![]() | submitted by MoarGPM to Webull [link] [comments] |
![]() | Cash vs. MarginTL;DR- Use Margin if you're trading securities and either above or below 25k. If you know how to size positions, it won't matter if you move $4,000 into a trade or $4,000,000. As long as you sized the position correctly. If you're limited to 3 trades, then take 3 PERFECT trades: https://imgur.com/a/SpPOERQ I see lots of people discussing contrasting ideas although they attempt to justify using both. Here are some things I see said and written frequently from people that doesn't add up for me:
The Predictive Model I built lays out all valid trades within the report range as well as \"Perfect Trades\" that I consider \"Textbook\". The report range is between a 30 day range. Between 4-17-20 to 5-17-20. Total \"Perfect Trade\" count is 9 trades. Even if I were limited to 3 trades per week. I'd be able to trade them with less than 25k on margin. The stats reflect $100 risk I've set on a different tab. (The \"W\" is just a graphic I made for \"Winning\") It doesn’t matter if you move $4,000, $40,000, or $4,000,000 into a position. As long as you’re risking the same. Your Trading Account's performance is based off of risk. Such as: •Sharpe ratio •RRR •Number of R’s in 1 week/month/quarter. (Example: I made 7R this week. If my R is $100. I made $700) If I were to go back to when I was below $25,000 some years ago. I'd still use a margin account while being limited to 3 trades per week. Here's why:Formulas you have to know:Position size formula = Risk ÷ Stop Size Stop Size Formula = Entry - StopLoss Example 1a:Stock ABC,Entry = $10.00 StopLoss = $9.90 StopSize = 10¢ Risk = $100 In Live Trading: $100 ÷ $0.10 = 1000 Shares 1,000 shares at $10.00 = $10,000 position Example 1b:Stock XYZ,Entry = $385 StopLoss = $383.00 StopSize = $2.00 Risk = $100 In Live Trading: $100 ÷ $2.00 = 50 Shares 50 shares at $385 = $19,250 position. *$10,000 CASH account: CANNOT trade Stock XYZ and must wait 3 days for his entire account to settle after trading Stock ABC. If it was a margin account, they'd still be able to take 2 more trades this week. *$10,000 MARGIN account: CAN trade Stock XYZ and can trade both scenarios while still able to trade 1 more time in a 5 day rolling period. Then the next point made is, "Just won't trade anything above $20".Ok. great rebuttal, but why? Let's remember this: StopSizes aren't always directly correlated to the price of a stock. YES you're more likely to have a wider StopSize on a higher priced stock and a tighter StopSize on a lower priced stock. But remember this: 1¢ of slippage on 1,000 shares is 10% of his risk ($10)... It will be even more slippage if his stop loss market order is hit. Even a Sell-StopLimit order will have slippage within the amount you allow for when you enter a position. Stock XYZ would have to be slipped 20¢ just to equate the amount of slippage on Stock ABC.Highly liquid and available stocks such as AAPL, AMD, NVDA etc don't have 20¢ spreads. Not even 10¢. Rarely 5¢. Most of the time. Just a couple cents. Of course there could be more right out of the open but the spread in my years of experience is tightened within 2 minutes of the open. Yes, these small amounts in pennies do hold lots of merit if you're looking at having any longevity in this business, it WILL add up over the years. Both trades have the same risk [in perfect world theory].If both stop market orders were hit (StopLoss). Both traders would exit with a $100 loss on each. Although 1 trade required $10,000 in capital and the other trade required $19,250 in capital.Use margin. If I had to go back to when I had less than $25,000 in my account, I'd still do it the same way I did it with margin. I highly suggest using margin even if you’re limited to 3 trades per week. I get asked all the time when I began trading. If you watched my last video, I showed my first ever deposit with Scottrade (Old brokerage that was bought out by TDA a few years ago) in 2015 although I don't consider that's when I started trading because I didn't treat it the way I do today. I really consider myself starting as a trader in 2017 when I: •Wrote a business plan •Understood statistics •How to research. All this being said, slowly over time I noticed that I am taking less and less trades and increasing my risk size. Why? EV: Expected Value. - Margin has zero negative effect if you're sizing your positions the same every time. Margin allows you to take on more expensive positions that are showing your edge. Bonus: Being limited to 3 trades a week isn't fun, I remember that feeling from years ago. Just remember to take 3 perfect trades a week. Sometimes "Perfect Trades" don't work out in your favor while some subpar situations hit target. Some weeks you might take your 3 "Perfect Trades" by Tuesday. Some weeks you might take only 1 "perfect trade". If you follow my watchlists on Twitter (Same handle as my Reddit), I keep my Day Trading Buying Power transparent. Not always is it growing perfectly linear. And not always am I posting every single day because sometimes, my edge isn't there. Just because the market is open doesn't mean you HAVE to trade. My watchlists aren't littered with 15+ tickers. Rarely do they have more than 7. That may work for other traders, but for me, I demand quality. It's either there or it isn't. No reason to force a trade. I'd rather focus heavily on a few tickers rather than spread myself thin across multiple. Trading isn't supposed to be exhilarating or an adrenaline rush. It can be boring. I said that in the post I wrote back in April. Also if you make money, even if its just $20 in a month. Take that money out and buy something. Shrine it. Cherish it. You ripped that money out of WallStreet. Be proud of it. It takes a lot of courage to do this business. Realize that the P/L is real money. Sometimes even just buying a tank of gas or a book will help you realize that. Spend it from time to time. Get something out of your trading account. You may or not be trading for long, get something that is tangible to always remember the experience in case you don't last. Make it your trophy. That's all I've got for right now. Maybe I'll make another post or 2 before the year ends. I hit my 1 year full-time mark in September. Best wishes! -CJT2013 |
![]() | This is actually my first DD I've ever posted so fuck you and forgive me if this doesn't work out for you.I've been looking at $PSTG for a while now and if my buying power didn't get so fucked from my decision to buy 8/7 UBER puts, I would have been already all over this play. submitted by OnYourSide to wallstreetbets [link] [comments] What had got me looking into Pure Storage was an unusual options activity alert. I've looked into this company before but didn't entirely understand what they do. Now after looking at them again, I'm still not exactly sure wtf they do....BUT I've gotten a better clue. Basically what I got from my research is that these guys fuck with "all-FLASH data storage solutions (enabling cloud solutions and other low-latency applications where tape/disk storage does not meet the needs)."......and ultimately what this all means to me is that these are the motherfuckers making those stupid fast laser money printers with the rocket ships attached. And that's something I'm interested in. Now, here is the DailyDick you all degenerates have all been fiending for: Fundamentally: PureStorage remains one of the few hardware companies in tech that is consistently growing double motherfucking digits, yet remains constantly cucked and neglected by investors (trading at 1.9x EV/Sales). https://preview.redd.it/ek7ugjsewnf51.png?width=1118&format=png&auto=webp&s=f9c7e72c95e450a105e44223937422d896eeeb21 The 36 Months beta value for PSTG stock is at 1.62. 74% Buy Rating on RH. PSTG has a short float of 7.28% and public float of 243.36M with average trading volume of 3.16M shares. This was trading at around $18 on Wednesday 8/5 when I started writing this and as of right now, it's about $17.33 💸 The company has a market capitalization of ~$4.6 billion. In the last quarter, PSTG reported a ballin'-ass profit of $256.82 million. Pure Storage also saw revenues increase to $367.12 million. IMO, they should rename themselves PURE PROFIT. As of 04-2020, they got the cash monies flowing at $11.32 million . The company’s EBITDA came in at -$62.81 million which compares very fucking well among its dinosaur ass peers like HPE, Dell, IBM and NetApp. Pure Storage keeps taking market share from them old farts while growing the chad-like revenue #s of 33% in F2019, 21% in F2020, and 12% in F1Q21. Chart of their financial growth since IPO in 2015: https://preview.redd.it/gwlmy82v4nf51.png?width=640&format=png&auto=webp&s=b6508cd5f641da4086b70d8b8007da034e982fd7 At the end of last quarter, Pure Storage had cash, cash equivalents and marketable securities of $1.274B, compared with $1.299B as of Feb 2, 2020. The total Debt to Equity ratio for PSTG is recording at 0.64 and as of 8/6, Long term Debt to Equity ratio is at 0.64.Earning highlights from last quarter:
