I took a .5% position in Roblox $RBLX Nov 19'21 75 Calls for $3.5 to play a strong Nov 16 investor day. Data tracking in spite of back to school and a metaverse focused catalyst calendar I think can send the stock back to the $85 area

1/ Exhibit 1: Web Tracking data is surging
2/ This spike in traffic is surprising and corresponds with good app store performance. In Roblox's September investor day the CFO cautioned investors that back to school might see some decelerating usage. After seeing a brief dip to #50 in iOS we are stabilizing back near #20
3/ Roblox sells Robux tokens to players. Investors appreciate in game currency as an effective revenue model. For example, the crypto game Axie Infinity has 1.5 million daily active players and a $32 billion market cap compared to Roblox 46 million players and $40b market cap
4/ Rather than developing its own content, Roblox has 3rd party developers making applications and designs on its own platform. Big brands pay these developers to make Roblox attractions for players. Users then spend Robux on the resulting in game items and even trade them
5/ The resulting financial model has allowed Roblox to have extreme free cash flow margins alongside massive growth. It collects money up front, and isn't taking the IP risk like Netflix. This is akin to a video game version of Amazon's hugely successful 3rd party seller model
6/ Much as how cool brands boost Amazon's Prime user base, Netflix (Stranger Things), Gucci, and Vans paying devs to build Roblox content which players then interact with not only helps margins but also is a flywheel for Roblox user growth. Big Events can draw millions of users.
7/ It is key to understand that development teams external to Roblox are building the applications / code to make these concerts a success. During last CFO meeting, Roblox noted that many of these development teams are heavily venture backed. This makes Roblox a true platform.
8/ Per Zara Larsson having a 3.8 million person Roblox concert, integrating music and audio is a potentially massive growth and profit driver for Roblox and will be a key focus of the investor day. Roblox launched Listening parties in September ir.roblox.com/news/news-deta…
9/ I think street numbers of only 18% 2022 revenue growth are under estimating the flywheel effects of brands and concerts increasingly building on Roblox. Fortnite's 27.7 million user Travis Scott show was nearly 60% of the size of Roblox user base. And that's just 1 show
10/ Management isn't overly promotional and believe Roblox can reach 1B DAUs. This implies a far higher than 20% 2022 growth rate. They noted that 2016 Roblox players are spending far more now than 5 years ago and points to Gucci Garden as a key example of "aging up" spend
11/ When you flow 30% growth rates into a 37-40% free cash flow margin business and assume a forward free cash flow yield of 2.2% (fairly conservative given comps like Netflix or Snapchat yet alone Crypto) you could easily see Roblox take out the $100 all time high in June
12/ Yes, US regulators could crack down on children using Roblox. China limited Roblox usage though Southeast Asia usage due to Korea remains robust. I think the infra bill & extremely violent "Squid Games" will distract meaningful regulatory focus on Roblox into the investor day
13/ Q4 will be a big metaverse quarter. FB is likely to unveil a $3-5b annual spending budget on The Metaverse during its October 25 earnings call as implied during their late September CTO interview. Nvidia is likely to talk about the Metaverse extensively on Nov 9 investor day.
14/ However - I think Facebook will likely disappoint investors on timing of its Metaverse bets. Boz said Horizon will take 3-5 years to fully roll out vs Roblox which has huge usage today. Horizon also is clearly a workplace app first and foremost per Zuck's CBS demo
15/ Finally - I think investors are finally starting to realize that you can't simply "reopen" and go back to normal because gasoline is much more expensive and supply chains aren't as functional -- making Roblox and other beneficiaries a benefit of Xmas spending vs consensus
16/ My checklist going into the investor day:
A] Listening Party Usage and concert partnership update
B] Positive back to school engagement commentary
C] Positive outlook for Xmas spend.
Given metaverse catalyst path & volatile history happy to own vol on RBLX here
17/ In conclusion - I think Roblox is the best in class publicly traded Metaverse stock going into Q4, positive data tracking, a coherent story around Brand & Concerts driving DAU growth and growing appreciation of the in game currency model take $RBLX to mid 80s by late Nov.

