YEET no. 24: Back to the Future
Welcome to The Yeet, a weekly DD where we try to tilt the casino...
Hey! I’m @yourboymilt, and welcome to retail’s Sunday Paper.
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Creator/Editor:@YourBoyMilt The Architect: 🧠 Publishing Associate:@YourGirlRachie
Pt. 1: Week’s Thoughts, Pt. 2: UW Darkpools 101 (Zach Taluskie), Pt. 3: GOED DD (@goldenticketin1), Pt. 4: Watchlist, Pt. 5: Index Forecasts (@daarkmaagician ) Pt. 6: TLDR
Editorial Board: @jimengland & @jameoneill
🕰 Pt. 1: Back to the Future
The past is gone, the future isn’t here yet, and it’s starting to look as if bulls r fuk.
An economy can be a roller coaster, twisting and turning, sliding frightened citizens into uncomfortable and unpredictable drops. The market, by contrast, is analogous to a Ferris wheel—a loop of ascents and descents inevitably lifting its riders back to the top. Eventual profits—if you’ve got enough patience and capital—are as guaranteed as another chance to view investments from above, legs swinging, as you view the bottom you grabbed them from below.
A repeating loop that you and I lounge in, anxious yet certain, riding from the bottom, to the top, back to a manufactured bottom again. The bottom of our Ferris wheel is already well-known from a year ago, a screeching viral halt following the Obama boom of the 2000’s. Blah blah blah, we all know what happened with Covid, but it’s how we re-ascended that serves our purposes. Let’s head back now, my friend, to the bygone era of a whole year ago…
The time? March, 2020. The place? A sudden and unexpected Bull Market.
In the scramble to undo the economic fallout of the Rona, The Fed was all hands on deck to keep the market from blowing up like your account in the recent chop. Liquidity kept the markets wetter than Curry’s jump shot, and we splashed around care-free in the big green days of unending free money. Economic turmoil led to more and more prolonged market grace; the less jobs that were available, the more the market required the continued protection of The Fed. Logically less jobs meant less economic prosperity, but ironically less economic prosperity somehow meant ceaseless market all-time highs.
The most frenzied pickup at the time was tech of all types, under the premise their need would become exacerbated in the months—maybe years—to come. All of a sudden sleepers like SQ, having been under our nose the whole time, became the must have companies to own in the strange future ahead.
In this time a swirl of perceived obstacles actually became catalysts; we were propelled into a future filled with gains because of—not in spite of—the landmines all around us. “Stimulus Talks Going Well”—that ceaseless headline—served as an eternal hope for SPY on any dip we suffered; all it took was a well-placed sound byte from Nance or Mitch to bring the relief of another overnight gap-up. Somehow, from governmental gridlock arrived governmental stock pumps.
The specter of a Trade War with China loomed over the markets like a harbinger of doom from the East. In anticipation of increasingly soured relations Chinese stocks slid to bargain basement prices, often dragging the indexes down with them on each piece of damaging news. Among other things, this combined with materials inflation and Covid to wreak havoc on supply chains; this served as yet another boon as used car prices and supply-chain reliant industries increased pricing to absurd levels. At one point it seemed rappers should attach pieces of lumber to their chains in the latest fad to signal their wealth.
What a time to be alive. Here in the present day, however, we have a different market, different rules, and different pumps. Right?
Markets are a Ferris wheel, and with enough patience, we’ll end up in the same place time and time again. “Stimulus Talks Going Well” have been replaced with “Debt Ceiling Extension Talks Going well”, another seemingly unending Government shit show that produces more SPY pops than SPY drops.
U.S. stocks climbed on Thursday in a broad-based rally led by heavyweight technology stocks, after a temporary truce in the debt-ceiling standoff in Congress relieved concerns of a possible government debt default later this month.
Tech stocks are at lows again, just in time for recent jobs reports which show that the Delta Variant may have actually caused a slowdown in hiring. Remember those days you could buy $SQ, close your app for a week, and wake up to yet another effortless multi-bagger? Great Scott—we’ve arrived there yet again (thanks to a perfectly timed tech dip)…
Tech shares fell as a rapid rise in rates makes their future cash flows less valuable, and in turn makes the popular stocks appear overvalued. Higher rates also hinder tech companies’ ability to fund their growth and buy back stock.
And from the same article, of course, another nod to our new “Stimmy Talks going well”:
Also weighing on sentiment was a budget showdown in Washington. Senate Republicans blocked a House-passed bill Monday that would have funded the government into December and suspended the debt ceiling until December of 2022.
Markets are a cycle. Of course Biden is having varying levels of acrimonious conversations with China again, and of course supply chains are fucked again, leading to coming sector and materials squeezes. But the truly languishing leftover from the past is the greatest promoter of continued liquidity we’ve seen since the 2020 market crash itself—severe underachievement in reaching economic benchmarks (re: we ain’t got no jobs, bruh!). Friday’s abysmal jobs report showed that the nation is likely more screwed than Powell & co. may have realized:
Change in non-farm payrolls, September: +194,000 vs. +500,000 expected and a revised +366,000 in August
Unemployment rate: 4.8% vs. 5.1% expected, 5.2% in August
And, even more eerily reminiscent of the past? This joke of an economic report is thought to be caused by—you guessed it—Covid.
According to Nick Bunker, economic research director for North America at the Indeed Hiring Lab. “The best estimate right now is that it’s the pandemic itself.”
“This is still a delta-wave-era jobs report,” Bunker added.
