Nathan Worden's avatar

$335.7M follower assets

Buy and continually verify. MBA and MLD. Long term mindset. Innovation enthusiast.

Optimistic, but not inappropriately so.

DMs open
Nathan Worden's avatar
$335.7m follower assets
Canoo risks, urban dictionary translation
"Reading 10-Qs is fun!" — Said no one, ever.

Ok but actually, for us investors, reading 10Ks and 10Qs is actually pretty fun. Especially the risks section.

For those of you who think the risks section is boring, here is an urban dictionary translation of the risks associated with the EV maker Canoo $GOEV.

😬 We need funding. We are freaking out that we won't be able to raise more money.

😬 We have so little control over our own destiny. Things like interest rates, inflation, and heck, the war in Ukraine could blow us up, yet there's zilch we can do about those things. Live, laugh, love.

😤 Gosh darn Tesla is dropping their gosh darn prices, which will make it harder for us to sell our gosh darn cars.

🫤 We set some timelines to make our electric vehicles. We have no idea if we can actually finish in time.

🫠 Spending is fun. We might be bad at controlling the costs associated with our operations. Tee hee.

🏗️ Ideally, we will build a manufacturing facility some day. That is hard. We will try our best. Wish us luck!

🏗️ That manufacturing facility we were just talking about, yeah, even if we successfully build it, it could cost so much, or take so much time, we might fail anyway. Just thought we'd spell that one out for ya'

😎 A good track record is important. We don't have one. We're "early stage," which means we incur significant expenses and 100% have every reason to believe will will continue to bleed money for the foreseeable future.

🫡 There are some super nice people who said they would buy our cars. So we told Wall Street, and now Wall Street values us off of those expectations. But sometimes nice people do mean things. Like buy fewer of our cars than they said they would. Or none at all. Beware nice people.

🔨 Oklahoma and Arkansas offered us incentives to develop our own manufacturing facilities. We thought those incentives were all ours. But now... maybe?

🥺 We know how much money we need. This is a problem because we also know that we have not achieved positive operating cash flow. And the weight of this knowledge haunts us. But it helps to share. Thanks for listening.

😵‍💫 Volatility in costs as well as demand for our cars is hard to deal with. This might un-alive us.

🫣 Our "control" over our financial reporting was weak (in the past). It's not anymore. But like, if we somehow realized that it got weak again, that would be bad for you. You probably are wondering what this means exactly. No follow up questions.

🌈 We might grow extremely quickly. You probably think that's a good thing. But growth is stressful. And very busy. If we are not able to take the requisite amount of naps to deal with all of this hypothetical growth, we will become very sleepy.

😎 We've got a great team, according to us. But if other people think we smell weird, we may not be able to attract other great team members. Their loss. But maybe ours too... if we do, in fact, stink.

😜 We have absolutely no experience in manufacturing a ton of electric vehicles. Which, is what we are trying to do.

🤓 We have an EV model we think is cool, but if other people don't think it's cool, we don't have any other models. So this one better work.

🤫 There is this thing called the "Canoo Digital Ecosystem"— it's a software platform that's super important to how we plan to get revenue. We hope we can build it. Can we build it? We hope we can build it.

😭 We might fail to attract new customers, or enough customers, or retain customers, or customers at all. We are seeing a therapist about our anxiety.

Disclosure: I am currently long Canoo 🙃 🥸 🤡 😭

“Everyone must believe in something. I believe I’ll go canoeing.” — Henry David Thoreau
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Absolutely hilarious 😂 🤣 😆
Nathan Worden's avatar
$335.7m follower assets
Awesome piece in InvestorPlace today about Commonstock:
@mrzackmorris Allegedly Scammed Retail Traders. Commonstock Could Have Stopped Him.

Commonstock builds integrity into the platform.
The community values trust.

I'm super proud of the community that has developed here, creating high quality content. Y'all are the best 😃⭐️
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Great article! And proud to be a part of such a fantastic community 😁😁
Nathan Worden's avatar
$335.7m follower assets
Charles Schwab swing trade
Yesterday Charles Schwab was down 12% along with other banks with massive bond holdings of longer maturities. The sudden awareness and fear around bond holdings of longer maturities was sparked by Silicon Valley Bank closing on Friday, whose bond portfolio was pummeled by quickly rising interest rates over the last year.

The main fears around $SCHW can be summarized as:

  1. Management has clearly been caught flat-footed by rising interest rates, as evidenced by a 1.5% return on their securities held to maturity, the majority of which have a more than 10-year duration.
  2. Deposits are decelerating as clients search for yield outside of savings accounts.
  3. Liquidity concerns if a bank run occurs (which seems unlikely now that the FDIC stepped in to protect depositors of Silicon Valley Bank

So is $SCHW in trouble? Probably not:

  1. Charles Schwab is well-capitalized with a low loan-to-deposit ratio.
  2. More than 80% of its total bank deposits fall within the insurance limits of the Federal Deposit Insurance Corp. which is further reason that depositors wouldn't be scared about losing funds. (This was a major factor which spiraled Silicon Valley Bank out of control, as the vast majority of depositors were startups with much, much more than $250k held at $SIVB. The game theory just isn't the same at Schwab)
  3. Charles Schwab had 12% YoY revenue growth last year, driven in part by 4 million new accounts and $428 billion in annual core net new assets.

My bet was that the fears regarding the similarities between Silicon Valley Bank and Charles Schwab would be short lived, as investors looked closer, they'd realize that the dip in Charles Schwab was unwarranted.

Therefore, I bought $SCHW at $53.77 yesterday.

