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The Tale of eVTOLs (Tickers of focus: $RTP | $EXPC) via /r/investing

The Tale of eVTOLs (Tickers of focus: $RTP | $EXPC)

Tl;dr: EXPC stock is worth at least 154% more than its present price of $12.9 (As of 03/14/2021). Both EXPC and RTP have significant catalysts lined up ahead that will likely boost the SP from current lows post-NASDAQ sell-off.

What to expect

Understanding the eVTOL Space

Outlook for EXPC and RTP

SPAC Transaction Summary

What Blade/ EXPC and Joby/ RTP Stocks are Worth

How I am playing EXPC and RTP

Useful Links

Understanding the eVTOL Space

(Note: Skip to next section if you feel reading this background info is a drag)

Before I even start discussing tickers and plays, I'd first like to shed some light on the groundbreaking Urban Air Mobility (UAM) space, where it's heading and who are the top players vying for the bigger piece of the pie. Understanding the potential investment opportunities without understanding this nascent space is a mooo point.

Electric VTOL (Vertical Take off & Landing) air taxis are one of the great emerging technologies of our time, promising to unlock the skies as traffic-free, high-speed, 3D commuting routes. Much quieter and cheaper than helicopter travel, they'll also run on zero-local-emission electric power, and many models suggest they'll cost around the same per mile as a ground-based ride share.

Currently there are over 100 players around the globe (check this article to get an overview of some the key players in the eVTOL space) in various stages of designing, building and commercializing eVTOL airframes. As is the case with any disruptive industry, the development and production of eVTOLs is an insanely cash hungry undertaking. Currently, we've a handful of frontrunners around the world who have gone public (Chinese eVTOL $EH) or are ripe to go public soon. Here's a the link to a well rounded DD comparing RTP-ACIC-EXPC-EH-Volo-Lilium that I highly recommend checking out.

The United States is acutely aware that it 'missed the boat' on consumer drones, and it's an understandably sore point. But perhaps more importantly the geopolitical consequences of Chinese drone dominance appear to have reverberated around the corridors of the Pentagon for some time. One consequence of this situation is that the latest area of rapid aerospace innovation - eVTOL - has firmly captured the attention of US industry, investors and now the Department of Defense. Leaders of all stripes Stateside are determined that America will indeed be 'first' in this new and exciting area of aerospace innovation. The Air Force recently launched Agility Prime, a non-traditional program seeking to accelerate the commercial market for advanced air mobility vehicles (i.e., "flying cars"). Check their website here and highly recommend reading this Wired article by USAF's former Acquisition Executive, Will Roper who starts his argument by drawing inspiration from the Jetsons.

The outlook for UAM looks positive based on increasing congestion in cities. There are various estimates of the TAM (total addressable market) of UAM. In its presentation, Archer Aviation said that it expects a TAM of $1.5 trillion for UAM, which stretches to $3 trillion in the optimistic scenario.

Joby Aviation said that it sees the TAM for UAM at $1 trillion globally and $500 billion in the U.S. Joby Aviation cited the 2018 UAM Market Study from Booz Allen Hamilton for its forecasts.

Now, What's stopping us from having eVTOL air taxis today, then? Here are some of the factors you should be considering while evaluating potential investment opportunities:

Batteries!! - Battery manufacturers' roadmaps are currently focused on satiating EV manufacturers and developing battery packs with required energy density and specific power (i.e. ability to sustain Tesla's ludicrous mode for a few minutes v/s a few seconds) could take a few years. Alakai Skai's (currently supported by a single private investor) decision however, to ditch lithium batteries for a liquid hydrogen powertrain completely eliminates the battery technology bottleneck that almost every other company is hoping will resolve itself by the time they launch commercial services

Certification - These are entirely new categories of aircraft, and the process of certifying, testing and regulating them is going to be monstrously expensive and time consuming. Federal support and urgency to outcompete global players should help the cause.

Safety - To coordinate their thrust, each of the electric motor and fan units will need reliable sensors to accurately measure pressure, temperature and other indicators. Each of the motors will induce vibrations in the wings, and their fans may not all spin with the same efficiencies as wear and tear set in. It will be complicated to write software to reliably control all that, says Ella Atkins, an aerospace engineering professor at the University of Michigan. While Atkins says she doesn’t see anything that’s “absolutely a showstopper” with the design, she thinks the many years it took to solve the deadly control problems of the first tiltrotor aircraft, the U.S. military’s V-22 Osprey, offers a sobering parallel for Lilium and other EVTOL developers. “You need a lot of money and time to be successful in aerospace, and the truth is, this industry is trying to go too fast,” says Atkins. Next issue is use of ballistic parachutes. Ballistic parachutes can only save you above a certain altitude, maybe 120 feet or so. Below that, they don't have time to open up, which means that every time you take off or land in one of these machines, you're exposed to a window of time in which total system failure would drop you like a stone.

Air Traffic Control - Down the track, there will also have to be a considerable leap forward in air traffic control if the skies are going to safely hold large numbers of these machines zipping about between a bunch of skyports/ vertiports dotted around an urban area.

Public Perception - Public perception (trust and safety in tech) is a large obstacle. Safety is the greatest concern with “unruly” passengers, “lasing” of pilots, and aircraft sabotage being main contributors. New importance of travel time, increase in telecommuting, urbanization and de-congestion scenarios could reduce the viability of UAM markets. Advancement in driverless car tech will likely make UAMs suitable for long-distance commute only.

All these problems are being worked on, and now we are ready to discuss 2 important SPAC plays that I have rounded up for investment in this space:

Joby Aviation - $RTP (eVTOL Manufacturer | Long term play)

Blade - $EXPC (eVTOL Asset Light Platform, aka 'Uber of skies'| Short-Mid term play)

Outlook for EXPC and RTP

Blade - EXPC

Investor's presentation

Blade is an eVTOL index play, often thought as the "Uber of skies" operates by connecting contract pilots with passengers to generate revenue via their proprietary platform.

Blade’s business model is proven and is profitable; eVTOL is expected to improve unit economics and dramatically expand the addressable market of BLADE’s existing products.

There are currently 167 different eVTOL aircraft under development. Blade is 1 of 1 asset light platform — poised to benefit regardless of which eVTOL manufacturer is first to market. Basically, Blade's strategy is akin to selling shovels in a gold rush.

Rob Wiesenthal, Founder and Chief Executive Officer of Blade, commented, “Ground mobility has been radically transformed by software and battery technology, as evidenced by the rapid adoption of electric vehicles. The next battle is in the air. This transaction provides the capital for Blade to profitably expand its urban air mobility business using conventional rotorcraft today, while providing a seamless transition to EVA aircraft tomorrow.”

Blade and KSL have already identified around $300 million in short- to mid-term investment opportunities that will help Blade expand its presence in the northeastern United States, on the West Coast in San Francisco and Los Angeles, and in new markets that could include Vancouver, Jakarta, and Tokyo. (EXPC is sponsored by an affiliate of KSL Capital Partners, making the EXPC<>Blade strategic merger even more prudent).

Blade operates in four key lines of business:

Short Distance – Flights between 60 and 100 miles in distance, primarily servicing commuters for prices between $595 and $795 per seat (or $295 for monthly commuter pass holders).

BLADE Airport – Flights between all New York area airports and dedicated Blade lounges in Manhattan’s heliports. Prices start at $195 per seat (or $95 per seat with the purchase of an annual Airport Pass)1 .

BLADE MediMobility – Blade is the largest transporter of human organs in the Northeast United States, reducing the costs and transport time for hospitals versus legacy competitors. This business is a critical part of the Company’s growth strategy as organ movements are expected to be one of the first uses of EVA, before flights for passengers.

International Joint Ventures – As part of its expansion strategy, the Company forms joint ventures with local partners in key overseas markets to provide the technology, customer experience, infrastructure design, and employee training, that enables a scalable and consistent Blade experience. Blade’s first international joint venture launched helicopter services late last year in India flying between Mumbai, Pune, and Shirdi.

The Company expects to use proceeds from the transaction to fund expansion into new markets, including the Northeast Corridor and West Coast in the United States, as well as target addressable markets internationally (Vancouver, Jakarta and Tokyo).

Blade's projected revenue outlook:

Blade estimates its revenue in 2021 will reach $52 million.

Moreover, by 2023, Blade estimates revenue will reach $181 million and $402 million by the end of 2024. This is all still before significant revenues occur from eVTOL which the company calls Phase 3 starting in 2025 and 2026. It does not assume any passenger eVTOL revenue before then.