What are Pure Storage's other revenue drivers? Well these motherfuckers also have the products to address the growth of Cloud storage as well as the products to drive the growth of on-prem storage. For on-prem data center, Pure sells Flash Array to address block storage workloads (for databases and other mission-critical workloads) and FlashBlade for unstructured or file data workloads. On-prem storage revenue is mainly driven by legacy storage array replacement cycle. https://preview.redd.it/01su6chrwnf51.png?width=1129&format=png&auto=webp&s=16e6a705f9392291bc0c3932c815802d9101365e So far, it seems like Pure Storage's obviously passionate and smart as fuck CEO has been spot on with his prediction of the flash storage sector's direction. Also seems like he's not camera shy either. Pure Storage's "Pure-as-a-Service and Cloud Block Store" unified subscription offerings is fo sho gaining momentum it. This shit is catching on with enterprises, both big and small. COVID-19 increased the acceleration of our digital transformation and the subsequent shift to the cloud. This increased demand in data-centers is going to drastically help Pure Storage's future top and bottom line. To top it off, NAND prices are recovering! (inferred from MU earnings). I expect Pure Storage to get some relief on the pricing front because of this which obviously in turn should improve revenues. PSTG's numbers look pretty good to me so far but are they a good company overall? Even when scalping and trading, I don't like to fuck with overall shitty companies so I always check for basic things like customer satisfaction, analyst ratings/targets, broad-view industry trends, and hedge fund positioning.. that sort of thing.Pure Storage stands out in all of these fields for me. https://preview.redd.it/4n0e5nve5of51.png?width=373&format=png&auto=webp&s=495416bb6f5a2dab77f3ac483ca4d9510b39037c Customers like Dominos Pizza and many others all seem to be happy AF with no issues. I can hardly even find a negative review online. Their products seems to be universally applauded. Gartner and other third party independent analysts also consider Pure Storage's product line-up some of the best in the industry. The industry average for this sector is a piss poor 65.Pure Storage has a 2020 Net Promoter Score of 86 https://preview.redd.it/3w51io8yvmf51.png?width=698&format=png&auto=webp&s=4f7d06825d0ad9d126216e5069af2f9c3636f86a Enterprises are upgrading their existing storage infrastructure with newer and more modern data arrays, based on NAND flash. They do this because they're forced to keep up with the increasing speed of business inter-connectivity. This shit is the 5g revolution sort to speak of the corporate business world. Storage demands and needs aren't changing because of the pandemic and isn't changing in the future. The newer storage arrays are smaller, consume less power, are less noisy and do not generate excess heat in the data center and hence do not need to be cooled like the fat fucks at IBM need to be. Flash storage arrays in general are cheaper to operate and are extremely fast, speeding up applications. Pure Storage by all accounts makes the best storage arrays in the industry and continues to grow faster than the old school storage vendors like bitchass NetApp, Dell, HPE and IBM. Pure Storage’s market share was 12.7% in C1Q20 and was up from 10.1% in the prior year - LIKE A PROPER HIGH GROWTH COMPANY.HPE, NetApp and IBM, like the losers they are, lost market share.According to blocksandfiles.com, AFA vendor market share sizes and shifts are paraphrased below:
https://preview.redd.it/5agj17gcgnf51.png?width=428&format=png&auto=webp&s=da9c6389baccab85261d6e0f71b3474e84b90d3c Hedge Funds are on this like flies on shit. Alliancebernstein L.P. grew its position in Pure Storage by 0.5% in the 4th quarter. Alliancebernstein L.P. now owns 104,390 shares of the technology company’s stock worth $1,786,000 after purchasing an additional 560 shares during the last quarter. Legal & General Group Plc grew its position in Pure Storage by 0.3% in the 1st quarter. Legal & General Group Plc now owns 258,791 shares of the technology company’s stock worth $3,213,000 after purchasing an additional 753 shares during the last quarter. Sunbelt Securities Inc. acquired a new stake in Pure Storage in the 4th quarter worth $4,106,000. CENTRAL TRUST Co grew its position in Pure Storage by 79.8% in the 2nd quarter. CENTRAL TRUST Co now owns 3,226 shares of the technology company’s stock worth $56,000 after purchasing an additional 1,432 shares during the last quarter. Northwestern Mutual Wealth Management Co. grew its position in Pure Storage by 203.0% in the 1st quarter. Northwestern Mutual Wealth Management Co. now owns 2,312 shares of the technology company’s stock worth $28,000 after purchasing an additional 1,549 shares during the last quarter. Also, everybody's favorite wall street TSLA bull, Cathie Wood has been busy steadily purchasing big lots of PSTG for her ARK ETF funds for a while now...Even going as far as selling TSLA in order to re-balance! https://preview.redd.it/zjxuakjosnf51.png?width=1125&format=png&auto=webp&s=f34abdd3b35791eb207d31d72ea0f6fb11beec30 https://preview.redd.it/bkf1uzb2tmf51.png?width=2048&format=png&auto=webp&s=a9870ec41cfb4ce468ba61d83f2f8a4151927a4e Hedge funds and other institutional investors own 78.93% of the company’s stock and it seems like more are piling in every day. Tons of active options, too -Pretty good volume lately with the spreads looking decent. Over 5,000 September $20 Calls added just on 8/3 alone 🤔 Order flow helps my thesis here, showing a recent influx of big dick money moving into PSTG. https://preview.redd.it/liychuhblnf51.png?width=592&format=png&auto=webp&s=ca6a60d54a9eb8bd9e32e0ef70992b8282c29e70 Google Search Trends showing uptick in interest: SPY420 baby https://preview.redd.it/joo0b9wxinf51.png?width=1710&format=png&auto=webp&s=24eb18f18be18b9b771ff1911c09c5479ba2f1a0 Robinhood Trends showing the YOLO is trending up https://preview.redd.it/4gk5yjdxmnf51.png?width=1538&format=png&auto=webp&s=76c4b114c133c493c84386d1705f85229f5f7d44 Increased job postings on LinkedIn all across the globe, further supporting the idea that Pure Cloud Adoption is looking strong. https://preview.redd.it/5zenasprznf51.png?width=1092&format=png&auto=webp&s=a492e227e2208fe89925c9b7fe365634f7ffde6a Technically: This broke out through down-trend line a couple of days ago and as of right now looks to be pretty oversold. Looks like its found support at the 50 DMA and zooming out , the chart just looks like to me that it's coiling up for a big breakout. https://preview.redd.it/wxtz8minmnf51.png?width=1208&format=png&auto=webp&s=7baabbd3e8f97dfc8bd0d5bfa512613c2eea4921 These fucking shorts are going to get squeezed out hard. Potential short squeeze coming? https://preview.redd.it/lh8lp08funf51.png?width=1533&format=png&auto=webp&s=921b6684369e25e94f00ed96a404458028e540c8 **So what's the play?**I'd like to see RSI break out of the downtrend and the divergence between price & momentum ends at some point. If/when RSI breaks out, I want to play this thing aggressively with bullish call calendar spreads....THAT IS IF I HAD SOME FUCKING BUYING POWER (FUCK YOU UBER)....Soooo really what I'll be doing is asking my wife's boyfriend sometime this weekend for a loan. That way on Monday I can buy some $PSTG 9/18 $17.5 & $20 calls at open and YOLO my saddness away for a week.God forbid, I might even buy of those things called "shares" I heard about from /investing if at all possible because in all honesty, I really do feel like this is a good company to hold in a long term growth portfolio.Pure Storage is NOT looking like your average KODK prostitute to flip or scalp and actually more like someone you'd bring home to your dads. EARNING DATE: 8/25 Pure Storage has a history of beating estimates and rocketing up. Over the last 20 quarters, the company beat revenue 17 quarters by an average of $4.9 million or about 3%. Out of the three times that the company missed on revenues, once was due to supply fuck-ups at one of its distributors and the other two times were due to Average Selling Prices declining faster than the company forecasted. Higher-than-expected ASP declines (due to NAND oversupply) is one of the risks of the storage business...but then again NAND prices look to be recovering now if MU's earning isn't fucking with us and telling us fibs. Big money is forecasting revenue to be around $396 million, essentially flat year-over-year, and EPS of a disrespectful ass penny....Fuck that conservative ass guidance! I think PSTG is going to blow that shit out the water. This chart shows Pure Storage’s past performance and we all know for sure that past performance = future results.....right? https://preview.redd.it/4xflpezdhnf51.png?width=623&format=png&auto=webp&s=c1660a80a1a1821ef8098791a8cee632e25f1445 My Prediction: After ER8/25, Pure Storage will hit new 52 week highs.$20.50 - $23.50 is my guess. Bold prediction, $27.50+ by the EOY and $50 by December 2021. tldr: PSTG 9/18 $17.5 & $20 calls edit: for those that bought into this, I'm in this with you! Let's pray for a rebound next week. also, Fuck Cisco! |
Item | Cost* | Sold | Fees | Inventory^ | Profit |
---|---|---|---|---|---|
1936 Goudey Lot (8) | 50.00 | 56.50 | (8.48) | - | (1.98) |
Hank Aaron "Odd-Ball" Collection | 150.00 | 777.29 | (116.59) | - | 510.70 |
(16) Pre-WWII card lot w/ Cobb | 1,300.00 | 1,708.52 | (256.28) | - | 152.24 |
(23) Sandy Koufax 1950's and 1960's lot | 250.00 | 299.50 | (44.93) | - | 4.57 |
1977-1979 Topps Baseball Rack & Cello Packs (6) | 250.00 | 380.00 | (57.00) | - | 73.00 |
1957 Swift Meats Game Complete Set (18) | 800.00 | 680.00 | (102.00) | (222.00) | |
(36) 1950s-2000s Multi-Sports Collection | 500.00 | 1,528.51 | (229.28) | - | 799.23 |
1933-1989 Wax Pack Wrapper Hoard (650+) | 400.00 | 1,918.01 | (287.70) | - | 1,230.31 |
1941-2004 Multi-Sport Group (33) | 800.00 | 2,859.83 | (428.97) | 100.00 | 1,730.86 |
1912 B18 Blanket Find (100) | 1,270.80 | 1,136.24 | (170.44) | 500.00 | 195.00 |
1962-63 Parkhurst Hockey Lot (45+) | 500.00 | 287.26 | (43.09) | 400.00 | 144.17 |
1953 to 1969 Mickey Mantle Group (16) | 1,000.00 | 2,747.85 | (412.18) | 150.00 | 1,485.67 |
1956-1959 Baseball Star Collection (48) | 1,130.00 | 322.04 | (48.31) | 900.00 | 43.73 |
1961-1969 Baseball Star Collection (61) | 804.95 | 257.78 | (38.67) | 600.00 | 14.16 |
1948-1965 Yogi Berra Collection (26) | 1,400.00 | 399.50 | (59.93) | 1,050.00 | (10.43) |
Lot of (4) Signed Perez-Steele Postcards | 676.59 | - | 676.59 | - | |
1950's-1980's Football Wrapper Lot (42) | 920.00 | 1,944.23 | (291.63) | 732.60 | |
1953 Topps Partial Set (208) | 1,472.00 | 2,855.13 | (428.27) | 100.00 | 1,054.86 |
1953-55 Dormand Postcard Set (47/52) | 685.00 | 804.85 | (120.73) | 250.00 | 249.12 |
