Tuesday, February 28, 2017

Under Armour Stock Updates + New Investing YouTube Video

For many years I have been monitoring the success of Under Armour (UA, UAA) stock - and for the most part the results have been good. While I wasn't a big buyer of the brand, plenty of other people were. However, late last year I started seeing the brand reach the peak of it's life here in the United States.

I'm not saying Under Armour isn't going to keep growing in the United States, however domestic growth limped along in the 6% last quarter, and the company wasn't particularly bullish about it picking up anytime soon.

The primary drivers behind this are a few things. First - there's only so much Under Armour gear someone can own. Even if you work out 5+ days per week, a handful of shirts and shorts will likely be sufficient for most consumers. Given UA's quality, these items tend to last longer than your average 100% cotton shirt. I have a single Under Armour shirt in my wardrobe (paid about $5 for it) and it still looks brand new. Consequently, many consumers closets have enough Under Armour in it.

Second factor is UA is not a major player in shoes. Even the most well-made shoes will wear out and need to be repaired or replaced, and that's a much more attractive market. UA's shoes styles often lead a lot to be desired on the fashion side (especially compared to Adidas and Nike) ... so it's going to be tough for that segment to continue scaling up rapidly.

Overall, I see Under Armour stock continuing to slide. In the next 12-18 months, I'm forecasting another 50% haircut off the stock price, meaning shares could trade below $10 if they really overshoot to the downside. In the meantime - shares will likely trade sideways until closer to the first quarter 2017 results are announced.

I've covered reading through an Under Armour 10-Q document on my YouTube page in the past, but wanted to let you know that I just uploaded a new video where I discuss Facebook's most recent 10K document.


When it comes to my personal portfolio. I'm staying long banks and looking to add on any market weakness. Two beaten down segments of the market are health care and retail right now - so I'm selectively adding stocks in a speculative swing trade portfolio. Names I've bought include LB, TGT, JCP among others.

Sunday, December 11, 2016

New YouTube Videos + BSQR & JYNT Updates

Haven't been blogging as much on this site, however I have been active in the last few months. Recently I have been taking a look at Under Armour's business model, and have seen some signs of weakness. Most recently I wrote about their connected fitness business unit - which UA has spent about $1B developing/acquiring assets for. With companies like FIT on decline, and recently buying up rival PEBBLE off the scrap heaps, doesn't look like this connected fitness stuff is generating much for shareholders.

I've gotten some very nice feedback on my YouTube channel, despite only having a handful of videos at the moment. Most recently I uploaded How To Pick An Online Broker and How To Read 10-Q Documents.

I only have 2 speculative investments in my portfolio at the moment. BSQUARE (BSQR) is a small software company that has a solution for tracking large equipment. With Donald Trump claiming he's going to be spending "big" on infrastructure over the next 4 years, a company like BSQR could see higher demand for it's new DATAV software package. Among other things, the software enables companies to manage fleet vehicles & heavy equipment. The stock has risen quite a bit over the last few months, and if the company gains more customers in 2017 it could get some real momentum.

The Joint (JYNT) is the second speculative stock I have in my portfolio. I've had to average down several times, but I believe I'm protected somewhat by the company having a business model that can scale up. One thing thing that set the stock back in 2016 was the company fired basically the entire c-suite. There was only small details provided by current management as to why everyone was let go very suddenly, however it appears the launch of Chicago area clinics have gone poorly. The company is already seeking alternative to those sites - most have only been open for only 12 months or so. There must have been a huge blunder by the old management, so it probably will take a while before this company starts making some moves. I'll be keeping an eye on a financing round they likely will have to lead - considering the company doesn't have a ton of cash. I don't think this company goes under any time soon, but the set-backs in large markets is going to take this company back a step or two.

Wednesday, May 11, 2016

MGT Capital now John McAfee Global Technologies

For those of you that have followed this blog & my research, I've long been outspoken on the challenges MGT Capital would face.

