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PHOTOGRAPHS: VINTAGE IMAGES PROVIDED BY STEPHANIE STUCKEY FROM HER GRANDFATHER’S ARCHIVES
Tourists found souvenirs of all kinds among the pecan log rolls and pralines at the Stuckey’s roadside oasis.
18
13 | Replays, Restarts & Comebacks Luckbox celebrates come-from-behind sagas and revisits time-honored investment strategies.
14 | Replay: Pinball Flips Back
Pinball has entertained Americans since the Depression. It’s hit some bumpers along the way, but it’s bouncing back.
18 | Stuckey’s: On the Road Again
The popular roadside oasis of yesteryear is making a comeback, thanks to the granddaughter of the founder and the underappreciated pecan.
24 | Luckbox Leans in with Shinola Detroit
Once the name of a shoe polish introduced in 1877, Shinola Detroit has reinvented the brand with premium luxury products.
JUNE 2022
26 | The New Look of Magazines In an age when screens can become a way of life, the look and feel of colorful ink on paper is making a bit of a comeback.
30 | Goodbye YOLO Brick Road
Active investors can bring back four tried-andtrue investment strategies, particularly if their you-only-live-once tech and communications stocks have tanked.
June 2022 | Luckbox
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L U X U R Y P E R F O R M A N C E P A S S I O N
Custom Outdoor Kitchens by Kalamazoo
888 340 4361
Crafted without compromise
kalamazoogourmet.com
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editor in chief ed mckinley managing editors yesenia duran elizabeth schiele associate editors kendall polidori mike reddy editor at large garrett baldwin technical editor james blakeway contributing editors vonetta logan, tom preston mike rechenthin Spanish tennis star Rafael Nadal poses with the Norman Brookes Challenge Cup in January 2022.
trends life, luxury & the pursuit of happiness GAME THEORY
35 Memorable Sports Comebacks RECORD HIGH
38 Sound Revivals ROCKHOUND
40 Radkey: No Rules Punk SENTIMENT
42 Are Big Cities Past Their Prime? WHEELS
43 The Bug’s Bus is Buzzing Back FINANCIAL FITNESS
44 Come Back to Fitness CALENDAR
PHOTOGRAPH: ANTOINE COUVERCELLE
45 Bicycles, Blues & Bourbon
comments, tips & story ideas feedback@luckboxmagazine.com
actionable trading ideas
47 The Blunt Truth About Pot Stocks
TRADER
63 Meet Aneta Genova
CHEAT SHEET
Speculation
50 Political Fortunes NORMAL DEVIATE
52 Short Puts in Small Stocks
contributor’s guidelines, press releases & editorial inquiries editor@luckboxmagazine.com advertising inquiries advertise@luckboxmagazine.com subscriptions & service support@luckboxmagazine.com
ERT Long Call INS
THE PREDICTION TRADE
contributing photographer garrett roodbergen editorial director jeff joseph
trades&tactics CHERRY PICKS
creative directors katherine bryja, tim hussey
8
FAKE FINANCIAL NEWS
EV Rider
LAST PICTURE
64 Get Outdoors
media & business inquiries associate publisher elizabeth schiele es@luckboxmagazine.com publisher jeff joseph jj@luckboxmagazine.com Luckbox magazine, a tastytrade publication, is published at 19 N. Sangamon, Chicago, IL 60607
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54 Down But Not Out
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56 Bitcoin’s Fifth Comeback
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TACTICS BASIC
59 Return to Value Luckbox magazine
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60 Cramer’s Comeuppance
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62 Slow-motion Rewards
On the cover: Illustration by Lilian Todd
2019 & 2020 Best New Magazine Folio Award for Custom Content
Luckbox magazine content is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities and futures can involve high risk and the loss of any funds invested. luckbox magazine, a brand of tastytrade, Inc., does not provide investment or financial advice or make investment recommendations through its content, financial programming or otherwise. The information provided in luckbox magazine may not be appropriate for all individuals, and is provided without respect to any individual’s financial sophistication, financial situation, investing time horizon or risk tolerance. luckbox magazine and tastytrade are not in the business of executing securities or futures transactions, nor do they direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. luckbox magazine and tastytrade are not licensed financial advisers, registered investment advisers, or registered broker-dealers. Options, futures and futures options are not suitable for all investors. Transaction costs (commissions and other fees) are important factors and should be considered when evaluating any securities or futures transaction or trade. For simplicity, the examples and illustrations in these articles may not include transaction costs. Nothing contained in this magazine constitutes a solicitation, recommendation, endorsement, promotion or offer by tastytrade, or any of its subsidiaries, affiliates or assigns. While luckbox magazine and tastytrade believe that the information contained in luckbox magazine is reliable and make efforts to assure its accuracy, the publisher disclaims responsibility for opinions and representation of facts contained herein. Active investing is not easy, so be careful out there!
June 2022 | Luckbox
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COMEBACK IDS Get back, get back (yeah) Get back to where you once belonged Get back (yeah), get back Get back to where you once belonged —Get Back, The Beatles, 1969
T
wo big stories are dominating the financial pages as Luckbox goes to press—the stock market sell-off and Elon Musk’s acquisition of Twitter. Both got us thinking about comebacks. Active investors are losing sleep, tossing and turning as they fret about market strategy. In their sleep-deprived minds, they create scenarios for how each approach to active investing could succeed or fail. Meanwhile, Musk faces his own daunting challenge. If he acquires Twitter, how will he rebuild it? The task Musk has chosen has something in common with the situation that bedevils the investment community. The only way out of either is through the id, that sometimes wayward component of the human psyche. The id is the only part of the personality present at birth, according to pioneer psychologist Sigmund Freud. It’s that primitive piece of the personality that strives to fulfill the most basic urges. It could be what drives investors to struggle for personal comebacks in today’s uncooperative market. It might also drive Musk to innovate for profit. Momentum—whatever the source—is nothing new for Musk. Multiple sources, including 15 Facts About Elon Musk on moneycontrol.com,
have captured the highlights of his wild ride. At age 12, the South African native who became the world’s richest person invested his own money to create a space combat game cleverly named “Blastar.” He sold it to PC and Office Technology magazine for $500. Musk was 28 years old in 1999 when he and his brother, Kimbal, sold their Zip2Map and business directories to Compaq for $307 million. That same year, Musk co-founded an online bank called X.com. It merged with Confinity Inc. to form PayPal, which eBay bought in 2002 for $1.5 billion. Musk walked away with stock valued at $165 million. In 2002, Musk started SpaceX in the belief that humankind must become interplanetary to survive. He also found space travel too expensive. The first SpaceX success came with the launch of the Falcon 1 in 2006, and then the Falcon Heavy in 2018. The Falcon Heavy carried twice the cargo of its closest competitor at one-third the cost. The company has helped reduce the cost of a typical space station mission from $1 billion to $60 million. Tesla was started in 2003, and Musk got involved the next year by investing $6.5 million. By 2008, he had risen to CEO and product architect. The company has produced 70% of the electric vehicles in the U.S.
Thinking Inside the Luckbox
Luckbox is dedicated to helping active investors achieve skill-derived, outlier results. 1 Probability is the key to improving outcomes in the markets and in life.
4
2 Greater market volatility brings greater opportunity for astute active investors.
3 Options are the best vehicle to manage risk and exploit market volatility.
4 Don’t rely on chance. Know your options because luck smiles upon the prepared.
SpaceX and Tesla qualify as comeback stories because both ventures came close to failing. The first three SpaceX rockets exploded upon landing, but the company succeeded on the fourth attempt. The original Tesla Roadster was plagued with production problems, but the Model Y and Model 3 each sold well over 100,000 units in 2021, placing them among the 20 top-selling vehicles in America. On April 26, 2022, Twitter’s board accepted Musk’s $44 billion bid to acquire the public company. He has since procured investment commitments from Oracle co-founder Larry Ellison and from institutional investors like Sequoia, Fidelity and the cryptocurrency platform Binance. In early May, The New York Times Daily Business Briefing released details of the pitch deck Musk presented to prospective Twitter investors. The revamped business plan’s highlights include growing revenue from $5 billion to $26.4 billion by 2028, reducing reliance on advertising revenue from 90% to 45% by generating $10 billion in subscriptions, launching a payments platform targeting $1.3 billion by 2028, growing the user base from 217 million at the end of 2021 to 931 million in 2028, and launching “X,” a yet-to-be-revealed subscription-based product projected to acquire 9 million users in its first year. At press time, a Musk-Twitter deal remained uncertain. Nevertheless, Musk’s detailed plans to make money with Twitter, along with other restart stories in this issue, may inspire readers to work out their own comeback schemes— and then get some much-needed sleep.
Ed McKinley Editor in Chief
Jeff Joseph Editorial Director
Luckbox | June 2022
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SCAN THIS
OPEN OUTCRY Do you approve or disapprove of Elon Musk’s acquisition of Twitter?
Somewhat approve Strongly approve Approve —Luckbox Readers Survey (April)
9% 52% 61%
Women 53% Men 65% Democrats 53% Republicans 71% Millennials (25 to 40 years old) 65% Approve 59% —Harvard CAPS-Harris Poll (April 2022) If Musk’s motivation and character is legit, it will result in the free speech our Founding Fathers envisioned, with an internet technology they never could have imagined. —Robert Richardson Sarasota, FL Twitter is a powerful public forum with the ability to amplify misinformation and hate speech if not moderated. We cannot trust Elon Musk (or any private owner) without some sort of accountability and oversight. —Mike Butler Steilacoom, WA I am a strong believer in free speech, whether I agree with the speaker or not. Content moderation turns into censorship. It comes down to the person with the finger on the button. —Tom Bartel Plano, TX Open sourcing the algorithms to be transparent to content moderation and suppression is brilliant. —Tony Provenzano Edmond, OK
More Musk How his brain works
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There’s more to Luckbox than meets the page.
Vonetta sh*t-talking—oops—I mean ‘spilling the tea’ on The Creator’s Model 3. The music section. Great. —Sascha Lynch Decatur, GA I love Luckbox. It’s eclectic in nature, which keeps it interesting, and there are often actionable ideas in the articles. —Bob Grafals Acworth, GA My likes are the innovations coming up in the energy space. However, my dislikes are the inability to develop sustainable solutions irrespective of the innovations. —Wale Johnson Nigeria
Look for this QR code icon for videos, websites, extended stories and other additional digital content. QR codes work with most cell phones and tablets with cameras.
1 Open your camera
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Two ways to send comments, criticism and suggestions to Luckbox Email feedback@luckboxmagazine.com Visit luckboxmagazine.com/survey A new survey every issue. Your thoughts on this issue? Take the reader survey at luckboxmagazine.com/survey
3 Click on the link that pops up
4 Enjoy the additional content
5/13/22 10:59 AM
SHORT INTEREST
COMEBACKS “It was our family legacy. It really broke my heart to drive by and see Stuckey’s stores that had turned into strip bars and poker lounges.”
SEE PAGE 18
60
new print magazines launched in 2020
—2021 Magazine Media Factbook
SEE PAGE 26
—Stuckey’s CEO Stephanie Stuckey in The Atlanta Journal-Constitution
TURN OFF THE MEMES. THIS PARTY’S OVER LIKE IN 2000. The dramatic plunge in stock prices is rooted in over-valuation. Investors are heading to less-exciting parts of the market. —John Authers, Bloomberg, May 10, 2022
55%
of Luckbox readers over the age of 50 are familiar with the Stuckey’s brand.
—The Luckbox Readers Survey
SEE PAGE 18
SEE PAGE 30
In the first six months of 2021, the average used pinball machine sold for $4,003, up $696 or 21% versus 2020. —This Week in Pinball SEE PAGE 14
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“No one buys CDs anymore. The only way you can get money from fans of more leftfield music is through T-shirts and vinyl (and cassettes, to some freaks).” —Josh Cohen of the independent record label Memorials of Distinction, NME
SEE PAGE 38
Publicly traded cannabis companies have seen their stock prices plunge by as much as 70% since early February 2021, reflecting the lack of progress in passing legislation to reform the nation’s marijuana laws.
SEE PAGE 49
—MJBizDaily
$27.9 B
Not-so Magnificent
Meta’s Q1 ad revenue, up 6.6% from the prior year —The Wall Street Journal SEE PAGE 54
SEE PAGE 60
THOUGH BITCOIN AND ETHEREUM HAVE BOTH HAD UPS AND DOWNS SHORT OF THEIR ALL-TIME HIGHS, MANY EXPERTS STILL EXPECT BITCOIN’S PRICE TO EXCEED $100,000 AT SOME POINT.
SEE PAGE 56
—Time June 2022 | Luckbox
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FAKE FINANCIAL NEWS
EV Rider
Harley-Davidson is finally producing bikes that environmentally conscious younger riders could love. But is it too late for another comeback? By Vonetta Logan
A
ny list of prominent companies that have been around more than 100 years would probably include CocaCola, Kellogg’s and Harley-Davidson. Coca-Cola started as a temperance drink, cornflakes as an “anti-masturbatory” cure and Harley-Davidson as America’s original freedom machine. Um, I know which one I’d pick. The brevity of such lists demonstrates the trials and tribulations of century-long success. Harley’s latest earnings report shows its global sales are up 2%, but its sales in North America are down 5%. It’s been a rocky road for the bar and shield brand. Harley is suffering from the same woes that
plague loan officers, corporate boards and both political parties: They’re running out of rich, old, white men. Harley helped create the biker way of life beloved by many in that dwindling demographic, but can it expand its audience? Starter culture Harley-Davidson was founded in 1903 in a barn in Wisconsin. The company will celebrate its 120th Anniversary next summer in Milwaukee, but while thinking about the future, company executives can’t help but be reminded of the past. Harleys didn’t truly enter the American zeitgeist until after World War II. The company
In 1985, the average American motorcyclist was 27 years old. By 2003, it was 41, and by 2018 it was 50. 8
sent 160,000 bikes overseas to aid the war effort and then brought them back stateside, used and abused. Harley sold them to vets for cheap. You could chop off the FUBAR stuff and do a victory dance all over town with your sweetheart on the back. These so-called choppers solidified their place in American history during the 1960s. Easy Rider stars Dennis Hopper and Peter Fonda heading across America on their custom bikes, abetted the indelible, iconoclastic image of bikers as individualistic, violent and dangerous. In the film, Jack Nicholson says to Hopper that “they’re not scared of you, they’re scared of what you represent.” To which Hopper responds, “All we represent to them is someone who needs a haircut.” Nicholson offers a delicious reply: “What you represent to them is freedom.” According to Business Insider, “from 1945 to 1970, the number of registered motorcycles on the road jumped from 198,000 to 2.8 million.” Harley doubled down on these core customers of disaffected bad boy boomers but it left the rest of the market wide open. Honda stepped in to market small, easy-touse motorcycles to people from all walks of life. Ads showed colorful, peace-loving hippies, moms wearing tennis whites and business-
PHOTOGRAPH: SHUTTERSTOCK
Harley-Davidson is expanding beyond the cruisers pictured here to offer an electric bike and an adventure bike.
Luckbox | June 2022
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men in suits. “You meet the nicest people on a Honda,” the ads chirped. By the end of the 1970s, Harley wasn’t just selling bikes, it was selling a lifestyle. It was Harley bikers versus the world.
PHOTOGRAPH: KENDALL POLIDORI
American muscle In 1969, the same year Easy Rider was released, Harley-Davidson was facing bankruptcy and needed a lifeline. AMF, a company known for making bowling equipment, took over the production of Harley-Davidson. Yeah, that makes sense. Take a gander at the AMF Harley snowmobile. Yikes! During the 1970s, as America was gripped by recession, low-cost bikes from Yamaha, Kawasaki, Honda and even Triumph became popular with Americans, especially the 750cc Hondas. In 1981, a group of senior executives bought Harley back from AMF, but they still needed help. In 1983, Harley persuaded then-President Ronald Reagan to impose a 49% tariff on imported bikes over 700cc. Harley’s net income rose from $2.9 million in 1984 to $4.3 million in 1986. Harley went public in 1986 and continued to rake in cash until the millennium. In 2006, Harley sold more than 260,000 motorcycles, netting over $1 billion in profit as its core consumer reached middle age. Then came another recession. By the end of 2009, Harley reported $55 million in losses. So the company doubled down on what the core consumer wanted: big, heavy, loud bikes. It worked. Profits ramped back up to $844 million by 2014. But the double-down and a series of stock buybacks really just masked the brand’s long-term issues. OK, boomer Harley hasn’t suffered from a catastrophic decline, but instead a tedious and persistent erosion of a oncegreat brand. Harley-Davidson has always sold a “lifestyle,” but what was cool 40 years ago isn’t cool today. We’ve shifted from The Wild One, starring a delectable young Marlon
The Harley LiveWire is the closest thing to a perfect urban bike I’ve ever ridden. Brando, to Wild Hogs starring Tim Allen and John Travolta doing Harley cosplay. What was once the answer has now become the punchline. According to the Motorcycle Industry Council Bureau of Statistics, “In 1985, a motorcyclist’s median age was 27 years old. In 2003, it was 41, and by 2018, the median age for a motorcycle rider was 50 years old.” One of Harley’s current top-selling brands is a Trike that for all intents and purposes is a chromed-out mobility scooter. After the recession, Harley doubled down on the company’s core consumer base of middle-aged white men, but while trying to appeal to millennials, the company has become the New Balance sneaker of the motorcycle world. In 2018, when then-President Donald Trump levied tariffs on steel at 25% and aluminum at 10%, the world responded by kicking us in the American jewels and imposing retaliatory tariffs on Kentucky bourbon, Levi’s jeans and Harley-Davidson motorcycles. Harley had to eat $2,200 on every bike it sold in the EU, so it ramped up production in India, Brazil and Thailand, but that just made the core demographic angry that all of the bikes weren’t made in America anymore. So, what’s a brand to do? Remember Honda and the nice, smiling lady on the motorcycle?
The Harley-Davidson bar and shield logo symbolizes stability and strength, the company says.
The future of the funnel A YouTube commenter wrote, “HarleyDavidson: Buy the technology of the past at the price of the future.” Harley is known for big, heavy bikes that weren’t even on the performance spectrum but carry an average price of more than $20,000. So what’s antithetical to old, rich, white guys? It’s me, I’m the solution! I am young (relatively speaking), female and a minority. I’m a triple threat! Did you know that women are the fastest-growing rider segment in power sports? Female riders now account for more than 20% of motorcycle riders. I have always loved bikes, and my current bike, a Triumph Tiger 800, is light and has a reasonable seat height. It’s all tricked out with aluminum panniers but still cost less than $10,000. Get your motor running I had never ridden a Harley until last week because I was never in Harley’s crosshairs. I’m manufacturer agnostic, just looking for the best bike that fits me and helps me attain my goals as a rider. But, I got to test ride Harley’s brand new Pan America 1250 Special, and I’m still picking my jaw up off the floor. First, a short primer on Adventure (ADV) motorcycling. Most people can name only two types of motorcycles: Harleys (cruisers) and crotch rockets (sportbikes). But there are other types of motorcycles. The fastest-growing market is the ADV or adventure segment. It’s a class of bikes, not one specific bike. ADV bikes have various displacements, on- and off-road capability, and luggage or bags for traveling great distances and carrying camping gear. If Harleys are the bad boys of the motorcycle
June 2022 | Luckbox
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BY 1893 INSPIRED
F E W H A S T H E S P I C E . H A N D - M A D E I N S M A L L B ATC H E S, U S I N G A M A S H-B I L L INSPIRED BY WHISKEY ’S PRE-PROHIBITION GOLDEN ERA. F E W COMBINES A HIGH RYE CONTENT & PEPPERY YE A ST TO MAKE A UNIQUELY SPIC Y BOURBON.
