Advertisements



GAME Stock: 6 Reasons Why Engine Gaming and Media Investors Are Feeling Thankful Today

InvestorPlace - Stock Market News, Stock Advice & Trading Tips Engine Gaming and Media (GAME) stock is on the move today as investors celebrate positive fiscal Q4 2021 earnings results. The post GAME Stock: 6 Reasons Why Engine Gaming and Media Investors Are Feeling Thankful Today appeared first on InvestorPlace. More From InvestorPlace Stock Prodigy Who Found NIO at $2… Says Buy THIS Now Man Who Called Black Monday: “Prepare Now.” #1 EV Stock Still Flying Under the Radar Interested in Crypto? Read This First........»»

Category: topSource: investorplaceNov 24th, 2021

If You Invested $1000 in Electronic Arts a Decade Ago, This is How Much It"d Be Worth Now

Holding on to popular or trending stocks for the long-term can make your portfolio a winner. For most investors, how much a stock's price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.Another thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to tech giants and popular consumer-facing stocks.What if you'd invested in Electronic Arts (EA) ten years ago? It may not have been easy to hold on to EA for all that time, but if you did, how much would your investment be worth today?Electronic Arts' Business In-DepthWith that in mind, let's take a look at Electronic Arts' main business drivers. Headquartered in Redwood City, CA, Electronic Arts is a leading developer, marketer, publisher and distributor of interactive games (video game software and content).Electronic Arts, popularly known as EA, distributes its gaming content and services through multiple distribution channels as well as directly to consumers (online and wirelessly) through its online portals — Origin and Play4Free.EA games can be played on video consoles, personal computers, mobile devices, tablets and electronic readers. The company generates revenues from the sale of disk-based video game products (known as packaged goods), downloadable contents (DLCs), subscription, micro-transactions and advertising.EA generated revenues of $5.62 billion in fiscal 2021, of which live services and other revenues contributed 74% and the remaining were generated from packaged goods and full game downloads.Net bookings for fiscal 2021 was $6.19 billion, up 15% year over year, and over $600 million above original expectations.EA delivered 13 new games in fiscal year 2021, and welcomed more than 42 million new players to its network of more than 500 million unique accounts.The company operates in three divisions — EA Studios, Maxis and EA Mobile. EA Studios includes DICE (Sweden), EA Canada (Canada), Tiburon (the United States), BioWare (Canada and the United States) and Visceral (the United States).EA faces substantial competition from console and personal computer game publishers and diversified media companies that include Sony, Microsoft, Nintendo, Activision Blizzard, Take-Two Interactive and Ubisoft. In the mobile and social gaming market, the company competes with Zynga.Bottom LineWhile anyone can invest, building a lucrative investment portfolio takes research, patience, and a little bit of risk. If you had invested in Electronic Arts ten years ago, you're probably feeling pretty good about your investment today.According to our calculations, a $1000 investment made in October 2011 would be worth $5,789.59, or a gain of 478.96%, as of October 20, 2021, and this return excludes dividends but includes price increases.The S&P 500 rose 273.56% and the price of gold increased 4.87% over the same time frame in comparison.Going forward, analysts are expecting more upside for EA. EA’s digital and live services revenues are expected to gain from portfolio strength on the back of franchises including Apex Legends, FIFA, Madden NFL and Star Wars. EA SPORTS titles and Battlefield are some of its biggest franchises driving active player base. Moreover, EA has a strong slate of game releases for the rest of fiscal 2022 that are likely to boost its top-line growth. The availability of EA SPORTS Madden NFL 22 and Lost in Random besides the upcoming launch of EA SPORTS FIFA 22 is expected to be a key growth driver. EA continues to benefit from spike in demand for video games due to coronavirus-induced social distancing norms. Shares have outperformed the industry year to date. However, intensifying competition from Activision and Take-Two Interactive is a significant headwind. The stock is up 7.88% over the past four weeks, and no earnings estimate has gone lower in the past two months, compared to 3 higher, for fiscal 2021. The consensus estimate has moved up as well. Zacks’ Top Picks to Cash in on Artificial Intelligence This world-changing technology is projected to generate $100s of billions by 2025. From self-driving cars to consumer data analysis, people are relying on machines more than we ever have before. Now is the time to capitalize on the 4th Industrial Revolution. Zacks’ urgent special report reveals 6 AI picks investors need to know about today.See 6 Artificial Intelligence Stocks With Extreme Upside Potential>>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Electronic Arts Inc. (EA): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksOct 20th, 2021

How ‘Subscribe to Me’ Became the Future of Work

Creators are bumping up against the limits of the platforms they use In August, Savannah’s entire monthly income was at stake. OnlyFans, the social media platform where she built her career, making an average of $2,000 a month from subscribers, had just announced it would be removing content like hers from the site. But there was little she could do about it. She remembers thinking: “OK, well, this is another Thursday, I might as well finish my Chick-Fil-A, and I’m just gonna chill here and wait for us to get some sort of response.” Savannah, 24, is part of a vibrant, supportive community of online sex workers that underwrite OnlyFans’s considerable financial success; it’s now valued at over $1 billion. But in a move that may foreshadow changes to come, that community was shaken when OnlyFans announced it would be banning explicit content on the site. “The sky falls on OnlyFans, like, every three or four months,” Savannah says, wryly. [time-brightcove not-tgx=”true”] She could’ve gotten a more standard job when she graduated from college in 2020 with a business degree—maybe at a bank, as a mortgage loan officer. But while career-hunting, she was working three part-time jobs and her boyfriend at the time suggested trying out OnlyFans. She opened an account in January 2020, posting sassy videos and photos that showed off her passion for Star Wars cosplay and her cheeky sense of humor to attract subscribers. “It was nerve-wracking,” Savannah admits. At first, the subscribers just trickled in; she made $80 that month. Then the pandemic lockdowns started, and Savannah’s online star began to rise. “It was an extreme case of right place, right time,” she says. “Everyone was suddenly locked inside. And they were horny. And it just all came together.” By September 2020, she had earned enough money to buy her own house—a goal that had always seemed elusive with a traditional career path. “I never, ever thought that I would be stable enough to buy a house, period, in my lifetime,” she says. That sense of stability was put to the test by the new August policy—briefly. OnlyFans backtracked just days later. For many, online sex work is easy to ignore or view as the internet’s titillating sideshow. Historically, though, the conditions of sex work serve as an indicator of the health of a society, and the inconclusive OnlyFans incident could predict the future of the growing digital creator economy and its workers. Annie Flanagan for TIME“Not only has it absolutely changed the trajectory of my life forever, but I have fun, I’m my own boss,” says Savannah. Savannah considers herself half sex worker and half “online creator,” a burgeoning and nebulous category of workers who have turned to online platforms to profit off their talents and speak to niche audiences. But the creator economy that took off around 2011 with YouTube has evolved as creators seek autonomy over their intellectual property and freedom from brand sponsorships and social media restrictions. Writers, gamers, academics, sex workers, chefs, athletes, artists: anyone with a point of view, or a video to share, has flocked to sites like Twitch, OnlyFans, Patreon and Substack in hopes of selling their skills directly to their fans. A September study from the Influencer Marketing Factory estimates some 50 million people around the world participate in this economy, broadly—that’s a third the size of the entire U.S. workforce. The study valued the creator market north of $100 billion in 2021. Direct subscription creators are a fraction of that, but a rapidly growing one. There are over a million creators on OnlyFans; streaming platform Twitch boasts over 8 million active streamers; Patreon, which hosts pay-to-view visual and written content, says it has over 200,000 active accounts. And the money generated by this new class keep going up, with OnlyFans announcing it has facilitated over $3 billion in payouts to accounts since their founding five years ago. Patreon says its creator accounts have racked up over $2 billion. Twitch’s in-app purchases neared $200 million in the first half of 2021 alone. Creators skew Millennial and Gen Z; digital natives are, after all, more prepared to capitalize on and take risks online. One study from research firm PSFK suggested that over 50% of Gen Z Americans are interested in becoming an “influencer” as a career. But some of the most successful subscription creators—historian Heather Cox Richardson, musician Amanda Palmer, photographer Brandon Stanton, and model Blac Chyna—are in their 30s or older, and were well established in their careers before selling their skills online, a fact that lends the subscription creator economy more credence. These days, Savannah—who goes by Savannah Solo on her Twitter, Instagram, TikTok and OnlyFans pages—counts hundreds of thousands of subscribers to her public profiles, and 6,500 paying subscribers to her more risqué content on OnlyFans. She doesn’t want to stop. “Not only has it absolutely changed the trajectory of my life forever, but I have fun, I’m my own boss, I wake up and I put on makeup and I wear a stupid costume and make fun content. You can decide if you want to be a persona—or if you just want to be yourself,” she says. But, as she has learned in August, the reality of a creator career is more complicated. Annie Flanagan for TIMESavannah looks through OnlyFans messages while laying at home on Oct. 18. The problem with platforms The job title “creator” is a new invention, born in the past decade thanks to the rise of self-publishing opportunities. First there was YouTube, the ür-influencer platform. Then came Facebook, Twitter and Instagram. These web2 behemoths offered anyone the ability to build a fanbase with little more than an internet connection (and, for the most successful, access to a way to photograph or video themselves). At first, little money was transferred into the hands of the creators; success in the form of wide viewership was a badge of honor, not a moneymaking scheme. That changed with the rise of models in which creators received a cut of advertising associated with their content (like pre-roll video ads on YouTube) and sponsored content and ambassadorship programs (like many of Instagram’s influencer programs). This kept content free for fans while still paying the creators—and it’s the model that still dominates the market. But positioning image-conscious brands in between fans and creators who value authenticity is not always a natural fit. Brands drop creators when they post something the brand doesn’t like. Creators lose autonomy when they spend all their time crafting sponsored content. Enter the paid social media model, in which audiences can contribute directly to their favorite creators. “From the creators’ point of view, it gives them more control and empowerment,” says OnlyFans CEO and founder Tim Stokely, about the potential for direct-to-creator paid social media to be the economic engine of the online future. The company is famous for featuring sex worker creators like Savannah, but Stokely is pushing the platform’s PG accounts, where users can subscribe to a chef’s cooking videos or a trainer’s workouts. Read More: Why OnlyFans Suddenly Reversed its Decision to Ban Sexual Content Twitch was early to this game, launching in 2011. “The digital patronage model we see popping up today in other iterations exists because of Twitch’s early entry in and focus on the creator economy,” says Mike Minton, Vice President of Monetization at Twitch. Twitch prefers to consider itself a “service” rather than a platform: it serves creators with access to audiences and monetizes their viewership, and serves fans by making it easy to watch and contribute. But it’s not all profit for creators. Hidden in the slick appeal of be-your-own-boss social media entrepreneurialism is the role of the platforms themselves, and sticky questions of ownership. Twitch, for instance, provides the necessary infrastructure for popular gamers to stream hours of high-resolution content to mass audiences of live viewers. But it also takes a 50% cut of any subscriptions. OnlyFans says the 30% it takes helps offset the costs of the security and privacy features that adult content in particular requires. Patreon takes from 5 to 12%, depending on your plan; Substack takes 10%, minus processing fees. Consummate middlemen, these companies have created low barriers to entry while still gatekeeping, at least financially. “There’s a history of artists being taken advantage of, and artists have to keep criticizing and keep skepticism at a high level,” says Jack Conte, CEO of Patreon. “I think that’s mission critical. Artists have to be educated, and choose wisely and watch platforms carefully.” Patreon, for its part, offers its users full access to their email lists in an attempt to offer greater control over their audience relationships. Patreon has had its share of controversy: a 2018 kerfuffle surrounded their choice to ban certain politically-extreme voices from the platform; payment snafus and hikes in processing fees have ruffled feathers; and their current content policies exclude sexually explicit work, to the frustration of some. The company is eager to try to keep up with creator-favored trends, however, announcing plans to integrate crypto payments and considering developing “creator coins,” and developing a native video player to more directly compete with YouTube. Stokely doesn’t try to promise financial stability or freedom to OnlyFans’ million-plus creators, especially given the complications of banking regulations (on which the company blamed the brief August ban of sexual content). He knows that change is inevitable, but he does promise one thing: OnlyFans will not become “littered with paid posts and adverts” like the free platforms. Annie Flanagan for TIME“I wake up and I put on makeup and I wear a stupid costume and make fun content. You can decide if you want to be a persona—or if you just want to be yourself,” Savannah says. Navigating an unsteady landscape Writer and musician Amanda Palmer, 45, is intimately acquainted with the challenges of creative autonomy. Palmer, the frontwoman of indie rock duo the Dresden Dolls, extricated herself from an album deal a decade ago, choosing to embrace independence—with all its financial risks—and gather income from her fans directly. “There’s been a general shift in consciousness, that people are no longer scratching their heads when an artist or a creator comes to you directly and says, Hey, I need 10 bucks,” she says. “You’re seeing it in right wing podcasting. And you’re seeing it in feminist journalism on Substack. And you’re seeing it with musicians and gamers on Patreon, and you’re seeing it with porn stars on OnlyFans.” Palmer started a Patreon in 2015, where she now posts bits of music, videos and blog posts to 12,000 paying subscribers. The direct, monetized line of communication with her fans has meant she could weather the pandemic storm—when she couldn’t play live concerts—using honesty and openness in the content she shares as bartering coin for their cash. She says she has made over $5 million in subscriptions to support her creative endeavors, although her net profit mostly just pays rent and living expenses. Still, it has been an effective solution to the conundrum of monetizing fame and artwork for a niche audience. Read More: The Livestream Show Will Go On. How COVID Has Changed Live Music—Forever Palmer’s experience with Patreon is a prime use-case for the company: a non-major artist finds financial freedom through direct-to-consumer content sharing. “Because of what’s happened over the last 10 years, there’s now hundreds of millions of creative people who identify as creators, putting their work online and already making a lot of money and want to be paid and want to build businesses,” Conte says. “Patreon is tiny; compared to the amount of creators in the world, we’re a speck.” But with $2 billion in payouts over the years, it’s proved to be a meaningful speck for a collection of creators. Conte says that about half the money that Patreon processes goes to creators who are making between $1,000 and $10,000 per month. “It’s not Taylor Swift rich, it’s not Rihanna rich. It’s a middle class of creativity: a whole new world of creators that are being enabled by this,” he says. It’s a group like Palmer: people who have a specific viewpoint, a built-in audience and an effective grasp on how to optimize their dynamic with fans. Still, even Palmer, who has “very warm feelings” about Patreon, recognizes that it can’t be trusted forever. “I’ve been ringing the warning bells for years about how dangerous it is to get into bed with a for profit company, and use them as the only avenue to reach your audience, right? Because it is dangerous, because at any moment, Facebook can take that away from you, at any moment, Patreon could sell up to Facebook and decide to change all of the rules of engagement. I really hope that doesn’t happen. But there are no guarantees in this dog eat dog tech world,” she says. “In order to protect myself, I always keep a lot of phone lines open with my community.” Annie Flanagan for TIMESavannah looks through photos with her assistant Cay. Healthy skepticism, and solidarity In her Instagram photos, Jahara Jayde doesn’t look real: technicolor eyes, luminous, airbrushed skin, ears elongated into elven tips. In her five-plus-hour Twitch streams every evening, though, she’s a bit more human, video chatting in real time with her thousand-plus viewers and slurping noodles from an unseen bowl as she plays Final Fantasy XIV through her dinnertime. When she streams, it’s just her and her subscribers. But she has discovered how vital it is to have a community of creators in this business, too. Twitch averages nearly 3 million concurrent viewers; in 2020, people watched nearly 20 billion hours of content on the site. By nature of its freewheeling live video DNA, it’s a place that is hard to regulate and populated by a wide array of characters. “I deal with racism on all of the platforms,” says Jahara, a 30-year-old BIPOC woman, citing in particular a recent influx of “hate raids” targeting BIPOC and LGBTQ+ creators on Twitch. Some creators even led a day-long streaming boycott to draw attention to the issue. Twitch has had to regulate the use of certain words and emotes (their version of custom emojis) in user chats in order to limit problematic language and content. Because of—and despite—that, Jahara has built a keenly supportive, tight-knit community that is expanding the definition of what it means to be a gamer or a creator, and who gets rewarded for the work. She’s a member of The Noir Network, a collective of Black femmes who work in content creation and help each other navigate the often-confusing Wild West of digital work, one that she is committed to continuing with. She loves the work, she just wants to make it better. Read More: The Metaverse Has Already Arrived. Here’s What That Actually Means Jahara didn’t mean to become a full-time gaming streamer when she first tried out Twitch in August 2020; she was already a business analyst with a side gig as a Japanese tutor, making use of her college degree. But soon she was gaining steam with eager subscribers: she got 300 in a month, more than enough to start monetizing her streams. “I was like, Oh, maybe I could be good at this,” she says over the phone from her home in Arizona. After just four months on Twitch, Jahara quit her day job. These days, thanks to Twitch’s subscription system, she brings in about $2,000 a month. With her tutoring clients, who she picked up because of her Twitch, she’s now matching her prior income. “And it’s awesome, because it’s doing the two things that I absolutely adore,” she says. “Ever since I was a little kid, my dad used to bring me into his room and talk to me about how I should work for myself, and the entrepreneurial spirit,” she says. She surprised herself by being able to take his advice. She has the freedom to be herself professionally, the flexibility to take care of her four-year-old daughter in the mornings before preschool, and the hope that her fiancé will eventually be able to leave his job as a manual laborer to support her online presence full time. (He already takes and edits all her photos, and does her marketing.) To her, it feels good to be a part of something. “I get a lot of messages, parents and teens and kids that tell me, like, ‘My daughter saw your photos, and her friends told her that she couldn’t copy that character because it’s not the same color as her, but now she’s excited to do it,” Jahara says. “People tell me that they feel more comfortable, they feel represented and they feel seen just by being able to see my face in the space. It wasn’t something that I expected when I set out for it. But it’s something that definitely keeps me going every day.” It’s networks like that one that have helped organize and provide a modicum of power to creators who are learning as they go. Longtime adult performer Alana Evans, 45, has an inside view of how this works; as president of the Adult Performance Artists Guild, she has helped hundreds of performers navigate issues with tech platforms including Instagram, Tiktok, and, of course, OnlyFans. “I was seeing hundreds of performers lose their pages, for very obscure reasons; you would be given an email that had vague reasons as to why maybe you were deleted, and they were absorbing all of their money,” she says. She and her organization have been able to help many rehabilitate their accounts. But these days she preaches the gospel of diversification, and of making sure that performers do their due diligence about who owns and profits from the platforms they share on. Beyond that, Evans has her sights set on the big picture: working through legal avenues to classify anti-sex-work restrictions, like those set by payment companies, as “occupational discrimination.” It’s only once they deal with the banking side of things, Evans explains, that online sex workers will be able to participate in the creator economy fully and safely. Read More: U.S. Workers Are Realizing It’s the Perfect Time to Go on Strike Creators in the music industry are trying to find power by banding together, too. By day, David Turner, 29, is a program manager at the music streaming service SoundCloud. By night, he publishes a weekly newsletter, called Penny Fractions, that goes into the nitty-gritty of the streaming industry; it’s been his pet project for over four years now. After publishing with Patreon for a few years, Turner realized only a small segment of the most popular creators were truly generating the income the platform touted. “They don’t care about me,” he says over the phone from Brooklyn. Now, Turner hosts his newsletter on an independent service and serves on the board of Ampled, a music services co-op whose tagline is “Own Your Creative Freedom.” Collectivization, as Turner sees it, is the safest way for this next generation to protect themselves from the predations of the market. Other decentralized social platforms like Mastodon and Diaspora, music streaming services like Corite and Resonate and sex-worker-backed sites like PocketStars have popped up to provide alternatives to the more mainstream options. Their selling point: bigger payouts to creators, and opportunities for creators to invest in the platforms themselves. But mass adoption has been slow. If the calling card of the independent platform is their bottom-up approach, that is also their limiting factor. By nature, they are scrappier, less funded and less likely to be able to reach the wide audiences that the top user-friendly sites have already monopolized. Annie Flanagan for TIMESavannah dresses up in Star Wars cosplay as Padmé. The future for creators When OnlyFans made its policy change in August, collectivization is what got sex workers through. Alana Evans helped lead the charge. To Evans, who has been in the industry for decades, it was just the latest iteration of exploitation from more powerful overlords. She saw her community speaking up against the change—particularly on Twitter, where sex workers and performers quickly renounced the policy and began proactively publicizing their accounts on other, friendlier platforms. To her surprise, their vocal opposition worked and OnlyFans moved quickly to find a solution. But Evans knows that this latest golden era of online work is already ending. “The writing is on the wall,” she says. Even successful creators like Savannah have begun actively promoting accounts on alternate platforms like PocketStars and Fansly. They know no solution, and no single site, will be forever. “The advice I’ve been given is to expect it all to crumble, and to have to rebuild again,” Savannah says. That advice isn’t specific to OnlyFans; it’s echoed by Amanda Palmer about Patreon, and Jahara about Twitch. As platforms inevitably seek a better bottom line, the creator workforce has no choice but to trust the tech companies will do right by them. In the meantime, they’re taking a note from the labor movement that has risen up in other industries this year: solidarity works......»»

Category: topSource: timeDec 1st, 2021

Generation PMCA 3Q21 Commentary: Right Place Wrong Time

Generation PMCA commentary for the third quarter ended September 2021, titled, “Right Place Wrong Time.” Q3 2021 hedge fund letters, conferences and more Right Place Wrong Time Being in the wrong place at the right time is usually just an inconvenience or in market parlance a missed opportunity. In the wrong place at the wrong […] Generation PMCA commentary for the third quarter ended September 2021, titled, “Right Place Wrong Time.” if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Right Place Wrong Time Being in the wrong place at the right time is usually just an inconvenience or in market parlance a missed opportunity. In the wrong place at the wrong time, you're likely a victim of poor circumstances. For an investor, a poor selection coupled with an unforeseen shock. The opposite—right place at the right time—implies luck. Right place at the wrong time, according to a certain someone’s significant other, means she’s always waiting for someone who’s invariably late. More than a mere inconvenience. While some of our equity selections have recently been operating on their own schedules, and our timing appears off, we still feel we’re in the right places. The adage ‘better late than never’ comes to mind. Fund manager Bruce Berkowitz once quipped that he suffered from premature accumulation. We have felt similarly over the last few months because many of our positions have either lagged or declined outright despite fundamentals that we believe remain intact. Of course, when our positions are zigging while the markets are zagging, we reexamine our assumptions to ensure we are correctly positioned. We believe that only one of our securities suffered permanent impairment relative to our initial appraisal and we realized a loss because we saw better opportunities for the proceeds. We remain confident in our assessments of our other holdings. They trade well below our estimated FMVs (Fair Market Values) implying substantial upside potential. Though we don’t know when the market will come to its senses and see what we see. Regarding the market in general, we feel like the little boy that cried correction. Though he kept calling for it, and was eventually correct, his too frequent calls were ignored. The S&P 500 is at a ceiling in our TRACTM work. From this level, it’s either moving on to the next ceiling, about 30% higher, or returning to its recent floor, over 20% lower. Neither event must take place all at once. However, with the market’s FMV currently lower, the likelihood of a material rise from today’s levels is low. We expect sideways or downward price action for an extended period until underlying values catch up. And, with the absence of the typical wall of worry, any exogenous shock could lead to a rapid decline. Global Traffic Jam Speaking of poor timing, the concept of Just-in-Time inventories, designed to promote efficiencies, contributed to inefficiencies over the last year. Everyone encountered an IKEA (‘Swedish for out of stock’) problem. Demand has simply overwhelmed supply. With the economy essentially closed in the spring of last year, production was scaled back (i.e., a supply squeeze) only to require a substantial ramp-up over the last year as demand surged from massive government stimulus and vaccines which allowed for widespread reopening and a leap in consumer confidence. But this about-face created a logjam. Delivery times have been near record highs which has fueled higher costs and, in turn, increased prices. In the meantime, companies are adapting, finding other sources of supplies, different means of transportation, and implementing productivity enhancing measures. While this does not occur overnight, the congestion will dissipate. The market must believe this is all transitory too because it hasn’t impacted the overall indexes. This, despite staffing shortages which, for example, has caused FedEx to reroute packages and airlines to cancel flights. Companies have had to boost pay for overtime and raise wages to attract new employees. There has been a record backlog of ships at ports because of staffing constraints and calls for the U.S. National Guard to loan terminals which would assist in moving goods. Rolling blackouts due to power shortages in China led to production slowdowns. For diversification purposes, some companies moved a portion of their manufacturing to Vietnam, only to have to cope with Covid related shutdowns. Despite these cost pressures, demand has been overpowering because profit margins remain at all-time highs. The usual semiconductor deficit is a result of excess demand, spurred by work-from-home and advances in digitalization which increased the need for electronic components at a time when supply hasn’t been sufficient to fulfill needs. Since the length of time between ordering a semiconductor chip and taking delivery rose to a record high, nearly double the norm, new plants are being built, many in the U.S. being subsidized by the government. Nearly 30 new fabs will be under construction shortly in various jurisdictions, which is more than opened in the last 5 years combined. Looks like an eventual overshoot. Time Heals All The pendulum will swing in the other direction. The scarcity issues facing us now will beget surpluses. Look no further than the PPE shortages at the outset of the pandemic which were quickly met by increased production ultimately creating surpluses, even with demand still high. A capital goods spending cycle is clearly upon us as companies expand production which also bodes well for continued economic growth. Some of the issues will immediately halt. How about the crazy story of Tapestry (maker of Coach purses and other brands) announcing it’ll stop destroying returned product? Apparently, employees were hacking up merchandise and tossing it. That’s one way of creating a supply constraint, and a PR nightmare. Used car prices hit another record high—the normal ebb and flow gone. Prices have been leaping higher. But with production of new cars expected to be back to near normal over the next several months, used car prices should moderate. Commodity prices have surged too as inventories haven’t been sufficient to keep up with demand. However, nothing cures scarcity better than higher prices which encourages production. These constraints have pushed U.S. inflation to the highest since the mid '90s. While some argue it’s a monetary phenomenon, as central banks have poured money into the system, it appears to us more related to the overall supply/demand imbalances. A step-up in demand for raw materials and labour, when ports became congested, simultaneously increased shipping costs, and led to other logistical bottlenecks, all of which combined to ignite prices. Housing prices have also lifted materially. Single-family home prices in the U.S. have risen by a record 19.7% in the last year because of ever-growing demand (spurred by demographics, the shift to work-from-home, and low rates) and, perhaps more importantly, a dearth of listings. While construction costs are up, house prices have outpaced so new builds will in due course help level off prices. That’ll be the Economics 101 feedback loop between prices/costs and supply/demand at work. Core PCE, the broadest inflation measure, was 3.6% for September, moderating since the April highs, a positive sign. Since supply disruptions are beginning to alleviate, it bodes well for a further diminution of inflationary pressures especially since most of the rise in inflation is attributable to durable goods which have suffered the brunt of the bottlenecks. As consumer spending moves from goods back towards services, this should help too. Though growth rates should slow, we are still experiencing an economic boom. Look no further than global air traffic which, astonishingly, is running virtually at 2019 levels. The March of Time Watching inflation is important because it directly impacts our pocketbooks in the short term and our real-spending power over time. Not only because inflation erodes purchasing power but because it also influences the level of interest rates which affects the valuations of financial assets. Longer-term interest rates are likely heading higher, not just because they’re coming off a really low base or inflation is rising. Serious supply and demand dynamics in the bond market are in-play. Fewer bonds will be bought (tapering) by the Fed, who’s been buying, a previously inconceivable, 60% of all U.S. 10-year Treasury issuances. Yet extremely elevated deficit spending still requires massive government bond offerings, at a time when foreigners and individuals have been disinterested in bonds at such low yields. Increasing rates will be necessary to attract buyers (i.e., create demand). Interest rates should remain relatively low though. Primarily because inflation should remain low as a result of poor demographics (nearly every developed country’s birth rate isn’t sufficient to generate population growth), the strength of the U.S. dollar which is disinflationary, and high government debt. These factors should temper economic growth rates. Q3 U.S. GDP grew by only 2% over last year. Aggregate demand may be weakening just when supply constraints are diminishing. On a good note, lesser growth may bode well for an extended economic cycle with low interest rates and relatively high market valuations as the Fed may not need to quell growth. On the other hand, debt laden Japan’s growth rate was so slow since 2008 that it slipped into recession 5 times while the U.S. suffered only once. For a Bad Time Call… Speculators have been winning big, but it almost never ends well. Right now, speculation is still running hot—too hot. Call option purchases (the right to buy shares at a set price for a fixed period) have leaped. Investment dealers, making markets as counterparties on the other side of the call option trades, buy sufficient shares in the open market to offset (i.e., hedge) their positions. As stocks run higher, and call option prices increase, higher amounts of shares are bought. Tesla’s run-up to recent highs is a good example as call-option buying was extreme and a disproportionate amount of buying was attributable to dealer hedging. On a related side note, Tesla ran to about 43x book value recently. In our TRACTM work that’s one break point, or about 20% below, the 55x book value level that only a small number of mature companies have ever achieved because it is mathematically unsustainable since a company cannot produce a return on equity capital sufficient to maintain that valuation level. Historically, share prices invariably have materially suffered thereafter until underlying fundamentals catch up. This is probably not lost on Elon Musk who has tweeted about the overvaluation of Tesla and just sold billions of dollars of shares. Insiders at other companies have been concerned about their share prices too which has led to an uptick in overall insider selling. Meanwhile, use of margin debt as a percent of GDP is at an all-time high of 4%, about 25% higher than at the market peaks in 2000 and 2007. Purchases of leveraged ETFs are at highs too. U.S. equity issuances (IPOs/SPACs) are also at all-time highs as a percent of GDP. The record addition of supply of shares should cause problems for the stock market, especially if demand for shares suddenly wanes if interest rates spike, profit margins shrink, or an unforeseen negative event occurs. Stock ownership generally has reached a high (50% of household assets) which doesn’t bode well for stock market returns when other asset classes shine again. The NASDAQ is extremely overbought. Similar levels in the recent past have led to double-digit declines. The fact that so much of the major indexes are now concentrated in so few companies could hurt too. Worrisome, Apple Inc (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL), and Meta Platforms Inc (NASDAQ:FB) (Facebook) are all at ceilings or have given “sell signals” in our TRACTM work. Buyout valuations paid by private equity firms has doubled over the last 10 years to levels that don’t make economic sense. Cryptocurrencies may have found a permanent role in the financial system; however, demand is too frothy. Just talk to teenagers or Uber drivers. Since it’s in weak hands, demand already running rampant, prices well above cost of producing coins, and supply virtually unlimited as new cryptos keep cropping up, prices could collapse. The overall hype should soon wither. While markets have already ignored the rise in 10-year Treasury yields, further increases could be harmful. Headline risk from inflation worsening in the short term, and rates rising further in reaction, could spoil the party. Valuations of growth companies are the most vulnerable to rising rates given their higher multiples and the more pronounced impact on cash flows which are further out in time. The forward-12-month S&P 500 earnings multiple is just about 30% above its 10-year average. The earnings yield less the inflation rate is at all-time lows. Earnings estimates themselves are likely too high, which is typically the case. Growth expectations are way above trend as analysts extrapolate the recent spectacular growth. But growth must moderate, if only because the comparison over time becomes much more challenging than last year’s trough. The added boost we’ve experienced from lowered tax rates and share repurchases should disappear too. Profit margins should eventually be negatively impacted. Not just from less sales growth but also from escalating costs, particularly on the labour front. Wage pressures are likely, and productivity may drop for a period, if companies cannot hire qualified workers. Job openings have skyrocketed, and job cuts haven’t been this low since 1997. Teens who’ve just graduated high school in California are training to drive trucks. This may be positive for teen employment but yikes! And global oil inventories have been plummeting. The inventory situation is expected to worsen which could lead to $100, or higher, oil prices, a level that would not be favourable for the economy. Investors generally are still expecting above-average returns for U.S. stocks over the next several years. Meanwhile, since valuations are so high, models that have been historically accurate predicting 10-year returns point to negligible returns. Our Strategy We continue to hedge (by shorting U.S. stock market ETFs in Growth accounts or holding inverse ETFs in registered or long-only accounts) principally because valuations have only been this high on 4 occasions in the last 50 years. Since we are not concerned about a recession, and the bear market that usually accompanies one, we’d like nothing better than to cover our hedges after a meaningful market correction. We sleep well at night knowing that we are partially hedged and that our holdings are growing, high-quality companies that, unlike the overall market, trade at substantial discounts to our estimates of FMV. The track record of most of our holdings shows steadily rising earnings over the last several years. And we foresee further growth ahead. Securities that are already detached from FMV can fall even further away if sentiment worsens. However, it doesn’t mean the companies are worse off, only that they’re temporarily losing the popularity contest. While the prices of our Chinese holdings have not gotten materially worse since last quarter, these holdings are still a drag on the portfolios. Since the ones we own are dominant high-quality companies, now trading at less than 40 cents-on-the-dollar in our view—a 60% off sale, we continue to wait for the end of the bear market in these shares. The entire KWEB, a Chinese Internet/technology ETF, is down 54% since February. Meanwhile, economic growth in China is expected to be 5% annually for the next several years, outpacing the U.S. which is expected to grow by less than 2% per year. By 2030, China should have the largest consuming middle class globally. The Chinese growth engine remains attractive. And the companies we hold continue to grow. With valuations so attractive and the stocks nearly universally shunned, we believe a new uptrend should be close. Our Portfolios The following descriptions of the holdings in our managed accounts are intended only to explain the reasons that we have made, and continue to hold, these investments in the accounts we manage for you and are not intended as advice or recommendations with respect to purchasing, selling or holding the securities described. Below, we discuss each of our new holdings and updates on key holdings if there have been material developments. All Cap Portfolios - Recent Developments for Key Holdings Our All Cap portfolios combine selections from our large cap strategy (Global Insight) with our best small and medium cap ideas. We generally prefer large cap companies for their superior liquidity and lower volatility. Importantly, they tend to recover back to their fair values much faster than smaller stocks, so they can be traded more frequently for enhanced returns. The smaller cap positions are less liquid holdings which are potentially more volatile; however, we hold these positions because they are cheaper, trading far below our FMV estimates making their risk/reward profiles favourable. There were no material changes in our smaller cap holdings recently. All Cap Portfolios - Changes In the last few months, we made several changes within our large cap positions all summarized in the Global Insight section below. Global Insight (Large Cap) Portfolios - Recent Developments for Key Holdings Global Insight represents our large cap model (typically with market caps over $5 billion at the time of purchase but may include those in the $2-5 billion range) where portfolios are managed Long/Short or Long only. A complete description of the Global Insight Model is available on our website. Our target for our large cap positions is more than a 20% return per year over a 2-year period, though some may rise toward our FMV estimates sooner should the market react to more quickly reduce their undervaluations. Or, some may be eliminated if they decline and breach TRAC floors. At an average of about 60 cents-on-the-dollar versus our FMV estimates, our Global Insight holdings appear much cheaper, in aggregate, than the overall market. Global Insight (Large Cap) Portfolios - Changes In the last few months, we made several changes within our large cap positions. We bought Altice USA Inc (NYSE:ATUS) and American Eagle Outfitters Inc (NYSE:AEO). We sold Wells Fargo & Co (NYSE:WFC) as it achieved or FMV estimate and TAL Education Group (NYSE:TAL) as it became clear we erred in our assessment once the Chinese government essentially eliminated for-profit education and other opportunities provide better reward vs. risk. Altice USA provides broadband, telephone, and television services to nearly 5 million customers across 21 states. Altice saw a surge in subscribers and plan upgrades with the increase in work from home. As people have returned to work, subscriber growth has slowed and become tougher to predict. At the same time, Altice is upgrading its network, leading to higher capital expenditures, lower free cash flow, and a moderation in share repurchases. Trading at over $35 at the end of last year, shares now trade near $17. We believe investors have become too focused on near-term subscriber trends and not the attractive long-term metrics of the business. Altice should generate close to $1.5 billion in free cash flow and see solid subscriber growth as network upgrades and fresh marketing initiatives bear fruit. Not unlike its peers, Altice carries a large debt-load. Though, management expects debt to decline even as spending accelerates and there are no material debt maturities before 2025. Our FMV estimate is $40. We believe there are numerous avenues for Altice to close the gap between its current share price and its intrinsic value. With large insider ownership already, a management-led buyout would not surprise us. American Eagle Outfitters is a vastly different company than it was just a few years ago. Gone are the days of chasing sales and market share. Management is now laser-focused on cash flow generation, return on investment, and total shareholder return (i.e., stock appreciation, dividends, and share buybacks). Its intimate apparel Aerie brand has metrics that top the retail field and is now close to 50% of revenue, on track to exceed $2 billion in revenue. Meanwhile, American Eagle continues to dominate denim. Years of investments in logistics and its supply chain are paying off. With disruptions everywhere, Eagle’s in-house logistics operations are now a major competitive advantage, enabling the company to achieve higher sales and margins on far less inventory. Our FMV estimate is $35. Income Holdings High-yield corporate bond yields have climbed slightly but at 4.4% remain near all-time lows. Our income holdings have an average current annual yield (income we receive as a percent of current market value of income securities held) of about 5%. Though most of our income holdings - bonds, preferred shares, REITs, and income funds—trade below our FMV estimates, attractive new income opportunities are still not easily found. We have our sights on several securities; however, we believe more attractive entry price points should avail themselves in the months ahead, either as rates rise and bond yields decline or as share prices correct, whether on a case-by-case basis or because of an overall market setback. We recently purchased, VICI Properties, one of the largest U.S. REITs, whose properties include 60 leading casinos (e.g., Caesar’s Palace, MGM, Mirage). Leases are long term with built-in escalators, provide high margins, required capital expenditures are low, and lease renewals are all but guaranteed as the behemoth tenants can’t simply relocate. It yields 5.1% and our FMV estimate is $39, well above the price. We also bought FS KKR Capital, one of the largest U.S. BDCs (business development corp.). The company utilizes its own investment-grade balance sheet (it borrowed $1.25 billion recently at 2.5%) to lend, mostly on a senior-secured basis, mainly to private middle-market U.S. companies. Despite delivering several good quarters recently, it trades at just over a 20% discount to its net asset value and sports an 11.6% dividend yield. All in Good Time We remain concerned about several factors, primarily high market valuations, which could trigger a market decline and reestablish a wall of worry. The average S&P 500 high-to-low annual decline since 1980 has been about 14%. In the last year, it’s only suffered just shy of a 6% correction. Prices have risen too far above underlying values and should revert. Many of our holdings, in contrast, have gone in the other direction, already enduring their own bear markets. We don’t expect to be right all the time. Nor do we need to be, to have respectable performance. But we’ve suffered unduly recently. We can’t turn back time and alter our selections. And we certainly don’t wish to rush time. Time is precious. But we do believe that good things happen to those who wait. And we will continue to wait patiently, biding our time, because our process is designed to select out-of-favour securities, the ones that are underappreciated but whose quality businesses we expect to advance, causing the disconnect between prices and values to alleviate, all in good time. We look forward to recovering from our recent lull and notes from clients stating, “It’s about time!” Randall Abramson, CFA Herb Abramson Generation PMCA Corp. Updated on Nov 26, 2021, 2:09 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 26th, 2021

