Tuesday, March 20, 2018


03/20/18 CNBC has an article on a pilot project: Fedex store within a store at Walmart. I never put a lot of stock in pilot projects, but this is interesting. AMZN makes noises from time to time about their own delivery systems, that could make this tie up good for both Fedex and WMT. The big thing for me is that the photo printing part of all of the Walmart stores I have visited "feels" like an after thought. Imagine a section devoted to packing, copying, shipping. Worth watching, could be big. If the pilot makes it to Kauai, I will be sure to take note.

"I don’t see how anyone can buy WMT stock at 26 times earnings when those earnings not only aren’t growing, but have been shrinking. If Walmart stock was paying a 5% dividend, that might make for a different story, yet it only pays a 2% yield."

I don't have my full brain on, I meant to take a nap, but was productive so I stayed at the keyboard. So maybe I am wrong, but doesn't that just mean their stock, like everyone else's is overpriced?

My moma would never allow me to use the everyone else argument. So, the rich question is for the ten thousandth time, whither goeth Walmart.

Some thoughts:

Walmart is the largest retailer in the world. Period. Forget all the Amazon hype, they aren't even close.

90% of Americans live within 10 miles of a Walmart.

Walmart is trying harder at online retail. Yawn. I used to travel for a living, no matter where I was, I could find a Walmart store . . . AND they are not always tied to big box shopping centers . . . AND their parking lots are not empty. . . even at night. If I want it in a cardboard box, I will use Amazon, if I am in Lihue and I want to pick something up, Walmart works for me. 

The dividend. Is 2 something measly or smart? Take either side of the argument you want, but it is sustainable.

Warren Buffet is selling it. OK maybe I can add to my position on a price drop.  

Monday, March 5, 2018

Annuities are bad for you?

Article I found on Yahoo Finance says:

"If you’re unfamiliar with annuities — you give an insurance company your money and in return they pay you an income stream, usually for the rest of your life. In some annuities, if you die before you’ve received all of your money back, too bad for you. The insurance company keeps the money."

"Essentially, you’re betting the insurance company that you’re going to live longer than they think you will. They take your money, invest it and give it back to you in dribs and drabs (with steep penalties if you want to withdraw more than the contract states)."

If your biased journalism spidey sense is tingling, that makes perfect sense. The author, while badly biased, is sort of correct, things to consider:

- Annuities come in many flavors, in general, the more complicated one is, the farther you should stay away from it.
- Some of these do have very high commissions, the 5 - 7% the salesman pockets comes directly out of the money you need to live on. The salesman needs to eat, but maybe hamburger instead of filet mignon, make sure you understand the commission structure.
- Kathy and I both have one from AARP/NY Life, you pay a lump sum, you receive a payment for life. Seems like a reasonable part of a retirement strategy to me. Simple, you know exactly what you are going to get. Highly recommended if you can afford it.
- Because it is a fixed payout, things like the interest rate environment impact your payout. In general, if you are in a rising interest rate climate, look for the guaranteed payouts to increase.

In closing, let me use an example. Supposed you invested $35k in Amazon in September of 2015 @$500 a share. And you are still holding it today at $1,500 a share and change. Is it likely to triple again? Certainly not that quickly? Do some people feels stocks are currently overvalued? Yes, in March 2018, many analysts feel stocks are on the high end of valuation.  And suppose you are between 55 and 65 years of age. Is it dumb, to take that money, buy a one time premium annuity, and start getting checks for ~$500/month for the rest of your life?

Seems like part of a rational portfolio to me.

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: http://northcuttholdings.blogspot.com/2017/12/retail-stephen-northcutt-and-jim-manico.html

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)