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PHOTOGRAPH: KENDALL POLIDORI
world, ADV bikes are the nerds. Seriously, my bike looks like a riding mower and a robot had a baby. Pan America has been a stunning success in a segment of the industry prepared to hate it on sight. Harley-Davidson Senior Public Relations Manager Paul James told Forbes: “Really, we were aiming at customers who had never set foot in a Harley-Davidson dealership before—and saw no reason to. This is a motorcycle aimed at them—something they see themselves on and will give us a shot because it is an outstanding motorcycle and very competitive in the space.” The way Harley turns itself around is not to lean more into the brand, but to lean away from it. The branding on the Pan America is minimal. There’s not a lick of chrome, and the bike features Harley’s new 1250 revolution max engine. Finally, it’s a Harley that shows up on the performance spectrum. This bike puts down 150 hp, and the company shockingly sold more than 2,500 units last year. Chicago Harley-Davidson Wrigleyville was kind enough to loan me a bike for a day, and I was super impressed by the fit and finish of the bike. It’s heavy at 570 pounds but that’s almost Kate Moss-like compared to Harleys that can weigh over 900 pounds. BMW leads the ADV market, and its R 1250 GS Adventure bikes set the standard. But BMW apparently believes that everyone is a tall German man, and the seat height is alarmingly high, at around 35 inches. ADV bikes are tall to maneuver over off-road terrain such as rocks. Harley’s Pan America adaptive ride height (a $1,000 option), allows the bike to “sink” one to two inches when the bike comes to a stop. Then the bike raises itself as you gain speed. I am 5 feet 2 inches tall with a 31-inch inseam, and I had no problems mounting the bike and stopping with confidence. The weight of the bike disappears when you start moving. The engine is buttery smooth, and riders can choose
13%
of Luckbox readers own one or more motorcycles
The Harley Pan America has been a stunning success in a segment of the industry prepared to hate it on sight. among modes to customize how much power the bike puts out. The bike has all the technical features of other premium ADV bikes, and the reviews have been outstanding. The only caveat is it’s still pricey at an average, out-the-door price of $24,000. An electric future Electric motorcycles are an integral part of Harley-Davidson’s “Hardwire” plan to restructure the company. Last year, Harley announced it was spinning off its LiveWire bikes as a new brand called LiveWire One. Harley dealers will offer the new standalone nameplate in kiosks to separate the bikes from the gasoline-powered models. The company is also reducing the price of its first electric bike from $29,979 to $21,999 (not including state and federal EV credits). I took a trip down to Chi-town HarleyDavidson in Tinley Park, Illinois, to test one out. The bike is small, but classic looking, with a stylish round headlight, sleek design and a
comfortable seat. Because the bike is electric, there’s no gear shifter or a clutch. Hop on, twist the throttle and you’re off. The “po-tato, po-tato” sound of a classic V-twin is gone, replaced by a zippy whir. The bike has a reported range of 140 miles per charge, but reviewers found that number varied based on how they rode. The bike can recharge within an hour on a fast charger or in eight to 10 hours using the 110-volt outlet at your house. I brought my GoPro with me to record my ride and the first five minutes of my footage is just me going “ahahahahahaha wheeeeeeee” in my helmet. It seriously feels like you’re in Tron. This is the closest thing to a perfect urban bike I’ve ever ridden—no tired clutch hand from stop-and-go traffic, or boiling temps between your thighs as your bike overheats in traffic. It’s torque-y and fast and, honestly, a total delight. So now what? During the dealership visits for my demo rides, I was by far the youngest person looking at bikes. But motorcycles bring people together, and I had a blast talking about Harley with dudes who have been riding longer than I’ve been alive. The Pan America and LiveWire should encourage lots of riders to look at the company’s bikes for the first time. The new Harley-Davidson revolution engines at 975cc and 1250cc displacement are also on track to put the bar and shield back in the spotlight. We hope the company hasn’t tried to pivot too late, and what was once sacred won’t become sacrilege. It’s not easy being 120 years old, but Harley is sincere in its desire to change. These may have been the first Harleys I’ve ever ridden, but I’m sure they won’t be the last.
Columnist Vonetta Logan mounts a Harley-Davidson Pan America on her latest Luckbox adventure.
Vonetta Logan, a writer and comedian, appears daily on the tastytrade network and hosts the Connect the Dots podcast. @vonettalogan
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REPLAYS, RESTARTS & COMEBACKS Take a look at the people, companies, investment strategies and trends getting a second chance
ILLUSTRATION BY LILIAN TODD
C
omebacks are king. Just about anyone who loves sports, stocks, rock or iconic brands loves a good comeback story, and this issue of Luckbox has a few to tell. From beaten-down stocks to pinball machines, roadside rest stops, motorcycles and magazine publishing, you’ll get your pick of comebacks here. Remember the feeling of power that coursed through your veins when you shook a pinball machine to rack up a higher score? America is playing again. Or Boomers recalling childhood memories of the joy that came with stopping at Stuckey’s for pecan log rolls, pralines, souvenirs and a taste of Southern culture? The founder’s granddaughter is reinventing the roadside oases with the help of pecans. The original Shinola brand introduced a certain four-letter word to a couple of generations of kids. See the famous phrase in big type in this issue’s story on a Shinola comeback that feels like a startup. There’s even a Luckbox take on a bit of a comeback in the magazine business. Beloved titles are disappearing, but one-off magazines and periodicals tied to brands are picking up the slack. Finally, readers will rediscover four “boring” investment strategies poised for comebacks as the stock market resets from frenzied valuations. Who doesn’t love a good comeback story?
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PINBALL FLIPS BACK RETURNING TO STUCKEY’S THE REBIRTH OF SHINOLA THE NEW LOOK OF MAGAZINES GOODBYE YOLO BRICK ROAD
June 2022 | Luckbox
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THE ISSUE WITH
COMEBACKS
REPLAY: PINBALL’S FLIPPING BACK
Vibrant colors, flashing lights and staccato bursts of sound: A piece of Americana is regaining popularity
FEW INDUSTRIES
have endured as many close calls with extinction as pinball. Yet, despite formidable challenges from politicians, arcade video games and home game consoles, the ball-and-flipper-based pastime has not only survived but is arguably entering a new golden age. Inspired by bagatelle boards, where players move balls past pins and into holes, modern pinball originated in Chicago during the 1930s. The Great Depression was an ideal backdrop for its initial widespread popularity. Cheap entertainment was in high demand, and pinball delivered. Early pinball, like Bally by Mike Reddy Manufacturing’s 1932 game Ballyhoo, had no flippers or bumpers, which are standard on modern machines. Balls were launched, scores were tallied based on where the balls landed, and prizes were occasionally awarded. But critics complained the games were driven by chance instead of skill and therefore constituted gambling. It didn’t help that some players actually were gambling on pinball, and before long, the industry fell into political disfavor.
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PHOTOGRAPH: COURTESY OF EMPORIUM
New York City Mayor Fiorello La Guardia banned pinball in 1942, asserting that the machines “robbed the pockets of schoolchildren in the form of nickels and dimes given them as lunch money.” The NYPD rounded up machines, smashed them with sledgehammers and dumped them into the city’s rivers. Similar bans were enacted across the country, many persisting decades after the 1947 debut of flippers on D. Gottlieb & Co.’s Humpty Dumpty. Those flippers literally put the outcome of a pinball game in the player’s hands. In many cases, it wasn’t until 1976 that the pinball prohibition of the ’40s was overturned. That year, the New York City Council was re-examining La Guardia’s 1942 ban, and magazine writer Roger Sharpe was tapped to testify in defense of pinball. Sharpe demonstrated that pinball was a game of skill rather than luck by calling a shot and precisely making it, saving the game and helping usher in a resurgence of its popularity. In 1979, the industry peaked with the sale of 200,000 machines, according to Vermont-based museum arcade Pastime Pinball. But when video games, such as Pac-Man and Space Invaders,
made their way into arcades, pinball sales took a hit, declining as much as 85% by 1982. Pinball made a comeback again in the ’90s, thanks to games like Bally’s 1992 The Addams Family, which sold more than 20,000 units. But the ’90s also saw the rise of home game consoles including the Super Nintendo Entertainment System in 1991, the Playstation in 1995 and the Nintendo 64 in 1996. Gaming at home became more popular—and convenient—than visiting an arcade. As pinball sales took yet another beating and the future looked more and more digital, one by one, manufacturers folded or pivoted production away from pinball until only one major American manufacturer remained: Stern Pinball.
B A L L 1 : THE BARBACK As a barback at Chicago’s Emporium arcade bar in Wicker Park, Roper Fuentes was responsible for washing glasses, bussing tables and emptying the various games of tokens patrons deposited the night before. He started working for Emporium, the first arcade bar in the city, when it opened in 2012, and he wasn’t sure how it would be received. A row of pinball machines at one of Emporium’s Chicago locations. “I sort of expected that there might just be a bunch of dudes who show up because it’s video games and beers,” Fuentes said. “We were, to our surprise, slammed every night.” Every night was like a Saturday night, he said, as customers from all walks of life mingled, drank and played games. At the time, about 95% of the games at Emporium were classic arcade video games: Pac-Man, Mario Bros., Asteroids, Space Invaders and others. But four pinball machines also found a home there. Fuentes admits that by enthusiast standards, the pinball machines they had were “crappy.” They were bought used, at least 20 years old and with a lot of mileage. The games broke down all the time, and without a dedicated
game technician, servicing them often fell on Fuentes or Emporium’s owners, Danny and Doug Marks. “They said, ‘You know what? We’re gonna get rid of the pinball machines. They’re too much of a hassle,’” Fuentes recalled. “And being the one who was emptying the games every morning, I was like, ‘We need more pinball. These are actually making more money than anything else in here.’” The next morning, Fuentes showed the disbelieving owners the pinball machines’ coin boxes and, sure enough, they were stuffed. “And they didn’t even work,” he said of the machines. “But they got played like crazy.” As the company grew and opened two more locations in Chicago—one in Logan Square and one in Fulton Market—each included pinball. Today, around 30 pinball games can be played across Emporium’s three Chicago
“FROM DOCTOR TO PINBALL SALESMAN, MY FAMILY WAS LIKE, ‘ARE YOU SURE YOU KNOW WHAT YOU’RE DOING HERE?’” —ZACH MENY locations, and Fuentes now serves as the regional manager. Pinball remains a big draw for Emporium, Fuentes said, and he looks forward to adding more games. But the market’s evolving, and pinball’s popularity isn’t exclusive to arcades and arcade bars. Home and collector sales are growing too, and as interest balloons, so do prices. B A L L 2 : THE DEALER Zach Meny was a clinical psychologist when the pinball bug bit him. Drawn in by how far the technology had advanced beyond the games he grew up with, Meny began spending more time playing, researching and talking
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COMEBACKS about pinball. He and a friend even recorded a video series on YouTube about it. “My wife said, ‘Hon, we’re spending too much time on this, so what’s the deal?’” Meny said, remembering how he tried to sweet talk her into taking over a pinball distribution company owned by a friend nearing retirement. He responded, “What if we reach out to him and say if he’s ever going to retire, we’d be happy to put some interest on purchasing his business.” Within the year, that’s exactly what happened, and in early 2019, Meny became the new owner of Flip N Out Pinball in Evansville, Indiana. What was supposed to be a weekends and evenings gig to justify his pinball obsession became a full-time job—plus some—in just six months. For a while, Meny tried to juggle both his work as a psychologist and the pinball business. But about a year and a half ago, he decided to devote all of his time to selling and distributing pinball machines, parts and other merchandise. “From doctor to pinball salesman, my family was like, ‘Are you sure you know what you’re doing here?’” Meny said. “And while it was a risk, it was a calculated risk. Those first couple of years that I was just a hobbyist and kind of a viewer of pinball and a player of
$4.54 BILLION Market size of the U.S. arcade, food and entertainment industry in 2019 — Statista
Stern Pinball’s 2021 Godzilla
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“PINBALL
TOURNAMENTS THAT WERE KIND OF BIG 10 YEARS AGO ARE NOW REALLY, REALLY BIG.” —RAYMOND DAVIDSON
PHOTOGRAPHS: COURTESY OF STERN PINBALL
pinball, I’d seen a pattern of market growth that started expanding.” A handful of factors contributed to that growth, Meny said, including nostalgia for the games, increases in pinball-related social media, buzzworthy new game themes and technological innovations. But pinball also got an unexpected boost from the pandemic. “It took an already trending industry, and it likely increased it tenfold,” Meny said. In the home and collector market, supply just can’t keep up with demand, he said—a trend intensified by the pandemic-induced lockdowns. Ninety percent of Flip N Out Pinball’s business is home sales and 10% is operator sales. As a direct result of internet-based purchasing, it ships as many
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The recreational and competitive scenes have never been more vibrant, and they’re attracting younger and more talented players by the day. “We are seeing younger developers like Raymond Davidson, the No. 1 pinball player in the world, hired by Stern Pinball to code these games,” Meny said. “He is a living, breathing computer—sweetest man in the world— but he’s a young guy in his 20s.”
games to California and New York as it does to its own backyard of Indiana. Sales have at least doubled every year for the past four years, Meny said, but that’s not a great gauge of overall market growth. “With so many games that we have back-ordered, it’s not really an accurate representation of what we could sell,” he said. Stern Pinball’s 2021 release of Godzilla is particularly popular. “If I had 200 of those things—these are $9,000 pinball machines—I could guarantee you I would be sold out of that 200 within a week,” Meny said. “And I’m trying to be conservative here.” Meny said it’s a good time to be in the pinball business. It’s also a good time to be a player.
B A L L 3 : THE WIZARD “As soon as I could reach the flipper buttons—like 3 or 4 years old—my dad showed me what pinball was,” said Raymond Davidson, the International Flipper Pinball Association’s highest ranked pinball player in the world. His grandparents had a 1976 Gottlieb Pioneer in their basement, and every time he visited, he had to play it. “My cousins would be out in the pool, and I would just be in the game room playing the pinball machine,” Davidson said. He started his competitive pinball career at the age of 15 during the 2008 Northwest Pinball Championships in Seattle. In a field of nearly 80 players, he placed ninth—high enough to win a cash prize— and was instantly hooked. At 29 years old, he’s competed in 345 IFPA-sanctioned events— 26 of them outside the United States. He’s come out on top 89 times. Davidson thinks he achieved the IFPA first place ranking after he won the 2018 IFPA World Pinball Championship in Canada— just a year after winning the World Championship in Denmark. These days, he goes to at least a tournament a month, averaging 18 to 20 tournaments every year. He’s a pinball wizard and undoubtedly one of the best players to play the game, but Davidson acknowledges the tournament scene is getting bigger and more competitive. “The events that were kind of big 10 years ago are now really, really big,” he said. “It’s crazy now to think that if you go to a tournament, I’d say like 80% of the people if you ask
“PINBALL HAS NEVER BEEN HOTTER AND MORE VISIBLE.” —GARY STERN them, they’d say they just got into pinball in the last five years.” He describes the growth as “an explosion,” yet he has managed to defend his spot on the top of the IFPA leaderboard. But his footprint in the pinball world doesn’t end there. As of May 2020, he’s been working as a software engineer for Stern Pinball, the largest pinball manufacturer by market share in the world. “I just focus on the game and don’t have to worry too much about any meetings BS,” he said. “It’s just all about the game, which is super cool.” EXTRA BALL: THE FOUNDER The pinball industry is looking good, and if anyone can speak to that with authority, it’s Gary Stern, the founder and CEO of Stern Pinball. “Pinball has never been hotter and more visible to the general public than it is currently,” Stern said. “The love of pinball is generational and a part of the global culture and family unit with players of all ages, genders and races.” Pinball’s getting more interconnected, too, he said. Innovations such as Stern Insider Connected, a web app on the company’s website, enables players to track their scores, receive digital and physical rewards, earn achievements and badges, and connect with other players around the world—all with the scan of a QR code. Stern Insider Connected not only enhances the experience for players but also helps operators improve earnings with operational efficiency through remote updates and diagnostics, Stern said. It’s a win for everyone and will likely play a significant role in the growth of the game. “Pinball has been a part of the human experience for over 300 years,” Stern said. “There’s nothing that can offer the same type of immersive entertainment experience with the hottest themes as pinball, and we see no signs of it slowing down.”
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THE ISSUE WITH
COMEBACKS
ON THE ROAD AGAIN
The granddaughter of the founder of Stuckey’s, the roadside oasis stocked with pecans, candy and souvenirs, is reinventing the nostalgic brand in what she calls an 85-year-old startup
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A COMEBACK CASE STUDY
STEPHANIE STUCKEY
by Elizabeth Owens-Schiele
awakens to an LL Cool J song she can relate to: “Don’t call it a comeback, I’ve been here for years.” Customers of her family’s roadside stores often feel a twinge of nostalgia when they load up on pecan rolls, divinity confections and souvenirs. They remember enjoying the same treats years ago on family vacations. She calls the Stuckey’s brand an 85-yearold startup, and she’s in charge of hitting the reset button. She’s rebuilding the Stuckey’s story one pecan at a time online and in retail stores.
THE BACKSTORY It all started in 1937 when W.S. Stuckey Sr., Stephanie’s grandfather, set up a roadside pecan stand in Eastman, Georgia. It was during the Great Depression, and he needed a job. Pecans sold well, and when his wife, Ethel, added her pecan log rolls and pralines to the mix, the couple soon had enough money to open their first store. In the next 25 years, Stuckey’s grew to more than 368 stores along the interstate in 40 states “offering kitschy souvenirs, clean restrooms, gas, pecan treats, and the iconic pecan log roll, becoming the country’s first roadside retail chain.” The signature white farmhouse, sometimes with a teal or blue roof, found fans young and old, particularly during its heyday in the 1950s and 1960s when President Dwight D. Eisenhower was creating the U.S. Interstate Highway System. W.S. “Bill” Stuckey Jr. remembers that time well. “When the interstate came along, we thought that was the end of business—it split the road,” said the 87-year-old father of Stephanie Stuckey. “Truthfully, it’s the best thing that ever happened to us. That’s when Stuckey’s really took off.” Stuckey Jr., who was serving as Stuckey’s executive vice president at the time, seized the opportunity. “My father never wanted to expand west of the Mississippi because of transportation since everything was made in Eastman,” Stuckey remembers. “I got the bright idea to put together a company and add a 15% freight charge on all products. Every store west of the Mississippi was brand new with new designs.” There was only one way to direct drivers to the new stores. “Billboards built Stuckey’s,” he said, and drove traffic from that new interstate right to the Texaco gas pumps at every Stuckey’s stop.
PHOTO ILLUSTRATION COURTESY OF STUCKEY’S
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Stuckey’s started as a family business selling pecans, homemade pecan log rolls, pralines, divinity and souvenirs.