I Haven’t Recommended A Stock In Over A Month. That’s About To Change…

It’s one of the biggest differences between rookie traders and successful ones… Q3 2021 hedge fund letters, conferences and more New traders crave action. They always need to be doing something in the markets. Successful traders know patience is a virtue. They only buy when the opportunity is right. Which is why I haven’t recommended […] It’s one of the biggest differences between rookie traders and successful ones… if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below! (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more New traders crave action. They always need to be doing something in the markets. Successful traders know patience is a virtue. They only buy when the opportunity is right. Which is why I haven’t recommended a new stock to my premium subscribers in over a month. This might surprise you. You see, I usually place 2–3 trades a month between my IPO Insider and Disruption Trader advisories, sometimes more. In fact, from May to mid-October, I recommended 23 stocks across my two advisories. Some of those positions have performed exceptionally. DigitalOcean Holdings Inc (NYSE:DOCN), has surged more than 100% since August. Bill.com Holdings Inc (NYSE:BILL) is up 110% since June. And Affirm Holdings Inc (NASDAQ:AFRM), the buy-now-pay-later pioneer, has rallied 115% since August. Don’t worry if you missed these moves. Because another great buying opportunity is shaping up right now. In a minute, I’ll show you how to make the most of it. But let’s first look at why I’ve been sitting on my hands over the past month, waiting… Fear is in the air again… And it’s reminding me a lot of what I saw back in May… Before I recommended 23 stocks over the next five months. Back then, inflation fears were running rampant. Just look at this cover that Barron’s published for its May 2021 issue. Over the summer, inflation fears continued to dominate the news. And after a quiet period in October, we’re starting to see the negative headlines again. In fact, the government just reported that its core measure for inflation, the consumer price index, surged 6.2% last month. That’s the highest since 1990! Source: CNBC The global economy also continues to suffer from problematic supply chain bottlenecks. That’s fueling a lot of the inflation we’re witnessing. And it’s leading to widespread shortages. In other words, there are plenty of things keeping investors up at night. And I take these matters seriously. But they make me bullish on stocks. Climbing A Wall Of Worry That’s because the most powerful bull markets tend to climb a “wall of worry…” Contrary to what many folks believe… stocks tend to perform best when fear, uncertainty, and doubt are running high. I’ve seen it over and over again through many cycles. The biggest gains come when people are the most worried. I know it sounds counterintuitive. But if you wait until everything is rosy, it’s usually too late. When everything’s rosy, investors get complacent. And when investors get complacent, markets tend to struggle. I don’t see much complacency now. Investors are on edge. Hardly a week goes by without a famous personality calling the financial markets a bubble. But keep in mind… a high level of investor nervousness by itself doesn’t mean much. That’s because it’s hard to measure. You have to go by “feel” and judgement… and human judgment can always be wrong. That’s why I need to see it confirmed with cold hard evidence. After eight long months… the important small-cap Russell 2000 index is finally breaking out… And history shows when small-cap stocks rise, the rest of the market usually follows. The Russell 2000 ETF The iShares Russell 2000 ETF (NYMARKET:IWM) measures the performance of small-cap stocks. Since 1979, whenever the Russell is up, the S&P 500 has been up 92% of the time. Take a look at the Russell’s recent action. It’s finally breaking out of a sideways trading pattern it was stuck in for most of this year. As a professional trader, I can’t argue with this price action. It’s incredibly bullish… and not just for investors who own small-cap stocks. It’s bullish for the stock market as a whole. “Ok, Justin… how do I make the most of this opportunity?” First, focus on quality. Specifically, I suggest focusing on hypergrowth stocks in cutting-edge industries. Second, focus on newer names. What do high-flying stocks Upstart Holdings Inc (NASDAQ:UPST), Affirm Holdings Inc (NASDAQ:AFRM), and DigitalOcean Holdings Inc (NYSE:DOCN) all have in common? They’re all recent IPOs. IPOs are my bread and butter for a couple reasons. The first is investor appetite. Simply put, investors love investing in and trading new stocks. And IPOs are the shiny new objects in the market. The IPO market is where the market leaders of tomorrow come from. It is, without question, the best place to find the next big company. This has been on full display lately. Today’s hottest trends are buy-now-pay-later and the metaverse. The best stocks to cash in on these megatrends are all recent IPOs. But the very best stocks are at the forefront of multiple megatrends… Cloudflare Is A 11-Bagger Cloudflare Inc (NYSE:NET) is a perfect example of this. Cloudflare, as long-time readers know, is a pioneer in edge computing. It’s also one of the world’s most important internet infrastructure companies. About 10% of the world’s internet runs through its network. It’s also a leader in the cybersecurity space. In fact, Cloudflare is the largest holding in the ETFMG Prime Cyber Security ETF (NYMARKET:HACK), which invests in a basket of cybersecurity stocks. In other words, Cloudflare is at the crossroads of three of today’s biggest megatrends. That’s almost unheard of. At any given time, Cloudflare will have a major bullish narrative working in its favor. As you can imagine, that’s done wonders for its share price. Cloudflare has now rallied nearly 1,000% since we added it to the IPO Insider portfolio in November 2019. Now, 11-baggers like Cloudflare are obviously rare. But finding one and investing in it early can do wonders for your portfolio. I’ll have more to say about this soon. How are you feeling about the markets right now? Nervous? Excited? Cautiously optimistic? Tell me at jspittler@riskhedge.com. The Great Disruptors: 3 Breakthrough Stocks Set to Double Your Money" Get our latest report where we reveal our three favorite stocks that will hand you 100% gains as they disrupt whole industries. Get your free copy here. Article By Justin Spittler, Mauldin Economics Updated on Nov 24, 2021, 2:13 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 24th, 2021

Conviction

One of my favorite quotes states that you can borrow someone’s ideas, but not their conviction. Q3 2021 hedge fund letters, conferences and more It is a great quote, because it deals with a problem that many investors face. Some of us may be taking tips from others, and may be investing money in companies, […] One of my favorite quotes states that you can borrow someone’s ideas, but not their conviction. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Warren Buffett Series in PDF Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more It is a great quote, because it deals with a problem that many investors face. Some of us may be taking tips from others, and may be investing money in companies, without really doing much research. This is a dangerous position to be in, because you are outsourcing everything to another person. You need to get to a point where you have an adequate investment plan for action. Thus, when things change, you would know whether to hold or to fold. I tend to spend time looking for ideas, either through screening, reviewing my investable universe, reading and interacting with other investors. However, I always try to put each idea and filter it in a way that makes sense for me. That way, I can take personal responsibility for my actions, and take the next step of learning and growing as an investor from there. I have been investing in Dividend Growth Stocks for about 15 years now, and have learned to try and devise my own set of guidelines that would do the heavy lifting for me. One such guideline has been to review my own investments that I have made. I believe that the ability to review historical transactions is very beneficial for investors, because it can help identify gaps, and improvement opportunities. Flexibility And Adaptability Vs Conviction In my analysis of my own investments, I have noticed that I cannot really tell in advance which specific company would be the best performer in terms of total returns, or future dividend growth over a set period of time like ten years for example.  I have looked at some ideas I posted about in 2008, and then the list of aristocrats from 2011. I did not know that one of the best companies would be Lowe’s for examples. But, by owning a diverse portfolio of companies, I had a fair share of winners that compensated for the losers. I did ok, even if I made some mistakes along the way, such as selling perfectly good companies and replacing them with cheaper value traps. Of course, I do try to pick many quality companies, and hold on to them for as long as possible which helps. Hence, I am a fan of diversification, and dislike concentration. I do not know what my top 10 ideas would be, though I presume they would be in my diversified portfolio of 50 – 100 quality securities. Based on my experience, my best performing ideas turned out to be outside my top 10 or 20 convictions. Analyzing past actions is a very humbling experience, because it shows me that we can have all the information in the world, but that doesn’t mean that we would be right all the time. Hence, I do not believe in having conviction in investing, because it may potentially lead me to overconfidence, stubbornness and inflexibility. I believe that apart from having a few principles, conviction can be dangerous for most investors. It is good to have conviction to hold through the hard times assuming that they do turn, but you also need to know when the situation has changed and you need to move on. I believe that flexibility and adaptability are more important than conviction. That’s because if I am convinced of something, I risk ignoring contradictory information, so I may end up just being plain stubborn and lose money. That’s the risk I am trying to avoid of course. In general, I assume that my investing universe would likely have a group of outstanding companies that would deliver outstanding returns. I just have to ensure I include them, and then hold on to them. I just don’t know which specific company would be the best, and which would be the worst. The goal is to just follow my strategy, letting winners ride, and keeping losses relatively limited. This means I should not invest based on my opinions, but follow my strategy into long term trends. It also means that I don't micromanage businesses, or create narratives. I should simply follow the performance of the business, not my opinion of it. In my case, it is as simple as just sticking around for as long as the dividend is growing, and not being cut. On average, this has been a winning strategy in the past. You won't be right on every investing decision, you may be whipsawed, but as long as you keep losses small and maximize winners, you stand a chance to make a profit. This goes along with my favorite quote from Buffett: Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.  Minimizing Losses Actually, I believe that to succeed in investing, one should start with the mindset of risk management and try to look for ways to minimize losses, rather than shoot for the stars. In other words, I believe that the upside would take care of itself, but it is my job as a portfolio manager to manage downside risks. The first way that I manage risks is refusing to risk more than a certain percentage of total portfolio value on a given position. I believe in diversification, which means not putting all my eggs in one basket. I also do not believe in concentrating my portfolio in my best ideas, because I do not know which of my ideas today would turn out to be best ideas in 2031. I have a rough estimate, but I also want to assume that I may make mistakes, that the world is uncertain and more difficult to understand than previously believed. This is how I come up with a list of 30 – 50 companies at the very minimum. This means that I shouldn’t really have more than 2% - 3% allocated in a given company. If a stock goes to zero, the most I would lose is 2% - 3% of portfolio value. However, I am still in the game, and I hopefully have the other positions to carry their weight, and overcompensate for losses suffered with their gains. I often hear the rebuttal that Buffett liked to concentrate their portfolios, and succeeded. Of course, I am not Buffett, and I would argue that you are not either. Today, Berkshire Hathaway is very well diversified, with a stock portfolio consisting of 44 individual holdings, as well as an operating business that consists of more individual businesses. I would much rather have slightly lower returns, but compound capital and income for decades, than earn more but at a higher risk of losing a large chunk of my portfolio on a concentrated bet. It’s insane to risk what you have for something you don’t need. While Buffett may have been more concentrated during the 1950s and 1960s, he still held at least 20 - 30 investments. Most importantly however, he diversified into several investing strategies such as generals (undervalued stocks), workouts (M&A, spin-offs, liquidations) and control situations (activist investing). (source) Following Long-Term Trends The second way that I manage risks is by following long-term trends, and exiting when they end. As a Dividend Growth Investor, I buy companies that have a certain track record of annual dividend increases. My idea is that a body in motion would stay in motion until something changes. I buy a stock, believing that certain business conditions exist for the business ( moat, competitive advantages, you name it), and the rising dividend is an indication of it. I then hold on to these companies for as long as possible, through thick or thin. I follow the companies, but would keep holding for as long as the dividend is not cut. I would consider adding to a position that is below my 2% - 3% cost threshold, for as long as it is still raising dividends, and those dividends are supported by strong fundamentals. But, if that company freezes dividends, I would not add to such position. This is basically a yellow light, a warning sign that things may not be going as well as what my initial thesis told me. It means I need to research further what is going on, but not take any action yet. Once a company cuts dividends, that shows me that my original thesis was violated. I bought a company, expecting that the good times that generated its track record of annual dividend increases would continue. When the music stops and the dividends are cut, it is a good wake up call that things have changed. Perhaps this is a short term situation that would be resolved, or perhaps this is the beginning of the end. I sell and put the money elsewhere, because conditions have changed. It is very likely that I am selling at a short-term bottom, and the stock would double or triple from there. That doesn’t matter. I make my money on businesses that grow and keep delivering. I make my money on businesses that I do not need to micromanage. I don’t make my money on guessing whether the stock price would go up or down in the short run.  In a given portfolio, most of the gains would come from a small portion of companies. That’s why it makes sense to identify strong companies, and then to hold them, through thick or thin. A rising dividend payment means that things are going ok in general. I will keep holding, through dividend rises. My goal is to follow long-term secular trends, that may last many years and hopefully many decades. The goal is to get on the elevator, and just stay on it, not second guess it on every move. Investors generally have a hard time holding on to winners for various reasons; could be because the stock looks “expensive”, they are told it is a bubble, some other company may look cheaper, some temporary weakness is blown out of proportion, the stock price may not go anywhere for a few years, etc etc The mental model of just sticking to a position while the dividend is still growing is very powerful. With this mentality, I can afford to focus on the evidence of growing dividends, and keep holding. While some companies may end up cutting dividends and I will end up selling them, a portion of them would end up in the portfolio for decades. These will be the winners that would cover for mistakes and losses, and hopefully result in a profit. Oh, and selling those companies early for no good reason would be the difference between making money and not making any money. Focus On Fundamentals Third, I focus on fundamentals when I buy companies. In general, I tend to look for several factors, playing together. Rising earnings per share over a period of 5 – 10 years Dividend increases that outpace inflation Dividend payout ratio that is sustainable and mostly in a range If a company can grow earnings per share, it can afford to pay rising dividends down the road. If it doesn’t, then it is likely that the business may not be a good fit for my portfolio for the time being. I tend to also look at valuation. However, I do not have a formula for it. I look for P/E and dividend growth, and I compare existing opportunities in my opportunity set. I also look at the stability of earnings, cyclicality and dependability. I believe that even if I may overpay a little for a good company, rising earnings per share would ultimately bail me out. On the other hand, if I buy a company with declining earnings, even at a low P/E it may turn into a value trap. Building Positions Slowly Last, I tend to build my positions slowly. I tend to buy a starter position, then add back a little later. I have done this, because built my net worth slowly and over time. I saved a portion from each paycheck I ever earned, and invested it. The downside of this approach is that in a raging bull market, I would usually end up paying higher and higher prices. This shouldn’t be a problem, if the business also grows over time. The upside of this approach is that I have time to react to changes or to information that shows me that my original analysis may have been wrong. Today, I discussed a few simple ideas on how to survive and thrive in the investing game. I believe in a few principles, that are helpful: Diversification Not risking more than a certain percentage of portfolio value on a given company Managing risks by following long-term trends Focus on fundamentals when reviewing a business Building positions over time Being adaptable and flexible Relevant Articles: How to improve your investing over time Adaptability How to find companies for my dividend portfolio Concentrated versus Diversified Dividend Investing Article by Dividend Growth Investor Updated on Nov 4, 2021, 5:25 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 4th, 2021

Gabriel Grego’s Short Report On Cassava Sciences

Whitney Tilson’s email to investors discussing Gabriel Grego’s short report on Cassava Sciences Inc (NASDAQ:SAVA); retail sales rise, showing strong consumer demand, higher inflation; China’s economy rests on three shaky legs; Pivot podcast by Kara Swisher and Scott Galloway; his Zoom call on The Art of Playing Defense. Q3 2021 hedge fund letters, conferences and […] Whitney Tilson’s email to investors discussing Gabriel Grego’s short report on Cassava Sciences Inc (NASDAQ:SAVA); retail sales rise, showing strong consumer demand, higher inflation; China’s economy rests on three shaky legs; Pivot podcast by Kara Swisher and Scott Galloway; his Zoom call on The Art of Playing Defense. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Gabriel Grego's Short Report On Cassava Sciences 1) My friend and former student Gabriel Grego of Quintessential Capital Management just released a short report on Cassava Sciences (SAVA). The biotech company has a $2.3 billion market cap despite no revenue based on bullish expectations for its sole drug, Simufilam, which it claims will help treat Alzheimer's disease. Gabriel's report, which you can read here, documents the shady backgrounds of many people associated with the company and concludes that there's no chance that Simufilam will ever be approved by the Food and Drug Administration ("FDA"). Here's an excerpt: Simufilam, Cassava's only prospective drug, appears based on allegedly forged scientific research. Phase II trials have been conducted with numerous and serious irregularities, which appear to have allowed management to deceive investors about the effectiveness of the drug. In our opinion, Simufilam is a worthless compound, and any touted benefit is likely the result of a combination of forgery, "cherry picking" of patients, and statistical manipulation of data, of which we have plenty of disturbing evidence. This alleged exercise in deception has taken place with the involvement of an astounding number of questionable characters: Cassava's former Senior Clinical Research Associate is a convicted felon with a record in fraud and theft. Cassava's prominent clinical research site (whose CEO is coauthor of critical research on Simufilam), IMIC Inc., is co-owned by a former escort, stripper, and crack addict with a criminal record for consumption and possession of cocaine. IMIC's Principal Investigator has been hit with a rare and ominous FDA warning letter during recent trials. Cassava's CEO and CMO have been caught making allegedly fraudulent statements about Simufilam's predecessor Remoxy, which duly failed, devastating shareholders. Cassava's recent board addition, Richard Barry, has been involved with multiple frauds. I'm not a biotech expert (to say the least) and haven't independently verified Gabriel's work, but knowing him and his track record, I have no doubt that his report is correct – which is bad news for this high-flying stock and its huge market cap... Retail Sales Rise 2) Following up on yesterday's e-mail about the white-hot economy, check out this extraordinary chart in this Wall Street Journal article: Retail Sales Rise, Showing Strong Consumer Demand, Higher Inflation. Spending on U.S. retail and food service hasn't just recovered but is nearly 15% above the trend line: China's Economy Rests On Three Shaky Legs 3) I'm not a China expert by any stretch of the imagination – and never will be – but I've read a bit about the country's history and try to follow current events there for two reasons: First, China fascinates me. It has a rich history and, in particular, its economic rise in recent decades, in which it's pulled over a billion people out of poverty, is simply unprecedented. Second, as I wrote in my October 11 e-mail, two possible triggers for a stock market crash are us getting into a shooting war with China (likely over Taiwan) and a crash of China's economy. I occasionally send articles related to China to my China e-mail list (if you wish to join it, simply send a blank e-mail to: china-subscribe@mailer.kasecapital.com). Here are two recent ones... From the Wall Street Journal: China's Economy Rests on Three Shaky Legs. Excerpt: China's economy has been taking it from all sides: power outages, the property debt fiasco, snarled shipping lanes, and, a bit further back, a brief but damaging Delta variant outbreak. Sharply weaker growth last quarter at 4.9% from a year earlier was expected. And given how modest countercyclical support has been so far, next quarter will almost certainly be worse. What happens in 2022 remains uncertain but appears to depend primarily on three things: how fast Beijing dials back its squeeze on the property sector, whether consumers finally perk up again, and whether exporters can hang on to recent market-share gains. Power outages remain a drag, but efforts to restart shuttered coal mines and raise power prices will help significantly. And another from the New York Times: In China, Home Buyers Who Went All In Say They Want Out. Excerpt: The real estate boom that once attracted young professionals like Mr. He is experiencing a dramatic overhaul. At one point, buying was so frenzied that properties would sell out within minutes of being offered. Speculation sent prices soaring. Real estate grew to provide more than a quarter of the country's economic growth by some estimates, with homes becoming the main savings vehicle for Chinese families. Nearly three-quarters of household wealth in China is now tied to property. The loss of confidence in the market could spill over to lower sales of cars and appliances, further hurting the economy. Already, weak retail sales in China have signaled that consumers are feeling increasingly insecure. As more buyers shy away from home sales, experts say Beijing's decision to intervene in the market and curb debt may risk overall growth. Even as prominent investors question whether the collapse of Chinese property developer Evergrande could lead to China's so-called Lehman moment, referring to the investment bank that triggered the 2008 global financial crisis, Beijing has been largely silent, having vowed to no longer rescue companies once considered too big to fail. Many local officials have been left on their own to respond to the growing frustration. When massive real estate bubbles burst, the fallout can be devastating and long-lasting – witness the U.S. in 2008 and several years afterward and Japan since 1990 (for more on the latter, see: The Lost Decade: Lessons From Japan's Real Estate Crisis). That said, I think there's only, say, a 20% chance that China will experience a similar meltdown that could roil world markets. Pivot Podcast By Kara Swisher And Scott Galloway 4) I'm really enjoying a new podcast called Pivot, hosted by two of my favorite commentators on the tech sector, New York Times columnist Kara Swisher and New York University marketing professor Scott Galloway. I especially recommend listening to "Land of the Giants: This Changes Everything," about Apple's (AAPL) remarkable history, and the latest episode, in which they: a) Heaped scorn on Facebook (FB) CEO Mark Zuckerberg renaming the company Meta. b) Praised Bobby Kotick, the CEO of video game maker Activision Blizzard (ATVI), which was sued by California's civil rights agency for fostering a "frat boy" culture, for his recent letter to his employees in which he asked the company's board of directors to reduce his salary to $62,500 and not award him any compensation or bonuses on top of his basic salary "until the Board has determined that we have achieved the transformational gender-related goals and other commitments." c) Interviewed professor Aswath Damodaran, a fascinating guy who teaches corporate finance and valuation at the Stern School of Business at New York University. Zoom Call On The Art Of Playing Defense 5) I was delighted to send more than 30 of my readers a free PDF of my recent book, The Art of Playing Defense, after they sent me copies of their recent COVID-19 vaccination or booster shots. I'll keep this offer open for at least another week, so please keep e-mailing me at WTDfeedback@empirefinancialresearch.com! Speaking of my book, I did an 82-minutes Zoom (ZM) call with an Israeli friend and his colleagues about it recently, which he posted on YouTube here if you'd like to watch it. Best regards, Whitney P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com. Updated on Nov 3, 2021, 12:17 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 3rd, 2021

“Altcoins” Look Ready To Rally…

When RiskHedge chief analyst Stephen McBride told me he was launching a crypto service, my first thought was… Q3 2021 hedge fund letters, conferences and more The timing could not be more perfect. The Crypto Market Is Sitting On The Launchpad As I’ll show you today, the charts tell me the entire crypto market is sitting […] When RiskHedge chief analyst Stephen McBride told me he was launching a crypto service, my first thought was… if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get Our Icahn eBook! Get our entire 10-part series on Carl Icahn and other famous investors in PDF for free! Save it to your desktop, read it on your tablet or print it! Sign up below. NO SPAM EVER (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more The timing could not be more perfect. The Crypto Market Is Sitting On The Launchpad As I’ll show you today, the charts tell me the entire crypto market is sitting on the launchpad. The crypto space hasn’t looked this primed to surge in a long, long time. If you’re new to RiskHedge, I’m a professional trader. I use price, volume, and other “charting” indicators to identify assets before they take off. Today, let’s look at the crypto market from a trader’s perspective. As you’ll see, we’re about to enter one of the most exciting times to be a crypto investor. Let’s Start By Looking At Bitcoin… Bitcoin is the world’s largest cryptocurrency. It’s worth more than $1.1 trillion. Due to its sheer size, bitcoin sets the tone for the overall crypto market. When it rises, it usually pulls the rest of the market higher. When it falls, the opposite happens. Bitcoin drags other cryptos down. And bitcoin has been strong lately. As you can see below, it’s more than doubled since bottoming out over the summer. Not only that, it recently broke out to new all-time highs, which is bullish for the entire crypto market. February 2021 was the last time bitcoin decisively broke out to a new high. It eclipsed $40k…then rallied 50% to over $60k in about two months. In short, bitcoin should do very well in the coming months. But make no mistake. "Altcoins" Will Deliver The Biggest Gains.... Altcoin is short for “alternative coin.” Any crypto except for bitcoin is considered an altcoin. Some altcoins have delivered huge gains lately. Axie Infinity (AXS) has rallied 22,724% since the start of the year… Harmony (ONE) has soared 7,709% in 2021, and Terra (LUNA) has skyrocketed 6,514% over the same period. The thing is… there are more than 13,000 altcoins. Some will revolutionize the world and command trillion-dollar valuations. Many others are complete jokes I wouldn’t invest a penny in. Now, I can’t share all those charts with you. However, we can get a sense of the overall altcoin market health by looking at Ethereum (ETH), the second-largest cryptocurrency. Specifically, we want to examine how Ethereum is performing relative to bitcoin. That’s what the chart below shows. When this line is rising, Ethereum is outperforming bitcoin. When it’s falling, bitcoin is outperforming. Ethereum spent nearly three years “carving a base” against bitcoin. It began climbing out of that base in recently. Source: TradingView Ethereum looks poised to outperform bitcoin in the coming months. This is a great development for folks who own Ethereum. But it’s also bullish for the rest of the altcoin market. You see, Ethereum usually leads the altcoin market. When it pulls ahead of bitcoin, it’s like giving the rest of the altcoin market the green light to rally. And That’s Not The Only Reason Altcoins Are Poised To Rocket Higher… This chart shows the performance of the Altcoin Index vs bitcoin. You can see that altcoins were outperforming bitcoin at the beginning of the year… until bitcoin took the reins in May. Now that altcoins have stabilized at a key level…  they appear to be setting up for another big run. Source: TradingView Having said all this, many investors are skeptical about investing in altcoins. That’s mostly because many altcoin projects never live up to the hype. But please understand: Crypto has come a long way in recent years… Back in 2017, crypto projects would trade based purely on hype. Today, it’s a totally different story. Crypto has truly gone mainstream. More importantly, as Stephen has showed us over the last couple weeks, many of these crypto projects have real use in today’s world. Take Uniswap, a $12 billion “stock market” for cryptos. It lets you buy cryptos you can’t easily buy anywhere else. There are even crypto “banks” where anyone can lend, borrow, and earn interest on their crypto assets. Stephen recently highlighted the crypto Helium, which sells hotspot routers you can install on your roof. You can then “sell” internet to nearby folks through this Helium router. Then there’s Axie Infinity. This gaming project already has more than 1.8 million active users worldwide. It’s now worth more than video game giants Take-Two Interactive Software, Inc (NASDAQ:TTWO), Zynga Inc (NASDAQ:ZNGA), and Ubisoft, as you can see below. Source: Messari Axie’s already soared a whopping 22,724% this year. Don’t get me wrong: There are lot of questionable crypto projects. And some downright bad ones. But when you pinpoint the right altcoins, you stand to make a lot of money during this crypto boom. The Great Disruptors: 3 Breakthrough Stocks Set to Double Your Money" Get our latest report where we reveal our three favorite stocks that will hand you 100% gains as they disrupt whole industries. Get your free copy here. Article By Justin Spittler - Chief Trader, RiskHedge - Mauldin Economics Updated on Nov 3, 2021, 10:42 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 3rd, 2021

