Kroger is starting to get attractive but Wal-Mart may be better

Amazon is buying Whole Foods so Wal-Mart, Costco, and Kroger are doomed!

Hmmmm. Kroger is a dividend payer, (albeit a bit paltry), they have been in business forever so they can spell supply chain and location. I live in the Pacific Northwest and there isn't a Kroger on every corner, but Fred Meyer, Ralphs, QFC and they are all Krogers, (not to mention the greatest of all stores for a geek on the planet, Fry's).

This strength is also their weakness, they are one of the largest grocery stores, but are spread a bit thin with electronics, jewelry, clothes and so forth. In aggregate they are a lot like Wal-Mart, but not as organized and they cannot compete on price.

Over the past five years KR was a better investment than WMT. However, if you held on for the past 12 months, KR got wasted.

KR is cheap and I am thinking about a purchase, but I do not understand them and I don't think many analysts do either.

As always debt is one of the first things to come up on my radar. They picked up $1B in 2016 to finance the purchase of Roundy's. One analyst said, "Levenson wrote that Kroger doesn’t have as much cushion as it used to in its debt ratios. But it can quickly rebuild that with strong free cash flow in the next year or two." However, 2017 has been a rough year. Morningstar rates them BBB, 4 star. However, a lot of debt is due 2019 - 2022.

Wal-Mart, by contrast has an AA- rating. And the debt due bulge is 2034 - 2043.

I need to take some money off the sidelines for one or the other.  While the world is concerned about AMZN, it might be a bit of a buying window. Lidi and Aldi, (Aldi appears to be two different companies, mostly in the Eastern half of the USA), may be threats in the future, but not in 2017 - 2018 and they both will have to face the eCommerce dragon.

GE: The lesson for future retirees

GE is in some trouble. Stock buybacks over the past few years ate up their "running room" and did not yield the desired results. They have some troubled business units. And somehow they need to come up with 47B over the next ten years for existing retirees.

Bloomberg reports, "According to Dennis Rocheleau, a 36-year GE veteran who was its chief labor negotiator until 2004, the company considered its pension well prepared and thought its investing prowess could help keep the plan in shape. No one could foresee the financial crisis or the rock-bottom rates that followed."

Fifteen years ago, my financial advisor told me the day I retired he would put everything in a bond ladder.  Today, of course, it is 60 - 70% stock chasing returns, (though at higher risk). What changed? Those rock bottom rates Mr. Rocheleau refers to.

A well placed CNBC article reports not saving enough for retirement early enough is the top financial regret most people have. But what if you did save? And then the financial crisis and the rock-bottom rates that followed damaged your nest egg, (because they probably did).

Part of this is much ado about nothing. If you are trying to buy municipal bonds, you have probably noticed you are not alone in the market. Yes, there was a financial crisis - followed by seven or so really good years depending on how you count. Most individual investors should be back, or even up from the crash. So now what?

OODA
Observation: Signs are increasing that GE should not be held long
Orientation: I have 2k shares in MLs, Don't worry about ETFs
Decision: Look for a replacement holding
Action: Communicate with broker, they will not be a good long choice over the next decade.

Es Tech Stocks

I am not an investing expert. This is my trading notebook for myself, friends and family. You are welcome to my ideas and research, but please make your own decisions and do your own research. As I remind myself all the time, this is real money we are spending.

Basket Es Thesis:

This money is a retread. I used to invest with Motley Fool guidance, but the MF advisor left several years ago, they changed everything around, so I decided that most of the money should go to Vanguard ETF/Munis. I still keep some tech stocks, and Wal-Mart, (based on their focus on online sales), and IBM are welcome here at the right price).
NOTE: I will be tracking IBM and Wal-Mart separately

6/5/17 sold my entire position in GOOG, still have GOOGL due to the stock split.

Historical: Basket Es THESIS (this portion last updated 9/18/14): 

The strategy in basket Es is to follow the advice of the Motley Fool Million Dollar Portfolio, a paid advice service. When they say buy, I do, when they say sell I do. It is one of my best performing strategies and I have enjoyed the communications from them. I especially appreciate that they allow me to read a transcript of their video updates. I process information much better and faster by reading.

2/27/15 The POT sale executed @35.72, really glad I used the trailing stop. As I sold out the news is all about people buying POT. Was this a mistake, or the blessing of not being where the majority is? Only time will tell.

