(B)(N) Alpha Mater

The Time Machine
Courtesy: Dr. Who

Drama. To get the job, we had to pick the one stock that was likely, very likely, to go up in price, and give our reasons for it; and we also had to pick the one stock that was likely, very likely, to go down in price, and give our reasons for that too (The Street, May 31, 2014, Wanna-Be Stock Pickers Fight Through a Weekend in the Shark Tank).

The Alpha Mater

To win, we invented a time-machine, but we lost anyway because, according to the judges, we didn’t have the “right stuff“, and they gave the prize, $6,000, and the job, to one of their graduate teams, although we would have thought that the prize alone would disqualify them from a future career in “business”; however, please see the “Alpha Mater” on the left and visit the UNC Kenan-Flagler Business School Alpha Challenge for a heads-up on next year’s challenge.

We tried to explain to the panel that there was no reason at all for the stock price of WWE World Wrestling Entertainment Incorporated to go through the roof, but that’s what it was doing, and so, that’s why we bought it and held on to it, despite all odds, because it was trading above the price of risk at $8, which they thought was “expensive” for a stock with only $400 million in assets, nearly no debt, and which lost ($9 million) last year; please see Exhibit 1 below.

But that didn’t stop the run-up of its 75 million common shares from $750 million at $10 to $2.1 billion at $28 in less than a year; obviously, lots of investors were buying the stock all the way up – we certainly weren’t alone – and the reason was that investors were excited about the new WWE Network which would provide wrestling 24/7 and include video on demand, and for the same $9.99 per month, access to all twelve WWE pay-per-view events every year (Forbes, May 28, 2014, WWE Boss Vince McMahon Has Lost $750 Million In Two Months).

That idea didn’t catch on as fast as they hoped, but there are still about 700,000 subscriptions on which the WWE is expected to lose $50 million this year; all that’s needed, in our opinion, is 3D 50″-screens that emit real blood, sweat and tears, which could be done using 3D-printers.

And we also told the panel that, pending that outcome, our attentive stop/loss policy would save our bacon, so to speak, no matter what the outcome. But they weren’t impressed by that either because they wanted more certainty and all we had was a time-machine that looked like a phone-booth.

Exhibit 1: (B)(N) WWE World Wrestling Entertainment Incorporated – Risk Price Chart – May 2014

(B)(N) WWE World Wrestling Entertainment Incorporated

World Wrestling Entertainment Incorporated is engaged in the development, production & marketing of television & pay-per-view event programming and live events & the licensing & sale of consumer products featuring its World Wrestling Entertainment brands.

From the Company: World Wrestling Entertainment Incorporated is an integrated media and entertainment company and engaged in the sports entertainment business worldwide. It operates in four segments: Live and Televised Entertainment, Consumer Products, Digital Media, and WWE Studios. The Live and Televised Entertainment segment produces live events and provides content for its television and other programming; designs, markets, and distributes various WWE-branded products, such as t-shirts, caps, and other novelty items; and offers pay-per-view programs. This segment also offers WWE Classics On Demand, a subscription video on demand service that offers classic television shows, pay-per-view events, specials, and original programming for a monthly subscription fee. The Consumer Products segment has a licensing program using its marks and logos, copyrighted works, and characters on various retail products, including toys, video games, apparel, and books; distributes home entertainment DVD/Blu-ray products; and publishes WWE, WWE kids, and several special magazines. The Digital Media segment operates Website, WWE.com; provides advertising services; sells merchandise on its Website at WWEShop Internet storefront; and sells broadband and mobile content. The WWE Studios segment is involved in the production and distribution of filmed entertainment content. The company was founded in 1980, has 760 employees, and is based in Stamford, Connecticut.

For more applications of these concepts please see our Posts which rely on the Theory of the Firm developed by the author (Goetze 2006) which calibrates The Process to the units of the balance sheet and demonstrates the price of risk as the solution to a Nash Equilibrium between “risk-seeking” and “risk-averse” investors within the demonstrated societal norms of risk aversion and bargaining practice. And for more on The Process, please see our Posts The Food Chain and The Process End-Of-Process.

And for more information on real “risk management” and additional references to the theory and how to read the charts and tables, please see our Post, The RiskWerk Company Glossary; we’ve also profiled hundreds of companies in these Posts and the Search Box (upper right) might help you to find what you’re looking for.

And for more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in America, Big Oil, Shopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.