Continued $TTWO dominance in Amazon Sales Rankings – Jan 5 2019

Take Two has six of the top 21 games on Amazon for XBox One
Six of the top 21 games on Amazon for XBox One
Take Two has 5 of top 21 games on Amazon for PS4.
5 of top 21 games on Amazon for PS4.

PS4 positions faltering a touch compared to the end of December, but the 2k NBA game is staying strong.

New $TTWO positions and RDR2-on-Amazon numbers

RDR2 continued its dominance on top of the Amazon sales charts through the end of December, which I’m using as a proxy for overall sales. I’ve covered the recent charts of TTWO here. I didn’t buy at the dip today, but I think that is a short term low absent a major market downdraft. Analysts even at the bullish end of the spectrum when at when TTWO was around $130 should be salivating soon.

  • Bought 600 TTWO at $103.6
  • 50 January 11, 110 calls at $0.95
  • 20 February 15, 110 calls at $4.84
  • (Update: 20 Feb 15, 135 calls at $0.5 – a real flyer.)

The middle trade is about as much as I’m willing to risk on the notion of a short term pre-announcement or failing that, analyst upgrade given the numbers I believe I’m seeing.

There are further promising signs (though again hard to measure against expectations) as I’ve seen 2K’s NBA2k19 also strongly on the charts in the last week. NBA season really gets started on Christmas, but I don’t know how this compares to expectations or previous years.

Right now, Amazon game sales leaders on PS4: 2, RDR2; 10 & 11, NBA2k19; 12 RDR2; 19 & 20 GTA5. on Xbox One: #1, RDR2, #3, RDR2, #5: NBA2k19, #9, NBA2k19, #11, GTA5, #14, RDR2, #28 GTA5, #37: RDR2 Ultimate ($89!), #47: WWE2k19.

Two captures of Dec 31:

Dec 31 Xbox One leaders on Amazon; RDR 1,3,12, GTA 7, NBA 2k 9, 10.
Dec 31 Xbox One leaders
Dec 31 PS4 games sales leaders on Amazon
Dec 31 PS4 leaders

The Reformed Broker’s Inspired Analogy


Brokerage firms make more money putting flashing lights on the user interface dashboard, conferring an illusion of control, as though you’re sitting in some sort of cockpit with switches to flip and instruments to make moves with.

The Reformed Broker (Joshua Brown) , “The Best Hedge There Is

A thought like this which I hadn’t found the words for – “illusion of control” – crosses my mind anytime there is a Fidelity or Ameritrade ad with forty- or fifty-something men shown contemplating some often incomprehensibly mishmashed chart of red and green, about to trade.

Ameritrade shills browbeat someone not confident into trading options
Fidelity brags about one second trade execution while this trader’s cat distracts him.

What Amazon is Telling me about Red Dead Redemption 2 Sales…and maybe a TTWO beat?

Take Two has for over a decade been tied to the release cycles of the Grand Theft Auto franchise. You can find a twelve year run of no return, from 2000 to 2012, even after the market bounce. The swoop upwards is from the consistent monetization of Grand Theft Auto online.

The last year was driven by anticipation of Red Dead Redemption 2. Which came out of the gate with roaring sales: 17 million units, far exceeding expectations. A summary from Dean Takahashi of Venturebeat collecting some of the expectations – even those on the high end, at the end of October is here. TTWO went from 120 to 130 quickly, but Take Two was subsequently caught in the market downdraft.

We do know that the old west open world is appealing across the Herring Pond. RDR2 has been the best selling boxed product in the United Kingdom according to Game Industry.biz.

Now RDR2 is a fantastic game, nearly always on top ten lists for the year. Will it monetize online as well as GTA5? To be determined (though I think there is a good possibility of this given the institutional knowledge from the latter.)

What is remarkable however is the dominance the roughly $60 game has shown throughout the most important holiday season.

At this writing December 27th at 3 pm Eastern, in the days after Christmas, the Amazon charts (updated hourly) show for XBox One game sales the following TTWO products in the top 50, as well as RDR2 being the most wished for game.

