Read the transcript below.by
His mother was upset he went into law, so he dropped the occupation and went to work at a counting house (bank), however he proved to have no business skills and that job was soon over. His father lent him money to start a business to which all of the loaned money was lost. He finally ended up working at at his fathers brewery but he was more interested in politics and the injustice of taxation at the time.
Samuel Adams would of course go onto be a revolutionary and one of America’s founding fathers.
Flash forward to 1985 and James Koch and Rhonda Kallman offered Samuel Adams Boston Lager as a tribute to the revolutionary hero. The Boston native started brewing in his kitchen with a recipe that went back for generations in his family.
You know of the signature beer of the Boston Beer Company ($SAM), however you may not know they also own brands such as Twisted Tea, Angry Orchard, and Truly Spiked & Sparkling.
I haven’t given a stock recommendation on Tao Economics in a while, partially due to being very busy these days (who isn’t) and also I am a fan of saving some dollars at the moment due to an overall expensive market and cracks showing in the credit markets.
In short, I’m being patient and looking for companies that have a strong balance sheet, that are not going anywhere, and have broken out to the upside.
We have found the perfect candidate with the Boston Beer Company. Lets start with the balance sheet.
I like to turn to the google finance for a quick visualization of a balance sheet. As you can see above the debt to asset ratio is nothing. They released earning for Q2 on 07/27 and the market was happy as margins increased along with a slight increase in revenue.
This company doesn’t need to worry about the credit markets rolling over and they have over $71 million in cash as they had $61 million in cash from operations this quarter. In short they have no issues covering their liabilities.
The company does not pay a dividend, however they did retire $88 million worth of shares and they have a history of buying back and retiring shares, which effectively increase the shares value.
The full 2nd quarter report can be found here.
So is the stock cheap? It’s current P/E (price to earnings) ratio is at 22 for the year. That may sound expensive for value seekers, but consider the S&P is currently at 24 and over the last 10 years the companies PE ratio has been as high as 63 and as low as 16.7. We are leaning on the cheap side for this stock. Other ratio’s also indicate the stock being cheap compared to it’s history.
If you don’t own any sin stocks, now is a good time to add this one to your portfolio as people drink no matter how the economy is doing. So what’s the downside? There has been heavy competition in the beer and cider industry. We could see revenue’s decline again, but this is why we use a trailing stop. If things turn really bad for $SAM down the road we know it will likely take some time to play out and our trailing stop will get out of the position before too much damage has been inflicted.
The stock broke out of it’s 50 day moving average as it had a long decline from it’s 2015 high’s
Thinking a bit more after my article on why Walmart should buy B&N, I started thinking more about the advantages of Amazon to traditional retailers and how Walmart and other retailers could effectively compete. How can a brick and mortar store compete with the ecommerce giant?
Amazon gets to know you very well. You let Amazon know exactly who you are, they have your purchase history, when you buy, how much you buy and why you buy.
While I assume Walmart certainly tracks as much as it can, how many people come in the store, what items are selling what items are not, and probably basket analysis (aka Co-occurrence). The store however does not know who you are and your specific history. BTW, I am bullish on Walmart right now.
Now imagine the following:
- You walk into a Walmart
- Your phone buzzes
- You look at your phone and are prompted to sign into Walmart’s free Wifi which will automatically also signs you into the companies website Walmart.com.
- Settings and agreements on your phone can be managed so that this sign in process automatically happens when you walk into the store.
- Walmart.com knows that you are ‘in-store’.
- You pick out a shopping cart which has a unique identifier and links the shopping cart to your in-store shopping session.
- The shopping cart also has a build in wireless charger for your phone.
- You pick up an item place in your cart, the item shows up in your online walmart.com shopping cart as well. Possibly tracked by RFID and your phone.
- You walk down the aisle and notice your favorite beef jerky is out of stock. You hold your phone and scan the QR code, the product enters your cart anyway notifying you it will be shipped within a few days to your home.
- You are all done shopping. You hit ‘Proceed to Check-Out’ on your phone. You are offered an additional discount off the total price for using this system. Your beef jerky was also qualified for free shipping. You hit the final button and pay.
- Being a good environmental shopper you brought your own bags and a employee shows up to offer you help out with a big smile as you avoid the check-out line.
