Daily General Discussion and spitballin thread Investing |
- Daily General Discussion and spitballin thread
- Daily Advice Thread - All basic help or advice questions must be posted here.
- Breaking: US Senate votes to pass 1.9T pandemic relief bill, positive outlook on equities
- “We are not in a bubble” – Cathie Wood
- Some advice on corrections / recessions...
- AppHarvest deep thoughts. Worth $6 or $100. $APPH and $APPHW
- Small Cap Value vs S&P 500 (3, 5, and 10-year returns)
- Disruptive innovation versus broad market index funds
- SPACS, new engineering, and acronyms
| Daily General Discussion and spitballin thread Posted: 07 Mar 2021 02:01 AM PST Have a general question? Want to offer some commentary on markets? Maybe you would just like to throw out a neat fact that doesn't warrant a self post? Feel free to post here! This thread is for:
Keep in mind that this subreddit, and this thread, is not an appropriate venue for questions that should be directed towards your broker's customer support or google. If you would like to ask a question about your personal situation or if you are asking for advice please keep these posts in the daily advice thread as that thread is more well suited for those questions. Any posts that should be comments in this thread will likely be removed. [link] [comments]  | |||||||||||||||||||||||||||||||||||
| Daily Advice Thread - All basic help or advice questions must be posted here. Posted: 07 Mar 2021 02:00 AM PST If your question is "I have $10,000, what do I do?" or other "advice for my personal situation" questions, you should include relevant information, such as the following:
Please consider consulting our FAQ first - https://www.reddit.com/r/investing/wiki/faq And our side bar also has useful resources. Be aware that these answers are just opinions of Redditors and should be used as a starting point for your research. You should strongly consider seeing a registered financial rep before making any financial decisions! [link] [comments]  | |||||||||||||||||||||||||||||||||||
| Breaking: US Senate votes to pass 1.9T pandemic relief bill, positive outlook on equities Posted: 06 Mar 2021 12:53 PM PST The US Senate just passed the 1.9T pandemic relief bill after negotiating with a centrist Democrat for the final vote to break the 50-50 tie. After a month of a downtrend in equities, on Friday, markets rallied into the green. I expect that this bill will likely be a catalyst that kicks markets off next week further into green territory as more households, especially those who are making less than 70k per year can anticipate a 1400 check in the coming weeks [link] [comments]  | |||||||||||||||||||||||||||||||||||
| “We are not in a bubble” – Cathie Wood Posted: 06 Mar 2021 12:26 PM PST The following is my summary of Cathie Wood's thoughts on recent market volatility, as presented in her latest video on the Ark Invest YouTube channel (~42 min) – I strongly recommend you check it out. The minimum expected rate of return for a stock to enter an ark portfolio is 15% CAGR. Cathie contends that she sees the recent volatility as a gift to gain alpha over the intended 15% return in many of her high conviction names. She mentions that at Ark, they have a five year time horizon, and it is counter productive to compare its performance with a benchmark (like the s&p) over a shorter period. She further adds that many stocks in traditional indices today are a potential value trap, and that ark etfs "are a good hedge against broad based benchmarks." She reiterates that "we are not in a bubble" – and that the seeds of their 5 innovation platforms were planted in the dot com bubble, and are now ready for prime time, in a period of reality. Fear of a bubble likely stems from benchmark sensitivity and backward looking institutional investors. Furthermore, intuitions should be worried about their own strategies as "creative disruption will impact nearly 50% of the s&p500". To Cathie, interest rates going up suggest that 'real growth is going to pick up' – and that she understands the concern over her own stock picks potentially underperforming as a result. However, she believes that that the market has assumed that interest rates will stabilize at a 4 to 5% range - which inversed (1/4 or 1/5) gives a normalized p/e of 20 or 25; so markets didn't actually misprice assets to begin with. She thinks that nominal growth however, will not be at 4 to 5%, but instead around 2-3%, which can lead to greater valuation support for companies that can grow more rapidly. Rotation from growth to value was also expected on her part. She repeats that value will face massive headwinds going forward. Energy and financial stocks have done amazing in the past month - which is a good thing as the bull market is broadening out unlike the dot com bubble, where 'too much capital chased too few opportunities, too soon'. Energy and financial sectors booming will likely be short lived as they are both ripe for massive disruption. Source: https://youtu.be/Qb8uQSQi8bc [link] [comments]  | |||||||||||||||||||||||||||||||||||
