What are you buying today?

[RichardGibbons]

I have a math degree, two computer science degrees, and like, 10 AI courses under my belt, so I'm not really someone who you can throw technobabble at to try to obfuscate the issue.

Congrats on your accomplishments! Between the two of us, we have a math degree, 3 computer science degrees, 1 electrical engineering degree, and a physics degree. I teach AI/ML at a university (historically, non-online  8)) and worked for an insurance company. So now that we pointlessly settled that (and really credentialed our mutual "technobabble") do we really need to go through the false equivalence that is the next 3 lines you wrote?

 

The only reason I wrote it was because you were trying obfuscate the issue by saying a lot of technobabble. I viewed it as attempt to obfuscate the issue, and intimidate anyone who was scared of buzzwords into shutting up.

 

Also, I don't think those things are false equivalences. It's just that they're more more clearly ridiculous because they aren't cloaked in technobabble.

 

That said, I'm fine with not arguing about whether statistics and AI are basically the same thing. And for all of Cardboard's hypocrisy, he's right. It's way off topic for this board.

 

More importantly, and probably more pertinent to this forum:

 

1) Today, Lemonade ratios are declining but are still above the industry average (59.6% for 219, 61.6% for 2018 - I'll agree upfront that these numbers aren't totally accurate as Lemonade doesn't cover everything P&Cs do). So, for now, they are converging to average.

 

2) Let's peel off some of that sweet, sweet, AI/ML magic. Lemonade's largest markets are CA, TX, NY (around 70%). All 3 of those markets clock in net loss ratios that are typically below the industry average with premiums above the industry average. As a fun fact, in California, they have a pretty high justified complaint ratio. Imagine what it takes to get a millennial to complain and take it to the state. By the way, few companies just above and below Lemonade have 2 star ratings and some very scratching remarks, as per Gooogle.

 

3) They are currently ceding 75% of their policies. Curious how their reinsurance fees will hold up as more data comes in.

 

4) Aside from my belief that they are simply converging on the weighted average of the rations of the markets they operate in, I'm genuinely curious what general set of AI/ML algorithms differentiates Lemonade from Progressives of the world? What makes you believe that the latter can't figure these algos out? The latter are sitting on plenty of data, can afford to acquire new datasets, and hire an army of data scientists to get through the data. Cloud is not really a differentiator anymore. I agree, Lemonade is willing to try things that others haven't (e.g., behavior analytics) at the production level but at its core, it's still a test-and-learn shop.

 

I don't have a high conviction in the timing of this short (hence such a small short). I do think it's a nice platform that beautifully obfuscates a traditional insurance company. Probably should take this to the Lemonade thread...

 

FWIW, I suspect that you're right about Lemonade. I do buy SAAS companies that are breaking traditional business models, and Lemonade is a "don't buy" for me because at a P/S of 53, it's too expensive considering its growth rate and questionable moat.

 

(Keep in mind for all my comments that I've literally spent a total of 5 minutes in my entire life looking at the company.  It's easy to know that I don't want to buy it, and then I don't spend more time.)

 

On 1 and 2, I think there's a reasonable chance you're right. Insurance is a pretty commodified business, and it's unclear to me what they could be doing differently that would provide a big boost over what other people are doing with statistics. Maybe they have found something, but the odds are against it, I think.

 

And if they have found something, how big of an of advantage is that "something" likely to be? I'd bet that whatever it is wouldn't be transformational, like improving margins by ten percentage points for an extended period of time.

 

On the other side of the analysis is that they likely haven't squeezed out most of the economies of scale yet. As they grow, they'll get a boost from that. On the other hand, at this scale, they can also be more picky about their business, so maybe that all balances out.

 

On 4, In terms of why at traditional insurance company might have problems with a tech startup--which is what I was talking about originally--it's not the tech. It's the culture.

 

(Here I'm generalizing my experiences over the whole industry, which might not be fair. But it happens again and again, where old school companies can't adapt to new tech models despite all reason seeming to indicate that they should be able to do so. And that's why I view my experience as more of a case study than an anecdote.)

 

So, I worked in an non-tech insurance-related business that did well enough to become the gorilla. A young tech company came in with about one hundredth of our resources, and started attacking us.

 

We were able to describe the threat in detail early on, but were ignored ("Don't worry about them. They're nothing, and will go bankrupt soon because they're doing unprofitable underwriting. Focus on the ball.").  Then they captured one of our customers ("It's just an aberration. This will prove that their business model doesn't actually work. They'll go bankrupt faster.")

 

We came up with technologies to counter them, technologies that we could've built in a few months with a few decent developers. But of course, those technologies needed to be put through the planning committee, and their value compared against all the other technical projects.  How long does that take?  Well, maybe a year to through the process, just to get get developers on it, and then the developers suck. So years to get something useful, and by then everything's moved on.

