What is Margin Trading? Definition of Margin Trading

Got flagged as PDT on a cash account, can I still trade?

Hi, I recently made too many day trades on my cash account without letting the cash settle. I was informed that my account has been flagged and I can’t day trade for 3 months or raise my account to 25K.
Does this mean no day trading at all or I can still do so with settled cash?
submitted by k_dot33 to RobinHood [link] [comments]


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.
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).
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:
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:
  • Revenue $367.1 million, up 12% year-over-year
  • Subscription Services revenue $120.2 million, up 37% year-over-year
  • GAAP gross margin 70.0%; non-GAAP gross margin 71.9%
  • GAAP operating loss $(84.9) million; non-GAAP operating loss $(5.4) million
  • Operating cash flow was $35.1 million, up $28.5 million year-over-year
  • Free cash flow was $11.3 million, up $29.0 million year-over-year
  • Total cash and investments of $1.3 billion
I bolded the Subscription Services Revenue bullet because to me that's a big deal. Pure Storage keeps them coming back with products such as Pure-as-a-service and Cloud Block Store and everybody knows that the recurring revenue model is best model. Big ass enterprises buy storage from vendors such as Pure Storage in the cloud to prevent vendor lock-in by the cloud providers. $$$ >!💰<
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.
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.
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
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:
  • “Dell EMC – 34.8% (calculated $766m) vs. 33.7% a year ago
  • NetApp – 19.3% at $425m vs. 26.7% a year ago
  • Pure Storage – 12.7% at calculated $279.7m vs. 10.1% a year ago
  • HPE – 8.4% – $185m vs. 10% a year ago"
Pure has been gaining marketshare almost every year since it began selling storage arrays in 2011. Pure Storage is consistently rated the highest for the completeness of vision as this chart shows:
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!
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.
Google Search Trends showing uptick in interest: SPY420 baby
Robinhood Trends showing the YOLO is trending up
Increased job postings on LinkedIn all across the globe, further supporting the idea that Pure Cloud Adoption is looking strong.
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.
These fucking shorts are going to get squeezed out hard. Potential short squeeze coming?
**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.
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?
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!
submitted by OnYourSide to wallstreetbets [link] [comments]

UK Guide to US Options Trading

This is guide to US options trading from the UK, because I've seen countless requests of people browsing in /ukinvesting, /options, /wallstreetbets etc. about this.
First thing's first - no part of this post is to be taken as financial advice. It is a guide on how to start options trading from the UK. Options/CFD trading is a high-risk activity and most retail traders lose money.

1. CFDs vs. Options

So getting started, options and contracts for difference (CFDs) are both financial derivatives - they derive their values from an underlying security e.g. stock, indices, currency, commodities. Long story short, CFDs do not have an expiration and options do; and at the option expiration date, options give the opportunity to buy/sell the underlying (e.g. stock) at the agreed strike price. CFDs are highly directional (delta) trades where positions require ongoing financing fees by a broker, whereas options strategies allow the trader to trade time decay (theta) as well as market volatility (vega). Options provide greater flexibility in trading strategies (time/volatility trading as well as direction); however, due to this, the more complex strategies can be difficult to understand.
Spread betting allows a literal directional bet of an underlying by a certain date. It is most similar naked options - i.e. if your position moves against you enough, your broker may forcibly close your position unfavourably and/or margin call you for extra cash ("you can lose more than your initial deposit"). With options/CFDs, you can define risk by specifying a profitability range (spreads) instead to avoid this scenario. Due to spread betting being so close to gambling, it is treated as such in the UK in terms of taxation - gains are tax free. I will also add here that CFDs/options can also be used in this manner (gambling, with subsequent margin calls etc.), and that CFD brokers tend to understate the risks of these strategies, whilst almost all options brokers require elevated permissions to seek out this level of risk - this is because blowing through margin presents a risk to the broker and they would rather have commissions without the risks of the brokerage going bust. The lowest level of permissions still allows you to buy extremely highly leveraged OTM options without margin, as your max loss is limited to the amount you paid for those options.

2. Brokers

Given that options effectively open up two additional aspects of trading (time/volatility) and require additional regulatory oversight compared to CFDs/spreadbetting, there is basically no options market in the UK - the only brokers at this time are IG/Saxo, and they only do vanilla options on Forex/Indices/Commodities. Everyone else only does CFDs and/or stock (T212, Freetrade, IG, Plus500 etc.). To engage in true stock options trading, the only choice is to open an international/US brokerage account.
The two that are accessible to UK investors are Interactive Brokers (IB) and TastyWorks. Both are reputable brokers and have strong insurances for cash & securities held with them.

3. Opening an account

I will walk through some of the aspects of funding and operating a TastyWorks account from the UK, as this is my recommendation if you're here looking for a cheap way to get started.
Opening a free account on TastyWorks is easy as they are used to foreign traders (form filling within 20-60 mins - you will need a photo of proof of ID and address). It typically takes 1 day for cash accounts and 2-3 days for margin accounts to be ready for funding. My referral link if you feel this guide deserves the effort is: https://start.tastyworks.com/#/login?referralCode=GD9EGGNZYZ. (mods, happy to remove this is this guide is deemed low effort)
The account types are:

4. Funding the Account

Since trading US options is done in USD, the account must be funded in USD. As international traders, deposits must be "By Wire", assuming you do not have a US bank account - full instructions for the "By Wire" method will show up when you are approved to fund your account. With TastyWorks, UK traders have 3 options at time of writing, going from highest to lowest fee:
1) Starling Bank: ~1% commission (+flat fee TBC?)
2) CurrencyFair: typical ~0.75% commission +$20 flat fee
3) TransferWise/Revolut + UK USD Account: ~0.5% commission +$20 flat fee
TastyWorks does not accept third party transfers (accounts not in your name), so services such as Revolut and TransferWise (inc. borderless) do not work directly
4.1 Starling Bank
With Starling Bank, you can do an international wire from a GBP account directly. Easy online bank setup and probably fastest way to get started, especially if you already bank with them. Note: Starling Bank is rejecting transfers to TastyWorks 'as it sits out of our international payment provider's risk appetite' (as of 11th May) - waiting for updates
Note that other routes include a $20 flat fee charged by intermediate banks before the transfer reaches TastyWorks. Haven't got confirmation that this route is charged or if Starling includes it within their higher fee.
4.2 CurrencyFair
TastyWorks have approved transfers via CurrencyFair with a guide at: https://support.tastyworks.com/support/solutions/articles/43000435321-can-i-use-currencyfair-to-fund-my-account-
Easy to get started, but a couple hoops to jump through to confirm your transaction to TastyWorks via email.
Note that the $20 flat fee is for an intermediary bank to take their cut between CF and TastyWorks, but that is not mentioned on the CurrencyFair website.
4.3 USD account + TransferWise/Revolut
The cheapest option is to set up a USD currency account and transfer through that.
The account of choice is the Barclays USD Foreign Currency account - you need a current account with them to be able to open the USD account. HSBC also have an offering, but not had this route confirmed.
Once the USD account is open, you can transfer into it using Revolut/TransferWise (cheap) and then international (wire) transfer from Barclays account to TastyWorks (free!). Note that the Barclays USD account is still a UK bank account, so you'll need to use a SWIFT transfer from Revolut/TransferWise to turn your GBP into USD.
Note that the $20 flat fee is for an intermediary bank to take their cut between Barclays and TastyWorks, but that is not mentioned on the Barclays website.
4.4 Withdrawals
To withdraw funds, do the opposite for a deposit, noting that $45 will be charged by TastyWorks per withdrawal.

