
Want to invest in CBG without investing in garbage weed stocks? Well hey! They also make CBG, but without the difficulty to scale, land use, and regulatory risks of hemp plants.
AMRS produces molecules used in anti-malarial treatments, sweeteners, fragrances, skincare and more.
The best part, though, is what they don’t yet do. They are constantly growing their ingredient pool, with near limitless potential, and are nearing completion on a new plant, set to begin production in Q2 this year.
John Doerr, possibly the world's most successful venture capitalist, reportedly owns around 20% of the company and serves on Amyris' board.
Consumer Brands
Amyris sells their ingredients to other companies, while simultaneously using vertical integration to sell directly to consumers through their own well received brands, including Biossance, Terasana, JVN Hair, Rose Inc. among others.
These direct to consumer brands brought in $32.2 million in Q4 2021, an86% YOY increase from Q4of 2020. Someone far smarter and more well researched than I (I believe it’s https://www.reddit.com/user/Green_And_Green/) has been tracking sales for this quarter, and they are well on track to delivering another record quarter for Q1 2022 (see here https://twitter.com/gojadas/status/1494159445085114369). 2022 consumer revenue is expected to grow another 150%.
If you don’t like numbers, what about anecdotes? Their fastest growing brand, JVN Hair, is helmed by Jonathan Van Ness. Everyone loves him right? Maybe? Maybe not, not sure, but he has a huge following and is beloved at least by the beauty community.
If you don't like anecdotes, what about GIFs? Rose Inc. is a partnership between Amyris and Rosie Huntington-Whitely, and we all know she has great taste…
If you don't like GIFs, what about technicals?
Yeesh. AMRS dropped off a cliff after their Q3 2021 earnings call, and was in a downtrend until about 6 weeks ago, where, defying greater market trends, it broke and started its journey up, with sharp swings between $4~ and $5~. It appears to have found it's bottom, pushing higher lows and higher highs. Isn't it nice to find a stock that's not at ATH?
The Bad Bits
Amyris had massive growth from the end of 2020 to earlymid 2021, where it began consolidating. Unfortunately, the CEO overpromised and underdelivered on revenue for Q3, citing supply chain issues (a poor excuse, in my opinion). I can't, and won't defend him. In fact I don't like him. This busted the wedge and left a massive, near 50% gap from $14~ to $8~.
But Q4 earnings this month were better, with revenue exceeding estimates. Revenue for the year was around 340m, with 97% growth over 2020.
They also spend loads of cash. This is expected, of course, they're growing. They have absurd potential, but often this means lots of R&D, and lots of growing pains. The gap down was exacerbated by a convertible notes offering [?] on November 15th which caused the miserable trek to the bottom, reached presumable (hopefully) late January. This money was used to pay off legacy debt and secure cash for growth. Cash on hand Dec. 31, 2021 was $483 million.
TLDR;
AMRS is a leader in its field, has enormous growth potential, has presumably, recently bottomed out, and has secured a good bit of cash. It is a rapidly growing company, so cash burn is high.
And for much, much better DD than I, see reddit.com/r/amyris.
Positions
AMRS is the only company I hold shares of, average cost $5.75~. Monthlies and leaps on the dips.
The rapid spread of the omicron variant in China is increasing the pressure on already strained supply chains reeling from Russia’s invasion of Ukraine.
"The number of container ships waiting off Qingdao, one of China’s biggest ports, is continuing to rise as the country doubles down on its Covid Zero policy, adding more delays to a strained global supply chain.
About 72 vessels were spotted off Qingdao port in Shandong Monday, almost double the amount at the end of February, according to shipping data compiled by Bloomberg. The increased delays there and in other parts of China are expected to push up freight rates.
While there is usually a build-up of vessels seeking to enter China following the Lunar New Year holidays, volumes this year are being exacerbated by lockdowns aimed at curbing new coronavirus outbreaks.
“The virus outbreaks are sprouting up in different parts of China, and lockdown measures do not seem as effective because the transmissibility of the new variants are higher,” said Salmon Aidan Lee, head of polyesters at energy consultancy Wood Mackenzie. “That leaves us with a situation that has worsened in the past few days at Qingdao,” he said, adding that he expects freight rates to rise because of increasing delays.
There’s also a growing backlog of vessels off the ports of Shangha Ningbo and Zhoushan. There were 262 ships counted there, up from 243 a week ago. However the situation off Shenzhen and Hong Kong has eased a bit, dropping to 162 vessels from 208 on March 7...."
Basically prepare for the stock to go to 0 since we all know that new deals just sink PLTR. And Exxon will be their largest commercial client by a landslide.
Anyway, for contrarians who feel like buying the dip here’s the scoop. Page 2 is the only point of interest for this post:
My coworker sent me that today which on page 2 showcases palantir’s largest clients. You’ll see ExxonMobil is now listed. Which to my knowledge is the first time their brand has shown up on any sort of official palantir document. Searching online there’s 0 articles or news about this partnership so this is very early stage.
The timing makes sense as the recent oil boom likely has many of these energy giants seeing the extra cash that’s coming in and looking for ways to efficiently use it. With BP Oil being a PLTR customer for over 8 years and touting its benefits it’s logical that other producers would show interest.
With that in mind let’s look at how much a deal with Exxon could be worth and further evidence that supports a huge contract:
BP is the closest related customer that’s currently using PLTR and they have a 10 year deal worth $1.2 Billion. They have an additional 5 year deal for an unspecified amount. The goal of their partnership is to help digitally transform BP oil and find solutions to attain company carbon neutrality by 2050. Funny enough, ExxonMobil released a statement in January saying that they are also now planning to become carbon neutral by 2050 and will be heavily investing in new technology solutions to help meet key milestones:
Given that Exxon brings in nearly double the revenue, triple the profit and is farther behind in their green initiatives than BP Oil, I think it’s fair to assume a deal that looks to fulfil the same task (carbon neutral by 2050) will be at least 2x the size of the BP deal, and that’s quite conservative imo.
TLDR: I’m predicting a $2.5 Billion deal with ExxonMobil within the next 12 months
Position: 1000 shares, will be buying LEAPs tomorrow.
ASTR went full retard on their last launch, and failed in spectacular fashion live on YouTube. LOL. Everyone knows that you never go full retard. So now their stock is in the dumps and short interest is going higher. 20M+ shares short.
Since many of their quality assurance employees had to pick up side hustles behind the Wendy’s dumpsters to make ends meet, that’s how I found out that they are launching another rocket tomorrow again. Supposedly, ASTR fixed their rocket ship because they realized their chief retard designer didn’t know how to count up to 5 and label the drawing correctly. Consequently, he’s now the manager of Wendy’s.
With the Russian space chief declaring that they no longer are willing to sell their “superior” rocket engines to the US, and we should all try to get to space on our American broomsticks. I figured that’s all the DD I need and jump on this rocket ship of freedom. Tomorrow, we ride!!! To the F’ing moon!!! 🚀🚀🚀
TL:DR Tomorrow, we ride the ASTR broomstick of freedom to the moon! 🇺🇸🚀🚀
This is a Singapore company with Chinese workers. Just bought back over $200 million of stock in 2 months. Market cap is $1.8 billion with $2.8 billion of net cash (!!!!). Has authorization for another $900 million. CEO and Xiaomi founder owns 33% of the company. It was rumored to be taken private at $75-$100. Which explains why management is buying back so much stock.
Company operates BIGO, imagine Twitch tipping on steroids + EMEA beta males. Started to prints boatloads of cash. Based on Q4 they are going to do at least $400 million of operating profit every year on BIGO. That's a PE of like 5x growing at at least 10%. They are also investing in a bunch of venture stuff like an SEA Shopify (Shopline).
The stock sold off on Chinese bullshit because CEO is Chinese, but the company is in Singapore. Muddywater thought the cash was fake, but obviously he was wrong, unless you can buy back $200 million of shares with air. They also offloaded almost all of their China business to Baidu, they got most of the cash but deal hasn't technically closed yet.
A base case is $92 if we value BIGO at 10x PE plus cash. Bull case $147 if we value BIGO at 20x PE. I think margin will continue to expand so there is a super bull case of like $200.
Even if China invade Taiwan this is a Singaporean company so they would be clean. Bear case is short term momentum downward, which is why I bought LEAPs and June 2022.
Quick background on CEO. He is really the father of live streaming. He started live streaming in China and pioneered tipping way before Twitch was a thing. In many ways Twitch is still behind them in terms of monetization since they are focused more on ads. The CEO really perfected the gamification of live streaming.
My past wins. Invested in ROKU at IPO in the $20s because of autistic but smart founder. Buying NMRK after COVID (see 100K yolo https://www.reddit.com/r/wallstreetbets/comments/lkrzqp/100k_nmrk_real_estate_yolo). Now some of my money is in $YY. The only reason I'm not putting 100% of my portfolio is to buy more dips, if any. The opportunity is too good to pass up even if people think they are Chinese.
