Well, thanks to everyone who posted - we'll definitely do this again. We'll have a fun post on sh--cos in this week's Research Notes and then another definitely-not-short idea on Sunday morning. Thanks again!
I think Musk will probably end up having to buy TWTR and that, that may be a catalyst to finally bring down TSLA’s share price. Not sure if there are any other potential catalysts before then. What are your thoughts?
I still have a bear spread open on $TSLA. I'm basically keeping it open at this point because it's nearly worthless, so there is no point closing when there's a still a (small) chance of if it moving back into profit. I can't really think of any real catalysts for a down move. It really depends on the macro situation and if this really is a bear market rally. If this is a holiday driven rally (many investors take time off in August) then who knows, September and October could be bad months. That's what happened in 08 and then whole picture could change.
yeah, I'm still short, pretty much at max pain point so that may change relatively soon.
could write a long essay about that position, really direct result of misreading this recent rally, very frustrated with myself for that and TXRH. (As Joe says, we eat our own cooking, and as I say sometimes it makes me puke.)
as far as downside catalysts...I agree with Joe. I mean, I think it has to be the broader market, right? Growth sold off late last year, and TSLA went, there was another leg down in the spring and TSLA followed. When there's optimism, the stock simply seems bulletproof.
It is absolutely incredible that the stock is up 10x from the beginning of 2020. In-cred-ible.
the only other downside catalyst on the horizon is that I might cover my short. the notification of that trade will be a subscriber-only feature.
we've written up a couple of "first wave" de-SPACs, for lack of a better term, in PACK and AMBP.
In terms of the ones from the boom, I haven't yet seen one that I would pound the table on, but there are some interesting ones:
-- Polestar/PSNY might be a legit EV maker. I'd at the least rather own that then FSR or TSLA.
-- Rush Street / RSI almost has to get bought out at some point. They've actually done better in sports betting and particularly iGaming than I thought. PENN and CZR can't be happy with their market share. I don't know about valuation at almost 3x rev (gross margins are 30%), but that's one where at $5 instead of $6.50 I'd start thinking about it.
-- Genius Sports / GENI is another sports betting play, though it's doubled already. Q2 earnings today were good, another one I'd hope for a pullback
-- I've looked at Alight / ALIT like five times and each time I keep thinking, "OK, maybe this really is a buy" and every time I can't quite get there. It looks pretty reasonably valued but it's tough to get to it being quite compelling.
probably missing one or two. definitely would love to hear any you're checking out bc there are going to be some diamonds in that rough over time
I didn't realize GENI had doubled. Will need to take another look at that. I did own CHPT at one point so might take a look at that too. PACK seems to be going well but not many others spring to mind to be honest.
Yeah, I think knowing when to sell is one of the trickier questions to deal with.
For me, I usually have an idea when I go into a stock of what sort of business it is and therefore what sort of return I should expect. If it is a high quality business, more of compounder or growth type, I will go in with the intention of holding it for a long time. 10 years +. But I make a mental note that these are rare opportunities.
If it is more of a value type play, where you are gunning for some type of move back to intrinsic value then I will have a target in mind and exit when we hit that target. I also think opportunity cost is important. So sometimes I will sell a stock if I think that money can be better deployed somewhere else.
let me rephrase that last line there - I'd say I knew those companies quite well, actually.
To the "when to sell" question...I try to subscribe to the idea that every day you own a stock is a day you've decided to buy it. That's theoretical, obviously, and sometimes inertia gets in the way.
When I buy a position, I'm looking more at a target than a timeframe. And then I try to update my mental model based on the information gained while I've held it and go from there. If the stock hits or nears the target I had when I initiated the position, is there good reason to raise that target? Conversely, if the stock tanks, did I miss something the first time around?
I think "when to sell?" is one of the more difficult decisions out there, in terms of both winners and losers. Really hard to keep emotion and anchoring bias out of it.
I'm actually writing up PLTR on Thursday over at Investing.com, which I'm looking forward to, as it's been a while since I took a close look.
