Y H & C Investments BLog
The blog is a personal commentary by Yale Bock on the specific events which may have occurred in the investment or political world. Specific stocks are mentioned, and many readers find this a good way to gain another perspective on the investment world.
A Changing of the Guard?
One of the crucial aspects of investing in any asset is using one's judgment regarding certainty and risk. The most applicable quote on this topic is from our friend Mr. Buffett, who once said, “If you are not prepared to own a stock for ten years, don't even think about owning it for ten minutes.” The crux of his argument is you are trying to find situations which you can depend on for a long period of time, think decades, not minutes. Even further complicating the matter is technology and it's particularly quick application in the current setting. A further difficulty is how competitive nearly every industry is, as many management teams are looking for ways to use new tools to attack competitors market positions. As society changes and evolves, finding situations where one can look out many years and have confidence things will stay pretty much the same is not easy, to say the least.
Over the past week, the investment world learned the financial results of many companies in the corporate world, and what occurred to me was the possibility that we may be seeing a changing of the guard in a few very important sectors, especially those which have been rewarding to investors for a long time. For example, Facebook released outstanding numbers this week and the investment community was very impressed by their traction in mobile advertising, as well as the size and scope of audience. If you consider the fact that Facebook now has over 1.3 billion members, it's reach is just staggering. If you are an advertiser looking for ways to reach the 15-30 age demographic, now or in the future, where do you spend your money, on Facebook or with a television network? Increasingly, more are choosing Zuckerberg's platform. Network and cable television is still a powerful platform, but as an investor you do have to consider where things are headed in the next five to ten years.
Next, let's consider the plight of two champions of american culture, McDonald's and Coca-Cola. McDonald's posted very poor results with negative comparisons in every single part of the globe, down anywhere from .5 to 3%. Coca-Cola, which has been and remains an incredible business, posted nice volume growth internationally but continued to struggle a bit in North America. At the other end of the spectrum, Chipolte posted incredible numbers last week, up 17% year over year, and Starbucks also impressed, with same store sales up 7% for the quarter. For nearly five years in a row, Starbucks has posted same store sales of over 5%. It leads us to the same question: Could the broader population be embracing new, healthier, food and beverage choices, as seen by the different numbers these popular brands are reporting? Or are the specific strategies and tactics used by each company the cause of the discrepancies? Either separately, or in combination, these are the kind of decisions investors have to make in thinking about the next decade in terms of where you want your capital allocated. I am not saying Ronald and Coke's big, white, furry, happy bear are still not firmly entrenched in the public's minds. Not at all. My point is there seems to be a slight change at the margin in terms of where people are headed, and those changes may result in big shifts over time, if they continue.
Apple reported another strong quarter as they sold over 50 million units of product in total (Iphones, Ipad's, and Macbooks). In addition, they announced a new partnership with IBM to try and gain market share in the enterprise area, where long dominant competitor Microsoft holds the majority of the corporate users. Here is yet another example of the possibility that the shifting sands in an industry could have huge implications for investors. Microsoft is trying to make a bigger push in the cloud and mobile spaces, especially on the enterprise side as a way to grow quicker. Google and Amazon also have eyes on the business space, as the prize is huge. Competition remains a fact of life in the technology world, and when you throw Facebook and Twitter into the mix, well, choosing who wins and loses is not a simple task. Not that it ever was.
Bear Stearns legend Ace Greenberg died this week. He was one of the legends of Wall Street and from everything I have read, he was revered for a good reason. He was the person most responsible for the growth of Bear Stearns for nearly 50 years as it became one of the leading investment banks in the world. He was known for believing one should always be taking profits when you could, and he had exceptional decision making skills about when to take risk and who to back. He was from Oklahoma, and a very talented and generous human being. The investment world will miss him. Anyone named Ace has to be admired, especially by a boy from Las Vegas.
It appears Rupert Murdoch continues with his quest to obtain control of Time Warner. It could not happen soon enough, in my opinion, as Time Warner is the owner and operator of among other entities, CNN. The conflict in Gaza highlights the role the media plays in creating the false and dangerous perception that the Palestinian general population are innocent when being bombed by the immoral Israeli's. The simple truth is there would be no conflict if Palestinians and Arabs would accept Israel's right to exist, period. Hamas hides their rocket launchers and military personnel in hospitals, mosques, and schools. Hams digs tunnels underneath Israel and puts rockets under toilets and kitchen sinks. Hamas kidnaps teenagers and slits their throats. CNN, along with other mainstream media networks, currently undertakes a narrative which completely takes away the Israeli point of view. Rupert Murdoch cannot come quickly enough, although he would have to divest CNN if he were to succeed in obtaining control of Time Warner. Yes, I am Jewish, and I am biased in favor of Israel as we have friends who live there. Still, it does not take a rocket scientist to figure out which side bears the responsibility of causing this conflict.
Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.