FAMILY BUSINESS “I know I would not have taken this on if it was not my name out there,” Stephanie said. “I have such great memories of my grandfather and I knew how much pride he took in what he’d done.” Her grandfather remained involved in the company for about a decade after he sold it and often took his granddaughter by the hand when he visited the candy plant where she saw the molten candy being poured onto the marble
tables and cracking. She would grab it and gobble it up, much to her grandfather’s delight. “He just took such pleasure seeing what he built and having us appreciate that,” Stephanie said. “And then after he died, I saw what happened to his vision, and it was heartbreaking. I never thought we’d get a chance to rebuild it.” Although her father did get the company back, it was not his priority, she said, because he
PECAN PERKS Stephanie “Roadie” Stuckey
“WE’RE AN
85-YEAR-OLD STARTUP. WE’RE BACK TO WHERE WE WERE VERY MUCH IN THE BEGINNING, AS FAR AS TRYING TO REBUILD THE COMPANY.” —STEPHANIE STUCKEY
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PECANS ARE A GOOD SOURCE OF FIBER, THIAMIN, AND ZINC, AND AN EXCELLENT SOURCE OF COPPER AND MANGANESE — A MINERAL THAT’S ESSENTIAL FOR METABOLISM AND BONE HEALTH. ONE OUNCE SERVING: 12g “GOOD” MONOUNSATURATED FAT 0 CHOLESTEROL OR SODIUM 4g CARBOHYDRATES 3g DIETARY FIBER —AMERICAN PECAN COUNCIL
VINTAGE IMAGES PROVIDED BY STEPHANIE STUCKEY FROM HER GRANDFATHER’S ARCHIVES
A savvy businessman, Stuckey Sr. negotiated a lucrative contract with Texaco, an American oil brand owned and operated by the Chevron Corp. The company distributed gasoline credit cards to many families who used them regularly on road trips. Every time they stopped at a Stuckey’s to fill up, Stuckey would collect a Texaco rebate which eventually reached 3 cents on every gallon of gas sold, he said. Stuckey’s continued to grow until W.S. Stuckey Sr.’s health declined and he pursued a merger with the Pet Dairy Corp. in 1964. Later, the company was owned by IC Industries, a Chicago-based railroad company, until Bill Stuckey Jr. bought it back in 1984. He and his partners ran the company for another 30 years until he retired. A skeleton staff remained in place to manage operations for the next seven years. His daughter, Stephanie, bought the company on Nov. 1, 2019, after spending 14 years in the Georgia General Assembly House of Representatives.
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also was running five other businesses which propped up the failing family business. After her dad retired, the company staggered on. “They started losing money to the point that they were six figures in debt,” Stephanie said. “I didn’t want our story to end that way. “I didn’t want to have a legacy of regret where my grandchildren would ask, ‘Why didn’t you save the family business when you had the chance?’”
W.S. Stuckey Sr. founded Stuckey’s in 1937 after he set up a roadside pecan stand in Eastman, Georgia.
ANATOMY OF A COMEBACK
“I’ve got the last name Stuckey. I know the story because it’s my story and the brand is so much a part of me that I think I can tell it in a way that’s authentic,” said Stephanie, who was named after her grandmother. She jokes that she’s the chief executive officer, the chief brand officer, the chief storyteller and the chief sales officer because she believes branding is sales. She said it’s similar to the old adage if you build it, they will come, but if you brand it, they will also come. “We’re an 85-year-old startup,” Stephanie said. “We’re back to where we were very much in the beginning, as far as trying to rebuild the company. Fortunately, we are no longer six figures in debt. But there’s a lot of market share that we need to reclaim to move us forward.” She has a multi-tiered strategy to bring the Stuckey’s brand back. The company is starting with what is generating the most profit: consumer products. The company makes in-shell and raw shelled pecans to toasted and flavored snack nuts, as well as a full line of candies and merchandise that account for 80% of the company’s $12 million in revenue. Pecans, she said, are the company’s strongest opportunity, particularly since Stuckey’s is based in Georgia, the No. 1 state for producing pecans. “We’re uniquely situated to be the brand associated with pecans, and as the trends are going toward more healthy diets, we think there’s a real market opportunity right now to come in and promote pecans and build on the fact that we do have some market value,” she said. One of Stephanie’s first initiatives was to partner with RG Lamar Jr., a longtime Georgia pecan farmer, family friend and owner
SOCIAL SAVVY Stephanie Stuckey wants to be authentic. Her name is on her product and so is her family legacy. Her social media posts are honest and enduring. Even after a career as an attorney and more than a decade as a state legislator, she looks almost 18 with her long, chestnut-brown hair and curtain bangs, wearing T-shirts, cut-off jean shorts and a toothy grin. Stuckey says it’s all in the lighting, but the truth is she is the fresh, young face behind an 85-year-old brand. LinkedIn is her choice of social media, where she has more than 88,000 followers. That’s where her people are, she says. Her customers range from 45 to 65 years old. They’re active, savvy and in business. “We’re looking to the business profession,” Stuckey said. “The way we’re growing the brand is B2B sales, but B2C as a component of it. The bulk of our profit is getting into retail chains and retail stores. So, the more we connect with the CEOs of grocery stores, convenience stores, department stores, any retail chain that sells gifts, we’re a good fit. So, that’s LinkedIn. That’s where you find that audience.” But it’s also what’s in her posts that matters to Stuckey. “I think how I’ve been successful is not posting the typical post. I tell the story of the entrepreneurial journey in a very real way. I put it all out there,” Stuckey said, hoping she doesn’t share too much information. “I try to be very upfront about what’s happening with our brand.” In one post Stuckey admits: “I had no experience running a company, much less a lemonade stand. What made me think I could turn Stuckey’s around when it was six figures in debt with no business plan or marketing budget?” Stuckey doesn’t post ribbon-cutting or award ceremonies on LinkedIn. Instead, “Roadie”—a nickname she earned by making frequent road trips—likes to be pictured in her blue jeans and T-shirt stocking boxes during the annual inventory count or posed outside one of the 65 Stuckey’s locations. She takes a lot of pictures during her trips and makes sure she posts multiple times a week every week. Her posts tell the real story of her efforts at rebuilding her brand. “That’s different and people appreciate that,” Stuckey said. “People can relate to that a lot more than they can some of the more businesslike type content.” That authenticity is the connection Stuckey relies on to move her brand and business forward. But she also knows about 15,000 of her 50- and 60-something-year-old customers also have another social media fav. Yes, she’s also on Facebook.
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THE ISSUE WITH
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More Stuckey’s Visit the online store
of a healthy snack brand called Front Porch Pecans. He’s now co-owner and president of Stuckey’s and works side-by-side with Stephanie, who first identifies channels of product distribution, and he closes the deals with grocery stores and such national chains as TravelCenters of America, Casey’s, Ace Hardware, Bealls and more. Next, the team revamped the company’s website, increasing product sales from $25,655 in 2019 to $229,250 in 2021—an increase of almost 800%. Recognizing the need to increase product production in-house, the partners acquired a pecan shelling plant, a candy plant and a fundraising business based in Wrens, Georgia. Last year, they saw a profit in excess of $2 million—the best bottom line since she took the business over. She looks to other companies, like Moon Pie, Krispy Kreme and Little Debbie, for strategic inspiration. They’re American-made brands that have stayed in the family and are still produced stateside. Little Debbie is the granddaughter of the founder and sits on the board of the company. All of those brands, she said, have an emotional connection with their consumers. That nostalgic connection is what Stuckey is reminded of when she visits the 65 licensed Stuckey’s locations, primarily in the southeastern states. Stephanie, also known as “Roadie,” promotes these road trips to her more than 88,000 followers on LinkedIn, where her people are. “I draw on my background in politics. I was in elected office for 14 years, and you go to your base first,” Stephanie said. “Our base are people who remember our brand—age 45 years and up with the sweet spot being 55 to 65 years old. They have money, they’re still active, they’re
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“I AM 100%
PERSUADED THAT OVER THE NEXT FIVE TO 10 YEARS, PEOPLE WILL BEGIN TO EAT PECANS AS A SNACK IN THE WAY THEY DO OTHER NUTS.” —RG LAMAR JR.
still road-tripping, they’re buying gifts for their family, they’re still in business, they’re loyal and they enjoy the nostalgia of our brand.” She’s making sure this core set of customers and fans know Stuckey’s is back. As the company focuses more marketing on healthy
trends and distributing nut products in convenience stores, she anticipates attracting millennials and then zoomers, too. “We want to be not just on the candy aisle,” she said. “We want to be on the nut aisle, too. That’s where we’re going to pick up more new customers. I am also finding people in their 30s who are connecting with our brand because their parents liked us.” Once she gains brand value, the company will be in a better position to open stores. “But it won’t be my grandfather’s stores. It won’t be 368 stores in 40 states,” she said. “I literally mean maybe 10 that we would own and operate that would be very brand forward and almost like incubators for testing product and ideas and really a space where we can elevate the brand.” She anticipates these Stuckey’s stores will someday be roadside oases in such tourist destinations as Branson, Missouri, or Pigeon Forge, Tennessee. PECAN PRO RG Lamar Jr. was handed the reins of his family’s 2,300-acre pecan farm in Hawkinsville, Georgia, 14 years ago. With 30,000 pecan trees and an annual production of about 2 million pounds of pecans, Lamar Pecan Co. is among the largest pecan farms in Georgia and is working with Stuckey’s. Now that he’s focused full-time on Stuckey’s, his stepbrothers are running the farm, planting and maintaining pecan trees that take anywhere from seven to 15 years to reach full production. Lamar has a love for the taste of pecans he describes as “sweet, buttery, nutty.” “Anyone who is involved with pecans loves to snack on them, but really nobody else in the world thinks of them that way,” Lamar
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VINTAGE IMAGES PROVIDED BY STEPHANIE STUCKEY FROM HER GRANDFATHER’S ARCHIVES; STUCKEY’S PRODUCTS PHOTO BY GARRETT ROODBERGEN
said. “I’ve always had a desire to find a way to change that, and one of the great opportunities we have with Stuckey’s is it is the single most recognizable brand name in the world that is associated with pecans. So, that’s really the heart of the opportunity and why Stephanie and I decided to partner.” The partnership also makes sense because of what happens when someone shells a pecan. Lamar said there are about five sizes of halves—often used in pies—and about five sizes of pecan pieces. “Any pecan sheller will tell you, the trick is selling the pieces,” he said. “Any idiot can sell pecan halves. That’s easy. What’s hard is selling the pieces, and that’s what will make or break your business.” But many of the candy products Stuckey’s sells use only pecan pieces, which makes the partnership a really good fit. The team has expanded the brand and products—which are over 600 SKUs—into three main store channels: convenience, grocery and what Lamar calls alternate stores, which include Bass Pro Shops, Tractor Supply, Bed Bath and Beyond, and Cracker Barrel. Stuckey’s B2B sells to 2,000 gift stores, tourist destinations, hotel gift shops, state parks, gourmet food markets, candy stores, gift basket companies and other smaller retailers. They’re discovering pecans are a bit of an untapped market. Lamar blames it on the other tree nuts, which have been marketed for nearly a century, leaving the pecan behind in the dirt. The almond was promoted as extremely healthy and made a great snack, and soon, he said, the almond industry took off. “So, what has happened is the nut industries have spent money on marketing and have persuaded the public to choose their nut as
a snack, oftentimes on the basis of health,” Lamar said. “They’ve also provided it in a convenient package, and pecans have not done that. We’ve been content to let folks eat pecans in pie one time a year, and that was an egregious mistake that our forebears made.” But now the pecan industry does have the marketing dollars and the research, he said, showing that pecans are at least as healthy as these other nuts that consumers often munch on now. “Many people don’t know that pecans have the most antioxidants of any nut, and almost nobody knows that pecans are the only nut native to this continent,” Lamar said, adding Stuckey’s is producing resealable, 4-ounce snack packs for $5.99. “I am 100% persuaded that over the next five to 10 years, people will begin to eat pecans as a snack in the way they do other nuts.”
certain generation—and the potential for sales on the internet is strong. “What started Stuckey’s was pecans,” Bill Stuckey Jr. said. “I still think that’s the demand, if nothing else, health-wise, of all the nuts, the pecan is the quality nut.” Pecan expertise is what he says RG brings to the table. He knows the business, and he’s confident they make the perfect team: candy, pecans and salesmanship. “Stephanie is an overachiever,” her dad said. “Stephanie has got the ability, but the main thing is, she’s got the enthusiasm. She can sell. She’s smart.” Stephanie Stuckey is rewriting the Stuckey story. “I want it to end with us being a $100 million in sales company that is associated with pecans,” Stephanie Stuckey said. “I want us to be the go-to nut on the snack aisle. But
Lamar said the company has reached production capacity with the 50 products it makes in-house, and it’s hoping to get the financing for a large building expansion and the equipment necessary to automate key products. He projects that will enable the company to produce 20 times as much product. Production of the pecan log rolls, he said, is about five logs per minute because they’re still making them by hand, just as Ethel Stuckey did back in the day. With increased production, he expects to make about 100 logs per minute.
we’re still known as a road trip brand, and that’s still at the core of what we do. Selling pecan snacks is a way that we’re able to grow the brand. But I still want us to celebrate the joy of exploring small town America by car.” She wants customers to have an emotional connection with Stuckey’s products, just like she does. “They’re not just buying up a pecan log roll. If they’re buying the story of our brand, they’re buying the story of my family’s history, they’re buying the fact that my grandfather started during the Great Depression with a stand on the side of the road with no money. That’s so much more meaningful than some generic candy bar.”
REWRITING THE STORY Bill Stuckey Jr. says the family name is one of the most recognized brands out there—for a
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LUCKBOX LEANS IN WITH
Shinola Detroit CEO
SHANNON WASHBURN
Back in 1877, Shinola was introduced as a shoe polish brand in Rochester, New York.
by Elizabeth Owens-Schiele 24
Is the brand’s story a comeback or a startup? If we had to pick one, Shinola would be positioned as a startup American manufacturer that has quickly become a well-known lifestyle brand. We expanded from watches to a portfolio that included leather products, journals, audio equipment and bicycles. Our name is now on hotels, home goods and jewelry. That said, Shinola represents—in a sense— the comeback of quality and craft in a revitalized city that has long offered extraordinary opportunities to women and men committed to American manufacturing.
PHOTOGRAPH (TOP): REUTERS
On the comeback of the iconic shoe polish brand and its now diverse, made-in-Detroit product line
Is Shinola Detroit based on the values of the original Shinola brand? The underlying principles of our company were created before we decided to call the company “Shinola.” The company began with the goal of creating 100 meaningful jobs in a location in need of a boost. This was accomplished by finding space in Detroit and building the first major American watch manufacturing facility to open in 50 years. Just before we started hiring people, someone told our founder this idea proved he may not “know shit from Shinola.” That’s how the brand name “Shinola” was [re]born, and we did have to acquire the company with the same name which sold shoe polish decades ago. It was shuttered in 1960. We’ve never tried to speak to the connection between the predecessor company and the Shinola Detroit that started building watches in 2012. We did try to have some fun with the connection by selling shoe polish products briefly, but our core values distinctly belong to the 450 people who work here and customers who embrace our products and mission. Our core values are quality, hospitality, determination, joy and humility. They drive our decisions, our behavior and our culture. Our stores, our communications, our products, our factory and our relationships are all evaluated by how effectively they follow these five values.
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THE ISSUE WITH
COMEBACKS
BIKE SPIKE
Some of Shinola’s best-selling products include designer watches, leather journals, purses, backpacks and the signature hotel blanket.
SOMEONE
PHOTOGRAPHY: COURTESY OF SHINOLA
SUGGESTED THE COMPANY’S FOUNDER DIDN’T “KNOW SHIT FROM SHINOLA.” THAT’S HOW THE BRAND NAME WAS [RE]BORN.
What are your top product segments? We are known for having breadth in our product line, but consumers tend to know us best for our watches, leather bags and fashion accessories. Your target customer? Shinola’s target customers are anyone who appreciates timeless and well-designed goods built to last a lifetime.
Demand for bicycles remains strong as gas prices soar and commuters seek alternative forms of transportation. “Due to COVID-19, the bike industry globally is having the biggest spike in sales since the 1973 OPEC oil crisis,” said Sky Yaeger, Shinola bicycle director. The pandemic forced component and assembly factories in Asia to shut down in 2020, stalling the production of new bikes, she noted. Meanwhile, increased sales of electric bikes are also keeping demand high. Since 2016, Shinola has been offering the option of an electric wheel that fits on the company’s Detroit Arrow ($1,000) bicycle to provide an electric assist. The company also sells the Runwell ($2,950) and Bixby bicycle models. Shinola’s bike sales mirror the growth of overall bicycle sales in the past few years, Yaeger said, and the company has a target customer for its premium brand. “People who want a simple bicycle for around-town riding, with the timeless quality and style representative of the Shinola brand,” Yaeger said. “There are no other bicycles like ours in the U.S. market. We are unique.”
How many SKUs does Shinola have now? Our offerings are in the 1,000 range.
Why has the brand diversified to apparel, watches, jewelry, hand- Does your strategy emphasize bags, accessories and bicycles? brick-and-mortar stores or The history of Shinola Detroit really dates online sales? back to that idea I mentioned—employing 100 We believe strongly in the omnichanpeople in meaningful jobs. Actually, our vision nel approach to our business with a robust was to sell the watches we made in Detroit to online presence, building our brick-and-morestablished brands like Tiffany. We ran an ad tar footprint and building strong wholesale to presell 2,500 watches we had made under partnerships. the Shinola Detroit brand. They sold out in about a week, and that changed the whole What are the long-term ambitions for the brand? plan for us. What we’ve found is that We believe we have room to customers embrace what Shinola grow, both in our existing busistands for, both in terms of the ness channels and categories five values I outlined and the and where Shinola is yet to have a presence. commitment to American quality and craft. That encouraged us to For instance, our recent launch More explore other areas where we could of Shinola Detroit for Crate Shinola & Barrel is a testimony of our deliver meaningful products and Watches, bikes, support American manufacturers brand’s broader appeal and the bags and more and craftspeople in the process. power of our partnerships.
The Shinola Bixby ($1,950) is available only in limited supplies at Shinola stores.
We want to be the next great American brand from Detroit—creating beautiful, enduring handcrafted products that are built to be lived in, worn out and well-loved. We are committed to remaining true to our core values and the brand pillars of people, products and community. We want to strengthen our job-creation capabilities and deepen our commitment to sustainability and diversity. This is accomplished by pursuing continuous improvement in our hiring, design activities, procurement, advocacy and investments.
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THE ISSUE WITH
COMEBACKS
THE NEW LOOK Publishers are determined to keep committing ink to paper by Ed McKinley
In an early example of brandoriented periodicals, John Deere began publishing The Furrow in 1895.
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F
amiliar magazines are moving online at a startling pace, but that doesn’t mean print publications will disappear from America’s nightstands, coffee tables or waiting rooms. In fact, print is making something of a comeback on the strength of four trends: one-off editions, brand ownership, tightly focused content and a switch from timeliness to timelessness. The resurgence means magazines will continue to shape and reflect popular culture but in new ways, according to Samir Husni, who founded the Magazine Innovation Center at the University of Mississippi in Oxford, Mississippi, and earned the nickname “Mr. Magazine.” Besides, readers simply aren’t ready to give up what they view as the endearing qualities of print, said Rita Cohen, president and CEO of a trade group called MPA—The Association of Magazine Media. “Consumers love the experience and feel of
For 2 million readers, The Red Bulletin connects Red Bull energy drinks with living on the edge.
