Lover of trading, tacos, 3D/AR/VR, cryptos, and most things Japanese

This morning I did three trades: two “good” ones and one “bad” one.

The first trade was the “bad” trade in AMD, where I FOMO’d in to buying near the ATH after a pretty big run whose energy was starting to wane. I tried to play the bounce, but set my stop too tight and didn’t stick to plan to buy if broke 19.2. Missed it and tried to grab on the way up from 19.68, finally bought at 19.75 and it peaked at 19.88 before trading back down and stopping me out.

The second trade was also in AMD where I got in at VWAP and was playing for a bounce that didn’t happen. I got stopped out just under VWAP, where I had set my stop too tight, and it ran up a bit over before returning to VWAP.

I set the first stop at a good point, confirmed the downtrend, but the second stop was set too close to VWAP where it pipped and popped from there. I didn’t have my indicators on when I jumped in – no VWAP, TTM, RSI – because I was too eager to get in. 🙂 The market was trending down, SPY/WIM/QQQ were all down, and I should have reversed my position and gone short. I also couldn’t trade AMD again for 4 days because I don’t have a large enough balance to be considered a pattern day trader, and TDA would have locked my account.

The third trade of the morning, NCR, was in play from the SMB Radar screen at 8.2. It had been there for an hour or so, with TTM levelling off about 8 up bars and bought at 28.49. It hit a consolidation phase, with the uptrend continuing, and I set my stop at 28.35 looking for a pop. I got a little one, with the RSI at 58 and fairly flat. The play was right, the move was right, and I was holding until Reason2Sell. NCR was trending up slowly, pulling back to higher lows and pushing up to higher highs in a tight range. TTM was staying postive, pulling back a bit but fairly flat too. I was being patient, sitting back and watching as NCR continued to stair step up. Volume decreased to less than 10k, flat chart, flat TTM. SPY at LOD at 282.75, and NCR started slowly trending down. I moved my stop to below VWAP as SPY started to turn around at 9am MT, approaching lunchtime in NYC on a summer Friday. NCR was fighting going down, with flat flat flat bars, volume under 5k, and no liquidity. SMB Radar still had it at a 7.5, #4 on top, when I stepped away to go to the bathroom.

When I got back, the dam had broken, and NCR had tanked fast, hitting my stop below VWAP. The SPY/QQQ/IWM were all up, so the move didn’t correlate with the larger market. In hindisght, I could have gotten out at with a small profit which felt like the top in my gut at the time, but I stuck with the trade to see how it developed. It was a good trade, a good exercise, and good for patience, which I still need to work on. However, I didn’t take profits when I sensed the turn in the stock, mainly because they were so small, and I need to remember that small gain is better than a loss. That said, I was working on practicing staying patient, which I did pretty well, and so I consider this a “good” trade – I set my target and stops and waited for it to develop.

Funko Inc ($FNKO)

Background

Funko is a pop culture consumer goods company serving the United States, China, Vietnam, and the United Kingdom. They create the very popular “Pop!” action figures with stylized, oversized heads, that have been extremely popular with collectors since debuting in 2008.

Funko IPO’s in November of 2017 at $5, opened at $7+, and ran up to $9.41 in quick order. A few weeks later, it dropped down to $6 and has been steadily growing up to $16 most recently.

Stats

Market Cap: $778M
ATR: 1.82
Short %: 4.03
Institutional Ownership: 78.81%
Avg. Daily Volume: 266K

Strengths

In addition to its licensing contracts with over a thousand entities ranging from the NFL, to the Marvel Universe, to Disney, to Pokemon, to WWE, Anime, and more, one of the key advantages Funko has is its speed to market for new products. Funko can bring a new product from concept through design and approval to production in as few as 70 days. This gives them a unique ability to capture and capitalize trends in pop culture. For example, when Game of Thrones unveiled a new character in its season finale, Funko was able to show HBO a printed and painted concept, get the go-ahead, and get the figures on the street in less than three months. Contrast this with giants like Hasbro or Mattel, which not only do not specialize in figures, but also usually take at least 12-18 months to get a new product to market.

In addition to the action figures, Funko produces whimsical pop gear such as tee shirts, purses, bags, pen toppers, and more. Their unique design look allows them to charge a premium for their items, yet they keep the price point of their action figures at under $10 for most. Their exclusive runs, such as the 10″ Thanos from Infinity War, were hugely popular at a higher price point.

Funko’s retail strength lies in its partnerships with big brick and mortar stores like Target and Walmart, where they are expanding their retail shelf space. Funko has developed a “pop store within a store” that leverages many of their properties in an expanding retail space. Years ago, they only had a three-foot end shelf at target, now they are positioned in five different areas of the store. In addition, Funko’s partnership with Target has produced “Funko Fridays”, and eight week exclusive sale that allowed Target customers to buy exclusive gear on consecutive Fridays. This resulted in a jump in Target’s site traffic of over 6500%.

Funko has created a platform, like Lego, that is not fad-dependent. They have a distinct style that is globally enjoyed. They are expanding their footprint in Europe. They had 59% growth in the Pop! figures last quarter, with 39% growth overall, and are guiding toward a high teens to low twenties growth rate for the year. The low volume indicates that this is a relatively unknown newcomer, perhaps having been forgotten by the street after its IPO.

