Thesis: The Washington State coast is attractive, has less summer smoke, has more gentle temperatures and is fairly easy to access. An airbnb with a great ocean view, easy beach access, but some safety to tsunami inundation might sell well.
Acquisition Plan A. Move assets out of the stock market while it is so durn high into a passive income stream.
Acquisition Plan B. Look for bankruptcy and stress sale opportunities where people have losses in a correction.
Monday, August 20, 2018
Monday, May 21, 2018
Trying to get all the macroeconomic forces in my head
Macroeconomic factors impacting investment in the US Version 1.3
??? Is the trade war a force, or simply an accelerator of existing forces???
http://money.cnn.com/2018/05/20/investing/stocks-week-ahead-buybacks-tax-cuts/index.html
1a) Money on the sidelines may be better invested after a correction or recession:
https://www.marketwatch.com/story/ask-yourself-this-simple-but-critical-question-before-you-buy-into-this-stock-market-2018-05-21
1b) 7/5/18 the move to cash is growing: https://www.cnbc.com/2018/06/28/3-ways-younger-wealth-is-diverging-from-an-older-approach-to-market.html
2) 200 years of interest rates show they are very low compared to history and have been for an unprecedented length of time:
https://www.cnbc.com/2016/11/17/200-years-of-us-interest-rates-on-one-chart.html
3) Aging demographic, as the baby boomers age, they will rapidly need services and care from younger persons almost certainly going through economic change:
https://news.aetna.com/2017/10/ticking-time-bomb-aging-population/
3a) There is a class of retirees that are wealthy:
https://www.washingtonpost.com/news/get-there/wp/2018/05/21/the-number-of-401k-millionaires-hits-a-new-high/?utm_term=.87110615c314
4) Depending on the source you use, consumer debt is at an all time high, or is about to be:
https://www.cnbc.com/2018/02/13/total-us-household-debt-soars-to-record-above-13-trillion.html
5) Corporate debt is also at a high level:
http://money.cnn.com/2018/02/26/investing/corporate-debt-rising-rates/index.html
6) US debt ratio to GDP is 105.4%, average is 61%, all time high 118.9 in 1946, all time low 31.70% in 1981:
https://tradingeconomics.com/united-states/government-debt-to-gdp
7) High number of created jobs, and we are starting wage increase:
https://www.bloomberg.com/news/articles/2018-02-02/u-s-added-200-000-jobs-in-january-wages-rise-most-since-2009
7a) However, medical care, child care, college tuition, college text books and most significantly, hospital services rose at a faster rate than wages:
https://www.marketwatch.com/story/this-chart-shows-the-modern-equivalent-of-bread-and-circuses-to-sate-the-masses-2018-02-12?link=sfmw_fb
7b) Certain jobs will be largely automated in 10 years, retail sales, fast food, are expected to the the largest categories, (retail sales is the largest job category today):
http://www.visualcapitalist.com/visualizing-jobs-lost-automation/
7c) Shipping costs are going up, this will increase the cost of about everything:
https://www.washingtonpost.com/news/wonk/wp/2018/05/21/america-doesnt-have-enough-truckers-and-its-starting-to-cause-prices-of-about-everything-to-rise/?utm_term=.0a8d8e423a2d
7c) Gilded age 2, the number of people squeezing to the bottom of the middle class is increasing:
http://money.cnn.com/2018/05/17/news/economy/us-middle-class-basics-study/index.html
https://www.washingtonpost.com/news/wonk/wp/2018/05/25/the-alarming-statistics-that-show-the-u-s-economy-isnt-as-good-as-it-seems/?utm_term=.805d0caa399b
8) Not a surprise, there are some indicators of inflation. The current stance of the Fed is to let it begin, (probably to avoid stagflation):
https://www.cnbc.com/2018/05/23/fed-indicates-it-will-let-inflation-run-above-2-percent-goal-for-temporary-period.html
9) China's bond market, which is only slightly open to foreign investment has been suffering defaults. China is working to shore up this area of their economy: https://www.reuters.com/article/us-investment-mutualfunds-lipper/u-s-money-market-funds-see-biggest-inflows-in-nearly-five-years-lipper-idUSKCN1J32X2
Microeconomic factors worth considering
Climate change will impact coastal areas. Upper middle class tend to have first and second homes in these zones. In some percent of cases this will reduce their net worth:
https://www.theguardian.com/environment/2017/aug/29/hurricane-harvey-climate-change-real-estate-florida
Foreign money pouring into Miami, perhaps the hardest hit high end US market by rising sea levels. The main point of the article, they think they can get out in time:
https://www.npr.org/2018/05/21/611919853/foreign-investors-shrug-off-miamis-rising-sea-levels
Pressure on the Euro continues in increase:
https://www.washingtonpost.com/news/wonk/wp/2018/05/21/italys-new-populist-government-really-might-blow-up-the-euro/?utm_term=.42fb0438854c
Tuesday, March 27, 2018
3/27/2018 Buy Facebook. Now?
Just gotta text:, "Facebook is on sale. If you can get in at $152, you've scored. :)"
Well I certainly want to score, so let's take a look.
For starters the 52 week low is 138.77, that is way South of 152.
Facebook has been in the news with Cambridge Analytica, and that is probably the MICRO force that drove the most recent drop.
However, more importantly, the stock market in general and tech in particularly is dropping and that is the MACRO force behind this curve.
The biggest problems Facebook has at this time are:
1) Loss of younger people to other services such as Snapgram and Instachat.
2) The side effect of the fake news, extremists, trolls etc, is an increasing number of people are just getting tired of it. And since the FB business model is to sell your data, that is, in a word, bad.
Conclusion: buying on dips is smart. There probably are bargains out there in tech world. AMD, for instance is well worth watching. But, at the current price point, I will pass on FB, if they hit 80 wake me up!
Well I certainly want to score, so let's take a look.
Facebook has been in the news with Cambridge Analytica, and that is probably the MICRO force that drove the most recent drop.
However, more importantly, the stock market in general and tech in particularly is dropping and that is the MACRO force behind this curve.
The biggest problems Facebook has at this time are:
1) Loss of younger people to other services such as Snapgram and Instachat.
2) The side effect of the fake news, extremists, trolls etc, is an increasing number of people are just getting tired of it. And since the FB business model is to sell your data, that is, in a word, bad.
