OSTK

Shopping for Income Within Retail in a Digital World

by

Image Source: Mike Mozart The 2017 holiday shopping season has shown that e-commerce has never been stronger and it will only continue to grow. But there is still potential for income generation among more traditional retailers. Investors must be tremendously discerning in this area, however, as margin, and ultimately free cash flow, pressures remain prevalent. We like Walmart, Target, Costco as income ideas in retail, but TJX Companies and Best Buy may be worth a look. We’re avoiding the department stores and teen retail like the plague, regardless of their Dividend Cushion ratios. By Kris Rosemann and Brian Nelson, CFA What an incredible time we’re living in. For those that study history, the US’ pressure on other countries like China … Read more

Valuentum’s 3 Breakthroughs in the Field of Finance and More

by

Valuentum’s President Brian Nelson pauses for a picture before speaking at the CFA Society of Houston in March 2017. By Valuentum Editorial Staff Let’s cover Valuentum’s 3 major breakthroughs in the field of finance. The first one is big and may challenge you to rethink everything you think you know about investing. 1. On a logical framework, Valuentum has debunked John C. Bogle’s landmark syllogism that has paved the way for the concept of index investing. Index investing has been built on a logical shortcoming, whether supported by evidence or not. We think it is important that the investment community know of this. Read (pdf): The “Luck” and “Randomness” of Index Funds (2018), Brian Nelson, CFA See video documentation: /FALLACY_of_Index_Funds To … Read more

15 Stocks That Have Boatloads of Net Cash Relative to Their Market Cap

by

They say that value is in the eye of the beholder. This is certainly true, but when it comes to stock valuation, value rests on the balance sheet and cash flow statement. The build-up of net cash on the balance sheet that results from the net performance of cash flow from operations less both capital expenditures and dividend payments is the primary reason how the intrinsic value of a firm increases over time. Think of a company’s balance sheet like your personal savings account. The more money you put into your personal savings relative to your liabilities and what you spend on personal dividends like vacation, for example, the wealthier you are.  Similarly, the more cash a company saves on … Read more

Amazon Drops $40 Per Share

by

Amazon (AMZN) continues to focus on taking market share and damaging its competitors rather than generating large accounting profits and cash flows. The company’s cash-flow generation should improve if investments turn out to be profitable (and management turns off the expense gushers), but the company remains a low-margin retailing operation. The market has recently grown impatient with the executive suite’s lack of profit focus, and reaction to its second-quarter results, released Thursday, couldn’t have made this point more clear. For a company that boasts a market capitalization of ~$146 billion, one would think the firm is highly profitable. For Amazon, however, this just isn’t the case. We explain why the firm garners such an elevated valuation (despite meager profits) in … Read more

Valuentum Economic Castleâ„¢ Rating Update

by

Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

E-commerce Remains in Secular Expansion

by

Thursday brought a plethora of news from the e-commerce space. First, Bloomberg reported that Amazon (AMZN) is raising prices on Prime from $79 per year to $99 per year. The company was quick to note that the Prime Fresh membership fee will remain unchanged at $299, as it continues to test pricing thresholds in the marketplace. We don’t expect much customer defection as a result of the price hike—and especially nothing like that which happened to Netflix (NFLX), which lost hundreds of thousands of customers when it raised prices in 2011. Amazon’s price increase at Prime was necessary, in our view, as it faces rising content (movies) and shipping costs. With more than 20 million US Prime members, the pricing … Read more

E-commerce Exposure Still Makes Sense

by

The Census Bureau of the Department of Commerce reported Friday that it estimates US retail e-commerce sales for the third quarter, adjusted for seasonal variation, came in at 17.5% (+/- 5.8%) versus the same period a year ago. On an adjusted basis, US retail e-commerce sales, as a percent of total quarterly retail sales, have advanced to nearly 6%, up from just 2% at the beginning of 2004 (shown in image below). Both the rapid pace of US retail e-commerce sales expansion and the trend toward more transactions being completed online show no signs of slowing. Image Source: US Department of Commerce The positive data follows comScore’s (SCOR) report, released earlier this month, of a 13% increase in US desktop-based … Read more

Groupon’s Results Miss the Mark; Liquidity Not a Concern…Yet

by

Once again, online deals retailer Groupon (GRPN) missed the mark when it reported third quarter results Thursday afternoon. Revenue fell slightly short of expectations, growing 32% year-over-year to $568.6 million. The firm’s loss shrank to $2.9 million, or break-even on a per share basis, which was short of consensus calling for a profit of $0.03. Roughly 80% revenue expansion in North America was overshadowed by weak 3% international growth. Further, third party and other revenue was flat year-over-year at $423.5 million. All of Groupon’s growth came from Groupon Goods, as Direct Revenue increased significantly year-over-year to $144.9 million and doubled quarter-over-quarter. However, we’re not too bullish on this dramatic shift. Gross margins in the Groupon Goods business totaled 12% compared … Read more

Our Thoughts on the Widespread Launch of 5G Services

by

Image Shown: The evolution of wireless networks and telecommunications technology over the years. Image Source: Intel Corporation – November 2019 State of 5G Presentation  By Callum Turcan The rollout of 5G telecommunication networks is upon us and we want to draw our members’ attention to some of the key companies with meaningful exposure to this space. Many are excited about what opportunities 5G technology could enable. Background On July 23, AT&T Inc (T) announced its 5G network in the US was operational nationwide and that effective August 7, both consumers and businesses with certain packages would have 5G access “at no additional cost” which included customers with AT&T Unlimited Starter, Extra, Elite, AT&T Business Unlimited Web-Only and Starter wireless plans. … Read more

2,350-2,750 on the S&P? Could the Coronavirus Catalyze a Financial Crisis?

by

Image: We think a rather modest sell-off in the market to the target range of 2,350-2,750 on the S&P 500 is rather reasonable in the wake of one of the biggest economic shocks since the Global Financial Crisis. The chart above shows how far markets have advanced since 2011, and an adjustment lower to the target range of 2,350-2,750 is rather modest in such a context and would only bring markets to late 2018 levels (note red box as the target range). The range reflects ~16x S&P 500 12-month forward earnings estimates, as of February 14, adjusted down 10% due to COVID-19. When companies like Visa talk about a couple percentage points taken off of growth rates, one knows that … Read more