If we can’t employ people, the economy is shit, and if the economy is shit, then The Fed won’t taper. In response, as if on queue from a play set last Spring, stonks opened with a nice rip in come Friday morning; tech led the charge, naturally, with the Nasdaq flipping .5% from lows just before the job numbers were released.
So, where are we? Are we stuck in the past, languishing in the present, or perhaps moving apprehensively into some unknown future? If the economy can’t turn itself around all signs point to our Delorean racing back to 2020; the days where joblessness, tech, and political landmines worked hand-in-hand, creating a disturbingly placid bull market.
TLDR: buy the manufactured dip. Again.
Welcome to YEET no. 24, brought to you by Doc. Brown
🏊♂️ Pt. 2: Dark Pools 101: Swimming in the Dark Pools of Wall Street
Written by: Zach Taluskie
Using tools from: Unusual Whales
Alrighty everyone, it’s a pleasure to be speaking (writing) to you all today. With that being said, let’s talk about dark pools. For those who are not up to speed, dark pools are a private exchange for the hedgies, financial institutions, and traders on the floor of Wall Street to trade anonymously. It is used for these groups to place trade in large premiums, without affecting the price of the stock. Do I have any moral reluctance toward this being allowed? Maybe. But is that morality outweighed by the benefits of access to this data? Of course! Yes, there are many platforms available that track dark pool transactions. The one I use is one that has been featured many times within this newsletter, Unusual Whales. They do indeed track dark pool flow (data) within their subscription services. More than that, they provide easy to analyze data showing what percentage of the premiums are buying and selling the security or securities you are viewing, the amount of buy and sell orders, the volume of the buying and selling, and sentiment.
So, you’re probably asking yourself, how can I effectively analyze dark pool transactions to make decisions about particular securities, or the market as a whole? Well, my friend, today I am going to outline some methods you can use. First things first; it is a must to understand times when it is most applicable to use to help make decisions. Dark pools are the buying and selling of a company's shares, not option contracts. That—paired with the large dollar amounts of these orders—indicate they are likely not day trading within dark pools. These positions are swing trades at the bare minimum, but likely longer-term positions. It is not as effective of a tool when deciding whether or not to enter a day trade, but more so when looking to enter 1) a swing position 2) monthlies, and 3) LEAPs or other long-term positions (whether you are trading options or shares). To be clear—it is by no means wrong to use dark pool flow data to guide your decision-making when entering day trades, but it needs to be backed by option flow data and a quality technical analysis setup. I would say that is the least important of the three just outlined. During times of large uncertainty and/or high volatility it is a great tool to use to get an idea of how the most informed and wealthy people/organizations are managing their portfolios. I believe the time we find ourselves in now is an ideal time to be actively checking the dark pool data. With inflation worries, debt ceiling woes (that have since been handled), fed tapering, and rate hikes all up in the air, the financial markets are seeing an uptick in volatility, and stronger selling pressure than what we have seen throughout the year. With the current uncertainty, dark pool flow can be a key factor in your decision making on whether to sell out of long positions or to buy the dip.
Now that you have an idea when to view the dark pools, let’s look at a) the technicals of how this thing works and b) a specific example of how it can be used from this past week
YourBoyMilt’s UW Dark Pool Breakdown for the uninitiated:
🖥 Part 1: The main screen
The first screen you’ll see pretty much mirrors flow, but here’s a few things you’ll want to look out for.
🧪️ Filtering: just like flow, put in your tickers and what you want to sort by
🛍 Buys and sells indicate whether “they” are loading or dumping shares
AA: above the ask, this is a bullish signal
BB: below the bid, a very bearish signal
💰 Premium Spent: another key part that lets you know just how hungry this whale is. Look for HIGH premiums that are anomalous by comparison
⭐️ Pro Tip: If you see the combo of AA/BB with a huge amount of money spent in comparison to the rest of the orders, BOOM BOOM IT’S A GO!!
📈 Part 2: The Flow Chart Screen
The second screen you’ll see when you click show charts (highlighted above, “THIS IS NEXT”). Again, think of this like the “flow chart” screen when you’re looking at regular flow.
👀 Viewable sentiment (far left): This is the most important as it lets you know in the simplest terms whether the DP buys are bullish or bearish
🤨 The other indicators, meh: The other indicators can be used in combination for a variety of strategies or pieces of information, but this is just 101! We’ll get there soon enough.
And now, back to Zach, who is going to show you how Dark Pool was best used this week.
Seeing it in action: Using Dark Pools to buy the tech dip this week:
Let’s check out this past Monday, October 4th, 2021. We had major selling, across the major indices, especially so in the Nasdaq Composite and mega-cap tech stocks. These are stocks that did not just underperform on this day, but throughout the entirety of this market correction. This underperformance was due to rate hike speculation discounting future earnings, but regardless, many were wondering if the “buy the dip” strategy was losing steam. Let’s see if the dark pools reflected this sentiment.
