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Margin trading vs leveraged ETF

Which would be a better choice for long term buy and hold:
  1. Margin trading ETF (IVV) at 2x leverage at 3.8% interest rate (Interactive Brokers)
  2. Buying the equivalent 2x leveraged ETF (SSO)
The 10-year trailing return of IVV is 14.62%, so option 1 would have yielded me 14.62*2-3.8 = 25.44%, while the 10-year trailing return of SSO is 26.17%, so it seems like the leveraged ETF is a better option (no risk of margin call too).
References: https://finance.yahoo.com/quote/IVV/performance/ https://finance.yahoo.com/quote/SSO/performance?p=SSO
submitted by Olivia512 to investing [link] [comments]

difference between margin trading BTC vs leveraged Forex

wondering why people prefer to to trade btc via bitmex vs forex, sorry if this sounds like a stupid question.
submitted by paisleydarts to BitcoinMarkets [link] [comments]

difference between margin trading BTC vs leveraged Forex /r/BitcoinMarkets

difference between margin trading BTC vs leveraged Forex /BitcoinMarkets submitted by HiIAMCaptainObvious to BitcoinAll [link] [comments]

Trading leveraged futures vs trading on margin.

First off is there any other site than btc.sx that actually traded bitcoins on an exchange on margin? Or are the rest trading futures?
Also what are the advantages and disadvantages of each? Do they impact the market differently?
submitted by germican to BitcoinMarkets [link] [comments]

SWK - Insanely Cheap Mining Adjacency

SWK - Insanely Cheap Mining Adjacency
*** Updated Research

SWK provides an amazing opportunity to take advantage of the bull market in precious metals at an undemanding valuation with excellent operational momentum.
Environment:
Precious metals have had a phenomenal ride lately; both due to fear arising from COVID-19, and coordinated monetary policy stimulating economies at an unprecedented level. The graphic below shows the recent parabolic move in GLD (overshadowed by SLV) and reflecting upon the 08 crisis and the numerous QE policies that followed, this upward trajectory may continue further.

GLD vs DJIA (2006-Present)

With rises in commodity prices, the logical next step is to get some operating leverage and purchase the gold miners. No doubt, this second level thinking has been handsomely rewarded albeit encountering the sovereign and FX risks with many of the global miners domiciled in South Africa and Russia:

DRDGold, Polyus and Polymetal (April 20 - Present)
Since many of these miners are in the process of expanding production, cash flow won't be realised for several years and operating margins may not improve as much as managements' forecast (i.e. ASX: DAC). Further, since the market has drawn the logical connection between commodity prices and miners, these companies have run a very long way in the last few months.

Company Overview:
This is where SWK provides us with a cheaper and lower risk opportunity to gain access to this thematic. SWK provides drilling services to large miners of metals (i.e. nickel, silver, gold etc.) in US, Canada, Europe and Australia. Specifically, they use specialised drills to extract samples, which they analyse to then assess to the viability of a site. Increasing demand for mining exploration will, intuitively, increase drilling utilisation and drilling rates. SWK also entirely owns Orexplore, which provides mobile sample analysis to determine the characteristics of extracted cores. This improves the efficiency of examining the quality of a site by removing cost (transportation and storage), timing (it can be conducted on-site), and operational risk (damage in transit) all of which further benefit the mining co. and embed SWK into the exploration process.

Competitive Advantage:
SWK’s competitive advantage is being able to a world class cost effective and efficient underground drilling. For example, their development of DeepEX allows for longer hole from underground that are cheaper than many shorter surface holes. Their recent contract extension from BHP at Olympic Dam despite competitors (i.e. MSV and BLY) rigs being used onsite is testament to their value proposition.
SWK has also invested heavily (~$25mn) into their Orexplore technology in an attempt to move up the value chain away from high-capital intensive drilling into a higher margin business. This technology removes significant operating expenses (employees and equipment), reduces lead time (can be built and shipped globally within 2 weeks), is very simple to use (technical training is not required), and most importantly, is currently being purchased for free and is the main catalyst in this investment (more on this later).
Furthermore, SWK has made a concerted effort to increasingly diversify their product offering to different miners (with exposure to various commodities), and geographically. Their global and diversified footprint has provided them with a world-wide footprint, with costs to build their global business already incurred (most recently in Pogo – Alaska), further encouraging a buyout (more on this later).
FY19 Financial Report
H1 2020 Financial Report


Catalyst and Valuation:
Exit Options:
The primary catalyst for a revaluation in SWK is a huge macroeconomic tailwind providing momentum that might facilitate a sale of the drilling business to a strategic buyer. Without doing too much crystal ball gazing, I view the exit opportunities as follows:
5% - Amazing sale of drilling business = >100%+ returns;
65% - Solid sale of drilling business = 50-100% returns;
20% - No sale and general re-rate = 25-50% returns;
10% - Languishing business and capital destruction = -25%-0% returns.
Given management’s firm guidance towards the sale (https://www.openbriefing.com/OB/Swick-Mining-Services-Ltd/2020/2/25/Swick-HY20-Results-Conference-Call/3716.aspx at ~08:00) I will focus on our base case that entails: (i) selling or closing surface drilling business as it’s the lowest margin / weakest vertical; (ii) selling underground drilling business; and (iii) refocus towards Orexplore either through taking the business private, IPOing a new entity or rebranding SWK.
Given shareholders have been frustrated with SWKs delay in progressing the business towards a sale and having difficulty commercialising Orexplore it has been important to wait for a noticeable inflexion point in the business to attempt to “time” entry as much as possible. Let’s see how the inflexion point is here beyond the macroeconomic environment above.
Miners around the world are aggressively looking to expand their operations due to increasing commodity prices and SWK's services become front of mind. Recent news is ticking all the boxes and adding huge momentum in the stock to catalyse a re-rating.
  1. Reinstatement of dividend payment and share buyback program showing prudential capital management and a positive outlook relating to future financial position. This is a double-edged sword as management raised capital at 23c and bought back shares from 12.5c through to 17.5. By buying now, we have avoided this dilution although acknowledge this was not the best form of capital management. On the other hand, it does suggest management are flush with cash and happy to redistribute to existing shareholders before a possible sale; that is, we get paid to wait:

ASX Announcement 1
ASX Announcement 1

ASX Announcement 2

  1. Contracts are being extended, new contracts being won, and guidance on FY21 figures. Management are highlighting clear intention to demerge and growth is providing EBITDA growth for a better sale price:

https://preview.redd.it/06fxmos33dh51.png?width=563&format=png&auto=webp&s=70367dc6c623a4bb16c434f7f0f9892cd2a2f20b

  1. Large contracts with key miners and commercialisation of Orexplore. This is increasing utilisation rates and improving margins by expanding work at existing sites:
ASX Announcement 3a

ASX Announcement 3b

  1. Upcoming earnings call to catalyse re-rating:
ASX Announcement 4


  1. The Orexplore website (https://orexplore.com/the-orexplore-review/) has received increased attention with far more activity within their “Review Blog” section leading towards commercialisation. Posts are being made almost weekly increasing its awareness:
https://preview.redd.it/snsbk0vz2dh51.png?width=602&format=png&auto=webp&s=bb5a68c362a20c900c127dd53357ac5bf46dbbd5
https://preview.redd.it/1a80klgz2dh51.png?width=602&format=png&auto=webp&s=ab1f81609e06fc30683de45a4de778bb2838bb80

  1. MSV as the strategic buyer for the drilling business has shown intent to inorganically expand their operations. Deepcore had an EV of ~$44m (excl. additional earnout payments), revenues of ~$50m p.a., and an EBITDA of ~$12m with approximately half the rig number of SWK. This purchase confirms the “fair value” multiple for a drilling business is ~4x EV/EBITDA, even for a significantly weaker private business due to utilisation, profitability, scale and contractual certainty.
https://preview.redd.it/jumpn58y2dh51.png?width=602&format=png&auto=webp&s=ad650e7b63b341e06ddd0a8bff88121249a03925
Valuation:
Ok, so let’s turn our attention to the forward guidance and conservative estimates for SWK. SWK against mostly all metrics is very cheap. Management have forecast EBITDA to be ~$25mn in FY20. Although I think we can conservatively estimate this to grow significantly throughout FY21.
The improvements to EBITDA will come from the following: (i) commercialisation of Orexplore = $0.5-1mn, (ii) ~$3-4mn in reaching steady state (20%) margin from the Pogo contract as costs normalise and backdated earnings flow through; (iii) ~$2mn in operating expense reduction during COVID-19; (iv) the $120m increase in the order book between 30 July and 14 August implies $120/5 = $24m p.a. at a slight discount to target margin of ~15% gives another $3.5mn EBITDA. Putting this all together FY21 EBITDA might be ~$35mn.
In addition to the purchase of Deepcore, we can use the current valuation ratios of MSV and CAPD as a guide. Currently competitors trade between 3.5x (CAPD) and 4.5x (MSV) EV/EBITDA multiples. If we use 4x as a reasonable multiple on current EBITDA, this would imply an enterprise value of ~$100mn (or a 30% upside) whilst paying nothing for Orexplore. Upon conservative forward FY21 EBITDA figures, the enterprise value could easily reach ~$150 (or a 100% upside) again paying almost nothing (only $1mn / $35mn in EBITDA) for Orexplore.
By way of reference, SWK with similar metrics in 2011/12 was trading at a ~100% premium (i.e. ~40c (market cap $90-110mn) whereas now it is ~$20 (market cap $50mn). A decade ago, it also did not have the same existing clientele and large-scale contract wins (see 3a above with a forward order book of $363mn (relative to current revenues of ~$150mn).
The cherry on top of this investment is Orexplore, which we buy for free. None of the revenue and earnings multiples above include any real impact from Orexplore. On 14th August the commercial viability of Orexplore was been partially validated with their first contract win. Although its value is only $700,000 over 6 months this call option like payoff comes entirely for free. Further, the true profit margins of SWK has been hidden due to the losses incurred from Orexplore, which has to date cost $25mn in R&D (or equal to almost 10yrs of earnings), the amortisation of associated software development, and continued global expansion (Portugal and Europe before North America) each requiring initial costs prior to achieving target margins. Even better we get a first glimpse at how attractive Orexplore might be. Combining discussion in the latest conference call (https://www.openbriefing.com/OB/Swick-Mining-Services-Ltd/2020/2/25/Swick-HY20-Results-Conference-Call/3716.aspx 04:30 - 06:30) with the recent contract we can conclude the following: (i) 3 machines at Sandfire will generate ~$3.6mn in revenue covering approx. 50% of cash flow with nearly no operating expenses; (ii) $700,000 for 6months scanning 1500m of core per month implies ~$75/m (against an estimated $100m from guidance). As per guidance, if we assume Orexplore machines can scan ~$4m/hr ($300hr) and total costs may include one unskilled technician and minimal overheads ~$50mn this provides a gross margin of ~75% (or almost 4x undergrounding drilling). Due to the profitability of Orexplore, 15-20 operational machines on yearly contracts would provide greater earnings than SWK’s entire business. Hopefully the publicity of Orexplore at Sandfire can attract some attention, and in turn some additional contracts.

