Highest shorted stock and a small cap stock what else can I say.
- Workhorse develops electric trucks and delivery drones.
- We all know where the future is going with electric vehicles (EV). The people want it, the government wants it, and a lot of private and public money is being poured in to make this happen. Legislation is aiming to make and FORCE this to happen.
- The government wants zero emissions. Workhorse trucks are already zero-emission. Gas and diesel-powered trucks are not. These petroleum-based vehicles are going to have a tough time catching up.
- Workhorse has a proprietary system called Metron to help manage its fleet and increase its efficiency. This helps to save costs and increases revenue for companies.
- Workhorse has developed its integrated drone named Horsefly which works with their trucks (see pictures). The trucks have a control center and charging capabilities. No one can deny that this is the future of commerce and there's no going back. Zero-emissions electric delivery step trucks traveling to a center point and launching their drones to deliver products to customers. Delivery should occur within 30 minutes after being ordered and Workhorse is set up to do this. Is there any retail company that will not benefit from this delivery structure? Think about it, Walmart, Fed Ex, Amazon, UPS, Postal Services, Supermarkets for food delivery, etc?
- 350,000 delivery trucks are already sold per year according to the New York Times. This number is projected to increase.
- Cathie Wood of Ark Investment Management, who has been very popular lately (google her), had purchased a few million shares for her fund. She has since sold. This may be due to not wanting to hold on to something that is being heavily shorted (more on that below). Her funds have gotten beaten up a bit after hitting their 52-week highs a few weeks ago. Her funds may also be on the receiving end of a process called Organizational Shorting. It's a complex process where market makers unpack and manipulate the positions within her funds and essentially short them. I'm not sure if this adversely affected her funds as I couldn't find any literature on a correlation but something to consider nonetheless.
- In April, Workhorse more than doubled its production of trucks in comparison to the combined previous three quarters. The Pride Group placed an order for 6230 trucks. That's 6230 trucks equating to several hundreds of millions of dollars!!! That's an enormous number of trucks and that's only from one wholesaler.
- Workhorse's main problems are with manufacturing and delivery. The reasons why:
- They're limited in part due to supply chain constraints. There are bottlenecks within the global supply chain and offshore shipping delays of commodity raw materials and components. This has impacted the entire industry, including Ford and GM. This is only TEMPORARY and will get worked out as it always does because every company wants to increase their sales. In addition, Workhorse now has a supply agreement with Coulomb Solutions, Inc. to supply their batteries. This company distributes for the largest EV battery manufacturer in the world.
- Electric trucks are a relatively new industry. Demand has skyrocketed so Workhorse's capacity to meet this demand has been limited. Recognizing that this will be something difficult for them to achieve, they teamed up with someone who can. They're now partnered with J.B. Poindexter & Co., a leading provider of commercial vehicle bodies. Poindexter has decades of experience with vehicle body engineering, construction, and assembly.
- There are several EV players. Most only have concepts and prototypes and we know from history that most will likely fail. Workhorse already has actual vehicles and these vehicles have driven millions of miles.
- Sales for the first quarter of 2021 were approximately $521,000 compared to approximately $84,000 in the first quarter of 2020. That is a significant increase and they are growing rapidly.
- Recent losses were mainly due to a decrease in the stock price of RIDE, which Workhorse was invested in.
- The Company had approximately $205.1 million in cash in March 2021. This helps limit the need to acquire debt.
- The stock has recently been beaten down due to having lost out on a $6 billion contract with the USPS last February. It's now June and the stock price reflects this as the market has already factored this in. This makes for a prime opportunity to invest in this company. This one-time contract will not be the only contract that the USPS offers nor does it mean Workhorse will lose out on other contracts from the USPS or other companies. Furthermore, Workhorse may still win this $6 billion contract as they are fighting it on the legal front. In addition, the USPS Postmaster, Louis DeJoy, who influences the direction of the contract, is being investigated by the FBI for possible fraudulent activity. There is concern that he may have made the decision based on political contributions. Several Ohio Congress members are also requesting a halt on the contract until it's assured that no political influence was asserted in Mr. DeJoy's decision of granting it to Workhorse's competitor. If this contract once again becomes up for grabs, there's a good chance Workhorse will win it. If that happens, watch out because the loss of this contract is what put downward pressure on its stock. Forget the moon, I'm talking about GN-z11, the furthest galaxy from us.
- Implied volatility has significantly increased resulting in the expensive option pricing you're seeing. This may indicate investors are expecting a big move and this risk is getting priced in.
- There are 8* analysts who have recently ranked WKHS. Five recommend a hold and three recommend a buy. NONE recommend a sell. It's unanimous, NONE recommend selling. Some of the analysts' recommend price targets are even $24, $20, $20, and $17. *Cowen & Co, Colliers Securities, Oppenheimer, Roth Capital, R.F. Lafferty, BTIG, B. Riley Financial, and Wolfe Research.
- You're helping the environment by investing in this company and you are becoming a part of the future.
- The stock price is about 30% of its 52-week high.
- This stock has an AMAZING SHORT SQUEEZE POTENTIAL. It's shorted about 40% of its float. It is one of the most, if not THE MOST, shorted stock out there.
It's very important to understand how a short squeeze works and you can't expect it to happen overnight. It takes discipline as no hedge fund manager is going to capitulate and hand money to you, especially now. The short sellers have borrowed shares to sell which drives the stock price down and they know you get fearful when this happens. They're accustomed to feeling fear because they deal with it every day. They've learned to process this emotion and not act upon it. However, they count on you not having the experience to deal with fear. They're counting on you selling out of fear (the bottom) and buying out of greed (the top). If you wait them out, they will eventually give in because every day you hold they lose money on the interest that they pay when borrowing their short shares. Also, the people lending them shares will not want to assume the risk indefinitely. The bottom line is that you have to hold and buy and not sell. Buying out of the money calls also helps because the market makers who sold you the naked calls need to cover by buying shares to protect themselves as the stock price rises.
So, how to deal with fear?
- Accept and expect fear to happen because it will. Anticipate it and do not act upon it.
- Do not invest money that you can't afford to lose. This way you can let it ride.
- Remember the ups and downs with GME and AMC. AMC was shorted about 20% on its float, it took a while and a lot of ups and downs but look what it eventually did. WKHS is shorted about double the amount of AMC!!!
Also, understand that hedge fund managers DO KNOW MORE about finance than you or I do but they are NO BETTER AT INVESTING than we are. They don't make their money from making good stock picks. They make their money from taking a cut of the money they're investing for other people. They make up fancy words, algorithms, and models to convince their customers to invest with them but overall they can't even beat the Dow. Numerous studies have shown this to be the case and a monkey throwing darts randomly at stock picks is able to beat them. The few that do outperform the market can be explained by the normal outliers of a bell curve distribution. The same distribution happens with us in WSB as it is the natural order of things. Look it up if you don't believe it.
- WKHS is prime for a short squeeze. It is one of the most, if not the most, shorted stock out there.
- WKHS fundamentals do not look as bad as it is priced. Out of 8 research analysts who follow it, all recommend either a buy or hold and NONE recommend a sell. Price targets for several were at or above $20.
- Most of the negative aspects of the company have been addressed.
- Demand for their products has skyrocketed.
- Don't be lazy, don't TLDR this one, ready the whole thing.
P.S not financial advice nor my DD
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