Replies to post #296 on Contrarian Value Ideas

[gfp927z]

Derf, >> Absolutely no one wants this board to be on any sort of Hot! list <<

Lol, that's like a corporation saying that they don't want increasing revenues this quarter. With I-Hub, overall posting activity is way down, so they resort to inflating the numbers to maintain their ad revenues. What makes 'Latoria' suspicious is that there is no other apparent explanation for her posts. What is her motivation? She isn't pumping specific stocks, and isn't hyping her supposed business ('!F Cash Advance LLC'). Her posts are just vacuous robotic fluff, so the goal is to pad I-Hub's flagging numbers? It's one explanation anyway, especially if more 'Latorias' start showing up on I-Hub.

Btw, the SMG chart you mentioned still looks interesting. I've been watching it for several years as a deep value play, but the cannabis related side of their business (Hawthorne) is what has tanked the stock so bad. Another otherwise 'normal' stock that has an unfortunate pot connection is Bausch Health (BHC).


>>> 5 Best Marijuana Stocks To Invest In


Insider Monkey

February 22, 2024


https://www.insidermonkey.com/blog/5-best-marijuana-stocks-to-invest-in-2-1263318/3/


3. The Scotts Miracle-Gro Company (NYSE:SMG)

Number of Hedge Fund Holders: 30

The Scotts Miracle-Gro Company (NYSE:SMG) manufactures and sells lawn, garden care, and indoor/hydroponic gardening products globally. It operates through three segments – U.S. Consumer, Hawthorne, and Other. The company offers a range of lawn care and gardening products, including fertilizers, seeds, plant foods, pest control, and hydroponic equipment. The Scotts Miracle-Gro Company (NYSE:SMG) is one of the best marijuana stocks to invest in. On January 22, the company declared a quarterly dividend of $0.66 per share, in line with previous. The dividend is payable on March 8, to shareholders on record as of February 23.

According to Insider Monkey’s fourth quarter database, 30 hedge funds were bullish on The Scotts Miracle-Gro Company (NYSE:SMG), compared to 17 funds in the prior quarter. Schonfeld Strategic Advisors is the leading stakeholder of the company, with 444,336 shares worth $28.3 million.

Madison Funds made the following comment about The Scotts Miracle-Gro Company (NYSE:SMG) in its Q4 2022 investor letter:

“Stock selection was the poorest for us in this sector. Two stocks in particular – Hain Celestial (HAIN) and The Scotts Miracle-Gro Company (NYSE:SMG) – while big winners for us in 2020 and 2021, hurt the portfolio in 2022.

While both companies were so-called COVID beneficiaries (businesses that benefited from consumers staying home and spending on their homes during COVID), we felt they possessed certain additional drivers that would maintain their fundamentals into 2022 and beyond.

Scott’s Miracle-Gro is arguably one of the great American franchises. The brand is synonymous with lawn care and pest control, has a dominant market share (~60%) with historically-impressive ~30% cash flow margins, and has the country’s largest Cannabis supply business. Scotts’ core business saw a significant windfall during COVID lockdowns. Lawn and garden care is not a growth business, and SMG dominance does not allow for much incremental gain in market share. However, our thesis was that even in a reopening scenario where lawn and garden businesses would revert to the mean, the cannabis market was poised for years of growth as more states legalized recreational use.

What we missed was the highly inefficient structure of the U.S. cannabis market. Currently, California, Colorado, and Michigan have the biggest and most mature markets. However, over the course of the last few years, several very large states and regions have voted to legalize recreational use, including New York, New Jersey, and Connecticut. The fly in the ointment has been Oklahoma, which is a medical marijuana state. Although recreational use is still prohibited, licenses to grow the crop were granted in Laissez Faire fashion to anyone willing to buy one. Oklahoma began to grow and cultivate the crop far in excess of their medical marijuana demand. That excess supply bled into gray markets across the country, devastating pricing for growers in other states. This glut put a near complete stop to capital spending on grow operations. With no new or incremental facilities coming on, Scotts’ Hawthorne business was cut in half from its peak in F21. This, of course, had a devastating effect on the stock.”

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[gfp927z]

Any ideas on ADM as a value play?

The chart is starting to look interesting for a rebound, but with the investigation going on, I'm thinking it might turn out to be 'value trap'. The company's comments try to minimalize the risk of earnings revisions, etc, but it looks like they finagled their numbers in order to boost management's bonuses. The big question is whether this will somehow get glossed over with minimal repercussions, or is it just the beginning of trouble for the company? The CFO is reportedly on administrative leave, pending an internal probe, and Bloomberg reports that "the US Attorney’s Office in Manhattan has launched an investigation into the reporting of inter-segment transactions", which sounds pretty serious.

The chart suggests a bounce to the 50 MA might be in the cards (58.7 area), but beyond that may require a resolution to the investigation uncertainty. Just a guess though..



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