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Why Any of This Matters

If you don't write down what you're thinking, you're short-selling yourself on some of your best ideas. That's why this is here.

Latest Fool.com Articles

Yay Capitalism! - August 29, 2017

8/29/2017

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Most weeks I link up with two smart analysts (@rorycarron and @TMFWillSommers) on Skype for 30 minutes or so to talk shop. Rory is covering stocks for our friends over at Rubicoin and Brendan is getting stuff done for us here at The Motley Fool. These are not service specific talks, just a chance for the three of us to link up and chat. I figured it's easy enough to just keep our notes here for posterity and for anyone else who may be interested. Enjoy!  

ULTA Salon (ULTA)
  • Recent earnings looked great, the stock is still having a poor year down almost 20%. Why was there a negative reaction to what seemed like a positive quarter?
  • The market may be pricing in margin challenges going forward. They will be competing on pricing more in the future. Will that large store base become a drag at some point?
  • The stock is down from our last update on the MDP watch list when shares were trading at $230. I pegged our interest range of $200 - $220 as where we would want to being this more into the discussion.
  • Management sees a range of 1,400 – 1,700 stores total. They are at 1,000 now.
  • Loyalty program of 25.4 million members likely overstates how many are actually meaningful to the company’s base. Probably makes sense to discount it by half to find the true number of customers that will be long-term drivers versus the one-timers who sign up for a discount on the spot. An ULTA loyalty membership is not like a Prime membership. This is important as 90% of ULTA’s sales come from loyalty members.
  • Positive market characteristics: Makeup is a resilient segment, folks like to get to the stores to physically see offerings, they have a lot of good SKUs/brands available, wide selection, the salon/services segment ULTA offers is a bit of a differentiator. There are some Home Depot-like characteristics in play here.
  • What’s driving these strong comp numbers? Part of it has to do with the pace of new openings. They are opening around 100 stores per year give or take and it takes two to three years for new stores to reach mature comps. This could be an indicator perhaps of comps normalizing at some point but that should still be at least a few years out, possibly even five or more. This is a good thing, means that they could continue to post impressive comps for some time to come.
  • This is a good retailer in a sea of really bad ones. The market will pay up for strong retailers.
  • How many more stores can they open? This isn’t one to buy and hold blindly, but it is one that could offer some attractive upside in the coming years.

American Tower (AMT)
  • Play on the long-term trend of wireless data, this is the largest wireless tower operator. Non-cancelable leases and price escalators in contracts make for predictable cash flows.
  • REIT structure allows for very attractive income yields for long-term investors.

Atlassian (TEAM)
  • High growth company growing the top line at impressive rates early on that focuses on collaborative software like Trello for example.
  • This is an interesting name, but a high growth company that is still unprofitable. It is cash flow positive, but stock based comp is still notable. Very difficult to determine what a reasonable price is for a company with no real obvious competitive advantages.
  • A key to the model is that they don’t employ a sales force. Early on word of mouth and grass roots can work, but is this sustainable in the longer-run? Is the model based on some early successes or is this something they can continue to replicate and iterate?
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Yay Capitalism! - August 23, 2017

8/24/2017

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Picture
Most weeks I link up with two smart analysts (@rorycarron and @TMFWillSommers) on Skype for 30 minutes or so to talk shop. Rory is covering stocks for our friends over at Rubicoin and Brendan is getting stuff done for us here at The Motley Fool. These are not service specific talks, just a chance for the three of us to link up and chat. I figured it's easy enough to just keep our notes here for posterity and for anyone else who may be interested. Enjoy!  

Zillow
  • Pull back in the stock price is a bit more valuation related, not as concerned with the actual business but still big questions as to the overall market opportunity. How are these guys not profitable yet?
  • Redfin is now a competitor in the public market and while the business model is a bit different (advertising versus online brokerage) it will likely be a worthy challenger to Zillow and could be worth a look as a recommendation at some point.
Walt Disney, Netflix
  • Streaming product is a smart idea in that they already have all of the content people want. But can they execute a compelling platform?
  • Shows how important and valuable Netflix’s early investments in the space were.
  • BBC coming up with its own streaming offering as well.
  • Cost argument is becoming less and less relevant over time in the move to streaming. The collection of a la carte apps you may subscribe to for your content may start costing as much as it would be to just subscribe to a cable package.
  • Netflix and Amazon are both making big investments in their own children’s content and it’s paying off; the content is good and kids are watching.
  • ESPN is becoming a bigger question mark. People valuing time differently, are sports as attractive an entertainment option for younger generations? Are sporting leagues running into a situation where they won’t be able to command as much pricing when contract renegotiations come back around?
Chipotle
  • Long road ahead for these guys. Any negative press is crippling regardless of veracity. Perception is reality like it or not.
  • Good move on Ells’ part hiring a chief restaurant officer as well as chief communications officer. Both have extensive experience in dealing with restaurants that offer fast food, an area where Ells needs some serious help.
  • Chipotle peak earnings was $15 per share in 2015. Perhaps they hit $7.50 in 2017. How long to get back to $15? Can they ever? And if so what’s the multiple on the stock? It likely never gains the premium multiple back, perhaps it’s 30 in better times?
  • With this in mind the stock even today as it looks to dip below $300 doesn’t look like a steal.
Under Armour, Nike, Dick’s, Foot Locker, Kohl’s
  • Bit of contention between Dick’s and Under Armour as Under Armour continues to develop its relationship with Kohl’s. This relationship is resulting in Kohl’s being able to offer Under Armour gear at lower prices due to the nature of its business.
  • Tough road ahead for Dick’s Sporting Goods and Foot Locker, probably not as severe for companies like Nike and Under Armour over the longer haul as they have the brands and the products that people want in the first place.
  • Still some questions on Under Armour’s connected fitness acquisitions and potential return on investment.
  • CEOs like Plank and Ells tend to paint targets on their backs with their bold statements and outlooks. This can work when things are going well, but when the worm turns it can work against them just as much.
  • All in all, the future for Under Armour looks encouraging as long as Plank can learn from mistakes and just focus on growing the business by getting great product out there as opposed to hitting unnecessary benchmarks.
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    My name is Jason A. Moser and I'm lucky enough to have a job doing what I love to do: investing. But my family, golf, music, watercolors, reading, writing, current events...these are all things that matter to me. Consider yourself warned.

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