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DD - Funko Toys
2/9/21 Update: Additional info posted here Funko is a good company with solid performance that is still trading at a reasonable price. Check out my DD below: Funko (FNKO) Share Price (1/28/21) : $11.97 Share Price (09/16/19) : $27.86 Short Interest (1/26/21) : 14% Next Earnings Release: March 2021 Funko Inc. is an American company that manufactures licensed pop culture collectibles, best known for its licensed vinyl figurines and bobbleheads. They have over 1,000 licenses across music, video games, film, TV, sports and many other pop culture properties. Some of their most popular licensed brands include Marvel, Disney, Star Wars, Pokemon, Fortnite, NBA, NFL, MLB, DC Comics, and a variety of anime properties. Several points below support the belief that Funko’s revenue grew during the 2020 holiday season and could continue well into 2021: · Increasing search traffic for Funko products · Direct sales growth is driving increased revenue and profitability · Parents are buying more gifts for their kids due to COVID · People have more disposable income from staying at home and not going out · Expansion of new products and licensees continuing through 2021 · Collectible investments like Funko POP! figures are exploding in value and popularity · Recent analyst commentary, valuation, and financials are positive FUNKO’S SEARCH TRAFFIC REACHES AN ALL-TIME HIGH IN Q4 2020 “Funko” google trends search traffic was up 20-30% in Q4 2020 (vs. Q4 2019) Searches for “Funko” were up 2x in December vs the beginning of November 2020 After falling in December, “Funko” searches are trending back up to all-time-high levels FUNKO’S DIRECT SALES INITIATIVES DRIVING HIGHER REVENUE & MARGIN Funko Direct Sales (B2C) grew significantly in Q3 and likely to continue into Q4 · B2C business as a percentage of sales increased to 8% in Q3 2020 from 4% during the prior year. · Funko’s e-commerce site grew over 150% vs. the prior year in Q3 2020 · The number of SKU’s on Funko’s e-commerce site rose tenfold since June 2020 “We went from only 200 of our own products [on our website] as late as June this year, to now well over 2,000 products available on our website.” – Funko CEO, Brian Mariotti Funko’s first ever Selena Pop! sold out online in just 40 minutes. Funko’s Q3 2020 Gross Profit % and Operating Margin % were near all-time-highs for the company · Funko’s Q3 Gross Profit Percentage of 38.6% was its second highest ever (behind only Q1 2020) · Funko’s Q3 Operating Profit Percentage of 10.8% was its second highest ever (behind only Q4 2018) · As Funko continues to grow it’s B2C e-commerce sales in Q4 and beyond, it is possible that gross profit and operating profit percentages could rise as well Retail customers were able to shift their Brick & Mortar inventory to their e-commerce channels to Funko unit sales · Funko resellers who didn’t sell online were severely impacted by Brick & Mortar closures during COVID stay-at-home orders. As 2020 progressed, some of these retailers were able to create online stores (e.g.- Shopify, Amazon, eBay, etc.) through which they could sell their Funko inventory. · Larger retailers that already had an omni-channel presence were able to shift their sales inventory from their Brick & Mortar stores to online fulfilment. Funko has also created a mini-Pop! factory at its headquarters where customers can make their own custom Funko at a price of $25 each · According to Funko, you can customize your Pop! using thousands of combinations. It’s “Think Build-A-Bear meets Funko Pop!” according to CEO Brian Mariotti. · With a $25 price point, the margins are likely higher than the average Pop! figure that retails for between $10 to $15 PARENTS BUYING MORE GIFTS FOR THEIR KIDS DUE TO COVID Parents likely splurged on their kids out of guilt of having shelter at home because of restrictions and to keep them occupied while they had to work at home. · “Faced with rising transmission of the virus, state restrictions on retailers and heightened political and economic uncertainty, consumers chose to spend on gifts that lifted the spirits of their families and friends and provided a sense of normalcy given the challenging year. We believe President-elect Biden’s stimulus proposal, with direct payments to families and individuals, and further aid for small businesses and tools to keep businesses open, will keep the economy growing.” NRF President Matthew Shay · “2020 was an unprecedented year for the U.S. toy industry. The growth we’ve seen in the toy industry speaks to the fact that parents are willing to put their children’s happiness above all else. The industry’s resiliency is very much underpinned by the reality that, in times of hardship, families look to toys to help keep their children engaged, active, and delighted. Put simply, toys are a big part of the happiness equation.” Juli Lennett - VP, U.S. Toys at NPD Toy sales were strong in 2020 as US retail sales of toys was up 16% vs 2019; driven by pandemic spending · According to NPD, “Much of the growth in 2020 was directly correlated to the COVID-19 pandemic and the changing consumer behavior associated with widespread lockdowns and school closures, the disposable income diverted from other types of entertainment to toys, as well as the onset of federal stimulus checks.” Consumer spending on toys increased measurably due to lockdowns; with strong performance continuing through the holidays · Per NPD, “While toy sales through mid-March 2020 were flat vs. 2019, widespread lockdown measures led to an abrupt increase in sales. This was further amplified by the distribution of stimulus checks beginning in April, resulting in the strongest month of growth for the year in May (+38%). Toy industry growth peaked again in October with an increase of 33% when the holiday season kicked off with Amazon Prime Day along with other retailer deals the same week.” Key retail sources reporting significant sales growth during Q4 2020 suggest Funko sales performance was strong · Target Q4 sales were fantastic showing signs of retail strength with a consumer that overlaps well with the Funko > Overall comparable sales were up 17.2% > Comparable digital sales were up over 100% > Store-originated comparable sales were up 4.2% > Store traffic was up 4.3% > Average ticket size was up 12.3% · GameStop Q4 sales were solid; showing additional potential for Funko sales > Same store sales were up 4.8% in Q4 2020 > Online sales increased 309% in Q4 2020 · According to the NRF, 2020 Holiday Retail Sales were up 8.3% compared to the prior year despite the pandemic > A surge in online shopping drove the increase (rising 32% vs. 2019) > The increase of 8.3% was over double the average increase of 3.5% that the industry had seen over the last five years. MORE DISPOSABLE INCOME TO SPEND AT HOME BY NOT GOING OUT The National Retail Federation (NRF) says that strong retail performance has been driven by consumers with stimulus checks and extra savings from not going out or traveling · “There was a massive boost to consumer wallets this season. Consumers were able to splurge on holiday gifts because of increased money in their bank accounts from the stimulus payments they received earlier in the year and the money they saved by not traveling, dining out, or attending entertainment events” – NRF Chief Economist Jack Kleinhenz. Spending on “experiences” fell significantly in 2020 · The US Travel Association forecasts that spending on travel fell $500 billion in 2020 from $1.1 trillion in 2019 > The industry has lost about 40% of its direct travel jobs (about 3.5 million jobs) in 2020; driven by a reduction in business travel > Foreign visitors to the US fell about 75% in 2020; driving a $119 billion reduction in travel spending · Concert spending is down dramatically > Live Nation reported a 98% decline in concert revenue in Q2 2020 and a 95% decline in concert revenue in Q3 2020 > About 5.2 million tickets were refunded in Q3 2020 and 23.3 million tickets had been refunded so far in 2020 (as of the end of Q3) · Movie theater attendance is down substantially > AMC theaters saw a 97% decline in attendance and a 91% decline in revenue in Q3 2020 > Cinemark saw a 96% decline in revenue > Marcus Corporation (which also owns hotels and restaurants) saw a 84% decline in revenue > Studio Movie Grill filed for bankruptcy · Other anecdotal information points to more stay-at-home activity decreasing recreational spending > Chuck E Cheese’s declared bankruptcy > Dave & Busters is considering bankruptcy and plans layoffs of +1,000 > CiCi’s Pizza declares bankruptcy > Starbucks saw fewer customers, reduced store hours, increased store closures, and a 5% decline in revenues in Q4 2020. This has led them to plan a shift to more “to-go” formats > Many Las Vegas Hotels and Casinos have decided to close “part-time” during the week due to lower attendance and travel. These include Encore, Rio, Linq, Planet Hollywood, Mandalay Bay, Park MGM, and Mirage The majority of food buffets at the major hotels and casinos have been shuttered for the time being Stimulus checks and other government programs to support consumer spending provide tailwinds for retail activity · The US government authorized more than $10,000 per person in stimulus spending in 2020 over the course of five relief bills totaling $3.5 trillion · More stimulus spending is expected; including a potential $1.9 trillion package that could include an additional $1,400 in stimulus checks MORE SKUS / LICENSES ARE GROWING AND EXPECTED TO CONINUE STRONG Active properties continue to rise and are expected to grow well into the future · The number of active properties in Q3 2020 grew 15% over 2019 · Active properties grew from 644 in Q2 to 715 in Q3 2020 · The potential universe for Funko Pops! is limitless as new films, tv shows, musicians, anime characters, sports stars, and other media properties are created every year. Some of the hot properties for this year and beyond · Star Wars: Baby Yoda, Mandalorian, Rey, Valentine’s Day, etc. · Marvel: WandaVision, Deadpool, Lucha Libre, Spiderman, Venom · Anime: Dragon Ball Z, Naruto, Bakugan, My Hero Academia · Films: Harry Potter, The Goonies, The Mummy, Fast & Furious · TV: The Office, Umbrella Academy, The Queen’s Gambit, The Simpsons · Sports: NFL, NBA, MLB, WWE · Others: Disney, Pokemon, etc. Retail exclusives can grow the potential universe of licenses and increase retailer buy-in · For example: A retailer like GameStop could lobby Funko to make a GameStop exclusive of the WallStreetBets Kid like this person suggested here. (The exclusive Pop! would be made into a limited edition and sold only to GameStop to sell at their stores) COLLECTIBLE INVESTMENTS ARE GROWING IN VALUE & POPULARITY · Funko: The average Pops! Figure has a retail price from between $10 and $15 which allows most people an affordable entry point into collecting. Over time some Pops! Figures increase substantially in price; from $50 to $100 to even several thousand dollars. While some collectors buy Pops! as primarily an investment, many more buy them as a way to show their fandom. Whether they are avid Star Wars, Harry Potter, Pokemon, Sports, or Anime fans; collectors build large collections and show them off to friends. · Sports Cards: To those paying attention, sports cards have been on a massive run with some cards worth more than your parent’s house and your sister’s car. Since the pandemic started, the demand for sports collectibles from basketball to football to soccer (and many others) has skyrocketed. Countless videos of box-breaks and pack openings have become the norm on social media. Some of these boxes are being purchased for tens of thousands with “hits” ranging from several hundred to hundreds of thousands. · Collector’s Universe: This company that grades sports cards and other collectibles has tripled in value since June 2020. The number of sports collectors grading cards has exploded as demand rises. The popularity of grading sports cards is expected to maintain as prices continue to rise and the hobby becomes more mainstream. ANALYST COMMENTARY AND FINANCIALS ARE A POSTIVE FOR THE STOCK Piper Sandler: Upgraded Funko from “Neutral” to “Overweight” (raising their price target from $6 to $12). · Analyst Erin Murphy sees evidence of “subsequent revenue pillars” with their recent launch of Snapsies at 800 Target stores; along with an expansion into board games and its digital efforts, which include a newly launched website in six European countries. Valuation Comparison: Market Cap / Revenue (TTM) · Funko: MC - $604 million / Rev - $640 million (0.9x sales) · Mattel: MC - $6.27 billion / Rev - $4.43 billion (1.4x sales) · Hasbro: MC - $13.13 billion / Rev - $5.17 billion (2.5x sales) Key Financial Trends For Funko · Q3 2020 EPS (Adjusted) = $0.31 > Third highest ever (only Q4 2018 & Q3 2019 were higher) · Q3 2020 Revenue = $191 million > Fourth highest ever (only Q4 2018, Q3 2019, and Q4 2019 were higher) · Q3 2020 Revenue increase vs prior quarter of 94% > Q1 and Q2 2020 saw significant declines due to COVID > Q3 2020 only down 14% vs Q3 2019 despite Q2 2020 being down 49% > Q3 2020 strength driven by Funko adapting quickly to online in the US market. (Q4 2020 revenue growth could be aided substantially by Funko’s development of their e-commerce shop in Europe.) · Q3 2020 SG&A was reduced 20% vs. the prior year as Funko rationalizes costs and adjusts to focus more on D2C e-commerce TL;DR After a tough summer, Funko sales have rocketed back in Q3 to near where they were pre-pandemic; setting up a potentially historic earnings for Q4 2020. Google search activity suggests that Funko is as popular as ever and is set up well for a strong year in 2021. People are spending less on “going out;” instead buying things to use at home and presents for their kids. As time passes, Funko’s status as a popular collectible only continues to gain momentum. Their direct sales initiative allows Funko to capture additional margin by sidestepping traditional brick and mortar retail to reach their customers. Investments in collectible products like Pops! and sports cards continue to increase in popularity and price. And the company continues to release even more products beyond Pops!; including games and apparel. While some Wall Street Analysts have already begun to take notice, a strong Q4 earnings announcement can drive even more attention to the stock. Positions: Long Shares & Calls Disclosure: I am long FNKO. This is not investment advice. I reserve the right to buy or sell FNKO without updating this thread. Do your own research and share (or not share) with the community in this thread. Thank you to the others on Reddit that shared this idea earlier. Feedback: If you have any additional information, ideas, or critiques please make sure to comment. It is great to get the perspective of others when making an investment. Also that information can be incorporated into future posts and updates. Previous DD:Herman Miller