Wall Street "Wins" Again As ESG Scam Infiltrates Retirement Plans

Wall Street 'Wins' Again As ESG Scam Infiltrates Retirement Plans Authored by Lance Roberts via RealInvestmentAdvice.com, Wall Street “wins again” by taking more money from savers as the Department Of Labor considers allowing the ESG scam to infiltrate retirement plans. “The U.S. Department of Labor today announced a proposed rule that would remove barriers to plan fiduciaries’ ability to consider climate change and other environmental, social and governance factors when they select investments and exercise shareholder rights. The proposed rule, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” follows Executive Order 14030, signed by President Biden on May 20, 2021. The order directs the federal government to implement policies to help safeguard the financial security of America’s families, businesses and workers from climate-related financial risk that may threaten the life savings and pensions of U.S. workers and families.” While the Department of Labor is following an executive order, are they doing the best thing for retirement plan savers? Since the financial crisis, great strides to bolster the fiduciary standards of retirement plans to protect workers got made. For example, rules requiring plan sponsors to ensure offerings had track records from reputable firms, low fees, tenured managers, etc., all benefited savers. In their publication, even the Department Of Labor noted the importance of low fees to savers outcomes. “While contributions to your account and the earnings on your investments will increase your retirement income, fees and expenses paid by your plan may substantially reduce the growth in your account which will reduce your retirement income.”  The problem is that ESG investing does nothing to improve investor outcomes, but rather, due to significantly higher fees, it likely makes them worse. What Is ESG Investing? ESG refers to the Environmental, Social, and Governance risk theoretically embedded in a business. However, while ESG investing is about taking these risks into account in investment decisions, these are all the things NOT on a company’s balance sheet or earnings statements. Such is the inherent problem. However, as is also the case, with the recent surge in liberal policies, woke activism, and demand for social justice, Wall Street is more than willing to sell products to fill a need. Not surprisingly, with plenty of media coverage, ESG investing has become an enormous business. Following the financial crisis, ESG funds had roughly a ZERO market share of total assets under management. Today, ESG-labelled funds in the United States exceed $16 trillion. According to the US SIF Foundation’s 2020 biennial “Report on U.S. Sustainable and Impact Investing Trends,“ sustainable investing assets now total $17.1 trillion, a 42% increase over 2018. Think about that for a moment. ESG investing now encompasses 33% of total U.S. assets under management. All of a sudden, everyone is now” “green!” The question is whether investors are getting what they are paying for? ESG – A Label With No Meaning In the late’90s, Wall Street had a significant movement to limit investing in “sin” stocks such as gambling, tobacco, pornography, etc. Just as it was then, investors initially jumped on board, but when returns failed to match the S&P index, that “fad” died away. The same occurs today as investors who want to be “woke” demand products that make them feel good to purchase. However, there are many problems with ESG outside the labeling. There are currently no universal rules to analyze ESG risks. Nor are there any clear frameworks to police ESG-labelled investment products. As Eco-Business recently noted: “For example, deforestation is a major driver of climate change. You would think it’s being used as a filter to ensure companies in ESG-labelled funds are not turning a blind eye to deforestation, but you would be wrong. Carbon Tracker, an industry ‘think tank,’ found that 78% of mutual fund providers offered ESG investments. However, none specifically excluded deforestation risk. Not a single one actively priced climate risk either.” AsSeth Levine previously wrote: “Almost all large companies satisfy sustainability reporting requirements now. Source Naturally, companies are gaming the ESG system. There’s simply too much to gain. However, the essence of ESG, improving the world, is something that every business does. Of course, every company is ESG-compliant. Given the intense market competition, every entity must lower its cost of capital if it can. ESG trophies for all!“ In other words, ESG is a label fund managers are sticking on funds to attract capital, yet there are no guidelines on what investors are investing in.  Investing In An Publically Traded Company Makes No Difference Here is another problem with ESG investing – it makes NO difference to the environment. Think about how mutual fund investing works for a moment. An investor buys shares of a mutual fund. The fund manager, in turn, purchases shares of the underlying investments from the open market. The underlying companies receive no capital from the transaction, nor are they aware a transaction occurred. In this scenario, how were carbon emissions reduced? Were trees planted? Did companies take a different direction with their management teams? Of course, not. So who benefitted? If you think investment managers are doing it for the “good of the environment,” think again. “Investment managers and banks are taking advantage of our collective willingness to help fight climate change because the ESG space is, to put it mildly, a zoo. Epic greenwashing is everywhere: Out of 253 funds that switched to an ESG focus in 2020 in the US, 87 per cent of them rebranded by adding words such as ‘sustainable’ or “ESG” or ‘green’ or ‘climate’ to their names. None changed their stock or bond holdings at that point.” – Eco-Business Why would they change their name and not their holdings? Good question. ESG Is A Money Scam In our previous discussion, we dug into the main driver behind the business. “With ESG now the rage, the ‘demand’ drives product development. However, there is also an understanding of why large asset managers have embraced the strategy so readily – higher fees. Let’s review our example, comparing the Blackrock ESG fund to the S&P 500 index ETF. Notice the similarity of the top-10 holdings and the difference in fees. Yes, you too can own an ESG fund that is almost three times as expensive as the S&P 500 index, all for the sake of “feeling good about yourself.”  According to The Wall Street Journal: “Citing ETF data from FactSet, it found the ESG funds’ ‘average fee was 0.2% at the end of last year, while standard ETFs that invest in U.S. large-cap stocks had a 0.14% fee on average. A firm managing $1 billion in a typical ESG fund, for example, would garner $2 million in annual fees versus managing the standard ETF’s $1.4 million.” Look again at the table above. Furthermore, there are virtually no significant differences in the ESG ETF except Blackrock put their company stock in the lineup. But, of course, there is “no self-serving purpose” except that as billions pour into the ETF, it boosts Blackrock’s stock price. As Michael Edesess recently addressed in “Stop The ESG Nonsense:” “There are three serious problems with ESG investing:” it won’t really accomplish its claimed objectives; it will give the pursuit of those objectives a bad name by undermining the seriousness of their pursuit; and most importantly, it creates an industry of well-compensated but Mickey Mouse jobs paid for by increased fees for investment management, drawing people away from much more important work in which they should be engaged. Paying More, Getting Less With this understanding, you can see where the Department of Labor is erring in its policy recommendations. While ESG investing sounds noble, in reality, investors pay substantially more for performance that is no better than existing index funds. As shown, the correlation between Blackrock’s USA ESG fund and the S&P 500 Index is almost perfect. Chart courtesy of Michael Lebowitz, CFA “These funds lately haven’t beat ­indices that are simply created to make you money and only do so when they pack themselves with high-flying tech names. Sounds good on paper — until you drill down. For starters, such investing methods are highly political and veer far to the left. Companies often get good grades for supporting lefty causes such as Black Lives Matter. Oil companies like Exxon will get higher marks for building wind farms that produce energy inefficiently.  But here’s where Larry Fink and BlackRock still come out ahead: They have sensed that with all the media hype of ESG investing as the next frontier, they can also make a lot of money creating a new type of fund dedicated specifically to ESG — and then charge more for it.” – NY Post  In short, while Wall Street pushes out products to make “you” feel as if you are socially responsible, such is not the case. When you buy an ESG fund, you are NOT contributing to making the environment better. Instead, you are substantially increasing the incomes and profits of companies like Blackrock, which benefits Larry Fink personally. But, of course, Larry Fink, with this personal jet, numerous mansions, and individual lifestyle, has a carbon footprint more significant than most small neighborhoods. So, what are you doing for the environment? Wall Street Wins Again The Department of Labor is not doing you, or the environment, any favors in pushing the ESG narrative into your retirement plan. The evidence undermines every premise of their proposed rule change: ESG will NOT safeguard the financial security of America’s families, businesses and workers. Investing in mutual funds or ETF’s makes no difference in climate-related financial risk. Substantially increasing the underlying fees in retirement plans is the biggest threat to the life savings and pensions of U.S. workers and families. What is true is that where money flows, greed always follows. “If governance is a hard quality to measure, rating a company’s environmental and social impact – the other two-thirds of hot investment style ESG – is even more challenging. But where the money flows, accusations of fraud follow and in 2020 there has been no shortage of examples of businesses claiming high ESG credentials with little merit.” – Investors’ Chronicle If you want to be a socially responsible investor, there is only ONE way to achieve that goal. You must invest directly in private startup companies that are tackling climate change effectively. Once a company is public, all you do is trade dollars for another investor’s shares. As noted, that transaction has ZERO impact on the environment or the company. Unfortunately, the Department of Labor is about to implement a rule change in retirement plans that hurts retirement savers. It does nothing to affect climate change but greatly benefits the one group of people who need it the least. Wall Street wins again. Tyler Durden Mon, 11/01/2021 - 14:53.....»»

Category: dealsSource: nytNov 1st, 2021

Alta Fox Opportunities Fund 3Q21 Commentary

Alta Fox Opportunities Fund commentary for the third quarter ended September 2021. Q3 2021 hedge fund letters, conferences and more Limited Partners, In Q3 2021, the Alta Fox Opportunities Fund (“the Fund”) produced a gross return of -0.91% and a net return of -0.99%. The Fund’s average net exposure during the quarter was 75.58%. Since […] Alta Fox Opportunities Fund commentary for the third quarter ended September 2021. .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Limited Partners, In Q3 2021, the Alta Fox Opportunities Fund (“the Fund”) produced a gross return of -0.91% and a net return of -0.99%. The Fund’s average net exposure during the quarter was 75.58%. Since inception in April 2018, the Fund has produced a gross return of 621.94% and a net return of 419.08% compared to the S&P 500’s return of 73.88%, the Russell 2000’s return of 50.75%, and the Russell Microcap’s return of 56.74%. As always, Alta Fox strives to ignore short-term price fluctuations and instead focus on the intrinsic value growth in our portfolio holdings, which should converge with portfolio performance over time. We encourage limited partners to do the same both in times of outperformance and underperformance. I firmly believe that in the long run, our strategy of buying high-quality and underfollowed businesses at cheap prices will deliver attractive absolute and relative returns. Most importantly, our process will remain disciplined with strict risk controls, minimal gross leverage, and a sound research process. Research Process Review Relative to recent quarters, Q3 2021 felt uneventful. We experienced lower volatility in the portfolio, a few winners and losers, but in the end, we basically finished where we started—with the net return modestly down for the quarter. With mostly strong fundamental performance from our portfolio companies and a weak environment for small-cap stocks, we are generally satisfied with this quarter’s results. While we actively avoid pontificating on macro-related news and instead focus on quality bottom-up fundamental analysis, it is impossible to ignore some developing market risks. In a rather short period, COVID has gone from a daily national headline to a sobering backdrop in most states, trillions of dollars of liquidity have been pumped into the economy through unprecedented measures, and the stock market has roared higher, with the S&P 500 up more than 15% though Q3 and 20%+ YTD. From a bottom-up perspective, it is our opinion that the opportunity set across market caps and styles seems less attractive today than at any point in the last 18 months. The shock and uncertainty from the onset of COVID in 2020 led to a significant selloff in almost every area of the market, including quality businesses that were benefitting from COVID trends, thereby creating opportunities for nimble stock pickers. However, recent market strength has seemingly done the opposite, and most companies’ valuations have increased to levels that are likely to yield mediocre annualized returns for the associated risk. Moreover, we question aspects of both current fiscal and monetary policy and have deep concerns about broken supply chains causing significant business disruptions ahead of a pivotal Q4 for many industries. Of course, even in a potentially frothy market, there are attractive off-the-run opportunities, and we are working hard to find them. We remain net long the market (albeit at the lower end of our normal net exposure range), and we own a collection of fantastic businesses that we expect to compound earnings at attractive rates of return. However, our portfolio’s position is more conservative today than it has been in quite some time. We will not sacrifice our underwriting discipline or lower our return thresholds because of the market’s current exuberance. While it is frustrating to turn over rock after rock only to pass because of valuation and then watch the market send that same security roaring higher, we are confident that maintaining our underwriting discipline is the right long-term strategy. We have high conviction that our growing watchlist of securities will eventually yield actionable investments. Alta Fox is playing the long game, and our disciplined and rigorous research process should help us capitalize on extraordinary opportunities while mitigating permanent capital loss during market drawdowns. Select Investment Commentary In July, we published our research on IDT Corporation (NYSE:IDT). IDT is the investment we have spent the most cumulative research time on this year. Researching this business has been a fascinating deep dive into various operating businesses and a management team and Board that we believe are some of the greatest capital allocators of all time. In September, we announced a private deal to purchase 2.5% of NRS, a subsidiary of IDT, for $10 million. For reasons highlighted in our original IDT report, we believe NRS has the potential to be worth a couple of billion dollars in a few years, multiples of the entire IDT enterprise value today. In August, we published research on Victoria PLC (LON:VCP) which remains one of our largest holdings today. The business has an excellent Chairman, Geoff Wilding, whose mission statement is “to create wealth for our shareholders.” Wilding has successfully executed his mission statement to date, having compounded total shareholder return at VCP over 50% per year since he became Chairman in October 2012. In September, we exited VQS entirely and highlighted our reasons in this thread. While any loss is painful, we do not stick around if our thesis is impaired. In this case, we strongly disagreed with the significant dilution that was taking place to execute on management’s business strategy. For this reason, we cut our losses, moved on, and redeployed capital to higher conviction names. Regarding the opportunity set today, we are spending more time on industrials than we have in recent memory while patiently waiting for many asset-light compounding gems to return to more attractive valuation levels. Business Updates Given capital inflows and strong strategy performance year-to-date, we have temporarily closed the Fund to new subscriptions. Although we do not believe that we are close to the upper bound of the strategy’s capacity, this fundraising pause will allow us to assess any capacity constraints as market conditions change. It will also allow us to digest our growth and pursue our goal of being world-class across all aspects of the business. This pause is in line with our commitment to generating the highest risk-adjusted returns for our investors. Even though the Fund is currently closed, we remain open to speaking with investors who understand our strategy and are long-term focused. Please note that the effective minimum initial investment is $1.0 million, and due to regulatory requirements, the Fund will only be available to Qualified Purchasers. In Q3, we also added to our operations team and welcomed Noah Peppler as the firm’s Controller. Prior to joining Alta Fox, Noah was the Controller at Yieldpoint Stable Value Fund, where he managed all firm operations. Before Yieldpoint, Noah was a financial analyst at Satori Capital, where he worked directly under the firm’s CFO and was involved in aspects of both the private equity and alternative investment business units. Noah’s contributions will allow us to continue to service LPs in-line with the highest standards, and we are thrilled to have him on the team. Conclusion We are humbled that you have elected to invest a portion of your assets with Alta Fox. We continue to strive to improve all aspects of our research and operational processes in our pursuit of building a world-class investment firm. Sincerely, Connor Haley Updated on Oct 29, 2021, 4:01 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 30th, 2021

Alluvial Fund 3Q21 Commentary: P10 Goes Public

Alluvial Fund commentary for the third quarter ended September 2021, discussing the IPO of P10 Holdings Inc (NYSE:PX). Q3 2021 hedge fund letters, conferences and more Dear Partners, Alluvial Fund Performance I am happy to report Alluvial Fund enjoyed another strong quarter, up 8.5% as small-cap and micro-cap stock indexes struggled. To date, it has […] Alluvial Fund commentary for the third quarter ended September 2021, discussing the IPO of P10 Holdings Inc (NYSE:PX). if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Warren Buffett Series in PDF Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Dear Partners, Alluvial Fund Performance I am happy to report Alluvial Fund enjoyed another strong quarter, up 8.5% as small-cap and micro-cap stock indexes struggled. To date, it has been a very good year for our enterprise. It feels good to see the market validate the thought and effort that has gone into building our very unusual portfolio. Much more commonly, the market treats our holdings with a disinterest bordering on disdain. Therein, of course, lies the opportunity, but it is not an enjoyable environment to occupy. It’s nice to have a strong quarter, just like it’s nice when your favorite baseball team wins a game or a series. But just as a strong quarter does not make a successful investment, winning a game or a series does not bring home the pennant. (As a fan of baseball’s sorriest franchise of the modern era, the Pittsburgh Pirates, I know this well.) I am enjoying our recent success as much as anyone, but I won’t let it distract me from the disciplined pursuit of long-term results, whatever ups and downs we may experience. A Market Debut For P10 Inc. And downs arrive in due course. For quite a while, I have been anticipating the day when our largest holding, P10 Inc., would conduct an IPO and up-list its shares to a major exchange. The day has come! Unfortunately, the company’s IPO has arrived with more of a dull thud than a splash, pricing below the indicated range. I can think of multiple reasons why the IPO failed to live up to expectations. It was a small offering, with the company and insiders looking to raise only $300 million or so. The shares being offered have little voting power, meaning buyers will have no ability to affect the company’s governance or strategic direction. Despite P10’s success thus far, it remains a new and unproven company, and a small one in the context of public companies. Whatever the reasons, this represents only a temporary set-back, not a change in narrative. I remind myself that at the IPO price of $12 (postreverse split) P10 shares have returned to where they traded just six weeks ago, before rumors of an IPO began to circulate. And compared to then, P10 is now better capitalized, more profitable, and an SEC-reporting NYSE company. At $12, shares of P10 offer remarkable value. Following the IPO, P10 has a market capitalization of $1.5 billion and debt of $180 million. Within six months, P10’s fee-paying assets under management should reach $17 billion, resulting in annual revenue of $170 million and normalized cash operating income of $94-102 million. Against this, P10’s interest expense will be around $11 million, resulting in free cash flow of $83-91 million, or 66-73 cents for a free cash flow yield close to 6%. Remember that P10 has virtually no need for capital expenditures and will not pay cash taxes for quite some time thanks to its large net operating loss carryforwards. This is my near-term outlook, but I believe P10’s free cash flow per share will climb past $1 in short order. Under the current capital structure, this would require assets under management to climb to $23 billion, a figure that I expect to be achieved inside of two years from a combination of internally generated AUM growth and ongoing acquisitions activity. P10’s business is among the best I have ever seen. It is supremely predictable and robust through all economic conditions. Its margins and returns on invested capital are tremendous, as is its runway for growth. I have confidence in the leadership of Robert Alpert and Clark Webb, each of whom has over $170 million at stake in P10 and his career and reputation on the line. 17x nearterm free cash flow is a bargain price to pay for a firm that could be worth multiples of its current value just a few years hence. P10’s underwhelming IPO is a short-term detour that costs us a little, but nothing about the longterm story or investment thesis has changed. Dips and declines are a fact of life in investing. This is the fourth or fifth time that P10 has fallen 20% or more since we have owned our shares, and it will not be the last. From time to time, I have sold some P10 shares for risk control purposes or to fund other opportunities. I had planned to let more shares go if the IPO priced in the high teens, but at $12, good luck to anyone trying to pry them from my fingers! Telcos: Comings And Goings Communications, as usual, remains an important theme for Alluvial Fund. Broadband is the new electrification. Much as the early and middle 20th century saw electricity reaching remote and rural areas, the story of our era is high-speed internet becoming available to most of humanity for the first time. Broadband, whether provided by traditional incumbent telcos and cable companies or upstarts like satellite providers and fibercos, is simply indispensable for participating fully in modern social and economic life. I believe providers of modern communications infrastructure should be valued much like gas, water, and electric utilities. It seems the market is slowly coming around to this view, particularly for our Italian fiber companies, Intred SpA (BIT:ITD) and Unidata SpA (BIT:UD). Both are up handsomely this year on growing revenue and excellent cash flow, and each continues to have a remarkable growth outlook at Italy races to catch up with its Western European peers. Intred will soon begin receiving revenue related to its winning tender to provide over 4,000 schools with broadband. Unidata’s joint venture with the Central Europe Broadband Fund will see the company invest in greenfield projects in suburban, exurban, and rural areas in the Rome metropolitan area. While each company remains a good valued, Unidata is the more attractive of the two and I have sold some Intred shares in favor of Unidata. On the domestic telecom front, LICT Corporation (OTCMKTS:LICT) just keeps performing its usual routine: generating cash, reinvesting in the business, and buying back stock with the excess. On a yearover- year basis, LICT repurchased 3.4% of shares outstanding. I expect the same or more this year. Meanwhile, LICT’s strategic review continues. The most likely outcome appears to be a spin-off of the company’s Michigan assets, which are cable-heavy and should trade at a reasonable multiple. Last week, LICT disclosed it had received an offer to buy the entire company at a premium, but that the offer was insufficient. I value LICT shares at $35,000-$40,000, and significantly more if the company is successful in buying back substantial additional shares. We are parting ways with our other domestic telecom, Nuvera Communications Inc (OTCMKTS:NUVR). Not for any particular failing by the company or concerns about valuation, but rather a loss of credibility. Over the years, management has assured me repeatedly that Nuvera would step into the spotlight, quit being the “quiet company” and begin telling its story to investors. Also, that the company would be active on the acquisitions front. Here we are, years later, with no changes and no activity. Nuvera still eschews press releases and any other attempt to build familiarity with investors. Even as Minnesota broadband mergers and acquisitions activity has heated up, Nuvera has sat on the sidelines. Any of a half dozen recent transactions in Minnesota would have been beneficial for Nuvera, but the company was either uninterested or unsuccessful in acquiring these assets. Meanwhile, the company’s balance sheet is rock solid with debt the lowest since the acquisition of Scott-Rice in 2018. To me, the economic rationale for acquiring assets at 6-10x free cash flow and funding these deals with debt at 4% is unassailable, but Nuvera apparently believes otherwise. There is nothing really wrong with being a sleepy company. Countless tiny banks and utilities operate quietly, serving their communities well and paying regular dividends, but otherwise doing little for shareholders. But companies like these owe it to investors to be honest about their goals and ambitions so investors may value them accordingly. And so, on to the next opportunity, having realized a healthy gain on our Nuvera shares. I don’t doubt that Nuvera will do fine in the coming years, but we are attempting to do better than just “fine.” Special Situations And Other Updates In other disappointing IPO-related news, I was elated see our acquisitive Cleveland industrial holding company, Crawford United Corp (OTCMKTS:CRAWA), file for an IPO in August only to withdraw the filing earlier this month. Crawford intended to use the IPO proceeds to strengthen its balance sheet and fund additional acquisitions. The company did not comment on the development. I suspect Crawford may be feeling the effects of the tight labor market and higher raw materials costs, which will put pressure on short-term results. Whatever the company’s short-term results may be, its long-term value will be driven by its ability to identify and acquire attractive manufacturing assets. Costrelated stresses on small manufacturers could actually prove a boon for Crawford if it enables them to acquire assets at lower valuations. It was a mixed quarter for our special situations investments. On one hand, Pegroco preferred shares moved up as the Swedish investment company reported strong results and prepared for the IPO of its largest holding, Nordisk Bergteknik (STO:NORB-B). The preferred shares are now trading just under face value. I expect the company to catch up on its dividend arrearage in the next few quarters. Plenty of upside remains. On the other hand, Series D preferred shares of Wheeler Real Estate Investment Trust Inc (NASDAQ:WHLR) trended slightly downward. The company and certain shareholders are at loggerheads over the treatment of Series A and B preferred shares, with a large holder threatening litigation. The most likely scenario in the months ahead remains a large repurchase of the Series D preferred shares, though it is also possible that a negotiated exchange agreement is reached with holders of the various series. Wheeler’s underlying properties must be worth at least $390 million or so for Series D preferreds to be worth at least their current trading price of $16. That is equal to 87% of gross property value and an implied cap rate of 9.5%. Wheeler’s grocery-anchored strip malls are nobody’s trophy assets, but they produce cash flow and are worth more than that. With a hard catalyst in the 2023 conversion option on the Series D preferreds, I am willing to wait for resolution. Markets may be at all-time highs, but I continue finding plenty of value in small, off-the-run companies and overlooked markets. Lately, I have identified several promising opportunities in Poland, where vibrant, profitable, and growing companies trade at one-third or less the multiples that similar companies fetch on US exchanges. More than one US post-bankruptcy/postrestructuring situation is wildly cheap, as well. I am adding to these holdings as the market allows. Expect more detail in the next quarterly letter. Thank you for your confidence in Alluvial. As always, I appreciate the opportunity to manage capital on your behalf. I know your investment represents years of hard work and prudent investing, and I will do my utmost to be a responsible steward of that legacy. The entirety of my family’s investable assets are invested in Alluvial Fund. I had planned to host some sort of partners’ gathering in New York this autumn, but I have decided to forgo any such event out of an abundance of caution. Perhaps I will see many of you in the spring. My associate, Tom Kapfer, and his wife Bailey welcomed a baby girl last month. All are doing well! Tom also passed level 2 of the CFA exam earlier this year. How he did it while juggling a fulltime job, house, and growing family, I do not know. It was certainly easier for me to pull off as a 20-something single guy sitting in my cheap apartment most evenings. Congrats! I remain available to discuss the portfolio in greater detail at any time. Please don’t hesitate to call or e-mail. And if you find yourself in the greater Pittsburgh area, dinner is on me! I hope you and your families are well, and I look forward to writing to you again in the new year. Best Regards, Dave Waters, CFA Alluvial Capital Management, LLC Updated on Oct 28, 2021, 2:16 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 28th, 2021

Interview With Robinhood CEO Vlad Tenev From The CNBC Disruptor 50 Summit

Following is the unofficial transcript of a CNBC interview with Vlad Tenev, Robinhood Co-Founder & CEO, live during the CNBC Disruptor 50 Summit today. Q3 2021 hedge fund letters, conferences and more Interview With Robinhood Co-Founder & CEO Vlad Tenev JIM CRAMER: Thank you so much, Vlad. I am so glad you’re with us. How […] Following is the unofficial transcript of a CNBC interview with Vlad Tenev, Robinhood Co-Founder & CEO, live during the CNBC Disruptor 50 Summit today. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Interview With Robinhood Co-Founder & CEO Vlad Tenev JIM CRAMER: Thank you so much, Vlad. I am so glad you're with us. How have you been? VLAD TENEV: I'm glad to be with you, Jim. Good to see you again. CRAMER: Alright, so let's get the zeitgeist of Robinhood. When I first met you, had a great app, you thought that people would be attracted to, it younger people. Younger people have been completely turned off from the market for years. Where are we now between when I saw you as a disruptor multiple years ago and your current status of business? TENEV: Well I think it's fair to say that investing has become culturally relevant. It's everywhere. People are talking about investing like they do their other financial needs – spending and saving. And Robinhood has grown tremendously. Over 22 million customers use the platform as of Q2 and, you know, despite the growth, we still feel like we're just at the beginning and there's so many people out there that are still not investing. Over half of Americans don't have any investments outside of their individual retirement accounts or 401ks. And nearly 70% of 18 to 29 year-olds have no investments whatsoever, not to mention a lot of people globally who lack access to a functional banking system. So I think the trends are going in the right direction and we see a huge opportunity to continue democratizing and democratizing safely. And we see a world where nearly everyone is investing in some form or fashion. CRAMER: You and I have both agreed that democratization is the greatest force in finance in this period, but I want to be sure it's democratizing correctly. You mentioned people are investing. If you looked at your book of business, we learned from Gary Gensler, the Chairman of the SEC, this week average customer 31 years old, median account balance $240. How much of that money, and it's all hard earned of course, is in option trading, in crypto trading, or investing in common stocks? TENEV: Yeah, so the bulk of the activity has been investing in common stocks in terms of assets on the platform. Relatively few customers are pattern day traders, I think the number is 2% or so. We have customers trading options, but that's a relatively small percentage as well. A little bit over 10% on a typical month. So, the bulk of the activity is equities. And, you know, we definitely see an increasing interest this year in cryptos as well as that asset has become a little bit more mainstream. And the philosophy is to allow access to these assets at the lowest possible cost, make it available to people on a level playing field, but also do that safely. You know, it's incredibly important to provide the customer support, the stability, the high quality infrastructure and the educational content to make sure that the people that are investing, a large portion of whom are first time investors, are in the best possible position to succeed. So we absolutely believe in democratization. And you've heard me say this a bunch of times, but it has to be done safely and we recognize that responsibility. We've actually spent a lot of effort this year, and all the way through the pandemic, in making sure that we make lots and lots of investments to put our customers in the best possible position to succeed. In fact, just a couple of weeks ago, we announced rolling out 24/7 customer support via voice for everyone using the app and doing that across every issue for logged in customers. And I think it's hard to overstate how challenging it is to do that at scale, and do it in a high quality way. And I believe we also became one of the first, if not the first, in the cryptocurrency market to offer 24/7 voice support to all customers. CRAMER: Well let’s talk about, before we talk about the single source of truth and safety, which I know you have adopted to because you had to after what happened in the events in January. We'll get to those in a moment. How do we, you and I, if we were brainstorming, keep people doing responsible things when it comes to crypto? We've got some cryptos that are named after dogs and then we have actually dog variations. There's mutts, I mean, there's some of this stuff you put to sleep? I’m against that, I own a lot of adopted dogs. But I am concerned that you and I both know that a market itself could be irresponsible and there's nothing you can do. You can't tell people, I don't want you to buy a slice of crypto. How are you engaged in trying to make people more wise and how much of what you see in crypto would you describe as speculation as opposed to investment? TENEV: Yeah, I think this is a tricky balance in the business, right. And, you know, a lot of things that end up being quite serious in a bigger and bigger part of the financial system started out being underestimated and, you know, made fun of and ridiculed in some sense. So I think it's important to have that perspective and be balanced. And the way that we approach it is of course by clearly articulating what our values are. And you've heard me mentioned, our value of safety first, our top value. And, you know, the way we operationalize that through the product is to make sure that of the assets we list, we make it clear to customers what the asset is, in certain cases, this year earlier, we launched information labels on certain assets like volatile, exchange traded products, or companies that have entered bankruptcy or companies or products that are undergoing volatility. So it's important to inform people of what's going on and give people that information and it's a delicate balance because some people, a lot of people, actually do understand what they're doing and they know exactly what these products are, and they'd like to have exposure to them, alongside their other investments. And we have to make sure we allow that and sort of make sure the happy path of people who are responsibly interested in diversifying and having exposure to cryptocurrencies and different assets have the ability to do that through our product and have an excellent experience doing it as well. CRAMER: Alright, I know that is definitely your duty and you're fulfilling it. Let's talk about the report that came out. This is the staff report on equity and options market structuring conditions early 2021. I’m calling it the report. You and I have both read it. I want to dive into my first takeaway is that a lot of people who felt that there was a vast conspiracy of people – Citadel, for instance. You, me. That we were all somehow in on it to hurt people. I think that this report represents a complete vindication of that and if you feel that way, tell me why you think so. TENEV: Well, of course. You and I probably already knew that. And there's a lot of people on the internet that are going to be difficult to convince one way or another. I think, misinformation on the internet has been a big issue of our time. Of course, as I said and a bunch of TV interviews around that time and I know you and I have made it into some memes together on the internet over the last couple of months as well. Which, you know, has it's good and it's bad, as I'm sure you know. But the sort of cause for these restrictions that we had to impose, along with other brokers, was crystal clear. It was an unprecedented time where you had lots and lots of people that wanted to invest in a small handful of stocks at around the same time. And you know, the market wasn't really built for that. If you look at the core infrastructure of the market and the clearing and settlement system, and the way that everything works, I'm sure that when everything was built over the course of the past few decades, they just didn't anticipate social media people getting together and funneling money into a small number of stocks. So, I actually, I'm not really making a value judgment on whether that's good or bad. I think people should be allowed to communicate with each other and buy the stocks that they're interested in buying. And moreover I think what's interesting is a lot of these companies a lot of these meme stocks are companies that have been hit hard by the pandemic. You have, you know, retailers, brick and mortar stores. You had the airlines getting the attention of retail customers in the early part of the pandemic. And you could argue, you know, the government hasn't stepped in to help them in this difficult time, and retail investors have come in and supplied them with capital and allowed them to grow their management teams. So it is a very interesting thing that I don't think we've entirely unpacked. But I did appreciate that the report mentioned my policy suggestion of shortening the settlement time. I think regardless, that's the right move for the industry, and the right way to move forward our financial system and reduce systemic risk. So, I was really happy to see that, alongside a number of other policy proposals that Robinhood and myself personally have made. CRAMER: Now they didn't really – when I spoke to Chairman Gensler it was clear that he is concerned about two issues we have to speak about. One is payment for order flow and whether people know about it and the other is the game like features. Now I was out last night with a big Robinhood fan. 19 year old gentleman. And I said what draws you to Robinhood? And he said, because the app is so much like Candy Crush. It was not the answer I expected. Is the app too much like Candy Crush, Vlad? TENEV: No, I think that's – as someone who played Candy Crush maybe 10 years ago or so, I can tell you that I don't see any similarities whatsoever. And I will say this – CRAMER: But the customer can’t always be right. Maybe something needs to be done to dissuade people from thinking this is as easy and as fun as Candy Crush because I've not seen people borrow money and lose money on Candy Crush. TENEV: I think it's important for it to be easy and accessible, and there's a big difference between that and so called gamification. And if you look at Robinhood right now, we do pride ourselves on having a simple onboarding, on having pioneered a cost structure and a business model with no account minimums and no commissions that has brought in a ton of new investors, a lot of whom are from diverse backgrounds that otherwise wouldn't have been even thinking about investing. And that's something we're incredibly proud of and we stand behind. I think it's a very, very powerful force. And there is this notion that you hear thrown around that, you know, when wealthy people or institutions are buying stocks, then that's investing. But when poor people do it, it's gambling. And I think we just have to move away from that. I think we reject that. We're proud of bringing all these new customers in. We're also proud of the educational content and a lot of the recent features. You know, not just the 24/7 support, but improvements we've made in app learning modules. CRAMER: I could not agree with you more. TENEV: Go ahead. CRAMER: I have spent an inordinate amount of time in my life trying to explain to people that just when someone – just because someone who doesn’t have any money is trying to make something of themselves in the stock market does not mean they are fools. That does not mean they don't know what they're doing. And until you came along, I felt no one in the industry believed in me. And that's one of the reasons why I've supported you from the day I met you. Because you do want to give people a chance. You do not discourage. Now shouldn't it be celebratory? I don't know. Should confetti go down? TENEV: Amen. CRAMER: What matters is that you have – you do not look down upon people who aren't that wealthy. Now sometimes I think, and my wife does too since she met you, think that perhaps it's because it’s your immigrant upbringing. Some of it is because I think you're just a good guy trying to get people involved. And some of it is because you realize technology can – a lot of barriers. At the same time, there are issues that the Commission brings up. Issues about like payment for order flow, where to me, it would seem like you're willing to tell anybody anything. I mean, you're willing to inform. You have become a person involved with safety and truth. Should you just give everybody a caveat that just says look, you know, there's other ways to trade, you can pay commission, some people think you get better. I don't know if you get better. We think you can get better. Something that indicates that the Commission's issues about this payment for order flow could go away and instead we focus on the fact that there are 22 million people who are trying to make something of themselves. TENEV: Well, I'll put it this way. I think that payment for order flow and digital engagement practices are what you call gamification in the report. It was a little bit confusing to me to see it in there because first of all, it had nothing to do with restricting the handful of stocks that were restricted in January. So it was sort of like a policy position that was kind of thrown in there a little bit as an aside with no connection to the restrictions or the underlying issues and I think the rest of the report supported that. I think some of the criticisms of payment for order flow, and the business model, frankly, don't make sense to me. I mean, you look at what the industry was like three years ago, pretty much all of the large brokerages were charging commissions and making revenue from payment for order flow as an addition, right. And Robinhood forced that to zero. Forced Commission's to zero and the payment for order flow model has become kind of the standard transaction base model for offering brokerage services in that space. And alongside that, you've had the best conditions for being a retail investor ever. By far the lowest cost of execution, across the board, whose spreads have been have been tighter. And I think it's a great time to be a retail investor in America and there's actually a lot of competition. Now I will say, I do support – I came out with a policy proposal a couple of months ago about the Sub-Penny Rule, and there has been some criticism about whether our exchanges can fairly compete with off exchange market makers like Citadel securities and Virtu. And I think there are opportunities to make the system better and to encourage more flow to go to the exchanges, and to strengthen the NBBO, and I think we should look at doing that. But I think the – CRAMER: Well, remember, we don't want people running ahead. We don't want rich people running ahead of the people who are trying to make something of themselves, correct? TENEV: We certainly don't want to do that, but I think by and large, this business model has helped pioneer commission free trading and make it possible. And certainly what we wouldn't want is the return to a commission structure in the industry that'll just keep people out especially those people of lower incomes and less means. CRAMER: Now how – if you were to look at the breakdown of what kind of common stocks people are buying, how much are these stocks that are say jumping 50% in one day – more than even GameStop – and how much are these days because we don't get to see them run like we used to. And I used to love that run. Where people are buying the great American industrials or they're buying the FAANGs, or buying fractions of the FAANGs because they cost too much. What is your –  just if you want to break up the mosaic of what you're seeing, how many people are really investing in America? TENEV: Well I think a lot of people are interested in buying the stock of companies that they believe in. You know, companies that make products that they use and understand. So you'll have, you know, the big technology companies, the consumer companies that are among the 100 most popular at Robinhood at any given time. And that's actually, you know, some information that we provide for customers within the app. There's also, you know, certain events that happen, so cryptocurrency entering the mainstream this year I think got a lot of people interested in cryptocurrencies and we offer seven different coins on our platform. And from time to time, you will see sort of shifts from one sector to another. When I was on your show last year – CRAMER: Is bitcoin the most popular? Or are they starting to buy like the dogecoin? The cocker spaniel coin, whatever it is. I mean, where are they – are they buying like the most steady of them? Or you're seeing people buying whatever is the least -- lowest value? Lowest dollar value. TENEV: You will have a range of activity. I think, generally speaking, people do buy larger companies, especially with fractional shares now making those companies more accessible, you'll see people investing smaller amounts into these companies, and with some of the tools that we've rolled out like recurring investments and drip, you'll see people automating a lot more of that activity, and actually dollar cost averaging into these names so that they don't have to watch day to day and keep track of the prices so closely. CRAMER: Okay, we like that. Are they dollar cost averaging into things like what people are chatting about Shiba. Now I feel somewhat embarrassed to say that they're talking about Shiba, but that's what they're doing. Are you seeing Shiba being traded? Is it on your platform? Or will you recognize it on your platform? TENEV: Well, I’ve heard a lot of people in that community – CRAMER: Are you thinking about adding it? TENEV: We actually don't offer. CRAMER: You don’t. TENEV: We only offer seven coins currently. And I think it goes back to safety first, right. So we're not generally going to be the first to add any new asset. We want to make sure that it goes through a stringent set of criteria. And, you know, we're very proud of our cryptocurrency platform, and giving people more utility with the coins they have. As a matter of fact, we rolled out our wallets waitlist. A lot of people have been asking us for the ability to send and receive cryptocurrencies, transfer them to hardware wallets, transfer them onto the platform to consolidate. And you know, the crypto wallets waitlist is well over a million people now, which is very exciting. We see an opportunity to continue growing that business. CRAMER: There was this bad old days period that fortunately did not last long, where there was kind of a, let’s call it a hate Vlad movement. And I'd like to think that the hate Vlad movement actually peaked on the night that you were willing to go on Twitter and debate Dave Portnoy. Where people thought you would be a no show. People thought that you didn't feel that safety had become paramount. That you were gamifying or whatever. And you showed. And it pretty much ended. Do you see that the way I did? TENEV: Well, it's been certainly an adventure over the past nine months, you know, to put it mildly – CRAMER: What do you mean? What are you, a diplomat? Give me some old Vlad, will you? Give me some old Vlad. Like the pre-Marc Benioff Vlad. I mean the guy who says yeah well I showed up I was willing to take the heat because I knew I did nothing wrong. What happened to that Vlad? TENEV: I'm surprised my hair is still dark and I don't have I don't have grays or it hasn't fallen out, put it that way. CRAMER: Watch yourself. You know, we don't like that our show. But no I mean, it did peak. And I think it peaked because you recognized that things – you didn't want things to get out of hand. I remember in the midst in the darkest moment, you were saying, look, no system was built for this. Which is true. That was one of the things that came out in the report. But I think that your democratization got challenged. And you never wavered, but you did have to change what was the most important value. And since you've done that Vlad – have you noticed that Vlad Tenev has become and Robinhood have become major I don't want to say you're, I hate to say this, but you're not a disruptor anymore. You're the norm. Do you mind being the norm? TENEV: I think there's always opportunities to continue along our mission, and, you know, I know that a lot of people talk about Robinhood as being a disruptor, and we certainly have been. We changed the industry and people used to be paying commissions and now we're not anymore, but I don't think that's done by any means. I think that, you look at cryptocurrencies, for instance, people are still paying 3%, 4% fees to access that market. You see a lot of opportunities to serve more customers that have even less money, who are even more underserved than the people we have now. So I think the mission has always been to democratize finance for all and to do that safely. And, you know, in some cases that might require disruption, in other cases is just going to be continual improvements to the product and just getting, you know, getting better and better each and every day with things like 24/7 support, improving our educational content, and really just helping customers be successful on the platform. I think that's a big part of it and we have really made incredible strides. I mean, the team has been working very, very hard to make the platform as reliable as possible for it to stand up to heavy volume and days where customers need us most. And to be there for customers if they need help, specifically for the first timers who can benefit the most. CRAMER: If you’ve got this set up – you’ve got the robust system, you've got 24/7 help, which most people don't. Is it time to start thinking bigger? For instance, right now we're hearing that perhaps PayPal is going to merge with Pinterest. But we see what some of the companies are doing – Square is doing. Not willing to be bound by the initial mission. I think that you have 22 million people who want more from Robinhood. Maybe they want to get some of the things that SoFi has, some of the things that Square has, is it time to be thinking about the next big leg up for Robinhood? TENEV: Well I think that there's always an opportunity to keep serving our customers and we have been expanding quite a bit over the past few years, especially getting into becoming one of the first to offer cryptocurrency trading, sort of, alongside traditional asset as a brokerage, our cash management product which allows customers to earn high yield and spend. And then, with cryptocurrencies, getting more into cryptocurrencies as a means of transacting with our new wallets waitlist that we announced and are rolling out shortly. So we're going to continue to do these things. I do think that investing and making people owners of our global economy is an incredibly powerful thing. And despite all the progress that we've made, there's still a lot of people that don't invest, and we see it as being very, very important to serve those people. I think it's not just good for them in their wealth building but also important for society. A society where more of us feel like owners in the common enterprise is one that's just going to be healthier. And I think, you know, we started this company in the wake of the financial crisis, there were a lot of protests, a lot of people were unhappy at the status quo, and just felt like the financial system wasn't working for them. And hopefully, bit by bit we can improve that and make it an inclusive system and one that really serve the needs of the people, as well as it possibly can. CRAMER: I know Chairman Gensler was very concerned about suitability. You have 1 million people who are 19. What do we tell the 19 year-olds to be sure that they understand that they're doing something that is in keeping with their suitability which by the way Vlad, they may not even know the word. How do we get 19 year-olds to be investing what you and I would say responsibly and not blow their heads off on shorting calls? TENEV: I think it's the things that we've been building and of course suitability is – there's very strict rules by FINRA and brokerages have to follow them, and Robinhood is always committed to following the rules of the road there. There's also educational content. You know, I think, investment products are not suitable for everyone. They involve risk, especially when you're talking about options, and having people understand the risks and understand all of the information of how they work, assuming they’re willing to take those risks and are suitable is something that's incredibly important as well. So we are continuing to do a lot more in product and through Robinhood Learn to educate people. CRAMER: Yeah, that's why we started our investing club here. Right because people don’t get enough. I think that, you know, we do investment club basically just to be able to teach. And I think that you're doing teaching now and I think it's absolutely terrific because we need to do that because we don't, as much as we're thrilled that you have – the average customers age 31, we've got to get this median account balance up to 240. Now how do we do that? And do these people own mutual funds away or index funds which I think is a very responsible way to start investing. And then they use their so called Mad Money $240 with you. Have you seen that grow? I mean, because you know that's not enough. And we all work hard. I started with $200. I know you started with nothing, which it is terrific to start with nothing. But I do believe that we need to get that balance up and I'm trying to figure out how to make people wealthier. How do we make people wealthy? TENEV: I think the best way to do it is to have a long term perspective and put aside a little bit at a time and really start young and you'll see kind of the magic of compounding and compound returns happen over a longer period of time. And I think there's ways we can continue to make that process easier with recurring, with drip, with fractional shares, we have a lot of the building blocks. And, you know, we're excited to see more and more people adopting those products and we believe that in the future, they'll be a larger and growing percentage of the activity on the platform. CRAMER: Now is the average investor, making I don't want to call it necessarily progress, but I would like to see the average investor not just suddenly go crypto. I mean are you saying people –people used to be say 90% stock, now 90% crypto? TENEV: It's certainly an interesting trend. I think there's certain advantages that crypto has for especially interoperability, and the ability to be global by default. So, you know, regardless of where you are in the world whether you're in the U.S. or overseas, you can have a wallet, you can send people cryptocurrencies from that wallet to their wallet. And so there there's certain advantages that are in the technology that make it kind of global and accessible by default and that makes it very interesting. Now of course, we also have, you know, the equities market in the US has really been where the best companies list over time. It's been a tremendous source of wealth creation, and there is an opportunity to kind of make that easier and make that more accessible as well. So I, generally agree with you, I think it's important for people to be diversified, for them to build up portfolios over time and invest for the long term. And you know what that specific mix is, I think, you know, we can probably debate, but crypto certainly is here to stay as an asset class, and the ease of use and the global nature of it, I think, has made it attractive to lots of people, not just in the U.S. but overseas in particular what you are seeing is very interesting. CRAMER: But Vlad, people are starting to come back to work. It's also football season, which is a DraftKings FanDuel situation. Are you seeing fewer people sign up? Is the app going down in popularity at all? As people then switch to football gambling, we know that – we're not saying that they're doing Robinhood  gambling with the football game, but these are various ways that people want to be able to make money. And the return to work means that most people can’t sit there and trade or invest during the day. Are you seeing those two trends which is gambling and back to work, cutting into the growth of Robinhood? TENEV: What I've always said and, you know, I think in our last conversation you've heard me say this as well. We're not paying too much attention to short term trends. The way that we're going to make progress and serve our customers and go after this opportunity of making as many people long term investors as possible is by focusing on the products. And so we're going to continue to roll out new products, improve the service, make sure that it's as easy as possible for first time investors to become long term investors and get all the support that they need. So, you know, whether short term fluctuations, Covid, reopening not something that we're going to spend too much time commenting on. CRAMER: By the way, did you see former President Trump’s SPAC today? Up 40 points. Do you follow any of these trends that some of the younger people really get a kick out of, too? TENEV: I heard about the product, the new social media platform. But I haven't been watching the stock too closely. CRAMER: No, no, it's a what I call a newer public offering, so to speak. Definitely newer. Well Vlad, look. I think you've come through Hades and back. I love the theme that I know you do care about passionately is safety. Any last words for people who are young who are watching who are thinking about taking the so called plunge into common stocks? TENEV: Yeah look I think that it's important to invest for the long term and to be educated. And we want to make sure to meet our customers where they are, and especially for young people, a lot of that educational content has to be contextual. It has to be in the form that customers expect. And we're going to continue to provide that through Snacks, on Snap and in in-product, which is our podcast and newsletter. We're going to continue to increase the tools and the functionality and the support that's available to customers. And we're going to continue to roll out products that democratize finance safely by giving you the lowest possible cost that we can offer, and the lowest barriers to entry with a great experience. So that's what Robinhood is all about and over the coming decades, I think we'd like to see more and more people globally become investors and we'd like to be a part of that and really driving that transition to where everyone becomes an owner of our economy and our society. CRAMER: Well I want to congratulate you for everything. For being 2021’s top disruptor, for the journey you have taken, for the maturity that we all had to have because so many new people have come in. And for your advice and counsel, particularly as far as I am concerned, in light of what happened at the end of January, shows that you never lost the flame. Some people thought you did. The report vindicates you. And I'm thrilled that you came to our Disruptor conference and to Mad Money. And it's always good to see you, Vlad. TENEV: It's always a pleasure. Thank you. Thank you for the time, Jim. Updated on Oct 22, 2021, 10:21 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 22nd, 2021

