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March Retail Sales Speak to Strength in the US Economy

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Retail sales numbers issued Thursday by the International Council of Shopping Centers (ICSC), which tracks 22 retailers, reinforced what we’ve been saying for some time: the US economy continues to grow and the pace of expansion may even be accelerating, even in the face of domestic political uncertainty, concerns about a slowdown in Chinese growth, and a recession in the Eurozone. According to ICSC data, retail sales rose 4.1% for March, with strong growth across all segments. We think the strong March retail sales performance and improving employment trends bode well for the US economy as we head into the second quarter. Though we liked the underlying March performance, we’re not making any changes to our fair value estimates for … Read more

Luxury Remains in Vogue: Macy’s and Ralph Lauren Report Blow-out Numbers

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Although the broader market sold off yet again August 10, Ralph Lauren (RL) was a stand-out performer, with shares rising nearly 5% on a very impressive quarter. As with literally every company in the clothing business, gross margins fell due to rising fuel and cotton costs. However, even with a 120 basis point drop in gross margins, RL achieved outstanding profitability growth, with diluted EPS up 57% on a 32% increase in revenue. We think the quarter’s same store sales growth (19%) was even more indicative of the company’s performance. Clearly consumers are going to this high-priced boutique stores and seeking out full-priced Ralph Lauren merchandise that is far more prone to sales at Nordstrom (JWN) or Macy’s (M). We think … Read more

Adding Collective Brands to Our Best Ideas List

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/278772-collective-brands-turnaround-candidate-not-value-trap  Collective Brands Looks More Like a Turnaround Than a Value Trap We have initiated coverage of Collective Brands (PSS) at a fair value of $24 per share based on our discounted cash-flow process. The company reported a miserable first quarter, and the stock has languished since, creating an excellent buying opportunity for long-term investors, in our opinion. Legendary investor Peter Lynch made quite a bit of money betting on turnarounds, and we think Collective Brands is the quintessential turnaround candidate. We think the stock is unfairly beaten down, providing considerable upside to patient investors. We are adding the firm to our Best Ideas List. Source: Valuentum Securities Inc.Source: Valuentum Securities Inc. (in millions of … Read more

Big 5 Sporting Goods Looks Extremely Undervalued, But Proceed With Caution

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/277117-big-5-sporting-goods-looks-extremely-undervalued-but-proceed-with-caution If you read nothing else, consider these 3 points: Big 5 is disproportionately affected by unemployment in its key home states The company continues to grow slowly and conservatively Big 5 finds homes in niche markets that Dick’s (DKS) and The Sports Authority aren’t interested in What Big 5 does Big 5 is a small sporting goods retailer with 396 stores in 12 western states. The vast majority of its shops are concentrated in California and Nevada. They sell shoes, apparel, athletic gear, and accessories. For shoppers in bigger cities, one might find The Sports Authority or Dick’s Sporting Goods, as Big 5’s stores operate on a much smaller scale. The … Read more

Top Research and Ideas You May Have Missed

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Is Quant Value Giving Intrinsic Value Investors a Bad Name? Surely, you don’t believe Warren Buffett’s “style” is out of favor? By Brian Nelson, CFA I need to make sure that you’re aware of something very important. The media and perhaps many investment professionals define the concept of “value” as companies with low price-to-book (P/B) ratios, and the concept of “growth” as companies with high price-to-book ratios. This definition of “value” and “growth” and their corresponding returns have been magnified in writings throughout the media and across quantitative research, even in prestigious journals. Warren Buffett has been rallying against most quantitative applications and how “growth” and “value” are defined in popular media and quantitative research for decades.  Here’s one of the Oracle’s most … Read more

ICYMI — Video: Will Hasty Policy Facilitate the Next Leg Down, or Do We Have It Coming Anyway?

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President of Investment Research and award-winning author of Value Trap: Theory of Universal Valuation Brian Nelson explains how US policymakers are stuck between a rock and a hard place, and how the market may be factoring in too high of a probability of a return to normalcy before 2021. This and more in the latest video report. Summary Make sure you review Value Trap on Amazon. Do so here. We think those that bought equities near the bottom of this swoon may be looking to take profits at present levels. The market is currently reflecting an 80%-85% probability of a return to normalcy before 2021, which we believe is too high at this time. Our main concern is that government … Read more

Earnings Roundup for the Week Ended Sunday, April 19, Covering Companies Across the Board

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By Callum Turcan Let’s take a look at several earnings reports across numerous industries in this article as the ongoing coronavirus (‘COVID-19’) pandemic forces the global economy to a crawl. Please note that as these reports primarily cover the first quarter of calendar year 2020, the impact of the pandemic has yet to be truly reflected in corporate earnings. That said, these reports still provide an important glimpse into what to expect going forward and how companies are responding to the pandemic. By ticker in alphabetical order: BBBY, CPSS, ISRG, LAKE, MRTN, OFLX, SCHW, TSM Bed Bath & Beyond Inc (BBBY) Shares of BBBY shot up on April 16 after reporting fourth quarter and full-year results for its fiscal 2019 … Read more

Nelson: The 16 Most Important Steps To Understand The Stock Market

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A previous version of this article appeared on our website July 21, 2013. Refreshed and updated throughout, as of July 2018. By Brian Nelson, CFA After earning my MBA at the University of Chicago Booth School of Business and training stock and credit analysts from large organizations over the past decade or so, I have heard just about every question (though I admit I am still surprised by many things and remain a very humble student of the markets). I’ve also spent years perfecting the discounted cash flow process for large research organizations such as Morningstar and studied under one of the most famed aggressive growth investors of all time, Richard Driehaus. My knowledge runs the gamut from value through … Read more