TLRY Research Notes

  1. Terminology and History

Hemp: A plant that is grown specifically for the industrial use of its derived product.

Cannabis: A general name for cannabis plant and related products. Male and female cannabis plant, industrial use cannabis and drug/narcotics cannabis.

THC: The principle chemical component in drug use cannabis.

CBD: The second most abundant cannabinoid in cannabis

Marijuana: A custom name for both medical and drug use cannabis, origined from South America.

Compassionate Access: Potential patient benefit justifies the potential risks of treatment, like using drugs that have not passed the clincal trial; drug used for pain release purposes.

  1. Geographical Distribution of Revenue
    Six months ended June 30, 2018, 97% of Revenue were generated in Canada. 3% of Revenue were generated outside Canada. The company has 15% fixed assets located outside Canada and expects the overseas revenue to catch up.

  2. Growth of Expenses
    The growth rate of S&M expenses and G&A expenses far exceeds the revenue growth. The profitability of the business is questionable if these expenses cannot be properly optimized.

M&A Deal Notes


$ 1.71 acquiztion proposal, as of June 28, 2019, market price $ 1.65

Merger Disclosure

5% beneficial ownership rule: Schedule 13D reports
FORM 13H (Large trader reporting rule)

Tender Offer: Schedule TO
Target Company Response: Schedule 14D-9

Tender Offer
A tender offer is a broad solicitation by a company or a third party to purchase a substantial percentage of a company’s Section 12 registered equity shares or units for a limited period of time. The offer is at a fixed price, usually at a premium over the current market price, and is customarily contingent on shareholders tendering a fixed number of their shares or units. Under the Securities Exchange Act of 1934, parties who will own more than five percent of a class of the company’s securities after making a tender offer for securities registered under the Exchange Act must file a Schedule TO with the SEC. The SEC also requires any person acquiring more than five percent of a voting class of a company’s Section 12 registered equity securities directly or by tender offer to file a Schedule 13D.

The filings required by Section 14(d) of the Exchange Act and Regulation 14D provide information to the public about persons other than the company who make a tender offer. The company that is the subject of the takeover must file with the SEC its response to the tender offer on Schedule 14D-9. The rules also set time limits for the tender offer and provide other protections to shareholders. When a public company makes a tender offer for a class of its own equity securities, it similarly must file a Schedule TO and may also need to file a Schedule 13E-3.

Except for the anti-fraud and a few other provisions of Regulation 14E, the SEC’s tender offer rules generally do not apply to tender offers that result in ownership of five percent or less of the outstanding shares —also known as "mini-tender offers." You can learn more about the risks of mini-tender offers by reading our information on that topic.


Wedbush Securities, Inc. 2019-1-14 AAPL Researh Report

The Wedbush report extensively discussed the future growth of AAPL's service segment. The FY2019, FY2020 revenue projection of AAPL made by Webbush was primarily based on the perspective operating result of AAPL's current business strategy.

The realiablility of Webbush's valuation analysis on AAPL, which is based on future growth projection, is questionable due to its speculative nature out of uncertainties.

ION Geophysical Corporation

The intransic value for ION is determined by the potentional acquisition price offerred by another company. When no such offer currently exist, the price can be estimated by comparing similiar mergers in industry.

Statutory Merger and Statutory Consolidation

Statutory Merger: one of the entity exist as a business entity after merger
Statutory Consolidation: both of the entities are terminated and replaced by a successor organization.

A Summary of My Short Strategy

Questions to be answered ?

  1. Is the downward momentum in prive movement exploitable in general, if not, what is the scope ?
  2. Is exploiting downward momentum in conflict with value investing ?
  3. What's the fundamental difference between upward momentum and downward momentum ?
  4. What is the historial performance of trading on tier 1 signal for non-pharmaceutial-non-merger comanyies ?