Hi all, To celebrate the return of Undervalued to the Reddit community, I decided to put together a quick DD and post it on a stock that I have had my eye on for a little while. It's still a "work-in-progress" and I may potentially update it later on Reddit with more information or detail if I have time at some point in the future. If you have any opinions, thoughts, or additional information, please share it. Positive. Negative. Neutral. All information is helpful and informative to the community. (I thought the feedback received from my first DD posted to this sub was quite helpful and I look forward to what you have to say.) Thank you to u/BuyLowSellNever for turning the sub back on; allowing us to share and discuss ideas with the broader community in a thoughtful and respectful manner. Best wishes. - LA Funko (FNKO) Share Price (1/28/21) : $11.97 Share Price (09/16/19) : $27.86 Short Interest (1/26/21) : 14% Next Earnings Release: March 2021 Funko Inc. is an American company that manufactures licensed pop culture collectibles, best known for its licensed vinyl figurines and bobbleheads. They have over 1,000 licenses across music, video games, film, TV, sports and many other pop culture properties. Some of their most popular licensed brands include Marvel, Disney, Star Wars, Pokemon, Fortnite, NBA, NFL, MLB, DC Comics, and a variety of anime properties. Several points below support the belief that Funko’s revenue grew during the 2020 holiday season and could continue well into 2021: · Increasing search traffic for Funko products · Direct sales growth is driving increased revenue and profitability · Parents are buying more gifts for their kids due to COVID · People have more disposable income from staying at home and not going out · Expansion of new products and licensees continuing through 2021 · Collectible investments like Funko POP! figures are exploding in value and popularity · Recent analyst commentary, valuation, and financials are positive FUNKO’S SEARCH TRAFFIC REACHES AN ALL-TIME HIGH IN Q4 2020 “Funko” google trends search traffic was up 20-30% in Q4 2020 (vs. Q4 2019) Searches for “Funko” were up 2x in December vs the beginning of November 2020 After falling in December, “Funko” searches are trending back up to all-time-high levels FUNKO’S DIRECT SALES INITIATIVES DRIVING HIGHER REVENUE & MARGIN Funko Direct Sales (B2C) grew significantly in Q3 and likely to continue into Q4 · B2C business as a percentage of sales increased to 8% in Q3 2020 from 4% during the prior year. · Funko’s e-commerce site grew over 150% vs. the prior year in Q3 2020 · The number of SKU’s on Funko’s e-commerce site rose tenfold since June 2020 “We went from only 200 of our own products [on our website] as late as June this year, to now well over 2,000 products available on our website.” – Funko CEO, Brian Mariotti Funko’s first ever Selena Pop! sold out online in just 40 minutes. Funko’s Q3 2020 Gross Profit % and Operating Margin % were near all-time-highs for the company · Funko’s Q3 Gross Profit Percentage of 38.6% was its second highest ever (behind only Q1 2020) · Funko’s Q3 Operating Profit Percentage of 10.8% was its second highest ever (behind only Q4 2018) · As Funko continues to grow it’s B2C e-commerce sales in Q4 and beyond, it is possible that gross profit and operating profit percentages could rise as well Retail customers were able to shift their Brick & Mortar inventory to their e-commerce channels to Funko unit sales · Funko resellers who didn’t sell online were severely impacted by Brick & Mortar closures during COVID stay-at-home orders. As 2020 progressed, some of these retailers were able to create online stores (e.g.- Shopify, Amazon, eBay, etc.) through which they could sell their Funko inventory. · Larger retailers that already had an omni-channel presence were able to shift their sales inventory from their Brick & Mortar stores to online fulfilment. Funko has also created a mini-Pop! factory at its headquarters where customers can make their own custom Funko at a price of $25 each · According to Funko, you can customize your Pop! using thousands of combinations. It’s “Think Build-A-Bear meets Funko Pop!” according to CEO Brian Mariotti. · With a $25 price point, the margins are likely higher than the average Pop! figure that retails for between $10 to $15 PARENTS BUYING MORE GIFTS FOR THEIR KIDS DUE TO COVID Parents likely splurged on their kids out of guilt of having shelter at home because of restrictions and to keep them occupied while they had to work at home. · “Faced with rising transmission of the virus, state restrictions on retailers and heightened political and economic uncertainty, consumers chose to spend on gifts that lifted the spirits of their families and friends and provided a sense of normalcy given the challenging year. We believe President-elect Biden’s stimulus proposal, with direct payments to families and individuals, and further aid for small businesses and tools to keep businesses open, will keep the economy growing.” NRF President Matthew Shay · “2020 was an unprecedented year for the U.S. toy industry. The growth we’ve seen in the toy industry speaks to the fact that parents are willing to put their children’s happiness above all else. The industry’s resiliency is very much underpinned by the reality that, in times of hardship, families look to toys to help keep their children engaged, active, and delighted. Put simply, toys are a big part of the happiness equation.” Juli Lennett - VP, U.S. Toys at NPD Toy sales were strong in 2020 as US retail sales of toys was up 16% vs 2019; driven by pandemic spending · According to NPD, “Much of the growth in 2020 was directly correlated to the COVID-19 pandemic and the changing consumer behavior associated with widespread lockdowns and school closures, the disposable income diverted from other types of entertainment to toys, as well as the onset of federal stimulus checks.” Consumer spending on toys increased measurably due to lockdowns; with strong performance continuing through the holidays · Per NPD, “While toy sales through mid-March 2020 were flat vs. 2019, widespread lockdown measures led to an abrupt increase in sales. This was further amplified by the distribution of stimulus checks beginning in April, resulting in the strongest month of growth for the year in May (+38%). Toy industry growth peaked again in October with an increase of 33% when the holiday season kicked off with Amazon Prime Day along with other retailer deals the same week.” Key retail sources reporting significant sales growth during Q4 2020 suggest Funko sales performance was strong · Target Q4 sales were fantastic showing signs of retail strength with a consumer that overlaps well with the Funko > Overall comparable sales were up 17.2% > Comparable digital sales were up over 100% > Store-originated comparable sales were up 4.2% > Store traffic was up 4.3% > Average ticket size was up 12.3% · GameStop Q4 sales were solid; showing additional potential for Funko sales > Same store sales were up 4.8% in Q4 2020 > Online sales increased 309% in Q4 2020 · According to the NRF, 2020 Holiday Retail Sales were up 8.3% compared to the prior year despite the pandemic > A surge in online shopping drove the increase (rising 32% vs. 2019) > The increase of 8.3% was over double the average increase of 3.5% that the industry had seen over the last five years. MORE DISPOSABLE INCOME TO SPEND AT HOME BY NOT GOING OUT The National Retail Federation (NRF) says that strong retail performance has been driven by consumers with stimulus checks and extra savings from not going out or traveling · “There was a massive boost to consumer wallets this season. Consumers were able to splurge on holiday gifts because of increased money in their bank accounts from the stimulus payments they received earlier in the year and the money they saved by not traveling, dining out, or attending entertainment events” – NRF Chief Economist Jack Kleinhenz. Spending on “experiences” fell significantly in 2020 · The US Travel Association forecasts that spending on travel fell $500 billion in 2020 from $1.1 trillion in 2019 > The industry has lost about 40% of its direct travel jobs (about 3.5 million jobs) in 2020; driven by a reduction in business travel > Foreign visitors to the US fell about 75% in 2020; driving a $119 billion reduction in travel spending · Concert spending is down dramatically > Live Nation reported a 98% decline in concert revenue in Q2 2020 and a 95% decline in concert revenue in Q3 2020 > About 5.2 million tickets were refunded in Q3 2020 and 23.3 million tickets had been refunded so far in 2020 (as of the end of Q3) · Movie theater attendance is down substantially > AMC theaters saw a 97% decline in attendance and a 91% decline in revenue in Q3 2020 > Cinemark saw a 96% decline in revenue > Marcus Corporation (which also owns hotels and restaurants) saw a 84% decline in revenue > Studio Movie Grill filed for bankruptcy · Other anecdotal information points to more stay-at-home activity decreasing recreational spending > Chuck E Cheese’s declared bankruptcy > Dave & Busters is considering bankruptcy and plans layoffs of +1,000 > CiCi’s Pizza declares bankruptcy > Starbucks saw fewer customers, reduced store hours, increased store closures, and a 5% decline in revenues in Q4 2020. This has led them to plan a shift to more “to-go” formats > Many Las Vegas Hotels and Casinos have decided to close “part-time” during the week due to lower attendance and travel. These include Encore, Rio, Linq, Planet Hollywood, Mandalay Bay, Park MGM, and Mirage The majority of food buffets at the major hotels and casinos have been shuttered for the time being Stimulus checks and other government programs to support consumer spending provide tailwinds for retail activity · The US government authorized more than $10,000 per person in stimulus spending in 2020 over the course of five relief bills totaling $3.5 trillion · More stimulus spending is expected; including a potential $1.9 trillion package that could include an additional $1,400 in stimulus checks MORE SKUS / LICENSES ARE GROWING AND EXPECTED TO CONINUE STRONG Active properties continue to rise and are expected to grow well into the future · The number of active properties in Q3 2020 grew 15% over 2019 · Active properties grew from 644 in Q2 to 715 in Q3 2020 · The potential universe for Funko Pops! is limitless as new films, tv shows, musicians, anime characters, sports stars, and other media properties are created every year. Some of the hot properties for this year and beyond · Star Wars: Baby Yoda, Mandalorian, Rey, Valentine’s Day, etc. · Marvel: WandaVision, Deadpool, Lucha Libre, Spiderman, Venom · Anime: Dragon Ball Z, Naruto, Bakugan, My Hero Academia · Films: Harry Potter, The Goonies, The Mummy, Fast & Furious · TV: The Office, Umbrella Academy, The Queen’s Gambit, The Simpsons · Sports: NFL, NBA, MLB, WWE · Others: Disney, Pokemon, etc. COLLECTIBLE INVESTMENTS ARE GROWING IN VALUE & POPULARITY · Funko: The average Pops! Figure has a retail price from between $10 and $15 which allows most people an affordable entry point into collecting. Over time some Pops! Figures increase substantially in price; from $50 to $100 to even several thousand dollars. While some collectors buy Pops! as primarily an investment, many more buy them as a way to show their fandom. Whether they are avid Star Wars, Harry Potter, Pokemon, Sports, or Anime fans; collectors build large collections and show them off to friends. · Sports Cards: To those paying attention, sports cards have been on a massive run with some cards worth more than your parent’s house and your sister’s car. Since the pandemic started, the demand for sports collectibles from basketball to football to soccer (and many others) has skyrocketed. Countless videos of box-breaks and pack openings have become the norm on social media. Some of these boxes are being purchased for tens of thousands with “hits” ranging from several hundred to hundreds of thousands. · Collector’s Universe: This company that grades sports cards and other collectibles has tripled in value since June 2020. The number of sports collectors grading cards has exploded as demand rises. The popularity of grading sports cards is expected to maintain as prices continue to rise and the hobby becomes more mainstream. ANALYST COMMENTARY AND FINANCIALS ARE A POSTIVE FOR THE STOCK Piper Sandler: Upgraded Funko from “Neutral” to “Overweight” (raising their price target from $6 to $12). · Analyst Erin Murphy sees evidence of “subsequent revenue pillars” with their recent launch of Snapsies at 800 Target stores; along with an expansion into board games and its digital efforts, which include a newly launched website in six European countries. Valuation Comparison: Market Cap / Revenue (TTM) · Funko: MC - $604 million / Rev - $640 million (0.9x sales) · Mattel: MC - $6.27 billion / Rev - $4.43 billion (1.4x sales) · Hasbro: MC - $13.13 billion / Rev - $5.17 billion (2.5x sales) Key Financial Trends For Funko · Q3 2020 EPS (Adjusted) = $0.31 > Third highest ever (only Q4 2018 & Q3 2019 were higher) · Q3 2020 Revenue = $191 million > Fourth highest ever (only Q4 2018, Q3 2019, and Q4 2019 were higher) · Q3 2020 Revenue increase vs prior quarter of 94% > Q1 and Q2 2020 saw significant declines due to COVID > Q3 2020 only down 14% vs Q3 2019 despite Q2 2020 being down 49% > Q3 2020 strength driven by Funko adapting quickly to online in the US market. (Q4 2020 revenue growth could be aided substantially by Funko’s development of their e-commerce shop in Europe.) · Q3 2020 SG&A was reduced 20% vs. the prior year as Funko rationalizes costs and adjusts to focus more on D2C e-commerce TL;DR After a tough summer, Funko sales have rocketed back in Q3 to near where they were pre-pandemic; setting up a potentially historic earnings for Q4 2020. Google search activity suggests that Funko is as popular as ever and is set up well for a strong year in 2021. People are spending less on “going out;” instead buying things to use at home and presents for their kids. As time passes, Funko’s status as a popular collectible only continues to gain momentum. Their direct sales initiative allows Funko to capture additional margin by sidestepping traditional brick and mortar retail to reach their customers. Investments in collectible products like Pops! and sports cards continue to increase in popularity and price. And the company continues to release even more products beyond Pops!; including games and apparel. While some Wall Street Analysts have already begun to take notice, a strong Q4 earnings announcement can drive even more attention to the stock. Positions: Long Shares & Calls Disclosure: I am long FNKO. This is not investment advice. I reserve the right to buy or sell FNKO without updating this thread. Do your own research and share (or not share) with the community in this thread. Thank you to the others on Reddit that shared this idea earlier. Feedback: If you have any additional information, ideas, or critiques please make sure to comment. It is great to get the perspective of others when making an investment. Also that information can be incorporated into future posts and updates. 2/9/21 Update: Additional info posted here
2/9/21 Update: Additional info posted here Funko is a good company with solid performance that is still trading at a reasonable price. Check out my DD below: Funko (FNKO) Share Price (02/01/21) : $12.90 Share Price (09/16/19) : $27.86 Short Interest (1/26/21) : 14% Next Earnings Release: March 2021 Funko Inc. is an American company that manufactures licensed pop culture collectibles, best known for its licensed vinyl figurines and bobbleheads. They have over 1,000 licenses across music, video games, film, TV, sports and many other pop culture properties. Some of their most popular licensed brands include Marvel, Disney, Star Wars, Pokemon, Fortnite, NBA, NFL, MLB, DC Comics, and a variety of anime properties. Several points below support the belief that Funko’s revenue grew during the 2020 holiday season and could continue well into 2021: · Increasing search traffic for Funko products · Direct sales growth is driving increased revenue and profitability · Parents are buying more gifts for their kids due to COVID · People have more disposable income from staying at home and not going out · Expansion of new products and licensees continuing through 2021 · Collectible investments like Funko POP! figures are exploding in value and popularity · Recent analyst commentary, valuation, and financials are positive FUNKO’S SEARCH TRAFFIC REACHES AN ALL-TIME HIGH IN Q4 2020 “Funko” google trends search traffic was up 20-30% in Q4 2020 (vs. Q4 2019) Searches for “Funko” were up 2x in December vs the beginning of November 2020 After falling in December, “Funko” searches are trending back up to all-time-high levels FUNKO’S DIRECT SALES INITIATIVES DRIVING HIGHER REVENUE & MARGIN Funko Direct Sales (B2C) grew significantly in Q3 and likely to continue into Q4 · B2C business as a percentage of sales increased to 8% in Q3 2020 from 4% during the prior year. · Funko’s e-commerce site grew over 150% vs. the prior year in Q3 2020 · The number of SKU’s on Funko’s e-commerce site rose tenfold since June 2020 “We went from only 200 of our own products [on our website] as late as June this year, to now well over 2,000 products available on our website.” – Funko CEO, Brian Mariotti Funko’s first ever Selena Pop! sold out online in just 40 minutes. Funko’s Q3 2020 Gross Profit % and Operating Margin % were near all-time-highs for the company · Funko’s Q3 Gross Profit Percentage of 38.6% was its second highest ever (behind only Q1 2020) · Funko’s Q3 Operating Profit Percentage of 10.8% was its second highest ever (behind only Q4 2018) · As Funko continues to grow it’s B2C e-commerce sales in Q4 and beyond, it is possible that gross profit and operating profit percentages could rise as well Retail customers were able to shift their Brick & Mortar inventory to their e-commerce channels to Funko unit sales · Funko resellers who didn’t sell online were severely impacted by Brick & Mortar closures during COVID stay-at-home orders. As 2020 progressed, some of these retailers were able to create online stores (e.g.