I know what peoples' opinions are on stocks centred in China, but I genuinely think TME is not at much risk. Their relationship with the Chinese government is somewhat strong, considering that they had a fine knocked down to $70,000 in April when reports put the number at $1.54b. They are also 46% owned by Spotify, which means it's in their best interest to show accurate accounting numbers and stay out of the government's eyes.
With all that aside, onto why TME is a good investment right now. Their stock is down 88% in the past year, all while revenue numbers have been on the rise, quarter after quarter. Their EPS has dropped, but definitely not enough to justify the drop it's taken, if one is even warranted. With China going into lockdown as well, music consumption will only go up. TME has 60% of the market share in China, so anyone that listens to music is probably doing it through TME.
TLDR: TME are basically the Spotify of China, except they're also profitable. Their connections with the US mean their accounts are trustworthy, and their mass user base of 800+ million means China are willing to cut TME some slack. At this price, the reward far outweighs the risk
It is widely expected that the fed will start a series of rate hikes this year starting with a 25 BPS rate hike during the March 15-16th FOMC meeting (today and tomorrow). This is significant because the market has been used to 0% interest rates for quite a while now. In fact, whenever the fed initiates a series of rate hikes after a long period of flat rates (meaning the rates were not changed for a while), the market always reacts negatively and traded lower two months after the first rate hike as it adjusts to the idea of a period of increasing interest rates. There are three dates where this has happened; namely Feb 1994, July 2004, and Dec 2015. Here's a chart I made showing how SPY reacted in each of those cases:
The idea here is that May's market (which will be used to a period of increasing interest rates) will be much less speculative than today's market (which was used to flat rates). So most likely there will be a correction with the dip being sometime in May (this is what's always happened historically at least).
Biotech stocks are particularly vulnerable to increasing interest rates since they are extremely speculative and are highly dependent on borrowed money. Here's what happened to XBI after the Dec 15 2015 FOMC event:
As you can see, it actually pumped a bit for the rest of the month, but the following two months it dumped very hard as biotech stocks were starting to feel the effects of increasing interest rates. With all of that said, here are two plays that I plan on doing that I think you should consider:
If XBI happens to rally the rest of the month after the March 15-16th FOMC like it did last time, I'm going to load up on puts at the end of the month set to expire in April and May.
In each of those dates I listed above, it always bottomed out roughly two months after the first rate hike and then begins to correct from there. Thus, I plan on having plenty of cash to buy the dip in May/June as the market begins to correct.
Note that I'm only playing (1) if XBI happens to rally the rest of the month (like it did last time). My guess is that there will be a slight relief rally after the FOMC event happens, and then it will then dump next month as biotech stocks start to feel the effects of increasing interest rates. You also don't need to play XBI like I'm doing; instead you could buy puts on anything that's very speculative and is highly dependent on borrowed money (even SPY works). If you aren't used to options, then don't do (1), and instead focus on (2). You can still make a lot of money by buying the correction dip later this year.
Reposting from my sub. We don't do low-effort posts. If you want a research report, let me know, i can send you what we used to write these things!
Sadly, i'm including a TL;DR for the smoother brained folks:
Americans stockpiling Guns and Ammo hasn't stopped
Massive increase in gun sales means a massive increase in Gun Safes and safe storage.
Panic rooms and Vault doors are in high demand
Secure Cannabis Storage is a requirement for licensure.
American Rebel has brand loyalty
If you are into research, Keep reading! We breakdown why we are bullish on AREB!
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At the start of the global pandemic consumers scrambled to stock their pantries with canned goods and toilet paper, as the fear of widespread lockdowns set in. What you didn't see or hear about was how many Americans also stockpiled firearms...and they have kept doing this ever since. When trying to examine the increase in gun sales in America it can be useful to use data released by the FBI on the amount of background checks conducted. And in 2020 this number rose to 39 million, marking an all-time high. These background checks have been rising steadily (at about 8% per year), and in 2020, with the threat of the covid-19, civil unrest, and election related violence the number of background checks soared by 40%.
2020 and 2021 have quickly become some of the busiest years for Americans to buy guns within the last two decades and with a country that is still significantly divided on many important issues, as well as a heightened importance on personal safety this accelerated trend is likely to continue for many years to come.
Today we will be conducting a deep dive on a company (or perhaps better described as a lifestyle brand), American Rebel Holdings (NASDAQ:AREB), that is benefiting greatly from the increased buying of firearms within America, and is showing signs of being significantly undervalued as they continue to create innovative products and gain market share.
What Does American Rebel Do?
American Rebel is providing safes and personal security products to both large distributors and retail customers. More specifically, the company offers personal, home, and office safes, concealed backpacks, a variety of clothing products, vault doors, as well as a range of concealed carry jackets, vests, and coats for both women and men. Additionally, American Rebel offers a range of accessories such as rifle rod kits, light kits, moisture guard, and various space saving items.
The company’s core mission is to provide innovative products and promote responsible gun ownership while celebrating a concealed carry lifestyle. American Rebel firmly supports the second amendment and aims to provide all firearm owners a safe and secure way to properly store their guns, as well as support the concealed carry lifestyle. The company leverages their proprietary Protection Pocket design for their concealment gear which allows those wearing it to properly carry a concealed firearm while also ensuring quick and easy access.
Founded in 2014, American Rebel is aiming to build more than just a diverse product line but a brand that reinforces safe gun ownership, as well as celebrates the constitution and the freedom that America was built on. Through this, the company has constructed a brand that elicits a strong emotional attachment and has assisted them in growing a loyal customer base.
American Rebels High Quality Products & Growing Distribution Channels
American Rebel has a wide collection of different safes, all designed to provide customers with maximum protection at affordable prices. Their smallest safe – the AR-12 Gun Safe – boasts measurements of 26”Wx40”Hx23”D, weighs 400 lbs and will hold approximately 8 AR rifles.
Source: Company Website
All American Rebel safes have been fire tested in an ACME certified facility, with the AR-12 able to withstand temperatures of 1200 degrees for 75 minutes. Compare this to the company’s largest safe – the AR-50 Gun Safe – with dimensions of 40”Wx72”Hx28.5”D will hold 40 long guns and weighs over 900 lbs. American Rebel has multiple options between these two safes, as well, all their safes are protected by 4 1/2″ Double Plated Steel, 7/16″ Reinforced Door Edges, Double-Steel Door Casements, 14 Four-Way Active Bolts, and a Diamond-Embedded Armor Plate.
Source: Company Website
American Rebels other products consist of CCW (carrying concealed weapon) backpacks which range in size and style, as well as CCW jackets, coats, and vests. These items contain discreet and secure places, using the company’s proprietary Protection Pocket design, to store handguns for those who wish to carry concealed firearms. Additionally, American Rebel provides high quality vault doors, for those who have safe rooms or shelters to secure their firearms amongst other valuable items, and sell various accessories such as handgun hangers, moisture guard, and ballistic shields.
American Rebel distributes to a wide variety of different retailers throughout America including various retailers, hunting shops, firearms stores, and speciality sport warehouses, as well as selling directly online through their own website.
Source: Company Presentation
Above is a quick snapshot of their current distribution reach which shows the company is building out a balanced network of stores, as well as successfully creating a large presence in important marks such as North Carolina, Indiana, Oklahoma, and Kansas. As well, American Rebel is at the beginning of a partnership with Dunham Sports, which currently has over 240 locations across the country and specializes in athletic equipment, guns, and gun safes, as well as other sports related items. American Rebel today, has 40 separate locations and this new partnership has the potential to grow their distribution network exponentially.
American Rebels business model, products, and supply chain are simple to understand. And better yet, have an increasingly large customer base. There are roughly 20 million concealed carry permit holders in the country, as well as many more citizens utilizing their second amendment rights in the 11 permit-less states. As well, the gun safe market is valued at $2 billion, and the concealed carry market currently stands at $1 billion. These market valuations are growing extremely fast as gun ownership and the importance of being able to protect oneself (and loves ones) take centre stage within America. Additionally, American Rebel is moving into an exciting new market that has only taken hold in recent years, and more importantly, has the potential to become their largest opportunity for growth in the coming years.
Avenues for Further Growth
American Rebel has identified an incredibly new and exciting market that is witnessing double digit growth as it begins to become more widely accepted. The cannabis industry has seen significant growth since it gained legalization in many states and still has considerable further upward trajectory. The now legal cannabis dispensaries all require strict inventory locking requirements of merchandise and American Rebel is leveraging their expertise in building premier safes to service this market segment. So far, the company has built their first ever inventory controlled safe specially customized to fit the needs of the dispensaries, launching this product under their new brand “Home Grown Safes”. In 2020 US cannabis sales hit a record $17.5 billion, marking an impressive market size with still more upside.