5. Getting Started

I highly, highly recommend TastyWork's education centre and their TastyTrade videos, especially if you are new to this.
Otherwise, once funded, it's as simple as downloading the app on mobile, using the browser trading screen, or downloading their full desktop platform.
That's it for the guide - happy trading, and if there are any questions, feel free to get in touch and I'll edit the answers in here. I want this to be a resource because I've helped many people get started, and it would be good to have it all in one place!
submitted by TheScotchEngineer to UKInvesting [link] [comments]

Thorough DD on $PRPO (Precipio)

What is Precipio and what do they do?
Their Products
* Their ICE COLD-PCR technology preferentially enriches mutant DNA sequences in an excess of wild-type DNA through selective amplification of the mutant DNA. The result is up to an increase in sensitivity in identifying mutations with the most precise sequence alteration detection rates available—down to .1% enabling mutation detection testing liquid biopsies. This capability removes the restriction for obtaining a tissue biopsy for genetic testing allowing for a more accurate diagnosis and monitoring of patients currently on therapies.
* Precipio has developed a proprietary hematologic malignancy mutation profile screening panel. The mutation profile screening panel currently includes JAK2 (V617F), JAK2 Exon 12, MPL & CALR. The panel utilizes a rapid and cost-effective detection technology that can screen for mutations to identify samples that require further evaluation or confirmatory testing.
* It is ready-to-use, fully supplemented medium developed specifically to support bone marrow and peripheral blood cell culture for in vitro cytogenetic analysis of hematological disease. IV-Cell is a proprietary culture media that enables simultaneous culturing of all four (4) hematopoietic cell lineages to solve the problem of selective culturing.
Shareholder Update Call in January 2020 stating business plan for Q1-Q4 2020
Events to positively impact Precipio Q1-Q4
* The results showed an average reduction of 3+ hours of labor time per case using IV-Cell. The reduction of the time required for steps such as identifying required components needed per each culture; separate cocktailing of their current media for each culture; set up of individual cultures with different media cocktails, and the actual time required to conduct the karyotype analysis necessary to arrive at the diagnosis - all resulted in more than a 50% labor time savings per specimen.
* The adaptation of IV-Cell by Northwell Health will streamline its cytogenetics laboratory to achieve rapid, more accurate results in blood-related cancer testing. Northwell Health intends to use IV-Cell for all relevant cytogenetics cases within their entire laboratory system, benefiting patients with leukemia, myelodysplasia, myeloproliferative disorders and other hematologic malignancies.
* Combining Precipio’s current run-rate revenues with Oncometrix’s 2019 revenues (both unaudited), annualized Hemepath diagnostic business is expected to increase to an estimated $6.0M
* Hemepath product line gross margins are expected to improve from the current level of 16% to 34%. Furthermore we project incremental Hemepath business above $6.0M to reach estimated margins of 50%
* Links regarding to what Ive just mentioned above: Link1 Link2
Corporate Presentation * The current corporate Presentation goes deep into their revenue models and projected earnings for Q1-Q4. * Here's the Link to the presentation that I highly recommend you guys please read
Financials & Q1 Report
Target Price and Forecasts
Risks Involved * Despite all the good news so far revolving the first quarter of 2020 and everything set into motion for Q2-Q4 to perform higher than Q1, there's always risks. With that being said, I'll mention the risks involved as stated in their latest 10-Q SEC Filing from May 14th 2020. * The filing states: "We will need to raise substantial additional capital to commercialize our diagnostic technology, and our failure to obtain funding when needed may force us to delay, reduce or eliminate our product development programs or collaboration efforts or force us to restrict or cease operations." * On April 29, 2020, they received a letter from Nasdaq notifying them that for the past 30 consecutive business days, the closing bid price per share of their common stock was below the $1.00 minimum bid price requirement for continued listing on the Nasdaq Capital Market. Nasdaq has provided them until December 28, 2020 to regain compliance with the Bid Price Rule. To regain compliance with the Bid Price Rule, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during the grace period. * If they don't reach compliance by December 28th, they will be delisted. * If they were to be delisted, the problems associated with the delisting are as follow: * "a determination that our common stock is a “penny stock,” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in reduced trading" * "a decreased ability to issue additional securities or obtain additional financing in the future." * "reduced liquidity with respect to our securities" * Here's a link to the 10-Q SEC Filing that mentions the risks I've talked about.
The Two Shareholders Update Conference calls from January 20th and May 19th of this year * I wrote just a small amount of information from the January 2020 update conference, but there's so much more information that I couldn't write it all. But I highly highly recommend that you listen to it alongside to the May 19th call. They're both only 15minutes long and so far the CEO & Precipio have been executing their business plans for the year & as shown in their May 19th shareholders update, they've been executing it well & meeting expectations stated in the January conference call. * January conference call * May
Final thoughts & comments * As I researched this company and did my best to learn as much I could about them to write about for you guys, I really liked everything they're doing so far and how they've pivoted their company to grow their company substantially by adding products. That alongside the partnership with oncometrix and already signed a deal for IV-Cell with Northwell health, everything they've planned to do is going well & it has been reflected upon Q1 earnings. * Because of that & their strong earnings, I feel confident in them, especially as they have stated in their SEC filing, they don't consider themselves a "penny stocks" unless they're delisted, which is something I highly doubt. * As of right now I do not own shares, but coming Tuesday, I will purchase around 2-300 shares. That's what I feel comfortable with. * As I have stated before, please read every single thing I've linked. Read all the articles, read the SEC filing and please listen to both of their Shareholders update calls. Please do so & always do your own DD that way you can have as much knowledge as possible so you can make a well informed decision.
I hope everyone here enjoyed the read & If this is one stock that's been on your mind, I hope this DD helps you make the decision to whether or not make a purchase.
submitted by PradoMV96 to EducatedInvesting [link] [comments]

CAMS IPO Analysis

IPO Filings/DRHP’s are some of the best places to learn from when you are trying to understand the company and industry it operates in. In this letter, we will delve into the IPO filing of CAMS (the largest RTA in the country)



Shareholding pattern is available here. The subreddit does not let us post pictures.

Growth Drivers:

Services provided by RTA’s to AMC’s:

Revenue Model:

In addition, RTA’s also have offer similar services to insurance companies for policy servicing of e-insurance policies. There are 4 insurance repositories in India :

Competitive Landscape

Following are the are the mutual fund registrar and transfer agents operating in India:
See market share and total AUM of top fund houses here.
CAMS services the 4 out of the top 5 AMC’s and 9 of the 15 largest AMC’s. It has been able to manage and hold on to its market share in the last few years: See chart here.
CAMS is the clear leader vs/ peers in profitability with RoE of 29.5% , PAT margin of 19% and witnessed the revenue CAGR of 20% over 2016-19: See chart here.
CAMS also has a 3X higher business per branch despite having only 22% higher number of branches than Karvy: See chart here.
There are multiple reasons for the oligopolistic nature of the RTA industry leading to significant entry barriers:
CAMS also has a significant presence in insurance repository market: Given the miniscule penetration of e-policies, there is a significant headroom for growth in this market.


CAMS Overview:

Business Structure:

See chart here.
CAMS operates in 7 business verticals namely: Mutual Funds Services Business, Electronic Payment Collection Services Business, Insurance Services Business, Alternative Investment Fund Services Business, Banking and Non-Banking Services Business, KYC Registration Agency Business and Software Solutions Business
Mutual Fund vertical services
Electronic Payment Collection services:
Manage end-to-end automated clearing house transaction and electronic clearance services and service mutual funds, non-banking financial companies and insurance for automated payments
Insurance services:
Scrutinizing and processing of applications, training and onboarding of new insurance agents, submission of proposals, scanning, indexing and data entry, reminding policyholders of payment receipts
Alternative Investment Fund Services:
Similar to MF
Banking and Non Banking Services
Customer interface and back office processing
KYC Registration Agency Business:
Maintain KYC records on behalf of capital market intermediaries registered with SEBI, eliminating the need to repeat KYC procedure.
Software Solutions Business:
Software solutions business through subsidiary, SSPL which owns, develops and maintains the technology solutions for mutual fund clients, with a team of 362 people .


Dividend Distribution Policy:
Notes on financial information:
Valuation :
Other comments:
Given that the growth in the CAM’s business with be primarily driven by the clients’ AUM growth , unless CAMS acquire more clients (which looks difficult to high entry barriers) and low pricing power, the earnings growth in the future will be largely in line with industry AUM growth.
Note: All the notes are based on the filed CAMS IPO prospectus , please consult your financial advisor for advice before investing in any product.