Risks:
No investment is without its risks, and for SWK they fall into: (i) capital mismanagement; and (ii) poor communication / delays. Firstly, the recent capital raise at ~23c followed by aggressive buybacks at ~12.5-14c-17c seems unwise. Although buying now avoids this dilution, it is unclear why excess capital was required if dividends and buybacks were announced shortly thereafter. Secondly, the share price has historically languished due to a lack of publicity and detail on the transformational Orexplore. It is likely that management were unwilling to oversell the Orexplore narrative before genuine contracts were won and the technology was established. Now that these are in place, hopefully the corporate restructure can take place and the upcoming strategic review can provide a clearer picture for the near term.
submitted by Bruticus91 to ASX_Bets [link] [comments]

Leverage cost / opportunity cost / miscellaneous

For those out there that have savings or investments in an ISA, but still have a mortgage, you are effectively paying your mortgage rate to get leverage on stocks and shares etc.
How does this stack up vs using a spread betting provider like Trading 212, or Spreadex? You can then pay down your mortgage more, and invest using leverage / on margin. Has anyone done a quantitative analysis on the benefits of each method?
Separately, how do people factor in to FIRE the need to support others? For example my parents are poor, so I help them financially. If I have kids, I want to be able to provide for them if they have trouble and need round the clock care etc. How much extra do people save to cope with nursing homes etc?
submitted by jpickles8 to FIREUK [link] [comments]

M1 Plus Review

Intro:
Bought into M1 Plus from a $60/yr Promotion 2 months ago. I had an investment account already, and even one of the first spend accounts. I had declined the offer for M1 Plus at $125/yr.
This is a first review of M1 Plus after two months of use and a bit of a dive into the value of its features from a financial and user experience point of view.
Value:
This is a pretty simple one. Do the math. The interest vs. your other checking account multiplied by the amount of cash you’d be keeping in there for M1 Spend. If you’re borrowing from M1 too, the 1.5% difference (or whatever difference there is between M1 Borrow and your next best offer) multiplied by the amount of money you’d like to borrow. If all these add up to greater than whatever annual fee is offered, go for it.
Otherwise, it’d be a very expensive metal card. But if 4 waived ATM fees go a long way to save you money, that should be worth considering too, however, there are tons of cards and products that’ll waive said fees, some even for unlimited transactions and no upfront cost. Just because M1 is offering this benefit as part of a premium package doesn’t mean it’s impossible to find for free somewhere else.
XP:
It is a great experience. I constantly invest lumps of $500 into my portfolio all the time. It’s quick, easy, and immediately fulfilling. Not that other brokerages don’t do this. But M1 is clearly focused on showing you your long term progress on your investment goals. It uses a money weighted return formula so that you know how much your capital has been making you to easily compare to the return of bank accounts and investments. There’s a reason their product is called “Invest” and not “Trade”, more on that later. But this means it’s primarily suited for this purpose. During the Covid crash, I took to Robinhood to place my Put Options on the S&P because high frequency derivatives trading and M1 basically speak different languages. All this to say, it feels amazing to watch your investments accounts slowly creep up as you continue to dollar cost average into the market, but this has some drawbacks.
Pies. While fun and easy to build, mix and match, they are not a very common mechanic to implement on amateur portfolios. Selling stocks can be quite the process on M1, and the platform will try its darnest to discourage you from making any but the most basic adjustments to your portfolio. Its really only suited for the “set it and forget it” mindset, which is not to say you can’t mess around with your money as you please, but it’s just so perfect for investing and watching your money grow with a long time horizon. The plots will show you your progress and encourage you to keep a regular deposit schedule. But try trading into and out of a stock, or a set amount of shares, or even thinking about playing with derivatives and other financial instruments: slim pickings.
The numbers make a lot of sense, too. I’ve been investing for about 5 years now, and my latest craze has been leverage. I’ve read about how the optimal leverage ratio for the S&P on average was 2.0 or 100% levered up, and looked up the historical comparisons to corroborate. Shopping around for margin accounts and available capital, it’s tough to beat the 2% rates at the moment. I’ve been slowly levering up during the latest market rally to great effect and the low interest really pumps up those numbers. Having this much cheap capital, not just for leverage, but also for life is worth more than just the time value of money. I would make the point that this is made even more valuable by having all your financial services on the same platform, as you really get to do with your money as you please and move it around to withdraw it to your hearts content.
My real issue was with Spend. Not a problem with the product but myself, in trying to justify the annual fee. I weighed how much money it would make sense to keep in Spend as opposed to an online savings account. To keep cash a couple of months ago, it made more sense to opt for ally or marcus as they were offering close to 1.55% on cash. But as their rates have plummeted, getting 1.0% on a CHECKING account has been an absolute godsend in this crazy economy. This account works for just about anything with the notable exception of checks... in a checking account which I suspect is the reason for the “Spend” branding the product was marketed with. When it’s hard to even find 1% on a savings account, a 1% APY on checking is no-worries approach to cash investment.
Ultimately, having all of these balances displayed together on the Transfers tab is huge in terms of consumer experience. This, however, should not be a replacement for true “Dashboard” that could show an overview of all your money moves and account balances.
Ideas:
M1 Trade. Admittedly, I do see how this can be very contrary to the philosophy, product and experience that M1 has worked to create. That being said, thinking that your customer will always prefer to have their money invested into automatically allocated pies is a little short-sighted.
Opening a much more DIY Trading product on M1 would of course have them incur tons of costs in handling and verifying transactions of all the individual financial, but many places already offer such services for free, some are even profitable at it. An M1 Trade product would also need integrating the Invest product because regardless of what you’re doing on the platform, you still consider your money your investments and want to see it all together. Pies and individual Buys would have to play nice together, and that does sound like a difficult endeavor.
I keep a couple of accounts with different mixtures of my pies for all my purposes. I also handle the investments for a few of my family members, which will become relevant shortly. You can obviously set up as many accounts as you wish and move money into them as you desire, but this can get you into some warmer water. If two of your pies hold most the same securities and you just want to have a different pie for a different account, you’ll have to call up to pause trading so that your pies have a chance to get to know each other and not force you to sell and buy right back into the same assets just to incur the taxes. It’s a bit of a hassle, and I would argue, on purpose.
For Pies themselves, I often find myself wanting to make small tweaks to pies but then quickly let it go as removing slices would automatically trigger a massive sell off that incurs taxes. From a conversation with tech support, I gathered that the best way to do this was simply pause trading on your account, and change the pie you want all your money to go into. Editing pies is fine and easy, but completely swapping a pie for another one led me to believe that it would sell put of all my holdings even if the old and new pie had many of those same holdings. If this is me being stupid, good, if it’s a gap in features, I hope M1 lets you simply swap a pie for any other and gives you the option either sell everything, sell only what is 0 in the second pie, or sell nothing and simply continue aiming for the allocation of the new pie without touching your previous investments.
Lastly, an iPad app. I’m a big fan of the iPad and the iPad Pro in particular. I’ve found myself using it far more than my laptop which is now strictly reserved for long work sessions (I write and edit for a YouTube Channel) and watching content in groups of people (15” MBP Speakers are the stuff of legend). But for anything else, I subconsciously grab the iPad. It’s annoying to have the website be the best M1 experience on the iPad. I understand that making a compelling iPad investing app is its own mountain to climb, but a lot of the Mobile app’s functionality can be ported over without too much of a hassle. Charles Schwab has an iPad app based 99% on the iPhone app that still performs all the same functions, just on the bigger screen, which is the whole point of the iPad in the first place. While it’s not a top shelf iPad app (there are only a select few) the Schwab app is lovely and I’m begging M1 for anything that doesn’t force me to use my iPad in portrait mode to use a blown up iPhone app. Again, this app doesn’t have to be a world beater, just a decent looking and bigger version of the iPhone app that would go a long way to boost the M1 customer experience.
Closing Remarks:
Obligatory YMMV disclosure: it’s about the math, I won’t bore you with my own, but I was just over the line when it made sense for me to opt into the $60/yr promo.
That being said, M1’s value has been a lot about the experience. The future of finance is free. No brokerage should be making money on transaction commissions or administrative fees, it’s a relic from the before times when you needed people who knew people on wall street to do your trading. At this point its not even worth any perceived convenience.
The clever ones reading this will point out that, while true, many brokerages already offer a wide variety of free services. Many of them, even, that M1 doesn’t offer.
The true spirit of this review is to express my personal opinion on the value of M1 Plus and how the customer experience is its edge in the ebrokerage market. Rates are competitive, but it is a brand new way to consider finance and its role in your life and society.
TL;DR
Spend is pretty competitive for a checking account, and as long as you’re not using checks too often, its a no brainer for anyone with close to $10,000 in cash just sitting somewhere.
Invest is beautiful, but the free version is exactly as good, more windows means very little with the limited trading you’re allowed to do anyway.
Borrow is brilliant, hella flexible and competitive rates.
8/10 Would recommend to a friend.
submitted by TomasFCampos to M1Finance [link] [comments]

[Historic] Optimizing Azorius Control

I started playing historic after the recent bans and felt that with amonkhet on the horizon UW control looked pretty well positioned. People seem pretty down on control in the format because Field of the Dead goes over the top in the control match. However while the matchup isn't ideal it isn't as bad as it appears, more thoughts below. In the last few days I made it up to Mythic with this list:
4 Frantic Inventory (M21) 50
4 Shark Typhoon (IKO) 67
2 Settle the Wreckage (XLN) 34
3 Teferi, Hero of Dominaria (DAR) 207
2 Absorb (RNA) 151
2 Seal Away (DAR) 31
3 Narset, Parter of Veils (WAR) 61
3 Irrigated Farmland (AKR) 304
2 Elspeth Conquers Death (THB) 13
2 Dovin's Veto (WAR) 193
4 Hallowed Fountain (RNA) 251
4 Glacial Fortress (XLN) 255
2 Castle Ardenvale (ELD) 238
3 Field of Ruin (THB) 242
1 Castle Vantress (ELD) 242
2 Neutralize (IKO) 59
2 Plains (AKR) 324
4 Island (AKR) 310
1 Wrath of God (AKR) 46
4 Censor (AKR) 52
1 Sphinx's Revelation (AKR) 262
1 Cast Out (AKR) 9
2 Shatter the Sky (THB) 37
2 Fabled Passage (ELD) 244

Sideboard
1 Timely Reinforcements (M12) 40
2 Essence Scatter (IKO) 49
1 Aether Gust (M20) 42
1 Baneslayer Angel (M21) 6
2 Dovin's Veto (WAR) 193
2 Mystical Dispute (ELD) 58
1 Dream Trawler (THB) 214
2 Rest in Peace (AKR) 33
1 Grafdigger's Cage (M20) 227
1 Leyline of Sanctity (M20) 26
1 Cast Out (AKR) 9