I was bearish in the past, due largely to valuation and stock-based comp. Last I looked both still seemed like concerns. But I admit that I haven't yet properly done the work on the commercial opportunity and what precisely that looks like long-term.
I still own both, probably more constructive on NGMS here. I think the core iLottery case still holds, the Aspire deal got done at a depressed price when you consider the stock consideration (remember, the stock was valued at $38 in the deal, still 2x the current trading price), Q2 looked fine even though the stock sold off the day after.
ARAY...I admit I need to look closer at fiscal Q4. But the case was that the spring sell-off was kind of illogical, and the stock was at $3.50 for three months before that.
I don't like it at all, for several reasons. First, U stock was down 75%-ish when AppLovin made the offer. If Unity takes the offer, then what the heck is going on where they're willing to try and convince their shareholders to do a merger that far off the highs?
Second, I think it suggests that AppLovin is legitimately worried about a Unity-IronSource tie-up.
Third, I think you're absolutely right that it's a bit ambitious, to put it mildly.
I hate that APP was the first idea - obviously, it hasn't played out well. It's one I've really been chewing on over the past couple of days in terms of trimming or exiting. I don't like the Unity stuff, the lower guidance in Games is a minor problem in terms of valuation, and it worries me that APP is missing out on this rally. To the point below, trying to look at it with fresh eyes...at the least it might go in the "too hard" pile for a while.
Let's start with the process one...on my end, yes, I run screens fairly regularly. Been doing that more in the topsy-turvy market of 2022 than I might otherwise. Certainly in the spring was curious as to what stocks avoided the downdraft — or really got punished even though they weren't quite as speculative as some of the big decliners (COIN, CVNA, UPST, etc.) during that stretch. More recently, tried to look at what stocks have missed out on the rally and why that might be.
Obviously, both screens have anchoring bias problems, and you want to make sure you're looking at both sides. If a stock is holding up in April, that's probably a good sign. But off the top of my head NATH has been an excellent pick , and that was one (at the beginning of May) where the screen showed a stock that was down big even though its prospects hadn't changed.
But NATH also highlights another fact: I've been doing this quite a while, and mostly in the small- to mid-cap space. So I knew NATH pretty well to begin with. I've probably done a deep or deep-ish dive on 500-plus companies at this point over 11 years.
In fact, four of our best longs — NATH, AGS, NX, and NGMS — I already knew to some extent. The first three I'd owned before. (Of course I also knew FLWS and ABM, so it's not foolproof.)
I also run screens. But Vince is right that they don't always lead you down the right path. Sometimes the data is not accurate enough. Also, if you base your screen on value or growth, you can end up looking at the same names over and over again. So it's good to mix the screens up from time to time.
About a year ago I went through all the stocks on Finviz.com and made a list of all the names that I know a bit about and feel comfortable with. I think it's best to start with companies that you know a bit about rather than jumping in and researching some company you don't have a clue about such as a biotech stock. If you read an earnings report or annual report and it's a real slog its usually best to put it aside.
It's tough to find good screens on fundamental measures besides price, precisely because of the data problem. There are some good tools in terms of ROIC or things like that, but you really have to remember that you're "screening" for good opportunities that need more research, not "finding" good opportunities
Thanks for joining us on this AMA. Here's a question from Jin Daikoku @jdaikoku on Twitter:
I’d like to hear about your process in general. You guys sometimes write about things I’ve never heard of. E.g. Are you running screens? How many stones are you turning over before you find something you like?
Well, thanks to everyone who posted - we'll definitely do this again. We'll have a fun post on sh--cos in this week's Research Notes and then another definitely-not-short idea on Sunday morning. Thanks again!
Poop cos sounds like fun. You guys should consider doing a live audio thing.
I came to this with headphones on and then felt like an idiot. 😂
Ha! I didn't even think of that.
Thanks everyone.
Still short TSLA?
I think Musk will probably end up having to buy TWTR and that, that may be a catalyst to finally bring down TSLA’s share price. Not sure if there are any other potential catalysts before then. What are your thoughts?