  • 2.Red Dead Redemption 2 – Xbox One
  • 3.Red Dead Redemption 2 – Xbox One [Digital Code]
  • 11.Grand Theft Auto V – Xbox One
  • 13.Red Dead Redemption 2: Special Edition – Xbox… ($69)
  • 23.Grand Theft Auto V – Xbox One [Digital Code]
  • 25.Red Dead Redemption 2: Ultimate Edition – Xbox… ($89!)

On the PS4, RDR2 holds the 1st, 10th, 40th, and 57th slots. GTA5 is in 13th and 28th.

Even on the Xbox 360 (the older console), GTA 5 is 3rd and the _original_ Red Dead Redemption is 4th in sales.

GTA5 is on the PC, RDR2 is not. However, GTA5 remained a top seller on Steam this year:

These figures are representative of the ranks the games had prior to Christmas. Though I did no more than spot check the rankings, so it is possible my sampling has all sorts of errors, (Amazon’s rankings change hourly),it was very impressive.

I also didn’t record impressions out of the top 10 – there are plenty of other 2k games floating in and out of the 51-100 slots, and ascertaining how meaningful that is would be hard to measure against expectations.

Best Sellers in Xbox 360 games, November 16th after RDR2 released: the RDR 1 effect held
PS4 leaders, November 16th: RDR2 1 & 9
November 16th on XBox One, RDR2 was 2, 7, 9
Nov 28, PS4: #1
Nov 28, XBox One: RDR2: #1, #8, GTA5, #10
Dec 22 – Last minute shoppers on XBox One, RDR2: #6, #9, GTA5, #7
Dec 22 – Last minute shoppers on PS4: RDR #1, GTA5 #6
Dec 26, PS4: RDR2: #1, #10
Dec 26, XBox One: RDR #2, #3, GTA5, #10

Was all of this priced into the stock? By investment analysts who haven’t played any of these games, but worried about it going against the fellow open world titles Fallout 76, Assassin’s Creed Odyssey and big budget installments in the Call of Duty and Battlefield franchises? Maybe.

Still I don’t think anyone foresaw this sort of sales dominance. Is Take Two building a moat for immersive open world gaming that has incredibly long monetization? The larger company story is something I’m still immersing myself in, and as a shareholder from $120, I’m down 15% on the trade so far.

This calls for an option trade:

I bought — yesterday, a day early, January 25th expiry 110 calls at $4.20 (I don’t have the confirmation handy, it was very close to that.). This plays with fire: the earnings report that would confirm this thesis comes likely on February 7th. However, a pre-announcement in order would avoid paying for the post-report volatility.

I may also purchase other call options, but haven’t evaluated all of them. The apothesis of this thesis would be to buy something like the January 120 calls, expiring January 11th, now asking $0.70. An earnings pre-announcement would send the stock flying though there remains market risk as well.

NB, another outlier that hangs over this trade: there are also rumors I discount that CBS Board member and Take Two Strauss Zelnick could be the next CEO of CBS. He took himself out of the running, though who knows. That would be a major negative for the stock but an outlier is: could CBS, a $17 billion market cap company, try to acquire a $12 billion market cap company in TTWO? Would not be unheard of.

In the time I wrote this – wrestling to get one of the wonky images up, TTWO has recovered from down $2 to up slightly on the day at $105.

Contrarian Strategy on WSJ The Score, December 22 2018

Another week of excellent performance for the Contrarian strategy, as each pick would have outperformed being long the S&P 500. This week is an outlier after a massive down week for the S&P but when a strategy still consistently works at the extremes you can have greater confidence in it.

Dec 15open Mondayclose Friday% changereversal?Contrary trade Outper. long S&P?
GM +0.834.9432.98-5.6yy
GOOGL, +0.71047.01991.25-5.3yy
VZ, +157.0654.92-3.8yy
TME, +7.7 (IPO)12.712.19-4.0yy
AAPL, +1.1165.45150.73-8.9yy
SBUX -2.46561.39-5.6ny
JNJ -10128.32128.09-0.2ny
SPY259.4240.7-7.2

Contrarian Strategy on WSJ The Score, December 15 2018

It was an only mildly outperforming week for the strategy, but still the third straight since starting to track. (ticker from last week’s column, monday open, friday close, % change, did it reverse direction, and would going contrary to posted number have beaten S&P).