Thoughts on individual included cards
Frantic Inventory: The deck needs ways to dig through the deck and frantic inventory has felt the best to me. 2 cmc makes a big difference vs 4 cmc draw when cycling multiple cards in a turn for answer. The biggest weakness is that when we side in rest in peace they lose most of their value.
Shark Typhoon: Might be the most important card in the deck and the main reason we have game vs Field of the Dead. It almost always trades 2 for 1 and at worst cycles for 2 mana. Versus creature decks, the token can ambush attacking creature and especially punishes playing around settle the wreckage. Most importantly it's a main deck threat for control that we can flash in end of turn. It's also amazing for sniping wins against field as none of their creatures can block the token. Easily a 4 of.
Settle the Wreckage: Not much to say other than the split of sorcery speed wraths gives you a lot options against creature decks and forces them to under commit attackers (which you can punish with shark or seal away).
Teferi, Hero of Dominaria: Premier control card when it lands and you can protect it the game is over. Only at 3 because it feels bad when you draw multiples especially against aggro.
Absorb/Neutralize: Most decks run the full set of absorb. In a significant number of games the lifegain is relevant. On the the other hand having 2 absorbs and no wraths in hand when opp mananges establish a board is very bad. There are also non-zero situations where the field of ruins prevent casting absorb. I like the split so far but could be convinced either way. I also occasionally wish for 1 more hard counter main board but I haven't found what to cut for it.
Seal Away: Pairs well with settle as mentioned above. The deck really needs some amount of instant speed spot removal. The tap clause mostly isn't an issue but occasionally it means we can't remove an untapped creature with a relevant ability.
Narset, Parter of Veils: Early on I thought she was too greedy to play mainboard. However she is amazing main deck hate for field and often replaces herself and saves some creature damage vs aggro. I definitely wouldn't go over 3 in the 75 and I could see some in the sideboard instead but I almost always like drawing her.
Irrigated Farmland/Hallowed Fountain/Glacial Fortress/Fabled Passage: Being two colours is a big advantage as it means we rarely stumble to our manabase and can afford a large number of utility lands. 4 shocks and 4 checks is historic standard and the Farmlands are big improvement from AKR. I think 2 might be most optimal but 3 hasn't been too bad. I haven't done the math for Fabled Passage but it mean we are more likely to fix hands without white mostly.
Elspeth Conquers Death: One of the trickier cards to evaluate. Sometimes it's a massive swing others it's stuck in hand with no targets and/or nothing to reanimate. I originally had an extra copy in the sideboard but I found I rarely wanted. The card is very powerful when you can leverage it but the inconsistency means it's not always great.
Dovin's Veto: One of the best reasons to be UW in control, against some decks it's a negate which is fine because most decks have at least some targets (especially with creature decks now playing 4 CoCo's). Obviously vs control this card is extremely strong as they can never counter war their non-creature threats into play. Fairly good against field but you generally want to be more proactive against them. 2 main 2 side has felt like the correct split.
Castle Ardenvale/Caste Vantress/Field of Ruin: I really like having access to both castles here, Ardenvale is great on a boardstate we want to preserve and can close games very quickly when we have enough mana. Vantress is better when we're behind and need an answer, but we're trying to avoid that position to begin with so I prefer the white castle. As mentioned above 2 colours means we can afford utility land including some colourless. All of these slots are dedicated to Field of Ruin because it attacks field of the dead which our colours can't easily interact with. However often this often just slows down the opp and we need more than these to beat them. Relevantly when they play their field of the dead with 7 different lands and we destroy it with the trigger on the stack they will still get the zombie if the basic they fetch isn't a pair. Obviously it's also very good for destroying utility lands in other matchups.
Island/Plains: The number of basics can be relevant in long games where if you draw any number of them, then eventually your fabled passages and field of ruins won't have targets. This is a definite reason to play 1 more basic instead of the Farmland.
Wrath of God/Shatter the Sky: While I think it's likely the wrath is simply the better card, there are frequent situations where I've drawn a card from a shark token and the opponent didn't get any. It might be too cute and it's a big drawback, but I enjoy the greed (and I'm too cheap to craft the remaining copies). I think I want 1 more copy of a 4 mana wrath effect in the sideboard but I'm not sure which yet.
Censor: A huge improvement from AKR. This slot used to be opt and while the scry is not irrelevant, we don't have any spell cast or graveyard synergy (Like pioneer UW with Dig Through Time), but we still want a large enough amount of cycling to allow us to play only 25 lands. The main benefit of censor is not the counter effect itself, (although any time you get someone with it is very satisfying especially if they shame-drop a land after) but instead the fact they they are forced to play off curve all game. There are tricky play patterns about when to cycle them end of turn or save for next turn.
Sphinx's Revelation: Another great AKR get, a huge comeback card and your favourite topdeck when empty handed. I think only 1 copy is ok but the case for another could be made. As has been said many times the lifegain is super relevant, sometimes more so than the cards.
Cast Out: As with seal away, we want instant speed removal and this hits everything with low opportunity cost because of cycling. It's more expensive than I'd like so it's too slow against fast decks but having an out to any resolved non-land is very good. It's far from our strongest sideboard card, but it can come in against a lot of different decks.
Timely Reinforcements: Classic anti-aggro card. When you get both effects you will almost always be able to stabilize and the tokens can even close games. However, with thoughtseize and shocks in the format you can't always get the lifegain when you want it. This is in consideration for the chopping block as we already have good creature match ups and isn't an instant win anyway.
Essence Scatter: Pretty much strictly replaces veto in creature match ups. Again could be considered for better sideboard cards but this gives us the speed to contend to low to the ground decks.
Aether Gust: Went from 3 of down to 2 and then down 1 more again. I don't bring it in as much as I'd like. While it hits everything in Gruul and Goblins, essence scatter would almost always do the same job and put the card in the graveyard. It also doesn't hit every relevant card in the field or Mono Green Ramp match ups, notably Ugin and Ulamog. That said this card is one of our most efficient answers to on board threats. I'm unsure of the optimal number.
Baneslayer Angel/Dream Trawler: Both do very similar jobs, large lifelinking flying threats. There are nuances though. Baneslayer comes down a turn earlier, always has 5 power, and first strike means she's unlike to trade. This makes her better again creature decks, especially burn and goblins. Dream Trawler on the other hand is almost a guaranteed win again grixis control as their wraths don't hit it and it can protect vs their targeted removal. That said in the match ups that they come in, I normally bring both and tend to do the same thing. I've seen some lists running 2 baneslayers, but they should almost certainly be running 1 baneslayer, 1 lyra. It's a very marginal difference however.
Mystical Dispute: These are specifically a hedge again UW auras and U tempo. It doesn't feel amazing against the former all the time because all of their creatures are just white. I think these are first in line to consider changing.
Rest in Peace/Grafdigger's Cage: These are two of our best silver bullet style sideboard cards. Permanently exiling is much better against decks that could eventually anwer cage (ie field, jund sac). However cage hits 2 of the strongest cards in the format, CoCo and Muxus. With cage on board, goblins is almost entirely crippled since it hits conspicuous snoop as well. I think optimally you want 2 cage and 1 RIP, but that's somewhat of a meta call, you do want both.
Edit: Totally forgot to mention Leyline of Sanctity. I haven't seen it in a single game since adding it, but in theory it shuts down BRx sac decks, mono red, and grixix control, because of all their player targeting effects. Thoughtseize in particular is wildly popular (with good reason).
Possible Inclusions
Ashiok, Dream Render: I'm strongly considering him (it?) for the field match up. The static text is relevant for Hour of Promise and Fabled Passage, exiling uros is great and milling them can even be relevant. My only concern is that he only works best in the one match up as other graveyard decks can remove him easier and rebuild faster than against RIP.
Edit: Ashiok is they/them.
Syncopate: Seems like it could be a flexible answer and the exile is relevant. Maybe good as a 1 of but I'm not sure what it replaces. I'd much rather void shatter.
Hieroglyphic Illumination/Chemister's Insight: I talked about this a little with Frantic Search, but I think 4 mana is just too much. Plus the amount of cards drawn by Search out paces them by the third copy. The reason to consider Illumination is because it's not soft to graveyard hate and cycling for 1 is strong. Chemister's gives you a way to turn lands you don't need into cards but is much softer to gy hate and still costs 4. The biggest benefit of either is that you don't need to play 4 and could fit a few of the extra cards I want slots for.
Notable Exclusions
Approach of the Second Sun: I haven't tried it but I think that we don't get to 7 mana fast enough nor can we afford to tap out for a 7 mana sorcery in most games. Win the game is very strong text however, so maybe 1 main 1 side could be ok.
Edit: I'm going to test Approach because of how many people recommend the card.
Mind Stone: Although it lets us cast a wrath a turn early which can be relevant, it's also a 2 mana sorcery speed do nothing. It cycles but for 3 mana which is terrible if we need a specific answer.
Search for Azcanta: Almost certainly too slow and worse than narset. I'm happy every time I play against it too because of the 3 main deck field of ruin.
Teferi, Master of Time: Originally a 1 of in the deck. I think it's too slow and doesn't generate any card advantage. Almost everything we play can trade at least 1 for 1 with opp or draw a card so the filtering just doesn't feel relevant.
Commence the Endgame: Mostly a worse Shark Typhoon, 1 extra card, but much less flexible and no flying.
This post ended up taking a lot longer than I intended, but I think there are interesting things to say about the deck. I would love to hear everyone's thoughts and things I've missed. I might add individual match up discussions when I wake up, but you can see a lot of my thoughts throughout the post. Also apologies for any grammar or spelling issues, I didn't have time to proofread.
Edit: A list of cards I've discussed in the comments or remember but could be worth more thought:
Nyx Fleece Ram
Runed Halo
Gideon of the Trials
Baffling End
Fall of Thran
Also some other grammar and forgot about leyline.
submitted by Lord_Myst to spikes [link] [comments]

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

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

Highlights

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

Introduction

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

Description of the 2 Main Business Segments

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

Management

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

Growth Strategies

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

Growth Through Acquisition

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

Dividend

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

Risks/Threats and Mitigation

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

Main Competitor in Canada: Finning International Inc.

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

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

Q1 2020 Financial Results


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

Sources of Liquidity

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

Financial Analysis

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

Key Performance Measures

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

Price Chart Comparisons

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

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

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

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

Analyst Price Targets and Estimates

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

Valuation

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

Closing Thoughts

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

Limitations and Further Areas of Research

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

Disclosure

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

CAMS IPO Analysis

IPO Filings/DRHP’s are some of the best places to learn from when you are trying to understand the company and industry it operates in. In this letter, we will delve into the IPO filing of CAMS (the largest RTA in the country)

Introduction:

Shareholders

Shareholding pattern is available here. The subreddit does not let us post pictures.

Growth Drivers:

Services provided by RTA’s to AMC’s:

Revenue Model:

In addition, RTA’s also have offer similar services to insurance companies for policy servicing of e-insurance policies. There are 4 insurance repositories in India :

Competitive Landscape

Following are the are the mutual fund registrar and transfer agents operating in India:
See market share and total AUM of top fund houses here.
CAMS services the 4 out of the top 5 AMC’s and 9 of the 15 largest AMC’s. It has been able to manage and hold on to its market share in the last few years: See chart here.
CAMS is the clear leader vs/ peers in profitability with RoE of 29.5% , PAT margin of 19% and witnessed the revenue CAGR of 20% over 2016-19: See chart here.
CAMS also has a 3X higher business per branch despite having only 22% higher number of branches than Karvy: See chart here.
There are multiple reasons for the oligopolistic nature of the RTA industry leading to significant entry barriers:
CAMS also has a significant presence in insurance repository market: Given the miniscule penetration of e-policies, there is a significant headroom for growth in this market.

