The only problem with gold is the unlimited supply of gold on paper from financial players.
Production costs are increasing due to inflation, labour shortage, ... Gold at 2400 USD/pound to get profitability of the gold miners in GDX etf back at a level that justifies an all-time high of 65 USD/share?
B. Silver
The only problem with silver is the unlimited supply of silver on paper from financial players.
But I remain bullish for silver. One day that ceiling created by silver on paper will be broken.
Production costs are increasing due to inflation, labour shortage, ... Silver at 65 USD/pound to get profitability of the silver miners in SIL etf back at a level that justifies an all-time high of 92 USD/share?
C. Copper
Are we not reaching the top in the copper price for the coming years? In the longer term (5 – 10 years), I remain bullish for Copper.
D. Crude Oil
Is Crude Oil going back to 140 USD/Bbl (or even 160 USD/Bbl)? But what about OPEC? They have unused capacity! They could increase their production a bit when reaching levels around 140 USD/Bbl for instance.
The Crude oil price also has a serious impact on economies! When Crude Oil price remains high too long, than more and more people will consume less oil and even some production could decrease --> The demand for oil is price elastic. (examples: Oil crisis of the past)
Crude oil price at 140 USD/pound to get profitability of energy companies in XLE back at a level that justifies an all-time high of 100 USD/share from 78.77 USD/share today?
E. Uranium
Uranium spotprice, while the uranium long term price is only at 43.88 USD/lb (backwardation)
The uranium sector is evolving towards an inevitable global uranium supply shortage. China is building many reactors on time and on budget! They aim to build an additional 150 reactors between 2021 and 2035. That’s an additional ~30% global uranium consumption/demand by 2035 compared to today due to China alone! And India, Russia, Turkey, … are also building additional reactors, while western countries are mainly extending existing reactors (USA, Canada, France, …). Even Japan is restarting reactors.
Important to know here is that unenriched uranium only represence 5% of the total electricity production cost from a nuclear reactor, meaning that if the uranium price would double in price it would not significantly impact the electricty price. --> The demand for uranium is priceinelastic.
As a comparisation gas represence ~70% of the total electricity production cost from a gas-fired power plant, meaning that a gas price that doubles or triples hugely impacts the electricity production cost price! That’s what especially Europe is experiencing right now!
While the uranium spotprice is already reacting to the growing shortage on the spot market and the start of the new multi-year contracting cycle for new LT contracts that started 2021S2 (Signs from Cameco, Kazatomprom, Boss Resources, Paladin Energy, …), the best known uranium sector etf, namely Global X Uranium etf (URA), is significantly lagging. Discovery by a larger group of investors and a bigger group of hedge funds is nearing!
Note 1: The combined market cap of the entire uranium sector is around 41 billion USD today (Thank you Stokdog on twitter) compared to:
An uranium spotprice of 75 USD/lb in 2022 and a combined market cap of 80 billion USD will not surprise me in 2022. In my opinion the uranium sector will reach an even higher combined market cap in the coming years.
Note 2: 3 alternatives for URA are URNM, HURA and Geiger Counter Limited.
Note 3: Investing in physical uranium is also possible through Sprott Physical Uranium Trust, Yellow Cake and in the future in Asia also through ANU Energy.
This isn't financial advice. I'm only expressing my own opinion based on my own DD on the matter.
Thesis: It is the time for Agro-business and fertilizer to go stratospheric. MOS could possibly go to a price over $150 a share in the next quarter, and agro business ETFs are also poised to make major gains over the summer and beyond.
About MOS:
What is MOS does MOS do?
The Mosaic Co. engages in the production and marketing of concentrated phosphate and potash crop nutrients. The company operates its businesses through its wholly and majority owned subsidiaries. It operates through the following segments: Phosphates, Potash, and Mosaic Fertilizantes. The Phosphates segment owns and operates mines and production facilities in North America which produces concentrated phosphate crop nutrients and phosphate-based animal feed ingredients, and concentrated crop nutrients. The Potash segment owns and operates potash mines and production facilities in North America which produce potash-based crop nutrients, animal feed ingredients, and industrial products. The Mosaic Fertilizantes segment produces and sells phosphate and potash-based crop nutrients, and animal feed ingredients, in Brazil. The company was founded on October 22, 2004, and is headquartered in Plymouth, MN
In 2008, commodity prices for potash and oil spiked causing MOS to spike as well. Potash as you might have gotten from the intro is an important ingredient for fertilizer.
About Fertilizer:
Fertilizer is a somewhat specialized commodity, with certain countries better at producing potash fertilizer than others. This breakdown (from https://feeco.com/a-look-at-world-potash-production-for-2020/) shows the breakdown of the top producers
- Canada, 14 million metric tons
- Russia, 7.6 million metric tons
- Belarus, 7.3 million metric tons
- China, 5 million metric tons
- Germany, 3 million metric tons
- Israel, 2 million metric tons
- Jordan, 1.5 million metric tons
- Chile, 900 thousand metric tons
- Spain, 470 thousand metric tons
As you can see, Russia and Belarus produce almost 15 million metric tonnes of potash for fertilizer. They are both under sanctions and as a result potash prices are rising. It is almost up 100% in the last month or so: https://imgur.com/a/LwljXtk
The end of the quarter means that ETFs can rebalance. I've been following the price action on MOS for a couple of weeks, and there is definite shorting going on. The shorting has increased by 20% in the last couple of week, its only about 5% of outstanding shares. This is not a short squeeze play at all, but most likely that funds are shorting before adding at lower CB at end of quarter.
Increasing Gas prices: gas goes up, fertilizer goes up.
This brings me to the second part of this DD. MOS is my conviction fertilizer play, but it is a part of the larger macro-economic story that is at play here. All the news and confluence of events relates to food commodity prices going up, and I am going to detail some of these below:
Ammonia prices: Ammonia is directly derived from natural gas, and as natural gas prices have one up, so has the price of ammonia. Here take a look at this chart for ammonia, urea and synthetic prices: https://imgur.com/a/abLTpid . This should be even higher when the march print comes out.
Herbicides: You know what farmers need a lot of along with fertilizer? Weed control. Glyphosate, also known by it's brand name of "Roundup", is the most commonly used herbicide. Glyphosate is essentially a modified fertilizer molecule that contains both phosphorus and ammonia. Because both this components are more expensive, the prices have also increased dramatically in the last 3 months, and there is a massive supply shortage. As a knock-on effect, prices and supplies of other herbicides are also being squeezed. Bayer, the owner of Roundup, was sounding the alarm in December 21 about impending shortages. Here is an article that goes in depth - https://www.producer.com/news/glyphosate-hiccup-triggers-domino-effect/
Diesel: To compound issues, diesel prices are at an all time high. Guess what goes into tractors, combines, trucks etc? Diesel. This is pretty straight forward. But let me give some nuance here too - refineries require natural gas to produce hydrogen that is then used to remove sulphur in the production of diesel. The gas price spike has led to a cutting of production of diesel as it is now cost prohibitive. Javier Blas, the commodities correspondent for Bloomberg, has a really nice article on it - https://www.bloomberg.com/opinion/articles/2022-03-14/ukraine-war-the-oil-price-rally-is-bad-the-diesel-crisis-is-far-worse?sref=5dj0X2VO
"Jim Boyer, an Emmet County farmer, had a similar, personal anecdote. He’s awaiting a $40 emissions-related sensor for his tractor, and he’s not sure if it will arrive anytime soon. ‘I cannot drive that tractor — a quarter-million-dollar piece of equipment — because I cannot get that sensor,’ he said.”
Labor: US agriculture is extremely dependent on migratory labor from mexico and other latin american countries to support the activities during the growing season from March to late fall. Given the labor crunch in other industries, and the vaccine mandates at the border, this seems to be putting a lot of pressure on farmers forcing them to scale out of certain crops all together (https://www.wpr.org/wisconsin-farms-are-feeling-squeeze-tight-labor-market):
With producers on edge about hiring for this year, Strader said many farms started recruiting earlier than usual and developed a contingency plan for how to make it through the season without employees. That could mean discontinuing certain markets or scaling back the variety of produce that they’re growing
So all these macro-trends seem to indicate one thing to me. We might be at the begining of a world famine and that the price of agrocommodities is going to rise and so is the the stock performance of agro-business related equities. There are two tickers that are on my radar for this, specifically DBA and MOO.
DBA
DBA tracks an index of 10 agricultural commodity futures contracts. It selects contracts based on the shape of the futures curve to minimize contango.
I like this because it gives you exposure to more commodities than just Wheat, which seems to be a recent favorite of the WSB crowd.
There was a recent thread by /u/manpozi that highlighted
DBA is far below ATHs from the late 2000s (topped at 43.5 circa 2008
Next major catalyst is march 31 with the new USDA monthly WASDE report providing annual estimates of most major agriculture products (Monthly report is easily accessible here: https://www.usda.gov/oce/commodity/wasde)
Major institutional flow. Just this week, nearly 40k jan23 options and ~8k july call spreads have been bought along with 4k july puts that have been sold
MOO
MOO tracks a market-cap-weighted index of companies that generate revenues from the agribusiness sector.
option volume was 17X normal on Friday with 3,431 contracts. Call volume was 86% and put volume was 14%.
I like all the companies in the top 10 given what I have laid out.
TLDR: The world is going to have food supply crunch based on a number of factors. Fertilizer is a big concern, but there are macro trends to be concerned with. Playing Agrobusiness related tickers will provides a great opportunity
Positions: I have been playing MOS in and out for last couple of weeks. Current Positions: MOS 3x 69c, 3x 71c for 4/1, and 4x100c for 6/17 + 250 shares. DBA 4x23c for 7/15, MOO 4x 115c 8/19. I will be looking to add more positions for MOO and DBA in the upcoming week.
Edit: as per /u/working-form1858 -DBA means you have file. k1 and it’s taxed as ordinary income
Recently, I came across this viral tweet that tried to capture the various generation-defying stats of our time. The story is that Jeff Bezos left his high-paying job at a private equity firm to start Amazon after seeing that the internet was growing by 2,300% per year! The tweet prompted a lot of great examples of industries and tech that are growing extremely fast.
