🎾 Investing in Pickleball

MARKET UPDATE

Good Morning Investor! On Monday, shares of semiconductor makers and designers Broadcom ($AVGO), Super Micro Computer ($SMCI), and ARM Holdings ($ARM) all dropped notably as the market prepares for Nvidia’s earnings on Wednesday.

Meanwhile, the price of US Crude Oil surged 3% on the announcement of Libya’s production halt which coincided with an escalation in tensions between Israel and Hezbollah in the middle-east.

TODAY’S BIG HEADLINES

The Booming Economics of Pickleball

Y Combinator Backs its First Defense Company

Cava Continues to Defy the Odds

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SPORT ECONOMICS

The Booming Economics of Pickleball🎾

The Rise of America's Sauciest Sport: Pickleball — the cheeky love child of tennis, badminton, and ping-pong - is having more than just its day in the sun. It's basking in a full-blown heatwave of popularity! According to the Association of Pickleball Professionals (APP), this saucy little sport has seen its player base explode faster than a pickle in a microwave. We're talking a whopping 900% increase in just three years, from a modest 4.8 million players in 2021 to a jaw-dropping 48 million today. Talk about a dill-ightful surprise!

• What's causing this surge in demand? Well, much like soccer - the world's most watched sport - pickleball has a very low barrier to entry. It's more accessible than your average celebrity's DMs, welcoming players of all ages and skill levels with open arms (and paddles).

• Played on a court smaller than your average millennial's apartment, with a lower net and a perforated plastic ball. Unlike tennis, pickleball features an underhand serve (no need for those bulging biceps), a slower ball speed, and a non-volley zone.

Picking Your Pickle: This pickleball pandemonium is creating clear winners in the investment world. Here at Tickergeek, we've been scouring the web harder than a determined pickleball player chasing a stray ball. Behold, the fruits of our labor:

Life's a Pitch: For those looking to dive headfirst into the pickleball pool, look no further than Life Time Group Holdings ($LTH). This luxury fitness chain operates over 500 permanent pickleball courts across North America. They've seen a massive influx of new members, causing their revenues to swell faster than a pickle in brine.

These Shoes Were Made for Pickling: If you prefer the picks & shovels approach, consider Skechers ($SKX). They've positioned themselves as the Cinderella of the pickleball world, offering the perfect fit for your pickleball-playing feet. Plus, they sponsor professional leagues and events, cementing their place in the sport.

The Big Cheese of Pickleball: Last but not least, we have Amer Sports Corp ($AMER), the Finnish company that recently went public. Owning the Wilson brand, they're serving up pickleball equipment, they've got all your pickleball needs covered including paddles, balls and accessories. It's like they're the Swiss Army knife of the pickleball world.

VENTURE CAPITAL & DEFENSE

Y Combinator Backs its First Defense Company✈️

From Apps to Apocalypse: Y Combinator, the Silicon Valley incubator known for hatching tech darlings like Twitch, DoorDash, and Dropbox, is now setting its sights on a whole new kind of "disruptive" technology. The startup accelerator has decided to add a little bang to its buck by backing Ares Industries, a defense company that builds "low-cost cruise missiles." Talk about taking "launch" parties to a whole new level!

Missiles, The New Black in Tech Fashion: Why this sudden interest in things that go boom? Well, as they say, follow the money trail - and in this case, it leads straight to the Department of Defense's piggy bank. With a whopping $850 billion budget request for fiscal year 2025, it's no wonder tech startups are lining up to court Uncle Sam faster than influencers at a free swag event.

• Ares' founders claim the current geopolitical climate of heightened tensions and ongoing wars is creating a need for their missiles. Priced at a mere $300,000 (bargain!), these bad boys are expected to be 10 times smaller and 10 times cheaper than the DoD's current long-range ship missiles.

From Frenemies to Bedfellows: Once upon a time, Silicon Valley and the Pentagon were like oil and water - they just didn't mix. Tech startups traditionally turned up their noses at the idea of their products being used for warfare, preferring to stick to more peaceful pursuits like inventing new ways to waste time on social media. Meanwhile, the DoD was perfectly content with its list of go-to suppliers like Boeing and Lockheed Martin. But as the cost of war skyrockets faster than a SpaceX rocket, times are a-changin'.