Risks:

CAMS Overview:

Business Structure:

See chart here.
CAMS operates in 7 business verticals namely: Mutual Funds Services Business, Electronic Payment Collection Services Business, Insurance Services Business, Alternative Investment Fund Services Business, Banking and Non-Banking Services Business, KYC Registration Agency Business and Software Solutions Business
Mutual Fund vertical services
Electronic Payment Collection services:
Manage end-to-end automated clearing house transaction and electronic clearance services and service mutual funds, non-banking financial companies and insurance for automated payments
Insurance services:
Scrutinizing and processing of applications, training and onboarding of new insurance agents, submission of proposals, scanning, indexing and data entry, reminding policyholders of payment receipts
Alternative Investment Fund Services:
Similar to MF
Banking and Non Banking Services
Customer interface and back office processing
KYC Registration Agency Business:
Maintain KYC records on behalf of capital market intermediaries registered with SEBI, eliminating the need to repeat KYC procedure.
Software Solutions Business:
Software solutions business through subsidiary, SSPL which owns, develops and maintains the technology solutions for mutual fund clients, with a team of 362 people .

Employees:

Dividend Distribution Policy:
Notes on financial information:
Valuation :
Other comments:
Given that the growth in the CAM’s business with be primarily driven by the clients’ AUM growth , unless CAMS acquire more clients (which looks difficult to high entry barriers) and low pricing power, the earnings growth in the future will be largely in line with industry AUM growth.
Note: All the notes are based on the filed CAMS IPO prospectus , please consult your financial advisor for advice before investing in any product.

P.S - Apologies. A lot of the charts are images that cannot be posted on this subreddit. However, all of these are available on the source article - https://www.thegalacticadvisors.com/post/computer-age-management-services-decoded.
submitted by GalacticAdvisors to IndiaInvestments [link] [comments]

Purple Redux – Cash is King Part II – Carnage of the Robinhood Trader Clouding a Great Quarter

As I got a comment snarkily saying “good call” from u/should_have_RAN in response to my post on Purple on 6/29 (at the time PRPL was trading at $18 - current price now is $21-$22), I thought it would make sense to provide an update on the results.
The original post: https://www.reddit.com/investing/comments/hi3m1y/prpl_cash_is_king_significant_upside/
Note in the original thread I had estimated EBITDA to come in at around $35-$40MM to base my assumption on upside to a $35-$40 share price. Purple released earnings yesterday and reported an adjusted EBITDA of $35.2MM despite sales being lighter than what I thought and an implied adjusted, diluted EPS of about $0.57 / share. On the heels of that, Wall Street firms have upgraded their price targets: KeyBanc ($22->$26), Raymond James ($19->$28), B. Riley ($23->$26). You will note that from the prior post, this EBITDA level is supportive of a $2-$2.5B TEV assuming a $140-$150M annualized EBITDA figure and $2-2.50 of annualized EPS (mid teens TEV EBITDA multiple and a 15-20x PE ratio, in line or lower than peers despite the growth and margin story).
For those following the story, the shares are trading ~10% lower today following the news release. Well, gee, if everyone’s raising their estimates and people congratulated them on a great quarter in the call, why the hell is it trading lower? In my view, this is driven by a few things: 1) revenue came in lighter than estimates 2) people are not understanding the earnings story due to nuanced GAAP accounting and 3) they did not provide any guidance or perspective on 2H outlook, which is creating uncertainty. I will take each of these in pieces and follow up with some other observations from the release and the call that should further support the upside case.
1) Revenue was lower at $165M vs. the $175M consensus estimate. What happened here was that estimates increased on the heels of commentary PRPL released on orders data for DTC and wholesale. As I indicated in my earlier post, you can’t assume this is pure revenue as there is a revenue recognition delay between order and booked sale. Sure enough, this is what happened even though orders trends maintained momentum through the full quarter. There was a substantial runup in the share price over the last two weeks, including a crowd from WSB and Robinhood, who were banking on a blowout due to not understanding this difference. On the earnings CC, mgmt cited a backlog going into July that has now been filled, all the while, there still is a one week day lead time on DTC orders and wholesale orders are continuing to grow month over month with all 1800 partner stores now open. Net net, this means that the demand picture is still as good if not better than advertised and Q3 will have the benefit of 1) backlog from Q2, which could be upwards of $10-$20MM (Q2 implied orders were close to $230MM, less the $165MM of booked sales, less 10% reserve for warranties and cancellations, less wholesale orders which will always carry a backlog). I would also note that Q2 included the month of April, which was peak COVID. Monthly runrate revenues exiting Q2 were likely around $70-$80MM, implying a $200-$250MM quarterly runrate. Per mgmt on the earnings call, they are shipping every mattress they can make and are working fast to expand production in Georgia. Q3 could likely end up between $210-$270MM of revenue assuming they maintain the Q2 runrate and have shipped the backlog, which they said they did by the end of July. Note that the top end of this revenue range is likely difficult to execute with current capacity.
2) The company reported negative EPS of ($0.11) a share as a headline number. The problem with this figure is that it includes a couple of major non-cash expenses: the first is the warrant expense. PRPL has 14MM warrants with a strike price of $11.50. From an accounting perspective, when the value of the shares increase, the warrants then require you to increase the liability on the balance sheet as they have become more valuable and are viewed from an accounting perspective as a liability to the company (this is very similar to non-cash expense related to stock options – the warrants are dilutive, but that is already a fixed, known quantity). Secondly, the company had changes in its Tax Receivable Agreement which compensates the prior sellers for the tax basis they contribute to the company by converting their shares to from founder shares to common stock. Note that this has no economic impact to the business. These were the two major expenses contributing the gap between what was a GAAP $(0.11) EPS to a positive $0.57 EPS. Put differently, excluding the non cash charges that don’t matter, EPS is really $0.57 in one quarter, and in a quarter that included the impacts of COVID in April. Adjusted EBITDA was reported at $35.2MM which is the best proxy for apples to apples cash flow and how businesses are valued. This is why the company’s cash increased from $26MM to nearly $100MM in three months even though GAAP earnings were negative. Cash is King.
3) The company provided no guidance for the rest of 2020. Usually this is a sign of uncertainty and an unclear demand outlook – the market does not like this. When you sift through the conference call, you will appreciate that on the contrary, demand up through the date of the call has remained as robust and if not more so than what was the case in Q2. Note that we are 50% through Q3 already. Mgmt mentioned on the call accelerating and investing in its Georgia facility and ramping up SG&A expenses and hires. The logical question would be why do this if you think your demand will be weak or uncertain for the next 3-6 months. Mgmt mentioned on the call that there is still one week lead times on DTC orders (meaning there’s not enough inventory to ship next day), that competitors are struggling to source spring coils for mattresses due to shortages, and that DTC channel remains strong while wholesale is increasing relative to Q2. Take all these together and this provides support that Q3 will match the runrate of Q2 (the $200-$250M I mentioned before with June monthly sales around $70-$80MM based on the runrate orders adjusted for returns, etc). Separately, they mentioned that they have capped retail stores at 1,800 due to capacity constraints (meaning demand is more than they can meet at this time).
Assuming a $225-250MM revenue quarter, this means they will likely hit $40-$50MM of EBITDA in Q3 assuming gross margins of 45-50% (compared to 49% in Q2) and SG&A % in line with Q2. This would translate into EPS (excluding warrants and non-cash) approaching $0.65-0.85 / share, so nearly 1.20-1.40 in just two quarters. Let that sink in a bit. The performance still supports a much higher share price with TPX at a 23x PE ratio and 14x EBITDA multiple and lower growth. That’s how you get to a $35-$40 share price or greater.
Note that $250MM hits and exceeds the upper limit of their traditional capacity, though DTC has allowed them to drive a higher $/unit expanding how much they can sell per manufacturing line. There is a risk that capacity constraints keep the quarterly revenue to the lower end of this range.
A few other observations from the quarter that may have been missed: 1) the company has increased pricing during COVID with no demand drop off 2) wholesale is now growing in line or above PY despite retail traffic being lower 3) DTC demand holding firm and thus showing it is sustainable (the company is managing to capacity that is now growing by holding off on promotions) 4) gross margins and operating margins drastically increased due to fixed cost leverage (and some COVID cost containment) – “the story we’ve had on demand outpacing our ability to manufacture continues to be more true than ever” per the CC transcript
Resources for DD:
https://finance.yahoo.com/quote/TPX/key-statistics?p=TPX
https://investors.purple.com/press-releases/news-details/2020/Purple-Innovation-Provides-Business-Update-Ahead-of-Participation-in-Oppenheimer-20th-Annual-Consumer-Growth-Conference/default.aspx
https://investors.purple.com/press-releases/news-details/2020/Purple-Innovation-Reports-Record-Second-Quarter-2020-Results/default.aspx
CapIQ for information on analyst targets
submitted by SanitysLastRefuge to investing [link] [comments]

Beating the UK brokerage via true arbitrage - £8k -> £98k ($128k) since 21st April

Beating the UK brokerage via true arbitrage - £8k -> £98k ($128k) since 21st April
Alright you American autists, here's a gains post from the UK across the pond - listen up because it's pretty incredible, managed to screw over our broker to turn ~£8k into £98k / $128k USD by reading the small print, true u/fuzzyblankeet style.

https://preview.redd.it/9mlup18v0q951.png?width=343&format=png&auto=webp&s=aea1393d304d16063d62d54d30cc5be9b23d937a
Unfortunately, we don't have options trading, commission free robinhood which crashes, or any other US based degeneracy, but instead we British chaps can trade "CFDs" ie. 'contracts-for-difference', which are essentially naked long / short positions with a 10-20% margin (5-10x leveraged), a 'holding cost' and you could theoretically lose more than your initial margin - sounds like true wallstreetbets autism, right? Well grab a lite beer (or whatever you lite alcoholic chaps drink over there) and strap in for this stuff:
So, CMC Markets, a UK based CFD brokerage, wanted to create a West Texas Intermediate Crude Oil 'Spot' product, despite WTI contracts trading in specific monthly expirations which can thus have severe contango effects (as all of you $USO call holders who got screwed know) - this was just a product called "Crude Oil West Texas - Cash", and was pegged to the nearest front-month, but had no expiry date, only a specific holding cost -> already a degenerate idea from their part.
So in early April, just before when the WTI May-20 expiry contract 'rolled' at **negative** $-37, the "WTI Cash" was trading at $15 at the time, but the *next* month June-20 expiry was still $30+ we (I am co-running an account with an ex-Goldman colleague of mine) simultaneously entered into a long position on the "WTI - Cash" product, and went short on the "WTI Jun-20 expiry", a pure convergence play. Sure enough, the June-20 tanked the following week, and we made over £35k, realised profits. But meanwhile the May-20 also tanked, and we were down £28k. But rather than realise this loss, we figured we could just hold it until Oil prices recover, and profit on both legs of the trade.
However, CMC Markets suddenly realised they are going to lose a lot of money with negative oil prices (Interactive Brokers lost $104m, also retards), so they screwed everyone holding the "WTI - Cash" product trading at $8 at the time, and pegged it to the December 2020 expiry trading at $30, with a 'discount factor' to catch up between the two.
https://preview.redd.it/zjjzyahx0q951.png?width=517&format=png&auto=webp&s=9523bab878f06702133631f12c1109081f299f65
Now fellow autists, read the above email and try to figure out what the pure arbitrage is. CMC markets will charge us a 0.61% **per day** holding cost (calculated as the 10x levered value of whatever original margin you put up, so in our case £8k*10x=£80k*0.61% = £500 per day, £1.5k on weekends for extra fun) on our open positions, but also "increase" the position value by 0.61% per day vs. the **previous day's** WTI - Cash value. Got it yet? No? Still retarded? Here's where maths really helps you make tendies:-> If your 'cost' is fixed at 0.61% of your original levered position, but your 'gains' are 0.61% of the previous day's position, then your gains will be ever increasing, whereas your costs are fixed.
So we added some extra £££ (as much as we could justifiably put into a degenerate 10x levered CFD account) and tried to see if it works. Long story short, it does. At this point in July we were making **over £1k per day on a £8k initial position*\* regardless where the WTI Dec-20 fwd moved.
Unfortunately, eventually CMC markets realised what utter retards they were, and closed down the arbitrage loophole, applying the holding costs to the previous day's value. But not before we turned £8k into £98k, less holding costs.
https://preview.redd.it/uh0f8knz0q951.png?width=553&format=png&auto=webp&s=c7e629f72de5aeb4e837ccef44ecae708f058bee
Long story short, puts on $CMCX they're total retards, and given what a startup robinhood / other brokerages are, never assume that only they are the ones taking your tendies away, sometimes you can turn the tables on them!
submitted by mppecapital to wallstreetbets [link] [comments]