But in Phase 3, revenue is forecast to skyrocket to $601 million in 2025 and $875 million in 2026. (These numbers should be considered with a grain of salt)

Blade's Competitive Moat:

BLADE’s first mover advantage, extensive and loyal customer base and control of strategic infrastructure secures its leading position in the future of urban air mobility.

#1 market share in key short-distance aviation markets, brings credibility to new market expansion.

Strong management team with domain expertise and public market experience.

BLADE is already slated to leverage and partner with KSL’s portfolio companies to generate attractive growth opportunities.

Proprietary technologies and asset-light model enables flight volume growth and accelerates launch timeline for new markets

While Joby Aviation - Uber partnership pose a significant competitive threat, it's worth noting that Uber Elevate failed to take off even with its branding and it'll be challenging for Joby to front the customer acquisition cost (after bleeding dry with production upscaling and certification costs) and outcompete Blade who have an edge in that domain with their ever growing loyal customer base. Another point to note is that Joby will be limited to their own aircrafts while Blade is already scanning potential players and will likely partner with different eVTOL operators depending on the nature of routes.

ARKQ is holding 2,748,457 shares, which represents 9.99% of public float for EXPC. Once the merger is complete, there will be a total of 82.5M shares. This means ARK currently own 2.9% of the 82.5M shares.

Leadership: Upon completion of the transaction, the combined company will continue to be led by Mr. Wiesenthal as Chief Executive Officer. The senior management team will also include Will Heyburn, Chief Financial Officer and Head of Corporate Development, Brandon Keene, Chief Technology Officer, and Melissa Tomkiel, General Counsel.

Board of Directors upon completion of transaction:

Eric Affeldt, Chief Executive Officer of Experience Investment Corp. and previously CEO of publicly-traded ClubCorp

Jane Garvey, former administrator of the Federal Aviation Administration (FAA) and former Chairman of the Board of Directors of United Airlines Holdings, Inc.

Kenneth Lerer, Managing Partner of Lerer Hippeau, Co-Founder of Huffington Post, and former Director of Viacom, Inc.

Susan Lyne, Co-founder and General Partner of BBG Ventures and former President of ABC Entertainment Group, a division of the Walt Disney Company

Ted Philip, Lead Independent Director of United Airlines Holdings, Inc. and Lead Independent Director of Hasbro, Inc.

Rob Wiesenthal, Founder and Chief Executive Officer of Blade; Former Chief Financial Officer of Sony Corp. of America, Head of Global Corporate Development, Sony Corporation, and Chief Operating Officer, Warner Music Group

David Zaslav, Chief Executive Officer of Discovery, Inc. and Director of Sirius XM Holdings, Inc., Lions Gate Entertainment Corp., and Grupo Televisa, S.A.B.

Investors - Strategic / Institutional Venture Capital:

Airbus

Lerer Hippeau

Colony Northstar

Raine Ventures

Investors - Private Venture Capital:

Kenneth Lerer (Board Chairman) – Lerer Hippeau; Co-Founder, Huffington Post

David Zaslav – CEO, Discovery Inc.

Barry Diller – Chairman, IAC; Former CEO: Fox, Paramount Pictures

Eric Schmidt – Former CEO, Google

Financial Advisors:

Credit Suisse is serving as the exclusive financial and capital markets advisor to Blade.

Deutsche Bank Securities is serving as lead capital markets and exclusive financial advisor to Experience Investment Corp., with Citibank and J.P. Morgan acting as joint capital markets advisors.

Credit Suisse and Deutsche Bank Securities are also acting as lead placement agents on the private offering, with Citibank and J.P. Morgan acting as joint placement agents.

Joby Aviation - RTP

Investor's presentation

Fact Sheet

Company has spent more than a decade developing piloted, all-electric, vertical takeoff and landing passenger aircraft, with over 1,000 test flights conducted to date.

Intends to operate clean, quiet and affordable air taxi service starting in 2024; with a vision to offer flights at the same price as a ground-based taxi.

First company to agree certification basis for an eVTOL aircraft with FAA

First company to be granted airworthiness approval for an eVTOL aircraft by U.S. Air Force

Company has strategic partnership with Toyota for production and recently acquired Uber Elevate and will be partnering with Uber for go-to-market and demand generation. Other partners include:

Agility Prime - A USAF program that will provide Joby access to key research facilities and equipment and allows us to prove out the maturity and reliability of our aircraft.

Toray - Joby Aviation and Toray Advanced Composites completed a long-term supply agreement for the composite material used for Joby’s aircraft.

Garmin - Garmin will be providing their state-of-the-art G3000 integrated flight deck to Joby for our aircraft. The G3000 integrated flight deck has been reliably demonstrated across a variety of aircraft and brings seamless integration for the unique requirements of eVTOL aircraft.

In 10 years, Joby’s presentation to investors projects a presence in over 20 cities worldwide with 14,000 aircraft in service generating more than $20 billion in revenue — electric air mobility at scale around the world.

Up to five-year lock-up agreement and price-based vesting on certain sponsor shares ensures unprecedented long-term alignment, with some shares not vesting until Company achieves $30 billion market capitalization.

Proceeds are expected to fund Company through start of passenger service launch, including certification of aircraft and development of manufacturing facilities.

Joby's Competitive Moat:

Expect to be first to market with the right aircraft

4 passenger aircraft to optimize unit economics

Significant progress in certification

Well developed go-to-market strategy enhanced through Uber Elevate acquisition

World class engineering and certification team

FAA Part 23 general aviation certification enables global reach

Leadership:

JoeBen Bevirt; Founder and Chief Executive Officer

Paul Sciarra; Executive Chairman

Matt Field; Chief Financial Officer (ex-CFO, North America, at Ford Motor Company, Prior to joining Ford, he worked at Goldman Sachs and the Board of Governors of the Federal Reserve System.)

Eric Allison; Head of Product

Greg Bowles; Head of Government and Regulatory Affairs

Kate DeHoff; General Counsel and Corporate Secretary

Justin Lang; Head of Partnerships & Corporate Strategy

Bonny Simi; Head of Air Operations and People

Board of Directors upon completion of transaction:

Reid Hoffman, co-founder of LinkedIn and co-director of RTP, will join Joby Aviation’s board of directors once the transaction closes. Hoffman is known to be a vocal proponent of safe autonomous mobility; in 2018, through venture capital firm Greylock Partners, he invested in Pittsburgh-based Aurora Technologies, which later absorbed Uber’s Advanced Technologies Group.

Michael Thompson, CEO and CFO of RTP

Sky Dayton, Aicha Evans, Dipender Saluja

Investors: Toyota Motor Corporation, 8VC, Aioi Nissay Dowa Insurance, AME Cloud Ventures, Baillie Gifford, The Baupost Group, Funds and accounts managed by BlackRock, Capricorn Investment Group, Edbi, Emerson Collective, Fidelity, Global Oryx Limited (Abdul Latif Jameel’s family investment arm), Intel Capital, JetBlue Technology Ventures.

Financial Advisors: Skadden, Arps, Slate, Meagher & Flom LLP, served as legal advisor to Reinvent. Morgan Stanley & Co. LLC and Allen & Company LLC served as placement agents on the PIPE transaction. Latham & Watkins LLP served as legal advisor and Morgan Stanley & Co. LLC and Allen & Company LLC served as financial advisors to Joby.

SPAC Transaction Summary

Blade - EXPC (Investor's presentation)

The transaction will be funded by a combination of EIC ($EXPC) cash held in a trust account and proceeds from a $125m PIPE, of which KSL has committed to subscribing for ~$20m

PF shares outstanding: 82.5 million

Transaction reflects pro forma market capitalization of $1.604 billion (The share price as I'm writing this is $12.9)

Transaction will result in $375m of cash to balance sheet to fund growth

Transaction implies a fully diluted pro forma equity value of $689.25m for Blade

Existing Blade shareholders expected to receive 43.2% of the pro forma equity

The boards of directors of both Blade and Experience Investment Corp. have unanimously approved the proposed transaction.

The transaction is expected to close in 1H 2021; predictions expect voting to happen in the last week of March/first week of April.

Form 8-K

Joby - RTP (Investor's presentation)

PF shares outstanding: 660 million

The pro forma implied market capitalization of the combined company is $6.6 billion, at the $10.00 per share PIPE subscription price and assuming no public shareholders of Reinvent exercise their redemption rights.

The Company will receive at the time of transaction close up to $690 million in proceeds from Reinvent’s cash in trust and an $835 million private placement of common stock at a $10.00 per share value and will also convert a $75 million convertible note into common stock at a $10.00 per share value.

