Just a few weeks after I announced I bought some shares, Danier Leather came out with its 4th quarter and full year 2014 results, which were more craptacular than having to explain for the 4,999th time why you don’t drink alcohol.
For the full year, revenue came in more than 10% lower than last year, and the stock ended up losing $2.00 per share. The 4th quarter wasn’t great either, as sales were down something like 15% and the loss was more than double last year’s.
A couple of things led to the crummy numbers. Since the winter was so long and cold, it ran out of winter jackets and delayed the move into spring/summer wear. There was a month or so that customers (and the weather) didn’t cooperate. Often the weather is a copout when it comes to retail sales numbers, but I tend to believe them on this one.
Margins stunk because the company’s promotions didn’t exactly work out as expected, leading it to liquidate a lot of inventory at a big discount. Gross margins fell from 46.6% to 39.9%.
The good news is that handbag sales continued to increase, and the company’s accessory business now makes up 39% of its revenue, up from 33% last year, and well on pace to meet management’s goals of between 40-50%. Handbags aren’t so weather dependent either.
The company also opened up a website in 2014, and has seen great growth from it. The website doesn’t represent much in sales now, but it’s 2014. You gotta have a website.
The balance sheet is still in good shape, and book value comes in at $12.56 per share. The stock has recently dipped to $8.80, which means I’m down about 5% so far. Not sure if I’m going to buy more. On the one hand, these are pretty much the very definition of short-term problems, but on the other, these are pretty crummy results.
I’m happy to hold, anyway.
Oh hey, it’s time for another week of your pal Nelly’s best stuff over from Motley Fool. Let’s not delay.
Because I am whatever the opposite of tactful, it’s yet another piece on BlackBerry, where I declare the turnaround over. Yes, I am the boss of such things. The company just hired a guy to head up a division which has one job — to monetize patents. That’s a good idea. Another good idea? My relentless BlackBerry pimping.
Why rental property is a crummy deal, and why you should buy REITs instead. Now, I don’t think rental properties are always a crummy deal, but in Canada, in 2014, they obviously are.
I wrote about why Tim Hortons is the perfect stock for billionaire investor and wet dream inducing grandfather Warren Buffett. I’d like Warren to be my grandfather and tell me folksy stories about what it was like to invest in the 1960s.
You guys should all know by now I tend to avoid the large-caps, because small-caps aren’t followed as closely represent a better chance of nice returns. But if I was going to buy a big Canadian company, it would probably be Rogers Communications. Here’s why.
Penn West Petroleum has too much debt for my tastes, but there could be an opportunity to make some money on the troubled name. Move your eyes over some words I wrote about it.
And that’s it. See you guys on Monday.
I’m in the middle of launching something new. You’ll know more about it next week during the official premiere, which is enough of a tease for you to be interested, but not so much that you hate me. Financial Uproar usually walks that line, actually. Just look at the dick jokes.
This project hasn’t required much in money (at least so far, it probably will later), but I’ve spent probably 20-30 hours going over the plans, setting things up, and so on. Throughout the process I’ve had doubts that I won’t even make enough on it to pay back my initial time investment, let alone make it a growing concern. But hey, I’m in a foreign land with time on my hands, so it was time to make it happen.
This is what I told myself. If I work at this for six months or a year and it flops, all I’m out is time. It’s probably time I would have squandered anyway, so it’s not a big deal. Like I’ve mentioned before, I intentionally set myself up with ample amounts of free time so I can work on stuff like this that is fun, and I think has long-term potential.
But am I looking at this all wrong?
I could always exchange that extra time for money. I could either hustle and take on extra freelance writing clients, or get my ass up and get a job. Assuming I could exchange my time for $15 per hour, the 25 hours I’ve already spent on this bad boy represents $375 out of my pocket. Another cost I have to consider is whether I’m the best choice for doing this type of work. If somebody can do what I did in 15 hours and I hire them out at the same wage, I could have paid out $225 while pocketing $375 at work.
And there lies the crux of the whole working for free thing, whether its on your own project or somebody else’s. Your time has value. I’d argue that, for most of you, it’s not worth your hourly wage at work, but it’s still worth something. And for a guy like me with lots of time and few responsibilities, it might be worth even less, but it’s still worth more than zero.
I can’t tell you what your time is worth. Hell, I barely know what my time is worth. Exchanging it for nothing is fine if there’s a potential reward down the road or if it’s something you enjoy doing. But don’t give it away for nothing unless it’s something that’s worth it. And if you’re me, hire more stuff out.
Time for freelance links
It’s your usual Saturday reading, consisting of your ol’ pal Nelson’s freelance links. He’s a Fool. As in, a Motley Fool. He’s also clever, and should probably stop referring to himself in the third person.
Think you should start loading up on cheap gold company shares? NOT SO FAST, BUCKO. Here are three reasons why you should avoid gold. Forever.
I see exactly 47% upside in Bombardier. How can I be so precise? Magic mirrors. And Harry Potter spells. He’s a wizard, right?