P.S - Apologies. A lot of the charts are images that cannot be posted on this subreddit. However, all of these are available on the source article - https://www.thegalacticadvisors.com/post/computer-age-management-services-decoded.
submitted by GalacticAdvisors to IndiaInvestments [link] [comments]

AMTX, and a new style of DD from me

Hello everyone,

I hope your day is going well. This post might take a while to read, so sit back and be prepared to dedicate a little bit of time on this one. I promise you, this stuff is worth it to learn.
Firstly, a recap of my progress so far trading pennystocks. I think my friend (more on this later) who introduced me to this subreddit did so on April 15th, not sure though. Here's where I'm at after 2.5 months of trading:

If you're familiar with my style of trading, you know that I risk small amounts, 5% per trade.
However, I've started implementing a new strategy, where I scale into the position as the price moves in my favor, while at the same time eliminating the risk. it quite quickly compounds the tendies bro. All you have to do is adjust your stop loss higher as you buy more shares.

And I get asked this question a lot:

This is not the way. I bagheld XSPA for a month right when I first started. F that. We're traders, not investors. Buy UPS or something if you wanna hold for long term lol. Anyway, I'm at 105% so far

Which Brings us to AMTX

I've been trading with a great friend of mine. We became best bros in third grade when we both got accepted into the 'Gifted & Talented' program. He wishes to remain anonymous so that's as much as I'll say. Here is his fundamental analysis of AMTX:

Ok so AMTX: last earnings call went well, they are a recycling company that is on the ground floor of recycling in India, also in California.
They do biofuels like ethanol, that see good bumps when gas usage goes up and stays in the 40-60/barrel range. They held a Q/A in last earnings call in which they stated they anticipate the margins for ethanol profits to increase since some states are pushing for 15% ethanol blend over the current 10%, and studies have found that up to 20% is fine in vehicles.
They also stated if they need to raise the stock price, they will do so with stock buy back, not reverse split.
California is giving them grants for their recycling work, and they recently got 4 farms online for natural gas refinements, with 14 more signed up and should be connected to their plant soon.
4Q 2019 saw 52.1Mil revenue vs 38.8mil in 4Q 2018.
Net loss was 7.7 mil for 4q2019, vs 11.4mil 4q2018.
Revenue for 2019 202mil, 2018 was 171.5mil.

They have the support of California regulators, and California Low Carbon Fuel standard is in their favor.
They got their biodiesel plant in India up, all debt paid off, maintained 100% ownership with no dilution, and plan to use proceeds to pay down other debt and fund further renewable fuels projects. Expected revenue once india plant is at 100% production is 300mil from that plant alone.
Planned biorefinery in California, with tax break of 12.5 mil offsetting equity, $125 mil from USDofAg. Expected revenue of $80mil, construction begins once engineering and procurement work is complete.
I dont think its a 1400% runner, but they are doing good work, progressing towards significant revenue, and profit. And are the only company in all of India, and are in good with California, 2 huge biofuels markets.
Ok now back to me, this is how we trade it. I apologize that I didn't post this sooner. I posted about taking this trade at $1.03 on my profile this morning.


Here is the chart that I made last night. I wanted to stay up and post all of this late last night but I fell asleep instead. You can see a lot going on here. The bro listed like seven different good things, and now we have like seven more good things. Truly inspirational. Great stock.
  1. Golden Cross: On the daily chart, you can see those EMAs have crossed. And you can also see that the price had already broken out at the point. My friend and I are working on finding these slightly sooner, ideally for this one would've been in the $0.90 range, but hey, we don't need to capture 100% of the move.
  2. You can see, that there were three seperate days where the price spiked, being held down by the 200ema each time. Anytime you see that, it is a very bullish sign.
  3. It is also breaking out of the pennant that it created (red triangle)
  4. The original entry for me was $1.03, with a stop loss at $0.91 and three seperate targets. It has already hit two of those, which brings the monthly fib extension target of $2.05 into play.
  5. I have already exited half of my position and have a stop loss in profit so that I'm not losing any money and I've already secured the tendies


Here is the new chart, and what we can look for moving forward.

You can see that today was a bearish daily candle. However, look at the previous day's wick. It spiked through that monthly resistance and the weekly resistance above that. It is totally normal for a retracement in this area. And today's candle didnt even close within the body of the previous candle.
The first potential trade is an entry anywhere below or at $1.18, or you could wait for a dip down to $1.12 depending on your style. I never wait for dips though because I'm impatient in trading sometimes. A stop loss of $1.07 would be sufficient imo. Underneath the weekly support at $1.12. If you don't know how to calculate position sizing yet, please learn before entering your next trade.
The first target is a fibonacci 127 extension at $1.45. I will be looking to add positions here if i see bullish consolidation underneath monthly resistance at $1.40.
The second target is at $1.70, which is a wick fill play off of that previous spike. It's also monthly resistance.
submitted by trevandezz to pennystocks [link] [comments]

$ESTC Soon to Rise, an unrecognized beneficiary of the Fortune 500's E-Commerce Transition