Pro-forma for the transaction, Joby expects to have up to $1.974Bn of cash to fund growth and commercialize its operations

Transaction implies a fully diluted pro-forma aggregate value of $4.6Bn (2.3x AV / 2026E Revenue)

Existing Joby shareholders to roll 100% of their equity and expected to receive 76% of the pro-forma equity

Up to five-year lock-up on founder shares. Major stockholders and key executives of Joby have agreed to enter into separate lockup agreements as well.

Price-based vesting triggers of $12, $18, $24, $32 and $50 per share on founder shares

The boards of directors of both Reinvent and Joby have unanimously approved the transaction, which is expected to close by the end of the second quarter of 2021.

Form 8-K

What Blade/ EXPC and Joby/ RTP Stocks are Worth

Blade - EXPC

PF shares outstanding: 82.5 million

EXPC SP as of 03/14: $12.9

SPAC Cash = $375MM

82.5MM * $12.9/share = 1.064Bn PF Market Cap

PF EV is = $689MM (PF Market Cap - SPAC Cash)

Disruptive technology platforms have an average EV-sales ratio of 8.2x. In addition, luxury brands are at 7.5x and recent EV / SPAC mobility deals have averaged 6.5x. The average of all four of these groups of stocks is 7.4x. On page 37 of the presentation, Blade shows the EV-sales ratios of four groups of its peers.

Unadjusted:

2024 estimated revenue is expected to be $402MM (Blade isn't accounting any eVTOL revenue, international expansion, operational upside or any strategic upside in this number).

This means that the unadjusted EV-sales ratio for 2024 is 1.71x sales. That is very low.

This means that at 7.4x $402 million, the EXPC stock EV is worth $2.975 billion. After adding back the $375 million in cash, the target market value is $3.35 billion.

That is 215% above today’s pro forma market cap of 1.064 billion.

Unadjusted fair share price: 3.35Bn/82.5M = $40.61

Adjusted:

We need to adjust the 2024 numbers to derive their present value. At a 15% discount rate for 4 years, the 2024 sales are worth 57.175% of this in today’s dollars. The present value sales number is $230 million (i.e., $402 million times 57.175%).

As a result, the adjusted EV-sales multiple is 3x (i.e., $689 million EV divided by $230 million).

This means that at 7.4x $230 million, the EXPC stock EV is worth $1.702 billion. After adding back the $375 million in cash, the target market value is $2.077 billion.

That is 95.2% above today’s pro forma market cap of 1.064 billion.

Adjusted fair share price: 2.077Bn/82.5M = $25.2

Average between adjusted and unadjusted:

Target market value is $2.713 billion.

Fair share price: $32.89

Conclusion: EXPC stock is worth at least 154% more than its present price of $12.9 (As of 03/14/2021)

This is without accounting all the hype from the merger announcement.

Joby - RTP (Speculation)

It's difficult to value this stock since all the revenue projections are subject to a lot of variables (Timely certification, customer acquisition, production delays, etc.)

Yet, I am long term bullish on this stock. With almost $2 billion in capital on-hand, the Elevate team, and Toyota as a manufacturing partner, Bevirt’s company has everything it needs to achieve his vision of saving a billion people an hour a day.

Check Ehang (Chinese competitor) stock's trajectory over past 6 months.

Clear that there's a lot of excitement surrounding eVTOLs and the news of merger should send this stock soaring in next few months.

ARKX ETF is slated to launch end of this month and RTP is a great match for Cathie Wood's sub-orbital space category.

How I am playing EXPC and RTP

Catalysts:

ARKX ETF launch EOM makes both EXPC and RTP a great spec play

EXPC - A lot of spec predictions floating around about the shareholder vote on 3/31

Post NASDAQ sell-off was brutal for all SPACs and especially EXPC and RTP but these stocks are bound to rebound.

Positions: 30 calls for 05/21 at $20 strike price, 18 calls for 8/20 at $25 strike price. I am tempted to pick up 04/16 $30 calls tomorrow.

I don't have any RTP shares/calls but I might pick up a few calls tomorrow as well.

Note that I am only playing catalysts at this point but may buy shares for RTP for long term investment (>5years). I find advent of eVTOLs super exciting.

Disclaimer: I am not a financial advisor, heck this is my first time writing a DD so what do I even know about investing. Do your own DD and most importantly, let me know if I've got any part of the thesis glaringly wrong.

Useful Links

https://newatlas.com/aircraft/evtol-air-taxi-flying-car-market-players/

https://www.reddit.com/r/SPACs/comments/lwj8rs/a_world_of_evtols_a_comparison_of/

https://www.osinto.com/post/agility-prime-the-pentagon-s-evtol-power-play

https://agilityprime.com/index.html?utm_source=Twitter&utm_medium=Social&utm_campaign=AgilityPrime#/

https://www.wired.com/story/opinion-flying-cars-could-take-off-soon-if-we-let-the-military-help/

https://www.forbes.com/sites/jeremybogaisky/2021/02/10/lilium-evtol-spac-air-taxi/?sh=33d80b54627c

https://drive.google.com/file/d/1800R_yjbYvbsAuBkD5QGBQKXiVoENsDL/view

https://www.nasa.gov/sites/default/files/atoms/files/bah-uam-executive-briefing-to-post.pdf

https://drive.google.com/file/d/1509s0IskyeliElH1O5TEcqSAsifSjsGx/view

Submitted March 14, 2021 at 09:14PM by sujaykot via reddit https://ift.tt/3tlgGUH

#IFTTT #reddit

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investingmade · 3 years

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Ford ($F) - Ugly Duckling to Golden Goose via /r/investing

Ford ($F) - Ugly Duckling to Golden Goose

Overview

For much of its’ history, Ford ($F) has been a boring dividend stock, yielding between 5% and 10% per year and generally languishing between $5 and $15 a share. Not exactly an inspiring story of growth or innovation. In a sector that hosts charismatic CEOs, exciting newcomers, and glossy new entrants to the industry, selling people on Ford’s potential certainly seems like an uphill battle. I mean… just look at their all-time chart, Ford hasn’t had meaningful sustained price movement since 00-01, and that was in the wrong direction.

I would like you to forget what you think you know about Ford and begin to look at them in a new light. Ford is no longer the ugly girl at the dance or the fat kid in gym class, but rather Ryan Reynolds in Just Friends or Laney Boggs in She’s All That. To understand why I think Ford is the most compelling value opportunity in the auto sector today, we’re going to have to look at its maneuverings over the last 3-4 years.

New Leadership, New Vision

$11B Restructuring Plan

In October of 2020, Ford hired its’ new CEO Jim Farley who had previously held the title of COO within the company. Farley was the architect behind the company’s $11B restructuring plan that it announced in June of 2018, and it has only accelerated its’ pace under his guidance. By most estimates Ford is about halfway through its plan to restructure the company, which primarily involves cuts to unprofitable sectors and refocusing on profitable ones, as well as investment in future technologies.

Trimming of Fat

Ford has made a few major moves to shore up losses it was incurring in unprofitable arms of the business. The first, and one which you are probably already aware of, is the discontinuation of many of its sedan lineup in North America. In the middle of 2018, Ford announced that it would be eliminating the Taurus, Fiesta, Fusion, C-Max, and Focus sedans from their lineup moving forward. The estimated operating cost savings was $25.5B through 2022, and Ford announced that they would be focusing on their more profitable SUV and pick-up models moving forward.

Ford also announced in 2021 that it would be largely exiting the South American market, which hadn’t turned a profit since 2012 and in fact accounted for over $5B in losses during that period. They would continue operating at small-scale producing their popular Ranger pick-up and commercial vans but with the closure of their main manufacturing facility in Brazil, Ford finally cut bait in a difficult market for most traditional automakers.

Ford Europe had a major redesign under Farley when he was President of Global Markets, slashing underperforming models from its lineup and refocusing on its highly profitable commercial vehicles as well as increasing imports of its iconic models. They also announced a strong shift toward EVs with the goal of selling only electric vehicles in Europe by 2030.

EV Investment

Here is the section everyone is interested in, and one which GM rightly received a lot of hype for when they announced a plan to spend $27B on developing EVs and autonomous vehicles by 2025. After that announcement, GM was viewed by many as the front-runner for EVs among traditional automakers. Not to be outdone, Ford announced a $29B investment in EVs and autonomous vehicles to be spent by 2025. To date, that is the third largest investment in EVs in the world, only falling short of the $86B and $87B investments by the mega-conglomerates VW and HMG respectively.