Apple: Down 1.85% on 10/4/21
Dark pool flow mid-trading-day:
Microsoft: Down 1.49% on 10/4/21
Dark pool flow mid-trading-day:
Google: Down 1.69% on 10/4/21
Dark pool flow mid-trading-day:
Nvidia: Down 3.77% on 10/4/21
Dark pool flow mid-trading-day:
QQQ: Down 1.65% on 10/4/21
Dark pool flow mid-trading-day:
These charts in the images I’ve selected breakdown the sentiment, premium per side, volume per side, and other metrics of the particular securities I have selected. As you can see here, the money managers of the massive financial firms were buying the dip on the Nasdaq and the heavily weighted equities it holds. I have provided how mega-cap tech stocks were buying on the dip pretty handily, and the PowerShares ETF tracking the Nasdaq Composite. This data was showing divergence in the movement in the stock price and the viewable sentiment of the Nasdaq as a whole. As other contributors of this newsletter have often talked about—but in terms of option flow—divergence between the flow and the stock price often means a reversal is coming. It also often means there is a nice setup brewing, in this case, to the long side. The dark pool flow is no different. Monday provided a great opportunity to buy the dip with shares or buy some calls to swing into the following day(s). Obviously, hindsight is 20/20, but the dark pool flow was indicating that this was coming. The rest of the week, the Nasdaq bounced, having three straight positive days, and looked strong. There was a Friday sell off, but it was clear the sentiment had changed. A large part of the sell off was due to Congress unwilling to come to an agreement to raise the debt ceiling. This was weighing on the market as a whole. Thursday, two days after the Nasdaq and the market as a whole had begun to bounce to the upside, the debt ceiling was raised, putting that problem to rest for now. This was a major factor in the sentiment change that took place throughout the trading week. However, time moves forward, and there will always be the next obstacle for the financial markets to overcome. The dark pool flow data can provide some clarity to us investors or speculators (or even the gambling degenerates out there) to see through the negative sentiment, and to help form calculated decisions the next time there is an abundance of uncertainty.
Good luck out there this week forging ahead into the darkness!
🎫 Pt. 3: $GOEDen Ticket
Goedeker 1847, a Rapidly Growing Small Business in the E-Commerce/Durable Goods Market
Written by: @goldenticketin1
This play was originally found by user "hundhaus". I want to give him full credit for this. That goes for if this play doesn’t work out too. That being said, I like it a lot. He found $ZIM back in March, I bought it on his recommendation, and it has since tripled. Now it is going for a quadruple. In the meantime, here’s some information about this new cool stock he found which many of you are aware of.
Summary
-Goedeker 1847 ($GOED) is an e-commerce company in the durable goods (appliances and furniture) market – a $40 billion industry. Goedeker is merging with Appliances Connection, which will be led by the current CEO of Appliance Connection, Albert Fouerti, who turned a brick-and-mortar store in Brooklyn into an e-commerce powerhouse generating over $155 million in sales in just a few years. The combined companies have acquired a smaller distributor in Florida and are opening new distribution centers in California and Texas to increase market access and reduce delivery times. Goedeker’s goal is to be the number one e-commerce business in the space.
- Goedeker has a Pro forma market cap of $330 million, is guiding to >$500 million in annual sales (Price-to-Sales<1) at 14% EBITDA margins, $62 million in income with a yearly EPS of $0.32 (forward P/E of 10) and is growing at an incredible 36% Compounded Annual Growth Rate (CAGR). It is priced at a fraction of the cost of its peers (1/3 to 1/8; Overstock.com, Wayfair, Purple). If growth continues and $GOED is assigned a comparable multiple, the potential upside is in the range of $18 to $23 (6 to >7X of its current share price [$3]) within the next 12 to 18 months and $200-$250 ([>74X upside] within the next 5 to 10 years).
- Catalyst: An activist shareholder (Kanen Wealth Management) has launched a public campaign to replace Goedeker’s planned management team by vote during the November 10th, 2021 annual meeting. Kanen Wealth Management wants to replace an experienced and successful group of e-commerce magnates with its own team of individuals who seemingly have no experience in the e-commerce industry. The current CEO, Albert Fouerti, has substantially increased his position in the company (>$1 million purchase), bringing management’s stake to >9% of the float whereas Kanen Wealth Management owns 5.5% of the float. It is possible that Kanen Wealth Management and/or its associates may attempt to buy more stock to increase leverage ahead of the stockholder meeting. Dealer positioning is at the date of posting is centered around the $2.5, $3, $3.5 and $5 strikes-suggesting a potential (though not guaranteed) ramp to those levels, depending upon market price action and implied volatility.
-Goedeker is viewed as an opportunity to invest in a company led by an industry-leading management team with rapidly gaining market share in a profitable market.
Background
Here is a link to a macroeconomic and microeconomic analysis of the durable goods sector. This due diligence (DD) post provides a background on durable goods, the influence of COVID-19 on e-commerce, consumer sentiment, pricing power as an advantage for retailers moving forward, retail-to-inventory dynamics, and evolution of the durable goods sector over time.
THE MERGER OF GOEDEKER 1847 ($GOED) WITH APPLIANCES CONNECTION AND THE FOUERTI BROTHERS
Let’s face it. Great CEOs are just… different. Whether they have strange looks, cryptic tweets, they just seem to have that odd charm, that ability to see through the bullshit and express their views regardless of who cares. So when Goedeker 1847 fumbled the customer service ball in 2020 under CEO Doug Moore, it was no surprise that legendary business magn-ATE Alan P. Shore tapped the Fouerti Brothers of Brooklyn New York to lead the charge. After all, Goedeker already had almost everything in place – a rich 70-year history based out of a modest brick-and-mortar store in St. Louis, an e-commerce platform, annual sales of over $22 million and profit margins of 26%. The only thing they were missing was the management team.
The best managers tend to succeed in the harshest business environments, and often have a talent for doing so. I developed the following infographic to illustrate the Fouerti’s path to success:
A history lesson for the millennials. This might be difficult for some people to understand, but believe it or not, you used to have to go to a store to buy things. You could only buy what they had in stock in the store at that very moment. If you found a washer and dryer you really liked, you had to put it in the back of a truck and bring it home yourselves. No moving services, no delivery, nothing.
