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Debt, Debt and More Debt

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Image Source: Michael Fleshman Many readers may be familiar with the rhetoric of the Presidential Election Cycle of 2016 and Democratic hopeful Bernie Sanders’ view on making “college tuition free and debt free.” You can take a read of the 6 steps Bernie will take as president to make college debt-free here. Many may find his last point rather intrusive to the heartbeat of the American economy and the driver behind innovation and standard-of-living improvements, but we’ll leave that conversation for another day. But what’s the shocking statistic, right? Get this – and I hope you are sitting down. According to an article by the Journal, “more than 40% of Americans who borrowed from the government’s main student-loan program aren’t … 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

Investing In Teen Retail Is Like Rolling the Dice

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There’s probably nothing more difficult to do in all of investing than predict the fashion trends of teenagers. Every season it seems there’s something new, and what was “in” a few weeks ago is now yesterday’s news. To me, predicting what kids will wear during each of the four seasons of the year is like asking my three-year-old what he did at school today: the answer is not always clear. Others say it’s like rolling the dice at the craps table. Very few firms make it in teen retail, and recent results reveal why. Abercrombie & Fitch (ANF) An excerpt from Abercrombie & Fitch’s third-quarter report: “As referenced in our earlier Business Update, our third quarter results were disappointing in … 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

American Eagle and the Difficulty of Investing in Teen Retailers

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Monday after the market close, teen retailer American Eagle (click ticker for report: ) reduced its second quarter earnings outlook. After a relatively weak first quarter, the firm was generally optimistic about its prospects heading into the second quarter, predicting flat same-store sales and earnings per share of $0.19-$0.21. However, earlier this week the firm said earnings per share will now be closer to $0.10 for the second quarter, a decline of 50% compared to the same period a year ago. Same-store sales that were predicted to be flat will actually be down 7% year-over-year (compared to 8% growth in the same period a year ago). Thus, same-store sales are only about 1% higher than they were two years ago.   … Read more

Valuentum’s Comprehensive Report on Retail Brands

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Key Takeaways ·        Valuentum sees four major brand segments o   Ultra-Luxury §  Richemont, Burberry, LVMH, Gucci (Kering), Chanel, Hermes §  Rich heritage brands, economically resilient consumer o   Luxury §  Marc Jacobs, Tory Burch, Ralph Lauren, Tiffany §  Valuable brands, semi-strong barriers to entry o   Aspirational §  Michael Kors, Marc by Marc Jacobs, Coach, North Face §  Popular with younger consumers, strong brand loyalty o   Established §  Nike, Adidas, Under Armour, lululemon, PVH, Express §  Price competitive, exposed to fashion ·        Our favorite dividend idea: Coach ·        Fallen Stars: Guess, Bebe ·        Valuentum’s Take: Brand value is only part of the investment equation Branding has been a powerful force in both marketing and investing for the past century. Companies work hard … Read more