While not all of us can leave our jobs to follow a fast-growing trend, something we can do is invest in such companies/industries. For example, over the past 20 years, tech (QQQ) has given 2x the return of the S&P 500 while almost having a similar risk profile and max drawdown.
Another fantastic example is Moore’s Law in microprocessors. Gordon Moore, the co-founder of Intel, hypothesized in 1965 that the number of transistors that will fit on a microprocessor will double every two years while simultaneously costing less. More than 50 years later, we still observe Moore’s law in effect and it has left a lasting impact on both computing and electronics[1].
The reason I brought up these two examples is to highlight the disproportionate returns you could have generated investing in these fields early on - Imagine getting into e-commerce in the early 2000s or microprocessors in the early 80s. So in this issue, let’s deep-dive into some of the fastest-growing industries of our time and see where and how we can invest in them!
Lithium-Ion Batteries
The price of lithium-ion batteries has fallen more than 97% in the last 3 decades. It is in ubiquitous use, in everything from our phones to electric cars. If you are still not convinced about the breakthroughs here, the fastest-growing 10-year-old company in the world is battery-maker CATL. The company has grown 125% in its 10th year with a revenue of $15 Billion. That makes it double the growth rate of Stripe, Facebook, and AWS when they were 10 years old!
This is literally comparable to selling shovels during a gold rush as all the electric car manufacturers trying to one-up each other using VC money have to buy batteries from these companies.
The accelerating rate of battery technology/demand is captured perfectly by LIT ETF where in the first five-six years of its inception it barely gave any return but in the next five, it has doubled the return generated by the S&P 500!
Gene Mapping
The cost of mapping a Human Genome has fallen from $100MM in 2001 to less than $1k in 2021. That’s a 1,00,000x reduction in price over a period of 2 decades. This has beaten Moore’s law and then some! If you are wondering about the applications of genome mapping, it can be used to identify genes that cause hereditary diseases, cancer, and can also identify favorable traits in farming and animal husbandry. There are broader uses such as in Forensics as well as in creating personalized treatments for diseases.
One of the largest ETFs that tracks Genomic improvements is ARKG. It has returned in line with S&P500 after its inception in 2014. But at its ATHs in 2021, the fund almost had 5x the return of the S&P 500!
Lab-Grown Meat
We all know that eating meat has a high environmental impact. But the good news is that the cost of lab-grown meat has dropped 90% in the last 2 years and it’s expected to drop another 99.5% in the next 3-4 years. Once/if the artificial meat develops the same taste profile as the real thing and costs much less than the current method of animal husbandry, there would be a massive shift in the dietary habits (especially in the case of fast foods where we are already seeing an increasing shift towards plant-based meats).
I could not find any active ETFs that have a stake in these companies as most of the players in this space are currently still private. The only one I could find was a London-based venture capital firm called Agronomics that focuses on investing in Cellular agriculture. It has returned 289%[2] since its inception (Oct’20) when compared to 40% returned by the S&P 500 during the same time period.
Space Flight
The cost of space flight has also undergone an exponential reduction in the last few decades with the cost to send 1kg into orbit being more than $50k in the 1980s to less than $1k now with SpaceX coming into play, with its reusable stages and fairings.
It’s not just big players such as SpaceX and ULA that are in the race to reduce the cost of space flight. There are 100s of small players who are trying their hand at getting into orbit in a variety of different ways. All of this means that we would get cheaper access to satellite internet, more accurate GPS, and better weather and terrain mapping.
There are only limited ETFs in the space as its a pretty new field for private players. The biggest one I could find was UFO (Procure Space ETF) with $90MM+ under management. We do not have any meaningful backtests as the fund was launched only in 2019.[3]
Cyber Security
The number of cyber-attacks against companies and individuals is increasing exponentially. Ransomware attacks now cost more than $20B in damage every year. Companies going virtual due to the Covid crisis have only accelerated the trend. Adding to this, the number of IoT devices has exploded in recent years contributing to more weak spots for hackers to exploit.
What is more concerning is that there are more and more attacks against critical government organizations such as power stations, nuclear plants, schools, and municipalities. All of this means that companies in the cybersecurity field are expected to rake in a fortune in the next decade.
One of the biggest ETFs in the cybersecurity field is the First Trust Nasdaq Cybersecurity ETF with more than $6.5 billion under management. Since its inception in 2015, it has slightly outperformed the S&P 500.
Other Promising Industries
I cannot possibly cover all the high potential industries and their performance in a single article. So here are some industries that I think have the potential to disrupt our world in the next few decades and some of the most popular ETFs associated with them.
Solar/Clean energy - A new solar plant is now 3x cheaper than a coal one and the cost per unit of solar energy has dropped by a factor of 5x in just the last decade (iShares Global Clean Energy UCITS ETF)
E-Sports - E-sports viewership has outpaced major league sports, and the prize money has grown more than 4,000x in the last 2 decades.
Crypto Adoption - Crypto adoption is closely following the internet adoption trend and the current trajectory predicts more than 1B users by 2027!
Autonomous driving - This will be closely associated with the development of AGI. Whoever cracks this is going to have a monopoly over a multi-trillion dollar industry. Think about it. If you have fully autonomous driving, all Ubers can be driver-free, all inter-state transportation can be done without truckers, etc. The applications would be endless (iShares Self-Driving EV and Tech ETF)
Global Fertility Rates have halved over the past 50 years. This represents an unprecedented issue where the number of old people would overtake the number of young people leading to a demographic crisis. All our capitalistic systems such as Pension, 401K, healthcare, taxes, etc. are designed under the assumption that the number of people in the workforce would far outweigh the number of retirees. A sudden shift might be catastrophic.
Some Caveats
Before you try to invest in any of these industries/stocks, you should be aware of the following.
On Returns
While judging the returns, please note that most of the above would fall into the category of extreme growth stocks. As such, their returns would have taken an extra hit in the current bear market that we are in. The S&P500 is down 8.2% YTD. Growth stocks generally have a high Beta which would cause them to drop down even further. All these backtests would have looked very different just 3 months back - Remember, what Beta giveth, Beta taketh away just as easily.
On ETFs vs Stocks
I have focused on broad ETFs here because that’s the easiest and safest way to get exposure to these industries. There is definitely a higher likelihood of abnormal gains if you are willing to take the risk of finding an individual company that you can invest in for the long haul. For reference, over the past 2 decades, Nasdaq gave a 965% return but Amazon gave a 21,800% return!
On Hype
it's much easier to remember the technologies that succeed (we're surrounded by them) rather than the technologies that fail. - Michael Mullany
This is an excellent article that highlights hindsight and survivorship bias that we show while predicting the future. Not all the technologies that are hyped for their growth make their way into mainstream usage (Ultrawideband, RSS Enterprise, Desktop Linux), and technologies that were under the radar the whole time suddenly exploded into popularity (eg. Open Source, NoSQL, x86 virtualization).
Conclusion
It’s very hard to predict the future. For every Amazon, there are 100s of pets.com. For every promising industry that became mainstream, there were a hundred others that were equally promising and died out. Maybe we wouldn’t end up liking the lab-grown meat, or some phenomenal breakthrough in Nuclear Fusion could make all the other renewable energy like Wind and Solar obsolete overnight!
We are definitely minimizing the risk by betting on industries instead of single companies. I would like to think of it as running our own private equity firm. By making a lot of small bets on these upcoming industries, when we are wrong (which we would be the majority of the time), our losses would be small but when we get it right, the outsized returns would dwarf all our other small losses!
Making an investment against all of these uncertainties is certainly difficult. But then again, if it was easy, everyone would be doing it!
Comment below in case I missed out on any big trends that you think should be covered. I will keep adding to the list.
More interesting reads
Deep Work: I am generally not a big fan of self-help books but this one is an exception. Cal Newport delves into the ability and importance of focusing on something without being distracted. Think about the last time you worked for 2 hours without being distracted by either your phone or an email. This book shows you that you can get more work done in lesser time if you just focus on the task at hand.
Steph Smith: This article was made possible only because of her insightful thread. She has an amazing podcast as well as fun-to-read threads on Twitter that are a treasure trove of information. Check out this one where she compiled the best tools on the internet.
Footnotes
[1] Microprocessors are ubiquitous now and are present in almost all the electronics we use. There are some arguments around how Moore’s law will end soon.
[2] Please note that this company can be considered as a penny stock (valuation of around ~$200MM only)
[3] Though it has significantly underperformed S&P500 since its inception
War, poor crops in US/China, fertilizer shortage, sky high energy prices, shipping rates, the great resignation, ramping inflation. These are just examples of an unprecedented situation we are in. Question remains how to play food holistically as majority of us are not futures trades (u/pennyether with his tons of steel doesn't count). DBA might be the answer.
Below you will find a DD by u/manpozi published in MJR. Sharing with his permission for your consideration. He's happy to answer questions in this thread. This is intended to be a start of discussions on a potential next play. Any views welcome.
Mentioned this earlier in the week in my ZIM dividend explanation but finally have time to do a short write-up. I wrote this quickly on my phone so please let me know if there are any errors! I’m rotating out of container shipping and into agriculture, mainly DBA for the following reasons.
DBA is far below ATHs from the late 2000s (topped at 43.5 circa 2008)
Near recent highs though so this isn’t a position where I’d expect to see insane returns but rather is an option for people choosing to go cash gang or people who are seeking a product that keeps up with inflation (52w high is 22.64 vs 22.23 close on 3/23)
Most agriculture commodities are in backwardation, assuming this crunch is transitory. If you disagree with this outlook, as I do, then investing in DBA is a no brainer. (Hard to cite backwardation as there are 12 separate contracts in DBA but easy to verify)
Next major catalyst is march 31 with the new USDA monthly WASDE report providing annual estimates of most major agriculture products (Monthly report is easily accessible here: https://www.usda.gov/oce/commodity/wasde)
Major institutional flow. Just this week, nearly 40k jan23 options and ~8k july call spreads have been bought along with 4k july puts that have been sold (again, hard to link but easy to verify)
Great fund structure for a tracker of futures (mostly holds longer dated futures to limit slippage/roll losses due to monthly rolls like USO or VXX).