1959 & 1960 Venezuela Topps Lot (34) | 216.00 | 58.66 | (8.80) | 200.00 | 33.86 |
1959 Topps Baseball High Grade Set | 1,557.30 | 1,132.80 | (169.92) | 1,000.00 | 405.58 |
1970 Topps Super Proofs Lot (12) | 405.41 | 493.75 | (74.06) | 200.00 | 214.28 |
1887 Allen & Ginter Boxing Lot (14) | 403.40 | 403.40 | - | ||
1954 Topps Starter Set (119/250) | 662.22 | 707.50 | (106.13) | 500.00 | 439.16 |
1947 Bond Bread Jackie Robinson Lot (6) | 2,220.00 | 2,125.00 | (318.75) | 1,480.00 | 1,066.25 |
1934 R310 Butterfinger Ruth & Gehrig Lot (2) | 720.00 | 720.00 | - | ||
1959 Topps Baseball Near Set (571/572) | 3,620.00 | 3,620.00 | - | ||
1973 Topps Complete Set | 2,512.40 | 6,347.41 | (952.11) | 600.00 | 3,482.90 |
1961 Topps PSA Graded Set | 5,791.60 | 11,445.51 | (1,716.83) | 100.00 | 4,037.08 |
2013 Bowman Chrome Judge Black Wave Auto | 1,940.00 | 1,940.00 | - | ||
1961-1982 Signed Card Lot (19) | 1,364.40 | 1,120.00 | (168.00) | 800.00 | 387.60 |
35,772.07 | 44,393.67 | (6,659.05) | 16,289.99 | 18,252.54 |
As of 8/25/2020 | 2020 YTD | 2019 Final |
---|---|---|
Cash | $5,588.15 | $1,680.15 |
Accounts Receivable | $6,743.43 | $- |
Inventory^ | 16,289.99 | $10,605.75 |
Accounts Payable` | ($2,886.54) | ($1,858.62) |
Retained Earnings | ($9,262.28) | $- |
Initial Capital | ($1,165.00) | ($1,165.00) |
Revenue | ($44,393.67) | ($40,163.15) |
Cost of Goods Sold | $19,482.08 | $22,582.96 |
Fees (15% of Rev.) | $6,659.05 | $5,956.97 |
Grading Fees | $2,944.79 | $2,360.93 |
![]() | Alright you American autists, here's a gains post from the UK across the pond - listen up because it's pretty incredible, managed to screw over our broker to turn ~£8k into £98k / $128k USD by reading the small print, true u/fuzzyblankeet style. submitted by mppecapital to wallstreetbets [link] [comments] https://preview.redd.it/9mlup18v0q951.png?width=343&format=png&auto=webp&s=aea1393d304d16063d62d54d30cc5be9b23d937a Unfortunately, we don't have options trading, commission free robinhood which crashes, or any other US based degeneracy, but instead we British chaps can trade "CFDs" ie. 'contracts-for-difference', which are essentially naked long / short positions with a 10-20% margin (5-10x leveraged), a 'holding cost' and you could theoretically lose more than your initial margin - sounds like true wallstreetbets autism, right? Well grab a lite beer (or whatever you lite alcoholic chaps drink over there) and strap in for this stuff: So, CMC Markets, a UK based CFD brokerage, wanted to create a West Texas Intermediate Crude Oil 'Spot' product, despite WTI contracts trading in specific monthly expirations which can thus have severe contango effects (as all of you $USO call holders who got screwed know) - this was just a product called "Crude Oil West Texas - Cash", and was pegged to the nearest front-month, but had no expiry date, only a specific holding cost -> already a degenerate idea from their part. So in early April, just before when the WTI May-20 expiry contract 'rolled' at **negative** $-37, the "WTI Cash" was trading at $15 at the time, but the *next* month June-20 expiry was still $30+ we (I am co-running an account with an ex-Goldman colleague of mine) simultaneously entered into a long position on the "WTI - Cash" product, and went short on the "WTI Jun-20 expiry", a pure convergence play. Sure enough, the June-20 tanked the following week, and we made over £35k, realised profits. But meanwhile the May-20 also tanked, and we were down £28k. But rather than realise this loss, we figured we could just hold it until Oil prices recover, and profit on both legs of the trade. However, CMC Markets suddenly realised they are going to lose a lot of money with negative oil prices (Interactive Brokers lost $104m, also retards), so they screwed everyone holding the "WTI - Cash" product trading at $8 at the time, and pegged it to the December 2020 expiry trading at $30, with a 'discount factor' to catch up between the two. https://preview.redd.it/zjjzyahx0q951.png?width=517&format=png&auto=webp&s=9523bab878f06702133631f12c1109081f299f65 Now fellow autists, read the above email and try to figure out what the pure arbitrage is. CMC markets will charge us a 0.61% **per day** holding cost (calculated as the 10x levered value of whatever original margin you put up, so in our case £8k*10x=£80k*0.61% = £500 per day, £1.5k on weekends for extra fun) on our open positions, but also "increase" the position value by 0.61% per day vs. the **previous day's** WTI - Cash value. Got it yet? No? Still retarded? Here's where maths really helps you make tendies:-> If your 'cost' is fixed at 0.61% of your original levered position, but your 'gains' are 0.61% of the previous day's position, then your gains will be ever increasing, whereas your costs are fixed. So we added some extra £££ (as much as we could justifiably put into a degenerate 10x levered CFD account) and tried to see if it works. Long story short, it does. At this point in July we were making **over £1k per day on a £8k initial position*\* regardless where the WTI Dec-20 fwd moved. Unfortunately, eventually CMC markets realised what utter retards they were, and closed down the arbitrage loophole, applying the holding costs to the previous day's value. But not before we turned £8k into £98k, less holding costs. https://preview.redd.it/uh0f8knz0q951.png?width=553&format=png&auto=webp&s=c7e629f72de5aeb4e837ccef44ecae708f058bee Long story short, puts on $CMCX they're total retards, and given what a startup robinhood / other brokerages are, never assume that only they are the ones taking your tendies away, sometimes you can turn the tables on them! |
![]() | Although AEF uniquely benefits from the structural tailwinds of both superannuation and ethical investing, we believe it remains misunderstood as an expensive traditional fund manager. submitted by Bruticus91 to ASX_Bets [link] [comments] The Opportunity Australian Ethical Funds (ASX.AEF) is a public market superannuation fund manager. The perception of the company itself vs. the industry is nicely summarised by the two figures below. Herein lies the opportunity. https://preview.redd.it/jhvvua1t5oj51.png?width=680&format=png&auto=webp&s=e511deb4411e81840ffcf8b635e1d8f7b78eeb6e AEF is a renowned Australian fund manager that fits within the ESG trend. It represents one of the only pure play superannuation investments in the Australian public market, with 67% of funds under management (FUM) coming from superannuation. The stock bounced exceptionally from a low of $2 in March, reaching a high of $9 in June, and has since retraced towards the low $4s. Previously, the business traded at $6+ following its announcement of end of year FUM and expected earnings figures. On 8th August IOOF Holdings (ASX.IFL) – 19.9% shareholder – announced it was divesting 15% of its stake in AEF. IOOF is a peer and platform provider which offers AEF products to its clients. The investment was sold at $5.24 vs. market price of $5.90. IOOF disclosed it was selling its AEF investment (at a gain) to raise much needed liquidity. The block trade was viewed negatively by the market, with AEF immediately re-rating to below $5.24 and trending downwards (towards low $4s) ever since. The current share price of $4.17 (24 August close) implies the stock is trading at ~51x FY20 earnings guidance, which is slightly above historical levels despite substantially improved performance and outlook. We suspect that the FY20 results will be aligned with guidance (as demonstrated historically) provided in the quarterly FUM update and guided earnings figures. Results have also been positive across its peers throughout mid to late August (see ‘Roadmap’). https://preview.redd.it/t4oy3ksu5oj51.png?width=478&format=png&auto=webp&s=e2a88ef0bf70fba2e85d36bc71a1df2994217dcf Company History AEF began as Australian Ethical Investments (AEI) in 1986 and was owned by 600 insider shareholders before listing. It is a superannuation fund – so revenue is derived from fees on managing invested funds. By 2005, the business managed four unit trusts and a superannuation fund: · Australian Ethical Balanced Trust (est. 1989) · Australian Ethical Equities Trust (est. 1994) · Australian Ethical Income Trust (est. 1997) · Australian Ethical Large Companies Share Trust (est. 1997) · Parent of Australian Ethical Superannuation (est. 1998) The investments of the trust and super fund are guided by ‘The Charter’ – a series of positive and negative investment screens that must be taken into account when selecting securities for inclusion. https://preview.redd.it/cye711106oj51.png?width=680&format=png&auto=webp&s=60c149549d7d752c26108c662ec319b56ebf371a In July 2005, the government enacted policy that afforded more choice to individual employees with regards to their superannuation provider (marking the beginning of a positive era for the superannuation industry). In that same year, AEF registered for a superannuation license which it was granted in 2006. Back in 2005/06 the company did not split out superannuation FUM, but FUM increased from $311m in Jun-05 to $380m in September-05 following this policy shift – suggesting there was an existing demand for ethical investment products in superannuation. From 2005 to 2011, AEF grew total FUM from $311m to $644m, despite muted FUM growth through the GFC-era. In 2012, the business began separating out its superannuation FUM-growth to improve its visibility. This era saw FUM increasing from $617m in 2012 to $4.05bn as at 30 June 2020. From 2016-19 reduction in FUM-based fees has seen suppressed revenue growth vs. FUM growth. This has resulted in several step changes in FUM-based revenue margins (revenue / FUM) as a result of lower overall fees earned on products. We view this shift as a positive in the long-run since AEF has competitively priced its funds, entrenching their competitive advantages (discussed below) and reducing the temptation that