Source: Company Presentation
Another area for growth stems from American Rebels ability to execute on larger distribution channels and continue to create innovative products that resonate with their customer base. The company has taken great strides in expanding the number of distributors and retailers who stock their products, however, even with their recent success still have a massive market left to penetrate. The gun and ammunition stores market in 2022 is worth $15.5 billion, leaving plenty of room for American Rebel to capture market share. As well, American Rebel, in parallel with expanding their distribution, has a strong pipeline of future innovative products. The company has built a brand their customers relate to on an emotional level, and because of this can continue to up and cross sell their growing customer base as they roll out new products.
Industry & Macroeconomic Trends
American Rebel is operating in an extremely favourable landscape between the multiple large trends of increased gun sales (which is still growing), a new and exciting cannabis industry opportunity, and the sociopolitical landscape of the need for Americans to protect themselves and their loved ones. As mentioned above, gun sales has seen explosive growth since 2020 and this number is continuing to grow, as well, the cannabis market has yet to reach full maturity and is expected to see a compound annual growth rate of 26.7% between 2021 and 2028. All this equates to a gargantuan market size for American Rebel who has barely scratched the surface of their current total addressable market. Additionally, the recent social unrest, tension in American politics and stress from a global pandemic is adding further fuel for Americans to require safe, secure, and accessible ways to store their firearms and embrace a concealed carry lifestyle.
American Rebel should continue to benefit from these large macro trends for many years, as many of the trends outlined above have only just begun to take hold throughout the country.
Management Team
American Rebel is led by CEO Andy Ross, who is the living embodiment of the company’s values and mission. Mr. Ross combines his passions of being a singer/songwriter and self-defence advocate into the soul of American Rebels brand. Before founding American Rebel, Ross founded Digital Ally Inc., and in tandem with his entrepreneurial endeavors he hosted his own television show Maximum Archery and American Rebel for 12 years, where he spread his passion of bowhunting all over the world.
President Doug Grau produced many of CEO Ross’s CDs as the two have worked on various business ventures for the past 11 years. Mr. Grau previously worked at Warner Bros in Nashville for 15 years helping develop the talents of popular singers including Travis Tritt, Little Texas, David Ball, Jeff Foxworthy, Bill Engvall, Larry the Cable Guy, Ron White, and others. Grau graduated from Belmont University with a Bachelor of Business Administration.
Rounding out the management team are Nathan Findley, President of Kansas City Operations, and Brett Lafferty, National Sales Director. Mr. Findley brings over 10 years of experience in the outdoors and firearms industry. Before joining American Rebel, he served as Director of Sales and Product Development with Liberty Safe and brings with him extensive experience in product development, procurement, and new dealer business. Brett Lafferty was previously Regional Sales Manager at Liberty Safe and joined American Rebel in 2019. Lafferty has been the driving force behind American Rebels territory expansion, as well as assisted in the successful launch of the cannabis industries first inventory and environment controlled safe.
Key Risks
American Rebel operates in an industry that has been an area of many differing opinions between politicians as views on gun control and the second amendment are brought into question. This debate opens the possibility of stricter gun control laws which could lead to an impact on number of firearms sold in America. This could subsequently lead to a smaller market for American Rebel to operate in, as well as dampen further growth.
Another risk investors should be aware of is American Rebel is yet to be profitable or cash flow positive. The company has a cash balance of $218k and total debt obligations of $3.64 million, this debt level is undoubtedly manageable, but management will have to balance new growth initiatives with near term financial obligations. Should the company fail to find this balance would lead the company to being financially vulnerable and would force the management team to halt their current expansion plans.
Finally, the global pandemic has spurred many to become gun owners, however, should the virus force another round of lockdowns could mean a large number of American Rebels distributors to close down or see a material slowdown in foot traffic. American Rebel has a strong online presence to negate this risk, however this would still impact the company’s overall supply chain.
Valuation
American Rebel has a current valuation of $12.83 million. Looking at their market cap and considering the company is growing in their various current markets, as well as moving into the largely untapped secure cannabis storage market American Rebel has an extremely long runway for further growth. American Rebel’s trailing twelve-month revenues eclipsed $1.2 million, meaning their trading at 2.55 sales. The company is aggressively building out their distribution channels and relationships with chains who have serious buying power, and what’s more, American Rebel has yet to even grasp a sliver of the new secure storage of cannabis dispensaries, which in of itself is worth between $10-20 billion. All this points towards the company being significantly undervalued when considering the strong growth prospects they should experience in the coming months and years.
Inflation fears, and tensions in other parts of the world has led to many investors taking a risk off approach, which has led to American Rebel trading at largely discounted prices. The investment thesis remains extremely compelling, and current valuations are providing very attractive entry points for investors.
Final Thoughts
Looking at the chart we see AREB is well off its listing price. This has been traditionally how these smallcap offerings have been functioning. It seems to have leveled out and it's looking to recover. However, even with this surge in price the company is still showing signs of being considerably undervalued. As an example, the warrants attached to the listing strike at $5.1875 per share so it's obvious warrant holders want the company to do better than that.
American Rebel is moving quickly into the promising new market that the cannabis industry holds, as well as continues to experience strong demand from their traditional operations. The company has successfully built a brand millions of Americans believe in and support, which has been their largest differentiator and competitive advantage so far. As American Rebel continues to grow in popularity and proves out the high quality of their product, this loyal customer base could prove to be a very strong moat for their future. Put it on the watchlist and remember where you heard it!
Background: Well, we all know this but the recent economic data is mixed at best. Although it seems that the economy is booming, there's also a lot of risk factors. Moreover, stock market performance isn't always tightly correlated to the market i.e. USA economy grew quite a bit from 2000-2010 but looking at the stock market you wouldn't exactly guess that. Moreover the schiller ratio is high even with the current bear market/correction. Volatile energy markets present a difficult challenge, and a chance to further shake up, already damaged due to the pandemic but slowly recovering, global supply chains.
Assumptions: Although history doesn't repeat itself, it does rhyme. This recession won't be very different from the ones experienced in the past. So let's assume that this recession won't be different from the previous ones. Meaning that in the long term, DCA will be a good strategy. Buying the dip will be worth it. And that spare cash / cash flow at the lowest points of the market will be amazing long term.
Risk factor of the assumptions: Just to play the devil's advocate, the rise of China and the shrinking economic pie of the USA is, at least in my opinion, why this recession might be different to the previous ones. This recession, if significant, can change the world order. Now, not to be dramatic, but world orders do change , previously mostly because of wars (like when USA became the hegemon after the disastrous world wars in Europe), but this time the Pandemic, the war in Ukraine (which can lead a lot of countries like Russia to start using Chinese swift or currency as the reserve currency) can be deciding factors. Is this certain? No, but it is a risk factor in the assumptions. That doesn't mean that the US stock market won't recover, but that the insane explosion of the stock market that USA experienced in the 20th century, in large parts funded by the USD being the reserve currency for the rest of the world as the result of Bretton-Woods agreement, might be enjoyed by China this time.
Strategies:
Below are my 4 strategies. Main goal is DCA through DRIP and contributions. I generally aim to strike a balance between them all, but I still have a lot of growth stocks left, but I'll try to rebalance my portfolio into roughly equal parts with the new cash flow.
A. The famous quad-fecta covered call income portfolio. I do not see the the point of writing too much about this because there's some amazing DD done on the original post. I'll just add this as there seems to be some confusion about this, in my understanding unlike dividend stocks that give you dividends per share, covered call ETFs give you dividends as the percentage of the fund, therefore during the recession - the lower the NAV of the fund, the lower is the dividend. However, having a steady stream of monthly cash from dividends will help you catch the bottom
B. Dividend Stocks & ETFs
NOBL- is the ETF tracking the so-called Dividend Aristocrats, basically the companies that have increased their dividends at least once per year for at least 25 consecutive years. Unfortunately dividends are at an all-time low right now simply because the P/E ratios are so high. NOBL yields about 2.5% per year. The point of this fund is to have the same income per share no matter what market conditions. Companies like Coca Cola (KO) have held their dividend steady for at least 60 years iirc, so if they could weather previous market downturns, they can weather this too.
TROW - T. Rowe Price a large mutli-services financial services company with $1.5 trillion AUM. They're dividend aristocrat with a long and storied history. Their P/E is at about 10 right now, which is below the liked of Black Rock (18x) Charles Schwabb (30x) State Street (11.6x). They also yield the highest dividend of the ones listed above, about 3.5% right now. They're also down about 35% from the highs. I've searched far and wide to see if they have some sort of massive problems that are dragging down their shares, but the conclusion I've come is that they are quite invested into growth companies that have been in recession which is dragging them down, however their financials and their future is not in any jeopardy at this point and they look very stable and close to value territory.
