Look For Roku To Benefit From The Streaming Wars

Microsoft licenses its operating systems to manufacturers of computers back in the day. Today, the name Microsoft is synonymous with PCs and laptops. Just like Microsoft is synonymous with PCs and laptops, Roku is synonymous with smart TVs.

Roku was founded in 2002 is taking advantage of the cord cutting trend. According to Roku’s most recent shareholders’ letter, “roughly 50% of U.S. cord cutters are Roku customers.

Roku offers an easy way to access all the top streaming services. Roku estimates that more than a third of all smart TVs sold in the U.S. have Roku’s operating system built in. The list right now includes TCL, Insignia, Sharp, Hisense, Hitachi, RCA and Philips. Roku’s free channel has also secured a partnership with Samsung.

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Roku is well-positioned for the streaming war. As the streaming war rages between Netflix NFLX, Amazon AMZN, Disney DIS and others and more people spend more time streaming their favorite shows on more services, Roku makes more money. So no matter which streaming service comes out on top, Roku should benefit.

It’s the reason why Roku was up as much as 400% this year at one point. In just under a year, Roku went from a small/mid cap stock to a large-cap. The firm’s sales growth has been accelerating with year-over-year growth of more than 50% for the past 3 quarters. In addition, Roku just reported its 8th straight top and bottom-line earnings beat. However, on the news the stock sold off. Wall Street will tell you their valuation got to rich, but a month ago I talked about where the chart suggested the Sellers were.

Is Roku’s Reign Over???

Although I thought the weekly demand would have been a better buy, price reacted to the monthly demand at $95. Thus, the chart suggests price will rise to the daily supply at $148.

It’s not a coincident, price sold off at the daily supply at $148, the news just served as a catalysts. Just another example of why the Markets are not random.

So where does Roku go from here?

Highlighting how well the company is monetizing its platform, Roku’s average revenue per user over the trailing 12 months is 40% higher than Netflix’s most expensive streaming plan. What’s particularly surprising, however, is that current trends indicate there’s still plenty of upside left for this metric to move even higher.

In Roku’s third-quarter update, management said its ARPU was $22.58. With 32.3 million active accounts (1.7 million of which were added in Q3 alone), this robust ARPU has helped Roku deliver $633 million in trailing-12-month platform revenue.

While Roku does benefit from subscriptions to third-party streaming services on its platform, advertising is the company’s most important growth driver. In fact, monetized ad inventory on its platform more than doubled year over year in Q3 — a trend that has been consistent with recent quarters.

Looking ahead, Roku believes this is just the beginning when it comes to advertising spending on its platform. Only 3% of TV advertising budgets are currently spent on connected TV, yet connected TV accounts for 29% of U.S. viewing, Roku’s general manager of platform business, Scott Rosenberg, noted in Roku’s third-quarter earnings call, citing research firm Magna Global.

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Thus, the chart suggests to go long at the daily demand at $107 and ride price back to the daily supply at $148.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Will Google Buy Fossil Next???

Fossil Group, Inc. designs, develops, markets, and distributes consumer fashion accessories in the United States, Europe, Asia, and internationally. Its principal products include men’s and women’s fashion watches and jewelry, smartwatches, handbags, small leather goods, belts, and sunglasses.

Although Fossil sales other things beside watches, their bread and butter and what they are known for are their watches.  However, watches are a tough business these days in the era of smartwatches.

Thus, Fossil has been expanding its smartwatches and wearable portfolio.  This holiday season, Fossil is selling their most advanced hybrid smartwatch, featuring text messages, alerts, caller ID, heart rate and activity tracking and a two-week battery life, but the smartwatch market continues to be dominated by Apple.

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Fossil reported earnings this past week.  The stock tanked after a surprise quarterly loss and said its sales fell 11%. Fossil said it lost $26 million, or 51 cents a share, in the third quarter, versus earnings of $5 million, or 10 cents a share, in the third quarter of 2018. Sales also declined to $539.5 million from $609 million.

Among the challenges that Chief Executive Kosta Kartsotis outlined on the earnings call, according to a FactSet transcript: a tough consumer environment, difficult sales trends at wholesale channels in developed markets, and lack of interest in traditional watches. “Based on these factors, we’ve lowered our sales expectations for Q4,” he said. “[G]iven the trends we saw in the third quarter, we think it’s prudent to plan our sales number assuming these trends don’t change near term.

