7+ months in the making

July 27th, 2020 - Keith Gill "Roaring Kitty" posted a YouTube video describing his Bullish reason to invest in GameStop.

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Mr. Gill believed that

• Business: GameStops Digital risks were overblown

• Sentiment: Negative sentiment was overdone

• Financials: Business value was overlooked

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NOTE: The below analysis and process was BEFORE the numerous Short Squeezes and media hype which has obfuscated trends and metrics over time.

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Business:

GameStops business was failing from a combination of a lack of new video game consoles (and thus accessory/game purchases). The COVID-19 pandemic greatly reduced their brick-and-mortar traffic. 

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Gill, through independent research, was able to identify that the perceived reduction in "Physical Disk" (games) sales was incorrect. Simply, there were more digital purchases in general, which pushed the percentage of Physical Disk sales down.

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Sentiment:

Sentiment was reviewed by manually looking through Social media systems to determine how positive or negative retail investors were of the product and company. Gill believed that an opportunity was arising because there was so much negative sentiment that it was over-blown

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Financials:

Mr. Gill reviewed the company financials and evaluated the business's free cash flow, debt, and forecasted revenue to determine how much leverage the business has and the potential of its downfall.

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He was able to determine that the business was very healthy, despite missed revenue goals.

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Short Interest:

Unique to GameStop was (and continues to be) the sheer amount of Short Interest and Short selling that has occurred by Hedge funds. Short interest exceeded 100% of the company's public shares. Essentially, any price increase would create a short squeeze, forcing the price point of shares up. This detail was taken into account by Mr. Gill but not to the exceptional levels we saw at its peak price point.

Value Analysis from HypeEquity

How HypeEquity Value Analysis works:

Derived from Keith Gills video "Investment Style Part 2/2"

The investment style is broken into 5 parts:

• Your Discount

  • HypeEquity looks at Analyst Recommendations to determine upside

• Leverage (potential bankruptcy)

  • HypeEquity looks at the overall company's health using the Piotroski F Score methodology

• Insider Buying (preferring purchases)

  • HypeEquity looks at the last 5 insiders who have purchased or sold shares and gives you a net change in shares (1000 bought - 900 sold = 100 shares remaining)

• Ownership (Prefers ~20% ownership)

  • HypeEquity looks at the top 5 owners, by share, to determine if they own 20% in totality among them

• Positive Analyst Opinion

  • HypeEquity ​will use third party Analyst content to only show companies rated Buy or higher

• Confidence (a gut check)​

  • There's no AI built (yet) to perform a gut check, but HypeEquity will use Social Sentiment data to see if people are talking about a company more/less.​