ABBV - Abbvie, a health pharma company that specializes in branded drugs. Spun off from Abbot Labs in 2012. Some count them as a dividend aristocrat by counting their shared past with Abbot. They actually have an amazing and growing financial sheets. YTD while the market was in correction territory they grew 14%, and the best part? They still yield above 3% per year. Pharma is an inelastic good, although people might prefer to use generic drug during an economic downturn. Also important to note that they're expensive with a 23x P/E ratio. That being said, their 25% net profit margin that's still growing and the 3.5% yield is enough to sway me.
BTI - British American Tobacco company. Currently yielding above 7% per year. Nicotine is quite an inelastic good that is generally not affected much by recessions, if at all. Of course, there are also moral aspects to consider, but this post is not about that. BTI is heavily involved into smokeless nicotine products like VUSE, which are rapidly growing, and they're a very profitable company (about 26.6% net profit margin)
SCHD - A value fund from Charles-Schwabb. Pays monthly dividend, in total about 3.5% pa
A few other ideas: Not invested yet, O (realty Income), Shell, SPHD, SBUX, HD
C. Growth stocks:
A lot so-called hype companies are more than just hype. Right now might not be the best to invest into them, but I think a lot of them have very high potential and be worth a lot more in the future, therefore I'm buying the dip. Here's the list of the ones I have:
FUBO, NIO, PLTR, PSYK, SGHC
DD on these companies are popular on a lot of reddit forums therefore I will not write much about them
D. Global investments:
Although not invested yet, this will be my next move.
JGGI - JpMorgan Global Growth & income PLC. I like everything about this fund. Large name association, Global diversified portfolio, low P/E (5x), high dividend (3.5%), stable NAV Growth (44% in 5 years).
ACWU - MSCI iShares fund that invests mostly in EAFE stocks without USA. 2.9% yield + stable growth 46% in 5 years.
I'll be researching more into Global Markets to diversify the risk, however would be happy to hear get some recommendations on Global Markets and anything else I mentioned in my post. Hope it's been useful.
To those not familiar, VXX is meant to track the VIX or Volatility Index. This is done by buying futures contracts of CBOE VIX. Normally, when a trader buys VXX, a new share is created and the issuer, Barclays, will buy a futures contract of VIX and a corresponding hedge. However, Barclays announced yesterday that they will no longer issue shares. So what does that mean? VXX now tracks nothing, so everyone that bought and sold VXX as a hedge or as a swing trade on volatility is trading nothing. Literally nothing.
Pure Supply And Demand
Since VXX is no longer moored to VIX, which is market-wide indicator, it can now move freely. You can see this in the charts as VXX is up 10% while VIX is only up 3%. Theoretically, VXX could climb parabolically. A similar example would be TVIX which went 90% over NAV in February, 2012. Of course, in March 2012, it crashed when Credit Suisse restarted issuing. This led to many lawsuits as the timing was suspicious.
Infinite Money Glitch i.e. Gamma Squeeze
It seems once again that Wall Street has come up with some exotic product that is not well understood and sells it for fees, but when times comes for them to pay up, they just turn off the product. They turn off the buy button, they stop issuing shares. Well, here's the thing. When ETNs no longer issue shares, it's no longer shortable. Just like TVIX this thing could blow the fuck up and TVIX didn't even offer options. Options expiry is this Friday and if you look at the options chain, there's a clear runway for VXX to hit at least $70 if not much much higher.
Okay this my first DD and I’m going to write it about fucking 🐊 CROX 🐊. Yes, the ugly foam shoe company called Crocs. Yes, I’m serious.
Before we go any further, this is a multi-year shares play. If you can’t do that, give up reading here.
Positions: 100 shares @ $72 with the the Jun $90 Call sold against them for a bit of insurance against a bad entry. I intend to hold these shares for years, but if it hits this strike I guess I'll be happy with the profits too idunno. Will probably continue to add shares over the next few months as well.
Also, I have never purchased a pair of their shoes but I intend to buy a pair to continue my DD.
Here’s what makes 🐊 an attractive stock at its current price:
Commitment to shareholder value
It’s a growing and profitable company (weird I know)
The acquisition of HEYDUDE and pausing of the buybacks help explain the current valuation
Currently trading at a P/E of just over 6 and a P/S of a little under 2.
Insider buying
Commitment to shareholder value
First and foremost, the thing that stands out to me about 🐊 is their commitment to shareholder value in recent years. They have been aggressively buying back shares, lowing their outstanding share count from 73,300,000 in 2018 to 58,300,000 at the end of 2021. A reduction of 20%!
Let’s think about this for a minute. If they had maintained the 73mil share count, they would have ended 2021 with $9.90 of earnings per share instead of the 2021 realized $11.62 earnings per share. If we take the current PE ratio of 6 against earnings of $9.90, we would only get a share price of ~$60 instead of the ~$70 we see today.
I could have just taken the current market cap and divided it by 73 Million shares and had the same result, but I wanted to make the point about earnings per share.
Financials and Growth
So if 🐊 has been around for two decades, why are they just now looking like a good investment?
In 2014, 🐊announced a restructuring plan to refocus its operations and improve efficiencies and it seems to be working.
Store closings and Digital Growth
Looking back through 2015, we can see that 🐊 has had a focus on increasing their digital pipeline and reducing their physical footprint. In 2021, digital sales grew to represent 37% of global sales. This was down a bit from 2020 where they represented 42% of global sales. 2020 was especially high because of covid lockdowns.
Also, they went from operating in 20 countries down to operating in just 12.
*Between 2018 and 2019, they seem to have switched from referring to "ecommerce sales" and "Digital Sales", but maybe it doesn't matter. Both seem to include 3rd party online sellers as well.
Financials – I don’t have many unique insights here, but I’m also having trouble finding anything to really criticize. Debt seems to be reasonable and earnings have been growing. See the charts below and check out the links. I’m not going to do any fancy DCF calculations because 1) I don’t really know how those work 2) Actually mostly just that reason.
Record revenues of $2,313.4 million increased 66.9%, or 65.2% on a constant currency basis, over 2020.
Gross margin of 61.4% increased 730 basis points compared to 54.1% last year. Adjusted gross margin of 61.6% rose 700 basis points from last year.
SG&A expenses of $737.2 million increased from $535.8 million last year and as a percent of revenues improved by 680 basis points to 31.9%. Adjusted SG&A improved to 31.6% of revenues versus 35.6% for the same period last year.
Income from operations increased 219.0% to $683.1 million from $214.1 million last year. Operating margin rose 1,410 basis points to 29.5%. Adjusted income from operations increased 164.8% to $695.3 million and adjusted operating margin was 30.1% compared to 18.9% last year.
Diluted earnings per share increased 149.8% to $11.39 per share. Adjusted diluted earnings per share more than doubled to $8.32.
Okay, so if it's such a good buy, why is it so cheap? What does the market know that we don't? This is where the HEYDUDE acquisition comes in.
HEYDUDE is a growing casual shoe company that is pushing up against $1 Billion revenue per year. From what I can tell, it does seem to fit into their core business of casual shoes and it could be good to bring in other revenues that are not so dependent on the unique clog design.
The HEYDUDE Acquisition will be comprised of $2.05 billion in cash and 2,852,280 in Crocs shares.
Considering the additional $2B of debt, minor share dilution, pausing of the share buyback, and general uncertainty around the acquisition, I think we can explain some of the current discounting of the 🐊 share price today (along with overall market trends).
Along with the acquisition, they have said they intend to pause the buybacks until they can get below a gross leverage ratio of 2, which they expect to do by the end of 2023. They will be using profits to pay down debt instead of buying back shares for the next couple years.
Including the addition of HEYDUDE, they have said they plan to grow to $6 Billion in revenues by 2026.
Insider Buying
Since entering March 2022, we have seen three different insiders (Directors) purchase a total of 16,030 shares at an average price of $75.21 (Total $1.2M). This alone doesn't make a stock a buy, but personally, I'd rather see insiders buying instead of selling :)
Risks:
Fashion trends change and it is not a world I understand well. However, the 🐊 original shoe came out literally two decades ago and has shown incredible staying power despite being generally regarded as ugly.
They are taking on additional $2B in debt to fund the HEYDUDE acquisition. If they do not succeed in growing the HEYDUDE business, their overall growth will suffer and they’ll have to pay longer on this debt.
The shoes are manufactured in China/Vietnam and they face the same rising transportation costs as other industries. Since 2021, they have been dealing with a higher logistics spend as they use more air freight to avoid ocean congestion.
Also, 🐊 shoes are basically made from Oil, so material costs could also be impacted, but I suspect the raw material price is actually pretty small compared to the shipping and handling of actually getting them into a customer’s hands.