InStyle is among several bigcirculation magazines moving online this year.
print magazines,” Cohen maintained. “They are a relaxation moment—a break from screen time. The tactile feel of the paper is enjoyed by millions.” Some of that love is directed these days toward single-issue publications, said Krifka Steffey, Barnes & Noble’s director of merchandise, newsstand and media. Industry insiders used to call them SIPs for short but now refer to them as bookazines, she noted. Let’s take a look at them.
ONE-OFF PUBLICATIONS The portmanteau “bookazine” comes from mashing up “book” and “magazine.” It fits because bookazines combine aspects of both. At first glance, bookazines look a lot like the magazines next to them on newsstand shelves or supermarket racks. But differences become apparent upon closer examination. Unlike magazines that appear weekly, monthly, quarterly or annually, most bookazines are published once and then disappear forever. Only a few extremely popular bookazines warrant a sequel or reprints. Bookazines are usually focused on a single subject—like Princess Diana, the secret life of cats, the golden age of Vikings or the illustrated story of Jesus—instead of offering a magazine’s usual string of diverse articles. Advertising, the lifeblood of magazines, seldom appears in bookazines. Instead, bookazine publishers and retailers make money from a relatively high purchase price. The extra expense is justified, Husni maintained, with slightly better paper stock, high editorial standards, stunning photography, and the appeal of a single specific topic. At Barnes & Noble, domestically published bookazines sell for $9.99 to $14.99, and imported versions go for as much as $20, Steffey said. Bookazines often use the name of a vener-
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OF MAGAZINES ated magazine as part of the title. Examples include National Geographic—Everest and Better Homes and Gardens—Secrets of Getting Organized. Those trusted names encourage shoppers to associate bookazines with magazines. Bookazines are pushing aside magazines on the shelves at Barnes & Noble, Steffey said, noting they already take about 40% of the newsstand space in the chain. Other newsstands devote as much as 70% of the space to them, according to Husni. Despite the attention bookazines are attracting, they aren’t the only publications vying for space with traditional magazines. Periodicals owned by brands have been a factor in magazine publishing for well over a century. BRAND-RELATED MAGAZINES It’s widely believed in publishing that the John Deere farm implement manufacturer launched the first periodical tied to a brand. The company introduced The Furrow in 1895, and it’s still publishing it today. But other brand-owned periodicals outdate that farm magazine, including one distributed by the American Tobacco Co. in the 1880s, said Steven Lomazow, a New Jersey neurosurgeon who’s collected 83,000 magazines and written several books on magazines. (See “For the love of print.”) To illustrate the enormity of the branded phenomenon, Lomazow described obscure examples, like a 1943 issue of Squeal, a magazine brought to the American public by Hormel, which was then a meat packing company. It has since expanded into other types of food processing and now calls its magazine Inside Hormel Foods. Name a subject and Lomazow can probably produce a brand-related magazine that
FOR THE LOVE OF PRINT New Jersey neurosurgeon Steven Lomazow has amassed a collection of more than 83,000 magazines. They line the walls of nearly every room in his house. Some date back to the 1700s. One’s worth $47,500. It all began 50 years ago when he walked into a Chicago bookstore during his first year in med school. A collector by nature, he had decided to start accumulating medical books. Lomazow noticed that the bookseller was misrepresenting the store’s copy of the Vol. 1, No. 2 issue of Look magazine as the first issue. He asked about Vol. 1, No. 1 (pictured left), and was told no one had it. “I was hooked,” Lomazow recalled. A magazine collector was born. Fifteen years later, he traded an issue of The Saturday Evening Post signed by Norman Rockwell for the coveted original issue of Look. Since then, he’s landed a second one. But he doesn’t necessarily treasure those copies of Look above his other magazines. “I have 83,000 children,” he said. “How am I going to pick just one favorite?”
covers it. Examples from the past include The Highway Traveler from Greyhound Bus Lines and TV magazines distributed by television manufacturers. These days, brand magazines are often considered “content marketing,” said Joe Pulizzi, who founded the Content Marketing Institute and publishes a magazine called Chief Content Officer. Companies can promote their products by publishing a magazine that associates their brand with anything interesting or exciting, Pulizzi said. “I receive Mazda’s Zoom magazine because they want me to buy another Mazda after I’m done with the one I have,” he noted. “If you have a loyalty goal … a magazine might be the way to go.” Publishing a print magazine can prove costly, he said, because they require a data-
base, postal fees, content, design and production. But many companies publish their own print periodicals just the same. “There are thousands of brand magazines that you never hear about because they are delivered to a specific person at a specific place and are not found on a newsstand or for sale online,” Pulizzi said. Successful examples include LEGO Life, which launched in 1987 as Brick Kicks, he said. The energy drink Red Bull publishes The Red Bulletin magazine, a general interest print periodical that reaches 2 million readers. The Red Bulletin and Airbnb Magazine are among the brand magazines on the shelves of Barnes & Noble, and Steffy characterized their sales as “OK.” But she cited two brand magazines as extremely strong sellers: Sift, from King Arthur Flour, and Magnolia Journal, which follows the home renovations of TV
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Higher, faster, further. Why not more beautiful?
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ESQUIRE
Esquire magazine chose to depict popular avant-garde artist Andy Warhol, known for his silk-screen printmaking of such iconic brands as Campbell’s tomato soup, drowning in his art with a tease suggesting a decline in American avant-garde.
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THE NEW YORKER
Illustrator Saul Steinberg shared his birds-eye View of the World from 9th Avenue for the March 29, 1976, cover of The New Yorker. According to the Saul Steinberg Foundation, this illustration, which generated countless posters, imitations and reproductions, is “a parody of Manhattanites’ provincial perception of life beyond the Hudson River.”
NATIONAL LAMPOON
The American Society of Magazine Editors ranked this January 1973 cover of National Lampoon No. 7 in its Top 40 magazine covers of the last 40 years. It described the popularity of National Lampoon “when it regularly skewered pop culture, counterculture and politics with recklessness and gleeful bad taste ... and is the magazine’s most memorable cover.”
LIFE
“The Eagle has landed.” Life magazine captured the epic journey of Apollo 11 astronauts Neil Armstrong and Buzz Aldrin in what editors described as “history’s greatest exploration” when the United States was the first to land on the moon on July 20, 1969. This special edition of Life appeared two weeks later documenting the event.
MEMOR ABLE MAG A ZINE COVERS personalities Chip and Joanna Gaines. Despite the huge variety of topics they cover, brand magazines and bookazines share a few traits. SOMETHING IN COMMON Brand magazines and bookazines offer a tighter focus than traditional magazines. That’s one of the reasons bookazines exist, but it’s also true of many of the brand magazines edited to expand a company’s clientele. Both tend to offer “evergreen” content that’s relevant longer than many of the articles in traditional magazines. They’re ceding breaking news coverage to the internet, where immediacy rules. But those qualities—specialization and timelessness—are also beginning to appear in
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The top magazines reach more Americans than the top prime time television shows.
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—The Association of Magazine Media
56%
Prefer print magazines to digital magazines
68%
Prefer printed books to ebooks
22%
Visited a bookstore in the past 30 days —Luckbox Readers Survey
traditional magazines that are becoming more like bookazines. Take the cases of O, The Oprah Magazine and Coastal Living. Those titles are switching from monthly to quarterly and improving the quality of their paper stock, said Steffey. The switch makes sense for the industry, she asserted. “In both of those instances, even though I’m getting fewer issues, the price point is higher. So, for the retailer, it’s almost a wash,” she said. “For the publisher, it’s a lot more advantageous because the financials on a bookazine look a lot better than pushing subscriber rates and managing all the advertisers.” Such changes may have become inevitable in a world transformed by the internet. TRADITIONAL MAGAZINES “The large-circulation magazines are disappearing,” Husni lamented. “You have companies killing one magazine after the other because they want to focus on digital.” More than 2 million subscribers weren’t enough to save the print version of Shape magazine. Publishing giant Dotdash Meredith moved the 40-year-old periodical online last December because the business model just wasn’t working—too many advertisers prefer to deliver their messages via the internet instead of on paper. Shape was hardly alone. Magazines that have ceased to exist as print publications this year include Eating Well, Entertainment
NATIONAL GEOGRAPHIC
Sharbat Gula, the greeneyed “Afghan girl” captured by photojournalist Steve McCurry, was only 12 years old when McCurry discovered her in a refugee camp during the Soviet invasion of her country which reportedly took the lives of more than 500,000 Afghans during the 11-year conflict. She became an international symbol of the war-torn country after her photo appeared on the cover of National Geographic in June 1985.
Weekly, Health, InStyle, Parents, People en Espanol, Field & Stream, Outdoor Life, Popular Science, Air & Space Smithsonian, and ARTnews. Their 19th-century business model of selling magazines for a low price to build circulation and then selling ads based on guaranteeing a certain number of subscribers was failing in the digital era, several sources agreed. However, the movement to take traditional magazines online opens the field for bookazines and brand magazines to fill the vacuum, said Pulizzi, the advocate of content marketing. What’s more, some industry leaders insisted the era of advertising hasn’t ended for print magazines. “We expect print magazines containing advertising to be around for a long time,” said Cohen of the publisher’s association. Perhaps print can accommodate all of the trends percolating in the industry, she suggested. “There is most definitely room for various types of magazine business models to coexist because each offers a unique way to reach consumers,” Cohen maintained. “Bookazines provide a platform for evergreen magazine content to thrive and find new audiences,” she continued. “Content marketing can stand alone or be included as a section of an existing magazine. Ad-based revenue models can coexist with subscriber- and reader-based revenue models.”
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THE ISSUE WITH
COMEBACKS
GOODBYE YOLO BRICK ROAD by Tim Melvin & Garrett Baldwin
Forget meme stocks and overcome the fear of missing out (FOMO). Come back to basics. Here are four time-tested investment strategies.
A
s valuation compression continues for growth stocks in tech and communications, active investors should come back to four “boring” strategies to make real money. Market fundamentals might not matter much on the way up, but they do on the way down. Investors in growth stocks and you-only-live-once (YOLO) assets, including technology and communications stocks popular during the pandemic, have one last chance to avoid the fallout. Turning the odds in one’s favor requires time, patience, diligence and strategies that don’t correlate with what the crowd is thinking. Luckbox digs into four strategies that have yielded sizable returns in non-YOLO markets dating back more than a decade. First, a little on the history of value compression—that means a company’s earnings are increasing but the price of its stock isn’t moving. Much like during the dot-com crash, some companies have declines in price-to-earnings, price-to-sales and other metrics, even though they maintain strong profits and improved balance sheets. As a result, investors aren’t willing to pay a higher premium for equities.
CHARTING VALUE COMPRESSION The chart on the opposite page tracks the history of the Shiller PE ratio, which measures the average price-to-earnings ratio for S&P 500 stocks. As of May 1, the Shiller PE ratio stood at 32.5, well above the historical average of 17.35 (1900-present). A further decline feels inevitable as the Fed begins to tighten its balance sheet by selling its war chest of bonds and mortgage-backed securities. The Fed’s liquidity drain will likely create more volatility, selling and valuation compression. As a result, active investors may want to consider timetested investment strategies in what continues to be an unpredictable market.
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1
COMMUNITY BANK MERGERS AND ACQUISITIONS (M&A)
In the mid-1980s, the United States had roughly 15,000 banks, but that’s down to fewer than 5,000. The downturn is tied to the consolidation of community and regional banking. The annual consolidation rate has consistently run 3% to 5%, according to Hovde Capital, and there’s no reason to believe the dealmaking will slow down. Community banking—defined as financial institutions with a market capitalization of less than $2 billion—is marked by several trends that make companies with lower valuations attractive takeover targets. A larger bank can use either of two methods to increase its depositor accounts and use that money for traditional lending. First, it could benefit from a dramatic uptick in the local population and local wealth. Community banks in the Sun Belt are receiving an influx of capital as populations increase because of the COVID-19 migration. Cities like Naples, Florida, for example, have experienced dramatic growth in recent years. The second option for growth is to buy another bank. Cities like Boston saw a spree in
community bank deals recently despite its 1% decline in population between 2020 and 2021. Meanwhile, the need for costly new technology and expensive cybersecurity measures makes it difficult for smaller banks to compete against larger rivals. JPMorgan spent $600 million on cybersecurity in 2018—more than
THESE FOUR STRATEGIES
HAVE YIELDED SIZABLE RETURNS IN NON-YOLO MARKETS DATING BACK MORE THAN A DECADE. the market capitalization of 198 U.S. banks trading on domestic exchanges, according to GuruFocus. Smaller banks have also struggled to attract talent. They often have older boards of directors as younger financial talent joins next-gen-
eration projects like decentralized finance or moves to New York and other financial hubs to join large investment banks. Banks remain attractive takeover targets when the Fed raises interest rates to levels not seen in more than a decade. The last time the federal funds rate stood at 3% was early 2008. That’s why it may be lucrative to buy banks that are trading under a price to tangible book value of 1 or less (TB/V of under 1). That means the bank effectively trades for less than its liquidation value. Think of it this way: A bank might be worth $1 billion. But the market—for some reason— trades it at a valuation of $800 million. That would be a price to tangible book value of 0.8. As of May 1, 45 U.S. banks traded on domestic exchanges at a price under a tangible book value of 1. Using a strategy of buying and holding these banks since 2000 has delivered annualized returns of 25.8%, compared with the S&P 500’s 7.5%, albeit with higher volatility. Patient investors who want to ride the M&A wave on cheap community banks can consider the fact that Blue Foundry Bancorp (BLFY) trades for 77% of its tangible book value and Territorial Bancorp (TBNK) trades for 83% of its TBV. Third Coast Bancorp (TCBX) trades at a slightly higher level of 1.09 times TBV but has had lots of insider buying in recent months.
SHILLER PE RATIO
Even with the recent fall in the Shiller price-to-earnings ratio, the S&P 500 remains above historical averages. Source: Robert Shiller
PHOTOGRAPH: SHUTTERSTOCK
32.5
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THE ISSUE WITH
COMEBACKS
TICKING TIME BOMBS In April, Luckbox examined the ARK Innovation exchange-traded fund strategy of purchasing “disruptive” growth stocks that traded at extremely high multiples and showed minimal track records of executive insider buying. ARK Innovation is managed by “innovation enthusiast” Cathie Wood. Wood doesn’t pay much attention to valuations, insider buying or hedging strategies. That’s perilous at a time when valuations are still high. Historically, a stock trading at 10 times revenue (price-to-sales) can be dangerous. To justify such an investment multiple, investors must expect a company to pay 100% of its revenues for 10 straight years as a dividend, with no accounting for expenses, taxes, research and development— just 100% of the revenue. This prospect was insane in 2000. But, with the Federal Reserve jackknifing the economy, raising rates and cutting its balance sheet to contain inflation, any company trading at these levels could face a reckoning. It’s safe to assume that hedge funds and other institutions recognized this danger in January. All year, institutions have used any
Cathie Wood
short-term uptick in the market as justification to sell equities ferociously, particularly stocks on the Nasdaq-100, anything with a high PS multiple and companies trading like the ones owned by Cathie Wood. The three worst-performing S&P 500 sectors of 2022 are consumer discretionary, technology and communications—all down more than 18% on the year.
However, iconic companies in those three sectors are still trading at high multiples. As of May 1, more than 60 companies from those sectors are trading at a nosebleed level of 20 times sales, according to GuruFocus. At that price ratio, a company would require a 20-year dividend of all revenue to justify the share price. Among the largest by market capitalization, companies with a PS ratio over 20 include Snowflake (SNOW), Crowdstrike (CRWD), DataDog (DDOG), Lucid Group (LCID), The Trade Desk (TTD), ZScaler (ZS), Bill.com (BILL), GitLab (GLAB), Confluent (CFLT), Plug Power (PLUG), MongoDB (MDB) and Rivian Automotive (RIVN). Institutions have been selling those stocks at a breakneck pace into every rally this year. That list of 12 stocks represents an average decline of 37.1% in four months ending May 1. But it gets worse. Six companies with a market capitalization of over $15 billion are trading at a PS ratio over 35. That list includes Snowflake, Datadog, Lucid Group, Cloudfare, Rivian Automotive and Bill.com. Buyer beware.
S&P 500 SECTOR PERFORMANCE Energy stands out as the one sector with a strong positive return for 2022. Technology, consumer discretionary and communications services are dragging down the overall S&P 500.
PHOTOGRAPH: REUTERS
Source: tastytrade
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2
RATIONAL LIQUIDATION VALUE The 1991 film Other People’s Money stars Danny DeVito as “Larry the Liquidator,” an activist fund manager who targets a smalltown business called New England Wire & Cable Co. and values the assets in a worstcase scenario of $100 million or $25 per share. When he began his campaign push for the company’s sale, shares traded at $10. He projects a potential 150% upside. Larry’s valuation of a company’s real estate, fixtures, equipment and inventory is a rational liquidation value strategy. An investor looks at the sum of the parts and buys the stock because the combined assets are worth more than what is reflected in the stock price. It’s best to use tangible book value as the anchor, like community banking. Anything trading at a tangible book value of less than 1 is trading more than the sum of its combined assets. Most investors might be impatient when it comes to this strategy. However, a simple backtest to 2000 shows the universe of these stocks has provided investors an annualized return of 32.6%. That figure is important because the S&P 500 averaged 7.5% during the same period. Over the
5.3% VS. 14.5% Financial professionals’ long-term return expectations for clients (above inflation) versus individual investors’ expectations. A expectations gap.
174%
—Natixis Investment Managers survey of 8,550 global investors in 2021
last two decades, the strategy has endured three major market downturns and presents itself as a strong alternative for 2022 and beyond. Attractive companies trading under liquidation value today include auto power and security giant Strattec Security (STRT) at 74% of its liquidation value; steel products manufacturer Friedman Industries (FRD) at 70%; and the 11th largest U.S. home manufacturer, Beazer Homes USA (BZH), at 64%.
3
THE INSIDER VALUE PORTFOLIO In January 2022, the insider buying to selling ratio—on a dollar-for-dollar basis— reached its highest level since April 2020,
according to secform4.com. However, insiders have largely remained on the sidelines when purchasing its stock since that late-January window. With so many executives selling stocks in 2021, investors should have confidence in companies where insiders maintain large amounts of company shares. With solid insider holdings, investors can look at lower, attractive valuations
THE SMALL-CAP
VALUE STRATEGY HAS BEEN MORE VOLATILE THAN THE S&P 500 BUT GENERATED ANNUALIZED RETURNS OF 36.9%. to identify opportunities. Returns have been strong for companies with solid insider buying mixed with low buyout multiples. For example, high insider buying combined with an EV/EBIT (enterprise value/earnings before interest and tax) of 10 have delivered annualized returns of 19.3% since 2000, according to Insider123, a backtesting and research software tool. The strategy also saw a slightly lower maximum drawdown compared with the S&P 500—51.6% compared with 55.4%. Today, investors can consider Dick’s Sporting Goods (DKS) with a 40% insider holding and EV/EBIT of 4.6. In addition, consider Taitron (TAIT) at an EV/EBIT of 6.7 with 74% insider ownership.
