What is up Cruisers? We are back!
We hope that everyone is having a blast this summer! We, at Cruising Altitude, have been working hard on building the foundation of our company which we will share in greater detail over the coming weeks!
This week’s newsletter recording is back!
🎧To listen on Apple Podcasts CLICK HERE!
🎧To listen on Spotify CLICK HERE!
What is Inside?
📕 Chart of The Week | 😂Meme of the Week
💸Portfolio Update | 🕺Portfolio Moves
📰Portfolio News |🔍Spotlight: $GAN
📕Chart of The Week
At Cruising Altitude, we emphasize investing early to our Cruisers because getting started early can be very very powerful. To help illustrate this point, we included an awesome chart from Vanguard!
We will definitely bring this chart back in the future because it is that good!
Since the last time we talked, we made one move to the Cruising Altitude portfolio! YES! Just one move over a one month period! Long term investing works the best the less you trade, and we could not be happier with our lack of activity!
The stock that we added is called 1847 Goedeker $GOED. $GOED is a complicated little situation that we will breakdown in a future newsletter. The stock is up a wild 47% since we added it to our portfolio a couple weeks back.
To follow when Cruising Altitude initiates new positions or sells existing positions, follow us on Twitter where we post everything!
💻Breaking the Internet- Literally. On June 8, there was a massive internet outage caused by a failure in Portfolio Pick Fastly’s network. Fastly’s network was down for just over an hour, taking down major sites like Amazon, Target, and the UK Government’s website! Rather shockingly, the stock is up 10% since June 8, as investors must have realized just how entrenched Fastly is in the new internet.
🧠Insurance Baby! Over the past month, Brainsway has been on an absolute tear making significant progress in getting insurance coverage for their FDA approved dTMS treatment of OCD. The company announced insurance coverage by top insurance providers Centene and Blue Cross Blue Shield as well as a “First Draft Proposal” by a Regional Administrative Contractor (very very very good!). Brainsway is definitely going the right way!
🔭Pluto is now officially a Planet! Well, to Cruisers, it is! PlutoTV, the free ad supported streaming service owned by ViacomCBS announced that they are expecting “comfortably” over $1 Billion of revenue for the service in 2022, which represents EXPLOSIVE growth from the $70 million of revenue in 2018. PlutoTV is an absolute rocketship. Not even Wall St. understands how big it is going to be!
🤣Meme Of The Week
Legos can be evil. We did not think they were this evil.
A question you shouldn't know the answer to but will serve as a fun way to learn more about the portfolio picks or the Spotlight company.
The CEO of today’s spotlight pick is named Dermot Smurfit. Yes, that is actually his name. When CEO Alan heard Dermot Smurfit, what person/character did he first think of?
A. Kermit the Frog, Sesame Street
B. Doug McDermott, PF Indiana Pacers
C. The Smurfs, The Smurfs (lol like those blue guys)
Answer: B. Kermit The Frog probably is what you guessed and for most people, that would probably be the right answer. However, when CEO Alan is not thinking stocks, he is thinking sports! Dougie McBuckets is the correct answer!
Let us kick things off this week with a small game of Jeopardy! What once was that boring show my Grandma (love you Grandma!) watched after Wheel of Fortune, became a beloved show of mine where every night I got to learn some cool facts and spend some time with the legendary Alex Trabek (RIP Legend- We miss you so much!).
**Side Note** When James Holzhauer went on his magical run a couple years back, my friends and I would gather every night and watch it like it was a sports game. It was lit. Okay. Jeopardy time: ANSWER: Somewhere between the best thing ever and the worst thing ever. Thrilling yet frustrating. Fun yet dangerous.
What is gambling? Correct!
A few weeks ago, I had an interesting gambling experience. No. It had nothing to do with YOLO options on AMC because that is not what we do here, but rather, I had a little excursion to a casino in Florida with some friends. When I walked into the casino, I thought three things:
I am about to lose all of the money I walked in with.
I cannot believe people willingly walk into a casino knowing they are going to lose hundreds or even thousands of dollars.
I wish I owned a casino.
Fast forward a couple of hours later and two of these thoughts were the same but one was different: I did lose all of the money I walked in with and, I did wish I owned a casino. The one that did change? I totally get how people walk into a casino knowing they will lose all of their money. The thrill is that good and that is what makes it so dangerous!
How good is it? So good that the long term, fundamentally driven, level headed Cruising Altitude CEO (me) found himself at the roulette table with his friends chanting a cult like mantra “RED EVEN RED EVEN RED EVEN” begging the die to land on a number that was red and even. It happened a couple of times but not too many, which means we lost our money. Casinos and gambling are fascinating little things.
The landscape of gambling, specifically sports gambling, is changing nation and worldwide. What was once taboo and frowned down upon is becoming legal and mainstream. From a moral perspective whether gambling should or shouldn’t be legal is a whole other conversation (and thankfully not for this newsletter).