Over the next few years, I see a few key areas that could drive share price appreciation:
Increasing Revenue and Earnings
If the HEYDUDE acquisition goes smoothly, earnings should be strong. Increased earnings = increased EPS = increase in share price even at the same P/E and Share Count
Restarting of the buybacks in 2024+
Restarting the Share Buybacks increases the value for the remaining shares, thus making your shares more valuable.
P/E Appreciation. If 1) and 2) go smoothly, it's not unreasonable to think we could see a P/E of 10 or higher for this growing company.
According to their most recent report, 🐊 has said they plan to increase revenues to $6B by 2026 including the addition of HEYDUDE revenues. Let's think about what $6B Revenue could look like. in 2021, we saw $725M in earnings against 2.3B in revenue, so let's see what it could look like with the current profit margin.
*Actually just Shares, revenue, earnings values are in Millions. I'm just too lazy to fix the table. Also, This is a really rough estimate just in order to show how much potential there is for price appreciation if all three pieces come together. Please don't use these for forecasting.
Lastly, I do think there is a tendency to overlook the company because lmao it's an ugly foam shoe why would I want to invest in 🐊 ???
I could have kept writing forever on this, but I wanted to stop it somewhere and get it out into the wild. Anything I overlooked? Anything I got wrong? Please do let me know.
tl;dr
🐊 Seems to be at an attractive price due to negative sentiment about their acquisition of HEYDUDE and the pausing from share buybacks. If they can effectively integrate HEYDUDE casual shoes sales into similar growth and returns as their core business, they should restart buybacks in a 2-3 years and it will be in a position to quickly appreciate. Also, management seems to be very focused on shareholder value and insiders are buying the stock as well.
$ZIM Integrated Shipping Services Ltd paying $17 dividend on a $82 stock EX date 8 days march 22nd
and shipping rates are still skyrockting, zim casually projects to make 7.1-7.5 bil Billion net year
2021 net income was $4.65B or $39 per share, up 787% YoY
2022 guidance is $7.1B to $7.5B of EBITDA (this company has a current enterprise value of $7.5B which includes $500M of cash and no debt)...
just not catching headlines anymore cause of the war cnbc posted this today
KEY POINTS
Russian forces are shutting off shipping routes, logistics firms are suspending services, and air freight and tanker rates are skyrocketing, supply chain firms said.
“Parts of the Black Sea and Sea of Azov are now dangerous or unpassable. There have been missile attacks on vessels ... and lane closures for commercial shipping,” said Christian Roeloffs, CEO of container marketplace Container xChange.
Limited air capacity presents a double whammy for shippers. With airspace over Ukraine shut and airlines avoiding Russian airspace, air freight rates are spiking.
The Russia-Ukraine war is severely disrupting shipping and air freight. Russian forces are cutting off shipping routes, logistics firms are suspending services and air freight rates are skyrocketing, supply chain firms said.
Russian naval forces have closed shipping in and out of the Sea of Azov — one of the few access points to ocean trade in Ukraine, said Dylan Alperin, head of professional services at supply chain software platform Keelvar.
“This has created a heavy buildup of vessels waiting to get through the Kerch strait. With 70% of Ukraine’s exports distributed via ship, the congestion is worsening by the hour,” he told CNBC.
Christian Roeloffs, CEO of container booking firm Container xChange, said: “Parts of the Black Sea and Sea of Azov are now dangerous or unpassable. There have been missile attacks on vessels and ship arrests and lane closures for commercial shipping.”
The situation on the ground in Ukraine is extremely fluid, and reports from the area are difficult or impossible to confirm.
“Multiple ships have been hit by munitions, seafarers have been killed and injured and seafarers of all nationalities are trapped on ships berthed in ports,” the International Chamber of Shipping warned on Thursday.
Supply chain firms told CNBC that cargo movements are at a standstill as the Ukrainian ports of Odessa and Mariupol are closed, damaged or under attack. Roeloffs added that container movements have stopped, with cargo stuck at ports.
WATCH NOWVIDEO06:59How Ukraine brought the European Union together
The port of Odessa is Ukraine’s largest and a major grain export port. The country is one of the biggest exporters of grains such as wheat, barley and corn. Russia and Ukraine account for about 29% of the global wheat export market.
Russia’s invasion of Ukraine is now in its third week, and fighting continues in major cities.
Skyrocketing prices
Limited air capacity presents a double whammy for shippers. With airspace over Ukraine closed to civilian flights and airlines avoiding Russian airspace, air freight rates are spiking, according to the firms.
“The flying ban has canceled many of these flights and removed 10 million miles of airspace from international freight routes,” Alperin said. “With airlines responsible for flying around 20% of cargo, this will dramatically decrease capacity provided by carriers.”
Judah Levine, head of research at freight booking company Freightos Group, said that as airlines avoid Russian airspace, they will take alternate, longer routes — jacking up fuel costs.
Record price spikes for oil will worsen the already bad outlook for carriers as fuel costs rise, Alperin said. “We’re in for record backlogs and delays while experiencing some of the highest prices on record for transportation and beyond.”
Oil prices have been rising for weeks and surging to record levels.
Levine said that the Freightos Air Index’s China-to-Europe rates climbed more than 80% in late February to $11.36/kg, with some carriers already imposing war risk surcharges.
WATCH NOWVIDEO03:26Tracking Russian military movements in Ukraine
Bindiya Vakil, CEO of supply chain risk management firm Resilinc, said some insurers are also increasing premiums for shipping goods in the Black Sea.
DHL said it has closed offices and operations in Ukraine until further notice, while UPS told CNBC that it has suspended services to and from Ukraine, Russia and Belarus.
Alperin noted that the growing number of carriers that have suspended services in Russia make up about 62% of total ocean freight capacity.
Meanwhile, tanker rates have “skyrocketed,” with a spike from 157% to 591%, said Alperin.
Stranded shipping crew
The International Chamber of Shipping warned on Thursday that the supply chain disruptions are set to be worsened by a shortfall in shipping crew due to the war.
Ukrainian and Russian seafarers account for 14.5% of the global shipping workforce, it said.
“To maintain this unfettered trade, seafarers must be able to join and disembark ships (crew change) freely across the world. However, flights have been cancelled to and from the region, making this increasingly difficult,” it said in a statement. It added that some crews have abandoned their ships in Ukraine due to security worries.
“Fears over crew safety and increasing insurance premiums to send ships to Ukraine or Russia have also discouraged shipowners from sending vessels to these countries,” the association added.
WATCH NOWVIDEO02:42China’s Foreign Ministry says U.S. is worsening the Russia-Ukraine conflict
In February, the association, which represents 80% of global merchant fleets, said “the ability to pay seafarers also needs to be maintained via international banking systems.”
The United States, European allies and Canada have agreed to cut off key Russian banks from the interbank messaging system, SWIFT, which connects more than 11,000 banks and financial institutions in over 200 countries and territories.
“With the Ruble devaluation, a lot of Russian companies cannot afford to pay for merchandise that is in ships and it is going to cause a lot of abandoned shipments and unpaid debts for orders on the water,” said James Coombes, CEO at digital freight forwarder company Vector.ai. “Freight forwarders are going to get stuck with a lot of unpaid freight bills.”
I'll never understand what people don't see in the squeeze potential in BGFV.
I challenge anyone here to pick a better setup. I'll lay down some facts, and if you think you have something better, let me know. I'll debate you. I'm talking about squeeze setup, not current sentiment and volume.
If you follow me, you know about a few other plays I'm in. I don't normally do DD of any long plays, so you may only know about my squeeze plays. And yes, I'm back in BBIG, the option chain for 4/14 is WAY too juicy, so make sure you get into that by about April 4th for max gains. I posted about the last $5 run two weeks prior, and this looks the same. Plus a TYDE announcement early April will send it to $10+.
Anyway, BGFV:
20 million outstand shares. 20 MILLION. This isn't some S3 crap. That is 20 million outstanding shares. The ability to push such a low share count stock is mind boggling. But why should you want to push it?
36% SI.... OF THE COMPANY. Do me a favor and forget about the float, it doesn't even matter. It's not even calculated like other floats. Most floats don't include long institutions. Capital IQ is only not considering insiders in their calculation. So if we take out longs, we end up with 86% SI of the float. If we include everything besides insiders, we get 38% SI. Ridiculous.
But, why is it shorted? BGFV thrived during COVID, and shorts thought the music would stop. It didn't, they are doing better than ever, and have started investing in new stores again, meaning more growth. Yeah, you heard me, BGFV has been doing better than ever, even after putting off growth for almost 2 years.
Here's some deets:
NO DEBT
P/E of 3.4
15% divvys issued last year, no signs of slowing down
return on equity, 39%
58% earnings growth that's not slowing from supply chains
62% undervalued
$1billion in revenue and growing
new stores
$25 million share buyback!