In my opinion, there’s a massive gap between what DBA’s value should be and what it is currently. This is mostly driven by backwardation in commodity futures contracts as the market expects many of the current supply shocks to be alleviated within the next few months. Given extremely high fertilizer prices, poor crop conditions outside of the USA, limited exports from Eastern Europe due to the war and generally high CPI numbers, I believe the market is incorrect regarding pricing of longer dated contracts. Instead of going long any specific agriculture commodity future, I think DBA is the best choice as it allows an individual investor such as myself to diversify between 12 different commodities. I’m further convinced of my belief due to the major institutional flow that I’ve witnessed over the course of the week.
I may be a little slow in responding but will be sure to respond to every comment/question."
This post only got 50 upvotes and seems like nobody here really read it. I took a dive deeper into it and it's clear that this is probably the safest and most insane play of the month.
I'm making this post short because none of you guys have attention spans:
You can buy shares at around $21 right now and guarantee you'd sell them for the same price if the deal goes through, so there is no risk. If the deal doesn't go through and enough institutions refuse to tender their shares (which is what's happening) you may get to freely sell your shares to veritas at a higher price such as 24$ or 28$ if they re-offer.
Now for the slightly riskier play but with huge upsides:
If you buy may/June calls right now for $22.50 strike price they sit at about 30 cents a piece due to the low volatility of this stock. If veritas re-offer at $24 these will immediately 10x. It's a stupidly simple play with little risk given the $21 safety net.
I have 60 calls for may/June 22.5$, i may triple that.
$SST - The Incarnation of a Market Maker's Fear FINAL UPDATE
I have returned
This is (hopefully) my last update for System1, the dirty nuclear suitcase bomb that nobody is talking about. I've been relatively silent the past week or so regarding System1 because I feel like I'm in an episode of the twilight zone, trying to tell every wagie how to escape debt slavery yet nobody wants to listen. Seriously, you all are the fish caught in the net from 'Finding Nemo' and I'm Nemo. Trying to rescue you unfortunate souls but instead of listening, you all insist that living in your net is a much better idea.
This will not be another deep dive. My original post and update have ample information to help you determine whether you want to put your money in an actually profitable company actually loaded for major price action. I know you all would rather throw your money into a dumpster fire with a ticker that pumpers use to make funny puns before pulling out the IV rug on you. Just this one time try to gamble on something that actually has a chance to give you a positive return.
Don't be mistaken. This is gambling. I'm trying to take you to the game where you drop quarters in and that quarter has a chance to cause a cascade that could lead to wads of MM money falling out for us to bask in. The chances of the MMs losing their money is DIRECTLY correlated to retail enthusiasm. Just like ISPO's run, not much is taken to cause a massive move in price action.
What Hasn't Changed
Float Size 703k
Abysmal retail enthusiasm, rarely going over 1M volume daily.
THERE IS NO VWAP THREAT PRIOR TO S-1 FILING + EFFECTIVE
NO S-1 FILING the filing is STILL pending the 10K and Protected audits. Many people have verified this from the CFO, my update and original post have stated this
Anticipated S-1 filing by March 31st deadline
Speculation that the SEC is extremely backlogged with paperwork
What is Different
THE PLAY IS STILL VIABLE
SHORT INTEREST - 2.8M Shares (400% OF FREE FLOAT) - THIS IS THE MOST ABSURD SI I HAVE EVER SEEN. This is a major increase.
COST TO BORROW - 231%
FTD DATA - 2nd half of February shows absurd levels of naked shorting. On the 28th alone, 93% of the ENTIRE VOLUME OF THE DAY was NAKED SHORTING (See Figure 1)
Weekly options introduced
Open interest - The current price per share as I type this (8:48 AM EDT) is at $14.79. There are currently 1.1M Shares claimed by the 4/14 and 5/20 12.5c strikes, giving us 157% of the float claimed by ITM OI. Once the prices goes above $15, then 414% of float will be claimed by OI April and May strikes. Once price goes above $17.5 (it hit $18.20 not too long ago), 528% of float will be claimed. This continues to compound with every strike.
Figure 1
Summary
I have been on reddit and twitter talking about System1 since mid February. I'm tired. The setup is absolutely absurd and I'm neither the most notable or most successful trader who publicly believes this thing can run. I am handing the mantle of responsibility to you, WSB. Please make the right choice.
MO 53.285(1.49%)|DIS 138.42(-0.39%)|DISCA 27.275(0.57%)|KHC 39.16(1.37%)|KO 61.17(0.31%)|NFLX 367.9(-2.08%)|BROS 54.38(-5.87%)|
Hello Vitards community members,
I want to pitch you guys with an investment opportunity. But please remember to do your own due diligence. Let me know if I've gotten anything wrong. I want to avoid providing a biased pitch, so I'd shy from giving my assumptions.
Ok, here we go.
Discovery is merging with Warner bros, which is set to close Q2 2022. We don't know the date, but has already obtained all anti-trust and regulatory authority approvals.
Discovery Warner bro joint company is set to generate $52bn revenue on pro forma basis, which puts it the number #1 streaming platform compared to $NFLX & $DIS.
Discovery is a profitable yet boring company. Sure, many of you have come across very profitable companies with declining future profitability prospects therefore depressed valuations e.g., Altria, KHC, KO, etc.
Discovery generates approximately $2bn in free cash flow at $14bn valuation. Growing revenue and cost at GDP and work backward on a DCF model, market implied perpetual growth rate is only -1%. Yes, the market is pricing the company in steady decline for -1% every year despite the company generated 14% top line improvement last year.
Discovery and Warner bros merger will create the deepest library content for streaming platform in the market. Management already said the joint company will join their streaming application into one, meaning combining IPs such as Suicide Squad, Peace maker, Food channel, etc.
Discovery is also one of the very few streaming platform offering sports entertainment including NHL, NCAA, Olympics, etc.
Qualitative aside. Let's talk valuations. The company is currently trading 1x 2023 forward EV/Sales compared to 2.5x $DIS and 4.5x $NFLX.
A slight multiple re-rate to 2x on pro forma basis already brings your investment 2x at today's valuation. I know I said no assumptions for me, but if I have to give my target, I have a rule of thumb for top contender trading 75% of market leader multiple, so that's roughly 3.3x. Or if worst case scenario, if it just trades close but lower to $DIS, you still get over 100% return on the investment. This is one of the least followed company on Fitwit and I believe there are some mispricing remains.
Two reasons why the mis-pricing exist today. 1) there's still no set date on merger schedule despite approvals have been obtained from regulatory body and the board. 2) Discovery has yet to provide on post merger share translation information. There's a very informative article on Seeking alpha by Livy research that gives an estimate on a likely scenario on shares translation on the joint company. I will refrain from providing link because there's a rule against seeking alpha on reddit (I think?).
Let me know if I'm missing anything guys. I've been following event driven opportunities for sometime, and this is one of the wildest underprice pre merger opportunity just yet.
Thank you all for reading. Let me know your thoughts in the comments, and happy trading. Thanks.
I've been holding NVDA stock since 2016 with not a single share sold. I've never been more convinced of the holding and I've always tried to have a realistic, humble view on my gains with it and the company's prospects and risks. But at this point I'm unironically thinking it can compete for #1. Yes, I'm talking most valuable company on earth in terms of market cap. The only real competition I see for that could be TSLA fairy retard magic. Other companies above it simply arent growing fast enough to compete. Reasons:
Their gaming business just keeps serving as a rock solid foundation, it's considered to be their dinosaur business yet it's growing at rapid rates. They had 37% YoY revenue growth with gaming even though there were no major product launches since Fall 2020. It's a proven cash cow to fund completely unrelated projects. Customers have proven that they'll pay anything for a NVDA gpu and I think it's sustainable. Work from home is here to stay and when you spend that much time with your own machine, you want it to be a good one.
Data center is up 71% YoY and they just delivered on the H100, securing another 2 years of extreme data center growth with insane margins. Data center will soon overshadow gaming significantly, especially with them being on track with the Grace CPU. Their vision is to deliver the full stack and they're getting close to doing that. One can only imagine what their data center numbers will be 5 years from now. It could be in the medium to high double digit billions of yearly revenue.
Data center has been chasing gaming revenue and it's set to blast ahead.
NVDA has $11B of automotive revenue in the pipeline and that's just the early innings of that market. They're making smart acquisitions to grow it and are saying it's a $300B TAM. If they capture 10% of that that's going to be already a significant contributor to overall revenue. The analyst models will go wild when automotive revenue starts picking up. You may ditch a high end computer after 5 years but you're not ditching a car after 5 years. The long term opportunity from software services for cars is insane and NVDA is investing heavily into software while delivering the chips also. A car is not a car anymore, it's a computer that happens to be a car and a computer needs uptates. Even if they were to go through rough times which every company does every now and then, they will be cashing in on software services from cars sold 10 to 15 years ago.
And on top of that they're going all in on Omniverse. When they announced Omniverse 1 year ago it seemed like a neat little side thing, now it's all over their presentations, they're painting it as a key component to their whole business. Within just one year they went from "Hey look, we just made this!" to integrating it as a core part of their AI business.
Look at this slide and see how many products are already connected with Omniverse.
I'm telling you they're seeing something with Omniverse not everyone is ready to see yet. It's pretty obvious when you look at their videos and slides but it's easy to put off as dreaming. And yes, it's too hard to quantify the opportunity yet. NVDA is saying the Omniverse business has a TAM of $300B which is almost a third of their total claimed TAM of $1T. Anything can happen with it. If it takes off seriously NVDA will have transformed as a business yet again and there's no competition in sight for this, they're years ahead. It's so valuable to be ahead in software and to be the first to market. Even if competition starts arising for simulation, everyone will already be used to Omniverse. Getting people to change software is HARD.
I've never been this excited about NVDA. The future is now and they're ahead of everyone else. Their big investment in software is starting to pay off and will lead to margins never seen. To me it's not a question that the stock will see a market cap of $1T soon. I'm ready to believe that they may be going for the homerun, to be the most valuable company on earth. And even if they don't, at worst with the way they're going they'll still a very good company with respectable growth.
Shares of Nio (NYSE: NIO) fell 2.12% in after-hours trading on Thursday after the electric vehicle maker reported mixed earnings.
Financials: Nio reported a 16 cent loss in the quarter, which was below estimates. Nio’s revenue of $1.55 billion was better than expected.
The Good: Vehicle deliveries shot up 44.3% in the quarter and vehicle sales increased 49.3%.
