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No. of Recommendations: 1
Staples were down across the board. 4.3% dividend yield, sales, margins are flattish, no growth. Nothing to get excited, except it is trading around 15x multiple.
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thanks for mention
always appreciate that

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care to express why you think it will move up?
say, in the next 18 months

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per VL, 953m cash and 9625m debt so an ugly BS (I think this means more than it used to be in company like this)
for EPS from 2014 VL shows 2.83-2.86-2.92-3.08-3.10 with 3.10 the 2018 estimate, or almost no growth despite a significant drop in share count and an improvement in the tax rate
on the dividend, I can get 5.5% from closed end preferreds, 6% from WFC-L, though it is interesting but where are rates going?
how much are they buying Blue Buffalo for? How does that compare to what GIS actually trades at?

ORCL trades cheaper (another value trap)
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p.s.

why not SBUX instead?
Incredibly powerful brand
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Own SBUX. I think NA is saturated and growth outside of NA is good but not a compelling valuation. Oracle is not getting their cloud traction, their on-premise database license growth is still strong, I view that as significant risk. Oracle needs a change in leadership. The company is still run by Larry (even though he is not CEO). Until they get cloud traction, they could be trading the range or even decline further from here.

Recently I looked at PG, GIS, etc. All moved up a bit from their low's but PG has a catalyst in terms of potential breakup.

For GIS, the debt is a concern, dividend payout ratio is high and it is a concern too. No argument about WFC.L offering 6%. I am sitting with huge cash and really running out of ideas.
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I was looking at MOAT for some ideas (or confirmation bias on WFC, PM, BRK).

I noticed MOAT:
- has a position in SBUX!
- has positions in AMZN and Salesforce!!!!
- has changed from about ~20, ~5% positions (IIRC) to about ~50, ~2% positions

I also noticed that VanEck has a MOAT-y international fund called MOTI that has done little over the last year. Anyone like it? It has slightly higher management fees and holds about 80 positions. Holds Tencent and SoftBank!


I haven't been doing much except for a little rotation that seems to be paying off on the fringes. GOOG, FB, DLTR & CHTR.
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thanks but - no, I get ZERO credit with those restaurants (and retailers)
if anything, it is something I'm contemplating doing a writeup on it
something in the order of the grass is greener fallacy
but I'm trying to figure out if that is actually true or hindsight cause I'm not sure I would have had the gumption to buy big anyway in the area
certain for sure I didn't see tax reform in a specific way even though it was easy to speculate about
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I have gotten used to Morn's research and while I often don't agree with them it is hard - anecdotally at least, to not admire their consistency

I own MOAT and MOTI - but sold most of my moat during a market dip
stupid move but I always tend to sacrifice outside managers
spread on MOTI is not very good though - often too high to be acceptable during trading day so be careful

not sure you have morn (if not, it is worth paying up for it IMO)
but you can run performances vs. various funds
so MOTI NAV return vs., say, VEA (Vanguard Developed Markets ETF)
1 year you get MOTI vs. VEA 4.5 vs 8.5, so not really pretty or inspiring, but that is just one year
I figure I'll give them 3 to 5 years, but I have a nominal position on it
I added cause of MOAT

if it matters, MOAT vs. SPY
5 years at 14.1 vs 13.96
3 years, which includes the more recent constituent changes which looked logical to me (logic in terms of soft feel) is 14.1% vs 11.6%
it has been fairly impressive
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Own SBUX. I think NA is saturated and growth outside of NA is good but not a compelling valuation.

I guess I'm just enamored of the brand name - I just think they can do more with it. Understand saturation arguments but less than 18x for SBUX? Will admit to a bare dink for now, and hoping it gets beaten up further - my experience, rightly or wrongly, is that powerful brand names like this that aren't really broken eventually find their way out of the woods. And I would add more if it fell more too.

