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Gamestop a Meme stock that is grossly undervalued
Gamestop was cheap at 17 dollars and expensive a 450 but if you look at pure asset value and current sales. It is easily a 200 dollar stock currently trading at 42 dollars.
Gamestop currently trades at only two times sales while the typical multiple for an internet company is seven times. With 2.7 Billion in assets and a 2.3 Billion dollar market cap you are getting their E-commerce gaming business for basically free.
Heavy short interest means another short squeeze could be coming but even without one you have a massive sale. Gamestop was hit hard by the pandemic but it has several positive drivers for its turnaround.
They have an established gaming brand, heavy insider ownership and a recent 12% increase in insider buying all are bullish signals. Some other positives include leadership changes including former senior leadership at Chewy.com.
Even without any turnaround progress the stock is a 130 dollar value worst case but that feels extremely pessimistic. The insider and institutional buying tells me I am not the only one that thinks the stock is dirt cheap.
We have Gamestop rated as a strong buy with a 200 dollar price target in our opinion now is the time to back up the truck.
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AMC Entertainment Holdings, Inc., through its subsidiaries, involved in the theatrical exhibition business. The company owns, operates, or has interests in theatres. As of March 17, 2020, it operated approximately 1,000 theatres and 11,000 screens in the United States and internationally. The company was founded in 1920 and is headquartered in Leawood, Kansas. AMC Entertainment Holdings, Inc. is a subsidiary of Dalian Wanda Group Co., Ltd.
AMC is a known consumer brand with a long and proud history but physical retail is dying. Very few physical retailers can maintain profitability and AMC is burdened with nearly 11 billion dollars in debt, negative cash flow and a paltry 92 million dollars in revenue. AMC stock looks cheap compared to 2019 financials, but this is fool’s gold.
If they had a much smaller debt load I could see an argument for holding some AMC stock and hoping for a turnaround but they are burning 300 million in cash a quarter and could be out of cash with no way to make debt payments by this summer. That is a recipe for bankruptcy which would wipe out any modest hope of shareholder value.
AMC could also dilute shareholder’s by issuing shares but thus far they have shown no desire to do that. Much like someone slowly bleeding to death who has accepted they are gone and doesn’t see a point in prolonging their suffering this seems to be the attitude of AMC management. They have accepted bankruptcy is coming and I feel terrible for anyone trying to convince themselves AMC stock still has value.
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RMCF or Rocky Mountain Chocolate Factory is not a sexy investment. They make chocolate and chocolate related products. They don’t have explosive growth or flashy new technology. Honestly they are kind of boring. Sometimes that can be a good thing.
They boast strong cash flows, a meaty 8% dividend and solid albeit not explosive growth. They are small enough to have plenty of room for growth but rarely ever use heavy leverage and take on minimal debt. If your looking for the closest thing to risk free this is probably it. (Note it’s still a stock risk of total loss exists just feels minimal.)
If you seek safety, income and the smallest amount of risk possible in the stock market Rocky Mountain Chocolate Factory is worth considering. We currently have a buy rating and price target of 10 dollars a share.
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On the surface Naked brands looks like another struggling company selling for a little over a dollar. Naked has been crushed by the pandemic forcing them to pivot and change their business model on the fly.
What is truly mind blowing is there is a real argument for a long term share price of fifteen dollars. Naked has some of the top brands in Australia, it's not a huge stretch to value these at five dollars a share, Fredericks Of Hollywood we also value at five dollars a share.
Their remaining assets include 59 million in cash and several other niche brands we gave these an estimated value of five dollars. Keep in mind none of this includes their business which is being transitioned to pure E-commerce. The potential is compelling will the turnaround be executed successfully?
We rate Naked Brands Ticker NAKD a strong buy with massive upside potential.
Disclosure Our CEO is Long NAKD stock
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Most people don’t think about investing until retirement is already on the horizon. By that time, many of the opportunities to build a successful financial portfolio have already passed. This article will discuss three main reasons investing early is crucial to reaching financial goals.
