By Jeffrey Cohen, Investment Advisor Representative US Advanced Computing Infrastructure Inc. May 20, 2022 It occurs to me that I will go to extraordinary lengths to avoid finishing a white paper, calling or writing potential clients, or 'gasp' programming our model. I will perform fundamental analysis on stocks. I look for signs that 'this time is different' when I know it is the same. That the laws of finance and economics are as constant and true as the laws of physics and behavioral science.
Yesterday I researched a MEME stock named Big Bear AI. This is a government contractor to the DoD and other agencies that require secure decision support services and software. This is like our business, except they have ongoing projects and we are entering the field. This company has a cost and revenue model that yields no economic profit. This was true before they went public, and is now slightly worse off due to the costs of being a public company. BTW, great mission and we support them 100%, but we cannot justify their current stock price at $10. Yesterday we also researched Vroom, a used car dealer and eCommerce platform that is moving into used car financing (as a keeper of the paper on their books). The due diligence was not positive for us, and we said so on Twitter. I heard from an analyst that I was likely wrong and they shared a more optimistic point of view. I responded with the bare bones of our analysis. This unfortunately is not a buy for us at the current price of $1.50. Today, we looked at how their bonds were trading. They were clever and issued 0.75% bonds. This morning they yield 29.47%. This company spent $417M of their cash last quarter on acquisitions, losing money in operations and the like. Imagine if they would have bought back their debt which last traded at $33.80. What a great way to increase shareholder equity! Well, they didn't do that...the $417M is gone...and now they need to find room on their balance sheet to hold consumer used car loans, as a borrowing cost of 29.47%. Today we looked at Party City Holdco. We like this business. They sell party supplies, costumes, and in a word, fun. They do about 1/4 wholesale and 3/4 retail in large US stores. My daughter worked there after school one year. Cool place. The stock is down to $1.18 today and we cannot justify the purchase based on current performance. They owe too much money $1.346.7B in long-term obligations along with other debt. The interest payments will be unbearable, especially as their core business operations are now unprofitable due to inflation. Adios Mios, and their debt trades at $74 for every $100 of debt yielding 18.732%. They redid their financing so they only owe ~$23M in 2023 which they can likely pay off, then have a breathing spell until 2025. That is not what we are worried about. Assuming they can pay their debt, tighten their operations, make their interest payments, and carry on, how likely is it that trade partners will finance new inventory? Once their trading partners stop extending seasonal credit, then they have to make use of their $135M in available borrowing capacity (SEC FILING HERE) which won't last long. We hope they make it, but cannot invest our money in their stock. We are still hopeless romantics with money invested in a biotechnology dream of the company that cures cancer, solves obesity, and helps those with chronic skin rashes due to inflammation. Everyone has to have at least one dream, and ours is here in Corbus Pharmaceuticals. I think this stock is equally likely to be $1.00 as it is to be delisted by 12/31/2022. It trades at $0.33 as we write this. Now, what we realize is that there are stocks of companies that make a profit which we should be analyzing. They may not have a huge Twitter following and we may not get MEMEs or .GIFs posted with apes or Leonardo DiCaprio. This is disappointing to us, we like seeing those. To be continued while we analyze one more 'troubled' company. So far, so good actually.
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In today's premarket video, we discuss $BBAI in detail, and we review the market. The open for US Equities looks strong based on global markets advancing and the futures.
We discuss the strength in fixed income, although the same pattern in stocks where lows go lower. So, continue to watch 'falling knives' but don't try to catch them yet. FOMO is a cost effective strategy, as your downtrodden stocks are more likely to be cheaper in a week or two.
We end our video sharing the three 'best' portfolios to own based on our model run last night. These would be purchased and held equally (say $100 apiece). These will do well today if the market stays green and rises on this options expiration day.
We also look at the variance of the market price action. $SPY which is the S&P 500 Equity Index has rising variance. It is 1.25 x 10-4. The overall set of 2000+ stocks with positive fundamentals has a price variance of 1.37 x 10-4. The stocks with weaker fundamentals have a variance of 4.2 x 10-4. This is quick, anecdotal evidence in the data that says to buy and hold stocks in companies that are profitable and perform well. You can still make profit by investing in turn-around stories but it is easier, calmer, and more of a hands-off strategy to invest in strong, sound, profitable companies which generate strong cash flows from operations. It is funny that we feel so 'stodgy' or 'old' when we say this publicly. However, it is true. You sleep better at night when your money is invested in companies that make a profit, generate cash from their operations, and pass all the other data validation steps we have in place to help ensure investor protections and liquidity. Good luck to everyone in the market today. Jeff
Remember, if you watch to the end you will see our three portfolios that were picked by our CQNS model to go up today if the market stays green. They should outperform the $SPY over time even if the markets continue to stay choppy (lower risk and higher expected return).