fee-conscious members switch funds. Since AEF has ratcheted the cost of their funds downwards (often ahead of their peers and industry averages), we believe fee compression improves the durability of AEFs revenue compared to peers who are yet to compress their margins. https://preview.redd.it/fcq5jog26oj51.png?width=453&format=png&auto=webp&s=d194c8778727e9adf1ebc162e6b181d8207cc292 Business Model AEF has a relatively simple business model – revenue is derived from fees on managing invested funds. The funds it manages includes retail, institutional and wholesale (non-super) funds, as well as superannuation funds. We are most interested in the superannuation business although the direct and indirect benefits associated with the funds management business are a noteworthy component to the brand and investment management infrastructure (i.e. ideation / performance fee generating / high performing ESG). Until 2012, AEF did not explicitly separate its super vs. non-super FUM. We believe this contributed to its (mis)perception as a traditional fund manager rather than a superannuation fund. Thankfully, since 2012 AEF has provided details relating to the composition of its FUM (below), and noticeably the growth in its superannuation FUM has been the driving force of the business. https://preview.redd.it/6ccbtqm36oj51.png?width=680&format=png&auto=webp&s=6fb4e11064313ca9ab7b57186b2eddc6be62b928 Competitive Advantage 1. Superannuation Exposure: Superannuation FUM is higher growth and lower risk than traditional managed funds. Superannuation funds are regulated to grow at 9.5% due to the Superannuation Guarantee (the Australian Government mandated superannuation contribution). The regulatory framework could see this increase up to 12% in the medium-term and 14% in the long-term. For the purpose of our analysis, we have assumed a constant 9.5% contribution – so any increase would be additional upside. More importantly, excluding fulfilling conditions of release (i.e. death) an individual's superannuation cannot be withdrawn until retirement. Much like the Superannuation Guarantee, withdrawals are also mandated on a schedule that increases as a percentage of FUM with age (beginning at 4% and increasing to 14%). Consequently, the minimum inflows and withdrawals are predictable (and we note the vast majority of individuals do not deviate from these minimum levels due to inertia). Because of this mandated growth, Australia has the fourth largest pension sector in absolute terms and second largest relative to GDP (below). In 2020, the total superannuation pool is ~$2.1trn and growing. It is estimated that by 2040 superannuation assets could be as much as $9trn according to the Australian Treasury. https://preview.redd.it/wenevil56oj51.png?width=680&format=png&auto=webp&s=c2210a8e26816af1ebf798d82c414c61760c5d5e Alternatively, traditional managed funds are subject to redemption risk, caused (typically) by performance and myopic investor behaviour associated with general market movements. Therefore, FUM growth for traditional managed funds must be attracted through marketing and distribution channels. This inextricably links fund inflows and outflows to performance and marketing efforts, which in turn causes a clientele that is more expensive to acquire and retain, and a more volatile pool of assets. Alternatively, traditional managed funds may access capital through secondary capital raisings and the reinvestment of distributions; both of which are a country mile from a 9.5% government mandated contribution. Logically, we wondered which (listed) asset could provide us with exposure to the exceptionally robust superannuation tailwind. We will not spend too much time detailing the industry dynamics and public market players as there is a lot of information to be found in various prospectus’ (see Raiz or OneVue prospectus). The main thing to understand is that superannuation funds can be separated into five buckets: https://preview.redd.it/jyykix976oj51.png?width=680&format=png&auto=webp&s=07e96ebc246a565546e400ef87018d3d3360cd48 After screening for diversified financials and financials businesses on the ASX there were 53 players with at least some revenue linked to superannuation. The revenue exposure desired is revenue linked to superannuation FUM (explained further in the ‘Valuation’). However, it is important to understand that gaining access to this lucrative industry is difficult for several reasons: · Private industry funds – the gems of the industry have been private superannuation funds such as CBUS, Hostplus, and ESTA. We cannot access them as public market investors. · Conglomerate financials – it is possible to gain some retail superannuation exposure within the banking majors such as CBA, WBC, ANZ and NAB. However, they represent insignificant exposure by revenue and profit and the stocks are driven by other risk and growth factors. · Fund managers – fund managers may directly manage retail superfunds or SMSF funds such as Magellan, Platinum and Perpetual. However, there is limited visibility over superannuation FUM exposure. · Superannuation adjacency businesses – superannuation exposure can also be housed within wealth / platform advisers such as like HUB24, Netwealth and OneVue. However, to varying degrees, these businesses are not purely exposed to superannuation-FUM linked revenue. · Pure play sub-scale – the final example can be found in Raiz, which is a sub-scale business that has ~$450m in FUM of which 85% is funds management. It is possible to envisage this business as an AEF in 10-15 years with larger superannuation FUM exposure. Although the superannuation exposure representing $70m in FUM currently (vs. AEF $2.72bn) is vastly inferior to AEF. For this reason, AEF is the closest to a pure play (at scale) superannuation player. Putting this together, we believe AEF is likely to continue to grow its FUM at 20% p.a. YoY. This is principally due to AEF's ability to acquire new members and retain existing members. Therefore, to monitor this continued FUM growth going forward we encourage readers to look out of the number of superannuation members added in these upcoming results and beyond. AEF has grown its member base YoY consistently in an industry which has, on average, been relatively flat in terms of member growth. In 2019 AEF was the highest growing superannuation business in Australia across the previous 5-years. https://preview.redd.it/c4t7jx596oj51.png?width=226&format=png&auto=webp&s=51e47aa607470ce6482ed30352183a6cf6043bff 1. Ethical, Social and Governance (ESG): Beyond the obvious tailwinds in superannuation, AEF is also exposed to another important trend: ESG. Needless to say, ESG investing is becoming not only popular but almost mandatory for corporate money managers. Younger demographic investors are increasingly concerned with the ethical and social impacts of corporate activity. This report by Harvard and another by State Street provide some interesting commentary on the issue. ESG ETFs have been growing at a CAGR of >30%, and State Street forecasts that the global ESG ETF market will increase from US$170bn in 2020 to US$1.3trn in 2030. Momentum for ESG ETFs has been building specifically in Australia, where AUM surged almost 300% — from A$554.1m in 2017 to A$2.2bn in 2019. Whilst the ESG-shift has been occurring since the 2010s, State Street argue that COVID-19 will only further catalyse this shift by highlighting the inherent inequalities in society and health care systems, in turn, spurring social conscience. We note the following data points as indicators of this more recent catalyst: · Perpetual’s recent acquisition of Trillium, a US-based ESG fund, shows the desire of traditional asset managers to become exposed to this space. · BlackRock has started publishing more frequently and consistently on ESG trends and continued rolling out ESG products. · Forager’s investment blog received frequent commentary from investors talking about negative screening on their gambling holdings which has never been the case in the past. The key insight is that a growing proportion of the investment community through time is becoming concerned with ESG issues and this will drive fund flow. Industry data is pointing to the fact that this is a prolonged structural shift rather than a short-term trend. 2. Performance: AEF has improved upon their exposure to structural industry trends in superannuation and ESG through excellent fund performance. AEF's performance (below) has been consistently strong across all of their strategies (we highly recommend reading page 4 of Sequoia's June 15, 2020 "Investor Day Transcript" to highlight how governance and performance are complimentary). Such strong performance not only disincentivises members from switching to competitors and assists member acquisition, but also significantly enhances earnings at the group level. For instance, FY20 guidance provided on 7 July 2020 vs. 22 June had a midpoint difference of ~$2m. Given the long track record of the managers it is expected performance will remain strong. https://preview.redd.it/p6shg5nc6oj51.png?width=680&format=png&auto=webp&s=e65acb553371c6bc7c1f70ddfdf153e9e625117a https://preview.redd.it/mtn23k7d6oj51.png?width=680&format=png&auto=webp&s=9a7ba471248070f9f05216cdf5bbcab2a1f9102b Valuation Key: · FUM = funds under management · FUA = funds under administration · MA = managed accounts · FU\ = total funds (FUM + FUA + MA)* Valuing a Superannuation Member: Our valuation technique here will be somewhat unconventional. We will attempt to value the lifetime revenue per member (LRM) for AEF and for a traditional fund and then highlight the incongruity of their relative valuations. The long-term nature of lifecycle retirement saving (and by virtue the true value of a superannuation fund) demands a long term perspective. Fortunately, the mandated nature of AEFs cash flows facilitates evaluating the lifetime value of a superannuation