I still have a bear spread open on $TSLA. I'm basically keeping it open at this point because it's nearly worthless, so there is no point closing when there's a still a (small) chance of if it moving back into profit. I can't really think of any real catalysts for a down move. It really depends on the macro situation and if this really is a bear market rally. If this is a holiday driven rally (many investors take time off in August) then who knows, September and October could be bad months. That's what happened in 08 and then whole picture could change.
yeah, I'm still short, pretty much at max pain point so that may change relatively soon.
could write a long essay about that position, really direct result of misreading this recent rally, very frustrated with myself for that and TXRH. (As Joe says, we eat our own cooking, and as I say sometimes it makes me puke.)
as far as downside catalysts...I agree with Joe. I mean, I think it has to be the broader market, right? Growth sold off late last year, and TSLA went, there was another leg down in the spring and TSLA followed. When there's optimism, the stock simply seems bulletproof.
It is absolutely incredible that the stock is up 10x from the beginning of 2020. In-cred-ible.
the only other downside catalyst on the horizon is that I might cover my short. the notification of that trade will be a subscriber-only feature.
Maybe this will be a catalyst https://twitter.com/elonmusk/status/1559691922725281800?s=21
Hi! Do you have a favourite despac at the moment/ the last couple of years?
we've written up a couple of "first wave" de-SPACs, for lack of a better term, in PACK and AMBP.
In terms of the ones from the boom, I haven't yet seen one that I would pound the table on, but there are some interesting ones:
-- Polestar/PSNY might be a legit EV maker. I'd at the least rather own that then FSR or TSLA.
-- Rush Street / RSI almost has to get bought out at some point. They've actually done better in sports betting and particularly iGaming than I thought. PENN and CZR can't be happy with their market share. I don't know about valuation at almost 3x rev (gross margins are 30%), but that's one where at $5 instead of $6.50 I'd start thinking about it.
-- Genius Sports / GENI is another sports betting play, though it's doubled already. Q2 earnings today were good, another one I'd hope for a pullback
-- I've looked at Alight / ALIT like five times and each time I keep thinking, "OK, maybe this really is a buy" and every time I can't quite get there. It looks pretty reasonably valued but it's tough to get to it being quite compelling.
probably missing one or two. definitely would love to hear any you're checking out bc there are going to be some diamonds in that rough over time
I didn't realize GENI had doubled. Will need to take another look at that. I did own CHPT at one point so might take a look at that too. PACK seems to be going well but not many others spring to mind to be honest.
what do you think on that front, Joe?
Yeah, I think knowing when to sell is one of the trickier questions to deal with.
For me, I usually have an idea when I go into a stock of what sort of business it is and therefore what sort of return I should expect. If it is a high quality business, more of compounder or growth type, I will go in with the intention of holding it for a long time. 10 years +. But I make a mental note that these are rare opportunities.
If it is more of a value type play, where you are gunning for some type of move back to intrinsic value then I will have a target in mind and exit when we hit that target. I also think opportunity cost is important. So sometimes I will sell a stock if I think that money can be better deployed somewhere else.
that's a great summary and a good distinction there, definitely.
let me rephrase that last line there - I'd say I knew those companies quite well, actually.
To the "when to sell" question...I try to subscribe to the idea that every day you own a stock is a day you've decided to buy it. That's theoretical, obviously, and sometimes inertia gets in the way.
When I buy a position, I'm looking more at a target than a timeframe. And then I try to update my mental model based on the information gained while I've held it and go from there. If the stock hits or nears the target I had when I initiated the position, is there good reason to raise that target? Conversely, if the stock tanks, did I miss something the first time around?
I think "when to sell?" is one of the more difficult decisions out there, in terms of both winners and losers. Really hard to keep emotion and anchoring bias out of it.
Hey Vince. Really enjoy what you’re doing with the newsletter, what do you think of PLTR?
I'm actually writing up PLTR on Thursday over at Investing.com, which I'm looking forward to, as it's been a while since I took a close look.