2/18/15 PRLB is a rapid prototyping company that is growing rapidly. There was a bit of a dip today -$2.33 at present. Put in a limit to open a position that is good for the day, we have 31 minutes of market left to go.
PRLB 50 Limit 71.10 Current 71.17
Executed at 71.10, now let's put in a bigger order for less money:
PRLB 75 Limit 67.02 Current 70.99 and bouncing like a beach ball

2/17/15 I have wanted to open a position on Tesla, (TSLA) for some time. I have a strong sense that it is going to drop after I get, but this is a long term position and if it does drop significantly I will be very tempted to add to the position. What is the driver that causes me to do this now? The more I think about the battery factory and its potential in addition to electric cars.
TSLA 35 Limit 203.00 Last close 203.77
2/18/15 Bought at 203.00 current 204.89

1/27/15 I may need to rethink my thesis for this basket, can't sort out all the mail, but MDP may be under new management.

The new team, (and I am reading about that right now), has made several sell recommendations, including Tile Shop, (TTS), and Bridgepoint, (BPI),  I agree and have closed those positions. They also recommend closing Potash, (POT). I find myself squeamish here, but current price is 36.53 and I have a trailing stop sell at 34.69. POT has continued to go up, as of 2/16/15 the sale point is 35.52, last close 37.04.

The market bashed Microsoft down over 8%. I have concerns about MSFT myself though as a Washington State resident I wish them well. Added 25 shares to my position @ market, (43.03).
2/11/15 Last close 42.38.
2/16/15 43.87


9/18.14 Closed my position in Exelsis, (EXEL). Great, more cash to invest in an aging bull market *grin* Infinera, (INFN), oh yeah. The hardest lesson in investing is to wait. I am still hugely overweight on this and aware the CXOs are cashing out. And every share is long, (over a year). Even so, I think I will ride this train a bit longer. I rarely make recommendations to family members, but I tipped this one to Trey, Hunter, and Ben.

7/22/14 WFM never hit, need to rethink it. Set a limit order to increase my holdings of LL. They missed their numbers and the market punished them. 50 shares, limit @ 54.00, last close 55.71.

6/11/14 Trying to open a position in Whole Foods, (WFM). They got smacked today, but are recovering in after hours trading. Going to use a limit order for safety. Price at market close is 41.24, but with after hours trading they are bumping 42.05. 200 WFM 41.00 L 41.24.

6/7/14 I have a solid holding of Amazon in my ecommerce basket, but will set some limit orders to open a position here as well. 20 Limit 320 LC 329.67, 25 Limit 310 MDP recommends selling Hillenbrand, (HI), to raise cash for other opportunities. Executed the trade, but did it as a trailing stop of 5%. I put the bid in on Saturday June 7 against a Friday close of 31.13. So far, the peak is 31.69 on June 10. According to the online stock service, the sell trigger is currently at 30.096.

5/12/14 Setting up some limit orders Tile, (TTS), 100 L@13, L 13.64, Invensense, (INVN), 50@18.00 L 18.42

4/23/14 Market was a bit soft. Using a limit to add to EXEL position, 650 L@3.40 L3.445

3/11/14 Market dropped a bit today, added to INVN position, 50 M@21.23

2/20/14 Leap Frog, (LF), leads the market in kids tablets, but their stock has been creamed. 750 shares, Limit@6.60 LC 6.78

1/29/14 Closing the position on Denbury Natural Resources, (DNR).

12/16/13
POT They have gotten cheaper, my thesis is that as populations grow fertilizer will be important. I wanted to set a limit order, but this broker would not let me. When I tried to call for help, the answering machine said they were closed. OK, OK, Market, 160 shares, last close was 30.74.

INTC They have been on a climb, thesis, they will solve the mobile chip issue with System on a Chip. Market 200 shares last close 24.45.

11/22/13 TSLA As insane as it sounds I want to open a small position on TESLA, they are selling well and at higher margins than Ford or GM, ( though I love our Cruze). Also, opened a larger position on POT, thesis is there are only so many potash mines possible on planet and the world will keep growing crops.

1/10/14 100 Limit@18.00 last close 19.57
5/17/13 INVN was down 3% today. 100 Limit@11.60, last close 12.42

1/10/14 Still liking Lumber Liquidators, but think this ride has been too good. Set another trailing stop for 5% with a goal of reducing this to 3% of my basket. Last close 104.32.
5/2/13 Lumber Liquidators has been incredible, but I am going to sell part of the position. Set a trailing stop at 5% which works out to $76.50. It hit the same day I set it.
5/17/13 This is insane. Last close was 87.50, great company, but why is the stock so high?

4/16/13 Market took a hit today, probably because of the Boston Marathon, our prayers and concerns are with the injured and those grieving the lost. Added to my position in IPGP and DNR.