Conclusion: buying on dips is smart. There probably are bargains out there in tech world. AMD, for instance is well worth watching. But, at the current price point, I will pass on FB, if they hit 80 wake me up!
Tuesday, March 20, 2018
Walmart
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.
03/05/18:
"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."
https://investorplace.com/2018/01/its-too-late-for-walmart-turnaround/
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.
03/05/18:
"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."
https://investorplace.com/2018/01/its-too-late-for-walmart-turnaround/
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.
"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:
http://www.goldmansachs.com/our-thinking/pages/macroeconomic-insights-folder/2018-global-economic-outlook-as-good-as-it-gets/report.pdf
US Households have too much debt, guess none of us have ever heard that before.
http://www.goldmansachs.com/our-thinking/pages/macroeconomic-insights-folder/2018-global-economic-outlook-as-good-as-it-gets/report.pdf
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."
https://seekingalpha.com/article/4133959-costco-going-lower-2018
Buy it now because its online sales are going to rock:
https://www.cnbc.com/2017/12/18/bmo-buy-costco-because-its-in-early-stages-of-online-sales-surge.html
Buy Costco now because they have retail 3.0 voodoo! What is retail 3.0?
https://seekingalpha.com/article/4132600-costco-market-might-right
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.
- 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."
https://seekingalpha.com/article/4133959-costco-going-lower-2018
Buy it now because its online sales are going to rock:
https://www.cnbc.com/2017/12/18/bmo-buy-costco-because-its-in-early-stages-of-online-sales-surge.html
Buy Costco now because they have retail 3.0 voodoo! What is retail 3.0?
https://seekingalpha.com/article/4132600-costco-market-might-right
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:
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!
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)
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
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)
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
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 .
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.
Monday, September 18, 2017
Transportation and Warehousing
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.
Tuesday, August 29, 2017
A 10 year tale of three ETFs "Growth versus Value"
We are starting to see articles about it is time for value focused stocks to have their day in the sun. Hmmm. Most of my family's assets are in low overhead Vanguard ETFs to prevent a hot head like me from making some stupid rash decision.
If we look at this Google Finance chart comparing Vanguard Growth and Value, you can see over ten years Growth is the better bet, but MORE IMPORTANTLY, they are highly correlated, one goes up, the other goes up, etc.
If we look at this Google Finance chart comparing Vanguard Growth and Value, you can see over ten years Growth is the better bet, but MORE IMPORTANTLY, they are highly correlated, one goes up, the other goes up, etc.
Now just for fun, I added a 3rd ETF, a highly overhead Value, that gives Vanguard Growth, VIGAX more of a run for its money.
With the money that I have set aside for personal investing, more as a hobby than anything else, I am starting to fall into a bit of a trap. As detailed in other posts, my family did well with big plays on spectacular growth stories. We took our profits are are largely on the sidelines trying to get back in. With an 8 year bull run behind me, I am expecting some buying opportunities. My brain keeps being focused on large, safe, companies and getting them at a good price. There is nothing wrong with this strategy, except that unless I really devote a lot of time and brain power, I will simply be correlated with various ETFs and could have used the time to do other things.
How to break the code?
1) My first temptation was to buy some RPV on a dip. Yikes, what am I NOT thinking? While it is performing very well compared to Vanguard's value, it is still massively correlated and for good reason, the top choices of the fund are in the 2% or slightly less of the total fund range. That means they do a great job of spreading risk across multiple companies, but so do all of my other ETFs. No!
2) I could go overweight with a company that appears to be undervalued and ready to ascend. That is every investor's dream. The problem with that is I only really know and understand a finite number of companies. No!
3) Try to figure out what the next macro trends are and the companies that stand to benefit. This strategy has two parts, getting in on the hype early and I think my family's successful investments in AMZN and TSLA were just that. Then we profit took and jumped out. But, the longer view of investing in, staying with, learning more about a few companies with the right business model, purchased at the right price, (WMT < 70, AMZN < 900 etc), is probably the best strategy. Some thoughts about Macro trends:
- Demise of malls, ok, people still need shoes and groceries, where will they shop?
- Overt consumerism, at some point people will wonder why they have closets full of clothes and drawers full of pocket knife, companies with really good, really useful products will be in good shape. In 2008 after the downturn there were a number of articles about consumerism is not sustainable, consumerism is dead and so forth, but while the message is muted in 2017, the numbers are there. And the link to the decline of shopping malls is clear and obvious.
- The robotic economy. From bricklaying to hamburger cooking, robotics are increasingly entering the workforce. Who is making them, who is selling them, who is using them, who is making money because they use them? the ETF ROBO is doing well, but has an almost 1% management fee. Buying on a dip might be a short term way to get some exposure.
Saturday, August 26, 2017
The war for retail will be won in groceries AMZN, WMT, KR, COST
8/26/17 I read that the war for retail will be won in groceries on a CNN blog so it must be true! But please forgive my twisted mind for diving deeper. The article is centered around Amazon and Whole Foods which is < 2% of the grocery market. This blog post will consider other retail than groceries, but they are a sector that begs watching.
The problem with the CNN Thesis is that groceries tend to be a defensive stock. As the Investopedia article points out, they do better in harder times, have slower growth in good times. It claims: "Despite this eat, drink or smoke perception and despite modern-day developments, tobacco shares have miraculously never disappeared or been wiped out. Not all food companies are actually defensive stocks, but a good rule is that if the bulk of the sales comes from grocery stores, the stock is probably a defensive one."
Perhaps, but WMT, AMZN, COST, KR all did fairly well post great recession. Our family benefited from their performance. But only KR has a weak footprint in non-grocery, but they certainly have feet in that camp, (Fred Meyer is a major local presence in Washington State). So perhaps the thesis is better stated:
9/9/17 The war for retail will be won by vendors that balance consumer goods and groceries well. I think that is a more accurate thesis. It helps explain why a number of retailers and such are struggling.
AMZN
9/25/17 Seeking Alpha, "The company may well be fully valued for essentially all future growth." Grated this thesis is a bit brash, but it does help with perspective.Here are some more stories, I am guessing this is more about Monday being the day the acquisition is complete instead of actual news, NPR, Fortune, Bloomberg, and a story about beauty supplier Ulta, (keep in mind Wal-Mart is not out of position here either). Then for desert, I saw a story that should be considered seriously about how Amazon is the most overhyped company in the world.
