Saturday, January 6, 2018

Consumer debt #307

Everybody gets a pat on the back, economics are as good right now as they have ever been globally:

US Households have too much debt, guess none of us have ever heard that before.

Moody’s Vice President Rita Sahu, “Auto loan delinquencies are above pre-crisis levels at around 2.3 percent,” Sahu warned, “and credit card charge-offs have increased sharply to around 3.6 percent as of the third quarter 2017.”

"According to Black Knight, in November, mortgage delinquencies jumped by 13 percent, the largest monthly rise since 2008, when the financial crisis was beginning to ravage housing."

Tuesday, January 2, 2018

Retail Costco

Three things never cease to amaze me about Costco:
- There are always a lot of cars in the parking lot
- There are always a lot of carts in line with ~$500.00 worth of booty
- There are always things that I totally do not need that end up in my cart

Before we talk about stock, I need to disclose a bias. I live in Hawaii in the winter time and you can't live here without going to Costco and Walmart, the grocery store prices are VERY HIGH.

But despite my bias, here are some thoughts on Costco as an investment.

This guy is shorting the stock and he has a point about both valuation and margins, "I think Costco should be much, much lower than it is today and its lack of margin growth is the reason why."

Buy it now because its online sales are going to rock:

Buy Costco now because they have retail 3.0 voodoo! What is retail 3.0?

Costco in my view is high right now. So is everything else. My pastor said there were 70 stock record highs in 2017. I have no idea if that is correct, but record high certainly is. The short idea is very attractive, but for the moment I have an aggressive limit order @179.00. That gives me some time to think.

Saturday, December 30, 2017

Retail Kroger

We are clearly going to buy a lot of groceries from Walmart and probably Amazon will get a chunk of that money. What about Kroger? One concern I have is their debt, they added it before really trying to get strategic and build white space between them and the other two companies:

Some of that was to buy Roundy's, purchase or compete. But that still leaves Walmart and their fleet of stores.

There is the new Kroger Marketplace format which resembles a Wegman's:

But they can only deploy so many of these and they already had Fred Meyer which is similar:

Here is a guy that thinks they are undervalued:

I think I will pass on Kroger!

Tuesday, December 26, 2017

Retail landscape

Initial discussion is:

Jim sent this link:
"Total retail sales this holiday season added up to a record $598 billion dollars — up $33 billion from last year."

Efficient market suggests all that will be priced in when earnings are reported in 2018. There will be no surprises. Now is the time to look ahead. Which retailers will prosper in 2018 and under which situations?

We live in good times, long bull market feeling of prosperity, willingness to open the wallet. That leads to debt:
"previous record in April 2008, when consumers had a collective $1.02 trillion in outstanding credit revolving credit."

The clear winner there is Visa, doubled over last year, no reason to think they will slip. Plus there is the trend to cashless, "freedom from carrying cash":

Use cases:
1) Good times continue to roll, people buy STUFF
2) Stock market falters, but no recession, stock buying opportunity
3) Recession

Macro forces:
= Household disposable income
= Household debt
= Items people need, (toilet paper)

= Items people want, (sports cars)

Sunday, December 24, 2017

Retail - Stephen Northcutt and Jim Manico

My friend Jim and I are starting to review the retail segment of our portfolio's for 2018. This is just a chance to keep some notes.

ACTION: Jim has a limit for WMT, I have one for CVS.
I started with an off the top of my bead list 12/21/17:

Stephens list

And asked Jim for his thoughts about best and worst, below:
NOTES: 12/24/17: 
- I plan to limit to 4 retail stocks, AMNZ, WMT, CVS, (limit buy in place), ???? who should #4 be?
- I hold Walmart and feel it should be a core holding. I have an aggressive limit in place to buy more
- Jim makes a good point with CVS, I have set a gentle limit to pick some up. 
- I looked into Trader Joe, they were private back then, I think they still are
- Been watching KR for a year, just does not move me

Jim's take:
WalMart - If they learn to pay for top quality tech talent they could give Amazon a run for it's money. I do not think it's likely. They are cheap bastards and cannot keep top talent. That's going to keep them down I think. Their stock is at an all time high. 
Costso  - I also took short gains here before they rose another 16%. I need to learn patience. This is just a marvelous company.
The Home Depot
CVS - VERY interesting buy as they get into health insurance
Safeway - Always was fond of this brand, but that might be because I'm always hungry
Best Buy
McDonalds - They have gotten their act together changing with the times. I'm a fan (of their business, not their food)
Rite Aid
YUM Brands
Albertsons - expensive and wonderful
Dollar General
Ace Hardware
BJ's Wholesale
JC Penny - Dead company walking
Bed Bath and Beyond
Trader Joes - Love these folks even though they are just masters of illusion
Wendys - they seem to be losing out long term even if their marketing is just amazing
Burger King - Great marketing
Dunkin Donuts