- Shopify, Amazon, eBay, etc.) through which they could sell their Funko inventory. · Larger retailers that already had an omni-channel presence were able to shift their sales inventory from their Brick & Mortar stores to online fulfilment. Funko has also created a mini-Pop! factory at its headquarters where customers can make their own custom Funko at a price of $25 each · According to Funko, you can customize your Pop! using thousands of combinations. It’s “Think Build-A-Bear meets Funko Pop!” according to CEO Brian Mariotti. · With a $25 price point, the margins are likely higher than the average Pop! figure that retails for between $10 to $15 PARENTS BUYING MORE GIFTS FOR THEIR KIDS DUE TO COVID Parents likely splurged on their kids out of guilt of having shelter at home because of restrictions and to keep them occupied while they had to work at home. · “Faced with rising transmission of the virus, state restrictions on retailers and heightened political and economic uncertainty, consumers chose to spend on gifts that lifted the spirits of their families and friends and provided a sense of normalcy given the challenging year. We believe President-elect Biden’s stimulus proposal, with direct payments to families and individuals, and further aid for small businesses and tools to keep businesses open, will keep the economy growing.” NRF President Matthew Shay · “2020 was an unprecedented year for the U.S. toy industry. The growth we’ve seen in the toy industry speaks to the fact that parents are willing to put their children’s happiness above all else. The industry’s resiliency is very much underpinned by the reality that, in times of hardship, families look to toys to help keep their children engaged, active, and delighted. Put simply, toys are a big part of the happiness equation.” Juli Lennett - VP, U.S. Toys at NPD Toy sales were strong in 2020 as US retail sales of toys was up 16% vs 2019; driven by pandemic spending · According to NPD, “Much of the growth in 2020 was directly correlated to the COVID-19 pandemic and the changing consumer behavior associated with widespread lockdowns and school closures, the disposable income diverted from other types of entertainment to toys, as well as the onset of federal stimulus checks.” Consumer spending on toys increased measurably due to lockdowns; with strong performance continuing through the holidays · Per NPD, “While toy sales through mid-March 2020 were flat vs. 2019, widespread lockdown measures led to an abrupt increase in sales. This was further amplified by the distribution of stimulus checks beginning in April, resulting in the strongest month of growth for the year in May (+38%). Toy industry growth peaked again in October with an increase of 33% when the holiday season kicked off with Amazon Prime Day along with other retailer deals the same week.” Key retail sources reporting significant sales growth during Q4 2020 suggest Funko sales performance was strong · Target Q4 sales were fantastic showing signs of retail strength with a consumer that overlaps well with the Funko > Overall comparable sales were up 17.2% > Comparable digital sales were up over 100% > Store-originated comparable sales were up 4.2% > Store traffic was up 4.3% > Average ticket size was up 12.3% · GameStop Q4 sales were solid; showing additional potential for Funko sales > Same store sales were up 4.8% in Q4 2020 > Online sales increased 309% in Q4 2020 · According to the NRF, 2020 Holiday Retail Sales were up 8.3% compared to the prior year despite the pandemic > A surge in online shopping drove the increase (rising 32% vs. 2019) > The increase of 8.3% was over double the average increase of 3.5% that the industry had seen over the last five years. MORE DISPOSABLE INCOME TO SPEND AT HOME BY NOT GOING OUT The National Retail Federation (NRF) says that strong retail performance has been driven by consumers with stimulus checks and extra savings from not going out or traveling · “There was a massive boost to consumer wallets this season. Consumers were able to splurge on holiday gifts because of increased money in their bank accounts from the stimulus payments they received earlier in the year and the money they saved by not traveling, dining out, or attending entertainment events” – NRF Chief Economist Jack Kleinhenz. Spending on “experiences” fell significantly in 2020 · The US Travel Association forecasts that spending on travel fell $500 billion in 2020 from $1.1 trillion in 2019 > The industry has lost about 40% of its direct travel jobs (about 3.5 million jobs) in 2020; driven by a reduction in business travel > Foreign visitors to the US fell about 75% in 2020; driving a $119 billion reduction in travel spending · Concert spending is down dramatically > Live Nation reported a 98% decline in concert revenue in Q2 2020 and a 95% decline in concert revenue in Q3 2020 > About 5.2 million tickets were refunded in Q3 2020 and 23.3 million tickets had been refunded so far in 2020 (as of the end of Q3) · Movie theater attendance is down substantially > AMC theaters saw a 97% decline in attendance and a 91% decline in revenue in Q3 2020 > Cinemark saw a 96% decline in revenue > Marcus Corporation (which also owns hotels and restaurants) saw a 84% decline in revenue > Studio Movie Grill filed for bankruptcy · Other anecdotal information points to more stay-at-home activity decreasing recreational spending > Chuck E Cheese’s declared bankruptcy > Dave & Busters is considering bankruptcy and plans layoffs of +1,000 > CiCi’s Pizza declares bankruptcy > Starbucks saw fewer customers, reduced store hours, increased store closures, and a 5% decline in revenues in Q4 2020. This has led them to plan a shift to more “to-go” formats > Many Las Vegas Hotels and Casinos have decided to close “part-time” during the week due to lower attendance and travel. These include Encore, Rio, Linq, Planet Hollywood, Mandalay Bay, Park MGM, and Mirage The majority of food buffets at the major hotels and casinos have been shuttered for the time being Stimulus checks and other government programs to support consumer spending provide tailwinds for retail activity · The US government authorized more than $10,000 per person in stimulus spending in 2020 over the course of five relief bills totaling $3.5 trillion · More stimulus spending is expected; including a potential $1.9 trillion package that could include an additional $1,400 in stimulus checks MORE SKUS / LICENSES ARE GROWING AND EXPECTED TO CONINUE STRONG Active properties continue to rise and are expected to grow well into the future · The number of active properties in Q3 2020 grew 15% over 2019 · Active properties grew from 644 in Q2 to 715 in Q3 2020 · The potential universe for Funko Pops! is limitless as new films, tv shows, musicians, anime characters, sports stars, and other media properties are created every year. Some of the hot properties for this year and beyond · Star Wars: Baby Yoda, Mandalorian, Rey, Valentine’s Day, etc. · Marvel: WandaVision, Deadpool, Lucha Libre, Spiderman, Venom · Anime: Dragon Ball Z, Naruto, Bakugan, My Hero Academia · Films: Harry Potter, The Goonies, The Mummy, Fast & Furious · TV: The Office, Umbrella Academy, The Queen’s Gambit, The Simpsons · Sports: NFL, NBA, MLB, WWE · Others: Disney, Pokemon, etc. Retail exclusives can grow the potential universe of licenses and increase retailer buy-in · For example: A retailer like GameStop could lobby Funko to make a GameStop exclusive of the WallStreetBets Kid like this person suggested here. (The exclusive Pop! would be made into a limited edition and sold only to GameStop to sell at their stores) COLLECTIBLE INVESTMENTS ARE GROWING IN VALUE & POPULARITY · Funko: The average Pops! Figure has a retail price from between $10 and $15 which allows most people an affordable entry point into collecting. Over time some Pops! Figures increase substantially in price; from $50 to $100 to even several thousand dollars. While some collectors buy Pops! as primarily an investment, many more buy them as a way to show their fandom. Whether they are avid Star Wars, Harry Potter, Pokemon, Sports, or Anime fans; collectors build large collections and show them off to friends. · Sports Cards: To those paying attention, sports cards have been on a massive run with some cards worth more than your parent’s house and your sister’s car. Since the pandemic started, the demand for sports collectibles from basketball to football to soccer (and many others) has skyrocketed. Countless videos of box-breaks and pack openings have become the norm on social media. Some of these boxes are being purchased for tens of thousands with “hits” ranging from several hundred to hundreds of thousands. · Collector’s Universe: This company that grades sports cards and other collectibles has tripled in value since June 2020. The number of sports collectors grading cards has exploded as demand rises. The popularity of grading sports cards is expected to maintain as prices continue to rise and the hobby becomes more mainstream. ANALYST COMMENTARY AND FINANCIALS ARE A POSTIVE FOR THE STOCK Piper Sandler: Upgraded Funko from “Neutral” to “Overweight” (raising their price target from $6 to $12). · Analyst Erin Murphy sees evidence of “subsequent revenue pillars” with their recent launch of Snapsies at 800 Target stores; along with an expansion into board games and its digital efforts, which include a newly launched website in six European countries. Valuation Comparison: Market Cap / Revenue (TTM) · Funko: MC - $604 million / Rev - $640 million (0.9x sales) · Mattel: MC - $6.27 billion / Rev - $4.43 billion (1.4x sales) · Hasbro: MC - $13.13 billion / Rev - $5.17 billion (2.5x sales) Key Financial Trends For Funko · Q3 2020 EPS (Adjusted) = $0.31 > Third highest ever (only Q4 2018 & Q3 2019 were higher) · Q3 2020 Revenue = $191 million > Fourth highest ever (only Q4 2018, Q3 2019, and Q4 2019 were higher) · Q3 2020 Revenue increase vs prior quarter of 94% > Q1 and Q2 2020 saw significant declines due to COVID > Q3 2020 only down 14% vs Q3 2019 despite Q2 2020 being down 49% > Q3 2020 strength driven by Funko adapting quickly to online in the US market. (Q4 2020 revenue growth could be aided substantially by Funko’s development of their e-commerce shop in Europe.) · Q3 2020 SG&A was reduced 20% vs. the prior year as Funko rationalizes costs and adjusts to focus more on D2C e-commerce TL;DR After a tough summer, Funko sales have rocketed back in Q3 to near where they were pre-pandemic; setting up a potentially historic earnings for Q4 2020. Google search activity suggests that Funko is as popular as ever and is set up well for a strong year in 2021. People are spending less on “going out;” instead buying things to use at home and presents for their kids. As time passes, Funko’s status as a popular collectible only continues to gain momentum. Their direct sales initiative allows Funko to capture additional margin by sidestepping traditional brick and mortar retail to reach their customers. Investments in collectible products like Pops! and sports cards continue to increase in popularity and price. And the company continues to release even more products beyond Pops!; including games and apparel. While some Wall Street Analysts have already begun to take notice, a strong Q4 earnings announcement can drive even more attention to the stock. Positions: Long Shares & Calls Disclosure: I am long FNKO. This is not investment advice. I reserve the right to buy or sell FNKO without updating this thread. Do your own research and share (or not share) with the community in this thread. Thank you to the others on Reddit that shared this idea earlier. Feedback: If you have any additional information, ideas, or critiques please make sure to comment. It is great to get the perspective of others when making an investment. Also that information can be incorporated into future posts and updates. Previous DD:Herman Miller
My discount bot to help /wallstreetbets. It took me almost a year to develop it to my standard.
My private codes was used to develop it, and it's very unlikely I will sell it off to anyone or publish the code freely as it took me way too long to develop it. I rather post updates freely, at no cost to anyone than give out the code.
I will not be posting this hourly. It just too long to load everything up maybe in the future. I will post during open though.
Discord and telegram admins, don't try to monetize my bot suggestions to vulnerable people, when you don't even own the codes behind it.
There are a lot of SPY500/"boomer" companies within the bot, I thought about removing it but many people preferred that I kept it in there.
There won't be any sell signals, as stocks only go up, so I rather just do a discount algorithm.
Batch 1 = Algorithm/Bot + Human Judgement
Batch 2 = Algorithm/Bot Judgement Only
This is a one man bot.
Bot Overview: It's showing an opportunity that you may have missed otherwise, so you can decide for yourself if you want to pursue the discount of a stock for potential profits. Backtesting has not been done, do not YOLO your life savings into whatever stated risking it all. Rather use this as a side tool. Key:
Pharma companies are very risky.
Meme/Hype stocks are very risky.
Companies that you don't know how they work are very risky.
Follower companies are very risky because they join the hype train (what NKLA is to TSLA).
I have a very low amount in options (less than $500), and I have 100k+ in shares and cash.
When doing options have a lot of collateral, so you don't hit margin call.
Take the "Calls" as very discounted, and "Potentially A Call" as somewhat discounted.
Old money companies are slow. While tech companies are fast-paced.
Only invest in companies that you do know and see potential in.
You don't have to invest every day, only when you see the potential.
At Close of Monday
Batch 1:
TDG TransDigm Group Incorporated 560.11 Aerospace & Defense
AXP American Express Company 121.15 Consumer Finance
Batch 2: Company | Current Price | Average Price Call:
Paychex, Inc. PAYX 86.83 90.99
Brown-Forman Corporation Class B BF.B 72.59 76.84
Verisign, Inc. VRSN 192.13 204.74
Marriott International Inc MAR 120.33 129.19
Xerox Holdings Corp XRX 20.07 22.88
Potential Call:
Boeing Co BA 206.14 212.53
Howmet Aerospace Inc HWM 26.14 28.21
Huntington Ingalls Industries Inc HII 168.76 171.07
TransDigm Group Incorporated TDG 565.72 606.2
FedEx Corporation FDX 254.21 255.93
United Airlines Holdings Inc UAL 41.1 44.32
Las Vegas Sands Corp. LVS 53.24 57.49
Fidelity National Information Servcs Inc FIS 127.36 136.59
Fiserv Inc FISV 107.03 112.67
FleetCor Technologies, Inc. FLT 262.95 273.03
Global Payments Inc GPN 187.76 203.16
Jack Henry & Associates, Inc. JKHY 152.88 160.58
Copart, Inc. CPRT 112.19 121.26
Edison International EIX 59.64 62.11
Twitter Inc TWTR 49.73 50.85
Booking Holdings Inc BKNG 2044.21 2211.4
IBM Common Stock IBM 119.49 127.91
Live Nation Entertainment, Inc. LYV 69.53 74.52
Boston Properties, Inc. BXP 92.78 93.48
Baker Hughes Co BKR 21.3 22.59
Halliburton Company HAL 18.89 20.6
Nov Inc NOV 12.97 14.68
MarketAxess Holdings Inc. MKTX 504.58 546.91
Moody's Corporation MCO 267.84 280.84
Msci Inc MSCI 401.37 437.74
Universal Health Services, Inc. Class B UHS 129 137
Host Hotels and Resorts Inc HST 13.7 14.79
Carnival Corp CCL 19.29 21.07
Royal Caribbean Cruises Ltd RCL 68.34 74.19
Fortive Corp FTV 67.9 70.98
CSX Corporation CSX 87.71 93.01
Verisk Analytics, Inc. VRSK 186.76 200.45
Coca-Cola Co KO 48.96 51.13
Arconic Corp (PITTSBURGH) ARNC 27.6 30.16
Greatland Gold plc GGP 27 34.73
Nuformix PLC NFX 2.56 2.82
Air Transport Services Group Inc. ATSG 26.42 29.27
Carnival plc CUK 16.62 18.26
ArcelorMittal SA MT 22.55 24.16
Batch 3:
Under Construction
Donation Link: I have created a donation link (as many of you guys requested that I do) just as an addition to help support and motivate me to continue. www.paypal.me/WallStreetTrader Update: Will update close it in an hour of this post. Suggest tickers, I will add them to the database. Adding batches Close Batch 2 Added 10:03 pm Monday, 25 January 2021 (GMT-5) Time in New York, NY, USA Close Batch 1 Added 8:26 am Tuesday, 26 January 2021 (GMT-5) Time in New York, NY, USA Open Batch 2 Added 9:59 am Tuesday, 26 January 2021 (GMT-5) Time in New York, NY, USA Open Batch 1 Added 10:06 am Tuesday, 26 January 2021 (GMT-5) Time in New York, NY, USA More tickers added.