member. To estimate the LRM we consider the following: (i) life cycle expectations (i.e. retirement age and life expectancy); (ii) salary expectations; (iii) superannuation contribution rate; (iv) investment returns; (v) member "type;" (vi) fee structure; and (vii) a discount rate. We begin by assuming a member makes $5,000p.a. at age 20, which grows to $130,000p.a. through the middle of their working life (35-50) and then declines to $90,000p.a. at 65 (noting these are gross values not inflation adjusted). Since the average member account balance for AEF is ~$60,000 (FUM of $4.05bn ($2.72bn of which is superannuation) / 43,000 members = $60,000 as at 30 June 2019), we can roughly assume that the average age of their member is between 30-35, which places them at the profitable end of this member acquisition cycle. Further, this member regularly contribute 9.5% of their earnings to their superannuation, which compounds at a rate of 6% p.a. Moreover, the prototypical member starts working / paying superannuation into AEF at age 20, retires at age 65, and redeems according to the minimum withdrawal schedule until age 85. However, how many members live according to this prescribed lifecycle; supported by an uninterrupted working life? What about people that take time off to raise children, either returning to part-time work or full-time work? We can model these archetypes also, which assumes much lower income growth and some years of earning no income. If we assume that society is roughly split into thirds by these archetypes (i.e. 1/3 uninterrupted, 1/3 interrupted and return part time, 1/3 interrupted and return full time), then we can calculate a weighted average LRM for the average member. Compressing fees by more than half to 50bps and assuming a 7% discount rate we arrive a weighted average discounted LRM of ~$18,000. Whilst comparing this to the average member in another non-super fund is difficult for an array of reasons (i.e. average acquisition age, average income, average balance, average contribution, redemption allowance etc.), we can loosely estimate what this looks. Adopting the same framework as above, to estimate the LRM of an average managed fund member we must first define the managed fund member "archetype." First, we assume the average traditional fund member has a higher income profile (as lower income earners typically do not invest in managed funds). We tweak the income profile to peak at $180,000 between 35-50 and taper down to $120,000 by age 65. Second, we assume the acquisition age is 30 years rather than 20 to reflect that most individuals do not invest in traditional managed funds until later in life. Thirdly, we account for the non-compulsory nature of managed fund contributions. If we start with the marginal savings rate (10-year average of ~7%) as a proxy for available funds for investment and increase this to align with our ‘managed funds’ archetype who has higher income to 15%. We then assume that from this 15%, about 1/3 will be invested into a managed fun (or ~5%). Therefore, for our individual earning $180,000 during peak working years, this is an annual contribution of $7,200. Finally, we increase the discount rate to 9% since because redemptions are more likely in a traditional fund. Using these alternative assumptions, we arrive at a LRM of ~$5,000. The significant difference in LRM helps explain why a superannuation business can command a much higher multiple of FUM or earnings. Further, we believe our estimate of LRM for a traditional fund manager is quite bullish (i.e. overstated) due to the following: (i) it assumes the individual works full-time for their entire life; and (ii) it assumes the individual stays with the fund from age 30 to 65 and makes uninterrupted and stable contributions. Although dollar cost averaging is touted as an eighth wonder of the world, we are doubtful it is applied as often as it is spoken. Trading Multiples Valuation: Valuing AEF on a relative basis is difficult given the lack of peers. Against traditional fund managers (i.e. Magellan, Perpetual and Platinum), which trade between 5-20x earnings, and superannuation exposed platforms (i.e. Netwealth and Hub24), which trade between 25-40x earnings, AEF looks relatively expensive. We are acutely aware that AEF is currently (at ~$4.2) trading at 12.6% of FUM and ~51x earnings; and at its peak (~$9) was trading at 25% of FUM and 120x earnings. We believe the valuation difference is driven by the quality of the FUM managed and, therefore, the quality of the earnings growth. Given their high alignment to superannuation, NWL and HUB are the two most comparable firms to AEF. As the trailing figures show, AEF appears to be trading on par with its peers. However, an important nuance is the trailing figure for AEF is based on 2019 earnings, whilst for NWL and HUB it is based on FY20 earnings given they have already reported. As such, on a like-for-like basis AEF’s ‘trailing’ earnings multiple (based on the mid-point of management’s guidance) is actually ~51x. This means it is trading below NWL and HUB, despite the fact that the majority of those businesses’ FU* is linked to FUA rather than FUM, which has a lower monetisation rate. Not to mention, the split between superannuation and managed funds is not as clearly delineated as is the case with AEF. What is also evident is limited analyst coverage of AEF and lack of forecast guidance assisting the market to predict growth (as is the case with NWL and HUB). Relative to traditional fund managers (i.e. PPT, PTM and MFG), we note the substantial difference in FUM and business quality. AEF hosts the highest monetization rate (Rev/FUM), even whilst facing fee compression, with the highest FUM growth among its investment management peers. Furthermore, we expect EBIT margins will improve from ~30% toward its larger traditional fund managers peers due to economies of scale over time that we believe will more than offset any fee compression. AEF has also supported a very high ROE due to its sticky clientele and service-based business model. The combination of: (i) best in class monetization; (ii) high LTM and increasing membership base; (iii) improving margins; and (iv) high ROE will make for an incredible growth engine on earnings in the long term. Thus, AEF is a higher quality business with ~4x+ the LCM of a traditional fund trading at only a 2-3x premium using current ratios... https://preview.redd.it/nffeuvef6oj51.png?width=680&format=png&auto=webp&s=e0aed3fcb4464355aa965ed151d6dc2e484ff4b8 Risks We note the following investment risks with AEF:
Peers’ Earnings Updates: In summary, the FY20 results of peers indicate that businesses with revenues dependent on investment funds have performed quite strongly during this period. https://preview.redd.it/np04rasg6oj51.png?width=680&format=png&auto=webp&s=0de02bee60036e9bd71068815e618c2f3711db24 Earnings Announcement: Earnings release on 26 August 2020 should provide for the first catalyst to remind the market of the AEF's fundamental performance. The key figures here will be superannuation FUM, superannuation members and FY20 earnings. AEF will also provide ongoing quarterly FUM announcements, with the following update due in early October. We may also see a mid-August FUM figure in the most recent announcement. Finally, AEF has historically provided updated FUM in back-dated results announcements. Evidence of this occurring can also be found in HUB's most recent announcement: https://preview.redd.it/jz8frxfi6oj51.png?width=680&format=png&auto=webp&s=325d7973e1eb6c98e714dea69306b1ebf8ab0cc7 Private Market Activity: Whilst we think that a private equity buyout is unlikely for AEF, further media exposure and transaction data points should help the public value these assets. There have been some recently executed and rumoured deal activity in the space through 2020. Notably, KKR – one of the largest US-based global private equity funds – bought a 55% stake in Colonial First State valued at ~$3bn from CBA. The implied valuation was ~16x EBITDA, despite the quality of business model and LTM of members being substantially weaker than AEF. There is similar PE interest in NAB’s MLC Wealth, with US funds CC Capital and FC Flowers on second round bids for the asset. NAB's MLC Wealth business caught the attention of Carlyle, BlackRock, and KKR earlier in the year although deals were not executed. The interest from KKR in Colonial is particularly notable, given Scott Bookmyer (KKR partner) who refers to Australian superannuation as the ‘the envy of the western world’. We believe AEF may benefit indirectly from private equity interest, which will confirm both the long-term value and viability of their business model. |