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SMALL CAP VALUE It’s a well-known market anomaly that smallcap stocks outperform the broader market. This is linked to the fact that smaller companies have longer growth runways than their larger rivals. But in an adverse momentum market that has seen outflows of speculative capital, smallcap investors and traders should turn their attention to companies with solid balance
27% of Luckbox readers have long-term average annual return expectations of
+14%
sheets and low valuations. To determine a strong balance sheet, pay close attention to the Piotroski F- and Altman Z-scores. The F-score, created by Joseph Piotroski, who taught at Stanford University and the University of Chicago, is a nine-point system that rewards each company for meeting a certain criterion on its balance sheet. Metrics include higher return on assets year-over-year, decreasing outstanding shares year-over-year and lower leverage year-over-year. Companies with F-scores in the 7 to 9 range are showing improving balance sheets annually. The Altman Z-score is a weighted average of five metrics to determine a company’s bankruptcy probability. Typically, investors can play it safe with companies with an Altman Z-score over 2.6. Finally, to assess valuation strength, look at companies trading at an EV/ EBIT under 8. Since 2000, the small-cap value strategy has been more volatile than the S&P 500 but generated annualized returns of 36.9%. Consider Rex American Resources (REX), Zedge (ZDGE) and A-Mark Precious Metals (AMRK).
PRAYING FOR A REBOUND It’s not too late to get out of the way of the valuation compression that appears to be an inevitable trend in 2022 and 2023. Instead of trying to catch the falling knives of the technology and communications sectors, active investors should turn their attention to the deep values a market sell-off can create. Many strong companies ripe for investing have solid balance sheets and great business models. Active investors should turn the odds in their favor and stop thinking that this time is different. Tim Melvin, a 30-year veteran of financial markets, uses rigorous quantitative analysis based on the principles of deep value and private equity styles of investing. Garrett Baldwin is a momentum trader, economist, editor-at-large of Luckbox, co-host of The Prediction Trade podcast and the executive producer of Money Morning LIVE.
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trends life, luxury & the pursuit of happiness
GAME THEORY
Memorable Sports
The exhilaration of snatching victory from the jaws of defeat By Andrew Prochnow
Comebacks
TORONTO MAPLE LEAFS PHOTOGRAPH: ARCHIVES OF ONTARIO
1942
The Toronto Maple Leafs pulled off an epic comeback that’s never been duplicated in the 100-year history of the National Hockey League. In 1942, the Maple Leafs fought their way through the playoffs to the final round. Only the Detroit Red Wings stood between them and the Stanley Cup. The Leafs came out flat during the first few games and found themselves down 0-3 in the series. The Red Wings needed only one more victory to raise the Cup, while the Leafs would have to string together four consecutive wins to snatch the title. Down 0-2 in Game 4, the Leafs pulled off a miracle, winning 4-3 in overtime. The Game 4 victory changed the tone of the series. The Maple Leafs went on to dominate games 5, 6 and 7 by scores of 9-3, 3-0 and 3-1 en route to hoisting the Stanley Cup. During that unbelievable run, the Maple Leafs became the only team in history to come back from an 0-3 series deficit in the final round of the NHL playoffs.
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trends
RAFAEL NADAL 2022
Rafael Nadal missed part of the 2021 tennis season because of foot surgery. As a result, expectations were low for the Spanish player at the outset of the 2022 Australian Open—the first of the year’s four major tennis tournaments. But expectations changed quickly, as Nadal beat the highly regarded Denis Shapovlov (seeded 14th) in a tightly contested five-set thriller during the quarterfinals. He followed that with a routine win in the semifinals over the seventh-seeded Matteo Berrettini. During the championship match, Nadal locked horns with Daniil Medvedev—the same player who stopped Novak Djokovic from completing the calendar Grand Slam in 2021. Medvedev beat Djokovic in straight sets during the 2021 U.S. Open final and is considered one of the best hardcourt players in the world. (Note: The Australian Open is played on hardcourt.) In the final, Medvedev took early control and cruised to a two-set lead. Medvedev also built a 3-2 lead in the third set and was up 40-love in the sixth game. With his back to the wall, Nadal fought off all three breakpoints and proceeded to win the match by a score of 2-6, 6-7, 6-4, 6-4, 7-5. With the title in hand, Rafa broke a three-way tie with Djokovic and Roger Federer, and became the first man in tennis history to win a total of 21 majors. The win made Nadal only the third man in the Open Era to win titles at all four majors at least twice—referred to as the “double career Slam.” The two other players to notch the achievement are Djokovic and Rod Laver.
NEW ENGLAND PATRIOTS 2017
Before 2017, football fans frequently cited the 1993 playoff game between the Buffalo Bills and the Houston Oilers as the greatest comeback in the history of the NFL. In that legendary wild card playoff game, the Bills climbed back from a 32-point deficit to beat the Oilers 41-38. Although that win will always rank among the NFL’s greatest comebacks, the 2017 Super Bowl between the Atlanta Falcons and the New England Patriots arguably displaced it as the greatest comeback in NFL history. In that championship game, the Patriots overcame a 28-3 deficit to pull off a 34-28 victory in overtime. In terms of margin, it represents the greatest comeback in the history of the Super Bowl. It was also the first Super Bowl decided in overtime, and more than 30 Super Bowl records were matched or broken. The victory was also quarterback Tom Brady’s fifth Super Bowl title, tying the record set by Charles Haley. Since then, Brady has won two more Super Bowl titles. 36
New England Patriots quarterback Tom Brady
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Pitching great Lefty Grove (right) played for Connie Mack on the 1929 Philadelphia Athletics.
PHILADELPHIA ATHLETICS PHOTOGRAPHY: (NADAL,LAWRIE) SHUTTERSTOCK; (PATRIOTS) REUTERS/ADREES LATIF; (ATHLETICS) BRUCE BENNETT STUDIOS VIA GETTY IMAGES STUDIOS/GETTY IMAGES
1929
Baseball, America’s 200-year-old pastime, has a long history of comebacks. In regular season play, three teams have come back to win after being down 12 runs: the Cleveland Indians in 2001, the Philadelphia Athletics in 1925 and the Detroit Tigers in 1911. One of the greatest comebacks in the post-season occurred during the 1929 World Series when the Chicago Cubs took an 8-0 lead over the Philadelphia Athletics. Philly managed to score 10 runs in the bottom of the seventh inning, winning the game and ultimately clinching the series.
PAUL LAWRIE 1999
The emerald green links of Scotland, the birthplace of golf, provided the backdrop for one of the greatest comebacks in the history of the sport. Like tennis, the men’s professional golf circuit includes four majors every year: the Masters, the PGA Championship, the U.S. Open and the British Open. In 1999, the British Open was played at the Carnoustie Golf Links in Angus, Scotland. During the final round, Paul Lawrie (pictured left) climbed out of a 10-stroke hole to realize the biggest-ever comeback during the final round of a major. Unfortunately, the 1999 British Open was also the scene of one of the most horrific collapses in golf history. Heading into the 18th hole, Jean van de Velde of France held a three-stroke lead and only needed to double-bogey 18 to claim the title. As it turned out, van de Velde was lucky to triple-bogey the hole, forcing him into a three-way playoff with Lawrie and Justin Leonard—a playoff Lawrie ultimately won. Lawrie’s victory at the British Open, the first for a Scotsman in 68 years, will forever be heralded as one of the greatest comebacks in golf history. Also worthy of noting is Jackie Burke Jr.’s win at the 1956 Masters Tournament. Andrew Prochnow, a longtime sports writer and options trader, has contributed extensively to Luckbox, Bleacher Report and Yahoo! Sports.
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trends
RECORD HIGH
Sound Revivals
Legendary musicians are stepping back into the limelight, older rock songs are scoring big streaming numbers and sales of tangible music formats are booming: The music industry is never short of comebacks By Kendall Polidori
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MRC Data and Billboard magazine release a combined year-end report on the music industry. They include streaming numbers, and digital and physical sales. The numbers from 2021 reveal “old music” continues to rank high among modern rock names on streaming services. TOP ROCK ALBUMS n Queen, Greatest Hits n Fleetwood Mac, Rumours n Machine Gun Kelly, Ticket to My Downfall n Elton John, Diamonds n Creedence Clearwater Revival, Chronicle: The 20 Greatest Hits
entry point for listeners. They often go for $10, compared with the $20 to $30 it costs to buy a new vinyl record. They’re also easier and quicker to produce, without the extended backorders typical now for vinyl. Not many companies have continued making and distributing cassette tapes over the past few decades, but more are starting to pick up on the trend. The Missouri-based National Audio Company, the world’s largest manufacturer of the format, saved a 62-foot tape-coating line once used to make magnetic strips for bank cards and began producing the tape themselves. Cassettes are not yet the biggest-selling physical music format, but they’re gaining traction. Could CDs make the same type of comeback in the next decade? Either way, analog and digital will be living harmoniously for the foreseeable future.
TOP ROCK SONGS n Glass Animals, Heat Waves (4 million digital song sales) n Machine Gun Kelly x Blackbear, My Ex’s Best Friend (2.2 million) n Måneskin, Beggin’ (2.1 million) n Fleetwood Mac, Dreams (2.1 million) n The Neighbourhood, Sweater Weather (1.8 million) TOP AUDIO STREAMS n No. 7: Creedence Clearwater Revival, Have You Ever Seen The Rain (94.4 million) n No. 9: Lynyrd Skynyrd, Sweet Home Alabama (92.3 million) n No. 10: Fleetwood Mac, Dreams (91.1 million) Source: MRC Data and Billboard 2021 Year-End Report
PHOTOGRAPH: SHUTTERSTOCK
REWIND Digital downloads and music streaming took flight in the early 2010s, leaving CDs, cassettes and vinyl collections to gather dust in grandma’s basement. But now vinyl’s back in the mainstream with sales that have gradually increased for the past 15 years. Tangible music sales in a variety of formats brought in $1.65 billion in the U.S. last year alone, according to the Recording Industry Association of America. In 2021, vinyl sales reached $1 billion, up from $643.9 million the year before and outsold CDs for the first time in three decades. Cassette tapes are also making their way back into music distribution, with global sales flourishing. WIRED reported in 2019 that the U.K. recorded its strongest cassette sales in a decade—totaling 75,000—thanks in part to artists like Billie Eilish and Björk. It’s a dramatic leap from 50,000 sales the year before. By the end of 2020, around 150,000 cassettes were sold in the U.K., an increase of 103%, according to NME, a British pop culture website. It’s not clear what’s driving the rise in cassette sales, but as the desire for physical music formats increases, cassettes become a cheaper
OLD ROCK OUTRANKS
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TOP MUSIC COMEBACK
PHOTOGRAPHY: (PEPPERS) PA ARCHIVE/PA IMAGES; (ABBA) MPTVIMAGES.COM; (BOWIE) REUTERS/DYLAN MARTINEZ/FILE PHOTO
Agnetha Fältskog and Anni-Frid Lyngstad (Frida) of ABBA, and Anthony Kiedis and John Frusciante of Red Hot Chili Peppers.
n DAVID BOWIE, Lazarus David Bowie’s single Lazarus, released on Dec. 17, 2015, and featured on his album Blackstar, was his first Top 40 hit on the Billboard Hot 100 in 28 years. The single and video earned great reviews, but Bowie never performed it live because he passed away from liver cancer just weeks later. The song, and others on Blackstar, his 26th and final studio album, are said to be commentaries on Bowie’s own death. Lazarus is often interpreted as Bowie’s prediction that his fame would increase after his death. The track has since been used in Bowie’s offBroadway musical of the same name. Lazarus did not define Bowie’s career but was an impressive comeback for the artist and a powerful tribute to his life.
RECENT COMEBACKS n ABBA, Voyage In November 2021, the beloved Swedish pop group ABBA made a comeback with their album Voyage, the first release from the group since 1981’s The Visitors. Apparently, they didn’t lose their audience during the 40-year pause. A month after its release, the album had already landed the No. 1 spot on album charts in 18 countries. It also broke records by selling more than 1 million copies during its first week. According to NME, the album accumulated more than 275 million streams combined across multiple platforms in December. It’s a catchy, melodic 10-song album meant to dance to. n ADELE, 30 Adele is the queen of releasing an album and then disappearing until she’s ready to drop the next one. After the success of her album 25, fans hadn’t heard much from the global pop icon until the announcement of 30, which was released last November. Her single Easy On Me quickly broke Spotify’s record for the most-streamed song in a day and week by surpassing 1.5 million streams across all platforms. The song also spent weeks at No. 1 on the Billboard Hot 100 chart. In January, Billboard reported that sales for 30 reached 1.46 million, making it the biggestselling album in the U.S. of any year since 2018.
n PIXIES, Human Crime The Pixies haven’t disappeared from the music scene in recent years, but they haven’t won praise for the albums they’ve released since their 2004 reunion. Their most recent album, Beneath the Eyrie, from 2019, garnered lukewarm reviews from the likes of Pitchfork and Rolling Stone. But their most recent single—their first in two years—is called Human Crime and just might reinstate the band in the top tier of new rock music. Reliable guitar riffs and smooth vocals from frontman Black Francis back the song’s anthemic vibe. n RED HOT CHILI PEPPERS, Unlimited Love The Red Hot Chili Peppers caught the rock world’s attention this year with the announcement of Unlimited Love—the band’s first album since guitarist John Frusciante’s return in 2019. Before this comeback, Frusciante was with the band in 1988-1992 and again in 1998-2009. He has played on Red Hot Chili Peppers’ most-acclaimed albums, and Unlimited Love is their first to hit No. 1 since their 2006 album Stadium Arcadium, which was the last one with Frusciante. After its debut in April, it landed on the U.S. Billboard 200 Albums chart by selling 97,500 albums. As of May, Unlimited Love also had the best-selling week of any rock album in the last 16 months. The album isn’t necessarily the band’s best, but it’s a solid, enjoyable piece of work and brings back the Californication vibe.
David Bowie released 26 studio albums.
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The Radke brothers don’t pretend to be musicians they aren’t, choosing instead to have fun.
trends Brothers David, Bobby and Dannis Hackney formed the Black funk band Death in Detroit in the 1970s, but it turned into a punk rock project after they saw The Who live.
ROCKHOUND
Radkey: No Rules Punk
A synergy born of shared experience binds the three Radke brothers. They make music with a driving punk force and delicately laid-out instrumental groundwork. Often, Death or Bad Brains come to mind, but the Radke brothers and their band, Radkey, live entirely within their own sphere. It’s true the St. Joseph, Missouri, natives share a certain aura with the bands above, but according to bassist Isaiah Radke, their band Bad Brains, formed as a jazz fusion band in 1976 in is more of a Weezer, Foo Fighters Washington, D.C., has been regarded as a driving force and Ramones mash-up, only there in hardcore punk. are no rules. Experimenting with punk, rock, pop and stripped-down acoustics, Isaiah, Dee and Solomon Radke bounce off one another rhythmically to form a sound all their own. THE EARLY DAYS It’s puzzling for Isaiah to look back at what the band faced in St. Joseph after touring with such stars as Jack White, Foo Fighters and The Offspring. He notes the bizarre reality of being a Black rock band—often questioned for not being into rap instead. “We just grew up listening to music, and it happened to be rock music. Black people have always been playing rock music,” Isaiah says. “We’d have people come up to us and say, ‘I saw you guys get on stage and I really didn’t know what was coming.’ But we loaded up guitar, drums and bass, so what else did they think was going to happen? It’s so confusing and bizarre that it’s considered weird to be a Black rock band.” Growing up homeschooled, the Radke brothers found themselves without much to do—aside from digging through their father’s massive vinyl and CD collections. Artists like Led Zeppelin, the Ramones, The Beatles, Steely Dan, Billy Joel, Elvis Costello,
The Beatles, Stones and Zeppelin were awesome—but rock lives on. Why not break out of the classic rock cocoon and give new rock a chance? Rockhound is here to help. Think of it as a bridge from 1967 to today and beyond. 40
Weezer and Nirvana were among their daily rotations. When they picked up instruments of their own, those influences immediately seeped through. They spew pure, elevated energy and an old school rock mentality—jumping around on stage for an hour straight in sleeveless jean jackets and black wrist sweatbands. What bass player other than Isaiah Radke comes to mind who bobs his head aggressively and does jump splits live? Next to none, even in the most hardcore rock bands. “We always tried to make music that we felt didn’t exist yet,” Isaiah says. “We’re happy we had those influences because then we always enjoyed the music that we made.” As young teens discovering their place in music, the Radke brothers found that writing and recording came to them naturally. With their dad as their manager, touring the country in a van was a family road trip they enjoyed. Grounded in the same influences, collaboration and songwriting has been an oddly smooth process for Radkey. They somehow eliminate the frontman mentality, too—they are all the frontman, contributing equal amounts of heart to their sets. But in the beginning, getting other people to see that, let alone listen to their music, wasn’t easy. When they dipped their feet into the live show pool in the 2010s, they had trouble booking shows in their hometown, forcing them to venture out to nearby Kansas City venues. “It was really discouraging,” Isaiah says. “That’s how people can really kill a band—by not letting them even play shows in the town they’re from. We continued to grind and practice and, eventually, we landed our first gig with Fishbone in Kansas. That’s when we were like, ‘OK, we can do this.’”
MAKING THEIR OWN RULES Radkey hasn’t let the challenges of stereotyping and hometown rejections slow them down. Independent from a record label, they’ve forged a path of their own. The key, Isaiah says, is playing as many shows as possible. With that came connections, landing them big
PHOTOGRAPHS BY ERICK LUCK AND PAUL ANDREWS
By Kendall Polidori
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gigs and allowing them to retain full creative control. They have to work twice as hard to promote themselves and book shows, but they have no one to answer to or pay, aside from their dad. “It’s important for us to prove to ourselves that we can make this work,” Isaiah says. Although known as a post-punk group, offstage the brothers are soft-spoken “nerds” who put family and their cats first. As for their music, they don’t hesitate to stray from a heavier, and sometimes lighter, sound. Incorporating rock riffs and pop melodies, the band lives up to what it means to be punk: authenticity. The brothers don’t pretend to be musicians they are not. They’d rather have fun.
ROCK JOY Playing their music unencumbered, Radkey strives to build a bridge between hard rock and dance music, which is often frowned upon in rock culture. At a live Radkey show, one song leads fans to form an energetic mosh pit and the next initiates a chill dance party. They’re shy, but it’s never been hard for them to turn on a spirited stage presence built from the influences of Cheap Trick. Isaiah notes this as “one of the reasons our music got bigger and better. We didn’t want to just be this stage show band, we really wanted people to dig our music.” Their sound is bigger than expected from a three-man band. The songs are musically full and layered, filling the space between them and their audience. A punk attitude is often directed toward school or broken family structures, but for Radkey, their attitude toward life in general is positive. As movie and video game hounds, they often get ideas from storylines that speak to them. After years of touring, they now
Their band is more of a Weezer, Foo Fighters and Ramones mash-up, only there are no rules.