By Jeffrey Cohen, Investment Advisor Representative US Advanced Computing Infrastructure Inc. May 20, 2022 It feels like we are on the eve of a special day today. It is Friday, options on individual stocks expire, and we are finishing off a difficult week in the markets. There is little news of significance other than inflation rages on, and our US Federal Government is taking a very cautious approach to making changes.
Yesterday, we stepped into the world of MEME stocks and the lure of easy money. After spending a day doing research we realize that the stocks being pumped do not have fundamental values to support increased prices. They are being promoted on the belief of a brighter future, or the lure of class struggle, or truly meaningless tweets with funny pictures. Today is a new day. We tightened the filters on our analysis to incorporate even stronger fundamental stocks. No, AMC Entertainment is not worth $13.06 per share. We would pay about $2/share.
Here are the reasons why, and a video where we discuss it openly and frankly. AMC: 516,820,595 shares outstanding Their fundamental movie business loses money at Q1 volumes.
I have a Gold and Silver mine to sell you… AMC purchased 23.4M shares of HYMC and warrants (one of each). A week before the purchase the shares were worth about $0.30, or ~70% less expensive (not including the warrant which is now trading at $0.25). This is a terrible purchase. Hycroft runs an open pit gold and silver mine in Nevada that loses money. They have a shareholder’s equity deficit of either $2.2B (total) or $4.7B (tangible assets only). They have some timing issues with their 2023 liabilities as well. They spent $300M in CFFO in Q1 2022, and about the same amount in Q1 2021. Their operations bleed cash. We know that as labor costs increase, the losses will be higher unless they can raise movie ticket prices. There is an awfully large amount of debt, around $5.6 Billion Dollars. Maturities are owed in 2022, and start up significantly in 2023, 2024 and 2025. They issued some new 2029 debt (7.5% interest) to pay back earlier maturing debt. 7.5% cash interest = $70M / year in interest expense. This is only ~20% of their debt. Some of their debt costs much more in interest, and some a little less. They have $1.2B in liquidity, but their operations burn $300M / quarter. Simplistically this gives them 4 quarters before they need to borrow more money, or sell more stock. Their business is seasonal, so this isn't quite right, but it is close enough. Maybe they have 6 quarters because Summer is a good time for movies. In summary: Negative net worth Negative earnings and cash flow. Large-scale debt they cannot afford to pay back Necessary to dilute the equity further to cover losses and maturing debt. Investments in an open pit silver and gold mine that loses money (in Nevada). This company is significantly over-priced at $13.00. If it were our money, we would pay $2.00 for the stock. We would continue to streamline operations, increase viewership, and focus on reducing the $5.6B in debt. UPDATE: The next day AMC Entertainment is trading at $11.81 when we checked at ~2pm ET. We are not surprised. Only another $9.81 more to fall to hit our price target of $2.00. There are many more new lows than new highs across corporate fixed income and US equities.
This means that if a stock is down, it is likely to keep falling lower. Few stocks are reaching new highs. So, FOMO is a cost effective strategy still applies. If you like a down-trodden stock and feel you have to have it. Write it down, do some more due diligence, then wait 1-2 weeks. It will likely be cheaper then. If not, there will be many other cheap stocks to choose from. GLTA
$CSCO down 13.4% and $HPE down 6% in sympathy. Cisco Systems saw flat revenue, 7% GAAP earnings growth, and tight execution. Weaker forward guidance (rev down 1 to 5.5% in Q4). sec.gov/Archives/edgar… No news from HP Enterprise.
May 19, 2022 Jeffrey Cohen, Investment Advisor Representative US Advanced Computing Infrastructure, Inc.