Statistical Models

  1. Generative Models and Discrimative Models

Generative models try to maximum the joint probability of the token sequence A and label sequence B, while discrimitive models try to maximum the conditional probability of label sequence B conditional on token sequence A.
NB and HMM are generative models; CRF is a discrimitive model.

  1. Posterior probability
    Posterior probability is the conditional probability itself: P(B/A), in contrast to the prior probability P(B), posterior indicates that this probability is the likelihood of event B happens given that the occuring of event A is already known.

  2. Assumptions
    HMM: a. n-order markov assumption b. conditional independent assumption (apply chain rule in conditional paradigm)
    Maximum Likelihood Estimation.

Naive Bayes: a. naive bayes assumption b. conditional independent assumption (apply chain rule in conditional paradigm)
Maximum a posterior estimation.

Generative model can be identified when the model needs to calculate the marginal distribution of the predicted label P(Y)


  1. Fundemental Issues of a Company
    Aside of earnings, many details are worth noting in the fundemental health of a company. Short-term liquidity issue is a typical case.

  2. The repayment of fixed income securities

The repayment is never guaranteed, but involves certain degree of defaults.

  1. Mutual Fund
    Mutual fund has two basic functions:
    a. pooling of risk
    b. agent of ownership

Through pooling, an investor of a mutual fund enjoys corresponding pieces of ownership of a varitiy of securities through the mutual fund.

  1. All other things equal
    The per share price of a stock will keep increasing if no dividend is paid from retained earnings. That is to say, the retained earnings kept pile up or reinvested into the business.

  2. The rise and falls of ETF fund prices

Prices tend to rise before the dividend distribution day. Then fall immediately after the dividend distribution day.

  1. Lending and Borrowing

Lending is a temporary surrender of control of economic resources so as to seek possible economic benefits.

Borrowing is acquire of control of economic resources so as to seek possible economic benefits.

Part of the value of a company are belong to the creditors.

  1. Future Value and Present Value
    The future value of certain amount of current cash depends largely on the realizable rate of return.

Normally speaking, the future value and present value are referring to a rate of return that is riskless.

Riskless time value of money refers to the discount rate (cut... that reflects a decline in buying power).
(Cut... Under current fiat monetary system, As riskless interest rate is set by the central bank, thus the riskless interest rate is actually the artificial decline in buying power enforced by central bank policy (Really SO ?)).

  1. Economic Value of Technology Breakthrough = Impact of Potential Application/Implementation Difficulity

  2. 债券发行时的Yield to Maturity由无风险利率+预期通胀率+预期风险溢价之和决定,然后YTM决定了债券发行价格(可能每个买家不同)

The YTM is defined as the interest rate that makes the present value of a bond's payments equal to its price. (Assuming coupon payments are reinvested at the same rate as the YTM)

  1. High operating or financial leverage is the source of net earnings fluctuations.

  2. Corporate Intransic Value Discount Rate
    U.S. treasury bond rate; Federal Fund Target Rate; Federal Fund Rate

  3. 数量型宏观调控政策

  4. Buffett's Oppertunity Cost
    Focusing on oppertunity cost is another way of maximizing the long-term return expectation.

  5. Political Conflicit
    The cause of political conflicit: Fight for benefits attached to the organizational power.

  6. The Central Position of Cash in Valuation
    Cash is the most generally accepted medium of exchange, which has the universal purchasing power. The nominal value of all other assets are measured and expressed in a certain amount of currency, which essentially is cash. In a boarder sense, in cash means realiable transaction (v.s. in credit).

Accounts receivables and payables are cash inflows and outflows that were to be realized in the near future. Other non-current assets and liabilities, excluding "accounting" assets (prepaid expense, etc), are cash inflows and outflows that were to be realized in further future, whether intended or forced.

Cash flow is systematically lagged behiend revenue expense flow in timing but they can reconcile in amount. Cash flow figures measure transactions that were realized but revenue expense figures measure past transactions that are both realized and unrealized, in actual or estimated number.