$ESTC Soon to Rise, an unrecognized beneficiary of the Fortune 500's E-Commerce Transition
On April 27th, Mark Cohodes, a well-known short seller and investor, mentioned his bullishness on Camping World. His thesis was that people—needing a socially and medically acceptable form of escape / recreation—would turn to RVs and the outdoors, resulting in dramatic sales increases. Since his interview, CWH has doubled in value from ~$8 to ~$18. Mark was able to look at an obvious shift (quarantine) in behavior and identify a non-obvious beneficiary (RV / outdoor equipment sellers). This is a great mindset when it comes to generating plays.
Here, we’ll take a look at another obvious shift and discuss a non-obvious beneficiary, Elastic N.V. (ESTC). I believe that ESTC will see it’s stock price rapidly appreciate after June 3rd, when ESTC’s earnings reveal that it’s highly undervalued compared to peers.
TL;DR Buy ESTC for an undervalued tech play that capitalizes on increased traffic for online commerce/site search, as well as a shift to work from home (all due to COVID)
This is SHOP/TWLO electric boogaloo, except you’re getting in while it’s hella cheap
Thesis Breakdown
  1. Shift in market demand due to COVID
  2. Examples of this shift evident from other tech company earnings reports
  3. Why ESTC is poised to benefit from this shift/said tech companies
  4. ESTC competitors and why ESTC shines
  5. Why ESTC is undervalued compared to peers
  6. Potential ER outcomes and implications for market valuation
  7. Play recommendations
  8. Positions
The COVID Shift
It’s no secret that consumer spending is shifting online. Online sales growth has been accelerating at 13+% YoY—and those numbers are pre- Covid-19. Now that businesses are being forced to move online, this process will accelerate in a virtuous cycle: more online businesses = more options for consumers = more online spending = more market for businesses = more online businesses. This shift has already largely occurred for big companies, but now this cycle will accelerate for small and medium sized companies.
To be successful here, it is crucial not only to provide consumers more options to appeal to their needs and convert to sales, but to also be able to understand user preferences by observing patterns in their browsing, so you can personalize presented options for optimal sales growth as well as customer retention. The incentives to improve customer retention/experience will help consumers lean in more to e-commerce.
The second part of the shift is that manye companies are focusing on WFH (work from home) and are responding to new needs to support such a paradigm shift. Obviously, these companies will need firewalls, endpoint protection, security etc. as well as needing better ways to manage remote collaboration and access to files/documents from unsecured locations that may not have all the protections a “secure facility” like an office workplace, has established. Indexing and searching those files/documents is just another example of how search becomes relevant
Evidence of the COVID Shift in Tech Earnings
Let’s think about the less obvious implications of this combined shift. What companies stand to benefit from continued WFH and from a massive spike in ecommerce / site usage?
I’ll list some examples of companies that have seen extraordinary usage increases that are now reflected in their market valuation from recent earnings reports
  1. SHOP reflecting a surge in both online sellers and online revenue sales
  2. TWLO reflecting a massive surge in companies trying to reach customers more proactively
  3. FSLY reflecting a huge surge in online content traffic
  4. DDOG reflecting a huge increase in monitoring/data analytics needs
  5. MDB reflecting a huge increase in demand for cloud databases
I can go into detail on every single company above, but why don’t I just let you take a look at how these companies are doing recently.
So what in the hell is going on? Every company dipped during COVID as you can see, some reaching as low as half of the peak valuation they had pre-COVID in the massive bull run we saw beginning of 2020. Only to blow their previous all time highs out of the water in a massive rebound!
Why? The common theme is massive beats on earnings reports, in some cases being almost complete surprise profits vs loss expectations, with a general 5-15% revenue surprise beat
  1. SHOP was expected to have a .17c loss for Q1, only to beat with a 19c profit!
  2. DDOG was expecting a 2c loss, only to have a 6c profit
  3. TWLO was expecting an 11c loss only to have a 6c profit
  4. FSLY was expecting 12c loss only to have a 6c loss
  5. MDB’s earnings was last in January, so does not reflect COVID gains, however has been benefiting from perception around its demand
The source of these surprises is because people underestimated the COVID shift which has benefited these companies massively and acted as tailwinds vs the analyst perceived headwinds.
Now let’s get to the point of the article, who else can benefit from all the above shifts we described? Let me introduce you to Elastic, a company whose product you use literally everyday without knowing and benefits from the previously proven shifts.
The Beneficiary
Elastic provides a (freemium) open source software stack which allows searching within apps / websites. Elastic is to Uber what Google is to the internet. To further explain the necessity of this product, I’ll quote Scott Miller of Greenhaven Road Capital:
The simplest form of search is a search box on a website like Cooking.com where users go to search the library of recipes. However, with thousands of recipes indexed on the site, how should search results be ordered? What should be included? Do you allow for misspellings? Synonyms? If you are in charge of optimizing search results on Cooking.com, you can build your own search tool or integrate with the extensive built-in functionality of Elasticsearch.
Scott continues to make the prescient point that for companies like Uber and Tinder, search [and the data it generates] is the product.” For years, Elastic has been a vital component of the world’s most popular apps and business websites. Take a look at some of Elastic’s customers here, and note that they are all big dogs:
Shopify, Uber, Stack Overflow (Twilio too, though not pictured)… all told, over 32% of the Fortune 500 use Elastic to power mission-critical search apps. Even the peerless brokerage Robinhood—known for its elite technological focus—turns to Elastic. Also, while it is not listed explicitly, many other companies you know of also use them like Netflix, LinkedIn, Slack and more. Google a company and elastic search and you’ll probably find a blog post about how they use it.
As part of it’s support, Elastic has a holistic stack referred to as ELK (Elastic, Logstash, Kibana) that power a multitude of the needs that go beyond just supporting search, but also processing the data/logs, monitoring it, and visualizing it to identify patterns that can serve as opportunities for enhancing customeproduct experience. Their services can be used to index content for websites referred to as site search, but they also have a flavor of the service focused on Enterprise search to enhance workplace productivity.
As thousands of companies increasingly shift to online-only, WFH, and dealing with more site usage, they have two options: improve in-house search tools, or turn to a provider. That means that the company which is able to be the best provider will win over these customers and benefit greatly—they’ll be the “Camping World” of this shift.
Who are Elastic’s competitors in the market?
If you have the above needs, you will end up using either Elastic, Splunk, or Amazon Elasticsearch (which I’ll cover in the next section) to serve your needs. Let’s table Amazon for now (don’t freak out just yet) and establish Elastic as better than Splunk first.
First, Elastic’s pricing is much more forgiving than Splunk’s—vitally important given the current economic reality. Elastic recently lowered its non-enterprise grade pricing over 60% to $16.40 a month, which will be extremely appealing to cash-strapped businesses. And ESTC’s enterprise grade product is far cheaper than Splunk’s, which is priced at $2000 a year, minimum.
Further, Elastic has been designed from day-one as a full text search engine (as opposed Splunk’s machine-data parsing focus). This is better suited to the needs of non-tech businesses who are now trying desperately to give customers a satisfactory web experience. You can make your own determination based on the information in this comparison:
Finally, I think that Elastic enterprise search is a great addition to Elastic’s offerings. Enterprise search “gives users the ability to explore content across common SaaS-based data sources (including Google Drive, GitHub, Salesforce and Dropbox) from a single search box.” For companies coordinating both WFH and shifting online, this will be a huge boon, as a single searchable repository massively improves efficiency.
Now let’s tackle Amazon. Before you go piss your pants, note that this is one case where Amazon is out of its element and has been unsuccessful despite being in market for almost five years already.
First, Amazon only became a competitor to Elastic by essentially copying it in an unethical but very Amazon-like manner (software strip-mining). However, I’m bullish on ESTC’s chances of wooing new businesses even in light of Amazon’s sketchiness: ESTC has shown willingness to fight in the courts, and they, like MongoDB (which is now at ATH despite Amazon), have other methods of continuing to be open-source while impeding unsavory appropriation from competitors. Further, Elastic has an extreme focus on R&D investment, meaning that Amazon cannot dedicate as many resources purely to search (and the dataviz that results from it, etc.). Lastly, ESTC actually can provide direct support for Elastic as a product (being the developers) whereas Amazon can only provide support for the AWS component of their service. All of this results in Amazon having far fewer notable clients despite debuting in 2015! Prime video is literally the most recognizable brand here from a consumer POV and they HAVE to use it:
Don’t believe me that it’s fine to compete with Amazon? Here’s Shay Bannon, Elastic CEO, on their last earnings call:
In my opinion, Elastic will be the clear winner of this three-horse race, already beating Amazon and likely to beat Splunk. That’s great, because it will accelerate Elastic’s two drivers of value: existing customer spend and new customer acquisition.
Existing Customer Spend
Elastic’s customers love the product. According to their Q3 filing, Elastic’s Net Expansion Rate was over 130%, meaning that existing customers spent 30% QoQ on Elastic. This metric has actually exceeded 130% for 12 consecutive quarters. Can you imagine a service that you would triple your spend on every twelve months (except Robinhood FDs)
Keep in mind that this is how well they do in a pre-COVID world—existing customers should spend even more this quarter due to the COVID shift and a desire to cater to customers more and more. Having the analytics to optimize customer experience and retain them is priceless in this economy, add in that Elastic employs a pricing philosophy where you pay for the resources and data you use (plus support / consulting fees), and the incentives are very aligned. Validating this theory, client companies like Shopify and Twilio have emphasized an increased focus on data usage in recent presentations (images taken from Shopify’s IP and Twilio’s most recent 10-Q, respectively):
Instacart, Udemy, Robinhood, Shopify, Slack, Datadog, GitHub Soundcloud, F-commerce, Fiverr, Twilio, Fastly, Uber(eats), etc.: these are just a handful of companies which have seen usage dramatically increase. That means that they should be using ESTC even more, too and earning even more revenue.
New Customer Acquisition
Elastic was able to increase its total number of customers by 8% QoQ in Q3. This was a continuation of a positive customer growth trend, reporting gains of 700, 900, and 800 customers QoQ (adding up to 10,500 paying customers today). Elastic is good at attracting big accounts. Accounts over 100k/y have seen quarterly increases of 35, 50, and 45 QoQ to 570 today. Further, Elastic’s will continue to have a massive customer base from which to draw new customers. The ELK stack has over 500 million downloads, so there is a pretty obvious path to growth assuming customers can be converted—which they have shown that they can do. And as is argued above, Covid should be a huge accelerant towards converting more.
Also, people will be incentivized to convert because ESTC is intelligently focusing on other solutions these customers need. These include infrastructure monitoring and SIEM applications. To further bolster these solutions, they’ve made prescient acquisitions, like Endpoint Protection in 2019 (which, by the way, is a direct blow to Splunk). Additionally, revenue from the professional services (essentially customer support) category increased 43+% QoQ, showing that they aren’t ignoring the importance of the customer support driver. In these dire times, this number will only increase—many companies literally cannot afford to have their search fail. When businesses are online, it is all the more important to retain customers and maintain their purchasing habits, particularly as customers are more highly conscious of their breadth of options.
Even before Covid, there was no question that demand for ElasticSearch was growing. Simply look at their accelerating revenue and gross profit generation, which is driven ( 90+%) by Elasticsearch subscribers. We’re seeing 40+% growth, every year, without fail, and with margin maintenance:
Put another way: “ESTC’s dominance is also reflected in their ability to sustain revenue growth around 60% w/ accelerating SaaS revenues: 70% -> 106% -> 114% which now form 22% of revenues vs 17% a year ago. SaaS has slightly lower gross margins, but overall GM has still stayed stable around 74%.”
Additionally, it’s important to point out that, due to their financial calendar, the next filing will incorporate 2 months of “Covid earnings” as opposed to only one for companies like DataDog, because Q4 2020 ER on 6/3 reflects February-April, vs Jan-March as most companies we mentioned above. That’s a double dose of COVID spikes meaning even more impressive gain opportunities!
They aren’t yet profitable (which should appeal to an autist), which is often held against them. But in all seriousness, this is not always bad—think of early Amazon. Like Amazon, Elastic spends a ton on R&D, rather than expansion:
And despite R&D spend, operating margins are trendings in the right direction: -27% -> -18% -> -18%. IMO, the question is not “if” but “when” ESTC becomes profitable, and they (like Shopify, for instance) may achieve profitability this quarter if R&D expenses are constant while revenue due to increased usage improves their bottom line (post COGS of course).
All Search and No Play Makes Stack A Dull Toy
So here’s the play. ESTC’s stock has somewhat recovered from the impact of Covid, but it’s still ~5% below where it was at its last ER at the end of February when it had a triple beat that sparked a 30% ER spike from 63$ open to 81$ high before settling near 70.
That’s despite many of its PTs being in the $80 - $100 range. However, because of the vast usage increase for their product which should occur from the en masse shift of WFH and web usage, it deserves an appreciation in price, not mere recovery. Consider its peers are all at all time highs that are 20-30, some cases 100% higher than their previous peak, and if there is another big beat across the board, or surprise profit, ESTC will likely have a similar run with series of upgrades and continuous rise up towards high end of its PT
Previously, this stock has traded at 20x+ revenue. Currently, it’s at around 14-15x, which is not accounting for the fact that this crisis should be helpful—and nor is it accounting for a stellar Q3, which was somewhat lost in the sauce. Keep in mind that stellar Q3 just had a 7c beat on earnings, and raise in guidance, and caused SP to rise 30%. Imagine what a COVID fueled beat and raise could do for the SP? I think this will all be reflected by the June 3rd ER. Additionally, it’s worth noting that ESTC has had a recent run of beats:
Ultimately, ESTC has an unfairly low EV to revenues when compared to competitors. I think this might start to shift as their strategy which has been viewed historically as unclear, shows that it is paying off with customer traction and COVID tailwinds to approach profit in 2021 FY (2020 Calendar Year):
If they do beat similar to last quarter, and/or provide optimistic guidance for 2021 FY forecasts, it’s possible ESTC could surge another 20-30% into the 90s—this would put its price in line with historical averages. In any case, its average PT from analysts is ~$84.
Institutions and smart money know this. This past quarter, ESTC has been among the top ten stocks hedge funds have increased stakes in. Additionally, I don’t think this is fully priced in yet: IV is similar to its historical pre-earnings levels and likely will be inflated due to COVID related market volatility.
Gay bear case:
  1. Free cash flow and cash from operations have been down in the past few quarters.
  2. ESTC faces stiff competition
  3. Their biggest moat is probably the fact that, because they are open source, they have hundreds of thousands of independent developers—but that’s also their biggest weakness (e.g. people can misconfigure Elastic Stack causing data breaches).
  4. SAAS companies may now be “priced to perfection.”
  5. Elastic is prone to having human error related “data breaches” because people don’t know how to configure it to actually keep data private, this is getting better but you still see reports regularly of morons from high profile companies that fucked up.
Obviously, I’m bullish. But as always, look into the pros and cons and do your own DD!
If you’re searching for a play (yes I am gay), this might be it.
6/19 $75 C safest low risk
6/19 $80 C if you want more risk / reward.
6/19 $85 C and above True wsb Yolo.
If you’re a more sophisticated brand of autist, spreads may be a nice way to lower your cost basis and avoid IV crush while still capturing high moon potential
P.S. if you’re on the fence, Splunk has ER after hours today, should be good signal of how ESTC does and it may get a boost from a beat there
My positions:

