UNFI

Target, Kroger Launch Counterattack on Amazon-Whole Foods; Industry Earnings to Shrink

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Image Source: Valuentum The pricing war has begun, but it may take years before we see the final effects. Only the strongest may come out ahead, and only those already focusing on giving customers the very best value proposition at the lowest prices may retain share. By Brian Nelson, CFA The grocery store business is now on a path of significant change in the wake of news that Amazon (AMZN) would acquire upscale organic grocer Whole Foods (WFM). The online retailing giant has wasted little time in resetting the product pricing environment at Whole Foods, and we expect that other grocers will have to follow. The group had already been on high alert given recent language from Kroger (KR), suggesting … Read more

Amazon To Buy Whole Foods: Not Creative Destruction, Just Destruction

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Image Source: Mike Mozart Amazon announced plans to buy Whole Foods. We’re viewing the news as affirmation of our decision to stay largely away from retail exposure in the newsletter portfolios. We think a bidding war for Whole Foods is possible, mostly to keep it and its real estate out of the hands of Amazon, potentially setting up for a true “winner’s curse” scenario. The winner will overpay. By Brian Nelson, CFA We’re not pleased, but then again, it’s okay. Amazon (AMZN) announced June 16 that it will buy high-end grocer Whole Foods (WFM) for $42 per share in cash. Though we mentioned that Amazon was expanding into the grocery store market anecdotally, we must say that it still is … Read more

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

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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

Restaurant Traffic – What’s Going On?

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By Kris Rosemann What’s going on with restaurant stocks these days?  Sonic’s (SONC) announcement of preliminary results for the fiscal fourth quarter of 2016, ended August 31, has been the latest catalyst to drag the restaurant sector (BITE) lower due to it reporting “lower-than-expected traffic, reflecting lower consumer spending in restaurants and continued aggressive competitive activity.” Our newsletter portfolios have not been spared the pain as shares of Dividend Growth Newsletter portfolio holding Cracker Barrel (CBRL) have faced pressure since its fiscal fourth quarter report September 14, and Best Ideas Newsletter portfolio holding Buffalo Wild Wings (BWLD) has suffered as a result of the weak data as well. Sonic’s report was not the first we’ve been hearing of slowing consumer … Read more

10 Bucks per Hour; What It Really Means

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Source: US Department of Labor, Walmart Walmart (WMT) is quite savvy. The big box retailer announced February 19 it would raise the minimum wage for all of its US workers to $9 per hour in April of this year and at least $10 per hour by next February. The move comes amid ongoing public scrutiny of its labor practices, elevated worker turnover, and general malaise among the ranks on social media platforms. At face value, the news headlines show Walmart caving to public pressure, and a win for big labor, but in reality, the retailing giant is merely doing what good businesses do – pleasing customers (which are its workers, too) and widening its economic moat. Hiking wages accomplishes both. … Read more

Valuentum Economic Castleâ„¢ Rating Update

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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

Surveying the Retail Landscape: Dollar General, Kroger, and Costco

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On Thursday, Dollar General (DG), Kroger (KR) and Costco (COST) reported quarterly results. Dollar General’s third-quarter report showed same-store sales advancing 4.4%, which propelled total sales 10.5% higher during its third quarter (ending November 1). Kroger’s third-quarter report showed 3.5% identical supermarket sales growth, without fuel, during the period ending November 9, while Costco’s fiscal first-quarter results (ending December 1) revealed same-store sales expansion of 3% during the quarter. Dollar General’s quarterly performance not only bested that of Kroger and Costco, but it also stood head-and-shoulders above that of Wal-Mart (WMT), which reported a comparable store sales decline in Walmart US and only a 1.1% increase at Sam’s club, and Target’s (TGT) third-quarter performance, where US comparable store sales advanced only … Read more

Surveying 3Q Performance Across the Retail Spectrum

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Sears There’s not much to say about Sears’ (SHLD) operational performance during its third quarter (results issued Thursday), except that it was atrocious. The firm lost more money in the most recently-reported quarter ($534 million) than it did through the first nine months of last fiscal year ($441 million). CEO Eddie Lampert has his hands full with the company’s multi-year transformation, but we think investors are hanging on to shares largely on hopes the firm will be able to monetize its real-estate portfolio in the future. Image Source: Sears But it seems that (lately) too many investors have been buying into this line of thinking, and the ‘real estate’ thesis continues to proliferate among investor psyches, particularly (now) with J.C. … Read more

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

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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

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