 

And, over the course of about 15 years, the tech company has been eating most of the customers.

 

The big problem is a culture built on conservative math and squeezing pennies out of operations fails against a rapid iteration, testing and failure tech model.  Pretty well every company says technology is a competitive advantage, but in the insurance companies I've see, technology is a cost center--it's there because it's necessary to compete. The company isn't run from a perspective of "tech is all we have, let's quickly cycle, failing 60 times in order to find that one solution that works and crushes everyone else."

 

If, as an individual, you have a project that fails in a tech company, it's something to learn (because it's set up so the failures aren't super-costly). If you fail in the insurance company, you've seriously impacted your career, and might never get that promotion. Why take that risk, when analyzing every decision to death, getting written buy-in from everyone, and proceeding at a slow, measured pace is much more likely to lead to successful personal outcomes? Then if you fail, everyone else fails too, and everyone's knows that there's nothing different you could have done.

 

The culture really matters.

 

(All that said, I still wouldn't bet on Lemonade.)

[rosemontseneca]

LMT, BAESY

[CassiusKing1]

Why do I feel like I'm in a scene of Good Will Hunting?

[SafetyinNumbers]

Added more ATTO today

 

Tiny market cap but big company.

 

They reported a strong Q3 and will likely again in Q4. Goldman, one of the three analysts didn’t update estimates post earnings last month so the forward EBITDA consensus is way too low. I think he’s either embarrassed or indifferent (ATTO reported $45m in EBITDA and GS was at $18m). Either way, consensus 2021E EBITDA is only $158m, while the three estimates are $114m, $174m and $185m. For 2022E, the consensus is $171m with Goldman at $138m and the other estimate at $204m.

 

Throwing out Goldman’s stale estimates, ATTO is trading at 3.7x EV/EBITDA.

 

Competitor Concentrix (CNXC) was just listed on the Nasdaq after spinning out of Synnex and it trades at ~9x EBITDA making, ATTO quite accretive for an acquisition. Slide 31/32 in their analyst meeting deck make a pretty good case to buy Atento to solve for growth in emerging markets and for accretive acquisitions.

 

https://ir.concentrix.com/static-files/6c895513-f519-46ce-9566-5c33ca93a8dc

 

I think this deal happens within two years which will be after ATTO management gets margins up to its target of 15% and the stock price is much higher.

 

At 8x EBITDA on the consensus 2022E number of $204m, yields a target of $70 vs the current price of $10.45.

 

Lots of room to be wrong in between those numbers and still be happy. In fact, I think the EBITDA estimates are too low so I see upside beyond that.

 

 

[Gregmal]

Trimmed the GEOS and some more CRSP, paid down some margin and bought a little GS.

 

Any news for GEOS to trade up 30% since that day of forced selling?

 

Only news I saw was the $6 to ~$8 move which in a round about way screamed, "ALWAYS TAKE ADVANTAGE OF FORCED SELLERS!"... I've trimmed position down again to about half; I think the rest I'll layer out of in the 8s. I would not be surprised to see a sale of the company though. The buyback was actually intentionally, or unintentionally, brilliantly timed as well.

 

Sold the rest of this today. Also did the unthinkable. Shorted some Tesla. ~1% position.

[chrispy]

AMT-near a low for the year if we exclude the few days in March

[fareastwarriors]

Trimmed the GEOS and some more CRSP, paid down some margin and bought a little GS.

 

Any news for GEOS to trade up 30% since that day of forced selling?

 

Only news I saw was the $6 to ~$8 move which in a round about way screamed, "ALWAYS TAKE ADVANTAGE OF FORCED SELLERS!"... I've trimmed position down again to about half; I think the rest I'll layer out of in the 8s. I would not be surprised to see a sale of the company though. The buyback was actually intentionally, or unintentionally, brilliantly timed as well.

 

Sold the rest of this today. Also did the unthinkable. Shorted some Tesla. ~1% position.

 

So you're the reason Tesla is finally down today.

[willie2013]

KBAL a Michael Burry coattail

[Value418]

Added more ATTO today

 

Tiny market cap but big company.

 

They reported a strong Q3 and will likely again in Q4. Goldman, one of the three analysts didn’t update estimates post earnings last month so the forward EBITDA consensus is way too low. I think he’s either embarrassed or indifferent (ATTO reported $45m in EBITDA and GS was at $18m). Either way, consensus 2021E EBITDA is only $158m, while the three estimates are $114m, $174m and $185m. For 2022E, the consensus is $171m with Goldman at $138m and the other estimate at $204m.

 

Throwing out Goldman’s stale estimates, ATTO is trading at 3.7x EV/EBITDA.

 

Competitor Concentrix (CNXC) was just listed on the Nasdaq after spinning out of Synnex and it trades at ~9x EBITDA making, ATTO quite accretive for an acquisition. Slide 31/32 in their analyst meeting deck make a pretty good case to buy Atento to solve for growth in emerging markets and for accretive acquisitions.