See the full spreadsheet here.

Dec 8
NXST, +6.9%86.4485-1.7yn
UPS, -7.4%104.6698.66-5.7nn
BA, -4.7%321.27318.75-0.8ny
AZO, +6.8%874.07871.24-0.3yy
MDXG, -60%1.171.5532.5yy
FCAU, -4.1%15.2915.471.2yy
CVX, -0.4%115.3113.83-1.3nn
SPY263.37260.47-1.1

Contrarian trades on the WSJ’s The Score: Weekly Review for Dec 8-9, 2018

Weekly post from this sheet, tracking all WSJ The Score weekly roundups – how does a contrarian strategy against the 7 stocks reported weekly by The Score work the next week?

With the big market tumble this week, all stocks reported the previous week were down, so straight up the strategy only worked 3 of 7 cases…but in 6 of 7 cases it outperformed the S&P.

Looking closely these reports (listing stock & the percentage move) are one day changes in a given day of the week, not the overall week result, which is interesting, as a delayed contrarian strategy.

Dec 1
GM, +4.8 39 34.69 -11.1 y y
CPB, -3.7 39.19 37.77 -3.6 n y
TGT, +2.8 72.43 67.81 -6.4 y y
PZZA, -10% 48.35 45.08 -6.8 n n
BAYRY, -1.3% 18.875 18.095 -4.1 n y
MO, +1.8% 54.7 54.18 -1.0 y y
MAR, -5.6% 116 111.25 -4.1 n y
SPY 280.28 263.57 -6.0
Dec 8
NXST, +6.9%
UPS, -7.4%
BA, -4.7%
AZO, +6.8%
MDXG, -60%
FCAU, -4.1%
CVX, -0.4%

Outliers of the WSJ Management Top 250

In one of those meh everyone-gets-some-kind-of-award supplements the Wall Street Journal reported the Drucker Institute’s top 250 “best managed” companies.

There are five criteria: customer satisfaction, employee engagement, innovation, social responsibility, and financial strength. The categories are batting only 3-5 out of the gate. “Social responsibility” might be strike against management in some consideration, and Financial Strength can also be read different ways. If you have a good management team and good opportunity, shouldn’t you be levering up? Each of the 250 companies (of 752 reviewed large cap publicly traded firms) got star ratings on a 1-5 scale for each of the five categories: 1,250 total ratings. Grade inflation ran rampant: only 6% of them were a 1 or 2.

Usual tech suspects take the first seven positions. They’re willing to divest from Indiana if not Saudi Arabia which might help their responsibility score, and are throwing off oodles of patents and cash. Since they’re not restaurant chains of course they’re going to invest in their employees.

As one’s eyes’ roam down the printed page, I find it only interesting to pick out the outliers. Who are the unloved runts of the litter?

Of the 1,250 ratings there are only four one star ratings:

DXC Technology (DXC: $66) for Employee Engagement

Phillip Morris International (PM: $83) for Customer Satisfaction

Berkshire Hathaway (BRK-B: $220) for Social Responsibility

Comcast (CMCSA: $39) for Customer Satisfaction: no surprise there.

There are only 75 two star ratings (from my possibly erroneous hand count), highlights:

Amazon (AMZN: $1772) for Social Responsibility

General Electric (GE: $7) for Financial Strength (not 1? This maybe bankrupt once glorious stalwart is the eighteenth best managed company? $10 says their rating on this front was a four or five not very long ago.)

Wal-Mart (WMT: $99), and McDonalds (MCD: $186) for Employee Development. Wal-Mart and McDonalds have probably trained a fifth of America how to work in a corporate job. (I’m pulling that number out of my ### but it probably is enormous.) Wal-Mart openings in depressed areas can have a greater ratio of applicants to positions than Harvard. Training entry level workers to show up on time (and profit share!) is development of a different kind than Google’s and should be on a different scale.

Walt Disney (DIS: $116) for Customer Satisfaction. Wut?? Is there a chemical plant next to a population center also named Walt Disney? Are some people unhappy that ESPN is bundled in the cable plan? Talk to Comcast (see above).