Over the course of the last few years, I successfully predicted that MGT would never materialize significant (or any) positive revenue from any of their business models. These included:

RealDeal Poker
FanThrowdown
DraftDay
Slot Champ
Slot Patents
... ect

Sep 2, 2014 - MGT Capital Investments Stock On A Wild Ride

Sep 4, 2014 - Is CEO Robert Ladd Good For MGT Shareholders?

Sep 9, 2014 - Low Turnout For MGT's DraftDay Fantasy Sports Website Week 1

Nov 19, 2014 - MGT Capital Investments DraftDay.com 3rd Quarter Overview

Ultimately MGT's underlying assets were worth nothing when the public symbol MGT was essentially used for reverse merger purposes. The newly formed company John McAfee Global Technologies won't have anything to do with the prior MGT business models.

So while MGT shares may run up as speculators trade what McAfee might or might not do. My work on this stock is likely complete. I have very little knowledge of the computer/software security business and really don't know much (other than the headlines) about John McAfee. He could end up creating lots of wealth - and I guess it's possible bagholders of MGT get un-stuck.

However, I encourage former holders of MGT to do research on what the current plan might be. Read the SEC documents (see my tutorial on reading 10K documents here) and make your judgement based on logic instead of company hype. Just because you might have been bailed out in this instance, that doesn't always happen.

Monday, March 7, 2016

Started An Investing Tips YouTube Channel

I've had a decent amount of requests over the years to start a YouTube channel. I'm not exactly sure what direction the channel will go in, but initially I plan on giving some overviews of some trading & investment ideas. I've already posted one video review of Lending Club. I will probably do some real basic stock market advice & tutorials in the beginning and go from there.

I just recently posted a new video where I discuss 5 stocks under $5 that could double. Some of the stocks I own, others are just on my radar/watchlist. As with any of these speculative stocks, you really need to do your homework - and also have really good timing. If the market retreats back to new lows - most of the small-cap names are going to get crushed. However, if you are a perma-bull and think the market will breakout & resume the uptrend, these small-cap names can really explode.

Other than that, I've been posting a bit to SeekingAlpha, but there really hasn't been many opportunities in small-cap names that I've really fallen in love with. In 2016 I have been buying/accumulating shares of Nike, Verizon, AT&T, Apple, and Disney. If market pressures lower the valuations of these companies further - I will be buying more.

Good luck!

Monday, February 23, 2015

New Article Updates + McDonald's & MGT Updates


Travelzoo.com - TZOO
The M&A is hot in this space, but TZOO is plugging away at a hotel platform that has no chance of competing against all the others out there. Strange how management is moving away from what makes the website unique and is trying to mimic what's already been done. The shares will likely stay elevated with buy-outs always in the rumor mill. PRO Article & Editors Pick

ReachLocal - RLOC
This company has some nice SaaS solutions for businesses trying to manage leads, but I don't think they charge enough. Personally I see a flat/down year ahead and it could turn into a nightmare if sales of new/existing products don't sell. PRO Article

LoJack - LOJN
This company has been selling the same product for 25 years - that in itself is impressive. The only issue is the company only can serve limited markets in the USA - and always seems to run into problems when expanding into foreign markets. PRO Article, & Editors Pick

United Online - UNTD
Still watching this company. They've announced 2 new websites/apps that seem mildly interesting. You never know how those things can go, but UNTD seems like it kept costs in check so there would be upside if the sites work out. Still don't think this company is compelling enough to invest in, but the management is trying & seem more than competent. PRO Article & Editors Pick

McDonalds - MCD
Back in October I wrote a quick piece on McDonald's basically saying the fundamental story was going to come to the forefront - so dividend only investors might want to take notice. Since then the CEO was bounced and MCD is still trying to figure out what it's going to do. Personally I think there's more pain before gain in the company ... but shares will likely weather the storm fairly well. I haven't ate at MCD in a long time and have no reason to - but a transition to a simpler menu and fresher food might make me want to try it again if it was the only option.

MGT Captial Investments - MGT
Probably will report 'earnings' at some point this month, although you never know with this crew. I had to chuckle when last month the company puts out a press release bragging about launching a website (that will make no money) at night club with porn stars attending. LOL - and people wonder why this company is in the tank.