submitted by Frostyfragzz to wallstreetbets [link] [comments]

Wall Street Week Ahead for the trading week beginning August 3rd, 2020

Good Saturday morning to all of you here on stocks. I hope everyone on this sub made out pretty nicely in the market this past week, and is ready for the new trading month ahead.
Here is everything you need to know to get you ready for the trading week beginning August 3rd, 2020.

Earnings and fiscal debate could be catalysts for stocks in the week ahead - (Source)

The market could lose some of its exuberance in the week ahead as the calendar turns to August, and investors await Friday’s July employment report and keep their eyes on Washington.
The focus will also be squarely on politicians, as Congress struggles to find a middle ground on a new fiscal spending package and decide the fate of the $600 a week unemployment supplement that was set to expire July 31. Former vice president Joe Biden is also expected to name his running mate in the coming week.
The jobs data will be crucial, particularly since the number of people filing for unemployment benefits has been edging higher, instead of falling back, as expected. According to Refinitiv, about 1.36 million new jobs are expected, well below the 4.8 million added in June, and the unemployment rate is expected to fall to 10.7% from 11.1%.
Trading around the report could be volatile, since some economists expect more than 2 million jobs were added, and some even see flat or negative payrolls.
Stocks have done well for the month of July, with the S&P 500 finishing at 3,271, a gain of 5.5%. The Nasdaq has performed the best, rising 6.8% for the month to 10,745, after a 3.7% gain for the past week.
“August has traditionally been a challenging month for investors,” said Sam Stovall, chief investment strategist at CFRA. The market is entering what historically has been the worst two months for stocks.
According to Stovall, the S&P 500 has been higher in August 53% of the time, and its average move is a gain of just 0.01%, going back to World War II. September is worse, down 0.51% on average, and up just 48% of the time.
In presidential election years, however the odds for August gains are better, as it rose 63% of the time and 73%, when the incumbent is up for re-election.
There are also about 120 S&P 500 companies reporting earnings, but the big earnings show for markets was this past week when four of the five biggest tech giants all reported Thursday afternoon. Three of those stocks — Apple, Amazon and Facebook — surged, helping Nasdaq outperform Friday with a more than 1.5% gain.

Earnings scorecard

“We’re only a month into the reporting period, and things are going to become less and less important from an earnings perspective,” said Stovall. “I think investors are sort of disappointed in that the bar was set so low for second quarter earnings that expectations were that we were going to see a lot of companies beat, which we have. But we were also going to see a gradual uplift of earnings expectations for forward quarters. We’re not seeing that.”
Eighty-two percent of the companies reporting so far have beaten estimates, well above the average 65%, according to Refinitiv. The earnings decline is now looking closer to 33% from an initial 40%, and tech, which has been leading the market is one of the best performers. Profits for the sector now look to be up 1.4%, according to I/B/E/S data from Refinitiv.
Because the tech names have contributed so much to market gains, their earnings were an important test for the market, and they didn’t disappoint. But they didn’t manage to pull up the whole market very far on Friday.
Among the names reporting in the coming week are a diverse group, including Disney, ViacomCBS, Bristol-Myers Squibb, Berkshire Hathaway, AIG, Clorox, and Wayfair, to name a few.

