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Análisis The Walt Disney Company (NYSE:DIS)

Hola! Hace un par de semanas compartí una breve investigación que había hecho sobre American Airlines (NASDAQ:AAL) que fue relativamente bien recibida. Ahora comparto esta que hice sobre Disney (NYSE:DIS), quizás a alguien le sirva. Por supuesto recibo criticas, sugerencias, puteadas, etc.
-Link análisis AAL: https://www.reddit.com/merval/comments/i7eh5d/an%C3%A1lisis_american_airlines_nasdaqaal/

The Walt Disney Company (DIS)

The Walt Disney Company (NYSE:DIS) es una compañía multinacional estadounidense dedicada principalmente a los medios de comunicación masivos y a la industria del entretenimiento. Su sede está en Burbank, California, EEUU. La compañía cotiza bajo el ticker DIS, en Nueva York, a un precio de US$ 127,44 al 23/8/2020. Goza de un tamaño prominente, teniendo 223 mil empleados y una capitalización de mercado de 230.292M de dólares. Disney integra el índice Dow Jones Industrial Average (DJIA) desde 1991, y también integra el S&P 100 y el S&P 500.
Evaluando más en detalle el desempeño de la acción, la acción cotiza US$ 127,44 al 23/8/2020. Hace aproximadamente un año, el 26/8/2019 la acción cotizaba a US$ 137,26 lo que representa una caída aproximada del 7,15% anual (TTM). La caída es mas pronunciada YTD, Disney cotizaba US$ 148,2 a principios de año, por lo que al día de hoy la caída seria del 14%. No obstante, la acción a recuperado bastante valor después de la caída pronunciada que sufrió en Febrero-Marzo, llegando a cerrar a US$ 85,76 el 23/3/20 (habiendo subido un 48% desde entonces). Es para destacar que desde dicha caída se vio un significativo incremento en el volumen operado del papel. Mirando brevemente las medias móviles, vemos que la cotización actual esta por encima del promedio de 30 días (US$ 122,73), del de 90 días (US$ 115,98) y de 200 días (US$ 124,12). Con respecto al mercado, al 25/8, desde comienzo de año Disney se desempeñó por debajo del S&P 500 (5,7%), y del DJIA (-2,15%), con desempeño de -12,42% YTD.[1]
La compañía fue fundada en 1923 por los hermanos Walt y Roy Disney. A lo largo de su historia, Disney se consolidó como líder en la industria de animación estadounidense y luego diversificó sus negocios dedicándose a la producción de películas live-action, televisión y parques temáticos. A partir de 1980 Disney creo y adquirió diversas divisiones corporativas, para penetrar en mercados que fueran mas allá de sus marcas insignia orientadas a productos familiares.
Disney es conocida por su división de estudios cinematográficos (The Walt Disney Studios), que incluye Walt Disney Pictures, Walt Disney Animation Studios, Pixar, Marvel Studios, Lucasfilm, 20th Century Studios, Searchlight Pictures y Blue Sky Studios. Otras unidades y segmentos de la compañía son Disney Media Networks; Disney Parks, Experiences and Products y Walt Disney Direct-to-Consumer & International. A través de estas unidades, Disney posee y opera canales de televisión como ABC, Disney Channel, ESPN, Freeform, FX y National Geographic, así como también venta de publicidad, merchandising y música. También tiene divisiones de producción teatral (Disney Theatrical Group) y posee un grupo de 14 parques temáticos alrededor del mundo.
Es evidente la complejidad de las operaciones de Disney, por lo que vale la pena ir un poco mas a fondo en la composición de los segmentos operativos de Disney, en base al reporte anual de 2019 (mas representativo que el ultimo reporte trimestral en medio de la pandemia), donde encontramos cuatro segmentos relevantes. El primer segmento, denominado “Media Networks”, compuesto principalmente por los canales domésticos de TV, este segmento generó 24.827M US$ de ingresos en 2019 (un 34,7% del total). El segundo segmento es el de “Parks, Experiences and Products”, compuesto por los parques temáticos, resorts y cruceros de las compañías, así como también de las licencias de los nombres, personajes y marcas de la compañía y de los productos de merchandising propios, este segmento reportó 26.225M US$ de ingresos en 2019 (un 36,66% del total, el segmento mas relevante de la compañía). El tercer segmento, es el de “Studio Entertainment” que contiene las operaciones de producción de películas, música y obras de teatro, así como también los servicios de post-produccion. Este segmento reportó 11.127M US$ (un 15,55% del total). El ultimo segmento, quizás el mas interesante es “Direct-to-Consumer & International”, donde además de contener las operaciones internacionales de TV y servicios de distribución de contenido digital como apps y paginas web, se incluyen las unidades de servicios de streaming de Disney, compuestas principalmente por Hulu, ESPN+ y Disney+. Este sector reporto ingresos por 9.349M US$ (un 13,07%, enorme incremento respecto del 5,6% que reportó en 2018).
Respecto a la distribución territorial de las operaciones, es notorio el bagaje del mercado doméstico (EEUU y Canadá) donde concentraron en 2019 el 72,6% de las operaciones. Vale destacar también que hubo un incremento significativo interanual de las operaciones en los mercados de Asia-Pacífico (del 9,3% al 11,2%) y en Latinoamérica y otros mercados (del 3,09% al 4,61%).
En lo que respecta a la política de dividendos de la compañía, encontré registros de pago constante de dividendos desde al menos 1989. El ultimo dividendo fue el 13/12, habiendo pagado $0,88 y arrojando un dividend yield anual de 1,2%. La compañía decidió omitir el dividendo semestral correspondiente al primer semestre de 2020 por la pandemia del COVID-19.[2]
Evaluando un poco la posición financiera de la empresa, a junio de 2020, según el balance presentado, Disney tenia activos corrientes por 41.330M US$ y pasivos corrientes por 30.917M US$, lo que resulta en un working capital (activos corrientes netos, activos corrientes menos pasivos corrientes) de 10.413 US$. El working capital entonces representa el 33,68% de los pasivos corrientes (Con lo cual, el current ratio es de 1,34 apreciándose una mejoría respecto del 0,9 reportado en septiembre 2019). En relación con la deuda de largo plazo, la podemos estimar en 70.052M US$ (borrowings + other long-term liabilities), dado que en septiembre 2019 la cifra era de 51.889M US$, vemos que sufrió un aumento considerable (en el orden del 35%).
Respecto a los flujos de efectivo de Disney, vemos que en lo que va del año fiscal (septiembre 2019-junio 2020) Disney reportó flujo de efectivo por operaciones por 5949M US$, casi lo mismo que reportó para todo el año fiscal 2019 (5984M US$). Viendo la evolución de 10 años del CF de operaciones:

Año (sept-sept) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
CF de operaciones (mill. USD) 6578 6994 7966 9452 9780 11385 13136 12343 14295 5984
Dif. Anual % 6,32 13,9 18,65 3,47 16,41 15,38 -6,04 15,81 -58,14
Viendo la evolución en 10 años del flujo de efectivo de operaciones, vemos que en 2019 hubo una drástica reversión de la tendencia al alza que se venia reportando (con un 58,14% de caída interanual). Esto se debe en parte a la política de adquisiciones de la empresa, que vemos reflejado en el flujo de efectivo por inversiones, equivalente en 2019 a -15.096M US$ (muy por encima del promedio de 2010-2018, equivalente a -4179,4M US$).
En lo relativo a las ganancias de la compañía, para el Q2 2020[3] Disney reportó pérdidas por 4721M US$ (contra una ganancia de 1760M US$ para el Q2 2019). La situación se atenúa considerando las cifras para los últimos nueve meses (Q4 2019-Q2 2020), donde Disney totalizó perdidas por 1813M US$. No obstante, la situación del COVID-19 distorsiona nuestro análisis a largo plazo, por lo que para analizar la evolución interanual desde los últimos 10 años, utilizare los datos de los reportes anuales (datando el ultimo de septiembre 2019).

Año (sept-sept) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Net Income (mill. USD) 3963 4807 5682 6136 7501 8382 9391 8980 12598 11054
Dif. Anual % 21,3 18,2 7,99 22,25 11,75 12,04 -4,38 40,29 -12,26
Como se puede ver en el cuadro, pese al revés sufrido por las obvias complicaciones de la pandemia, el historial de ganancias de Disney es sólido. La compañía tuvo en los últimos 10 años, 2 años de contracción en las ganancias (2017 y 2019), pero en términos generales, las ganancias crecieron a una tasa promedio del 13,02% los últimos 10 años. Para evaluar el crecimiento general estos 10 años, si tomamos el promedio de los primeros 3 años (2010-2012) y el promedio de los últimos 3 (2017-2019), las ganancias de Disney crecieron un 125,8%.
Mirando un poco de ratios, analizaré el EPS (Earnings Per Share) de la acción. Para el Q2 2020, Disney presentó un EPS negativo, de -2,61, contra un 0,98 obtenido en el Q2 2019. Refiriéndonos al desempeño pre-pandemia, el EPS promedio anual de los últimos 5 años fue de 6,3 y el ultimo EPS anual reportado (septiembre 2019) estaba ligeramente por encima, alrededor de 6,68.[4] En lo respectivo al Price/Earning, el P/E (TTM) al valor de la acción del 23/8 es de -208,9. No obstante, si eliminamos la distorsión producto de la pandemia, calculando las ganancias promedio de los últimos 3 años (de acuerdo con los reportes anuales), es de 18,38, lo cual es un valor aceptable dada la coyuntura de los últimos años. En lo que respecta al Price-To-Book (P/B) ratio, el book value a junio 2020, es de 50, por lo que el P/B (siempre al precio del 23/8) es de 2,54, un valor razonable dados los promedios de los sectores en los que Disney tiene incidencia.[5] El ultimo ratio a analizar es Price/Assets (P/E*P/B) que, (usando P/E con promedio de las ganancias de los últimos 3 años) arroja un valor de 46,68.
Sobre el soporte institucional de la compañía, Disney tiene un apoyo considerable, calculado en el 66,42% del flotante en manos de instituciones. Los tenedores líderes son Vanguard con el 8,22%; BlackRock (NYSE:BLK) con el 6,32% y State Street Corporation (NYSE:STT) con el 4,19%. Otros tenedores significantes (1-2%) son Bank of America (NYSE:BAC), MorganStanley (NYSE:MS) y Bank of New York Mellon (NYSE:BK).[6]
En lo respectivo al management de Disney, la primera consideración importante es respecto al legendario CEO de la compañía, Robert “Bob” Iger, quien, en febrero de este año, después de posponerlo por años, decidió dar un paso al costado como CEO de la compañía, dejando a cargo al director del segmento de Parques y Resorts, Bob Chapek. Esto duró poco, y en abril Iger volvió a tomar las riendas de la compañía.[7] No obstante, es altamente probable que, una vez estabilizado el panorama Iger retome su frustrado plan de dar un paso al costado.[8] En lo relativo a la compensación, Iger cobró 47.525.560 US$, los executive officers una remuneración promedio de 11.319.422 US$ y el empleado promedio de Disney cobró 52.184 US$.[9]
Una cosa que llama la atención del balance de Disney (septiembre 2019), es el incremento notorio del goodwill (de 31.269M US$ a 80.293M US$, un aumento del 157%). No obstante, este incremento puede deberse a la política de fusiones y adquisiciones de la compañía. Disney viene llevando en los últimos años una política de adquisiciones relativamente agresiva, ideada por el CEO Bob Iger, de las cuales podemos destacar 4 o 5 operaciones clave, la primera de ellas fue la adquisición de Pixar, la famosa empresa de animación que había despegado bajo la conducción de Steve Jobs y Ed Catmull, en 2006 por 7,4MM US$ (de esa adquisición se beneficiaron sacando películas muy exitosas como Up, Wall-E, Ratatouille, Toy Story 3, etc.). Otra adquisición clave, fue la compra de Marvel en 2009 por 4MM US$ (La última de sus películas Avengers: Endgame, la más taquillera de la historia de Disney, vendió entradas por 3MM US$). En 2012, Disney compró Lucasfilm (histórica productora de Star Wars), por 4,05MM US$, y posteriormente anunció una muy lucrativa tercera trilogía de Star Wars. Por último, en marzo de 2019, Disney concretó la adquisición de 2oth Century Fox, en marzo de 2019, por la extraordinaria cifra de 73MM US$, sus resultados aún están por verse.[10]
Analizar la competencia de Disney es algo trabajoso, dado la variedad de sectores en los que se involucra y la falta de compañías que abarquen tantos sectores como Disney. Considero que la compañía que más se aproxima en cuanto a sus operaciones y al volumen de las mismas es Comcast (NASDAQ:CMSCA), si bien Disney compite con numerosas empresas en numerosos sectores, como podrían ser, por ejemplo Cedar Fair (NYSE:FUN) o Six Flags (NYSE:SIX) en el negocio de los parques temáticos; ViacomCBS (NYSE:VIAC) o Discovery Communications (NASDAQ:DISCA) en el negocio mediático; así como Netflix (NASDAQ:NFLX) o Amazon (NASDAQ:AMZN) en el negocio del streaming, sobre los cuales hablare más adelante. También compite con segmentos de negocios de conglomerados grandes como Sony (NYSE: SNE) o AT&T (NYSE:T).
Observando a Comcast, el acérrimo rival, vemos que la capitalización bursátil es similar, siendo de 198.301M US$ para Comcast y de 234.538M US$ para Disney, así como los empleados, teniendo 190.000 (CMCSA) y 236.000 (DISN). El desempeño de ambas acciones es parejo, en términos generales Comcast tuvo mejor performance, sobre todo YTD (-3,47% contra -10,26%). En los márgenes y ratios también gana Comcast, supera ampliamente en gross margin (TTM) a Disney, con 56,78% contra 27,95% y en net margin (TTM) con 10,91% frente a un pobre -1,91%. El EPS (TTM) da 2,53 para Comcast contra -0,6 para Disney. Consecuentemente, Comcast pudo mantener un P/E positivo de 17,56.
Si bien los números parecen positivos en la comparación para el lado de Comcast, me parece relevante destacar que lo mismo que fue su mayor ventaja comparativa (la composición de sus segmentos operativos), puede ser lo que la haga perder en la comparación a futuro, dada la absoluta supremacía que tiene la operatoria relacionada con la televisión, así como la falta de un segmento de negocios dedicado al streaming de video (sobre el cual también me referiré mas adelante).[11]
Para analizar el futuro, creo que es relevante hacer unas breves conclusiones sobre la actualidad. En primer lugar, los segmentos operativos mas afectados fueron el segmento de parques temáticos, resorts, etc. y el segmento de los estudios cinematográficos con lo cual los ingresos de Disney este último trimestre quedaron a cargo, principalmente, de los canales de TV (que sufrieron una breve baja del 2%) y de los servicios de streaming.
Empezando por los sectores más afectados, respecto a la producción fílmica (Studio Entertainment), me parece que la situación no es crítica, claramente la situación de la pandemia redujo fuertemente los ingresos del sector (al haberse reducido lógicamente la asistencia a salas de cine). No obstante, el manejo del sector viene siendo exitoso hace años (en los últimos 2 años lanzaron 3 de las 4 películas más taquilleras de la historia de la compañía, Endgame, Infinity War, y el live-action de El Rey León), y no hay indicios de que esto vaya a cambiar en el futuro (hay un esquema de estrenos futuros interesante).[12]
En lo que respecta a los parques, las perspectivas no son tan buenas. La caída para el Q2 2020 fue del 85% en relación al Q2 2019. Es evidente que al haber una cuestión sanitaria de por medio, el turismo va a ser uno de los sectores mas afectados, habiendo sufrido una caída increíble en la primera mitad del año. [13] Actualmente, la actividad comercial de los parques temáticos está empezando a reanudarse, habiendo reabierto las operaciones en Walt Disney World en Florida, y estando a la espera de reabrir Disneyland en California, dada la incertidumbre de la pandemia.[14] No obstante, la recuperación fue peor de lo esperado y a partir de Septiembre Walt Disney World recortará los horarios de sus parques.[15] Asimismo, comparativamente, el desempeño de Universal Studios (propiedad de Comcast), parece ser mejor que el de Disney en esta reapertura.[16] No obstante, es importante destacar el carácter de líder absoluto de Disney en este sector,[17] con una competencia que difícilmente pueda igualar su posición, con lo cual si bien el desempeño en el corto plazo puede ser inferior al de la competencia, es altamente probable que recupere su posición dominante en el mediano-largo plazo.
Es interesante ver, en tercer lugar, el segmento “Media Networks” que consiste principalmente en los canales de TV que Disney posee. Este sector no tuvo una caída significante (solo del 2% para el Q2 2020 en relacion al Q2 2019) en el corto plazo, pero en el largo plazo, es evidente que la tendencia del sector es a desaparecer. Las encuestas y reportes muestran un lento descenso año tras año de la audiencia, tanto de TV en vivo, TV diferida y radio.[18] Con lo cual, a largo plazo, es previsible que este segmento sufra una disminución considerable en su volumen de operaciones.
También es previsible (y así lo reflejan las encuestas), que el reemplazo de la TV tradicional sea protagonizado por los servicios de video streaming (VOD), es decir, por las operaciones del cuarto segmento (Direct-to-Consumer). Disney tiene hoy 3 servicios de streaming, Hulu, ESPN+, y Disney+ (ofrece los tres en un bundle que cuesta US$ 12,99). Como ya dijimos, el incremento de los ingresos por estos servicios durante el FY 2019 fue significante. Veamos la evolución de los subscriptores a estos servicios en lo que va del FY 2020 (es decir, Q4 2019, Q1 2020 y Q2 2020).
Q4 2019 Q1 2020 Q2 2020
Hulu 30,4M 32,1M (+5,6%) 35,5M (+10,6%)
ESPN+ 6,6M 7,9M (+19,7%) 8,5M (+7,6%)
Disney+ 26,5M 33,5M (+26,4%) 57,5M (+71,6%)
Como se puede apreciar, el crecimiento es destacable, sobre todo de Disney+. Yendo producto por producto, cuesta encontrar competidores comparables con ESPN+, con lo cual Disney no tiene mucha competencia. Por su parte Hulu y Disney + son complementarios, la diferencia entre uno y otro radica principalmente en el catálogo (el de Hulu es un poco más ecléctico, el de D+ se centra principalmente en contenidos de marcas propias de Disney), así como también pequeñas características de Hulu que lo diferencian de otros servicios de streaming (incluyendo una versión alternativa de suscripción que incluye TV en directo). Estos dos servicios si se enfrentan a una feroz competencia, participando de la contienda denominada “streaming war” con gigantes como Netflix o Amazon Prime Video.
En ese orden, mientras Netflix tiene 193 millones de subscriptores,[19] y Amazon ostenta un numero similar o superior (habiendo ganado mas de 100M de subscriptores en un año), [20] Disney tiene solo 93 millones entre Disney+ y Hulu (nada mal, considerando que Disney+ está en su primer año de vida). Mirando hacia adelante es posible que el servicio que ofrece Disney expanda su base de subscriptores, así como también es muy probable que la competencia se recrudezca (incluyendo la incidencia de otros servicios como Apple TV+). En ese contexto, el principal motivo para pensar que Disney podría ganar la “guerra” los próximos años podría ser el amplísimo catálogo de licencias de personajes, series, y películas que posee el conglomerado (Star Wars, Los Simpson, Marvel y todos sus superhéroes, por solo mencionar algunos), que podrían tener muchísimo mas peso que las producciones originales de sus competidores. Por otro lado, el servicio de Amazon, por ejemplo, resulta mas atractivo en cuanto a pricing, porque le es ofrecido como un beneficio a todos los que cuentan con una subscripción de Amazon Prime)
A forma de conclusión, es difícil imaginar un futuro adverso a largo plazo para Disney. Sin embargo, su desempeño en el corto-mediano plazo dependerá de varios factores (quizás valga la pena analizar Comcast para el corto-mediano plazo, para el largo parece ser una desventaja fatal el hecho de que no estén compitiendo fuerte en la guerra por el streaming), en mi opinión, principalmente de la reactivación del turismo (tanto domestico como internacional) así como del desempeño de sus servicios de streaming (y el desempeño de sus competidores).
Fuentes
-Forms 10-K y 10-Q, principalmente los últimos, toda la información esta en https://thewaltdisneycompany.com/investor-relations/
-Yahoo! Finance: https://finance.yahoo.com/quote/DIS?p=DIS
-Otras fuentes, especificadas en los footnotes

