Welcome to stock quick hits! A series of posts where I look at stocks that seem vaguely appealing at the moment. Stocks like China Mobile!
I’ll do about thirty minutes of research and analysis on each stock. That means some background, a look through their financials and a quick calculation in my DCF spread sheet to establish a fair value. If a DCF isn’t applicable, then I’ll use some other metrics.
Then I’ll set a price alert at which point I’d want to revisit the stock and do a deeper dive and/or consider a purchase.
Full disclosure, there’ll be some stocks and industries I’m not 100% familiar with. That means you should take these quick hits as a first look from someone not well versed in a subject. In essence, I’ll be talking out of my ass 20% of the time. Keep that in mind!
China Mobile and General Mills are the first two to make the list. Both recently caught my eye after a couple tough weeks for both.
These picks generally won’t be stocks I think are awesome buys.
More like stocks I think can be good buys if the price is right. These are just companies I want to research more in the future. Doing a quick hit means I can create an alert for a price point so I’ll get an email when that price point is reached.
Since these stocks are ones I think have some issues, I’ll likely be conservative in my valuations.
I’ll try to do this regularly so if anyone has any suggestions for stocks for me to look into then let me know!
Gaming has become a huge part of everyday life. I’ve always been a gamer. I spent way too many hours during my high school days locked up at home playing RPGs on my Sony Playstation. It was only in the recent decade, however, that gaming has stepped out of the shadows of basements into the mainstream.
The appeal of video games for me was the great value proposition they offer. I could spend $20 on a used video game as a kid and get hundreds of hours of entertainment. I simply couldn’t beat that outside of a long fantasy novel and that appeal of the $$ spent/hr of entertainment stuck with me as I got older.
The video game industry has always been good at adapting to the changing nature of tastes and product cycles and the various revenue opportunities that exist and could be harnessed.
The model started with a game you could buy for a $50 to something like an MMO that added a recurring monthly fee and an ever expanding world. All these games started to tap into the addictive nature of progression based gaming as publisher began to realize that they could get more than just the initial sales price and the user base was willing to pay for it to fund additional content.
The turning point was when the old model of selling physical copies morphed into digital copies with additional DLC(downloadable content) that could be purchased.
The proliferation of mobile devices thrust the world of video games into the mainstream and publishers began to realize the benefits of mobile games.
Just like digital, there was an ease of distribution as well as additional ways to monetize the massive user base that mobile games attracted.
Companies realized that a that small portion of users were willing to spend extra money to customize a character or get an advantage in the game. They took advantage of the ability to attract that type of gamer to improve profits. Micro transactions, first used outside of mobile in limited scope, became a much bigger deal on mobile. These allowed developers and publishers to sell a variety of things like extra lives, power boosts or loot boxes containing items that users could use to customize their characters. The freemium gaming model(free game with in-game purchases) became massive on mobile as publishers wanted to capture as many people as possible in hopes of catching whales(gamers who would spend a ton of money to max out everything possible).
This model soon transitioned back onto PC and console games with an added focus on micro transactions and capturing more and more revenue from the whales that would spend extra money beyond the cost of the initial game to get everything the game had to offer.
Personally, this model doesn’t appeal to me and I never pay extra for a game and will avoid any game where you can buy an advantage but the financials don’t lie.
Video game companies have done very well in recent years and a lot of it is due to the new ways of monetizing their releases.
The truth is that there is always a need for escapism and video games provide one of the most effective ways to achieve that for the end user. The product captures the attention of users due to having a low(often free) cost of entry in relation to amount of entertainment produced leading to a high user base. That means there’s often(not always) a revenue boost for the company when a game first sells. On top of that, game designers have added a very addictive progression based flow to many games with the idea of monetizing a certain percentage of the user base in a big way leading to very high margins and repeating revenue on successful games.
That new foundation of monetizing games after released has meant that the global video game market has exploded in recent years. Almost $110B in revenue has been generated by video games in 2017 and that number is expected to grow at ~6% per year until 2020.
One of the most visible trends that has driven this is the growth in Mobile based gaming. The mobile chunk of the pie started at 39% of $101B in 2016 and is projected to be 50% of nearly $130B in 2020. Continue reading “Investing in video games”→
I’ve always been a basketball fan and the recent purchases of NBA franchises at increasingly higher prices has led me to take a closer look this stock. There aren’t a ton of ways to invest in sports teams with only a few publicly traded companies offering investors an opportunity to do that and MSG is one of those.
My recent portfolio update showed me lagging behind on my mid-cap allocation and MSG fits that criteria with a market cap just above 5B. The stock has had a solid year and is up 24% YTD. I never looked at the stock before but the not so recent spin off of MSG Networks, the under performing cable assets the company used to own has made it an intriguing proposition.
MSG owns the Knicks but also owns a variety of other assets most notably the Rangers, the most valuable NHL team and the MSG arena.
Valuing an trophy asset such as a basketball team is very tricky. Forbes does an annual list of NBA valuations which has the Knicks listed at 3.3B for 2017 so that’s a good starting point but how does that valuation compare to the actual amount people are willing to pay to own such a unique luxury asset. The recent purchase of the Rockets at 2.2B gives me a good start pointing but it’s also worth looking at a few other recent NBA teams that have changed hands as well. Continue reading “Recent purchase – The Madison Square Garden Company(MSG)”→
Amazon’s purchase of Whole Foods Market was the headline this Friday and it sent a whole sector of retail into a tailspin as the thought of competing with Amazon had investors worried about the future of the grocery space.
It’s true that Amazon and online shopping in general has had quite an effect on retail as can be seen by the many store closures in the past two years. Companies like Sears, Macy’s, J.C. Penney and many others are closing hundreds of stores this year and will likely continue to do so in the next few years.
There are two reasons for this destruction in retail. The main reason is that more and more shopping has moved online. The e-commerce share of the overall pie has more than doubled in the past decade.
Do note that the number represented in the graph below includes certain things normally not bought online like gas, cars and the number excluding those items is nearer to 15% and continuing to grow.
Amazon has been the main beneficiary of this movement as evidenced by their stock performance and brick & mortar retailers have struggled to keep up. They’ve only recently started to invest heavily in the online sector but the moat that Amazon has built in that area may be hard to beat this late in the game. In fact Amazon makes up nearly half of the overall e-commerce which is impressive considering the # of online retailers that are out there. Continue reading “Amazon’s taking over the world and the much talked about death of retail”→
I’m always on the lookout for solid values but it takes a really solid value for me to pull the trigger and actually buy something.
I’m also a firm believer that research is the keystone of a good investment and I simply haven’t had time lately to get the research I want done on stocks that look interesting.
That’s one of the reasons why I only own three individual securities and keep most of my money in index funds and ETFs. It’s simply easier to buy ETFs when you have no time to research individual stocks.
Thankfully, I have gotten to a point where my work allows me ample time to do research on individual stocks and plan to start investing more in individual securities. This is the first of what I hope will be many articles that will discuss my analysis of a stock and my decision regarding a potential purchase.
If you’ve read my blog before, you know that my asset allocation plan has a 10% allocation to small-cap stocks so I’m willing to take additional risk in search for long-term results. All of my small-cap holdings are in mutual funds that spread the risk across a massive group of securities but that recenlty changed as I initiated a position in George Risk Industries Inc.
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