Enough Ukraine Uncertainty: Let ‘Dave & Buster’s; PLAY On Your Investment Values

Stock Market

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Investment Thesis

Advances in information technology and data management have made stock transactions a free good, thanks to competitive intensity. Trade “commissions” now are gone. Portfolio management is significantly easier now than in the 20th century, despite the world being a much more complex, intricate, faster-moving place.

But it takes a very different investing strategy than what worked back (some 20+ years ago) in the 20th century. It takes more personal energy now to up your activity to effectively utilize the fire-hose information flow coming at (or past) you. Not every one is going to be competitive.

Besides the physical demands, there are intellectual ones. New tools may demand new understandings of how things go together now, instead of the way they used to. Keeping up is an ongoing demand, consuming attention time as well as energy. The value of a support staff educated in the use of the new technologies can be a make-or-break test.

There will be a variety of approaches up to the test, many yet to be proven. What follows is one which has been in use daily since Y2K, evolving some refinements while its basic rules have had no changes. An analysis of stocks in the entertainment industry will be displayed, with particular focus on Dave & Buster’s Entertainment, Inc. (PLAY).

But, first, a look at the industry competitors to see why that attention is deserved.

The Big Picture of Competitive Conflicts Comparisons

The highly sophisticated functioning of today’s investment markets guides investors into making choices of portfolio holdings primarily in terms of Rewards received in return for Risks taken. Risks of decisions made under uncertainty since they depend on future outcomes.

Both of the opposing R’s require forecasts of what may come about. We choose to first look at the actions of big- $ institutional investment organizations, reflected by their trade orders for (or against) what they consider at this point in time to be the best holdings for their equity investment portfolios.

Their decisions boil down to which choices present the best tradeoffs between prospects for Reward, at the costs of Risks undertaken. The reward prospects are the experienced estimates of well-paid, highly-informed analysts aware of the available resources and management capabilities of industry competitors. The Risk costs are largely understood but rarely completely accounted for, since they involve the securities’ price expectations yet to be made by other investment organizations.

We have the means to define the securities’ price Reward expectations by the principal players in this serious game. But decades-long experiences with multi-month forecasts of their Risk outcomes prove them to be less reliable than their Reward forecasts. We find actual market-price outcomes to be better guides to the loss-side of this gain-loss seesaw, so that is what is used in the downside element of the trade-off, given the extent of the upside expectations.

Figure 1

risk ~ reward trade-offs between stocks


(used with permission)

The tradeoffs here are between near-term upside stock price gains (green horizontal scale) seen worth protecting against by Market-makers with temporary short positions in each of the stocks, and the prior actual price drawdowns experienced during holdings of those stocks (red vertical scale). Both scales are of percent change from zero to 25%, and better positions are downward and to the right.

The intersection of those coordinates by the numbered positions are identified by the stock symbols in the blue field to the right.

The dotted diagonal line marks the points of equal upside price change forecasts derived from Market-Maker [MM] hedging actions, and the actual worst-case price drawdowns from positions that could have been taken following prior MM forecasts like today.

Our principal interest is in the RR comparisons between PLAY at location [18] in the array of its competitors starting with a “market index” norm of SPY at [4]. That frontier of Reward-Risk tradeoffs continues with DLB at [11] and HAS at [10].

Those forecasts are implied by the self-protective behaviors of MMs who must usually put firm capital at temporary risk to balance buyer and seller interests in helping big-money portfolio managers make volume adjustments to multi-billion-dollar portfolios. Their protective actions define daily the extent of likely expected price changes for thousands of stocks and ETFs.

This map is a good starting point, but it has some deficiencies of investment characteristics that often should influence an investor’s choice of where to put his / her capital to work. The table in Figure 2 spells out some of the above considerations and several others specifically for PLAY and its investment competitors vying for a role in your portfolio.

Comparing Alternative Investments

Figure 2

comparative detail data


(used with permission)

Readers familiar with our analysis may want to pass over the next few paragraphs to get to Recent MM price-range forecast trends.

The price-range forecast limits of columns [B] and [C] get defined by MM hedging actions to protect firm capital required to be put at risk of price changes from volume trade orders placed by big- $ “institutional” clients.

What must not be forgotten in any market-valuation analysis is that every trade has two sides of opposing interests, both of which will be realistically pursued. We use the balance between upside and downside expectations differences from [D] as a measure we call the Range Index [RI]. Its numeric value is that percentage of the full forecast range of [B] to [C] which lies between [D] and [C].