Funko has also acquired an animation studio with the aim of creating content for social media and perhaps even following in Lego’s footsteps and ultimately creating feature films. While the feature film idea is pure speculation on my part, Funko has reported over 40 million views of its animated content last year. By the end of Q2 this year, they had over 50 million views, signaling a double in impressions for their video content.

Risks

Funko is a fast growing pop culture consumer products company. The stock has pulled back from its ATH and when I looked for possible reasons, I discovered that there are at least two pending class action lawsuits against them for misrepresenting their growth rate to investors in preparation for the IPO last November. I didn’t learn much more than that, and the market seems to either not know or not care about the lawsuits. I suspect, though do not know, that these types of filings may be commonplace when investors do not get the price they wanted or expected during the IPO. That said, this does cast a question over Funko’s reported earnings – at least prior to the IPO. From what I’ve learned listening to last quarter’s earnings call, the anticipated growth rate is strong. I am looking forward to the next earnings call, in a few weeks or so, to shed more light on what is going on as I’m sure the lawsuits will come up during the Q&A session after the report.

Summary

I like Funko products and I like their stock. I wish I had thought to look into them earlier, as I would have likely gotten in last year at a lower price point. That said, I like the prospects and will be initiating a small position soon, with the possibility of adding to it after reviewing their Q2 earnings call.

Today I initiated two positions in my Roth IRA – Salesforce ($CRM) and PTC Inc. ($PTC), and added to my core crypto position in Cardano ($ADA). I had transferred my 401(k) plan from Accenture to the Roth in cash, and needed to put that money to work. I had established positions in both securities in my Otaku Ventures trading account, which had already seen positive returns, and my outlook for both these firms into earnings is strong, so I wanted to make the buys in my Roth right away.

Salesforce ($CRM)

Salesforce has been crushing it for years now, consistently remaining one of the top ranked tech companies serving Enterprise. I have been watching this one go up for a long time, but hadn’t put any money to work in it. They report earnings in about a month and have been trending up, so I hopped on the trend and initiated a core position now, well ahead of earnings. If history repeats, it will continue to trend up into earnings and get a nice pop when they report.

$CRM had just hit a 52-week high and had started to pull back a bit when I decided to buy. My initial purchase was at $141.80, just to establish the position in case it continued going up, and I waited for a pullback. In a few days, CRM pulled back to $136, where I added to my position for a net average price of $138 in my Otaku account. I was later to the party for my Roth and initiated that position Friday morning at $147.50. CRM hit a new ATH on Friday at nearly $149, before closing down to just above where I got in.

PTC Inc. ($PTC)

I was clued in to PTC when discussing Akamai’s firm foundation providing network and hardware infrastructure for video streaming with Christine. The topics ranged to Akamai’s IoT prep, at which point I asked what company is better positioned than Akamai for IoT. Christine mentioned PTC, and I jumped in to the research. PTC is an IIoT (Industrial Internet of Things) provider that is leveraging Microsoft’s HoloLens tech to provide AR solutions for manufacturing, among other things. They have just partnered with Rockwell Automation, including a $1B investment from Rockwell that will be used to buy back PTC stock, thus reducing the float. The partnership is to be a close one, with Rockwell’s extensive capabilities directly adding to PTC’s bottom line.

In addition to the natural synergies between the two, PTC partnered with Microsoft and another firm to improve its AR technology. This partnering brings things such as real-time simulation data overlays to PTC’s modeling software. So instead of modeling something in one program, exporting it to another to run analytics, fixing issues in the first program, exporting again to verify the fixes took, over and over again until the product is solid. Now the simulation overlay allows modelers to see in real time things such as stress points and structural weaknesses directly in their modeling program, eliminating the need to export and review in another. This alone will reduce modeling time substantially, in addition to having a high ‘cool factor’. 🙂

I initiated my position in my Roth at $98.50, up about three dollars from where I initiated the position in the Otaku Ventures account. $PTC finished the day just off the highs, almost matching it’s all-time high of a few weeks ago. The big catalyst here is that they are reporting earnings this week, and I’m expecting a good pop. PTC guides conservatively and didn’t factor in the partnership synergies into their outlook. It looks like they prefer UPOD – Under Promise, Over Deliver – which is a method I prefer as well.

It may be too early to see any revenue impact from the partnerships, as they were just announced, but I’m looking forward to listening to the earnings call to hear their forecasts.

Cardano ($ADA)

Coinbase announced they are considering adding five new currencies to their platform, the most interesting of which, to me, is Cardano (ADA). I have a held a core position in Cardano for some time, and have been looking for a catalyst to add to it. This was the trigger for me, and ADA jumped more than 10% on the news. If this had happened last year, Cardano would have jumped substantially higher but alas, the crypto space has changed. Still, the outlook for Cardano looks bright, and I’m glad to have added to my position. Perhaps Asia will hear the news by Monday and we’ll see another substantial pop.

Summary

I traded well this week, overall. I did jump in a bit hastily to CRM, which is something I still need to work on. Just because I have a great idea does not mean that that is the right time to buy. I stuck to my plan, obeyed my rules, and established key positions as intended. All of my positions were profitable by the end of the day.