When Appliances Connection was founded by the Fouerti Brothers in 2011, they created a website which would allow you to buy everything without leaving your house. They offer free White Glove delivery, and installation services meaning they’ll even haul away your old appliance for you. If you have a problem with your product, they offer 24/7 customer service.
Realize that there are only three major pure-plays on the direct-to-consumer (DTC) appliances market
● AJ Madison (not publicly traded);
● Appliances Connection; which is merging with:
● Goedeker
Since AJ Madison is not a publicly listed company, Goedeker offers you an opportunity to invest in the only publicly traded pure-play direct to consumer appliance company.
Focused on Building a Clear Value Proposition to Attract and Retain Customers
Goedeker’s has a number of exciting advantages over its competitors.
Huge Selection: Leveraged long-standing and new vendor and supplier relationships to reach more than 57,000 Stock Keeping Unit (SKUs). They are curating a diverse assortment of primary and secondary products in anticipation of emerging customer needs and maintaining comprehensive access to core, premium and luxury brands.
Competitive Pricing: Strictly adhering to minimum advertised pricing (MAP) policies, as well as opportunistic pricing discounts. Integrated industry-leading price-scraping mechanism to keep pricing competitive and flexible. MAP ensures that competitors don’t drive the price (and margins) down to lure customers away from competition, which ends up damaging profit margins for all involved.
Approximately 50% of the company’s sales are handled over the phone. This significantly decreases the friction associated with customers who are not accustomed to technology.
With the pandemic, older folks had no choice but to order things online. There were growing pains, but many issues were resolved over the phone and enhanced with a user-friendly website.
New Talent Acquisition: Albert Fouerti takes the realm as CEO and his brother Eli Fouerti joins as vice president after building out Appliance Connection. The Fouertis are bringing over a team jacked full of hard-hitters from Appliance Connection and I have no doubt these team is going to slay.
Quick Shipping: Goedeker delivers to all 48 continental United States, usually within a 6-10 day shipping window. That’s important – what happens if your refrigerator breaks down? You don’t want to wait over a month for it to arrive. Goedeker’s expansion into Florida, Texas and California could reduce these shipping times even more.
Insider Ownership: When the new board took over, they took a significant position in the stock as shown below. Current management owns more than 9% of the float.
Customer Reviews: Under Foerti, customer reviews at Appliances Connection have been glowingly positive, in particular the quality and inventory of their merchandise and their customer service. Complaints have to do with delivery times – having to wait for orders to arrive. In my experience due to the COVID-19 shutdowns this has become a bit more commonplace. Often AppliancesConnection subcontracts with third parties to have items delivered, particularly when the item has to be delivered outside their service area. New distribution centers in Florida, Texas and California will largely resolve overland travel times and supply chain hiccups.
Goedeker’s customer reviews are not as bad, but to some extent are tainted with the foibles of past management, mostly having to do with delivery and the customer experience. In my opinion this was part of the reason for bringing Foerti on board. Shareholders expect the post-merger customer reviews to improve as the Goedeker’s and AC websites seamlessly transition into the new brand and are taken over by AC’s world-class customer service team.
Website: If you get an opportunity, I invite you to explore the websites of both Goedeker and Appliances Connection. The design is fantastic, the photos are high resolution and you are not overwhelmed with information as in other competitor’s websites. The quality of the products is unmatched, a lot of them are very expensive, and it’s actually kind of fun to explore. If an item is out of stock, they let you know when it will be coming in. They tell you when it would ship. The level of detail in the Product Description is unmatched. You can actually click on the products you like and explore them in more depth. The website highlights reviews from Verified Owners and sorts them from Most Helpful to Least Helpful. You can access Product Overviews, Specifications, Manuals and Guides, Rebates (they offer promotions if you open a credit card with their partner), and talk to a customer service agent whenever you need help.
"I love goooooold!!! The look of it, the taste of it, the smell of it, the texture! I love it so much, I even lost my genitalia in an unfortunate smelting accident. Hence the name, Goldmember". - Goldmember, Austin Powers' Goldmember
Re-Branding: With the new merger, Goedeker will be hiring a nationally recognized re-branding consultant. With the combined energy of the Fouerti Brothers, Alan P. Shor, and their large war chest, you can expect that they will settle for nothing left then the very best. If there’s anything we learned from Chip and Joanna Gaines, it’s that there’s no end to the amount of money rich white women will spend to get a beautifully designed bathroom. Personally, I am excited to see their re-branding effort flourish through social media and other avenues as positive news about the company spreads.
Maintaining Profit Margins While Managing the Supply Chain: Companies are still dealing with supply chain issues that happened after the COVID-19 pandemic As noted by Mr. Fouerti in the online Jefferies Retail Conference, management is ordering items ahead of time. Instead of ordering items 30 to 90 days, now they’re ordering items 90 to 180 days ahead of time, non-cancelable orders. They are working with the manufacturers who sometimes are unable to get specific parts from other manufacturers and occasionally have to cancel certain SKUs. Goedeker is increasing their roll-out of Original Equipment Manufacturer (OEM) and Private-Label brands, which are more available. Fouerti notes that shipping and wage costs have been elevated as of late, but they are raising prices to account for these higher prices. They note that because supply is constrained, they don’t have to lower prices to beat the competition and in many situations customers are willing to pay more for a product because they know inventory is low.