![]() | *** Updated Research submitted by Bruticus91 to ASX_Bets [link] [comments] SWK provides an amazing opportunity to take advantage of the bull market in precious metals at an undemanding valuation with excellent operational momentum. Environment: Precious metals have had a phenomenal ride lately; both due to fear arising from COVID-19, and coordinated monetary policy stimulating economies at an unprecedented level. The graphic below shows the recent parabolic move in GLD (overshadowed by SLV) and reflecting upon the 08 crisis and the numerous QE policies that followed, this upward trajectory may continue further. GLD vs DJIA (2006-Present) With rises in commodity prices, the logical next step is to get some operating leverage and purchase the gold miners. No doubt, this second level thinking has been handsomely rewarded albeit encountering the sovereign and FX risks with many of the global miners domiciled in South Africa and Russia: DRDGold, Polyus and Polymetal (April 20 - Present) Since many of these miners are in the process of expanding production, cash flow won't be realised for several years and operating margins may not improve as much as managements' forecast (i.e. ASX: DAC). Further, since the market has drawn the logical connection between commodity prices and miners, these companies have run a very long way in the last few months. Company Overview: This is where SWK provides us with a cheaper and lower risk opportunity to gain access to this thematic. SWK provides drilling services to large miners of metals (i.e. nickel, silver, gold etc.) in US, Canada, Europe and Australia. Specifically, they use specialised drills to extract samples, which they analyse to then assess to the viability of a site. Increasing demand for mining exploration will, intuitively, increase drilling utilisation and drilling rates. SWK also entirely owns Orexplore, which provides mobile sample analysis to determine the characteristics of extracted cores. This improves the efficiency of examining the quality of a site by removing cost (transportation and storage), timing (it can be conducted on-site), and operational risk (damage in transit) all of which further benefit the mining co. and embed SWK into the exploration process. Competitive Advantage: SWK’s competitive advantage is being able to a world class cost effective and efficient underground drilling. For example, their development of DeepEX allows for longer hole from underground that are cheaper than many shorter surface holes. Their recent contract extension from BHP at Olympic Dam despite competitors (i.e. MSV and BLY) rigs being used onsite is testament to their value proposition. SWK has also invested heavily (~$25mn) into their Orexplore technology in an attempt to move up the value chain away from high-capital intensive drilling into a higher margin business. This technology removes significant operating expenses (employees and equipment), reduces lead time (can be built and shipped globally within 2 weeks), is very simple to use (technical training is not required), and most importantly, is currently being purchased for free and is the main catalyst in this investment (more on this later). Furthermore, SWK has made a concerted effort to increasingly diversify their product offering to different miners (with exposure to various commodities), and geographically. Their global and diversified footprint has provided them with a world-wide footprint, with costs to build their global business already incurred (most recently in Pogo – Alaska), further encouraging a buyout (more on this later). FY19 Financial Report H1 2020 Financial Report Catalyst and Valuation: Exit Options: The primary catalyst for a revaluation in SWK is a huge macroeconomic tailwind providing momentum that might facilitate a sale of the drilling business to a strategic buyer. Without doing too much crystal ball gazing, I view the exit opportunities as follows: 5% - Amazing sale of drilling business = >100%+ returns; 65% - Solid sale of drilling business = 50-100% returns; 20% - No sale and general re-rate = 25-50% returns; 10% - Languishing business and capital destruction = -25%-0% returns. Given management’s firm guidance towards the sale (https://www.openbriefing.com/OB/Swick-Mining-Services-Ltd/2020/2/25/Swick-HY20-Results-Conference-Call/3716.aspx at ~08:00) I will focus on our base case that entails: (i) selling or closing surface drilling business as it’s the lowest margin / weakest vertical; (ii) selling underground drilling business; and (iii) refocus towards Orexplore either through taking the business private, IPOing a new entity or rebranding SWK. Given shareholders have been frustrated with SWKs delay in progressing the business towards a sale and having difficulty commercialising Orexplore it has been important to wait for a noticeable inflexion point in the business to attempt to “time” entry as much as possible. Let’s see how the inflexion point is here beyond the macroeconomic environment above. Miners around the world are aggressively looking to expand their operations due to increasing commodity prices and SWK's services become front of mind. Recent news is ticking all the boxes and adding huge momentum in the stock to catalyse a re-rating.
ASX Announcement 1 ASX Announcement 1 ASX Announcement 2
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ASX Announcement 3b
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Valuation: Ok, so let’s turn our attention to the forward guidance and conservative estimates for SWK. SWK against mostly all metrics is very cheap. Management have forecast EBITDA to be ~$25mn in FY20. Although I think we can conservatively estimate this to grow significantly throughout FY21. The improvements to EBITDA will come from the following: (i) commercialisation of Orexplore = $0.5-1mn, (ii) ~$3-4mn in reaching steady state (20%) margin from the Pogo contract as costs normalise and backdated earnings flow through; (iii) ~$2mn in operating expense reduction during COVID-19; (iv) the $120m increase in the order book between 30 July and 14 August implies $120/5 = $24m p.a. at a slight discount to target margin of ~15% gives another $3.5mn EBITDA. Putting this all together FY21 EBITDA might be ~$35mn. In addition to the purchase of Deepcore, we can use the current valuation ratios of MSV and CAPD as a guide. Currently competitors trade between 3.5x (CAPD) and 4.5x (MSV) EV/EBITDA multiples. If we use 4x as a reasonable multiple on current EBITDA, this would imply an enterprise value of ~$100mn (or a 30% upside) whilst paying nothing for Orexplore. Upon conservative forward FY21 EBITDA figures, the enterprise value could easily reach ~$150 (or a 100% upside) again paying almost nothing (only $1mn / $35mn in EBITDA) for Orexplore. By way of reference, SWK with similar metrics in 2011/12 was trading at a ~100% premium (i.e. ~40c (market cap $90-110mn) whereas now it is ~$20 (market cap $50mn). A decade ago, it also did not have the same existing clientele and large-scale contract wins (see 3a above with a forward order book of $363mn (relative to current revenues of ~$150mn). The cherry on top of this investment is Orexplore, which we buy for free. None of the revenue and earnings multiples above include any real impact from Orexplore. On 14th August the commercial viability of Orexplore was been partially validated with their first contract win. Although its value is only $700,000 over 6 months this call option like payoff comes entirely for free. Further, the true profit margins of SWK has been hidden due to the losses incurred from Orexplore, which has to date cost $25mn in R&D (or equal to almost 10yrs of earnings), the amortisation of associated software development, and continued global expansion (Portugal and Europe before North America) each requiring initial costs prior to achieving target margins. Even better we get a first glimpse at how attractive Orexplore might be. Combining discussion in the latest conference call (https://www.openbriefing.com/OB/Swick-Mining-Services-Ltd/2020/2/25/Swick-HY20-Results-Conference-Call/3716.aspx 04:30 - 06:30) with the recent contract we can conclude the following: (i) 3 machines at Sandfire will generate ~$3.6mn in revenue covering approx. 50% of cash flow with nearly no operating expenses; (ii) $700,000 for 6months scanning 1500m of core per month implies ~$75/m (against an estimated $100m from guidance). As per guidance, if we assume Orexplore machines can scan ~$4m/hr ($300hr) and total costs may include one unskilled technician and minimal overheads ~$50mn this provides a gross margin of ~75% (or almost 4x undergrounding drilling). Due to the profitability of Orexplore, 15-20 operational machines on yearly contracts would provide greater earnings than SWK’s entire business. Hopefully the publicity of Orexplore at Sandfire can attract some attention, and in turn some additional contracts. Risks: No investment is without its risks, and for SWK they fall into: (i) capital mismanagement; and (ii) poor communication / delays. Firstly, the recent capital raise at ~23c followed by aggressive buybacks at ~12.5-14c-17c seems unwise. Although buying now avoids this dilution, it is unclear why excess capital was required if dividends and buybacks were announced shortly thereafter. Secondly, the share price has historically languished due to a lack of publicity and detail on the transformational Orexplore. It is likely that management were unwilling to oversell the Orexplore narrative before genuine contracts were won and the technology was established. Now that these are in place, hopefully the corporate restructure can take place and the upcoming strategic review can provide a clearer picture for the near term. |
![]() | tl;dr: Buy PRPL stock, warrants (PRPLW) or calls based upon your preference. They are closing out a killer quarter and are undervalued. PRPL 22.5c 8/21 if you really need a strike. submitted by lurkingsince2006 to wallstreetbets [link] [comments] I decided to appeal to both WSB audiences today with two different types of DD:
I bought six Purple Mattresses today.Yep. I moved to Utah a few weeks ago (absolutely true) in order to do better DD for you in Purple's hometown (not true at all), so I decided to trek down to the Purple Factory Outlet to scope out the scene.Purple Factory Outlet in a crappy part of Salt Lake - Sign on the door says \"NO CASH INSIDE\" Family informed me they were coming to visit in three days (who does that to someone when they just moved!?!). My wife said we needed sleeping arrangements, so I said Purple mattresses. After speaking with my Mattress Firm friend, he told me that Mattress Firm is entirely out of stock of twin mattresses in the Salt Lake City market (Purple's hometown). Worse, the mattresses aren't coming back as the original (the only mattress to come in twin) is being discontinued. https://preview.redd.it/qd4u5bo3oy751.png?width=1242&format=png&auto=webp&s=3417ffb0eca481dbd797b67be2cb9c06c7a58a65 This is a screenshot of an internal Mattress Firm memo on the discontinuance of the Original Purple Mattress (the cheapest one by far) What can I say? He isn't a photographer.