Now Walmart knows who you are, they can build a history and send you precision type ads and notifications. You equally become use to shopping online with their site. While the above is extremely complex and needs to integrate data centers, single-sign on, location, RFID and shopping cart tracking it is possible. Obviously this would need to be tested with a small number of stores first. But the above shopping experience would provide a huge competitive advantage with Amazon.com.
Maybe the above is already being developed? Amazon.com could also end up partnering with retailers to offer the in-store website shopping service as well.
The above shopping scenario could very well be the future. Well it happen? I have no idea. This is really just me thinking out loud as a fun exercise. But this is what I would be thinking about if I was an executive at a major retailer.
Now, I realize this sounds like one step away from facial recognition personalized shopping like in the movie Minority Report. The cell phone step would make the transition less terrifying for most people.
Folks will no doubt also be concerned about privacy. I believe there will be a market for those not willing to give up their privacy. When we tend to move far in one direction in society, something else seems to arise to counter. I am an advocate for anonymous based browsing and shopping and I hope the two worlds can co-exist.by
Walmart has been in the news a lot lately. The stock has been moving steadily down since it’s 2015 high of almost $90 a share. It recently closed over a 100 U.S. stores and announced it will be placing more money into it’s online operations to compete with Amazon.com. Walmart is now a big hiring company in Silicon Valley.
At first glance it may seem unrealistic that buying Barnes & Noble would help Walmart compete, but the company needs something to desperately draw people to it’s ecommerce website. That something could and should be ebooks. Business Insider points out that B&N has extremely loyal Nook users, however the companies ebook reader the Nook is bleeding the company of cash.
If Walmart owned the Nook it could push other Walmart.com ads to inexpensive Nook readers just as Amazon.com does with it’s Kindle.
Walmart wants developers for it’s website, imagine that it could fold barnesandnoble.com into Walmart.com and expand it’s media library along with all of barnesandnoble.com content and reviews and retain those developers as well. Think about when you go to Amazon.com. What keeps you on the site is content and being able to explore new items that you did not know existed. B&N has the content, they have customer reviews along with “Customers Who Bought This Item Also Bought…”
What about all the book stores? B&N is currently in the process of closing it’s non-profitable stores as sales are down. Can Walmart turn them around? I’m not suggesting that Walmart can change the trend of brick and mortar books stores, but I believe the companies experience and leverage may be able to help manage it’s current operations and reduce costs. The overall strategy of the buyout would not be for the stores, but for the website catalog and the Nook device, the stores would be a bonus as I believe they could be continued to be operated profitably.
Isn’t this all just playing catchup?
Yes. It is. That is the reality. Walmart needs to catchup in one major aspect. Digital content. Right now Walmart is trying to also attract affiliate members just like Amazon’s affiliate program, but Walmart will continue to have issues unless they get that content so that visitors want to hang out longer on their site.
B&N has a market cap of just over $600 million. Walmart pulled in $15 billion of cashflow just in 2015. Even if they paid a premium for B&N it would barely put a dent in their annual cash flow.
The next step after the Nook? Streaming movies programs to draw in more customers. I bet Walmart could pick up the Blockbuster brand name for a song. 🙂 It may be possible that Walmart using it’s stores can come up with a program more desirable than Amazon prime. Time will tell.by
There is a burger renaissance going on, at least here in Seattle there are a multitude of places to get a unique killer burger. Just to name a few:
- Blue Moon Burgers
- Red Mill Burgers
- Uneeda Burger
- Dick’s Drive-in
- Giddy Up Burgers
On top of all those, I guess In and Out is also coming to Seattle. Seriously, all the places I listed are amazing. I think my top two favorites are Blue Moon and Giddy UP, and yes I have been to all of them. Blue Moon replaced Red Mill for me. Sorry Red Mill!
I have never been to a Shake Shack ($SHAK). I am sure they are great. The stock has been going gang busters with a market cap over $3 billion. It finally had a major correction today of almost 10%. Not sure what triggered the correction, but it is likely due to the stock being over valued.
Think back to the 1980’s and 90’s, there weren’t that many good food options back in the day. Not like the casual dinning experience with fantastic food we are getting now. People really seemed to enjoy fast food during that time period. Then we grew up and realized what crap it all was. Why not pay a few dollars more and get something that you will really enjoy? Not to mention, what if you are a vegetarian like my wife? Fast food does not offer good vegetarian options, but almost all of the burger places I mentioned above have great in house veggie burgers not to mention local craft beer to wash it all down.
