1-Summer Friday Boredom Thread with a stock idea at the end....(wait for it)
2-In 2020, what makes stocks go up?? Not valuation. Definitely not cash flow. Revenue growth helps, as does losing globs of money, but this is simply indicative of current investor focus—it’s not real or sustainable.
3-Today, what makes a stock go up is small float + cross-ownership in multiple ETFs and other passive groups. As the ETFs fight for limited shares, they push the market cap higher, increasing the weighting in the ETF, forcing them to buy more shares. Positive Feedback Loop (PFL)
4-Lets look at the $BYND IPO as an example. Sure, there are people who liked the brand, maybe they built a thesis saying it is a fast growing CPG, maybe they just chased a chart pattern. Those people are all idiots. They got it right anyway. Here’s why...
5-The $BYND IPO was 11m shares. Let’s say half were bought by people who actually believe in the brand. That leaves 5.5 million shares on day 1 for a float. $BYND was added to a host of ESG indicies, it was added to ESG ETFs, active managers bought it to prove they were woke...
6-That’s a lot of shares for all these funds to fight over. Then daytraders saw it going up and chased it higher, the weighting went up, the passives had to keep buying. True PFL. It worked so well b/c it was the first listed plant based meat co. Limited shares/lots of ETF demand
7-I bring this up because $BYND was the first way to get plant based meat exposure and $BLCT is the first US listed way to get gay exposure. Sure, it’s chinese, the numbers are probably fake, but who cares. ESG funds need to check the gay box.
8- $BLCT has 5.3m shares in the float. That’s 48% as much as $BYND. There is genuine demand from Asians who know the brand, it traded up thursday premarket as Asians had their first chance to buy. Say the residual float is 3m shares now. That’s not much to go around for ETFs
9-Don’t bother me with fundies. It is growing fast, asset light, losing less money lately. Could be a total fraud. Who cares..?? None of these facts have mattered for the past 18 mos. Woke capitaism needs to check the gay box and this is the first US listed public option...
10-I’m playing small as an experiment. I have a VERY FIRM STOP at $20. Until then, see what happens. I bet the ESG types have millions of shares to buy over the next few months....