Revival of Valuable IP

In the last few years, Ford has refocused much of their business on their greatest hits. They’ve cut unpopular IP from their lineup and re-released the Bronco as well as reworked the Mustang into a crossover EV. In my opinion, this demonstrates a greater understanding of their markets and how to capitalize on their most valuable asset, which is their IP. Their most profitable model, the F-150, will be released as an EV in 2022 or 2023, and I expect that the Bronco will also see an EV model in the next few years as well. I believe that Ford has become a leaner and more focused company within the last 3 years and is set to continue their dominance in pick-ups as well as siphon significant market share in the EV and SUV spaces.

The Power of Partnerships

Ford, VW, and Argo

Ford, along with fellow automotive titan Volkswagen Group, have both taken large stakes in a company dedicated to autonomous driving software called Argo AI. Partnering with a company with considerable resources like VW takes some of the pressure off of Ford to develop this technology solo. While there haven’t been too many details released about this partnership or the progress being made by Argo AI, it is reassuring to know that Ford is actively invested in developing autonomous driving along with another industry leader in VW.

Ford and Google

In February of 2021, Ford and Google announced a partnership to place Google’s software and technology in all of Ford’s new vehicles beginning in 2023. The operating platform in these new vehicles will be based off of the Android platform and all new vehicles will come equipped with Alphabet products like Google Cloud, Google Maps, Google Assistant, and the Play Store. The addition of a familiar and established operating system like Android will give Ford vehicles a competitive edge over other automakers who try to create and implement their own subpar operating software (*cough* Toyota *cough*).

Ford and Rivian

Ford made headlines in April 2019 when they invested in Rivian for an undisclosed stake. What is clear from statements made by both CEO’s at the time is that the investment was both for equity as well as a strategic partnership. A planned vehicle by Ford, which has yet to be announced, will be built on Rivian’s unique “skateboard” platform. This platform consists of “a flat frame that contains the batteries, suspension, motors and braking” on which the cab rests, and theoretically cuts costs in the manufacturing of EVs due to fewer overall parts in assembly. I suspect that this may be the platform used in the inevitable Bronco EV release, due to the striking similarities in the size and styling of the Bronco and the Rivian R1S. It is also possible that Ford may release an entirely new model on the platform, but that is just my hunch.

The equity stake in Rivian was undisclosed, but I expect that that stake may be worth between $2B and $5B based on the valuation of Rivian at time of investment (~$5B-7B) and now (~$30B-$50B). This equity stake and strategic partnership will serve Ford well in their future development in the EV market.

Financials and Valuation

Financial Overview

2020 was a tough year for many industries and the auto sector was no exception. Ford had 4 consecutive quarters of negative EPS, their YOY revenue fell by almost 20% when compared to 2019, and they had to eliminate their dividend in March 2020 for the first time since 2009 when it was eliminated during the Great Recession, before being reinstated in 2012. So where does this leave Ford now?

Despite the blow to revenue in 2020, Ford is emerging leaner and better equipped to dominate the market in 2021 and beyond. Revenue decreased 20% in 2020, and Ford had to take on significant new debt to continue financing operations. However that appears to be true for most other major automakers during the pandemic, so I don’t expect this to be a major factor in determining which automakers will be most successful in the future. I expect that 2021 will be a blockbuster year for Ford as revenues increase to pre-pandemic levels (I expect higher earnings in Q3 and Q4), and they continue to develop the most profitable arms of their business.

Dividend Reinstatement

GM and Ford both eliminated their dividends to survive the pandemic in March 2020, however there is widespread expectation that they will reinstate them sometime this year as revenue begins to pick back up. I personally view this as an incentive to buy Ford before the announcement. If they reinstate their .60 yearly dividend, it would amount to a ~5% annual yield based on the current stock price of 13.37. I expect that the return of their dividend will also attract the return of investors who value dividend stocks which may push the price up further all on its own. I believe this is a mini-catalyst for short term price movement for Ford, and collecting on the dividend won’t hurt either.

Comparison to Other Traditional Automakers

Generally, I like to look at 4 different ratios to quickly judge the valuation of a company compared to their peers in the same industry. Lets compare Ford’s numbers to their closest 5 competitors (Toyota, Honda, VW, GM, Daimler) to get a sense of how fairly they are currently valued. I’m avoiding comparing Ford to newcomers like TSLA, NIO, etc. because frankly the numbers aren’t comparable. Financial data was gathered from Finviz and Yahoo Finance.

Quick definitions of the ratios, with respect to current valuation:

P/S = Share price/Sales per Share (Lower is better)

Forward P/E = Share price/(Estimated net profit for next year/# of outstanding shares) (Lower is better)

Debt-to-Equity = Total debt/shareholder equity (Lower is better)

Current Ratio = Current assets/Current liabilities over the next year (Higher is better)

Price to Book = Share price/Book value per share (Lower is better)

Ratio Ford Toyota Honda VW GM Daimler P/S 0.39 0.99 0.45 0.53 0.66 0.50 Forward PE 8.64 12.92 9.24 10.67 9.49 8.87 Debt/Equity 5.27 1.10 0.97 1.71 2.44 2.60 Current Ratio 1.20 1.10 1.30 1.12 1.00 1.15 P/B 1.73 1.05 0.67 0.80 1.89 1.27

As you can see, Ford has noticeable strengths and weaknesses when it comes to valuation. Strictly looking at revenue metrics like P/S and P/E, Ford is the most undervalued company on this list. They do however carry the largest debt burden of all of the listed companies, so that is something to keep in mind. I’m not particularly worried about their debt situation, as their Current Ratio at 1.20 indicates that they are in no present danger of being crushed by their debt, and I expect that strong future revenue will allow them to dig themselves out of that hole.

Compared to GM, who I believe to be their closest competitor, they are trading at a much lower revenue multiple (0.39 vs 0.66). Even accounting for Ford’s higher debt burden, I believe they should be trading closer to a 0.50 multiple, which puts them more in line with other traditional automakers.

My personal price target: $17.14/share

2021 Outlook

Massive Demand

Ford’s most recent releases the 2021 F-150, the 2021 Bronco Sport, and the 2021 Mustang Mach-E are all flying off dealer’s lots at record pace. The auto industry quantifies demand with a specific metric called Time to Turn. This is a measure of how long a vehicle sits on the lot before it is purchased. The industry average Time to Turn is somewhere around 60 or 70 days for new vehicles. Anything under 20 days generally indicates that a specific model is in very high demand. I’ll list the Time to Turn for Ford’s three new models in 2021 below:

2021 Ford F-150: 9 days

2021 Bronco Sport: 13 days

2021 Mustang Mach-E: 4 days (!!!)

As you can see Ford’s recent releases have been massive successes so far, and I expect that as the economy continues to recover from the pandemic that demand will only continue to rise for these models.

7500 tax credit availability

Remember that $7500 federal tax credit that everyone was all excited about when EVs first went to market in the U.S.? Me neither. The reason you may not have heard about this tax credit in awhile is probably due to the fact that the biggest seller of EVs (Tesla) is no longer eligible to receive the credit for purchases of their vehicles. The second biggest seller (GM) is about to lose eligibility at the end of this month.

The way this program works is that an auto manufacturer is eligible for the credit for their first 200,000 vehicles sold in the U.S. After that, they are only eligible for state-level tax credits which tend to be much smaller if they exist at all. To date, Ford has only sold a measly 10,000 EVs total in the U.S with around 5,000 of their largely unsuccessful Focus EV and 5,000 of their new 2021 Mach-E. That means they have an enormous 190,000 vehicles left for which their purchasers can be incentivized by the tax credit. In my opinion this gives Ford a massive advantage over their closest competitors (GM and Tesla), and in fact, we are already seeing Ford stealing market share directly from Tesla as it appears that nearly 100% of Tesla’s recent loss in market share is attributable to Ford.

Bear Case

Chip Shortage

As I’m sure you’ve heard by now, semiconductor shortages are projected to be a massive problem for the auto industry as a whole. Recent estimates put nearly1 million new vehicles affected by the shortage in Q1 2021 alone across the entire auto sector. Ford has already had to cut shifts at some of their manufacturing plants because they cannot secure enough chips to produce as many vehicles as they’d like. A few automakers like Toyota and Hyundai had the foresight to maintain their semiconductor supply, and thus their 2021 production will not be affected. The chip shortage will surely cut Ford’s top-line revenue, and it is not expected to ease until late 2021 at the earliest.