Politics now in play

“The earnings story is over. My call had been once we had gotten through the earnings season, we would be more vulnerable to a sustainable pullback,” said Barry Knapp, Ironside Macroeconomics managing partner and director of research. “Obviously, it’s volatility season, but it’s also an election year. ... We’re more vulnerable to that next week and earnings won’t hold us up.”
Knapp said if President Donald Trump and Republicans do not begin to perform better in the polls by Labor Day, the market is likely to focus on what a Democratic win would mean for taxes and regulation. That could be a negative for stocks.
“If he hasn’t made headway by then, it’s likely he’s done.That’s about the point when things become pretty set in stone. The market will presume that’s the case,” Knapp said.
The politics of the stimulus package could also reverberate through markets, until it looks like the Senate Republicans and House Democrats can find common ground.
The two sides look to be at a standoff, but an agreement is still expected in early August. The market is particularly watching to see what happens with the enhanced unemployment benefits. Republicans have proposed cutting it to $200, but Democrats support keeping it.

The economy

Cutting the size of the payments back might be good for the labor market and persuade more workers to return to work, some strategists say. However, there is also concern that the funding has helped stimulate the economy and keep the unemployed from defaulting on loans and payments. Consumer spending on goods in June was even higher than last year, and that was also seen as getting a lift from stimulus.
Besides the jobs report, there are other important data like ISM manufacturing on Monday. There are also monthly vehicle sales Monday, and ISM nonmanufacturing data Wednesday.
“I think the macro data is going to be fine next week,” said Knapp. “I’m not in the camp that thinks the payroll number is going to be negative.”
NatWest Markets economist Kevin Cummins is one of the economists who expects the jobs gains to be much smaller than the past two months. He expects the payrolls to come in at just 200,000. “You look at jobless claims, and you see a stalling out,” he said. “The Fed is right. There is significant downside risk to the economy.”

A trade to watch

Treasury yields, in the 2-year to 7-year range, fell to new lows in the past week. The 10-year yield, not yet at a record low, was also falling and was at 0.53% Friday. At the same time, the dollar was down more than 1% on the week and 4% for the month.
Gold was a beneficiary of the lower interest rates, weaker dollar trade, rising about 5% for the week and 10% for the month.
Strategist say investors are reacting to super-low interest rates, concerns about the economy, and the possibility that huge government spending will send inflation higher.
Investors are also jumping into inflation-protected bonds. According to Refinitiv’s Lipper, inflation-protected bond funds took in $271 million of net new money for the fund-flows week ended July 29, the sixth week of gains. About $1 billion went into the SPDR Gold Shares ETF, (GLD) in the last week, Lipper said.
During this time period, the Treasury Inflation-Protected Securities funds recorded their two best weekly net inflows ever with increases of $1.9 billion and $1.5 billion, respectively, for the fund-flows weeks of June 24 and July 1.
Lipper said investors started to put money into TIPS funds in the middle of the second quarter, and the flows have been . net positive in 11 out of 13 weeks since the beginning of May. This its second-worst quarterly net outflows ever as oil prices slumped in the first quarter.
“I think this is going to be a much more inflationary decade. It will start out slowly. [Fed Chairman Jerome] Powell is right that more forces are putting downward pressure on inflation at present. But the market looks past that,” said Knapp. “The big story in 2021 will be the recovery of inflation. You’re already seeing it in import prices.”

This past week saw the following moves in the S&P:


Major Indices for this past week:


Major Futures Markets as of Friday's close:


Economic Calendar for the Week Ahead:


Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday's close:


S&P Sectors for the Past Week:


Major Indices Pullback/Correction Levels as of Friday's close:


Major Indices Rally Levels as of Friday's close:


Most Anticipated Earnings Releases for this week:


Here are the upcoming IPO's for this week:


Friday's Stock Analyst Upgrades & Downgrades:


August: Top NASDAQ & Russell 2000 Month of Election Years

August is amongst the worst months of the year. It is the worst DJIA, S&P 500, NASDAQ, Russell 1000 and Russell 2000 month over the last 32 years, 1988-2019 with average declines ranging from 0.1% by NASDAQ to 1.1% by DJIA.
Contributing to this poor performance since 1987; the second shortest bear market in history (45 days) caused by turmoil in Russia, the Asian currency crisis and the Long-Term Capital Management hedge fund debacle ending August 31, 1998 with the DJIA shedding 6.4% that day. DJIA dropped a record 1344.22 points for the month, off 15.1%—which is the second worst monthly percentage DJIA loss since 1950. Saddam Hussein triggered a 10.0% slide in August 1990. The best DJIA gains occurred in 1982 (11.5%) and 1984 (9.8%) as bear markets ended. Sizeable losses in 2010, 2011, 2013 and 2015 of over 4% on DJIA have widened Augusts’ average decline.
However, in election years since 1950, Augusts’ rankings improve: #6 DJIA, #5 S&P 500, #1 NASDAQ (since 1971), #1 Russell 1000 and #1 Russell 2000 (since 1979). This year, the market’s performance in August will likely depend heavily on how July closes and whether or not the rate of covid-19 infection continues to accelerate which could force some areas to roll back reopenings.

August’s First Trading Day Bearish Last 23 Years

From the Stock Trader’s Almanac 2020 (page 88), it is known that the first trading days of each month combined gain nearly as much as all other days combined. However, the first trading day of August does not contribute to this phenomenon ranking worst among other First Trading Days in the 2020 Almanac. In the past 23 years DJIA has risen just 30.4% (up 7, down 16) of the time on the first trading day of August. Average and median losses are on the mild side due to a few sizable advances. Over the past nine years, DJIA and S&P 500 have both declined nine times.

S&P 500 Stronger Underneath the Surface

Earlier today we posted a chart showing S&P 500 sector performance since the Nasdaq's recent peak on 7/20 when Technology stocks began what has now been a 10-day period of consolidation. Below we have updated these performance numbers to include today's moves. While not as many sectors remain in positive territory, the majority of sectors continue to outperform the S&P 500, while Technology drags the market lower. Along with Technology, Communication Services, and Consumer Discretionary are the only other sectors that have lagged the S&P 500, and their performance has been dragged down by the mega-cap tech-like stocks of Alphabet (GOOGL), Facebook (FB), and Amazon (AMZN).
Expanding on this theme of underlying strength in the index, the chart below shows the average performance of stocks in the S&P 500 grouped by sector. On an equal-weighted basis, the S&P 500 is actually up 1.3% since 7/20, and only two sectors (Technology and Materials) have seen negative average returns. On the upside, Real Estate (4.1%) has been the big winner followed by Consumer Discretionary (3.3%), and Consumer Staples (2.2%). The fact that Consumer Discretionary at the cap-weighted sector level is down over 1.4% while the average performance of stocks in the sector has been a gain of 3.3% illustrates what a mammoth impact AMZN has on that sector.
Breadth among S&P 500 stocks has also been overwhelmingly positive. For the S&P 500 as a whole, 59% of stocks in the index have had positive returns since the close on 7/20. Only two sectors (Technology and Materials) have seen fewer than half of their components post positive returns over that time, while Real Estate, Consumer Staples, and Utilities have seen roughly three-quarters of their components rally since 7/20.

Bullish Earnings Season So Far

At our Earnings Explorer tool available to clients on our website, we provide a real-time look at beat rates for both EPS and sales. Below is a snapshot from the website showing both the EPS and sales beat rates for US companies reporting earnings on a rolling 3-month basis. Currently, 64.61% of companies have exceeded consensus analyst EPS estimates over the last three months, while 63.75% of companies have beaten consensus sales estimates over the same time frame.
In looking at the chart, you can see a big spike in the EPS beat rate over the last few weeks. Since earnings season began on July 13th, nearly 80% of companies have posted stronger than expected EPS numbers. That's a huge beat rate and suggests that analysts were too bearish on Q2 numbers heading into July. The revenue beat rate held up much better than EPS beats throughout the first half of 2020, but it too is on the upswing this season.
We also monitor how share prices are reacting to earnings reports. So far this earnings season, the average stock that has reported Q2 numbers has gained 1.31% on its earnings reaction day. That compares to a historical average one-day change of just 0.06% on earnings reaction days. As shown below, stocks that have beaten EPS estimates this season have gained 2.2% on earnings reaction days, while companies that have missed EPS estimates have fallen 1.89%. It's rare to see beats gaining more than misses decline, but that's what is happening this season.