FIREX and FIGRX

1/10/14 FIGRX 40.46 now up +4.5%, FIREX 10.19 -9.8% Tried to set an online alert to monitor these, but the website seems to be having issues.
5/17/13 FIGRX 37.15 FIREX 10.82
4/20/13
FIGRX  34.72 up up 13.3% for the year
FIREX 10.83 Up 33.87% for the year
3/23/13 There are two mutual funds in a very small basket on the same online broker, but a different strategy and account number. The idea was to increase my international coverage. Both are down they are FIGRX and FIREX. I have held both for years.

Today, I used a fund screener to see if I could do better than FIREX (International real estate).
                 30  90  180  1yr   5yr
FIREX      1    1    1      1      -
TAREX          3                    2
GRSIX     3    2     2     3
SWASX
JIRSX      2           3     2       1
Decision: hold FIREX and hope it can make up some more lost ground. Set an alert and a calendar setting to check on it.

                 30  90  180  1yr   5yr
FIGRX      2    1    1      1     2
FSIIX        1    2    3      3     3
SWISX     2    2     3      3
VDMIX    2     2    3      3
TRIPX      2    3     2      2     1

I also screened it against ETFs
FIGRX     1     1    2     1       1
SCHF
GWL                    1
EFA         2     2            2
VEA                     3      3       3

The mutual funds are VERY HIGHLY CORRELATED, it almost does not matter which one I pick. There is more variation between FIGRX and the ETFs. I hold SCHF in basket Cs. The strategy there is to use the online broker's offer to trade with no commission and add small amounts on days when it dips. So even if the SCHF ETF does not outperform FIGRX, with free commissions, the ability to buy on dips and the much lower fee, at some point I should make SCHF the primary way I play the FTSE Developed ex-US Index.

7/23/13
FIREX 10.41 I am still down 8%, this is only a Morningstar 3 star with an expense ration of 1.19, this is one of those what was I thinking moments, hopefully we still will make a bit more forward progress.
FIGRX 36.90 down 4.67% from the time I bought it

Infinera

1/10/14 Director Kenneth Goldman just unloaded 12,100 INFN shares at an average price of $10.00 netting $120k. Wonder what that will result in on Monday?

7/23/13 11.61 some financial group called Needham has raised the price target to 16.00.
6/1/13 10.53 can you believe it? Wow!
5/1/13 Finally a pop. A loud resounding pop. I try to be fairly patient as an investor, but this was overdue. I close my eyes and try to imagine the pain the short sellers are feeling. Last close 8.42.

5/17/13 9.62
4/20/13 6.26 this is now the 2nd worst performing equity in the basket. And they just installed a 100G network that is an astounding 38,00km long.
Update March 18, 2013 7.02, INFN won two more customers, Pacnet and Akado, who knows?
Update February 12, 2013, INFN is still making some progress, last close at 6.79, but it is being jerked around by Wall Street Trading programs. The word picture in my mind is a Raggedy Ann Doll in the jaws of a 200 pound Rotweiler.
Update January 10, 2013 6.51 short intrest still 14,511,000
Update January 2, 2013 major update 9% in a day closed at 6.34, according  to Short Squeeze, short interest is 14,511,000 down from 14,955,300.
Update January 1, 2013, last closed at 5.81, will be VERY interesting to see if it can keep climbing in January 2013.

Update November 5, 5.07 another positive day; who knows
Update November 28, 5.41, up 11% in three days. Come on and pop! When a stock has a lot of short interest and the short sellers have to close their positions it can accelerate the increase.
Update November 29, this press release is fairly exciting. It talks about demonstrating a Software Defined Network ( SDN ) using Open Transport and Open Flow.
Update December 6, 5.73 and it dropped .06 on the day
Update December 17, 5.84, up 34% in 30 days. With all respect to Marvin Martian, "Where's the pop? There was supposed to be an earth-shattering pop!" Well, this is one of those moments where individual small investors have to sweat the Wall Street Efficient market engine. The number of short stocks is increasing when the stock is up 34% in 30 days. What does Wall Street know that I do not?
Update December 21, 2012, I am guessing some Wall Street program made a pretty big sell bet this morning. INFN had raised to 6.05 and then plunged to below 5.80 and closed today at 5.94. So it is still on an uptick with a setback today.

Infinera Thesis 11/4/12

The biggest reckless play I have in the entire portfolio is Infinera, INFN. I have been in this equity for a long time and watched it fall further and further, but believe in their technology and also believe we are going to need faster and faster networks. This is my field. Every week or so, I pull it up in Google Finance hoping to see forward motion. Every week I look at my Google Alerts hoping to see of another sale of DTN-X. So far, all I have seen is more red ink.