it is funny, ORCL will do - don't know, as I'm no expert, about 45 billion to 50 billion in cash flow in the next three years and everybody thinks they are messed up cause they've buried the cloud numbers cause cloud numbers are actually more important than real $$$$. Agree, the narrative is 100% broken, and I'm writing it up as a poster child for 'value traps' in my portfolio this Q, but I can't bring myself to rid it. My mistake - sure been so far.
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guess another way to put it
if Q3 comps are up 3% for SBUX, no reason it can't be $60
maybe that's a dumb way to invest...
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No. of Recommendations: 3
for funsies
my musings (early, early draft) on value traps
somehow, I have to make this coherent in a week or so
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VALUE TRAPS
No investor willingly holds a value trap. This is a security that seems like ought to be worth more but ends up trading in a tight range, with no real appreciation realized. As such, value traps are among the most frustrating investments imaginable, with tantalizing possibility never actually realized, so avoiding these securities is paramount.
Dicey cause they aren’t bad companies and seem like….balance sheet strength gives them options….MSFT was considered a value trap and I continually underestimated HD. Value traps take up space in a portfolio that could be used for more dynamic entrants.
Distinguish between these and outright lousy investments.
While these criteria are subjective, value traps are often marked by disappointment of varying degrees
• Out of favor industry. Sometimes stock valuations resemble popularity contests, with ‘sexy’ business models like cloud computing garnering high investor excitement and deadly dull areas like legacy database systems little respect. This occurs even if the dull area produces better profits but investors are often trained, in least in the short-term, to focus on other areas.
• Declining Market Share. One of the more frustrating metrics often used to judge a business is total addressable market, or TAM for short. Frustrating for me at least, because outlandish estimates of TAM can often be used to justify the most outlandish valuations imaginable, which runs contrary to the idea that an company must produce distributable earnings to valued correctly. A value trap is often a stock whose TAM appears limited or shrinking; this could be due to outdated technology, new competition, or simply market saturation.
• Missing Forecasts and Muted Sales and Earnings. The surest way to break out of a price range for a business is to produce perception changing results, but value traps by definition are more apt to reported dull results and forecast dull forecasts, and forecasts are the key. Note that when management provides a forecast they can intentionally under promise and over deliver, but value traps can’t get this formula right. Over time, a company that makes a series of inaccurate forecasts is no longer believed, and the valuation suffers.
• Boring Story. Finally, value traps by definition tend to be boring stories, but managements are not obvious to this this. Every company wants the company to be seen in the best possible light, so they try to turn a narrative to its favor. The key is exciting on this narrative, but if you tie in bad forecast with a boring story and investors look faith, the stock just sits there.
Too much patience from the investor – an investment is a speculation that didn’t work out; I’m not worried about terrible near term results because I’m a long term investor
When should patience run out – what is the company’s story and has the investor’s thesis changed?
This is a hard thing to avoid, but maybe the best approach is to always look for better ideas than existing stocks. Object is to make the train stronger, not longer. TIS rarely fully invested which probably increases the odds that we’ll have these energy draining vampires because I’m too passive in finding better ideas. Hindsight bias and remembering one’s own history – the HD example – all value traps are not.
Moment of truth – which stocks in the TIS portfolios could be potential value traps? Three immediately came to mind as I typed this section: IBM, CHKP, and especially ORCL.
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Do you prefer GIS to KHC? All things being equal, I might favor KHC in view of some potential 3G optionality.

That being the case, I agree with the market that packaged foods is pressured, and I am not sure about wading into the area.
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SBUX:

I used to french press my coffee and like Starbucks DARK roasts with a good amount of milk. I never bought a Keurig but I bought the Verismo from Starbucks after trying it at a friend's house. Warm some milk, put in an espresso pod and hit the espresso button 3 times. Makes a really, REALLY great cafe au lait.

Buy the pods at Bed Bath and Beyond. You can get the 72 packs on 20-25% sale fairly often and then add a 20% coupon on one item. I usually average about 65 cents per pod and it is FAST and good. So much better than Keurig -- think it's the way they force the water into the pod with 3 prongs. Or Starbucks is lacing the pods with meth or something.

I never owned SBUX early on outside of indexes. Bought it twice in 2008/9 for $26 and ~$7 (not split adjusted). Was a great company and I sold around $60 I think -- shy of a 10 bagger. Do you think this is a buy and hold punchcard stock or just a trade these days? Knowing full well you don't punchcard per se.
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i think it is a higher quality range-bound stalwart - so you trade it

I mean, maybe I'm old, but - as an example - the morn evaluation (one of many) on their latest announcement bemoaned the failed execution of this company which I guess I view as laughable. SBUX is one of the handful of greatest businesses in my lifetime and they are entitled to mess up a little bit, esp. since they have been over promising lately (been obvious - this underperformance was pegged up-front by many). I just figure they will get it straight. Does have China risk (15% of operating income) as you know.

Again, a $50 to $60 play and back again, but I'm only dink size right now and just started buying yesterday and today. I would make it more than a dink lower than $50 but view it as a trade.
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everybody thinks they are messed up cause they've buried the cloud numbers cause cloud numbers are actually more important than real $$$$

Oracle has serious limitations with their offering, they are not able to expand their offering, now they are under cutting their partners, their pricing is off, Starting June they increased the price and the proposals we had out with earlier pricing have to pulled, that is a serious mess, the licensing model is completely messed up, etc... Spend two days at Redwood shores and still we could not come up with a pricing model... If Oracle is not going to get this figured out, there are going to be some nasty surprised in the next 1 or 2 quarters, we just finished a quarter without a single cloud deal...

Oracle had multiple application suits, EBS, PeopleSoft, JDS, Siebel,.... But they are not able to convert these into SaaS model. Workday is now $28B market cap vs Oracle $175B.

The only reason I have not shorted Oracle is there is $70B cash sitting on the balance sheet (even thought they have debt), they can launch massive buyback's anytime.