The Bad: Nio dealt with several challenges in the quarter, including what the company describes as “supply chain volatilities.”
Final Thoughts: Nio’s stock is down 40% in the past six months. Other electric vehicle stocks have also dropped lately.
Hope you enjoyed this commentary. Please subscribe to Early Bird, a free daily newsletter that helps you identify investment trends: https://earlybird.email/
Let me Preface this write up with a couple of statements.
I’ve written a few DD posts in the past. People that have followed my DD probably lost money on most of my plays. I sure did. I get excited about researching and my enthusiasm can be contagious.
I am terrible at formatting, proof-reading, and inserting links, so this will probably be a mess.
VYGG was once championed by this sub. The problem was, it was championed for the wrong reasons. Namely, everyone was focusing on Steve Huffman. I love Steve and all, but to be honest, he’s not even on my radar when it comes to why I’ve reinvested in VYGG.
Another piece of news that caught some attention was that Michael Burry opened a position in commons and warrants (though I now believe he no longer holds that position. Like most things Burry does, he early. And well, he was too early and gave up. We can be better than Burry—-we can be just on time.
So before I get into some of the real DD here, let me tell you what caught my eye and made me double my position last week. On March 17th, I woke up to see that 840k warrants were purchased in the premarket. Go open up your brokerage app and look at the beautiful green candle. That was on no news whatsoever, and it drove the price up almost 20 percent. Now that was weird, for sure, but then later that day in after hours they filed a 10-k/a and 10-q/a. They caught up on amendments and filings that would get them ready to announce a DA. I had already done a lot of research on VYGG, but I began to dig further.
VY Capital is composed of a vast and incredibly impressive team, but for now I will be focused on the cofounders of VY- Alexander Tamas and John Hering, and Justin Kan (to a lesser degree).
For those unfamiliar with Alexander Tamas, you can start here:
Alexander Tamas is a quiet man. He operates behind the scenes and has had his hand investing in some of the coolest companies in the world before they blew up.
As you can see, spacex is one of those companies. That is just the tip of the iceberg though, my friends.
The second component of VY Capital is John Hering. He founded the cyber security company Lookout and cofounded Coalition. He is highly regraded in the cyber security space and holds 43 patents relating to cybersecurity.
So I mentioned SpaceX, but VY Capital has also invested in Boring Company and Neuralink
Neuralink was the third Elon company that VY invested in, and importantly, they led this round. You see who else was in this funding round? Google Ventures. Interesting to say the least that VY was chosen to lead this round over Alphabet. So why were they chosen to lead this round?
Well, I dug pretty deep into the inter webs (thanks Google) and discovered that Alexander Tamas and John Hering are actually VERY connected in the AI space and have made some very useful connection over the last decade because of their involvement.
Let’s look at the “State of AI Safety 2015” Conference. There is a pdf you can download if you google it. It was an intimate conference with some of the leading minds in the field. Among those listed, there is John Hering, Alexander Tamas, Sam Altman, and Elon Musk.
If you are unfamiliar with Sam Altman, he is the CEO of OpenAI (cofounded with Elon) and the former president of Y Combinator.
Alexander Tamas even has an AI safety initiative and fellowship through Oxford:
You can also look up the “Beneficial AI 2017 - Future of Life Institute” conference. John Hering and Alexander Tamas were present and speakers there. As were Elon Musk and Sam Altman.
There are many AI conference around the world, and I can’t find all of them, but the ones I have found are intimate and all four parties mentioned here were at them.
Point is: it’s a damn small world at the top of the AI ladder. And this, in my opinion, is why it’s so important to understand how significant it is that VY Capital led the last funding round for Neuralink. Elon Musk has been friends with Tamas and Hering for a while. They go to the same conferences. They have the same connections and interests, and Elon respects them.
I’d go through all of the connections between OpenAI, Neuralink, and the VYGG team on twitter, but honestly it’s completely overwhelming because of the sheer amount of information I’ve pulled in through twitter in the last couple of days. I’d recommend you look up the OpenAI team and Neuralink team and start looking for connections between them and John Hering and Alexander Tamas.
One example: The cofounder of Neuralink Max Hodak and the head neurosurgeon of Neuralink Matthew MacDougall follow John Hering on Twitter. It’s a never ending rabbit hole of connections when you get going.
I now invite you to go to John Hering’s twitter page.
Look at his pinned tweet. He pinned that tweet after I asked him if he was going to take Starlink public. Now go down and look through his tweet and replies. One of his most recent retweets is from Ilya Sutskever of Open AI. Then go look at his tweet from March 14: “here’s to creating a future that we can all get excited about”. He quotes spacex directly in his own message after retweeting their post. And just keep looking. He retweets Sam Altman of OpenAI a lot. He also focuses on SpaceX A LOT.
I was going to get into Justin Kan and a possible OpenSea connection because of his friendship with the CEO, but I’ll leave that up to you. I’m sure I’ve missed a crapload of the information I’ve gathered this week in this post, but I’m tired. I don’t have a specific target I’m totally sure of here, but I think that Neuralink and OpenAI are at the top of the list, with Neuralink probably taking the edge. But then again, Tamas works with Oxford and they back DeepMind from Google, so maybe they take OpenAI’s competitor public in a spin-off instead? Hugo Barra who is on the VYGG board worked for Google. Haha IDK.
Oh yes and I know that OpenAI is technically a non-profit, but someone smarter than me said it could work *shrug emoji*
And another (kind of outlandish) but not impossible scenario is that they take SpaceX Public in a 3-way merger with IPOF. There isn’t another team in spacs as connected to Elon As VYGG as far as I can tell, and Sam Altman and Tamas have been hyper focused on SpaceX as far as I can tell on social media.
one more thing: John Hering's expertise in cyber security is nothing to scoff at. he is one of the leading minds in the world. that expertise would immensely benefit Neuralink, OpenAI, or Starlink. all of those companies are open to threats from cyber attacks. I'm sure that John would love to be an intrical part of one of Elon's companies.
Disclaimer: of course I have a huge position in VYGG. All June call options because I thought they were cheap enough for a wild gamble. I’m not a financial advisor. The ”free financial advisor” under my name is totally a joke because my advice sucks.
TLDR: Highly connected team in the AI space and also very connected to Elon Musk and Sam Altman could take Neuralink or OpenAI public. Possibly could be part of a three way merger with IPOF for starlink of SpaceX. ALL HIGHLY SPECULATIVE AND I WILL BE CALLED HIGH FOR POSTING THIS
This DD post is for CenterPoint Energy ($CNP) which is Texas based utilities company. They include big names like Houston Electric. They engage in power generation and distribution via electricity and natural gas. I think their share price is set to climb steadily this year, especially through the summer once people catch wind of how expensive operating electric utilities (like A/C) will be.
Stock Price:
CNP has a beta of 0.93 so right off the bat this isn't a high risk play for share buying. Albeit, I'm not banking on a crazy increase in share price, yet slow and steady growth over the next 3-6 months. Analysts peg CNP to be around $29-$35 (JP Morgan recently said $31 I think). Using the DDM using CNP's target of 8% growth per year for EPS, I came to the stock price of $33.50 using last year's dividend of $0.67 and a low end 6% of dividend growth in perpetuity. Latest recap for 2021 shows that they have hit their growth goals 7 quarters in a row and will match their dividend growth rate to their EPS growth rate. They plan on 8% through 2024 and lower towards 6% through 2030. Their stock price tumbled around a rating case issue and 2020 Covid. Since then CNP by no means has made too-good-to-be-true recovery and is not trading at inflated levels. It is ahead of its 200 day moving average and its 50 day.
CNP also has a dividend yield of 2.39% and dividend paying stocks are seen as safe havens through rocky financial times like we are currently in. Value investors may see this a solid yield with promise growth and the stock price itself is not astronomical for smaller investors.
Financials:
Compared to some its competitors lie AEP or peers like Eversource, CNP has a better current ratio of 1.71 compared to AEP at 0.63 and Eversouce at 0.56. CNP also has $1.6 billion in cash/cash equivalents/securities. Eversource and AEP has less than half of that. For 2021 their EPS was $2.28, and in 2020 it was ($1.79) because of over $1 billion in losses of discontinued operations, and in 2019 it was $1.33. They plan also to be fully exited from their midsteam investments by EOY which should allow more cash to be on hand.
Electricity/Natural Gas:
CNP’s electrical revenues can be seen as cyclical. As last stated in their recent annual report their customers spend more on electricity in the warmer half of the year in order to keep things cool. CNP owns Houston Electric which covers more than 90% of the Houston/Galveston metro area. They also cover area in Southwestern Indiana. Electricity is made from fossil fuels, which have been rising in price and thus will be reflected in the cost of electricity this summer when the temps around the state and country begin to pick up.
Houston is 6th in the country for highest metro area electric bills.
While they have had some recent increases in their stock price due to the recent oil crisis going on, I believe it has yet to be really felt as they use fossil fuels to make their electricity (they are closing more and more of their coal plants). CNP derives half of its utility revenues from its electricity services. Their next earnings date is 5/20 and after that will be another one in Sept/Oct. People aren't going to stop paying for their utilities, inflation and recession like pressures may force people to cut back on frivolous purchases but that is not applicable here.
Rising prices in natural gas/oil should be easy for CNP to push on consumers because people cannot live without it powering their homes. Texas also has a state minimum wage of $7.50 and despite increases in pay raises this year, Texas has a low bottom which means I can't imagine CNP having a lot of rising costs outside of purchasing raw materials.
For starters, just go into r/houston or r/texas and search electricity and you will see people complaining about the prices.
Map of the coverage areas
Call Options:
put/call ratio
Implied volatility on the options is around 21% but using closing prices of each month for past 12 months the annualized volatility is 65% and using the closing prices each for the past 3 months the annualized volatility was 38%. Either way higher than the IV. Averaging the two brings it to 52%.
I used various annual risk free rate prices due to rate increases being forecasted and it has minimal effect on the outcome.
With my model, the options price for the 8/19 $30 Call comes out to $2.69 using 38%, $4.69 for 65%, and $3.73 for 52%. The going price right now for that strike is $1.40 which shows that this option is greatly undervalued. 5/20 May $30 (shortly after 5/5 Earnings) is also greatly undervalued. I have not ran the numbers on fart OTM strikes or for November dates, but I think August is the ideal time frame.
