We'd better give some to Disney (DIS), who lost $5Bn in Q2 and has given up on releasing Mulan (live version) in theaters and will go straight to video in September. The Covid-19 pandemic has closed Disney’s theme parks, virtually eliminated movie distribution and curtailed live sports, a key programming source for Disney TV networks. However, the world’s shut-in nature has helped the company’s Disney DIS 0.81% + streaming service secure more than 60 million users in nearly nine months, a mark that Netflix took about eight years to achieve.
In other playground stocks, WYNN also lost $5Bn this morning in their Q2 report and the company has $3.8Bn in cash left and already has $12.8Bn in debt. The company is trading at about 50% of it's all-time high despite revenues being off 94.8% for the quarter and despite the fact that WYNN has only made about $2Bn in the past 5 years so a $5Bn loss is wiping out 10 years+ of profits.
Of course the nice thing about WYNN going forward is it will be 10 years until they have to pay taxes again but it could be 100 years if they lose another 5Bn in Q3 and go bust – all this optimism assumes things will be back to normal next year but, between now and then, how much debt damage will be done.
Unfortunately, we simply don't have enough information to take a stab at WYNN for $8Bn when they are losing $5Bn a quarter. What rational investor would pay $8 to lose $5 per quarter? These losses are real, they have to either borrow more money next Q (you already owe $13 as a proud shareholder) or find more investors, which will dilute your position. As fun as it would be to own the stock going forward, even if they make $500M/year, there's this debt to pay and $8Bn is still 16x FUTURE earnings – that's not a good deal by any stretch.
Most stocks are like that at the moment and so is the entire market. We're irrationally ignoring the the potential downside to a second wave of viral infections and we're still in the middle of the first wave with 156,839 dead Americans among the 4,771,846 infected. Other poorly-run 3rd World countries like Brazil are now catching up to us with 2.8M infected and India has now crossed 1.9M infections so the over 1M club is growing along with other distastrous nations like Russia, South Africa, Mexico, Peru, Chile, Columbia and Iran.
That's the company the US is keeping these days but it's our own Rogue Nation that is most dangerous to the World because we are major trading partner with so many first-world countries and our tourists keep invading their lands bringing disease as well as our thuggish style of politics and we have become a serious nuclear threat as well to the Civilized World as you never know what our crazy leader is going to do next!
We don't know what the crazy markets will do next either. Yesterday we spent $35,000 to add $100,000 more protection to our portfolios, using about 1/3 of our unrealized gains for the month to hedge our positions and hopefully lock in the $65,000 we've made on paper.
We've been holding onto our longs expecting the second round of stimulus and it's supposed to be coming any day now but, after that, then what? There WILL be more stimulus but will it be enough? Our viral cases have calmed down again now that we've gone back to lockdown but what will happen to WYNN, DIS and thousands of other businesses that need people to leave their homes to make a profit?
Middleby (MIDD) just announced this morning, turning into another nice winner in our Long-Term Portfolio:
- Adjusted net earnings were $30.4M, or $0.55 per diluted share, beating estimates by $0.13, but down 69% from $1.80 a year ago.
- Excluding the impacts of acquisitions and foreign exchange rates, sales decreased 39.8% in Q2, reflecting the impact of COVID-19.
- "As we progressed through the month of July, business activity across all of our foodservice segments demonstrated continual improvement," said CEO Timothy FitzGerald. "While the current environment is subject to uncertainty, we remain confident in our ability to leverage the strength of our industry-leading business platforms while continuing to exercise our proven financial discipline."
- "We are well-positioned across all three business segments to capitalize on emerging trends that will accelerate during this period and we are committed to maintaining the ongoing investments to support our strategic sales and technology initiatives."
- MIDD +5% premarket
- Q2 results
| MIDD Long Call | 2020 18-DEC 100.00 CALL [MIDD @ $85.73 $0.00] | 10 | 1/23/2020 | (135) | $17,700 | $17.70 | $-11.10 | $64.20 | $6.60 | $0.00 | $-11,100 | -62.7% | $6,600 | ||
| MIDD Short Put | 2020 18-DEC 75.00 PUT [MIDD @ $85.73 $0.00] | -20 | 3/23/2020 | (135) | $-66,000 | $33.00 | $-25.95 | $7.05 | $0.00 | $51,900 | 78.6% | $-14,100 | |||
| MIDD Long Call | 2020 18-DEC 30.00 CALL [MIDD @ $85.73 $0.00] | 20 | 3/24/2020 | (135) | $40,740 | $20.37 | $35.18 | $55.55 | $0.00 | $70,360 | 172.7% | $111,100 | |||
| MIDD Short Call | 2020 18-DEC 50.00 CALL [MIDD @ $85.73 $0.00] | -20 | 3/24/2020 | (135) | $-16,220 | $8.11 | $28.79 | $36.90 | $0.00 | $-57,580 | -355.0% | $-73,800 |
We had adjusted our original spread and left the long calls and the short puts because we still had hope and now we are catching up on thiose as well and our new spread is deep in the money and very profitable. There are plenty of sensible things you can invest in that will make plenty of money. Our 3/23 trade idea was only net $9,040 and already it's net $23,200 so up $14,160 (156%) in just 4 months and well on it's way to the full $40,000 we expect in December so it can still almost double from here – even if you missed our original entry!
