Update on Casey's General Stores after my first visit; OpenAI delayed its IPO – and I'm not surprised; Continue to avoid SpaceX and Strategy; How a master con man manipulated investors out of $50 million

1) Longtime readers may remember that I wrote favorably about convenience-store and gas-station operator Casey's General Stores (CASY) on August 21.

Then I did a deeper dive on August 22, concluding that Casey's was an exceptional, long-term growth story. And I agreed with Dan Loeb of hedge fund Third Point, who said:

In Casey's we see a world class management team with a differentiated mousetrap and a decade of profitable growth ahead of them – whether they are labeled a restaurant or a gas station or a general store is semantics. As the company's slogan goes, "It's Not Crazy, it's Casey's!"

It was a good call, as the stock is up 55% since then.

Though it has pulled back 16% from the all-time high it hit earlier this month, it's still trading at 33.2 times forward earnings.

I don't doubt this fabulous company's stock is worth such a high multiple, but it's hard to argue that it's cheap. So I'm going to wait patiently and hope for a better entry point.

I decided to look at this stock again because last week, I had the chance to visit my first Casey's – and was very impressed. I recorded a two-minute video with my thoughts and took these pictures:

This was during a trip to Abilene, Texas to see the massive data centers being built there. I'll share more on that in a future e-mail, so stay tuned...

2) Last week, news broke that ChatGPT maker OpenAI is likely to delay its IPO until next year, as this New York Times article reports.

I'm not surprised by this after the bombshell revelation of the company's staggering, accelerating losses, which I covered in my June 17 e-mail. I concluded:

When investors digest these horrific numbers, I think they're going to reject the $1 trillion-plus valuation OpenAI is hoping for – even in this environment of extreme valuations for anything AI related.

But bankers and insiders will likely still get the IPO done, foisting this turd on naïve retail investors and index funds. That said, I think it'll be delayed into 2027 and at a lower valuation than the latest $852 billion figure.

In my opinion, OpenAI's intrinsic value – defined as the present value of its future free cash flows ("FCF") – is zero. I don't think it'll ever generate even $1 of FCF.

I now question whether this cash-burning furnace will ever go public...

3) On the subject of IPOs, shares of SpaceX (SPCX) have pulled back to roughly where they closed on their opening day. They currently trade at an absurd 112 times trailing revenue... which is why this is my single least-favorite stock right now.

CEO Elon Musk's cult followers are propping up the stock. But bond investors are already getting cold feet, as this X post by Bloomberg reporter Joe Weisenthal notes:

4) Speaking of stocks to avoid, shares of bitcoin owner Strategy (MSTR) are tumbling again today. That's after hitting a multiyear low on Friday and rallying 12.6% yesterday.

The short-lived rally was due to the company announcing various steps to arrest the decline, as this Wall Street Journal article outlines:

Michael Saylor's Strategy plans to buy back stock and sell bitcoin among many moves aimed at stemming the loss of confidence in the crypto-hoarding company.

Strategy said Monday it would repurchase as much as $1 billion of its preferred shares and up to $1 billion of its Class A common stock. It also said it might sell bitcoin to raise up to $1.25 billion in cash to help cover the dividend payments on its preferred stock and the interest on outstanding debt, as well as to fund its share-repurchase program and cash reserve. Strategy said it had boosted this cash reserve to $2.55 billion as of June 28.

Strategy's three-year stock chart looks similar to some of the beaten-down stocks I wrote about last week:

But don't be tempted to bottom-fish here. Strategy's stock is a promotion engineered by a con man... That's why I've warned my readers to avoid it several times (archive here).

Two of my favorite writers (and friends) have also recently warned about Strategy. Chris Irons, in his Substack Quoth the Raven, writes (for paid subscribers):

If you own STRC, STRF, STRD or STRK, this announcement is difficult to dismiss as anything but as constructive as the company could be right now, give Bitcoin's price and its equity and preferred prices. But here's the catch.

A meaningful portion of that new flexibility comes from the company's willingness to monetize Bitcoin. Not hypothetically. Explicitly.

Under the new framework, Strategy can sell Bitcoin to build its cash reserve, replenish that reserve after paying dividends, fund interest expense, and even finance repurchases of preferred securities and common stock.