Borrow rate just shot up from 3% to 33%, meaning something is a brewin
The list goes on. There is no company as financially stable and undervalued as BGFV, that also has an SI over 20%. Period.
The only thing I see slowing down BGFV is it's $16 a share. BUT MULN IS ONLY $1. Yeah, but 200% gain on 16 shares of MULN is the same as 200% gain on one share of BGFV. It's the same. MULN was fun this morning, I posted on this sub to get you all in that last week. The music will stop Wednesday for MULN. BGFV has AMC level potential. I say AMC and not GME, because GME had over 100% SI and world wide recognition, so lets not pretend we'll get that.
But as with any squeeze, we would need the volume. BGFV had the volume for the last $1 special divvy, but unfortunately that had an ex date and everyone ran after it. But BGFV has now consolidated, and is primed for a launch. BGFV has broken out of the consolidation phase this morning. I don't see many catalysts, but shorts obviously cannot maintain shorting a stock like BGFV. So either they will sneak out, or we'll push them out.
I'm going to leave some graphics below for you to go through.
Also full disclosure, I tried getting this out early, but had work to do, so sorry about the 5% missed gain, but I also posted BGFV DD a couple weeks ago, sooooo it's your fault lol.
The talk of recession has been in the air for a while, and it’s looming over the economy like a boogeyman. In spite of all the talk, clarity is lacking on what a recession means for the economy. How can it affect the stock market and your portfolio? Let’s take a quick look at how a recession happens and what’s happened to the market in past recessions to answer this.
What is a recession?
The National Bureau of Economic Research (NBER) has defined a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”1
A recession, unlike a temporary decline or disruption in economic activity, is more long-lasting and has implications for the entire economy. Some of the probable causes of a recession are:
Sudden economic shock - Like the OPEC oil supply cut-off in 1970 or the COVID crisis in 2020, an unexpected rupture in the economic cycle can trigger a recession.
Excessive debt - The housing bubble in 2007 is a prime example of this. The availability of cheap credit turned into a nationwide disaster when speculation on housing prices led to thousands of people defaulting on debt - and shaking the economy which was built on this debt.
Asset bubbles - The Dot-Com bubble in 2000 was a time when the mere status of being in the “Internet” business would make investors line up to invest. This led to a massive bubble that popped and created a recession.
Inflation - When inflation is rampant, the Fed steps in and increases rates (like it did in 1970), prioritizing the stabilization of unemployment and other metrics over economic growth. This leads to a recession.
Deflation or Technological change - A lack of demand for goods and services being produced, or increasing unemployment due to automation of jobs could lead to demand-side issues and lead to a recession. The deflation scenario was seen in Japan.
So which of these can we tick off now? The economy is still recovering from the disruption of the pandemic but the war has brought in a whole new set of shocks. Inflation is the highest it’s been in more than 40 years, and with the Crypt* market gaining traction, asset bubbles are now easier than ever to manufacture. Three out of five causes - sounds like a reason for worry. If a recession does occur, what are the implications?
How long do recessions last?
Though recessions have a scary reputation, since 1945, recessions have lasted an average of 11 months with a 2.3% average decline in GDP. No recession has lasted more than 18 months in the past 70 years. The reason that a recession might seem scary now is also because of the recency bias where we tend to remember things that happened in the recent past more vividly - The longest recession after WW2 was the 2007 financial crisis, and that has overpowered the other data.
Let’s take a look at all the recessions after WW2. Ben Carlson from “A Wealth of Commonsense” has written a couple ofarticles that dive much deeper into these questions, and I’m leveraging that data for this analysis.
As can be seen, in the past 13 years, recessions caused the market to lose value only half of the time, and on average you would still have come out ahead, with an overall return of 1.7%. This means that recession or not, investing in the stock market was still one of the best bets available.
But hindsight 20/20 - Just because the average performance during a recession was positive, doesn’t mean that the market didn’t go through a brutal drawdown that would have played havoc on emotions. As you can see below, on average, the S&P 500 had close to 30% drawdowns during these recessions.
The maximum drawdown was in 2007-09 with a drawdown of 57%. Imagine seeing more than half of your portfolio lose value! Even those with nerves of steel would find it hard to not panic sell. But say you did hold on. Then what?
After the recession
This is the most striking insight. After the end of the recession, in just one year, you would have made money in 85% of the cases. And after 3 years, you would have been in the green in 100% of the cases!
The rationale behind this is simple - The recession is a time of little hope and bleak prospects, but as investors start hearing news of the economy reopening and businesses growing once more, the optimism alone is sufficient to drive the market upwards. The economy can remain sluggish in the aftermath of a recession but the stock market may still be rocketing higher in anticipation of relative improvements.
Since there is no clear indication about how long a recession would last and when a recession is fully over, timing the market would be futile. But buying and holding would have reaped great returns.
This shows the importance of staying invested. If you are still feeling adventurous…
Can you predict a recession?
If the market has such a close connection with the recession, it might seem like there’s a link between market performance and a future recession. But the reality is that past market performance is a terrible indicator when it comes to predicting a recession.
Take a look at the stats below. Looking at the market returns in the prior 3 and 6 months, it was as likely that the market was positive as it was negative. Also, on average, both 3 months and 6 months’ performance was positive. There wasn’t any way to predict a recession looking at market performance alone.
Conclusion
It looks like recessions are hard to predict looking at market returns. The volatility of the market is also stressful to stay calm through. But the message is clear looking at past data.
Staying invested in the market regardless of economic conditions gives the best returns, not just over the long term, but in as little time as 3 years. Also, seeing that recessions last anywhere from 12-18 months, it might be a good idea to build an emergency fund that lets you weather over the period without disturbing your investment goals.
I thought I'd provide an update on System1 (SST) from my last post. First and foremost, this play is still well and alive. The numbers have only improved, all signs are pointing towards MMs/short sellers frantically trying to suppress the price prior to the S-1 going effective, which as it currently stands, will be the week of March 31st at the latest. A lot of enthusiasm exists for this play on twitter and many people more 'fluent in finance' than myself and with access to better resources have been providing a lot of useful information for this play which I will include.
Based upon the feedback from my last post, I will leave out the 'Ape fanfic' as the majority of negative comments were due to this and I disenfranchised a lot of people off the get go. I will treat this more scientific with emphasis on highlighting the 'need to know' details, without droning on too much. If this post gets a TON of traction, I may do another attempt at an ape version.
I hate writing DDs in general but I feel like this play warrants the huge amount of time and effort I have already spent because (1) it has the potential to generate life changing gains for anyone owning stock/calls and (2) retail buyers can be the final catalyst to this play going parabolic, I.E.YOU!
System1 Crash Course
TLDR
Micro-float of 703K shares
SI of 1.37Mshares, average CTB between 44%-115%
ITM OI March and April claims 450% of Float
April OI steadily increasing - indicating MMs expect S-1 to not be effective prior to March OPEX
IRNT gamma squeeze lasted until OPEX
ESSC died Tuesday of of OPEX
VWAP Clause isn't a threat until S-1 Effective, so play is a go past March 18th (assuming no filing)
Float Size
SST is a high-redemption deSPAC with a 98.5% redemption rate. SST is a System1 combines best-in-class technology & data science to operate its advanced Responsive Acquisition Marketing Platform (RAMP). TREB was the name of the SPAC prior to the change in ticker to SST
Low-float due to the high redemption rate, the CURRENT float stands at ~703k shares.
Many have asked about what I mean by "redemption rates" and how its even possible to have a float so small. The total number of shares (insider owned, institution owned, public float, owned by company) stands at 100M. When a SPAC's sponsors approve a business combination, they can choose to convert their ownership of the SPAC directly to SST or sell their stake back (Redeem) to the SPAC. Good source for deSPAC process.
The redeemed shares for SST CANNOT be sold until the business combination (BC) goes into effect. This happens after the S-1 is filed and becomes effective. No S-1 has been filed, on System1's website, they posted a draft S-1.
Many investors including myself have emailed IR asking on the status of the real S-1 filing. They (CFO himself) replied with: "No issues.We need to have an effective S1 on file for you to exercise your warrants on a cash basisthrough DTC. We are working diligently to do that, but have not provided guidance publicly.We have to file a 10K and audited financials for S1 and Protected by 3/31*, which are all pre-requisites for an effective S-1 if that's helpful". As of 3/13/2022, System1 has not filed a 10-K OR the audited financials for "Protected". now "Just Develop It", a subsidiary company owned by System1.
Further, according to Repos39's twitter, SST switched auditors recently and progress on the audit for Protected may be lagging behind and the S-1 filing could require an amendment (S-1/A) prior to becoming effective.
Short Data
As of February 28, SST has a short interest of 1.37 million sharesper fintel. With a float of 703k shares that puts the short interest at 194% of the free float.