We are looking for potential runners today (the bottom line) as well as doing a top-line market scan. Top-line: Yield curve still positively sloped, but yields are down. Short UST bills yield less, lowers bank account interest. 30 year UST bonds had a pretty big drop, almost 10 basis points or 0.1% Corporate fixed income: Strong day yesterday for investment grade. More new lows than new highs, dramatically more. US Dollar has stabilized with the Euro. Euro/Dollar has been flat lately at 105.36 No material news. New jobless claims up slightly to 218k. We expect this number to spike if recessionary fears come to reality. As companies have lower profitability, they will layoff employees. Futures for US Equities more RED than when we started the video, over 1% down for the three main indices, SPY, IWM and QQQ. High VIX at 32.30, and it is up pre market. Fear gauge is high. Gasoline came way down. $3.57, or down $0.43 in the past few days. This is good for US consumers, for Main Street, but not sure how this happens. Europe and Asian markets were down pre market. Lots of markets down 2%. China mainland was up 0.3%. Jakarta, Indonesia has been strong the past few days in a relatively tight range. Worth a look. We think big money is putting the puts back on after having taken them off earlier this week. Commodity futures are down in energy and cotton. Good news for the regular investor. Gold, silver, platinum are up. Bond futures up (yields down) Overall: Equity Factors, growth was down more than value yesterday. Less to fall, less belief in stock prices for value than growth. Tech, consumer discretionary, and consumer staples are all down 5% to 10% yesterday. Growth is down. Melvin Capital shut down voluntarily, they were running MEME stocks. We expect other money managers will have to drop out as well, as equities and fixed income drop. This type of volatility is not good for money managers who are caught on the back foot. Crypto looked ok, up 1%. Wale Tokens are down 50% since we started following them. You can buy 20 billion wale tokens for less than $4,000. The Bottom Line: High Volume, Low Price: Search for money losers on volume up (4x average volume) and price down more than 66.66% vs. the 253 day simple moving average. Down and active. No academic justification for this filter. We found five to look at. $EMBK $CMRX $ENDP $BRDS $OTMO $BBAI Big Bear AI BBAI no shares to borrow Up on heavy naked short volume Last 2 days Volume up yesterday, up 10x On the Bottom Line BBIG Vinco Ventures Longs loaded up heavily yesterday. Zero shares to borrow On the Bottom Line AMC AMC Entertainment Holdings Definitely an imbalance of shorts to longs. AMC GO APES! 13 short days 2 even 3 out of 5 accumulation days Moderated yesterday. Volume is up a little Very few shares to short On the Bottom Line? $LWLG Lightwave Logic, Inc. Being accumulated. Worst stock in the model, too volatile without anything behind it. Very little volume. Sleepy. Accumulation phase for this stock. 300k shares available to borrow. In accumulation phase, 300k shares available to borrow Not a lot of volume. No conviction. Price is towards the bottom. On the Bottom Line? $BRDS Bird Global, Inc. It’s a SPAC that started at $10. Big shorts 2 days ago. Heavy short on very light volume. $BRDS Only 55k shares available to borrow to short. This stock has seen tremendous selling pressures. BRDS SPAC from $10 to .78 This stock has significant short pressure for the past two weeks and the stock is down 92.2% from the IPO price. On accumulation volume, short short short 55k shares available to short 280,949,068 shares fully diluted. 270M basic shares. They earned 4 cents and grew their business. Borrowing money and used up cash. They are cash flow negative. Bird is a micro-mobility company engaged in delivering electric transportation solutions for short distances. The Company partners with cities to bring lightweight, electric vehicles to residents and visitors in an effort to replace car trips by providing an alternative sustainable transportation option. Bird’s offerings include its core vehicle-sharing business and operations (“Sharing”), and sales of Bird-designed vehicles for personal use (“Product Sales”). They have 240M shares of class A (1 vote) and 34.5M shares of Class X (20 votes per share). Since our first shared ride in 2017, we have facilitated over 140 million trips on Bird vehicles through our vehicle -sharing business. Today, Bird offers riders an on-demand, affordable, and cleaner alternative for their short-range mobility needs in over 400 cities worldwide. We believe that Bird is uniquely positioned to capture share in this market due to (i) our founder-led, visionary management team, (ii) our advanced technology and data platform, (iii) aligned incentives in the mutually beneficial operating model in which we utilize third-party logistics providers (“Fleet Managers”) to store, charge, maintain, and repair our vehicles, and (iv) our strong year-round unit economics. On the Bottom Line VRM Vroom Inc. is up 4% on average volume. Short volume has been mixed, long, then short, then long, then short then long. No commitment. Big volume days were flat, then short yesterday on typical volume. Positive gathering yesterday, accumulation. Almost no shorts left. Up 2.5% Close to a bottom. Almost nothing available to short. Probably going to run. 45k shares to borrow short now. VRM (to $3) from $1.36 Short volume dropped at this level. Looks like minimal volume to acquire it. Big load on May 10, smaller loads May 13 - 16. On the Bottom Line $MKD Molecular Data Inc., just announced another 100M shares in ADR for a maximum offering price of $0.05 per share. This is dilution. Could be to enable trading and liquidity in the stock. MKD just had 4 distribution days where shorts were 55% up to 60% short volume. Very high volume on 5/17. I wonder if someone knew the 100M ADRs were coming, as 37M shares traded in the FINRA dark pool. Probably yes, they shorted forward. 