I understand and agree that Amazon disrupted a lot of retail. Their total retail is 5% according to CNBC. And we all know and agree the classic big box stores are struggling with more growth going to online.
A really big statement in the CNBC article is: "But this is coupled with big names in the retail space — Wal-Mart, Costco, Home Depot, Target — seen as losing market share as their margins shrink and dollars shift back to Jeff Bezos' company, the analyst added." Hmmm, maybe, maybe not. 8/31/17 A bit of sanity, AMZN might be the weakest of the major retailers.
Those are four companies that I am following closely, the only one that I am not ready to open a position on tomorrow, if prices drop and the time is right, is Target.
One thing that will be interesting to watch are the brands themselves. Whole Foods has many "house" brands, (as do the rest). One of the Consumer Packaged Goods, (CPG) brands is Campbell Soup and they have the increasing problem that demand is decreasing for what they are peddling.
COST
Bias alert! Kathy and I spend winters on Kauai, Costco and Wal-Mart are the best grocery buys on the island by a far piece.
8/27/17 There is an article that is better than most about why COST might be in for more of a dip in prices, naturally the AMZN Whole Foods is mentioned, but they point out poor eCommerce performance and lower membership rate than AMZN Prime, plus much higher PE than Wal-Mart.
WMT
The recent 2% drop in WMT yesterday was not enough to tempt, it is still really close to 80 and in my dreams I buy in below 70. However, the 8% drop in KR, was enough to get me to set a limit buy in case it dropped again today, (it rose).I don't want to be a Blockbuster or Circuit City dinosaur and blindly bet against AMZN. We held the stock until June 26, 2017 and sold it for 1009.14. Today AMZN is trading for 945.26. It just isn't clear to me why WMT which is slightly up for the same 3 month time period is the next Blockbuster.
Nobody died and left me smart, but if we are in fact riding an 8 year old bull market, change could be in the air. The magic of the growth companies may be coming to an end. We didn't just sell AMZN in June, we sold:
COST @ 158.19 now 152.45
GOOGL @ 990.00 now 930.50
TSLA @ 386.69 now 348.05
And thank them all from the bottom of our hearts for their hard work that made profit taking possible. Now, with bull market ending, the thought of value coming back into style conceivable, we want to get back in the game. Leaving a lot of money on the sidelines does not make sense.
I am leaning towards larger companies right now. We have managed to get a position in IBM, I want to add more, but the pesky stock keeps going up. I did establish a position in XOM and may add just a little more if it drops enough. WMT and KR are on the shopping list.
KR
Kroger is big enough that they should be able to compete, but they may be out of step, sort of like Chili's, Applebees, Radio Shack and so forth, if their model doesn't work they will get creamed. We still have a limit order in for KR.9/8/17 250 limit@ 18.02
I may drop it further. Between 2008 and 2012 going into 2013 they spent a long time in the $12 - 15 dollar range.
Thursday, August 24, 2017
Buy list
8/31/17 Thesis, there will be some uncertainty in the markets if Congress screws up the debt ceiling and Government continuing resolution. Kathy and I have been able to buy some:
The potential buy list:
Today 52L 52H Limit1 Limit2
AAPL 163.35 102.53 163.89
AMZN 967.59 710.10 1083.31
COST 154.44 142.11 183.18
GOOGL 943.63 743.59 1008.61
IBM 142.56 139.13 182.79
KR 22.20 20.46 36.44
WMT 78.54 65.28 81.99
XOM 76.10 76.05 93.21
At reasonable prices on dips. We expect them to drop even further. Have to balance being careful with letting the opportunity pass. Plan to start using historical 52 week low as a guide.
NOTE: XOM is below the 52 week low when we bought it.
The problem is that even a 52 week low is potentially high since it is an 8 year bull. And any stock that has not appreciated since five years ago is not likely to now, unless there is one heck of a story.
Limits 8/31/17
KR 200 20.02
WMT 50 77.02
XOM 50 75.02
8/24/17 AMZN announced it was dropping prices on Whole Foods and KR dropped 8%, WMT 2%. Also, the US Government is having a tough time with their budget. Let's start setting some limits for worthy companies, who knows, wish us luck, will revisit ROK soon?
WMT 50 77.53
WMT 50 77.02
KR 200 20.52
The potential buy list:
Today 52L 52H Limit1 Limit2
AAPL 163.35 102.53 163.89
AMZN 967.59 710.10 1083.31
COST 154.44 142.11 183.18
GOOGL 943.63 743.59 1008.61
IBM 142.56 139.13 182.79
KR 22.20 20.46 36.44
WMT 78.54 65.28 81.99
XOM 76.10 76.05 93.21
At reasonable prices on dips. We expect them to drop even further. Have to balance being careful with letting the opportunity pass. Plan to start using historical 52 week low as a guide.
NOTE: XOM is below the 52 week low when we bought it.
The problem is that even a 52 week low is potentially high since it is an 8 year bull. And any stock that has not appreciated since five years ago is not likely to now, unless there is one heck of a story.
Limits 8/31/17
KR 200 20.02
WMT 50 77.02
XOM 50 75.02
8/24/17 AMZN announced it was dropping prices on Whole Foods and KR dropped 8%, WMT 2%. Also, the US Government is having a tough time with their budget. Let's start setting some limits for worthy companies, who knows, wish us luck, will revisit ROK soon?
WMT 50 77.53
WMT 50 77.02
KR 200 20.52
Monday, August 14, 2017
XOM
After cashing out, I am trying to get back in the game at reasonable prices.
Exxon, (XOM) thesis: One of the largest companies in the world. They have been whacked by sustained cheap oil. They have debt and cash flow under control. They fell under their 52 week low today.
8/9/17 50 shares market 80.015 (opening the position to force me to spend a lot more time watching the company)
8/9/17 Limit 200 shares@77.74, I would not be surprised if that hits the week of Aug 14, current: 87.17. Even after the limit hits I would not be surprised to see the stock drop. I am tempted to break this into two orders, one even lower, but if I get too greedy, I may miss the bus, no reason not to sleep on it as is.