When To Buy And Hold A Stock Versus When To Sell

Whitney Tilson’s email to investors in which he discusses knowing when to buy and hold a stock versus when to sell. Q3 2021 hedge fund letters, conferences and more When To Buy And Hold A Stock Versus When To Sell In my last four e-mails, I discussed how I found, analyzed, invested in, sized my […] Whitney Tilson’s email to investors in which he discusses knowing when to buy and hold a stock versus when to sell. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more When To Buy And Hold A Stock Versus When To Sell In my last four e-mails, I discussed how I found, analyzed, invested in, sized my position in, and, for nearly 18 months, didn't sell my position in SandRidge Energy Inc. (NYSE:SD). As I noted earlier, it was one of my most successful investments ever: I just closed out the position over the past week for a 544% gain in less than 18 months – which is almost 10 times the 56% return of the S&P 500 Index. I had planned to wrap up my discussion today of this beautiful case study by sharing why I decided to exit this position. But that will have to wait until tomorrow because I first want to discuss in general terms the critically important topic of when to hang on to a stock versus when to sell. As I concluded in yesterday's e-mail, getting this decision wrong on a handful of occasions were some of my biggest mistakes: ... in my nearly 18-year hedge fund career, [I too often truncated] my big winners far too soon. (I shared the three most painful examples, Apple (AAPL), Amazon (AMZN), and Netflix (NFLX), in yesterday's e-mail.) This type of behavior by active investors is absolutely deadly. Numerous studies have shown that a handful of huge, often unexpected winners drive a large percentage of the total gains in any long-term stock portfolio. But if in "practicing prudent portfolio management" or "not being greedy," you're trimming or exiting these monster winners far too early, it will crush your long-term performance. That's one of the reasons why the vast majority of investors trail passive index funds like the S&P 500, which, if you think about it, let their winners run forever. But here's the thing: This approach only works with a very small number of stocks. If you want to practice "buy and hold" for years (if not decades) of investing – what Charlie Munger calls "sit on your ass investing" – then you need to be able to identify companies that have long runways and huge moats that can grow and grow and grow. The All-Time Greats Above I mentioned three of the all-time greats, Apple Inc (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Netflix Inc (NASDAQ:NFLX). Off the top of my head, others that I would put on the list include Berkshire Hathaway Inc. (NYSE:BRK.B), Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:FB), Visa (NYSE:V), Mastercard (NYSE:MA), Nike (NYSE:NKE), Walmart (NYSE:WMT), Costco Wholesale (NASDAQ:COST), Brown-Forman (NYSE:BF.B), Salesforce (NYSE: CRM), McDonald's (NYSE:MCD), Johnson & Johnson (NYSE:JNJ), Procter & Gamble (NYSE:PG), Nestlé (SWX:NESN), Home Depot (NYSE:HD), and Adobe (NASDAQ:ADBE). That seems like a long list, but in reality, stocks like these are only a tiny fraction – less than 1% – of the more than 4,000 publicly traded companies in the U.S. – and more than 10 times that number globally. So if you find one of these rare gems, my advice (which I wish I'd followed in my hedge fund career!) is to hold on, almost irrespective of price. Don't try to be too smart and cleverly trade their stocks – you are almost certain to lose at this game (especially if you're paying capital gains taxes every time you realize a profit). Just let these stocks compound year after year... They'll surely have flat and even down years – sometimes even multiple years! But if you ignore these periods – and you're right about the business – you will be richly rewarded over time if you just have the patience to sit tight. Some investors – Berkshire Hathaway's Warren Buffett and my friends Tom Russo of Gardner Russo & Gardner and Yen Liow of hedge fund Aravt Global come to mind – seek to build portfolios exclusively of these long-term compounders. Therefore, they have a very low portfolio turnover. I do this to some extent in my personal account, which today is 32% in cash and 68% in stocks. The latter is half in an S&P 500 index fund and the balance in a dozen stocks. The three largest are long-term compounders. But the others are a hodge-podge of stocks that have the characteristics of mispriced options (like SandRidge) or lower quality businesses where the stocks are way too cheap, in my opinion. (Unfortunately, as a publisher, not an investment advisor, I'm not permitted to name the stocks I currently own.) The latter stocks are the ones I know I'm going to have to sell at some point. When Should You Sell? So, when should you sell? In my September 14 e-mail, I shared an excerpt from my forthcoming book, The Rise and Fall of Kase Capital, on this topic. But the short answer is that there are four reasons to sell: 1) You realize you've made a mistake, either at the time of your investment or later because the story changes negatively and unexpectedly. 2) The position grows so large that it hits your risk limits (or just makes you nervous enough that you're losing sleep over it). 3) You're capital constrained and are certain that if you sell, you can reallocate the money (after taking taxes into consideration) into something much better. 4) Your thesis has played out, and the stock fully reflects this (i.e., you've been paid for it). You need to be very careful with each of these because it's easy to fall into emotional traps and sell too early... Regarding 1) Over the past nine years, how many times have there been negative reports or news about Netflix – yet the stock is up 80 times over this period! Regarding 2) If you've identified a great long-term compounder like one of the stocks I mentioned above, I urge you to get comfortable with letting it grow to be a 10% or even 20% or larger position. My friend Chris Stavrou, who ran hedge fund Stavrou Partners for many decades before retiring a few years ago, discovered Warren Buffett in the 1970s and was smart enough to realize that he was a once-in-a-generation investor. He started buying it at $211 and kept buying, even as the stock went up and up over the years. But here's the key: He never sold, even when Berkshire grew to be more than 50% of his hedge fund! To this day, he owns Berkshire shares with an average cost of $1,876. (To be clear, these are "A" shares, which trade above $432,000 – that's a 230-bagger!) Chris was kind enough to say this about me (here's the 40-second video clip): The greatest teacher of investing was Benjamin Graham. He was followed by Warren Buffett and Charlie Munger. Believe me, the third person is Whitney Tilson. He's a natural teacher. Getting Bored Of Holding Stock Regarding 3) It's easy to get bored with a stock you've owned for a while, especially if it's been flat for a while. Still, you are generally well-advised (according to many studies) to resist the temptation to trade it for something new, no matter how shiny and exciting it appears. And regarding 4) If you're smart/lucky enough to own a great long-term compounder, just because it's doubled or even gone up ten-fold does not necessarily mean your thesis has played out. In conclusion, your decision about whether and when to sell a stock depends on your investment thesis and the type of stock and company you're dealing with. If your thesis is: "This is an insanely great business with a tremendous growth runway," then the correct answer about when to sell it might well be never! But for most stocks, you should buy them with some sort of idea of what might lead you to sell them. As my colleague Enrique Abeyta often says, "Plan the trade, then trade the plan." When he says this, it's usually in the context of his short-term trades in his weekly Empire Elite Trader, but the principle applies more broadly as well. In tomorrow's e-mail, I'll discuss my thesis when I invested in SandRidge and why I decided that it had played out sufficiently for me to exit. Best regards, Whitney Updated on Oct 21, 2021, 11:48 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 21st, 2021

Squid Game

Squid Game By Michael Every of Rabobank I presume most readers will have watched or are familiar with ‘Squid Game’ on Netflix. It is excellent: the kind of high-quality, realistic-yet-fantastic drama Hollywood used to make before it focused solely on underpants-and-politics-on-the-outside productions: and wait until its scripts are run through the Gina Davis AI, which can “identify character representation and percentage of dialogue by gender, race, sexual orientation, disability, age and body type.” If only there were an AI for good/original script ideas too. Anyway, I mention Squid Game today for several reasons. One is that while Netflix is American, much of the best content on it is not, underlining what we argued in “The World in 2030” last year - that US cultural hegemony would decline (and it would turn away from neoliberal orthodoxy, as in USTR Tai’s argument for managed trade, for example.) Another is that Squid Game is perceived to about inequality. (A little, perhaps, but it has far larger doses of well-acted character-driven narrative - and buckets of shocking ultra-violence.) Inequality comes to mind when Fed data show 89% of US stocks are now owned by the top 10%, and 54% are owned by the top 1%: so why do the rest of us care what these indices do or don’t do? Likewise, given rising inflation *and* taxes, and labor militancy, is the Bank of England really sure it wants the market to price for future rate hikes so aggressively? Curve flattening is a trend all over, and not one that suggests a happy ending for many players. The RBA minutes today certainly stuck to their script – no rate hikes until 2024. What, apart from a love of unaffordable housing (which they admit higher rates would slow, at the cost of fewer jobs) do they see that the RBNZ and BOE don’t? Another Squid Game analogy is the battle for position within one’s own team. As alluded to before, someone is gunning for the Fed Chair, and yesterday saw news Powell sold up to $5m worth of stock options just before the Dow Jones tanked last year. His on-line betting odds on getting the Chair again keep slipping, and Brainard’s keep rising. That internecine struggle surely also runs through a host of other US media stories of late: “China is ahead of the US in AI”; “China has new hypersonic weapons”; “John Kerry has $1m holdings in a Chinese firm tied to alleged forced labour in China”; “Uighur forced labor is being used outside Xinjiang”; and “US troops are in Taiwan”, etc. The New York Times, both venue and player, has a good summary in an article about why Hollywood never has Chinese villains (‘James Bond Has No Time For China’), noting that within the US: “On the left now you see several impulses. There is an irrelevant but fascinating fringe of very online ‘tankies’ --a reference to the Communists who justified the USSR sending in the tanks to Hungary-- actively championing the Beijing regime. There is a Bernie Sanders left that wants to critique the Chinese regime on trade and human rights, but fears anything that seems like warmongering. And there is a left that thinks the existential stakes of climate change require deep cooperation with Beijing. The center, meanwhile, has lost its optimism about China turning into a democracy. But it’s not sure whether to pivot to confrontation and try to disentangle our economies, or whether globalization makes that disentanglement impossible and so we need, with whatever nose-holding, to deepen ties instead. (This divide runs through President Biden’s cabinet.) The right includes several tendencies as well. There’s a Cold War 2.0 mentality, which fears China as a sweeping ideological threat, a fusion of old-model Communism with 21st-century surveillance technology that promises to make totalitarianism great again. There’s a realist perspective that regards China as a traditional great-power rival and focuses on military containment. And there’s a view that sees China and the US as actually converging in decadence - with similar problems, from declining birth-rates to social inequalities to internet-mediated unhappiness. But for some on the right, that last view comes with a wrinkle, where the Chinese state is almost admired for trying to act against this decadence --as in its attempt to wean young people off the ‘spiritual opium’ of video gaming-- in a way that liberal societies cannot.” The latest New York Times story on this front --'Washington Hears Echoes of the '50s and Worries: Is This a Cold War With China?’-- underlines the views of the hold-the-nose camp, who argue the US and China must not view their struggle as military, and must “compartmentalize”, e.g., co-operate on climate while “jousting for advantage” in the South China Sea. This geostrategic illogic astounds many international relations observers, as does the lack of recognition of what relative defense spending is doing. It’s not the trade logic espoused by USTR Tai either, if she gets a say: a recent Asia Times article argues the recent pattern of US-China trade resembles “the sort of import dependency economists associate with Third World countries dependent on former colonial powers.” (As US industrial production fell 1.3% in September.) But that does not mean the hold-your-nose crowd won’t push more co-operation, as Beijing is already flagging. Meanwhile, Congress is walking a different path, this time pushing a bipartisan bill to counter Chinese economic coercion. That your partner can suddenly become your opponent is another key theme in Squid Game: and it is worth considering given the strain in global supply chains, and the pains over Northern Ireland, where EU olive sausages were perhaps not enough, and now everything needs to be imperial rather than metric just to muddy the waters. The Northern Ireland Protocol is problematic, says BoJo, but “we’ll fix that.” How – via a game of marbles, perhaps? Lastly, Goldman Sachs has now taken 100% ownership of its China securities venture, following JP Morgan’s lead. Goldman is notoriously the firm Matt Taibbi described as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” It certainly knows how to swim: e.g., in the Global Financial Crisis suddenly becoming a bank holding company so the Fed could stand behind it. However, it is now in new waters, and just as China’s GDP growth is slowing: everything that hit Q3 will be worse in Q4, and well into 2022, while the China Beige Book is talking about 2% GDP growth rates in future years, and are not alone. Moreover, common prosperity, which will officially last until 2050, means “coordinating finance with the real economy”, rebalancing between rich and poor regions *and* rich and poor people, while “adjusting high incomes” via floated consumption, income, capital gains, and property taxes. The US this is not. Plus, of course, the Chinese capital account is largely closed, and underlying pressure on the none-shall-pass CNY exchange rate continue to build as structural debt and demographic problems loom. So, back to the Squid Game and market “Red light, green light…” Tyler Durden Tue, 10/19/2021 - 11:10.....»»

Category: smallbizSource: nytOct 19th, 2021

Boyar Value Group 3Q21 Commentary

Boyar Value Group commentary for the third quarter ended September 30, 2021. Q3 2021 hedge fund letters, conferences and more “Cryptocurrencies, regardless of where they’re trading today, Will eventually prove to be worthless. Once the exuberance Wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in Cryptocurrencies.” – […] Boyar Value Group commentary for the third quarter ended September 30, 2021. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Warren Buffett Series in PDF Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more “Cryptocurrencies, regardless of where they’re trading today, Will eventually prove to be worthless. Once the exuberance Wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend anyone invest in Cryptocurrencies.” – John Paulson Stock market investors have a laundry list of worries these days, from partisan bickering over the infrastructure package and a massive social and climate spending bill (amid a high-stakes game of political chicken over the debt ceiling) to supply chain disruptions and a spike in the costs of critical commodities. Geopolitical tensions are escalating between the United States and China—which is undergoing a significant regulatory crackdown—and question marks surround the future of interest rates and the consequences of a future Fed taper. And that’s to say nothing of the coronavirus! So it’s no surprise that investors are on edge—we’re getting depressed just reading through the list. Yet volatility in 2021, measured by how much the S&P 500 has decreased from its all-time high (~5%), has been tame. (According to David Lebovitz, a global market strategist with JP Morgan, the average peak-totrough decline for the S&P 500 over the past 41 years has been 14.3%.) In fact, until September, the S&P 500 was regularly charting new all-time highs, at ~54 and counting. But then the stock market got spooked, with the S&P 500 suffering its worst monthly performance (down 4.65%) since March 2020 and its worst September performance since 2011 (during the European debt crisis). Worse, all but one sector was in the red, with Energy the only advancer. Despite a 4.65% September loss, the S&P 500 eked out a 2% gain for the quarter, marking the sixth consecutive quarter of advances. But its 227 days without a 5% drop from the high ended on September 29—the seventh-longest such streak on record, Jacob Sonenshine of Barron’s tells us. The Dow and the Nasdaq were less fortunate, with their fivequarter winning streaks ending after respective falls of 4.2% and 5.31% in September. The Dow declined by 1.46% for the quarter, and the Nasdaq fell by 0.38%. Historically speaking, a September decline in the S&P 500 isn’t surprising: the past 100 years have seen 89 monthly drops of more than 5%. Felice Maranz of Bloomberg notes that September and October have accounted for 12 of the 26 times the market has dropped by more than 10% in a month. Encouragingly, these 26 drops were followed by subsequent 12-month gains on 16 occasions (for an average gain of 6.8%). Bond yields also began to increase (the 10-year Treasury went from 1.18% to 1.61% in less than 3 months), which dragged down technology shares. Higher yields on long-term risk-free investments make future profits less valuable, harming many tech company valuations, which are often based on expectations of significant profits many years down the line. Since technology companies are weighted heavily in the S&P 500 (nearly 28%, or more than 2x the weighting of the next-largest sector, Health Care, at 13.3%), the index dropped quite a bit more than the average stock did. (In September the S&P 500 index declined by 4.65%, while the S&P 500 equal-weighted index fell 3.90%.) The S&P 500 finished 3Q 2021 selling for 20.3x earnings (fwd.) versus 19.2x at its February 19, 2020, pre-COVID peak and 13.3x at its March 23, 2020, pandemic low. Since the March 23 bottom, the S&P 500 has gained well over 90%. By most traditional valuation measures (price to earnings, price to book, price to free cash flow, etc.), the S&P 500 is historically overvalued. Overvaluation against historical averages does not mean that investors should avoid equities, because extraordinarily low interest rates make prior valuation comparisons less meaningful. More important, at The Boyar Value Group, we don’t buy “the market”; rather, we purchase, and hold, businesses that sell far below our estimate of their worth. It might be especially hard uncovering bargains right now, but we’ve identified quite a few businesses selling at attractive levels even so. What’s Been Driving Share Price Returns in 2021? None of the 11 S&P 500 GICS sectors had standout performance in 3Q 2021, with 4 in negative territory and 1 flat (Consumer Discretionary). The biggest gainer, Financials, advanced a mere 2.7%. (For comparison, last quarter’s biggest gainer, Real Estate, advanced 13.1%.) By the end of 3Q, no sector was in negative territory YTD, and the best-performing sector by far was Energy (+43.2%). However, its low weighting in the S&P 500 (2.7%) gave it little effect on the index’s return, and its fantastic rise should be viewed in context, following as it did a loss of 37.3% in 2020. Other notable gainers thus far in 2021 have been Financials (+29.1%), Real Estate (+24.4%), and Communication Services (+21.6%). Interestingly, according to JP Morgan, since the market bottomed in March 2020, the S&P 500 had advanced ~97.3% as of September 30, 2021—leaving the index “only” ~30.6% above its February 2020 peak. The FAAMG stocks (Facebook, Apple, Amazon, Microsoft, and Alphabet—formerly Google), which have seemingly been leading the market ever upward, have struggled lately. Since their September peak, they have lost ~9%, or nearly $1 trillion, in market value. Due to FAAMG’s heavy weighting in the S&P 500 (~22%), if this area of the market continues struggling, the S&P 500 likely won’t perform well. Even so, we think there could be plenty of opportunities to make money investing in companies that have lower index weightings and/or that are outside the major indices. Some of the biggest “pandemic winners” are struggling too, with shares in Zoom Video Communications Inc (NASDAQ:ZM), Peloton Interactive Inc (NASDAQ:PTON), and Teladoc Health Inc (NYSE:TDOC) down 24%, 43%, and 34%, respectively, in 2021. (Though it’s worth noting that each company’s share price is trading significantly higher than before the pandemic.) One pandemic standout that has continued to soar throughout 2021 is vaccine maker Moderna, whose shares are up 192% in 2021 and up over 1,000% since March 2020. In hindsight, many signs of an imminent pullback were present. Market sentiment, for example, was very bullish (usually a contrarian indicator). At the beginning of August, two-thirds of JP Morgan clients surveyed were planning to increase their stock exposure in the coming weeks. A recent Bank of America gauge that tracks levels of optimism among market strategists was at a postcrisis high, and as of mid-August, 56% of all Wall Street analyst recommendations on S&P 500 index components were buys, the highest figure since 2002. However, we aren’t market timers. That’s because we know that trying to pinpoint the exact start of a market correction is a fool’s errand that impedes long-term results by prompting more trades (making results less tax-efficient) while removing the chance to make spectacular gains with companies that may be temporarily overvalued based on current earnings but that still have great long-term potential. When selling a high-quality company that has temporarily gotten ahead of itself in terms of valuation but that has excellent future growth prospects, knowing when to repurchase shares is extremely difficult, because the company’s share price often never drops enough to tempt investors into buying it again. So if you sell early to lock in a profit, anticipating a future correction, your profit on a well-timed sale might short-change you on future outsized gains. Reasons for Optimism According to Bloomberg, the final quarter of the year has been the strongest quarter for stocks since 2001, with an average increase of 4.1%. If history is any guide, 4Q 2021 could be a good quarter: 412 members of the S&P 500 are heading into it with gains for the year, the third-highest figure during the past 20 years. During that same period, each time 400 or more stocks have been positive through 3Q, the S&P 500 has produced a gain for 4Q.In another potentially bullish sign for stocks, cash holdings among S&P 500 companies hit $1.8 trillion in August 2021, as reported by Dow Jones Market Data—an increase of almost 30% from 3Q 2019. According to recent research by Goldman Sachs cited by Hardika Singh in a Wall Street Journal article, corporate America seems unlikely to be hoarding this cash, with S&P 500 companies expected to increase cash spending to $2.8 trillion in 2021 (mostly on capital expenditures, mergers, and business investment). Corporations also seem willing to buy back their own shares, having collectively authorized ~$870 billion in share repurchases thus far in 2021, $50 billion ahead of the record set in the first 9 months of 2018. If they deploy this capital wisely, share buybacks could buoy share prices in the short run, with capital investments spurring long-term earnings growth. What Does TINA Have to Do with the Stock Market? TINA, meaning “there is no alternative,” has become a popular catchphrase among investors, used to express the idea that stocks should continue doing well simply because interest rates are so low as to leave investors few investment options to produce an adequate rate of return. With the 10-year Treasury yielding ~1.6% and municipal bonds yielding ~1.17%, investors certainly are lacking attractive traditionally “safe” investment opportunities! Interest rates are so low that even the yields on some risky European junk bonds don’t earn any real return after factoring in inflation. Until rates rise meaningfully, equities should continue to see support—because there truly are few alternatives. The State of Value Investing Since April 2020, the S&P 500 value index has risen a little under 60%, while the S&P 500 growth index has surged over 90%, says Jacob Sonenshine of Barron’s. Value stocks should start outperforming if history is any guide: in the first 2 years of a recovery after a recession, value has bested growth by an average of 24%, based on data from Research Affiliates. The swift rotation back into value shares that began in September 2020 ended abruptly in July of this year as the delta variant slowed down the economic recovery, interest rates fell, and investors once again began embracing technology-oriented shares. But value looks like it might be making a comeback, with interest rates rising again and investors starting to embrace industrial and financial shares. Market Tops With the S&P 500 having advanced well over 80% since its March 2020 highs, and in view of all the political and economic uncertainty on the horizon, investors are questioning whether the latest bull market has ended. However, Mark Hulbert of the Wall Street Journal points out that unlike bear-market bottoms, which usually occur quickly (thankfully), bull markets end slowly, because individual sectors or investment styles peak and retreat at different times: “A recent illustration that not all sectors and styles hit their bull-market highs at the same time came at the top of the internet-stock bubble in early 2000. Though the S&P 500 and Nasdaq Composite indexes hit their bull-market highs in March 2000, value stocks—and small-cap value stocks, in particular—kept on rising. The S&P 500 at its October 2002 bear-market low was 49% lower than its March 2000 high, and the Nasdaq Composite was 78% lower, but the average small-cap value stock was 2% higher than it was in March 2000. Hulbert analyzed 30 bull-market tops since the mid-1920s, using data maintained by Ned Davis Research, and identified the dates when individual sectors and market styles (value, growth, blend) reached their bull-market peaks, reporting a 225-day spread between the dates when the first and last market sectors reached their bull-market tops. There are exceptions, of course, such as with bear markets caused by exogenous events such as 9/11 and the pandemic, but in general, he says, “it’s more accurate to view a bull-market top as a process rather than a single event.” As Hulbert points out, even the so-called experts can’t determine when a market peaks. Over the past 40 years, on days when the S&P 500 reached a bull-market high, the market timers that he followed recommended equity exposure at an average of 65.7%—a higher level of recommended investment than on 95% of all other days over the period. The experts were even worse at picking bear market lows, with their average equity exposure at market lows over the same period a mere 5%—yet another example of investors buying high and selling low! The takeaway is that knowing when a market has peaked is pretty much impossible to do regularly: even the so-called experts are consistently wrong. Individual investors would do much better to base their decisions on the value of each of their holdings rather than trying to guess whether they’re in a bull or bear market. Speculation in the Market The amount of speculation in the stock market worries us. A good example is the heightened use of stock options, which have legitimate hedging purposes, but which individuals seem to have recently embraced for speculative purposes. CBOE data indicate that option trading by individual investors has risen 4x over the past 5 years. As noted by Gundan Banerdi in the Wall Street Journal, “Nine of 10 of the most-active call-options trading days in history have taken place in 2021, Cboe Global Markets data show. Almost 39 million option contracts have changed hands on an average day this year, up 31% from 2020 and the highest level since the market’s inception in 1973, according to figures from the Options Clearing Corp.” As a result, the options market has grown so large that in some respects it’s bigger than the stock market. In 2021, for example, according to CBOE data, the daily average notional value of single stock options was over $432 billion, compared with $404 billion in stocks. We’ve said it before, and we’ll say it again: staying the course and taking a long-term view is one of individual investors’ best ways of stacking the odds of investment success in their favor. According to Dalbar, over the past 20 years the S&P 500 has advanced 7.5% annually, yet the average investor has gained a mere 2.9% (barely beating the 2.1% inflation over the period). Why this underperformance? Partly because investors let their emotions get the best of them and chase the latest investment fad (or they pile into equities at market peaks and sell out at market troughs)—or sell for nonfundamental reasons, such as simply because a company’s share price (or an index) has increased in value. By contrast, taking a multiyear view tilts the odds of success in investors’ favor. Since 1950, the range of stock market returns measured by the S&P 500 (using data supplied by JP Morgan) in any given year has been from +47% to -39%. For any given 5-year period, however, that range is +28% to -3%—and for any given 20-year period, it is +17% to +6%. In short, since 1950, there has never been a 20-year period when investors did not make at least 6% per year in the stock market. Although past performance is certainly no guarantee of future returns, history shows that the longer the time frame you give yourself, the better your chances of earning a satisfactory return. As always, we’re available to answer any questions you might have. If you’d like to discuss these issues further, please reach out to us at jboyar@boyarvaluegroup.com or 212-995-8300. Best regards, Mark A. Boyar Jonathan I. Boyar Boyar Value Group Updated on Oct 14, 2021, 2:01 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 14th, 2021