350k shares now available to short, down from 2M in the past 30 minutes. This must have been shorted to the moon on the news of the dilution. Not on the Bottom Line due to dilution. Raw analysis: No Bottom Line assessment: $BKKT Bakkt Holdings, Inc. is in accumulation phase on lower volume. 6 days, and the last day was the weakest. 200k shares available to borrow. Stock is up 1% on low volume. $CRBP Corbus Pharmaceuticals is not at risk of a short squeeze. CRBP shares available to short rose from 900k to 1.3M. $RIBT Yesterday's thoughts. Looks poised for liftoff. Low of $0.30, then $0.40, now $0.72 on significant volume. Looks like the shorts piled in last week on volume, and yesterday was the first day of even trade. 800k shares available to short into AH. 30.58M market cap, 50.25M public float. Loses money. $INDO Indonesia Energy Corporation Limited Yesterday's thoughts. Big dark pool volume lately, and shorts > 50% the past 2 days on high volume. Low volume today $UPST Upstart UPST is down 6.5% on average volume. Closing things out. We are still red in all US equities. Run away…VIX is up, dollar down, gold and silver up. Some of the stocks we looked at have a chance to run (either up or down). By: Jeffrey Cohen, Investment Advisor Representative US Advanced Computing Infrastructure, Inc. Today’s pre market action in US Equities
There are two stories to tell. Two markets. We normally work in the top-line market. The headlines. Macro-economics, money flows, fixed income, US equities, and look at the major indices (S&P 500, NASDAQ Composite and Russell 2000). Today, we also looked at the bottom end of the market. The stocks that are down, and trading higher and lower seemingly on emotion or inside baseball. There is more to that story as you will find out. Retail stocks are falling in pre market. Our CQNS UP model picked fewer stocks and we see a smaller edge. Our model ran very deep, reached equilibrium, and picked 7-10 stocks. Weakness in the markets. SPY at 404.60, and IWM at 181. WMT at 129.26. Twitter was negative this morning. Gasoline is down $0.06 to $0.08 since yesterday. Markets are flat to down globally. US dollar is ok, but USD/EUR is 105.3 and was as low as 103.9 recently. US dollar is strong. Fixed Income (corporate) had a very bad day today. We found news. Retail sales update by the US Census:
Bureau of Labor Statistics publishes the Consumer Price Index. Energy is up 30%, and food is 9.4%, with overall inflation (all items) at 8.3%. Walmart $WMT Stock Price analysis Originally during this market correction, the discount retailers went up significantly. This seemed a safe place in the market. Walmart had flat number of transactions, with average ticket up 3%. However, earnings fell 23%, and Walmart lost $3.8B in cash flow from operations. Why, the cost of gasoline to transport goods is up, the price of goods themselves are up, and the cost of labor went up. Walmart lost ground vs. inflation, which means customers either substituted cheaper goods, or they bought fewer items. They cut back. Was Walmart a good buy this morning? Our answer: Is Walmart a good buy at $129.50? It might be, but the odds are that the price will drop further in the next 1-2 weeks. FOMO is a cost effective strategy in this market. It doesn’t hurt to wait before you buy a downtrodden stock. US dollar is up slightly, and the VIX is under 30. We expect a small move. God help us if we get a big move (when VIX is low). Crypto is down pre market, which means crypto-related stocks will be down too. Fixed Income Fixed Income is an important part of everyone’s portfolio and investment plan. Everyone over 18 years of age should hold some fixed income. The US Treasury yield curve looks healthy and upward sloping. Short-term money has lower rates, but longer-term debt (bonds) are getting cheaper, with higher yields. Corporate Issues Traded: 3:1 declines to advances 5:1 declines to advances IG High Yield and Convertibles were around 1:1. The highs to lows are still dramatically skewed to new lows. Corporate IG bonds 1:100 new high/low ratio. This is extreme. Fear of missing out (FOMO) is a cost effective strategy for down-trodden fixed income issues too. New lows beget new lows. It pays to wait for the stock and bond market crash to play out. Fixed income, corporate, investment grade was the worst performing grade yesterday. News of the day: First item of substance is negative. US Housing starts and permits plunge, down ~3% (0.2% in April, and -3.0% in March) This does not bode well for construction labor, lumber, and home improvement