(Left to right) Solomon, Dee and Isaiah Radke have been playing music together for more than 10 years.
build off experiences of their own. Their latest single, Games (Tonight), is an example of Radkey’s knack for forcing people to reflect on common human experiences. They wend their way through emotional complications. They encourage listeners to understand themselves and learn to articulate their feelMore Radkey ings. They drive anthems forward with Dee’s baritone Seize vocals kicked up to a higher octave. They take a pop-punk approach similar to Green Day and Blink-182. With more singles, shows and festivals ahead, Isaiah says they are likely to release their fifth studio album later this year and hope to encourage people to attend more rock shows. “We want to deliver a good enough show to maybe change people’s minds about going to concerts and convert average people into concert-goers. Then, maybe rock shows will get a little bit more filled,” Isaiah says. “I would love for people to enjoy big rock bands in a broad kind of way.” START WITH Radkey’s song Seize and you might hear a drum anthem and tempo similar to that of Foo Fighters’ Pretender.
PAY ATTENTION TO Dee’s baritone vocals and bluesy undertone. He quickly switches octaves to keep up with the fast-paced guitar and bass rhythms—which present a powerful solo midway through. Kendall Polidori is Luckbox’s resident rock critic. Follow her reviews on Instagram @rockhound_luckbox and Twitter @rockhoundlb.
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SENTIMENT
ARE BIG CITIES PAST THEIR PRIME? INTELLIGENCE SQUARED U.S. invites some of the world’s brightest thinkers to debate issues. The organization was founded in New York in 2006 to promote intellectual diversity by fostering respect for differing opinions. The debates are organized in the traditional Oxford style. The side that convinces more audience members to embrace its arguments wins. The excerpts below come from a debate in March about big cities and their appeal—or lack thereof— in a post-pandemic world.
YES
39% YES
47%
14%
NO
UNDECIDED
–AUDIENCE OPINION BEFORE THE DEBATE
TOKYO, THE WORLD’S MOST POPULOUS CITY, HAS
37.7 MILLION PEOPLE
More Debate See who won the debate
MANILA, PHILIPPINES, THE MOST DENSELY POPULATED CITY IN THE WORLD, HAS
111,000 PEOPLE PER SQUARE MILE IN THE U.S., IT’S NEW YORK CITY WITH MORE THAN
27,000 PEOPLE PER SQUARE MILE NO
KOTKIN: I think cities have been past their prime in many ways, compared with where they were 40 to 50 years ago. But I want to define what i’m talking about when I say “city.” I’m talking about the core city. What we’re seeing is that regions are becoming more important than cities, and these regions are predominantly suburban. This has been accelerated by online work—it allows people more options. Let’s say you live in Riverside, California, and your job is in Irvine, California. It’s kind of a death march to do that commute every morning. So, what we’re really talking about here is not that cities are going to die, but that their function will be different.
O’MARA: I am here to forcefully argue against the notion that big cities are past their prime. They are not only in their prime, but perhaps their best days are yet to come, and here is why: If we take the long view of large cities throughout millennia—throughout human history— the density of human settlement has been critical not only for protection from harm but also in creating commerce and building wealth, communities of sociability and, critically, communities of innovation and creativity where new ideas come together and advance social progress and human understanding. There have been many premature obituaries written for cities.
HERNANDEZ: The world has changed. Technology has changed. I’m sure there were people defending horses and buggies, and I certainly know that people were defending telegraphs. We just completed a big study in the SCAG region—all of Southern California except San Diego—finding out who’s telecommuting and who wants to telecommute. Even for essential workers who have to be on the job, they have the opportunity to buy into shorter work weeks—four days instead of five—travel less, and do some of their functions from home. So, I’ll stop by saying there’s convergence on a megacity. There’s absolute disagreement on core cities.
GLAESER: If we take a global perspective, the case that cities are past their prime is laughably false, right? In 2018, the U.N. projected that we would go from having 33 megacities to having 43 megacities over the next 12 years. Today, more than one in eight people live in these megacities. Cities are powering the growth of the developing world. They are providing enormous income benefits, and there are even places where self-reported happiness is demonstrably higher. If we want to restrict ourselves just to the U.S., I think the case is closer, but I still think it is very much false that cities are past their prime.
Joel Kotkin, scholar of global, economic, political and social trends and the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class.
Margaret O’Mara, historian of modern America who teaches and writes about the history of the technology industry, American politics and the connections between the two.
Jennifer Hernandez, attorney and environmental advocate who studies how city policies affect minority communities, especially in the wake of climate change.
Ed Glaeser, American economist and professor at Harvard University, where he teaches microeconomic theory and urban and public economics.
This transcript has been edited for length and clarity.
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WHEELS
The Bug’s Bus is Buzzing Back The look of an automobile icon—VW’s T1 Microbus— returns in the era of electric mobility
PHOTOGRAPHS: VINTAGE VW (REUTERS); NEW VW (COURTESY OF VOLKSWAGON)
F
or more than 70 years, the Volkswagen Bus has been an automotive icon. A trendsetting choice for American hippies and road-trippers, VW helped define van life. Rumors the popular bus would make a comeback floated 20 years ago, and now VW has confirmed a retro reboot—but with a twist. The all-new electric VW Microbus is scheduled to launch this fall in Europe, and a North American debut featuring a long-wheelbase model is planned for 2023 with sales to begin in 2024. Two zero-emission vehicles transfer the design of one of the greatest automobile icons—the T1 Microbus—to the era of electric mobility. Recycled materials and no use of real leather in the interior complete the sustainability strategy of the ID. Buzz and ID. Buzz Cargo. The European versions will come to market with a 77 kWh battery, which provides current to a 150 kW electric motor. Although VW doesn’t offer details on range, a MotorTrend March 2022 article projects 270 miles as the range for the electric bus. That’s comparable to the battery range of a Tesla Model 3 RWD. VW said the peak charge rate of 170 kW can generate a quick charge from 5% to 80% in 30 minutes. It also features an onboard AC charger good for 11 kW, ensuring the ID. Buzz will keep Level 2 charges as brief as possible, too. “The ID. Buzz brings a lot of
Featuring a vintage oversized VW logo, two-tone paint and a diamond-patterned grille, the electric ID. Buzz takes its design cues from the classic VW bus of yesteryear. Car and Driver magazine estimates the retail price at $40,000, a figure VW has not confirmed.
endearing charm and affinity with people back onto the road,” said Jozef Kabaň, head of Volkswagen Design, tying a direct link to the original classic VW Bus. “In the T1, you are practically sitting on top of the front axle—there’s no front overhang.
While providing everything of relevance to safety and technology, the ID. Buzz has wonderfully short overhangs.” Unlike the original boxy VW bus built on a Beetle-based platform, the new ID. Buzz features a space-age square body sitting on a platform motored by a battery pack. The compact overall length of 4,712 mm is accompanied by what in comparison is a very long wheelbase of 2,988 mm, VW reports. Design already followed function in the case of the T1, the first Bulli. Beyond exterior aerodynamics, the roomy interior offers what VW describes as “lounge-like” comfort for five passengers and their luggage. MotorTrend suggests the vintage styling—such as the oversized VW logo, two-tone paint, and diamond-patterned grille—are reminiscent of the buzz from the classic VW bus.
The all-new electric VW Microbus is scheduled to launch this fall in Europe, and a North American debut is planned for 2023.
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FINANCIAL FITNESS
Come Back to Fitness Here’s how to manage workouts, nutrition and a third approach to fitness that may surprise you By Jim Schultz
T
ime to be brutally honest with yourself. It’s been a while since you’ve sweated through a training session or filled out a food journal. In fact, you’re not even 100% sure your old gym is still in business. But you can reclaim your fitter former self with the help of three strategies. One’s for the gym, another’s for food and you may find the third a surprise. Here’s how to get back on the train to Shredsville in no time.
2. EAT RIGHT Develop a nutritional strategy. Simply “eating clean” isn’t a strategy, and committing to “making better choices” almost guarantees failure. Instead, create a structure with two parts: measurement and accountability. For measurement, choose one of the dozen or so methods available and try it for two weeks. Then adjust it or abandon it and pick another approach. Track everything stuffed into your mouth in calories or micros. Measure protein or sugar. Choose time-restricted eating (intermittent fasting) or fun-restricted eating (keto). All of those methods can work. But don’t trust your intuition when it comes to nutrition. Chances are your eating habits are a bit, uh, suboptimal. For people who have struggled with their weight, intuitive eating may never be a long-term option. Even fitness enthusiasts who depend on intuitive eating didn’t roll off the couch and into that lifestyle—
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The author takes a stroll
Brisk walking increases life expectancy by as much as 16-20 years, according to a 2019 U.K. Biobank study with 475,000 participants. it takes years of discipline. Not sure where to start? Begin by tracking protein and build up to 0.36g/lb of body weight per day. For example, a 150-pound person should consume 54 grams of protein per day. 3. WALK FAST Start walking your way to a healthier lifestyle. Do it every day and don’t make exceptions. Download a free app to track steps, lace up those sneakers and start getting your steps in. It’s simple but also sneakily effective. Not only will you start reclaiming your fitness, but if you’re able to walk outside, where the beauty of nature collides with your natural endorphins, you’re going to feel great. Need some goals? Aim for 7,000 steps a day the first week, then 8,000, then 9,000, then 10,000. Jim Schultz, Ph.D., a derivatives trader, fitness expert, owner of livefcubed. com and the daily host of From Theory to Practice on the tastytrade network, was named North American Natural Bodybuilding Federation’s 2017 Novice Bodybuilding Champion. @jschultzf3
PHOTOGRAPH: SHUTTERSTOCK
1. LIFT SMART Start small and keep it easy. In fact, shoot for smaller than small and easier than easy. Whatever you think you’re capable of doing right now, which won’t be much, do 50% of it. Simply stepping back onto the rubber mats is a big enough victory for the time being. Besides, setting an easier goal makes it more likely you’ll accomplish it. Small victories lead to greater confidence, which leads to more small victories, and so on. While muscles get all the press and hog the spotlight, forget them for a minute. Tendons, which are everywhere in the body, don’t get much attention. But overload them too quickly, and you’ll be hurting in places you hadn’t thought about in years. Take it easy—give those tendons a chance to strengthen and solidify, and they’ll thank you with months of injury-free bombing and blasting. If you need a specific plan, do a full-body routine on Mondays, Wednesdays and Fridays.
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CALENDAR
JUNE 3 World Bicycle Day 5 World Environment Day 3-5 Street Vibrations Spring Motorcycle Rally Reno, NV 6-10 Apple’s Worldwide Developers Conference Online 7 National VCR Day 9-12 Chicago Blues Festival 10-12 Governors Ball Music Festival New York City 14 National Bourbon Day 16 Entertainment, Pop Culture, Toys & Collectibles Auction Potter & Potter Auctions 19 Father’s Day 21 World Day of Music 21 Summer Solstice PHOTOGRAPHS: BEATLES, BICYCLE, BOURBON, TYPEWRITER (SHUTTERSTOCK)
23 National Typewriter Day 23-26 Pintastic Pinball & Game Room Expo Sturbridge, MA 25 Global Beatles Day 27 Wimbledon Begins London
Pedal Power Cyclists are hitting the bike paths and lanes more than ever, and that’s driving a boom in spending. In fact, Americans paid $8.2 billion for bikes and accessories in the first quarter of last year, up 35% from a year earlier, according to the U.S. Bureau of Economic Analysis. High gas prices and fear of the pandemic have triggered those increases, but commitments to exercise and sustainability have also contributed. That’s according to professor Leszek Sibilski of Montgomery College in Rockville, Maryland. He’s helped support the surge by urging the United Nations to declare a global celebration of bicycles for both exercise and travel—a resolution the U.N. unanimously approved in 2018. Giggle Water That’s what flappers called bourbon during Prohibition, but it’s no laughing matter that U.S. bourbon sales reached $76 million in 2021, according to Statista. Sales of bourbon, also known as “America’s Native Spirit,” have increased every year since 2010. To put it in perspective, vodka accounted for about a third of the spirits industry’s volume with $78 million while gin came in just under $10 million last year. Vintage Keys A light blue Olivetti Lettera 32 once owned by Cormac McCarthy, author of All The Pretty Horses, sold for $254,000 at Christie’s Auction House. Despite falling from favor in the 20th century, typewriters apparently are again bringing comfort to collectors and famous writers. Connoisseurs of vintage keys include George R.R. Martin, Quentin Tarantino and Jhumpa Lahiri. Although typewriters may not be put to use much these days, they’ve gained renewed popularity, and some companies are still producing them in small quantities. Get Back The June 25 day of celebration marks The Beatles’ first global live TV performance on the BBC’s Our World in 1967 of All You Need Is Love, which reached 26 countries simultaneously. For six decades, the band has remained at the top, despite not releasing any new music since Let It Be in 1970. The group attracts about 25 million monthly listeners on Spotify today. By the end of last year, their vinyl album Abbey Road sold approximately 201,000 units. Here are their three most streamed songs on Spotify: 1. Here Comes The Sun / (798 million streams) 2. Come Together / (501 million) 3. Let It Be / (453 million)
June 2022 | Luckbox
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tastyworks.com/get200 LOVE WHERE YOU TRADE * Starts 3/1/22 and ends 8/31/22. Offer only valid for new tastyworks customers or existing tastyworks customers who have never funded a tastyworks account
prior to 08/31/22. Must be legal residents of the 50 United States (or D.C.), 18 years+. Must have a $2,000 min. funded account for 3+ mos. to qualify. Qualified customers receive a minimum $200 in stock. Stocks randomly selected by tastyworks, and stock value may fluctuate up or down due to market volatility. Offer not valid for non-US residents, IRA or Trust accounts. For additional eligibility requirements and all details, see the Official Terms and Conditions at www.info.tastyworks.com/get200.
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cheat sheet
NO.
Long Call Speculation
trades& tactics
23 PROS
Paying a fee to lock in a price
Leverage
By Eddie Rajcevic
CONS
✓
Instead of paying $10,000 to buy 100 shares of a $100 stock, long calls allow active investors to gain exposure to those shares at a much lower price (e.g., $500).
Time Decay
✗
Each day that a long call is held, it slowly loses value due to the time component of options. If the stock does not see a large enough price increase, the time decay results in a losing trade.
uying a long call option is like saving a coupon for a rainy day. Let’s say a clothing store sells rain jackets. Shoppers aren’t certain if the upcoming season will be rainy or not, so they Limited Risk Volatility don’t want to risk buying a $100 jacket and not using it. If the store offers a $5 coupon that guarThe only cost, and loss Impending news, like earnings antees the $100 purchase price, they can wait for potential, for a long call is the announcements, increase premium paid to acquire the volatility and the price of a month to decide if they’ll buy the jacket. contract initially. options. After the news Now, suppose that two weeks pass and it rains passes, the volatility and price nonstop. People are flocking to the store to buy rain falls. This can create a loss for jackets, so the manager raises the price to $120. long calls. Customers with coupons can still buy the rain Flexibility Probability jacket for $100 instead of the inflated price of $120. In the opposite scenario—it doesn’t rain for Long calls can be combined Long calls generally weeks and no one needs a rain jacket—coupon with other options strategies, have a lower probability holders can let them expire and just lose $5 or even stock positions, to of being profitable. instead of the $100 they would have lost if they create new strategies. had bought the jacket and not used it. In finance, a long call works in a similar fashion. This options stratTaking a shot egy of buying a single call option gives Investors buy calls to speculate on a rising stock price for a fraction of the cost. the owner the right to buy 100 shares of a stock at a designated price on or $300 before a future date. The designated price is the option’s strike price and $250 that future date is the expiration date. $200 To buy a long call, the owner pays a premium to the seller. Traders use $150 long calls because they believe the stock will increase before the expi$100 ration date but don’t want to buy the $50 shares initially. If the stock increases in price, the value of the long call has $0 a similar increase. When investors are satisfied with their gain, they can sell $-50 the call to lock in the profit.
B
✓
✗
✓
Profit/Loss
✗
Eddie Rajcevic, a member of the tastytrade research team, serves as co-host of the network’s Crypto Corner and Crypto Concepts programs. @erajcevic11
$-100
96
98
100
102
104
106
Stock Price June 2022 | Luckbox
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5/4/22 1:44 PM
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5/4/22 1:44 PM
trades&tactics actionable trading ideas
CHERRY PICKS
R I PE & J U I CY T RADE IDEAS
The Blunt Truth About Pot Stocks
Cannabis-related stock prices are falling as the nation awaits federal decriminalization By Michael Rechenthin
fter the 2020 U.S. presidential election, cannabis stocks reached new highs as the nation waited for President Joe Biden to fulfill campaign promises to decriminalize cannabis and pardon nonviolent offenders. When that didn’t happen, cannabis stocks began falling to new lows. Although the S&P 500 is up 5% since January 2021 when Biden took office, the average cannabis stock is down almost 50%. Here are a few stocks that are smokin’, and others that are ready to go up in smoke.
PHOTOGRAPH: SHUTTERSTOCK
A
Cannabis-oriented ETFs Cannabis exchange-traded funds have great symbols: Cambria Cannabis (TOKE), AdvisorShares Pure Cannabis (YOLO) and ETF Managers Alternative Harvest (MJ). But catchy symbols haven’t necessarily led to liquidity and widespread use. The most liquid, judging by the average dollar amount traded per day, is AdvisorShares Pure US Cannabis (MSOS). A close second is ETF Managers Alternative Harvest.
Opposite of high Although the S&P 500 is up 5% since President Joe Biden took office in January 2021, the average cannabis stock is down almost 50%. S&P 500
80%
Average Cannabis Stock
60% 40% 20% 0% -20% -40%
Jan 2021 Mar 2021 May 2021 Jul 2021 Sep 2021 Nov 2021 Jan 2022 Mar 2022 May 2022
Source: tastytrade
June 2022 | Luckbox
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Your Retirement, Your Call You Can Trade Stocks, Options, and Futures in your IRA
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trades& tactics
The others are best avoided— Cambria Cannabis trades an average of $191,000 worth of shares a day, and it’s a good rule of thumb not to buy anything that trades less than $10 million per day. Below are some of the biggest names in the cannabis industry. Stocks priced at less than $5 are not included. Tilray Brands (TLRY) was the most actively traded stock through the end of April. While revenues have increased, it is bleeding money and net income is dreadful. But its fortunes could change and the stock could turn around. Active investors considering Tilray for their portfolios could take advantage of the call skew. By projecting out a month, they could buy the stock and sell the first out-of-the-money call and lower the investor’s breakeven by 20%. Investors interested in taking advantage of a real estate investment trust (REIT) might want to
Suffering symbols
Investors aren’t eating up these cannabis-related exchange-traded funds. Description
Avg. Dollar Traded Per Day
MSOS
AdvisorShares Pure US Cannabis ETF
$30 million
MJ
ETF Managers Alternative Harvest ETF
$16 million
YOLO
AdvisorShares Pure Cannabis ETF
$2 million
POTX
Global X Funds Cannabis ETF
$2 million
CNBS
Amplify Seymour Cannabis ETF
$1 million
THCX
Spinnaker Series Cannabis ETF
$700,000
TOKE
Cambria Cannabis ETF
$200,000
consider Innovative Industrial Properties (IIPR). It’s had positive net income for years. It’s lumped into the cannabis industry because it owns cannabis-heavy commercial properties. It also pays a respectable 4.8% dividend. Investors could consider a covered call in this stock
When call options are trading at greater values relative to equidistant put options.
by buying 100 shares of stock and selling the first (or second) call option above the current stock price. Michael Rechenthin, Ph.D. (aka “Dr. Data”), is head of research & development at tastytrade. @mrechenthin
Smokin’ stocks
Some of the biggest names in the cannabis industry aren’t traded often. Description
Implied volatility 100%
12-month price change
Avg. Dollar Traded Per Day
TLRY
Tilray Brands
98%
-73%
$281 million
CGC
Canopy Growth
134%
-81%
$71 million
IIPR
Innovative Industrial Properties
60%
-19%
$46 million
GRWG
Grow Generation
108%
-87%
$42 million
HYFM
Hydrofarm Holdings
111%
-85%
$25 million
CARA
Cara Therapeutics
98%
-28%
$12 million
TPB
Turning Point Brands
74%
-38%
$8 million
SWM
SchweitzerMauduit International
52%
-45%
$5 million
June 2022 | Luckbox
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trades& tactics
THE PREDICTION TRADE
Political Fortunes Serious money can be made and lost when prediction markets flip—and in some cases flip back again. Here are a few of the most memorable market comebacks from recent elections. From left: President Joe Biden, Virginia Gov. Glenn Youngkin and New York Mayor Eric Adams
By Mike Reddy
50
$1
Joe Biden Bernie Sanders
.75
.50
.25
0 Jan 2
Jan 13
Jan 25
Feb 6
Feb 18
Mar 1
Mar 13
Mar 25
Apr 6
Apr 18
Apr 30
PredictIt.org
Then, on Feb. 26, South Carolina Rep. Jim Clyburn endorsed Biden just three days before his state’s primary. Biden’s share prices jumped to 23¢ that day, and after winning the South Carolina primary, his average trade price never dipped below 25¢ again. Early March marked Sanders’ descent and Biden’s return to the top, where he would remain until he comfortably secured the Democratic nomination for President of the United States. ⊲ TRADERS WHO BOUGHT JOE BIDEN SHARES UNDER 15¢ SAW RETURNS OF AT LEAST 566.7%.