Battery Supplier Issues

In February 2021, the U.S. International Trade Commission ruled against battery supplier SK Innovation in their patent battle with competitor LG Chem. SK Innovation is the contracted supplier for batteries for the planned F-150 EV. This caused reasonable consternation among investors who were worried that the F-150 production timeline could be affected. Buried in the ruling however, was a stipulation that SK Innovation could continue to supply Ford with batteries for the F-150 through 2025, which should give Ford time to shift to a new supplier. There is always a chance that the Biden administration overrules the ITC in favor of securing greater production capability for the U.S. Nevertheless, this represents a hurdle that Ford will have to address in the future.

Debt Burden

There’s no way to sugar coat it, Ford has a ton of debt. They were a relatively debt heavy company prior to the pandemic, and that has only become worse. If you look at the company comparisons done above you can see the relatively high debt-to-equity ratio that ford carries compared to other automakers. The good news is that much of that debt isn’t due in the near future and Ford’s outlook is due to improve significantly from the disaster that was 2020.

New Competition (Tesla, Lucid, Rivian, Etc.)

This post has already become obscenely long so I’m not going to go into great detail here. You’ve all heard of these companies and how they intend to disrupt the auto sector, costing traditional automakers market share. There is no doubt that there are more players on the field these days, and Ford and GM will not have a virtual monopoly on the American market anymore. I personally only have high hopes for a few of the newcomers, but they still represent one more obstacle on Ford’s path to success.

Closing

I believe that Ford is currently undervalued and is ready to succeed as a leader in EVs in the future. This does not mean that investing in Ford is a sure thing; parts shortages, a high debt burden, and emerging competition all represent serious threats to Ford’s core business. Nonetheless, I am confident in Ford’s future prospects and consider them to be a strong buy as a long-term investment.

Disclosures: I am long Ford at an average cost basis of $10.30. I am not a financial advisor, always do your own due diligence before investing in the market.

Submitted March 15, 2021 at 09:23AM by LiftUni via reddit https://ift.tt/2Q5OC9D

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investingmade · 3 years

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The weakness of gold is starting to tire and worry investors. via /r/investing

The weakness of gold is starting to tire and worry investors.

Many associate its decline with rising bond yields and fears of a rate hike.

The logic here is that gold does not generate a fixed income. This means that as the attractiveness of bonds grows due to higher yields and investors m can begin to shift from gold into bonds.

As inflation expectations rise, profitability will continue to rise, which means more people will choose this strategy.

I have seen the opinion that for this reason gold will "forever" remain below $ 1700.

Apart from the obvious exaggeration about "forever", then there is logic in these arguments. But there are nuances, and not even one.

- This reasoning could, in principle, be applicable if gold and bonds were competing for one fixed budget, and the question would be only in allocation. This is definitely not the case even without the participation of the Central Banks, and they are pouring more and more new money here.

- Even more important is the very reason why profitability is growing, and it was already mentioned above, is the growth of inflationary expectations. A rise in prices means an increase in the nominal value of "real assets", to which gold belongs. And in an inflationary world, the argument about the absence of a coupon income, which is expressed in terms of currency losing value, is inapplicable. Here, protection against the destruction of this value is more important, and gold provides such protection, albeit with reservations.

Those who claim that all this was already in the past, and now the role of gold, they say, is played by the crypto, I think, will soon understand how wrong they were. The world's regulators have not yet had their say. But they can. And will.

As for inflation itself, two scenarios can be roughly distinguished here.

1. Inflation is increasing, but it remains under control. Then monetary policy does not change significantly, rates stabilize and even fall, thanks to the Fed. Everything returns to what it was in the 2nd half of 2020, that is, both bonds and gold are growing moderately.

2. Inflation is rising sharply and the current order is being disrupted. The rest depends on the scale of inflation, and even more on inflationary expectations.

In a mild form, this will repeat the scenario of the 2000s before the crisis - rates are gradually increasing, gold is growing even faster (in the 2000s, more than three times before the crisis).

In a tougher version, refinancing gigantic debts, including sovereign ones, becomes impossible, the bond market tends to collapse, forcing the Fed to buy everything. Gold in this case can go to the stratosphere.

Output? In our opinion, the current weakness in gold is temporary and not directly related to inflationary expectations.

These can be purely trading strategies, for example, buying gold with borrowed money at a rate tied to bond yields.

Now such trading is unprofitable, and positions are closed, in favor of this can be evidenced by a sharp drop in speculative longs for gold - almost twice from the end of December to the level of spring 2019, when gold was trading below $ 1300. Inflationary trading, in fact, has not yet begun, and it is definitely positive for gold.

I am convinced that many will disagree with me. There are quite a few ifs & buts in all of this. I express my cautious point of view. God forbid, I do not pretend to be the ultimate truth.

However, I hold shares of producers of precious metals in my portfolios. As well as I still hold the Bitcoin.

Submitted March 15, 2021 at 08:44AM by SirFuckingLoin via reddit https://ift.tt/2Q4Iezs

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investingmade · 3 years

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Palantir - Investing In The Gold Of The Future via /r/investing

Palantir - Investing In The Gold Of The Future

Article

The data analysis specialist and market leader Palantir Technologies was able to announce another significant order. A six-year strategic partnership with Faurecia, one of the world's leading automotive technology companies, was announced.

The Palantir Foundry platform will enable Faurecia to reduce raw material consumption, improve competitiveness in research and development, ensure optimized purchasing and track and analyze all steps towards CO2 neutrality. From a chart perspective, the situation around Palantir shares has also improved significantly. The sell-off ended at the test of the annual low of January at USD 22.50. This support was torn but was recovered in the course of trading. Currently, the data octopus is trading at USD 26.92 in volatile trading. A successful overcoming of the USD 30 mark would result in a price target of USD 38 again.

Submitted March 15, 2021 at 05:24AM by NineteenSixtySix via reddit https://ift.tt/3vpXCGH

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investingmade · 3 years

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Daily Advice Thread - All basic help or advice questions must be posted here. via /r/investing

Daily Advice Thread - All basic help or advice questions must be posted here.

If your question is "I have $10,000, what do I do?" or other "advice for my personal situation" questions, you should include relevant information, such as the following:

How old are you? What country do you live in?

Are you employed/making income? How much?

What are your objectives with this money? (Buy a house? Retirement savings?)

What is your time horizon? Do you need this money next month? Next 20yrs?

What is your risk tolerance? (Do you mind risking it at blackjack or do you need to know its 100% safe?)

What are you current holdings? (Do you already have exposure to specific funds and sectors? Any other assets?)

Any big debts (include interest rate) or expenses?

And any other relevant financial information will be useful to give you a proper answer.

Please consider consulting our FAQ first - https://www.reddit.com/r/investing/wiki/faq And our side bar also has useful resources.

Be aware that these answers are just opinions of Redditors and should be used as a starting point for your research. You should strongly consider seeing a registered financial rep before making any financial decisions!

Submitted March 15, 2021 at 05:00AM by AutoModerator via reddit https://ift.tt/3rSD33y

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investingmade · 3 years

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Daily General Discussion and spitballin thread - March 15, 2021 via /r/investing

Daily General Discussion and spitballin thread - March 15, 2021

Have a general question? Want to offer some commentary on markets? Maybe you would just like to throw out a neat fact that doesn't warrant a self post? Feel free to post here!

This thread is for:

General questions

Your personal commentary on markets

Opinion gathering on a given stock

Non advice beginner questions

Keep in mind that this subreddit, and this thread, is not an appropriate venue for questions that should be directed towards your broker's customer support or google.

If you would like to ask a question about your personal situation or if you are asking for advice please keep these posts in the daily advice thread as that thread is more well suited for those questions.

Any posts that should be comments in this thread will likely be removed.

Submitted March 15, 2021 at 05:01AM by AutoModerator via reddit https://ift.tt/2NjGp0z

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investingmade · 3 years

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Positive cash flows and negative earnings vs negative cash flows and positive earnings via /r/investing

Positive cash flows and negative earnings vs negative cash flows and positive earnings

So earnings go by accrual accounting system which is why we have a separate cash section after all. This can cause a mismatch.

What we see in a lot of growing companies is negative earnings, but positive cash flow. I’ve started to think about it recently and it has started to confuse me a bit. How does this get easily explained by “oh they’re a growing company”?.

Thinking about it it would seem that a growing company might have negative cash flows from investing into the future while having positive earnings only taking into account the expenses that go into making what they sell.

What is the reasoning behind the growing company with negative earnings pattern that we see so often?