I was bearish in the past, due largely to valuation and stock-based comp. Last I looked both still seemed like concerns. But I admit that I haven't yet properly done the work on the commercial opportunity and what precisely that looks like long-term.
Some of your picks are up quite a lot. NGMS is up 40%, ARAY is up 50%. Do you see more upside ahead or is it time to bank profits?
I still own both, probably more constructive on NGMS here. I think the core iLottery case still holds, the Aspire deal got done at a depressed price when you consider the stock consideration (remember, the stock was valued at $38 in the deal, still 2x the current trading price), Q2 looked fine even though the stock sold off the day after.
ARAY...I admit I need to look closer at fiscal Q4. But the case was that the spring sell-off was kind of illogical, and the stock was at $3.50 for three months before that.
Thank you
thanks so much for joining! hopefully we can make this a regular thing
Any thoughts on the merger offer between APP and Unity. Seems a bit ambitious for APP to take on and would require a lot of debt?
Glad you asked that, I was thinking the same thing.
I don't like it at all, for several reasons. First, U stock was down 75%-ish when AppLovin made the offer. If Unity takes the offer, then what the heck is going on where they're willing to try and convince their shareholders to do a merger that far off the highs?
Second, I think it suggests that AppLovin is legitimately worried about a Unity-IronSource tie-up.
Third, I think you're absolutely right that it's a bit ambitious, to put it mildly.
I hate that APP was the first idea - obviously, it hasn't played out well. It's one I've really been chewing on over the past couple of days in terms of trimming or exiting. I don't like the Unity stuff, the lower guidance in Games is a minor problem in terms of valuation, and it worries me that APP is missing out on this rally. To the point below, trying to look at it with fresh eyes...at the least it might go in the "too hard" pile for a while.
Unity Board already rejected the offer
Let's start with the process one...on my end, yes, I run screens fairly regularly. Been doing that more in the topsy-turvy market of 2022 than I might otherwise. Certainly in the spring was curious as to what stocks avoided the downdraft — or really got punished even though they weren't quite as speculative as some of the big decliners (COIN, CVNA, UPST, etc.) during that stretch. More recently, tried to look at what stocks have missed out on the rally and why that might be.
Obviously, both screens have anchoring bias problems, and you want to make sure you're looking at both sides. If a stock is holding up in April, that's probably a good sign. But off the top of my head NATH has been an excellent pick , and that was one (at the beginning of May) where the screen showed a stock that was down big even though its prospects hadn't changed.
But NATH also highlights another fact: I've been doing this quite a while, and mostly in the small- to mid-cap space. So I knew NATH pretty well to begin with. I've probably done a deep or deep-ish dive on 500-plus companies at this point over 11 years.
In fact, four of our best longs — NATH, AGS, NX, and NGMS — I already knew to some extent. The first three I'd owned before. (Of course I also knew FLWS and ABM, so it's not foolproof.)
I also run screens. But Vince is right that they don't always lead you down the right path. Sometimes the data is not accurate enough. Also, if you base your screen on value or growth, you can end up looking at the same names over and over again. So it's good to mix the screens up from time to time.
About a year ago I went through all the stocks on Finviz.com and made a list of all the names that I know a bit about and feel comfortable with. I think it's best to start with companies that you know a bit about rather than jumping in and researching some company you don't have a clue about such as a biotech stock. If you read an earnings report or annual report and it's a real slog its usually best to put it aside.
It's tough to find good screens on fundamental measures besides price, precisely because of the data problem. There are some good tools in terms of ROIC or things like that, but you really have to remember that you're "screening" for good opportunities that need more research, not "finding" good opportunities
Thanks for joining us on this AMA. Here's a question from Jin Daikoku @jdaikoku on Twitter:
I’d like to hear about your process in general. You guys sometimes write about things I’ve never heard of. E.g. Are you running screens? How many stones are you turning over before you find something you like?
Do you usually have a timeframe in mind when you take up a new position, in terms of when to exit?
Otherwise, how do you decide when to sell?
Please see my answer above in response to Vince, thanks.