China Running Away YTD

Every Wednesday, we publish our Global Macro Dashboard which provides a high-level summary of market and economic data of some of the world's largest economies. Of the 23 stock markets tracked, just six including the US are positive year to date at the moment (in local currency). In the chart below we show the YTD performance of these six countries as well as the global median in 2020. As shown, even though it was actually the first to tip into the green YTD following the global sell-off in February and March very briefly back in early June, the US is up the least of this group with a YTD gain of 0.4%. China's stock market is up the most at +14%. Taiwan, South Korea, South Africa, and Malaysia are also outperforming the US but are up more modestly than China with the best of these, Taiwan, gaining 4.53% this year. Meanwhile, the median country in our Global Macro Dashboard remains down 6.2% YTD.
Given it is up the most on a year to date basis, China has also gained the largest share of global equity market cap in 2020. As shown in the table below, China has gained 1.7 percentage points of global market cap in 2020 and now takes up 10.14%. China now joins the US as the only other country with a double-digit share of total world market cap. Despite this, China has actually lost share since the bear market lows on 3/23. Meanwhile, the US, Germany, Canada, India, South Korea, and Australia have all gained a significant share since 3/23.

Do the Top 5 Stocks Pose a Risk to the Market?

Apple, Microsoft, Amazon, Google, and Facebook. These five stocks have helped spawn a number of acronyms as they try to capture the rise of mega-cap tech stocks that have led the market higher for much of the past decade. The average return for those five stocks so far this year has been a gain of more than 30%, while the broad S&P 500 Index is just marginally positive, at 0.4% through July 30.
While many other areas of the market have remained largely static, the total market value of these stocks has dramatically increased, making them an increasingly large piece of market cap-weighted indexes such as the S&P 500. As shown in the LPL Chart of the Day, the combined weight of the top five stocks in the S&P 500 has increased to its highest level ever, at nearly 22%. Only one of those five stocks (Microsoft) was a top five name in the index during the previous peak of March 2000.
But does this pose a risk to the index? From a diversification standpoint, one could certainly argue it does. For instance, if any shared risks should come up, from regulation, for example, it could do outsized damage to cap-weighted indexes. However, we believe that the recent gains have been justified by the fundamentals, and we continue to favor both large caps over small caps, and growth-style stocks over value stocks. According to analysis from Credit Suisse, over the past 12 months, the top five stocks in the index have grown revenues at 11.2% vs. just 0.8% for the rest of the S&P 500. Further, the remainder of the S&P 500 has subtracted roughly $17 from S&P 500 earnings per share (EPS), while the top five stocks have added more than $12.
Finally, while these stocks have been the face of the recent “stay-at-home trend” and may be more insulated from broader economic weakness, they are far from the only stocks making money this year. On July 30, the Philadelphia Stock Exchange Semiconductor Index hit a new all-time high and is now up more than 15% year-to-date.
“After a huge run, many of these top stocks may be due for a pause,” said LPL Chief Market Strategist Ryan Detrick. “However, looking out over the next 6 to 12 months, we believe that investors will continue to place a premium on companies that are able to organically grow sales, especially in a low-growth environment.”
Here are the most notable companies (tickers) reporting earnings in this upcoming trading week ahead-
  • $CLX
  • $BYND
  • $SQ
  • $MRNA
  • $ROKU
  • $FSLY
  • $TSN
  • $ATVI
  • $CHGG
  • $CVS
  • $W
  • $DIS
  • $MELI
  • $GPN
  • $SPCE
  • $TWLO
  • $CMS
  • $LVGO
  • $MCK
  • $AMRN
  • $ETSY
  • $PLUG
  • $NET
  • $BMY
  • $RACE
  • $TTWO
  • $MPC
  • $MPLX
  • $ZNGA
  • $DBX
  • $DDOG
  • $UBER
  • $WIX
  • $KOS
  • $TTD
  • $ENPH
  • $CRON
  • $BP
  • $TEVA
  • $PENN
  • $FVRR
  • $RNG
Below are some of the notable companies coming out with earnings releases this upcoming trading week ahead which includes the date/time of release & consensus estimates courtesy of Earnings Whispers:

Monday 8.3.20 Before Market Open:


Monday 8.3.20 After Market Close:


Tuesday 8.4.20 Before Market Open:


Tuesday 8.4.20 After Market Close:


Wednesday 8.5.20 Before Market Open:


Wednesday 8.5.20 After Market Close:


Thursday 8.6.20 Before Market Open:


Thursday 8.6.20 After Market Close:


Friday 8.7.20 Before Market Open:


Friday 8.7.20 After Market Close:


Clorox Co. $236.51

Clorox Co. (CLX) is confirmed to report earnings at approximately 6:30 AM ET on Monday, August 3, 2020. The consensus earnings estimate is $2.00 per share on revenue of $1.83 billion and the Earnings Whisper ® number is $2.06 per share. Investor sentiment going into the company's earnings release has 78% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 6.38% with revenue increasing by 12.48%. Short interest has increased by 9.5% since the company's last earnings release while the stock has drifted higher by 22.5% from its open following the earnings release to be 33.0% above its 200 day moving average of $177.86. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, July 31, 2020 there was some notable buying of 2,147 contracts of the $250.00 call and 1,848 contracts of the $220.00 put expiring on Friday, August 7, 2020. Option traders are pricing in a 7.2% move on earnings and the stock has averaged a 4.6% move in recent quarters.


Beyond Meat, Inc. $125.90

Beyond Meat, Inc. (BYND) is confirmed to report earnings at approximately 4:05 PM ET on Tuesday, August 4, 2020. The consensus estimate is for a loss of $0.02 per share on revenue of $97.75 million and the Earnings Whisper ® number is $0.01 per share. Investor sentiment going into the company's earnings release has 71% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 300.00% with revenue increasing by 45.35%. Short interest has decreased by 27.3% since the company's last earnings release while the stock has drifted higher by 14.2% from its open following the earnings release to be 21.7% above its 200 day moving average of $103.45. Overall earnings estimates have been revised lower since the company's last earnings release. The stock has averaged a 23.1% move on earnings in recent quarters.


Square, Inc. $129.85

Square, Inc. (SQ) is confirmed to report earnings at approximately 4:05 PM ET on Wednesday, August 5, 2020. The consensus estimate is for a loss of $0.05 per share on revenue of $1.01 billion and the Earnings Whisper ® number is ($0.01) per share. Investor sentiment going into the company's earnings release has 59% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 126.32% with revenue decreasing by 13.99%. Short interest has decreased by 20.5% since the company's last earnings release while the stock has drifted higher by 85.9% from its open following the earnings release to be 71.3% above its 200 day moving average of $75.80. Overall earnings estimates have been revised higher since the company's last earnings release. On Tuesday, July 14, 2020 there was some notable buying of 9,381 contracts of the $97.50 call expiring on Friday, August 21, 2020. Option traders are pricing in a 9.7% move on earnings and the stock has averaged a 7.1% move in recent quarters.


Moderna, Inc., $74.10

Moderna, Inc., (MRNA) is confirmed to report earnings at approximately 7:00 AM ET on Wednesday, August 5, 2020. The consensus estimate is for a loss of $0.36 per share on revenue of $19.83 million and the Earnings Whisper ® number is ($0.34) per share. Investor sentiment going into the company's earnings release has 66% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 12.20% with revenue increasing by 51.57%. Short interest has increased by 3.5% since the company's last earnings release while the stock has drifted higher by 32.8% from its open following the earnings release to be 99.3% above its 200 day moving average of $37.17. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, July 24, 2020 there was some notable buying of 12,120 contracts of the $95.00 call expiring on Friday, August 21, 2020. Option traders are pricing in a 12.2% move on earnings and the stock has averaged a 8.3% move in recent quarters.


