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    Stocks - Oil stocks - the time is now

    August 23, 2020

    Stocks - Oil stocks - the time is now

    Oil stocks - the time is now

    Posted: 22 Aug 2020 10:43 PM PDT

    Hello there

    I posted about 6 weeks ago about defense being undervalued and they've climbed 15-20% since then (besides HII which completely whiffed earnings). Hope you hopped on. Now I am now starting to see value in the oil sector(s). The June high and subsequent re-crash for oil industry coincided directly with the new covid case rate picking up. With covid cases declining and oil stocks generally trading in ranges for over a month now, I present my case for a break in those ranges

    There are a couple of tailwinds that are happening right now for WTI:

    Which all support WTI prices in the coming weeks. Should be noted that rig counts have continued to lows, however last week was the first week in a long time that a few rigs came back online, which will add to the inventory. How much, I am not sure. You can see from Baker Hughes' rig count that we added 10 rigs, but are still down a net of 662 rigs from last year. Next we can take a look at the EIA data for some more insight into what current inventories are like:

    • 512M barrels of crude, 15% above average. Peak was 540M barrels on June 19th
    • 244M barrels of gasoline, 7% above average. Peak was before covid due to build over the winter
    • 178M barrels of distillates, 24% above average. Peak was 180M barrels on July 31st
    • Refinery inputs at 14.5M barrels, low was 12.4M barrels on May 13th
    • Refinery rates at 81%. At the low on April 22nd it was at 67%, normally around 95%.
    • WTI is trading in the $42-43 range, with the low being negative due to the contract rollover situation back in the Spring

    The last several EIA reports have been good in general – drawing down of products, with two weeks in a row of fantastic gasoline draw down.

    What's my point here? The takeaway should be this: the worst is over and it seems we're about halfway recovered. Now is the best chance for a while to get beaten up value stocks at a discount, as the industry recovers and conditions for the crash are resolving

    Right now cyclicals have been beaten down to Earth's core as tech goes up and up. Cyclicals and value generally outperform in a market recovery and I expect a rotation at some point, strengthened by a combination of inventory drops making headlines, covid cases going down, and a general resumption of normal. Any stimulus would be big news for these beaten down stocks as well

    Worried about a Democratic administration? Unlike the defense stocks I had previously looked at, I think it's a real issue for this industry. The Democratic platform calls out removing tax breaks for oil and gas companies while adding environmental regulations. It's weird that big tech has been climbing – companies like Amazon, Apple, Facebook etc. that are known tax avoiders and privacy usurpers seem like prime candidates to have a 'tax bill fear' from the Dem's closing of tax avoidance legislation and future lawsuits. I haven't seen any hints of this in the market, so I am going to assume this is not considered a big deal by investors. Environmental regulations should be, however

    However, I still believe these low valuations are still too low, even with headwinds. Some of the majors have already been adjusting (Shell in particular) and refineries like Valero already have strong renewable fuels segments; Phillips 66 recently announced plans to build the biggest renewable diesel refinery in the world

    What am I looking at in particular?

    Right now, refineries have the best value to me. PSX is criminally undervalued with a safe dividend. VLO is another that is set for strong performance. MPC has a strong position after its Speedway asset sale, but I would rank PSX>VLO>MPC at this point for value.

    • PSX target price: ~$82, sitting currently at ~$61
    • VLO target price: ~$71-72, sitting currently at ~$52.50

    From a producer standpoint, CVX and COP are both fundamentally solid (I prefer COP at this point). RDS is the closest its been to it's covid low and is one of the leading majors in transitioning off oil. It's been beaten down since losing its dividend but I can only assume it will be back. I'm not a fan of XOM going forward, but right now it's at the low of the range it's been confined in and wouldn't be a bad temporary pickup. FANG / EOG / PXD aren't bad pickups either

    PS – stay away from OXY. It's very clear they're going to continue to issue shares until they're through their debt and the pummeling is well deserved. It was popular for a while, not sure how it's still viewed, just stay away

    TLDR; buy refineries and the producers worth buying that aren't drowning in debt or have terrible assets

    Disclosure: I have a large position in PSX calls

    submitted by /u/dweeegs
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    Beyond Meat (BYND) fundamental analysis with my 2025 price targets. (DD)

    Posted: 23 Aug 2020 12:46 PM PDT

    I've seen a lot of bullish and bearish talk on Beyond Meat on this sub and I decided to do a deep dive into the company's fundaments. It's a cool company with a bold vision and I hope that this analysis provides value for some people.