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Earlier this year, Fossil announced that they were sell technology related to its high-end watches to Google. Google paid $40 million to Fossil in exchange for intellectual property needed to make the watches.

Fitbit was the pioneer in fitness trackers and was doing well, that until the smartwatches were also able to track fitness activities.  And at the point this was the beginning of the end for Fitbit. And after years of struggling and trying to remain relevant, they finally waved the white flag and sold to Google. Google was seen as a potential suitor for Fitbit prior to the deal announcement, as the two companies struck a partnership last year and have vested interests in the health space.

So why would Google buy Fossil.  Googles mission for its Wear OS is to create “a diverse set of devices” for their smartwatch platform.  Fossil owns and licenses 14 brands, including popular names like Kate Spade, Michael Kors, Armani, DKNY, and Diesel. Each of these brands already have their own Wear OS watch in its own signature style.  Thus, buying Fossil would be in alignment with Googles mission for Wear OS.

If Google is going to buy Fossil, the chart suggest, to wait for price to hit the monthly demand at $5, which would represent a 44% discount from the current price.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Another Sub Prime Auto Lender Setting Up For A Short

Yesterday, I wrote a post about Santander Consumer,

Santander Consumer Is Setting Up For A Short Position

Santander Consumer is one of the largest subprime auto lenders in the market. Delinquencies for auto loans in general, including both prime and subprime, have reached their highest levels this year since 2011.

Santander Consumer had $26.3 billion of subprime auto loans as of June 30 that it either owned, or bundled into bonds, According to a report from S&P Global Ratings, Santander Consumer has more than $25 billion in subprime auto loans which is almost 50% of the company’s total managed loans.

Today, I want to introduce another auto lender, Credit Acceptance Corporation

Credit Acceptance Corporation provides financing programs, and related products and services to independent and franchised automobile dealers in the United States. The company advances money to dealers in exchange for the right to service the underlying consumer loans; and buys the consumer loans from the dealers and keeps various amounts collected from the consumers.

Don Foss is known as the pioneer of the subprime auto loan market.  Back in the days, General Motors and Ford would only lend money to folks with good credit.  So Don started selling cars on credit to people with shaky finances.  Don was charging customers crazy high interest rates and could because nobody else was issuing loans to this particular population with bad credit. So in 1972, Foss founded Credit Acceptance (CACC) to handle financing and debt collection for his used car business. Today, CACC is a major player in the U.S. subprime auto loan market and its market cap is a little under $8 billion.

Credit Acceptance Corporation’s CACC third-quarter 2019 earnings of $8.73 per share missed the Zacks Consensus Estimate of $9.13. However, the bottom line was up 12.6% year over year. 

Provision for credit losses increased 37.9% from the year-ago quarter to $19.3 million. Moreover, allowance for credit losses at the end of the third quarter was $509.1 million, up from $461.9 million as of Dec 31, 2018.

Credit Acceptance is well poised for growth in revenues, given the continued rise in consumer loans. However, persistently increasing expenses and deteriorating asset quality are near-term concerns.

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So as the economy slows, companies hire less and layoff more, customers’ confidence decline, the more sub-prime auto loans default.  And when this chain reaction fully materializes, CACC’s stock will crash. 

At the moment, there is a nice band of support/resistance at the $450 level.

However, because this band of support/resistance was breached last month, the chart suggests to short price at the weekly supply at $460.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Santander Consumer Is Setting Up For A Short Position

Santander Consumer USA
Holdings Inc., a specialized consumer finance company, provides vehicle finance
and third-party servicing in the United States. Its products and services
include retail installment contracts and vehicle leases, as well as dealer
loans for inventory, construction, real estate, working capital, and revolving
lines of credit.

The company also offers
financial products and services related to recreational and marine vehicles;
originates vehicle loans through a Web-based direct lending program; purchases
vehicle retail installment contracts from other lenders; and services
automobile, and recreational and marine vehicle portfolios for other lenders.

Santander Consumer (SC)
reported earnings this past week and their quarterly earnings of $0.67 per
share beat Wall Street estimates of $0.66 per share. This compares to earnings
of $0.64 per share a year ago.  Over the
last four quarters, the company has surpassed consensus EPS estimates three
times.  But don’t let the numbers fool
you.