As noted by one investor, with supply challenges they are reducing marketing, in particular marketing of items they don’t have in stock. This could increase profitability next quarter depending on any future acquisitions.
When inventory is in stock and needs to be moved, Goedeker offers discounts, closeout deals and seasonal promotions. Like singing a baby to sleep at night, you’ll see a $7,500 stainless steel refrigerator with a 20% discount and think it’s a great deal. This is the same genius marketing strategy that lures people to $50,000+/year private colleges with smart-sounding scholarships.
According to former CEO Doug Moore, seasonal promotions often create record-breaking periods of profitability, generating incredible cash flow and sell-through on existing inventory.
Quality Brands: Appliances Connection and Goedeker offer a wide range of reputable brands. If new brands want to be listed, they must undergo an on-boarding process which includes (1) sharing damage and return statistics (how often was the product damaged, returned, sent back, (2) reading customer reviews about the products, and (3) ensuring that the brand has a full-service network backing it.
GROWTH AND EXPANSION INTO HIGH-END MARKETS
INCENTIVES: Anyone who’s in sales knows that the best way to get your team laser-focused on revenue is to create them.
By incentivizing both junior staff and management, you align their sales targets with yours. If you have any doubts about the Fouerti’s experience and reputation, I would refer you to their past sales growth and submit that the proof is in the pudding.
BOARD IS EXPERIENCED AND INVESTED. All of the board members are qualified, experienced, invested, with executive experience and meaningful stock ownership.
Financials (from a previous DD provided by hundhaus)
"The CEO has expressed a desire to capture 10% a $32 billion market. $3.2 billion at the same profit margin would produce between $3-4/share/year. $ETSY has similar revenue and trades at $220. To be clear, this won't happen overnight, it could be a 5 to 10 year timeline. But let's say they go for it and do it in 5... that's a 74X return in five years." -hundhaus
FIRST QUARTER 2021 results:
● $123M in Revenue
● $14.7M in EBITDA
● $13M in Net Income (88% rate to EBITDA)
Q1 EBITDA was ALREADY HIGHER than all of 2020. That's because Americans are buying more appliances. Over the next four years this market is expected to go from $21B to $40B and $GOED is on track to be the #1 retailer.
Growth in market can be seen by combined April numbers that saw them do $45.2M in Revenue or a run rate of $135.6M for the upcoming quarter. This puts them on pace to do $500M in yearly revenue. (Note: Based on Q2 earnings, Goedeker *increased* their guidance another ~10% to $520 to $550 million)
But that's not all. Looking at past financials the Goedeker side of the equation is terrible. They were losing money from being with a holding company, the spinoff, and being a small player trying to compete. The only reason they led this whole acquisition is so Appliance Connection (AC) didn't have to do the dirty IPO work. On the other hand, Appliance Connection is an amazing, very profitable company with large upside. Combined these two companies form a powerhouse and will actually increase EBITDA. The biggest upside is faster, cheaper shipping. Instead of Goedeker having to ship to East Coast that can now be filled by AC. And AC orders on West Coast are more easily filled by Goedeker. Longer term EBITDA will keep improving through more fulfillment centers (Note: one month after this was written Goedeker announced their acquisition of a Florida retailer and confirmed intentions to engage the Texas and California markets).
In total my expectations for 2021 are:
● $500M in Revenue (CEO has confirmed they are on track for this)
● $70M in EBITDA (improvement to 14%)
● $61.6M in Net Income (88% rate)
This would be a yearly EPS expectation of $.32. Let's see how this breaks out for them:
$GOED is Underpriced Relative to its Peers!
Following up on hundhaus’s analysis, I scraped quarterly sales, gross profit and net income from the most recent quarterly earnings reports relative to market cap and compared it to the three largest e-commerce companies in addition to a competitor of slightly larger size - $PRPL Innovation. What you can tell right now is, in terms of sales, $GOED trades at 1/3 the price of $PRPL/$W, ½ the price of $O and is 1/8th the price of $AMZN. In other words IT’S CHEAP. With continued growth into domestic markets and as valuation multiples expand, a price target of $20 within the next several months is not out of the question.
"The CEO has expressed a desire to capture 10% a $32 billion market. $3.2 billion at the same profit margin would produce between $3-4/share/year. $ETSY has similar revenue and trades at $220. To be clear, this won't happen overnight, it could be a 5 to 10 year timeline. But let's say they go for it and do it in 5... that's a 74X return in five years." -hundhaus
TRANSLATION:
This is devolving into mostly memes now
OK, back to class.
WHAT DOES GOEDEKER 1847 HAVE THAT THE E-COMMERCE GIANTS DO NOT?
-Carries brands across all categories: core, premium and luxury (Wayfair, Amazon, Overstock do not cater to the high-end segments)
-High growth business
-Constant attention to customer service
What’s great about small caps is that (1) smaller companies consistently outperform their larger cap companies – it’s much easier for a $500 million company to double than it is for a $25 billion company, (2) underfollowed: Wall Street doesn’t cover the small cap space nearly as much as it covers the larger cap stocks.. there isn’t enough money in covering and reporting on small caps and (3) smaller companies are able to grow at a much, much faster rate due to compounded annual growth. This is through the magic of rapid growth, increasing market share, and maintaining elevated profit margins.