    NOTE I own a few shares of BYND and I do not recommend you buy without doing your own research

    Reasons for plant based meat market growth

    1. Consumer behavior is changing along with worries of beef consumption due to climate change.

    2. Increasing awareness of health benefits provided by plant based meat.

    3. Potential for lower prices due to economies of scale as plant-based meat industry grows

    4. Logical economic efficiency in plant-based meat production versus animal based meat.

    Plant based: Agriculture → meat

    Animal based: Agriculture → animal → meat

    Reasons why Beyond Meat will lead the plant based meat industry

    1. Current market leader, incredible growth numbers and market share gains over time, despite traditional meat companies starting plant programs.

    2. Strategic partnerships with businesses such as Del Taco, Dunkin, Carl's Jr, Subway, Denny's, Hardees, TGI Fridays, KFC, Kroger, WholeFoods, Starbucks, Sam's Club, Costco, Target, Publix, Walmart & many more

    3. Strong management team. Ethan Brown is a charismatic, visionary CEO.

    4. Beyond is the most recognized plant-based meat brand in the U.S. According to the most recent conference call, 5% of U.S. households purchased Beyond Meat products (Up 33% from January) and the repeat purchase rate rose to 50%, from 45% from January.

    5. Beyond has seen significant growth in China, with their launch into Starbucks, Yum Brands China, and grocery locations such as Freshippo (operated by Alibaba)

    6. 7% of revenue currently goes towards R&D in order to ride the lowering cost curve towards lower prices than animal based meat.

    7. Management aims for the start of 2024 to have lower price than animal based meat in one of beef, pork or poultry.

    Risks and potential downfalls

    1. Beyond's brand name could be tarnished and cause them to lose market share.

    2. Legacy meat companies can outspend Beyond and take market share of plant based meat future

    3. Consumers could be less receptive to plant based meat and climate change/health benefits could be seen as overblown.

    4. Beyond isn't able to innovate enough to lower costs & prices in line with animal based meat

    5. Studies come out showing Beyond's products have adverse health effects. (Despite the recent University of Michigan study showing the health benefits of Beyond)

    6. Plant based market never overtakes animal based market (3 & 4)

    7. Plant based meat becomes comoticized and Beyond is unable to become consistently profitable.

    Price Targets (5 year timeline)

    1. Current market cap of $7.9 billion, compared with Tyson Foods' $24 billion (3X)

    2. Current sales estimate of $500 million expected 2020 compared with Tyson's $43 billion (86X). Revenue is best measure of valuation due to high growth

    3. 2023 sales estimate of $1.23 billion compared with Tyson's $45 billion expected (assuming linear growth). (36X).

    4. 2023 sales estimates could easily be much higher than 1.23 billion. Especially if costs & prices keep declining + more strategic partnerships develop. I'm estimating sales closer to $2 billion in my bull case. This would mean a P/S ratio of 4.

    5. If the P/S ratio is around 15 in 2023, Beyond would be undervalued by 3.75X in 2023.

    Bull Case: $804 price target (in 2025)

    P/S of 10, Revenue of $5 billion, 58.5% annual revenue growth

    1) Total plant based meat market size rises from 12.1 billion in 2019 to 100 billion in 2025 (from 0.605% to 5% of global meat market)

    • Price of plant based meat is lower than that of animal based meat in the chicken, poultry and beef market (management target is for one of these markets by 2024).

    • Climate change & health concerns drastically push demand higher, government incentives are also a possibility under a more progressive 2024 legislation.

    2) Beyond's 2.5% 2019 global market share in the plant based meat market rises to 5% market share in 2025.