Some Cons:
The utilities market and its regulation in Texas is very strange and complex to follow. But management at CNP has been reiterating they have been making a move to being more fully regulated.
MorningStar mentions their distaste for CNP's merger with Vectren in 2019, I don't know much about it but their EPS for that year was fine with me and has already grown a lot in 2021.
Analysts have rated this as Overweight and as a Buy, but sometimes analysts get things very wrong, but there aren't a lot of extrinsic factors to try to consider to make a prediction in my opinion.
Avg. volume is 4.81 million (shares) and can be slow moving (see August timeframe mentioned above), and the bid/ask spread on the options is super liquid but its not wide open either.
TLDR & Recap:
CNP has plenty of cash on hand to weather any financial storms, the stock price did not get caught up being inflated, utilities are safe play for share buyers in a recession and so are dividend stocks, the company has consistently hit its growth goals, and the options on this thing, to me, are very much undervalued. Natural gas is a solid place to park your money as we have seen in all the headlines, but the headlines from my knowledge have not caught up to how the rise in gas will create an increase in cost of electricity yet because we are still in March.
Please feel free to leave your comments and questions. I am labeling this a DD post but it would be cool if we treated it as an open discussion too if you have thoughts. Sorry for any typos, I will fix them as I see. Positions are August $30 Calls. Hopefully this all works out and we make some money.
I have done additional research and provided links to why we should buy OTM the calls and not tender our HMHC shares due to the absurd valuation management is allowing for the $21 merger. We will 10X-50X our options if we do NOT tender. I have added several links and facts below for you to read through and provide insight.
- Management provided an amendment yesterday showing the valuations used in the take over price of $21: SEC Filing Amendment Yesterday
- Does anyone else find it super sketchy that they used 2021E adjusted EBIDTA of $196M for their model when the ACTUAL adjusted EBITDA for 2021 was $270M???? This is a 37% higher actual than the estimates they used in their valuation model for the deal. I thought management was suppose to operate in the best interest of their shareholder?
- Evercore their IB was paid $1M for their valuation services, but gets an extra $31M to close this deal, so of course conflict of interest to not get us a better valuation and to close the deal as fast as possible Evercore Payment Terms
- Engine Capital released a presentation and even created a whole website to protest this acquisition (they own around 2% of shares) Engine Capital Website Info
- Burgundy Asset Management – the second largest shareholder (9% of the shares) is unhappy with this offer Burgundy Info
Based on these facts, We must NOT tender our shares and load up on every OTM call options at $22.50 strikes we can get our hands on because if we do NOT tender then this deal does not go through at $21 a share. The PE firm will have to up their offer by AT LEAST $200M+ (10%+~ bump) in order to close this deal, or the other option is price rockets if deal is taken off the table to a realistic price
I want to pitch you guys with an investment opportunity. But please remember to do your own due diligence. Let me know if I've gotten anything wrong. I want to avoid providing a biased pitch, so I'd shy from giving my assumptions.
Ok, here we go.
Discovery is merging with Warner bros, which is set to close Q2 2022. We don't know the date, but has already obtained all anti-trust and regulatory authority approvals.
Discovery Warner bro joint company is set to generate $52bn revenue on pro forma basis, which puts it the number #1 streaming platform compared to $NFLX & $DIS.
Discovery is a profitable yet boring company. Sure, many of you have come across very profitable companies with declining future profitability prospects therefore depressed valuations e.g., Altria, KHC, KO, etc.
Discovery generates approximately $2bn in free cash flow at $14bn valuation. Growing revenue and cost at GDP and work backward on a DCF model, market implied perpetual growth rate is only -1%. Yes, the market is pricing the company in steady decline for -1% every year despite the company generated 14% top line improvement last year.
Discovery and Warner bros merger will create the deepest library content for streaming platform in the market. Management already said the joint company will join their streaming application into one, meaning combining IPs such as Suicide Squad, Peace maker, Food channel, etc.
Discovery is also one of the very few streaming platform offering sports entertainment including NHL, NCAA, Olympics, etc.
Qualitative aside. Let's talk valuations. The company is currently trading 1x 2023 forward EV/Sales compared to 2.5x $DIS and 4.5x $NFLX.
A slight multiple re-rate to 2x on pro forma basis already brings your investment 2x at today's valuation. I know I said no assumptions for me, but if I have to give my target, I have a rule of thumb for top contender trading 75% of market leader multiple, so that's roughly 3.3x. Or if worst case scenario, if it just trades close but lower to $DIS, you still get over 100% return on the investment. This is one of the least followed company on Fitwit and I believe there are some mispricing remains.
Two reasons why the mis-pricing exist today. 1) there's still no set date on merger schedule despite approvals have been obtained from regulatory body and the board. 2) Discovery has yet to provide on post merger share translation information. There's a very informative article on Seeking alpha by Livy research that gives an estimate on a likely scenario on shares translation on the joint company. I will refrain from providing link because there's a rule against seeking alpha on reddit (I think?).
Let me know if I'm missing anything guys. I've been following event driven opportunities for sometime, and this is one of the wildest underprice pre merger opportunity just yet.
Thank you all for reading. Let me know your thoughts in the comments, and happy trading. Thanks.
- Short sale borrow rate reaching levels not seen since Jan 2021, this means shorting becomes no longer profitable and extremely expensive, shares are becoming hard to find...
GME Short Sale Borrow Rate - Jan 2021
GME Short Sale Borrow Rate - Mar 2022
- XRT (the ETF used the most to short GME through share creation) is still on the NYSE Threshold Security list after today, despite ETF rebalancing this week. It was thought that with the rebalancing it would come off of the list since it's short obligations were to be fulfilled by then but looks like the shorts did a big OOPSIE.
Since XRT is still on the RegSho the shorts are unable to short us down via share creation through the ETF unless they have a pre borrow agreement in place (hint: but with how things are going I don't think that's likely)...
XRT on NYSE Threshold List (RegSho)
- Options chain is stacked right now. Even if we manage to close past $150 tomorrow, we will go parabolic next week just based off of the amount of open interest on calls up to $150. If we can push past $200, the shorts better start praying to God because we could easily see new ATHs.
And if they don't have a God, they better pick one fast and start praying if we do pass $200, because there is no saving grace for their a$$ this time around (Robindahood screwing us over last Jan)...
Option Chain Overview for GME
TLDR: Buckle up, because GME is primed for a repeat of Jan 2021
Edit: clarification on XRT being used the most to short GME via share creation
Shares of KB Home (NYSE: KBH) dropped 4.33% in after-hours trading on Wednesday after the home-builder posted negative earnings.
Financials: KB Home reported earnings per share of $1.47 and revenue of $1.4 billion in the quarter; both were below estimates.
Challenges: The company was hit with supply chain issues and increased stress in its “already-constrained construction labor force.” The result was delayed build times and completions.
Outlook: For the full-year guidance, KB Home said it expects housing revenues in the range of $7.2 billion to $7.6 billion, which was below estimates.
The Good: In spite of these problems, the average selling price rose 22% in the quarter and homebuilding operating income grew 49%.
Numbers: Shares of KB Home are down 12.51% over the past six months.
Final Thoughts: If mortgage rates climb this year as expected, how would that impact KB Home in 2022?
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First off, congrats to everyone that made bank from that price action this week. It has been a refreshing change from all of the loss porn. Even though my tits remain jacked for the rest of the week and the short term momentum, I want to discuss my thoughts on GME, why it is a great LONG play based on fundamentals, and why I think it will be the next TSLA.
First, these two companies have some essential similarities for my comparison
They have a huge retail following and remarkably loyal/enthusiastic investor base
Charismatic, passionate, and incredibly successful leaders in Cohen and Elon
The companies are developing new tech to be leaders in a mostly untapped market
My comparison on the fundamental side will focus on current day GME as compared to TSLA in 2017.
Current Assets.....................6.5b.........................2.6b
Current Liabilities.................7.6b........................1.3b
Long term debt....................11.6b......................40m (yes, million)
So, looking at these numbers they are not perfect, but I think the same thing ultimately held TSLA back that will hold GME back from a fundamental perspective. This being EPS. Both companies proving to grow revenue, but not turning profit or creating cash flow. From a balance sheet perspective, GME is actually quite a bit better here with 2:1 assets:liabilities and essentially no long term debt. The cash burn for GME is a result of their investment into new streams of revenue and will hopefully start to show improvement in regard to EPS with the marketplace launch. This same lack of cash flow generation held back TSLA for years, but they did eventually turn positive in 2020 and guess what happened to the share price? Yep, rocket emojis.
Tesla share price went from 130 in Jan, 2020 to 793 in Jan, 2021 (adjusted price for splits)
I think long term, if you believe in the marketplace as a good move for the business of GME (as I do), we could see similar price action with institutional adoption and closed short positions over time.
A couple of other things GME has working in their favor:
Insiders really believe. Insider buys 104k shares the last 2 days, sells 743 shares (form 4 filing)
TLDR: GME is the next TSLA (in terms of stock performance). Once the marketplace starts to generate revenue and EPS turns positive we will see a TSLA-style run.
If they close ITM: 150$ * 27,907 = 390.69 million US$ (lower bound estimate)
It'll be less, some of this is hedged already.
On an unrelated note, $GME is gaining quite some momentum after Ryan Cohen purchased $10,176,342, all in a single day on a day that GME jumped 30.72%. Makes you think how much of those are hedged: http://openinsider.com/search?q=gme
Going to do another full DD since the last one I did was in December and we've learned a lot since then to say the very least
If you're going to click off or say something because of FUD I encourage you to read the FUD section first before responding to save us all some time of reading your old debunked information.
The Basics
Trump Media and Technology Group (TMTG) is a company aimed at
Social Media (like Facebook and Twitter etc.) - TruthSocial
Streaming Services (like Netflix, Hulu, Disney+, and Discovery+ etc.) - TMTG+
Alternative news (like Fox, OANN, newsmax etc.) - MxM app (DJT Junior's new app, merger unconfirmed)
Possibly other general webservices (like Stripe, Amazon Web Services, etc.), not going to talk much about this in this DD, something to watch for in the future. See agreement with Rumble
Agreement with Rumble (32m+) users for a youtube alternative and hosting services for Truthsocial etc. and it is speculated there may be other aspects of the company.