Three ways to play earnings without getting IV crushed

Sup nerds. Tomorrow is my birthday and I’m probably waking up to a nice fat 4 digit red number because I dared bet against a company so badass as to have a one letter ticker. So my birthday gift to all of you is the gift of knowing how to lose money like I do.
If you’ve tried to play earnings with options though you’ve probably experienced IV crush. The stock moves in your favor but you lose money anyway. So I thought I’d give a quick rundown of what IV crush is and some simple strategies to avoid it.
Skip ahead to number 2 if you already know what IV crush is.
(Yes there have been some posts on IV crush over the past few months but as far as I can tell they’re all huge walls of text, don’t give enough clear advice, and aren’t specifically about earnings, so here you go.)

1 . What is IV crush in relation to earnings?

It’s easiest to think of it in terms of “expected move.” Implied volatility (IV) is how much of an "expected move" is implied in the current options price. Add up the price of the ATM call and ATM put, and this is how much of a move the market has priced in.
Example: $W today at close:
$134 5/8 call = 11.80
$134 5/8 put = 11.00
Expected move between now and expiration: 22.80
Naturally, after the earnings report is released there will be a much smaller expectation of movement over the remainder of the week, so the expected move will go down no matter which way the stock goes. This is another way of saying IV is going down, i.e. IV crush.

2. Strategies to play earnings without getting IV crushed:

a) Buy Deep ITM calls/puts

Deep ITM options get the majority of their price from their intrinsic value (what you’d make if you exercised the option today) as opposed to their extrinsic value (IV and theta) so there’s a lot less IV for them to lose, assuming you get a good fill. You want to pay as close to intrinsic value as possible.
Strike - Stock price = intrinsic value
Example: $160 put - $134 stock price = $26 intrinsic value
So if you’re buying the $160 put on a stock trading for $134, pay as close to $26 as possible. You’re gonna have to pay a little over but don’t just hit the ask, as the bid/ask can be wide on these.

b) Sell naked options or spreads

Get on the right side of IV crush. Personally I like to sell naked options, but spreads are good if you are a scared little baby or if your fake broker doesn’t let you sell naked options.
i) ATM vs OTM
I like ATM the best because you collect the most premium, and if the stock trades flat you still win because IV crush works in your favor.
OTM does offer extra protection from the stock moving against you. Keep in mind as you move OTM you are moving toward smaller wins and bigger losses, but also a higher win ratio. Pennies in front of the steamroller.
ii) Spread positioning
Position the outer leg (the leg you’re buying) as far OTM as possible to increase your profitability if the stock trades flat and improve your odds of winning.
Or make it a narrower spread to make it closer to a binary event. If the stock is trading at $134.50 and you sell the $134/$135 put spread for $0.50 (half the width of the strikes), that’s basically a double or nothing coin flip. If you have a high degree of confidence in which way the stock is going, that's pretty good leverage.

c) Use options to be synthetically short/long shares

If you want to gamble on direction in a way that is more leveraged than shares but completely free of Greek headaches, this is for you.
To go long: Buy the ATM Call, sell the ATM put
To go short: Sell the ATM call, buy the ATM put
If you buy an ATM call and sell the ATM put of the same strike, your position is exactly the same as being long 100 shares. The greeks from the long and short options cancel each other out.
The same is true if you buy the ATM put and sell the ATM call. Your position is mathematically the same as being short 100 shares.
The beauty, though, is that it uses about half as much buying power as buying or selling shares on margin. Just for example, based on numbers at market close today, buying an ATM call and selling an ATM put on $W uses $3716 in buying power, as opposed to roughly $6700 to buy 100 shares on margin.
ii) If your fake broker won’t let you sell naked options
You can just buy a wide leg. So if you’re going long just buy the ATM call, Sell the ATM put, and buy a deep OTM put. If you're going short, buy the ATM put, sell the ATM call, and buy a deep OTM call.

That's it I think. Hopefully someone found this helpful and it wasn’t just a bunch of obvious shit you all already know. I’m gonna get started on drinking some wine and eating some edibles and contemplating how fucking old I am. Feel free to ask any questions or add any thoughts.
submitted by themadpooper to wallstreetbets [link] [comments]

A very detailed DD on $ASRT(Assertio Therapeutics)

What is Assertio Therapeutics? * They are formerly known as Depomed, they have transformed theur company with a current focus on three FDA-approved products in their core areas of neurology, orphan, and specialty medicines as they continue to identify, license, and develop new products that offer enhanced options for patients who may be underserved by existing therapies.
Assertio Pipeline Products * Currently, Assertio had two products that are past P3 of clinical trails and have been Submitted to the FDA for approval, those products are: - Diclofenac Potassium: Mild/moderate acute pain 12-17 years - Long-acting Cosyntropin: Diagnosis of Adrenal Insufficiency
This is very important due to fact that if they are approved, it will provide a huge jump to their stock price/value
Their patented technology * Their patented technology is known as Acuform. It is a patented polymer-based tech designed to optimize drug delivery. * Acuform technology is currently being used in multiple marketed products and being evaluated internally and with other potential partners for many additional compounds. * With Acuform technology, unique swelling polymers allow tablets to be retained in the stomach—the preferential absorption site for many oral drugs—for 8–10 hours vs the 3 hours seen with immediate-release and some extended-release formulations. * This gradual, extended release allows for more drug absorption in the upper GI tract, offering the potential for greater efficacy and increased tolerability, with the convenience of once- or twice-daily dosing. * Tablets utilizing Acuform technology can be tailored to deliver new drug combinations of varying properties, either simultaneously or sequentially, for a wide array of product possibilities * Here is a link for the actual Acuform patent if you're interested in reading it.
Q1 2020 Financials/reports * The first Quarter of 2020 proved to be the beginning of what is set to be an amazing year financial and medically for Assertio Therapeutics. * Their EPS was .10 thus beating set EPS expectations of -.08 by 225% *Their revenue for Q1 was $20.92 Million thus beating set revenue expectations of $11.3 Million by 85.16%
You may wonder how/why their revenue is considered positive despite it being 30M less than the previous quarter. I'll explain why right now * The reason for the revenue being considered positive despite it lower than the previous quarter is due to the fact of the sales of two of their drugs to other companies
Sales of both NUCYNTA &Gralise * Assertio sold NUCYNTA franchise to collegium pharmaceuticals for a total of $375 million dollars in addition, they also paid for inventory relating to NUCYNTA * They sold Gralise to Alvogen for a total of $127.5 Million dollars, plus inventory * Sold both for a combined total of $502.5 Million dollars
Why the sale of two high earning products is amazing & what it sets up for Q2-Q4 of 2020 * With the combined sale of NUCYNTA & Gralise for $502M, Assertio was able to repay their senior debt in full * Repaying their Senior debt in full is amazing because with the sale closing and the accelerated repayment of their senior debt obligations, it allows Assertio Therapeutics the ability to invest in their core business which will help them build and grow for the future. * the Company has also retired substantially all of its outstanding Convertible Notes through $188.0 million of privately negotiated purchase agreements and a tender of an additional $76.7 million. * The sale of NUCYNTA & Gralise sets up the the merger of Assertio Therapeutics with Zyla
The Merger of Zyla into Assertio Therapeutics * Early 2020, Assertio Therapeutics announces the agreement to merge with Zyla Life Sciences to create a synergestic portfolio of Neurology & non-opiod pain products. *The merged company will remain where Assertio is based, in Lake Forrest Illinois. * The merged company will keep Assertio's name and trade on Nasdaq under the ASRT ticker symbol. * Assertio therapeutics will hold 68% ownership & Zyla will hold 32% ownership of the merged company * Under the deal, Zyla stockholders will receive 2.5 common shares of the combined company for each common share of Zyla held. * The Merger is set to close after the shareholders meeting on May 19th
Why the Merger with positively impact share price/company * The merger between the companies Expects to capture significant operating and product portfolio synergies upwards of $40 Million, accelerating revenue growth and creating shareholder value * The combined company will have a leading portfolio of branded non-steroidal anti-inflammatory drugs (NSAIDs) commonly used by neurologists, orthopedic surgeons, internists, women’s health providers, podiatrists and pain care specialists * The new company will have the platform, profitability and financial strength to both grow its existing portfolio and acquire additional complementary assets. * Assertio said the combined company has pro forma 2019 net product sales of about $128 million and is expected to have product portfolio synergies of over $40 million. * the Assertio board of directors’ expectation that the combined company will have a stronger financial position than Assertio on a stand-alone basis, with attractive pro forma revenues, 2020 non-GAAP adjusted EBITDA margin expected to be greater than 25% and anticipated 2020 debt to EBITDA leverage of two times * the Assertio board of directors’ belief that combining Assertio with Zyla would establish the largest portfolio of branded NSAIDs in the United States, significantly enhancing the competitive position of the combined company by providing increased scale and broader commercial reach, and providing opportunities to expand into new therapeutic areas * Set to increase shareholder's value * Here are links to the SEC filings & their presentations regarding the merger and the benefits of the merger: - Link 1 - Link 2 - Link 3 - Link 4
**One of the best bits of information that came out of Q1 is that with the sale of Gralise & NUCYNTA and the repayment of their senior debt obligations, Assertio Therapeutics are currently on track to having zero debt.
Target Price/Forecasts * The Wallstreet journal sets their Target Price at $1.35 * CNN money sets their target price at $1.35 * Zacks sets ASRT as a strong buy and sets their target price at $1.35 * Finviz sets their target price at $1.35 *Zyla Life sciences currently trades at $2.00 on the OTC Market
Final thoughts & comments * As I always tell you guys, this is just a very detailed post containing as much useful information I could find and write about so you guys can read and make your own well informed decision. At the end of the day, it is upto you if you decide to purchase shares and how much you'll purchase. What I'm doing for you is that I want to give you guys the best knowledge possible before you make your decision.
I hope this post helps you guys out and I hope everyone has a great day & hope you all have been having a good week as well :)
submitted by PradoMV96 to pennystocks [link] [comments]

I really like how each of the elite bigs in the league have their own strengths and weaknesses. No two unicorns are the same!