I figured the Purple branded store would have stock, if it existed. And because they are being discontinued, I didn't want to be left short-handed in the future. So, I walked out of the store with six Purple mattresses. And some pillows. And sheets. And mattress protectors. Aaaaaand because I took delivery, it counts towards Q2 revenue (the best part). For all of those who will inevitably accuse me of pumping the stock, I admit that purchasing six mattresses will pump revenue and therefore pump the stock after earnings. Now, where are all of those people who asked me for a free mattress? This was a sign. Most importantly, when I pulled out of the parking lot, a purple Dodge Challenger zoomed right by me. I was barely able to get this zoomed in picture of it. This means PRPL stock is going to zoom up. PRPL 22.5c 8/21. I bought ten of those contracts today too. It was cheaper than the mattresses. Numbers and Other StuffI put forward that because Purple is a high revenue growth company, the best valuation metrics are revenue multiples (as opposed to EBITDA multiples or P/E ratios). You're welcome to debate this, but frankly, the forward looking EBITDA and Earnings look beautiful as well.Additionally, I put forward that Enterprise Value / Revenue is superior to Market Cap / Revenue, but I'll let you do that research yourself. From Yahoo Finance: Enterprice Value / Revenue
PRPL is currently trading well below its own previous EV / Rev multiple range, despite accelerating revenue growth into Q2 with a healthy long-term outlook of holding an increase. Additionally, PRPL is trading well below the pre-COVID norm for industry EV / Rev mutliples. What about CSPR? CSPR is a total dumpster fire that is now drowning in IPO lawsuits. Its revenue growth has materially slowed, was awful in April forward looking (15% YoY growth vs 170% for PRPL), on declining margins. The cash burn rate for CSPR was high before COVID. They likely only have a few quarters left to live. I think they are overpriced as a result. CSPR is a bad comp even though there are similarities to the businesses at the 30,000 ft level. Revenue Growth & Estimates (Q2 Estimates via Yahoo Finance)
Summary: PRPL's EV / R multiple is under where is should be, even in this market, whether you compare it to its own previous multiples or its competitors before they were affected by COVID. If you look at COVID EV / R multiples, it is in-line with companies who are materially struggling with cash flow and growth... this couldn't be further from the truth. PRPL is undervalued. Analyst Price TargetsI don't usually give these guys much weight, but for those of you who do: https://preview.redd.it/h13nnc7zxy751.png?width=531&format=png&auto=webp&s=f36406c5e43cd7e07757ba6459dbff5665b7e525 Marketbeat (and a few others) are inaccurately showing a lower consensus price target because they are using some very old price targets. https://preview.redd.it/qxgstjh4yy751.png?width=1359&format=png&auto=webp&s=af9d185d18ad3db9c3bc8f44c6acecc729cc6d1a As you look at the 7 price targets MarketBeat is using to build a consensus price target, two of them are from last year, which is ridiculously old (it's about time you update this Bank of America--you got your underwriting--now do your job). Wedbush was after earnings, but before the recent 8-K on Q2 revenue. I put forward that the only targets that matter are those that adjusted to the 8-K revenue announcement. The consensus there is $19.75. This only matters if you follow these types of things. Today's Price ActionI admit that this post would have been more relevant early this morning when I started writing it (the numbers part).The price spiked late afternoon because of the attention drawn to it by a CNBC interview by CEO Joe Megibow. https://www.cnbc.com/video/2020/06/29/purple-ceo-on-the-popularity-of-mattresses-as-americans-stay-at-home.html In the interview, he doesn't share anything really new (for those of us who closely follow), but he does emphasize that PRPL doesn't have a return rate problem, unlike others (*cough* CSPR *cough*). Q2 EPS / EBITDA EstimatesPRPL has generated $70M in cash during April and May, which is insane for a stock that has generated Adjusted EBITDA in the 6.2-15.3M range over the last four quarters. The quarter isn't even done yet.I'm not putting an EPS estimate on this because the amazing cash generation is going to be partially offset by a fairly large warrant liability expense adjustment. It will likely be one of the final expense adjustments we see as the secondary offering triggered a strike price drop to zero, which is one of key things the liability expense was modelling. Regardless, warrant liability expense doesn't deserve to be an expense as the warrants themselves are already built into fully diluted EPS, which is what everyone reports. The FASB done messed up on this one. Technical Astrology & PRPL PatternsIMO, most technical analysis is confirmation bias at best. Here's some confirmation bias.https://preview.redd.it/5kviazrs0z751.png?width=1166&format=png&auto=webp&s=56c8daaa52c4af31c66c9821e57e40b9362b1bcd If you are into this type of thing, PRPL has been a series of Bull Flags since the bottom of COVID. We are now ending our fourth bull flag (which likely ended today). At least this is what stocktwits and a few other areas are raving about. Intraday Patterns The intraday patterns are more interesting to me. I've been watching this security fairly closely over the last 3 months since the COVID bottom, and on most days, you'll see a spike in the morning that fades away into the afternoon. It is almost like clockwork and seems to be irrespective of volume. While I don't trade this pattern because I don't want to exit my long-term capital gains positions yet, some of PRPL gang makes money by buying in the morning (or afternoon before), selling/shorting at the peak, and then closing/buying late afternoon. Good on them! Also, PRPLW warrants tend to lag the stock on the way up if you want to play that too. What is your next play after PRPL?I've already mentioned several times that I will fully exit my warrants (and rotate into some PRPL stock / long dated options) when the stock price reaches about $24. My inbox has been bombarded with questions about what my next play is. https://preview.redd.it/t56ziwe42z751.png?width=1161&format=png&auto=webp&s=4ccef0051c2f1740d1c8059f1cb2a16188f7435c The above chart is a comparison between CSPR and PRPL. CSPR, even though it is a total dog, has been riding up with PRPL on sympathy plays. CSPR spikes on PRPL news, conference presentations, and any other movement. PRPL has reasons to be up. CSPR shouldn't be any higher than where it was after its last earnings release. The only new things that have occurred are dozens of IPO lawsuits. I'll be shorting CSPR for somewhere between $100k-$500k if I end up exiting my PRPL positions before CSPR earnings and if this stupid pattern holds. It's free money. PositionsI've got tons of warrants (closing in on $2M worth) and now 10x PRPL 22.5c 8/21. Do your own due diligence. This is not investment advice of any kind. |
Item | Cost* | Sold | Fees | Inventory^ | Profit |
---|---|---|---|---|---|
1936 Goudey Lot (8) | 50.00 | 56.50 | (8.48) | - | (1.98) |
Hank Aaron "Odd-Ball" Collection | 150.00 | 777.29 | (116.59) | - | 510.70 |
(16) Pre-WWII card lot w/ Cobb | 1,300.00 | 1,708.52 | (256.28) | - | 152.24 |
(23) Sandy Koufax 1950's and 1960's lot | 250.00 | 299.50 | (44.93) | - | 4.57 |
1977-1979 Topps Baseball Rack & Cello Packs (6) | 250.00 | 380.00 | (57.00) | - | 73.00 |
1957 Swift Meats Game Complete Set (18) | 800.00 | 680.00 | (102.00) | (222.00) | |
(36) 1950s-2000s Multi-Sports Collection | 500.00 | 1,528.51 | (229.28) | - | 799.23 |
1933-1989 Wax Pack Wrapper Hoard (650+) | 400.00 | 1,918.01 | (287.70) | - | 1,230.31 |