Compound interest can be tricky in that it heavily penalizes individuals who do not understand how it works. While most college graduates look at buying new cars, they don’t understand that the interest they pay will compound over the life of the loan. On the other hand, a deposit into a mutual fund, Roth IRA, or IRA will grow interest, and interest on the interest. Unfortunately, compound interest needs time to work. Many don’t realize how compound interest can work in their favor soon enough to maximize its potential. Taking an active role in understanding compound interest early on can make a huge difference overall.
It is generally common knowledge that a well rounded financial portfolio is diversified.
When investors diversify early, they benefit from more opportunities to sculpt investments. Early on, an investor has more opportunity to balance risk and reward. Additionally, a diversified portfolio is more secure over time. With many types of investments, if one fails, others will likely still grow.
Bull and Bear Markets
Historically, the economy regularly shifts from a Bull to Bear Market. Whether new investors find themselves in an economy on the rise or fall, investing early can help safeguard against times with a declining economy. Indexes may go up or down every year, but the S&P 500, over the rolling 10 year periods, is only positive. An investment with more time to grow will be more valuable through time.
Overall, when it comes to investments, earlier the better. That’s not to say it’s ever too late to start. The most important idea to take away is, start investing today. While some investments will be better than others, time is a major factor in the success of a financial portfolio.
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Let's say you've decided you want to choose stocks yourself. Great but where do you begin?
In our humble opinion this is a foundation of a great investment. Strong cash flows, low debt to cash flow ratio, selling at a discount to asset value and with a strong brand or physical prescense that is well defended. Warren Buffet calls this a moat. You want this to be long and deep and wide and with angry gators inside it. (Barriers to entry)
From there stick to industries you know and only invest what you can avoid touching for at least 3 years.
Other things to keep in mind, the free cash flow multiple and price to earnings multiples should be considered. Additionally pay attention to revenue and profit growth some stocks can look expensive but really be cheap.
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What are my investment options beyond stocks?
Other than stocks you have options, bonds, futures and real estate.
We will give you’re a overview of these here and go into each in more detail in future articles.
Options are a contract on a set number of shares of stock. Say a lot of 100. These contracts mainly give you two options bet on a stock to go up or down. You buy a call when you think the stock will go up and a put when you expect it to go down.
Futures are a contract betting on the price increase of a commodity, say you think oil will go up five dollars or gold will go up fifty dollars. You but a contract on this price increase as long your right you make money.
Bonds are the debt of a company, depending on the company’s financials and credit rating you will get more or less interest. A bond rated below B grade is considered a junk bond because the chances are you will never get your money back.
Real estate is buying a physical or digital property. Physical property is a house, apartment building or some commercial location. Digital real estate is buying domain’s or website and flipping them for a profit.
This should give you a better idea now of what your investment options are.
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The Basics Of Investing In The Stock Market
You have a little money, you keep some in a jar, maybe you want to add more to the jar one day. That’s where we come in. ( Yes I am quoting the Wedding Singer) Love that movie. At Broth Investing we believe knowing how to be smart with money can be life changing. We became financial experts with a lot of blood, sweat and tears, It’s our superpower and we want to share it with you.
How to get started investing in the stock market.
Buy a small cap or mid cap index fund, learn how to analyze individual companies, pray and just chuck money at something.
These are your three main options. For most people buying an index fund with a low-cost structure is enough. You want this to always be less than .5% . If you want to learn how to analyze companies and build your portfolio we will teach you in future articles.
In the meantime, your like small cap, midcap are these types of mushrooms? I’m too sober for this please explain.
A small cap is a company worth between 50 million and 1 billion, these companies have a bit more risk but offer higher investment rewards.
A mid cap is a company with a value of over 1 billion but less than 30 billion, anything above that is a large cap and your investment returns could be more modest.
We don’t think blindly chucking money at something without researching it is a good idea so option 3 is not something we would recommend.
In our next article we will start to teach you how to analyze companies for investment and how to build your financial future.
We will also talk about other investment vehicles beyond stocks but one thing at a time.