Biden shares traded for their lowest price ever, at 6¢, and spent 17 straight days trading under 15¢ on average.
PHOTOGRAPHS: SHUTTERSTOCK
More than 140 million shares traded hands in PredictIt’s “Who will win the 2020 Democratic presidential nomination?” market, and it’s no surprise why. The market launched in August 2017 and spent the bulk of its three-year lifespan fiercely contested among a total of 33 contracts. Then-candidate Joe Biden was almost always the favorite—something that was likewise reflected in the polls. Six months before he even announced he was running, 33% of respondents to an October 2018 CNN/ SSRS poll put Biden far ahead of the pack. But prediction market traders and political junkies alike remember that the race was anything but a lock. Besides Biden, candidates Bernie Sanders and Elizabeth Warren each saw daily average trade prices on PredictIt reach above 50¢, implying the market was forecasting they had greater than 50% odds of securing the nomination. By Jan. 25, 2020—a little over a week before the Iowa caucus—the race that looked like it was Biden’s to lose had flipped in Sanders’ favor. Adding insult to injury, Sanders had a stronger showing than Biden in Iowa, pulled off a narrow victory in the New Hampshire primary a week later and went on to win the Nevada caucus a little over a week after that. Sanders looked unstoppable. On Feb. 11, the day of the New Hampshire primary, Biden shares traded for their lowest price ever, at 6¢, and spent 17 straight days trading under 15¢ on average. Meanwhile, Sanders was trading as high as 53¢ with no sign of slowing down.
Who will win the 2020 Democratic presidential nomination?
Average trade price ($)
WEAK END WITH BERNIE
Luckbox | June 2022
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Which party will win the 2021 Virgina gubernatorial election? Democratic Republican
.75
.50
.25
0 Sep 3
Eric Adams Andrew Yang Kathryn Garcia
$1 Average trade price ($)
Average trade price ($)
$1
Who will be elected New York City mayor in 2021?
.75
.50
.25
0 Sep 13
Sep 23
Oct 3
Oct 13
Oct 23
Nov 2
Mar 2
Mar 29
Apr 25
PredictIt.org
May 22
Jun 18
Jul 15
Aug 11
PredictIt.org
VIRGINIA? I HARDLY KNOW YA
MAYORAL MELEE
When it comes to the 2021 Virginia gubernatorial election, whether you look at the polling averages of FiveThirtyEight and RealClearPolitics or the prediction markets of PredictIt, you’ll essentially see the same thing: long, dull trend lines that flip dramatically in the final days. Democrat Terry McAuliffe, the 72nd governor of the state from 2014 to 2018, was the favorite from the get-go against Republican businessman Glenn Youngkin. In PredictIt’s “Which party will win the 2021 Virginia gubernatorial election?” market, Republican shares traded under 20¢ for nearly five months from December 2020 to May 2021. But it was Youngkin who would come out on top and win the election by over 63,000 votes. When did the flip happen? Republican and Democratic shares began inching toward each other until reaching a virtual dead heat on Oct. 29, 2021, when Democratic shares traded for an average of 53¢ and Republican shares traded for an average of 50¢. The next day, Republican shares eclipsed Democratic shares for the first time, at 52¢ to 51¢, respectively. The rest is history. Political pundits suggest it was Youngkin’s campaign emphasis on education—and especially parents’ role in their children’s education—that made the difference in the election. McAuliffe’s “I don’t think parents should be telling schools what they should teach” remark during a September debate certainly didn’t help.
Andrew Yang seemed like a shoo-in for New York City’s 2021 mayoral election—at least at first. As a Democratic presidential candidate just the year before, Yang had name recognition, energized supporters and early polling leads. In PredictIt’s “Who will be elected New York City mayor in 2021?” market, Yang shares traded as high as 73¢ in late April 2021, and it looked like the former presidential hopeful would soon be in charge of The Big Apple. At the same time, Brooklyn Borough President and retired New York City Police Captain Eric Adams had shares trading in the teens, down from the mid to upper 20s a month prior. In total, his shares spent 17 consecutive days in April and May trading under 20¢ on average. Things didn’t look good, but Adams got a boost from an unlikely place: Andrew Yang. From criticizing unlicensed street vendors, calling Times Square his favorite subway station and tasteless debate gaffes about mental illness, Yang and his campaign unraveled as New Yorkers questioned whether he was experienced enough to serve as their mayor. Then, in June, the early front-runner became the first in a field of 13 Democratic candidates to drop out of the race. Still, it wasn’t a sure thing for Adams after he overtook Yang and became the new front-runner. Former sanitation commissioner Kathryn Garcia was within striking distance when initial rankedchoice preferences were revealed—with over 120,000 absentee ballots yet to be counted. On July 1, Garcia shares traded up to 61¢ as traders grappled with the very real possibility that she could win. But it was ultimately Adams who came back from behind again, went on to beat Republican Curtis Sliwa in the general election and became New York City’s mayor.
⊲ TRADERS WHO BOUGHT REPUBLICAN SHARES UNDER 20¢ SAW RETURNS OF AT LEAST 400%.
HOW PREDICTION MARKETS WORK Prediction markets use real money to forecast outcomes of events. Contracts trade between 1¢ and 99¢, and the price reflects the market’s forecasted probability of an event occurring. When an outcome is reached, correct contracts pay out $1, and incorrect contracts become worthless.
More TPT
Watch the podcast
⊲ TRADERS WHO BOUGHT ERIC ADAMS SHARES UNDER 20¢ SAW AT LEAST 400% RETURNS.
June 2022 | Luckbox
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trades& tactics
THE NORMAL DEVIATE
Short Puts in Small Stocks Low-priced stocks and short put strategies are essential ingredients for active investors, but challenges arrive when mixing them By Tom Preston
contrarian options trader might see a bullish opportunity when a stock gets pummeled to a low price. It’s a Pavlovian reaction, but there’s nothing wrong with that. There’s money to be made by taking on risk. When an increase in implied volatility accompanies the sell-off in a stock, a trader speculating on a bullish bounce might use a short put. Because a short out-of-the-money (OTM) put has a lot going for it as a bullish strategy—higher credit, high probability of profit and positive theta. But when a stock’s price gets too low, a trader looking to short a put might run into a battle between percents and points. Put simply, if a $100 stock moves up $1, that’s 1 point and also 1%. If a $10 stock moves up $1, that’s 1 point but 10%. A $1 change is the same amount no matter what the stock’s price, but it can represent a different percentage change. That’s important because while people trade and invest to make dollars to spend or save, options’ theoretical values are derived from percents. To explain, let’s take a little statistical detour. An OTM option is valued by how far its strike price is from the current stock price along the normal distribution curve, then deriving a probability of the stock price reaching the strike price from the normal distribution. The farther the strike price is from the stock price—all other things being equal (i.e., time to expiration and volatility)—the lower the probability that the stock will drop (in the case of an OTM put) to the option’s strike price, and the lower the option’s value. But the normal distribution doesn’t use the stock price and strike price themselves. It converts them to percents. The current stock price has a 0% difference from itself, so it sits at the peak of the normal distribution curve
A
52
Short put selection Higher-priced stocks give active investors more flexibility with strike selection.
Viatras VTRAS @$10
Novo Nordisk NVO @$110
5% OTM
9 Strike Put $0.27
10% OTM
105 Strike Put $6.15
100 Strike Put $4.20
97.5 Strike Put $3.40
15% OTM
8 Strike Put 20% OTM $0.07
at the mean. The strike price of a short OTM put is some percent away from the current stock price, and it sits somewhere to the left of the peak. For example, the 95 strike is 5% lower than a $100 stock price. The way an options pricing model looks at it, the $100 stock price sits at 0%, and the strike price sits at about -5%. Now, here’s the problem with low-priced stocks. The exchanges where options are traded determine their strike prices, as well as the minimum difference between adjacent strikes. The exchange considers the price of the stock as well as the expected interest in trading options at a particular strike when adding new strikes to an expiration. For example, a $1,000 stock like Tesla (TSLA) has a minimum of 5 points between strike prices, e.g., 945 to 950. A $200 stock like Netflix (NFLX) has a minimum of 2.5 points between strikes. SPY (the S&P 500 Exchange-Traded Fund) has 1 point between strikes. The difference is point-based, not percent-based. When a stock price drops, the number of points that a strike price is away from the current stock price becomes a larger percent. The larger percent translates into a lower probability the stock will reach that strike, and in turn, makes an option at that strike price cheaper. For the “Greeks” geeks, how much a change in the percent difference between the strike price and the stock price impacts the option price is known as an option’s elasticity. There’s a formula for it, but it’s not widely used because trading is done in points, not percents. But the impact of elasticity combined with low stock prices is that they can reduce the flexibility that options provide, as well as the actual dollar amount of profit a contrarian trader can make on a short put on a beaten-down stock.
Luckbox | June 2022
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Take two stocks in the pharmaceutical industry: Viatris (VTRS) and Novo Nordisk (NVO). Both have options traded on them and have similar implied volatilities. They’ve had some sharp drops in 2022, and could be appealing to traders for bullish strategies. But Viatris is a $10 stock, and Novo Nordisk is a $110 stock. Looking at options with 56 days to expiration, the 9 put is the first OTM put strike for Viatris. It’s 10% OTM and valued at $0.27. The next OTM put for Viatris is at the 8 strike. It’s 20% OTM and valued at $0.07. For Novo Nordisk, the first OTM put is at the 105 strike with a 4.5% OTM and valued at $6.15. The next OTM put is the 100 strike with a 9% OTM and valued at $4.20. The last OTM put is the 97.5 strike with a 11% OTM and valued at $3.40.
Takeaways
⊲ Cheap stocks can be attractive to trade. But cheap options? Not so much. ⊲ Betting on a bounce can be a good strategy—you’re rewarded for taking risk. ⊲ Percentages matter to options, but points matter to active investors.
This shows that the large percentage difference between strikes in low-priced stocks knocks the premiums of the OTM options down quickly. In Viatris, traders don’t have much choice between selling the 9 put and not having much room for the stock to drop, versus selling the 8 put and only collecting $7 of max potential profit. Novo Nordisk’s puts give traders more flexibility in not just selecting which
OTM put to sell, but because they have higher premiums, they can potentially be closed for profits sooner. Yes, the linear relationship of option prices to stock prices is a factor in Novo Nordisk’s larger put values, but the elasticity of options is playing a big role, too. Tom Preston, Luckbox contributing editor, is the purveyor of all things probability-based and the poster boy for a standard normal deviate. @thetompreston
When an increase in implied volatility accompanies the sell-off in a stock, a trader speculating on a bullish bounce might use a short put.
Listen Here Truth or Skepticism
Tom Sosnoff, entrepreneur, options trader and co-CEO of tastytrade, joins Dylan Ratigan, businessman, author and former host of MSNBC’s The Dylan Ratigan Show, for a weekly podcast covering everything from sports and investing to politics and monetary policy. One’s an iconoclast, and the other’s a contrarian. Tune in each week to find out who is who. It’s unscripted and unpretentious—some like to think of it as rants, but refined.
The Prediction Trade
If you can trade it, or bet on it, you can bet they'll talk about it on The Prediction Trade— the only podcast for gamblers, traders, investors, math geeks, data freaks and superforecasters devoted to the intersection of probability, prediction and profit. Each episode features expert guests with proprietary forecasting models and insights into the outcomes of prediction market events. So whether you live to bet or bet to live, check out the next episode of The Prediction Trade.
Truth or Skepticism and The Prediction Trade are available on your favorite podcast platform and the tastytrade financial network's YouTube channel.
2206_TRADES_normal deviate.indd 53
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trades& tactics
DO DILIGENCE
QU I E T FOU N DAT I O N HELPS P ROACT IV E INV ESTO RS U NDERSTAND T HEI R PORTFOLI OS
Down But Not Out When euphoria fades, the hangover may drag down the price of a healthy company’s stock By James Blakeway
echnology stocks are taking a hit this year, but it’s important to remember the lessons of history. When fear takes over, prices can fall well below their theoretical value. Some—but not all—will rally back to prior levels. Think back to the end of the postdot-com slump in 2002. Stocks were beaten down for nearly two straight years after the peak of the bubble in 2000. Many companies didn’t survive, proving their lofty valuations were nothing but a pipe dream. Companies like Pets.com and eToys.com went bankrupt or were bought out. The bubble had to burst to bring on a necessary re-evaluation of the inherent value of many companies, but it also took down legitimate stocks that continued to be profitable and are now powerhouses in the S&P 500. By the time Adobe (ADBE) hit its $41 peak in November 2000, the company’s PDF technology was 7 years old and its Photoshop software was 11 years old. The company’s stock began the millennium by rallying from below $17 to above $40. But that’s where it ended, as the stock fell precipitously and consistently for nearly two years, bottoming out at $8.32 in August 2002. In that time frame, earnings remained steady. Some quarters were better than others, but profits were consistent. Adobe, like many other stocks, was dragged down when the end of the dot-com euphoria brought panic selling. Perhaps Adobe wasn’t worth $41 in 2000, but the continued growth of its businesses has turned it into a $206 billion company.
T
54
Can’t keep ‘em down The dot-com bust, a necessary re-evaluation of the inherent value of many companies, also took down stocks that are now thriving in the S&P 500.
Symbol
ADBE
AMD
BBY
EBAY
High price in 2000
$41.36
$47.50
$25.17
$12.27
Low price (2000-2002)
$8.32
$3.20
$6.53
$2.81
% Loss in dot-com slump
-79.9%
-93.3%
-74.1%
-77.1%
March 31, 2022
$455.62
$109.34
$90.9
$57.26
Return from lows
5377%
3317%
1292%
1936%
Best Buy (BBY) was also yanked down by the early millennium stock sell-off. By the turn of the century, the company was trading with a price-to-earnings (P/E) ratio of 17, and it now has a P/E ratio around 9. (See Tactics Basic on p. 58 for more on P/E ratios.) Even though Best Buy was possibly overvalued in 2000, it likely didn’t deserve to plummet below $7. Twenty years later, competitors RadioShack and Circuit City were long gone, and Best Buy remains alive and well. Advanced Micro Devices (AMD) has almost become a household name as consumers scramble for graphics cards to build powerful PCs for gaming and cryptocurrency mining. In 2000, the company was trading at $47 per share and had a P/E ratio of around 37. That P/E ratio is similar to the first quarter
Source: tastytrade
Buying stocks when others are selling can be a grueling endeavor. of 2022 with the stock’s recent selloff. The company hit a rough patch in the early 2000s and had some losing quarters in 2001 to 2003. However, investors who believed in the company were handsomely rewarded because the shares trading at $3.20 in 2002 were worth as much as $164 last year. eBay (EBAY) was founded in 1995 and went public in 1998. After a huge rally in 1999 and another in 2000, the stock peaked just over $12 in March 2000. The company’s collapse came swiftly, with the stock bottoming out at $2.81 in December 2000. While many internet stocks continued to fall throughout 2001
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Comeback kid Analysts are mostly bullish about Meta making a comeback.
$350
$300
$250
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Jan 2019
May 2019
Sep 2019
Jan 2020 May 2020 Sep 2020
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Source: tastytrade
and 2002, eBay found its lows early in the downturn, recovering some of its value in the next two years. While Amazon became the internet shopping sensation and Pinterest brought many small businesses to wider audiences, eBay soldiered on. In 2022, eBay is a $32 billion company, and the stock reached an all-time high last year of more than $80 per share. So, what’s the moral of the story? While euphoria may cause long periods of stock market rallies, the resulting hangover may drag down legitimate companies with solid business models. Often, stocks fall below their actual value and underrepresent their future potential. One company that may present a comeback opportunity is Meta Platforms (FB), the parent company of Facebook, Instagram and WhatsApp. Trading around the $200 level in late April, Meta is at about the same price as before the pandemic, except now the company is more profitable. In January, Meta was trading with a P/E ratio around 27, meaning shares were valued at 27 times the earnings for the prior year. In April, the P/E ratio was 16. Wall Street analysts are predomi-
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Bears have pummeled tech stocks so far this year. nantly bullish about Meta making a comeback. The average buy-side ratings are over $300, meaning analysts anticipate the stock will recover at least half of its losses from that $384 high. Time will tell if Meta shares can recover to anywhere near prior levels. Investors willing to find out will likely have some rough days ahead as the bears continue to hit tech stocks in 2022. As with those who held onto worthwhile stocks after the dot-com bust, waiting for a Meta revival will take patience. Buying stocks when others are selling can be a grueling endeavor. Investors are often early to the party and have to endure some downside pain before reaping the benefits of the reversal. James Blakeway, Luckbox technical editor, serves as CEO of Quiet Foundation, a data science-driven subsidiary of tastytrade that provides fee-free investment analysis and trade ideas for self-directed investors. @jamesblakeway
5/12/22 5:30 PM
trades
CRYPTO CURRENTLY
T H E STAT E O F C RYPTO CU R R ENC IES AND DEC ENT RALIZED FINAN CE
Bitcoin’s Fifth Comeback The cryptocurrency has soared in value repeatedly and could pull it off again By Mark Helfman
itcoin imploded, but that doesn’t mean it can’t come roaring back with increased trading volume and much greater value. Let’s begin with recent history. After reaching an all-time high of $68,885 in November 2021, bitcoin lost more than half its value. That’s an extreme drop, even for an asset known for volatility. Since May 2021, search volume has declined 80%, and the number of active users has dropped 27%. Looking only at the largest exchanges, weekly trading volume has fallen from 94,000 bitcoins to 10,000 bitcoins during the same period. Thanks to the private nature of bitcoin transactions, stats aren’t available on how much of the cryptocurrency is bought and sold outside of the exchanges. But it’s safe to assume volume has decreased. This is happening to an asset that rose from $0.06 to $32 in its first bull run, $2 to $1,200 in its second bull run, $166 to $20,000 in its third bull run and $3,160 to almost $69,000 in this most recent run. Some say that’s the last time bitcoin’s price will ever go up. A 2,000% run? Never again. Can’t happen a fifth time. Even the most ardent bitcoiner would have a hard time believing its price will reach $800,000 anytime soon, but a 500% upswing doesn’t seem outside the realm of possibility. That would put bitcoin’s market cap at roughly $4.5 trillion. That’s crazy for any other market but a letdown for anybody who prospered in any of bitcoin’s previous bull markets.