This post was fun to write. I ask whether Tim Hortons should bet the farm on investing in a bunch of coffee serving robots. I would so go there more often if I could watch a robot pour coffee. I would also make all the Robocop jokes.
I generally don’t hate any of the oil sands plays. It’s an important resource, and electric cars are probably a decade away from mainstream use, at least. So I wrote some words about Cenovus Energy.
Speaking of the oil sands, I also talked about Inter Pipeline, which has some pretty good growth potential in getting that oil to refineries.
And that’s it. See you guys on Monday.
Let’s take a little time to talk about Coca-Cola, and how management is killing little shareholders like you. I touched on this before, but let’s take a longer look at Coca-Cola’s share buybacks and how they’re barely moving the needle.
Over the last 4 years (excluding any part of 2014, for easy figuring), Coca-Cola spend nearly $11 billion buying back shares, according to it’s cash flow statement on the Google. Most of the time, the company’s shares were between $35 and $40 each, so we can assume that at an average of $37.50 per share would have gotten rid of more than 293 million shares. That seems like a lot, but it’s only a little more than 5% of Coke’s outstanding share count of 4.4 billion.
Then why did the share count only go down by 180 million?
It’s simple. Management is issuing themselves a huge amount of stock.
Not only that, but they’re borrowing a whole bunch of money to do so. Check out the last 4 complete years of cash flow:
They’ve spent $11 billion (ish) on buying back stock, and borrowed $15 billion to do it. Now the amount of cash on the balance sheet has gone up in the meantime, but not nearly enough to compensate for all the borrowing.
Essentially, management is issuing themselves massive stock options, and then borrowing money to buy back shares to lessen the effect. Why this doesn’t piss off Coca-Cola investors is beyond me.
Look at the share count barely moving, even though they company is spending billions buying back stock.
(The share count, at the bottom, is in million of shares. So the company went from 4.584 billion shares to 4.402 billion.)
To put in into perspective, it’s like the company paid the equivalent of $61.11 per share to buy back its own stock, because it’s too busy issuing shares to management. 110 million shares in 4 years works out to $4.25 billion in stock based compensation, assuming each share is worth $37.50.
Everybody crapped all over the banks (and rightfully so) when they paid out bonuses after the financial crisis. I know Coke isn’t in the same boat as the banks were, but why are shareholders cool with this? I’m pretty sure the company’s management isn’t so underpaid that they need these bonuses to survive.
When the newest share compensation plan was announced at the 2014 annual meeting, Warren Buffett actually went as far as abstaining to vote for the newest plan. He could have made a bigger statement by giving it the ol’ thumbs down, but hey, it’s a start.
There are many reasons why I think Coca-Cola is a terrible investment at these levels. It trades at an expensive P/E, consumption is going down, growth is virtually nonexistent, and it does dumb things like partnering up with Green Mountain Coffee Roasters to introduce a Keurig machine for Coke, because apparently there isn’t a perfectly good method for delivering perfect Coke products to consumers already.
Anyway, avoid the stock.
Time for links, yo.
You all know the drill by now. This is the stuff I do for Motley Fool Canada, blah blah blah.
TransAlta is a pretty beaten-up power generator with some problems that I think are largely behind it. Plus, shares are at something like a 14-year low, and trading at the lowest price-to-book multiple since 2004. Here are some more words I wrote about it.
Last week, Suncor reported earnings that included approximately 3% of its book value written-off because of a failed project. And yet, the stock is down 7% since. Why? I take a look at the market’s obsession with the short-term, and how you can rise above it.
Apparently it was Warren Buffett week in my head, because I wrote about him (and Fairfax Financial head honcho Prem Watsa), detailing why insurance is a big key to their success.
If you’re one of those dividend growth investor types that likes investing in companies that are a little beaten up, I continue to think you’d do well with Rogers Communications. Go read.
And finally, I make a dream joke about Dream Office REIT, perhaps my favorite name in that sector. It trades at 80% of NAV and has nearly an 8% dividend. What’s not to like?
The other day, I stumbled upon a blog post written by Mitt Romney about his trip through the U.S. Southwest with 5 of his 22 (!) grandkids. Here’s the post if you want to take a gander. It’s sweet. Mitt sounds very grandfather-y throughout, and clearly wants to make sure he teaches the rugrats a few things before he kicks it.
Which got me thinking about a couple things. First of all, I’m pretty sure Romney is a pleasant guy. If he invited me over to enjoy a nice Mormon beverage (tap water, with a hint of lemon, I’m assuming), I would go, and I think I’d have a nice time. He used to be in the private equity game, and I assume he’d have some interesting things to say about markets and just business in general.
This led me to seek out more info on the man. That lead me to this, a 2012 takedown of Romney’s business practices by Matt Taibbi over at Rolling Stone. I’ll let you go read the article in depth if you’re really interested. Let’s just say that Taibbi is not a fan of the leveraged buyout, which was Romney’s speciality at Bain Capital. I’ll say that it’s obvious that Taibbi isn’t a shareholder of anything, or else he’d recognize why buyouts are important to investors.