| Some advice on corrections / recessions... Posted: 07 Mar 2021 03:03 AM PST There seems to be a lack of really solid advice on what to do when the market starts tanking on you... aside from go for a walk / turn off your phone. Whilst these are all sensible, there are a couple of things you can be thinking about with you investments:
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| AppHarvest deep thoughts. Worth $6 or $100. $APPH and $APPHW Posted: 06 Mar 2021 05:40 AM PST AppHarvest good long-term investment or bust? I think $6 to $100 is range of valuation. Deep thoughts below. Is AppHarvest the anti-Monsanto? What is $APPH worth? Can company get to $10 billion valuation within 5 years. DISCLOSURE I OWN 20,000 of $APPHW which is warrants. Ever since AppHarvest was announced as a SPAC I got intrigued with not just the company but agtech or in this case vertical farming, to be more specific. I do think this is not a fad and a necessary way of life for the next 100 years. My only concern is if there really is a competitive advantage in regards to tech. Many claim to have good tech but none have proven this at scale with hundreds of millions pounds of a product being grown and distributed and more importantly profitable. I think there are major trends we need to consider and food resources has definitely been a major problem and will continue for decades. The Chinese have been securing food supply buying companies all over the world such as pork, beef and others. They own so many supply chains, raw material companies, ports, etc. Usually when you have a new sector (although not new in Europe as the dutch have been working on vertical greenhouse farming for decades). First is the growth and hype, then there is business reality (growth but growing losses and continued capital needs) and then there is consolidation from all the players that mismanaged their funds or made a poor strategic decisions. Then there is profitability or economies of scale from all the consolidation, more mature phase. Nevertheless, although there is some hype with Appharvest today I begin to think with my venture capital hat....what is the real value of this company today and how big can it really get over the next 5 years? Who are the best comps when compared to new agtech or pioneering (think beyond meat). If you read the article below you can see all of the future products that the company will be producing over the next 5 years. All they talk about today is tomatoes and leafy greens but they will also do fruits, other veggies and something that is not even mentioned is cannabis. This is because Kentucky has not legalized it but when they do I am sure the company would be the first to get the license. This article explains all the potential products and services too. https://www.verticalfarming.com/food-crops/ The company claims that their farming does about 30x better yield than a convention farm but when I looked at conventional farm yield and those from vertical farms in Netherlands they claim to do more than even well established vertical farms that do about 7x traditional farms. If they do 30x the rate of a regular farm then I believe the revenue estimates provided by the company to actually be conservative. Below is what I believe the company can do in revenues. 2021 revenues is $25 to $40 million 2022 revenues is $60mm to $100mm 2023 revenues is $150 to $200mm 2024 revenues is $250 to $350mm 2025 is $400mm or more If you look at beyond meat historical valuation they traded at 10x to 20x revenues given their growth rate. That would imply the following valuation for AppHarvest. 2021 would be $600 mm marketcap at 20x revenues given year 2 will be 300% growth. 2022 would be $1 to $1.5 billion when using $75mm as revenue and 18x revenue. 2023 would be $2.6 billion as it would be 15x revenue at $175mm in revenues. 2024 would be $4.5 billion as it would be 15x $300mm in revenues. 