[1] Datos en base a gráficos de https://www.tradingview.com/chart/
[2] Datos de https://www.macrotrends.net/stocks/charts/DIS/disney/dividend-yield-history y https://www.nasdaq.com/market-activity/stocks/dis/dividend-history
[3] El año fiscal de Disney comienza en septiembre, por lo que los reportes de ellos (y el orden de los trimestres del año fiscal) se presentan en consecuencia. No obstante, cada vez que me refiera a un determinado trimestre o quarter, lo hago en base al año calendario.
[4] En base a datos de los filings ante la SEC y de https://www.macrotrends.net/stocks/charts/DIS/disney/shares-outstanding
[5] En base a una comparación con datos de https://siblisresearch.com/data/price-to-book-secto
[6] Información de https://finance.yahoo.com/quote/DIS/holders?p=DIS
[7] Información de https://www.nytimes.com/2020/04/12/business/media/disney-ceo-coronavirus.html
[8] Si se quiere mas insight sobre Bob Iger, es recomendable la biografía de Steve Jobs que hizo Walter Isaacson
[9] Datos del proxy statement de 2020 https://otp.tools.investis.com/clients/us/the_walt_disney_company/SEC/sec-show.aspx?FilingId=13852150&Cik=0001744489&Type=PDF&hasPdf=1
[10] Ver https://www.cnbc.com/2019/08/06/bob-iger-forever-changed-disney-with-4-key-acquisitions.html , https://money.cnn.com/2006/01/24/news/companies/disney_pixar_deal/ , https://money.cnn.com/2009/08/31/news/companies/disney_marvel/ , https://www.bbc.com/news/business-20146942 , https://www.the-numbers.com/box-office-records/worldwide/all-movies/theatrical-distributors/walt-disney entre otros
[11] Comparaciones con el screener de TradingView: https://www.tradingview.com/screene
[12] Ver https://editorial.rottentomatoes.com/article/upcoming-disney-movies/
[13]Estadísticas del sector en: https://tradingeconomics.com/united-states/tourist-arrivals
[14] Ver https://www.usatoday.com/story/travel/experience/america/theme-parks/2020/08/10/disneyland-california-theme-parks-left-limbo-covid-19-surge/3319886001/
[15] Ver https://deadline.com/2020/08/walt-disney-world-cut-hours-september-1203008260/
[16] Ver https://www.foxbusiness.com/lifestyle/universal-sees-more-visitors-than-disney-amid-coronavirus-report
[17] Ver https://www.forbes.com/sites/niallmccarthy/2019/05/23/the-worlds-most-popular-theme-parks-in-2018-infographic/#7c2354e577ac , https://edition.cnn.com/travel/article/most-popular-theme-parks-world-2018/index.html , https://www.teaconnect.org/images/files/TEA_268_653730_180517.pdf
[18] Ver https://www.nielsen.com/us/en/insights/report/2020/the-nielsen-total-audience-report-august-2020/
[19] Form 10-Q Q2 2020 Netflix: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001065280/bcff7d52-7a7d-4e0c-8265-4b6860929fb1.pdf
[20] Ver https://www.forbes.com/sites/petercsathy/2020/01/31/amazon-prime-video-the-quiet-ominous-streaming-force/#6abbe5e41f1a
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Top options trading mistakes that you should not make

This is my post on wsbelite. Repost here for all.
IMO, trading options have similarities to playing poker and in order to be successful in the long run you need to be disciplined and refrain from making common mistakes. I’m going to list common mistakes and some tips here. Please suggest more. Hope we all lose less tendies!
  1. Refrain to trade low volume options . These contracts will have really wild bid/ask spread, or really low volume, which reduces your chance to make profit significantly. For example how can you win if you trade $ROPE 100c when the bid ask spread is $69/$96 per contract?
  2. Refrain to trade very low price options (e.g 1-10 cents) because your broker commissions will eat up a significant amount of the transactions. Think how much commissions you have to pay to buy 10000 contracts of 0.01 $ROPE 1000c which costs $10000 of premium.
  3. Refrain to buy near-dated far OTM options, because this is almost a sure way to burn your money. Even worse, even if you guess the direction right, you may still have a substantial loss. Think $PEI 500% OTM 2DTE. Btw $PEI is a great stock to own. Example: on 04/13 you bought SPY 496c 04/17 when SPY=280. On 04/14 SPY rises to 285. Guess how much you made on your call options?
  4. Know when to select OTM vs ITM options: in general: OTM is higher risk/higher return. Have some sense of OTM price movement - even when you guess the direction right, far OTM options won’t make you money because of low delta. ITM is more expensive. ATM is typically a safe choice if you just want to make a directional bet.
  5. Know theta-crush. Your options will lose time-value every day, so refrain from buying short-dated options unless you know what you're doing.
  6. Know the effects of IV (VIX for SPY) on options price. Sometimes even when you guess the direction rights, you may lose money because of VIX movements. Know how to hedge for VIX movement.
  7. Refrain from using market orders when possible: limit orders will give you the price you want.
  8. Understand the margin impact of different options strategies.
  9. Understand the impact of your broker commissions.
  10. Bank management: never YOLO your entire portfolio into one position, because if you lose, there’s 0% chance to make it back. Learn http://www.thepokerbank.com/strategy/basic/bankroll-management/. If you want to get in a large (50K+) position, average in/out may be a good idea.
  11. Don't open too many positions unless you're a bot. It's hard to manage manually and easy to make mistakes.
  12. (Mostly) don't follow autist DDs that you can't explain.
  13. Learn the market hours!
  14. Options strategies can be complex to visualized. Use your broker's performance profile tool to understand the performance implications before making a trade.
Some risky options strategies that you should only do when you know what you’re doing
Less risky options strategies:
  1. Covered calls: very low risk. You hold shares, and sell OTM calls to cover them and collect the premium.
  2. Cash secured puts: sell puts but you have cash to cover it. This is good when you’re willing to buy the shares if it drops, otherwise you collect the premium.
  3. Diagonal: Simultaneously entering into a long and short position in two options of the same type (two call options or two put options) but with different strike prices and different expiration dates. Typically these structures are on a 1 x 1 ratio. This is less risky and can hedge you against IV as well. For example if you bearish on USO, buy a 4p 05/15 and sell a 3.5p 04/24, that way if USO moves upward on the week ending 04/24 you’ll collect the near-dated premium.
  4. Learn how to sell options. Every mistake you made as an option buyer is probably a chance for you to profit as an option-seller.
Practical tips
  1. Use tools to scan top volume options. https://www.barchart.com/options/volume-leaders . This can give you some confirmation.
  2. Use tools to scan unusual activity options. https://www.barchart.com/options/unusual-activity Try to think why people are making that trade. Your broker also has tools to scan these.
  3. Take advantage of L2 flow data if your broker provides.
  4. Sometime when you can't make a long-term directional bet, it may be profitable to day-trade or swing-trade (hold your positions for 1-3 days).
  5. Know common ETFs:
Tips to improve
Learn more about economics and business to improve your common sense.
Advanced topics: understand how MM works, gamma hedging, dark pool indicators, probably understand some TAs such as RSI.
Day trade dynamics: power hours.
Things to debate
  1. Should you use stop-loss orders or not?
  2. When to buy FDs and how much should you spend on FDs?
  3. What is the impact of the underlying delisted on put options? As example OILU closed on 03/29 https://materials.proxyvote.com/Approved/MC3724/20200316/SUP_421079.PDF
submitted by tinkerprophet to wallstreetbets [link] [comments]

Unusual Option Activity for Aug-26-2020 - STM, SE (C), AMD (C)

