Uniqlo Launches Flagship in New York City – Prospects for the Brand and Fast Retailing (9983.JP)

October 23, 2011
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Uniqlo Launches Flagship in New York City – Prospects for the Brand and Fast Retailing (9983.JP)

Uniqlo is the main global brand produced and designed by Japanese parent company Fast Retailing (9983.JP). Uniqlo is an older brand with a domestic focus on market share in Japan. The company has done a great job of growing as a Japanese specialty retailer with its compartmentalized presentations and spartan, clean, and colorful styles. The clothes come across as very neat, sharp and essentially Japanese. Over the past month, Uniqlo initiated a major marketing campaign in New York City to build brand and flagship store awareness. The advertising has been all over the subway, grand central, bus stops, and taxis. The New York City flagship opening is on 5th avenue and 34th street. The store just opened on Friday and has some massive sales through the end of the...

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Lyondell Bassell – Diversified Manufacturing Exposure with 25% Upside

October 21, 2011
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Lyondell Bassell – Diversified Manufacturing Exposure with 25% Upside

Lyondell Bassell Industries is a manufacturing company producing chemicals, fuels, and polymers used for clean fuel, construction materials, automotive parts and medical equipment. LyondellBasell announced a shareholder-friendly $2.6B special dividend ($4.50/share). I believe this reflects management’s confidence in the company’s financial condition and substantial free cash flow in the medium and long term. Management indicated in its filing the intent to seek an investment grade rating over time. These actions demonstrate why the shares deserve to trade at a higher valuation. At present there is extreme value with the shares trading at sub-4x EBITDA. The company has substantially deleveraged and the risks are nowhere near the same as during the financial crisis. The cash tender offer is for $2.8B of secured notes which are due out in 2017. Lyondell...

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McRally – McDonald’s Posts Excellent Results with no Slowing in Europe

October 21, 2011
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McRally – McDonald’s Posts Excellent Results with no Slowing in Europe

McDonald’s posted an excellent set of results this morning and the quality of the reported earnings was very high because it came at an abnormally high tax rate. McDonald’s global same store sales came in at 5.0%. The results continue to confound many analysts and investors who fear that McDonald’s growth is not sustainable – in short it is sustainable. McDonald’s posted 4.9% same store sales in Europe and also indicated that September comp sales in Europe were up 6.9%. This strength of McDonald’s business is in Europe is rather stunning given all that is going on in the world. Perhaps the French are trading down from the brasserie and the German’s from the schnitzel and sausage houses (but I believe there is more to it than this). McDonald’s...

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Santa Will Come! – Strong Back-To-School Sales an Indicator for Holiday Season

October 20, 2011
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Santa Will Come! – Strong Back-To-School Sales an Indicator for Holiday Season

The back to school season was surprisingly resilient in August and September. We now have the full set of retail sales data available from company same store sales, the Johnson Redbook Survey, and Census retail sales. The back-to-school season varies by region and by state as school start dates aren’t uniform. Further complicating analysis is that some states offer tax-free shopping holidays which also have a variety of start dates and durations. In order to conduct a valid study, I looked at retail sales strength over the entire August-September period and correlated this to sales strength in the November-December period. I looked at all data in terms of y/y growth rates because this is what drives corporate earnings growth and expense leverage. The results are rather conclusive – with...

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Intel (INTC) – Strong Results Driven By Emerging Market PC Adoption

October 19, 2011
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Intel (INTC) – Strong Results Driven By Emerging Market PC Adoption

Intel is a polarizing stock that most technology investors have a strongly positive or strongly negative opinion on. Taking a step back, Intel was clearly a premier growth stock of the 1980’s and 1990’s. An investment in Intel in 1986 at a price of $0.40 (not a typo) appreciated 100x by the end of 1999. Intel experienced a fleeting rally from $40 to $75 during the technology craze in 2000 and subsequently crashed during “tech wreck” down to about $20. The shares have remained around $20 for the next 11 years. For perspective on the de-rating Intel experienced, shares earned $0.46 in 2002 while estimates are now around $2.50 for next year. While the Street gravitated towards the bearish case that nothing at Intel is sustainable (the growth rate...

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Germany and France discussing a 2T euro rescue fund

October 18, 2011
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This is being reported in the Guardian. If it is true and the plan gets confirmed it would be a set up for a lift-off.  

