There are so many kinds of madness, so many ways in which the human brain may go wrong; and so often it happens that what we call madness is both reasonable and just. It is so. Yes. A little reason is good for us, a little more makes wise men of some of us--but when our reason over-grows us and we reach too far, something breaks and we go insane.
Throughout history, when explorers made long trips to distant parts of the world, usually in the quest for riches via colonization, occasionally, these brave souls fell mysteriously ill. The common situation was they traveled to hot, muggy, humid places and were diagnosed with the precise description of, ‘Jungle Fever.’ Nowadays, it would be called malaria, but back then it was often fatal. Still, even now, there are segments of our society which all of a sudden go ill, but not physically, instead, they become mentally ill. Now, in no way am I disparaging people with severe mental illnesses as they rightly deserve our compassion and medical treatment (sadly, too many are not getting it). Specifically, I am calling out many in the investor class who have, in my estimation, fallen to the popular delusion of cray cray, known as Amazonitis.
You see, as the value of the Amazon (NASDAQ:AMZN) enterprise now approaches over half a trillion smackers, it is now believed that anything retail related will ultimately succumb to the aggressive tactics by Bezos and company. Let’s consider the retail pharmacy area, dominated by two solid companies, Walgreen’s and CVS. Both have lost plenty of market value in the last few weeks after Amazon announced its purchase of Whole Foods Market Inc (NASDAQ:WFM). Well run companies like Costco (NASDAQ:COST) and Bed Bath & Beyond Inc (NASDAQ:BBBY) have suffered similar fates. In the department store area, if you are a shareholder of Macy’s Inc (NYSE:M) or Kohl’s Corporation (NYSE:KSS), looking at your share price could make you join the ranks of the insane, if you get my drift. This week, Amazon released a new extension of Amazon prime called Amazon Prime Wardrobe, and naturally it’s stock rose while anything related to fashion fell. It seems the case of Amazonitis has spread far and wide, so much so that Amazon’s stock price is up over 40% for this year alone. As such, if one were a skeptic, and you know I am, it begs the question is this an accurate assessment of the retail landscape and could there be an opportunity among those entities which might be unfairly tarred?
Regarding the first query, there is no question Amazon is a juggernaut and it’s Amazon Prime service, with over 50 million subscribers, is formidable for the value it brings to consumers. Still, with the overcapacity among malls and retailers closing huge numbers of stores, I suspect much of the carnage is self inflicted by management teams believing their site selection was impervious to competitive forces. As for the second question, the investment world makes decisions based on performance and quarterly results speak for themselves. If the retailers can begin to claw back market share, you will see a different attitude across the allocation landscape, after all, the quest for ownership of a rising stock is a disease which afflicts anyone in the market, sane or insane.
Elsewhere, the NASDAQ hard hitters shone this week as Adobe, Red Hat, and Oracle (NYSE:ORCL) laid waste to earnings estimates. FedEx Corporation (NYSE:FDX) and Carnival (LON:CCL) showed nice results while Sonic Corp (NASDAQ:SONC) met expectations. The Finish Line Inc (NASDAQ:FINL) and Bed Bath and Beyond had poor quarters and naturally, you know which company benefited from those figures. Up north, a big housing lender was given a lifeline by the noted humanitarian, Warren Buffett, who injected capital and received his customary pole position in the debt and equity. Charlie Munger, in a CNBC video, commented on the investment prowess of Al Gore, and you might take a look at it when you have a chance.
Thanks for reading the blog this week and if you have any questions or comments, please email me at information@y-hc.com
Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.