A look at developments in the financial markets over the last week or so.

The best time to plant a tree was 20 years ago. The second best time is now.
– Chinese Proverb

Featured Article

How to Read Results Like an Analyst
Keith McLachlan, a small cap equity analyst from South Africa, explains how to assess a company’s results in a few minutes.

Companies

Inside RadioShack’s Slow-Motion Collapse
RadioShack declared bankruptcy this week, which didn’t come as much of a surprise to the market. RadioShack will not disappear completely, with around 1,000 franchise stores continuing to operate. For the rest – a number of companies have been involved in negotiations around acquiring RadioShack’s stores, including Amazon and Sprint.

Amazon’s interest is probably the most interesting news – this article sums up the reasons it might be interested in a physical store presence.

Poundland To Spend £55m On 99p Stores Buyout
Poundland, the largest value chain in the UK, announced that it plans to purchase its smaller competitor. The £55 million price will be funded through a rights issue, diluting the stock. However, the acquisition will increase its store count by 50% and help it expand into areas where it is currently underrepresented.

The companies are waiting for regulatory approval, and the acquisition will likely put pressure on Poundland’s margins in the short-term. In the long-term, this move accelerates the company’s plan for 1,000 stores in the UK and cements its position as the largest value chain in the country. Given that it sells everything in its stores at a single price point (£1), scale is key to its long-term strategy of low-cost, high volume retailing.

The stock closed up almost 15% on the day of the announcement, somewhat surprising given the dilutive impact of the impending rights offering. The stock price move was likely driven by a combination of a small float and retail investor interest.

Twitter Reaches Deal to Show Tweets in Google Search Results
Twitter and Google have concluded a deal to make tweets searchable on Google. This seems like a good move for both companies: Twitter gets exposure (and advertising) to non-users, and Google gets to incorporate Twitter activity into its search results (Twitter is currently an alternative to Google for real-time news). Here’s how it will work.

Staples Inks Deal to Buy Office Depot for $6.3 Billion
After much speculation, Staples announced that it is buying its old rival and expects the move to save $1 billion annually from store closures and layoffs. While this represents another victory for Jeffrey Smith’s Starboard Value, investors seem concerned about regulatory approval, with the company’s shares close down on the day of the announcement.

Markets

How to Read Results Like an Analyst
Keith McLachlan, a small cap equity analyst from South Africa, explains how to assess a company’s results in a few minutes.

Summary:

  1. Read the previous result’s management guidance
  2. Check if revenue is up by more than inflation
  3. Check if margins are up or stable
  4. Check Headline Earnings Per Share (HEPS)
  5. Check the Cash Conversion Ratio
  6. Read the commentary as background to the numbers
  7. Where are the once-offs?
  8. What happened to debt, finance charges and tax?
  9. What is the Return on Equity (ROE)?
  10. Dividend and Dividend Cover
  11. Prospects

Going Beyond Jobs Numbers Noise
Barry Ritholtz explains why the monthly jobs report is essentially worthless to investors.
Understanding where we are in the employment cycle is vastly superior to any given monthly data point. More significant is what’s within the data. The alternative is a useless guessing game that creates far more heat than light.

Long Reads

Welcome to SubTropolis: The Massive Business Complex Buried Under Kansas City
More than 1,000 people spend their workdays in SubTropolis, an industrial park housed in an excavated mine the size of 140 football fields.

The way we get off airplanes makes absolutely no sense
There’s a much better way to deboard, and no airline uses it.” Why?

Graph of the Week

What drives millennials as consumers?

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