Context -
The S&P 500 (+1.0%) and Nasdaq Composite (+1.7%) rallied to fresh record highs on today, propelled higher by some eye-popping gains in the mega-cap stocks. The Russell 2000 was left in the dust with a 0.7% decline.
Highlighting a few of the moves: Salesforce (CRM 272.32, +56.27, +26.0%) surged 26% following its earnings report, Facebook (FB 303.91, +23.09, +8.2%) rose 8% on no news, and Netflix (NFLX 547.53, +56.95, +11.6%) rose 11% on no news. Apple (AAPL 506.09, +6.79, +1.4%) and Tesla (TSLA 2153.17, +129.83, +6.4%) were fueled by a pair of Street-high price-target increases.
Today’s leadership came from the S&P 500 communication services (+3.7%), information technology (+2.1%). In the afternoon, the gains broadened out to the materials (+1.0%), industrials (+0.1%), and consumer staples (+0.1%) sectors.
Declining issues outnumbered advancing issues at the NYSE and Nasdaq by a comfortable margin. The biggest laggards were found within the energy (-2.2%), utilities (-1.2%), and real estate (-0.7%) sectors.
Durable goods orders increased 11.2% m/m in July (consensus +3.9%), and Moderna (MRNA 70.50, +4.25, +6.4%) said its COVID-19 vaccine generated a promising immune response in ten elderly patients.
For some perspective on today's record-setting performance, the S&P 500 finished the day up 58.7% from its March 23 low, up 7.7% for the year, and 13.0% above its 200-day moving average (3079). The latter raises the risk for a technical correction, although the momentum in the market can go on for longer than expected.
The U.S. Dollar Index declined 0.1% to 92.91. WTI crude futures increased by 0.1% to $43.39/bbl.
Investors will receive the weekly Initial and Continuing Claims report, the second estimate for Q2 GDP, and Pending Home Sales for July on Thursday.
Index Summary -
S&P 500 +1.0%; Nasdaq +2.13%;
DOW +0.29%; Russell 2000 -0.63%
VIX: 23.27 1.24,( +5.63%)
Sector Summary -
The three highest sectors for today were :
Communication Services +3.42%; Information Technology +2.03%; Materials +1.05%;
The three lowest sectors for today were :
Energy -2.11%; Utilities -1.11%; Real Estate -0.69%;
Commodities -
Gold - 1921.3,( -0.09%); Crude - 43.19,( -0.37%)
Today’s Option Activity Fast Facts -
CBOE Put/Call Ratio - 0.42
Highest Multiple Over Daily Average - BOX with 17 x the ADV of 2756. There were 36698 calls and 9645 puts.
Ticker with Most Contracts - NIO with 1330223 contracts traded today with an AVD of 322440. There were 1036099 calls and 294124 puts.
Largest Put / Call Ratio - ALBO with a 49.0 P/C ratio. There were 14603 puts and 298 calls.
Largest Call / Put Ratio - STM with a 98.36 C/P ratio. There were 57247 calls and 582 puts.
\Stocks must be >$6, Highest Multiple must have >1k ADV, Largest ratios must have an option volume >10k*
Recap -
PDD 89.24 +2,(+2.29%)
NIO 20.44 +2.6,(+14.57%)
AMGN 250.16 +1.94,(+0.78%)
LI 23.3 +5.07,(+27.81%)
You can find yesterday's post here.
MOMENTUM UNUSUAL OPTION ACTIVITY -
First Momentum Stock Pick -
Ticker : STM 30.91 +0.72,(+2.38%) Earnings : 2020-10-22
Name : STMicroelectronics NV
Industry : Semiconductors, Sector : Electronic Technology
Option Information -
Today’s Option Volume: 57829, OptionOI: 140872
Multiple of ADV: 6, ADV: 9349
Total Calls: 57247, Total Puts: 582
Calls at Ask: 75.4%, Calls at Bid: 14.0%
Puts at Ask: 9.1%, Puts at Bid: 82.0%
C/P Ratio: 98.4
Notable Strikes :
SEP 18 '20 30.0 C had 1526.0 VLM and 0 OI.
OCT 16 '20 30.0 C had 1438 VLM and 0 OI.
NOV 20 '20 30.0 C had 1976 VLM and 4400 OI.
News :
Potential Sympathy Stocks for STM
TXN, NXPI, ADI, MXIM
My Impression :
The Calls at Ask %, Multiple of ADV, and C/P ratio looks extremely bullish. The Semi-Conductor sector has seen a lot of aggressive buying over the past few weeks. This was a pick on July 15ths post. This stock increased initially after it was mentioned and has now declined. I think I will likely invest in this one again tomorrow.
CLASSIC UNUSUAL OPTION ACTIVITY -
First Classic UOA Stock Pick -
Ticker : SE 159 +4.87,(+3.16%), Earnings : 2020-11-18
Name : Sea Ltd. (Singapore)
Sector : Technology Services, Industry : Internet Software/Services
Option Information :
2020-09-18 185.0 C - 1,200 @ 2.85 were traded at 11:37 as a BLOCK Spot Price: 161.62
News :
No new news today.
Potential Sympathy Stocks for SE
WMB, EPD, ENB, SRE
Second Classic UOA Stock Pick -
Ticker : AMD 86.01 -0.34,( -0.39%), Earnings : 2020-10-15
Name : Advanced Micro Devices, Inc.
Sector : Electronic Technology, Industry : Semiconductors
Option Information :
2020-09-18 95.0 C - 1,238 @ 1.80 were traded at 09:38 as a BLOCK Spot Price: 86.58
News :
2020-08-26 07:04:46 - The Value vs Growth Dilemma for Intel, Nvidia and AMD
No summary available.
2020-08-25 17:35:36.383000 - AMD Q2 Earnings: The Company Gained Market Share in All CPU Markets
For years AMD was known as the little low-cost competitor of Intel. For people who cared looking into details, AMD processors often delivered better performance per dollar but in the end, who said…
Potential Sympathy Stocks for AMD
INTC, NVDA, TXN, MCHP
Upcoming Events for Next Trading Day -
Here you can find a full list of tomorrow's events with explanations.
Thanks for reading.
DISCLAIMER – These are my observations that I have made at the end of each day and trades that I am considering placing or watching. I am not responsible for your financial losses if you follow any of these trades. As always, do your due diligence.
Company Summary : STM
STMicroelectronics NV designs, develops, manufactures and markets products, which offers discrete and standard commodity components, application-specific integrated circuits, full custom devices and semi-custom devices for analog, digital and mixed-signal applications. It operates through the following segments: Automotive and Discrete Group, Analog and MEMS Group, and Microcontrollers and Digital ICs Group. The Automotive and Discrete Group segment comprises of all dedicated automotive ICs, and discrete and power transistor products. The Analog and MEMS Group segment comprises of low-power high-end analog ICs, smart power products for industrial, computer and consumer markets, touch screen controllers, low power connectivity solutions and metering solutions for smart grid and all MEMS products. The Microcontrollers and Digital ICs Group segment comprises of general purpose and secure microcontrollers, EEPROM memories, and digital ASICs. The company was founded in June 1987 and is headquartered in Plan-Les-Ouates, Switzerland.
Company Summary : SE
Sea Ltd. (Singapore) is an internet and mobile platform company. The firm engages in the provision of online gaming services. It operates through the following segments: Digital Entertainment, E-Commerce and Digital Financial Services. The Digital Entertainment segment offers access to game-related content through game forums, group voice chat, live streaming, and other user socializing functions on the Garena mobile app and desktop application. The E-Commerce segment manages third-party marketplace through Shopee mobile app and websites that connects buyers and sellers. The Digital Financial Services segment includes financial services to individuals and businesses, including e-wallet and payment services through the AirPay mobile app and AirPay counter applications on mobile phones or computers. The company was founded by Xiao Dong Li, Gang Ye and Jing Ye Chen on May 8, 2009 and is headquartered in Singapore.
Company Summary : AMD
Advanced Micro Devices, Inc. engages in the provision of semiconductor businesses. It operates through the following segments: Computing & Graphics, and Enterprise, Embedded and Semi-Custom. The Computing and Graphics segment includes desktop and notebook processors and chipsets, discrete and integrated graphics processing units, data center and professional GPUs and development services. The Enterprise, Embedded and Semi-Custom segment includes server and embedded processors, semi-custom System-on-Chip products, development services and technology for game consoles. The company was founded by W. J. Sanders III on May 1, 1969 and is headquartered in Santa Clara, CA.
submitted by noentic to u/noentic [link] [comments]

Due Diligence: Toromont Industries Ltd. - Building Together For An Exciting Future

Due Diligence: Toromont Industries Ltd. - Building Together For An Exciting Future
Hi,
This is my first attempt at writing a DD report. I hope it makes sense.
Just a few cautionary words:
  • Grammar (and English in general) is not a skill of mine. There will be a few parts that you might have to decipher, good luck.
  • I tried not to provide too much commentary and stick to the facts. I know you are spending your valuable time reading this and you probably don't want to listen to some random guy on the internet pontificate.
  • For those of you who are easily offended/triggered, can't take a joke, or sarcasm isn't your taste, DO NOT click the spoilers.
Lastly, the following is just my findings, by no means is it a representation of all the information out there. It is just the baseline for me to have confidence in becoming an owner of the Company. Do your own due diligence or talk to a financial advisor to find what is best for you and your financial situation.
Happy reading!

Highlights

  • Over the last 5 years the stock price has more than doubled.
  • Toromont dominates market share over everything east of Manitoba in Canada.
  • Customer base is heavily diversified, giving the Company many opportunities to expand into multiple industries.
  • Dividend has increased for 31 consecutive years. It has been paid for 52 consecutive years
  • The management team is extremely knowledgeable and have a good track record

Introduction

Toromont Industries Ltd. (TSE:TIH) provides specialized equipment in Canada and the United States. The Company operates two business segments: The Equipment Group and CIMCO. The Equipment Group supplies specialized mobile equipment and industrial engines for Caterpillar Inc. (NYSE:CAT). Customers for this business segment vary from infrastructure contractors, residential and commercial contractors, mining companies, forestry companies, pulp and paper producers, general contractors, utilities, municipalities, marine companies, waste handling companies, and agricultural enterprises. CIMCO offers design, engineering, fabrication, and installation of industrial and recreational refrigeration systems.
The Company was founded in 1961 and operates out of Concord, Ontario. As at December 31, 2019, Toromont employed over 6,500 people in more than 150 locations across central/eastern Canada and the upper eastern United States.
The primary objective of the Company is to build shareholder value through sustainable and profitable growth, supported by a strong financial foundation.

Description of the 2 Main Business Segments

  1. The Equipment Group includes the following 6 business units:
  • Toromont CAT: one of the world’s largest Caterpillar dealerships which supplies, rents, and provides product support services for specialized mobile equipment and industrial engines
  • Battlefield Equipment Rentals: supplies and rents specialized mobile equipment as well as specialty supplies and tools.
  • Toromont Material Handling: supplies, rents, and provides product support services for material handling lift trucks
  • AgWest: an agricultural equipment and solutions dealer representing AGCO, CLAAS and other manufacturers’ products
  • SITECH: provides Trimble Inc (NASDAQ:TRMB technology products and services. Trimble is a SaaS company that provides positioning, modeling, connectivity, and data analytics software which enable customers to improve productivity, quality, safety, and sustainability. Target industries: land survey, construction, agriculture, transportation, telecommunications, asset tracking, mapping, railways, utilities, mobile resource management, and government.)
  • Toromont Energy: supplies, constructs, and operates high efficiency power plants up to 50 MW, using Caterpillar's leading power generation technologies. Toromont Energy operates plants that supply energy to hospitals, district energy systems, and industrial processes.
  • Performance in this segment mainly depends on the activity in several industries: road building and other infrastructure-related activities, mining, residential and commercial construction, power generation, aggregates, waste management, steel, forestry, and agriculture.
  • Revenues are driven by the sale, rental, and servicing of mobile equipment for Caterpillar and other manufacturers to the industries listed above.
  • In addition, Toromont is the MaK engine dealer for the Eastern seaboard of the United States, from Maine to Virginia.
  • MaK engine is a marine diesel engine manufactured by Caterpillar
  1. CIMCO is a market leader in the design, engineering, fabrication, installation and after-sale support of refrigeration systems
  • Performance in this segment is dependent on the activity in several industries: beverage and food processing, cold storage, food distribution, mining, and recreational ice rinks.
  • CIMCO has manufacturing facilities in Canada and the United States and sells its solutions globally.
  • CIMCO services the ice rinks of 23 out of 31 NHL teams. So if you are watching a game and the ice is shitty, you know who to blame… the Ice Girls, obviously.
  • For those of you who live in the GTA and have skated on The Barbara Ann Scott Ice Trail at College Park, the trail was created using CIMCO proprietary CO2 refrigeration technology.

Management

CEO, Scott J. Medhurst has been with the company since 1988. He was appointed President of Toromont CAT in 2004 and he came into his current position as President and CEO in 2012. He is a graduate of Toromont’s Management Trainee Program.
CFO, Mike McMillan joined the executive team in March of 2020. His predecessor, Paul Jewer is retiring this year and has been working with McMillan during the transition period.
VP and COO, Michael Chuddy has been with Toromont since 1995.
On average, leaders have 29 years of business experience and have served at Toromont for 19 years. Seeing long tenures, good stock performance, excellent business planning and execution is usually a sign of strong leadership. In addition, insiders hold more than 3% (~$175 million) of the company’s outstanding shares. Medhurst owns more than 170 thousand shares, Chuddy owns just under 100 thousand shares and the former CEO and current Independent Chairman of Board of Directors, Robert Ogilvie owns more than 2 million shares, making him the 4th largest stockholder. High insider ownership typically signals confidence in a company's prospects. Compare this to Toromont’s main Canadian competitor, Finning, where insiders own less than 0.4% ($12 million) of the company (this number varies depending on where you look, I just took the highest one I found).
Recently insiders have been selling stock (Figure 1). I cannot speak to the reasons why insiders are selling but the remaining position owned by the insider is sizable and demonstrates that the executive still has confidence in the company. Some of the reasons insiders sell are: they don't believe in the company’s future, they need money for personal use, they are rebalancing their portfolio, among others.
Figure 1: Buy and selling activity of insiders (the data is from MarketBeat, so take that for what it's worth).
On a somewhat unrelated but still related note, 50% of Toromont employees are also shareholders.

Growth Strategies

Toromont has five growth strategies (expand markets, strengthen product support, broaden product offerings, invest in resources, and maintain a strong financial position). I chose to focus on the following two strategies, as they seemed most prevalent.
  1. Expand Markets
  • Toromont serves a wide variety of end markets: mining, road building, power generation, infrastructure, agriculture, and refrigeration. This allows for many opportunities for growth while staying true to their core competency. Further expansion into new markets doesn't require Toromont to build a whole new business model or learn the intricacies of the new industry because their products stays the same. Thus, the main concern is the application/selection of the products for the customer.
  • Expansion is generally incremental. Each business unit focuses on market share growth and when the right opportunity presents itself, geographic expansion is archived through acquisitions.
  1. Strengthening Product Support
  • In an industry where price competition is high, product support activities represent opportunities to develop closer relationships with customers and differentiate Toromont’s product and service offering from competitors. After-market support is an integral part of the customer's decision-making process when purchasing equipment.
  • Product support revenues are more consistent and profitable.

Growth Through Acquisition

Rapid growth in this industry is generally driven through acquisitions. Toromont has gone through multiple acquisitions since the 90’s:
  • Acquisition of the Battlefield Equipment Rentals in 1996
    • Toromont grew Battlefield from one location to 82 locations
  • Acquisition of two privately held agricultural dealerships in Manitoba to form AgWest Equipment Ltd
  • Acquisition of Hewitt Group of companies in Q3 2017 for a total consideration of $1.0177 billion
    • $917.7 million cash ($750 million of which was finances through unsecured debt) plus the issuance of 2.25 million Toromont shares (equating to $100 million based on the 10 day average share price)
Acquisition of Hewitt Group of companies
This acquisition allowed Toromont to make headway into the Quebec, Western Labrador, and Maritime markets, as Hewitt was the authorized Caterpillar dealer of these regions. Hewitt was also the Caterpillar lift truck dealer of Quebec and most of Ontario and the MaK marine engine dealer for Québec, the Maritimes, and the Eastern seaboard of the United States (from Maine to Virginia).
Toromont had total assets of $1.51 billion before the acquisition, the acquisition added $1.024 billion in assets, nearly doubling the balance sheet (look at Figure 2 for more details about the acquisition).
Figure 2: (all numbers are in thousands) The final allocation of the purchase price was as of Dec 31, 2018, Note 25 of 2018 Annual Report. $1.024 billion was added to the Toromont’s B/S
Large acquisitions like this one can be the downfall of a company. Here are some of the risks highlighted by management at the time of the acquisition:
  • Potential for liabilities assumed in the acquisition to exceed our estimates or for material undiscovered liabilities in the Hewitt Business
  • Changes in consumer and business confidence as a result of the change in ownership
  • Potential for third parties to terminate or alter their agreements or relationships with Toromont as a result of the acquisition
  • Whether the operations, systems, management, and cultures of Hewitt and Toromont can be integrated in an efficient and effective manner
In 2018, the Company started and successfully completed the integration of the Maritime dealerships acquired through Hewitt under Toromont’s decentralized branch model (bottom up approach). Under a decentralized model, regional leadership make business decisions based on local conditions, rather than taking top down mandates. A bottom up approach is an advantage in businesses like Toromont where the customer mix can vary vastly from region to region. It allows for decision-making that is better aligned with customemarket needs and more attuned to the key performance indicators used to manage the business. In 2019, the integration of the decentralized branch model was implemented in Quebec after its success in Atlantic Canada in 2018. Successful integration of Hewitt into the Toromont family shows the depth of industry and business knowledge possessed by the management team. Being able to maintain inherited customer relationships and ensure low turnover is no easy feat. Many companies have completely botched these kinds of acquisitions. One that comes to mind is Sobeys (the second largest food retailer in Canada) acquiring Safeway for $5.8 billion. Three years later, they wrote off $2.9 billion as a loss because they did not anticipate the differences in consumer habits in Western Canada vs Eastern Canada, among other oversights.
The result of the acquisition and Hewitt’s integration with Toromont’s existing business produced a 39% increase in EPS in 2018 and 14% increase in 2019.