    • More big time strategic partnerships with major foodservice companies (possibly McDonalds)

    • Brand penetration continues to increase

    • Internationally distribution network expands

    • Substantial expansion into China and Southeast Asia

    • Competitors fail to innovate at the same rate of Beyond and have higher prices than Beyond

    3) Price/Sales ratio of 10, implying high future growth, but a lower rate than the 58.5% annual growth rate from the last 5 years (2020-2025).

    • Their current price/sales ratio is 19.5

    • Beyond deserves a much higher P/S ratio than traditional meat companies. Their current gross margin of 35% is three times greater than Tyson 12% gross margin.

    • Net profit margin will increase over time as they leverage economies of scale with the growth of their operation.

    Median Case: $385 price target (in 2025)

    P/S of 10, Revenue of $2.4 billion, 37% annual revenue growth

    1) Total plant based market size rises from 12.1 billion in 2019 to 60 billion in 2025. (from 0.605% to 3% of global meat market)

    • Plant based meat is lower than that of animal based meat in one of the chicken, poultry or pork markets. (management target is for one of these markets by 2024).

    • Climate change and health concerns increase demand moderately over time, governments don't intervene in market pricing with subsidies

    2) Beyond's 2.5% 2019 market share in the plant based meat market rises to 4% market share in 2025.

    • More big time strategic partnerships with major foodservice companies (possibly McDonalds)

    • Brand recognition continues to increase

    • Internationally distribution network expands

    • Expansion into China grows, but not as quickly

    • Competitors fail to innovate at the same rate of Beyond and have higher prices than Beyond

    3) Price/Sales ratio of 10, implying high future growth, but a lower rate than the 37% annual rate from the last 5 years (2020-2025).

    • Their current price/sales ratio is 19.5

    • Beyond deserves a much higher P/S ratio than traditional meat companies. Their current gross margin of 35% is three times greater than Tyson 12% gross margin.

    Bear Case: $108 price target (in 2025)

    7.5 P/S, $900 million revenue, 12.5% annual revenue growth

    1) Total plant based market size rises from 12.1 billion in 2019 to 30 billion in 2025. ((from 0.605% to 1.5% of global meat market)

    • Prices of Beyond Meat's plant based products are slightly above that of animal based products

    • Climate change and health benefits don't have a significant increase on demand

    2) Beyond's 2.5% 2019 market share in the plant based meat market rises slightly to 3% market share in 2025.

    • Beyond loses traction in increasing partnerships and strikes out on companies such as McDonalds.

    • Brand recognition is not a significant factor

    • International growth slows down

    • Beyond strikes out in China

    • Competition increases and stunts Beyond's market share growth

    3) Price/Sales ratio of 7.5, implying slowing future growth.

    • The 12.5% annual growth rate over the last five years shows signs of slowing down.

    • Although Beyond still has a higher P/S ratio compared to traditional meat companies, a slowing growth rate limits their potential.

    • The 3X gross margin compared to Tyson is the reason why the P/S ratio isn't lower than 7.5.

    I hope you all learn something from this post! Any other Beyond shareholders or Beyond haters out there?

    (Reposted due to weird formatting)

    submitted by /u/Evil____
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    NIO: Revenue Could Skyrocket From Intel Robotaxis Alone (NYSE:NIO)

    Posted: 22 Aug 2020 11:31 PM PDT

    NIO will be the first customer of Intel's Mobileye self-driving system. Moreover, NIO will make a robotaxi version specifically for Mobileye, which the company would purchase from NIO. This would be beneficial for Mobileye, as it can purchase these robotaxis with its own SDS, instead of having to retrofit other vehicles with its SDS. NIO - Mobileye Collaboration

    submitted by /u/rushpro808
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    Amazon would support bill holding online retailers liable for injuries under certain conditions

    Posted: 23 Aug 2020 06:17 AM PDT

    https://www.foxbusiness.com/money/amazon-liability-retail-ab-3262-california

    Amazon said it would conditionally support a California bill that holds online marketplaces strictly liable for defective products after a California appeals court ruled the company should be held to a higher standard of liability.