What I do know is that everyone will soon have the ability to make money (more like lose money) from the comfort of their own homes. This means huge thematic growth within the gambling industry. This means huge opportunity for investment opportunities. Today we break down one of our new and favorite Portfolio Picks GAN Limited.
GAN is a company that provides solutions and tools to casinos looking to create an online gambling presence. Their flagship award winning platform GameSTACK is a software as a service (SaaS) that GAN sells to other casino providers that includes casino games, customer tracking services, and much more. GAN offers both real money gaming ( gambling with real money) and simulated gaming (gaming with fake currency) to prospective clients.
GAN has seen very nice success over the past handful of years by signing deals with a strong cliental base and growing revenues at a nice rate. Specifically, the company had seen revenue double from $14 million to $29 million from 2018 to 2019 and grow from $29 million to $34 million in 2020-impressive to see any growth in a year that saw deal flow significantly slow down due to COVID-19.
This year GAN is projected to do over $100 million in revenue which would be almost 3x revenue in one year! How are they pull this off? Well- they did a very big acquisition of a global sports gambling company called Coolbet which is having a significant impact on that revenue number (which we will discuss later) but the company has also seen significant increase in deal flow for the legacy GAN products.
🤝Deals Deals Deals
The way GAN earns their revenue is by taking a percentage of every transaction that takes place on their technology. More transactions, more revenue. Therefore, the more deals the better!
GAN has absolutely been crushing it by signing a plethora of deals with top notch casinos and gambling companies. Specifically, in January, the company recently launched services with three top companies in the gambling arena in Michigan: Churchill Downs, Wynn Hotels, and Fan Duel Group.
(*Side Note* when analyzing an investment opportunity, it is not only good to analyze how many deals a company is signing but with whom! For example, if a tech company is signing a deal with Amazon or Microsoft, that is quite the endorsement! GAN signing deals with some of the biggest names is a huge deal.)
Importantly, they were all launched on the same day and the first day of launch eligibility. This shows that not only can GAN get their products rocking and rolling in a fast manner but they are also able to do so across many companies and at a large scale.
This is a fantastic sign as the gambling market is rapidly changing left and right with more states announcing the legalization of gambling one after another. GAN is showing that they can adapt on the fly and can take on many clients.
Important Fact: In the first quarter, the company also announced that they signed 10 new deals in 1Q21 which was more than all of 2020 combined! We told you! Deals Deals Deals!
In November, GAN acquired a company Coolbet for $175.9 million from the Vincent Group. As mentioned earlier, Coolbet specializes in online sports gambling in Europe! The main logic behind the acquisition was for GAN to carve out a niche in the US domestic sports gambling market by being able to offer domestic customers a sports gambling option and achieve both cost and value synergies between Coolbet and the classical GAN services.
Here is what the CEO (Dermot!!!!) had to say about the acquisitions:
“The completion of the Coolbet acquisition brings together two best-in-class offerings in the iGaming space today, and makes a powerful combination by creating a fully-integrated offering, customizable for each client’s needs”
**iGaming btw means both sports betting and casino style games like poker or slots.**
On January 14th, GAN announced that they had signed their first deal with a provider for their new (from Coolbet) sports gambling technology for a casino in Virginia! Just 2 months after the acquisition, the company is already doing deals in the US!
What is the best part about the deal? The fact that it was with an existing customer. This shows two things! One that people love working with GAN (which we love to see) and two that the acquisition was a great one and already paying dividends (pun intended. Well kind of because we are not getting dividends from GAN but you get the jist!).
(For our new Cruisers we have definitions for these terms at the end of the newsletter).
Let's break it down:
Market Cap1: Current Market Cap is $747.3 million
Projected 2021 Revenue2: $103- $108 million
Forward price to sales3: 7x
Gross Profit Margins4: GAN ended Q1 2021 with a Gross Profit Margin of 67.27%
Putting these numbers into perspective, GAN is trading at a cheap multiple to sales, at high gross margins, with zero long term debt! That is music to our ears!
🎁Wrapping It Up
GAN is a fantastic company in a rapidly growing industry trading at a very reasonable valuation. Their ability to sign many top clients in a highly competitive landscape gives us here at CA the confidence to welcome the company into the portfolio!
Want to learn more about GAN? Here is a link to their investor presentation!
"Your extraordinary profits will not be a result of taking on big risks; they will be the justly deserved pay for doing your homework."
- Joel Greenblatt (legendary investor)
The stock market is a beautiful place because you CAN make a lot of money without taking significant risks. There will of course be calculated risks, but the more research you do and the better you know the company, the less of a risk that investment is and the more the potential for extraordinary profit exists.
Final Point: Extraordinary profits often take years and years (maybe even a decade or more) to reap. That is why we at CA are not fazed by daily price movements! We are in this thing for years!