The earning performance is more accuratly demonstrated in cash flow than revenue expense, as cash flow is based on transactions that are realized.

  1. Ex-dividend Price Drop
    Cause: a. dividend distribution may decrease the ex-dividend future return of the security
    b. If the stock price was pushed up under the expectation of possible dividend distribution, it is natural for price to return after the distribution is realized.

Berkshire Hathaway Letter

Warren Buffet

According to related descriptions in wikipedia, buffet sold a co-owned business when he was a sophmore (year 1945) in high school for around $1000. If we assume his savings was 10 times of the business he sold 10 years later, then by 1955, his savings would be $10,000. A second description in wikipeida stated that buffet finished college (after 5 years) with a saving of $9,800, which collaborates with our first estimation in terms of magitude. A concervative estimation of buffet's wealth when he founded Buffett Partnership, Ltd would be around $100,000 (around 6.3 Million RMB)

1957 Letter

In buffet's view, the market is in general priced above intrinsic value. This view relates to blue-chip securities. Buffet stated that if this view is accurate, it is possible that a substantial decline in all stock prices, both overvalued and undervalued, is to happen. As it is very unlikely that current market level will be thought of as cheap 5 years from now. Even a full-scale bear market won't hurt the current work-out portfolio. In buffet's plan, if the general market were to return to an undervalued status, he would invest in the undervalued general issues. It should be noted that, for Buffett at this time, debt financing is an option for the fund needed for general issue investment under this condition. If the general market were to move to a higher level (overvaluation), Buffett plan to put more capital on work-outs.

In Buffett's view, a market decline followed by general decline in earning power is a normal market behavior and it should be. Any market decline not in the same magnitude with the decline in earning power can be considered as "moderate".

Buffett Talks about "current market level", but how does he determine if the current market level is overvalued or undervalued ? Perhaps he was using average PE ratio as a reference to make the judgement.

When dicussing market declines, Buffett use the word "moderate" to describe the market decline in 1957 because the decrease of corporate earning power was worse.
Buffett identify market price, corporate earning power and intransic value as specifically three seperate concept.

I assume that "corporate earning power" refers to the earning power of the company for the next few years. "Intransic" value refers to a longer period, say 30 years.

Does the Buffett position "work-out" stocks before or after corporate action announcement ?

1958 Letter

1958 year, In Mr Buffett's view, is a year with huge number of amateurs entering into the market, pushing up the general market level. The public enthusiasm on stock market will eventually cause trouble, affecting even undervalued stocks. Commonwealth Trust Co. of Union City is the stock our partnerships has large stakes on, we hope its price to remain stable or even decline, so we can purchase more shares for a reasonable price. This would hold back our overall portfolio performance.

Buffett stated that the performance of thier portolio, due to their strategy, would be better in a bear market than in a bull market. He is well statisfied to match the advance of the general market in a bull year.

The partnership has large stake in the Commonwealth Trust Co. of Union City, New Jersey. For reasons including not paying dividends and etcs, the market price for the Comonwealth's stock is $50, while the intransic value of the company is $125 under Buffett's estimation.

The acquiring period of undervalued stock (here Commonwealth Trust Co. of Union City, New Jersey) can be as long as a year. Buffett was building up a position with great patient, buy in shares in good price multiple times.
Buffett chose not to do block trade because of the mangitude of his target position is high, over 10% of target floating shares. Block trade will push up market price for the target stock, which hurt investment return.

1959 Letter

To the extent possible, invest in situations at least partially insulated from the behavior of the general market. This policy should lead to superior results in bear markets and average performance in bull markets. (In modern sense, a low beta, high potential alpha policy. By this policy, an investor can minimize the adverse influence of the general market which he cannot control, therefore the uncertainty of the investment is minimized.)

1977 Letter

  1. Capital Gain
    It is improper to include capital gains and losses when evaluating the performance of a company for a single year, they are an important component of the longer term record.

Buffet admits that