Camber Energy: What If They Made a Whole Company Out of Red Flags? – Kerrisdale

Kerrisdale Capital is short shares of Camber Energy Inc (NYSEAMERICAN:CEI). Camber is a defunct oil producer that has failed to file financial statements with the SEC since September 2020, is in danger of having its stock delisted next month, and just fired its accounting firm in September. Its only real asset is a 73% stake […] Kerrisdale Capital is short shares of Camber Energy Inc (NYSEAMERICAN:CEI). Camber is a defunct oil producer that has failed to file financial statements with the SEC since September 2020, is in danger of having its stock delisted next month, and just fired its accounting firm in September. Its only real asset is a 73% stake in Viking Energy Group Inc (OTCMKTS:VKIN), an OTC-traded company with negative book value and a going-concern warning that recently violated the maximum-leverage covenant on one of its loans. (For a time, it also had a fake CFO – long story.) Nonetheless, Camber’s stock price has increased by 6x over the past month; last week, astonishingly, an average of $1.9 billion worth of Camber shares changed hands every day. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2021 hedge fund letters, conferences and more Is there any logic to this bizarre frenzy? Camber pumpers have seized upon the notion that the company is now a play on carbon capture and clean energy, citing a license agreement recently entered into by Viking. But the “ESG Clean Energy” technology license is a joke. Not only is it tiny relative to Camber’s market cap (costing only $5 million and granting exclusivity only in Canada), but it has embroiled Camber in the long-running escapades of a western Massachusetts family that once claimed to have created a revolutionary new combustion engine, only to wind up being penalized by the SEC for raising $80 million in unregistered securities offerings, often to unaccredited investors, and spending much of it on themselves. But the most fascinating part of the CEI boondoggle actually has to do with something far more basic: how many shares are there, and why has dilution been spiraling out of control? We believe the market is badly mistaken about Camber’s share count and ignorant of its terrifying capital structure. In fact, we estimate its fully diluted share count is roughly triple the widely reported number, bringing its true, fully diluted market cap, absurdly, to nearly $900 million. Since Camber is delinquent on its financials, investors have failed to fully appreciate the impact of its ongoing issuance of an unusual, highly dilutive class of convertible preferred stock. As a result of this “death spiral” preferred, Camber has already seen its share count increase 50- million-fold from early 2016 to July 2021 – and we believe it isn’t over yet, as preferred holders can and will continue to convert their securities and sell the resulting common shares. Even at the much lower valuation that investors incorrectly think Camber trades for, it’s still overvalued. The core Viking assets are low-quality and dangerously levered, while any near- term benefits from higher commodity prices will be muted by hedges established in 2020. The recent clean-energy license is nearly worthless. It’s ridiculous to have to say this, but Camber isn’t worth $900 million. If it looks like a penny stock, and it acts like a penny stock, it is a penny stock. Camber has been a penny stock before – no more than a month ago, in fact – and we expect that it will be once again. Company Background Founded in 2004, Camber was originally called Lucas Energy Resources. It went public via a reverse merger in 2006 with the plan of “capitaliz[ing] on the increasing availability of opportunistic acquisitions in the energy sector.”1 But after years of bad investments and a nearly 100% decline in its stock price, the company, which renamed itself Camber in 2017, found itself with little economic value left; faced with the prospect of losing its NYSE American listing, it cast about for new acquisitions beginning in early 2019. That’s when Viking entered the picture. Jim Miller, a member of Camber’s board, had served on the board of a micro-cap company called Guardian 8 that was working on “a proprietary new class of enhanced non-lethal weapons”; Guardian 8’s CEO, Steve Cochennet, happened to also be part owner of a Kansas-based company that operated some of Viking’s oil and gas assets and knew that Viking, whose shares traded over the counter, was interested in moving up to a national exchange.2 (In case you’re wondering, under Miller and Cochennet’s watch, Guardian 8’s stock saw its price drop to ~$0; it was delisted in 2019.3) Viking itself also had a checkered past. Previously a shell company, it was repurposed by a corporate lawyer and investment banker named Tom Simeo to create SinoCubate, “an incubator of and investor in privately held companies mainly in P.R. China.” But this business model went nowhere. In 2012, SinoCubate changed its name to Viking Investments but continued to achieve little. In 2014, Simeo brought in James A. Doris, a Canadian lawyer, as a member of the board of directors and then as president and CEO, tasked with executing on Viking’s new strategy of “acquir[ing] income-producing assets throughout North America in various sectors, including energy and real estate.” In a series of transactions, Doris gradually built up a portfolio of oil wells and other energy assets in the United States, relying on large amounts of high-cost debt to get deals done. But Viking has never achieved consistent GAAP profitability; indeed, under Doris’s leadership, from 2015 to the first half of 2021, Viking’s cumulative net income has totaled negative $105 million, and its financial statements warn of “substantial doubt regarding the Company’s ability to continue as a going concern.”4 At first, despite the Guardian 8 crew’s match-making, Camber showed little interest in Viking and pursued another acquisition instead. But, when that deal fell apart, Camber re-engaged with Viking and, in February 2020, announced an all-stock acquisition – effectively a reverse merger in which Viking would end up as the surviving company but transfer some value to incumbent Camber shareholders in exchange for the national listing. For reasons that remain somewhat unclear, this original deal structure was beset with delays, and in December 2020 (after months of insisting that deal closing was just around the corner) Camber announced that it would instead directly purchase a 51% stake in Viking; at the same time, Doris, Viking’s CEO, officially took over Camber as well. Subsequent transactions through July 2021 have brough Camber’s Viking stake up to 69.9 million shares (73% of Viking’s total common shares), in exchange for consideration in the form of a mixture of cash, debt forgiveness,5 and debt assumption, valued in the aggregate by Viking at only $50.7 million: Camber and Viking announced a new merger agreement in February 2021, aiming to take out the remaining Viking shares not owned by Camber and thus fully combine the two companies, but that plan is on hold because Camber has failed to file its last 10-K (as well as two subsequent 10-Qs) and is thus in danger of being delisted unless it catches up by November. Today, then, Camber’s absurd equity valuation rests entirely on its majority stake in a small, unprofitable oil-and-gas roll-up cobbled together by a Canadian lawyer. An Opaque Capital Structure Has Concealed the True Insanity of Camber’s Valuation What actually is Camber’s equity valuation? It sounds like a simple question, and sources like Bloomberg and Yahoo Finance supply what looks like a simple answer: 104.2 million shares outstanding times a $3.09 closing price (as of October 4, 2021) equals a market cap of $322 million – absurd enough, given what Camber owns. But these figures only tell part of the story. We estimate that the correct fully diluted market cap is actually a staggering $882 million, including the impact of both Camber’s unusual, highly dilutive Series C convertible preferred stock and its convertible debt. Because Camber is delinquent on its SEC filings, it’s difficult to assemble an up-to-date picture of its balance sheet and capital structure. The widely used 104.2-million-share figure comes from an 8-K filed in July that states, in part: As of July 9, 2021, the Company had 104,195,295 shares of common stock issued and outstanding. The increase in our outstanding shares of common stock from the date of the Company’s February 23, 2021 increase in authorized shares of common stock (from 25 million shares to 250 million shares), is primarily due to conversions of shares of Series C Preferred Stock of the Company into common stock, and conversion premiums due thereon, which are payable in shares of common stock. This bland language belies the stunning magnitude of the dilution that has already taken place. Indeed, we estimate that, of the 104.2 million common shares outstanding on July 9th, 99.7% were created via the conversion of Series C preferred in the past few years – and there’s more where that came from. The terms of Camber’s preferreds are complex but boil down to the following: they accrue non- cash dividends at the sky-high rate of 24.95% per year for a notional seven years but can be converted into common shares at any time. The face value of the preferred shares converts into common shares at a fixed conversion price of $162.50 per share, far higher than the current trading price – so far, so good (from a Camber-shareholder perspective). The problem is the additional “conversion premium,” which is equal to the full seven years’ worth of dividends, or 7 x 24.95% ≈ 175% of face value, all at once, and is converted at a far lower conversion price that “will never be above approximately $0.3985 per share…regardless of the actual trading price of Camber’s common stock” (but could in principle go lower if the price crashes to new lows).6 The upshot of all this is that one share of Series C preferred is now convertible into ~43,885 shares of common stock.7 Historically, all of Camber’s Series C preferred was held by one investor: Discover Growth Fund. The terms of the preferred agreement cap Discover’s ownership of Camber’s common shares at 9.99% of the total, but nothing stops Discover from converting preferred into common up to that cap, selling off the resulting shares, converting additional preferred shares into common up to the cap, selling those common shares, etc., as Camber has stated explicitly (and as Discover has in fact done over the years) (emphasis added): Although Discover may not receive shares of common stock exceeding 9.99% of its outstanding shares of common stock immediately after affecting such conversion, this restriction does not prevent Discover from receiving shares up to the 9.99% limit, selling those shares, and then receiving the rest of the shares it is due, in one or more tranches, while still staying below the 9.99% limit. If Discover chooses to do this, it will cause substantial dilution to the then holders of its common stock. Additionally, the continued sale of shares issuable upon successive conversions will likely create significant downward pressure on the price of its common stock as Discover sells material amounts of Camber’s common stock over time and/or in a short period of time. This could place further downward pressure on the price of its common stock and in turn result in Discover receiving an ever increasing number of additional shares of common stock upon conversion of its securities, and adjustments thereof, which in turn will likely lead to further dilution, reductions in the exercise/conversion price of Discover’s securities and even more downward pressure on its common stock, which could lead to its common stock becoming devalued or worthless.8 In 2017, soon after Discover began to convert some of its first preferred shares, Camber’s then- management claimed to be shocked by the results and sued Discover for fraud, arguing that “[t]he catastrophic effect of the Discover Documents [i.e. the terms of the preferred] is so devastating that the Discover Documents are prima facie unconscionable” because “they will permit Discover to strip Camber of its value and business well beyond the simple repayment of its debt.” Camber called the documents “extremely difficult to understand” and insisted that they “were drafted in such a way as to obscure the true terms of such documents and the total number of shares of common stock that could be issuable by Camber thereunder. … Only after signing the documents did Camber and [its then CEO]…learn that Discover’s reading of the Discover Documents was that the terms that applied were the strictest and most Camber unfriendly interpretation possible.”9 But the judge wasn’t impressed, suggesting that it was Camber’s own fault for failing to read the fine print, and the case was dismissed. With no better options, Camber then repeatedly came crawling back to Discover for additional tranches of funding via preferred sales. While the recent spike in common share count to 104.2 million as of early July includes some of the impact of ongoing preferred conversion, we believe it fails to include all of it. In addition to Discover’s 2,093 shares of Series C preferred held as of February 2021, Camber issued additional shares to EMC Capital Partners, a creditor of Viking’s, as part of a January agreement to reduce Viking’s debt.10 Then, in July, Camber issued another block of preferred shares – also to Discover, we believe – to help fund Viking’s recent deals.11 We speculate that many of these preferred shares have already been converted into common shares that have subsequently been sold into a frenzied retail bid. Beyond the Series C preferred, there is one additional source of potential dilution: debt issued to Discover in three transactions from December 2020 to April 2021, totaling $20.5 million in face value, and amended in July to be convertible at a fixed price of $1.25 per share.12 We summarize our estimates of all of these sources of potential common share issuance below: Might we be wrong about this math? Absolutely – the mechanics of the Series C preferreds are so convoluted that prior Camber management sued Discover complaining that the legal documents governing them “were drafted in such a way as to obscure the true terms of such documents and the total number of shares of common stock that could be issuable by Camber thereunder.” Camber management could easily set the record straight by revealing the most up- to-date share count via an SEC filing, along with any additional clarifications about the expected future share count upon conversion of all outstanding convertible securities. But we're confident that the current share count reported in financial databases like Bloomberg and Yahoo Finance significantly understates the true, fully diluted figure. An additional indication that Camber expects massive future dilution relates to the total authorized shares of common stock under its official articles of incorporation. It was only a few months ago, in February, that Camber had to hold a special shareholder meeting to increase its maximum authorized share count from 25 million to 250 million in order to accommodate all the shares to be issued because of preferred conversions. But under Camber’s July agreement to sell additional preferred shares to Discover, the company (emphasis added) agreed to include proposals relating to the approval of the July 2021 Purchase Agreement and the issuance of the shares of common stock upon conversion of the Series C Preferred Stock sold pursuant to the July 2021 Purchase Agreement, as well as an increase in authorized common stock to fulfill our obligations to issue such shares, at the Company’s next Annual Meeting, the meeting held to approve the Merger or a separate meeting in the event the Merger is terminated prior to shareholder approval, and to use commercially reasonable best efforts to obtain such approvals as soon as possible and in any event prior to January 1, 2022.13 In other words, Camber can already see that 250 million shares will soon not be enough, consistent with our estimate of ~285 million fully diluted shares above. In sum, Camber’s true overvaluation is dramatically worse than it initially appears because of the massive number of common shares that its preferred and other securities can convert into, leading to a fully diluted share count that is nearly triple the figure found in standard information sources used by investors. This enormous latent dilution, impossible to discern without combing through numerous scattered filings made by a company with no up-to-date financial statements in the public domain, means that the market is – perhaps out of ignorance – attributing close to one billion dollars of value to a very weak business. Camber’s Stake in Viking Has Little Real Value In light of Camber’s gargantuan valuation, it’s worth dwelling on some basic facts about its sole meaningful asset, a 73% stake in Viking Energy. As of 6/30/21: Viking had negative $15 million in shareholder equity/book Its financial statements noted “substantial doubt regarding the Company’s ability to continue as a going ” Of its $101.3 million in outstanding debt (at face value), nearly half (48%) was scheduled to mature and come due over the following 12 months. Viking noted that it “does not currently maintain controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified by the Commission’s rules and forms.” Viking’s CEO “has concluded that these [disclosure] controls and procedures are not effective in providing reasonable assurance of compliance.” Viking disclosed that a key subsidiary, Elysium Energy, was “in default of the maximum leverage ratio covenant under the term loan agreement at June 30, 2021”; this covenant caps the entity’s total secured debt to EBITDA at 75 to 1.14 This is hardly a healthy operation. Indeed, even according to Viking’s own black-box estimates, the present value of its total proved reserves of oil and gas, using a 10% discount rate (likely generous given the company’s high debt costs), was $120 million as of 12/31/20,15 while its outstanding debt, as stated above, is $101 million – perhaps implying a sliver of residual economic value to equity holders, but not much. And while some market observers have recently gotten excited about how increases in commodity prices could benefit Camber/Viking, any near-term impact will be blunted by hedges put on by Viking in early 2020, which cover, with respect to its Elysium properties, “60% of the estimated production for 2021 and 50% of the estimated production for the period between January, 2022 to July, 2022. Theses hedges have a floor of $45 and a ceiling ranging from $52.70 to $56.00 for oil, and a floor of $2.00 and a ceiling of $2.425 for natural gas” – cutting into the benefit of any price spikes above those ceiling levels.16 Sharing our dreary view of Viking’s prospects is one of Viking’s own financial advisors, a firm called Scalar, LLC, that Viking hired to prepare a fairness opinion under the original all-stock merger agreement with Camber. Combining Viking’s own internal projections with data on comparable-company valuation multiples, Scalar concluded in October 2020 that Viking’s equity was worth somewhere between $0 and $20 million, depending on the methodology used, with the “purest” methodology – a true, full-blown DCF – yielding the lowest estimate of $0-1 million: Camber’s advisor, Mercer Capital, came to a similar conclusion: its “analysis indicated an implied equity value of Viking of $0 to $34.3 million.”17 It’s inconceivable that a majority stake in this company, deemed potentially worthless by multiple experts and clearly experiencing financial strains, could somehow justify a near-billion-dollar valuation. Instead of dwelling on the unpleasant realities of Viking’s oil and gas business, Camber has drawn investor attention to two recent transactions conducted by Viking with Camber funding: a license agreement with “ESG Clean Energy,” discussed in further detail below, and the acquisition of a 60.3% stake in Simson-Maxwell, described as “a leading manufacturer and supplier of industrial engines, power generation products, services and custom energy solutions.” But Viking paid just $8 million for its Simson-Maxwell shares,18 and the company has just 125 employees; it defies belief to think that this purchase was such a bargain as to make a material dent in Camber’s overvaluation. And what does Simson-Maxwell actually do? One of its key officers, Daryl Kruper (identified as its chairman in Camber’s press release), describes the company a bit less grandly and more concretely on his LinkedIn page: Simson Maxwell is a power systems specialist. The company assembles and sells generator sets, industrial engines, power control systems and switchgear. Simson Maxwell has service and parts facilities in Edmonton, Calgary, Prince George, Vancouver, Nanaimo and Terrace. The company has provided its western Canadian customers with exceptional service for over 70 years. In other words, Simson-Maxwell acts as a sort of distributor/consultant, packaging industrial- strength generators and engines manufactured by companies like GE and Mitsubishi into systems that can provide electrical power, often in remote areas in western Canada; Simson- Maxwell employees then drive around in vans maintaining and repairing these systems. There’s nothing obviously wrong with this business, but it’s small, regional (not just Canada – western Canada specifically), likely driven by an unpredictable flow of new large projects, and unlikely to garner a high standalone valuation. Indeed, buried in one of Viking’s agreements with Simson- Maxwell’s selling shareholders (see p. 23) are clauses giving Viking the right to purchase the rest of the company between July 2024 and July 2026 at a price of at least 8x trailing EBITDA and giving the selling shareholders the right to sell the rest of their shares during the same time frame at a price of at least 7x trailing EBITDA – the kind of multiples associated with sleepy industrial distributors, not fast-growing retail darlings. Since Simon-Maxwell has nothing to do with Viking’s pre-existing assets or (alleged) expertise in oil and gas, and Viking and Camber are hardly flush with cash, why did they make the purchase? We speculate that management is concerned about the combined company’s ability to maintain its listing on the NYSE American. For example, when describing its restruck merger agreement with Viking, Camber noted: Additional closing conditions to the Merger include that in the event the NYSE American determines that the Merger constitutes, or will constitute, a “back-door listing”/“reverse merger”, Camber (and its common stock) is required to qualify for initial listing on the NYSE American, pursuant to the applicable guidance and requirements of the NYSE as of the Effective Time. What does it take to qualify for initial listing on the NYSE American? There are several ways, but three require at least $4 million of positive stockholders’ equity, which Viking, the intended surviving company, doesn’t have today; another requires a market cap of greater than $75 million, which management might (quite reasonably) be concerned about achieving sustainably. That leaves a standard that requires a listed company to have $75 million in assets and revenue. With Viking running at only ~$40 million of annualized revenue, we believe management is attempting to buy up more via acquisition. In fact, if the goal is simply to “buy” GAAP revenue, the most efficient way to do it is by acquiring a stake in a low-margin, slow- growing business – little earnings power, hence a low purchase price, but plenty of revenue. And by buying a majority stake instead of the whole thing, the acquirer can further reduce the capital outlay while still being able to consolidate all of the operation’s revenue under GAAP accounting. Buying 60.3% of Simson-Maxwell seems to fit the bill, but it’s a placeholder, not a real value-creator. Camber’s Partners in the Laughable “ESG Clean Energy” Deal Have a Long History of Broken Promises and Alleged Securities Fraud The “catalyst” most commonly cited by Camber Energy bulls for the recent massive increase in the company’s stock price is an August 24th press release, “Camber Energy Secures Exclusive IP License for Patented Carbon-Capture System,” announcing that the company, via Viking, “entered into an Exclusive Intellectual Property License Agreement with ESG Clean Energy, LLC (‘ESG’) regarding ESG’s patent rights and know-how related to stationary electric power generation, including methods to utilize heat and capture carbon dioxide.” Our research suggests that the “intellectual property” in question amounts to very little: in essence, the concept of collecting the exhaust gases emitted by a natural-gas–fueled electric generator, cooling it down to distill out the water vapor, and isolating the remaining carbon dioxide. But what happens to the carbon dioxide then? The clearest answer ESG Clean Energy has given is that it “can be sold to…cannabis producers”19 to help their plants grow faster, though the vast majority of the carbon dioxide would still end up escaping into the atmosphere over time, and additional greenhouse gases would be generated in compressing and shipping this carbon dioxide to the cannabis producers, likely leading to a net worsening of carbon emissions.20 And what is Viking – which primarily extracts oil and gas from the ground, as opposed to running generators and selling electrical power – supposed to do with this technology anyway? The idea seems to be that the newly acquired Simson-Maxwell business will attempt to sell the “technology” as a value-add to customers who are buying generators in western Canada. Indeed, while Camber’s press-release headline emphasized the “exclusive” nature of the license, the license is only exclusive in Canada plus “up to twenty-five locations in the United States” – making the much vaunted deal even more trivial than it might first appear. Viking paid an upfront royalty of $1.5 million in cash in August, with additional installments of $1.5 and $2 million due by January and April 2022, respectively, for a total of $5 million. In addition, Viking “shall pay to ESG continuing royalties of not more than 15% of the net revenues of Viking generated using the Intellectual Property, with the continuing royalty percentage to be jointly determined by the parties collaboratively based on the parties’ development of realistic cashflow models resulting from initial projects utilizing the Intellectual Property, and with the parties utilizing mediation if they cannot jointly agree to the continuing royalty percentage”21 – a strangely open-ended, perhaps rushed, way of setting a royalty rate. Overall, then, Viking is paying $5 million for roughly 85% of the economics of a technology that might conceivably help “capture” CO2 emitted by electric generators in Canada (and up to 25 locations in the United States!) but then probably just re-emit it again. This is the great advance that has driven Camber to a nearly billion-dollar market cap. It’s with good reason that on ESG Clean Energy’s web site (as of early October), the list of “press releases that show that ESG Clean Energy is making waves in the distributive power industry” is blank: If the ESG Clean Energy license deal were just another trivial bit of vaporware hyped up by a promotional company and its over-eager shareholders, it would be problematic but unremarkable; things like that happen all the time. But it’s the nature and history of Camber/Viking’s counterparty in the ESG deal that truly makes the situation sublime. ESG Clean Energy is in fact an offshoot of the Scuderi Group, a family business in western Massachusetts created to develop the now deceased Carmelo Scuderi’s idea for a revolutionary new type of engine. (In a 2005 AP article entitled “Engine design draws skepticism,” an MIT professor “said the creation is almost certain to fail.”) Two of Carmelo’s children, Nick and Sal, appeared in a recent ESG Clean Energy video with Camber’s CEO, who called Sal “more of the brains behind the operation” but didn’t state his official role – interesting since documents associated with ESG Clean Energy’s recent small-scale capital raises don’t mention Sal at all. Buried in Viking’s contract with ESG Clean Energy is the following section, indicating that the patents and technology underlying the deal actually belong in the first instance to the Scuderi Group, Inc.: 2.6 Demonstration of ESG’s Exclusive License with Scuderi Group and Right to Grant Licenses in this Agreement. ESG shall provide necessary documentation to Viking which demonstrates ESG’s right to grant the licenses in this Section 2 of this Agreement. For the avoidance of doubt, ESG shall provide necessary documentation that verifies the terms and conditions of ESG’s exclusive license with the Scuderi Group, Inc., a Delaware USA corporation, having an address of 1111 Elm Street, Suite 33, West Springfield, MA 01089 USA (“Scuderi Group”), and that nothing within ESG’s exclusive license with the Scuderi Group is inconsistent with the terms of this Agreement. In fact, the ESG Clean Energy entity itself was originally called Scuderi Clean Energy but changed its name in 2019; its subsidiary ESG-H1, LLC, which presides over a long-delayed power-generation project in the small city of Holyoke, Massachusetts (discussed further below), used to be called Scuderi Holyoke Power LLC but also changed its name in 2019.22 The SEC provided a good summary of the Scuderi Group’s history in a 2013 cease-and-desist order that imposed a $100,000 civil money penalty on Sal Scuderi (emphasis added): Founded in 2002, Scuderi Group has been in the business of developing a new internal combustion engine design. Scuderi Group’s business plan is to develop, patent, and license its engine technology to automobile companies and other large engine manufacturers. Scuderi Group, which considers itself a development stage company, has not generated any revenue… …These proceedings arise out of unregistered, non-exempt stock offerings and misleading disclosures regarding the use of offering proceeds by Scuderi Group and Mr. Scuderi, the company’s president. Between 2004 and 2011, Scuderi Group sold more than $80 million worth of securities through offerings that were not registered with the Commission and did not qualify for any of the exemptions from the Securities Act’s registration requirement. The company’s private placement memoranda informed investors that Scuderi Group intended to use the proceeds from its offerings for “general corporate purposes, including working capital.” In fact, the company was making significant payments to Scuderi family members for non-corporate purposes, including, large, ad hoc bonus payments to Scuderi family employees to cover personal expenses; payments to family members who provided no services to Scuderi; loans to Scuderi family members that were undocumented, with no written interest and repayment terms; large loans to fund $20 million personal insurance policies for six of the Scuderi siblings for which the company has not been, and will not be, repaid; and personal estate planning services for the Scuderi family. Between 2008 and 2011, a period when Scuderi Group sold more than $75 million in securities despite not obtaining any revenue, Mr. Scuderi authorized more than $3.2 million in Scuderi Group spending on such purposes. …In connection with these offerings [of stock], Scuderi Group disseminated more than 3,000 PPMs [private placement memoranda] to potential investors, directly and through third parties. Scuderi Group found these potential investors by, among other things, conducting hundreds of roadshows across the U.S.; hiring a registered broker-dealer to find investors; and paying numerous intermediaries to encourage people to attend meetings that Scuderi Group arranged for potential investors. …Scuderi Group’s own documents reflect that, in total, over 90 of the company’s investors were non-accredited investors… The Scuderi Group and Sal Scuderi neither admitted nor denied the SEC’s findings but agreed to stop violating securities law. Contemporary local news coverage of the regulatory action added color to the SEC’s description of the Scuderis’ fund-raising tactics (emphasis added): Here on Long Island, folks like HVAC specialist Bill Constantine were early investors, hoping to earn a windfall from Scuderi licensing the idea to every engine manufacturer in the world. Constantine said he was familiar with the Scuderis because he worked at an Islandia company that distributed an oil-less compressor for a refrigerant recovery system designed by the family patriarch. Constantine told [Long Island Business News] he began investing in the engine in 2007, getting many of his friends and family to put their money in, too. The company held an invitation-only sales pitch at the Marriott in Islandia in February 2011. Commercial real estate broker George Tsunis said he was asked to recruit investors for the Scuderi Group, but declined after hearing the pitch. “They were talking about doing business with Volkswagen and Mercedes, but everything was on the come,” Tsunis said. “They were having a party and nobody came.” Hot on the heels of the SEC action, an individual investor who had purchased $197,000 of Scuderi Group preferred units sued the Scuderi Group as well as Sal, Nick, Deborah, Stephen, and Ruth Scuderi individually, alleging, among other things, securities fraud (e.g. “untrue statements of material fact” in offering memoranda). This case was settled out of court in 2016 after the judge reportedly “said from the bench that he was likely to grant summary judgement for [the] plaintiff. … That ruling would have clear the way for other investors in Scuderi to claim at least part of a monetary settlement.” (Two other investors filed a similar lawsuit in 2017 but had it dismissed in 2018 because they ran afoul of the statute of limitations.23) The Scuderi Group put on a brave face, saying publicly, “The company is very pleased to put the SEC matter behind it and return focus to its technology.” In fact, in December 2013, just months after the SEC news broke, the company entered into a “Cooperative Consortium Agreement” with Hino Motors, a Japanese manufacturer, creating an “engineering research group” to further develop the Scuderi engine concept. “Hino paid Scuderi an initial fee of $150,000 to join the Consortium Group, which was to be refunded if Scuderi was unable to raise the funding necessary to start the Project by the Commencement Date,” in the words of Hino’s later lawsuit.24 Sure enough, the Scuderi Group ended up canceling the project in early October 2014 “due to funding and participant issues” – but it didn’t pay back the $150,000. Hino’s lawsuit documents Stephen Scuderi’s long series of emailed excuses: 10/31/14: “I must apologize, but we are going to be a little late in our refund of the Consortium Fee of $150,000. I am sure you have been able to deduce that we have a fair amount of challenging financial problems that we are working through. I am counting on financing for our current backlog of Power Purchase Agreement (PPA) projects to provide the capital to refund the Consortium Fee. Though we are very optimistic that the financial package for our PPA projects will be completed successfully, the process is taking a little longer than I originally expected to complete (approximately 3 months longer).” 11/25/14: “I am confident that we can pay Hino back its refund by the end of January. … The reason I have been slow to respond is because I was waiting for feedback from a few large cornerstone investors that we have been negotiating with. The negotiations have been progressing very well and we are close to a comprehensive financing deal, but (as often happens) the back and forth of the negotiating process takes ” 1/12/15: “We have given a proposal to the potential high-end investors that is most interested in investing a large sum of money into Scuderi Group. That investor has done his due-diligence on our company and has communicated to us that he likes our proposal but wants to give us a counter ” 1/31/15: “The individual I spoke of last month is one of several high net worth individuals that are currently evaluating investing a significant amount of equity capital into our That particular individual has not yet responded with a counter proposal, because he wishes to complete a study on the power generation market as part of his due diligence effort first. Though we learned of the study only recently, we believe that his enthusiasm for investing in Scuderi Group remains as strong as ever and steady progress is being made with the other high net worth individuals as well. … I ask only that you be patient for a short while longer as we make every effort possible to raise the monies need[ed] to refund Hino its consortium fee.” Fed up, Hino sued instead of waiting for the next excuse – but ended up discovering that the Scuderi bank account to which it had wired the $150,000 now contained only about $64,000. Hino and the Scuderi Group then entered into a settlement in which that account balance was supposed to be immediately handed over to Hino, with the remainder plus interest to be paid back later – but Scuderi didn’t even comply with its own settlement, forcing Hino to re-initiate its lawsuit and obtain an official court judgment against Scuderi. Pursuant to that judgment, Hino formally requested an array of documents like tax returns and bank statements, but Scuderi simply ignored these requests, using the following brazen logic:25 Though as of this date, the execution has not been satisfied, Scuderi continues to operate in the ordinary course of business and reasonably expects to have money available to satisfy the execution in full in the near future. … Responding to the post- judgment discovery requests, as a practical matter, will not enable Scuderi to pay Hino any faster than can be achieved by Scuderi using all of its resources and efforts to conduct its day-to-day business operations and will only serve to impose additional and unnecessary costs on both parties. Scuderi has offered and is willing to make payments every 30 days to Hino in amounts not less than $10,000 until the execution is satisfied in full. Shortly thereafter, in March 2016, Hino dropped its case, perhaps having chosen to take the $10,000 per month rather than continue to tangle in court with the Scuderis (though we don’t know for sure). With its name tarnished by disgruntled investors and the SEC, and at least one of its bank accounts wiped out by Hino Motors, the Scuderi Group didn’t appear to have a bright future. But then, like a phoenix rising from the ashes, a new business was born: Scuderi Clean Energy, “a wholly owned subsidiary of Scuderi Group, Inc. … formed in October 2015 to market Scuderi Engine Technology to the power generation industry.” (Over time, references to the troubled “Scuderi Engine Technology” have faded away; today ESG Clean Energy is purportedly planning to use standard, off-the-shelf Caterpillar engines. And while an early press release described Scuderi Clean Energy as “a wholly owned subsidiary of Scuderi Group,” the current Scuderi/ESG Clean Energy, LLC, appears to have been created later as its own (nominally) independent entity, led by Nick Scuderi.) As the emailed excuses in the Hino dispute suggested, this pivot to “clean energy” and electric power generation had been in the works for some time, enabling Scuderi Clean Energy to hit the ground running by signing a deal with Holyoke Gas and Electric, a small utility company owned by the city of Holyoke, Massachusetts (population 38,238) in December 2015. The basic idea was that Scuderi Clean Energy would install a large natural-gas generator and associated equipment on a vacant lot and use it to supply Holyoke Gas and Electric with supplemental electric power, especially during “peak demand periods in the summer.”26 But it appears that, from day one, Holyoke had its doubts. In its 2015 annual report (p. 80), the company wrote (emphasis added): In December 2015, the Department contracted with Scuderi Clean Energy, LLC under a twenty (20) year [power purchase agreement] for a 4.375 MW [megawatt] natural gas generator. Uncertain if this project will move forward; however Department mitigated market and development risk by ensuring interconnection costs are born by other party and that rates under PPA are discounted to full wholesale energy and resulting load reduction cost savings (where and if applicable). Holyoke was right to be uncertain. Though its 2017 annual report optimistically said, “Expected Commercial Operation date is April 1, 2018” (p. 90), the 2018 annual report changed to “Expected Commercial Operation is unknown at this time” – language that had to be repeated verbatim in the 2019 and 2020 annual reports. Six years after the contract was signed, the Scuderi Clean Energy, now ESG Clean Energy, project still hasn’t produced one iota of power, let alone one dollar of revenue. What it has produced, however, is funding from retail investors, though perhaps not as much as the Scuderis could have hoped. Beginning in 2017, Scuderi Clean Energy managed to sell roughly $1.3 million27 in 5-year “TIGRcub” bonds (Top-Line Income Generation Rights Certificates) on the small online Entrex platform by advertising a 12% “minimum yield” and 16.72% “projected IRR” (based on 18.84% “revenue participation”) over a 5-year term. While we don’t know the exact terms of these bonds, we believe that, at least early on, interest payments were covered by some sort of prepaid insurance policy, while later payments depend on (so far nonexistent) revenue from the Holyoke project. But Scuderi Clean Energy had been aiming to raise $6 million to complete the project, not $1 million; indeed, this was only supposed to be the first component of a whole empire of “Scuderi power plants”28 that would require over $100 million to build but were supposedly already under contract.29 So far, however, nothing has come of these other projects, and, seemingly suffering from insufficient funding, the Holyoke effort languished. (Of course, it might have been more investor-friendly if Scuderi Clean Energy had only accepted funding on the condition that there was enough to actually complete construction.) Under the new ESG Clean Energy name, the Scuderis tried in 2019 to raise capital again, this time in the form of $5 million of preferred units marketed as a “5 year tax free Investment with 18% cash-on-cash return,” but, based on an SEC filing, it appears that the offering didn’t go well, raising just $150,000. With funding still limited and the Holyoke project far from finished, the clock is ticking: the $1.3 million of bonds will begin to mature in early 2022. It was thus fortunate that Viking came along when it did to pay ESG Clean Energy a $1.5 million upfront royalty for its incredible technology. Interestingly, ESG Clean Energy began in late 2020 to provide extremely detailed updates on its Holyoke construction progress, including items as prosaic as “Throughout the week, ESG had met with and continued to exchange numerous e-mails with our mechanical engineering firm.” With frequent references to the “very fluid environment,” the tone is unmistakably defensive. Consider the September update (emphasis not added): Reading between the lines, we believe the intended message is this: “We didn’t just take your money and run – honest! We’re working hard!” Nonetheless, someone appears to be unhappy, as indicated by the FINRA BrokerCheck report for one Eric Willer, a former employee of Fusion Analytics, which was listed as a recipient of sales compensation in connection with the Scuderi Clean Energy bond offerings. Willer may now be in hot water: a disclosure notice dated 3/31/2021 reads: “Wells Notice received as a preliminary determination to recommend disciplinary action of fraud, negligent misrepresentation, and recommendation without due diligence in the sale of bonds issued by Scuderi Holyoke,” with a further investigation still pending. We wait eagerly for additional updates. Why does the saga of the Scuderis matter? Many Camber investors seem to have convinced themselves that the ESG Clean Energy “carbon capture” IP licensed by Viking has enormous value and can plausibly justify hundreds of millions of dollars of incremental market cap. As we explained above, we find this thoroughly implausible even without getting into Scuderi family history: in the end, the “technology” will at best add a smidgen of value to some generators in Canada. But track records matter too, and the Scuderi track record of failed R&D, delays, excuses, and alleged misuse of funds is worth considering. These people have spent six years trying and failing to sell power to a single municipally owned utility company in a single small city in western Massachusetts. Are they really about to end climate change? The Case of the Fictitious CFO Since Camber is effectively a bet on Viking, and Viking, in its current form, has been assembled by James Doris, it’s important to assess Doris’s probity and good judgment. In that connection, it’s noteworthy that, from December 2014 to July 2016, at the very start of Doris’s reign as Viking’s CEO and president, the company’s CFO, Guangfang “Cecile” Yang, was apparently fictitious. (Covering the case in 2019, Dealbreaker used the headline “Possibly Imaginary CFO Grounds For Very Real Fraud Lawsuit.”) This strange situation was brought to light by an SEC lawsuit against Viking’s founder, Tom Simeo; just last month, a US district court granted summary judgment in favor of the SEC against Simeo, but Simeo’s penalties have yet to be determined.30 The court’s opinion provided a good overview of the facts (references omitted, emphasis added): In 2013, Simeo hired Yang, who lives in Shanghai, China, to be Viking’s CFO. Yang served in that position until she purportedly resigned in July 2016. When Yang joined the company, Simeo fabricated a standing resignation letter, in which Yang purported to “irrevocably” resign her position with Viking “at any time desired by the Company” and “[u]pon notification that the Company accepted [her] resignation”…Simeo forged Yang’s signature on this document. This letter allowed Simeo to remove Yang from the position of CFO whenever he pleased. Simeo also fabricated a power of attorney purportedly signed by Yang that allowed Simeo to “affix Yang’s signature to any and all documents,” including documents that Viking had to file with the SEC. Viking represented to the public that Yang was the company’s CFO and a member of its Board of Directors. But “Yang never actually functioned as Viking’s CFO.” She “was not involved in the financial and strategic decisions” of Viking during the Relevant Period. Nor did she play any role in “preparing Viking’s financial statements or public filings.” Indeed, at least as of April 3, 2015, Yang did not do “any work” on Viking’s financial statements and did not speak with anyone who was preparing them. She also did not “review or evaluate Viking’s internal controls over financial reporting.” Further, during most or all of the Relevant Period, Viking did not compensate Yang despite the fact that she was the company’s highest ranking financial employee. Nevertheless, Simeo says that he personally paid her in cash. Yang’s “sole point of contact” at Viking was Simeo. Indeed Simeo was “the only person at Viking who communicated with Yang.” Thus many people at Viking never interacted with Yang. Despite the fact that Doris has served as Viking’s CEO since December 2014, he “has never met or spoken to Yang either in person or through any other means, and he has never communicated with Yang in writing.” … To think Yang served as CFO during this time, but the CEO and other individuals involved with Viking’s SEC filings never once spoke with her, strains all logical credulity. It remains unclear whether Yang is even a real person. When the SEC asked Simeo directly (“Is it the case that you made up the existence of Ms. Yang?”) he responded by “invoking the Fifth Amendment.”31 While the SEC’s efforts thus far have focused on Simeo, the case clearly raises the question of what Doris knew and when he knew it. Indeed, though many of the required Sarbanes-Oxley certifications of Viking’s financial statements during the Yang period were signed by Simeo in his role as chairman, Doris did personally sign off on an amended 2015 10-K that refers to Yang as CFO through July 2016 and includes her complete, apparently fictitious, biography. Viking has also disclosed the following, which we believe pertains to the Yang affair (emphasis added): In April of 2019, the staff (the “Staff”) of the SEC’s Division of Enforcement notified the Company that the Staff had made a preliminary determination to recommend that the SEC file an enforcement action against the Company, as well as against its CEO and its CFO, for alleged violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder [laws that pertain to securities fraud] during the period from early 2014 through late 2016. The Staff’s notice is not a formal allegation or a finding of wrongdoing by the Company, and the Company has communicated with the Staff regarding its preliminary determination. The Company believes it has adequate defenses and intends to vigorously defend any enforcement action that may be initiated by the SEC.32 Perhaps the SEC has moved on from this matter and will let Doris and Viking off the hook, but the fact pattern is eyebrow-raising nonetheless. A similarly troubling incident came soon after the time of Yang’s “resignation,” when Viking’s auditing firm resigned, withdrew its recent audit report, and wrote a letter “advising the Company that it believed an illegal act may have occurred” – because of concerns that had nothing to do with Yang. First, Viking accounted for the timing of a grant of shares to a consultant in apparent contradiction of the terms of the written agreement with the consultant – a seemingly minor issue. But, under scrutiny from the auditor, Viking “produced a letter… (the version which was provided to us was unsigned), from the consultant stating that the Agreement was invalidated verbally.” Reading between the lines, the “uncomfortable” auditor suspected that this letter was a fake, created just to get him off Viking’s back. In another incident, the auditor “became aware that seven of the company’s loans…were due to be repaid” in August 2016 but hadn’t been, creating a default that would in turn “trigger[] a cross-default clause contained in 17 additional loans” – but Viking claimed it “had secured an oral extension to the loans from the broker-dealer representing the lenders by September 6, 2016” – after the loans’ maturity dates – “so the Company did not need to disclose ‘the defaults under these loans’ after such time since the loans were not in default.” It’s easy to see why an auditor would object to this attitude toward financial disclosure – no need to mention a default in August as long as you can secure a verbal agreement resolving it by September! Against this backdrop of disturbing behavior, the fact that Camber just dismissed its auditing firm three weeks ago on September 16th, even with delisting looming if the company can’t become current again with its SEC filings by November, seems even more unsettling. Have Camber and Viking management earned investors’ trust? Conclusion It’s not clear why, back in 2017, Lucas Energy changed its name to “Camber” specifically, but we’d like to think the inspiration was England’s Camber Castle. According to Atlas Obscura, the castle was supposed to help defend the English coast, but it took so long to build that its “advanced design was obsolete by the time of its completion,” and changes in the local environment meant that “the sea had receded so far that cannons fired from the fort would no longer be able to reach any invading ships.” Still, the useless castle was “manned and serviced” for nearly a century before being officially decommissioned. Today, Camber “lies derelict and almost unheard of.” But what’s in a name? Article by Kerrisdale Capital Management Updated on Oct 5, 2021, 12:06 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkOct 5th, 2021