This post consists of me rambling about Embiid, Jokic, KAT, AD, Giannis, and Porzingis. (Be warned, it's pretty long.)

Giannis, AD, and KP have primarily played PF this season, but they're still bigs.

(EDIT: Added Bam and Siakam.)

By the way, why mention Porzingis, you might be thinking, since he hasn't been as good as the other players on the list this season? Well, I thought it would only be appropriate to include KP, as he was the OG "Unicorn" as crowned by KD in 2016, as a 7-footer who can shoot and defend at a high level:
"He can shoot, he can make the right plays, he can defend, he's a 7-footer that can shoot all the way out to the 3-point line," Durant said, according to ESPN's Royce Young. "That's rare. And block shots -- that's like a unicorn in this league."

For the purposes of this post, a "unicorn" is a tall player with All-NBA potential who spends a decent amount of time defending bigs and possesses a strong offensive skillset (hence someone like Rudy Gobert is omitted, as he's a defensive monster but has a more limited offensive skillset).

Embiid is a borderline case with his more old-school, post-oriented offensive skillset, but he's at least a decent and willing shooter from midrange and 3, separating himself from the bigs of yore, and besides, he also makes for a nice contrast with some of the others on the list.
Before we begin...
This post steals/references numerous ideas from the excellent Thinking Basketball YouTube channel, run by Ben Taylor. I highly recommend you also watch these highly informative, well-made, and entertaining player breakdowns (note, some of these were made in 2019, so some statistics they reference might not reflect these players' 2020 production):
Some terms I'll be using:
per 75 = per 75 possessions, i.e. points per 75 possessions = measure of a player's scoring rate. Each season and each team has a different pace, so adjusting for pace like this allows us to compare players' scoring more fairly than PPG. (Why 75 possessions? There isn't any grand reasoning- the average *(edit) high-usage modern NBA player simply uses roughly 75 possessions/game, so "per 75" stats are perhaps easier to intuitively understand for most people than "per 100" stats, which are available on Basketball Reference.)
TS% = true shooting percentage, i.e. a player's scoring efficiency, basically FG% but accounting for 3-pointers and free-throws
rTS% = relative true shooting percentage, i.e. how efficient a player's scoring is compared to league average scoring efficiency, which is 56.4 TS% in 2019-20 according to Basketball Reference
ORTG and DRTG are a team's offensive and defensive rating, respectively, with numbers taken from Basketball Reference.
rORTG = relative offensive rating, i.e. how good a team's offense is compared to league average offensive rating, which is 110.4 in 2019-20 according to Basketball Reference.
PnR = Pick and roll, DHO = Dribble hand-off

Joel Embiid | "The Process", "Do-a-180"

In a nutshell: Philadephia 76ers C, 7-0, 250lb, All-Star. Basic stats: 23.4/11.8/3.1/0.9/1.3 with 3.1 TOVs on 47.4/34.8/81.4 splits (59.3 TS%), 44 games played. Advanced: 0.203 WS/48, 5.2 BPM.
The good:
  • Monster low-post scorer: Embiid has an excellent scoring rate (~28 points per 75). He does most of his damage on offense by being the most prolific post-scorer in the league (91st percentile in post scoring efficiency, 1st in frequency by a large margin), where Embiid's massive frame and Hakeem-esque post-game allow him to make opposing big men look helpless and draw fouls at a heady pace with his relentless bully ball.
  • Decent scoring efficiency: +3.0 rTS%, it mostly results from a monstrous free-throw rate (10.5 FTA per 75, 81.4 FT%) and elite scoring in the paint (72 FG% from 0-3 feet). His midrange shooting has improved to an acceptable 41% too, and his 3P shooting is a decent 35%. He's been slightly less efficient in the playoffs (56TS%, +1.1 rTS%), with the caveat being that he was afflicted by injury and that the Raptors had an all-time-great playoff defense and former DPOY Marc Gasol, who made his life a nightmare (18/9/3 on 53TS% that series).
  • DPOY-level defender: Embiid is an amazing defender, stemming from his elite rim protection (1.3bpg, Sixers defense improves by 7 points when he enters a game). His mammoth frame, length, and first-class shot-blocking instincts at the rim have given him a Gobert-like deterrent-effect on offenses, making opponents thinking twice about attacking the basket. The Sixers have 105.1 DRTG with Embiid on the floor, which would rank 3rd in the league. Even when he's having a bad day on offense, he can recover his impact on the other end - he was a +84 over 7 games against the Raptors last playoffs despite shooting poorly from the field, testament to his incredible defense.
The not-as-good:
  • Heavy feet: Embiid can be slightly lead-footed when switching onto perimeter players, and can be blown past on closeouts. He's still a decent perimeter defender overall, as his length and timing can allow him to recover well with strong contests from behind.
  • Spotty vision/passing: JoJo has as many turnovers as assists. His decision-making falters somewhat under defensive pressure. His dribble is a bit loose, too, which doesn't help in this aspect. He can make basic passes out of double-teams, though more advanced reads are beyond him for now.
  • 3P-shooting has some room for improvement: He came into the league shooting 37% in his rookie year, so he's regressed somewhat since then. He's shown marked improvement this season though, making 34.8% of his threes. Joel's next step will be attempting more 3s, since he currently takes fewer than 4 threes a game. His excellent FT% (81.4%) and passable midrange efficiency (41 FG%) bode well for future improvements in his 3P shooting.
  • Durability: Health will perhaps always be the biggest concern with Embiid- he's consistently missed an average of 20 games/year over his past 3 seasons. When he does see the court, he's generally been great.

Nikola Jokic | "Joker", "Big Honey"

In a nutshell: Denver Nuggets C, 7-0, 253lb, weak MVP candidate. Basic stats: 20.2/10.2/6.9/1.2/0.7 with 3.1 TOVs on 52.8/31.4/81.3 splits (60.4 TS%), 65 games played. Advanced: 0.209 WS/48, 7.6 BPM.
The good:
  • Passing prodigy: Best playmaking big in NBA history and one of the best passers in the league, period - Jokic's vision is reminiscent of a 7-foot Magic Johnson. He makes every single pass in the playbook quickly and accurately, never looking at his target in order to throw off defenders, adept at using his eyes to manipulate defenses. His outlet passing is the envy of any point guard - throwing outlets like this mid-rebound is unfair. Jokic runs Denver's offense from the high post, as the Nuggets' bevy of guards and wings whir around him for DHOs and PnRs. He rarely ever misses high-% layup-passes, and his otherworldly vision (helped by his 7ft frame allowing him to see over defenders) encourages his teammates to move and cut off the ball because he'll almost certainly get the ball to them the moment they make themselves open. Joker's height and wingspan allow him access to passing lanes not available to most guards and wings, deftly flicking it to teammates around the outstretched arms of defending bigs. Jokic can lob to his more athletic teammates, pitch bounce-passes to cutters through the tiniest of passing windows, no-look skip-passes to 3P-shooters, and is even capable of blending in passes with his shooting motion as he reads the help and rifles the ball neatly into a wide-open teammate's shooting/scoring pocket. For me, he's right up there as one of the finest passers in the game.
  • Very good, efficient scorer: 23.2 points per 75 on +4 rTS%, mostly stemming from his versatile post game and decent midrange scoring (45 FG%). He's also got excellent touch around the rim, mixing in some floaters and hooks (elite 60.2 FG% from 3-10 ft), along with throwing his weight around in the post and pump-faking defenders into oblivion to get easy looks at the rim (elite 73 FG% from 0-3 ft). He also likes following his own/opponent misses- he has 3 offensive rebounds a game. Encouragingly, there exists some precedent for Joker elevating his offensive production when the team requires it - he put up 25/13/8 on +4.8 rTS% in 2019 playoffs, up from 20/11/7 on +2.9 rTS% in the 2019 regular season.
  • Not a bad team defender! : Sound positioning and good hands(healthy steal rate for a big, ~2%) + his size and length allow him to retain good value on defense. Denver's defensive rating actually improves by +1.6 points when he's on the court.
  • Clutch play: Jokic has been one of the most clutch players in the league this season- he even had two game-winners against the Sixers and Wolves. The Nuggets are ranked 5th in clutch-win% in the league (26-14 record in clutch situations) largely due to Jokic's play.
  • Durability: Jokic has always been highly durable, having yet to miss a game this season. He's missed a grand total of 20 games in his entire 5-year career.
The not-as-good:
  • Paint-defense: Jokic doesn't offer too much in the way of rim-protection (low block rate for a big, opponents shoot a pretty high 63 FG% in the paint when Jokic is the nearest defender). Although, as mentioned previously, his good positioning and size/length plus IQ/anticipation make him an adequate/decent team defender, often making smart rotations to stall opponent forays to the rim.
  • Perimeter-defense: He also suffers from some of the the same heavy-footedness that Embiid has when switched onto non-bigs, albeit to a higher degree.
  • 3P-shooting: Jokic's outside shooting has been pooinconsistent (31.4% from 3), though with some flashes of potential (he shot 40% in 2018, 39% in 2019 playoffs). His solid shooting from the midrange (45%) and from the FT line (81%) bodes well for him stretching out more succesfully in the future.
  • Is perhaps too selfless on offense: Especially compared to the other behemoths on this list, Joker could probably afford to call on his own number slightly more often when it comes to scoring. I doubt his coaches or teammates would mind him scoring more, given how efficient and unselfish he normally is, and given Jamal Murray is a much less efficient scorer (-0.5 rTS%) than Jokic despite taking more shot attempts than Nikola. Jokic is clearly capable of elevating his scoring, as mentioned earlier. Given that Denver's offense is generally quite good (+2.1 rORTG this season, +2.6 rORTG last season), I don't think Jokic will necessarily change what he's doing as it's been working decently so far. However, if he wants to run a truly elite offense or be considered one of the league's best offensive players (along with Steph, LeBron, Harden, Doncic etc.), he could think about starting to score more.