Dividend

Toromont pays a quarterly dividend and has historically targeted a dividend rate that approximates 30 - 40% of trailing earnings from continuing operations.
In February 2020 the Board of Directors increased the quarterly dividend by 14.8% to $0.31 per share. This marked the 31st consecutive year of increasing dividends and 52nd consecutive year of making a dividend payment. The five-year dividend-growth rate is 12.09%.
Table 1: Information about the last eight dividends

Risks/Threats and Mitigation

Dependency on Caterpillar Inc.
It goes without saying that Toromont’s future is heavily dependent on Caterpillar Inc. (NYSE:CAT). For those who don't know, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. It has a market cap in excess of $68 billion. All purchases made by Toromont must be made from Caterpillar. This agreement has been standing since 1993 and can be terminated by either side with 90 days notice.
Given that the vast majority of Toromont’s inventory is Caterpillar products, Caterpillar’s brand strength and market acceptance are essential factors for Toromont’s continued success. I would say that the probability of either of these being damaged to an unrecoverable point are low, but at the beginning of this year, I would have said the probability of the world coming to a complete stop was very low too and look at what happened. Anything is possible. The reason this is a major consideration is because it's a going concern issue. Going conference is an accounting term for a company that has the resources needed to continue operating indefinitely until it provides evidence to the contrary. This term also refers to a company's ability to make enough money to stay afloat or to avoid bankruptcy. If there was irrevocable damage to Caterpillar’s brand, Toromont is no longer a going concern, meaning the company would most likely be going bankrupt or liquidating assets. The whole Company might not go under because the CIMCO, SITECH, and AgWest business units would survive but, essentially ~80% of the business would be liquidated.
In addition to the morbid scenario I laid out above, Toromont is also dependent on Caterpillar for timely supply of equipment and parts. There is no assurance that Caterpillar will continue to supply its products in the quantities and time frames required by Toromont’s customers. So if there is supply chain shock, like the one we just saw, there is the chance that Toromont will not have access to sufficient inventory to meet demand. Which in turn would lead to the loss of revenue or even to the permanent loss of customers.
Again, both of these threats have low a probability of occurring but either could single handedly cripple Toromont’s business. As of now, Caterpillar continues to dominate a large market share (~38% as per Gurufocus) in the industry against large competitors like John Deere, CNH Industrial, Cummins, and others.
Caterpillar's stock has been on a slow decline for a couple years but that is due to reasons beyond the ones that directly concern Toromont’s day-to-day operations. I would say if you don't believe in Caterpillar’s continued market share dominance, investing in Toromont is probably not for you.
Shortage of Skilled Workers
Shortage of skilled tradesmen represents a pinch point for industry growth. Demographic trends are reducing the number of individuals entering the trades, thus making access to skilled individuals more difficult. Additionally, the company has several remote locations which makes attracting and retaining skilled individuals more difficult. The lack of such workers in Canada has caused Toromont to become more assertive and thoughtful in their recruitment efforts.
To combat this threat, Toromont has/is:
  • Recruited 303 technicians to achieve growth targets
  • Created 208 student apprenticeship programs
  • Working with 19 vocational institutions in Toronto to teach about best practices and introduce the Company as a future employer to students
As a result of these initiatives and others, Toromont saw their workforce grow by ~8% 2019. Growing the workforce is one of the primary building blocks for future growth.
Cyclical Business Cycle
Toromont’s business is cyclical due to its customers' businesses being cyclical. This affects factors such as exchange rates, commodity/precious metal pricing, interest rates, and most importantly, inventory management. To mitigate this issue, management has put more focus on increasing revenues from product support activities as they are more profitable than the equipment supply business and less volatile.
Environmental Regulations Affecting Customers
Toromont’s customers are subject to significant and ever-increasing environmental legislation and regulation. This leads to 2 impacts:
  1. Technical difficulty in meeting environmental requirements in product design -> increased costs
  2. Reduction in business activity of Toromont’s customers in environmentally sensitive areas -> reduced revenues
Threats such as these come with a business of this type. As an investor in Toromont, you can't do much to mitigate these kinds of threats because it's out of your hands. Oil and gas, mining, forestry, and infrastructure projects are major drivers of the Canadian economy, so I think there will always be opportunity for Toromont to make money, regardless of government action.
Impact of COVID19
While the company had been declared as an essential service in all jurisdictions that it operates in, Q1 2019 results were lower as a function of COVID19 reducing activity in many sectors that Toromont services. Decline in mining and construction projects lead to a decrease in demand for Toromont products in the latter part of the quarter. Revenues were trending for 5-7% growth for the quarter before the effects of COVID19 were felt.
Management cannot provide any guidance on how to evaluate the impact of COVID19 on future financial results. They are focusing on ensuring the continued safety of employees and working with customers and the jurisdiction they operate in to evaluate appropriate activity levels on a daily/weekly basis. Lastly, management is keeping a close eye on how this crisis has led to an increase in A/R delinquencies and financial hardship for customers.
The Executive Team and the Board of Directors have taken a voluntary compensation reduction. Wage increase freezes and temporary layoffs have been implanted on a selective basis. Management believes that expanding product offerings and services, strong financial position, and disciplined operating culture positions the Company well for continued growth in the long term.
Competition
Toromont competes with a large number of international, national, regional, and local suppliers. Although price competition can be strong, there are a number of factors that have enhanced Toromont’s ability to compete:
  • Range and quality of products and services
  • Ability to meet sophisticated customer requirements
  • Distribution capabilities including number and proximity of locations
  • Financing through CAT Finance
  • E-commerce solutions
  • Reputation
  • Financial health

Main Competitor in Canada: Finning International Inc.

Finning International Inc. (TSE:FTT) is the world's largest Caterpillar dealer that sells, rents and provides parts and service for equipment and engines to customers across diverse industries, including mining, construction, petroleum, forestry and a wide range of power systems applications. Finning was founded in 1933 and is headquartered in Vancouver, Canada.

Toromont Industries Ltd Finning International Inc.
Market Cap $5.84B $3.02B
Price $65.66 $18.49
Dividend Yield 1.87% 4.36%
Number of Employees >6,500 >13,000
Revenues (ttm) $3.69B $7.57B
Trailing P/E Ratio 19x 11x
Price/Book 3.71x 1.35x
Profit Margin 7.71% 3.54%
Places of Operations Manitoba, Ontario, Québec, New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland & Labrador, most of Nunavut, and the Northeastern United States British Columbia, Yukon, Alberta, Saskatchewan, the Northwest Territories, a portion of Nunavut, UK, Ireland, Argentina, Bolivia, and Chile
Table 2: A quick comparison between Toromont and Finning.
I am sure there are some people looking at this table and thinking Finning looks rather promising based on the metrics shown, especially in comparison to Toromont. Finning’s dividend yield, P/E, and price/book look more attractive. Their top line is 2x. Not to mention it operates worldwide and is the only distributor in the UK, while Toromont only operates in half of Canada.>! Before you go off thinking “I need to use my HELOC to buy some Finning,” as some people on this subreddit are prone to do, ask yourself: do you see any cause for concern in the metrics listed above? !<
One glaring question I have is: why is Finning trading at half of Toromont’s market cap given that it operates internationally and has twice the number of employees and revenues of Toromont?

Q1 2020 Financial Results


Figure 3: Q1 2020 Income Statement
Overall operating income, net earnings, and EPS all decreased even though Toromont saw an increase in revenue for the quarter compared to Q1 of 2019.
  • All of these decreases were contributed to COVID19, as the pandemic lead to increases in costs
Historically, Q1 has always been Toromont’s weakest quarter. Q1 accounts for ~20% of yearly earnings and is consistently the least profitable quarter. Toromont’s profit margin generally ranges from 5%-9% progressively increasing into the later half of the year. This is good news for investors with the thesis that the economy will return to "somewhat normal" in the latter half of this year. The majority of the earnings for 2020 are still on the table for Toromont to earn. If current conditions persist, or there is a second wave and lockdown later in the year, we will most likely see a regression in Toromont’s growth to last year’s levels or even lower.
Assuming the world does return to “normal,” many of Toromont’s customers (especially in mining and construction) may try to catch up for lost time with increases to their operational activity, leading to an increase in Toromont’s sales for the remainder of the year. Of course this is a major assumption but it’s a possibility.
Below is a comparison of the last eight quarters. You can see the clear cyclical nature of their business.
Figure 4: Last eight quarters of earnings

Sources of Liquidity

Credit
  • Toromont has access to a $500 million revolving credit facility, maturing in October 2022
  • On April 17 2020 they secured an additional $250 million as a one year syndicate facility
Cash Position
  • Cash increased by 22.6 million for the quarter
  • Cash from operations increased 13% Q1 2020 compared to Q1 2019
  • The company also drew $100 million from their revolving credit facility
  • $4 million dollars of stocks were repurchased during Q1 2020
Given their access to $750.0 million dollars of credit and cash on hand equaling $388.2 million, the Company should have sufficient liquidity to operate if COVID19 and its aftermath persist for an extended period of time.

Financial Analysis

Analysis of Debt
Historically, Toromont has had very low debt levels. The spike in late 2017 was due to the acquisition of Hewitt. Management paid off the debt aggressively in 2018. At the end of December 2019 Toromont had $650 million of debt maturing between 2025 and 2027. As a result of COVID19 the company has taken on more debt. This additional access to debt accounts of the slight uptick in historical debt in 2020 (Figure 5).
Figure 5: Toromont’s historical debt, equity, and cash
The long-term debt to capitalization ratio is a variation of the traditional debt-to-equity ratio. The long-total debt to capitalization ratio is a solvency measure that shows the proportion of debt a company uses to finance its assets, relative to the amount of equity used for the same purpose. A higher ratio means that a company is highly leveraged, which generally carries a higher risk of insolvency with it.
The debt-to-equity ratio is at 47% and debt-to-capitalization ratio is 32%, Toromont has $388 million in cash that could be used to pay down debt by nearly 50% and bring the net debt-to-equity to 23% and net debt-to-capitalization to 18%. As mentioned before, management is holding on to cash to insure sufficient liquidity during these times.
The implication of these ratios is that Toromont does not take on large amounts of debt to finance growth. Instead the Company leverages shareholders equity to drive growth.
For comparison, Finning has a debt-to-equity ratio of ~100% (it differs between WSJ, 99%, and Yahoo Finance, 101%). The nominal amount of their total debt is ~$2.2 billion, which gives them a long-term debt to capitalization ratio 62%. Finning carries $260 million in cash.
Figure 6: Toromont’s debt-to-capitalization and debt-to-equity ratios
Profitability Ratios
Return on equity (also known as return on net assets) measures how effectively management is using a company’s assets to create profits.
Toromont’s return on equity is generally around 20%. Go to Figure 6 to look at the ROE for the last 4 years. In comparison, Finning has had a ROE of ~11% for the last three years, about 3% in 2016 and a negative ROE in 2015 (as per Morningstar).
Return on capital employed (ROCE) tries to find the return relative to the total capital employed in the business (both debt & equity less short-term liabilities). Toromont’s ROCE (ttm) for March 31 2020 was 22%. This means for every dollar employed in the business 22 cents were earned in EBIT (earnings before interest and tax). Finning had a ROCE of 11% as of December 2019.
Liquidity Ratios
Working capital is the amount of cash and other current assets a business has available after all its current liabilities are accounted for. In the last ten years, Toromont’s working capital has fluctuated between 1.6 at its lowest (2018) to 2.8 at its highest (2016). At the end of 2019 it was at 1.8. Meaning current liabilities equate to 60% of current assets.
Interest coverage ratio is used to determine how easily a company can pay their interest expenses on outstanding debt. Toromont has an interest coverage ratio 15x (as per WSJ). Finning on the other hand is at 4x. At this point I feel like I'm just beating up on Finning.
For those of you who made it this far, I have to admit something to you. This whole post is just a facade to ask you a question that has never been asked on this subreddit before: Should I buy BPY.UN? It keeps going down and I'm worried if I buy it, it will keep going down and I'll lose money. I don't want to lose money. Although if you go through my post history, you'll see I've been looking at/buying penny stocks.

Key Performance Measures

Below is a chart with key financial measures for the last four years. A few things I want to highlight:
  • Toromont had large capital expenditure last year (most of it went to increasing inventory) so they have the choice to keep capital expenditure down this year and preserve cash
  • From the start of 2018 (aka end of 2017) to the end of 2018 Toromont stock was down about 3% while the TSX Composite was down more 12% and S&P was down 7%. This stock has a history of out performance not only on the upside but also on the downside. I'll go into a bit more detail in the next section.
Figure 7: Summary of key financial measure for the last four years

Price Chart Comparisons

I don't do technical analysis. To those who do, good luck to you because let's be real, you'll need it. This section is just to get an idea of past performance and evaluate the opportunity cost of investing in Toromont compared to a competitor or a board based index fund.
I thought it would be easier to look at pictures as opposed to reading a bunch of numbers off a table.
For the sake of not creating a picture album of screenshots, I just looked at charts for the last 5 years. If you're interested in looking at different time intervals you can do so on google finance.