• The Defense Innovation Unit, a DoD organization with a name that sounds like it was created by a random buzzword generator, has been handing out contracts like candy on Halloween. We're talking over $5.5 billion worth of goodies for everything from autonomous drones to cybersecurity software since 2015.

• According to PitchBook, venture capital firms invested roughly $35 billion across 627 deals in 2023. That's a lot of zeroes! And just this month, the Peter Thiel-backed Anduril Industries raised $1.5 billion to ramp up production of autonomous weapons for the US military and its allies. Because nothing says "peace" quite like autonomous weapons, right?

FAST-SERVICE RESTAURANTS

Cava Continues to Defy the Odds🥙

The Fast Food Feud Heats Up: It seems not all fast-service restaurants are created equal in this culinary colosseum we call the market. We've already witnessed a divergence in performance between the likes of Starbucks ($SBUX) and McDonald's ($MCD), while culinary contenders like Chipotle ($CMG) continue to sizzle despite the consumer spending crunch. But last week, we got a taste of something truly special when Cava ($CAVA) proved it's got the secret sauce, serving up quarterly earnings that sent its stock soaring faster than a gyro spinning on a spit - up over 22% on Friday! Since its IPO in June 2023, this Mediterranean marvel has risen 234%, making other stocks look as flat as day-old pita.

A Feast for the Financial Senses: The Mediterranean restaurant chain’s earnings report was so delicious it made traders blush from Wall Street to Canary Wharf. Let's unwrap this mouthwatering financial gyro:

• Cava reported revenue of $231.4 million, compared to $219.5 million expected, up 35% from the same quarter last year.

• Earnings per share came in at $0.17, beating expectations by $0.04. Quarterly net income almost reached $20 million, compared to $14.8 million expected. Last year's $6.5 million looks like small fries in comparison.

• Impressively, the company also reported increases in traffic and same-store sales of 9.5% and 14.4%, respectively — numbers that would make other fast-food joints weep into their ketchup packets.

• The company added 18 new restaurants last quarter and now plans to open 54 to 57 this year, up from 50 to 54 in previous guidance. Currently, the company has 341 establishments primarily scattered across the East Coast, Southwest and Southern California.

Millennials and Gen Z Are Eating It Up: Cava's management raised the company's full-year guidance — a strategy almost guaranteeing a positive share price reaction. But the real cherry on top of this financial falafel? Almost 60% of Cava's customers are Gen Z or millennials. It's like they've cracked the code to young people's hearts - through their stomachs!

• Cava seems uniquely positioned to keep growing despite the industry's challenges. As the CEO put it, "We're seeing trade down from traditional casual dining, trade up from traditional [quick service restaurants] and trade over from legacy fast-casual players." In other words, Cava is the Goldilocks of fast food.

MORE NEWS

Additional market-moving events🌎

Pumpkin Spice in August: Starbuck has brought back its fall-themed pumpkin spiced latte, earlier than ever before. Most likely due to its outrageous popularity — it single-handedly contributes towards 10% of the company’s total sales. (Axios)

No Vacancies Anywhere: North America added the equivalent of Silicon Valley’s full data-center inventory so far this year. AI’s generating data-center demand, with construction up 70% from last year and vacancies at below 3%. (Cbre)

Bot Takeover: Publishers are relying on a decades-old robots.txt file to block AI bots from scraping their content. The problem: newer bots from the likes of Amazon and Meta keep popping up, making it harder to stay ahead. (TheVerge)

Our Crayons, Our Scent: Crayola trademarks the smell of its crayons, that waxy scent of a childhood spent trying to color within the lines. (Bloomberg)

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OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “superperformers” stock pick which we believe will provide significant outperformance compared to the S&P 500. Then on the 14th of June we released our next stock selection. Lastly, on August 6th, we initiated a position in Celsius holdings.

Here’s how the stocks have performed since:

• Hims & Hers Health: $16.03 (📈+10.78%)

• PayPal: $71.99 (📈+18.72%)

• Celsius: $40.15 (📉-0.57%)

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