Today, $SCHW was up 6%.

Since my thesis was short in nature, and appeared to be confirmed, I decided to take the 6% win and call it a day.

For those of you who bought $SCHW and are looking to hold longer term, what is your thesis?
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Why not hold it longer?
Nathan Worden's avatar
$335.7m follower assets
Fear and Greed Index crosses into 'Extreme Fear'
Today, the Fear & Greed index closed down 10 points, the first time we've been in the 'Extreme Fear' category since October 2022:

About a month ago, on Feb. 2nd, we were all the way up at 78, in the Extreme greed range. It's crazy how fast things can change. But if you look at the last year, we've actually done an up-down cycle like this five times:

The Fear & Greed index is based off of 7 indicators. The first is Market Momentum: Is the S&P 500 above or below its 125-day moving average( and by how much)? We just crossed below it:

The second indicator is Stock Price Strength, which is still in the Greed. There are currently more stocks on the NYSE at 52-week highs compared to those at 52-week lows:

But its all fear from here. The third indicator is Stock Price Breadth. The amount, or volume, of shares on the NYSE that are rising compared to the number of shares that are falling. A lower number is bearish.

The put and call ratio is climbing fast (puts are the option to sell while calls are the option to buy. When the ratio of puts to calls is rising, it is usually a sign investors are growing more nervous)

The VIX has spiked:

Bonds have outperformed stocks over the last 20 days:

A wider spread between junk bonds vs. investment grade bonds shows more caution.

Excessive fear tends to drive down share prices.

Hello darkness, my old friend.
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Oh wow, this is terrific Nathan !
All these decades in the market and I never bothered to find out what the components were that went into the Fear & Greed Index.
I had just assumed it was like AAII's Sentiment Survey where they just surveyed a cross section of investors and institutions :). There's actually a science to it !
There's that saying about an old dog still learning new tricks :)
Nathan Worden's avatar
$335.7m follower assets
A Short Story
Despite having been friendly with many short sellers, I had never actually shorted a stock myself.

I wanted this to change.

2022 had been such down year and there were plenty of actionable short ideas. My curiosity needed quenching.

Some people are against short selling (betting a stock will go down)— which I can respect. They see it as 'profiting off of failure.'

However, short sellers keep the market honest. They offer a counter-balance to euphoria— providing a mechanism for unchecked bullish mayhem.

And if a short is wrong, you can lose MORE than 100% of your money.
Seems like a short seller will lose his shirt long before you need to shame him.

But be warned, you who thinks of short selling— there are risks abound. Do not try this unless you understand what you are doing. Even if you understand, shorting is not a tool that most people should be using.

So with the risks in mind, I scanned the horizon for a short opportunity to jump out at me.

One did on November 29th, 2022.

China had announced the end of Covid-lock downs and many Chinese stocks were pumping.

In particular, $NIO the Chinese electric car manufacturer, was up 5% on the day because of the news.

I knew:
  • Nio was losing money, and only had enough cash to survive a couple more years
  • Gross profit margin was decreasing
  • The delivery forecast in Nov. 2022 was the best piece of news that had come out in a while from Nio. But I didn't trust that they could hit their numbers.

So I borrowed the stock and sold it for $10.56 a share.

What happened next?

$NIO proceeded to go UP 30%, as the market got even MORE excited about the end of Covid lockdowns.

Since this was a speculative trade, it probably would have been wise to have a mental stop-loss. Say, sell when the stock moves 10% against me. But nothing had changed other than the news about China. Once the news died down, shouldn't this stock come back down too?

Yes. It did.

The news blew over, Nio revised their delivery estimates down and the stock plummeted.

It was a wild ride, but today Nio closed 17% lower than when I shorted it.

So I bought the stock at $8.72 (which was 17% less than when I sold them for $10.56 in November) and returned the shares I had borrowed, keeping the 17% spread.

Lessons learned
  • Things can immediately go bad to begin with. This doesn't mean your busted, but the risk is elevated immediately. Shorting isn't low stress.
  • Accept delays in your thesis, but only to a certain point.
  • Shorting is a tool. It's not good or bad, just something you can use in certain situations. These situations often tend to be more speculative in nature.

Have you ever shorted a stock? What happened?

Are you looking at shorting anything now?
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with shorting the number one thing to watch out for is risk control. Without it you can be right regarding a stock but go bust because you didn't manage risk properly. I think it's also not appropriate for 90% of investors.
Redwire Insider Buying
About a year ago @taylorsulik gave a pitch for Redwire $RDW, a company that is accelerating humanity’s expansion into space. They make high reliability components for the next generation space economy, with valuable IP for solar power generation and in-space 3D printing and manufacturing.

Lately there has been a lot of insider buying and today the stock is up 48%.
You can check out Taylor's pitch here:
Thanks for highlighting this. The Space Economy being so nascent will not attract as much attention and eye balls however that tends to be the best time to research and analyse stocks.
What Former GE CEO Jack Welch said after his heart attack
Welch realized he wanted to change something about his lifestyle after a brush with death.

He started purchasing wine north of $ 100 per bottle ...
Money Supply is declining at the fastest rate ever
@pranshu created an awesome data-visualization showing how money supply has increased over the decades. The rate of increase accelerated drastically at the start of the pandemic. But now money supply has started to contract.

A contraction seems normal after such a drastic increase, right? Wrong— very rarely in history has money supply EVER contracted. We really don't have any historical precedent for increasing the money supply by this much and then taking it away so quickly.

Please follow @pranshu for more great data visualizations like this.

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