  1. Toromont Industries Ltd v. Finning International Inc.
Figure 8: Five year price chart of TIH v. FTT
These are the only two Caterpillar distributors on the TSX, making them direct comparisons. If I was looking for exposure to this industry, I would be choosing between these two companies (on the TSX anyways). There isn't really much to evaluate here. It's like they saying: “A picture is a thousand words,” or in this case, it's 128%. If you have time, go look at the graph from August 1996 to now. I can safely say it hasn't been much of a competition. Toromont has outperformed by ~2500% in stock price appreciation alone. If you're a glass half full kind of person, I guess you could look at this disparity as Finning having enormous upside. LOL

  1. Toromont Industries Ltd v. S&P 500 Index
Figure 9: Five year price chart of TIH v. VFV
If I'm not buying individual stocks, I’m buying the S&P 500 and to a lesser extent a Nasdaq index fund. This gives me a second look at the opportunity cost of my money. The story is not as bad as the Finning comparison. If you had bought $100 dollars of Toromont stock 5 years ago, it would have turned into $207 today, whereas the same $100 dollars in VFV would have became $157.
Just a quick aside, you can see the volatility in Toromont’s stock is much higher compared to the VFV. VFV has a relatively smooth trend upwards while Toromont trends upwards in a jagged path. This is the risk of single stocks, they move up and down more erratically, leading inventors who don't have a grasp of the business or conviction in their pick to panic sell or post countless times on Reddit asking why their stocks keep going down. “I bought the stock last week and it's done 3% already, do you guys think it’s going bankrupt? I thought stonks only go up???”

  1. Toromont Industries Ltd v. S&P/TSX Capped Industrials Index
Figure 10: Five year price chart of TIH v. ^TTIN
The S&P/TSX Capped Industrials Index isn't my favourite comparison for Toromont because its constituents cover many industries ranging from waste management (WCN), to railways (CNCP), to Airlines (AC, lol, had to mention it. I miss the days when there were double digits posts about AC. I wonder where those people have gone, because I can tell you where AC stock has gone... absolutely nowhere). Regardless, I used TTIN because I deemed it a better comparison to Toromont than the entire TSX. The story is on par with the other two comparisons. Toromont’s out performance is significant.
I just threw this bonus chart in here because when I saw it, I was like BRUHHH (insert John Wall meme)… It's completely unsustainable but that's impressive given the vast differences between the two.
  1. Toromont Industries Ltd v. NASDAQ-100
Figure 11: Five year price chart of TIH v. ZQQ
Now, of course, past performance does not dictate future results and all that good stuff, but it really gets you thinking about how the rewards disproportionately favours winners compared to the overall market. People are generally happy getting market returns (i.e. the just buy VGRO people) but being able to pick even a few winners really pays. This reminds me of the Warren Buffet quote: “diversification is protection against ignorance.” The context of the quote is that if you are able to study a few industries in great depth and acquire a wealth of knowledge, you can see returns astronomically higher than those who diversify across the board market. The problem then becomes you put yourself at risk of having all your eggs in one basket. Look at what's happening with Wirecard in Europe right now. This is why the real skill in investing is managing risk.

Analyst Price Targets and Estimates

The prince targets set for by analysts range from $63-$81. The average price target is ~$72, with the majority of targets within the 70-$71 range. Given the current price of $65.66, there is a ~10% upside. These price targets haven't changed much due to COVID19 even though revenues and EPS forecasts have been downgraded for 2020. The consensus estimate on 2020 revenues is $3.36 billion, down from the actual revenues of $3.69 billion in 2019 and the consensus EPS for 2020 is $3.01 down from actual EPS of $3.52 for 2019 and $3.10 for 2018. The fact that revenues and EPS forecasts have been downgraded, yet price targets remain untouched, for the most part, indicates that the effects of COVID19 are expected to be short-lived.
Figure 12: Earnings and estimate ranges for Toromont. Note: EPS numbers in this graphic are diluted EPS numbers.

Valuation

Multiples
Assuming P/E ratio stays the same as it has been for the last 12 months (~19x) and EPS goes down to ~$3.00 (as per analyst consensus), the implied price would be $57.
Using the last 12 months of revenues, the EV-to-Revenues ratio is at 1.56x. Assuming that ratio stays the same and with revenues estimated to be ~$3.36 billion, enterprise value (EV) comes out to $5.2416 billion. Using Q1 2020 figures for shares outstanding (82.015 million), cash ($388.182 million), and debt ($745.703 million), the implied price for a share is $58.94*.
\Note: Enterprise Value is equal to market cap plus total debt minus cash.)
Dividend Discount Model
The dividend discount model (DDM) is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present value.
The average dividend growth rate is 12% for the last 5 years is 12%. There is no way Toromont can increase the dividend at this pace in the long term, thus, I chose a long term dividend growth rate of 5%. This is the assumed rate in perpetuity. The required rate of return will equal WACC, 6.85% (averaged from 2019 Annual Report). The dividend over the last year is $1.16 (two payments of $0.27 in 2019 and two payments of $0.31 for 2020).
The fair value equals $65.84.
Figure 13: DDM calculation.

Closing Thoughts

There is no doubt that Toromont trades at a large premium. The current P/E is 19x and the CAPE ratio (Shiller P/E) is 26x. The fair value of the Company as per Morningstar research is in the mid $60 range.
Based on all valuations I did and analyst price targets, I would start buying in the high $50 range or maybe the very low $60 range, but my belief in the company has to do with long term thematic trends and how the Company operates, rather than today's price. Although I have to admit, the price does look more attractive now than it did in the beginning of June when the stock hit new all time highs. It seems like the only companies hitting new all time highs these days are tech companies, so it's refreshing to find a non-tech company achieving the same feat.
Toromont is not going to double next year or the year after that. It is a relatively low margin business, with slow growth and a cyclical business cycle. I like that the Company has strong financials, low debt, and good management. They don't take shortcuts or unwarranted risk. Future growth will mostly be driven through acquisition, but management is cautious with acquisitions and don't overextend themselves. One of the biggest problems Finning has been facing for the last couple years is political and social turmoil in South American countries which is affecting their mining clients and thus affecting revenues/margins.
The Q2 earnings are reported on July 22 202. We should have a clearer picture on the prospects of the Company from management. Hopefully we have a better idea of the COVID19 situation by then too. Regardless, I think the company is in a position where its services will always be in demand so short term fluctuations are not something that shake my confidence in this pick.

Limitations and Further Areas of Research

By no means is this an exhaustive due diligence report. This is enough for me to feel confident in the business and its trajectory. Limitations/further areas of the research include:
  • Looking into the growth of each sector Toromont services and extrapolating that growth to calculate Toromont’s future growth opportunity.
    • As per IBIS Research the heavy equipment rental market in Canada is ~$8.3 billion. It grew 1.1% yearly for the last 5 years.
    • The US market is estimated to be $47 billion, with an average growth of 2% for the last 5 years
      • Sorry but I couldn't get my hands on future projections as each report is $750
  • More research into competitors
    • I chose to include Finning only for simplicity’s sake. But there are many other competitors like:
      • United Rentals (NYSE:URI) provides similar services to Toromont/Finning in 49 U.S. states, 10 Canadian provinces, Puerto Rico and four European countries. The only thing being they aren't distributors for Caterpillar.
      • Rocky Mountain Dealerships Inc (TSE:RME) sells, leases, and provides product and warranty support for agriculture and industrial equipment in Western Canada
      • Holt Cat, N C Machinery, Ziegler CAT (none of these companies are publicly traded)
  • Further analysis can be done on the B/S and accounting treatments.
  • The effects of automation in the industry
    • Distributors in the US have started working with industrial automation companies to provide autonomous construction equipment on rent to contractors
      • Sunstate Equipment Co.'s partnership with Built Robotics
  • I was not able to do a discounted cash flow, which would be critical to finding the intrinsic value for Toromont and having true confidence in the company and its trajectory.
  • Further analysis of CIMCO and prospects of future growth
    • Based of the financials, CIMCO seemed like a small part of the business, which is why I mainly focused on the Caterpillar dealership side
These are not all the limitations or areas of further research, they are just the glaring one that came to mind.
>! I know I took a few shots at people in this post. It's all in good jest. If you're offended well.... maybe you should be. I don't know, you have to figure that out on your own or you could make a post on Reddit asking random people on the internet whether you should be offended or not. !<
Remember I'm not an expert, I'm just a random guy on the internet.

Disclosure

I am long Toromont. This information is not financial advice. Please do your own research and/or talk to a financial advisor. All data provided is current prior to the market opening on June 29, 2020. Inconsistencies in data can be due to many reasons, the foremost being that data was spruced from multiple different websites.
submitted by Dr_Sargunz to CanadianInvestor [link] [comments]

$Rkt Rocket Companies Raging bull case for a undervalued pink chip stock with 7 solid reasons why I'm investing. Would love to hear the opposing side

New account and could not post on /Wallstreetbets, therefore you guys are more worthy of this DD. Key take away, I Will 3X my money this next year with this large cap stock $RKT. it is at 51bil market cap with a P/E of around 5.30¿¿¿ The average pe in this industry is 16 so I'mma need y'all to bump these numbers up a bit mhhhkkkayyyy
This is my 10 days of DD concisely put into a numbers based approach for the significance of Rocket Companies $RKT. Hopefully your thesis matches up with mine so we can hold for what it's worth to make an impact.
I suggest you spend 5 mins looking into Rocket mortgage before reading my post for a bigger picture into my small perspective.
I will say this to preface "DETROIT, Aug. 6, 2020 /PRNewswire/ -- Detroit-based Rocket Companies, Inc. ("Rocket Companies" or the "Company") today celebrates its debut on the New York Stock Exchange ("NYSE") as a publicly traded company with its stock beginning to trade under the ticker symbol "RKT." Founded by Dan Gilbert, tech-driven Rocket Companies provides industry-leading real estate, mortgage and financial services, empowering consumers through entities including Rocket Homes, Rocket Auto and Rocket Mortgage, the nation's largest mortgage lender."
sep 2 earnings 35-40 September pt, expect small profit taking during earnings for a continuation holding until ~April 2022
interest rates may be low to 2024 remember as interest rates fall RKT moons with more profit 3.5% and Under is gold. 2022-2024 lowest interest rates expected. pe ratio of 16 is average for this companies endeavors comparitave to others 80-99pt(12months-18months) shooting for16-20 pe(average pe in their industry)
  1. Currently Underappreciated (51 billion market cap) 5.3 current pe The Math if earnings is at 3.5bil this quarter plus 1.37 bil. last quarter. a good guestimate will be 9.75bil per year thru 2022(likely to 2024 if we are observing dropping interest rates after 2008 recession that lasted 4 years of falling 2.6% of interest rates total starting at 6.63%(2008) highest down to 4% (2012)highest. lowest 5.1%(2008) down to 3.31%(2012)
Why and How Rkt will outperform the industry
  1. They Are Cutting Middle Man, buying insurance providers for better cost and profit. plus added referral rate.
  2. 8 vs 2 average loan effieceny per employee per month for quicker growth comparitavely to the avg mortgage company.
  3. They are the fastest way to a loan with the most profit margin for an extremely seem less process ( think time is money, big investors don't want a headache and want to save their time while having an organized process)
  4. with lower interest rates thru 2022 maybe 2024 creates more profit and interest in rockets loans. 
  5. mind you the highest rate in 2019 was 5.34% and 3.63% lowest. so we are due to see L 1.8%-H 3.6% 2024 if history repeats which would be the lowest rates I've ever seen. J Pow promised lower rates for 2 years at least 
  6.  they are diving into zillows atmosphere of intuitive home buying via AI data driven App interface 
submitted by GoogleisDD to stocks [link] [comments]

VZW > ATT

Edit :
"Stock symbols wrong"
Okay, suck my dick. Ur so cool that you memorized every single company and it's symbols on the NYSE. Go use that knowledge on your friends you have in real life. Or in the work force. Or even at your next job interview.
  1. WHEN YOU TRADE STONKS AM I FORCED TO TYPE THE SYMBOL TO TRADE? AM I?
  2. Yes, Robinhood traders,congratulations! You've learned the symbol(s) via visual repetition. Full company names wouldn't even fit on your portfolio screen. And then staring at data that can only fit on a 6 in screen while checking every 10 minutes to check on your "big gains". It's truly amazing how much better the information is spread out on PC, or even Webull (my 2nd acc)
Ah man, a part of me can't fucking wait for this sell off. Only because I KNOW it'll cause a temporary dip overall in my big 10 where I can get my next big buy in.
I bring you cold, hard facts and you mock me. (this is definitely how Jesus felt when he did his Thang (- not Christian))

Long term options going in SOON but as of now, no current holdings or ulterior motive. Facts only.

I've done my research. But in my very strong opinion, the long term points to Verizon but it seems to me that everyone is hopping onto ATT and Tmobile while neglecting "Americans Fastest and Most Reliable network". (sorry, ex employee hah)
  1. "Verizon doesn't have 5G"
  2. First off, YOU don't have 5G. Low band vs UWB. 5G low band is marginally faster than 4G LTE. ATT and Tmobile rushed to have "nations first 5G network" for marketing but you barely get past 150 Mb/s on low band. UWB has a much smaller radius and it's bad at penetrating surfaces, so it takes much longer and the technology is presumably taking longer. 5G is being used as a marketing ploy while QUALITY is in the backseat. And Verizon understands this, so they are taking their time.
  3. VZW just got rights to use Ericcsons first 5G base for commercial use FIRST https://www.ericsson.com/en/blog/2020/5/for-ericsson-and-verizon-a-strong-partnership-makes-one-plus-one-equal-three
  4. Vzw expanded into the Asian market (India). Partnered with Airtel for some video communications company. - - "foot in the door"
What do we know? 5G UWB technology is for smaller radius and not great at penetrating surfaces (based on current technology). Where would this technology be maximized? India. 5G iPhones coming in fall. And Indians LOVE their iPhones. All I'm saying is Real G's Move in Silence like lasagna. Tmobile and ATT can make all the noise they want. When Verizon steps up 5G UWB, AND *HOME INTERNET, it's a wrap.
***commission pay for retail salesman employees has been cut SEVERELY. Sure, that sucks, but that's a looooot of money that will now be going into vzw pockets. Bad for employees, amazing for stock holders and future investment.
submitted by ShadeSlayxr to wallstreetbets [link] [comments]

Foley Trasimene Acquisition Corp. II BFT.U Announces Closing of Initial Public Offering

" LAS VEGAS – August 21, 2020 -- Foley Trasimene Acquisition Corp. II (the “Company”) (NYSE: BFT.U) today announced the closing of its initial public offering of 130,000,000 units at a public offering price of $10.00 per unit. Each unit consists of one share of the Company’s Class A common stock and one-third of one warrant. Each whole warrant entitles the holder to one share of the Company’s Class A common stock at a price of $11.50 per share. The units are listed on the New York Stock Exchange (the “NYSE”) under the symbol “BFT.U”. Once the securities comprising the units begin separate trading, the Class A common stock and warrants are expected to be listed on the NYSE under the symbols “BFT” and “BFT WS,” respectively. "
https://www.sec.gov/Archives/edgadata/1818355/000110465920098024/tm2025074d14_ex99-2.htm
https://www.sec.gov/Archives/edgadata/1818355/000110465920098024/tm2025074-14_8k.htm
The Foley Trasimene Acquisition website:
https://foleytrasimene2.com
S-1 registration statement:
https://www.sec.gov/Archives/edgadata/1818355/000110465920089252/tm2025074-3_s1.htm
" We will seek to capitalize on the tactical, operational and organizational experience of our founder William P. Foley, II. We believe Mr. Foley’s distinguished business track record can have a transformative impact on a target business. Although we may pursue targets in any industry, we intend to initially focus our search on identifying a prospective target business in financial technology or information and business services, which acts as an essential utility to industries that are core to the economy. We also intend to focus on prospective target businesses that have unseen potential for revenue growth and/or operating margin expansion with high recurring revenue and cash flow, defensible intellectual property and strong market positions within their industries. Many of our management team’s prior investments, including Dun & Bradstreet (NYSE: DNB), FNF (NYSE: FNF), Black Knight (NYSE: BKI) and Ceridian (NYSE: CDAY) exhibited many of these qualities. "
submitted by SPAC_Time to SPACs [link] [comments]

###Wall Street Breakfast: The Week Ahead

Jun. 07, 2020 8:43 AM ET take what you will and tell me what you think, I think they named most of the stocks out there. What are your favorites?