They have been increasing sales and the fourth quarter of 2012 should give a lot of clarity as to whether they have a chance of shaking the short sales and earning back the ground they have lost in the market.

Hillenbrand (HI)
7/23/13 I was reading an analyst note saying this casket maker would soon be dropping. They are up 6% for the month and a number of other analysts say things look good for them. Current price is 24.95.

Markel

11/18/12 Markel is going to take some damage as a result of Hurricane Sandy. I am *assuming* ( yeah, yeah, I know), the earlier drop was a result of both the fiscal cliff concerns and also the Hurricane. I picked up five shares to add to my position using a market buy@482.00
7/23/13 543.40 up 25% YTD

USA and global debt

This NYTIMES article is a must read. Two quotes say it all: "Americans have now borrowed more money than they had at the height of the credit bubble in 2008, just as the global financial system began to collapse."

"The fear is that ballooning debt from student loans — and from auto loans and credit cards — could put many Americans back into a hole, prompting a new wave of defaults, much like the one that accompanied the mortgage meltdown a decade ago."

One factor is that new car sales are declining and the auto manufacturers have been using discounts and other profit shrinking methods to keep the cash register ringing. This is largely based on April 2017 and may be temporary. If the declining new car sales trend continues it will become a bit of a drag on the overall economy.

USA Today asserts that the average USA consumer owes $5k in credit card debt. "According to Experian's latest State of Credit report, the average U.S. consumer holds about two bank-issued credit cards and carries a total balance of $5,551. That's a lot of money, especially if you're paying interest of 15% to 20%."

Student loan debt is also of note, studentloanhero reports, "Americans owe over $1.4 trillion in student loan debt, spread out among about 44 million borrowers. That’s about $620 billion more than the total U.S. credit card debt. In fact, the average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year." That would not be such a serious problem if students that graduate with debt could find high paying jobs to pay back the loans. However, as NPR reports, "Every day, 3,000 people default on their federal student loans — and those lack of payments amount to an unpaid bill of $137 billion for the federal government. For decades, the government has tried to get borrowers to pay up by hiring debt collection agencies to call and send letters. But now the government is trying this new lawsuit strategy." The government debt collection agency plan is not working, we pay far more to the collectors than we collect. We can ill afford that because the government debt is also growing to a troublesome level.

This is not a USA only problem. Last year, global debt reached an all time high. And there are impacts, last week Moody's downgraded China to Aa3 even though their debt to GDP is fairly healthy. In fact, the canary in the coal mine remains Japan, the world's 3rd largest economy. However,  despite all the debt, the IMF report tends to balance this out expecting higher growth in 2017/2018.

As investors, what do we do? Are the cards in place for another pull back in the stock market. Warren Buffet has moved to a high cash position look to capitalize on a major dip with a focus on buying a large, well run company.

• Wal-Mart is still on my list though I would be looking for a dip. They have largely licked the same store sales problem and are making some traction in online sales.  They are high right now, up 10% for a YoY period, but in a dip it might be a good move.  This would be in the steady Eddie category, not a big score. They might get some benefit from the collapse of Sears, Macy's and other troubled big box stores, if they can find the right smaller store format, (if not keep an eye on Target).
• I have been thinking about the Internet of Things movement. Even if we head back into a recession, smart this and smart that will keep happening. Motley Fool suggests Verizon, Amazon and Cisco are poised for success. I honestly do not see how Verizon is poised for a lot of growth, I already own Amazon, and Cisco, while up 9% for the year is less than the S&P 500 for the year. I thought a lot about an ETF, (your choice is SNSR or SNSR), but this article points out that is essentially an investment in technology.
• If you believe that a result of all this debt is a shortage of cash, (or usable cash), then perhaps a barter site is worth considering. One driver will be millenials that cannot afford to buy a house and use Craigslist etc to find a room or apartment to rent. NOTE: many barter sites have some sort of reputation score. If you believe this is an important avenue to explore you may want to start sooner than later. A similar approach is reverse supply chain, I think LQDT might be best positioned here.
• One way to minimize debt is to encourage inflation. If you borrow $250k fixed rate for 30 years in a home mortgage and significant inflation occurs, you pay off that loan with "cheaper dollars". Other than the debt, one of the biggest inflation drivers is the unemployment rate. It is now historically low. 