Three Best:
Ross - In hyper growth mode, a well loved consumer brand at all economic levels, and can compete with Amazon
Apple - Their P/E is shamefully low and if you compare them to other FANG's (or any other company, period) they have 40% growth potential. I still might take my winnings for the year, which are big, but I'm likely to have sellers remorse. Analysts are very thumbs down on Tim, but service revenue is way up and everything the do is flying off the shelves.
Costco - Sales up 10% from last year in the same quarter. Pro employee and pro consumer brand. I just love how the run their company.Their foot traffic is 4X that is walmart and target. eCommerce sales rose 40+% while at the same time growing foot traffic. Unprecedented! I have sellers remorse here but might just back in like the new investor that I am. :) They can compete with Amazon on all fronts.

Five Worst:
Wendy - Very high P/E and is an "expensive brand that is in a discount sector" I do not think they will do well in the next downturn.
Sears - They could not survive that last 2 years? Dead company walking. They are not a discount brand and will not survive a downturn since they could not survive an up economy.
Walmart - Their stock is on a tear the past 2 years but I think there is lots of room to short here. They cannot get their IT act together online. They will NOT pay for top IT talent. There is no way they can compete with Amazon unless they change that.  Minor 2% sales growth over last year. Bad foot traffic growth, bad online sales growth. I don't see a lot of upside and their stock is way 
Target - 0.9% growth over last year. This is anemic. What the are doing is NOT WORKING and they will get CRUSHED in a down economy. 

I am so flooded with information that I do not know what to do. This is a blessed problem to have.



UPDATE: 2/26/17 Jim is point to place a limit to open a position in WMT. Good luck, that may be chasing an upbound elevator for this week anyway. He sent this link:
"Total retail sales this holiday season added up to a record $598 billion dollars — up $33 billion from last year."

So there are some forces that we need to explore:
= Household disposable income
= Household debt
= Items people need, (toilet paper)

= Items people want, (sports cars)

Wednesday, December 20, 2017


Summary: I think TSLA is rapidly becoming one of the Greenblatt "Stock Market Genius" poster children. If they run into cash flow problems and it causes their stock to swing down it might make sense to place a bet.

Forget model 3s and semi-trucks for a minute, did you catch this somewhat obscure post:
Slashdot: Tesla Big Battery Outsmarts Lumbering Coal Units After Loy Yang Trips (
The Tesla big battery is having a crucial impact on Australia's electricity market, far beyond the South Australia grid where it was expected to time shift a small amount of wind energy and provide network services and emergency back-up in case of a major .

We could bemoan the aging infrastructure in the US, or we can think of it as an investment opportunity. 

And a quick reminder, this was the famous Elon Musk 100 day bet, he won, and it went operational 12/1/17.

Monday, September 18, 2017

Transportation and Warehousing

8/26/17 Convergence alert, AMZN is buying up what was formerly the world's largest mall in Ohio to become a warehouse.

I was really struck by Table 1 of this Obama presidentially funded report. No matter what your politics are, the fact that consolidation in the Transportation and Warehousing and Retail Trade industries has increased over 11% from 1997 - 2012 should get our attention. Same old story, mom and pop companies edged out, a few big strong players such as AMZN and WMT in retail when the smoke clears.

But who is winning the Transportation and Warehousing world? This is not my area of expertise, but right off the bat UPS and Fedex come to mind. Walmart does their own thing, (another moat factor). Schneider is private. So, let's add Roadway, Yellow, C.H. Robinson, and Crete as a starting list on the trucking side.

I know less about warehousing then trucking.  Google, at least, seems to equate "warehouse" to "logistics", since this is just a notebook, we will go with that for the moment. This webpage claims to list the top ten and we have to start somewhere: C.H. Robinson, Echo, Transplace, Ryder, UPS, J.B. Hunt, Kenco, Penske Logistics, Unyson, Seko, Menlo, Landstar.

ACTION: setting a Google alert for C.H. Robinson and need to get on some mailing lists to understand the Transportation and Warehousing sector better.