Welcome to Wall Street Brunch, our preview of stock market events for investors to watch during the upcoming week. You can also catch this article a day early by subscribing to the Stocks to Watch account for Saturday morning delivery. Podcast listener? Subscribe now to receive Wall Street Breakfast by 8:00 a.m. every trading day on Seeking Alpha, iTunes, Stitcher and Spotify

Fed Reserve Chairman Jerome Powell will be in the spotlight next week when the Federal Open Market Committee meets on June 9-10. Powell is expected to face questions on the central bank's role in the economic recovery and what tools are still available to use. "We think right now they’re just trying to get this Main Street lending program to work. The question is are they going to do more things around what they do in terms of forward guidance and next steps of macro easing," previews Bank of America economist Ethan Harris. On the economic front, reports on consumer prices, producer prices and consumer sentiment will be watched closely. The weekly jobless claims numbers due out on June 11 will be crucial for sentiment after May’s employment report showed a surprising record gain of 2.5M jobs. On the corporate side of things, Lululemon (NASDAQ:LULU) reports earnings with shares sitting near their all-time high and a board battle at GameStop (NYSE:GME) goes to a vote.
Earnings spotlight: REV Group (NYSE:REVG) and Stitch Fix (NASDAQ:SFIX) on June 8; Signet Jewelers (NYSE:SIG), AMC Entertainment (NYSE:AMC), Chewy (NYSE:CHWY), Five Below (NASDAQ:FIVE) and GameStop on June 9; Guess (NYSE:GES) and Red Robin Gourmet Burgers (NASDAQ:RRGB) on June 10; Adobe (NASDAQ:ADBE), Dave & Buster's Entertainment (NASDAQ:PLAY) and Lululemon on June 11. Go deeper: See Seeking Alpha's complete list of earnings reporters
IPO watch: Online car seller Vroom (VRM) is offering about 18.8M shares in an expected range of $17 to $19. The timing for the IPO is intriguing with the pandemic leading to more online shopping for cars, but sales and margins under pressure. How well the Vroom IPO is received by investors could be of interest to Carvana (NYSE:CVNA), Cars.com (NYSE:CARS), TrueCar (NASDAQ:TRUE), AutoNation (NYSE:AN) and even Tesla (NASDAQ:TSLA) as the concept of online car shopping heads more mainstream. Vroom is expected to have a market capitalization of around $1.92B if it prices at the higher end of the indicated range. Across the Pacific, Chinese gaming company NetEase (NASDAQ:NTES) is looking to raise $1.2B in a Hong Kong listing to fund strategies for international expansion. Shares are expected to start trading on June 11. Also in the IPO world, the quiet period expires for ADC Therapeutics (NYSE:ADCT) on June 9 and IPO share lockups end on XP (NASDAQ:XP), Bill Holdings (NYSE:BILL), OneConnect Financial (NYSE:OCFT) and Sprout Social (NASDAQ:SPT) later in the week. There are also secondary offering lockup expirations on Tilray (NASDAQ:TLRY) and BlackRock (NYSE:BLK) to keep an eye on. Go deeper: Catch up on all the latest IPO news.
M&A tidbits: Gaming officials in New Jersey meet to discuss the Caesars Entertainment (NASDAQ:CZR)-Eldorado Resorts (NASDAQ:ERI) merger. The tender offer on the Menarini Group pickup of Stemline Therapeutics (NASDAQ:STML) is also due to expire. Keep an eye on Western Union (NYSE:WU) and MoneyGram International (NASDAQ:MGI) for reports on if the companies are in talks and expect a little more drama around the Tiffany (NYSE:TIF)-LVMH (OTCPK:LVMHF) merger.
Projected dividend changes (quarterly): W.R. Berkley (NYSE:WRB) to $0.12 from $0.11, Casey's General Stores (NASDAQ:CASY) to $0.34 from $0.32, National Fuel Gas (NYSE:NFG) to $0.445 from $0.435, Realty Income (NYSE:O) to $0.2330 (monthly), Urstadt Biddle (NYSE:UBA) to $0.14 from $0.28.
Spotlight on Snap: Snap (NYSE:SNAP) has its partner summit event scheduled for June 11. The virtual event will feature a keynote address by Snap co-founders Evan Spiegel and Bobby Murphy, as well as talks from other team members from across the company. New product features and partnerships will be announced around Snap's augmented reality offerings and a stripped-down version of its platform that partners can embed in their own apps is expected to be unveiled. Developers are expected to be able to use a toolkit provided by Snap to build a Snapchat-like mini-app right in their own websites. The Snap event takes place with the company under a brighter spotlight for how it curates its promoted content on the Discover page. Heading into the summit, shares of Snap are up more than 50% over the last 90 days.
Airlines: How high can the airline sector fly? After a series of reports on improved bookings trends, airline stocks are showing positive momentum. American Airlines (NASDAQ:AAL) paced the sector with a 77% gain last week, while Spirit Airlines (NYSE:SAVE) +75%, JetBlue (NASDAQ:JBLU) +36%, Delta Air Lines (NYSE:DAL) +36%, Hawaiian Holdings (NASDAQ:HA) +34% and SkyWest (NASDAQ:SKYW) +33% also reeled off big gains. Traffic reports for May are due out next week, which could include more market-moving metric updates.
Healthcare watch: At ENDO Online, OPKO Health (NASDAQ:OPK) is due to present data on Somatrogon on June 8 and Neurocrine Biosciences (NASDAQ:NBIX) will present on Crinecerfont. Virtual presentations scheduled for the European Hematology Association conference starting on June 11 include bluebird bio (NASDAQ:BLUE) on LentiGlobin data, Merus (NASDAQ:MRUS) on MCLA-117, Altex Industries (OTCQB:ALTX) on Nomacopan, Vertex Pharmaceuticals (NASDAQ:VRTX) on CTX001, AstraZeneca (NYSE:AZN) on AZD1222 and Agios Pharmaceuticals (NASDAQ:AGIO) on AG-348.
Analyst meetings and business updates: Equifax (NYSE:EFX) has an investor update scheduled for June 8. Intel (NASDAQ:INTC) CEO Bob Swan will talk ESG in a discussion with JUST Capital on June 8 and Ericsson (NASDAQ:ERIC) has a business update call scheduled for June 9 covering networks and digital services. Avery Dennison (NYSE:AVY) has a conference call scheduled with R.W. Baird on June 9. Salesforce.com (NYSE:CRM) cloud exec Mike Micucci is participating in the Citi Virtual Software Bus Tour on June 10. Finally, Overstock.com (NASDAQ:OSTK) has an Investor Day scheduled for June 10 and Centene (NYSE:CNC) has a Virtual Investor Day presentation scheduled for June 12.
Conferences rundown: Cowen hosts a conference covering the "New Retail Ecosystem" with virtual presentations from Vince Holdings (NYSE:VNCE), Lands' End (NASDAQ:LE) and Macy's (NYSE:M). Also next week, William Blair has a growth stock conference with online talks by execs from a long list of companies, including Pluralsight (NASDAQ:PS), Appian (NASDAQ:APPN), TransUnion (NYSE:TRU), Arista Networks (NYSE:ANET), CyberArk Software (NASDAQ:CYBR), QAD (NASDAQ:QADA), Talend (NASDAQ:TLND), Workday (NASDAQ:WDAY), SmileDirectClub (NASDAQ:SDC), DocuSign (NASDAQ:DOCU), Chewy (CHWY), Zendesk (NYSE:ZEN) and Varonis Systems (NASDAQ:VRNS). The hodge-podge list of companies due to participate at the Stifel 2020 Virtual Cross Sector Insight Conference include Starbucks (NASDAQ:SBUX), Donaldson (NYSE:DCI), HubSpot (NYSE:HUBS), S&P Global (NYSE:SPGI), Autodesk (NASDAQ:ADSK), Archer-Daniels-Midland (NYSE:ADM), MasTec (NYSE:MTZ), Lindsay (NYSE:LNN), Dycom Industries (NYSE:DY) and Cronos (NASDAQ:OTC:CRON). Meanwhile, the Deutsche Bank 11th Annual Virtual Global Industrials & Materials Summit 2020 will also run next week with presentations ranging from airline companies, paper producers, construction concerns to home builders. Appearances are expected from MYR Goup (NASDAQ:MYRG), WillScot (NASDAQ:WSC), Berry Global (NYSE:BERY), Builders FirstSource (NASDAQ:BLDR), Cabot Corp. (NYSE:CBT), Canadian Pacific (NYSE:CP), Clearwater (NYSE:CLW), Crown Holdings (NYSE:CCK), AMETEK (NYSE:AME), ArcelorMittal (NYSE:MT), Ahland Global (NYSE:ASH), AXTA, Delta Air Lines (DAL), Dow Inc. (NYSE:DOW), Fluor (NYSE:FLR), Garrett Motion (NYSE:GTX), Rio Tinto (NYSE:RIO), Saia (NASDAQ:SAIA), Silgan Holdings (NASDAQ:SLGN), Sonoco Products (NYSE:SON), Summit Materials (NYSE:SUM), Target Hospitality (NASDAQ:TH), Vulcan Materials (NYSE:VMC), Westlake Chemical (NYSE:WLK), XPO Logistics (NYSE:XPO), Meritor (NYSE:MTOR), nVent Electric (NYSE:NVT), Peabody Energy (NYSE:BTU), PPG Industries (NYSE:PPG), PQ Group (NYSE:PQG), REVG, Alcoa (NYSE:AA), Rexnord Corp. (NYSE:RXN), Canadian National (NYSE:CNI), CSX Corporation (NASDAQ:CSX), Union Pacific (NYSE:UNP), Kansas City Southern (NYSE:KSU), Honeywell (NYSE:HON), Ball Corporation (NYSE:BLL) and O-I Glass (NYSE:OI).
Eating out: The week ahead will see the eat-at-home vs. restaurants trade be hashed around again. Nielsen data could show a deceleration in the stockpiling benefits for Campbell Soup (NYSE:CPB), J.M. Smucker (NYSE:SJM), B&G Foods (NYSE:BGS), Blue Apron (NYSE:APRN), Hain Celestial (NASDAQ:HAIN) and General Mills (NYSE:GIS) - while restaurant stocks like Cracker Barrel (NASDAQ:CBRL), Denny's (NASDAQ:DENN), Dine Brands Global (NYSE:DIN), Brinker International (NYSE:EAT) and Red Robin Gourmet Burgers (RRGB) will look to scrap back from their YTD losses with more people eating out.
Notable annual meetings: GameStop may generate the most drama of the annual meetings next week with the company's board up for re-election. Two proxy firms are backing candidates from stakeholders Hestia Capital and Permit Capital for board inclusion, while Michael Burry's Scion Asset management is voting in favor of the board's slate. The annual shareholder meeting arrives with shares of GameStop down 32% YTD. Other annual meetings to watch this week include MercadoLibre (NASDAQ:MELI), SeaWorld Entertainment (NYSE:SEAS), Shake Shack (NYSE:SHAK), Target (NYSE:TGT), Wingstop (NASDAQ:WING), TJX Companies (NYSE:TJX), Mattel (NASDAQ:MAT), Nvidia (NASDAQ:NVDA), Best Buy (NYSE:BBY) and Dollar Tree (NASDAQ:DLTR).
Betting on betting: The brand-new Roundhill Sports Betting & iGaming ETF (NYSEARCA:BETZ) heads into its first full week of trading just ahead of the re-emergence of major sports in the months ahead. The Roundhill Sports Betting & iGaming ETF is designed to offer retail and institutional investors exposure to sports betting and iGaming industries. Holdings include DraftKings (NASDAQ:DKNG), Flutter Entertainment (OTCPK:PDYPY), Penn National Gaming (NASDAQ:PENN), William Hill (OTCPK:WIMHF), Scientific Games (NASDAQ:SGMS), GAN (NASDAQ:GAN), Churchill Downs (NASDAQ:CHDN) and PointsBet (OTCQX:PBTHF).
Barron's mentions: Twitter (NYSE:TWTR) makes the cover this week with the company in the middle of the political firestorm. For investors, the bigger issue than the culture debate is that the stock is valued at a sales multiple lower than social media peers. Food suppliers Sysco (NYSE:SYY), US Food Holdings (NYSE:USFD) and Performance Food Group (NYSE:PFGC) are recommended with sales volume slowly recovering. The publication notes that large investors like KKR and Trian Fund Management are taking an interest in the sector. There is also a reminder that COVID-19 drug trials are progressing. Eli Lilly (NYSE:LLY) is testing its antibody in a Phase 1 trial. Regeneron Pharmaceuticals (NASDAQ:REGN) is also set to begin testing this month, while a collaboration between Vir Biotechnology (NASDAQ:VIR) and GlaxoSmithKline (NYSE:GSK) will begin trials later this summer. If the trial results are positive and the pandemic remains intense, emergency authorization of some of the drugs could follow.
Sources: Bloomberg, Reuters, CNBC, BioPharmCatalyst, EDGAR
submitted by abiech to Winkerpack [link] [comments]

Verizon Analysis

Hey everyone! I have been a lurker of the sub for a while. I just graduated (3 days ago from writing this post) from university with a degree in finance and I focused on classes where we analyzing companies as I find it very intriguing and I have actually found fun. This last quarter I took an equity analysis class and was pretty limited in what I was allowed to analyze, no FI's, or any equity analyzed in the last 4 years by another student. I ended up choosing Verizon as I thought it would be a start on learning and practicing. Here is my analysis and my hope is if any professionals out there would be willing to go through and give their input, advice, and be a critic on how to improve on my future analysis.
Some formatting may look funky as this was originally in a word doc that didn't exactly transfer over well.
Also I was forced to delete some tables and graphs due to the 20 picture upload limit, specifically I deleted MV of Debt calculations, some tables in the appendix representing WACC and cost of Equity, industry average statistics, which can be googled, my calculation of FCFE, as well as a few other minor tables, if the text refers to a table that isn't there that would be why, and I can provide to anyone upon request.
Thanks to anyone taking the time. I greatly appreciate it.