 

https://ir.concentrix.com/static-files/6c895513-f519-46ce-9566-5c33ca93a8dc

 

I think this deal happens within two years which will be after ATTO management gets margins up to its target of 15% and the stock price is much higher.

 

At 8x EBITDA on the consensus 2022E number of $204m, yields a target of $70 vs the current price of $10.45.

 

Lots of room to be wrong in between those numbers and still be happy. In fact, I think the EBITDA estimates are too low so I see upside beyond that.

 

Starting tor read about these guys.  Seems to be a fair amount of the business in Brazil, which is going to be challenged, right?

[SafetyinNumbers]

Added more ATTO today

 

Tiny market cap but big company.

 

They reported a strong Q3 and will likely again in Q4. Goldman, one of the three analysts didn’t update estimates post earnings last month so the forward EBITDA consensus is way too low. I think he’s either embarrassed or indifferent (ATTO reported $45m in EBITDA and GS was at $18m). Either way, consensus 2021E EBITDA is only $158m, while the three estimates are $114m, $174m and $185m. For 2022E, the consensus is $171m with Goldman at $138m and the other estimate at $204m.

 

Throwing out Goldman’s stale estimates, ATTO is trading at 3.7x EV/EBITDA.

 

Competitor Concentrix (CNXC) was just listed on the Nasdaq after spinning out of Synnex and it trades at ~9x EBITDA making, ATTO quite accretive for an acquisition. Slide 31/32 in their analyst meeting deck make a pretty good case to buy Atento to solve for growth in emerging markets and for accretive acquisitions.

 

https://ir.concentrix.com/static-files/6c895513-f519-46ce-9566-5c33ca93a8dc

 

I think this deal happens within two years which will be after ATTO management gets margins up to its target of 15% and the stock price is much higher.

 

At 8x EBITDA on the consensus 2022E number of $204m, yields a target of $70 vs the current price of $10.45.

 

Lots of room to be wrong in between those numbers and still be happy. In fact, I think the EBITDA estimates are too low so I see upside beyond that.

 

Starting tor read about these guys.  Seems to be a fair amount of the business in Brazil, which is going to be challenged, right?

 

Brazil (~40% of revenue) has their highest EBITDA margins at 16%. Both revenues and costs are in BRL so it has hurt on a linear basis already in Q2/Q3 results. The USDBRL averaged 5.38 both of those quarters and it’s currently at 5.06 (but volatile) so if that holds there should be a positive currency impact next year, all else being equal.

 

Given Q3 margins were above last year I think it’s safe to say they have been up to the challenge.

 

 

[Gregmal]

Starter in ALCO and MAA, shorted some ZM. Added to BYND puts.

[BG2008]

Starter in ALCO and MAA, shorted some ZM. Added to BYND puts.

 

Greg,

 

Curious about BYND strikes and expiration date.  Thank you for the GEOS trade.  I'm fully out.  But that thing is on fire! Holy shit!

[Gregmal]

I try to be as transparent as possible but sometimes for liquidity purposes need to be a little bit discreet, especially with stuff with big spreads and limited liquidity like these. But generally speaking, I'm in the March-June timeframe and in various strikes from $125 down to $80, a few kamikazes below that but mainly 80-125. Ive also put on some minor exposure via a straight short of the common.

 

Every day I wake up I become more and more convinced we are currently in the later stages of a bubble in several prominent market places, and it seems most people are in an Enya video. Perhaps I'm losing it though.

 

[bilo]

have been buying RMRM, a closed end fund that is mid-conversion to a commercial MREIT. 

 

The basic situation -  It is trading sub 50% of book value ($19.17) as of last measurement period (11/30) and the portfolio is now 65% commercial mortgages underwritten AFTER covid. 

 

When it completes the REIT conversion and ramps up the dividend, it will get on investors radar and the price will go up.  I estimate +20% yield potential from today's price.  In terms of price targets, even 80% book value is a nice return from the current level. 

 

However, for me it is mostly an incentive play - I believe RMR the manager will treat this vehicle right and use it to help improve their reputation as their growth prospects and run-rate EBITDA has been badly hit by the poor trading values of their managed REITS.  I could see RMRM being used to acquire TRMT in a way that is accretive to the remaining (RMRM) entity.   

 

Really enjoy this trade (regardless of success) as it creates a nice test case in my overall hypothesis that RMR CEO is making real changes that will enhance trading values of all the RMR entities (and RMR itself).  Risk of course is more (and more severe) shut downs that hurt commercial real estate and that I am wrong on my reading of future incentives/behavior by management.