Hewlett-Packard Enterprise (HPE: $15) gets two 2 star ratings (Employee Development, Financial Strength) yet still slides into a tie for 114th

The biggest laugher is Take Two (TTWO: $108) as a 2 star innovator. They’re redefining the cutting edge of open world gaming, providing the analogies for Elon Musk that’s its likely we’re living in a simulated world. This is the same rating given to fast food companies that haven’t changed how they or anyone else does business in many decades.

 

 

Keeping Score of The Score

The Wall Street Journal has a weekly section, The Score, which covers “The Business Week in 7 Stocks.”

This week caught my eye since Target (TGT) was the highlighted stock two weeks in a row. Last week, ending November 24th, TGT was down 11%, “as investors focused on rising shipping and labor costs and mounting supply-chain disruptions.”

This week: “The overall strong start to the holiday shopping season pulled up shares of several big-box retailers, including Target’s 2.8%” The second week didn’t reference the first – an odd omission for the set of readers that may take action on these blurbs.

It telegraphs a possible contrarian strategy – going countertrend to the market. Buy on the open Monday stocks that were down. Short on the open stocks that were up. Here is a spreadsheet where I’m going to test this for a while.

All seven stocks reversed direction Nov 24 to Dec 1 WSJ. So did the market, however. Still, 5 of the 7 trades in this strategy outperformed.

(NB, the 2.8% rise the WSJ has today must have been calculated from the Wednesday close, 69.26, not Friday’s close of 67.35. I’m generally not going to double check the WSJ % reports…and generally there won’t be holiday breaks with unusual trading like the Friday after a Thanksgiving.)

 

Nov 24 open Monday close Friday % change reversal? Outper. S&P?
TGT, -11% 68.07 70.96 4.2 y y
GOOGL, -3.8% 1044 1109.65 6.3 y y
Nissan, -5.5% 8.65 8.87 2.5 y n
LOW, -5.7% 88.67 94.37 6.4 y y
LB, -18% 30.32 33.11 9.2 y y
WBA, -2.6% 79.11 84.67 7.0 y y
CVX – 3.4% 114.7 118.97 3.7 y n
SPY (control) 265.78 275.65 3.7

Barron’s observations October 17 2015

Excluding the news summaries, there have been three table-pounding endorsements of JPMorgan (JPM) in the last few days; first two were in the print edition, the third online.

1: Fund manager Chris Davis’ review of financial stocks recommends JPM, with the quote: “Jamie Dimon may be the greatest financial executive of my time.”

2: The Follow-Up column revisits an earlier recommendation of JPMorgan:

JPMorgan looks as good as it did six months ago at the time of our cover story. Under CEO Jamie Dimon, the bank has invested in key businesses and is a leader in investment banking, credit cards, and asset management. It is also looking to trim expenses.

At the current price, investors get a best-of-breed bank, with a management team that arguably is the industry’s best,”

3: “A Mega-bank selling at a discount price” on October 15 online.

JPM is at 62 now, yielding 2.8%. Great.

jpm 10 years

This performance almost identically tracks Wells Fargo, which is the other “well managed” money center bank. Heck there are really only four now, and let’s accept as a given that Citi and Bank of America were less well managed.

JPM v. WFC

But I can never get excited about these things. The Jaime Dimon-is-a-superb-manager seems to be one of the very non falsifiable managerial propositions. Maybe it’s not falsifiable because it is true. But a _great_ manager would have steered clear of the financial crisis. A better-than-others just avoids bankruptcy better than others. I’m not excited about this and feel when JPM is so regularly getting the drum beaten at Barron’s (which also had an article enamored of regional banks) my gut says pass.

 

* * *

Coverage of the Dell buyout of EMC was a bit lazy spread out through the magazine – recommending that one could make 19% on an arbitrage over the deal. Not if VMWare ($69) continues to dive, a possibility only lightly explored in that article but was visited elsewhere.

There was a decent piece on the tower operators for cell phone companies, focusing on AMT ($96), CCI ($81), SBAC ($110): perhaps beneficiaries instead of victims of Google Fi/Fiber rollout (not mentioned in the article) as well as the national emergency system. Central contention from Alexander Eule is AT&T can’t let quality degrade more so fears overblow.

 

Proudly powered by WordPress
Theme: Esquire by Matthew Buchanan.