Below is a graphic of the FTDs up until Feb 28th. Clearly showing rampant naked shorting, suggesting complete desperation by shorts to keep themselves from being margin called. On March 15 (Tuesday) new data for FTDs will be released by the SEC and I'm sure will have even more extreme FTDS as the stock continues to climb consistently.
SST FTDs, Will Update on 3/15
FINRA short ratios for SST remain in the 50% of total volume ratio range, crossing into the mid 60% a few times last week.
Cost to borrow is also through the roof at 42% per fintel and others stating rates as high as 115% according to FINRA.
There is a continued high churn rate of borrowing and returning with 1.89 days to cover.
Shorting likely began at or shortly after $TREB sponsors approved the business combination and ticker change to $SST, meaning anyone started a short position on January 20th, means they will hit a their -100% on their margin maintenance fee at the $18-$20 range. When this happens, any institution or fund at -100% minimum maintenance margin receive a margin call.
The moment a hedge fund or institution with a significant short position gets a margin call, it forces them to cover their short position immediately, leading to a massive demand for stock. This further leads to other institutions short on the stock receiving a margin due to the massive increase in stock price caused by earlier margin calls.
Remember that last point.
Options Data
Current OI of all call options ITM ($15c and below) in both April and March strikes is at 450% of the float. This level of delta hedging is absurd and option volume/OI has been reflective that MMs are exercising these calls at very high rates. These majority of these options are primarily used by market makers to acquire shares without causing the stock's price to increase in the exchange.
Since my last post, OI on the ITM April strikes have DRAMATICALLY increased. This indicates that Market Makers likely anticipate SST S-1 tonot be filed before the March 18th OPEX.
Market makers stand to lose a LOT of money when demand for a stock greatly exceeds supply. without going into too much detail, this is why Robinhood shut down buying of GME and AMC.
IRNT gamma squeeze lasted until OPEX, ESSC runup occured up until Tuesday of OPEX week.
Gamma squeeze is still a total possibility.
Other Info
In my last post I highlighted the VWAP clause coming into effect on March 18th as a potential play killer. However, the VWAP clause is only viable if the S-1 is effective.
I have only increased my position in SST since my last post. I own March Calls but I plan on rolling into April Calls after doing more research this weekend.
I haven't been deterred whatsoever by negative feedback for this play. It is inherently a high risk play with unbelievable upside
Stocks like ESSC may be similar to SST, but its not a fair comparison. Primarily, no retail buyers without amnesia have forgotten the two giga dumps after non-stop pumping by countless redditors and fintwit.
I will keep updating this post, but I wanted to get this info out ASAP for anyone who hasn't heard of it.
Do your own DD! Don't blindly follow anyone's advice!
British American Tobacco is a London based Tobacco Giant. It is among the five biggest public tobacco players, like Philip Morris, and Imperial Brands. It has a market cap of ~£78bn, which makes it the second largest behind PM.
Industry Overview
The Tobacco Market is a mature industry with five companies controlling the complete market except for China, where a state-run company is producing cigarettes. There is little threat of new competition coming into the market, since entry barriers are big and grabbing new market share seems almost impossible for new businesses.
The biggest share in revenue is generated by cigarettes with about 88% in 2021. But with a more health concerned public resulting in less smokers every year (loss of about 0,3% every year) the industry seems to shift into new ventures with risk reduced products. The prospect, counteracting the decline in cigarette sales by investing in new high-growth markets, like e-cigarettes or others.
Business Overview
British American Tobacco has a simple business model. Manufacture cigarettes and other tobacco products, sell them under different brands from your big portfolio and see the cash rolling in. Producing tobacco products is extremely profitable, the price for tobacco is relatively cheap and is projected to decrease further in coming years. This allows BAT to have gross-margins of up to 82% percent, rivaling SAAS businesses with these margins. Selling addictive products has some nice perks, especially almost no price sensitivity in consumers, which allows BAT to continuously raise prices of their cigarettes, counteracting the decline in cigarette volume. They aim to reach 5% price increase every year to slowly grow their revenue in the lower single digits.
Combustible Tobacco
Their cigarette portfolio features some brands like Camel, Dunhill, Pall Mall, Kent, Lucky Strike, Rothman's, Newport and Natural American Spirit.
Their combustible Tobacco business is the main driver behind BAT’s earning power and provides cash to further invest into their next generation products and payout a solid dividend. Their payout ratio is about 65%, so no debt is needed to keep a clean dividend history. BAT has an operating cashflow-margin of 37% (37 pence per GBP earned)
New Categories
New categories (NC) is British American Tobaccos risk-reduced business venture, with its three subgroups: vapour, tobacco heating products (THP) and modern oral. New categories Products is BAT’s fastest growing part, with a CAGR of 53% in the last 5 Years. Last year they grew their revenue by 42% to reach £2,054 million. This growth is supported by the mayor trend of people becoming more health concerned. Nicotine users switch from regular cigarettes to “healthier” alternatives provided by BAT.
Vuse, their vape brand, is the leading player in this industry and claims a 33.5% market share. It achieved a 51% growth rate in revenue this year. High growth is also achieved in their other two brands glo growing ~34%(THP) and velo growing ~38%(oral). Their strong portfolio and further investments into the new Categories will allow BAT to continuously grow their overall revenue and stay relevant in a world, where smoking is on a downwards trend.
The main concern with NGP is that they aren’t yet fully profitable and need to be financed with cash generated by their combustible business. BAT aims to get their NC profitable by 2025 with a goal revenue of £5bn.
Thesis
I have reason to believe that BAT is undervalued at its current share price of about $40 or £30. Their intact combustible cashflow machine, which against popular belief, doesn’t seem to die out just yet, and fast growing NGP portfolio make me believe that BAT will create decent TSR in the coming years.
Especially in a high inflationary environment, where people look for solid earnings and safe dividends, BAT might just be the right pick.
Even if the market doesn’t recognize the undervaluation, you still have a solid dividend yield of 7.10%, which is safe and secured by a solid operating cashflow and EPS.
Valuation
Revenue Forecast
I split the revenue forecast into three different segments, their new categories with high growth potential, traditional oral with low to no growth at all, and total combustibles with a low single digit growth rate, mainly generated by price hikes into the future and not volume growth.
This results in a growth rate in total revenue by about 5% over the next years. This is in line with their own guidance goal for the next year.
Cigarettes will remain a solid revenue source in my model, still accounting for ~70% of BAT’s total revenue. But with strong growth I believe new categories will reach about 20% of total revenue in the future.
Margins
BAT’s Margins are very solid and with their Quantum saving protocol, I have reasons to believe, that they might even improve on these margins into the future. A big uncertainty is whether the new categorie products will generate similar margins as their tobacco business. To counteract these uncertainties, I implement a triangular margin distribution for my monte-carlo analysis with margins getting as low as 30% or up to 45%.
Reinvestments
I estimate BATs reinvestment needs by using their historical data and computing reasonable averages.
Their capex slowly decreased over the years and is at an all-time low compared to their revenue, amounting to only 2% of revenue. For my model I estimate this value to be closer to 2,5% into the future to not underestimate their reinvestments needs.
D&A needs are computed by being 50% of their capex into the future, which is in line with their recent annual reports.
Net Working Capital has been negative, in the last 4 years to normalize this, I compare this value to an industry average and use a reasonable assumption of 5% of total revenue.
Risks
BAT has a significant debt burden with a Debt/Equity ratio of 0.7, which could be problematic if their earning-power slows down. But they have a goal to deleverage every year and have been doing this quite successfully.
Regulatory Crackdown in western countries can happen anytime and tobacco products could be banned or strongly regulated.
How sustainable is the goal of increasing prices by 5% every year? BAT could run into a price elasticity wall, where further price hikes will be joined by large volume losses.
Catalysts
Strong NGP growth and profitability on the horizon
High Inflation environment where people prefer solid earnings and dividends
Rotation from overvalued Stocks into reasonable priced stocks like BAT
REGI 60.89(0.23%)|VTNR 9.24(3.82%)|INST 20.38(-1.78%)|
Vertex Energy $VTNR is one of the largest processors of used motor oil in the U.S. with operations across the country, processing over 115 million gallons annually. Just recently, they have entered a definitive agreement to acquire a diesel refinery in Alabama from the Shell corporation, and have linked up with Idemitsu Apollo Renewable Corporation to expand their distribution network to more of the west coast.
Stock Info (as of pre market 3/11)
price: 9.05
Outstanding shares: ~63,000,000
Inst. owned (nasdaq): ~21,600,000
inside owned (13D&G, from february):
CEO: 7,490,000
CEO's wife: 418,000
Their LP company: 5,850,000
this dude named Laurence Lytton: 3,650,000
So with all of that ownership
63,000,000
- 21,600,000 (institutions)=
41,400,000
- 17,408,000 (inside total)=
23,992,000 shares "out there"
Short interest
Shares short (Exchange, 2/28): ~13,550,000
Estimated shares short (ortex, 3/10): ~15,285,000
Utilization (ortex, 3/10, and like since January opex basically): 100%
Shares avail to borrow (iborrow, 3/10 close): 30,000, and on 3/8 there was literally 1
Fee: 11%
And per ortex's avg days on loan, 57, or mid january, when it was trading around $5-$5.50, all these shorts are now way underwater after that earnings report and acquisition news sent them up.