Submitted March 15, 2021 at 02:14AM by Meeesh- via reddit https://ift.tt/3qMCmaO

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investingmade · 3 years

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$SESN (Sesen Bio) D&D huge incoming catalysts with mayor impact on bladder cancer. via /r/investing

$SESN (Sesen Bio) D&D huge incoming catalysts with mayor impact on bladder cancer.

Today I´m bringing you all my third D&D. There will be no technical analyzed information done by me as I´m not good at it but I like to do some information research and maybe you find it helpful.

Disclaimer: I´m not even close to being a financial advisor so please do your research and make your own decisions based on what you understand.

Before you ask, I currently hold 3652 shares at an average cost of 2.32.

About the company:

Sesen Bio is a late-stage company developing fusion protein medicines. Their fusion protein approach tethers a tumor-targeting antibody fragment to a protein cytotoxic payload to form a single protein molecule designed to selectively and broadly kill cancer cells while minimizing toxicity to healthy cells and to activating the body’s innate immune response system.

What are they doing and why I think it´s important:

The company is initially focused on the treatment of non-muscle invasive bladder cancer (NMIBC).

Their main drug is it’s called Vicineum. This is being evaluated in the Phase 3 VISTA trial for the treatment of patients with non-muscle invasive bladder cancer (NMIBC) who have been previously treated with Bacillus Calmette-Guérin (BCG), which is the current standard of care for NMIBC. While BCG is effective in many patients, challenges with tolerability have been observed and many patients will experience recurrence of the disease. If BCG is not effective or a patient can no longer receive BCG, the recommended option for treatment is radical cystectomy, the complete removal of the bladder.

In case you ask how many people are vaccinated with the BCG feel free to click this link: http://www.bcgatlas.org/.

The preliminary findings are highly encouraging, demonstrating that treatment with Vicineum results in clinically meaningful efficacy and favorable safety and tolerability. In addition, the data are consistent with the results of Vicineum in their completed Phase 1 and Phase 2 clinical trials.

https://preview.redd.it/5vuucec194n61.png?width=761&format=png&auto=webp&s=ae7df58f362a0ee4bf59bbae9d1bf08955c13b77

Vicineum can potentially treat head and neck cancer. They have completed Phase 1 trials for an injectable form of Vicineum for the treatment of SCCHN that have demonstrated anti-tumor activity and safety. Data from these trials also demonstrated that certain patients who were injected with Vicineum in one tumor had responses in non-injected tumors as well, suggesting that Vicineum may promote an anti-tumor immune response and combine well with immunotherapies. In addition to the Phase 1 trials, Sesen Bio completed a Phase 2 trial in the United States, which demonstrated a reduction in the bidirectional size of the principle targeted tumor observed in 71 percent (10/14) of patients evaluated in the study.

https://sesenbio.com/our-programs/#bladder-cancer

Some important fact about Bladder Cancer:

- Bladder cancer is the 6th most common cancer according to the National Cancer Institute. If BCG is not effective one of the options is complete bladder removal. Bladder cancer is a highly prevalent cancer, but options for treatment have not changed in more than 20 years. At Sesen Bio, they want to help you save your bladder. Vicineum™, is administered in the exact same way as BCG but works differently and may offer a new option.

- This year, an estimated 83,730 adults (64,280 men and 19,450 women) in the United States will be diagnosed with bladder cancer. Smoking accounts for 47% of all these cases.

- Bladder cancer mostly affects older people. About 90% of people with bladder cancer are older than 55. The average age people are diagnosed with bladder cancer is 73.

- The 5-year survival rate tells you what percent of people live at least 5 years after the cancer is found. Percent means how many out of 100. The general 5-year survival rate for people with bladder cancer is 77%. If the tumor is invasive but has not yet spread outside the bladder, the 5-year survival rate is 69%. Approximately 33% of bladders cancers are diagnosed at this stage.

https://www.cancer.net/cancer-types/bladder-cancer/statistics

This is pretty good illustration of the diagnosis to treatment:

https://sesenbio.com/patients/

Why I´m very bullish and this and analysts are too:

- Since 2006 the Oncology Products Reviewed by FDA that have a BLA Submission (as Vicineum has) have a Probability of Approval of 82%.

https://preview.redd.it/t0mmmtw494n61.png?width=495&format=png&auto=webp&s=70095d984765b665e8e4ac2694774cdb3605f0d5

- Forward-looking Timeline for Vicineum

Positive progress in the US and Europe enables a clear regulatory path forward with the following anticipated milestones:

https://preview.redd.it/u414613894n61.png?width=708&format=png&auto=webp&s=97351379e468b517ed0f766931014737dbf22050

- Potential for Peak Revenue of $1B - $3B Globally for Vicineum

Substantial US opportunity and OUS potential of roughly two times the US.

An anticipated virtuous cycle of advocacy across physicians, patients/caregivers, and payers to drive rapid uptake and strong growth after approval and launch.

Compelling intent to prescribe research in the US.

A highly concentrated US market of ~1,500 Urologists treating ~75% of BCG patients allows for efficient targeting.

- Key partnership with leading partner in MENA (Hikma Pharmaceuticals)

A public company headquartered in London with a market cap of >$6B and >$2B in annual revenue.

The fifth-largest pharma company in the MENA region trusted and leading licensing partner in the region and extensive regulatory affairs capabilities.

- Huge Estimation on the OUS Opportunity for Vicineum

https://preview.redd.it/1e4yvyx994n61.png?width=544&format=png&auto=webp&s=f1e14495da8a7b695fae401273ac30557ec7f03e

- Strengthening the Balance Sheet while Minimizing Dilution

No outstanding debt

As of 12/31/2020 $44M available on an $85 ATM facility administered by Jefferies.

https://ir.sesenbio.com/static-files/5b335135-ecf0-4455-9ab3-49b8613ae0e1

What are analysts saying and price prediction:

https://preview.redd.it/x8snbm0b94n61.png?width=971&format=png&auto=webp&s=46196f67c788760b3dc805e8a78ec64e056c7d4e

https://www.marketbeat.com/stocks/NASDAQ/SESN/price-target/

Short, Medium- and Long-Term Indicators:

https://www.barchart.com/stocks/quotes/SESN/opinion

My opinion on all this:

Vicineum appears to be the new great thing around bladder cancer, numbers are showing to be great and this is close to receiving an FDA response which is expected to be positive. This is the 6th most common cancer and if the BCG fails the most common treatment is bladder removal. Sesen is trying to avoid this by providing a great solution. The company is partnered around the world to provide this once approved and is aiming beyond the USA. The balance sheet looks impeccable, no debt, 44M free, indicators look great for the short, mid, and long-range with a huge upside on a price target.

I see this having some big news soon and driving the price very high up.

Another important thing is that there are not many videos or spam around it so the price isn´t pumped in my opinion.

There is a BCG shortage which might help Sesen Bio get their drug approved even faster. This shortage has been going for some years now.

I will not buy more shares as I already own a lot but I see this as a great investment.

https://wchh.onlinelibrary.wiley.com/doi/10.1002/tre.783

One more disclaimer: I am not a doctor, nor have I ever done any study related to medicine or pharmaceuticals.

If you have please be polite and leave a comment for us to learn from you don´t just bash the DD. Your knowledge is very much appreciated.

Hope this information helps you to know more about the company and bladder cancer.

Submitted March 15, 2021 at 12:47AM by JoacoFerna24 via reddit https://ift.tt/3cvkrjI

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investingmade · 3 years

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Equity-Based Dollar-Cost Averaging: Methodically Buying Dips and Taking Profits via /r/investing

Equity-Based Dollar-Cost Averaging: Methodically Buying Dips and Taking Profits

Anyone who spent some time studying the basics of investing knows about dollar-cost averaging. If anyone needs a refresher, here's a short analysis between lump-sum versus averaging by Vanguard: https://investor.vanguard.com/investing/online-trading/invest-lump-sum.

Vanguard makes a compelling case about market timing. Assuming a retail trader can't time the market (even if you don't support EMH, it still is obvious that this is pretty darn difficult), you may believe it's simply for those who are scared of realizing losses, which is exactly the point they make.

I would like to propose a slight tweak to the concept: instead of spreading the payments out over time, spread them out over price. You start with an initial exposure, and scale up when the market takes a hit, while scaling down to take profits during bull runs.