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Big Blue (IBM) Posts Solid Q3 Results – Adamant That Macro Isn’t Slowing Meaningfully

October 18, 2011
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Big Blue (IBM) Posts Solid Q3 Results – Adamant That Macro Isn’t Slowing Meaningfully

IBM posted a solid third quarter result that exhibited 16% earnings per share growth and enabled the company to slightly raise full year guidance (from $13.25 to $13.35). IBM has been beating quarterly consensus results by some 2-4% in consistent fashion. The 1.8% beat for the third quarter is likely causing most of the sell-off in the after-market (shares down 4.5% from yesterday’s close). I watch IBM closely because its tentacles stretch deeply into the global economy and the stock is one of the largest weights in the Dow Jones, a price weighted index. IBM’s quarter saw solid constant currency sales growth in both major markets (developed) and growth markets (emerging). Developed markets grew 1% in constant currency but emerging markets grew 13% at constant FX. This was the...

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Germany Wants To Go At Their Own Pace – Implications for Financial Markets

October 17, 2011
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Germany Wants To Go At Their Own Pace – Implications for Financial Markets

German leaders are coming out with comments that indicate there will not be a sweeping fix to the Eurozone financial crisis when leaders meet at a summit on October 23rd. Angela Merkel has been credited as saying “dreams that are taking hold again now that this package will be solved and everything will be over on Monday won’t be able to be fulfilled”. To me that is a pretty clear statement by an important leader. Moreover Wolfgang Schaeuble is echoing these sentiments this morning in the Financial Times. There are two approaches to crisis management, the American style approach which entails bringing out the bazooka, implementing a broad, sweeping, and immediate fix and worrying about many of the finer details and legal issues later on down the road. There...

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Google Q3 Earnings Surge – Demonstrates The Power of Innovation and Focused Investment

October 14, 2011
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Google Q3 Earnings Surge – Demonstrates The Power of Innovation and Focused Investment

Q3 earnings were reported after the close of market as earnings seasons kicks off. Google’s stock price has been volatile based on market fluctuations, Department of Justice concerns, fears about losing focus after the announced deal to acquire Motorola, and fear that a recession would slow search and display revenues. The above fears failed to materialize and Google continues to excel in terms of internet related innovation and vision. Wall Street estimates were much too low for the current quarter and Google beat pro-forma EPS by about $1 or 10%. The Q3 earnings conference call is worth a listen for all investors. The shares closed at $559 but quickly traded up to $595 in after-hours trading. Starting with the top line revenues, Google reported the strongest revenue growth rate in...

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A Guide for Q3 Earnings Season – What I’m Looking For

October 13, 2011
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A Guide for Q3 Earnings Season – What I’m Looking For

Earnings season officially gets started this week, with reports already released from Alcoa, Pepsi, JP Morgan and a few others. Tonight Google will be reporting after the close – a stock I continue to view favorably. Next week the reports will pour in and by the end of next week we’ll have a pretty good feel for the tenor of US Q3 earnings. It is an important quarter because the market started to price in an abrupt slowdown around the world which would naturally be expected to negatively impact earnings in subsequent quarters. It now appears the market got way ahead of itself with negativity and bearishness as the S&P 500 approached 1,100. Since the past couple weeks couldn’t produce evidence of a spiral into chaos in the Eurozone,...

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Analysis of the Fed Minutes – Dovish Tone Remains

October 12, 2011
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Analysis of the Fed Minutes – Dovish Tone Remains

The Fed minutes released today at 2:00pm didn’t provide anything that was too much of a surprise. The general impression I felt after reading the 12 pages was that the Fed remains exceptionally dovish. Economic growth, while not rolling-over, remains disappointing, so the Fed is looking to remain accommodative. Inflation was discussed in dovish terms. Early in the minutes, it’s mentioned that consumer prices appeared to have moderated since earlier in the year. Later in the minutes, the statements go further mentioning that participants agreed that inflation had moderated, though not as substantial as some participants had expected, and that inflation was expected to decline moderately over time. The possibility of QE3 was mentioned early on and “a number of participants” were considering this as a policy option. In...