As he continues, this shift should be a red flag for investors:

That's a significant evolution in philosophy for a company that has spent years building its identity around buying Bitcoin and almost never selling it.

It's definitely prudent and necessary for the stack they are trying to run, but it also introduces the idea of a feedback loop that investors shouldn't ignore and that wasn't necessarily there a couple months ago.

Strategy isn't just another Bitcoin holder. It has been one of the largest marginal buyers of Bitcoin over the last several years. That buying has undoubtedly supported demand for the asset. If that flow begins reversing – even modestly – the dynamic changes.

And here's a blog post from Herb Greenberg, who was warning as far back as February about Strategy's Stretch (STRC) preferred stock, which is a total scam:

I originally wrote what I hope you're about to read in February...

Given the collapse of Strategy's supposedly safe Stretch preferred stock, I figured this was as good a time as any for a re-run.

The focus was CEO Michael Saylor's unabashedly P.T. Barnum-like claim that a highly risky bitcoin-centric vehicle is as "risk-free" as Treasuries, with triple the yield. The stock has since plunged by roughly 25%.

He then shared this quote from the WSJ's Spencer Jakab, who sums up the situation best:

Visionaries gamble when they have little to lose and lots to gain, not the inverse. Saylor doesn't seem to have grasped that: Strategy already crashed 99% once under his leadership.

What's alarming is how many people went along for the ride this time. It says something about this frothy moment in markets.

5) Speaking of con men, this WSJ story reveals how a "master of deception" manipulated investors out of $50 million:

Paul Regan claimed to have discovered the investment holy grail of high return at low risk, offering investors the chance to earn 10%, even 15% or more annually for up to 10 years, guaranteed.

That might seem too good to be true – and it was. But Regan pulled from a bag of tricks to rip off his clients. And he recorded many of his phone calls to teach others how to rip people off, too.

Those recordings offer rare access into the inner workings of a fraud and the psychological tactics of a master of deception. They show how Regan made a multipronged assault on clients' emotions by playing on their vulnerabilities, their need for income and their yearning to believe.

If you hear salespeople using lines like this, run away:

He told a 71-year-old woman who said she had always worked two jobs: "Not only will you not lose your money, but in recognition of how hard you worked for it, I want you to remember something: Your money's going to work twice as hard for you as you ever did for it."...

"I have to tell you that there's risk," Regan told one client. "But at the end of the day with insurance wrappers and protection, y'know, it's the same risk that we have of, y'know, being ripped apart by a saber-tooth tiger or, y'know, stepped on by a dinosaur."...

"What we have," Regan told one prospect, "are the biggest and strongest and most powerful institutions behind us, the insurance carriers that have been around for hundreds of years that are guaranteeing you that you won't lose."

Con men also often use references to faith and religion to build trust:

When the prospective client, a 75-year-old disabled Vietnam veteran, said he was investing not only for himself but also for an elderly friend with Alzheimer's, Regan said that was "something that's sacred."

"The kind of person that would hear that and then put you in a situation where, y'know, there's risk, I mean there's a special kind of hell for that person," he added...

On another call, the 71-year-old prospective investor who had worked two jobs told him she had no family and that "nothing was ever given to me." She said she had been clearing her yard with a chain saw when Regan called. "Amen," said Regan, who often described himself as a Christian.

"Honestly and truly, this is a blessing for me because having the knowledge of the fact that you need it, y'know, makes it that much sweeter, that much more of a blessing for me, knowing that I can, y'know, come through for you and be your deliverance and give you the peace of mind and give you the, like, easy night's rest, like melatonin. For me, it's the greatest gift in the world and it's a blessing," he told her.

And these kinds of lines make their offerings sound worry-free because they have government "approval":

"There's no way this document would be placed before you for your edification," he said on one call, "unless dozens of people sitting in high places that are overseeing the banking regulations, banking department, insurance department as well as, y'know, the Securities and Exchange Commission, had approved it for public dissemination."

These victims forked over hundreds of thousands of their hard-earned wealth to a single con man who used these tactics. Be careful out there!

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.