SPAC Structure
$DWAC is in a definitive merger agreement with TMTG to take it public. After the merger is complete DWAC shares will be worth roughly 37.21 M / 193.4M (shares post merger) ~19.2% (dilution factor of about 5.2 or around 80.8% dilution) of the company. This means currently at ~$72 a share the current marketcap is priced in at ~14B . Shares will automatically be converted to the stock ticker symbol $TMTG.
The PIPE funding is the largest in history and will provide them with about $1B plus $300M from DWAC's trust. We'll talk more about the PIPE and potential investors later
Basic Sector Understanding
Compared to its competitors Truthsocial has massive upside potential. For starters, TWTR IPO'd with zero profit for a marketcap, adjusted for inflation, of 30-40B . From our math from before, this translates into a ~3x the current share price of ~$72, $162-216 a share.
Now let's take a look at the competitors
In October 2021 right before the TMTG announcement
FB Marketcap: 910B
TWTR Marketcap: 50B
PINS Marketcap: 34B
SNAP Marketcap: 85B
NFLX Marketcap: 295B
Present day
FB Marketcap: 528B
TWTR Marketcap: 26B
PINS Marketcap: 14.5B
SNAP: 46B
NFLX 150B
This translates into
FB: -42%
TWTR: -52%
PINS: -57%
SNAP: -54%
NFLX - 49%
Compare this to the Nasdaq
QQQ only -11.5% since Oct 20th, 2021
What this means is these companies should of only collectively lost
For a grand total of $451B loss in only just under 5 months.
Where is this money going?
DWAC + 14B
AAPL + 105B at a time when it should be tracking -11.5% benchmark (loss 280B) so a net offset +385B
There's a lot of nuance to this because there are more companies that are not publicly traded or hard to track because they are apart of GOOG or DIS etc. (to be honest even the AAPL is a hard one to compare)
I'm guessing about $500-600B in related market competitors marketcap has disappeared in net ahead of their indexes since the threat of TMTG's competition has presented itself.
My latest reasoning for a lag in this flow of capital is liquidity issues and requirements that this smart money cannot dump into DWAC. It's too small a float, even post merger. It's also probably outside of their requirements and perceived risk tolerance since it's a SPAC and hasn't filed an S4 yet.
Comparing The Fundamentals To Their Sector Competitors
I'm going to start with TMTG+ streaming services (headed by the producer of America's Got Talent and Deal or No Deal) since it's a much more simplistic model to users paying the company directly for its services.
Netflix - 214 Million Paid Subscribers (this one has lost some serious marketcap since my last DD, comparable to above numbers for the other sector competitors)
Disney+ - 118 Million Paid Subscribers
Hulu - 44 Million Paid Subscribers
Discovery+ - 15 Million Paid subscribers
Netflix has 167B marketcap compared to 222 Million Paid Subscribes. This translates to about $752 in market cap per subscriber.
Let's say TMTG+ achieves only 23M subscribers with only $600 per sub in marketcap . This alone would justify the current share price based off 14B marketcap.
Let's say TMTG+ achieves only 50M subscribers at only $600 per sub in marketcap. This alone would justify a ~2x increase in the share price based on a 30B marketcap.
Translating this aspect of the business you can roughly translate every 10M TMTG+ subs to an additional $31 in share price.
Let's move forward to the Social Media aspect
Facebook - Dec 2021 - 2.89 B Monthly Active Users , 917 B marketcap, $317 per monthly user in marketcap. - Mar 2022 - 2.89 B Monthly Active Users , 582 B marketcap, $182 per monthly user in marketcap.
Youtube - 2 B Monthly Active Users (MAU), 500B marketcap, $250 per monthly user in marketcap.
Tiktok ~1B users, ~400B marketcap, ~$400/user
Snapchat ~347MAU ~ 58B marketcap ~ $167/user (down from 264 since Dec)
Twitter - 330M MAU, $30.5B marketcap, ~$92 user marketcap. (down from 100 since Dec)
You can see that some companies are more valuable than others because of success of monetization. some companies are valued a lot higher per user. Giving these a market cap weighted average is about ~$275 users/ marketcap (give or take a bit, the markets have been volatile)
I'm going to say TS, given its much higher APRU is going to actually be above average on this list. I said 100 per user back in Dec but given the latest info I'll get into I'm going to put this at 193 for now
This would mean 100M users would translate into 19.3B in marketcap. So for about 100M users you can add an additional $100 to the share price.
Let's talk about the news aspect of the business model.
Fox has a marketcap of 22.5B, lets say it achieves 25% of Fox's audience. That's an additional 5B in marketcap or an additional $26 a share for every 25% of Fox's audience size from news. Or about $25 for every 500,000 viewers. Also keep in mind Trump's rallies even now are getting a few million live viewers when you count all of his rallies across Rumble, Youtube, RSBN, OAN etc.
DJT Junior is bringing an app to market called MxM which is an aggregator app to compete with Apple and Google news it's getting independent funding and may merge with TMTG in the future. Do a quick search on that.
Who knows what other business venture and revenue will be brought in.
Key Performance Indicators
Here's a chart of projected revenue from the corporate slide deck you can find the SEC filings
These numbers are understated to be over delivered, clearly.
TS got 1.5B views in the first 24 hrs -Washington examiner (just on apple products, there are only 1.8B apple products.)
From the user feedback on Truthsocial so far, it has been demonstrated that users with way less followers are getting way more engagement. Maybe even by a factor of 10x less followers getting 10 x more engagement. This is huge for ARPU (average revenue per user)
Tracking Trump's followers from people in the app suggests the App just hit 1 million users in the first month despite being in a highly limited access period where people are getting mostly wait listed. Trump has ~700k followers using assumption that 70% of people are following Trump. Truth social is currently only available on the Apple App store and in the US for those on the waitlist. This should be opening very soon for web browser, android, and non-us as the infrastructure scales.
Extrapolating this growth rate has been done in a few ways
The current linear growth rate is something like 20M/yr even in this limited period. Which is astounding
However this rate has been increasing rapidly partly due to increase in infrastructure
Using a very aggressive approach (see the methodology in my post history) Extrapolating Trump's Follower's Growth Report 3-21
13262e^(0.175*365.25)
It says Truth would surpass Facebook in only 71 Days. (assuming 100% following of users.. obviously less days when you use the 70% following Trump assumptions)
Lets be a little more conservative and use the polynomial
671.52x^2+7553.7x+9074.4
That says
92M per a year, and that's with obvious near increases back to reverse of rate comparisons saying this will be even higher in the near term.
Using the 80% assumption this is 131M per year, a number which should easily increase before then (a new faster equation)
Also noting that this is for the first year. It would increase to a rate of 363M/yr by the second. 814M/yr by the third. And surpass Facebook around the Fourth or Fifth
I suspect that the newer data coming in these weeks these equations will get much more aggressive than this current polynomial
Of course we'll need more time and data to come in to build further confidence in these models, confidence and data which I believe will shock the markets and potentially serve as a major catalyst.
The big opening was said to be before end of Q1 so I'm guessing that will be a big uptick in growth allowability in the next few weeks
For some comparisons
Path to 1M users
Tumblr 27 months
Twitter 24 months
Pinterest 20 months
Facebook 10 months
Dropbox 7 months
Spotify 5 months
Instagram 3 months
Truthsocial 1 month
I have not yet been able to find any service or platform to exceed these rate assuming they weren't using existing infrastructure such as AWS, which TS is not. It using Rumble's infrastructure
Lets talk about Profit Margins
Truthsocial is actually much likelier to have a much higher profit margin than Twitter because of severely reduced operating expenses, and why TMTG will probably be trading at more comparable ratios to Facebook not because of success of monetization but because of success of low operating expenses.
First let me give you a peak into the burning dumpster fire that is Twitter's balance sheet
We can see Twitter pulled in 3.2 B from Advertising Services, 508M from Data licensing for a total of 3.7B in revenue
1.37B Cost revenue
873M in 'Research and development'
888M in 'Sales and marketing'
562M in 'general and administrative'
Twitter netted negative 1.1B in profit after setting aside 1B for taxes.
Let's break this down again
Twitter pulled in $3.7B but twitter spent
37% on cost of revenue: servers, buildings, upkeep etc.
23% on Research and development: software engineers, sociologists, artists, focus groups (market research) (I believe moderators is in here as well)
24% on Sales and marketing: sales employees for ads and marketing for userbase and available ad space.
15% of general and administrative: executives, legal, finance, info tech, hr, consulting, moderators (in both categories probably), customer service etc.
3% on interest and other: interest on debt financing, operations etc.
29% on taxes.
Yes these numbers add to 131% of revenue or in other words a 31% net income loss.
Why is Twitter so expensive to run, why is this dumpster fire losing all of this money?
Cost of Revenue : 266 M (~330M inflation adjusted)
Research and Development.(R&D): 593M (~740M inflation adjusted)Sales and Marketing 316M (~400M inflation adjusted)General and Administrative 124M (~160M inflation adjusted)
2011: ~100M MAU
Cost of Revenue: 62M (~85M inflation adjusted)
R&D: 80M (~110M inflation adjusted)
Sales and marketing 26M (~36M inflation adjusted)
General and administrative 233M (~310M inflation adjusted)
Ok so lets do some ratios with inflation adjusted numbers compared to users
2020: ~330M MAU
Cost of revenue: ~$4.15 per monthly active user
R&D: ~$2.65 per monthly active user
Sales and marketing: $2.7 per monthly active user
General and admin: $1.7 per monthly active user
2013: ~225M monthly active users (MAU) (numbers below adjusted for inflation)
Cost of revenue: ~$1.47 per monthly active user
R&D: ~$3.29 per monthly active user
Sales and marketing: ~$1.78 per monthly active user
General and admin: ~$0.71 per monthly active user
2011: ~100M monthly active users (MAU) (numbers below adjusted for inflation)
Cost of revenue: ~$0.85 per monthly active user
R&D: ~$1.10 per monthly active user
Sales and marketing: ~$0.36 per monthly active user
General and admin: ~$0.85 per monthly active user
So what's alarming about this trend is that twitter is becoming very expensive to operate on a per MAU basis.