8/15/17 Limit hit 200 @ 77.94
Exxon, (XOM) thesis: One of the largest companies in the world. They have been whacked by sustained cheap oil. They have debt and cash flow under control. They fell under their 52 week low today.
8/9/17 50 shares market 80.015 (opening the position to force me to spend a lot more time watching the company)
8/9/17 Limit 200 shares@77.74, I would not be surprised if that hits the week of Aug 14, current: 87.17. Even after the limit hits I would not be surprised to see the stock drop. I am tempted to break this into two orders, one even lower, but if I get too greedy, I may miss the bus, no reason not to sleep on it as is.
8/15/17 Limit hit 200 @ 77.94
Wednesday, August 2, 2017
DOW 22,000 and Cramer
I'm not a Cramer disciple by any means. However, he does make a lot of sense especially at major tops and bottoms. I thought this was sensible and want to remind myself of this:
"I found the celebration particularly disturbing because the last thousand Dow points were really the work of a handful of stocks — actually, just four of them: Boeing, McDonald's, UnitedHealth and Apple," the "Mad Money" host said. "In other words, the strength in the Dow isn't much of a tell for the broader market."
I agree with the analysis not that I have any right to second guess Mr. Cramer's analysis and would extend the observation to some non DOW stocks that are bringing the market higher, AMZN, TSLA, GOOG etc. He goes on to say:
"The Dow surged towards this arbitrary mark just as a large fund began selling its positions in a slew of Nasdaq stocks, otherwise known on Wall Street as a "sell program," Cramer said."
That is the whole point of this trading notebook. I am a small investor without access to Wall Street trading algorithms, supercomputers, and lightning fast trading. Right or wrong, and only time will tell my family jumped out of AMZN, TSLA, GOOG at the end of June 2017.
That money is on the sidelines currently. I think IBM is a candidate for getting back in, but need to be patient, right stock at the right price and all of that. Back to Mr. Cramer:
What matters, though, is that there are plenty of companies out there that saw their stocks get laid low by these sell programs, and when they get taken down like that, you're always going to hear the sirens of panic telling you to sell everything," Cramer said. "In reality, it's more likely to be the sound of opportunity knocking. You just have to have some cash ready to buy the dip in a responsible way."
I tend to agree, so what are the buying opportunities? I still have my eye on Wal-Mart, but the price is very high. I agree with Cramer on transport and came to that conclusion myself, but still trying to study.
Stocks of companies with no, (or very little), debt and 1 year performance include: CTSX +8, LSI -9, -9, FFIV -12, TROW + 10, ISRG +52%. FRX -6, RHT +25, CTSH -18, ADSK -9, MA +42, EXPD -21.
Mini-thesis: if I can find solid companies with no debt, they will have an advantage. One to look at closely is Mastercard. It is up and I doubt it will drop much, but it almost perfectly matches Visa.
I held ISRG in the past and it was good, lost it in the switch to ETFs. Not sure if I want to add it back with my "mad money".
I want to like F5, FFIV, they just do not seem to have a really compelling product line. I ended up going with Palo Alto, PANW and did a bit better, but just sold it two weeks ago for an ETF. Citrix too, CTSX, was really in a good place ten years ago, but I think the whole cloud thing thumped them a good one. Some of these companies I really don't know, I used to use AutoCad every day, would be fun to start getting to know Autodesk, ADSK again.
"I found the celebration particularly disturbing because the last thousand Dow points were really the work of a handful of stocks — actually, just four of them: Boeing, McDonald's, UnitedHealth and Apple," the "Mad Money" host said. "In other words, the strength in the Dow isn't much of a tell for the broader market."
I agree with the analysis not that I have any right to second guess Mr. Cramer's analysis and would extend the observation to some non DOW stocks that are bringing the market higher, AMZN, TSLA, GOOG etc. He goes on to say:
"The Dow surged towards this arbitrary mark just as a large fund began selling its positions in a slew of Nasdaq stocks, otherwise known on Wall Street as a "sell program," Cramer said."
That is the whole point of this trading notebook. I am a small investor without access to Wall Street trading algorithms, supercomputers, and lightning fast trading. Right or wrong, and only time will tell my family jumped out of AMZN, TSLA, GOOG at the end of June 2017.
That money is on the sidelines currently. I think IBM is a candidate for getting back in, but need to be patient, right stock at the right price and all of that. Back to Mr. Cramer:
What matters, though, is that there are plenty of companies out there that saw their stocks get laid low by these sell programs, and when they get taken down like that, you're always going to hear the sirens of panic telling you to sell everything," Cramer said. "In reality, it's more likely to be the sound of opportunity knocking. You just have to have some cash ready to buy the dip in a responsible way."
I tend to agree, so what are the buying opportunities? I still have my eye on Wal-Mart, but the price is very high. I agree with Cramer on transport and came to that conclusion myself, but still trying to study.
Stocks of companies with no, (or very little), debt and 1 year performance include: CTSX +8, LSI -9, -9, FFIV -12, TROW + 10, ISRG +52%. FRX -6, RHT +25, CTSH -18, ADSK -9, MA +42, EXPD -21.
Mini-thesis: if I can find solid companies with no debt, they will have an advantage. One to look at closely is Mastercard. It is up and I doubt it will drop much, but it almost perfectly matches Visa.
I held ISRG in the past and it was good, lost it in the switch to ETFs. Not sure if I want to add it back with my "mad money".
I want to like F5, FFIV, they just do not seem to have a really compelling product line. I ended up going with Palo Alto, PANW and did a bit better, but just sold it two weeks ago for an ETF. Citrix too, CTSX, was really in a good place ten years ago, but I think the whole cloud thing thumped them a good one. Some of these companies I really don't know, I used to use AutoCad every day, would be fun to start getting to know Autodesk, ADSK again.
Tuesday, July 25, 2017
WMT AMZN TGT shopping malls and all that Jazz
7/25/17 This is not going to be a post about buying stock in AMZN vs. WMT. The answer to that is simple. Buy both, but at the right price. If AMZN drops below 900 or WMT below 70, please wake me up! Until then, keep in mind there are macro forces working in their favor.
8/26/17 55.01 down 22% for the year. I still am not ready to issue even a limit order for Target. Too many questions, but still watching them closely.