What Microsoft did under Satya is truly remarkable. I cannot believe how well I understood Azure and how stupid that I never bought Microsoft. Likewise, letting Adobe shares go on a covered call, instead of buying back when it broke out on $100...
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potential value traps? Three immediately came to mind as I typed this section: IBM, CHKP, and especially ORCL.

IBM: Cloud, automation will hurt their legacy business for at least another 1 to 2 years, and the revenue could drop by another $3 to $5B, declining revenue, margins, technology obsolescence risk

ORCL: Legacy business is still strong but transformation to cloud and digital is going nowhere. Cannibalizing existing revenue and hesitant to spend now (thus take a hit on margins, EPS targets etc) will be hurting. Their database business is really strong, I think this is a long-term risk and hoped they would mitigate this with their SaaS but so far failed.

CHKP: Solid earnings, solid margins, no debt, $1.5B cash. I think the company had an opportunity to grow significantly and didn't. product/ technology obsolescence risk is high, if this is a cosumer brand, I would happily buy.

In a nutshell, all of them are value-trap's. But I see no reason to hold IBM or Oracle, but I am not averse to holding CHKP.
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6% from WFC-L

They lost 7.5% on a small interest rate change. I don't think long-term interest rates will raise above 6% in near future, but if 30 year interest rates raise to 4%, the price could go down by another $100.

If you are holding WFC-L, you need to find a way to hedge interest rate risk. If we could short 30 year treasuries and go long WFC-L, the excess return of 3% would be awesome. I just don't know how to make that work. But in an IRA, holding over for few years, the excess return could mitigate any decline in price.
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If you are holding WFC-L, you need to find a way to hedge interest rate risk.

if it matters, no disagreement here, but I tend to view these are entirely 5 years holds and more, and thus believe that this and things like it can earn the coupon over a range of years; therefore, I don't believe a hedge is necessary, especially if you vary position sizes. I've held preferreds like this for - don't know - a decade or more, though the bulk of what I use is CEF preferreds, not bank ones.

I also think if you watch a collection of them you can, at times, make a little bit here and there moving things between them. There is also an opportunity to add small returns based on how these things trade around ex-dividend dates. I know this because I've been doing this for a long time, especially in the closed end preferreds (by the way, thanks to hacker who abused me in my ignorance and set me straight on how to view the credit risk; even now, there are CEF preferreds with virtually identical credit risk with yields ranging from 5.55% to 5.09%; there's even a virtually IDENTICAL CEF preferred on the same underlying fund that trades for differing yields, so there are clear and obvious inefficiencies based on lack of awareness and liquidity).

Of course, if you 100% invested in common stocks all the time, there is no need for these things.
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ORCL keeps tempting me but I keep dodging it. For now.
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Great company SBUX but hard to get excited at 19x fwd PE for 11% growth trailing 5 years and presumably still slowing.

10% lower I'd think about buying a dink.

But I always trade this name poorly. Should never of sold the shares I bot at $8-9. [My friends still have theirs!]
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Just a thought, why SBUX should not be viewed similar to consumer staples? Look at other names like KHC and PG, it is trading at similar valuations, and have better growth and lower debt and dividend yield is similar.
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Just a thought, why SBUX should not be viewed similar to consumer staples?

because SBUX has the most powerful brand name in the space
ZERO debate on that
it is the only consumer name that could never be dismembered or disintermediated by Amazon
it is the coke without the pepsi
it is the drink nobody in their right mind would go without
often times, their biggest problem is how to serve customers fast enough


but I gotta dink right now
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Great company SBUX but hard to get excited at 19x fwd PE for 11% growth trailing 5 years and presumably still slowing.

agree - I view it as trade it range-able stalwart so waiting for a dip in the range.
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No. of Recommendations: 2
Sbux is tough, it's almost like HS needs a 3rd tour, even though he's barely packed up his things. The new CEO talking up digital like it will save the day is hard to stomach when my newfound addiction via the app continues to get less efficient. Instead of a tiresome and already annoying 3 clicks to pre-order it went to 6 or something a while back. So I switched to mobile pay. This took 3 minutes out of my day, or maybe I gained 3 as the mobile pre-order can be bedlam. Then the barcode shrank by 90% so that scanning(ditched pre-order mobile but am on mobile pay) takes forever and the lines keep piling up.

They can't seem to get more people through and food just hasn't really worked. Although Amazon won't make coffee it's still to blame. Like with the staples, the high end experience people now have offerings in big cities, at least here in TO, and its easy(ier) to set up shop because retail space is open (Amazon). It took way too long to recognize that rolling more stores won't work (classic - but honestly when crews of construction workers are loading up trays you gotta think "saturation") and neither will taking price as MCD is now the real deal so non China growth has to be from "experience". And it doesn't seem like the new guy gets experience.

I'm sure China will get fixed but for me it's a bit scary that this reduction in takeout took comps down so much and people only figured that out at the Open conference. Seems like more to drop?

Still, down a bit more from here as it fully transitions to stalwart from fast grower (my mistake, this happened before I noticed - so suffering from value trapitis), and you gotta think this is winner.
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