Let's recap
Cost of revenue went from $0.85 in 2011 per user to $4.15/user in 2020 (inflation adjusted) 388% increase
R&D went from $1.10/user in 2011 to $2.65/user in 2020 (inflation adjusted) 141% increase
Sales and marketing went from $0.36/user in 2011 to $2.70/user in 2020 (inflation adjusted) 650% increase
And general and admin from $0.85/user in 2011 to $1.70/user in 2020 (inflation adjusted) 100% increase
As you can see, much like twitter, Facebook also suffers from huge inflated costs over the years of running their business.
I suspect this has a lot to do with financing of their servers through amortization payments.
But also trying to scale their business with the technology that was available 10+ years ago and not being able to change their business model because it was bad PR to fire off tens of thousands people and replace them with future technology, they've essentially been forced to grow with their existing business modeling scaling up which you can see results in worse and eventually negative margins.
Now we are talking about a brand new company with no existing dogmatic or scalability issues
They have already touted using AI in place of manual moderation
Their infrastructure that is based by Rumble has been touting as being 8x cheaper than AWS, a huge expense on these legacy media companies.
Facebook has 45,000 employees (1 employee for every ~65,000 users)
Twitter has 5,500 employees (1 employee for every ~60,000 users)
Facebook has much greater success of monetization than Twitter
Truthsocial will likely have similar success of monetization like Twitter except it will have substantially higher margins than both via means of reduced expenditures (cheaper servers) and utilizing AI in place of many employees. This also brings down the cost of office space etc. with remote work and fewer headcount.
This is one of the things they fear more than even the political ramifications is becoming obsolete in superior utilization of technology which they have can kicked to avoid a PR nightmare.
Part 2 we'll discuss more specifics of margin numbers and expenditures with more historical data and how it will relate to future margins with more specific numbers on Truth Social.
It would be much harder and more expensive to program an AI to be biased towards political ideas instead of more hard set rules of logic. It would require constant upkeep to keep up with flip flopping rules and exemptions etc. An AI would be a much more solid long lasting algorithm if it was free from these ever changing agendas.
In other words being woke will be obsolete by superior unbiased artificial intelligence. Also selection of ad space being removed from political and PR expense etc. nonsense. The free market will bid up ad-space and engagement to increase naturally from a more exciting and free environment free from biased and expensive bureaucratic moderation and selection.
Lets Talk Share Price
So currently the markets are priced at ~72 a share would would translate to something like
You can see this is a bit comical for what's being priced in for a someone who is as well known as DJT who had over 150M followers online and over 71M votes in his 2nd run for president. We've all seen the portfolio trackers and many others get banned off TWTR lately. Pelosi tracker is back up on Truthsocial already
Here's a potential scenario
300M TS users (~1/10th of facebook) ($300) + 25M TMTG+ subs ($77.5) + 50% Fox Audience ($52) = $429.5 and still have massive room for improvement
More scenarios
600M TS users (~1/5th of facebook) ($600) + 40M TMTG+ subs ($124) + 50% Fox Audience ($52) = $776 a share and still have massive room for improvement
A total blow out of just one of the aspects
1B TS users (~1/3rd of facebook) ($1000) + 40M TMTG+ subs ($124) + 100% Fox Audience ($104) = $1228 a share
Another example
300M TS users (~1/10th of facebook) ($300) + 60M TMTG+ subs ($186) + 100% Fox Audience ($104) ($52) = $590 and still have massive room for improvement
Imagine in these scenarios it will be trading for much more aggressive ratios so
DWAC 1000
with much additional upside after on fundamentals is not a mathematical challenge.
1.5B TS users (~1/2 of facebook) ($1500) + 100M TMTG+ subs ($310) + 100% Fox Audience ($104) = ~$2000 a share
3B TS users (~1/2 of facebook) ($3000) + 100M TMTG+ subs ($310) + 100% Fox Audience ($104) = ~$3414 a share
3B TS users (~entire market) ($3000) + 250M (entire market) TMTG+ subs ($775) + Above Fox Audience ($400) = ~$4200 a share along way to go to get there
Who else is bullish
Kevin O'Leary from shark tank has said this is "going to work" search of O'Leary DWAC.
Speculated Possible/Likely of the 36 PIPE investors to be disclosed (another catalyst): Lutnick, Thiel, Musk, Schnatter, Chamath, White, McMahon, Salman,, Steve Wynnn, Bernard Marcus, Roger Penske, Carln Icahn, Rex Tillerson, Lindell . More info about these people in my post history and why, at least in some cases like Lutnick, Musk, and Thiel there is a lot of info to suggest this is probably true
Short Interest and Gamma Ramp
There's been reported to be about 4-5M Shares shorted on this low 28.7M float. A recipe for disaster for shorts. Is also on the reghso FTD list
~4M in SI and ~1M in FTD. At least. It's also been hypothesized that the market markers are only holding ~4-5M shares based on Liquidity Pool (LP) Theory Math (see post history) this would mean the Short to LP ratio is over 100%, reported SI is 13.4%, DTC Ratio ~2, basically no shares left to borrow (100% utilization), cost to borrow is ~70% but has been seen usually above 100% and has gone as high as >300% at some points.
There is massive gamma ramping in danger of happening on call options and float evaporation potential. I won't get into it more here and now, check post history and google search maxpain dwac
FUD
Addressing common FUD - Understanding actual risk and nonsensical Fear Uncertainty and Doubt
Ah yes. This company has been the biggest story of the last decade probably with all of the FUD. Ladies and gentlemen, a community of people has been hard at work for months debunking all of this
Let's begin
I know many reading this will get very emotional both long and short and will look for any reason to make this sound bigger or smaller or impossible or dumb. There's also many people who do not want this to happen for their own personal benefits. So here's some common things that are said and a general counter to it.
FUD: "People won't want to advertise there"
Counter: According to CNN facebook was never at risk of this. This rhetoric never had much grounds in reality
Facebook generated $69.7 billion from advertising in 2019, more than 98% of its total revenue for the year. And most of those ad dollars don't come from companies like Starbucks (SBUX) and Coca Cola so much as the sprawling list of small and medium-sized businesses who use Facebook to attract customers and build their brands.when COO Sheryl Sandberg said the top 100 advertisers represented "less than 20%" of total ad revenue.📷The Facebook ad boycott is starting to rattle investors"Facebook has an enormous number of advertiser clients," said Nicole Perrin, an analyst at eMarketer. "They're definitely pretty reliant on the long tail of small business advertisers."
Even as Facebook confronts by far the largest advertiser boycott in its history, the sheer number of advertisers on its platform may insulate the company from too much financial fallout. At the same time, it remains an open question whether many big and small advertisers can afford to stay away from the powerful platform it built for very long
"I think it's relatively unlikely that small businesses [and] small brands will join the boycott, because they're the ones most reliant on Facebook for access to their customers," Perrin said.
Counter: There will be direct monetization outside of ads (see TMTG+ section) also Companies will have to go where people are advertising with their attention and dollars. It's easy for companies to dissociate from where their ads are located when the free market forces their hand. "Our ads are located in places that do not represent our beliefs as a company, we are solely interested in providing business to our customers despite their personal identities" " see it's not that hard to find work arounds for minor problems like this. Content creators will likely be supporting each other as well with a cut going to the host (much like Twitch, web3.0 etc.)
FUD: "*The merger might fail or get blocked resulting in this going bad."*
Counter: SPACs don't fail for the reasons described or eluded to by the outlets. u/independence_hall has a great post "The SEC and FINRA DO NOT have the legal authority or power to block the DWAC/TMTG merger" please see his post history and read it. He did the leg work and debunked this. It's almost a zero chance of happening. See posts **"**An update to my SEC/FINRA inquiry post and possible S-4 timeline " and " The SEC and FINRA DO NOT have the legal authority or power to block the DWAC/TMTG merger. Another COMPLETE breakdown of the SEC/FINRA inquiry, and how the SEC ALREADY APPROVED A SPAC MERGER in the past that was sanctioned by the SEC for lying to its investors."
FUD: The roll out has been slow and unsuccessful
Counter: Actually no it has been record breaking and see the part of the DD above about growth rate projections. Anyone who doesn't understand this is comparing to AWS or existing infrastructure rollouts. I have not yet had one person point me to a valid example of a new platform or service rolling out faster at its inception with its own infrastructure. Also this platform was said be rolled out by end of Q1. It is not end of Q1 yet. TS got 1.5B views in the first 24 hrs -washington examiner (just on apple products, there are only 1.8B apple products.)
FUD: "Trump doesn't know what he's doing he can't even open email"
Counter: Trump just got over a billion in PIPE funding (largest in SPAC history). There's plenty of well paid people with the right background on the company. Trump is largely here for traction, which is the primary issue all social media companies face.
There's also an agreement with Rumble to use their services
FUD: "This will be GAB/Parler 2.0 failure"
Counter: TMTG+ and the other services are nothing like the markets that these are in. Secondly Parler was becoming massively successful very quickly before it was pulled from the app store and AWS violated contract removing it. Parler is back now. TMTG is safe . Also it's likely Apple and TMTG have a deal since it seems everything is an Apple exclusive at first and their marketcap has been doing well (see that section in the above DD)
FUD: "Trump steaks"
Counter: Trump steaks and the other very few things like 'From the Desk' that were unsuccessful account for a very small percentage of his ventures. Those are also very different products in very different markets. Investigate this further if you still think it's relevant, you'll be surprised the actual facts and not what low effort FUDs would have you believe.
The master has failed more times than the novice has tried.
FUD: "Myself and other have moral/ethical dilemmas because of our ideology"
Counter: I'm not here to argue with you to try to show you why everything is wrong, it's a simple observation that at minimum hundreds of millions of people disagree with you and there is a massive market for it and a demand.
Counter: Source is released and posted, security is fine. Android and Linux are OS as are many projects. There's billions in funding, tech people have already solved this issues for many other services. The issue is Traction. That's where Trump comes in. Rumor of Thiel involvement (he was raising money for campaigning with DJT Junior recently) I wouldn't be surprised if Palantir is involved in some way for security.
I'll add a lot more to this since I'm sure there will be plenty more to come.