'Looking down their nose at you': GameStop frenzy showed a fresh contempt for hedge funds. Why do Americans hate them? Updated 2:25 pm EST Feb. 11, 2021 In the middle of a pandemic and slow economic recovery, Americans think they’ve identified their Wall Street villain: hedge funds. Their nemesis is summed up in a few searing images: a hedge fund manager who makes millions betting that the subprime mortgage market will collapse, without warning them. Or another relaxing on a yacht as the economy tanks. Years of anger culminated late last month when a group of angry small-time investors on Reddit took on a few of those firms in the GameStop “short squeeze” frenzy. That spurred millions of others to join in, as their effort to drive up the price of a stock perceived as undervalued soon shifted to a campaign to “Stick it to Wall Street." They used the "squeeze" to rally the share price and make profits for themselves while forcing the hedge funds who had bet it would fall to buy it to prevent greater losses. What are these funds, and where does this resentment come from? Hedge funds, known for using higher risk investing strategies, are private investment vehicles that typically wealthy individuals use to get higher returns. They control more than $3 trillion in assets globally. They've angered many Americans by gutting companies such as former American retail icon Sears, causing layoffs and engaging in questionable financial practices that contributed to the near collapse of the U.S. financial system in 2008, experts say. 'This is life changing': Meet the Redditors behind the GameStop saga “Most people see it as guys in suits looking down their nose at you,” says Adam Bixler, 28, an active user on the WallStreetBets Reddit forum, whose members led the charge against the funds. “How I feel is probably how a lot of people feel when thinking about the financial crisis and the massive wealth inequality that exists in this country.” Radio Shack, Toys ‘R’ Us and Payless ShoeSource, along with mall-based retailers such as the Limited, Wet Seal, Claire’s and Aeropostale faced further financial woes after hedge funds and private equity firms loaded them up with debt. A fight is raging in the stock market: Should you worry about your 401(k)? Where to get vaccines: CVS, Walgreens to begin delivering COVID-19 vaccines on Friday “The idea that you can crack open a hedge fund like a piñata and redistribute all this money to people in the form of a short squeeze is very appealing,” says Bixler, who lives in Boonton, New Jersey, and works as a product manager for a company that makes software and tools for the advertising industry. “These are the stimulus checks that everyone wanted.” Proponents of hedge funds say the firms identify and support distressed industries such as retailers and newspapers. These funds are owned by groups of big investors pooling the savings of millions of unionized workers, such as teachers and firefighters, who count on hedge funds to grow and protect their nest eggs. Even so, hedge funds are viewed as vultures by many Americans. Kaysha Apodaca, an emergency room nurse in Dallas, was furious last summer when she lost thousands of dollars after CytoDyn, a biotechnology company she owns, was hammered following a negative report from a “short selling” research firm, about one of CytroDyn's drugs in clinical trials. The post with the research was later pulled. This year, Apodaca thought she missed the opportunity to jump in and buy GameStop or AMC, so she supported the Reddit campaign against hedge funds by investing a few thousand dollars into shares of Nokia, another beaten-down stock discussed on the forum. “I hate hedge funds. Even if this goes to zero, I’m OK with it. I’m not selling, just to prove a point,” Apodaca said. “Hedge funds have unfairly made money off retail investors for years. Now they’re getting a taste of their own medicine.” For Iris Findlay of Orlando, Florida, joining the movement was a way for Americans to show their strength in numbers. “I’m definitely not OK that there are so many billionaires hoarding their wealth while people are struggling, especially during the pandemic,” said Findlay, 31, who is disabled and retired from the Air Force. A large portion of hedge-fund assets are owned by institutional investors, such as pension funds and endowments. Hedge fund research has been critical in exposing an array of accounting fraud scandals in recent decades, including the one involving energy firm Enron. “Hedge funds do play a very important role in the financial ecosystem, but at the same time, they have a PR problem,” says Andrew Lo, a finance professor at MIT Sloan School of Management. They are an easy target, experts say, because some high-profile managers' massive wealth offends Americans who struggle to make ends meet. Michael Burry, founder of Scion Asset Management, is an investor whose billion-dollar bet against the housing market was chronicled in Michael Lewis' book "The Big Short." He personally collected $100 million and made $750 million in profits for his investors. These managers “are seen as multibillionaires that really don’t care about the public good and are focused on enriching themselves and their investors,” Lo says. “But I think that’s a caricature, especially given that hedge funds now have become much more institutionalized as pension funds and endowments are investing in these financial vehicles.” Who do Americans blame? When asked who was the “most in the wrong” in the trading mania that set off one of the biggest short squeezes in history, nearly half of Americans polled said it was either hedge funds (27%) or online brokerage Robinhood (22%), according to a Harris Poll survey conducted Jan 29-31 that was given to USA TODAY exclusively. Just 8% said it was the Reddit retail investors on the WallStreetBets forum, who angered hedge funds that had bet GameStop's stock would remain low. The small-time investors used the forum to help drive up the prices for shares such as GameStop, theater chain AMC Entertainment and several other companies. Many respondents were angry that hedge funds were shorting stocks – betting that the share prices would fall – of companies that average people use and love, according to John Gerzema, CEO of the Harris Poll. “This wasn’t just an attack on a few weak companies,” Gerzema says. “These are companies that are a part of middle-class America and ordinary people’s lives.” How did these funds begin, and how did they grow into such big villains in the minds of so many? What are hedge funds? Hedge funds are financial partnerships between a professional fund manager and investors who pool their money into the fund to earn active returns. Hedge funds can be traced back to the 1940s when Alfred Winslow Jones, an investor, sociologist and former Fortune magazine writer, created a "hedge" by “shorting" stocks he thought were poised to fall. The "hedge" was meant to reduce risk and protect against market fluctuations. It was unconventional at the time but remains the basic strategy for these funds. Hedge fund strategies today are more diverse and run the gamut of extremely risky to fairly conservative. There's another theory about the origin of hedge funds, and this one is connected to a more beloved figure. Some people credit the founding of hedge funds to Benjamin Graham, a mentor to Warren Buffett and the author of "The Intelligent Investor" – the bible of everyone who loves Buffett's method of investing. Buffett, one of the world's richest people and a folksy inspiration to small-time investors, argued that Graham managed a fund with a "hedge"-like strategy in the 1920s. So you made a bundle on GameStop: Get ready to pay the taxes How did hedge funds evolve? Hedge funds have gained in popularity over the past two decades after many of them delivered hefty outsize returns in either up or down markets, an attractive selling point for savvy investors. Some of the world's largest hedge funds include Bridgewater Associates, founded by billionaire Ray Dalio; Renaissance Technologies, founded by billionaire Jim Simons; and Pershing Square, run by Wall Street billionaire Bill Ackman. They have historically charged much higher fees than mutual funds, which are professionally managed funds that invest in stocks, bonds or money market instruments. Since hedge fund managers are nearly always paid a performance fee, or percentage of the gains they create, they have a strong incentive to make money for their investors. For the hedge fund managers to earn performance fees, their investors have to make money first. Hedge funds charge an expense ratio and a performance fee. The common fee structure is known as two and twenty – a 2% asset management fee and a 20% cut of generated gains. How did they become villains? While many Americans lost money during the depths of the financial crisis, some big-time investors did astonishingly well, including those who predicted and profited from the buildup and collapse of the housing and credit bubble in 2007 and 2008. For those Americans who had their livelihoods upended in the financial crisis, it left a bad taste in their mouths, experts say. “They’re associated with ruthless financial institutions that are out there to make money and not care where it’s coming from,” says Itay Goldstein, a professor of finance and economics at the University of Pennsylvania's Wharton School of Business. A big winner from that time is billionaire investor John Paulson, a hedge fund manager who netted $20 billion in profits when he bet against subprime mortgages at the peak of the credit bubble in 2007. In general, short sellers keep stock prices in check by voicing their opinion on where they believe a stock is valued, says Dennis Dick, head of markets structure and a proprietary trader at Bright Trading in Las Vegas. “I’m concerned with this public image that ‘evil short sellers are betting against America’ and that it’s ‘un-American to short stocks,’” Dick says. “It’s not like every short seller is making bets against America. They’re making calls on whether a stock is overvalued or not.” GameStop: Reddit ran a 5-second Super Bowl ad in honor of WallStreetBets, GameStop stock volatility The hedge fund industry has faced a rough stretch in recent years and underperformed the broader stock market but produced its best return in a decade at 11.6% in 2020, according to data provider Hedge Fund Research. Some received a boost from shares of technology firms and companies that focused on goods that people used when stuck at home during the pandemic. Americans who don’t invest directly in hedge funds still receive a benefit from the returns that hedge funds generate, according to Daniel Smith, a partner at ACA Compliance Group, an advisory firm for financial services. Of the $4.5 trillion in state and local pension plans, about 6.9% is allocated to hedge funds, according to data published by the Center for Retirement Research at Boston College, the Center for State and Local Government Excellence and the National Association of State Retirement Administrators. ”Hedge funds help secure the retirement of more than 26 million teachers, firefighters and other public employees by helping pensions navigate all market conditions and meet long-term financial obligations,” says Bryan Corbett, president and CEO at Managed Funds Association, a hedge fund lobby group. GameStop and questions of power The rollercoaster involving GameStop, Reddit and Robinhood has prompted Capitol Hill’s harshest criticisms of Wall Street in years. Several prominent lawmakers on Capitol Hill have warned of such moments, cautioning that companies and hedge funds have too much power. One of these lawmakers, Sen. Elizabeth Warren, D-Mass., who is well known for her disapproval of Wall Street, called on the Securities and Exchange Commission (SEC) to address the dramatic swings surrounding these companies. Warren wrote in a letter that it is “long beyond time for the SEC to act” and asked it to investigate the rallies in GameStop, AMC Entertainment and others that “have seen huge shifts in their share price driven by similar internet reading schemes.” "These wild fluctuations are just the latest indication that many private equity firms, hedge funds, and other investors, big and small, are treating the stock market like a casino, giving little consideration to the companies, communities, workers, and consumers that may be affected by these risky bets," she wrote. The House Financial Services Committee will hold a virtual hearing Feb. 18 regarding “recent market volatility” involving GameStop and the other companies. According to Politico, the CEO of Robinhood, Vlad Tenev, is likely to testify. GameStop-Robinhood stock revolution: Not a secure retirement plan Does the movement have legs? Questions have been raised as to whether the populist movement threatening to disrupt the financial system will be sustained. It’s too early to tell, experts say. “It has the potential to gather momentum. It depends on whether we see other related episodes in the next few weeks that show the same kind of patterns in the financial markets," Goldstein says. "We live in a period of so many unusual things going on that it will probably take the edge off this event." Hedge funds such as Melvin Capital Management took the brunt of losses from soaring stock prices of GameStop and other heavily shorted stocks. Others made a ton of money on the rally, including Senvest Management, which had a profit of nearly $700 million, The Wall Street Journal reported. “Is it sticking it to Wall Street? Only temporarily, but in the long term probably not,” Goldstein says. “At the end of the day, the sophisticated financial institutions will find ways to recuperate and make money out of this.” Lo of MIT agrees. “This incident highlights the growing dissatisfaction, distrust and dislocation that many people feel with respect to the financial sector,” Lo says. “It suggests that people are sick and tired of being disenfranchised and being pushed around by large financial institutions.” Contributing: Savannah Behrmann
2/9/21 Update: Additional info posted here Hi everyone. Funko is a great stock that I believe will do well this year. Internet search traffic for Funko has been increasing and is at all-time highs over the last couple of months. The company is selling more of their toys directly to customers through their e-commerce shop (which allows them to capture higher retail revenues than wholesale revenues). And demand for collectibles and toys continues to be strong. Here is a DD I wrote on the company below. I would love to get your thoughts. Funko (FNKO) Share Price (1/28/21) : $11.97 Share Price (09/16/19) : $27.86 Short Interest (1/26/21) : 14% Next Earnings Release: March 2021 Funko Inc. is an American company that manufactures licensed pop culture collectibles, best known for its licensed vinyl figurines and bobbleheads. They have over 1,000 licenses across music, video games, film, TV, sports and many other pop culture properties. Some of their most popular licensed brands include Marvel, Disney, Star Wars, Pokemon, Fortnite, NBA, NFL, MLB, DC Comics, and a variety of anime properties. Several points below support the belief that Funko’s revenue grew during the 2020 holiday season and could continue well into 2021: · Increasing search traffic for Funko products · Direct sales growth is driving increased revenue and profitability · Parents are buying more gifts for their kids due to COVID · People have more disposable income from staying at home and not going out · Expansion of new products and licensees continuing through 2021 · Collectible investments like Funko POP! figures are exploding in value and popularity · Recent analyst commentary, valuation, and financials are positive FUNKO’S SEARCH TRAFFIC REACHES AN ALL-TIME HIGH IN Q4 2020 “Funko” google trends search traffic was up 20-30% in Q4 2020 (vs. Q4 2019) Searches for “Funko” were up 2x in December vs the beginning of November 2020 After falling in December, “Funko” searches are trending back up to all-time-high levels FUNKO’S DIRECT SALES INITIATIVES DRIVING HIGHER REVENUE & MARGIN Funko Direct Sales (B2C) grew significantly in Q3 and likely to continue into Q4 · B2C business as a percentage of sales increased to 8% in Q3 2020 from 4% during the prior year. · Funko’s e-commerce site grew over 150% vs. the prior year in Q3 2020 · The number of SKU’s on Funko’s e-commerce site rose tenfold since June 2020 “We went from only 200 of our own products [on our website] as late as June this year, to now well over 2,000 products available on our website.” – Funko CEO, Brian Mariotti Funko’s first ever Selena Pop! sold out online in just 40 minutes. Funko’s Q3 2020 Gross Profit % and Operating Margin % were near all-time-highs for the company · Funko’s Q3 Gross Profit Percentage of 38.6% was its second highest ever (behind only Q1 2020) · Funko’s Q3 Operating Profit Percentage of 10.8% was its second highest ever (behind only Q4 2018) · As Funko continues to grow it’s B2C e-commerce sales in Q4 and beyond, it is possible that gross profit and operating profit percentages could rise as well Retail customers were able to shift their Brick & Mortar inventory to their e-commerce channels to Funko unit sales · Funko resellers who didn’t sell online were severely impacted by Brick & Mortar closures during COVID stay-at-home orders. As 2020 progressed, some of these retailers were able to create online stores (e.g.- Shopify, Amazon, eBay, etc.) through which they could sell their Funko inventory. · Larger retailers that already had an omni-channel presence were able to shift their sales inventory from their Brick & Mortar stores to online fulfilment. Funko has also created a mini-Pop! factory at its headquarters where customers can make their own custom Funko at a price of $25 each · According to Funko, you can customize your Pop! using thousands of combinations. It’s “Think Build-A-Bear meets Funko Pop!” according to CEO Brian Mariotti. · With a $25 price point, the margins are likely higher than the average Pop! figure that retails for between $10 to $15 PARENTS BUYING MORE GIFTS FOR THEIR KIDS DUE TO COVID Parents likely splurged on their kids out of guilt of having shelter at home because of restrictions and to keep them occupied while they had to work at home. · “Faced with rising transmission of the virus, state restrictions on retailers and heightened political and economic uncertainty, consumers chose to spend on gifts that lifted the spirits of their families and friends and provided a sense of normalcy given the challenging year. We believe President-elect Biden’s stimulus proposal, with direct payments to families and individuals, and further aid for small businesses and tools to keep businesses open, will keep the economy growing.” NRF President Matthew Shay · “2020 was an unprecedented year for the U.S. toy industry. The growth we’ve seen in the toy industry speaks to the fact that parents are willing to put their children’s happiness above all else. The industry’s resiliency is very much underpinned by the reality that, in times of hardship, families look to toys to help keep their children engaged, active, and delighted. Put simply, toys are a big part of the happiness equation.” Juli Lennett - VP, U.S. Toys at NPD Toy sales were strong in 2020 as US retail sales of toys was up 16% vs 2019; driven by pandemic spending · According to NPD, “Much of the growth in 2020 was directly correlated to the COVID-19 pandemic and the changing consumer behavior associated with widespread lockdowns and school closures, the disposable income diverted from other types of entertainment to toys, as well as the onset of federal stimulus checks.” Consumer spending on toys increased measurably due to lockdowns; with strong performance continuing through the holidays · Per NPD, “While toy sales through mid-March 2020 were flat vs. 2019, widespread lockdown measures led to an abrupt increase in sales. This was further amplified by the distribution of stimulus checks beginning in April, resulting in the strongest month of growth for the year in May (+38%). Toy industry growth peaked again in October with an increase of 33% when the holiday season kicked off with Amazon Prime Day along with other retailer deals the same week.” Key retail sources reporting significant sales growth during Q4 2020 suggest Funko sales performance was strong · Target Q4 sales were fantastic showing signs of retail strength with a consumer that overlaps well with the Funko > Overall comparable sales were up 17.2% > Comparable digital sales were up over 100% > Store-originated comparable sales were up 4.2% > Store traffic was up 4.3% > Average ticket size was up 12.3% · GameStop Q4 sales were solid; showing additional potential for Funko sales > Same store sales were up 4.8% in Q4 2020 > Online sales increased 309% in Q4 2020 · According to the NRF, 2020 Holiday Retail Sales were up 8.3% compared to the prior year despite the pandemic > A surge in online shopping drove the increase (rising 32% vs. 2019) > The increase of 8.3% was over double the average increase of 3.5% that the industry had seen over the last five years. MORE DISPOSABLE INCOME TO SPEND