Last month was also a major conference for daily fantasy sports at Bellagio in Las Vegas. It was almost like Draft Day didn't even exist. Several presenters confirmed a viable #3 daily fantasy site seemed unlikely unless it was affiliated with Yahoo, ESPN, CBS or a similar property.

A reverse split seems like the likely scenario at some point for MGT to keep it on the regular exchange, but so does some kind of pump/dump campaign. The CEO knows if he tries the latter, I will likely perk up again and he may not want that. All I know is MGT likely only has a few more puffs of air left in them before it all comes crashing down.

That's it for this month. Added JYNT @$6.06 and SYRX @$1.38 in the last 60 days
Have not sold any long positions in several months, but have been trading oil ETFs on the volatility in that market.

Friday, January 9, 2015

Recent Blog Posts On Seeking Alpha

New York & Company - NWY
This clothing brand/retailer has a market cap around $160m but recently moved into corporate offices with a rent obligation of $160m. PRO Article & Editors Pick

Digimarc - DMRC
I've been monitoring this stock for a while now and while not at the tipping point yet - they are close. The company has developed technology that will make scanning items at retail counters easier & faster. The company also has some other IP that is valuable. PRO Article

The Joint - JYNT
This is a franchise of chiropractic care centers. It's a relatively low-labor intensive, so the company might not be as effected by minimum wage hikes - and that could make the units attractive to franchisees. The corporation is in the process of repurchasing existing franchises, which should make the revenue comps on a Y/Y basis look impressive in the press releases. PRO Article

NXT-ID - NXTD
This company is heavy on PR but has yet to release the one product to market it has been promising. The Wocket is a secured mobile wallet that will compete with giants like ApplePay and other solutions. This company is likely going to zero. PRO Article

Sysorex - SYRX
This company has trended up since I posted an article saying to add it to your watchlist. I still don't think there's a rush to jump on board here, the company is still in the early stages. However - they have an AirPatrol unit that has some promise. PRO Article


Find all my articles posted here.