Karl-Anthony Towns | "KAT"

In a nutshell: Minnesota Timberwolves C, 6-11, 248lb, All-Star level. Basic stats: 26.5/10.8/4.4/0.9/1.2 with 3.1 TOVs on 50.8/41.2/79.6 splits (64.2 TS%), 35 games played. Advanced: 0.205 WS/48, 7.8 BPM.
The good:
  • Elite, multi-level 3-point threat: KAT is already probably the best 3-point shooting big in NBA history, taking into account volume and efficiency - he's shot 41.2% from 3 on 7.9 attempts per game this season. (For reference, Klay Thompson, from 2015-2019, averaged 42.3% from 3 on 7.7 attempts per game.) The only players to shoot more accurately than Towns on at least as many attempts this year were Duncan Robinson (44.5%, 8.4) and Dāvis Bertāns (42.4%, 8.7). KAT's shooting is is in rarefied air. He doesn't just stand in a corner and wait for Jeff Teague or DLo to pass him the ball, either. He shoots these off-the-dribble, catch-and-shoot, stepbacks, pick-and-pop, diving around screens like he's some oversized Reggie Miller. The spacing and gravity he provides the Minnesota offense with his shooting and off-ball movement is tremendous. He destroyed the Jazz once earlier this season by hitting 7 threes and pulling reigning DPOY Gobert all the way out to the 3-point line, pushing their paint-centric defensive scheme to the breaking point. The Wolves improve by 12 points on offense when he's on the court.
  • Well-rounded, exceptionally-efficient scorer: His offensive impact isn't limited to shooting, not by a long shot- close out on him too hard and he'll drive to the rim, where he's finishing at an elite 72 FG%. He barely takes any midrange shots- only 7% of his total shots come from there. His post game, however, is decently efficient (61st percentile), though he doesn't utilise it as much as Embiid or Jokic. Overall, due his incredible outside shooting, rim finishing, and decent foul drawing(8.8 FTA per 100, 79.6 FT%), his scoring output is extremely impressive- 27.2 points per 75 on amazing efficiency (+8 rTS%).
  • -Decent passer: KAT's passing has come along this year (4.4 APG), making good reads when he's doubled in the perimeter or in the post and finding cutters with regularity. He has a passable AST/TO ratio for a big (1.4:1).
  • Good post-defense: He's good at defending other post scorers (eg. Embiid, AD), where he can take advantage of his length and strength.
The not-as-good:
  • Not great at most other aspects of defense: His blocks (1.2 bpg) are more the result of block-chasing than good positioning. He's poor at navigating pick-and-roll defense. He's possibly the most laterally-challenged of the bigs in this list, his transition defense is bad, and he often falls for pump fakes. He shows potential for becoming a good rim protector- when he does manage to get in front of his man and get his hands up in time, his opponent rim DFG% is pretty great (~50 FG%)! However, his motor and defensive-IQ aren't the best- he can be found ball-watching sometimes or falling behind opponent plays, losing track of cutters or getting stranded in no man's land. Overall, Minnesota are nearly +8 points better on defense with Towns off the court. (The usually defensively-challenged Wolves were a top 10 defense for a period when KAT missed 15 games earlier on in the season, thought that was also partly because his replacement Gorgui Dieng was a defensive god.)
  • Some holes in passing game: There's still room for improvement in this aspect. He's still relatively turnover-prone, and misses open high-% passes under the rim sometimes.
  • Durability: Prior to this season, this was one of Town's greatest strengths- he didn't miss a single game during his 1st 3 seasons and only 5 games his 4th season (last year), and that was only because he got into a car accident. This year, however, the script has changed- he's missed 30 games with a sprained knee followed by a fractured wrist.

Anthony Davis | "AD", "The Brow"

In a nutshell: Los Angeles Lakers PF/C, 6-10, 253lb, weak MVP candidate. Basic stats: 26.7/9.4/3.1/1.5/2.4 with 2.5 TOVs on 51.1/33.5/84.5 splits (61.4 TS%), 55 games played. Advanced: 0.262 WS/48, 8.5 BPM.
The good:
  • Excellent all-round volume-scorer: 27.8 points per 75, on ~ +5 rTS%. AD has a versatile scoring arsenal, capable of shifting his offensive game to fit cleanly within different offensive schemes (e.g. higher pace in NOLA vs. LeBron's more methodical half-court style). Possesses a variety of post-moves, hooks, spins, fakes, stepbacks, turnarounds, etc.; has a passable face-up game with a good handle, moves like a guard and capable of athletic finishes at the rim. This season he's been skilled at leaking out in transition to receive LeBron's outlet passes. His scoring has translated well to the playoffs- he's averaged 27.3 points per 75 on ~ +5 rTS% in his 3 playoff series.
  • Vertical spacer: All-time lob-finisher (75 FG% from 0-3 feet). Davis's catch-radius is one of the best in NBA history. Just throw it up in the general direction of the rim and he'll make it work somehow with his touch and athleticism. His addition to the Lakers is a major reason why LeBron's leading the league in assists (2.8 of LeBron's 10.6 assists/game go to AD). It's an underrated part of his game as it allows him to fit with a variety of teams and mesh well with ball-dominant stars.
  • Decent passer: This is mostly based on his last season at New Orleans, which was his peak year as a passer. In the 2019 season, with their starting PGs missing significant time due to injury, the Pelicans leaned on Jrue Holiday's versatile playmaking gifts more, but they also parked AD in the high post and ran offense through him from there, letting him weaponise his own threat to score by feeding cutters with neat interior pocket passes or spraying kickout passes to shooters when he got doubled. He averaged 4.4 assists and only 2.0 turnovers prior to his trade request, producing a very efficient 2.2:1 AST/TO ratio. However, AD's playmaking has regressed this season (only 3.3 APG, uninspiring AST/TO ratio of 1.25:1) as he's gone more off-ball than in 2019 with LeBron manning point full-time in LA.
  • DPOY-level defender: Highly likely to finish in the top-2 in voting this season. His weakside rim-protection is elite - the Lakers have had a top-3 defense due in no small part to his efforts. He's highly switchable, too, capable of jumping onto guards and wings as required and scaring them silly. His motor has been excellent and he closes out hard on shooters. He's handsy as well, with good defensive instincts- he has a good eye for anticipating plays and jumping passing lanes. His steal-rate is elite for a big, and he hasn't gambled too much this year, either. He often cleans up mistakes by teammates, allowing them the freedom to play aggressive defense on the perimeter because they know that he's always got a watchful eye out to pounce on any perpetrators who make it past them. Works well in tandem with the Lakers bigs (Dwight/McGee) so that if either of them gets beat, he is still there to protect the rim. Strangely enough, the Lakers' defensive rating actually improves when he sits, likely because LeBron paired with Dwight/McGee are too much for weaker opponent bench units to handle.
  • Surprisingly healthy: The opposite of KAT - durability is generally considered a weakness of AD's, but this season he's missed only 8 games. Good stuff!
The not-as-good:
  • 3P/Midrange Shooting: Much like Embiid, AD's 33.5% 3-point shooting on 3.5 attempts/game isn't awful, but it isn't good enough to consistently garner defenders' respect either. His midrange efficiency isn't great, either, too, at about 38 FG%. The latter isn't too detrimental to his overall scoring game, however, as it at least allows him to keeps defender honest in the post. Regardless, his foul drawing (8.3 FTA per 100, 85 FT%) and elite rim finishing does allow him to compensate for his relatively weaker jumper.
  • Ability to run an offense: It remains to be seen whether AD can run an efficient team offense as a primary initiator, like a slasher like Giannis/LeBron/Kawhi or a full-time high-post operator like Jokic in Denver or Kevin Garnett back in the day on the Wolves. Perhaps further improving his handle or his strength will allow him to do so, since he already proved he possesses decent playmaking vision in New Orleans last year. When LeBron's been off the court this season, his decision-making on-the-ball has been inconsistent at times. Even so, as things stand, the Lakers still have a good offense (+2.6 rORTG) with AD playing primarily off-ball, so I doubt that's going to change much in the foreseeable future.
  • Some areas for improvement on defense: Ball-watches every so often, though greatly improved from last season. Quicker guards can still occasionally blow by him. Misses the odd help scenario. Gambles sporadically for steals, though it works out for him more often than not. The KAT's and Embiid's and Giannis's of the world have sometimes caused him trouble before, though he often holds his own too.

Giannis Antetokounmpo | "The Greek Freak"

In a nutshell: Milwaukee Bucks PF/C, 6-11, 242lb, strong MVP candidate. Basic stats: 29.6/13.7/5.8/1.0/1.0 with 3.7 TOVs on 54.7/30.6/63.3 splits (60.8 TS%), 57 games played. Advanced: 0.282 WS/48, 11.5 BPM.
The good:
  • All-time-level slasher and rim-finisher: Elite drive-and-kick game that is the crux of Milwaukee's 7th-ranked offense. A monster in transition, and getting increasingly comfortable as a shooter in half-court situations. Has some post-moves too, with some basic fadeaways, flip shots, and hooks, made all the more dangerous with his incredible wingspan. Has started taking more midrange and three-point jumpshots off-the-dribble this season.
  • Elite volume scorer: Giannis has the highest scoring rate in the league (yes, higher than James Harden), on good efficiency: 32.9 points per 75 on ~ +4.5 rTS%. He is the likely MVP, leading a historically good Bucks team while averaging only 30.9 minutes per game. There are some worries that elite playoff defenses (most famously, the Toronto Raptors in the 2019 ECF) can limit his scoring output (22/14/6 on 52 TS% that series), but it's really only the very very best of defenses, with ideal personnel and scheme, that have proven that they can slow him down. He mowed down Boston's 1st- and 7th-ranked defenses in consecutive postseasons, to the tune of 26/12/5 on 62 TS% in 2018, and 28/11/5 on 62 TS% in 2019. What the Raptors accomplished in 2019 isn't easily replicable.
  • Transition terror: The most prolific transition scorer in the league, with his long, long strides, speed, length, and poweskill around the rim. Also, shoutout to his huge hands and underrated handle for letting to him to move as fast as he does with the ball.
  • DPOY-level defender: The favourite to win the award this season, he's a high-level rim-deterrent with his length, instincts, and athleticism. Opponents score an anemic 41% at the rim when Giannis is the closest defender, the best mark in the league. He's also a skilled perimeter defender. Milwaukee improve by +8.0 points on defense when he's on the court (they have a ridiculous 98.7 DRTG when Giannis plays), and he rates very highly on the majority of available defensive impact metrics. 2019-20 Milwaukee are one of the best defensive teams ever, and Giannis is the best overall defender on the team. He's long, fast, twitchy, and strong, capable of switching 1-5 without batting an eye. With the Lopez twins walling off the rim, Giannis is free to roam and generally wreak havoc where needed, scaring shooters off the line, providing weakside rim-help as required, shadowing ball-handlers step-for-step and occasionally stamping their layups onto the glass with his huge paws or simply clouding their vision with his massive reach. When he is beat by a guard/wing on the perimeter, he doesn't chase blocks, instead staying grounded and disciplined, often funneling these slashers to the equally-long waiting arms of human fly-swatter Brook Lopez at the rim as the Bucks' game-plan decrees, while he stalks them from behind, helping effectively make the paint a no-fly zone. Much like AD, his condor wingspan shrinks passing lanes and deters high-leverage interior passes.
  • Decent passer: An adept and willing passer for a 7-foot human, gathering 5.8 APG this season. He's skilled at lasering kickouts to Milwaukee's armada of shooters if his initial penetration fails/draws help defenders, and has some success making tight interior passes near the rim.
  • Durability: Giannis is rarely injured.
The not-as-good:
  • Some areas to improve in terms of passing/vision: Has room to improve in terms of interior passing, sometimes doesn't recognise open cutters or the passes themselves can be off-target etc.. Turnover-prone at times, has imperfect decision-making if he's under intense ball-pressure by elite defensive bigs/wings (guys like Bam, Embiid, Jonathan Isaac). Notably, the Raptors' monster playoff defense led by the length and IQ of Kawhi/Gasol/Siakam greatly tested his passing ability and decision-making last playoffs, leading to him turning the ball over much more often than usual (5.5 assists : 4.2 turnovers).
  • Poor outside shooting: Giannis has become much more comfortable taking these shots, attempting nearly 5 a game this season, but he's still not very good at making them (30.6 3P%). Defenses still heave a sigh of relief when they see him pulling up for 3. He's also shooting 38% from midrange, which isn't much better.
  • Some areas for improvement on defense: Has occasional lapses on off the ball, arriving late on help, whether due to motoball-watching or not recognising plays until it's too late; can get blown past by quick guards due when he closes out sometimes (though his length/athleticism helps clean up some of his own errors); has trouble navigating screens sometimes because he's so large. Like AD, elite post-players can still overpower him on occasion, but luckily for Giannis there aren't that many elite post players any more.
  • FT shooting: This could be an aberration, but his FT-shooting has greatly regressed this season, at 63 FT%. This can limit his effectiveness on offense in clutch situations (notably, he shot a ghastly 58% from the line against the Raptors in last season's ECF), and put a cap on his overall scoring efficiency. Prior to 2020, he's shot 74% in the regular season, so he's certainly capable of being a decent FT-shooter.