8/15/17 Target has their issues, but they are too big, too well positioned to write them off. As other retailers fail, it makes a bit more space for Target. They are giving this immediate gratification, (Next day delivery etc), a close look and not just looking. Buying a shipping/logistics company! WSJ reports they are hiring the skills they would need: "Target is hiring former executives from General Mills (NYSE:GIS) and Wal-Mart (NYSE:WMT) to help bolster its food and beverage business. "Across all categories of our business, we are investing to build an even better Target (NYSE:TGT) for our guests," said Mark Tritton, executive vice president and chief merchandising officer. "We have been making positive progress with our assortment, presentation and operations."" Target is currently selling for 55.00. I am not big on the impact of earnings on stocks, but this is their chance to explain what their next steps are.
7/25/17 TGT is down almost 28% for the past 52 weeks. They need to make some major moves soon. However Morningstar, (A rating), shows they have a lot of debt. That could make that juicy dividend hard to fund over the next few years. I doubt they are a good long investment and possibly will be more market share for AMZN and WMT.
6/30/17 Motley Fool had this to say about Costco, "Management is willing to give up short-term profitability to keep its subscriber base thrilled with the shopping experience. Its 2% net income margin puts it far below other retailing chains, but has been a key driver behind its unusually high sales growth."
9/20/17 Bed Bath and Beyond BBBY dropped 15% in the stock market today to 22.81. This is a very small sample size, but Kathy and I have only been in a store, one time in three years. Granted out house is furnished. When we needed washcloths we went to Wal-Mart.
9/19/17 Kohl and Amazon have announced a business tie-up, they are going to test being an Amazon return center. This is the closest thing I have seen to a potential re-vitalization of shopping malls and complements many AMZNs strategy, not sure about Kohls.
9/18/17 Now TOYS, Toys R Us looks like it will file for bankruptcy. This story keeps coming down to debt, "It must refinance $400 million of its crushing $5 billion debt next year with lenders who have grown less patient about waiting for results and who are less confident about the future of traditional retailers." In 2005, KKR and Bain Capital and Vornado took the company private in a $6.6 billion deal. No they have a lot of debt.
8/26/17 The latest media attention seems to be Footlocker, FL, 35.88 down 46% for the year and other sporting goods stores.
UPDATE: 6/3/17 this notebook entry started out focused on Sears, but I realize that the entire retail industry is strongly affected.
SHLD. For years, many would argue since 2004, Sears Holdings, (Sears and K-mart) have been faltering. They are now at death's door. The Washington Post has a great story about the fall of Sears. As of June 2, SHLD has lost almost 45% of its value. 6/13/17 SHLD has announced they are cutting 400 jobs. Conventional wisdom is still that Seritage Growth Properties (NYSE:SRG), a real estate investment and has interests in 266 properties, most of them from Sears Holdings.
Since the REIT was created in 2015, financial pundits have been claiming that as Sears Holding decreased, the REIT would increase by leasing the closed properties. Recently, we have seen some, "I'm not so sure" posts. This is because malls are closing, CNN Money reports that 25% of the malls will be closed in five years. If this is true, who will lease SRG's properties, (SRG is down over 10% in the past 90 days)? Sears Canada, (SHLD is an investor), is running out of money and must borrow to remain operational for another year. Since these are mall stores this also affects Canadian REITs. 6/22/17 WSJ reports Sears Canada about to file bankruptcy.
Sears Holdings CEO Ed. Lampert's Seritage thesis. As the market currently stands physical shopping centers, home of the declining big box stores, are ideally located, and at least at the moment, believed to be valuable real estate. If Sears Holdings unravels too fast for Seritage to take advantage then what? It isn't just Sears/K-Mart, Macy's, JC Penney, Kohls, J Crew, etc. are closing stores fast, see Clark report for comprehensive list. Nordstrom just released a PR expressing interesting in going private. It is worth pointing out that Wal-Mart goes it alone as opposed to anchoring malls. In some cases, the chains are going bankrupt. 6/20/17 Amazon Prime Wardrobe hits JC Penney and Nordstrom, (does anyone actually buy clothes at JC Penney other than kids to small to fight back to school?)
Is the combined Sears and K-mart market share enough to matter? Do they command enough of the market that someone can profit from their demise. Six years ago I would have said yes, today, not so much. 6/8/17 Sears is closing 72 more stores leaving 1,200 down from 2,073 five years ago. 8/26/17 Sears posts another loss, suppliers report trouble getting account receivable insurance.
Malls in general.
9/20/17 I found a 2012 URL with the top 10 REITS with mall exposure. Number 1 was SPG, they appeared to peak mid-2016 above 220, have dropped at lot and are selling at 159 something. Note: when they need credit to spruce up malls, where is it going to come from? #2 GGP has a similar curve.
Is online retail the future or even the present? BusinessInsider predicts 8 - 12% growth in online retail in 2017. Globally, Amazon Inc., Wal-Mart Stores Inc. and Apple Inc. are the top 3. A better way to look at purchase future is high-value. This 1/5 of customers account for 50% of sales and that is a long standing rule of thumb.
- Is the overall decline in big box brick and mortar and the malls that host them a major factor? USA Today has a thought provoking piece. For a real downer Market Watch is comparing brick and mortar to the oil and gas industry. CNN Money says, "Brokerage firm Credit Suisse said in a research report released earlier this month that it's possible more than 8,600 brick-and-mortar stores will close their doors in 2017. " McKinsey says that just selling doesn't work, the mall has to be an experience, (take with a grain of sand, shopping at Wal-Mart can hardly be called an experience, that is back to value.).
NPR carried a piece on the malls in danger, "LEINBERGER: It's the middle-market malls that are in biggest danger of going dark. The fortress malls - those huge, you know, 1-and-a-half-, 2-million-square-foot malls like the King of Prussia Mall outside of Philadelphia - those are fine. But it's the ones anchored by JCPenneys and Sears that are and will go increasingly dark."
I did find an author that claims physical space is "coming back", "But physical space is reinventing itself. Malls continue to focus on "experience" versus "things". The example he gives is PEI who has lost 54% of their value in the past 12 months. The author may be right, eventually, but I am betting against physical space in the short term. Have you ever seen what happens when the asphalt of the parking lot starts to give way?
