I could not, at any age, be content to take my place by the fireside and simply look on. Life was meant to be lived. Curiosity must be kept alive. One must never, for whatever reason, turn his back on life.
Eleanor Roosevelt
When you are investing capital in public markets, you realize there are plenty of possibilities to place fresh money to work in. In fact, there are currently over one hundred thousand publicly traded companies across the globe. Lots of choices, with many different kinds of industries and business models, run by all kinds of people who have their own unique approaches. A distinguishing characteristic for success in any field, but especially in the investment world, is curiosity. For example, here are questions one might consider if you have a questioning mind regarding investing- Why might two companies in the same industry experience different financial outcomes for their investors? Why do some industries use more debt on the balance sheet then others? Why do some companies engage in financial engineering and what is the rationale behind it? Why is the high tech industry littered with many moonshot companies which don’t have sustainable performance and a lasting record of accomplishment? What are the common characteristics of those which have lasting and admirable results? You can probably come up with plenty more on your own, but all will revolve around the three letter word why? Essentially, why do things happen the way they do? I know, deep, man, deep.
In the financial markets this week, we learned first quarter GDP growth came it at 1.2%, much better than the previously determined .7%. On the earnings front, with the season winding down, retail showed some life with Best Buy, PVH, Tilly’s, and Big Lots bolstering investors with their better than expected results. Up north, with the housing boom (bubble?) in full swing, the largest Canadian banks all reported boffo figures. If one were curious, you might ask why, given that the Canadian economy hasn’t been all that hot as oil remains in the doldrums? Well, when the humble fifteen hundred square foot abode sells for a million dollars, it kinda helps those who write the mortgages and keep them on the books (unlike Wall Street, which either didn’t do the underwriting diligence, or just securitized them and piece by piece unloaded them to unsuspecting buyers). In the oil markets, the joy that is OPEC decided to maintain production cuts for another nine months. I know, you are shocked. Curious minds might wonder how the oil market evolves over the next five years with US oil production well over 9 million barrels per day and technology bending down the cost of extraction, especially in the shale regions. A trillion dollar question which will be answered, one way or another. Ford decided to replace their long time CEO, a guy who did a good job turning the company around and putting it in solid financial shape. When Wall Street values a company like Tesla more than yours, you have to think the board of directors decided it was time to bring a different message to the investment community. Highlighting their strength in technology (driver less cars, automation, ride sharing strength, cloud, artificial intelligence, and managing fleets) might do the trick there, we’ll see. The current challenge for any public entity is to make investors believe it has a treasure trove full of data just waiting to be ‘monetized’ for shareholder benefit. Of course, the comparisons are Amazon, Facebook, Google, and in autos Tesla, or so the market has decided.
Globally, the world was saddened by yet another senseless terrorist incident, this time in Manchester, England. Our hearts go out to the families of those who lost loved ones at the event. As a father of a young girl who I am sure will want to go to a similar kind of concert, these kinds of situations are truly frightening. It highlights the importance of authorities and security in every mature, freedom loving society. Finally, with the long Memorial Day Weekend upon us, I hope my friendly readers enjoy themselves and are curious about what events portend for the future.
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.