[E] measures potential upside risks for MM short positions created to fill such orders, and reward potentials for the buy-side positions so created. The buy-side risks actually encountered from prior forecasts like the present are in [F]as the most severe loss moments encountered during holding periods in effort to reach [E] gains. Those are where buyers are most likely to accept losses.

We use the RI values ​​to identify prior time periods, on a stock by stock basis, which had outlooks for price risk and reward like today’s forecast. In figure 2 above for PLAY, the RI is 51, so there is about an equal upside and downside balance. There were 61 prior instances [L] of such RIs for PLAY in the 1261 market days of the past 5 years [M].

But samples of RI to be credible as past indicators of future prospects need to be of sufficient number to avoid having only occurred in one short time period and not being representative of the whole 5 years. The pink cells of column [L] fall short of such a test in the case of NFLX and FOXF. This is an explanation of why they are regarded as outside of the Reward-Risk frontier of Figure 1. Another example of the problem potential is in the NFLX row of Figure 2 above, at the [T] calculation of its RR Ratio of 15 to 1 where all others in the column are below only 3.8 to 1. The low T value for SPY is discussed later.

[H] tells what proportion of the [L] sample of prior like forecasts have earned gains by either having price reach its [B] target, or be above its [D] entry cost at the end of a 3-month max-patience holding period limit. [ I ] gives the net gains-losses of those [L] experiences and [N] suggests how credible the future [E] may be compared to the previously-accomplished [ I ].

Further Reward-Risk tradeoff evaluations involve using the [H] odds for gains with the 100 – H loss odds as weights for N-conditioned [E] and for [F]for a prospective combined-return score of [Q]. The typical position holding-period [J] divided into [Q] provides a figure of merit [fom] ranking measure rate of return [R] useful in portfolio position preferencing. The investment candidates of Figure 2 are row-ranked based on R, with PLAY earning top rank.

Among the 20 best-ranked of all 3,174 of today’s MM price-range forecasts, their high Win Odds (90 of 100) and short holding periods (36 days) boost their average CAGRs to 253%. Here, PLAY compares favorably at Win Odds of 92 of 100 and brief holds of only 29 market days – 8 days longer than a market month – pushing its CAGR to 375%.

Its fom at 60+ bp / day is substantially better than all others – over 1/2 of 1% net gain each day held.

Perhaps, we should know more about PLAY.

Company Description

Dave & Buster’s Entertainment, Inc. owns and operates entertainment and dining venues for adults and families in North America. Its venues offer a menu of entrés and appetizers, as well as a selection of non-alcoholic and alcoholic beverages; and an assortment of entertainment attractions centered on playing games and watching live sports, and other televised events. The company operates its venues under the Dave & Buster’s name. As of January 31, 2021, it owned and operated 140 stores located in 40 states, Puerto Rico, and one Canadian Province. The company was founded in 1982 and is headquartered in Dallas, Texas .. ”

Source: Yahoo Finance

(used with permission)

Street Estimates for growth

Yahoo Finance

Recent MM price-range forecast trends

Figure 3

MM price range forecasts daily, oast 6 months


(used with permission)

This is not a typical “technical analysis chart” because instead of presenting past history the vertical lines for each day of the past 6 months are plots of price-range forecasts updated each day from actual hedging transactions in derivative securities markets.

The lower picture of Figure 3 provides a frequency distribution of PLAY’s Range Indexes of the last 5 years’ daily MM forecasts. The stock is at the upper end of its recent history and is likely to see price recovery in the coming 3 months, according to prior market activity under similar expectations. The exceptional rate of return is due to a combination of MM forecasts of a price range of 46% and present price at its middle, with very high frequent prior achievement of those higher upside price bounds.

PLAY at present appears to be a more promising near-term capital gain prospect than the market-index ETF of SPY. Figure 2 near-bottom-row odds-weighted price-change SPY prospects [R] are the least attractive outlook seen in the past two years, where prospective risk actually exceeds the return outlook. No doubt the impending invasion of Ukraine by Russia is a dominant factor.


Dave & Buster’s Entertainment, Inc. appears to be in solid competitive position to support price recovery in the next few months on the order seen by market professionals dealing both directly in the stock and in markets providing hedge contracts in derivatives to PLAY.

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