Santander Consumer is one of the largest subprime auto lenders in the market. Delinquencies for auto loans in general, including both prime and subprime, have reached their highest levels this year since 2011.

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Prior to the Great Recession, banks were approving just about any applicant regardless of their income or ability to pay the mortgage.  The banks didn’t care as they just packaged the loans as CDOs and sold them to Wall Street.  All kinds of debt were repackaged and resold as collateralized debt obligations. As housing prices declined, many homeowners found they could no longer pay their mortgage resulting in mass defaults.

Santander Consumer does
the same thing today.  The package these
auto loans and sell them to bond investors. 
But in Santander Consumer’s case, if the debt can’t be paid back Santander
Consumer is often obliged to buy the loans back, which ends up being a loss on
their books.

Santander Consumer had
$26.3 billion of subprime auto loans as of June 30 that it either owned, or
bundled into bonds, According to a report from S&P Global Ratings, Santander
Consumer has more than $25 billion in subprime auto loans which is almost 50%
of the company’s total managed loans.

Are you thinking what I’m thinking…the stock is setting up for a short. Based on the monthly chart, the chart is suggesting two targets.

With the first testing being the level at $23.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Salute To Leon Howard aka “The Wallstreet Trapper”

Leon Howard aka “The Wallstreet Trapper” was born and raised in New Orleans. At the age of 9 he saw his mother get shot right before his eyes.  At the age of 16, he went to prison for 10 years for attempted murder and armed robbery.  But it was in jail that he met a white who told him black people are playing the wrong game.  You see the white guy was in jail for embezzling millions of dollars from his job.  But what he told Leon is wealthy people don’t trade time for money.  Think about that for a second, wealthy people don’t trade time for money.  Another way of saying this, in the famous words of Warren Buffett, “if you don’t find a way to make money while you sleep, you will work until you die.”

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It was during this conversation that the white guy told Leon about the stock market.  And for the rest of his time in jail, he read every book he could about the stock market, how banks work, etc.  And before the other prisoners would get up to watch TV, he would get up before them and turn the channel to CNBC.  And then a fellow prisoner, who read the USA Today, would give Leon the financial section every day.

The slang word trap has numerous definitions, but is mostly used to refer to any place where drugs are being exchanged. A trap can be anywhere, it can be an open spot where cops don’t frequent or a house which dealers typically refer to as a trap house.

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Leon defines “Trap” as “a state or condition of a people being financially trapped, unable to find the path to financial freedom no matter how many jobs or side hustles worked.”

And so when he got out of jail his mission and targeted market was the people he knew on the streets because he knew the game they were playing and wanted to expose them to a different game. Leon committed to showing Black America a very different hustle, moving “From The Trap To Wall Street” one stock share at a time.

He’s a smart dude, because he is conquering Wall Street, but because he knows how to break down the financial literacy in a language that’s digestible.  He tells people, you may possess the clothes on your back or the call you drive, but you don’t really own it because you don’t have any stake in the company.  Do you remember how I talked about wealthy people don’t trade time for money.  Leon is very big on that.   So I want to salute Leo by sharing with you an article I read on Motley Fool about 3 stocks that pay dividends every months.

Pembina Pipeline (NYSE:PBA) currently pays its shareholders a dividend yield of just over 5% per year. While the Canadian company may offer some volatility for U.S. investors, given that its payouts are in Canadian dollars, it’s still one of the better dividend stocks in the oil and gas industry.

Strong free cash flow during the year also came in at more than CA$1 billion, although that was still below the CA$1.2 billion paid out in 2018.  Even so, the company has been increasing its dividend payments. Five years ago, the stock was paying CA$0.145 every month; that figure is now up to CA$0.20. That’s a 38% jump, averaging a compound annual growth rate of 6.6%.

Apple Hospitality REIT (NYSE:APLE) operates in a much more stable industry, and its portfolio of 235 hotels gives investors a great opportunity to benefit from the tourism industry. With many upscale rooms in 34 states across the country, Apple Hospitality has a diverse cross-section of properties that includes big names like Hilton and Marriott.

The stock pays investors a dividend yield of 7.3%. Although the company isn’t one that investors have come to expect dividend increases from, with that high of a yield, shareholders would probably be happy if it were to simply remain intact.