Let's demonstrate why this works out. Take a random price point the SPY has reached in the past: 250 USD. How many times did it reach this point? Five times. Take another one, 270 USD: ten times. How about 290 USD? Fourteen times. But maybe that's just a recent trend. Things might've been different back when it was around 100 USD, right? Nope, ten times it reached 100 USD.

I haven't conducted an elaborate backtest, but it's clear the amount of setbacks to any particular price level is rather large, just as it's clear the whole thing is positively drifting in general.

Given that we know this, instead of investing 100% at once, consider what would happen if you invested 60% at 100 USD and invested an extra 20% for every 10% drawdown, and scaled down by 5% for every 10% increase? In other words, we scale up by double the drawdown, and realize half of our profits.

Starting in May '68, let's say we started investing with 60 shares for a 6,000 USD position with 4K left in cash. Two months later we hit a low of 88 USD per share, meaning we now own 80 shares at roughly 7,000 USD with a little over 2K in cash. We dip to below 72 in May '70 resulting in 100 shares with 800 USD remaining in cash. We hit four profit targets on the way up to 105 USD and end up with 80 shares and 2.6K in cash for a total of 11K USD. That's already doubling our profits while significantly reducing our exposure at any given time!

We could continue to test and demonstrate this, but the point is clear; we all know this will generate less returns in a very strong bull market, and create very strong opportunities in bear markets. We profit when bull runs are facing continous corrections, when the market goes sideways with some swings in between, and we are extremely well-protected against crashes, able to purchase lows and hold whole multiples of shares compared to when we'd just lump-sum.

It's no coincidence the greats such as Warren Buffet hold so much of their available capital in cash and play the waiting game on crashing markets. Ask yourself: when the markets crashed by 50+% over the course of their history, did it ever correspond with a similar collapse of the global economy? Not really, jobs were lost, consumer spending took a hit, some companies went under, but at a global scale we never took a hit even in the same universe as the rate at which the market tanks during those times.

So what's your take on this? Is this even considered "dollar-cost averaging"? Are there superior alternatives? Or would you consider / are you already applying this in your actual investment strategies? Would very much like to further my knowledge on this topic.

Submitted March 14, 2021 at 09:05PM by schravenralph via reddit https://ift.tt/3bQK93b

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investingmade · 3 years

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Tips on 5k Mid-Longterm portfolio into big players via /r/investing

Tips on 5k Mid-Longterm portfolio into big players

Hey guys,

I would like to ask you for some tips about the stock portfolio im about to set up. Got around 5k which I think im gonna put equally into these big players that are already really established in the market.

Alibaba

Amazon

Disney

Facebook

Apple

At the moment it looks like im just gonna invest and forget about it for the next 3-5 years. What are your thoughts on it? Any other big ( equals kinda safe?) players I should consider? Dont want to spread this small amount of money too much.

Thanks in advance!

Submitted March 14, 2021 at 08:22PM by datw4y via reddit https://ift.tt/3cq3LtS

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investingmade · 3 years

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The evidence is in on negative interest rate policies, and it has largely worked via /r/investing

The evidence is in on negative interest rate policies, and it has largely worked

https://blogs.imf.org/2021/03/03/the-evidence-is-in-on-negative-interest-rate-policies/

https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2021/03/01/Negative-Interest-Rates-Taking-Stock-of-the-Experience-So-Far-50115

Interest rates are low, and “lower for longer” has become something of a mantra among policy makers, regulators, and other market watchers. But negative interest rates raise an entirely new set of questions.

After eight years of experience with negative interest rate policies, the initial skepticism (paying interest to borrowers rather than savers was certainly unprecedented) has proven largely misplaced. The evidence so far suggests that negative interest policies have worked.

The evidence so far indicates negative interest rate policies have succeeded in easing financial conditions without raising significant financial stability concerns.

Since 2012, a number of central banks introduced negative interest rate policies. Central banks in Denmark, euro area, Japan, Sweden, and Switzerland turned to such policies in response to persistently below-target inflation rates (most central banks set rates as part of their broader mandate to keep prices stable, thereby supporting jobs and economic growth). These banks were also responding to a very low “neutral real interest rate”—that is, the real interest rate at which monetary policy is neither contractionary nor expansionary. The move reflected the central banks’ struggle to boost inflation even when they had already pushed interest rates to zero.

The effects of the COVID-19 crisis, in an environment where many central banks are constrained, have brought back negative interest rate policies to the forefront.

Overall, these policies have eased financial conditions, and, in the process, likely supported growth and inflation. However, negative rate policies remain politically controversial, partly because they are often misunderstood.

Unfamiliar territory

At the time of introduction, many questioned whether negative interest rate policies would work as intended.

There were concerns about risks, given the untested, and in many ways counterintuitive, nature of the move. Would banks, households, and firms shift massively to cash in response to the new policies, thereby weakening the link between central bank rates and other interest rates? Would banks resist cutting lending rates, or even reduce lending to prevent profits from falling? Would negative interest rate policies provide a meaningful monetary stimulus?

Concerns about potential side effects of these novel policies also arose. Chief among the concerns were financial stability risks stemming from lowered bank profitability, and fear of disruptions in the functioning of financial markets and money market funds.

Based on the evidence to date, these fears have largely failed to materialize. Negative interest rate policies have proven their ability to stimulate inflation and output by roughly as much as comparable conventional interest rate cuts or other unconventional monetary policies. For example, some estimate that negative interest rate policies were up to 90 percent as effective as conventional monetary policy. They also led to lower money-market rates, long-term yields, and bank rates.

Deposit rates for corporate deposits have dropped more than those on retail deposits—because it is costlier for companies than for individuals to switch into cash. Bank lending volumes have generally increased. And since neither banks nor their customers have markedly shifted to cash, interest rates can probably become even more negative before that happens.

So far, so good

Any adverse effects on bank profits and financial stability have so far been limited.

Overall, bank profits have not deteriorated, although banks that rely more on deposit funding—as well as smaller and more specialized banks—have suffered more. Larger banks have increased lending, introduced fees on deposit accounts, and benefited from capital gains. Of course, it is possible that the absence of a significant impact on bank profitability mostly reflects shorter-term effects, which could potentially be reversed over time. And side effects may still arise if policy rates go even more negative.

Money market funds in countries that have adopted negative interest rate policies have not collapsed. And, even if the existing “low-for-long” environment does create significant financial stability concerns (as it induces a search for yield or excessive risk taking by financial institutions), negative interest rate policies per se do not appear to have compounded the problem. For example, the increase in bank risk-taking does not appear to have been excessive.

Given this evidence, why haven’t more central banks jumped on board? The reasons are likely related to institutional and other country characteristics. Institutional and legal constraints may play a role, and some financial systems—because of their structure or interconnection with global financial markets—may be more prone to suffer adverse side effects from negative interest rate policies. For example, countries with many small banks that rely more on household deposits as a main source of funding may be more reluctant to adopt negative interest rates.

Even the adopting central banks have moved tentatively, typically with small interest rate cuts because of the risk that negative side effects become more apparent if the negative rate policy lasts for very long, or if rates go very negative.

In sum, the evidence so far indicates negative interest rate policies have succeeded in easing financial conditions without raising significant financial stability concerns. Thus, central banks that adopted negative rates may be able to cut them further. And those non-adopting central banks should not rule out adding a similar policy to their toolkit—even if they may be unlikely to use it.

Ultimately, given the low level of the neutral real interest rate, many central banks may be forced to consider negative interest rate policies sooner or later.

Submitted March 14, 2021 at 08:13PM by ipartytoomuch via reddit https://ift.tt/2PUs5MK

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investingmade · 3 years

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Coupang stock thoughts $5,670,583 in liabilities via /r/investing

Coupang stock thoughts $5,670,583 in liabilities

Recent talks about IPO. I spoke to a friend of mine as he was looking through the s1 filing and came across the consolidated balance sheet (F3) which says $5,067,332,000 assests and $5,670,583,000 in liabilities.

Wiki Extract- In November 2018, Coupang received a US$2 billion investment from SoftBank. Other major investors in Coupang include BlackRock and Fidelity.

It seems Softbank according to some sources may hold 37% of Coupang. Are investors basically holding up the company?

Submitted March 14, 2021 at 06:13PM by ToastNomNomNom via reddit https://ift.tt/38E20rW

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investingmade · 3 years

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AudioEye (AEYE) DD - The digital accessibility SaaS leader via /r/investing

AudioEye (AEYE) DD - The digital accessibility SaaS leader

Overview

AudioEye is a SaaS company operating in the niche and fast-growing digital accessibility industry. It provides a software solution for businesses to make their websites accessibility compliant using AI / machine learning without modifying website design or code. This helps companies steer clear of digital accessibility lawsuits (which have been sky-rocketing in recent years) for not providing a suitable website for persons with disabilities. AudioEye also has a help-desk for customers and provides legal support in case a digital accessibility lawsuit occurs.

