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:
https://seekingalpha.com/article/4063699-kroger-co-safe-haven
https://www.bizjournals.com/cincinnati/news/2016/01/25/exclusive-here-s-why-kroger-issued-1b-in-debt.html

Some of that was to buy Roundy's, purchase or compete. But that still leaves Walmart and their fleet of stores.
http://www.businessinsider.com/walmart-is-cutting-prices-2017-4

There is the new Kroger Marketplace format which resembles a Wegman's:
http://www.businessinsider.com/kroger-has-plan-to-to-take-down-walmart-2017-3/#there-are-lots-of-decorative-items-like-picture-frames-and-vases--24

But they can only deploy so many of these and they already had Fred Meyer which is similar:
http://money.cnn.com/2017/06/15/investing/kroger-earnings-grocery-wars/index.html

Here is a guy that thinks they are undervalued:
https://seekingalpha.com/article/4129411-kroger-produce-cash-portfolio-analysis

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:
https://www.cbsnews.com/news/holiday-retail-sales-reach-record-598-billion/
"Total retail sales this holiday season added up to a record $598 billion dollars — up $33 billion from last year."

Stephen:
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:
https://www.marketwatch.com/story/us-households-will-soon-have-as-much-debt-as-they-had-in-2008-2017-04-03
"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":
https://www.washingtonpost.com/business/going-cashless-bad-for-tax-cheats-privacy-the-poor-quicktake/2017/12/04/4bb13e72-d93f-11e7-a241-0848315642d0_story.html

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
Sears
K-Mart
Macy
Nordstrom
Penny
Ross
Marshall
Dollar
Walmart
Amazon

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. 
Krogers
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
Walgreens
CVS - VERY interesting buy as they get into health insurance
Lowe's
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
Kohl's
Dollar General
ShopRite
Ace Hardware
BJ's Wholesale
Subway
Gap
AT&T
JC Penny - Dead company walking
Bed Bath and Beyond
7-11
Starbucks
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.

ALOHA,
Jim

=============

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:
https://www.cbsnews.com/news/holiday-retail-sales-reach-record-598-billion/
"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

TSLA

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 (https://slashdot.us15.list-manage.com/track/click?u=aab6529d3675bd877963a652d&id=09c86ed030&e=d78fb7daea)
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.