LTC Properties (NYSE:LTC) is another REIT that investors in search of cash flow can add to their portfolios. With a focus on healthcare — in particular, senior living facilities providing long-term care, thus the name LTC — LTC has a much safer mix of properties in its portfolio than Apple Hospitality.

Like Pembina, LTC has increased its payouts over the years, although they haven’t been nearly as significant. From monthly payments of $0.17 five years ago, they’ve grown to $0.19 today, for a much more modest increase of 12%, which comes in at a CAGR of just 2.2%.

However, with a solid yield and a payout ratio that’s below 100%, LTC could be a great option for long-term investors.

These are just three of many well run companies that offer dividends on a monthly, quarterly, semi-annual and annual basis  Dividends are really no different than interest earned on bonds…now look at me, now I’m sounding like “The Wallstreet Trapper.”

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Garmin Is Just Like Madonna – Part 2

I first experience with Garmin was probably with my first job out of college. I went on a business trip, had to rent a car and noticed this big bulky looking portable screen.  I recognized the name “Garmin” right away due to my venture into becoming rich through the stock market, specifically through tech stocks (no, I’m not rich yet).  And so I was eager to test it out.  I remember the map on the screen being very crisp and this dot moving along a green road and every turn I made, the street would reappear on the screen.  It was a pretty cool device.   That was probably my first and last time using a Garmin as in the years that would eventually come, I would have no need for the device.  To be honest, I completely forgot about Garmin until eight months ago, when I questioned why/how were they still in business. 

I first wrote about Garmin eight months ago,

Garmin Is Just Like Madonna 

Garmin, the maker of full-featured GPS navigation systems that take the doubt out of driving as you make your commute or vacation.  However, with the introduction of smart phones and navigation apps, I was sure Garmin was going out of business.  But just like Madonna, who has been in the business for almost 30 years mastered the art of reinventing herself.  And that’s exactly what Garmin did.  Garmin got into the activity tracking and smartwatch business.

And when they crushed earnings for the fourth quarter of 2018, despite the stock at the time rising more than 15%, the charts were suggesting there was more room to grow…by a lot.

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However, there were a couple of speed bumps in the way in the form of daily supply zones.  Since that time price did react to the first one in April and pulled back about $8.

But this is a company that can’t be stopped at the moment.   On Wednesday, Garmin reported third quarter earnings. Not only did the company smash earnings estimates again, but raised their full year guidance. 

Staying true to their core competencies, Garmin has been working in the lab on a product for about 10 years that’s going to compliment the personal air vehicles era called Autoland. Autoland is the first soon-to-be certified automatic landing system that will control and land a plane, by itself, in the event of an emergency.  I know, we don’t even have mass self-driving cars yet, so their first market for this product will be commercial aircraft market.

“The technology will translate across a lot of areas of aviation,” Straub said. “It will be interesting to see how it responds to the nascent urban air mobility environment, where there’s electric vertical takeoff and landing and where autonomy is a big part of what they want to do.”

Pemble said Garmin always has viewed the company in the long term and envisions its autonomous technologies in many segments, such as commercial, the government and the military — markets where Garmin already has traction.

“What we’ve done all throughout our history is approach an opportunity step by step, proving our capability and collecting wins, while building upon those successes,” Pemble said.

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I was one who doubted Garmin with the invention of Smart Phones, but now I realize I can never count out Garmin due to their DNA, which is the idea of persistence. The chart suggests the next target is the daily supply at $103.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Is Beyond Meat Just Another Grubhub???

After watching the financial news yesterday, I just realized Beyond Meat and Grubhub have a lot in common.  Both are in the food industry, both are in burgeoning markets, both had “first to market” head starts over the competition and both companies saw their stock price rise like a Tesla rocket and…well read the rest of the post.

Convenience, accessibility and just pure laziness are major factors driving the global online on-demand food delivery services market.

GrubHub was at once upon a time the world’s leading online and mobile food ordering company.  Despite competition from the likes of Uber, DoorDash, Postmates, Square and Amazon, GrubHub controlled 50% of the U.S. food delivery market just under two years ago.

The way the business model works is restaurants do not have to pay anything up-front or any subscription fees, just a commission fee for every order the platform generates.

However, the valuation was crazy.  Grubhub was a first to market mover and shares of Grubhub returned 5X from 2016 to 2018 and in 2018 even went as high as $140.  The valuation got out of hand.  At one point, the P/E was over 80.  