Past and present customers include Uber, Samsung, Kia, Tommy Hilfiger and Square.

Management and employee satisfaction

The company was founded by Jim Crawford and Sean Bradley in 2005. Jim Crawford is no longer involved with the company and Sean Bradley still owns shares of the company (very minor stake), but is no longer on the Board or on the Executive Team (no involvement with the direction of the company).

The current Chairman of the Board and third-largest individual shareholder is Dr. Carr Bettis. He has been at the forefront of the company’s operations in recent years. He’s a serial entrepreneur with previous experience in developing financial science and technology innovations businesses that have been acquired. He received his Ph.D. from Indiana University and is a former tenured professor and researcher.

The current interim-CEO and largest individual shareholder (through Sero Capital) is David Moradi. He is an entrepreneur and founder and CEO of Sero Capital, a private investment firm focused on growth opportunities in the technology sector.

Recent notable hires include Rob Ulveling as Chief Business Officer (former Product Marketer at Pinterest and Facebook) and Zach Okun as Chief Product Officer (former Product Manager at Facebook and Oracle).

The company has a 3.4 rating on Glassdoor (24 reviews), 44% approval of the Interim-CEO and the reviews highlight the employees alignment and approval of the company’s mission. However, there are many complaints that the company is too profit-focused and that the recent executive team reshuffle has brought along plenty of unwelcome changes and layoffs. Employees speculate the company is being prepared for a possible buy-out or acquisition.

Industry and competition

AudioEye is the largest and only publicly traded company specialized on providing B2B digital accessibility solutions.

Notable competitors include Siteimprove, accesiBe, Silktide and other small private businesses.

Moats and competitive advantages

AudioEye offers the most complete and comprehensive solution for websites to become accessibility compliant. Their use of machine learning and AI is a big moat when measured up against the technology of competitors. They currently have around 32,000 customers, representing a 370% increase over 2019, which further exemplifies their business strength and relevance.

In an industry with little serious competition, AudioEye’s current financials, brand, customer base and technology represents a huge advantage over competitors. There’s also the advantage that this industry is still small enough that none of the big tech players will bother with it just yet.

Areas of growth

The digital accessibility industry is still in its early-stages. AudioEye should remain at the forefront of any industry tailwinds and grow accordingly. There’s a ton of potential internationally for their suite of products as more and more countries crack down on and further scrutinize digital accessibility.

A possible expansion into App accessibility could provide a huge catalyst for growth for the company, in my opinion.

It is estimated 15% of the world’s population has some sort of disability, so you can probably see how huge the market opportunity is for a company that provides a suite of products like this.

If AudioEye continues investing into AI and machine learning, they could develop superior technology that would improve margins exponentially, facilitate rapid expansion and possibly be used for other product suites or applications.

Potential headwinds

The biggest threat for AudioEye would be a big tech company suddenly becoming interested enough in the industry and deciding to launch a competitor (specially if they have good AI technology to use as leverage). Although I don’t see it happening any time soon, it would be fatal for a company like AudioEye at this stage.

Also, there are some reports that AudioEye’s technology isn’t that complex and that their recent growth and adoption is mostly based on a culture of fear and ignorance businesses have developed to avoid getting sued. There might be some truth to this, and if a scandal broke out discrediting the technology, dragging adoption down, AudioEye as a company would become worthless pretty quickly.

Tech experts argue that AudioEye’s customers could easily develop the same solution in-house if they really wanted to and without too much hassle and/or added cost.

Institutional and insider ownership, short interest

Institutional ownership sits at about 15-16%.

Insider ownership and major individual shareholders:

David Moradi, including indirect ownership through Sero Capital (Interim-CEO): 3,119,600 shares (29.13% of total shares outstanding)

Jamil Tahir, including indirect ownership through TurnMark Capital (Board Member): 229,564 shares (2.14% of total shares outstanding)

Dr. Carr Bettis (Executive Chairman): 155,773 shares (1.45% of total shares outstanding)

Sachin Barot (CFO): 134,834 shares (1.26% of total shares outstanding)

- Total % of outstanding shares held by insiders: 35-36%.

Short interest is currently 20.28% of the total floating shares

Earnings

From the latest earning report:

Quarterly net revenue was $5.6 million, up 57% YoY

Monthly Recurring Revenue (MRR) was $1.9 million, up 58.33% YoY

Quarterly gross profit margin of 73%, up from 66% YoY

Quarterly net loss of $3 million, up 114.29% YoY

Full-year net revenue was $20.50 million, up 90% YoY

Full-year gross profit margin of 71%, up from 59% YoY

Full-year net loss of $7.2 million, down 7.69% YoY

Guidance for full-year 2021 of revenue between $30 to $32 million, representing a 46.34%-56.10% YoY increase over 2020

Spent $2,134 million of quarterly revenue (38.11% of total) and $4,138 million of full-year revenue (20.19% of total) on Stock Based Compensation expenses, which is the principal cause for the widening quarterly EPS loss and the lackluster full-year 2020 EPS improvement.

Spent $430,000 of quarterly revenue (7.68% of total) and $1.230 million of full-year revenue (6% of total) on Research and Development expenses, which is unusually low for a SaaS company (specially one with AI and machine learning components).

Balance Sheet

$9,095 Million in Cash and Cash Equivalents

$14,631 Million of Total Current Assets

$18,254 Million of Total Assets

$9,015 Million of Current Liabilities (including $6,328 Million of Deferred Revenue)

$1,083 Million of Long-Term Debt

$10,620 Million of Total Liabilities

Valuation metrics

Market cap: $305.10 Million

Total shares outstanding: 10.71 Million

PE Ratio: N/A

P/S Ratio: 14.88

P/B Ratio: 39.98

D/E Ratio: 0.17

Negative Free Cash Flow (estimated): ($3.5-4 Million)

PEG Ratio: ≈ N/A

Principal financial metrics of closest competitor (all competitors are private companies, so I’m comparing it to a smaller-cap, more mature SaaS just for reference. AudioEye should, ideally, achieve gross margins on the level of PagerDuty at some point):

NYSE: PD

Market Cap: $3.461 Billion

Revenue: $210 Million

Gross profit margin: 86.20%

PS Ratio: 16.48

Price action

AudioEye currently sits 35.77% below its 52-week high. It’s a highly volatile stock and has corrections in the double digits on a semi-frequent basis. Only fit for investors with a stomach for short and medium term volatility and extremely high risk tolerance.

Current valuation is by no means a bargain and the stock is probably close to fair value or maybe a tad overvalued due to several fundamental risks.

Pros

Fast-growing, possibly huge industry in its infancy and this company has the strongest moat and resources to grab up major market share in years to come.

Interim-CEO has a ton of skin in the game with 29% total ownership.

50% insider and institutional ownership (with growing institutional ownership and interest).

90% revenue growth, 71% gross profit margin. Rapidly improving margins and good guidance for 2021.

Committed to becoming cash-flow positive this year and will probably become Non-GAAP profitable this year as well.

Healthy balance sheet with little debt and enough net cash to sustain the current cash burn for at least 2 more years without diluting shareholders any further.

Encouraging recent hires of talent from Facebook and Pinterest.

Cons

Extreme levels of Share Based Compensation expenses is a huge problem in my opinion. It’s dragging very heavily on EPS and Free Cash Flow. The company should aim to pull way back on these expenses at this stage.

It’s urgent that the company generates positive Free Cash Flow this year. Things could get nasty otherwise.

Lack of continued executive leadership and non-involvement from the founders is a problem.

The company is being led by Private Equity firms and owners. I wouldn’t be surprised if they’re working towards the company being sold so they can cash out. There’s also a risk that all of these people could cash out at any time and leave the company stranded, diluted and with no leadership to speak of.

Not profitable, not cash flow positive.

Burning $3.5-4 million in cash per year with a net cash position of $9 million.

Disclaimer and conclusion: I’m cautiously bullish on AEYE at this point and have a small exploratory position. I truly believe the market opportunity and projected growth for the industry they’re in is insane, but there are several fundamental risks and challenges with the company that need to be acknowledged. Current valuation is probably fair, but not a bargain. Invest at your own caution and discretion.

Submitted March 14, 2021 at 03:35AM by elvita12345 via reddit https://ift.tt/3tf5KYI

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