Anyway, Taibbi had this to say about Romney’s track record:
“Less than 30 percent per year” is a pretty broad number here. Were his returns 29% annually? 25%? 2%? There are plenty of numbers between 0 and 30, but let’s assume it’s closer to 30.
Now I know the stock market did well during the 80s and 90s, but did it really go up 30% a year? That seems high. So I used the handy Don’t Quit Your Day Job S&P 500 calculator to figure out that, between 1984 and 1998, the S&P 500 returned 14.1% a year (or 17.6% a year if you reinvested the dividends).
If Romney’s returns over 14 years at Bain Capital really beat the market by double digits, that’s amazing. Like, that’s practically Buffett good. They did not “track more or less with the stock market’s average.” Not if they averaged close to 30%.
But hey, at least I have an excuse to feature this video:
Time for freelance links, yo
More Motley Fool links for your amusement/education. Let’s call it amusication. THAT’S TOTALLY A WORD, STUPID SQUIGGLY RED LINE. GEEZ.
I continue to think higher interest rates are something that we’ll have to worry about in the medium term, and not the near term. Meaning, if you’re nervous about stocks after a bit of volatility late in the week, it might not hurt to take some gains off the table and move them into something a little more boring, like RioCan.
Remember how Bell Aliant got acquired and I called it? Considering my 100% success rate, I’d pour 100% of your money into Manitoba Telecom, which I think could be next to be bought out. And by “pour 100% of your money into” I really mean “(fart noise).”
Penn West shares got hammered this week. Look for a more detailed analysis on the company at some point in the future, but you guys know me. If it’s beaten up, I’m going to at least have a look. Penn West is no exception.
Here are some beaten-up tech companies. Yes, one is BlackBerry. No, I don’t have any shame.
And finally, coal continues to be an interesting commodity. Prices are at 6-year lows, and the big North American players keep cutting production (while the damn Australians keep upping it, for some reason. Dingos eating babies, probably.) Here’s a Canadian way to play it.
And that’s it. See you kids tomorrow for the dump.
There are a few things I miss about Canada, now that I’m an intrepid world traveler hanging out in the land of kimchi and singing appliances.
I miss all the Canadian food. My tummy isn’t so happy after a lot of Korean food. (I think it’s a shrimp/crab thing, which I’m allergic to. The internet says seafood is used as a base here a lot.)
It’s hotter than the surface of the sun here. I miss being able to go outside without sweating my ass off.
And I miss my television, especially the large amounts of Blue Jays baseball and BNN I used to watch.
Fortunately, there are solutions to all these problems. The number of American restaurants in Ulsan is sufficient for my needs. They’ve got McD’s, Subway, Burger King, Pizza Hut, Dominos, Dunkin Donuts, and so forth. Hell, there’s even a TGIFridays. Guy Fieri approves.
As for the hotness thing, let’s just say me and the air conditioner are becoming good friends. If it wasn’t for that, I would probably have been reduced to a puddle of goo by now.
And while I haven’t found any way to watch my Blue Jays (short of shelling out for MLB.tv), I found a way to recapture my business channel addiction, with the new BNN app.
The BNN app is great. It has a week’s worth of shows all ready to go, including my favorites like Market Call and Market Sense. Sure, you’ve got to watch a few ads in front of them, but what streaming service doesn’t make you do that these days? It also has blogs written by some of the on-air personalities, as well as all the day’s top business headlines.
Oh, the BNN app has more. It also has a recommended button, which gives you the channel’s most popular videos. It also has a decent enough stock lookup tool, which gives a good amount of info about a company. It even gives you a peak as to what the channel will be showing that day.
Every Canadian investor with an iPhone should have the BNN app. For every minute that you don’t download it, a puppy gets a tummy ache. You don’t want to see puppies with tummy aches, do you? I didn’t think so.
So I missed this last week. Apparently I was traveling or some junk. So allow me to condense two weeks of fun into one half blog post. Think of it as the least sexy version of a corset, ever.
Remember, this is all stuff I do for Motley Fool. If you want my words on your blog, just scroll up and hit the contact me button.
Y’all like dividends? Of course you do. As you guys know, I could take em or leave em, but I recognize there are a whole bunch of you that want to hug and kiss them. That’s cool, so I wrote this piece on some large (but sustainable) dividends just for you guys.
Remember how everyone hated uranium after the Fukishima kerfuffle? I think it’s sufficiently beaten up that people should take a look at the sector. Plus, George Soros just bought a bunch of the stock, so that’s gotta be helpful.
Back in May, I wrote a piece predicting that two Canadian companies would be acquired. This week, one of them announced that it was accepting a deal to get bought out, while the other popped on news that a rival was considering a bid. I am officially a jenius. Considering my impressive track record, you should probably bet on these other 3 companies being taken over as well. It’s practically a sure thing.
I continue to think that interest rates aren’t going anywhere for at least a year or two, and maybe even four or five, especially if the stock market sells off. With that in mind, I don’t hate REITs at this point, so I went ahead and recommended three of them.
And finally, presented without comment, I wrote something called Should Investors Even Care About Dividends?. I like that piece, and I think you should click on it.
That’s it. See you guys tomorrow for the dump.