But then the competition started coming and their market share went from 50% to 34%, quick fast.  So order to stay ahead of the competition, Grubhub grew in other cities, which meant increasing their customer acquisition cost, which meant lower margins.  While that was happening, many of Grubhub’s critical metrics like initial diner spend and peak diner spend were all decreasing because customers were using the services of the competition as well.  Wall Street started to smell the blood.

Jim Chanos is an American investment manager and currently serves as president and founder of Kynikos Associates, a New York City registered investment advisor who is focused on short selling said Grubhub was a short just last month.

“Right now, GrubHub is making almost no money per order — it’s something like 15 cents,” Chanos said. “There’s just no margin in this business.”

“We believe that this pressure is occurring at both ends of the spectrum for the delivery companies,” Chanos said. “Not only are we seeing pressure on the labor side with the California law, we believe that the labor arbitrage — calling these guys contractors — works in insidious ways.

Chanos said that the company can’t afford to be as aggressive as Uber, which has its own food delivery service Uber Eats, because it doesn’t have the “financial wherewithal.” Competing with Uber, Chanos said, is like being “locked in a cage with a psychopath with an ax.”

And while there’s competition, Chanos said growth in the restaurant business itself has been stagnant.

“The restaurant business is a tough business,” he said. “Even if this all works, and all four of these delivery companies grow to 20 or 25% of all meals, you are growing into a no growth business.”

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Yesterday, GrubHub short-sellers made $504 million when shares of the company fell 42% after announcing their third-quarter earnings according to data from financial-analytics provider S3 Partners.

GrubHub received five downgrades, including double downgrades from both Bank of America Merrill Lynch and Oppenheimer following its disappointing third-quarter results.

The food delivery company missed on revenue and posted a fourth-quarter forecast well below Wall Street’s expectations and received five downgrades, including double downgrades from both Bank of America Merrill Lynch and Oppenheimer.

I don’t know where the bottom is, although there is some demand on a smaller timeframe at $30. However, this is a no touch stock in my opinion.

Beyond Meat priced its initial public offering at $25 and now the stock is up more than 200% in less than a week.  Beyond Meat, a maker of plant-based meat products is the new IT THING on Wall Street and sold at a supermarket and restaurant near you.

Beyond Meat is also trailblazing a new secular movement away from animal protein.

So yes, although plant-based meats in the U.S. rose 23% last year, it still represents only 1% of the total meat sales in the US. So yes, because Beyond Meat controlling about 10% of the plant based meat market in 2018, what you have is FOMO in the stock price.

But Beyond Meat is beyond over-valued. For example, with $80 million in sales last year, you get a sales to price ratio of 44 vs. Hormel Foods and Conagra with a sales to price ratio of 2.3 and 1.6, respectively.

Beyond Meat priced its initial public offering at $25 and skyrocket 800% in less than four months. Beyond Meat, a maker of plant-based meat controls about 10% of the plant based meat market.  And because they have achieved “first to market” status, they are the new IT THING on Wall Street.

Beyond Meat is also trailblazing a new secular movement away from animal protein. Although plant-based meats in the U.S. rose 23% last year, it still represents only 1% of the total meat sales in the US, with Beyond Meat controlling about 10% of the plant based meat market in 2018.

But there valuation is beyond ridiculous.   Their valuation was at one point higher than roughly 25% of the companies in the S&P 500 index.  For example, with $80 million in sales last year, you get a sales to price ratio of 44 vs. Hormel Foods and Conagra with a sales to price ratio of 2.3 and 1.6, respectively.

But now the competition is coming.

Kellogg (K) introduced “Incogmeato,” which is a plant-based meat alternative made from non-GMO soy. Kellogg’s plant-based burger patties, Chik’n tenders, and Chik’n nuggets which go on sale in early 2020.

Kroger said they will sell a new line of branded plant-based burgers, other meatless products like dips, pasta sauces and cookie dough in the coming months under their Simple Truth Plant Based label.

Hormel Foods once a piece of the action too and announced its plant-based meat substitute called “Happy Little Plants” is available at select retailers.

Then there is Impossible Foods which launched the Impossible Burger through Burger King in August and now have product along Beyond Burger on the shelves in supermarkets.