- Who is the "dark horse", the unknown that will benefit from the change in shopping habits? Online retail! If you focus on Amazon, most people say Wal-Mart, the number 2. If you focus on Wal-Mart most people say Target, which doesn't make any sense to me, but bears investigation, (they are profitable, have an attractive P/E and a decent dividend, (as of 6/1/17 TGT is down almost 20%, they also have more debt than I like to see, but they are managing it so far.).
It does not seem like there is enough demand for Stein Mart, Hobby Lobby and Five Below to reuse many of the big boxes. Empty big boxes can be adapted for churches, after all, most mall parking lots are not full on Sunday morning, however it requires a church with solid funding, (if you were a loan officer, would you make a loan to a church), in need of a big building. Looks like another case of a big opportunity looking for a bigger idea. Oh well.
Target TGT
8/26/17 55.01 down 22% for the year. I still am not ready to issue even a limit order for Target. Too many questions, but still watching them closely.8/15/17 Target has their issues, but they are too big, too well positioned to write them off. As other retailers fail, it makes a bit more space for Target. They are giving this immediate gratification, (Next day delivery etc), a close look and not just looking. Buying a shipping/logistics company! WSJ reports they are hiring the skills they would need: "Target is hiring former executives from General Mills (NYSE:GIS) and Wal-Mart (NYSE:WMT) to help bolster its food and beverage business. "Across all categories of our business, we are investing to build an even better Target (NYSE:TGT) for our guests," said Mark Tritton, executive vice president and chief merchandising officer. "We have been making positive progress with our assortment, presentation and operations."" Target is currently selling for 55.00. I am not big on the impact of earnings on stocks, but this is their chance to explain what their next steps are.
7/25/17 TGT is down almost 28% for the past 52 weeks. They need to make some major moves soon. However Morningstar, (A rating), shows they have a lot of debt. That could make that juicy dividend hard to fund over the next few years. I doubt they are a good long investment and possibly will be more market share for AMZN and WMT.
COST
6/30/17 Motley Fool had this to say about Costco, "Management is willing to give up short-term profitability to keep its subscriber base thrilled with the shopping experience. Its 2% net income margin puts it far below other retailing chains, but has been a key driver behind its unusually high sales growth."
Big Box and Mall Retail Shopping Crisis BBBY, KOHL SHLD, RSHCQ
In search of a thesis: the next section has a number of reasons malls are in trouble and the retail jobs that go with them. Everyone knows that, the question is not who is going down, retailers, REITs that specialize in malls. But, I would prefer to profit on growth, who and what stands to benefit from this opportunity.9/20/17 Bed Bath and Beyond BBBY dropped 15% in the stock market today to 22.81. This is a very small sample size, but Kathy and I have only been in a store, one time in three years. Granted out house is furnished. When we needed washcloths we went to Wal-Mart.
9/19/17 Kohl and Amazon have announced a business tie-up, they are going to test being an Amazon return center. This is the closest thing I have seen to a potential re-vitalization of shopping malls and complements many AMZNs strategy, not sure about Kohls.
9/18/17 Now TOYS, Toys R Us looks like it will file for bankruptcy. This story keeps coming down to debt, "It must refinance $400 million of its crushing $5 billion debt next year with lenders who have grown less patient about waiting for results and who are less confident about the future of traditional retailers." In 2005, KKR and Bain Capital and Vornado took the company private in a $6.6 billion deal. No they have a lot of debt.
8/26/17 The latest media attention seems to be Footlocker, FL, 35.88 down 46% for the year and other sporting goods stores.
UPDATE: 6/3/17 this notebook entry started out focused on Sears, but I realize that the entire retail industry is strongly affected.
SHLD. For years, many would argue since 2004, Sears Holdings, (Sears and K-mart) have been faltering. They are now at death's door. The Washington Post has a great story about the fall of Sears. As of June 2, SHLD has lost almost 45% of its value. 6/13/17 SHLD has announced they are cutting 400 jobs. Conventional wisdom is still that Seritage Growth Properties (NYSE:SRG), a real estate investment and has interests in 266 properties, most of them from Sears Holdings.
Since the REIT was created in 2015, financial pundits have been claiming that as Sears Holding decreased, the REIT would increase by leasing the closed properties. Recently, we have seen some, "I'm not so sure" posts. This is because malls are closing, CNN Money reports that 25% of the malls will be closed in five years. If this is true, who will lease SRG's properties, (SRG is down over 10% in the past 90 days)? Sears Canada, (SHLD is an investor), is running out of money and must borrow to remain operational for another year. Since these are mall stores this also affects Canadian REITs. 6/22/17 WSJ reports Sears Canada about to file bankruptcy.
Sears Holdings CEO Ed. Lampert's Seritage thesis. As the market currently stands physical shopping centers, home of the declining big box stores, are ideally located, and at least at the moment, believed to be valuable real estate. If Sears Holdings unravels too fast for Seritage to take advantage then what? It isn't just Sears/K-Mart, Macy's, JC Penney, Kohls, J Crew, etc. are closing stores fast, see Clark report for comprehensive list. Nordstrom just released a PR expressing interesting in going private. It is worth pointing out that Wal-Mart goes it alone as opposed to anchoring malls. In some cases, the chains are going bankrupt. 6/20/17 Amazon Prime Wardrobe hits JC Penney and Nordstrom, (does anyone actually buy clothes at JC Penney other than kids to small to fight back to school?)
Malls in general.
9/20/17 I found a 2012 URL with the top 10 REITS with mall exposure. Number 1 was SPG, they appeared to peak mid-2016 above 220, have dropped at lot and are selling at 159 something. Note: when they need credit to spruce up malls, where is it going to come from? #2 GGP has a similar curve.
Is online retail the future or even the present? BusinessInsider predicts 8 - 12% growth in online retail in 2017. Globally, Amazon Inc., Wal-Mart Stores Inc. and Apple Inc. are the top 3. A better way to look at purchase future is high-value. This 1/5 of customers account for 50% of sales and that is a long standing rule of thumb.
- Is the overall decline in big box brick and mortar and the malls that host them a major factor? USA Today has a thought provoking piece. For a real downer Market Watch is comparing brick and mortar to the oil and gas industry. CNN Money says, "Brokerage firm Credit Suisse said in a research report released earlier this month that it's possible more than 8,600 brick-and-mortar stores will close their doors in 2017. " McKinsey says that just selling doesn't work, the mall has to be an experience, (take with a grain of sand, shopping at Wal-Mart can hardly be called an experience, that is back to value.).