2025 would be $7.5 billion at 15x revenues and $500mm of revenues. There are so many variables as to what this valuation would be on a price per share basis because I do expect a debt or equity raise by 2022 or 2023, better 2022 as maybe terms would be better and not on desperate terms. It all depends how much cash flow they can generate but each farm costs about $1.5 to $2 million an acre and if they plan to add about 100 acres of land every year they need $150mm to $200mm a year to keep growing. Given the $465mm of cash they got from the SPAC is now $330mm after the $125mm purchase of their first farm. They basically have enough capital for 100 to 150 acres....this is where it gets interesting because what will the company do? My bet or educated guess is that the PR machine will kick into high gear for the next year. I do have concerns or questions such as: Will the growth and perhaps hype help them fund more growth? The company will not have enough operating Cash flow to build a 60 acre farm a year until the company reaches at least $300 to $400mm in revenues at the very least. So, that means that from today to that day they will need at least another $500mm to $1 billion in capital to keep growing and not be concerned with growth via cash flow. That means they will either need to do a few small raises or one really large one. So, what has to happen in order for the company to be able to generate more buzz than just selling tomatoes? The only thing I can think of is that the company starts producing products that are higher revenues and margin per acre and the only way I can see that is via cannabis or other medicinal products. You see, just like Amazon where people saw it as a book store in the 1990's it is way different today. With AppHarvest it really can be the next Monsanto was taken private by Bayer at a pretty high multiple too. Today you are paying $1.3 billion enterprise value for the business of which all of the cash js going to go for salaries and land acquisition of farms (building and construction). So, what are shares worth? Well given enterprise to revenue multiples you could argue that trough valuation would be $6 to $10 and assuming no equity raise and the same share count by 2025 that would be $75 to $100 a share. With a current price of $17 dollars it could drop 50% or go up close to 500%. Although I believe they will need more capital probably they will keep raising $50mm to $100mm a year to keep growth momentum going. What are your thoughts on this? What am I missing from the story that is good or bad? [link] [comments]  | |||||||||||||||||||||||||||||||||||
| Small Cap Value vs S&P 500 (3, 5, and 10-year returns) Posted: 06 Mar 2021 07:39 PM PST There's been a lot of discussion lately about small cap value tilt since their 10-year returns finally shot past S&P 500 10-year returns. So I took a look at 3-year, 5-year, and 10-year returns for Small Cap Value ETFs (IJS and SLYV), which started in Oct 2000, and compared them to S&P 500 returns (SPY). Although Small Cap value has somewhat outperformed the S&P 500 in the earlier years, the difference is smaller than the variation. There is no strong pattern, and it really depends on which 3/5/10-year window you pick. In fact, there's a bigger difference between the top 2 small cap value ETFs (IJS and SLYV) than between either of them and SPY. This chart shows the # of weeks in the past 20 years where ...
Here's a Chart that shows the differences vary all over the place. I don't see a clear case for having small value tilt in your portfolio. It'll perform better in some years and worse in others. [link] [comments]  | |||||||||||||||||||||||||||||||||||
| Disruptive innovation versus broad market index funds Posted: 06 Mar 2021 10:35 AM PST As the title might suggest, I've been consuming a lot of ARK Invest's content of late. They make the case that the coming years are going to be hell for a large segment of the market, due to the type of disruptive innovation that is the focus of ARK's funds. They position themselves as a hedge against this activity. I'm aware they are, in a sense, marketing their funds, but I do think there is merit to their case. My question is, given this context, are broad market index funds as sensible a strategy as they are presented to be? What are some alternatives to incorporate as a hedge against this potential upheaval among stalwarts and the traditional safer harbors in the market? [link] [comments]  | |||||||||||||||||||||||||||||||||||
| SPACS, new engineering, and acronyms Posted: 06 Mar 2021 08:45 AM PST SPAC engineering, dilution, and fees First....they are correct in adjusting the structure to reduce dilution...but this volume of pseudo reverse mergers has clearly been aggressively pushed by some investment banking arms....and those top players are looking for any edge given their lackluster brand appeal in IB. No offense Citi...or take offense Credit Suisse. But...a personal theory...when SAIL, SCALE....and updated accronyms become a norm..may be time folks to b a i l. [link] [comments]  |
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