Yesterday, Beyond Meat announced third quarter earnings.

Beyond Meat, which has a market value of about $6.4 billion, on Monday topped analysts’ expectations for its fiscal third-quarter earnings and revenue. The company reported earnings of 6 cents on revenue of $92 million, while analysts forecast earnings of 3 cents on revenue of $82.2 million, according to Refinitiv. Beyond Meat saw sales grow across both its grocery and restaurant divisions, as its meatless products drew in more customers and kept existing customers coming back.

“Despite solid results the likelihood of early stage investors cashing out on a stock which is still up about 4x since its IPO, remains a drag in coming trading sessions,” said Barclays analyst Benjamin Theurer in a note to clients Tuesday.

Tuesday is the first time since the IPO that insiders can sell the stock, which could cause short-term pressure, analysts said. Roughly 75% to 80% of the outstanding stock is available to trade after the lockup expiration.

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So is the weekly demand at $81 the time to get in, the chart suggests so, but I think this stock is a no touch as well.

As you can see, Grubhub and Beyond Meat are almost like twins. The question now becomes can both companies remain twins in the form of a comeback story?

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Valero Energy Finally Breaks Out

Valero Energy Corporation
operates as an independent petroleum refining and ethanol producing company in
the United States, Canada, the United Kingdom, Ireland, and internationally. The
company is involved in oil and gas refining, marketing, and bulk selling activities.
It produces conventional and premium gasolines, diesel fuels and other distillates.

This past week, Valero
Energy Corp. beat analysts’ expectations in the third quarter, reporting a
profit of $609 million, or $1.48 per share. 
It was a better-than-expected quarter despite making $250 million less
in profit than the company reported during the same period last year, when the
company reported $856 million in profit, or $2.01 per share.

Valero also makes ethanol.  Ethanol is made from corn and almost 50% of corn
crop in the US is used to make ethanol. 
However, this past Spring into Summer the Midwest was hit with massive
flooding, which lead to record slow planting season for corn.  The end result was corn prices were high, which
is an input cost for Valero, which lead to low margins.

Valero can utilize its midstream network to process cheaper crude oils. However, the fall in spreads between discounted (medium or heavy) crudes and Brent affected the company’s refining earnings. The Brent-WTI, Brent-LLS (Louisiana Light Sweet), Brent-ANS (Alaskan North Sweet), Brent-Maya, and Brent-ASCI (Argus Sour Crude Index) spreads narrowed YoY in the third quarter.

The Brent-ANS spread fell from $0.4 per barrel in the third quarter of 2018 to -$0.9 per barrel in the third quarter of 2019. The Brent-Maya spread also narrowed from $9.7 per barrel to $5.4 per barrel. Similarly, the Brent-ASCI spread fell from $5.1 per barrel in the third quarter of 2018 to $3.2 per barrel in the third quarter of 2019. The most important of all, Brent-WTI, fell from $6.2 per barrel in the third quarter of 2018 to $5.6 per barrel in the third quarter of 2019.

Further, in the third quarter, gasoline cracks declined in the US Gulf Coast, US Midcontinent, and North Atlantic. However, the crack rose in the US West Coast. Diesel cracks also put up a mixed trend.

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The crack spread is the one parameter that determines a refiner’s earnings.  The crack spread entails the cost of the raw material input, oil and what the finished product, gasoline, diesel, and jet fuel can be sold for.

Since there are 42
gallons of oil in a barrel, you can multiply this ratio by 42 to get the actual
profit margin per unit. At today’s ratio of .0295, multiplying by 42 gives us
1.24. That means a profit margin of 24% for every gallon of crude oil refined into gasoline.

But during the earnings call, Valero forecasted favorable market conditions for the current quarter, based on improved gasoline and distillate cracks from the lower levels and sour crude weakness resulting from the IMO low-sulfur fuel oil mandate, which goes into effect on January 1, 2020. And this is why Valero broke out after consolidating for the past 10 months.

Thus, the chart suggests there is room for price to run up to $108, which would represent another 9% increase in price.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Jack Said…Hell No To Libra, But YYEESS To Bitcoin

Bitcoin fan and Twitter CEO Jack Dorsey said today at a Twitter media event in New York City. He said “hell no” when asked if he would join the Libra Association.

He then went on to explain that the Facebook-created stablecoin didn’t need to be a cryptocurrency to pull off its broader goals of democratizing the financial system.