Student Research Telecommunication
Verizon
6/16/2020
Ticker: VZ
Recommendation: HOLD
Price: $56.92 Price Target: $64.42
Highlights
· In the beginning of a 5g upgrade cycle, a significant opportunity to be a growth driver in the North American wireless market for Verizon.
· Verizon’s profit margin is at 14.61%, double compared to their competitors
· Stock market fluctuations low relative to the general market, a beta of .7, and a safe industry that many consumers deem as essential, relatively “recession proof”
· A dividend yield of 4.5%
Investment Summary
Dividend Growth: The company is in its mature stage cycle with an established industry and market presence. Verizon has stable revenues with limited opportunity for growth outside of an acquisition of a smaller mobile carrier. This allows us to value Verizon mostly from its’ dividend growth. Historically, Verizon has a growth rate of 2.6% in the last 10 years, in the last 5, they have a historical growth rate of 5%. A growth rate of 3.5% is estimated to be Verizon’s growth rate moving forward. Fortunately, the industry business model allows for constant cash flow and sustainability in the mature stage cycle.
Expansion: 5g is the one of the few areas for growth still available to Verizon, 5g refers to the next generation in wireless data transfer technology. This new technology will increase data transfer rates by up to 100-fold. The last technological advancement with 4g impacted Verizon by increasing revenues by up to 5% one year and averaged revenue growth 4.3% annually for 4 years. This effectively doubled Verizon’s revenue growth average of 2.3% annually. Outside of 5g Verizon still has expansion options including expanding its wired FIOS network, and its online presence under Verizon Media Group.
Stability: Verizon is a stable cash flow company with an adjusted beta of .7. This illustrates the safety of the company’s stock. Verizon has little room for growth in the saturated wireless telecom market, meaning Verizon’s stock price is not likely to explode in value in the future. However, historically Verizon’s stock price does not fall substantially relative to the general market when macroeconomic forces cause the market to fall. Verizon is not currently competing with other equities as it is with safe debt in our current economic environment. This is because of the current interest rate environment on the U.S. 10-year being less than 1%. This causes investors to look for other high-quality investment alternatives that deliver better yield. Verizon satisfies this type of investor with a yield of over 4% as well as providing market exposure from the general market.
Execution: The biggest potential obstacle currently facing Verizon is their execution of rolling out 5g technology. Any hinderance can result in missed revenue, with next year’s iPhone coming out with 5g capable technology, which the iPhone has over 50% market share alone in the smartphone market, could cause many customers to switch to a competitor if Verizon cannot meet demand by that point. Let alone the other half of the market, largely denominated in various android devices, already has 5g capable technology. Should Verizon miss the mark, it could potentially hurt the company for years. However, according to Verizon’s CTO, as of the end of May, they are ahead of schedule deploying 5g. Verizon has a history and reputation of being on top of deploying new technology quickly, while being ahead of schedule, it is plausible to see many customers switch over to Verizon to take advantage of their 5g if Verizon’s competitors can’t meet the 5g demand. Verizon management needs to be able to take advantage of this new technology by charging higher prices to their mobile customers. Any lack in the execution could result in bad revenues and earnings.
Business Description
Verizon Communications Inc. (NYSE:VZ) is the parent company to Verizon Consumer Group and Verizon Business Group. Verizon provides services such as communications, entertainment, and information to consumer, business, and governmental customers. Employing 135,000 people, 96% are located in the U.S. and over 2,300 retail stores open, and headquartered in New York, NY. In 1877 the bell system was created in the name of Alexander Graham Bell, over time the company slowly expanded across the U.S. and Canada over the next 100 years. Over the years the system evolved to AT&T controlling a bunch of regional company’s providing land line service. In 1982 the U.S. government broke up the monopoly AT&T had into the regional companies, this plan was originally proposed by AT&T. This event was known as the breakup of the bell system and the companies post breakup were known as the “baby bells”. Two of the companies as a result of this breakup were Bell Atlantic Corp. and GTE Corp. Verizon was formed in June 2000 with the merger of Bell Atlantic Corp. based in New York city and GTE Corp. based in Irving Texas. Both firms were some of the largest in the industry, and both were heavily focused on the eastern side of the U.S.
Table 1 below shows Verizon’s consolidated revenues for the years 2019 and 2018. Revenues are broken down into their three subsidiaries of Verizon Consumer, Verizon Business and Verizon Corporate. Eliminations refers to the exchange of cash between these segments as it is not new revenue. Below explains each segment and where each segment gets their revenue broken into a percentage.
Table 1

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Verizon Consumer Group offers wireless and wireline communications, branded the most extensive wireless network in the U.S., North America is where over 95% of their revenue comes from geographically, the other 5% comes from overseas in Japan, Central America, and selective parts of Europe. Wireline is provided in North Eastern and Mid-Atlantic U.S. over fiber-optic lines through their Fios brand, or wireless services provided nationwide on hotspot devices or mobile phones. Both wireline and wireless can be prepaid or postpaid, the majority are in the postpaid segment, paying monthly for the services. The consumer segment provides data connection to 95 million wireless mobile connections, 6 million broadband connections, and 4 million Fios connections: making up 68.8% of revenues.

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Verizon Business Group provides the same services to corporate and some governmental agencies with additional services such as “video and data services, corporate networking solutions, security and managed network services, local and long distance voice services and network access to deliver various Internet of Things (IoT) services and products including solutions that support fleet tracking management, compliance management, field service management, and asset tracking” according to Verizon’s 2019 annual report. In all, Verizon’s Business Group is in a position to solve more complex problems that may come up at a business compared to their Consumer Group. Verizon Business Group provides 25million wireless connections and 489 thousand broadband connections: making up 23.8% of total revenues.
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Verizon Corporate includes media business, investments in businesses, and financing expenses outside of the regular course of business. The biggest section here is Verizon Media which provides third party entertainment services such as email, news, and streaming services to customers. Verizon Corporate makes up 7.4% of total revenues.

Verizon plans to position themselves into future growth trends such as increased expansion of their wireless network, high-speed fiber, and the new introduction of high-speed 5g connections on mobile devices or in-home. With over 17.9 billion invested for capital expenditures at end of year 2019 for 5g technology release.

Environmental, Social, Governance and Management Quality
Environmental criteria include the company’s impact on the environment such as energy use, waste output, and pollution production. In the last 10 years so called “green bonds” has been discussed more about and demand for them has slowly been rising. These green bonds are any bonds issued by a company, where all the money raised from the bonds goes towards any ESG related goal. Verizon in February 2019 issued their first green bond to the total of $1 billion, this is the first green bond issued in the telecom industry as well. Verizon has stated they are committed to being completely carbon neutral in their operations by 2035; this propagates their current goal to “generate renewable energy equivalent to 50% of our total annual electricity consumption by 2025”. Finally, Verizon has stated that they are committed to setting an annual emissions reduction target by fall 2021.
Social criteria include the relationships the company has with business partners, local communities, employee health and safety, and any other “stakeholder” that the company impacts. Verizon claims to focus on their customers upmost before most other stakeholders, they reinforce this through their actions and from their goal of being the best and most reliable network in the U.S. and serves this goal mainly through delivering high quality services through their wireless segment at a reasonable price. Outside of customers Verizon is aiming to contribute 2.5 million hours of volunteer work through their 135 thousand employees, these hours are aimed to improve “digital inclusion, climate protection, and human prosperity”. In Cleveland, Ohio the company is launching 5g enabled classrooms to deliver instruction in struggling middle schools and aims to expand this effort to 100 middle schools in total by 2021. Additionally, to evaluate the employee side of social criteria using a website called Glassdoor is used. Glassdoor is a website where current or past employees can rate the company anonymously on salary, benefits, satisfaction, outlook of the company, and their experience at the company; however, Glassdoor has been known to be biased at times. Verizon has over 21 thousand reviews on Glassdoor, from this large amount of reviews it can be taken with some accuracy. Considering all 21 thousand reviews they are rated at a 74% satisfaction rating, and 68% approve of the CEO, whereas AT&T has a 68% satisfaction rating and 51% approve of the CEO. At Verizon a controversial subject among employees are work-life balance with a 50% split on it needing some improvement or that it is adequate. Over 8,000 reviews claim that Verizon is a good employer when relating to pay and benefits.
Governance criteria includes how transparent and accurate the financial statements are, avoiding conflicts of interest among the executives and board members, and ensuring the company is not engaging in any illegal activities. As far as engaging in illegal activities Verizon has a good track record and no one suspects any major allegations against Verizon, with Verizon being a U.S. dominant business they mostly just have to obey rules and regulations within the U.S. and not balancing between international laws. Verizon has been clear in all of its financial reporting, obeying all GAAP rules and even going above the mark to provide additional information that is non-GAAP with disclosures. Conflicts of interest among the board members meet all laws and guidelines from the NYSE and NASDAQ. Verizon’s board members also meet the “heightened independence criteria” rules from the NYSE and Nasdaq. Regarding the green bond discussed above, they have and will report on how much of the green bond money has been spent and on what projects the money is going to until the note matures.
Overall Verizon is a quality company with quality management, among the 9 board members currently, 3 are African American, and 2 are woman. The company CEO, Hans Vestberg has been with the company since 2017, and CEO since 2018, a noticeably short amount of time compared to peers at AT&T whose CEO has been with the company since 2007. Verizon’s CFO, Matthew Ellis, has been with Verizon since 2016. Verizon’s management is relatively new and most likely experiencing a learning curve still, but so far, they have made strides in redefining Verizon and shows promise to be a strong team long term. Sustainalytics is an ESG rating company who rates companies on a scale of 0-100, they rate VZ at a score of 20, AT&T with a score of 19, and T-Mobile with a score of 25. This is a low score, however, ESG scores are highly subjective and vary widely among different ESG ratings companies. Verizon does not participate in any of the “high risk” ESG industries such as oil or mining, meaning in the grand scheme of company’s they are a relatively sustainable company. While the company can always do better, they aim to bring diversity to the company and strive for transparency.
Demographic Trends
Companies should be aware of demographics and which ones their customers fall under, this information can provide to a company who their core customer base is, and which segments they can expand into. There are many demographics out there, each with their own preferences, tolerances, and taste. Gender, race, and age are the three big demographics, however, there are many more than those three and each can be combined or divided into bigger or smaller groups. Of particular importance to Verizon is age as there is a dilemma currently with an aging work force and how the transition to retirement will be in our society. Called the “Baby Boomers” they are by far the largest section of our population with the most buying power, many of them are about to enter retirement age. Many of these baby boomers are going to start to wind down their portfolios they’ve built up over the course of their lives. Over the next 50 years this population will naturally fade out and their immense buying power will switch to the younger generations. Currently the buying power of generations, while different studies vary on exact numbers, annual spending roughly comes down to about $550 billion for baby boomers, $350 billion for Gen X, $320 billion for Millennials, and $160 billion for the silent generation. The youngest generation, Gen Z, has little to no buying power of their own, however, their parents buy much of what they want with over 93% of households say that they influence purchasing decisions. Gen Z buying power will increase substantially in the future as they enter adulthood. Younger generations have been becoming more acclimated with technology as it has become more readily available and introduced at a younger age. Younger people (under 25) tend to use social media much more than older generations, most of these social media apps can only be accessed through mobile devices. As we observe these younger generations using technology more and becoming more affluent in them, we can assume that these kids will be more accepting of smartphones and other technologies; possible making these devices “essential”.
By looking at Verizon’s customers we can predict where much of their revenue in the future will be coming from. Verizon’s customers, broken down by age, are as follows: 24.3% of customers in the 18-29 range, 26.1% in the 30-49 range, and 31.58% in the 50-64 range. Totaling our age groups, this accounts for about 82% of Verizon’s customers, the other 18% comes from the ages on the tail end of either side, so the under 18 or 65+ and the corporate customers who are unaffected by these aging demographic trends, there is not any percentage breakdown for these groups. As the 50-64 age group enters retirement they will want to stay in touch with relatives and try to keep busy, a phone is a good way to do this and it can be reasonably predicted that this age group will rise as the Baby Boomers enter retirement. Although this will most likely saturate the market completely and leave no more room for growth for Verizon in the U.S. market, aside from stealing customers from other providers. This effect will most likely be in the next 20-30 years, but at the 50-year time horizon this generation will have dwindled and the largest age of customers will shift to a younger age group.
“Younger people are getting phones”, says the CFO of Verizon at a Morgan Stanley investor meeting. At a younger age many kids are getting cell phones, this ingrains cellphones into kids’ heads and makes it an essential item. Under 18, the generation titled “Gen Z” (born after 1997) is now the largest population in the U.S. with over 90 million, larger than the millennial and Baby Boomer population. Who this generation chooses to have as their cellphone provider will likely depend on who their parents used, or other factors such as environmental sustainable governance ratings which seems to be a top factor within this age group. With this information we can assume that the under 18, and 18-29 age group will increase as young people get more phones due to an increase in population in this age group and the increasing likelihood that this group will obtain phones at a younger age.
The Pew Research Center conducted a study in February 2019, they found that 96% of people in the U.S. have smart phones and that ethnicities, genders, education, and age seem to have smartphones at about the same levels; in the 91%-100% range. There is likely little market share to be gained by looking at demographic's trends over time other than the extremes of age, as the under 18-year-old are at 92%, and over 65 at 91%.
Currently with the Covid-19 virus shutting down the economy it can be safely predicted that Verizon will have a reduced earnings report through either Verizon delaying payments customers need to make to the company or writing off losses. Although many people see phones as a form of entertainment and people are craving entertainment now more than ever. As for long lasting effects coming about from the change of Covid-19, there may be a few that affect Verizon that are yet to be known.
Industry Overview and Competitive Positioning
At the beginning of 2020 in the Telecommunications Industry there were 4 big players, AT&T, Verizon, T-Mobile, and Sprint. T-Mobile and Sprint have merged as of 4/1/2020 into the company name of T-Mobile. Outside of Verizon the only one bigger than it is AT&T which is diversified outside of telecommunications such as AT&T owning streaming service and entertainment subsidiary HBO, and DirectTV a cable provider. With the T-Mobile and Sprint merger they are still the smallest of the 3 companies, but they are able to compete effectively with Verizon and AT&T. Verizon, AT&T, and T-Mobile are the “900-pound gorillas” of the industry.
The industry business operation consists of a provider offering data (or internet connection), and cellphone services to customer on a mobile connection, such as phones. Most of the company’s customer base pays month to month for service, included sometimes in the cost of the service will be a phone or other accessories (such as mobile hotspots, TV plans, or in home internet) that the customer bought with it. However, this makes it easier for a customer switching between providers for the better service as there is no commitment on the customer side.
Verizon’s revenues shown in the table below illustrate stagnant growth in 2018 and rather lackluster growth the other years. Verizon attributes this growth to expanding into new segments and upgrading infrastructure, as well as spending nearly 35 billion on new 5g technology, which is claimed to be revolutionary when it comes out.
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Shown in the table below, Verizon has the lowest Trailing Twelve Month (TTM) P/E (Price/Earnings) ratio of 12.46, with AT&T being slightly higher at 15.14. T-Mobile absorbing Sprint has created a very high P/E ratio of 22.59. We can also observe that not only does Verizon have a lower P/E ratio, but they also boast higher return on equity and profit margins compared to their competitors.
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Valuation
The discounted cash flow valuation methods used for Verizon consist of the dividend growth model, a free cash flow to firm (FCFF) model, a free cash flow to equity (FCFE) model, and a multiples analysis.
The cost of equity calculation is shown below, calculated to be at 7.62% using a 3% risk free rate and an expected market return of 9.6%. Weighted Average Cost of Capital (WACC) was calculated to be 5.4%, highlighting the extensive use of cheap debt, about 50% of their capital structure. Their average cost of debt on outstanding bonds was about 3.64%, much lower than what the required return on equity is, bringing cost of capital much lower.
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Dividend Growth Model – Constant Growth: Using a constant growth of dividends, and picking a growth rate of 3.5%, taking the average of the last 10 years we see an average increase of about 2.6%, and a 5.1% annual growth during the last 5-years. This will likely decline over an infinite time horizon, using historical data, as such an estimate of 3.5% is used to accurately reflect the economic environment. A 2.6% 10-year growth rate reflects the reality of coming out of the 07-09 financial crisis which does not reflect the current economic environment. This gives an intrinsic value of $60.79.
Dividend Growth Model – Two-Stage Growth Model: In the past Verizon has had periods of high dividend growth for a year or two. The last time this happened was briefly after the widespread release of 4g in 2013 and the subsequent increase in earnings growth. From the recent developments of the highly anticipated release of 5g technology, in the two-stage growth model a dividend growth rate of 5% is assumed to be the average for 6 years and then settle at a constant growth of 3.5% indefinitely. This gives an intrinsic value of $65.77 for the two-stage model.
Dividend Growth Model – Three-Stage Growth Model: As for the three-stage growth model an assumption of an average of 7% dividend growth over the next 2 years, as in the past Verizon has experienced up to 11% dividend growth after the release of this new technology. After this, Verizon will settle into an average 4% dividend growth for 4 years, after which point, a 3.5% constant growth. This gives an intrinsic value of $66.25 for the three-stage model.
Free Cash Flow to Firm Model: Verizon’s free cash flow to the firm (FCFF) represents the cash flow available to all of the company’s capital providers, this includes bond holders, common shareholders, and occasionally preferred shareholders. Verizon’s actual FCFF is very volatile at first glance, fluctuating between -43% to positive 226%. Most of this volatility is from high amounts of investments of working capital into projects, as is the nature of the business. However, it seems that the cash flows are also very unstable due to Verizon’s taxes in 2017 with the huge tax cuts Verizon was able to get -$9956 (mils), FCFF was significantly affected. Substituting the 2017 tax number to a Verizon average tax payment of $5000 makes FCFF seem much more stable. Averaging out over the course of 5 years, an average of 8% growth in free cash flow to the firm is calculated. In the constant growth model, a growth rate of 3.5% is used. This is from an assumption that one day Verizon will wind down working capital and be able to achieve more stable cash flows. In the two-stage and three-stage models a slightly higher growth over the next 6 years because of the release in 5g technology significantly increasing the growth is used. The average growth rate for the two-stage model is estimated to be at 5% before settling back down to 1.5% growth rate. In the three-stage growth model an estimate of 8% free cash flow growth for 3 years, a 2.5% average for the next 5 years, and then settle back into 1.5% growth. This gives an intrinsic value for constant growth, two-stage, and three-stage models of $110.57, $146.38, and $153.58, respectively.
Free Cash Flow to Equity Model: Verizon’s free cash flow to equity (FCFE) holders represents all cash flow available to common equity holders after all operating expenses, bond payments, investments into both working, and fixed capital have been made. Over the last 5 years FCFE has grown on average at 4%, however, the per year change is also very volatile, much like FCFF. Three separate years had negative FCFE of around -70%, and our other two years had positive 1,393% and 307%. This is mostly due to paying down debt rapidly or taking out a lot of debt to fund new projects such as 5g rolling out, mainly the latter. Taking out net borrowing from the calculation creates a more stable model, as such net borrowing is taken out and a growth rate of 10.3% is calculated. As such FCFE growth rates are estimated to be slightly lower than the average because while taking out net borrowing shows more stable cash flows, repaying the debt will lower cash flow available to common stock. That said, in the constant growth model a growth rate of 4% is used. The two-stage model a growth rate of 7% for the next 6 years, then settling to 4% for terminal value. In the 3-stage model an estimate of a 10% return over the next 3 years and a 6% return for 5 years, before settling into the terminal growth rate of 4%. This gives an intrinsic value for the constant growth, two-stage, and three-stage models of $106.35, $124.20, and $135.29, respectively.