Dovish To Hawkish Fed: Sounds Bearish For Gold

With a more hawkish Fed disposition, non-commercial traders remaining dollar-strong, and the EUR/USD sinking, it doesn’t bode well for the metals. Q2 2021 hedge fund letters, conferences and more The USD Index Is Loving The Surge In Volatility With U.S. Treasury yields continuing their ascent on Sep. 28, the mini taper tantrum pushed the NASDAQ […] With a more hawkish Fed disposition, non-commercial traders remaining dollar-strong, and the EUR/USD sinking, it doesn’t bode well for the metals. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below! (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q2 2021 hedge fund letters, conferences and more The USD Index Is Loving The Surge In Volatility With U.S. Treasury yields continuing their ascent on Sep. 28, the mini taper tantrum pushed the NASDAQ 100 over a cliff. And with the USD Index loving the surge in volatility, the greenback further cemented its breakout above the neckline of its inverse (bullish) head & shoulders pattern. And looking ahead, the momentum should continue. Case in point: Fed Chairman Jerome Powell testified before the U.S. Senate Banking Committee on Sep. 28. In his prepared remarks, he said: “Inflation is elevated and will likely remain so in coming months before moderating. As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors. These effects have been larger and longer lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 percent goal.” Furthermore, while I’ve been warning for months that Powell remains materially behind the inflation curve, his prepared remarks didn’t have a single mention of “base effects” or “transitory.” Instead, the Fed chief’s new favorite buzz word is “moderating.” In any event, while I warned on several occasions that the composite container rate has gone from $6.5K to $8.1K to $8.4K to 9.4K, Powell finally admitted that the supply chain disruptions have “gotten worse:” A Mismatch Between Demand And Supply “Look at the car companies, look at the ships with the anchors down outside of Los Angeles,” he said. “This is really a mismatch between demand and supply, we need those supply blockages to alleviate, to abate, before inflation can come down.” For context, the composite container rate is now at $10.4K (the blue line below): To that point, with inflation surging and the Fed materially behind the eight ball, even the doves have turned hawkish since Powell unveiled his accelerated taper timeline on Sep. 22. New York Fed President John Williams told the Economic Club of New York on Sep. 27: “I think it’s clear that we have made substantial further progress on achieving our inflation goal. There has also been very good progress toward maximum employment. Assuming the economy continues to improve as I anticipate, a moderation in the pace of asset purchases may soon be warranted.” Likewise, Fed Governor Lael Brainard added that labor-market conditions may “soon” warrant a reduction in the Fed’s bond-buying program: “The forward guidance on maximum employment and average inflation sets a much higher bar for the liftoff of the policy rate than for slowing the pace of asset purchases,” Brainard told the National Association for Business Economics on Sep. 27. “I would emphasize that no signal about the timing of liftoff should be taken from any decision to announce a slowing of asset purchases.” For context, she tried to calm investors’ nerves by separating rate hikes from tapering. However, with “a much higher bar” for “liftoff” implying a much lower bar for tapering, QE is likely on its deathbed. Achieving Substantial Further Progress Rounding out the hawkish rhetoric, Chicago Fed President Charles Evans also told the National Association for Business Economics on Sep. 27 that “I see the economy as being close to meeting the 'substantial further progress' standard we laid out last December. If the flow of employment improvements continues, it seems likely that those conditions will be met soon and tapering can commence.” And why are these three voices so important? Well, with Powell ramping up the hawkish rhetoric on Sep. 22 and his dovish minions following suit, their messaging is much different than the hawk talk that we normally hear from Bullard, Kaplan and Rosengren. For context, the latter two actually resigned for ethical reasons after their questionable day trading activity became public. Please see below: To explain, the graphic above depicts Bank of America’s FOMC dove-hawk spectrum. From left to right, the blue areas categorize the doves, while the red areas categorize the hawks. If you analyze the third, fourth and fifth columns from the left, you can see that Evans, Powell, Brainard and Williams are known for their dovish dispositions. However, with all four materially shifting their stances in the last week, the hawkish realignments are bullish for U.S. Treasury yields, bullish for the USD Index and bearish for the PMs. For example, the U.S. 10-Year Treasury yield has risen by 19% over the last five trading days. What’s more, the U.S. 5-Year Treasury yield has risen by 24% over the last seven trading days and ended the Sep. 28 session at a new 2021 high. For context, the last time the U.S. 5-Year Treasury yield closed above 1% was Feb. 27, 2020. Please see below: Source: Investing.com On the opposite end of the double-edged sword slashing the gold price, the USD index is also reasserting its dominance. And with the greenback’s fundamentals also uplifted by higher U.S. Treasury yields, the current (and future) liquidity drains support a stronger U.S. dollar. For one, after 83 counterparties drained more than $1.365 trillion out of the U.S. financial system on Sep. 28, the Fed’s daily reverse repurchase agreements hit another all-time high. Please see below: Source: New York Fed To explain, a reverse repurchase agreement (repo) occurs when an institution offloads cash to the Fed in exchange for a Treasury security (on an overnight or short-term basis). And with U.S. financial institutions currently flooded with excess liquidity, they’re shipping cash to the Fed at an alarming rate. And while I’ve been warning for months that the activity is the fundamental equivalent of a taper  – due to the lower supply of U.S. dollars (which is bullish for the USD Index) – as we await a formal announcement from the Fed, the U.S. dollar’s fundamental foundation remains robust. Second, non-commercial (speculative) futures traders, asset managers and leveraged funds’ allocations to the U.S. dollar remain strong. Please see below: To explain, the dark blue, gray, and light blue lines above represent net-long positions of non-commercial (speculative) futures traders, asset managers and leveraged funds. When the lines are falling, it means that the trio have reduced their net-long positions and are expecting a weaker U.S. dollar. Conversely, when the lines are rising, it means that the trio have increased their net-long positions and are expecting a stronger U.S. dollar. And while asset managers and leveraged funds’ allocations (the gray and light blue lines) remain slightly below their 2021 highs, non-commercial (speculative) futures traders’ allocation to the U.S. dollar has now hit a new 2021 high. As a result, a continuation of the theme should uplift the U.S. dollar and negatively impact the performance of the gold and silver prices. Finally, with the EUR/USD accounting for nearly 58% of the movement of the USD Index, the currency pair has sunk below 1.1700 once again. And with the Fed’s inflationary conundrum dwarfing Europe’s predicament, I warned on Jul. 20 that the dichotomy is bullish for the U.S. dollar. I wrote: Not only is the U.S. economy outperforming the Eurozone, but the Fed and the ECB are worlds apart. Please see below: To explain, the green line above tracks the year-over-year (YoY) percentage change in the Eurozone Harmonized Index of Consumer Prices (HICP), while the red line above tracks the YoY percentage change in the U.S. HICP. If you analyze the right side of the chart, it’s not even close. And with the U.S. HICP rising by 6.41% YoY in June and the Eurozone HICP rising by 1.90%, the Fed is likely to taper well in advance of the ECB. To that point, with the rhetoric above guiding the Fed down a hawkish path, the ECB is heading in the opposite direction. For example, ECB President Christine Lagarde said on Sep. 28 that there are “no signs that this increase in [Eurozone] inflation is becoming broad-based. The key challenge is to ensure that we do not overreact to transitory supply shocks that have no bearing on the medium term…. Monetary policy should normally ‘look through’ temporary supply-driven inflation, so long as inflation expectations remain anchored.” As a result: Source: the Financial Times Conclusion The bottom line? With U.S. Treasury yields and the USD Index firing on all cylinders, the PMs remain caught in the crossfire. And with both variables still having the fundamental wind at their backs, the Fed’s hawkish shift should help underwrite further gains over the medium term. In conclusion, the PMs declined on Sep. 28 and the gold miners continued their underperformance. And with the Fed’s inflationary anxiety sparking a mini taper tantrum, the PMs remain stuck in no man’s land. Furthermore, with the general stock market also feeling the heat, a sharp correction could accelerate the ferocity of the PMs’ current downtrend. As a result, their medium-term outlooks remain quite bearish. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and silver that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFA Founder, Editor-in-chief Sunshine Profits: Effective Investment through Diligence & Care All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Updated on Sep 29, 2021, 11:09 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkSep 29th, 2021

Futures Rebound Fizzles On Slowing iPhone Demand, Omicron Fears

Futures Rebound Fizzles On Slowing iPhone Demand, Omicron Fears U.S. index futures regained some ground alongside Asian markets while European stocks slumped to session lows in a delayed response to yesterday's late Omicron-driven US selloff, as markets remained volatile following the biggest two-day plunge in more than a year, spurred by concern about the omicron coronavirus variant and Federal Reserve tightening. Investors await data for unemployment claims, as well as earnings from companies including Dollar General and Kroger. Tech is the weakest sector, dropping in sympathy after Apple warned its suppliers of slowing iPhone demand. Nasdaq futures pared earlier gains of up to 0.8% to trade down 0.1% while S&P futures are only 0.2% higher after rising as much as 0.9%. While the knee-jerk reaction of stock investors may “continue to be to take profits before the end of the year,” there is “plenty of liquidity available to drive stock prices higher as dip-buyers enter the market,” Ed Yardeni wrote in a note. The U.S. economy grew at a modest to moderate pace through mid-November, while price hikes were widespread amid supply-chain disruptions and labor shortages, the Federal Reserve said in its Beige Book survey Tuesday. Cruise-ship operator Carnival jumped 3.8% in premarket trading, while Pfizer and Moderna fell as the World Health Organization said that existing vaccines will likely protect against severe cases of the variant. Boeing contracts gained 3.4% after a report that the flagship 737 Max aircraft has regained airworthiness approval in China. With lots of uncertainty surrounding the pandemic and Fed policy, the size of potential market swings is still considerable.  Here are some other notable premarket movers today: Apple (AAPL US) shares fell 1.8% in premarket trading after the iPhone maker was said to tell suppliers that demand for its flagship product has slowed. Wall Street analysts, however, remained bullish. U.S. stocks tied to former President Donald Trump rise in premarket trading following a report his media group is in talks to raise new financing. Digital World Acquisition (DWAC US) +24%, Phunware (PHUN US) +38%. Katapult (KPLT US) shares sink 14% in premarket after the financial technology firm said its gross originations over a two-month period were lower than 2020 levels. Vir (VIR US) shares jump 8.1% in premarket trading after its Covid-19 antibody treatment, co-developed with Glaxo, looked to be effective against the new omicron variant in early testing. Snowflake (SNOW US) is up 17% premarket following quarterly results that impressed analysts, though some raise questions over the data software company’s valuation. CrowdStrike (CRWD US) shares jumped 5.1% in premarket after it boosted its revenue forecast for the full year. Square’s (SQ US) shares are 0.4% higher premarket. Corporate name change to Block Inc. indicates “a symbolic rebirth,” according to Barclays as it shows a broader set of possibilities than those of a pure payments company. Okta’s (OKTA US) shares advanced in postmarket trading. 3Q results show the cybersecurity company is well- positioned to deliver growth, even if some analysts say its guidance looks conservative and that its growth was not as strong as in prior quarters. The Omicron variant also hurt risk appetite, making the safe-haven bonds more attractive to investors, pushing yields down - although yields picked up again in early European trading. Volatility in equity markets as measured by the Vix hit its highest since February on Wednesday, before easing on Thursday, but remained well above this year’s average and almost twice as high as a month ago. Investors are braced for volatility to continue through December, stirred by tightening central-bank policies to fight inflation just as the omicron variant complicates the outlook for the pandemic recovery. The recent market turmoil may offer investors a chance to position for a trend reversal in reopening and commodity trades, according to JPMorgan Chase & Co. "Investors will need to maintain their calm during a period of uncertainty until the scientific data give a clearer picture of which scenario we face," said Mark Haefele, chief investment officer at UBS Global Wealth Management in Zurich. “This, in turn, will help shape the reaction of central bankers." Also weighing on stock markets, and flattening the U.S. yield curve, were remarks by Federal Reserve Chair Jerome Powell, who said that he would consider a faster end to the Fed's bond-buying programme, which could open the door to earlier interest rate hikes. In his second day of testimony in Congress on Wednesday, Powell reiterated that the U.S. central bank needs to be ready to respond to the possibility that inflation does not recede in the second half of next year. read more "In this past what we’ve seen is central banks using COVID as an excuse to remain dovish, and what we're seeing is central banks turn hawkish despite rising concerns around COVID, so it is a bit of a shift in communication," said Mohammed Kazmi, portfolio manager at UBP.  That said, the market is now so oversold, this is where we usually see aggressive dip-buying. In Europe, tech companies were the worst performers after Apple warned its component suppliers of slowing demand for its iPhone 13, the news dragged index heavyweight ASML Holding NV more than 4%. Meanwhile, travel shares were among the worst performers as the omicron variant continued to pop upin countries around the world, including the U.S., Norway, Ireland and South Korea. The Euro Stoxx 50 dropped as much as 1.7% while the Stoxx 600 Index fell 1.5%, extending declines to trade at a session low, with all sectors in the red and led lower by technology and travel stocks. The Stoxx 600 Technology Index slumped as much as 3.9%, the most in two months. Vifor Pharma surged by a record 18% following a report that Australia’s CSL is in advanced talks to acquire Swiss drugmaker. Here are some of the biggest European movers today: Vifor Pharma shares rise as much as 18% on a report that Australia’s CSL is in advanced talks to acquire the Swiss-based drug maker and developer while working with BofA on a A$4 billion funding package. Argenx jumps as much as 9.5% after Kepler Cheuvreux upgrades the stock to buy, saying the biotech company is on the brink of launching its first commercial product. Duerr gains as much as 7.2%, most since Aug. 10, after Deutsche Bank upgrades to buy and sets aa Street-high PT of EU60 for the German engineering company, citing the digitalization of the industry. Daily Mail & General Trust rises as much as 3.9% after Rothermere Continuation raised its bid for all DMGT’s Class A shares by 5.9% to 270p a share in cash. Klarabo surges as much as 54% as shares start trading on Nasdaq Stockholm after the Swedish property company raised SEK750m in an IPO. Eurofins Scientific declines for a fourth session, falling as much as 3.2%, as Goldman Sachs downgrades the company to neutral from buy “following strong outperformance YTD.” Deliveroo drops as much as 6.4% after an offering of 17.6m shares by CEO Will Shu and CFO Adam Miller at a price of 278p a share, representing a 4.2% discount to the last close. M&S falls as much as 3.4% after UBS cut its rating to neutral from buy, citing limited upside to its new price target as well as “little room for meaningful upgrades.” Earlier in the session, Asian stocks erased an earlier loss to trade slightly up, as traders continued to assess the potential impact of the omicron virus strain and the Federal Reserve’s efforts to keep inflation in check.  The MSCI Asia Pacific Index rose 0.2% after falling 0.4% in the morning. South Korea led regional gains, helped by large-cap chipmakers, while Japan was among the worst performers after the government dropped a plan for a blanket halt to all new incoming flight reservations. Asia’s equity benchmark is still down about 4% so far this year after rebounding in the past two sessions from a one-year low reached earlier this week. Despite the region’s underperformance against the U.S. and Europe, cheap valuations and foreign-investor positioning have prompted brokerages including Credit Suisse Group AG and Nomura Securities Co. Ltd. to turn bullish on Asia’s prospects next year. “Equity markets continue to play omicron tennis and traders looking for short-term direction should just wait for the next virus headline and then act accordingly,” said Jeffrey Halley, a senior market analyst at Oanda Corp. “Volatility, and not market direction, will be the winner this week.” Chinese technology shares including Alibaba Group Holding slid after Beijing was said to be planning to close a loophole used by the sector to go public abroad, fueling concern over existing overseas listings. Japanese equities declined, following U.S. peers lower after the first American case of the omicron coronavirus variant was confirmed. Electronics makers and telecoms were the biggest drags on the Topix, which fell 0.5%. SoftBank Group and TDK were the largest contributors to a 0.7% loss in the Nikkei 225.  The S&P 500 posted its worst two-day selloff since October 2020 after the first U.S. case of the new strain was reported. Federal Reserve Chair Jerome Powell reiterated that officials should consider a quicker reduction of monetary stimulus amid elevated inflation. “Truth is, there’s probably a lot of people who are wanting to buy stocks at some point,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. “But, with omicron still an unknown, people are responding sensitively to news development, and that’s keeping them from buying.” India’s benchmark equity index climbed for a second day, led by software exporters, on an improving economic outlook and as investors grabbed some beaten-down stocks after recent declines. The S&P BSE Sensex Index rose 1.4% to close at 58,461.29 in Mumbai, the biggest advance since Nov. 1. Its two-day gains increased to 2.5%, the most since Aug. 31. The NSE Nifty 50 Index also surged by a similar magnitude. All of the 19 sector sub-indexes compiled by BSE Ltd. were up, led by a gauge of utilities companies. “India underperformed the global markets in recent weeks. Investors are now going for value buying in stocks at lower levels,” said A. K. Prabhakar, head of research at IDBI Capital Market Services. The Sensex gained in three of the past four sessions after plunging 2.9% on Friday, the biggest drop since April. The rally, however, is in contrast to most global peers which are witnessing volatility on worries over the spread of the omicron variant. High frequency indicators in India, such as tax collection and manufacturing activities, have shown robust growth in recent months, while the country’s economy expanded 8.4% in the quarter ended in September, according to an official data release on Tuesday. Mortgage lender HDFC contributed the most to the Sensex’s gain, increasing 3.9%. Out of 30 shares in the index, 27 rose and three fell. In rates, trading has been relatively quiet as bunds and gilts bull steepen a touch with risk offered, while cash TSYs bear flatten, cheapening ~5bps across the curve.Treasuries retraced part of yesterday’s rally that sent the benchmark 30-year rate to the lowest since early January. A large buyer of 5-year U.S. Treasury options targets the yield dropping around 17bps. 5s10s, 5s30s spreads flattened by ~1bp and ~2bp to multimonth lows; 10-year yields around 1.43%, cheaper by more than 3bp on the day while bunds and gilt yields are richer by ~1bp. Front-end and belly of the curve underperform vs long-end, while bunds and gilts outperform Treasuries. With little economic data slated, speeches by several Fed officials are main focal points. Peripheral spreads tighten with 10y Spain outperforming after well received auctions, albeit with a small size on offer. U.S. economic data slate includes November Challenger job cuts (7:30am) and initial jobless claims (8:30am) In FX, the Bloomberg Dollar Spot Index fell to a day low in the European session and the greenback traded mixed versus its Group-of-10 peers as most crosses consolidated in recent ranges. Two-week implied volatility in the major currencies trades in the green Thursday as it now captures the next policy decisions by the world’s major central banks. Euro- dollar on the tenor rises by as much as 138 basis points to touch 8.22%, highest in a year; the relative premium, however, remains below parity as realized has risen to levels unseen since August 2020. The pound rose along with some other risk- sensitive currencies following the British currency’s three-day slump against the dollar. Long-end gilts underperformed, leading to some steepening of the curve. The yen fell for the first day in three while the Swiss franc fell a second day. The Hungarian forint rose to almost a three-week high after the central bank in Budapest raised the one-week deposit rate by 20 basis points to 3.10%. Economists in a Bloomberg survey were evenly split in predicting a 10 or 20 basis point increase. The Turkish lira resumed its slump after President Recep Tayyip Erdogan abruptly replaced his finance minister amid deepening rifts in the administration over aggressive interest-rate cuts that have undermined the currency and fueled inflation. Poland’s central bank Governor Adam Glapinski sent the zloty to a three-week high against the euro on Thursday with his changed rhetoric on inflation, which he no longer sees as transitory after prices surged at the fastest pace in more than two decades. Currency market volatility also rose, with euro-dollar one-month volatility gauges below Monday's one-year peak but still at elevate levels . "Liquidity in some areas of the market is still quite poor as people grapple with this news and as we head towards year-end, a lot of it is really liquidity driven, which is leading to some volatility," said UBP's Kazmi. "Even in the most liquid market of the U.S. treasury market we've seen some fairly large moves on very little newsflow at times." In commodities, crude futures extend Asia’s gains. WTI adds 2.2% near $67, Brent near $70.50 ahead of today’s OPEC+ meeting. Spot gold finds support near Tuesday’s, recovering somewhat to trade near $1,774/oz. Base metals are mixed: LME aluminum drops as much as 1.1%, nickel, zinc and tin hold in the green Looking at the day ahead now, and central bank speakers include the Fed’s Quarles, Bostic, Daly and Barkin, as well as the ECB’s Panetta. Data releases include the Euro Area unemployment rate and PPI inflation for October, while there’s also the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting. Market Snapshot S&P 500 futures up 0.7% to 4,540.25 STOXX Europe 600 down 1.0% to 466.37 MXAP up 0.2% to 192.07 MXAPJ up 0.7% to 629.36 Nikkei down 0.7% to 27,753.37 Topix down 0.5% to 1,926.37 Hang Seng Index up 0.5% to 23,788.93 Shanghai Composite little changed at 3,573.84 Sensex up 1.3% to 58,436.52 Australia S&P/ASX 200 down 0.1% to 7,225.18 Kospi up 1.6% to 2,945.27 Brent Futures up 2.4% to $70.53/bbl Gold spot down 0.6% to $1,771.73 U.S. Dollar Index little changed at 96.03 German 10Y yield little changed at -0.35% Euro little changed at $1.1320 Top Overnight News from Bloomberg Federal Reserve Bank of Cleveland President Loretta Mester said she’s “very open” to scaling back the Fed’s asset purchases at a faster pace so it can raise interest rates a couple of times next year if needed A United Nations gauge of global food prices rose 1.2% last month, threatening to make it more expensive for households to put a meal on the table. It’s more evidence of inflation soaring in the world’s largest economies and may make it even harder for the poorest nations to import food, worsening a hunger crisis Germany is poised to clamp down on people who aren’t vaccinated against Covid-19 and drastically curtail social contacts to ease pressure on increasingly stretched hospitals Some investors buffeted by concerns about tighter monetary policy are turning their sights to China’s battered junk bonds, given they offer some of the biggest yield buffers anywhere in global credit markets Pfizer Inc. says data on how well its Covid-19 vaccine protects against the omicron variant should be available within two to three weeks, an executive said GlaxoSmithKline Plc said its Covid-19 antibody treatment looks to be effective against the new omicron variant in early testing A more detailed look at global markets courtesy of Newsquawk Asian equity markets traded tentatively following the declines on Wall St where all major indices extended on losses and selling was exacerbated on confirmation of the first Omicron case in the US, while the Asia-Pac region also contended with its own pandemic concerns. ASX 200 (-0.2%) was subdued amid heavy losses in the tech sector and with a surge of infections in Victoria state, although downside in the index was cushioned amid inline Retail Sales and Trade Balance, as well as M&A optimism after Woolworths made a non-binding indicative proposal for Australian Pharmaceutical Industries. Nikkei 225 (-0.7%) weakened after the government instructed airlines to halt inbound flight bookings for a month due to fears of the new variant and with auto names also pressured by declines in monthly sales amid the chip supply crunch. KOSPI (+1.6%) showed resilience amid expectations for lawmakers to pass a record budget today and recouped opening losses despite the record increase in daily infections and confirmation of its first Omicron cases, while the index also shrugged off the highest CPI reading in a decade which effectively supports the case for further rate increases by the BoK. Hang Seng (+0.6%) and Shanghai Comp. (-0.1%) were choppy following another liquidity drain by the PBoC and with tech pressured in Hong Kong as Alibaba shares extended on declines after recently slipping to a 4-year low in its US listing. Beijing regulatory tightening also provided a headwind as initial reports suggested China is to crack down on loopholes used by tech firms for foreign IPOs, although this was later refuted by China, and the CBIRC is planning stricter regulations on major shareholders of banks and insurance companies, as well as confirmed it will better regulate connected transactions of banks. Finally, 10yr JGBs were higher as prices tracked gains in global counterparts and amid the risk aversion in Japan, although prices are off intraday highs after hitting resistance during a brief incursion to the 152.00 level and despite the marginally improved metrics from 10yr JGB auction. Top Asian News Asia Stocks Swing as Investors Weigh Omicron Impact, Fed Views Apple Tells Suppliers IPhone Demand Slowing as Holidays Near Moody’s Cuts China Property Sales View on Financing Difficulties Faith in Singapore Leaders Hit by Record Covid Wave, Poll Shows Bourses across Europe have held onto losses seen at the cash open (Euro Stoxx 50 -1.4%; Stoxx -1.2%), as the region plays catchup to the downside seen on Wall Street – seemingly sparked by a concoction of hawkish Fed rhetoric and the discovery of the Omicron variant in the US. Nonetheless, US equity futures are firmer across the board but to varying degrees – with the cyclical RTY (+1.1%) and the NQ (+0.3%) the current laggard. European futures ahead of the cash open saw some mild fleeting impetus on reports GlaxoSmithKline's (-0.3%) COVID treatment Sotrovimab retains its activity against Omicron variant, and the UK MHRA simultaneously approved the use of Sotrovimab – but caveated that it is too early to know whether Omicron has any impact on effectiveness. Conversely, brief risk-off crept into the market following commentary from a South African Scientist who warned the country is seeing an exponential rise in new COVID cases with a predominance of Omicron variant across the country – with the variant causing the fastest ever community transmission - but expects fewer active cases and hospitalisations this wave. Back to Europe, Euro indices see broad-based losses whilst the downside in the FTSE 100 (-0.7%) is less severe amid support from its heavyweight Oil & Gas sector – the outperforming sector in the region. Delving deeper, sectors see no overarching theme nor bias – Food & Beverages, Autos and Banks are towards the top of the bunch, whilst Tech, Telecoms, and Travel &Leisure. Tech is predominantly weighed on by reports that Apple (-2% pre-market) reportedly told iPhone component suppliers that demand slowed down. As such ASML (-5.0%), STMicroelectronics (-4.4%) and Infineon (-3.6%) reside among the biggest losers in the Stoxx 600. Deliveroo (-5.3%) is softer following an offering of almost 18mln at a discount to yesterday's close. In terms of market commentary, Morgan Stanley believes that inflation will remain high over the next few months, in turn supporting commodities, financials and some cyclical sectors. The bank identifies beneficiaries including EDF (-1.5%), Engie (-1.2%), SSE (-0.2%), Legrand (-1.3%), Tesco (-0.5%), BT (-0.8%), Michelin (-1.6%) and Sika (-0.9%). Top European News Shell Kicks Off First Wave of Buybacks From Permian Sale Omicron Threatens to Prolong Pain in Bid to Vaccinate the World Apple, Suppliers Drop Premarket After Report Demand Slowed Valeo, Gestamp Gain After Barclays Raises to Overweight In FX, currency markets are still in a state of flux, or limbo bar a few exceptions, and the Greenback is gyrating against major peers awaiting the next major event that could provide clearer direction and a more decisive range break. Thursday’s agenda offers some scope on that front via US initial jobless claims and a host of Fed speakers, but in truth NFP tomorrow is probably more likely to be influential even though chair Powell has effectively given the green light to fast-track tapering from December. In the interim, the index continues to keep a relatively short leash around 96.000, and is holding within 96.138-95.895 confines so far today. JPY/CHF - Although risk considerations look supportive for the Yen, on paper, UST-JGB/Fed-BoJ differentials coupled with technical impulses are keeping Usd/Jpy buoyant on the 113.00 handle, with additional demand said to have come from Japanese exporters overnight. However, the headline pair may run into offers/resistance circa 113.50 and any breach could be capped by decent option expiry interest spanning 113.60-75 (1.5 bn). Similarly, the Franc has slipped back below 0.9200 on yield and Swiss/US Central Bank policy stances plus near term outlooks, and hardly helped by a slowdown in retail sales. GBP/CAD/NZD - All firmer vs their US counterpart, though again well within recent admittedly wide ranges, and the Pound perhaps more attuned to Eur/Gbp fluctuations as the cross retreats to retest 0.8500 and Cable rebounds to have another look at 1.3300 where a fairly big option expiry resides (850 mn). Indeed, Sterling has largely shrugged off the latest BoE Monthly Decision Maker Panel release that in truth did not deliver any clues on what is set to be another knife-edge MPC gathering in December. Elsewhere, the Loonie is straddling 1.2800 with eyes on WTI crude ahead of Canadian jobs data on Friday and the Kiwi is hovering above 0.6800 after weaker NZ Q3 terms of trade were offset to some extent by favourable Aud/Nzd headwinds. AUD/EUR - Both narrowly mixed against US Dollar, with the Aussie pivoting 0.7100 in wake of roughly in line trade and retail sales data overnight, but wary about the latest virus outbreak in the state of Victoria, while the Euro is sitting somewhat uncomfortably on the 1.1300 handle amidst softer EGB yields and heightened uncertainty about what the ECB might or might not do in December on the QE guidance front. In commodities, WTI and Brent front-month futures are firmer intraday as traders gear up for the JMMC and OPEC+ confabs at 12:00GMT and 13:00GMT, respectively. The jury is still split on what the final decision could be, but the case for OPEC+ to pause the planned monthly relaxation of output curbs by 400k BPD has been strengthening against the backdrop of Omicron coupled with the coordinated SPR releases (an updating Rolling Headline is available on the Newsquawk headline feed). As expected, OPEC sources have been testing the waters in the run-up, whilst yesterday's JTC/OPEC meetings largely surrounded the successor to the Secretary-General position. Oil market price action will likely be centred around OPEC+ today in the absence of any macro shocks. WTI Jan resides around USD 66.50/bbl (vs low USD 65.41/bbl) whilst Brent Feb briefly topped USD 70/bbl (vs low USD 68.73/bbl). Elsewhere, spot gold has eased further from the USD 1,800/oz after failing to sustain a break above the 50, 100 and 200 DMAs which have all converged to USD 1,791/oz today. LME copper is on the backfoot amid the cautious risk sentiment, with the red metal back under USD 9,500/t but off overnight lows. US Event Calendar 7:30am: Nov. Challenger Job Cuts -77.0% YoY, prior -71.7% 8:30am: Nov. Initial Jobless Claims, est. 240,000, prior 199,000; 8:30am: Nov. Continuing Claims, est. 2m, prior 2.05m 9:45am: Nov. Langer Consumer Comfort, prior 52.2 DB's Jim Reid concludes the overnight wrap With investors remaining on tenterhooks to find out some definitive information on the Omicron variant, yesterday saw markets continue to see-saw for a 4th day running. Following one of the biggest sell-offs of the year on Friday, we then had a partial bounceback on Monday, another bout of fears on Tuesday (not helped by the prospect of faster tapering), and yesterday saw another rally back before risk sentiment turned sharply later in the day as an initial case of the Omicron variant was discovered in the US. You can get some idea of this by the fact that Europe’s STOXX 600 (+1.71%) posted its best daily performance since May, whereas the S&P 500 moved from an intraday high where it had been up +1.88%, before shedding all those gains and more to close -1.18% lower. In fact, that decline means the S&P has now lost over -3% in the last two sessions, marking its worst 2-day performance in over a year, and this heightened volatility saw the VIX index close back above 30 for the first time since early February. In terms of developments about Omicron, we’re still in a waiting game for some concrete stats, but there was positive news early on from the World Health Organization’s chief scientist, who said that they think vaccines “will still protect against severe disease as they have against the other variants”. On the other hand, there was further negative news out of South Africa, as the country reported 8,561 infections over the previous day, with a positivity rate of 16.5%. That’s up from 4,373 cases the day before, and 2,273 the day before that, so all eyes will be on whether this trend continues, and also on what that means for hospitalisation and death rates over the days ahead. Against this backdrop, calls for fresh restrictions mounted across a range of countries, particularly on the travel side. In the US, it’s been reported already by the Washington Post that President Biden could today announce stricter testing requirements for arriving travellers. Meanwhile, France is moving to require non-EU arrivals to show a negative test before arrival, irrespective of their vaccination status. The EU Commission further said that member states should conduct daily reviews of essential travel restrictions, and Commission President von der Leyen also said that the EU should discuss the topic of mandatory vaccinations. There was also a Bloomberg report that German Chancellor Merkel would recommend mandatory vaccinations from February 2022, according to a Chancellery paper that they’d obtained. That came as Slovakia sought to incentivise vaccination uptake among older citizens, with the cabinet backing a €500 hospitality voucher for residents over 60 who’ve been vaccinated. As on Tuesday, the other main headlines yesterday were provided by Fed Chair Powell, who re-emphasised his more hawkish rhetoric around inflation before the House Financial Services Committee. Notably he said that “We’ve seen inflation be more persistent. We’ve seen the factors that are causing higher inflation to be more persistent”, though yields on 2yr Treasuries (-1.4bps) already had the shift in stance priced in. New York Fed President Williams echoed that view in an interview, noting it would be germane to discuss and decide whether it was appropriate to accelerate the pace of tapering at the December FOMC. 10yr yields (-4.1bps) continued their decline, predominantly driven by the turn in sentiment following the negative Omicron headlines. That latest round of curve flattening left the 2s10s slope at its flattest level since early January around the time of the Georgia Senate race that ushered in the prospect of much larger fiscal stimulus. In terms of markets elsewhere, strong data releases helped to support risk appetite earlier in yesterday’s session, with investors also looking forward to tomorrow’s US jobs report for November that will be an important one ahead of the Fed’s decision in less than a couple of weeks’ time. The ISM manufacturing release for November saw the headline number come in roughly as expected at 61.1 (vs. 61.2 expected), and also included a rise in both the new orders (61.5) and the employment (53.3) components relative to last month. Separately, the ADP’s report of private payrolls for November likewise came in around expectations, with a +534k gain (vs. +526k expected). Staying on the US, one thing to keep an eye out over the next 24 hours will be any news on a government shutdown, with funding currently set to run out by the weekend as it stands. The headlines yesterday weren’t promising for those hoping for an uneventful, tidy resolution, as Politico indicated that some Congressional Republicans would not agree to an expedited process to fund the government should certain vaccine mandates remain in place. An expedited process is necessary to avoid a government shutdown at the end of the week, so one to watch. After the incredibly divergent equity performances in the US and Europe, we’ve seen a much more mixed performance in Asia overnight, with the KOSPI (+1.09%), Hang Seng (+0.23%), and CSI (+0.23%) all advancing, whereas the Shanghai Composite (-0.05%) and the Nikkei (-0.60%) are trading lower. In terms of the latest on Omicron, authorities in South Korea confirmed five cases, which came as the country also reported that CPI in November rose to its fastest since December 2011, at +3.7% (vs +3.1% expected). Separately in China, 53 local Covid-19 cases were reported in Inner Mongolia, whilst Harbin province reported 3 local cases. Looking forward, futures are indicating a positive start in the US with those on the S&P 500 (+0.64%) pointing higher. Back in Europe, sovereign bonds lost ground yesterday, and yields on 10yr bunds (+0.5bps), OATs (+1.1bps) and BTPs (+4.2bps) continued to move higher. Interestingly, there was a continued widening in peripheral spreads, with the gap between both Italian and Spanish 10yr yields over bunds reaching their biggest level in over a year, at 135bps and 77bps, respectively. Another factor to keep an eye on in Europe is another round of increases in natural gas prices, with futures up +3.42% to their highest level since mid-October yesterday. Lastly on the data front, the main other story was the release of the manufacturing PMIs from around the world. We’d already had the flash readings from a number of the key economies, so they weren’t too surprising, but the Euro Area came in at 58.4 (vs. flash 58.6), Germany came in at 57.4 (vs. flash 57.6), and the UK came in at 58.1 (vs. flash 58.2). One country that saw a decent upward revision was France, with the final number at 55.9 (vs. flash 54.6), which marks an end to 5 successive monthly declines in the French manufacturing PMI. One other release were German retail sales for October, which unexpectedly fell -0.3% (vs. +0.9% expected). To the day ahead now, and central bank speakers include the Fed’s Quarles, Bostic, Daly and Barkin, as well as the ECB’s Panetta. Data releases include the Euro Area unemployment rate and PPI inflation for October, while there’s also the weekly initial jobless claims. Lastly, the OPEC+ group will be meeting. Tyler Durden Thu, 12/02/2021 - 07:57.....»»