“I don’t know if it’s a gimmick,” said Dorsey “but a cryptocurrency wasn’t necessary to make that work”

“It’s not an internet open standard that was born on the internet,”

“It was born out of a company’s intention, and it’s not consistent with what I personally believe and what I want our company to stand for.”

Source

Jack is the CEO of not only Twitter, but Square as well.  Square, Inc. provides payment and point-of-sale solutions in the United States and internationally. The company’s commerce ecosystem includes point-of-sale software and hardware that enables sellers to turn mobile and computing devices into payment and point-of-sale solutions.

I have come to like Square over the last two years, not because I’m a customer, but because I see them as a Disruptor.  I’m bias to Square because of their first to market initiatives into Cryptocurrencies.  Back in April of 2018, Square allowed customers buy and sell bitcoins via its Cash App in all 50 U.S. states.

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Then in March Square announced Square Crypto.  Square Crypto’s goal is to help improve the Bitcoin ecosystem.  Team members include: Valentine Wallace joins from Lightning Labs, Jeffrey Czyz from Google, and Arik Sozman from Facebook, where he was building the Calibra wallet for Facebook’s blockchain project, Libra and Matt Corallo, co-founder of Blockstream.

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But is not just the crypto space that Square is focused on.  Over the next few weeks, Square will start allowing customers to buy and sells stocks for free on its cash payments app.  And yesterday Square announced the rollout of fractional stock trading services on its Cash App.  As an example, this means you can buy just a fraction of one Amazon stock vs. dishing out over $1700 / share.

So where is the price of Square heading next, the last several weeks, price has been sideways, but if price gets down to the weekly demand at $46, the chart suggests to buy and go long.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

Unusual Options Activity In World Wrestling Entertainment, Inc.

World Wrestling Entertainment, Inc., an integrated media and entertainment company, engages in the sports entertainment business in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America.

Along with watching the kung fu movies on Sat. it was all about watching wrestling on TV as well.  My era of wrestlers didn’t involve WWE superstar, John Cena, and his signature “you can’t see me” hand gesture.  Nor did I ever see Dwayne “The Rock” Johnson wrestle.  The only screen I ever see Dwayne on are the moving screen.  My era involved André the Giant and Hulk Hogan.  The rivalry that had is perhaps is one of the most important in professional wrestling history.

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Andre the Giant’s real name was André René Roussimoff who also happen to be a French actor as well.  But his wrestling name was so fitting.  By the time Andre was 12, he was already 6 foot 3 and 240 lbs and later grew to 7 foot 4 and 540 lbs.

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Terry Gene Bollea aka Hulk Hogan, was the Man.  He was the face of the WWE back then and is one the most popular professional wrestlers of all-time. However, I never got the pleasure to play his video game, Hulk Hogan’s Main Event.

Then I grew up and found out the WWE doesn’t exist to really entertain us, it’s about making money.  If you had held the stock in the last five years, well you would be up about 400% with EPS growth of 45% per year the last three years.  But if you still hold the stock, well you would be down about 30% since April.  The decline in the stock in recent months is largely due to declines in their viewership.  For example, SmackDown TV ratings declined 13% in the first quarter 2019 and the average attendance at WWE’s live events across North America fell 4% in June.

However, with the company’s third-quarter earnings report less than a week away, analysts remain bullish on WWE’s longer-term outlook.

Morgan Stanley Weighs In

On Wednesday, Morgan Stanley analyst Benjamin Swinburne reiterated his Overweight rating and $85 price target for WWE.

Swinburne said WWE has simply been struggling to meet high expectations in the past two quarters, but he said little has changed about the company’s fundamental outlook.

“Expectations aside, WWE continues to offer exposure to an asset with unique IP, rapidly growing revenues and FCF, and now at its lowest multiple since late ’17,” he wrote in a note.

Morgan Stanley is forecasting high single-digit EBITDA growth for WWE through 2025, and Swinburne said the 2019 sell-off is a buying opportunity.

Source

And the Smart Money is taking notice because today I noticed bullish buying in the January $75 call options where they bought over 6,000 contracts.

At the moment, the momentum is to the downside, but limit. With three months before these contracts expire, there is plenty of time for momentum to reverse…and the catalyst could be when WWE announces earnings next week.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.