The bottom line. The increasing debt is a driver that will affect the economy, both USA and global. This is not a crisis, I would not expect the sky to start falling tomorrow. However, the level of debt is a force on the global economy and is something the wise investor should watch and consider. In the mean time, to the extent possible, Polonius was right, "“Neither a borrower nor a lender be; / For loan oft loses both itself and friend.”"

Robotics

I came across this post: "The total value of all the robots in the United States, from Roombas to aut0-manufacturing plants to those that fold laundry, and everything in between, is $732 billion, a number that, according to a study released today by researchers at CEBR and Redwood Software, is larger than that of the economy of Switzerland.

Other findings in the study suggest that American investment in robotics has doubled since 2009, and went up 30% between 2011 and 2015. The researchers also concluded that investing in robotics has a higher long-term return than that of transportation, financial services, or real estate. And all-told, robotics investment in the 35 countries that make up the OECD—including the U.S., Canada, France, Germany, and others—amounted to 10% of GDP growth between 1993 and 2016. In short: Robots are very, very big business."

I believe the rough outline, robots could be the next big business. A few years ago I found a robot ETF, but it did not do so well, (NOTE: If I had stayed with it I would have a small gain today). If you have ideas, please leave them in the comments.

Found this page by Redwood. Curious they do not spell out RPA, guess you just have to know.

Here is a piece by Motley Fool. (NOTE: I lost money on ISRG, not saying that is a reason not to buy, but be wise.)

CNN has an investing guide. They mention robo stock advisor BKFS, but I am inclined to pass. The most interesting thing I saw was ROK.

Wal-Mart

Wal-Mart Thesis V 1.3

First, this is one of the largest and most influential companies in the world, of course I want a piece of that, (at the right price).

Second, they are expanding their e-commerce offerings. I really need to give that a try, last time, (early 2016), I got so frustrated, I gave up. See Wal-Mart.com section.

Third the grocery store business is a tough one with razor thin margins in many cases. WMT continues to expand in that area. They are the perfect anchor for smaller malls.

Fourth, what held their shares back in the past was US store sales were losing year over year share. They were doing well internationally, but US is the core. But that is the past and they have turned that around.

Fifth, (and a distant factor), if Target is their competitor, (I personally think it is Amazon), but if so, Target has been doing a pretty good job of playing dead and they have a lot of debt to face.

6/6/17 WMT dropped 1.33 to 78.93 today, probably general market and insider selling.
6/15/17 Kroger announced more price pressure competition
6/20/17 Bit of a chest beating on why AMZN purchase Whole Foods should have raised WMT

Wal-Mart.com

6/20/17 Looked at a Spyderco Delica 4 page no blade length! (AMZN does this too sometimes, what kind of an idiot would buy a knife not knowing the blade length? Same thing for the Endura 4, I xrefed and it is 3 3/4" assuming they are all the same.

Document history:
Originally created 10/9/12
Version 1.1 2/11/15 in anticipation of earnings results 2/19/15
Version 1.2 4/1/15 based on U.S. Strategic Update
Version 13 5/19/17 considering adding to my position in basket Es.

Time to plan on profit taking

Please note, most of my investments are in Vanguard index ETFs and mutual funds in fire and forget mode. I do still have some active "mad money" in basket Es. These are just my ideas, I am not a professional, do your own research.

My biggest holding since the stock split is GOOG/GOOGL and my family is grateful to the Lord for His providence. I still think it is a great company with legs for the future, but since it is far and away our biggest investment, this is the logical place to profit take. I think I will sell GOOG and keep GOOGL, there seems to be a slight premium on the voting shares.

Now the rich question is what to buy, or hold on for a drop in the market and try to do my shopping that way. I will be going back to my older notes looking for ideas and analysis. In the mean time, here are my first observations.

Defensive stocks in general, (toilet paper and baby formula), are trading at a high, have limited growth prospects and tend to have shabby dividends. I think I would be better off stockpiling toilet paper, (just kidding).

Nike has been beaten down. But the big box tidal wave is going to give them at least a year of chop. I might try to buy on a dip, but those are pretty cheesy dips. Pass.

I looked at Moody's. I have a warm place in my heart for companies that manage to monetize information and I applaud their recent acquisition. However, I lost my shirt on Morningstar back in 2008 and this is a long term bet with limited payback. Pass.

The Ts basket benefitted from Corning and they have done very well this year. I already have a dividend basket, but as I look over my notes they seem very solid, the big question is do they have another gorilla glass up their sleeves. I think I will set a Google alert for GLW and watch for a dip or a game changing innovation.

My notes on Wal-Mart got me thinking. I deleted all the stuff that did not pan out and will return this trading idea to the "parking lot".