1941-2004 Multi-Sport Group (33) | 800.00 | 2,859.83 | (428.97) | 100.00 | 1,730.86 |
1912 B18 Blanket Find (100) | 1,270.80 | 1,136.24 | (170.44) | 500.00 | 195.00 |
1962-63 Parkhurst Hockey Lot (45+) | 500.00 | 287.26 | (43.09) | 400.00 | 144.17 |
1953 to 1969 Mickey Mantle Group (16) | 1,000.00 | 2,747.85 | (412.18) | 150.00 | 1,485.67 |
1956-1959 Baseball Star Collection (48) | 1,130.00 | 322.04 | (48.31) | 900.00 | 43.73 |
1961-1969 Baseball Star Collection (61) | 804.95 | 257.78 | (38.67) | 600.00 | 14.16 |
1948-1965 Yogi Berra Collection (26) | 1,400.00 | 399.50 | (59.93) | 1,050.00 | (10.43) |
Lot of (4) Signed Perez-Steele Postcards | 676.59 | - | 676.59 | - | |
1950's-1980's Football Wrapper Lot (42) | 920.00 | 1,944.23 | (291.63) | 732.60 | |
1953 Topps Partial Set (208) | 1,472.00 | 2,855.13 | (428.27) | 100.00 | 1,054.86 |
1953-55 Dormand Postcard Set (47/52) | 685.00 | 804.85 | (120.73) | 250.00 | 249.12 |
1959 & 1960 Venezuela Topps Lot (34) | 216.00 | 58.66 | (8.80) | 200.00 | 33.86 |
1959 Topps Baseball High Grade Set | 1,557.30 | 1,132.80 | (169.92) | 1,000.00 | 405.58 |
1970 Topps Super Proofs Lot (12) | 405.41 | 493.75 | (74.06) | 200.00 | 214.28 |
1887 Allen & Ginter Boxing Lot (14) | 403.40 | 403.40 | - | ||
1954 Topps Starter Set (119/250) | 662.22 | 707.50 | (106.13) | 500.00 | 439.16 |
1947 Bond Bread Jackie Robinson Lot (6) | 2,220.00 | 2,125.00 | (318.75) | 1,480.00 | 1,066.25 |
1934 R310 Butterfinger Ruth & Gehrig Lot (2) | 720.00 | 720.00 | - | ||
1959 Topps Baseball Near Set (571/572) | 3,620.00 | 3,620.00 | - | ||
1973 Topps Complete Set | 2,512.40 | 6,347.41 | (952.11) | 600.00 | 3,482.90 |
1961 Topps PSA Graded Set | 5,791.60 | 11,445.51 | (1,716.83) | 100.00 | 4,037.08 |
2013 Bowman Chrome Judge Black Wave Auto | 1,940.00 | 1,940.00 | - | ||
1961-1982 Signed Card Lot (19) | 1,364.40 | 1,120.00 | (168.00) | 800.00 | 387.60 |
35,772.07 | 44,393.67 | (6,659.05) | 16,289.99 | 18,252.54 |
As of 8/25/2020 | 2020 YTD | 2019 Final |
---|---|---|
Cash | $5,588.15 | $1,680.15 |
Accounts Receivable | $6,743.43 | $- |
Inventory^ | 16,289.99 | $10,605.75 |
Accounts Payable` | ($2,886.54) | ($1,858.62) |
Retained Earnings | ($9,262.28) | $- |
Initial Capital | ($1,165.00) | ($1,165.00) |
Revenue | ($44,393.67) | ($40,163.15) |
Cost of Goods Sold | $19,482.08 | $22,582.96 |
Fees (15% of Rev.) | $6,659.05 | $5,956.97 |
Grading Fees | $2,944.79 | $2,360.93 |
Item | Cost* | Sold | Fees | Inventory^ | Profit |
---|---|---|---|---|---|
1936 Goudey Lot (8) | 50.00 | 56.50 | (8.48) | - | (1.98) |
Hank Aaron "Odd-Ball" Collection | 150.00 | 777.29 | (116.59) | - | 510.70 |
(16) Pre-WWII card lot w/ Cobb | 1,300.00 | 1,708.52 | (256.28) | - | 152.24 |
(23) Sandy Koufax 1950's and 1960's lot | 250.00 | 299.50 | (44.93) | - | 4.57 |
1977-1979 Topps Baseball Rack & Cello Packs (6) | 250.00 | 380.00 | (57.00) | - | 73.00 |
1957 Swift Meats Game Complete Set (18) | 800.00 | 680.00 | (102.00) | (222.00) | |
(36) 1950s-2000s Multi-Sports Collection | 500.00 | 1,528.51 | (229.28) | - | 799.23 |
1933-1989 Wax Pack Wrapper Hoard (650+) | 400.00 | 1,918.01 | (287.70) | - | 1,230.31 |
1941-2004 Multi-Sport Group (33) | 800.00 | 2,859.83 | (428.97) | 100.00 | 1,730.86 |
1912 B18 Blanket Find (100) | 1,270.80 | 1,136.24 | (170.44) | 500.00 | 195.00 |
1962-63 Parkhurst Hockey Lot (45+) | 500.00 | 287.26 | (43.09) | 400.00 | 144.17 |
1953 to 1969 Mickey Mantle Group (16) | 1,000.00 | 2,747.85 | (412.18) | 150.00 | 1,485.67 |
1956-1959 Baseball Star Collection (48) | 1,130.00 | 322.04 | (48.31) | 900.00 | 43.73 |
1961-1969 Baseball Star Collection (61) | 804.95 | 257.78 | (38.67) | 600.00 | 14.16 |
1948-1965 Yogi Berra Collection (26) | 1,400.00 | 399.50 | (59.93) | 1,050.00 | (10.43) |
Lot of (4) Signed Perez-Steele Postcards | 676.59 | - | 676.59 | - | |
1950's-1980's Football Wrapper Lot (42) | 920.00 | 1,944.23 | (291.63) | 732.60 | |
1953 Topps Partial Set (208) | 1,472.00 | 2,855.13 | (428.27) | 100.00 | 1,054.86 |
1953-55 Dormand Postcard Set (47/52) | 685.00 | 804.85 | (120.73) | 250.00 | 249.12 |
1959 & 1960 Venezuela Topps Lot (34) | 216.00 | 58.66 | (8.80) | 200.00 | 33.86 |
1959 Topps Baseball High Grade Set | 1,557.30 | 1,132.80 | (169.92) | 1,000.00 | 405.58 |
1970 Topps Super Proofs Lot (12) | 405.41 | 493.75 | (74.06) | 200.00 | 214.28 |
1887 Allen & Ginter Boxing Lot (14) | 403.40 | 403.40 | - | ||
1954 Topps Starter Set (119/250) | 662.22 | 707.50 | (106.13) | 500.00 | 439.16 |
1947 Bond Bread Jackie Robinson Lot (6) | 2,220.00 | 2,125.00 | (318.75) | 1,480.00 | 1,066.25 |
1934 R310 Butterfinger Ruth & Gehrig Lot (2) | 720.00 | 720.00 | - | ||
1959 Topps Baseball Near Set (571/572) | 3,620.00 | 3,620.00 | - | ||
1973 Topps Complete Set | 2,512.40 | 6,347.41 | (952.11) | 600.00 | 3,482.90 |
1961 Topps PSA Graded Set | 5,791.60 | 11,445.51 | (1,716.83) | 100.00 | 4,037.08 |
2013 Bowman Chrome Judge Black Wave Auto | 1,940.00 | 1,940.00 | - | ||
1961-1982 Signed Card Lot (19) | 1,364.40 | 1,120.00 | (168.00) | 800.00 | 387.60 |
35,772.07 | 44,393.67 | (6,659.05) | 16,289.99 | 18,252.54 |
As of 8/25/2020 | 2020 YTD | 2019 Final |
---|---|---|
Cash | $5,588.15 | $1,680.15 |
Accounts Receivable | $6,743.43 | $- |
Inventory^ | 16,289.99 | $10,605.75 |
Accounts Payable` | ($2,886.54) | ($1,858.62) |
Retained Earnings | ($9,262.28) | $- |
Initial Capital | ($1,165.00) | ($1,165.00) |
Revenue | ($44,393.67) | ($40,163.15) |
Cost of Goods Sold | $19,482.08 | $22,582.96 |
Fees (15% of Rev.) | $6,659.05 | $5,956.97 |
Grading Fees | $2,944.79 | $2,360.93 |
Cash Account vs. Margin Account: An Overview . Investors looking to purchase securities can do so using a brokerage account.The two main types of brokerage accounts are cash accounts and margin Choosing the account that works best for your trading style and needs is an important decision that could have significant ramifications for you financially. Understanding how a brokerage settles trades can make the difference in your decision to use a margin account or stick with a cash account. Margin Account vs. Cash: Which is Better for You? In this post, we’ll look at the key differences between a margin account and cash account, and help you determine which one might be the better choice for you. For example, let’s say you’ve decided to start trading stocks. You’ve read some tutorials and watched some videos … The loan in the margin trading account is collateralized by the securities you purchase. While you hold securities using margin, if the value of the stock drops significantly, the account holder will be required to deposit more cash, more marginable securities, or sell a portion of the securities to maintain the minimum margin requirements. The settlement for cash accounts is 2 business days. Margin accounts allow you to borrow money against the value of the securities in your account. For example, if you have $2,500 in a margin account, you could use additional margin funds of up to $7,500 supplied by Webull, to purchase $10,000 worth of stock.
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The ultimate guide to cash vs margin accounts. If you currently have trouble deciding between these two account types, this video should help you with your d... Understanding the difference between Cash and Margin accounts is vital when it comes to the stock and trading industry. In this video I give you guys an in dept breakdown of both Cash and Margin ... Trading 101: What is a Margin Account? Come join me for a live session where I talk more about trading, the markets and all the money that can be made. Claim... Cash and Margin Trading Accounts and Which is Right for You - Duration: 8:32. 1215 Day Trading 563 views. 8:32. Cash Account vs Margin Account - Ultimate Guide - Duration: 16:05. What is margin trading? What is a margin? What is the difference between a cash account and a margin account? In episode #34 of Real World Finance we dive de...