    Nearly 60% of products sold on Amazon come from third-party sellers, the company said.

    submitted by /u/coolcomfort123
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    If all goes well Virgin Galactic SPCE will be generating $590 million per year of revenue.

    Posted: 23 Aug 2020 08:25 AM PDT

    https://www.sec.gov/Archives/edgar/data/1706946/000114420419034053/tv524921_ex99-2.htm

    Virgin Galactic should be able to generate $590 million in revenue by flying 1560 people to sub low earth orbit per year on expenses of $158 million per year, generating $431 million in gross profit per year by 2023.

    submitted by /u/DoIAnnoyYouBadly
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    The market doesn’t account for unexpected innovation. Which is why ARKK is currently the best ETF today.

    Posted: 23 Aug 2020 12:56 PM PDT

    Something I noticed, when Amazon released AWS the value of the stock began increasing ten fold.

    When Tesla released the cybertruck, and announced battery day the stock shot up ten fold.

    When Square announced a new addition to their ecosystem such as using ML to take out loans and opening a real bank, the stock also increased tremendously.

    It seems that investing in good vertically integrated companies, with great CEOs, that have shown a history of being able to suddenly announce unexpected innovations will end up giving 10-100x returns. Which is what TSLA, AMZN and SQ are currently doing. Which is what AAPL used to do under Steve Jobs.

    This is also why Cathy Wood's investment thesis is amazing. Because not only does her ETFs contain good companies, led by good CEOs, but they also tend to innovate as well.

    submitted by /u/Okmanl
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    RKT upcoming potential

    Posted: 23 Aug 2020 11:45 AM PDT

    As we all know RKT is growing moderately towards its upcoming earnings. I think it is September 2. Id like to hear everyones thoughts on how the stock performs this week, as well as after September 2.

    submitted by /u/ech0713
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    Why are leveraged equities like SPXL and TQQQ not considered good long-term holds?

    Posted: 23 Aug 2020 12:46 AM PDT

    As I understand it, TQQQ has the same holdings as QQQ. Sure there is a risk that you lose 3x more money if TQQQ goes down, but QQQ is widely considered a safe long hold. So why not hold TQQQ and make 3x the gains? Thank you in advance.

    submitted by /u/NeoQuaker1
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    Can We Talk About NIO Long-Term Debt?

    Posted: 23 Aug 2020 05:16 AM PDT

    NIO is involved with design, manufacture, and sale of electric vehicles, driving innovations in next generation technologies in connectivity, autonomous driving and artificial intelligence.

    I was taking a look at their financials on Yahoo Finance today and noticed their long-term debt in 2018 was 1.2 billion and then in 2019 that debt turned into 7.15 billion.

    Does anyone know why that big jump happened in debt?

    submitted by /u/Austins-Reddit
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    Worthy buying? SE and OTRK long term potential

    Posted: 23 Aug 2020 11:20 AM PDT

    Are these companies worth buying and hold for the next 3-5 yrs, or they are more of a trade?

    unfortunately, i miss the rally for SE, but OTRK had a recent nonconvertible perpetual preferred stock.

    ​

    Does SE has the potential to be MELI growth projectory?

    submitted by /u/You_Apart
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    VXX before elections

    Posted: 23 Aug 2020 09:39 AM PDT

    Is it a good ideea to invest into a volatility index before elections? I've noticed from the past years that these stocks ussually spike during elections, then quickly fall back. My logic is that during uncertain times such as these, the chance of it happening is even higher. Does this make a good hit and run?

    submitted by /u/BulldogDog
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    “Now is the time to buy Oil stocks” ?

    Posted: 23 Aug 2020 12:27 PM PDT

    i found this a very insightful read: https://www.bloomberg.com/news/articles/2020-08-16/oil-companies-wonder-if-it-s-worth-looking-for-oil-anymore

    Oil may bump up short term, but it really does seem like even these companies may never see profitability the way they did pre-COVID. We don't even know for sure if we'll have a working vaccine by the end of the year. I remember tankers circling in the ocean with nowhere to unload their tanks when COVID was slamming the world. The supply is huge.