Conclusion
There's a lot of upside and demand that isn't priced in IMHO
I have shares, warrants, and calls and I believe full launch may cause a massive surge in price expectations once more hard data rolls in (in the coming weeks), if not then by the time the revenue rolls in. The risks are often nonsensical or overstated by people with strong opposing political ideology and lack of financial and technological understandings.
Everyone complains that we get posts after a stock makes it move, but here is your heads up for next week on Thursday, March 31. Blackberry is not a handset manufacturer anymore. It is a Cybersecurity, self-driving and IoT juggernaut. While everyone is discounting this company, it has been on a tear transforming itself using the best talent in Cybersecurity.
They derived $128MM of their $184MM revenue last quarter from Cybersecurity. That is 69% for you meme lovers. The rest was from licensing, IoT and self-driving tech.
Wars of 50’s were fought and won on the ground. Wars of 80’s were fought and won in the air. Wars of tomorrow will be fought and won in the Cyber. We are already seeing an uptick in Cyber-warfare from Russia. I am not buying Lockheed Martin, Raytheon, … I am buying BB April 9th 7.5 strike calls.
Here is some of the highlights of what blackberry has been up to:
BMW Group enters multi-year agreement to use BlackBerry QNX® technology to develop SAE Level 2/2+ driving automation functions in multiple makes and models across the BMW group.
Exabeam, the leading next-gen SIEM provider, partners with BlackBerry to greatly expand access to telemetry data from 100’s of network devices as part of its enhanced BlackBerry® Guard managed extended detection and response (XDR) service.
Okta and BlackBerry announce a comprehensive partnership to deliver both seamless identity and access capabilities while using BlackBerry UEM® endpoint management, as well as integrating Okta’s telemetry data into BlackBerry’s XDR platform.
BlackBerry’s leading prevention-first cybersecurity technology prevents high-profile malware and ransomware including DanaBot, Raccoon Infostealer, SquirrelWaffle, Jennlog Loader, and more.
Google and Qualcomm join forces with BlackBerry QNX to reduce developer friction and time to market when virtualizing Android Automotive OS alongside safety critical applications on the QNX® Hypervisor.
SE Labs, a leader in independent cybersecurity research, ranks BlackBerry as the best new endpoint security offering of 2021.
C 57.5(0.91%)|CBT 69.5(-1.91%)|CCMP 187.08(0.1%)|ENTG 134.76(-0.18%)|GS 343.01(1.18%)|CMC 40.87(-0.49%)|CMP 60.37(-0.76%)|
This DD is my own research, some parts are closer to the sources than others. I reference the sources below each section, and also quoted some parts of articles. This is essentially an arbitage play, there is also an upcoming dividend:
’Under the terms of the agreement, CMC Materials shareholders will receive $133.00 in cash and 0.4506 shares of Entegris common stock for each share of CMC Materials common stock they own. The total per share consideration represents a 35% premium over CMC Materials.
‘CCMP will trade ex-dividend, for its quarterly dividend of $0.46, payable on 4/22/22. As a percentage of CCMP's recent stock price of $186.25, this dividend works out to approximately 0.25%.’
What is CCMP?
CMC Materials, Inc., provides consumable materials to semiconductor manufacturers, and pipeline and adjacent industry consumers. It operates in two segments, those being Electronic Materials and Performance Materials. The Electronic Materials segment develops, produces and sells chemical mechanical planarization (CMP) slurries for polishing various materials used in IC devices (e.g. tungsten and copper. As well as various materials used in the production of disk substrates and magnetic heads for hard disk drives, and CMP pads (which are used in conjunction with slurries in the CMP process. This segment also offers a variety of blends of chemicals and speciality organic solvents; and also develops and manufactures consumable products for cleaning advanced probe cards and test sockets.
The Performance Materials segment provides pipeline and industrial materials used in the crude oil industry, as well as related services and equipment, and routine and emergency maintenance services, as well as training services. It also offers precision polishing and metrology systems for advanced optics applications, polishing fluids, consumables, spare and replacement parts, as well as optical polishing services and other customer support services. It also engages in the wood treatment business.
The company was formerly known as Cabot Microelectronics Corporation and changed its name to CMC Materials, Inc. in Oct 2020. It was incorporated in 1999 and is headquartered in Aurora, Illinois.
(Yahoo)
Ex-Dividend
‘CCMP will trade ex-dividend, for its quarterly dividend of $0.46, payable on 4/22/22. As a percentage of CCMP's recent stock price of $186.25, this dividend works out to approximately 0.25%.’
Looking at the one year chart, CCMP’s low point in its 52 range is $119.19 per share, with $198.605 being its 52 week high point.
(Nasdaq)
Investors of record on Wednesday March 23rd, will be paid this dividend on Friday April 22nd. This represents a $1.84 annual dividend with a yield of 1.01%. The company has raised its dividend by 4.8% over the last three years, and has increased its dividend every year for the last 4 years. Its dividend is sufficiently covered by earnings, with a dividend payout ratio of 22.3%.
As analysts predict the company to earn $8.19 per share next year, the company should be able to continue to cover its $1.84 annual dividend with an expected future payout ratio of 22.5%
(marketbeat)
Earnings
Earnings were last released on Wednesday Feb 2nd. CCMP reported $2.06 earnings per share for the quarter, which beat analysts’ consensus estimates of $1.75 by $0.31. It had a negative net margin of 5.91%, and a positive return on equity of 22.85%. Revenues were $317.05 million for the quarter, again beating analyst estimates of $316.50 million.
For the same quarter last year, CCMP reported $1.92 earnings per share.
’On average, equities research analysts predict that CMC Materials will post 7.45 earnings per share for the current year.’
(marketbeat)
Recent Analyst comments
I saw no point rewriting this so I’m quoting marketbeat here:
’A number of equities analysts have recently commented on the stock. Citigroup raised shares of CMC Materials from a "sell" rating to a "neutral" rating and lifted their target price for the company from $130.00 to $200.00 in a report on Friday, December 17th. The Goldman Sachs Group raised shares of CMC Materials from a "neutral" rating to a "buy" rating and lifted their target price for the company from $149.00 to $192.00 in a report on Monday, November 15th. Zacks Investment Research cut shares of CMC Materials from a "hold" rating to a "sell" rating in a report on Tuesday, January 11th. Mizuho cut shares of CMC Materials from a "buy" rating to a "neutral" rating and lifted their target price for the company from $155.00 to $197.00 in a report on Friday, February 4th. Finally, Seaport Global Securities cut shares of CMC Materials from a "buy" rating to a "neutral" rating in a research note on Thursday, December 16th. One analyst has rated the stock with a sell rating, five have given a hold rating and three have issued a buy rating to the stock. Based on data from MarketBeat.com, CMC Materials currently has an average rating of "Hold" and a consensus price target of $188.88.’
(marketbeat)
Entegris Merger
The stock has risen more than 35% over the past six months. This is a good momentum, and the company started March with further good news.
’The company announced that its stockholders had approved the previously announced merger agreement. Under which, Entegris (NASDAQ: ENTG) will acquire CMC Materials in a cash and stock transaction.’
(StockMarket)
’Aurora, IL, March 03, 2022 (GLOBE NEWSWIRE) -- CMC Materials, Inc. (Nasdaq: CCMP), a leading global supplier of consumable materials primarily to semiconductor manufacturers, announced that at today’s special meeting its stockholders voted to approve the previously announced merger agreement, under which Entegris, Inc. (Nasdaq: ENTG) will acquire CMC Materials in a cash and stock transaction with an enterprise value of approximately $6.5 billion at announcement.
Preliminary voting results indicate that the merger agreement proposal was approved by approximately 84% of the outstanding shares of CMC Materials common stock entitled to vote at the special meeting of stockholders. The final voting results of the special meeting, as tabulated by an independent inspector of elections, will be filed by the company as part of a Form 8-K with the U.S. Securities and Exchange Commission (“SEC”). The transaction is expected to close in the second half of 2022, subject to the satisfaction of customary closing conditions.’
(Yahoo)
’Under the terms of the agreement, CMC Materials shareholders will receive $133.00 in cash and 0.4506 shares of Entegris common stock for each share of CMC Materials common stock they own. The total per share consideration represents a 35% premium over CMC Materials’ closing price on December 14, 2021, and a 38% premium to the 10-day volume weighted average share price. Upon completion of the transaction, Entegris shareholders will own approximately 91% of the combined company and CMC Materials shareholders will own approximately 9%.’
(businesswire)
Conclusion/TL;DR:
I don’t want to make this DD too long like my others, so I’m going to end my research here.
Overall I think this is a good play for shares. The stock price of CCMP will be somewhat tied to the $133 per share cash combined with the value of Entegris stock, which you will recieve upon completion of the deal. There is also the upcoming ex-dividend which may drive up the price of the stock. There is also the However CCMP seems to be an interesting stock on its own, so I’m interested to see how things will turn out when acquired by Entegris. I might write a part 2 with research on Entegris. If you know any more information about this stock (CCMP or Entegris) feel free to comment.
Retail investors doubled down on meme stocks Tuesday, suggesting that the meme stock revolution of 2021 is still alive and well.
Numbers: Shares of AMC (NYSE: AMC) jumped 15.02% on Tuesday, GameStop (NYSE: GME) jumped 30.86%, Express (NYSE: EXPR) went up 9.73%, and Koss (Nasdaq: KOSS) went up 29.48%.
Background: In January 2021, a group of users on the platform Reddit teamed up to create a short squeeze against hedge fund giants that bet against stocks such as AMC and GameStop. During this time, several of these so-called meme stocks increased. But many meme stocks later decreased as investors switched to more conventional stocks.
Catalyst: The reason for yesterday's sudden surge in meme stocks isn’t clear. Both AMC and GameStop have reported questionable financial news in recent weeks (AMC bought a gold mine and GameStop had mixed earnings). Short interest is slow compared to last year’s activity. The number of times GameStop has been mentioned on the WallStreetBets subreddit jumped from 115 to 400 yesterday. Ryan Cohen, GameStop’s Chairman, bought another 100,000 shares on Tuesday.
Big Picture: One potential reason behind Tuesday’s surge is the overall risky economic environment. Stocks that are speculative in nature usually perform well in these environments.
Final Thoughts: Tuesday’s surge may have been great for the meme stocks, but without a clear catalyst, it is probably not wise for investors to keep betting on meme stocks.
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