Continue to avoid Beyond Meat; The Daily Show on meat alternatives; Letter to Wirecard's board; Things I can't live without
1) I warned my readers to avoid alternative-meat maker Beyond Meat (BYND) in my July 30 e-mail. At the time, when the stock was near $200, I predicted that shares "will be cut in half – below $100 – by the end of the year..."
It turns out that I was much too conservative... The stock has crashed to today's level around $72 per share. All the way down, I continued to warn investors not to try to bottom fish it.
To understand why investors should continue to avoid this stock, I asked my friend, Professor Joel Litman, if I could share the analysis he did of Beyond Meat using his proprietary "Uniform Accounting" methodology. Joel's system analyzes companies' financial statements, making dozens of adjustments to uncover their true earnings and financial health.
He was gracious enough to say yes, so here's a link to his recent post: More Downside Is Likely Ahead for This Fad Stock. Excerpt:
The chart below explains Beyond Meat's Uniform historical corporate performance levels in terms of returns on assets ("ROA") and asset growth (dark blue bars) versus what sell-side analysts think the company is going to do this full year and next year (light blue bars). The white bars show what returns the market expects Beyond Meat to reach over the next few years to warrant its current stock price. Take a look...
As you can see, the market expectations are very high. To justify the current stock price of $75, Beyond Meat needs to improve its ROA from negative 25% in 2018 all the way to 46% by 2023.
Food-manufacturing companies have historically seen muted returns, as they sell commodity products with thin margins. Just look at McDonald's (MCD), which we covered in October... the company has seen impressive performance over the past 20 years, but currently only has a Uniform ROA of 15%.
As competitors continue to muscle in on the plant-based burger space, it will be hard for Beyond Meat to charge large premiums for its products... which the company will need to do to justify its current valuations.
Despite Beyond Meat's long fall, using Uniform Accounting we can understand that there is still room for market expectations to be tempered further.
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2) Speaking of Beyond Meat, here's a funny segment from The Daily Show about Cutting-Edge Meat Alternatives for Carnivores Who Want to Save the World, which features an interview with the CEO of Beyond Meat's competitor, Impossible Foods. Excerpt:
Roy Wood Jr. sits down with food experts to determine how harmful eating beef really is to the environment and taste tests some meat alternatives.
3) Following up on my mention in Thursday's e-mail of German payments giant Wirecard (WDI.DE), an anonymous group of short-sellers that calls itself MCA Mathematik last week released its fourth letter to the Wirecard Supervisory Board (Click here to access its previous letters and other materials.) The two-page letter is extremely well-written and reasoned. It puts the Wirecard board on notice because the company continues to issue debt securities, which will blow back to the board if it doesn't act once it knows something (which, unless auditor KPMG gets completely snowed, it will pretty soon).
4) This video, 10 Things Trevor Noah Can't Live Without, has inspired me to share (in this e-mail and future ones) the things I can't live without – maybe you'll get some holiday gift ideas!
At the top of my list are the Bose QuietComfort 20 Acoustic Noise Canceling Headphones.
They're pricey at $249, but are totally worth it (don't be tempted by lousy, cheap knockoffs – trust me, I've tried them). They're compact (unlike my over-the-ear noise-canceling headphones, which are so big that I never travel with them), yet the noise-canceling is outstanding. I wear them on trains and planes to block the noise, even if I'm not listening to anything...
I was reminded of how much I love them last Wednesday when I was on the train from Baltimore back to New York City. A guy sat down across from me and started to talk on his phone, threatening and cursing loudly. It was so unbelievably rude and irritating – not just to me, but to everyone on the car – that I wanted to grab his phone and smash it on the floor... But instead I put on my headphones, turned up the music so I couldn't hear him, and went to my happy place and just did my work.
Here's a picture of them...
As you can see, you need a socket to plug them into – they're not wireless. Some folks may not like this, but there are no small wireless headphones that have true noise cancelation. Also, the jack allows you to watch movies on airplanes.
Best regards,
Whitney