Thinking About GME

Thinking About GME

One of my largest MFI holdings is GME.  I have it in three MFI Formula tranches, so it definitely matters to me how it performs.  Overall, it has not been good for me.  In the three tranches it is down 26%, 26% and 18%.  Yuck.  I know.

But let us think/dig a bit further.  Just a month ago it was a stinker (down more than 30%.  So let me point out a couple of interesting thoughts.

First it bottomed out on March 29th at 12.62 (right at Good Friday.  Remember that date.  They are now at $13.96, plus paid a 38 cent dividend.  That is 13% up this quarter.

Second, they are certainly a battleground stock.  This week was up and down.  They closed last Friday at $14.53.  Then they dropped during the week, on no news that I saw, to $12.85.  Finally, they popped back up 8.5% yesterday.  Something is going on.  I heard a rumor that perhaps NFLX was getting into streaming video games, which could explain the drop this week.

But then third, I was listening to a webinar this morning that was created March 31st... yes, right at after the March 29th low I mentioned on point 1.  Now maybe I just have confirmation bias, but it is interesting what he says (at about the 40 minutes mark, although the entire webinar is good) about GME.  Here are some of his comments (and I am paraphrasing):

• He looks at charts and says "i think GME is near a reversal".  It was (so far) the absolute bottom.
• "they're profitable. They make money. They are trading near BV".
• "debt is not very high".
• "in penalty box because used video game sales are declining. True, but they have positives"
• Kirk then walks through their opportunity to change business model to a subscription base (works for Costco, AMZN, NFLX, MSFT) close smaller stores and open larger stores (discarded K Marts) and make them virtual gaming destination spots.
• "moving away from deals with AT&T, very low margin, competitive business".
• "gaming is never a mature business because there are always more kids".
• He thinks in the "next 90 days" (which would be now next 3 weeks), they may make announcement about a push into VR and away from non-gaming business.

We shall see.  Obviously I'd like a bump.

Other Stuff

No full update until end of quarter, I am alive and well (but not as well in markets as I'd like).  One stock (my 3rd largest) will be interesting on Monday, NMM.  They announced sale and perhaps future sale of some ships.  The prices they're getting for ships should cause people to do some cocktail napkin math and think, "wow, they are selling on the market for a lot less than the value of their ships".  They traded up about 10% after the bell on Friday to just under $2. 

Here is a link (I know it is locked) about NMM:  https://seekingalpha.com/article/4132596-top-idea-2018-80-percent-upside-baseline-case

The amazing thing is that when this was written, NMM was $2.29.  It is now $1.79.  NMM is primarily a dry bulk shipper.  Dry bulk rates, as measured by BDI are up substantially in 2018, yet NMM has languished.  Here is a graph showing NMM vs other dry bulk shippers in 2018:

Wow, NMM is down 23%  while the other 5 dry bulk companies are up a composite 15%.  NMM was clearly the wrong pick (teeth gnashing) ... so far.  But I sincerely believe that differential could easily dissipate.  It is really (in my opinion), lack of trust/confidence in NMM management and fact that GP, NM is in dire financial straits.  If that gets alleviated, NMM could shoot to $2.50 in a heartbeat.

Now, eyes wide open, if a trade war really does go full bore and global growth slows as a result - that is clearly a bad outcome for dry bulk shipping (and containers).

Stay tuned, same bat channel.