Roku Inc $154.89

Roku Inc (ROKU) is confirmed to report earnings at approximately 4:00 PM ET on Wednesday, August 5, 2020. The consensus estimate is for a loss of $0.55 per share on revenue of $305.10 million and the Earnings Whisper ® number is ($0.47) per share. Investor sentiment going into the company's earnings release has 73% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 587.50% with revenue increasing by 21.99%. The stock has drifted higher by 23.3% from its open following the earnings release to be 23.0% above its 200 day moving average of $125.96. Overall earnings estimates have been revised lower since the company's last earnings release. On Monday, July 20, 2020 there was some notable buying of 4,243 contracts of the $125.00 put expiring on Friday, September 18, 2020. Option traders are pricing in a 13.8% move on earnings and the stock has averaged a 17.4% move in recent quarters.


Fastly, Inc. $96.49

Fastly, Inc. (FSLY) is confirmed to report earnings at approximately 4:05 PM ET on Wednesday, August 5, 2020. The consensus estimate is for a loss of $0.01 per share on revenue of $60.42 million and the Earnings Whisper ® number is $0.01 per share. Investor sentiment going into the company's earnings release has 82% expecting an earnings beat The company's guidance was for revenue of $70.00 million to $72.00 million. Consensus estimates are for year-over-year earnings growth of 93.75% with revenue increasing by 30.86%. Short interest has increased by 186.2% since the company's last earnings release while the stock has drifted higher by 229.3% from its open following the earnings release to be 186.0% above its 200 day moving average of $33.74. Overall earnings estimates have been revised higher since the company's last earnings release. The stock has averaged a 17.8% move on earnings in recent quarters.


Tyson Foods Inc. $61.45

Tyson Foods Inc. (TSN) is confirmed to report earnings at approximately 7:35 AM ET on Monday, August 3, 2020. The consensus earnings estimate is $0.90 per share on revenue of $10.49 billion and the Earnings Whisper ® number is $0.96 per share. Investor sentiment going into the company's earnings release has 44% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 38.78% with revenue decreasing by 3.63%. Short interest has decreased by 38.0% since the company's last earnings release while the stock has drifted higher by 5.5% from its open following the earnings release to be 14.3% below its 200 day moving average of $71.73. Overall earnings estimates have been revised lower since the company's last earnings release. On Friday, July 31, 2020 there was some notable buying of 1,804 contracts of the $60.00 put expiring on Friday, October 16, 2020. Option traders are pricing in a 6.6% move on earnings and the stock has averaged a 4.9% move in recent quarters.


Activision Blizzard, Inc. $82.63

Activision Blizzard, Inc. (ATVI) is confirmed to report earnings at approximately 4:05 PM ET on Tuesday, August 4, 2020. The consensus earnings estimate is $0.63 per share on revenue of $1.70 billion and the Earnings Whisper ® number is $0.73 per share. Investor sentiment going into the company's earnings release has 81% expecting an earnings beat The company's guidance was for earnings of approximately $0.64 per share. Consensus estimates are for year-over-year earnings growth of 57.50% with revenue increasing by 21.78%. Short interest has decreased by 32.3% since the company's last earnings release while the stock has drifted higher by 11.7% from its open following the earnings release to be 29.7% above its 200 day moving average of $63.71. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, July 31, 2020 there was some notable buying of 8,749 contracts of the $85.00 call expiring on Friday, August 21, 2020. Option traders are pricing in a 8.4% move on earnings and the stock has averaged a 3.9% move in recent quarters.


Chegg Inc. $80.97

Chegg Inc. (CHGG) is confirmed to report earnings at approximately 4:05 PM ET on Monday, August 3, 2020. The consensus earnings estimate is $0.32 per share on revenue of $136.52 million and the Earnings Whisper ® number is $0.35 per share. Investor sentiment going into the company's earnings release has 85% expecting an earnings beat The company's guidance was for revenue of $135.00 million to $137.00 million. Consensus estimates are for year-over-year earnings growth of 100.00% with revenue increasing by 45.45%. Short interest has decreased by 21.9% since the company's last earnings release while the stock has drifted higher by 51.1% from its open following the earnings release to be 74.9% above its 200 day moving average of $46.28. Overall earnings estimates have been revised higher since the company's last earnings release. On Thursday, July 30, 2020 there was some notable buying of 2,335 contracts of the $90.00 call expiring on Friday, August 21, 2020. Option traders are pricing in a 13.5% move on earnings and the stock has averaged a 13.6% move in recent quarters.


CVS Health $62.94

CVS Health (CVS) is confirmed to report earnings at approximately 6:30 AM ET on Wednesday, August 5, 2020. The consensus earnings estimate is $1.91 per share on revenue of $64.49 billion and the Earnings Whisper ® number is $1.96 per share. Investor sentiment going into the company's earnings release has 75% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 1.06% with revenue increasing by 1.67%. Short interest has increased by 21.9% since the company's last earnings release while the stock has drifted lower by 0.8% from its open following the earnings release to be 5.7% below its 200 day moving average of $66.72. Overall earnings estimates have been revised lower since the company's last earnings release. On Tuesday, July 28, 2020 there was some notable buying of 4,028 contracts of the $85.00 call expiring on Friday, September 18, 2020. Option traders are pricing in a 5.3% move on earnings and the stock has averaged a 4.6% move in recent quarters.



What are you all watching for in this upcoming trading week?
I hope you all have a wonderful weekend and a great trading week ahead stocks.
submitted by bigbear0083 to stocks [link] [comments]

My first ever "Empire vs Stormcloaks" post. Please don't crucify me.

I have probably never engaged in any of the Empire vs Stormcloaks discussions throughout the years and never really thought much about it. I've seen them and read comment here or there but never participated or went too deep into it.
At this point I've played through Skyrim (begging to end) at least 13 times and only two times I've played on the side of Stormcloaks, first time just to see their side and second for role-play purposes.
Maybe it's partially because I fought for Empire both in Morrowind and Oblivion but mainly because Empire in Skyrim just seemed like a better option on practically all levels. The only thing making Stormcloaks more appealing was the fact that they were more lore-fitting.
But outside of Stormcloaks Cool Factor and the rebel style, Empire just seemed better:
So yeah, those would be my reasons (more or less) why I never found Stormcloaks appealing and just choose to join Empire time and time again. They're just better option.
If someone has some good reasons why it would be better to join Stormcloaks or why you don't support the Empire, tell me.
submitted by Mr_J-Wood to skyrim [link] [comments]

AEF - A Misunderstood Superannuation Fund

AEF - A Misunderstood Superannuation Fund
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.

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.

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’).

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.

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.

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.

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.

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:

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.

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.


· 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...

We note the following investment risks with AEF:
  1. Fee Compression – The funds management industry is subject to fee compression across both funds and superannuation funds. There has already been a lot of restructuring of AEF’s fees since 2016. The investment product(s) they advocate is also one that serves an ethical / moral dimension and can arguably be charged at a premium above market. Notwithstanding fee compression beyond that which we have considered would place downward pressure on margins.
  2. Member Attrition – The stickiness of AEF's membership base is a hallmark of their competitive advantage although this could be reversed over time due to poor performance or corporate mismanagement. We encourage the reader to keep an eye on member growth and net inflows over time.
  3. Product Reproduction – There is no official IP upon ESG investing and new products are increasingly being promoted to capture market share of this growing market. We believe AEF's early mover and strong brand serve to mitigate this risk.
  4. Regulatory Risks – Changes in the superannuation regulatory environment can be material. This has long been debated within the public domain although it has been viewed as politically unfavourable to change the superannuation system without a reasonably long lead time and grandfathering provisions, which we hope would make any changes unlikely and less meaningful.
Investment Roadmap
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.

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:

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.
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