Wednesday, November 19, 2014

MGT Capital Investments DraftDay.com 3rd Quarter Overview

This isn’t the first time I’ve written about MGT Capital Investments (MGT), and I’ve been following MGT for some time now. To cut down on redundant arguments, I will direct you to some of the previous articles I’ve written:
  1. Sep 2, 2014 - MGT Capital Investments Stock On A Wild Ride
    In this article I explain that MGT’s management expecting to use positive gross margins from DraftDay to fund operations was optimistic at best.  As the numbers show in my article below, the company lost more in 3 months running DraftDay than whatthey paid for the entire site in April. I also explain that daily fantasy sports websites require significant financial investment and MGT does not have the capital (or access to capital) required to sustain operations for much longer.
  2. Sep 4, 2014 - Is CEO Robert Ladd Good For MGT Shareholders?
    One thing CEO Robert Ladd is good at is investing in business units that only cost the company (shareholders) more & more money each passing quarter. I’m not 100% if this is a semi-elaborate way for Robert Ladd to enrich himself and a small number of insiders, or if he’s just a poor businessman. Either way, his mismanagement and odd acquisitions have deteriorated shareholder value and makes investing in MGT a very bad idea even as a speculative penny stock play. In this article I also touch on – what I believe to be (NEAR) worthless business units – MGTPlay, RealDeal Poker, and SlotChamp. Again, I’m not 100% sure if these business units (subsidiary companies) are in existence to actually create something of value, or to funnel money into the pockets of insiders. That or Mr. Ladd simply has poor judgment when making acquisitions with shareholder money. Either way it shows you cannot trust the management MGT – and if the company is still around in a few quarters I’ll investigate further what really might be going on with these business units. For now, all 3 are D.O.A and likely will never materialize any value for the company or shareholders.
  3. Sep 9, 2014 - Low Turnout For MGT's DraftDay Fantasy Sports Website Week 1
    This article was really just to illustrate how daily fantasy sports websites don’t print money. In fact, they are a good way to burn through money, which is probably why the original owners of DraftDay sold just months before the 2014 NFL football season started. I’m not 100% certain the daily fantasy sports website business model (as currently constructed) will even be sustainable in a few years, but that remains to be seen. What is evident (as represented by the 3rd quarter numbers I post below) is that these daily fantasy sports websites are a poor investment for a company that doesn’t have much capital or access to the capital required to sustain a daily fantasy website while the industry is still not profitable.
How is MGT funding operations?
ATM Agreement
Pursuant to the ATM Agreement, the Company may offer and sell shares of its Common Stock (the “Shares”) having an aggregate offering price of up to $8.5 million from time to time through the Manager (Ascendiant Capital Markets, LLC).
For the nine months ended September 30, 2014, and through November 14, 2014, the Company sold approximately 1,274,471 shares of our common stock under the ATM Agreement through an “at the market” equity offering program for gross proceeds of approximately $1,407, before related expenses. The proceeds will be used for general corporate purposes, including, but not limited to, commercialization of our products, capital expenditures and working capital. As of November 14, 2014, the Company has approximately $7.1 million remaining under the program, assuming sufficient shares are available to be issued. (p. 10 3q 10-Q)
The company will raise funds in this fashion in order to keep the company solvent through September 2015 (last quarter the company expected to have enough cash through June 2015, so there is one sign of improvement). While these types of fundraising rounds are not particularly rare, it will create an overhang on the share price as long as the agreement is in place and the company is not producing positive cash flows. Additionally, with MGT stock trading near or under $1.00 per share – it potentially means millions of shares will be added to the share count without the advanced notice a secondary offering usually provides. Essentially if you’re a holder of MGT shares, your valuation metric needs to factor in the company will be issuing and selling common shares in order to continue the already dismal outlook the company has. Considering the company’s loses are accelerating at a rate that will burn through the remaining cash on the balance sheet and the ATM agreement allowance, paring back operations would be the prudent thing to do but becomes more difficult when operating a public facing website like DraftDay.
Do Daily Fantasy Sports Websites Make Money?
MGT’s 3rd quarter spans the months of July, August, September and includes week 1through week 4 of the NFL football season and the tail end of the MLB baseball season.
Revenue - $297
Overlay – ($168)
SG&A – ($892)
R&D – ($40)
Figures in thousands
The overlay figure was one I brought up in September after witnessing very weak signups during the first week of the NFL season and it’s something even the larger sites have to account for. More alarming to shareholders actually should be the SG&A figure ($892) is 3x the revenue figure! Keep in mind that SG&A expense is likely going to trend upward even as revenue trends up, so the company needs to grow the business more than 3x to simply break even!  I thought daily fantasy sports was blowing up? In actuality it’s costing the company & shareholders money it can’t afford to lose. Now you can see why the previous owners & investors in DraftDay sold to MGT for less than FY revenue. As you can see the costs associated with running a daily fantasy website is significant and the ability to generate revenue is small. In September I laid this all out for investors to realize in this article. In fact, evidence shows that the entire US market for daily fantasy sports generates less moneythan the New Jersey regulated casino/poker websites – which have fallen well short of expectations. In case you missed that – one (very small) state generates more revenue on poker/casino websites than the entire daily fantasy sports market. Still think daily fantasy sports websites are a good investment?