stores. This is partially due to inflation, partially due to mortgage prices, and partially due to Main Street weakness. COVID 19 is up in the US, but not dramatically. Trending higher. Global Markets: Asia was down, mostly. Europe is down. Turkish stock market is a model for equities in a country with high interest rates. Major US equity indices are up, generally, on lower volume these past few days. When markets rise on lower volume, it is a lack of conviction. Also, all three US indices (the ETFs) are down for the year (excluding dividends). Did you know $KKR has negative cash flow from operations. That’s super interesting. Same with $ARES Ares Management Corporation. Discount retailers: Target down 25% Dollar Tree down 6% Dollar General Costco Walmart All down pre-market. This is a Main Street bloodbath. QED Other pre-market industries: Trucking RED Semiconductors and Chips RED Money Managers RED Crypto and Mining RED The US indices are down pre-market (futures are down). We also checked out our ‘shitcos’ or stocks that have fallen significantly in this market. $AUTO Autoweb, we like the business. Going bankrupt or MEME: Good list today for shorting? BBAI BigBear.ai Holdings, Inc Low Volume, 100 shares available to short. Been unshortable for the past few days. Low volume today BBIG Vinco Ventures, Inc. High Volume: No shares available to short, solid volume, especially in FINRA dark pool. Today, it is running up 12%, and no ability to short it down. High volume today. INDO Indonesia Energy Corporation Limited Big dark pool volume lately, and shorts > 50% the past 2 days on high volume. Low volume today EAR RGC IMPP LWLG Lightwave Logic, Inc. Reasonable volume. Short available to borrow down to 200k from one million yesterday. Low volume today Overall strategy: Be careful in stocks today. Be careful. Don’t get drawn in by a stock that is down in price. By: Jeffrey Cohen, Investment Advisor Representative US Advanced Computing Infrastructure, Inc. May 17, 2022 The US Equities markets are set to open GREEN or up this morning. What do we see?
US retail sales data was ok, with month on month (MoM) sales up 1%. I could not tell whether these were real sales, so this could just be inflation at work. Car sales drove the increase, which is not good for general Main Street as these tend to be lumpy purchases. We saw dramatic inflation last night into this morning in food (wholesale food prices) and gasoline and oil are very high right now. Walmart is set to open down 6% to 136.72. Ouch, this is a big fall. It either means that investors want to be in specialty retail (e.g., mall shops) or that the discount shopper is in trouble. China looks to be having continued trouble with COVID, and there could be political concerns. Not sure we have salvation coming out of China for our US economy, or US equities, anytime soon. Nothing dramatic in the morning's news otherwise. Lots of street violence and shootings, which is bad but not necessarily relevant for equities. Ukraine is making gains against Russia, and Russia took Ukrainian soldiers prisoner. Looks to be a balanced day in the war. Bonds were interesting. We saw strength yesterday in corporate bonds at ~1.7 advance/decline in the investment grade category. High Yield and Convertables were ~ 1:1 advance to decline. New lows are still 25x new highs, but at least we saw strength. In US Treasuries, we see lower yields across the board. Long rates are not rising...the market is not ready to pick up rates. This is bullish. The VIX, or fear gauge, is down again. We had a period from April 25 to May 12 where the vix went above 30, and stayed there almost the whole time. Today it is back to 26, which is bullish for equities. Finally, one thing to remember. Friday is the day when many options expire. It is possible that what we are seeing is that many traders and money managers had BIG bets on the downside that expire on Friday, and they are selling or closing those positions. This morning's rally could be a removal of bearish or put bets. In closing, we looked at our canary in a coalmine industry sectors, and in almost every case almost every stock was trading higher in pre-market. This is not typical, nor is it accidental. People were making large, broad, bullish bets before the market opened. The market is now open, and let's see if that intention (or signaling) has been maintained. Good luck to all GLTA! By Jeffrey Cohen, Investment Advisor Representative US Advanced Computing Infrastructure, Inc. Food and energy prices rose dramatically today. This, along with a 2 or 4 cent increase in the wholesale price of gasoline today, means a much higher food bill for regular Americans. Think about sugar, wheat, orange juice, cocoa, cotton, coffee, lumber, gasoline, heating oil, natural gas, ethanol, pork and beef all becoming significantly more expensive in one day.
We need to fix this. When inflation is running at 8.5%, but coffee goes up 5.38% in one day, inflation is set to rise faster and farther than we expect. Most average Americans don't follow the futures markets and will only feel the sting of higher prices at their next grocery store visit. |
AuthorJeffrey Cohen, President and Investment Advisor Representative Archives
May 2022
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