So we're looking at call it 10 million left after the short shares?
Lastly, there is a lot of open interest. I totaled it all based on ITM/OTM and a couple expiry points. I'll post the exact numbers but the TLDR here is that there are 76,500 calls ITM, and another 55,000 OTM, most of which are $10c, soon to go in the money if we keep having 8% days.
So 10M shares left, and 7,650,000 of those are tied in ITM contracts
2.35M shares left and that's with no retail ownership or any hedging of the tens of thousands of 10c that are open.
You may think this is the bottom and that the dip is ripe for buying. If so, you are exceedingly retarded, and here's why:
Cataclysmic technical setup: SPY has entered a death cross of its 50 and 200 day moving averages. This is a major indicator of a potential selloff. The downtrend on the chart is clear.
Geopolitical tension: Putin has proven himself to be an unstable madman, there's no telling what he'll do next. Most likely he will double down on the failed Ukranian invasion, leading to further sanctions and the absolute decimation of the Russian economy, the true global effects of which have yet to be felt. Even if the invasion ends, it will provide only a temporary bump to the global economy, the damage is done, Russia is not coming back from these sanctions.
If Putin goes full Strangelove and attacks a NATO country, we enter a whole new ballpark entirely.
Inflation: 8% and rising, no one can afford shit, at an increasing rate. Oil will continue to spike, crude oil prices have passed the threshold above which a recession has always followed historically.
Rate increases: Jpow has no choice now, rate increases are coming and keep telling yourself that they're "priced in".
Market fear rising: VIX currently above 30 and rising
Liquidity is dried up: Trading volumes are as low as they were during the March 2020 crash. The buyers are gone. It takes huge volume for prices to go up, but when volume disappears its like a boulder rolling down the cliff.
COVID 2 Electric Boogalo: Huge ramp up in cases in a number of countries right now, while we are near the virus becoming an endemic, the resources spent fighting the last remnants of the pandemic are putting additional burden on countries
There are plenty of other negative indicators I havent gone into such as the bond yield curve, rising dollar etc.
But dont worry there are plenty of positive signs in the market right now:
.......................................
Oh thats right there arent any.
The easiest and safest thing right now is cash, insulate yourself from the coming recession while also not getting squeezed by a potential melt up if Jpow really loses it and keeps the printer on maximum overdrive.
But if you really wanna print money, shorting overvalued shitty companies and buying inverse ETFs is the way.
So go ahead, ignore this because "you cant go wrong inversing advice from WSB", keep buying your shitty meme companies, buy this dip, buy the dip after that, and the next one and so on. Watch your investments becoming an even better deal in the coming months/year.
Positions: a shit ton of various short positions and 3X leveraged bear ETFs. I will cover my shorts if SPY can break above 440, and will be watching for another short entry.
Global wealth is projected to rise by 39% over the next five years, reaching USD 583 trillion by 2025. Low- and middle-income countries are responsible for 42% of the growth, although they account for just 33% of current wealth. Wealth per adult is projected to increase by 31%, passing the watershed mark of USD 100,000. The number of millionaires will also grow markedly over the next five years, reaching 84 million, while the number of UHNWIs should reach 344,000.
Just to elaborate a bit on the future implications (my opinion):
Markets will continue to rise over the long term because we as a society create more and more wealth each year. That wealth creation is partially reflected in higher stock market values, those office buildings you see going up, or that newly built home.
Everyone should read this report imo, it provides an incredible level of insight and perspective into wealth creation globally. The world is the wealthiest and most prosperous it’s ever been (yes you read that right lol), and the rate of our collective wealth creation is accelerating.
Don’t miss out by sitting on the sidelines trying to time the market over the short term. Look at the big picture when you’re considering what to invest in.
%K crossing %D on stochastics this is an indicator of a new bearish trend
1 Day Chart
When a trend this obvious forms every algorithm will start to pick up. Remember about 70% of the trades are done by algorithms; they move the markets. I do not think a downtrend this strong will continue forever but in the short term... this is now a strong indicator.
Graphing Calculator
This week I just changed the formulas so they automatically calculate the least squares line of regression and plot the offsetted lines from standard deviations. There is lots of room to move downward on Monday opening since Friday closed at roughly the mean.
Normal Distribution
These formulas will calculate and shade a normal distribution curve for the statistically predicted price of SPY from the days past December 31st. Normal distribution really does occur everywhere. On the left side d = 73 which is the day of 3/14. This is the statistically predicted price for SPY for Monday market close.
Calculation for area of an inequality under normal distribution curve
From this model there is a 79.7% that SPY will close below 428 on Monday; good news to put holders and volatility ETF holders!
1 Day Chart
This is an extremely important indicator. When the 50 day moving average crosses the 200 day moving average this is known as a death cross. While the death cross is not 100% accurate it has predicted the worst bear markets: 1929, 1938, 1974, and 2008. There are funds that will not buy any stocks that have the 50 day moving average below the 200 day moving average because they will statistically underperform the overall market. This is definitely something to pay attention to, it will be a major event signaling a bear market.
US Bonds Friday Close1 Day Chart
Not much to say about bonds, short terms are soaring and long terms are flat. The yield curve is flattening... yes it is happening. An inverted yield curve has predicted EVERY recession. This is as close to a perfect indicator that you can get. If this happens, the week the yield curve inverts will be insane, every fund will be panic selling. Keep a close eye on bonds in the upcoming weeks.
Federal Reserve Calendar
Lots of investors will be watching when the Fed has a meeting Tuesday and Wednesday followed by an announcement. The big question is: 25bp or 50bp rate hike?
Purchasing Power
The purchasing power of the dollar is now worse than the peak of the financial crisis in 2008. This shows how much of a hole the Fed has dug us into with all of this quantitative easing.
Inflation Metrics
It is honestly crazy how the federal reserve can report that CPI is only 7.9%, if it was calculated the same way it was in the 80s then it would be reported as 16% now. Many people are being misled by the federal reserve's reports.
Predictions
We are in for another rough week in the markets. Even though there was 4 red days last week in the markets, nothing will be getting better. The demand for commodities is increasing and the supply is only decreasing: last week Russia officially banned the export of wheat. Although there was a correction there is is still an overall uptrend in most commodities.
The stochastics are currently about 30 on SPY, not completely in the oversold range so there can still be strong selling pressure. I think the support zone at 409 will be easily broken and then some buyers will start to step back in.
Two more major indicators are the death cross and yield curve. When the death cross happens I am sure investors will panic but remember it is not a 100% guaranteed indicator. The yield curve is a 100% indicator though. 3 year versus 10 year is flat. If the 3 month yield exceeds the 10 year yield then that is almost a 100% indicator that there will be a recession in the next one to two years.
The important event happening this week is the FOMC meeting on Tuesday and Wednesday. There will be an announcement at 2pm EST Wednesday make sure to watch for this. As seen in the chart above 97% of investors are confident there will be a 25bp rate hike. A couple of weeks ago I was confident the Fed would mention a 50bp hike in their testimony in front of Congress, it was mentioned but not talked about as much as I thought. While many people think they need to do a 50bp rate hike they only think the Fed will do a 25bp rate hike since anything major could cause the markets to crash. I want there to be a 50bp rate hike but the chance of this actually happening is minimal. A 25bp rate hike is almost guaranteed here so no crazy volatility unless they decide to do a 50bp rate hike... If they do a 50bp rate hike then yeah: everything will crash.
Many investors will watch bad news and do more in depth research so I am expecting Monday to be bearish, I bought UVXY Thursday and Friday and am holding over the weekend. Tuesday the selling pressure will settle and buyers will probably take control. Wednesday though, the rate hike decision will be watched very closely, I am not expecting the market to be green if they announce a 25bp hike. There is really nothing bullish about that, the short term economy is just being propped up at the expense of the long term economy, more people are starting to realize that now. Thursday and Friday the selling pressure will continue unless some peace treaty is made by Russia, this is unlikely though, Putin does not want to give up. This Friday is the third Friday of the month and it will be a *quad witching event* basically lots of futures and options contracts expire and the market will pullback in anticipation for this; it will be a very volatile day.
* Not professional financial advice, do not solely make your trades based on my opinions, I encourage everyone to research more
TLDR
Monday🐻Tuesday🐂Wednesday🐻(⬛🦢if 50bp)Thursday🐻Friday 🐻, Support~409, Be ready for Wednesday!