Category: dealsSource: nytDec 2nd, 2021

The best gaming keyboards for every budget in 2021

If you love to play video games on your PC, you need a great gaming keyboard. These are the best gaming keyboards you can buy. Prices are accurate at the time of publication.When you buy through our links, Insider may earn an affiliate commission. Learn more.Amazon; Alyssa Powell/Insider Gaming keyboards can make or break your game, so we rounded up the best for you to choose from. The best gaming keyboard overall is the Corsair K100 RGB, combining sheer performance with a deep feature set. We've picked out the best mechanical, optical, and mini keyboards too, meeting every PC gamer's need. Choosing an excellent keyboard that meets your gaming demands isn't as easy as you may think. There are a lot of them out there to sift through, from big-name offerings to bargain-basement alternatives you'll only find on Amazon. That's not to mention the different types and sizes you must choose from. You have your work cut out for you, especially if you don't already know the kind of keyboard you need.Luckily, we are here to help you narrow down your choices. The final decision is still yours, but we'll make it easier by testing them ourselves and highlighting the best gaming keyboards we found on this list. We've also included a short yet detailed guide to choosing the right gaming keyboard just below to help you figure out exactly the kind of keyboard that's best for the kinds of games you play.Just looking for something cheap in general? Cyber Monday deals are still ongoing. Models from Razer's BlackWidow and Logitech G's Lightspeed lines have seen deep discounts in the past. You should be able to find a premium gaming keyboard that's within your budget this year. In the days leading up to these sales events, we'll help you do just that. In the meantime, be sure to check out our top picks for every need and even budget. Whether you hit that buy button now or are here to window-shop so you know what you want when Black Friday and Cyber Monday arrive, you'll find something that's a perfect fit.Here are the best gaming keyboards of 2021Best gaming keyboard overall: Corsair K100 RGBBest mechanical gaming keyboard: Razer BlackWidow V3 Best optical gaming keyboard: Roccat Vulcan ProBest customizable gaming keyboard: Razer Huntsman V2 AnalogBest TKL gaming keyboard: Roccat Vulcan TKL Pro Best mini gaming keyboard: Razer BlackWidow V3 Mini Hyperspeed Phantom EditionBest wireless gaming keyboard: Logitech G915 Lightspeed WirelessBest gaming keyboard for less than $50: Corsair K55 RGBThe best Cyber Monday deals on gaming keyboards from this guideA decent and comfortable gaming keyboard is crucial to any PC gaming setup. Gaming peripherals generally don't go on sale much outside of specific events, namely ongoing Cyber Monday deals.Corsair K100 RGB$189.99 FROM AMAZONOriginally $229.99 | Save 17%Razer BlackWidow V3 Mechanical Gaming Keyboard$89.99 FROM AMAZONOriginally $139.99 | Save 36%Roccat Vulcan Pro$149.99 FROM AMAZONOriginally $199.99 | Save 25%Razer Huntsman V2 Analog$199.99 FROM AMAZONOriginally $249.99 | Save 20%Roccat Vulcan TKL Pro$119.99 FROM AMAZONOriginally $159.99 | Save 25%Logitech G915 TKL Tenkeyless Lightspeed Wireless RGB$179.99 FROM AMAZONOriginally $229.99 | Save 22%Read more about how the Insider Reviews team evaluates deals and why you should trust us.Best gaming keyboard overallThe Corsair K100 RGB is the best gaming keyboard overall for its combination of performance, features, and build.CorsairIf you're looking for a premium experience, the Corsair K100 RGB brings sheer performance that is only surpassed by its feature set.Type: Optical-mechanical full-sized keyboardSwitch: OPX switchesInterface: WiredFeatures: Fully-customizable keys and RGB lighting, dedicated macro keys, onboard memory, passthrough chargingPros: Solid construction, top-notch performance, a host of great featuresCons: More expensive than most, takes up space, bulkier than othersCompetitive gamers want the best, and the Corsair K100 RGB is the best. But, even if you're more about getting the most features for your money, this gaming keyboard is also a win. We've used it on games like Marvel Avengers, Death Stranding, and Cyberpunk 2077 – and it really delivers on performance. Touting Corsair's impressive OPX switches and Axon Hyper-Processing technology, it boasts a 4,000 polling rate, 1 millimeter (mm) actuation point, and the N-key rollover with anti-ghosting. That means that it's as fast as it is responsive, which matters in games where every fraction of a second and every key press count. The Corsair K100 RGB is also one of the most robust and premium feeling gaming keyboards we've ever tested. You just know it's going to survive years of button-mashing and pounding, as well as resist everyday wear and tear, swimmingly while staying elegant-looking and comfortable to use. What gives the Corsair K100 RGB even more value, however, is its host of incredible features. Corsair really took advantage of its sizable footprint by stuffing it with a whole bunch of useful features. There are extra media keys and six dedicated macro keys on top of its already fully-programmable design. There's also a very accessible control dial that lets you cycle through five different functions and adjust their settings.Passthrough charging via its USB port allows you to attach another device to your rig. And, its RGB lighting is also grouped into 44 zones, so you can get as creative as you'd like without spending too much time on customizations.To really make it worth your money, Corsair also gave it an 8MB onboard memory so you can create up to 200 key remap, macro and RGB lighting profiles that you can take with you.$189.99 FROM AMAZONOriginally $229.99 | Save 17%Best mechanical gaming keyboardDelivering excellent value, the Razer BlackWidow V3 is deserving of the best mechanical gaming keyboard title.RazerTouting premium features without the premium price, the Razer BlackWidow V3 is a terrific and affordably priced mechanical keyboard.Type: Full optical keyboardSwitch: Titan optical switchInterface: WiredFeatures: 100 million keystroke life-cycle, 512kb integrated macro & settings memory, 6 programmable macro keys, magnetic wrist restPros: Great value, solid build, a whole lot of customization optionsCons: Sizable form factor, wrist rest is not comfortable, minimal keycap curvatureIf there's one thing the Razer BlackWidow V3 proves, it's that those features we don't pay much attention to really do matter. The minimal curvature in its keycaps and lack of foam on its wrist rest make this keyboard an adjustment to use, especially if you're upgrading from something that keeps your fingers and wrist resting nice and comfortable.Still, this full-sized keyboard is much-lauded and for good reason. Those green or yellow mechanical switches are not only very precise and solid with a rating of 80 million keystrokes, but they're also extremely satisfying to use. In fact, we love typing on this keyboard as much as we love gaming on it. Of course, it's in gaming where it really shines, boasting a 1,000Hz polling rate and N-key rollover that allows its performance to be as responsive and accurate as its pricier rivals. There aren't as many features here, sadly, with Razer putting its focus on making it among the best mechanical keyboards out there. However, it's not bare-bones either – at that price, it better not be. You're getting onboard memory for up to five profiles, a multifunction media button, a multifunction roller wheel, and a handy cable routing solution in the back.Plus, as much as this keyboard belongs in the entry-level category of gaming keyboards due to its more stripped-down approach, it still has a robust set of customization options to match its excellent performance. Via the Razer Synapse software, you can personalize its RGB lighting (though not per-key), program per-key remaps and macros, and take full advantage of Razer's Hypershift feature that basically gives you a whole new set of shortcuts and key reassignments.Razer then rounds those out with the BlackWidow V3's keycaps and matte aluminum body, both of which feel like they can take their share of beating. Speaking of those keycaps, they're labeled using a doubleshot molding process, which means you'll never wear those letters off no matter how much button-mashing you do.$89.99 FROM AMAZONOriginally $139.99 | Save 36%Best optical gaming keyboardThe Roccat Vulcan Pro is among the best performing and best looking gaming keyboards out there, optical or otherwise.RoccatThe Roccat Vulcan Pro packs robust performance and solid build in a beautiful and elegant design. If you're looking for an optical option, you'll fall in love with this one.Type: Full optical keyboardSwitch: Titan optical switchInterface: WiredFeatures: 100 million keystroke life-cycle, 512kb integrated macro & settings memory, 6 programmable macro keys, magnetic wrist restPros: Aircraft-grade aluminum body, thin and light, excellent performanceCons: Hard wrist rest, keypresses may take some getting used toWe cannot deny that we're big fans of Roccat's gaming accessories. The manufacturer has a knack for producing luxurious peripherals that masterfully combine robust performance and rugged build with sexier aesthetics. The Roccat Vulcan Pro certainly doesn't fall far from that high-class tree, and is the best performing and best feeling optical gaming keyboard we've ever used.Optical keyboards are generally considered to be faster and more durable than the traditional mechanical ones. However, they tend to also have a bit more resistance. If you're unfamiliar with optical switches, you should do your due diligence before buying. If, however, you are a fan, then the Roccat Vulcan Pro is the one to get. We love the bounce its keys offer, as much as we do the curvature of those keycaps that are incredibly effective in keeping our fingers in place.Gaming on this thing is a pleasure, which isn't surprising. After all, it boasts an actuation point of 1.4mm, which is much shorter than other premium keyboards, a 1,000Hz polling rate, and a 32-bit ARM Cortex-M0 based processor for incredibly fast responses. And, its Titan optical switches are rated at 100 million keystrokes.As far as features, you're getting an onboard memory to save five profiles in, a set of mixer-style audio controls, and a detachable wrist rest that magnetically snaps onto the keyboard.It's beauty and brains in one, and there's certainly a lot of beauty here. The floating keys on an aluminum plate aesthetic are designed to let that customizable RGB light up like the Rockefeller Christmas tree. And, even though it is a full-sized keyboard, its 3.20cm-thin profile makes it feel less in your face. So much so you won't be embarrassed to use this at the office, especially because those keys are also elegantly quiet.$149.99 FROM AMAZONOriginally $199.99 | Save 25%Best customizable gaming keyboardThe Razer Huntsman V2 Analog offers plenty of customizations that make it worth the price.RazerPerhaps the most feature-rich and most customizable gaming keyboard we've ever tested, the Razer Huntsman V2 Analog makes gaming incredibly seamless and easy.Type: Full optical keyboardSwitch: Razer analog optical switchInterface: WiredFeatures: Adjustable actuation, Dual-step actuation, USB 3.0 passthrough, magnetic leatherette wrist restPros: Adjustable actuation, dual-step actuation, comfortable wrist restCons: Pricey, a bit of a learning curve with some features, heavyThe Razer Huntsman V2 Analog isn't what most would call cheap, but it's also among the best value gaming keyboards out there thanks to its treasure trove of features. We're not just referring to its unbelievably plush wrist rest that magnetically snaps onto the keyboard and makes your wrists feel like they're resting on clouds or the USB passthrough that offers another port to which you can connect other peripherals or the underglow RGB lighting that extends to the wrist rest. Although those do add to this keyboard's appeal.Most importantly for gamers, the Razer Huntsman V2 Analog is incredibly customizable, offering per-key adjustments and remapping like you've never seen on other keyboards. Via the Razer Synapse software, you can toggle each key's actuation point from 1.5mm, which is the default, to 3.6mm, so the keyboard responds to your presses exactly how you want it.That's nothing, however, next to the keyboard's dual-step actuation function, which actually lets you assign two different functions at two different actuation points on the same key. It's an incredibly nifty feature to have, as it gives you the ability to press fewer keys for similar game actions. A great, if basic, example of this would be to keep the W key's default forward action at 1.5mm actuation point while assigning the run action as its secondary function at 3.5mm in games like Valheim. It essentially eliminates the need for extra key presses and makes your gaming experience much more seamless, mimicking the dynamism of analog gamepads.Of course, essentials like customizable RGB lighting, macro recording – which can be done on-the-fly, onboard memory for up to five profiles, media keys, and robust doubleshot PBT keycaps are on hand as well. That's not to mention its super responsive and accurate performance thanks to its 1,000Hz polling rate, optical switches and N-key roll-over with anti-ghosting.$199.99 FROM AMAZONOriginally $249.99 | Save 20%Best TKL gaming keyboardGo compact but keep your arrow keys with the elegant Roccat Vulcan TKL Pro.RoccatThe Roccat Vulcan TKL Pro stands out by combining elegance and style with sheer performance and durability, making it our tenkeyless champion.Type: TKL optical keyboardSwitch: Titan optical switchInterface: WiredFeatures: 1.4mm actuation distance, beautiful RGB lighting, volume dial, floating keys designPros: Compact form factor, quiet operation, short actuation distanceCons: Pricey, FN shortcuts take a bit of adjustment, bouncy feedback not for everyoneIf you want the best tenkeyless (TKL; lacking a number pad) gaming keyboard, take a look at the Roccat Vulcan TKL Pro, which is among our favorite gaming keyboards at the moment.This optical option takes the classy route with its elegant and stunning aesthetic that features a floating keys approach on a brushed gunmetal finish. The whole thing seems to be designed to allow its customizable RGB lighting to shine brilliantly, which it does even in broad daylight.Don't let that elegant exterior fool you. The Roccat Vulcan TKL Pro is as robust as they come, boasting aircraft-grade aluminum and optical switches that are rated at 100 million keystrokes.Speaking of those optical switches, they are Roccat's Titan optical switches, renowned for not just being durable but also for being extremely responsive. With an actuation distance of 1.4mm, you don't have to press those keys all the way for them to register — and accurately, we might add. In fact, we've typed up a song verse on this keyboard with very light presses, and it did not miss a single key. Combined with its 1,000Hz polling rate, you'll find this keyboard a huge advantage when gaming.Because it's incredibly quiet, you'll also have the peace of mind knowing that you can game late at night and not piss off your roommate with all the button-mashing. Don't worry about the more compact form factor, either. Its Function (FN) key shortcuts allow for quick access to media controls, settings, or RGB lighting presets, while the Roccat Swarm software lets you adjust keyboard settings, program key remaps and macros, and fine-tune the RGB lighting. There might just be an adjustment period — it's the price you pay for compactness. However, you definitely won't be missing out on full keyboard functionalities.$119.99 FROM AMAZONOriginally $159.99 | Save 25%Best mini gaming keyboardRazerThe Razer BlackWidow V3 Mini Hyperspeed Phantom Edition earns our highest regard for a mini gaming keyboard because of its high polling rate and ability to store up to 50 custom key profiles for use with several games.Type: 65% mechanical keyboardSwitch: Razer Green or Razer YellowInterface: Wireless and wiredFeatures: Three types of connection, Phantom keycaps, Razer Hyperspeed Multi-Device support, Razer Chroma RGBPros: Very small form factor, fast performance, multiple connectivity options, robust build, floating keys appearanceCons: No dedicated arrow keys, steep learning curveThe Corsair K65 RGB Mini was our previous top choice for a mini keyboard, but it's been since toppled by the extremely versatile Razer BlackWidow V3 Mini Hyperspeed Phantom Edition. The Corsair K65 RGB Mini remainsan impressive piece of kit, especially to hardcore and pro gamers who need its ultrafast polling rate of 8,000Hz and onboard memory that stores up to 50 profiles. However, the Razer BlackWidow V3 Mini Hyperspeed Phantom Edition is the mini keyboard for the rest of us who need versatility and comfort just as much as we do power. This 60% gaming keyboard boasts a 1,000Hz polling rate and on-board memory that lets you store up to 5 profiles, which is more than enough for most non-pro gamers. It combines those capabilities with the versatility of having three different modes of connectivity, something that the fully-wired K65 doesn't offer. What that means is that this mini gaming keyboard will let you connect it to your gaming PC or laptop via the Razer HyperSpeed Wireless (2.4 Ghz) dongle, Bluetooth, or the detachable USB-C cable. And, all of them are almost equally reliable for gaming.There's also a solid-keycap version of this keyboard, but we do adore the version with  Phantom keycaps, which gives it the illusion of having low-profile floating keys and, in effect, letting that gorgeous RGB shine even brighter. For comfort, there's a tapered design that angles down towards your hands as well as an incredibly plush, mini ergonomic wrist rest. Though this wrist rest is sold separately, it's more than worth its $20 price, so much so this author uses it for all her keyboards, even the non-gaming ones.Rounding all that out are the keyboard's fully programmable keys, on-the-fly macro recording capabilities, and an 80-million-keystroke lifespan.$199.99 FROM RAZERBest wireless gaming keyboardThe Logitech G915 TKL Tenkeyless Lightspeed Wireless RGB’s wireless performance makes it deserving of the title.AmazonBeautiful and incredibly thin, the Logitech G915 TKL Tenkeyless Lightspeed Wireless RGB is the best wireless gaming keyboard for its impressive wireless features and performance.Type: TKL mechanical keyboardSwitch: Low Profile GL tactile switchInterface: WirelessFeatures: Dual device connectivity, onboard memory, low profile switches, fully customizable per-key lightingPros: Great performance, incredibly thin profile, long battery lifeCons: Expensive, no numeric pad, not all keys are programmableThe Logitech G915 TKL Tenkeyless Lightspeed Wireless RGB is one good looking keyboard, with its thin floating keycaps, brushed aluminum alloy top, round multimedia buttons, and beautiful RGB lighting. It doesn't just go by looks alone, however. Despite being one of the thinnest gaming keyboards out there, it also feels robust, its aluminum alloy top case supported by a steel-reinforced base. Meanwhile, its GL switches feel like they can take their share of button mashing.There are a lot of other things to love here. Though it may not have an expansive feature set, it does come with its share. Those dedicated media keys, all round in shape, as well as the volume dial, are definitely useful additions. Meanwhile, the dedicated wireless, Bluetooth, game mode, and RGB brightness buttons are a boon to multitaskers who either use two devices at once or want to go from being productive to gaming in seconds.Because, honestly, you'll love using this keyboard for typing up documents and writing those work emails as much as you would gaming with it. Combining a 1 millisecond response time and 1.5mm actuation distance with its satisfying tactile feedback, it's just as comfortable to use for work as it is responsive and accurate for gaming.Of course, being our top wireless contender, there are a few noteworthy things here. It has two connectivity options — one via its Lightspeed USB receiver, the other via Bluetooth. This is something we often see with Logitech's wireless keyboards, but it isn't something we often see with wireless gaming keyboards.While Logitech didn't specify its Lightspeed USB receiver's range, we've used this keyboard six to seven meters away from the laptop it's connected to in another room with the door closed, and it didn't miss a single keypress.$179.99 FROM AMAZONOriginally $229.99 | Save 22%Best gaming keyboard for less than $50The Corsair K55 RGB may be cheap, but its performance and features prove that it can hold its own against its more expensive rivals.CorsairThe Corsair K55 RGB may cost less than $50, but it still looks like a fully-featured gaming keyboard and boasts many of the same features.Type: MembraneSwitch: Rubber Dome switchesInterface: WiredFeatures: Programmable macro keys, detachable palm rest, dust and water resistance, anti-ghostingPros: Cheap, RGB lighting, customizable keysCons: Keys aren't mechanical, not fully programmable, This is the third time Corsair has featured on this list, though for good reason. Not only does the company build excellent top-tier keyboards, it also builds great affordable keyboards for the gamer on a budget. The best of those is the Corsair K55 RGB, which comes in at less than $50.The Corsair K55 RGB, as the name suggests, offers full RGB lighting, making it look much more expensive than it really is. It also boasts a total of six programmable buttons, which can be programmed through the same great software you'll get with the K95 Platinum. It also has dedicated media controls, and well-built keys.So why is the keyboard so cheap? Well, those keys may be well-built, but they're not mechanical keys, and as such, they may not be as satisfying to press or durable as other gaming keyboards. Still, that doesn't make this a bad keyboard, it's just something to keep in mind.$49.99 FROM AMAZONHow we test gaming monitorsWhen it comes to buying computer peripherals, gamers often need something a little higher quality than everyone else. After all, when you're gaming, every millisecond counts, and the feel of a keyboard and mouse can have a pretty major effect on a gamer's performance. Those are the things we test when deciding whether or not a particular gaming keyboard is a worthy addition to this list.In terms of performance, we typically see what a gaming keyboard does in the face of the latest popular games, playing a good mix of game genres on it. For example, we tested our most current picks above on AAA games, like Cyberpunk 2077 and Resident Evil Village, as well as lower-budget but equally popular titles, like Valheim and It Takes Two. Of course, since most people often just use the same keyboard for productivity as they do for gaming, we've done our fair share of typing up emails and articles on these picks as well, which also helped us gauge each one's comfort level, tactile feedback, and overall typing experience.We also make sure to test the software every keyboard utilizes for customizations, especially when it comes to macros, remaps, and RGB lighting. After all, many gamers rely on those supporting apps to improve their gaming experience. Naturally, if a gaming keyboard is wireless, we test its range and amount of latency as well, typically by taking it as far as we can from the PC it's connected to or in another room and using it like we normally would. Finally, we test specific features as well — for example, if a keyboard has some specifically for MMORPG and MOBA, we make sure to utilize such features for such online multiplayer games.What to look for in a gaming keyboardMore so than gaming PCs or laptops, the ideal gaming keyboard for one person isn't necessarily going to be the same for another. It highly depends on a number of factors, including gaming preferences, budget, space, and comfort. So, let's try to narrow yours down for you:Type of switchesMost high-quality gaming keyboards opt for mechanical switches, of which there are also several subtypes: linear, tactile, and clicky. Do bear in mind that different manufacturers have their own names for these subtypes – Razer, for example, calls its own mechanical switches Green (tactile and clicky), Yellow (linear and silent) and Orange (tactile and silent). This means that choosing the mechanical switch you like most is actually a bit more involved, and for that, you should check out our Guide to Mechanical Switches. But, then there are keyboards that use optical switches, which tend to have faster actuation and longer lifespans in general. Of course, with these two types of switches competing against one another, this isn't necessarily a hard and fast rule. There are mechanical switches out there that now have just as long of a lifespan as optical ones, for example. And, while most people prefer the feel and feedback that mechanical switches offer, some optical switches have managed to deliver that same satisfying feel.Finally, some gaming keyboards – usually the budget ones – come with membrane switches, which have very little tactile feedback but tend to be cheaper and can allow the keyboards to be waterproof.Size, layout and form factorThere are a lot of full-sized gaming keyboards out there, which is likely the type of keyboard most gamers have. But, in recent years, manufacturers have come to realize the value of smaller ones. TKL, or TenKeyLess, gaming keyboards were the first to really hit the mainstream, abandoning the number pad and other miscellaneous keys most people don't need for gaming use to save space.Then mini – or 60%, 65% and 75% – keyboards hit the shelves, offering that extremely compact and portable form factor to gamers with smaller spaces and setups. These are definitely ideal if you have a small or already overcrowded desk. However, these have really steep learning curves. You will be sacrificing small luxuries like having easy access to your arrow keys, which means you'll have to take time to program or learn shortcuts before diving into your games.Whichever size/layout you choose, you'll find some thick ones and some with very thin profiles. These come with their own advantages and disadvantages as well, which means that the right one for you greatly depends on your comfort level and, to an extent, the size of your hands.ConnectivityFor most gamers, a wired connection is still king, which is true in some ways. You don't have to worry about battery life or your connection getting cut in the middle of a pivotal game moment.However, wireless gaming keyboards have come a long way in terms of performance, accuracy, and connectivity. Choose one of the best wireless options out there, and you're pretty much guaranteed the same quality as their wired counterparts. And, these tend to also have very long battery lives. The only thing is that you do have to remember to charge it once in a while.PerformanceWhen it comes to gaming keyboards, performance is key, no matter the type of games you typically play. However, there are also different levels of performance ideal for different types of games. An 8,000Hz polling rate might be the dream, for example, but realistically, a 1,000Hz one should be more than enough for gamers not playing at pro levels. And, keyboards with 1,000Hz polling rates tend to be cheaper.Make sure to get something with N-key rollover and anti-ghosting features if the games you play tend to require a lot of button-mashing, fast presses, or macros, as these ensure that the keyboard registers every single key your press, no matter how fast in succession you do them.FeaturesThe most basic keyboards tend to be minimal in features, but pricier ones come kitted out with things like onboard memory to store profiles and macros in, dedicated media controls, fully programmable keys, and an included wrist rest. Before you hit buy, make sure you know which features are vital to you so you can choose the gaming keyboard that offers them.What else we consideredThere are so many excellent gaming keyboards out there that narrowing them down to eight has been tough. We've considered models like the Razer Huntsman Tournament Edition, the SteelSeries Apex 3, and the HyperX Alloy Origins 60, all of which are incredible in their own right. It's just that our picks above simply did it better.It was also hard to knock off previous picks like the Corsair K65 RGB Mini and the Corsair K95 RGB Platinum, but for varying reasons, we've had to give them up to make space for newer and perhaps slightly better entries.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 1st, 2021