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Ruby Tuesday – Highlights Value in the Restaurant Space

October 12, 2011
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Ruby Tuesday – Highlights Value in the Restaurant Space

Ruby Tuesday (RT) is one of the largest players in the US bar and grill segment. The restaurant chain consists of 841 restaurants with the vast majority of the restaurants company operated and 95 franchised. The secular trends have been working against the bar and grill segment based on healthy lifestyle trends and consumers moving away from burgers and fries towards lower fat options. Moreover the bar and grill space boomed in the 1990s and became over stored. Some bar and grill chains went bankrupt during the financial crisis and some chains have converted to other concepts. Despite the negative headwinds, Ruby Tuesday remains standing with decent operating metrics but with limited ability to grow from here. The result has been a company run largely for cash flow. The...

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China’s Golden Week Retail Sales Remain Strong – No Hard Landing

October 11, 2011
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China’s Golden Week Retail Sales Remain Strong – No Hard Landing

China’s Golden Week is one of two major 7-day national holidays in China. The two holidays are the Lunar New Year which begins sometime in January or February and Golden Week which starts in early October. The idea of a week long holiday is to provide an opportunity to take time off from work and travel. Although businesses and government officials have a holiday, the retail sector stays open during both of these holidays which make them important for retail sales. Lunar New Year is more important because there is a gift giving tradition associated with Chinese New Year but Golden Week is a very important fall shopping week as well. A number of companies have come out in China and provided indications of strong sales during the week....

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A Commitment to Recapitalize European Banks is Bullish for US Financials

October 10, 2011
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A Commitment to Recapitalize European Banks is Bullish for US Financials

The Euro rallied 2% today against the USD causing a sharp reversal of crisis-fearing “risk off” trades which have been working against all financial markets around the world. The Euro rallied based on indications that France and Germany are going to work seriously towards recapitalization of the European banking sector. This has been one of the two necessary conditions for the confidence to return to Europe: 1) Sovereign debt crisis needs to be contained by capping interest rates for countries like Italy, Belgium, and Spain. This was the easy part because for now the ECB has the authority to buy the debt to cap rates. Eventually the EFSF will be expanded and debt will be purchased through this vehicle. 2) The financial system in Europe needs to be able...

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Occupy Wall Street – Part Protest, Part Woodstock, Part Circus

October 9, 2011
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Occupy Wall Street – Part Protest, Part Woodstock, Part Circus

Occupy Wall Street is part protest, part Woodstock, and part circus act, but none of it has anything to do with Wall Street. I live in Manhattan and figured I would check out the scene this weekend not quite sure of what to really expect. There has been plenty of financial press calling the protest full of imbeciles and there have also been coverage of arrests and hard core protesting. After seeing the spectacle in full splendor most of the media coverage has been sensationalized. Upon arriving to Zuccotti Park early on Saturday morning I was immediately struck by the sanitation aspect of things. The downtown Manhattan park was something one would expect after a humanitarian crisis like Katrina or a camp for displaced refugees fleeing an oppressive dictator...

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Crying Wolf – False Recession Calls Brutally Hurt Returns

October 7, 2011
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Crying Wolf – False Recession Calls Brutally Hurt Returns

The ECRI has come out and caused a stir from continually touting their “unavoidable recession” forecast. In addition, ECRI co-founder, Lakshman Achuthan has been continually highlighting their 3/3 track record without forecasting a false positive. While this track record is impressive, Crackerjack Finance would like to highlight a term from our disclaimer; “past performance is no guarantee of future results”. At economic inflection points, the investment stakes are doubly heightened. I thought it worthwhile to review and quantify S&P 500 investment returns when investing in an environment of recession fears that does not materialize into a recession. Reviewing the numbers clearly demonstrates that if you are not invested during the time of a false recession fear you miss out on out-sized excess returns over the next 12 months. Of...

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US Economy Demonstrates Resiliency – Retailer Comp Sales Strengthen in September

October 6, 2011
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US Economy Demonstrates Resiliency – Retailer Comp Sales Strengthen in September

Despite massive uncertainty stemming from the manner in which Europe is handling its financial crisis, a gut wrenching stock market sell-off (the S&P 500 was down 7.2% last month), negative headlines almost every day, and predictions towards the end of the month that the US economy is now “in a recession”, the US consumer continues to spend at a healthy rate. Perhaps the savings rate is now high enough at 5% which is leading to more stability in retail sales than many predict. Stability with the growth rate of retail sales is one of the most important inputs towards GDP growth. With personal consumption expenditures as a % of GDP still above 70%, a 4% growth rate in PCE makes it all but impossible to be in a recession....

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