AT HOME BY NOT GOING OUT The National Retail Federation (NRF) says that strong retail performance has been driven by consumers with stimulus checks and extra savings from not going out or traveling · “There was a massive boost to consumer wallets this season. Consumers were able to splurge on holiday gifts because of increased money in their bank accounts from the stimulus payments they received earlier in the year and the money they saved by not traveling, dining out, or attending entertainment events” – NRF Chief Economist Jack Kleinhenz. Spending on “experiences” fell significantly in 2020 · The US Travel Association forecasts that spending on travel fell $500 billion in 2020 from $1.1 trillion in 2019 > The industry has lost about 40% of its direct travel jobs (about 3.5 million jobs) in 2020; driven by a reduction in business travel > Foreign visitors to the US fell about 75% in 2020; driving a $119 billion reduction in travel spending · Concert spending is down dramatically > Live Nation reported a 98% decline in concert revenue in Q2 2020 and a 95% decline in concert revenue in Q3 2020 > About 5.2 million tickets were refunded in Q3 2020 and 23.3 million tickets had been refunded so far in 2020 (as of the end of Q3) · Movie theater attendance is down substantially > AMC theaters saw a 97% decline in attendance and a 91% decline in revenue in Q3 2020 > Cinemark saw a 96% decline in revenue > Marcus Corporation (which also owns hotels and restaurants) saw a 84% decline in revenue > Studio Movie Grill filed for bankruptcy · Other anecdotal information points to more stay-at-home activity decreasing recreational spending > Chuck E Cheese’s declared bankruptcy > Dave & Busters is considering bankruptcy and plans layoffs of +1,000 > CiCi’s Pizza declares bankruptcy > Starbucks saw fewer customers, reduced store hours, increased store closures, and a 5% decline in revenues in Q4 2020. This has led them to plan a shift to more “to-go” formats > Many Las Vegas Hotels and Casinos have decided to close “part-time” during the week due to lower attendance and travel. These include Encore, Rio, Linq, Planet Hollywood, Mandalay Bay, Park MGM, and Mirage The majority of food buffets at the major hotels and casinos have been shuttered for the time being Stimulus checks and other government programs to support consumer spending provide tailwinds for retail activity · The US government authorized more than $10,000 per person in stimulus spending in 2020 over the course of five relief bills totaling $3.5 trillion · More stimulus spending is expected; including a potential $1.9 trillion package that could include an additional $1,400 in stimulus checks MORE SKUS / LICENSES ARE GROWING AND EXPECTED TO CONINUE STRONG Active properties continue to rise and are expected to grow well into the future · The number of active properties in Q3 2020 grew 15% over 2019 · Active properties grew from 644 in Q2 to 715 in Q3 2020 · The potential universe for Funko Pops! is limitless as new films, tv shows, musicians, anime characters, sports stars, and other media properties are created every year. Some of the hot properties for this year and beyond · Star Wars: Baby Yoda, Mandalorian, Rey, Valentine’s Day, etc. · Marvel: WandaVision, Deadpool, Lucha Libre, Spiderman, Venom · Anime: Dragon Ball Z, Naruto, Bakugan, My Hero Academia · Films: Harry Potter, The Goonies, The Mummy, Fast & Furious · TV: The Office, Umbrella Academy, The Queen’s Gambit, The Simpsons · Sports: NFL, NBA, MLB, WWE · Others: Disney, Pokemon, etc. COLLECTIBLE INVESTMENTS ARE GROWING IN VALUE & POPULARITY · Funko: The average Pops! Figure has a retail price from between $10 and $15 which allows most people an affordable entry point into collecting. Over time some Pops! Figures increase substantially in price; from $50 to $100 to even several thousand dollars. While some collectors buy Pops! as primarily an investment, many more buy them as a way to show their fandom. Whether they are avid Star Wars, Harry Potter, Pokemon, Sports, or Anime fans; collectors build large collections and show them off to friends. · Sports Cards: To those paying attention, sports cards have been on a massive run with some cards worth more than your parent’s house and your sister’s car. Since the pandemic started, the demand for sports collectibles from basketball to football to soccer (and many others) has skyrocketed. Countless videos of box-breaks and pack openings have become the norm on social media. Some of these boxes are being purchased for tens of thousands with “hits” ranging from several hundred to hundreds of thousands. · Collector’s Universe: This company that grades sports cards and other collectibles has tripled in value since June 2020. The number of sports collectors grading cards has exploded as demand rises. The popularity of grading sports cards is expected to maintain as prices continue to rise and the hobby becomes more mainstream. ANALYST COMMENTARY AND FINANCIALS ARE A POSTIVE FOR THE STOCK Piper Sandler: Upgraded Funko from “Neutral” to “Overweight” (raising their price target from $6 to $12). · Analyst Erin Murphy sees evidence of “subsequent revenue pillars” with their recent launch of Snapsies at 800 Target stores; along with an expansion into board games and its digital efforts, which include a newly launched website in six European countries. Valuation Comparison: Market Cap / Revenue (TTM) · Funko: MC - $604 million / Rev - $640 million (0.9x sales) · Mattel: MC - $6.27 billion / Rev - $4.43 billion (1.4x sales) · Hasbro: MC - $13.13 billion / Rev - $5.17 billion (2.5x sales) Key Financial Trends For Funko · Q3 2020 EPS (Adjusted) = $0.31 > Third highest ever (only Q4 2018 & Q3 2019 were higher) · Q3 2020 Revenue = $191 million > Fourth highest ever (only Q4 2018, Q3 2019, and Q4 2019 were higher) · Q3 2020 Revenue increase vs prior quarter of 94% > Q1 and Q2 2020 saw significant declines due to COVID > Q3 2020 only down 14% vs Q3 2019 despite Q2 2020 being down 49% > Q3 2020 strength driven by Funko adapting quickly to online in the US market. (Q4 2020 revenue growth could be aided substantially by Funko’s development of their e-commerce shop in Europe.) · Q3 2020 SG&A was reduced 20% vs. the prior year as Funko rationalizes costs and adjusts to focus more on D2C e-commerce TL;DR After a tough summer, Funko sales have rocketed back in Q3 to near where they were pre-pandemic; setting up a potentially historic earnings for Q4 2020. Google search activity suggests that Funko is as popular as ever and is set up well for a strong year in 2021. People are spending less on “going out;” instead buying things to use at home and presents for their kids. As time passes, Funko’s status as a popular collectible only continues to gain momentum. Their direct sales initiative allows Funko to capture additional margin by sidestepping traditional brick and mortar retail to reach their customers. Investments in collectible products like Pops! and sports cards continue to increase in popularity and price. And the company continues to release even more products beyond Pops!; including games and apparel. While some Wall Street Analysts have already begun to take notice, a strong Q4 earnings announcement can drive even more attention to the stock. Positions: Long Shares & Calls Disclosure: I am long FNKO. This is not investment advice. I reserve the right to buy or sell FNKO without updating this thread. Do your own research and share (or not share) with the community in this thread. Thank you to the others on Reddit that shared this idea earlier. Feedback: If you have any additional information, ideas, or critiques please make sure to comment. It is great to get the perspective of others when making an investment. Also that information can be incorporated into future posts and updates.
I wanted to share with the group some due diligence and speculation I have done around Gamehost (TSX: GH). I want to start by saying that this is not a situation where you urgently need to buy this right now and ride up a wave, there will be no rocket ships on this post and I strongly encourage you to perform your own due diligence and see if you want to buy this stock. This is an extremely low volume stock and if you rush to buy it, the price will go up far past the supply of sellers. I do not intend to pump this but only to get critique. Gamehost is an owner and operator of 3 casinos located in Alberta, 2 hotels in Grande Prairie and a retail store rented to a liquor store near one of the casinos. The 3 casinos are: Boomtown Casino in Fort McMurray, The Great Northern Casino in Grande Prairie and the Deerfoot Inn and Casino in Calgary which they own 91% of currently. As you probably guessed by these locations, the casinos are cyclical and make a lot of money when oil prices are up and go through downturns when prices are low and projects stop. All 3 casinos are not destination type casinos like you would find in Las Vegas where people come from all around to visit, but are very reliant on their local communities. The Boomtown Casino is the only casino in Fort McMurray and the Great Northern Casino is the only proper casino in Grande Prairie with a much smaller limited one in town. The Deerfoot Inn and Casino is 1 of 7 (yes, 7!) casinos in the Calgary area. It primarily focuses on the Southeastern portion of the city and the surrounding suburbs and still serves a market of about 200,000 people in just that area. All 3 casinos are also very focused on live events and have become gathering points for live events and nights out for their communities. Although all 3 casinos have been affected by oil downturns all 3 communities they serve have much higher median income than the country as a whole. The casinos have remained profitable throughout the entirety of the oil downturn and despite a dividend cut in 2016 they have still paid a consistently strong dividend until the COVID-19 pandemic (more on this later). Grande Prairie’s economy is more focused on natural gas extraction which has been consistently profitable. Calgary as a major city does have a diversified economy as well which leaves just Fort McMurray to be the lone straggler in dealing with oil prices. No new casinos have been built in Alberta since 2006, which has left people still coming to the doors of the casinos regardless of the economy. All three cities have seen consistent population growth greater than 10% from 2016 according to Statistics Canada’s estimates which is far greater than the national average. People are still coming to these cities and are still making a fairly high wage compared to the average Canadian. The second thing that has likely come to your mind is why casinos when they have been shut down during the pandemic? As the vaccine is currently being implemented the orders will not last forever. When the casinos have been opened even with reduced services, they have remained profitable and the management has responded by using the pandemic as an opportunity. They have been consistently buying back thousands of shares every day and cancelling them. If you look at their SEDAR profile you can see that they have not missed a single day to cancel at least 2,000 shares per day. Since the company had 24.5 million shares issued, they have bought back about 1-2% of the float so far which has made the stock even harder to buy on the open markets due to the lack of volume. They have also been approved to expand the operations of the Deerfoot Inn and Casino which should be completed by the summer. The insiders have followed by accumulating many shares in their personal accounts over this period of weakness. In the third quarter of 2020 the company posted EPS of 12 cents per share down from 16 cents a year ago. Revenue was down to $4.9 million from $6.7 million. This is with severe restrictions and limitations on the amount of people that can come in the casino and what they can do. All live events were cancelled, table games were restricted and yet the company was still making enough money to buy back significant shares and improve their existing assets. The management has essentially channelled the dividend into making the number of shares decrease in a time of strong price weakness. There is interest in this space since the largest casino operator in the country Great Canadian Gaming was acquired recently for almost double what they were trading for in the spring. Private equity firms have been looking into casinos as a post-recovery play. Unlike companies in airlines or movie theatres, these do not have significant issues staying profitable during intense downturns, they only become less profitable with a sudden surge afterwards. I am speculatively buying this stock on the idea that as COVID-19 restrictions are gradually lifted there will be an awkward window where people will be back almost to normal within Canada and will have a strong urge to go out and do activities that they have been restricted from doing for months. At the same time they will be unable to travel internationally due to different countries having different vaccination schedules, planes still operating at reduced capacity with many airlines being in trouble and governments being reluctant to remove limitations abroad. This will significantly bring business to casinos and other live event focused businesses within Canada. I anticipate that in the 12 months past restrictions being lifted that the business will see a significant bump in EPS. They will reinstate the dividend and the share price will grow significantly. My personal price target is $12 per share but I could see it being anywhere from $10-$15 per share. This is without oil prices budging at all. In the long-term the price will be cyclical based on oil prices unless they start diversifying geographically. It is extremely difficult to get a licence to open a casino, which leaves the company with the only option of acquiring other casinos. This is a possibility down the road but something I will look more into once I see a significant bump in EPS due to increased demand. I do believe that in the current market with the price having barely recovered from the March lows, that the stock is a very good contrarian play in the 12-24 month range. Holding after that could potentially be risky depending on your own views on how the oil industry will play out and if the management has what it takes to diversify. Online gambling is an even longer term threat but since these casinos are focused on live events and have become a staple of the communities that they are in, this is not likely to be a threat for some significant time. Please let me know what you think, feel free to criticize. If you guys like my analysis I could do more on other small or mid cap companies. There have been a few I have kicked myself over missing.
LVCC Loop compared to Phoenix Valley Metro (Light) Rail
On the (controversial) simulation video showing 8,640 passengers per hour (https://youtu.be/J8C7SEQtSQ8), there is a response to the "Just build a train" comment that sounds like a concrete example to the critics of TBC's transportation solution.
@Naiba kie Phoenix is constructing (might be done?) a 5.5 mile light rail extension where costs doubled last year to $1.35B. Some goes to park&ride and a $350M contingency fund, but it doesn't include the cost of removing two lanes from Central Ave for 5.5 miles. Previously constructed routes were cheaper, but went through light density areas. The convention center area isn't light density nor is the land cheap. That is about $200M/mile for light rail construction assuming some use of contingency money and trade-off of Central Ave lanes vs park&rides. The Las Vegas Loop takes up minimal Convention Center land and costs $55M total for 1 mile of tunnels in each direction and 3 stations. Phoenix Light Rail System Summary FY19 Operating expenses are over $14/mile at 4.5 boardings/mile or $3.23/boarding/mile (note: "revenue miles" so might not count "out-of-service" trips to the maintenance building). Assuming TBC has an average of 3 boardings per mile (2/station avg, 2/3mi avg per trip), that would be almost $10/mile operating budget to still be cheaper than light rail. That is $1M/cayear at 100k miles per year. I must have done my math wrong, right? Even I can't believe these numbers. Please help. Perhaps the value of dynamic-demand? Perhaps Phoenix is an outlier?
I found the document containing "Phoenix Light Rail System Summary FY19" Operating expenses referred to above here: https://www.valleymetro.org/sites/default/files/uploads/event-resources/200498_fy19_transit_performance_report_tpr_accessibility_v3.pdf Based on calculations of numbers presented in chart, the rows below "Vehicle Revenue Miles" are all per mile units. They actually pay out more than 3.4x what they collect in fares. When compared to bus or paratransit, light rail is a good deal. But when compared to the estimated costs per passenger TBC has provided, they will collect less than public transport in Phoenix and still have a profit. How is it TBC can be better than subways and light rail? Here are a few reasons: Dynamic Demand -- Subways and Light Rail run on a schedule so they can be predictable, and riders can time it to where they don't have to wait long which improves ridership. This causes it to cost more per passenger where ridership is low (e.g. time-of-day, day-of-week, and/or location). TBC tunnels will adjust the number of cars in the system based on passenger demand, since the cars only show up when a passenger is ready to travel. An empty subway car or one with just a few passengers is going to cost way more to operate than a Tesla with only a few passengers. FSD is closer for tunnels -- Full Self Driving is even closer to reality in a more controlled environment such as a TBC tunnel system. Look at Waymo's self driving robo-taxi fleet in Phoenix. If they can do it on open roads, why can't Teslas do it in a controlled environment? This will reduce staffing costs due to not requiring drivers. Maintenance -- Teslas are going to be much cheaper to maintain since they are able to take advantage of the mass production car maintenance network of service centers, mass produced replacement parts, car washes, detailers, vinyl wrap installers, etc. Subways, light rail and trains are extremely expensive to maintain. They require specialized buildings with tracks going in and out for every train being maintained at once. Specialized equipment and unique parts which are produced in low volume and highly expensive. Specially trained and highly paid mechanics who may sit idle for hours when nothing needs to be done. They even require vandalism repair staff on hand! Storage/replacements/leveraging investment -- Teslas can be driven out of the tunnels and put into a parking structure for storage. They can be repurposed on highways as rentals during off hours, and sold used when fleet is refreshed. They can be driven from one TBC system to another on highways or car carrier trucks to another to balance load if one system is expecting an unusual amount of peak load (e.g. a conference, sporting event, etc.). You can't do that with subway cars and trains, so you either are overloaded beyond capacity or you have extra trains that do nothing but collect dust for those few occasions where extra capacity is required. More routes: Subways and light rail are restricted to main routes due to cost of infrastructure and station size requirements. TBC can pop up in any parking lot to create a station and can route their smaller, cheaper tunnels in places that do not have the volume to warrant a subway or light rail. Just look at the extension to the Vegas Loop requested by Caesars Entertainment to provide transportation to their casino properties from the Las Vegas Loop. It is just one example that will pop up over and over as TBC builds systems in other areas. Eminent Domain / Public Land Acquisition: So far, TBC has only requested access to public land for underground tunnels. None of this underground area is in use, so there aren't any concerns about requiring eminent domain or giving up public land for a private company's profit. The surface area requested so far (AFAIK) is on private land that TBC has either purchased or is in partnership with the owner. If another tunneling company wants to also tunnel under a public street, they can go under (or possibly over) the TBC tunnels, thus there isn't an exclusive use to TBC. Trains and subways are not exactly the same. Subway stations are extremely disruptive to build if not require eminent domain. Surface areas for maintenance buildings of subways and light rail almost always require eminent domain and/or public land acquisitions. Bottom line: Mass produced TBCs creating cheap tunnels with mass produced electric vehicles ends up being cheaper to build and operate than any subway system and most light rails. Dynamic demand will increase ridership as passengers do not have to wait as long and are provided point-to-point service. The nimbleness due to the scalability of TBC systems into less volume routes will give it a competitive edge no other rail solution can provide. Cities will embrace TBCs once these characteristics are demonstrated and the public demands it.