Bonhoeffer 3Q21 Commentary: Case Study – Millicom

Bonhoeffer Capital Management commentary for the third quarter ended September 2021, providing a case study for Millicom International Cellular SA (NASDAQ:TIGO). Q3 2021 hedge fund letters, conferences and more Dear Partner, The Bonhoeffer Fund returned -2.8% net of fees in the third quarter of 2021. In the same time period, the MSCI World ex-US, a […] Bonhoeffer Capital Management commentary for the third quarter ended September 2021, providing a case study for Millicom International Cellular SA (NASDAQ:TIGO). if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Dear Partner, The Bonhoeffer Fund returned -2.8% net of fees in the third quarter of 2021. In the same time period, the MSCI World ex-US, a broad-based index returned -0.7% and the DFA International Small Cap Value Fund, our closest benchmark, returned -2.5%. Year to date, the Bonhoeffer Fund has returned 22.9% net of fees. As of September 30, 2021, our securities have an average earnings/free cash flow yield of 14.3% and an average EV/EBITDA of 4.7. The DFA International Small Cap Value Fund had an average earnings yield of 11.1%. These multiples are lower than last quarter primarily due to increasing earnings and declining share prices. The difference between the portfolio’s market valuation and my estimate of intrinsic value is greater than 100%. I remain confident that the gap will close over time and the portfolio quality will continue to increase as we increase allocations to faster-growing firms. Bonhoeffer Fund Portfolio Overview Our investment universe has been extended beyond value-oriented special situations to include growthoriented firms using a value framework, including companies that generate growth through consolidation. There have been modest changes within the portfolio in the last quarter in line with our low historical turnover rates. We have sold Cambria Automotive which is in the process of being acquired and used the proceeds to increase our holdings in Asbury Automotive, Countryside Properties, and Millicom. As of September 30, 2021, our largest country exposures include: South Korea, United States, United Kingdom, Italy, South Africa, and Philippines. The largest industry exposures include: distribution, telecom/media, real estate/infrastructure, and consumer products. We added to some smaller positions within the portfolio and are investigating additional consolidation plays with modest valuations in industries that have nice returns on invested capital such as fiber rollouts, convenience stores, and IT services. Compound Mispricings (37% of Portfolio; Quarterly Average Performance -8%) Our Korean preferred stocks, the nonvoting share of Telecom Italia, Wilh. Wilhelmsen, and some HoldCos all feature characteristics of compound mispricings. The thesis for the closing of the voting, nonvoting, and holding company valuation gap includes evidence of better governance and liquidity. We are also looking for corporate actions such as spinoffs, sales, or holding company transactions and overall growth. Throughout the year, Net1 UEPS has been accumulating cash from the sale of its non-core assets including a Korean transaction processing network and its stake in a crypto bank. This cash, in addition to issuing some debt, was used to purchase Connect, a merchant transaction processor catering to small and medium businesses. This acquisition will complement its consumer fintech EasyPay transaction and ATM network and expand Net1 UEPS’s total addressable market to include small and midsized businesses and lead to profitability. The Korean preferred discounts in our portfolio are still large (25% to 73%). The trends of better governance and liquidity have reduced the discount in names like Samsung Electronics, and more preferred names trade at a premium to common shares. We continue to like the prospects for LG Corp preferred post LX Holdings spinoff from both a business and discount perspective. The current discount to NAV is 74% for the LG Corp preferred. In addition, this discount is based upon a base value of LG Corp with reasonable implied EV/EBITDA multiples of LG Corp subsidiaries of 4.7x for LG Electronics, 13.6x for LG Chemical (including LG’s EV battery division), and 16.7x for LG Household & Health Care. Public LBOs (37% of Portfolio; Quarterly Average Performance -1%) Our broadcast TV franchises, leasing, building products distributors, and roll-on/roll-off (RORO) shipping fall into this category. One trend I’ve noted in these firms is growth creation through acquisitions which provide synergies and operational leverage associated with vertical and horizontal consolidation and the subsequent repurchasing of shares with debt. The increased cash flow is used to pay the debt and the process is repeated. Millicom, this quarter’s case study, is a public LBO that has financed many of its investment opportunities with debt. The recently announced buyout of its Guatemalan JV partner illustrates this. The debt, when used in situations like this, has been paid down over time as Millicom generates a lot of free cash flow and can increase returns like leveraged rollups, as described below. Distribution Theme (41% of Portfolio; Quarterly Performance +3%) Our holdings in car and branded capital equipment dealerships, convenience stores, building product distributors, and capital equipment leasing firms all fall into the distribution theme. One of the main KPIs for dealerships and shopping is velocity or inventory turns. We own some of the highest-velocity dealerships in markets around the world. There have been challenges in some markets hit by COVID, like South Africa and Latin America; but there should be recovery now that vaccines have been approved and distributed. GS Retail, the second largest convenience store operator in Korea (with 14,600 convenience stores and 320 grocery stores), is the security we received for the buyout of GS Home Shopping. We have applied our growth methodology described in the last quarterly report. The following is a summary: The convenience store business is growing and consolidating worldwide. As a result of the acquisition, management is planning on using the younger customer data from GS Retail, the older customer data from GS Home Shopping, and the GS distribution network (42 logistics centers supporting convenience, grocery, and home shopping customers) to provide older and younger customers their products instore (convenience store) or next-day home delivery across Korea. Management expects 10% growth overall, composed of underlying convenience store growth of 4-5% and 5% from cross selling and digital commerce from the merger. Given the fixed costs in the convenience store network and distribution infrastructure, management expects cost synergies to generate net income margins of 5.0%. If these revenue and growth rates are realized, then a P/E closer to comparable convenience stores BGF Retail (Korea), Seven & I, and Alimentation Couche-Tard of 15-20x is not unreasonable. This range has significant upside from current P/E multiple of 5.9x and five-year forward P/E of 4.3x. Telecom/Transaction Processing Theme (36% of Portfolio; Quarterly Performance -2%) The increasing use of transaction processing in our firms’ markets and the rollout of 5G will provide growth opportunities. Given that most of these firms are holding companies and have multiple components of value (including real estate), the timeline for realization may be longer than for other firms. Telecom Italia continues to work with the Italian government and Fiber Corp to merge their telecommunications infrastructures together. Vivendi has called an emergency board meeting to ensure Telecom Italia will retain control of the combined telecommunication infrastructure after the merger. We view this action as a positive despite the decline in Telecom Italia’s share price. The updated sum-ofthe- parts analysis (as detailed in previous letters) implies an upside of 80–100%. In my opinion, much of the recent decline is due to concerns that Telecom Italia will give up control of the combined telecommunications infrastructure. Consumer Product Theme (10% of Portfolio; Quarterly Performance -7%) Our consumer product, tire, and beverage firms comprise this category. The defensive nature of these firms has led to lower-than-average performance due to the stronger performance from more recoverycorrelated names. One theme we have been examining is the increase in sales of adult products (tobacco, alcohol, and lottery) in convenience stores as other stores are removing these products from their product offerings. GS Retail is taking advantage of this trend in Korea. Real Estate/Construction Theme (23% of Portfolio; Quarterly Performance -3%) In my opinion, the pricing of our real estate holdings has been impacted by both a recession and the communist takeover in Hong Kong. The current cement and construction holdings (in US/Europe via BFS and Countryside and in Korea via Asia Cement) should do well as the world recovers from COVID shutdowns and governments start infrastructure programs. Asia Standard also declined during the quarter due to the concern over the decline in its Chinese real estate developer bond holdings. Asia Standard holds a large number of Chinese real estate developer bonds, including those of Evergrande and Kaisa. The Evergrande bonds have declined to about 20% of face value as of September 30 (they were at 40% of face value on July 31, 2021, the last market-to-market valuation date for Asia Standard’s bond portfolio) while the Kaisa bonds have declined to 85% of face value. I ran a stress test assuming a 25% decline in the bond portfolio from July 31, 2021. This is 2x the 13% decline in the portfolio from Evergrande and Kaisa bond prices between July 31, 2021, to September 30, 2021. The resulting NAV/share is $8.09 versus the $10.09 NAV as of July 31, 2021. The September 30 stock price of $0.85 is at a 91% discount to the stressed NAV and 92% to the July 31, 2021, NAV. Consolidation Frameworks In our Q1 letter, we described how we are examining growth opportunities associated with consolidation in fragmented industries. Growth from consolidation can be a resilient form of growth as it is dependent upon the availability of target firms and associated cost and revenue synergies versus overall market growth. When consolidation growth is combined with modest industry growth, some exciting growth can be realized. If the firms also exhibit operational leverage from economies of scale/scope, then the combined effect can be significant growth in earnings or free cash flows. The advantage of this type of growth is that it is realized over time and not recognized by the market in advance. This can be seen in the price charts of many of these firms moving from the lower left to the upper right over time as the growth is realized. Fragmented markets can have long runways associated with consolidation and economies of scale and scope which can lead to cash flow growth in excess of the market growth for many years. We try to identify these markets and firms that can ride the consolation wave over a long timeframe. Some of these firms have valuations reflecting some of the future growth and some have little to no premium reflecting future growth from consolidation. Currently, the internet (an innovation) is providing more consolidation via additional fragmentation of retail demand from offline, online, and omni-channel selling channels. An example is traditional auto dealers using an omni-channel sales approach and Carvana who is exclusively online. Bonhoeffer is looking for businesses that are adopting the innovation (internet distribution) which will enhance growth going forward but where it is not recognized by the market yet, as evidenced by the current stock price. Some analysts have developed useful frameworks to evaluate consolidation or serial acquirer situations. Scott Capital has developed a useful framework1 for categorizing consolidators, shown below: Scott has categorized these types of firms depending upon the level of target integration. Most of the firms we have been examining recently have been rollups (firms in the same industry) with scale-driven synergies and operational leverage. We also hold one platform (Wilh. Wilhelmsen) and one holding company (LG Corp). Another way to look at these firms is cross-sectionally based on total addressable market (TAM) size and integration of operations, as described by Canuck Analysts Substack2 below: Using this framework for our current areas of interest (rollups), I have been monitoring acquisition multiples in the car dealers (Asbury Automotive), local TV and radio firms (Gray Television), building supply distribution (Builders First Source), Latin American telecommunications (Millicom), cement firms (Asia Cement), equipment leasing firms (Ashtead), and network processing (Net 1 UEPS). In each of these segments, multiples have been modest. None of these firms have done international “diworsifying” deals to date and some have recently divested unrelated firms (Net 1 UEPS, Daelim Industrial and LG Corp). In each of these markets, the market share of the top firms is less than 10% except for GS Retail, where itself and FRB have a dominant share of 31% each, and Millicom, where it has a leading or number two position in eight of its nine markets where it competes. The small market shares provide a large runway for consolidation in its existing industry for years to come. Also, none have made international expansion into new markets outside their existing footprints. A return benchmark developed by the Canuck Analysts Substack3 is shown below: This framework, used in combination with calculating return on incremental capital, can illustrate where the invested capital returns can be modest. As an example, we will look at Asbury Automotive. Asbury’s returns on invested capital averaged 13%, and the return on equity averages 31% over the past 10 years plus an organic growth rate of 2 to 3% per year based upon US auto sales and maintenance service costs. This results in an ROIC plus ½ of annual organic growth of about 15%. The size of Asbury’s acquisitions has been about $1.4 billion over the past five years. Below is Asbury’s return on incremental invested capital over the past 10 years which has averaged in the upper teens during that period. For other serial acquirers like Ashtead, the organic growth rate is 6% and its ROICs over the past 10 years is 14% resulting in an ROIC plus ½ of annual organic growth of about 17%. The size of Ashtead’s acquisitions has been about $2.0 billion over the past five years. Conclusion As always, if you would like to discuss any of the philosophies or investments in deeper detail, then please do not hesitate to reach out. Until next quarter, thank you for your confidence in our work and have a safe and warm year-end holiday season. Warm Regards, Keith D. Smith, CFA Case Study: Millicom International Cellular SA (TIGO) Millicom International Cellular SA (NASDAQ:TIGO) provides mobile and broadband telecommunications services to consumers and businesses in Central America (Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, and Panama) and South America (Columbia, Bolivia, and Paraguay). TIGO provides legacy voice, wireless and data services, and fiber-based services to firms and individuals. Currently, TIGO has 43.1 million wireless subscribers, including 20.3 million 4G subscribers and 4.9 million home customers, including 8.4 million revenue generating units (RGUs) and 4.1 million broadband subscribers. In addition, TIGO’s network includes 5,400 points of presence and 300,000 business customers. TIGO is the number one or two broadband and wireless provider in eight of the nine markets in which TIGO competes. Recently, TIGO announced the purchase of its joint venture (JV) partner’s share of its JV in Guatemala for $2.2 billion. This transaction will be financed by debt and a shareholder friendly common stock rights offering. TIGO provides mobile money/banking services for five million customers in six countries. TIGO also has 10,000 towers and 13 data centers which can be sold and leased backed. TIGO is in the process of separating its towers and data centers (like Telefónica and América Móvil) and its mobile money/banking service to facilitate sales or investments by third parties. In 2017, TIGO sold 3,410 towers in Columbia, El Salvador, and Paraguay for $417 million or $122,287 per tower. Historically, TIGO operated in both Africa and Latin America. Over the past five years, TIGO has divested its African telecommunications assets and purchased additional assets in Latin America. TIGO’s network passes over 12.2 million homes (24% penetration of total homes) and covers 80% of mobile phones. The firm is in the midst of rolling out fiber to homes to provide broadband connectivity to Latin American customers. This rollout is being funded by cash flow from operations. The firm has been described as building a Charter Communications under a wireless Verizon umbrella. This is similar to our Consolidated Communications play with the additional benefit of having a wireless network and a mobile money business. In most countries in which TIGO operates, they have joint ventures or minority interest local partners. TIGO currently has an average high-speed internet (HSI) penetration rate (a take rate of HSI for homes passed) of about 39% across the countries it serves. This has increased by 1.4% since year-end 2020. To put this in context, most cable broadband penetrations are in the 50% plus range. In seven of the nine countries they serve, TIGO is the number one or two competitor in wireless and broadband in two-player markets (Guatemala, Honduras, El Salvador, Costa Rica, Panama, Bolivia, and Paraguay) and number three in two markets (Nicaragua and Costa Rica). The Q3 2021 mobile average revenue per RGU was $6.40 per month, and the broadband revenue per RGU was $28.10 per month. The largest shares of proportional EBITDA are from Guatemala (38%), Bolivia (11%), Paraguay (11%), Panama (10%), and Columbia (9%). In terms of regions, 70% of EBITDA is from Central America and 30% from South America. TIGO has developed a customer-focused culture at the corporate and country level using NPS as a metric which is collected and used as a management incentive to increase customer satisfaction. In addition, the countries that TIGO serves have stable currencies versus the US dollar. Since 2000, the EBITDA weighted average currency movements have been only 0.7% per year. Another positive trend is the movement of suppliers to US-based firms moving from China to a closer location with political and currency stability—Central America. If we look at the index of economic freedom for the Central American countries in which TIGO primarily operates, they have a moderately free ranking. For the subcategories most of interest to suppliers (tax burden and trade and business freedom), they all are ranked free or mostly free (highest ratings). Millicom and Fiber-optic Rollout The Latin American telecommunications services market is a local, fragmented market. Consolidation has occurred over the past 10 years amongst these local players, and the next generation of technology (fiber-optic connections) is being rolled out. Fiber-optic rollouts are generating organic growth and economies of scale with high incremental user profitability. Millicom has created economies of scale depending upon the geography of the acquired telecommunications firm. There is also the vertical integration across telecommunications services (like wireless, voice, data, cable, and hosting) in a given geography which can create additional economies of scale. With these rollouts, telecommunications companies compete with the local cable companies—and in some cases wireless providers—to provide HSI and other services to customers in their local footprints. Historically, telecommunications and cable firms have had poor customer service, as evidenced by low net promoter scores (NPSs). Keith Rabois, a founder of PayPal, has tweeted, “Formula for startup success: Find large highly fragmented industry w low NPS; vertically integrate a solution to simplify value product.” Part of simplifying the solution is providing multiple services and good customer service. The telecommunication services market fits this description. The new fiber rollouts are analogous to organic startups and thus can also be successful in the vertical integration into these markets. Business and Service Analysis One way to look at telecom business is to divide it into slowly growing (wireless) and quickly growing segments (HSI). The slower-growing wireless business is mature and is growing about 2% per year. The HSI business is growing at an 8% annual rate driven by fiber rollouts in TIGO’s countries. Millicom’s overall mix of wireless and HSI revenue is 33% HSI and 67% wireless, with 67% recurring subscription revenue (HSI and post-paid wireless) but varies by country. The current revenue growth rate is 4.3% and will increase to 5%, by the end of 10 years and the HSI/wireless mix approach 50%/50%. If we look at unit economics of the fiber rollout, it is also quite favorable. According to management, the estimated cost to pass each new customer is about $150; and the cost to connect a customer is $100. This is similar to the cost reported by Oi, a telecommunications firm rolling out a fiber-optic network in Brazil. If you have a final penetration rate of 45% using the current HSI monthly charge of $28/month, and a steady-state EBITDA margin of 45% (which management believes are both achievable at scale; the current margin is 40%), then the payback time is between six and seven years, and the unlevered IRR is 26% and a levered return of 52%. See Exhibit A for details. Latin America Broadband Telecommunications Market The broadband telecom business in Latin America is a fragmented market on an international basis and a concentrated market on a country-by-country basis. The market is a local market, so the smaller country markets only have a few competitors. This leads to less price competition for TIGO than in larger, more urban markets where there are more competitors. Gig speed internet and wireless are core infrastructure services that will be required in the internet service economy. Currently, broadband usage is growing at a 30-40%/year rate and is expected to increase going forward, as more bandwidthintensive applications are developed and rolled out over time. Since most of TIGO’s competition is from cable companies and incumbent telecom firms (that have low NPSs), TIGO has an opportunity to provide improved customer service versus the cable companies. This highlights the importance of the decentralized management system, incentivized and shareholding country managers, and including NPSs in management’s incentive compensation at the corporate and country levels. Of the other publicly traded Latin American telecommunications firms, TIGO has the largest potential to increase HSI organic revenue growth (by 8%) via a fiber rollout in its incumbent territories. This can be seen in the projections based upon the currently planned and financed fiber rollout shown in Exhibit B. The tilt toward the faster-growing Central American countries (which should get some opportunities to replace China as exporters to the US) versus the slower-growing South American countries will also add a nice tailwind. The countries TIGO services had an average real GDP growth rate of 3.2% per year over the past five years versus the overall 0.7% GDP growth rate for all of Latin America. Downside Protection TIGO has been reducing debt over the past few years with a current proportional debt/EBITDA of 2.7x and a goal of 2.0x. TIGO has a bond rating of Ba2 and yields 3.5% for five- to 10-year bonds. TIGO is in a defensive business—telecommunications services—which has a large amount of recurring revenue. HSI data revenues are increasing, while wireless revenues are increasing at a slower rate. See below for projections and Exhibit B for more detailed projections. Below is the proportional historical and projected revenue, EBITDA, and FCF since 2016 when the Guatemalan and Honduran JVs were deconsolidated. Management and Incentives One of the risks in emerging-markets investing is management, as they may have different incentives than those to which Western investors are accustomed. In this case, you have a management team based in the US (Miami) that has been historically influenced by the firm’s domicile, Sweden. TIGO is led by a former Liberty Latin America executive, Mauricio Ramos. He brings the Liberty Media playbook (a successful leveraged rollup strategy of cable-related properties and associated shareholder friendly corporate actions) to the markets that TIGO serves. TIGO is listed in Sweden and the United States and brings the corporate governance practices, capital allocation, and shareholder renumeration approaches to its operations throughout Latin America. In many countries, TIGO has local JV partners which provide TIGO with access to the local connections. TIGO has management incentives, including TIGO stock (with minimum levels for country managers) at both the corporate and country levels. The capital allocation is also done at both the corporate and country levels. This country-level capital allocation, incentives, and stock ownership is unusual for a Latin American company. The major categories of capital allocation for TIGO are: 1) purchasing minority interests from partners, 2) investing in the HSI broadband rollout described above, 3) selective acquisitions, 4) repurchasing shares, or 5) distributing dividends. Categories 1, 2, 3 and 4 have the most well-defined and highest returns and have been used by management in the past. In 2020, the CEO’s management compensation was 20% base salary and 80% incentive-based bonus, of which short-term incentive (STI) is 50% equity based (TIGO shares) and 50% cash based and long-term incentive (LTI) is 100% equity based (TIGO shares). The 2020 STI compensation was based on service revenue growth, EBITDA growth, operational cash flow growth, NPS, and other operational goals. The 2020 LTI compensation is based upon service and EBITDA growth and relative total shareholder return versus peers. The 2020 equity-based shares were issued at $38.09 per share, and the 2019 shares were issued at $42.70 per share. Overall, 700,000 shares were granted in 2020 (about 0.7% of shares outstanding per year). The management team owns 0.7% of TIGO common stock. TIGO has stock ownership guidelines of 5x the salary for the CEO, 3x for other senior managers, and 1x for country managers. Valuation The valuation of TIGO is an interesting exercise because its expected growth rate is accelerated by the fiber rollout and share buybacks described above. The implied growth using the Graham Formula, adjusted to today’s interest rates ((8.5 + 2g)*(4.4/AAA bond rate)) and the current P/E, is -1.8%, clearly implying that the market expects TIGO’s cash flows to continue to decline. Some benchmarks for growth are the projected sales growth rates of 4.5% per year (based upon the fiber rollout), an EBITDA growth rate of 6% per year, and an adjusted free cash flow growth of 12%. The question is whether this growth rate is sustainable over the next seven years. Given the key penetration, margin, investment, and timing assumptions in the projection model, I believe it is. TIGO is the only Latin American publicly traded telecom firm that has a rollout of this magnitude (adding 18% to revenue) scheduled over the next five to seven years. One firm that also has a Latin American footprint is Liberty Latin America (LILA). LILA has grown revenues and EBITDA at about 8% per year since 2015. The EBITDA margin is similar to TIGO, but historically the conversion to FCF from EBITDA was 50% less than TIGO—25% for TIGO and closer to 12% for LILA. The current FCF multiple of LILA is about 16x. If that multiple is applied to TIGO’s FCF, it yields a value of $74 per share, which I believe is a reasonable 12-month target. If, over the five to seven years, a 12% FCF growth is attained, then the earnings will be $8.19. Applying a 23.8x multiple to these earnings (implying a 4% growth rate over the subsequent seven years) means a value of $195 per share is obtained. Another way to look at valuation is on an enterprise basis. If we value TIGO on a forward EBITDA basis of 9x EBITDA (the current multiple of cable overbuilder WOW!), then the resulting value is $200 per share. If we consider both benchmarks, then a $200 price target is not unreasonable. See Exhibit B for details. This results in a five-year IRR of about 42%. In addition to the core assets, TIGO has about 10,000 towers (with an additional 2,000 under construction), 13 data centers, and a mobile banking division. According to management, these non-core assets are being prepared for either sale-leasebacks or investments by third parties. The estimated value of the towers and data centers is about $2 billion—$1.1 billion for the towers and $900 million for the data centers. The tower valuation of $1.4 billion is based upon an estimated value per tower of $120k based upon tower transaction values (TIGO’s historic transactions averaged $122k/tower and a 2021 Telxius transaction was $110k/tower, 9,300 Latin American towers for €900 million) and Telesites’s current valuation of $252k/tower times 12,000 towers. The data center valuation of $750 million is based upon an estimated value per data center of $58k which is based upon Latin American data center transactions (Anxel data centers were purchase by Equinix for $58k/center, three data centers for $175 million, and Telefónica data centers were purchased by Asterion for $58k/data center, nine data centers for €550 million) times 13 data center. Adding together the towers and data centers, the total valuation of these assets is $2.1 billion. The mobile banking division (TIGO Money) can be valued using a range of values based upon the value of African mobile banking firms and Latin American neobank firms. The mobile banking business had 5 million customers and 48 million transactions in 2020. If we use African mobile banking transactions (20 million Airtel customers were purchased for $2.6 billion and 46 million MTN customers were purchased for $5.0 billion), the average value per user is $121. If we use $121/customer times 5 million transactions, it implies a $600 million value for TIGO Money. If we use recent Latin American neobank transactions (40 million Nubank (Brazil) customers were purchased for a $30 billion valuation and 3.5 million Ualá (Argentina) customers were purchased for a $2.45 billion valuation), the average value per user is $750. If we use the midpoint of the African mobile banking and Latin American neobanks of $435, we get $435 times 5 million customers, and the resulting value is $2.2 billion. This is additional value of $2.7 to $4.2 billion ($27 to $42 per share) in addition to the core business value estimated above. So, for example, if you assume a 12% FCF growth rate and the value of non-core assets, you get a total value of $255 to $270 per share. Comparables Given the fiber rollout and the size of TIGO, the comparable firms include US and Italian small-cap telecommunications firms. One of the larger issues in Latin American firms versus developed markets is currency risk, however; as described above, TIGO’s currency risk is similar to developed markets’ risk. The following are the comparable firms in the US and Italian telecommunications markets. The smaller Italian telecom firms have smaller floats than the US firms and are majority controlled (70%+) by the original owners. There have been some private equity acquisitions in the US rural local exchange carriers (RLEC) space, namely Cincinnati Bell and Alaska Communications. These firms have a similar dynamic associated with their respective fiber rollouts, and private equity firms have invested in these firms for similar reasons that make CNSL attractive. Cincinnati Bell has been purchased by the private equity firm Macquarie Infrastructure Partners, which outbid an original offer from Brookfield Asset Management. Alaska Communications is also in the process of being purchased by ATN International and Freedom 3 Capital. The EV/EBITDA paid by these buyers was 6.5 to 6.9x EBITDA for assets with lower margins than the current price of TIGO (4.6x EBITDA). Benchmarking In comparison to other US and Italian firms, TIGO has above-average (but good) FCF ROE and a high EBITDA margin. With TIGO’s fiber rollout and customer take-up, the fixed asset turns and ROEs should increase. With these favorable operational metrics, TIGO has one of the lowest current and 2021 P/FCF ratios of either group. Risks The primary risks to achieving a target valuation of $72 per share for TIGO include: a lower-than-expected broadband penetration of fiber rollout communities; and a quicker-than-expected decline in the legacy telecom lines. Potential Upside/Catalysts The primary upsides/catalysts include: faster-than-expected penetration of uptake of broadband services; operational leverage due to economies of scale; and re-rating to reflect higher growth. Timeline/Investment Horizon The short-term target is $72, which is more than double today’s price. I think the investment thesis can play out over the next three to five years. By that time, TIGO’s net income and earnings should have appreciated by 75%, and the fair multiple could triple with a 4% increased growth rate. If that is the case, then TIGO will attain a 6.7x return to $235 over five years or 46% annualized. This is similar to a “Davis double,” where both underlying earnings increase along with the fair value multiple. Updated on Dec 1, 2021, 1:24 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkDec 1st, 2021

The Fed Worries About Inflation. Should We Worry About Gold?

Oops!… Gold did it again and declined below $1,800 last week. What’s happening in the gold market? Q3 2021 hedge fund letters, conferences and more Gold Prices Decline Did you enjoy your roast turkey? I hope so, and I hope that its taste – and Thanksgiving in general – sweetened the recent declines in gold […] Oops!… Gold did it again and declined below $1,800 last week. What’s happening in the gold market? if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Gold Prices Decline Did you enjoy your roast turkey? I hope so, and I hope that its taste – and Thanksgiving in general – sweetened the recent declines in gold prices. As the chart below shows, the price of the yellow metal (London P.M. Fix) plunged from above $1,860 two weeks ago to above $1,780 last week. It has slightly rebounded since then, but, well, only slightly. What exactly happened? Funny thing, but actually nothing revolutionary. After all, the reappointment of the same man as the Fed Chair and the publication of the FOMC minutes from the meeting that had already took place earlier in November, were the highlights before Thanksgiving. Well, sometimes lack of changes is a change itself and information about the past can shed some light on the future. Let’s start from Powell’s renomination for the second term as the Federal Reserve chair. In response, the market bets that the Fed will hike interest rates more aggressively in 2022 have increased. At first glance, the strong investors’ reaction seems strange, given that the monetary policy shouldn’t radically change with Powell still at the helm. However, the continuation of Powell’s leadership implies that Lael Brainard, regarded as more dovish than Powell, won’t become the new Fed Chair – what was expected by some market participants. Hence, the dovish scenario won’t materialize, which is hawkish for gold. Just two days later, the FOMC revealed the minutes from its November meeting. The main message – the Fed decided to taper its quantitative easing – was, of course, included in the post-meeting statement. The minutes revealed, however, that the Fed officials had become more worried about inflation and had expressed a more hawkish stance than the statement suggested. First of all, we learned from the minutes that some central bankers opted for more aggressive tapering and a more flexible approach that would allow for adjustments in the face of high and persistent inflation: Some participants preferred a somewhat faster pace of reductions that would result in an earlier conclusion to net purchases (…). Some participants suggested that reducing the pace of net asset purchases by more than $15 billion each month could be warranted so that the Committee would be in a better position to make adjustments to the target range for the federal funds rate, particularly in light of inflation pressures. Various participants noted that the Committee should be prepared to adjust the pace of asset purchases and raise the target range for the federal funds rate sooner than participants currently anticipated if inflation continued to run higher than levels consistent with the Committee's objectives (…) participants noted that the Committee would not hesitate to take appropriate actions to address inflation pressures that posed risks to its longer-run price stability and employment objectives. This is because the FOMC members’ concerns about inflation strengthened. As we can read in the minutes, They indicated that their uncertainty regarding this assessment had increased. Many participants pointed to considerations that might suggest that elevated inflation could prove more persistent. These participants noted that average inflation already exceeded 2 percent when measured on a multiyear basis and cited a number of factors—such as businesses' enhanced scope to pass on higher costs to their customers, the possibility that nominal wage growth had become more sensitive to labor market pressures, or accommodative financial conditions—that might result in inflation continuing at elevated levels. Last but not least, the Fed officials also made other hawkish comments. Some participants argued that labor force participation would be lower than before the pandemic because of structural reasons. It implies that we are closer to reaching the “full employment”, so monetary policy could be less accommodative. What’s more, “some participants highlighted the fact that price increases had become more widespread”, while a couple of them noted possible signs that inflation expectations had become less anchored. So, the Fed officials’ worries about inflation strengthened. Implications for Gold What does it all imply for the gold market? Well, both the reappointment of Powell as the Fed Chair and the latest FOMC minutes were interpreted as hawkish, which pushed gold prices down. The more upbeat prospects for monetary tightening are clearly negative for the yellow metal, as they boosted the bond yields (see the chart below). This is something I warned investors against earlier this month. I wrote in the Fundamental Gold Report on November 16 that “when something reaches the bottom, it should rebound later. And if real interest rates start to rally, then gold could struggle again.” This is exactly what happened. Later, in the article on November 18, I added that “I will feel more confident about the strength of the recent rally when gold rises above $1,900”. Well, gold failed to do this, so I’m not particularly bullish on gold right now. We could say that gold did it again: it played with the hearts of gold bulls but got lost in the game, as it didn’t resist the pressure. Yes, the new Omicron variant of coronavirus has been noted, and uncertainty about this strain could provide short-term support for the yellow metal. However, it seems that the prospects of monetary tightening and higher real interest rates will continue to put downward pressure on gold prices. I agree, the rally looked refreshing after months of disappointment. However, it seems that we have to wait longer, possibly for the start of the Fed’s increasing the interest rates, to see gold truly shining. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhD Sunshine Profits: Effective Investment through Diligence & Care Updated on Nov 30, 2021, 11:57 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 30th, 2021