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.
Giving Thanks as Black Friday Approaches-
Thanksgiving is on Thursday and it is important to recognize how grateful one must be for the blessings in your life. Specifically, good health and happiness for family and friends is at the top of my list as those alone are a great gift in their own right. When you consider the fact that all over the world, so many people have serious problems in their daily lives, those of us in the United States are very fortunate to live in a country which provides such immense opportunities. Certainly, the U.S. has its share of people with problems, but relatively speaking, all things considered, the country has plenty of reason to give thanks, and give thanks we shall.
Last week was full of all kinds of news and events in the business world, so lets get right at it. Target reported a real surprise of a quarter as sales of beauty related and Apple products, along with strong internet demand, gave a boost to sales, which rose 1% year over year. On the other side of the coin, traffic declined .4% and Canada continues to bring red ink. The company represented by the big red dot has accumulated over $2 billion dollars of losses in the great white north, $211 million alone in the last quarter. Nevertheless, the stock popped nicely this week. When Target gets Canada fixed, and at some point they will, the company will see much better growth in all of the financial metrics which matter.
Elsewhere in the retail sector, Gap reported earnings which disappointed investors. A two percent decline in revenues because of soft sales at its Gap Stores, offset by some strength at Old Navy, and a reduction in full year guidance, led to a drubbing of the stock, down a little under 5% for the week. Misery loves company, and joining Gap was Gamestop, which also had problems as revenues came up short by over 100 million for the quarter. With investors worried about digital displacement, competition from Wal Mart with the used gaming system strategy, and the delayed release of a popular game, shareholders took it on the chin as the stock lost nearly 20% in the last five days (ouch, that hurts).
Dish Network shares popped after the most recent government auction of wireless spectrum raised over $34 billion. Chairman and founder, Charlie Ergen, a legendary blackjack player, has purchased a large quantity of the valuable airwaves over the last few years. The prices of these assets in the market were increased dramatically by bidding from the large telecommunications, cable, and wireless providers. It is thought Mr. Ergen was also a bidder as well as he, along with others, realize the value of those properties. With wireless data usage exploding due to the massive rise in the number of smart phone users, spectrum is increasingly scarce. Look for the trend to continue for the foreseeable future.
In the capital markets, the Habit hamburger chain had its long awaited IPO and shareholders feasted, pardon the pun. The stock rose 120% in its initial debut as the market clearly believes it is a worthy adversary of McDonald's, Burger King, Smashburger, Five Guys, and of course, In N Out. You can see from the long list, competition is fierce in the burger industry. Having experienced the delicacies of the Habit, they do provide a nice quick meal if ever the opportunity arises. Whether or not it's growth lives up to expectations is the key issue, which is typically the case. Those who bought this week may face some serious indigestion from the price paid for their shares.
On the macro front, the Chinese Central Bank surprised the world with an interest rate cut late Thursday night. With GDP growth of 7.3% not meeting the expected 7.5% threshold, the one year borrowing rate was cut from 6.0% to 5.6%. The one year deposit rate was dropped to 2.75% from 3%. In another critical area of the globe, the ECB started its version of quantitative easing by beginning to buy asset backed securities. These actions helped give a jolt to currencies which have struggled versus the dollar, as well as global stock markets.
OPEC meets on Thursday in Vienna to discuss whether or not they will cut their goals for oil production. The price of oil rose last week on speculation the cartel would cut because of the severe reduction in price over the last three weeks. Much depends on the posture of Saudi Arabia towards the other upstanding countries in this brotherhood. If the Saudis want to inflict more pain on the others in the group, output levels will stay the same. Knowing what we know about this lovely organization, to expect any favors would be a mistake.
Liberty Media held its annual investor day on Wednesday. As always, there is much to be learned from its leaders. When you create an entity worth over $50 billion, people are going to be interested in what is going on with your businesses. The most noteworthy comment from Mr. Malone was when he was asked whether or not Charter would pursue Time Warner Cable if the Comcast-Time Warner Cable merger did not go through. His answer, in characteristically Malonesque type jargon was, “Hell, yes.”
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.