Catalyst and Activist Shareholder Alert: Kanen Wealth Management
On September 9th Goedeker released a statement that it received a notice from Kanen Wealth Management LLC and its affiliates (“Kanen”) to nominate a majority slate of five individuals for election to the company’s eight-member board of directors at the annual meeting to be held November 10th, 2021. Per comments from current CEO Albert Foueti, “It is disturbing that Kanen has chosen to initiate what appears to be a costly, distracting and unnecessary public campaign to obtain control of the board. We are still in the initial phases of accelerating growth, and my goal is to avoid unwarranted disruptions and focus on value creation.”
On September 15th, CEO Albert Fouerti purchased 330,000 shares at an average price of $2.95 (a total value of $972,345).
On September 21st, Foeurti issued another press release in which they (1) outlined their six-point plan for obtaining a dominant share of the durable goods/e-commerce market, (2) confirmed the nomination of Chair Ellery W. Roberts and Alan P. Shor to the board of directors, and (3) firing back at Kanen for their “costly, disruptive, and unwarranted activist campaign” aimed at obtaining control of the Board of Directors.
On September 23rd, deep value investor and hedge fund Cannell Capital LLC (Cannell) filed an SEC Form 13D (Activist) indicating that they had bought shares and warrants adding up to 9% of the outstanding voting power and support Kanen's nominations of 5 out of the 8 board members, that management has been preventing Cannell from accessing management, that they do not approve of Goedeker using existing cash for litigation against either Kanen and Cannell, and calling for a settlement with Kanen.
Later that day, Fouerti issued a public response to Cannell saying they are concerned by their ongoing efforts to gain outsized access to management, and that they had already spent considerable time communicating with Cannell. Fouerti agrees to allow Cannell eight extended interactions per year with management rather than the four they were previously allowed, and says “Current shareholders would likely look poorly upon Cannell’s attempts to “grandstand and engage in public hostilities.”
On September 25th the St. Louis Times issued a news story (pay wall) covering Cannell’s support of Kanen Wealth Management’s activist campaign.
On September 28th, Steve Goedeker, a former CEO and sizeable stockholder whose father founded Goedeker’s in St Louis in 1951, released a letter saying that the Goedeker family supports and believes in CEO Albert Fouerti and his team to lead the company, and that fellow stockholders should remained focused on the long-term potential of the company rather than its value over a few months or quarters. Based on data reported by Fintel, Goedeker owns shares equivalent to 16.4% of the voting power.
The vote is scheduled to be held at the annual meeting on November 10th. Based on previous presentations, Goedeker’s current leadership (9%) and Stephen Goedeker (16.4%) add up to ta total of 25.4% whereas Kanen Wealth Management (5.5%) and Cannell Capital (9%) collectively own 14.5%. The remainder is held by 13G filers (passive investors) and retail.
● Based on this data it appears that activists such as Kanen, Cannell and possibly others are attempting to accumulate the stock in an effort to become a majority shareholder ahead of the meeting and possibly gain the majority (5 out of 8) seats on the company’s board of directors.
SEPTEMBER 28TH UPDATE: I have posted due diligence summarizing what I interpret the interplay is between the activists and current management. The disagreement seems to focus Fouerti's decision to confirm Alan P. Shor as a board member, who oversaw the last stock offering. This offering was criticized by many and caused Kanen Wealth Management to lose $40 million (and the associated opportunity cost) basically overnight. In my view, Kanen has a right to be pissed, and shareholders deserve a right to fight back against excessive dilution. I have also posted an analysis of deep value hedge fund manager J. Carlo Cannell, the deep value investor/activist who owns 9% of the outstanding shares and currently supports Kanen’s nominations.
SEPTEMBER 30TH UPDATE: Nice cup and handle forming getting ready to take us on the next leg up. We're ready for it!!! Bullish into mid-month (OPEX), we might see some consolidation the third week in October but I fully expect this bad boy to moonrocket into the November 10th meeting, even if the Goedeker family says we shouldn't trade it.
Seasonality: As noted by hundhaus, Goedeker is a consumer discretionary which is a sector that tends to do well into the fall and holiday season. Small caps also tend to do well into year end, so there is a decent chance of seeing seasonal inflows.
Position: Shares baby! With a $1 trailing stop loss and an FY2022 $20 price target, you risk only a dollar to make over 6 times that! (I should note this is more likely to hit the $4-5 range in the near term!).
Hundhaus Bonus Comment:
I just want to add some market theory here. Typically in a mature market the top 3 players look like this:
#1: 30-40% Market Share
#2: 20-30% Market Share
#3: 10%ish Market Share
The rest scattered among small players
Finding immature markets but with some players making big bets is a great way to make money. Most recently my family benefited greatly from this insight when we went heavy on Darden Restaurants in 2013 knowing they were trying to become the premier restauranteur.
When I look at appliances I see huge white space for this market to mature. Amazon/Wayfair don't really focus hard in this area given the supply challenges. Amazon you will see a lot of 3P sellers which $GOED could be if they wanted (so Amazon is on the table for them). Really a consumer has to rely on Big Box like HD and Lowes for assortment and that can be limited with high prices too. In my cursory search AC/Goedeckers had more assortment and often better prices.
So where does that leave us? A market full of small players ripe for acquisition, limited pure competition, and huge white space to establish yourself as the market leader. The CEO already said 10% but I think they could easily become the #1 player down the road.
I truly, truly believe this stock will explode over the next couple years, especially with the large macro factor around appliances/furniture.
