The only way you get a real education in the market is to invest cash, track your trade, and study your mistakes.
– Jesse Livermore

Featured article

Stanley Druckenmiller: Lost Tree Club speech
Stanley Freeman Druckenmiller is an American hedge fund manager, he is the former Chairman and President of Duquesne Capital, which he founded in 1981. He closed the fund in August 2010 because he felt unable to deliver high returns to his clients. At the time of closing, Duquesne Capital had over $12 billion in assets.

Companies

Bed Bath & Beyond Inc. Reports Results For Fiscal 2014 Fourth Quarter And Full Year

  • Q4 14 $1.80 EPS (+12.5% YoY) with comp sales +3.7% YoY
  • FY 14 $5.07 EPS (+5.9% YoY) with comp sales +2.4% YoY
  • $947m Q4 bybacks, $2.3bln FY 14 buybacks

Bed Bath & Beyond announced its results last week and the market wasn’t happy – the company missed revenue estimates by about $30m on $3.4 bln (~1%) and the stock has since dropped around 6%.

Apart from this, there were a number of interesting things in the company’s report:

  • Even with revenue misses and slowing sales, BBBY is still a cash generating machine – almost $1.2bln operating cashflow in 2014.
  • It continues to canabalise itself – $2.3bln share buybacks in 2014, thanks to a $1.5bln bond issuance, after several years of +$1bln repurchases.
  • The company continues to invest in customer data management, which bodes well for its omni-channel efforts. It was slow to catch on to the benefits of technology, and is working towards better understanding its customers. At the moment, it arguably doesn’t – demonstrated by its matured sales growth.
  • BBBY is expanding its offering to furniture, indoor and outdoor. This includes large items like mattresses, tables and rugs. This follows its expansion into jewellery in 2014, and everything is available online, instore and by catalog.
  • Its also expanding into groceries and home goods, leveraging its acquisition of Cost Plus World Market.
  • Similarly, it is experimenting with combined offerings – multiple brands housed in a single space.
  • The company is tightening up its shipping and returns policies in an effort to boost margins.

The company continues to return cash to shareholders – it shrunk its share count by almost 20% in 2014. However, it also continues to invest in the company despite matured sales. These capital expenditures should be monitored to determine if they are providing suitable value. While management’s conservative fiscal strategy has given the company some room to manoeuvre in a market where other big box retailers are struggling, it cannot afford to spend cash without generating a return that can be passed onto shareholders through continued buybacks. Its margins continue to shrink and customers are as reliant on coupons as ever. This is a company operating in a commoditised sector, that needs to keep itself going (growing like-for-like and steady margins) in order to continue its share buybacks; while at the same time remaining on the lookout for opportunistic acquisitions – as it did with linen holdings. if it can do that, it only has so many shares left…

GE Doesn’t Want to Be a Big Bank Anymore
It’s expensive for GE to run GE Capital’s businesses, because GE Capital is burdened by regulation. It’s less expensive for other people to run GE Capital’s businesses, because those other people will be less burdened by regulation.

EBay Reports Details Of PayPal Spinoff
After the split, both will operate separately, each as an independent public company. PayPal will enter into a separation and distribution agreement with eBay.

JPM Annual Report 2014
The 2014 JPM annual report was finally released last week and it’s a great read as usual. Dimon takes his time to talk about the goods and the bads, industry trends, competitive threats and all kinds of things. It’s one of those letters (like Buffett’s) that you learn about all sorts of things reading it, not just about the company.

Markets

IT’S OFFICIAL: You have to pay the Swiss government to take your money for the next 10 years
On Wednesday, Switzerland sold 377.9 million Swiss francs worth of bonds maturing in 2025 and 2049, respectively, and the yield on the 10-year paper came in at -0.055%.

Mexico Sells 100-Year Bond in Euros in First Offer by Government
The country offered 1.5 billion euros ($1.62 billion) of debt due in March 2115 with a 4.2 percent yield to maturity

Why Britain’s parcel couriers are still struggling to deliver
Faced with that challenging outlook, Britain’s delivery companies cannot afford to waste time. They need to concentrate on improving results because otherwise rivals will move and grab their chunk of the booming, but difficult, delivery market.

47% of American households save nothing
It’s not good.

Investing

Stanley Druckenmiller: Lost Tree Club speech
Stanley Freeman Druckenmiller is an American hedge fund manager, he is the former Chairman and President of Duquesne Capital, which he founded in 1981. He closed the fund in August 2010 because he felt unable to deliver high returns to his clients. At the time of closing, Duquesne Capital had over $12 billion in assets.

Related

A Dozen Things I’ve learned from Stanley Druckenmiller About Investing

Star Investors Reveal Their Hits and Misses
The hard lessons from Rob Arnott, Jeremy Grantham, Howard Marks and Jeffrey Gundlach

Seth Klarman: What I’ve learned from Warren Buffett
12 lessons, including ” Risk is not the same as volatility

Long reads

New York Taxi Mogul, Seeking a Bailout, Says He’s Too Big to Fail
At the top, the price for New York mini-fleet medallions, which may be owned by nondrivers, was over $1.2 million.

Graph of the week

Warren Buffett’s Nine Rules for Running a Business

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