Ok It's Time for my...Annual *Pre-Burning Man Rant and Predictions!!
Ok It's Time for my . . . Annual Pre-Burning Man Rant and Predictions!!! After 22+ years of attendance, I have watched this festival go from what was described by Wired Magazine in 1997 as, "what the internet would be like if it was happening in reality" to 2020 where, "What? In reality, this festival is happening on the internet" ?!? What a serious head fuck . . . So strap in or strap on and get ready for disappointment . . . like virtually everything in this virtual world right now. Here goes this year's Virtual Rant! PREDICTIONS The Virtual Burn is going the be everything you think it could be . . . an underwhelming and depressing reminder that you are not going the real Burning Man this year. While it is still better than nothing, nothing is an extremely low bar. Get ready for a clusterfuck of 8 separately-produced interpretive video game dreamscapes, made by skilled teams of programmers eager to prove that their world-building technology will be able to make future financial investors a shitload of money. Burning Man 2021 is a 50/50 chance at best. 2022 is not looking that great either. Between The Org burning cash on side projects, the FEDs wanting to crack down hard and the Bureau of Land Management clearly pretty fucking stoked that they did not have to deal with the whole shitshow this year, it's going to be an uphill battle for the festival to return. Huge changes will need to be made. Those few gluttons for punishment who do decide to go to the playa this week will be treated to Burning Man without the Burning Man Experience. It will take all the hard work, organization and preparation for survival in the middle of a harsh desert environment for a week of Burning Man . . . just without the Burning Man. If there is one silver lining of the event not happening this year, it's the fact that I don't have to pack up my dust covered Burning Man bullshit from last year, drive 19 hours, then have to smuggle drugs inside my ass to make it past the BLM rangers just go camping in one of the most fucking miserable and inhospitable places on earth. Without Shirtcockers, Megaphones and Massive Thumping Soundsystems, it's just a bogus camping trip in bad weather with a shitload of cops. This year we will NOT be seeing the usual post-Burn MASSSIVE FLOOD of social media posts from Burners who lost their nice $60 water bottle/container somewhere on the playa, often accompanied by a story of why this particular water container was of importance because it has a strap on it, followed by a brief description of unique camps stickers on it and a photo of said missing water bottle/container. In fact, while we are starting to think about cutting costs -- How about lost and found stops giving a fuck about your overpriced water bottle. You lost it, Becky . . . let it go. You spent 20 times More Money on Cocaine for the week than the price of your fucking stoopid-Smart-Bottle-container. THE VIRTUAL BURN This year’s Virtual Burn brings about more questions than it does answers. How will Shirtcockers express their hatred of pants without a Burning Man? In a virtual world, they become no different than unsolicited dick pics. How will Artcar Owners be able to swing their metaphorical dicks around without their Artcars booming Deep House music to show the world their girth. Sure, you can build one in the Minecraft world for this years Burn . . .But lets face it: No one is gonna be like "Who did that 3D CAD drawing, I totally wanna fuck them!" What will all the Assholes with Megaphones do without Burners to heckle? Without handheld amplified audio devices and wide-open spaces, they become no different than Internet Trolls. How will Hippies on a Vision Quest be able find their spirit animal online? Without a guided shamanic ritual and Temple to burn, they become no different than someone playing Animal Crossing. If there is no moop or trash to clean up in a virtual Burning Man how can Moop-shamers be able to prove to campmates and others that they are better at "doing Burning Man " than everyone else? In a virtual world they become no different than a Sarah McLaughlin Green Peace commercial. How will Dooshbonnets and Dooshbags be able to gain followers on Instagram without the giant Robot Heart to climb? How can they show the world that they not only have braved the pool of Piranhas chomping for position for line, negotiated past the all-seeing and all-knowing doorgirl with a clipboard, proving that they have climbed both the social and physical ladder to reach the top of the Robot Heart, so that they may look down upon the lowly dancefloor with both spite and pity for the unwashed masses who where not able achieve such greatness. Without this accomplishment, they become no different than average Twitter users vying for Celebrity attention. How will Burning Man DJs be able to disappoint us with poorly executed timing and bullshit Michael Jackson remixes? Without huge Soundsystems to bang out the worst in modern electronic music, DJs just become . . . The SAME TERRIBLE DJs just now on Twitch! #playatech #Djstreaming #Djsofburningman Although each Virtual World must have been an amazing feat of programming in its scope and size, it kinda feels like a huge project that was done in a short amount of time. None of the Eight Worlds, in any way, reflect the typical Burning Man experience. However, there are a few non-official super realistic Burning Man simulators out there. By far the most realistic experience has to be the "Getting Out More This Year" Simulator. The player is welcomed to a rich and tangible 3D World of Chris's DopeAss 70s RV, which is camped way out on 4:30 and H, where your avatar can spend all day and all night doing fun things like Ketamine, or other colorful interactive game play such as snorting Ketamine, and even interact with the virtual Chris’s chat box and watch his avatar do Ketamine. Other game play options include doing Ketamine, talking about doing Ketamine and also doing Ketamine. The more days and nights spent doing Ketamine, the higher the score! If you want to experience what a typical Burner really does the whole week, than this one is for you!! Then we have: "Let's Go Party" . . . the online multi-player game where the objective is to get your group of more than 6 Burners to try and leave camp, and all go out to party together. I did not have much fun playing. I was never able to leave the front of camp. 14 hours of game play later, Brenda still needs to go back for chapstick and Ricky can’t find his bag of blow. Then once Brenda arrives ready, Kaleporia is cold and needs a scarf. Darkwad David is going back to get some blinky lights for the 3rd time. Now Timmy can't find his cigarettes . . . Fuck. “ManBun Boyfriend”. In this first person POV game, you (the ManBun) has little to no control within the game, with only a single "Ok, Sure" button to navigate within the world. The game play opens as the player is dragged out of bed at 6 AM by the onscreen girlfriend who takes you (the ManBun) on an treacherous journey of sunrise yoga classes, self help lectures, think and grow rich seminars, yoga, positive affirmation workshops, mindful guided mediations, yoga, healing arts ceremonies, wellness and well-being talks, yoga, vegan lifestyle in the new age conferences, yoga, mindful-and-wellness-group-chat and also yoga. Extra points if you can score a selfie in front of the Giant BELIEVE letters!! After 8 grueling hours of game play, it simply flashes a screen where girlfriend says "I'm Tired", and the “ManBun Boyfriend” simulator then restarts game play to opening sequence. “DJs Girlfriend”. This simulation offers a similar experience to “ManBun Boyfriend”. However, in this first person POV game, you (the DJs Girlfriend) is invited to Follow "Dj GlockTrigger" on a dubstep-and-monster-energy-drink-filled adventure as you (the DJs Girlfriend) is rushed from empty dancefloor to empty dancefloor, while picking up extra points if you can find him a "line of blow". After 12 hours of game play the screen flashes "Hey babe I'm gonna go drink with the boyies" and game play is reset. THE RANT I am not that great at finance. Obviously. I’ve been to Burning Man 22 times. That should tell you enough about my poor financial / life choices. But even this burnout Burner can do the math and see that the Burning Man Org is in financial trouble. Burning Man may need to sell out to save itself. It would not be the first time.. Burning Man "sold out" to the PsyTrance community in 1997. To help ticket sales, the Bay Area was flooded with seriously lame underproduced Rave flyers. Or maybe Dr. Dre can toss in a few million to keep The Org afloat once again. Or hey why don't we start tickling Elon Musk's balls again, and see if we can start choking on his shaft in return for some sweet corporate demon semen sponsorship. The Org has already gone pinky finger deep with him. Like when Tesla brought out a full-on Electric Car Expo. That's right, in 2007, at Burning Man, right at fucking Esplanade & 9:00, they had what can only be described as an “anonymous car dealership” from “the green future”, complete with lengthy-worded displays filled with lofty promises of clean energy, infused with subtle corporate propaganda. In the center of the exhibit sat a life-size solid black plastic model Tesla car. As well as someone on guard 24/7 to make sure no one tagged or fucked with the stoopid thing. I personally got chased out for drawing a dick in the DUST on the window! All I know is they should have burnt it down or blew it up by the end of the week, but that lame ass mother fucker was still there on Sunday when I journeyed back to draw a dick on it again -- this time with a PAINT PEN. After executing a perfect fat-sacked-choad-headed-donger on the hood, I was once again chased out by rangers, this time with pitchforks screaming bloody murder for my head!! Fuck you, Ranger Doug! You will never be able to prove that was Me!!! So Look, it's not the first time The Org spread its asscheeks for a little bit of corporate dick on the side. They also bent over back in 2013 and let Mark Fucking Zuckerberg bring a Giant Golden 'LIKE' sculpture out there. I just hope they did the right thing by the end of week and it was killed with fire. SO we know The Org is corporateBiCurious. Time to snuggle up, get out of the corporate cocksucking closet and cash in on the fact that this place sold out a long time ago. Start flirting with attractive corporate entities like Mark Z, the Google Boys, Elon, Tommy Boy from Myspace, or maybe even P-Diddy to toss in some cash to get this fucking party started again! Yo, Elon! How can we have Burning Man on Mars in 2050 as planned, if we can’t keep it going on Earth for the next 30 years? At this point, The Org can spread their legs in the backseat of that Tesla and change next years theme to Space-X. I could give a FUCK!!!!! As long as we can keep Old Naked Dudes On Bikes rolling free. Let some of these cocksucking limpdick corporations like Doritos -- who have already profited from using our Artcars and culture in a their fabricated commercials -- actually fucking pay us money and we will let them shoot a real commercial out there. Have fun pixelating the nipples out of the background actors. I COULD GIVE A FUCK as long as Shirtcockers have a natural habitat to dongslap and roam free. Let Brazzers.com build the Temple! I sincerely really don't care what they do . . . as long as Assholes with Megaphones have wide open spaces to heckle Burners in the Black Rock Desert like GOD intended. BACK TO BASICS : THE FESTIVAL WILL NEED TO RESEST Maybe The Org will stop fisting themselves in the burnhole with all the Cultural-Direction-Bullshit and get down to brass tax here. They have spent years trying to market the festival as a family-friendly-non-offensive-all-inclusive-experience for the suburban upperclass while still catering to the super elite. We need The Org to provide the DPW and Tickets . . . Not for Cultural Direction, or Large Scale Art Funding Circle Jerks, Abstract Charity Causes, International Involvement, or any of the Meaningless Feel-Good Propaganda tools they use to control the image of the festival! The number one focus from here on out needs to be the festival itself taking place once again in Black Rock City! This defacto-defunding of The Org is a blessing. Look, when it comes down to it, it's not about the lame fucking themes each year. It's about the Burners who come and contribute to the festival that makes it special. It’s not about overpriced art grants, or Rich-Dick Theme Camp placement priorities. It about the shitty unofficial un-themed camp at 7:00 and J blaring Discotrance music on a distorted soundsystem while giving away room temperature margaritas! I could give a fuck about all of the elaborate expensive blinking bullshit! Cuts cost! Make the Burning Man effigy from toothpicks for all I give a fuck. None of that shit really matters. The spirit of Burning Man is in the person giving away ice cream from a cooler out in deep playa on a hot afternoon. The soul of the festival is in Old Naked Dudes on a Bikes rolling free across the desert! The heart of the festival is the Nightmare Hippy Chick on Acid rolling around in the dust, screaming about her spirit vegetable. Believe me if The Org had its way, Burning Man would be nothing but Transformational Mediation Seminars, Yoga Classes, Ultra Overpriced Sculptures, and TED talks about how to get rich quick selling a new type of investment portfolio. I am perfectly happy with the crappy bars and half-assed theme camps that are there just to have a good time. We don't need The Org's unique brand of new age capital-elitism bullshit. They have clearly dropped the ball on the Cultural Direction for years, and the less they steer the ship, the better, cuz we have already washed up on the rocks. BULLSHIT CLICKBAIT “Top 10 Burning Man Pictures You Must See To Believe!” And once clicked, sure enough it’s nothing but a bunch of super basic-ass photos of some super-hot-Coachella-swinger-couple at sunset in front of the most gentrified “OMG I need to get a selfie in front that to show my followers on Instagram” artwork on the playa. You already know exactly where these fucksticks took the stoopid photo is front of, OF fucking course it's in front of the BELIEVE letters. It’s Basically the "live, laugh, love" of playa art. Really, I won't believe this ?! What I won't believe is that their relationship is going to last beyond next week . . . cuz there’s a 90% chance they are gonna join the wrong gangbang at the Orgy Dome and suddenly someone is not happy about the amount of buttfucking the other one received. Thanks Business Insider Magazine for exposing the public to the wild and crazy world that is Burning Man. Now every fucking Chad and Becky from Wall Street is trying to come here to get laid. "Bro if I was there I would bang so many Hot Chicks on top of those letters" . . . "OMG I LOVE those Letters!! We are SOOO going to Burning Man to meet our future husbands <3." How about 10 REAL photos you won’t believe? Too bad the cameras weren’t there to snap a picture of the guy who took a shower with a fat chick and midget porn star! It’s a shame no one from the Daily Mail UK was there to catch video of the guy who was tripping his nuts off and could not figure out how to unlock the door of the porta-potty -- escaping only by busting through the plastic roof and climbing out the top several hours later. Or how about that chick at the meditation camp that was able to summon a higher power of consciousness and transcended the spacetime continuum for a short/infinite amount of time! Where the fuck was BoredPanda.com to catch a photo of the person who was hit with a rubber dildo when it was carelessly thrown from the top of the Space Pirate ship into the Mayan Warrior crowd. Now That’s some real stuff that happens out there that I would be happy to clickbait on! THERE WILL BE SOME CHANGES MADE The Large Scale Art: Instead of funding massive installations that end up being resold to casinos on the Las Vegas strip, why not treat them like large Rich-Dick Theme Camps -- give the Installation Artists 200 DGS Tickets, and in return, these assholes will be happy to spend shitloads of money on blinky light towers or whatever, just so they can lock in those sweet sweet reserved tickets for themselves and their friends. The Tone: The Utopian Blinkylight Dreamscape has been cool for the past 16 years . . . Buuuut . . . it has gradually fallen out of touch with the world around us. For far too long, The Org has ignored camps or underfunded art that could be perceived as dark or controversial in any way, shape or form. Yet again, another example of their Cultural Direction Tactics to market Burning Man as a blinky-light-mickey-mouse-Epcot-Center for wealthy-business-insiders-and-celebrities featuring a safespace-family-oriented-wholesome-body-wellness-green-living-environment for social-media-influencer-photo-shoots. Burning Man has NEVER been a Safe place! In 1998, I witnessed a beheading by guillotine at the Opera Performance that was so realistic I spent the next 5 hours (still frying balls on acid!) convinced that Billy Graham was right about this place being a Satanic death cult that would bring about the end of the world. IT WAS DISTURBING! If the Barbie Death Camp incident at last years’ Burn taught us anything, it is that there clearly need to be risky and controversial works of art at the festival. We can't be having pussy-footed Australians throwing temper tantrums like little punk bitches CUZ they don't like the way someone put Barbie Dolls inside an oven! Why did that do-good-koala-humping-limpdick-ASS-licker think it was OK? Well . . .The Org has shoved the narrative that Burning Man is strictly "good vibes only" down our fucking throats so deep that we finally gagged from it. Why the fuck was that guy even there? Well, he clicked on the Business Insiders’ “Top Ten Burning Man Photos You Must See To BELIEVE” and thought it was gonna be nothing but butterfly sculptures and Instagram Models in front of giant letters. No Kids: Yep. Sorry Minecraft Burners, but you are gonna have to wait until you are 21 to come to this party! Renegotiating the insurance policy as an over-21 festival will save The Org millions and millions of dollars. Out of 80,000 people, less than .05% are under 21 . . .yet we have to check IDs at every fucking bar !? Every year the gate gets closed down and no one can filter in or out because someone asshole can't find their kid. This should be a HUGE red flag ! Law Enforcement uses the fact that minors are allowed at the event as justification to engage in predatory conduct such as undercover stings, camp raids and random tickets for unsuspecting bartenders who forget to check IDs. Also I am not comfortable with the legal grey area the Shirtcocking and Titbouncing in the presence of minors creates. And if it ever comes down to nudity versus allowing kids, I am sorry but we can't sacrifice the heart of this festival on account of the fact that you don't want to get a fucking babysitter