NPR carried a piece on the malls in danger, "LEINBERGER: It's the middle-market malls that are in biggest danger of going dark. The fortress malls - those huge, you know, 1-and-a-half-, 2-million-square-foot malls like the King of Prussia Mall outside of Philadelphia - those are fine. But it's the ones anchored by JCPenneys and Sears that are and will go increasingly dark."
I did find an author that claims physical space is "coming back", "But physical space is reinventing itself. Malls continue to focus on "experience" versus "things". The example he gives is PEI who has lost 54% of their value in the past 12 months. The author may be right, eventually, but I am betting against physical space in the short term. Have you ever seen what happens when the asphalt of the parking lot starts to give way?
- Who is the "dark horse", the unknown that will benefit from the change in shopping habits? Online retail! If you focus on Amazon, most people say Wal-Mart, the number 2. If you focus on Wal-Mart most people say Target, which doesn't make any sense to me, but bears investigation, (they are profitable, have an attractive P/E and a decent dividend, (as of 6/1/17 TGT is down almost 20%, they also have more debt than I like to see, but they are managing it so far.).
Retail jobs crisis.
And what about the people that work in those stores? Retail, according to marketwatch has shed 30,000 positions over 12 months. BusinessInsider reports, "The US administration has focused its rhetoric on coal and manufacturing jobs. However, it's notable that the number of workers in general merchandise stores who have lost their jobs since October is greater than the entire number of people employed in the US coal industry." And yet we do not hear the furor that we hear from manufacturing and coal. But it can't remain silent much longer as it is impacting the economy. What other industry needs the skills of retail jobs? There are already "transition" articles appearing, but this one sounds like a rehash of retail. Some of them will end up in Amazon fulfillment centers, but retail is spread across the country and fulfillment centers are strategically placed.It does not seem like there is enough demand for Stein Mart, Hobby Lobby and Five Below to reuse many of the big boxes. Empty big boxes can be adapted for churches, after all, most mall parking lots are not full on Sunday morning, however it requires a church with solid funding, (if you were a loan officer, would you make a loan to a church), in need of a big building. Looks like another case of a big opportunity looking for a bigger idea. Oh well.
Dark Horse revisited, online retail.
Rather than rehash Amazon and Wal-Mart, what are the categories of items being purchased online? According to EngageCustomer, "The top five products bought online in the last 12 months were books (63 per cent), clothing/footwear (61 per cent), DVDs (54 per cent), CDs (43 per cent) and beauty & healthcare products (32 per cent)."Wednesday, July 19, 2017
IBM (taken from Es Tech Stocks)
8/8/17 The first limit order hit, so we now have a position with IBM. Want to really keep an eye on things for the short term to see about adding to the position.
7/23/17 I moved the purchase price down and reduced the amount of shares. New initial purchase is 143.02 which is below the 52 week low. Second tranche is at 140.02. Thesis: I still believe they are a good company, better priced than most of the tech and their strategic initiatives are in the right place. I think the turn around is going to take longer than they had hoped for. The goal remains to make a significant investment of my family's money, but at the right price.
Rather than recount declining quarters YoY, dividends, stock buybacks and free cash flow, here is a great article that summarizes my concerns late July 2017 and why I dialed the purchase back to be more conservative: https://seekingalpha.com/article/4089704-ibm-anatomy-value-trap
But in all the gloom and doom I need to remember something. IBM is a technology company, or at least they used to be and with the purchase, I am betting they still are. Tech companies create products that have value out of seeming thin air - like blockchain. Betting against Watson in my view is a big bet.
7/22/17 IBM continued to drift down slightly through the week, we are approaching the 52 week low. After a lot of thinking, I think holding to the 145.02 plan is the good choice, it is very likely to hit in the next few weeks. Maybe even being more conservative than that makes sense. We have benefitted from a very long bull market. My Vanguard ETFs are heavily loaded towards GOOG, FB, etc. But IBM for all of its issues seems to be the best value buy of the tech stocks large enough in grow iteratively. I realize I should be looking for a diamond in the rough, but I should not turn down a Steady Eddy.
I try to do my own research, but as I am getting close to the trigger point I notice most of the industry research says hold or neutral, (though the e-trade blogger sentiment says bullish); possibly another vote for being even more conservative?
7/19/17 IBM dropped very near my limit on earnings reports. I think I had better do a change order, moved it to 145.02.
6/1/17 Set a limit buy of 145.01 to re-establish a position with IBM, which used to be my largest holding. However, that was in basket Cs and got sold in the Vanguard ETF/Muni change. That turned out to be a blessing, IBM's stock price has dropped over $10.00 since then with a high water mark of 182.79.
Truthfully, the chance of hitting 145.00 seems a bit low based on recent markey performance, but some thoughts that might be downward pressure:
- May 5 Warren Buffet sold 1/3 of his position in IBM dropping it from the 158 zone to the 152 zone
- IBM pension plan is dumping IBM
- Essentially 20 consecutive quarterly expected revenue shortfalls, (we can debate accounting practices later),
- Tech, in general, might be overpriced, macro factor, IBM however, is pricewise one of the better buys in tech,
- They are in transition from services and product to cloud and cognitive AI and the growing as we approach earnings on 7/18/17 analysts will be expecting the new parts of the company to grow.
IBM Thesis, (or at least wild hope). IBM is a company fraught with contradictions. My hope is that my family can establish an initial position on a dip, add to that carefully and then profit as some of the emerging businesses start to establish and prosper. IBM for us has been a long investment so this is not a short term strategy. There is little doubt that there is some financial trickery involved at this point, if they can get their revenue mojo back on, I suspect all will be forgiven.