B
56
Mountaineering Bitcoin prices have scaled the heights and then descended precipitously. Can the pattern continue?
BTC
PEAK 4 $70,000 $60,000 $50,000 $40,000 PEAK 3
$30,000 $20,000 $10,000
Jan 2018
Jan 2019
So, some might ask what could possibly carry bitcoin’s price to such lofty heights. The fact that it’s happened before hardly seems compelling. That logic may work for gold or stocks, but those assets have centuries of history. Bitcoin’s only had 13 years. Yet bitcoin has a lot going for it. Technology. Last year, the Taproot upgrade made bitcoin’s network easier to scale. New payment technology, like Strike and Opennode, brought transaction time and fees almost to zero—less than conventional payment processors. While that doesn’t mean anything for bitcoin’s price, it adds utility and builds natural demand. Millennials. Investopedia’s most
Jan 2020
A 500% upswing doesn’t seem outside the realm of possibility for bitcoin.
Jan 2021
Jan 2022
0
recent financial literacy survey indicated that more millennials own cryptocurrency than stocks, a finding that matches many older studies. This generation is set to inherit at least $60 trillion in the coming years, assuming the economy cooperates, and it’s fair to wonder how much of that inheritance will go into bitcoin instead of legacy assets. Generation Z. That same study showed that Gen Z owns less crypto but expects that cryptocurrency will deliver better returns than any other financial asset listed in the poll. Members of that generation are just getting their first “real” jobs and the disposable income that goes along with employment. It’s hard to think they won’t put some of that money into bitcoin.
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Low- and middle-income countries. Faltering currencies and looming debt crises may drive residents of some nations to put money into bitcoin to protect their wealth. With Western countries sometimes inclined to confiscate foreign assets, bitcoin could seem like a safe haven. Network effects. While bitcoin’s price remains lower now than a year ago, the number of daily transactions is down only 10% and the size of the average transaction has tripled. The number of bitcoin wallets continues to rise, with clear accumulation among those with 10 or fewer bitcoins. Cost basis dropped substantially, suggesting this isn’t a market of HODL (hold on for dear life) investors who bought the peak and hope the market will recover.
Instead, active buyers are gaining a larger share of the market as speculators sell at a loss. “You should see the other guy.” Investors need an asset that’s already priced low but also carries a high upside. After all, bonds are getting smashed, gold is struggling to get above its 2020 high, stocks are sliding, U.S. mortgage applications are down 50% since last year, private equity is facing the end of the cheap money era, and commodity prices seem less predictable than ever (if they ever were). Perhaps that’s not an endorsement of cryptocurrency as much as an indictment of the legacy financial system. Risky investments offer paltry returns, safe investments are guaranteed money-losers, and inflation has turned cash
into a financial burden. At least with bitcoin, investors might get ahead on their money. Some may scoff. But as befits any asset that’s had upswings of 2,000% to 20,000% every few years, the cryptocurrency market needs time to recover. How long? If only somebody knew. As with other financial assets, momentum plays a big role. Once bitcoin’s price keeps increasing long enough to win the confidence of new buyers, everything else will take care of itself—just as it always has in the past. Mark Helfman, crypto analyst at Hacker Noon, edits and publishes the Crypto is Easy newsletter at cryptoiseasy.substack. com. He is the author of Bitcoin or Bust: Wall Street’s Entry Into Cryptocurrency. @mkhelfman
Stocks. Futures.Crypto.
One platform. You Deserve It All. tastyworks.com/better
tastyworks, Inc. is a member of FINRA, NFA, and SIPC.
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What’s better than free? Loving Where You Trade.
tastyworks.com/better tastyworks, Inc. is a member of FINRA, NFA, and SIPC.
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trades& tactics
TACTICS: BASIC
Return to Value Savvy bargain hunters search for underpriced stocks By Eddie Rajcevic
Intel on Sale? In 2022, Intel Chart (INTC)headline P/E ratio is at Ipsantio its lowest level ruptiseatio in the past decade. aperit
INTC average annual P/E ratio
Chart explainer Ad utatibu sciasitaque perupta sperum doluptat aliqui iuntibus aces si occabor maximporro tempori $70
20
$60 15
$50
$40 10 $30
$20
5
Source: Unt voluptate sum $10
0
0 2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Source: INTC
can’t paint the full picture, and that’s why investors should use P/E ratios to analyze the companies. Here’s an example: Let’s say company A has earnings of $1 per share, and company B has earnings of $10 per share. That means company A has a P/E ratio of 20 and company B has a P/E ratio of five. Simply put, $1 of earnings in company A would cost $20, while $1 of earnings would cost $5 for company B. Why pay more for less? When using a P/E ratio to assess a
The market tends to overreact to news, resulting in large price movements that aren’t necessarily representative of the long-term performance of a stock.
stock’s value, compare it with other stocks in the same industry because every industry has a different range of P/E ratios. A high P/E ratio is not always problematic because the market may be pricing in greater growth in future years. However, if the P/E ratio is much higher than comparable companies, investors may end up paying more for every dollar of earnings. Value investors search for companies with lower-than-average P/E ratios hoping earnings will increase and lead to a higher stock price. A negative P/E ratio indicates the company has not reported profits, a common occurrence for new firms. If a negative P/E ratio persists for years, it may become a concern.
June 2022 | Luckbox
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INTC stock price
alue investing may seem like a thing of the past in an era of high-frequency trading, special-purpose acquisition companies (SPACs) and meme stock mania. But that doesn’t have to be the case. Value investing is making a comeback in a year characterized by rising interest rates, heightened uncertainty and resets in the valuations of many companies. It’s an investment strategy based on picking companies trading below fair value. It works because the market tends to overreact to news, resulting in large price movements that aren’t necessarily representative of the long-term performance of a stock. Investing is like shopping, and value investors are savvy shoppers who look for a sale. The price-to-earnings ratio, or P/E ratio, helps investors find stocks that are “on sale.” To calculate the P/E ratio, divide the current stock price by the company’s earnings per share. The resulting P/E ratio tells investors how much they will pay per share for $1 of a company’s earnings. That provides insight into the valuation of a stock and expectations for growth. Price may be a big factor in how newer investors view a company’s valuation. Suppose company A is $20 a share and company B is $50 a share. At first glance, company A may seem like the more attractive investment. However, price alone
V
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trades& tactics
THE TECHNICIAN
A V E T E RA N T RA DER TAC K LES T EC HNICALS
Cramer’s Comeuppance A famous stock picker got almost everything wrong with a set of predictions By Tim Knight
early two years ago, stock prognosticator Jim Cramer created a seminal video called The Magnificent Seven to showcase stocks he considered the superstars of the COVID-19 pandemic. All had achieved cult status despite weak earnings. “What if earnings just don’t matter anymore?” Cramer asked rhetorically. Readers can see how he addressed that issue by searching for “Cramer magnificent seven” on YouTube. Let’s review the stocks, in the order he presented them, to see how they’ve performed since the video was released on Oct. 19, 2020. (Percentages as of May 9, 2022.)
N
Netflix (NFLX) ▼ 67% The first stock examined in the video was the streaming video service Netflix, which Cramer cited as a logical pick because “people won’t go to movies anymore” during the pandemic. “Four fall from grace,” and “The black sheep” begin when Cramer’s video was created and provide a quick way to track performance. Netflix stock meandered for many months, but in the latter half of 2021, it gained strength, peaking at above $700 before losing a breathtaking 70% of its peak value. PayPal (PYPL) ▼ 61% PayPal has been public much longer than most of the other stocks in Cramer’s group. After he recommended it as a long position, it did indeed ascend in price, peaking in July 2021.
60
Four fall from grace
Square, PayPal and Netflix saw some decent returns after Jim Cramer’s video before eventually falling. Zoom, on the other hand, started a steady descent almost immediately.
SQ PYPL NFLX
40% 20%
ZM 0% -20% -40% -60% -80% Nov 2020
Jan 2021
Mar 2021
May 2021
Jul 2021
Sep 2021
Nov 2021
Jan 2022
Mar 2022 May 2022
Source: tastytrade
The cumulative returns on the seven stocks Jim Cramer touted would have been -47%. Since then, however, it has formed a large rounded top above the $226 level, and an even larger top above the $179 level, crumbling lower and lower in successive stages. Although Cramer described PayPal as having “a remarkable ecosystem” and being “all about the democratization of money,” those buzzwords did not save it from a mesmerizing demise. Peloton (PTON) ▼ 89% Peloton truly benefited from the COVID-19 lockdown. Cramer
described it as being a way to play “the athletic-pandemic angle” and said that it was “the one stock you can buy instead of going to the gym.” Between September 2020 and November 2021, the stock formed a tremendous right triangle topping pattern, then plunged when the company reported declining sales and a significant quantity of unsold inventory. Roku (ROKU) ▼ 60% Home entertainment companies thrived during the pandemic lockdown, and Roku, a streaming video-related organization, was no exception. It also got Cramer’s nod, as he declared “no one under 30 can tolerate commercials.”
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In February and July 2021, Roku double-topped in price action and began a nearly ceaseless plunge. Square (SQ) ▼ 54% Square, the payment processing company, was a highly valued “unicorn” before it went public. Cramer said Square “stands for the empowerment of the little guy.” He characterized the company’s prospective performance by saying, “it doesn’t seem to matter what these guys do.” Although the company did increase in value immediately after the release of the video, the stock has not performed well in the long term. Tesla (TSLA) ▲ 87% Finally, a “magnificent” pick that actually lived up to the name! Tesla was the one and only stock among Cramer’s seven that’s now worth more than when he chose them. Even though it’s below the lifetime peak it reached Nov. 4, 2021, it consistently performs as a tripledigit winner. The stock has been hammering out a steady series of higher highs and higher lows. From a charting point of view, the stock does have one black mark against it: the trendline failure of January 2022. Zoom (ZM) ▼ 83% The Magnificent Seven video was released precisely when Zoom was reaching the highest price in its history at $588.84. Cramer described the company as the leader of the magnificent seven and said, “This is the Zoom economy, and we just live in it. It’s only just begun to monetize all those users. Any disappointment is just one more reason to buy them.” Unfortunately, there has been ample disappointment in Zoom stock since then and absolutely no reason to indicate a buy.
The black sheep
As all of Jim Cramer’s other picks cratered, Tesla held onto its strong returns. 200% TSLA ROKU
150%
PTON 100%
50%
0%
-50%
-100% Nov 2020 Jan 2021 Mar 2021 May 2021
Jul 2021
Sep 2021 Nov 2021 Jan 2022 Mar 2022 May 2022
Source: tastytrade
Tesla is the one and only winner among Cramer’s picks. The other stocks he identified were bordering on “meme” status. What’s the difference? The numbers don’t lie. If someone purchased an equal amount of these seven stocks the day the video was released, the cumulative return would have been approximately -47%. Now, if the market as a whole had gone down 35%, well, that’s simply unfortunate timing. But on the contrary, the plain old boring SPY (S&P 500 Index) went up 18% during the same period, which means this basket of stocks underperformed the market by an eye-watering 65%. Tesla is the one and only remaining winner among Cramer’s picks. The other stocks Cramer identified were bordering on “meme” status. By recommending a buy despite lackluster company performance, Cramer suggested a flawed investment strategy. Tesla was the outlier for a number of reasons: Unlike most of the other seven
stocks, Tesla was already a well-established, very large-cap company with an expanding product line and growing profits. It did not depend upon a very specific circumstance (the COVID19 lockdown) for helpful business conditions. Companies like Zoom, Peloton, Roku and Netflix all benefited from the lockdown. For whatever reason, Tesla’s robustness as a “cult” stock was vastly greater than that of Peloton. As a result, Tesla continues to be much hardier, even in the face of occasional overall market weakness. It may be tempting to perceive these battered stocks as representing some kind of bargain. However, the bottom of the y-axis on a price scale is $0.00 and not the minimum price of a given security. From a charting perspective, only Netflix may ultimately make sense as an “on sale” security, assuming it eventually grinds its way down to about $150. Tim Knight has been using technical analysis to trade the markets for 30 years. He’s the host of Trading Charts with Tim Knight on the tastytrade network and offers free access to his charting platform at slopecharts.com. @slopeofhope
June 2022 | Luckbox
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trades& tactics
TACTICS: INTERMEDIATE
Slow-motion Rewards Incrementally scaling into a position can be a more prudent and sustainable way to play stock comebacks By JJ Kinahan
irk Gibson came off the bench to pinch hit for the Dodgers in the 1988 World Series. Despite two injured legs and a stomach virus, he walloped a two-run homer that won the game and helped clinch the championship. It was quite a comeback for Gibson and for Los Angeles. But a prudent trading strategy shouldn’t depend on such exhilarating turnarounds— explosive comebacks are neither predictable nor sustainable. It’s the grinding, mundane recoveries that lead to successful long-term investing. Those slow-motion comebacks require segueing in and out of trades instead of assuming an all-or-nothing mentality. Let’s use Apple (AAPL)—a widely held and widely traded stock—to illustrate that point. At the end of January, Apple was trading at $162 per share, down from a $182 high earlier in the month. Some investors would see this down move and want to get long on the stock with what’s called “buying the dip.” However, as with all investment decisions, investors should have a price and a time in mind when making a trade. If capital is available, an investor might choose to buy 300 shares and hold them for four months. That investor could do that at the outset or establish a comeback over time. To accomplish the latter, the investor would buy a first round of 100 shares. If the stock loses value, an investor could purchase another 100 shares at the lower price. If it falls in price again, the investor could buy another 100 shares and then sit back and wait
K
62
Doubling down Turbulent markets in strong companies enable investors to lower their average purchase price. $185 APPLE, Scaling into 300 shares Average Price: $157
$180
$175
$170
$165
$160 Bought 100 @ $162 $155 Bought 100 @ $152 Jan 3
Jan 13
Jan 23
for the stock to make a comeback. The investor should also set a target price to get long. In this case, that price should be between $155 and $160. But comebacks aren’t immediate. Apple’s stock eventually rallied, coming back to trade above $174 between March 25 and April 5, providing a tidy little profit. Just the same, investors using this scaling approach should set a time and price target. Then they have to be patient yet poised—which is also an art. As investors become more experienced at scaling, they develop a better sense of choosing logical points of entry and exit. An investor just getting started might prefer to start with just price, then identify three or so possible intervals. After becoming
Feb 2
Feb 12
Feb 22
Mar 4
Mar 14
$150
Mar 24
Grinding, mundane recoveries lead to successful long-term investing.
More Gibson Watch the 3-2 pitch
more comfortable, an investor could use the Fibonacci sequence or more frequent intervals to increase the size of the overall position. The point is that the basic concept does not change, but the way it’s adopted may change to fit an investor’s wants and needs. Although a dramatic Gibson-style comeback home run is exciting, scaling empowers investors to make a series of less dramatic but still profitable smaller comebacks. JJ Kinahan is vice president and chief market strategist for tastytrade. @thejjkinahan
Luckbox | June 2022
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trades& tactics
PICTURED LEFT
TRADER
1. Poster from the “He Said She Said” tour 2. Trade window depicting a broken wing butterfly setup
3
2
3. Price charts with various time frames 4. IRA account 5.The tastyworks app on iPad
1 4 5
BWBs on the call side with the debit spread wider than the credit spread if I feel exceptionally bullish. To make the BWB free, you need the underlying to move in your direction, so you can close the long option on the wider side and buy another one closer to the shorts to make the longs equidistant. That releases the buying power, and you now have a regular symmetrical butterfly. The goal is to do that transaction for less than the credit you received initially, so you lock in a profit and have a trade that wins in any direction. Average number of trades per day?
Eight
MEET
ANETA GENOVA 12
I finally found my niche and a community of traders who are fun and engaged every day. I have very little patience and like variety, so I love that options contracts have many expirations and offer a wide array of strategies.
How did you start trading?
Favorite trading strategy?
Home/Office location
New York City Years trading
I was running my own business for small leather goods about 17 years ago, and when I started being profitable, my accountant advised me to go to Fidelity and invest my money with them. I bought some mutual funds based on their advice, and nothing much happened for what felt like a very long time. I didn’t like the feeling of being so passive and detached. I wanted a lot more engagement than mutual funds offered. I like to make my own decisions and wanted to participate in the market, so I started trading stocks and eventually worked my way to options. I tried four or five brokerages and took courses before I found tastytrade and tastyworks, where
I love variations of ratio spreads, and two of my favorite strategies are 1-3-2 put spreads and broken wing butterflies (BWB). Both are high-probability omnidirectional trades that give you a lot of flexibility to be right. There is also the excitement of the max profit zone and the opportunity to make the BWB free. BWBs can be explained as a debit and a credit spread with shorts at the same strike where usually the credit spread is wider than the debit spread. That eliminates risk to one side, and the debit spread gives you an extra profit zone on the other side. I also use
What percentage of your outcomes do you attribute to luck?
I rarely attribute outcomes to luck unless they’re scalps on futures that not only immediately go in my direction but keep going and going in the right direction! Worst trading moment?
Some of my worst trading moments have been in crude oil and silver futures. Crude oil can go in one direction relentlessly for a very long time, and it certainly caught me a couple of times with naked futures. My worst experience was in November 2020 when crude oil just went straight up for weeks. I truly misjudged how much it can move, and by the time I started hedging my position with options, there wasn’t much I could salvage. What I learned is not to be stubborn and to cut my losses much sooner, rather than thinking that I know something more than other traders. After that year, I’ve only traded crude oil options and scalped small futures. The lesson for me was to stay small so one trade doesn’t take a big chunk out of my portfolio. Favorite trading book
Trading in the Zone by Mark Douglas
June 2022 | Luckbox
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5/12/22 5:13 PM
Get Outdoors Just as the Wooden Shoe Tulip Festival in Woodburn, Oregon, celebrated nature’s bounty with a rainbow of 40 acres of tulips, Luckbox will explore the outdoors in the July issue. Look for trends in camping, RV travel and outdoor recreation. Discover how a couple found each other and followed their dream of living on the road. Meet other professionals who have embraced “working from home,” no matter where that may be.
64
Find out how major home improvement brands have leveraged the pandemic-induced outdoor living trend—decks, porches, pools and elaborate outdoor living spaces—and what that may mean for their stock prices. Discover how advanced equipment technology has changed the game of golf and what manufacturers are doing to drive the debate. Get the word on music festivals and how fans and members of the industry can reduce the environmental impact of outdoor shows. You’ll find more than just tulips in our coverage of the outdoors.
PHOTOGRAPH: REPRINTED WITH PERMISSION FROM PATRICIA DAVIDSON PHOTOGRAPHY
THE LAST PICTURE
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