for the week. Your kids could give a flying-donald-duck-fuck about Burning Man! You and I both know goddamn well that given the opportunity they would rather play video games for the week at grandma's house then have to listen to Mom and Dad fight at Burning Man all week about who got buttfucked by whom at the Orgy Dome. . . LEAVE THEM AT HOME!!!!!! So the rest of us can be free to fuck, drink, smoke and wave our goddamn dicks and clits around whereever we see fit!!! The Temple: In the early days of the David Best Temples, they were constructed from the leftover hollows of wooden dinosaur jigsaw puzzle pieces. It was low cost, recycled and pretty fucking cool! Last year’s Temple was overdesigned, structurally unsound, and made from rare rustic-oak hardwood and redwood trees imported from China. Let’s cut costs and just do what those guys from Belgium did in 2005. It's a Very Simple Plan. We get a shitload of old 2x4 boards and fucking Wing It! The Belgium Waffle House would have made a perfectly good Temple. Garbage Dumpsters: Yep, that's right. In the future we will have dumpsters at Burning Man! All the Survivalist and Moop-shaming Burners say it will destroy the festival. Guess what, Burn Nut? It's already common practice for larger theme camps to rent dumpsters that are emptied at the end of the week!! It's been going on for YEARS! So what? Theme Camps will now have to pay a dumpster fee and there will be strict rules around any public dumpsters. Believe me The Org will provide the minimum amount possible to accommodate the BLM. It won't be nearly enough dumpsters for everyone to just toss all their trash, recycling and extra bikes into. Don't worry, Radical Self-Reliant Survivalist Burnertypes, other people will still have to suffer packing up and dealing with their own trash on the ride home. Moop-shamers rejoice! You will definitely still be able to shame people for mooping and not cleaning up, if not even more so now. I don't see why we can't be Radically Self-Reliant by having dumpsters on site. We will still Leave No Trace, while leaving one less thing for surrounding communities to bitch about. Build the Wall !!! Ya fuck it! Build the Wall. So what? Honestly, it will be more aesthetically pleasing than that fucking orange fence. And if that is what the Feds want, that's cool with me -- as long as The Org gets to choose who does Security! Thank fucking god we are not doing Burning Man this year. With the world on fire all around us, it seems a bit tone-def to hold a giant rave utopia party! I, for one, will be enjoying the week indoors under air-conditioning and rolling around in the heaps of cash I am saving by not going. I’m not attending a single workshop to expand my consciousness, not giving a single gift to anyone, and not being radical or self-reliant in any way. Fuck your Virtual Burn. I am Zapper Jones. I will see you in the Dust again . . . Sometime Somewhere in the Future!
Before I start, I wanted to say that I've lived in many different countries (brick/concrete buildings) & I never experienced so many problems as I have with US homes. The use of cheap plywood and wood chip, poor or no insulation, flimsy siding and roofing that either blows off in high winds or just rots away after a few year, in addition to high prices have made life a living miserable hell for the average American. I've lived in US for the past 20 years, mainly in the west coast. I owned a nice peaceful house in Seattle area back in the 90s, things were not this expensive & I had a great mortgage rate until the collapse of housing market happened in 2008, and my mortgage rate went up from 3.25% to 6%, although I paid my mortgage onetime & didn't do anything wrong. Around the same time, my utilities, and taxes went up drastically. The house was built in the 80s and the constant rain & termite damage & carpenter ants had made the wood rot underneath the house, not to mention the leaky roof & many other issues with plumbing, mainly to do with wood-structured houses. Long story short, my house was peaceful, but because of high taxation, crime, constant rain & cold, & other problems like high utility & mortgage rate, I made a decision to sell the house and move to California. I rented a two bedroom luxury apartment unit in Orange County around 2015 for $2500/months, but everyday there was an issue with the management, constant noise of performance cars revving their engine, garbage trucks, leaf blowers & landscapers, you name it .... After a year, I finally got sick & tired of high rent & high taxation in Cali & moved to Nevada, Las Vegas. The apartment I moved in was ok for a few months until a loud motorcyclist moved next door to me. The guy worked all odd hours and he used to love revving his bike at nights, like 12 am, 3 am, 5 am, multiple times, when he commuted back & forth to work every day ... Calling the police, talking to Management or leaving nice notes on his bike, none of them worked, until I was forced to move out. Everybody said rent a house, apartments are crap. oh how little I knew So I ended up renting a home (paying $2100) to have more privacy & peace of mind. The house was fine for a few years (except the loud neighbors kids screaming & swearing, dogs barking all day & night, neighbors doing landscaping at 8am Sunday morning, etc etc), but I still put up with it, at least I had few hours of quiet at nights & I used white noise machine to drown out some of the noise. Until one day, out of the blue, the house started making weird noises, mainly coming from the ceiling/attic. It started with one loud knock/snap every morning at 8:30 am, and over a week period, the knocks went from one loud one to 20 knocks a day. Within a month, things became so bad that every time the sun would come up or go down, the roof would pop like 200 times. At nights, I would hear a lot of loud banging/popping noises coming from chimney and the attic. I let the landlord know right away (which they didn't believe me at first), I even paid for pest control (we thought it maybe rats or some other animal in the attic), which no trace of any animal was found in the attic. We brought roofers, inspectors, you name it, no one had any clue what was going on. Things got so bad that I couldn't sleep more than couple of hours every night, waking up with a very loud knock or bang, sometimes every 30 min. I lived in that house for 3.5 years, and didn't hear a beep from the structure of the place, so I have no clue how a building that quiet could go suddenly crazy & it was so frustrating that no one had any clue what was going on . Haunted house? I was forced to move out of the lease & find another place. I ended up living in another house (1,900/mo) that had severe zapping issues (the floors were made out of cheap laminate & they wouldn't let you ground), so every time I touch a door knob or kitchen appliances or doors or windows, I would get zapped like crazy. I also would hear loud banging from pipes when I took a shower & once every two weeks I would hear loud banging from the roof/siding of the house. But at least the structural noise of this house wasn't constant, like the other property. But a few months to my lease, I discovered that the house is foreclosed and the owner has no intention to fix anything, so I moved to another single family home in a very nice area & gated community (paying $2,300/mo). Oh boy, renting this new place was probably one of the biggest mistakes I have ever made. I moved there around December last year & the first night I slept there I realized that I have made a giant mistake. There were LOUD snaps/pops once every 30 min all over the house, I mean snaps as loud as gut shots that could be heard overheard all over the house, even in the closet or bathroom, day & night. It wouldn't go away. When the heater ran, the snaps & knocks would become so loud, as if wood is splitting in half on top of your head. No amount of white noise or ear plug could block that noise. I work from home & my clients could hear the loud snaps over the phone & often asked me what is that loud noise in the background and if someone is shooting. Because I had moved twice in less than 3 month I ended up putting up with it & staying there for 7 month, I have a background in structural/civil engineering, so I thought I could bring inspectors & could figure out a way to minimize the constant loud popping & snapping noises. I talked to PM & they send people who had no idea what was going on, charging the owner thousands of dollars in roof & pest control. I paid out of pocket myself, bringing contractors to screw the ceiling drywall, in case the nails holding the ceiling boards were moving in & out of 2x4s. We tried re-screwing the ceiling in one room & to my surprise it made the popping noises a lot worse & even more often. By then I knew the property has serious foundation & possibly truss uplift issue. I even got covid during this whole mess around January & not sleeping, constant stress & loud noises made my illness prolong for 4 months Dry coughs, severe diarrhea, shortness if breathe, severe joint & muscle pain & high fever. At that time I was so devastated & all I wanted was to sleep & I couldn't I couldn't even go rent a hotel room for a few days, since around March the Gov had shut everything down, so I was stuck inside a big house that I couldn't sleep in any of the rooms. Eventually when I recovered from covid, I thought I've had enough of homes with severe structural/roof issues & it's time to go back to condo/apartment living. At least, they wouldn't have serious foundation/roof issues, right? I moved to this condo a few months ago & of course it's another wood-structure multi-family home made with flimsy roof & floors. What I didn't know about this building is the fact that there is absolutely NO insulation in between the units, over the floor & walls that I share with other neighbors, NON, whatsoever, so I could hear normal conversation, dogs barking, constant door slamming, banging noises from other units. Also because of covid, some neighbors work from home, sometimes repairing heavy machinery & auto parts! Imagine , only sharing a thin plywood with the unit underneath and the loud obnoxious neighbor next door! Another issue with this condo is the shaky floor, when I walk around my unit or neighbors walk around their own unit, my floor shakes violently & ends up shaking my heavy coach as well as the bed. If I'm sleep & the noise doesn't wake me up right away, the shaking of the floor definitely would. I never thought I could hear this much from units downstairs or on the side, because I had lived in other apartments before, and I had never experienced this level of noise traveling up from downstairs neighbors or the hellish neighbors on the side. My neighbor on the side works night-shift, I hear her coming home, all odd hours (like 1am or 4am, every day- it's Vegas so people work odd hours at the casino), I hear everything, when she is taking a shower, slamming the hell out of her bathroom door, her dogs barking, walking around her unit, I've tried to reason with them & talk to them to at least not slam doors 10 times an hour day & night, but had no luck. Unreasonable people can't be reasoned with. As a matter of fact, I think they are doubling down on their door slamming & banging noises. My neighbor downstairs also has a habit of slamming every door & drawer & leaves the house at 7 am (every morning) & my floor shakes violently every time she goes in & out of her building, which is 5 or 6 times a day I have moved 4 times, in less than a year. I lived in single family homes as well as condos that were uninhabitable, because of poor construction & use of cheap plywood, if these structures were built with concrete/brick, none of these issues would have happened. Trust me, I have lived in many concrete/brick structures before, my first apartment in Seattle was an old building made out of brick & you still may hear loud trucks or bikes, but there is no way you would hear your neighbors talking in normal voice, taking a shower, wiping their ass, or closing their door. This is so depressing that we pay so much in mortgages or rent in America, yet we have to live in such horrible living spaces that are uninhabitable. American houses often have the appearance of having brick walls, however these are just stuck onto the outside of the plywood walls giving a false sense of quality and strength. I understand that using flimsy wood is much cheaper than using stone, brick or concrete, but this is not really evidenced by the prices of houses. Even multi-million dollar new houses in the States are being built from the same cheap plywood, poor insulation, shabby roofing material as cheaper houses. The fact that walls are paper thin and conversations can be heard a room away is nothing strange in American houses. I'm not even gonna mention horrible loud structural problems/noises that no one has any clue how to fix (god help you if something goes wrong inside the attic), rotting walls, water getting into insulation, pest issues, termite damage or leaking roofs. You will be surprised that the average material cost (cost of wood chip) for a cheap flimsy American home is around $5,000, but since we live in a mafia state, by the time the city, the contractors, & the utility companies are all done with you, you will end up paying hundreds of thousands of dollars, in some case millions of dollars for a home that's gonna end up having too many problems, in just 10 years or less. Sorry for the long rant, i know this has been a tough year for many with people dying alone of covid, but I'm penniless, sleepless, stressed & exhausted & I can't bare the idea that I have to move again soon , to another wood chip rental, I wonder what kind of a horror is gonna be waiting for me there? costing me thousands of dollars in rent & moving cost. > I have a masters degree in civil/construction engineering. I used to do cost analysis for different projects & I know the material cost, for just the framing of a house (the cost of timber & plywood) is around $5,000, I have worked with many reputable construction companies all over the NW. All of them used the same cheap crappy plywood, even for the construction of multi-million dollar homes. > I have owned & rented many homes/condos, town homes/apartments all over US (mainly in NW), new & old. I understand there are individuals who have ulterior motives & are doubling their already doubled profit by enriching themselves off of consumers. But these of the realities of wood-frame residential buildings: the use of weak beams, cheap plywood, poor insulation, flimsy siding and roofing that either blows off in high winds or just rots away after a few year, termite damage, carpenter ants that chew and push out wood by finding crawl spaces underneath your house & you wouldn't even know until half of the house is gone, high expenses regarding pest control (over the years, I've spent at least 20K regarding pest control - rats, squirrels or ants, that will chew the wood & will find a way to get inside your attic/basement again & again) ... Rotting walls, water getting into insulation, moisture damage & mold, termites, leaking roofs, etc, etc. Houses built of plywood and low quality beams will not last all that long. Using staple guns to hold plywood to beams that ends up shabby. Contractors using the cheapest materials to throw up buildings as soon as they can in order to maximize profits. For some reason this shabby building tradition has become the norm in US. Simply using concrete, brick or stone will prevent all these issues related to wood. > If the price of these flimsy wood-frame buildings were as cheap as the cost of its materials, it wouldn't be that big of a deal. At least, it's not costing consumers an arm & leg. The argument I've heard over & over is that we can't afford to build homes made of concrete or brick in US, but this is a gross lie. Even multi-million dollar homes are built with the same material as the cheap ones & how come other countries can afford to build homes made of concrete & still make money? There are so many newer technologies like building homes with precast concrete, so cost effective because they are modular homes (many parts can be per-manufactured) & are a LOT MORE cost effective & durable > Loud popping/snapping noises in wood structured homes are a recent phenomenon, which I believe has occurred as a result of rapid changes in the climate. Super dry or humid & hot summers depending on which side of the country you live in, long cold winters, constant rain, moisture & high winds are taking their toll on wood-frame buildings. Three out of the three recent homes I lived in had severe issues to do with constant loud snapping/popping noises coming from the structure of the house, mainly from ceiling joists as well as walls. Never experienced this issue ever before & here is a video that even new constructions are not immune to this disease Buyers be aware, there is no way to know that a property has this particular issue until you spend a week sleeping & living at the property. I know homes with this problem that were sold & the problem was concealed & the inspector never found anything wrong, because the issue is hidden from naked eyes, check out truss uplift & the effect of rapid changes in the climate on wood-frame buildings. I believe more & more buildings are gonna end up having this issue in the near future. This issue is NOT related to normal expansion/contraction of the wood, these noises are not normal home noises, they are as loud as gunshots, happen all the time, & no one can even figure out what is going on. The building you buy might not have this issue right away, but there is no guarantee that within a few years, you will not end up with this nightmare. > I have lived in homes as old as 300 yrs old, in Germany & UK, built from brick/store & I tell you they are as solid as a rock. They are warm & cozy during winter & cool & pleasant during summer. As far as sound insulation goes, concrete, brick & stone have high mass density, and they muffle & dampen sound quite a bit, whereas wood echos the sound by reverberating it & transmitting it all over. In fact, stealth plans are mainly made of wood, in order to reduce reflection/emission of radar, so they CANNOT be detected, where as signals would bounce off other solid materials. Knock on a wall made of wood & see how it feels hollow & void, whereas concrete or brick will dampen the echo quite a lot. If you punch a concrete wall, you will end up breaking your hand, where as you can easily punch a hole in a plywood wall & if you live in a multi-family home, you may end up in your neighbors unit. Many US houses or buildings will not be around, let's say 500 years from now, as a result of a wasteful consumerism system & a mindset of bulldozing the old & buying something new, even if it's cheaper quality. All great civilizations have left structures for us to admire: Rome, Egypt, Greece, Byzantium, Incas, Aztecs etc. Unfortunately, it doesn't seem likely that American civilization will leave any impressive physical structures behind.