TL/DR: Durable goods orders are resilient and E-commerce companies in that space are more profitable then ever. The merger of Goedeker 1847 and Appliances Connection, combined with their experienced management and nationwide supply chain will shape it into a retail powerhouse and will pose a serious threat to the market share of other E-commerce giants. $GOED is trading at an attractive valuation, expanding margins and rapidly increasing sales. Aggressive buy-in by current shareholders ahead of the annual shareholder meeting in November indicates there may be a bidding war for stock ownership. Hold on tight and enjoy the ride!
P.S. This information is not to be taken as financial advice to buy or sell any specific security. You should assume that the individuals who prepared this information currently hold an investment in this position.
👀 Pt. 4: The Whale Watchlist Picks
Contributor: @TRSTNGLRD
Yo guys! We have the very awesome, very savvy with the technicals, young savant @TRSTNGLRD in the building with a watchlist!
Enjoy him, support him, and play his picks! Without further adieu...@TRSTNGLRD’s Watchlist.
OOOOHHHH MAN, it’s insane for me to be here. I’ve been reading this Newsletter since the very start, and it was a huge inspiration for everything I’ve been doing on my end. To actually be featured as a guest on here - I’m thrilled. Some information about me: I’m a young jit who’s an entrepreneur, student of physics, and cryptocurrency enthusiast. They call me Mr. Everywhere, as I literally seem to have my hands in just about everything. You can find my LinkTree at the top of this section and my Newsletter below, which is completely free for everybody. Thank you, now let’s go kick some ass!
I have an extra special Watchlist planned out for all of you today - we’re going to be looking at a series of five tickers w/ each of these being long-term LEAPS that are ready to rocket into another nebula. So, draw these charts like one of your French girls and grab a doobie because this is gonna get JUICY!
❗️Note: My trading style utilizes two tools known as TrendSpider (Charting) & UnusualWhales (Options Flow). These tools help me combine two strategies together, which are used to make pinpoint exits and entries for long-term Swing positions. These strategies are known as Pattern Breakouts & #TheSTRAT. To learn more about #TheSTRAT to better understand how I’m analyzing this set of tickers, click on my small introduction here: Unusual Due Diligence: 9/26/21
👀 Watchlist: PCG, PROG, LEDS, APWC, & DSPG
1. PCG
Current Price: $10.71
Now, this ticker is one that I recently shared on my Watchlist, but I can’t resist bringing it up a second time in an effort to give this bad little birdie the attention she deserves. When I shared it on my Watchlist, she was cooking up for an eruption. But this week, her top popped and there is nothing anybody can do to stop what’s about to come. This is literally La Palma 2.0 (Sorry, too soon?). Her RSI is low and her temper is high, acting sassy right out the gate with not one - but TWO breakouts at once. Let’s see what she has to offer, shall we?
📊 PCG: Charts
Chart #1: #TheSTRAT | Monthly Timeframe
Bullish breakout of 2D-2U Reversal; Targets @ All major pivots in formation & S/L @ Maximum of -30%
Chart #2: Pattern Breakout | Weekly Timeframe
Bullish breakout of MASSIVE symmetrical triangle pattern; Major unfilled gap from $34 to $39 w/ RSI @ 53.67 (Overbought above 70 & Oversold below 30)
📈 PCG: Flow Chart
10/8/21 | $125+ Premium | Ask-Side: 92% Bullish Premium & 92.3% being Calls w/ Top Strike @ $11 and Top Expiration @ 11/19/21
🌊 PCG: Whale Flow
10/8/21 | $125+ Premium | Ask-Side: Largest orders organized by Top Premium
2. PROG
Current Price: $1.35
🚨 SHORT-SQUEEZE ALERT 🚨 Oh my Heavens, you’re gonna have to pinch me on this one, I must be dreaming. $PROG is another one I previously had on my Watchlist (Last one, the next 3 are new ones alright - I promise) but I’m adding it to this because I have seen NOBODY mention this ticker, and people really need to be aware of what’s brewing - because it’s not a witch potion. It’s actually, well, it’s Jeffrey. Jeffrey Ferrell, who’s the CEO of $PROG. I can write an entire Newsletter about this company, so I’d really rather just give you an interesting link to dig into yourself. This fucker’s 50%+ shorted, so get to researching. You do NOT want to miss out on this massive explosion of a position - and I don’t use the term “short-squeeze” lightly like a lot of others do.
https://www.reddit.com/r/Shortsqueeze/comments/q45755/the_short
📊 PROG: Charts
Chart #1: #TheSTRAT | Monthly Timeframe
Bullish breakout of 2D-1-2U Reversal; Targets @ All major pivots in formation & S/L @ Maximum of -30%
Chart #2: Pattern Breakout | Weekly Timeframe
Broadening downtrend channel w/ recent reversal at channel high (First target hit w/ rejection @ $2.205); RSI @ 38.94 (Overbought above 70 & Oversold below 30)
📈 PROG: Flow Chart
10/8/21 | $275+ Premium | Ask-Side: 89.6% Bullish Premium & 90.9% being Calls w/ Top Strike @ $1.50 and Top Expiration @ 1/21/22
🌊 PROG: Whale Flow
10/8/21 | $275+ Premium | Ask-Side: Largest orders organized by Top Premium
3. ATER
Current Price: $7.75
🚨 GAMMA-SQUEEZE ALERT 🚨 Yes, another one. I had no other choice but to drop some absolute bangers for this letter, ‘twas a must! Again, this is another company that I can probably write an entire goddamn series about, so I’m also going to just drop a link that’ll give you the nice rundown of what’s crackin’. This beauty reversing after almost hitting our second target, so just wait and for that reversal at the bottom of this channel. The gains are magnificent - truly.