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Multiples Analysis: In this valuation approach a price/earnings (P/E) ratio and enterprise value/EBITDA (EV/EBITDA) ratios are used. Through the P/E approach, Verizon currently has a P/E fluctuating between 12-13 and historically they have had P/E’s up to 20 in the last 5 years. Their competitors AT&T and T-Mobile have P/E ratios roughly around 15 and 20 respectively, and the industry standard is P/E is 15. Verizon has an earnings per share of $4.43; however, with 5g technology becoming widely available, a modest earnings growth to $4.90 per share (a 10.6% increase) is estimated for next year. This calculation leads us to an intrinsic value of $73.50. As for the EV/EBITDA approach, Verizon’s current EBITDA is $47,152 and with a ratio of 8.2. With an estimated EBITDA value of $49,500 and a target ratio of 9, this calculation gives us a value of $76.08 one year from now.
Valuation Summary: Verizon is a company with stable cashflows and without much room for significant growth. This makes Verizon perfect for a dividend growth model valuation and is the most accurate of the three models. FCFF is confusing and hard to estimate because of the massive tax changes year to year. FCFE is misleading as the huge amounts of borrowing throws off calculations as net borrowing is not typically used as funds available to shareholders, as such net borrowing has been taken out of the analysis. A growth rate reduction of 2-3% is used for FCFE to account for the reduced cash flow available to common shareholders resulting from paying off the debt in the future. The multiples analysis shows that Verizon may be undervalued currently with a P/E ratio hovering around 12, significantly lower than the industry average and peers. In all the dividend models are most accurate as investors in this company value the stable cash flows and dividends. To arrive to the final intrinsic value estimate, a blend of the three dividend growth models is used, with a 30% weighting on the constant and three-stage growth models and a 40% weighting on the two-stage model. This weighting provides a final intrinsic value of $64.42.
Financial Analysis
Liquidity – As of March 31st, the most up to date financial statements available. Verizon’s liquidity is poor, Cash as a percent of total assets is only 2.3%, although slightly higher than the last 5 years of around 0.9%, this influx of cash is most likely a response to the Covid-19 epidemic. The cash came from 7.5 billion of new debt, all of which expires before 2020. Doing a Current Ratio, and Quick Ratio for Verizon (Current Assets / Current Liabilities and Current Assets – Inventory / Current Liabilities respectively). This calculation provides poor numbers, with the current ratio being at .991, and the quick ratio being at .952. This shows that Verizon has way more in liabilities than assets, and if they needed to sell off assets quickly and liquidate the company, in case of a bankruptcy, they would not have enough to meet their obligations. Although due to the nature of the business this is extremely unlikely and as discussed below the debt is manageable. This is further reinforced via the Net debt to EBITDA ratio, a common way at to measure if the amount of income generated is available to pay down its current debt. Any number higher than 4 or 5 typically raises concerns, however, Verizon is well below that number as of now and shows adequate debt management.
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Profitability Ratios – Verizon has a profit margin of 14.6% in 2019, effectively doubling their 2014 profit margin of 7.6% shown in the table below. Return on Invest Capital is also very high number at about 46% and Return on Equity slightly lower at 31%; however, these ratios have fallen the past 6 years from 114% and 78% respectively. This dramatic decrease is attributed to the payoff of massive investments into 4g technology in 2014, and now we have much lower percentages due to massive investment increases into 5g spending. These ratios will most likely return to much higher numbers over the next 2-3 years.
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*Equity Multiplier* refers to Assets / Shareholder Equity-1 and Sustainable Growth Rate g* uses Equity Multiplier* instead of Equity Multiplier, Equity Multiplier uses Assets / Shareholder Equity of the same period.
Debt - Verizon is levered at about 2 currently, although they have reduced that from 9.2 in 2014. This means that Verizon has double the amount of debt than they do equity. Their debt ratio is at .79 currently, although that has dropped substantially from .95 in 2014. Debt ratio illustrates what portion of the company’s assets is owed to creditors. Currently most of this debt is used for various infrastructure costs for 5g, as well as introducing a new “Green Bond” for environmental social governance, the first in the telecom industry. Using market values rather than book values, Verizon has a capital structure of 53% equity and 47% debt. The times interest earned ratio is currently at 6.44, meaning they currently make more than enough in operating income to pay for interest, so they are not currently at risk of defaulting. As well as their times burden covered for 2020 at 5.28, allowing Verizon to be rated as investment grade bonds.
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Asset Management Ratios – Shown above in the second table, asset turnover is at about 45.2% currently, although this number is misleading as they sell a service and accumulate assets over time without having to sell them to customers. Shown in the table below is collection period, inventory turnover and payables period, with collection period and payables period having risen between 2014 and 2019 from 40.19 to 70.39 and 40.92 to 51.52, respectively. This shows that Verizon has been extending receivables at a faster rate than payables, ideally, Verizon would like to see that reversed. Supplier terms are currently unknown for Verizon, however, payables period being under 60 days, they are still getting favorable terms. Inventory turnover has decreased slightly from 43 to 38 since 2014, which is promising and shows more inventory going out the door.
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As for industry averages, it is shown that Verizon has a much higher quick ratio and a lower times interest earned (TIE). The leverage ratio, and debt to equity ratio is about the same as the industry average. In some ways Verizon company is close to industry averages with the exception of being slightly more levered currently.

Investment Risks
Debt Levels and Credit Rating: Verizon currently has debt levels equal to about its market capitalization, meaning the company nearly has just as much debt as it does equity outstanding. These high levels of debt represent significant risks via Verizon’s obligations. A single quarter of abrupt cash flow disruption could force Verizon into default on much of its outstanding debt. The high debt levels Verizon currently deals with could potentially lower their credit rating with the credit rating agencies. This would be detrimental to Verizon as it would affect their ability to introduce new debt at low rates, and hurt Verizon’s profitability.
Geographic: Currently Verizon mainly operates in North America. This provides significant systematic risk on the part of Verizon. Terrorist attacks, regulation change, or any other factor that could negatively affect the North American region is a significant risk to Verizon.
5g: Any delay in the release of the 5g network could significantly hurt Verizon’s business. This technology is new and is creating rapid change within the industry that Verizon must be a part of moving forward or risk losing customers to a competitor. Introducing new technology also means that they must phase out old, unprofitable technology on a cost-effective basis or else Verizon is at risk or having reduced profitability.
Competition: With the recent merger of T-Mobile and Sprint into T-Mobile there is a much more competitive landscape for Verizon. Before the merger, the only real competitor in size was AT&T, now with the merger Verizon has two competitors of similar size. The merger is particularly dangerous to Verizon as the company is not diversified outside of the industry like AT&T, and a new significant entrant into the industry could pose a huge threat as T-Mobile will be able compete with Verizon on a more cost-effective basis than previously.
Sensitivity Analysis: The two biggest factors affecting Verizon’s stock price are identified as the change in the cost of equity, and the change in the dividend rate. This is because in the dividend discount model the future dividends are discounted by the cost of equity and the annual dividend rate shows how the stock price will change given all else is equal. Shown below are the changes in the cost of equity and dividend rate plus or minus 2% and 1% and how it effects the stock price. For the cost of equity calculation, it is important to realize that rising interest rates, changing expected return in the market, or a change in the volatility (beta) of the stock could affect our cost of equity, and in turn, our intrinsic value. As for the change in dividend growth rate, will easily affect a change in our intrinsic value calculation by changing the projected future cashflows. Below in table 1 illustrates both possibilities and the potential impact on the calculated intrinsic value. The most probable of these two is a change in the cost of equity as the economy is currently in an extremely low interest rate environment, and the cost of equity calculation assumes a 3% interest rate. Changing the rate to the market risk free rate could substantially raise intrinsic value; however, our 3% assumed risk free rate more accurately reflect what investors expect, and not the artificially pushed down price shown in the market right now.
Table1

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Appendix
Financial Calculations
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Income Statement
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Income Statement Proforma
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Balance Sheet
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Balance Sheet Proforma
https://preview.redd.it/kg894tvv8c551.png?width=590&format=png&auto=webp&s=09f62e46f6d1962ea6ac7a7fe838f81600ea7dad
Cost of Equity
Calculating the cost of equity by using a risk-free rate of 3% as current U.S. 10 year bond rates are at all time lows and has a possibility to not accurately reflect the actual cost of business within the U.S. for Verizon. Using an expected return on the market of 9.6%, which is the average annual return in the stock market going back to 1928. Finally, using an adjusted beta of .7. The cost of equity is calculated to be 7.62%
Weighted Average Cost of Capital
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Finding the market value of long-term debt by taking 43 long term bonds Verizon currently has outstanding and took the current price each bond trades at. Using this information, the market value of long-term debt from these bonds was found but does not reflect *all* debt. Taking the average price each was selling at, weighted by amount outstanding, multiplied this average by the book value of debt to comes to MV of LTD of $129,747.73 billion.
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To find the pretax cost of debt by taking the yield on each bond weighted by percent of total debt, summing this up a cost of debt to Verizon of 2.69% was calculated.
To find the weighted average cost of capital follow the above formula. Spelled out is: weight of equity x cost of equity + weight of debt x cost of debt x 1- tax rate. The calculated weighted average cost of capital to be 4.7%. This accurately reflects the cheap use of debt Verizon takes advantage of as the cost of equity is significantly higher at 7.62%. This is how Verizon should be funding its operations as this substantially lowers their cost of capital and they can sustain this sizable amount of debt through the stable cash flows as is the nature of their business.
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Using Margin Interest Rates to Day Trade NYSE Technologies Market Data Analytics Lab What SEBI circular says on upfront margin and how it will impacts the intraday traders -Simple Exp. Level 3 Stock Market Data

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Using Margin Interest Rates to Day Trade

Provided clear data with the new margins requirements. This Channel is all about to discuss day trading ideas, investment in share market, strategies in trading, key points in intraday trading and ... Level 3 Stock Market Data. What is Level 3 Data, where to get it and how to use it in day trading. See Nasdaq.com . CLICK THE LIKE BUTTON MAN! Disclaimer All information is for entertainment only ... The trading activity shown on TraderTV.Live are, stocks, futures and Forex purchases and sales, using real money and real-time market data. Our traders may own the securities they are trading on ... In our top story Nicole takes us on a tour of the New York Stock Exchange. The NYSE was founded in 1792 and today billions of dollars exchange hands there ev... The Market Data Analytics Lab is a centralized, hosted database granting access to many of NYSE Technologies' TAQ (Trades and Quotes) Historical Data Sets. The Analytics Lab provides a library of ...

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