Watson, I am going to start tracking Watson separately, it could be the major driver
- IBM Watson and Sesame Workshop team
- Watson cancer and Hackensack team
- Watson goes to Wall Street for financial legal compliance
Things to research:
- What if 145 is too high once Wall Street gets more data priced in *falling knife*. Consider splitting the buy L145, L140, L130 or some such, once the supercomputers kick in this could happen in a wink
- Impact of new 5nm chips, will not affect stock in 2017, but surely by 2019
- Stock buybacks propping up the stock price
- IBM debt in general
- Can they really keep upping the dividend
- R&D investment lower than peers incl cloud providers MSFT and AMZN
- Spectra believes IBM will have all the mag tape business
- IBM Cloud, WhatsApp leaving the IBM cloud, Forbes impressed, now includes identify as a service,
- Cisco/IBM teaming
- IBM's glass door ratings, 6/21/17 cutting contractor hours,
- X-Force is expanding to Poland,
- Is Watson their future or a marketing campaign, IBM teams with Hortonworks for analytics, they are having a go at the weather,
- IBM and blockchain, teaming with AIG for smart insurance, working with Euro banks, trucking industry,
7/23/17 I moved the purchase price down and reduced the amount of shares. New initial purchase is 143.02 which is below the 52 week low. Second tranche is at 140.02. Thesis: I still believe they are a good company, better priced than most of the tech and their strategic initiatives are in the right place. I think the turn around is going to take longer than they had hoped for. The goal remains to make a significant investment of my family's money, but at the right price.
Rather than recount declining quarters YoY, dividends, stock buybacks and free cash flow, here is a great article that summarizes my concerns late July 2017 and why I dialed the purchase back to be more conservative: https://seekingalpha.com/article/4089704-ibm-anatomy-value-trap
But in all the gloom and doom I need to remember something. IBM is a technology company, or at least they used to be and with the purchase, I am betting they still are. Tech companies create products that have value out of seeming thin air - like blockchain. Betting against Watson in my view is a big bet.
7/22/17 IBM continued to drift down slightly through the week, we are approaching the 52 week low. After a lot of thinking, I think holding to the 145.02 plan is the good choice, it is very likely to hit in the next few weeks. Maybe even being more conservative than that makes sense. We have benefitted from a very long bull market. My Vanguard ETFs are heavily loaded towards GOOG, FB, etc. But IBM for all of its issues seems to be the best value buy of the tech stocks large enough in grow iteratively. I realize I should be looking for a diamond in the rough, but I should not turn down a Steady Eddy.
I try to do my own research, but as I am getting close to the trigger point I notice most of the industry research says hold or neutral, (though the e-trade blogger sentiment says bullish); possibly another vote for being even more conservative?
7/19/17 IBM dropped very near my limit on earnings reports. I think I had better do a change order, moved it to 145.02.
6/1/17 Set a limit buy of 145.01 to re-establish a position with IBM, which used to be my largest holding. However, that was in basket Cs and got sold in the Vanguard ETF/Muni change. That turned out to be a blessing, IBM's stock price has dropped over $10.00 since then with a high water mark of 182.79.
Truthfully, the chance of hitting 145.00 seems a bit low based on recent markey performance, but some thoughts that might be downward pressure:
- May 5 Warren Buffet sold 1/3 of his position in IBM dropping it from the 158 zone to the 152 zone
- IBM pension plan is dumping IBM
- Essentially 20 consecutive quarterly expected revenue shortfalls, (we can debate accounting practices later),
- Tech, in general, might be overpriced, macro factor, IBM however, is pricewise one of the better buys in tech,
- They are in transition from services and product to cloud and cognitive AI and the growing as we approach earnings on 7/18/17 analysts will be expecting the new parts of the company to grow.
IBM Thesis, (or at least wild hope). IBM is a company fraught with contradictions. My hope is that my family can establish an initial position on a dip, add to that carefully and then profit as some of the emerging businesses start to establish and prosper. IBM for us has been a long investment so this is not a short term strategy. There is little doubt that there is some financial trickery involved at this point, if they can get their revenue mojo back on, I suspect all will be forgiven.
Watson, I am going to start tracking Watson separately, it could be the major driver
- IBM Watson and Sesame Workshop team
- Watson cancer and Hackensack team
- Watson goes to Wall Street for financial legal compliance
Things to research:
- What if 145 is too high once Wall Street gets more data priced in *falling knife*. Consider splitting the buy L145, L140, L130 or some such, once the supercomputers kick in this could happen in a wink
- Impact of new 5nm chips, will not affect stock in 2017, but surely by 2019
- Stock buybacks propping up the stock price
- IBM debt in general
- Can they really keep upping the dividend
- R&D investment lower than peers incl cloud providers MSFT and AMZN
- Spectra believes IBM will have all the mag tape business
- IBM Cloud, WhatsApp leaving the IBM cloud, Forbes impressed, now includes identify as a service,
- Cisco/IBM teaming
- IBM's glass door ratings, 6/21/17 cutting contractor hours,
- X-Force is expanding to Poland,
- Is Watson their future or a marketing campaign, IBM teams with Hortonworks for analytics, they are having a go at the weather,
- IBM and blockchain, teaming with AIG for smart insurance, working with Euro banks, trucking industry,
Thursday, June 29, 2017
Thank you Chase Purdy (Silicon Valley Unicorn definition)
Unicorn, the white horse with the horn, has numerous alternative definitions, some of them not to be used in polite society.
I keep seeing the term used in financial documents, but with no explanation. Today I saw it defined, not once, but twice. Slashdot with Chase Purdy, "By contrast, Hampton Creek -- just a 20-mile drive from its Silicon Valley rival -- has raised more than $120 million since 2011. It's one of Silicon Valley's unicorns -- a company that has a valuation that exceeds $1 billion." Tech Crunch, "However, it’s last private valuation was close to $1 billion, the company priced under that mark, and has since moved past the $1 billion valuation threshold into unicorn-land."
So there we have it, apparently a unicorn, in financial parlance, is a company, possibly pre-IPO, that has a value greater than 1 billion.
I keep seeing the term used in financial documents, but with no explanation. Today I saw it defined, not once, but twice. Slashdot with Chase Purdy, "By contrast, Hampton Creek -- just a 20-mile drive from its Silicon Valley rival -- has raised more than $120 million since 2011. It's one of Silicon Valley's unicorns -- a company that has a valuation that exceeds $1 billion." Tech Crunch, "However, it’s last private valuation was close to $1 billion, the company priced under that mark, and has since moved past the $1 billion valuation threshold into unicorn-land."
So there we have it, apparently a unicorn, in financial parlance, is a company, possibly pre-IPO, that has a value greater than 1 billion.
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