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More from @goodalexander

14 Oct
Took .75% position in Chainlink $LINK at 25.941. I think it has asymmetric risk reward into a humiliating defeat for Biden in the midterm elections. This will remove Gensler's sword of Damocles hanging above Chainlink's Oracle TAM.

1/ Republican sweep odds just broke 50% Image
2/ Odds of $1.5 T or lower package just hit highs. Support for aggressive green spending for tomorrow is probably harder to muster when the world's gas infrastructure seems to be blowing apart today. Biden is uncharismatic, doesn't do interviews, and is fading fast. ImageImageImage
3/ Gensler's aggression re: defi regulation compared to Jay Clayton is heavily predicated on him having a mandate. A republican sweep of the house and senate would raise the spectre of Trump 2024 who would probably like defi bigly. Gensler already seems unpopular with the crowds Image
Read 11 tweets
13 Oct
Just going to share some interesting quotes from JPM earnings, one of my favorite indicators for earnings season
1/ Double Digit Spend Growth in 3q vs 19. "Combined credit and debit spend was up 24% versus the third quarter of '19. Softened in Aug and reacceled in recent weeks."
2/Seem Convinced Delta is Done. "we see some signs of life and we believe that recovery is strongly underway and it seems hopeful like Delta is really fading so that's going to help."
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Read 14 tweets
13 Oct
Put 3% in Kohl's $KSS @ $45.1. Shorted 3% Consumer Staples $XLP @ 69.99. Overwrote $KSS Jan 21'22 50 Call for $2.48 (5%). Market is over-discounting Kohl's long term story & huge buyback with a short term supply chain narrative.

1/ Debt holders are unconcerned ImageImageImage
2/ A double downgrade out of BoFa on supply chain concerns 'derailing' turnaround plan has caused Kohl's equity to implode versus other retail comps and elevated near term equity volatility. Per the charts above, however, this has not flowed into the company's LT financing costs
3/ Carry. The yield of this trade is extreme. Kohl's has likely 300m of buyback auth into end of the year - an 18% annualized yield on top of the overwriting yield of 22%. When you net out consumer staples capital return of 5-7% annualized leaves you 33% of annual low beta yield
Read 13 tweets
11 Oct
I am long BTC @ 57,400. 2.5% of capital with 3 catalysts in mind to move Lightning story forward which builds BTC maxi narrative
Twitter/SQ Earnings: Oct 26, Nov 4
Nov 18: El Salvador Lightning Conf @GaloyMoney

1/ Lightning Capacity will likely be a hockey stick into the events
2/ Lightning is important because
a] it enables global adoption of Bitcoin as currency, powering things like El Salvador's Chivo wallet
b] Layer 2 allows apps - including NFTs to run directly on bitcoin, creating a story for fees can displace the block reward in the long run
3/ ETH story around NFTs, artwork likely is forgetting things like Satoshi.Place pictured below built on top of lightning network. Layer 2s provide theoretically higher TPS and interoperability with Twitter via strike.me . Twitter already verifying NFTs
Read 15 tweets
5 Sep
Some markets related reading I've done past 2 months I found actionable/interesting:
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2/ Paper on run up into the close -- hedging intraday demand -- fairly robust discussion of all major asset markets. TLDR it's worth studying how momentum/ mean reversion plays out statistically in stuff you trade going into the close. long backtest
www3.nd.edu/~zda/intramom.… Image
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Read 9 tweets
22 Jul
quick rant about "constructing a neutral exposure" while I wait for something to load. a qualitative description about step by step optimization for us peons who take seconds to calculate (not microseconds on a custom ASIC like some here)

1/ Have a quant strategy. What's that?
2/ A quant strategy is a thing that assigns an expected value to many assets over a short period of time. It justifies itself primarily out of a process working historically specifically *having been able to predict profits*. A bit on what that means/ why it's important
3/ Basically - if you have the Russell 3k and split it into 50 buckets, a good quant strategy should have bucket 50 work *out of sample* better than 49 work better than 48... 2 better than 1. Having good quartile profitability allows you to have some notion of expected value.
Read 14 tweets

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