Kristaps Porzingis | "KP", "Unicorn"

In a nutshell: Dallas Mavericks PF/C, 7-3, 240lb, Sub-All Star. Basic stats: 19.2/9.5/1.7/0.7/2.1 with 1.6 TOVs on 42.0/34.9/77.6 splits (54.0 TS%), 51 games played. Advanced: 0.129 WS/48, 1.5 BPM.
The good:
  • Potential elite shooter: Porzingis's offensive potential still lies mainly in his incredible shooting (40% from 3 in 2018), though he's yet to recover that elite form this season. However, he remains highly dangerous, taking a wide variety of threes at a very high rate (7.1 attempts per game) and hitting a decent enough percentage of them (35%) that defenders have to respect his shot. In his last 14 games, he averaged 37% on 9.1 attempts per game. Much like KAT, he's a dynamic shooter, shooting off movement, off-the-dribble, off-the-catch (& pick-and-pop), pulling up from well behind the 3-point line, etc., spacing the floor for Dallas's resident offensive genius Luka to go to work.
  • Good rim finisher: He finishes very well at the rim (72 FG%).
  • Elite paint defender: Porzingis flashes All-Defensive value with his rim-protection (led the league in blk% in 2018, is 6th in blk% and has very good paint DFG% of 49.5% in 2020), and defensive instincts. The Mavs improve by 3.2 points on defense with Porzingis on the floor. His oft-maligned rebounding has greatly improved this season, too, snagging almost 10 boards a game, up from 6.6 in his last healthy season on the Knicks.
The not-as-good:
  • Very limited playmaking: KP's passing/vision remains his weakest suit (1.7 assists/game). He's actually improved slightly this season, being a more willing passer and participant in Dallas's dynamic offense, but his assist rate still lags in the single digits, at 8.6% (for reference, AD's is about 15%, KAT 23%, Jokic 34%), and he has almost as many turnovers as assists.
  • Scoring efficiency/shooting: His poor shooting to start the season coming off a serious injury hurt his efficiency, which is currently 2 points below league average (-2 rTS%). He averaged an excellent 60TS% in his final 14 games, though, signs that he was rounding into form before the quarantine hit.
  • Not a great perimeter defender, but still decent: With his lanky 7'3'' frame, he's not the best at closing out to shooters (opposing players hit 40% of their threes when he's the closest defender), and while he can move his feet decently for a big and he's surprisingly athletic, his fundamentals defending the perimeter and effort can seemingly be lacking sometimes: he's often "flat-footed, erect", and doesn't always have his hands up.
  • Durability: KP has missed a season and a half prior to this one with a torn ACL, and missed 15 games this season too. His health remains a huge asterisk, though it's promising that he was healthy and playing games up until the quarantine hit - he played 20 of the Mavs' last 25 games.
That's it for today. Thanks for reading!
**JUST KIDDING, I FORGOT ABOUT BAM.

Bam Adebayo | "Bam", "Bam Bam"

In a nutshell: Miami Heat PF/C, 6-9, 255lb, All-Star. Basic stats: 16.2/10.5/5.1/1.2/1.3 with 2.8 TOVs on 56.7/7.7/69.0 splits (60.6 TS%), 65 games played. Advanced: 0.175 WS/48, 3.6 BPM.
The good:
  • Versatile inside scorer: 17.6 points per 75 on +4.2 rTS%. Bam was a revelation for the Heat this season, utilising his length and explosive athleticism well to finish at the rim (both from half-court and in transition), scoring at an elite rate (73.5 FG%) from 0-3ft. He's an adept lob-finisher from Miami's guards, with about 72% of his total baskets being assisted - for comparison's sake, AD, a similarly adept off-ball rim-finisher (albeit on better efficiency and much higher volume), has about 64% of his total baskets assisted. Similar to AD, Bam's far from a one-trick pony when it comes to scoring, often running pick-and-rolls and hand-offs with Miami's army of guards and wings (he has especially good chemistry with Duncan Robinson and Jimmy Butler) to find clean looks at the rim. He often employs his 7.1ft wingspan and athleticism to rebound team misses (including his own), with 2.5 offensive rebounds/game either resulting in tip-ins or neat passes to open teammates. He's got surprisingly deft touch further away from the rim, too, with little floaters, finger-rolls, and hooks in the paint (outside the painted area), finishing there at an impressive 45% rate (his hooks are especially efficient, going in 56% of the time). Outside of the paint, his short-midrange game is money, too, for a big, finishing 42% of his short midrange attempts. Going any further than that, though, yields diminishing returns for Bam - he shoots a woeful 19 FG% outside 16 feet. Fortunately for Miami, though, Bam sticks to his strengths, with only 7% of his total shot attempts coming from outside 16ft.
  • Elite passer for a big: Outside of Jokic and Draymond, there isn't a better passing big in the game today. His 5.1 assists/game are impressive enough, but it's the way he goes about getting these dimes that stands out. Coach Spoelstra has effectively given him the keys to Miami's offense this season for a reason- his offensive IQ is excellent, and he routinely makes quick and smart decisions with the ball in his hands. As stated earlier, he's Miami's primary high post operator, with Bam's dribble handoffs (DHOs) and PnRs with their guards being one of the primary features of their offense. His low post passing is great, too, often setting up Miami's other bigs with adept interior bounce passes and lobs when the help commits to him, and he can drive-and-kick to the Heat's shooters as well, Giannis-style. In transition, he's fully capable of and willing to grab a defensive rebound and start the break on his own - he's got a really good handle for a big - either creating his own score with that elite paint finishing we talked about, or making quick kickouts to Duncan Robinson for transition 3s. If a transition score doesn't happen at first, he will push for a quick DHO with a guard, with Bam's elite screening and Miami's elite shooters meaning that said 3PA is highly likely to go in. Bam is highly active on offense, too, always either scoring, setting a screen, or orchestrating from the elbows.
  • Elite, multi-positional defender: In the words of Zach Lowe's excellent piece on Bam, he is "addicted" to defense. Bam is an incredibly high-motor and versatile defender, and is already an All-Defensive lock in his first season as a starter. His steal rates (elite for a big) and block rates speak for themselves, but his versatility is what stands out the most - he's equally capable when switched onto Stephen Curry as he is Giannis Antetokounmpo. Opponents shoot worse from every spot on the floor when Bam is the closest defender (43 FG% overall), be it from 3 (33.8%) or in the paint (55.8%). Bam's footwork and fundamentals guarding the perimeter are impeccable, shuffling perfectly along with guards and wings as they try to dribble past, reminiscent of Draymond or KG, and his strength and wingspan allows him to bang down low with the behemoths of the league as well, despite standing at 'only' 6-8. He's a ferocious and competitive rebounder, too, a major contributor to Miami's 3rd-ranked defensive rebounding rate.
  • Durability: Bam has played in every single game for Miami the past two seasons.
The less good:
  • Some gaps in playmaking: He's a bit too excitable sometimes, and can turn the ball over trying to squeeze the ball through tiny gaps between defenders' arms near the rim. I love his aggression and offensive ideas, though - these high percentage passes put a lot of pressure on opponent defenses. His AST/TO ratio of 1.8:1 is still fantastic for a player who's helping Jimmy Butler run a strong Miami offense (+2.3 rORTG) for the first time. He can miss the shooting pocket occasionally too, and his vision isn't perfect, missing open teammates on occasion. With more experience and once he becomes a more dangerous scorer, he will presumably become a more effective passer as passing-lanes become more open when he starts to command more defensive attention.
  • Non-existent 3P shooting: Bam is (correctly) completely ignored by defenders on the perimeter (once again, he shoots a horrendous 19 FG% outside 16 feet). The Heat's system masks these flaws, making great use of his physical gifts as a fantastic and physical screener and elite passing big in DHOs and PnRs. His shot selection helps issues, too, as the vast majority (93%) of his shot attempts come inside 16 feet. On other teams with fewer offensive weapons, his lack of spot up shooting would likely become a larger issue.
  • Lower scoring rate than peers: Bam's scoring rate pales in comparison to some of the other guys in this list, and there will be a ways to go before he becomes a primary scoring option. His post game is below average (40th percentile), his ISO-scoring is only barely passable (50th percentile). In the PnR he's proficient as both a roll-man (67th percentile) and, amusingly, on very low volume, as a ball-handler (84th percentile). Perhaps expanding his post-game will allow Miami to run more offense through him like Denver do with Jokic, or Philly with Embiid/Lakers with AD. Alternatively, he could practise and develop his handle and outside-shooting more, lean into the more guard-like qualities of his game.
  • Some defensive flaws: Bam's rim protection lags behind the best (Gobert, AD, Lopez, Embiid, Giannis, Draymond, Isaac etc.), and larger centers can still finish over him on occasion- his 6'8" frame probably comes into play here. While Bam's man defense is impeccable, his team defensive impact seems to lag behind slightly- he's possibly a touch slow on help rotations occasionally or ball-watches sometimes. Miami's defensive rating with Bam on the floor would rank around 12th in the league (109.6 DRTG, +0.8 rDRTG), and it "only" improves by +1.7 points when Bam enters the game. However, defense, of course, is a team effort- the Jazz's seemingly perpetual top-5 defense dropped to 11th this year, even though Gobert hasn't missed a step - losing defensive stalwarts in Favors and Rubio probably contributed to the descent. In Miami's case, key starter Duncan Robinson isn't a great defender, and they lack good defensive bigs outside of Adebayo; backup Cs Leonard and Olynyk (primarily shooters) are woeful rim protectors, and Jones Jr is decent but mostly plays SF. It's perhaps to Bam's and Butler's (and Spoelstra's) credit that the team has a positive defensive rating at all.

EDIT 2:

- Mike Prada of SB Nation on JAREN JACKSON JR.

- PASCAL SIAKAM

submitted by KagsTheOneAndOnly to nba [link] [comments]

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