Is the “3rd Largest” daily fantasy tag safe?
I’ve always found it a bit confusing (and somewhat laughable) the company boasts being the 3rd largest in the daily fantasy sports website – with no tangible plan laid out by management to move into (or even compete with) #2 or #1. It’s almost like the company is comfortable being #3. The main problem with that logic is MGT doesn’t currently generate positive cash flows from DraftDay and/or FanThrowdown, so being #3 isn’t even sustainable. While it’s likely the daily fantasy sports market expands in the coming years, it could be argued most of that growth will flow to top and/or will require considerable investment until that day comes. Additionally, if the market expands enough to support multiple (profitable) operators, the competition to be “#3” will become harder for MGT to hang onto as more nimble upstarts enter the market. And in fact, there’s evidence that MGT’s DraftDay is already facing competition from sites that recently launched.
To give you an idea how quickly daily fantasy sites can gain traction, Ruckus Gaming, opened it’s office in April 2014, reported a $2m fundraising round in August 2014, launched in beta mode in August 2014 – and now has guarantee NFL prize pools that are larger than MGT’s DraftDay.
The largest guarantee prize pool on DraftDay on Sunday November 16, 2014 was the $12,500 guaranteed "The Benjamin.”  On Victiv.com, the site owned by Ruckus Gaming, the highest prize pool was a $22,000 guarantee "Lombardi" contest … nearly double that of DraftDay. Additionally the second highest guarantee prize pool on Victiv was a $11,000 “Lambeau” contest - only $1,500 less than DraftDay's highest guarantee.  So while guarantee prize pools aren’t the only measure of success for a daily fantasy website, it does display that competitors that were opening new offices in April and in beta mode in August can boast larger guarantee prize pools than DraftDay, which has been around since 2011. Competitors without an eye to the bottom line, shareholders, or excessive executive compensation packages likely have an advantage over MGT who can’t afford to be as nimble and forward thinking as upstart competitors can. In conclusion, if your thesis to invest in MGT is because they share a piece of the daily fantasy sports market, it appears that piece will get harder to maintain as competitors with a few million dollars in fundraising and not even 1 year in the business can gain market share. Imagine if companies with the resources like Yahoo, ESPN (ABC), CBS, or even the NFL itself decides it wants to dip it’s toes into the daily fantasy sports market? How safe will the “#3” tag MGT places on itself be then? Will MGT brag about being #4 or #5 in a few years?
NBA now owns a piece of FanDuel
In an interesting move last week, FanDuel announced a partnershipwith the NBA – where the NBA acquired an equity stake and seat on the board at FanDuel. While competing sites like DraftDay & DraftKings will still offer NBA contests, the NBA is now clearly in bed with FanDuel, which should be a cause for concern for every other daily fantasy website. One threat to DraftDay & others would be if the NBA decided to make FanDuel the “exclusive” provider of NBA real money daily fantasy games (or a version of a game), much like they’ve done with apparel, TV, trading cards and other business relationships. While I think that threat is minimal, now that the NBA owns a piece of FanDuel – it’s something that could materialize in the future.
Conclusion
Investing in MGT because they own a fraction of the daily fantasy sports market is ignoring the facts while being in love with the story. Sometimes (often times) the story is better than the stock. That is the case here. Larger competitors like FanDuel and DraftKings are blowing through money faster than a teenage girl at a shopping mall. Other competitors and MGT are doing the same thing on a smaller scale. In my opinion, all daily fantasy sites are still several years away from being profitable, mainly because the barrier for entry appears to be about $2 million dollars of seed money and some office space. Additionally, if/when daily fantasy sports sites become profitable – that’s when larger players will sweep in like Yahoo, ESPN and/or CBS to take all the moneyconsidering they have massive player databases due to providing free contests for over a decade. As a side note, I’m not sure why the daily fantasy sites haven’t tried to attract more of the free and/or season long league action that is monopolized by the three companies I mention. Wouldn’t a freemium model work well for these daily fantasy sites? Draw players in like Yahoo/ESPN do – only to upsell them to the daily leagues as they check their lineups each day. Seems like an easy way to acquire potential players – and likely would cost less than it does to run some TV ads or partner with a league. Just a thought.
In my opinion, taking even a small speculative stake in MGT is like throwing money down the toilet. You’d be better off depositing the money on DraftDay and trying to win cash in the daily fantasy sports contests the site offers. The company doesn’t hold regular conference calls and the communication you get from management is always light on strategy or plans for the future. Management could have kept the business model much simpler (and less capital intensive) by not acquiring public facing companies like FanThrowdown and DraftDay – and collected compensation for years by flying under the radar and stringing out a patent litigation lawsuit that will take years before any verdict is handed down or any royalty checks are written. With that being the case, I actually lean toward CEO Robert Ladd just being a poor businessman/leader/decision maker over MGT being a semi-elaborate way for Mr. Ladd and a small group of insiders to enrich themselves. Either way Mr. Ladd is not someone you’d want to trust with your investment dollars with, and the entire history of the company’s share price has proven that to be the case.

Disclosure:
I’ve never owned shares of MGT – long or short.