    It does take time to build a new energy grid, but I think the whole "we made 5 years of progress in six months" thing could happen with the alternative energy sector. Obviously not in six months, but definitely faster than a lot of skeptics seem to think. The job creation alone would be huge.

    If you're waiting around for a bump and sell more power to ya i guess. I'm just not totally on board with the idea y'all are gonna make yourselves mini oil monoliths when these companies still aren't sure if they're even gonna get more oil lol.

    submitted by /u/ratshow
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    Stocks News Tracking

    Posted: 23 Aug 2020 09:37 AM PDT

    Would anyone be interested in a using a web app for finding and notifying you with the latest news on specific stocks you are interested in following. Basically an RSS feed collating financial news from the stocks you want to follow. The app could send push notifications to your phone if desired for certain stocks. I have found trying to swing trade the vaccine frontrunners I've spent a LOT of time refreshing google.

    Been getting into both trading and programming during lockdown and would like to gauge whether this is something people may find useful. Apologies if this is already a thing, probably will build this as a project for myself anyway but would like to see what people think.

    Cheers

    submitted by /u/iTAMEi
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    Papa Johns (PZZA) vs Dominos (DPZ)

    Posted: 23 Aug 2020 09:46 AM PDT

    Do you guys think PZZA will ever reach the same Market Cap and same value as DPZ?

    Also do you guys think that trends with DPZ will affect trends for PZZA or can PZZA branch out ? What I mean by that is that if DPZ does poorly will there be a same correlation for PZZA? Thoughts?

    I do not have any shares of either but I was thinking of purchasing a few shares of PZZA with confidence that they'll grow in the future like DPZ is.

    submitted by /u/philltastic1
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    Trump Treatment Announcement

    Posted: 23 Aug 2020 10:52 AM PDT

    Amazon or mercadolibre?

    Posted: 23 Aug 2020 02:23 PM PDT

    I have a feeling that i missed amazon train and would still like to get some non-chinese e-commerce stock( i own baba) opinions about meli and is it still worth it to get in amazon? I saw that e-commerce is still in the "early days in south america, so im leaning towards meli.

    submitted by /u/Quirky-Touch7616
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    Are these good picks?

    Posted: 23 Aug 2020 01:57 PM PDT

    BABA, AAPL, MSFT, and NVDA

    I'm aware some(or all) of these might be overvalued, but this is long term and the plan is to hold for awhile.

    Just wondering if now is the time to buy or if anyone knows better options.

    submitted by /u/Quin1617
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    Any downside to buying after split record date?

    Posted: 23 Aug 2020 01:25 PM PDT

    Is there any downside or implication for the average buyer to buying after the record date of a split, but before the actual split date? Do any brokerages charge anything extra if you bought after the record date or something as opposed to before the record date? I don't think it matters, but just want to make sure.

    submitted by /u/investortrade
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    Thoughts on E-trade?

    Posted: 23 Aug 2020 01:10 PM PDT

    Seriously thinking of moving from Fidelity to E-trade. Fidelity isn't great for complex options trades and they haven't been giving me IPO allotments when I request them.

    Two questions for anyone with experience with E trade and the other major platforms?

    1. How does etrade stack up to the others? Especially for complex options trades and active trading?

    2. What has your experience been with getting IPO allotments when you submit your indication of interest?

    submitted by /u/angrypuppy35
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    What are your favorite “no brainer” small & mid-cap stocks for the future.

    Posted: 23 Aug 2020 12:43 PM PDT

    Some of my favorite stocks for the future are $PBF, $PBFX, $GOOD and $SSL. All three stocks were trading in (roughly) the $20s prior to COVID-19 and the oil crash. PBF & PBFX also have a remarkable dividend track record.

    List your favorites, I'd love to hear them!

    submitted by /u/XIST-R-2-S
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    OKTA earnings next week. Is it a good buy?

    Posted: 23 Aug 2020 12:27 PM PDT

    I have been eyeing on OKTA and i'm confused if I should buy OKTA or AYX. AYX is at low and it maybe the right time to jump in. What is better?

    submitted by /u/Ijustwantoknowmore
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