📊 ATER: Charts
Chart #1: #TheSTRAT | Monthly Timeframe
Bullish breakout of 2D-2U Reversal; Targets @ All major pivots in formation & S/L @ Maximum of -30%
Chart #2: Pattern Breakout | Weekly Timeframe
Uptrend channel w/ recent bearish reversal at 50% mark; RSI @ 42.60 (Overbought above 70 & Oversold below 30)
📈 ATER: Flow Chart
10/8/21 | $800+ Premium | Ask-Side: 58.5% Bullish Premium & 66% being Calls w/ Top Strike @ $10 and Top Expiration @ 11/19/21
🌊 ATER: Whale Flow
10/8/21 | $800+ Premium | Ask-Side: Largest orders organized by Top Premium
4. XELA
Current Price: $1.65
I pray for formations like this every night before I go to bed. Well, my friends, this one is a keeper. Broadening formations are great for the reason that you can play the same ticker over and over again while your earnings increase each time. The highs get higher while the lows get lower - it only makes the plays & earnings get larger. $XELA’s on its way to target #2 currently, which is at the bottom of the trend. Give her some patience and wait for that reversal, this one’s going 20x.
📊 XELA: Charts
Chart #1: #TheSTRAT | Monthly Timeframe
Bearish breakout of 2U-1-2D Reversal; Targets @ All major pivots in formation & S/L @ Maximum of -30%
Chart #2: Pattern Breakout | Weekly Timeframe
Broadening uptrend channel w/ recent reversal at channel high (First target hit & continuing to floor); RSI @ 46.23 (Overbought above 70 & Oversold below 30)
📈 XELA: Flow Chart
10/8/21 | $35+ Premium | Ask-Side: 70.2% Bullish Premium & 85.1% being Calls w/ Top Strike @ $2 and Top Expiration @ 11/19/21
🌊 XELA: Whale Flow
10/8/21 | $35+ Premium | Ask-Side: Largest orders organized by Top Premium
5. RGS
Current Price: $3.08
Alright, somebody come look at this fuckery. Look at it. What in the Hell is going on here? I have yet to hop into the fundamentals of this thing, but just looking at the chart prompted me to immediately squeeze it into this Watchlist. We’re almost at all-time lows and the weekly is showing a lot of rejection at the bedrock support level. Next week, we could possibly see a 2D-2U Reversal, or even a 2-1-2 Reversal… I’ll keep you updated on this one through my Twitter. I’m definitely gonna be dreaming about that reversal tonight - God Almighty.
📊 RGS: Charts
Chart #1: #TheSTRAT | Monthly Timeframe
Large pushback on recent bearish candle, possible 2D-2U Reversal forming
Chart #2: #TheSTRAT | Weekly Timeframe
No patterns or noticeable trends forming | Massive pushback on most recent bearish candlestick - gives more precise entry to what we were hoping to see next month; Possible 2D-2U Reversal forming w/ Targets @ All major pivots in formation & S/L @ Maximum of -30% | RSI @ 27.50 (Overbought above 70 & Oversold below 30)
📈 RGS: Flow Chart
10/8/21 | Zero Premium | Ask-Side: 73.9% Bullish Premium & 83.7% being Calls w/ Top Strike @ $5 and Top Expiration @ both 10/15/21 & 11/19/21
🌊 RGS: Whale Flow
10/8/21 | Zero Premium | Ask-Side: All orders organized by Time (Glitched and provided no data when sorted by Top Premium)
🎲 Milt and ABU’s ER Bonus Gamble: TSM Calls
IF I played earnings, I’d say that we have an ER grudge and something to prove after MU sullied our stellar ER record.
IF I played earnings, I’d say that this flow on a shitty Nasdaq day is about as good of a confirmation you’re going to get for a move as any
IF I played earnings I’d say the chart is dipped nice enough that a win can result in an AMD-like pop
If.
🐳 TSM: Unusual Whales Alerts
🌊 TSM: Flow reading 2500+
📈 TSM: Flow Chart: 81.4%🐂
📊 TSM: Chart
Good luck out there!
Pt. 5: Weather: SPY, SPX & QQQ Forecast by @daarkmaagician 🌦
Below is the chart & info for a SPY, SPX & QQQ forecast from @daarkmaagician, his DISCORD is the place to be (YEETers get two weeks free!).
SPY/QQQ Charts Legend:
Solid Blue= ATH, Green= Dark Pool Buys, Red= Dark Pool Sells, Purple= Dark Pools, Orange= Supports/Resistances, Teal= 9ema
SPY Forecast:
SPY & SPX Charts:
QQQ Forecast:
QQQ Charts:
Make sure you follow @daarkmaagician to get updates on the indexes daily!
Pt. : TLDR & GOODBYE ✌️
TLDR:
Pt. 2: Dark Pools 101— Dark Pools are hidden purchases of shares, which can tip you off to when to buy.
Pt. 3: DD Discussing the merger of Goedeker 1847 and Appliances Connection, and how combined with their experienced management and nationwide supply chain this will shape it into a retail powerhouse and will pose a serious threat to the market share of other E-commerce giants.
Pt. 4: 👀 Guest Watchlist: PCG, PROG, LEDS, APWC, & DSPG
🎲 Milt & Abu’s ER play: TSM
Pt. 5: SPY, SPX & QQQ Forecast by @daarkmaagician
Goodbye and thanks for reading! Questions, scoops, comments @yourboymilt or /u/alldatdalton. See you next week! ✌