DubbyTGF wrote: Watchmeplz,
You sound like a youngster with very little experience or knowledge about the world, let alone equities markets. Not because you're wrong, but because you continue to try and speak with authority about things that you may not have a complete grasp of. It doesn't seem like a bad thing in this case, because anybody dissuaded by your arguements probably shouldn't be in an equity this risky in the first place.
It's just my perspective, because I'm hyper-conservative with what I consider worth speaking about, but there sure is a heck of a lot of, "probably," in your posts. Picking stocks is an act of arrogance, and you certainly have plenty to go around. What you say has a grain of truth, as a possibility, but you speak on it as if it's a certainty. Some humility would serve you good in the future.
The idea that BMO would agree to a credit facility so flippantly as you describe is a complete joke. In my experience, repossession usually means that a company is recovering their capital AT BEST. There is so much overhead to the process that it's just silly to think that any professional would sit down and consider that as a deciding factor for the loan.....It isn't BMO's first day in company financing and they will always have their bases covered and if there is anything left for the company no problem but that will be after BMO has what they have coming, per agreement.
"200m is literally worth .10c on the dollar IF that." There's so many facets to a lot of the things you say without giving them much thought. It's clear that you're just coming up with random numbers to suit your beliefs, but you're actually not too far off base when you say that the assets aren't worth their full valuation, to BMO.
Not because, "BMO doesn't realize yet," which actually made me laugh out loud when I read that. Like I said, no shortage of arrogance on your part, to actually think you know better than them how to run their business. In reality, it's because BMO is simply incapable of extracting the full value of these assets, or in the case of a deafult, would even like to. They're not even going to attempt to get full value from these assets, they're going to return as much capital as they can, as quickly as realistically possible. Likely still well above 10%. Supreme's facility has probably more resale/salvage value per sq ft than any other facility in the sector if Supreme was to fail/ go into receivership but this option is very likely not going to be a reality.Their facility is the most efficient in several areas, than others in the sector, their methods/ procedures and quality of product are second to none and significantly ahead of most.
First, however, if things were really in such a poor state as you state, Supreme would preemptively sell assets in the market to repay their loan or implement cost-savings / restructuring as you mentioned. The only way to extract optimum value from these assets is while they are fully operational and healthy. There is a lot of greed in the market, but to think that leaders are genuinely going to drive a business into the dirt just to line their own pockets, with little concern for their professional reputation or future, is absurd.
It happens, but it's not the baseline we should be talking about. It's more likely that they would get genuinely blindsided by unexpected headwinds and the appropriate discussion point would be to focus on what those headwinds might be. Instead, you just talk about how everything is terrible and everybody else is stupid for not realizing this. Even though they should command top dollar for plant/ equipment in liquiation, this scenerio is probably most unlikely for Supreme than any in the sector. The main issues that plague the sector right now are to produce quality product, at scale and consistantly, of which Supreme has focused on and mastered from the jump. This will be very hard to duplicate to any material degree for most and not possible for others and for those that are successful to some degree, would they be competitive?
Another concern about your strategy, as was already mentioned in this thread, is that you seem a bit short-sighted in your approach and overly focus on trivial realities. While it's true that the stock price is a representation of investor sentiment, just because it's gone in a certain direction, does not mean it will continue to. During the tech bubble, Amazon was valued over $100 at one point. In the following year, it tumbled down below $6 per share. That's a loss of ~95%, but Supreme and the Cannabis sector still havn't quite made it that far. Was Cannabis a bubble? Has it popped? I remember this well and of course thought there would be no way they could compete with Sears et al and a rebirth of Eaton's....and wisely followed Bill Gates's former management team to solid losses, all round.
I personally have the natural contrarian instinct that if the majority is doing something, I consider that a sign to do the opposite. With your approach of validating your opinions through stock-price performance, you should be returning at least 10% ROI per annum in the current market, are you? I know that I'm reducing it down more than I should, but in my experience it's this exact herd mentality -- feeling validated by others doing the same thing -- that leads to the biggest losses. On the flip side, it also leads to the greatest opportunities. People are currently criticizing Warren Buffet for his cash hoard, but we'll see. This is FIRE, they are the contrarian and have been from the start, they were going in the opposite direction with the focus on quality, "respect the plant", and no million sq ft+ grow area, 10,000 sq ft grow rooms to mitigate loss and over all management and control of the grow from start to finish.
Of the same note, I don't know how you justify a single 11M quarter as suddenly being the run-rate for the company -- there has to be a limit to short-sightedness and arrogance. While the dip versus last quarter is a concern, a savvy investor will just wait for the next quarter, rather than throwing the baby out with the bathwater. Supreme has already said multiple times that revenue in fiscal 2020 will be back-half weighted. The sales for last quarter was by design, that is clear with many shelves not restocked of late and the increase in inventory to ~$27.5mil by far the largest inventory to date. Add the production for Oct, Nov and Dec and they are definately loaded for solid increases in sales from here to FQ20. With full production from total grow area to start FQ21 sales/ revenue targets in guidance are more than achievable going forward.
I was actually a bit suprised, when looking at the Aphria fiscal 2019 numbers, as it's a good benchmark to compare Supreme to. They started in Q1 with revenue of ~$10 mil, followed by $17m, $55m and $96m. That's a similar performance as to what Supreme is anticipating. This data is useful because it isn't unheard of to see the numbers shake out like Supreme expects, but it's far from a guarantee. After however many quarters of strong growth, a hiccup like this is a buying opportunity at best and a wait-and-see moment at worst. Supreme's guidance and forward looking statements to date have not been based on hope or if this or that like most in the sector, but rather 5yrs+ of fine tuning to this end, all based on quality of product and facilities with input and support from some of the best in the cannabis world across the globe.
It is not any of my business to tell anyone to buy, sell or hold but I can tell you that I will be selling at much higher SP levels than this as this story unfolds, JMHO...Opt
I hope your other investments serve you well (a 10% return is nothing to scoff at),
-Dubby