 

Short blog post and comments here: 

 

https://seekingalpha.com/instablog/1117597-nat-stewart/5524937-rmr-and-rmr-managed-companies-are-coiled-springs

[wescobrk]

I bought a huge amount of Desktop Metals today (symbol DM). 3d printing.

This is going to print me money. Exchange is having problems with the symbol but I bought several thousand shares.

This is a gift!

[winjitsu]

I bought a huge amount of Desktop Metals today (symbol DM). 3d printing.

This is going to print me money. Exchange is having problems with the symbol but I bought several thousand shares.

This is a gift!

 

Looked at the stock chart. Remember laughing at Chamath's "2025 Ebitda prediction". This is insane.

[thowed]

Every day I wake up I become more and more convinced we are currently in the later stages of a bubble in several prominent market places, and it seems most people are in an Enya video. Perhaps I'm losing it though.

 

 

Ditto.  But I also know that these things usually go on much longer than I think, and it's excruciating sitting it out while the party keeps going.  I need the Great Winfield to help me!

[Gregmal]

Bought a starter in AMT, rolled a few VIX calls, and shorted some ARKG.

[jasonchin]

CTRM: Net-net stock

[Libs]

Bought a starter in AMT, rolled a few VIX calls, and shorted some ARKG.

 

Greg:

Re ARKG....the July 2021 puts offer 10/1 if ARKG retraces to March re-Covid levels ($34). I own some July 21 $65's. Pretty good risk / reward for some gambling money.

[Gregmal]

Bought a starter in AMT, rolled a few VIX calls, and shorted some ARKG.

 

Greg:

Re ARKG....the July 2021 puts offer 10/1 if ARKG retraces to March re-Covid levels ($34). I own some July 21 $65's. Pretty good risk / reward for some gambling money.

 

Thanks for the heads up. Yea I planned to take a look at the options and some of the similar loony tune ETFs over the weekend. At quick glance the options did seem quite reasonably priced. I also was surprised to see near 0 borrow cost on ARKG, which, while exciting, is currently holding an extraordinary number of stocks that have done 100%+ in a couple of weeks. This is also smack in the middle of what is seasonally a very strong stretch for biotech. Nov-Jan typically. So theres many ways this can shed 15-50% over the next quarter or two, on scenarios ranging from just a simple correction, to a full blown bubble pop...or at least I think/hope.

[bizaro86]

Bought a starter in AMT, rolled a few VIX calls, and shorted some ARKG.

 

Greg:

Re ARKG....the July 2021 puts offer 10/1 if ARKG retraces to March re-Covid levels ($34). I own some July 21 $65's. Pretty good risk / reward for some gambling money.

 

Thanks for the heads up. Yea I planned to take a look at the options and some of the similar loony tune ETFs over the weekend. At quick glance the options did seem quite reasonably priced. I also was surprised to see near 0 borrow cost on ARKG, which, while exciting, is currently holding an extraordinary number of stocks that have done 100%+ in a couple of weeks. This is also smack in the middle of what is seasonally a very strong stretch for biotech. Nov-Jan typically. So theres many ways this can shed 15-50% over the next quarter or two, on scenarios ranging from just a simple correction, to a full blown bubble pop...or at least I think/hope.

 

One reason biotech has seasonal strength Nov-Jan is the JP Morgan Biotech conference in early January. Biggest conference of the year - inevitably lots of deals/partnerships/asset JVs are announced. I somehow doubt the virtual version will have quite as many catalysts for small biotechs this year.

[JRM]

have been buying RMRM, a closed end fund that is mid-conversion to a commercial MREIT. 

 

The basic situation -  It is trading sub 50% of book value ($19.17) as of last measurement period (11/30) and the portfolio is now 65% commercial mortgages underwritten AFTER covid. 

 

When it completes the REIT conversion and ramps up the dividend, it will get on investors radar and the price will go up.  I estimate +20% yield potential from today's price.  In terms of price targets, even 80% book value is a nice return from the current level. 

 

However, for me it is mostly an incentive play - I believe RMR the manager will treat this vehicle right and use it to help improve their reputation as their growth prospects and run-rate EBITDA has been badly hit by the poor trading values of their managed REITS.  I could see RMRM being used to acquire TRMT in a way that is accretive to the remaining (RMRM) entity.   

 

Really enjoy this trade (regardless of success) as it creates a nice test case in my overall hypothesis that RMR CEO is making real changes that will enhance trading values of all the RMR entities (and RMR itself).  Risk of course is more (and more severe) shut downs that hurt commercial real estate and that I am wrong on my reading of future incentives/behavior by management.

 

Short blog post and comments here: 

 

https://seekingalpha.com/instablog/1117597-nat-stewart/5524937-rmr-and-rmr-managed-companies-are-coiled-springs

 

RMRM looks really interesting.  Thanks for the idea.

[lnofeisone]

Starter ABNB

[Gregmal]

Added a few MX