This is an example of fundamental DD that takes place at ‘smart’ money institutions based on my professional experience in IBD, Private Equity & most recently at a HF (mods can message me for proof). Not thoroughly fleshed out b/c you autists have limited attention spans, but a summary. Figured I’d take the time to give back to this community that has provided many lolz, & should be a good measuring stick when evaluating other forms of fundamental DD posted here. NFA. DKNG - DraftKings, Inc.: vertically integrated US mobile betting operator that also provides retail sports betting & back-end betting solutions through SBTech. Think of SBTech as the tech ‘market-maker’ for traditional sports betting, they do all the funny math to set the betting odds & seem to be working on back-end solutions for DKNG Casino The Big Picture
Total annual US Gambling Revenue: ~$90Bn [1]
Casinos: ~$75Bn
Illegal Sports Betting: ~$13Bn
Horse Racing: ~$0.8Bn
Daily Fantasy Sports: ~$0.4Bn
Only ~2% of the ~$90Bn gambling revenues were placed online which is the lowest in the world where betting online is legal. For example, in other countries online gaming activity represents ~6% - ~52% of total gambling revenues, with ~12% being the average. Wall Street expects online gaming revenue to be $20Bn-$40Bn within the next 10 years. For this to be achieved, the online gambling market will have to achieve a ~30% penetration rate on total country gaming revenues. There is an expectation that this is could be easily achievable given penetration trends overseas - see page 11 of this: https://s1.rationalcdn.com/vendors/stars-group/documents/presentations/TSG-Investor-Day_March-27-2019.pdf Other catalysts include increasing adaptation of sports betting in more states. States that have both legal sports betting + online sports betting permitted: NV, NJ, WV, PA, IA. Sports betting permitted but no online: DE, MS, RI, MO, AR. Prior to COVID there was ongoing discussions across many States, especially ones with growing deficits to explore how permitting sports betting could create a fresh avenue of tax dollars. Post COVID there is an expectation that these discussions will be given extra focus as many States will be hungry for incremental tax dollars. Important to note that currently 43/50 States allow DFS, but given the small share DFS has on total Gaming Revenues, it increasingly looks like DKNG is banking on traditional sports betting for a variety of reasons, more later. There are entire articles on Google arguing this catalyst so I’ll end this here. Digging Deeper DKNG’s main offerings are Daily Fantasy Sports (“DFS”) products & traditional sports book products to its clients. Long story short, a metric to look for in my opinion (that is curiously not reported by management or remarked on) is the hold % in traditional gaming sector parlance or the ‘rake’ & compare it to the ‘traditional’ gaming products like sports betting & Blackjack. For DFS: DKNG takes ~15% of the prize pool (note: used to be ~6-11% [2]). Curiously, their main competitor FanDuel also has moved up to a ~15% rake recently. Google searches show the smaller competitors have a rake in the ~13% range. This ‘rake’ has grown ~2x in 6 years, but it has been a delicate move on behalf of management. Why? B/c the more ‘sophisticated’ DFS players (equal to autistic day traders on Robinhood) have noted this increase & based on some Googling, some have moved down market to the smaller players. As a side note, many live casino games have their rules altered to grow the Hold %. For example, Blackjack games with 6:5 payouts on 21 have materially higher Hold % than the traditional BJ rules that pay out 3:2. Given the findings so far, DKNG may not have much room to materially increase its hold % in DFS games in the near-term from current of 15%. More on this later. Now why the fuck is this important? This is important b/c the typical sports book (ex-Parlays) have a ~5% hold %/rake. Parlays have up to a ~30% hold (which is why it’s commonly known as the sucker’s bet), & just for reference, the average Blackjack table clocks in 14.5%. What this means: Every dollar put into these games, the “House” or DKNG, will take 15% of your money for DFS games, for sports bets they will be pocketing ~5%, up to ~30% if you’re into parlays, & we’ll just use the standard 14.5% BJ hold for the DraftKings Casino platform. So why the acquisition of SBTech & a foray into the traditional sports gambling market? As you can see previously, the illegal sports betting market is >30x the size of the current daily fantasy sports market. So it’s clear that the DFS providers including DKNG are foraying into the space to capture this user base & hopefully convert them into games that have a higher hold %, such as DFS/DKNG Casino. As of May 2020, DKNG has achieved a 30% penetration rate on its ~4mm ‘monetized’ DFS clientele to its Online Sports Book (OSB), from the OSB+DFS clientele, DKNG has converted 50% into its DraftKings Casino platform. Including non-monetized users, user base totals at 12mm. Based on these unit economics: every 1mm of additional users -> 333k monetized users for DFS -> 100k users for OSB -> 50k users for DraftKings Casino. Some Numbers – Italicized/Bolded the important
In total, DKNG has DFS paying clientele of ~4mm, the metric management focuses on is “Monthly Unique Payers (MUP)” which spans across DFS & online sports betting***. As of Q1’20 they reported 720,000*** MUPs, representing +16% YoY growth [3]
Average revenue per monthly user (ARPU) of ~$41, +11% YoY
Based on previous observation of Hold %, looks like ARPU growth will be limited
Since ’17, MUP has grown at a ~11% CAGR & ARPU has grown at a ~19% CAGR
As a side note: the ~4mm monetized user base was acquired at ~$122/user over 3 years. Total users cost them $41/user over the last 3 years [3].
They are currently EBITDA negative & Wall St expects them to be positive by 2023
I took a dive into the math driving this, here is a summary:
Based on their current cost structure they will need to have ~1.7mm MUPs at an ARPU of ~$46 to break-even. This implies total monetized users of ~10mm from ~4mm currently
Numbers that represent Risks to Long Thesis
DKNG’s user base of ~12mm is on the low end of the sector vs. its ‘brick & mortar’ competitor's user bases (online betting platforms with physical casino presence)
CZR with 55mm, MGM with 33mm, ERI with 10mm (in pending merger with CZR, could have a lot of overlap), FanDuel with 8.5mm
Is there a concern for increased marketing costs to increase user base? Let’s look at a case study of NJ, the first state to open both mobile & retail sports betting:
FanDuel + DraftKings have held 80%+ of the OSB market share since 12/2018 which is estimated to be driven by the conversion opportunity from DFS that is unique to both companies [4]
On the flipside, a case study to examine going forward is how DKNG can get OSB customers in a State that does not allow DFS. Nevada. Home to Las fucking Vegas. Prior to NV pushing FanDuel/DKNG out (highly likely due to casino lobbying), NV was a top-15 State in terms of revenue for them. NV is home to the fattest sports book in the US, & recently the gaming commission started to parse the data on sportsbook wagers done online vs. in-person, & it came out to roughly 50/50. It will be interesting to see how they try to capture market share in a state with no DFS
Long-term EBITDA margin target of 35% requires huge growth in MUPs
Based on their estimated '22 cost structure: Holding ARPU of ~$46, MUPs will have to be ~5.2mm, a 7x increase from current to achieve a EBITDA margin of 35%
A focus on future earnings will be management's ability to shift to a more fixed-cost structure which would effectively lower the MUP requirement for profitability
Things to look for when going Long - Progress of additional States legalizing sports betting – specifically, States with DFS already legalized - Cost structure evolving to a more fixed mix vs. the mostly variable mix currently as this will be the forward figure that determines profitability - Increasing User Base (Curr.: 12mm) -> Monetized Base (Curr.: 4mm) -> MUP (1Q’20: 0.7mm)
Management seems to be focused more on the first step, but one thing to note is that the 33% monetization rate is very high when compared to something like League of Legends which isn’t entirely comparable but in 2013 had a ~4% monetization rate [5]. This, combined with the below implies that this conversion rate may be the ceiling for now
As a side note, ~6 years ago FanDuel had ~300k monetized on an ~800k user base for a monetization rate of ~37% [6]
Share Price Target Given the cost structure of the company, I’m going to base the price targets around Enterprise Value / Revenues (driven by MUPs & ARPUs).
MUP sensitivity of 5mm - 6mm
ARPU sensitivity from $41 - $47 for an average of $44, just a $3 increase from current of $41.
Share Price targets based on 2.0x - 4.5x EV / Sales.
Note: Flutter Entertainment (FanDuel ParentCo) trades at ~3.6x EV/Sales
Bear Case MUP: 5mm -> $20.32 - $45.73 Base Case MUP: 5.5mm -> $22.27 - $50.10 Bull Case MUP: 6mm -> $24.21 - $54.47 These MUPs imply a monetized customer base of 28mm – 33mm. At the high-end, this implies that DKNG monetized customer base will equal MGM’s current total user base. At yesterday’s close of $43.70, DKNG is trading at 3.5x – 4.5x forward Revenues on an expected >5,000 MUPs. Share Price drivers / considerations: - Continued multiple expansion
Consideration: A 1x premium to FanDuel's 3.6x, implies a ~15% upside to current. They're bigger than FanDuel, do they deserve the premium?
- MUP Growth exceeding beyond targets
Consideration: Stock currently implies that they should on average be growing at 40% QoQ – during 2018 they had on average +30% growth QoQ in MUPs, marking their best year
Management Team Jason Robins, 39 – Co-Founder & CEO. Duke BA, started DraftKings from day 1 in 2011. The 2 other buddies he started the Company with are still at DKNG. Dude navigated the Company through the scandal that rocked them in ’15 & ’16, and was the trailblazer in getting DFS labeled as a non-gambling product that enabled it to open in States without a gaming designation. This shit is the stuff that gets people in history books. His accomplishments make him seem like a very competent guy. Has 3 kids now, and only ~3% economic ownership in DKNG but has 90% of the voting power through his Class B share ownership. Also he actively participates in venture investments, sitting on 10 boards. His comp plan performance bonus target is pretty murky, but main drivers are EPS growth, revenue growth, then a bunch of margin & return metrics, along with share price returns. Overall, very open-ended & it’s safe to say as long as shit doesn’t hit the fan, he will be eligible for his max payouts year over year. I’m assuming the lawyers tried to encompass everything possible for maximum flexibility to justify him earning his max comp as long as DKNG is still around. Since he’s got voting control of 90%, I’ll end the specific-person overview here, but want to note that they have a very bloated C-suite. 12 folks at DKNG, 8 folks at SBTech, all with C-suite designations. Whereas their main competitor FanDuel, has 3 guys with a C-suite designations & 1 EVP, but is a sub under a larger ParentCo that has its own management team of ~5 guys. Looking through glassdoor you can see the biggest complaint among employees giving bad reviews is based on management, all of the specific issues they point out IMO are a result of a top-heavy company. Seems like a good starting point to optimize their cost structure, but given Robins' history of sticking this entire thing through with his co-founders since '11 stuff like this doesn't seem to be a part of his playbook. They’re a public company now though, so it’s going to be interesting to see going forward. TL;DR: If I were to initiate a position in DKNG, the stock would have to fall to the $35-$37 range for me to be a buyer of the stock, and based on this rough intro analysis I'll be considering Put options if it breaches $50. I would not touch Calls at this level. [1] Wall Street Research - 6/27/19 [2] https://rotogrinders.com/articles/bang-for-your-buck-a-look-at-dfs-industry-rake-153302 [3] https://draftkings.gcs-web.com/static-files/8f3a5c5a-7228-45bf-aab2-63604111c48d [4] Wall Street Research - 5/19/20 [5]https://www.gamasutra.com/view/news/223071/Dont_monetize_like_League_of_Legends_consultant_says.php [6] https://rotogrinders.com/threads/how-many-people-actually-play-dfs-regularly-252044
Strangely, the average gambling budget in Las Vegas is $619 compared to Macau’s $250, yet the gaming revenue in Las Vegas per year is $11.1 billion, which is easily dwarfed by Macau’s $28 billion. Las Vegas Strip casinos that gross at least $1 million in gaming revenue annually saw their net incomes jump more than 191 percent during the 2016-17 fiscal year. In 2019 dollars, that isn’t so bad. If a casino has only 1,000 gaming machines, it can turn a $5 million daily profit just by retaining an average $1000 per machine. According to a 2015 Las Vegas Sun article, about 40 million people visited Las Vegas on an annual basis at that time. That works out to nearly 110,000 visitors to Las Vegas daily. University Libraries University of Nevada, Las Vegas The Average Big Las Vegas Strip Casino, 2015. In fiscal 2015, 23 casinos in the Las Vegas Strip area produced gaming revenue of more than $72 million. The averages for several key financial statistics produce a picture of the statistically ‘average” The Las Vegas Strip's Most Profitable Resort Billions of dollars flow through Las Vegas each year, but one company generates more money than the other resorts on the Strip. The best answer I could come up with for you comes from the fiscal year of 2013 where the revenue of 23 casinos was 72 million dollars that year. This included gaming and non-gaming revenue from things like hotel rooms etc. This was according to t... Current and historical gross margin, operating margin and net profit margin for Las Vegas Sands (LVS) over the last 10 years. Profit margin can be defined as the percentage of revenue that a company retains as income after the deduction of expenses. Las Vegas Sands net profit margin as of December 31, 2020 is -46.65% . For calendar year 2007 the larger casinos in Vegas (non-restricted Clark County) made $145.384M profits from Sports Books from 99 locations reporting to the Nevada Gaming Control Board. This is not the total betting action but just the net income for the books. On a per day, per casino basis it works out to about $4,023. While Las Vegas remains the gambling and entertainment capital of the United States, the center of the global casinos and online gambling industry has shifted towards Macao in 2006. The average casino slot profit there might be higher than a lot of vegas casinos because its fairly busy compared to what I have seen in Vegas where its always easy to find a machine. That would explain a number like $81 at Fitzgeralds, ie idle machine time.
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