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Porter Stansberry thinks McDonald’s ($MCD) is a great buy right now. He may be correct. He points out things like huge cash flow, a high return on equity and low price to sales ratio. McDonald’s collects royalties by franchising which is a great way to make money and McDonald’s is getting out of running any of the few remaining corporate stores themselves. Porter is banking on the ability of McDonald’s to change directions.
Porter may be right, how ever I would not pull the trigger on buying the stock yet. He does admit the company should buy a higher end burger place like Shack Shack and put those in places where McDonald’s does not do well (higher end trending places). The strategy does make sense IF they actually start changing.
Before I would purchase McDonald’s I would like to see the following happen:
- End those damn “I’m loving it” jingles. They were never good, they have been played way to long and if they want to claim they are now different they need something WAY less annoying.
- The menu needs to be further cut and to get rid of the McCaffe. I actually like McDonald’s drip, but the espresso stuff is crap and a waste of time, money and adds complication.
- Forget trying to be healthy. The people that complain about the health of fast food are not the people that go eat a these restaurants. So why listen to them.
- Offer one vegetarian option for a hamburger. No, this does not contrast with number 3. There are lots of vegetarian things that are not good for you.
- I don’t care about customizing my McDonald’s Hamburger.
- Make the restaurants less depressing (Everything feels cheap).
- Make the restaurant less noisy. What’s up with all the loud beeping from the kitchen all the time?
- Don’t ever use ketchup packets again.
- Brand your own ketchup in stores.
- Give me a non-fructose corn syrup soda option.
- I have the feeling the all day breakfast will be a successes. Run with it.
- Give me something to read. Want people to use your app? Offer the paper for free from your app. If not, I’ll still buy the paper.
McDonald’s is one I am watching carefully. I think you should as well. The company now has TONS of competition. Hell, I didn’t even mention “5 Guys”, and “What-a-Burger” plus all the other fast food places that are fighting for the same customers. I am sure there are many more superior burger joints out there. If you start to notice really good changes from the company then pick up shares before everyone else starts to notice too. Warning: we may be waiting a while.
About a week ago I posted ‘2 Main Reasons Why People Fail at Starting a Business‘ which was based off of a James Altucher podcast. I covered the 1st reason why businesses fail, and stated I would cover the second reason the next day.
Well here we are a week later. To be successful in bogging or just about anything, one has to be consistent. Which I clearly am not yet.
So finally, to go into greater detail on why businesses fail:
*They remove themselves from the day to day operations.
When the owner removes themselves from the day to day operations, they cease to know their business. It may take a while to really understand the operations of the business. If you suddenly hire someone else to run your business, you will have an additional cost and the employee will not care to the same degree that you as the owner will.
There may come a time where you can remove yourself from the day to day operations from the store, but in order to do that you have to know the business very well, write an operations manual, an employee code of conduct, learn how to hire someone you can trust, meet with the person and how to work with them going forward. All of the above things and more come from a more matured business much later down the road.
Again, I highly recommend reading the following book for anyone who wants to start a business:
[amazon asin=1118178440&template=iframe image]
The author of The Reluctant Entrepreneur was interviewed recently by Mike Dillard in episode 2 of the Self Made Man. Listen to the interview here:
Its a great interview and a great book and will help clear the fog so you can move forward. Take care!by
I was listening to a James Altuchers podcast today (I’m a fan), where he was interviewing a guy named Steve DiNisio who liquidates companies and will re-sell things like used restaurant equipment on the second hand market that he requires form the liquidation process. Over the years Steve as a liquidator has picked up on a few common reasons why people fail at starting a business. He detected a pattern and it coincides with my observations from watching many episodes of “Bar Rescue” and “Kitchen Nightmares”. You can listen to the entire podcast below:
“Ep 238 How to Make Seven Figures Liquidating Failed Businesses”
The two quickest guaranteed ways to fail at starting a business are:
1. You started the business because it had been your dream. That is you always dreamed about owning your own coffee shop, or bar, or restaurant, etc…
2. You removed yourself from the day to day operations.
The first point about having a dream sounds like an awful thing to point out, as it sounds like a dream crusher. Lets take having a dream to own a bar as an example. Why is it really your dream?
* Do you picture yourself being the life of the party?
* Being able to have a drink and joke with the regulars?
* Not having to answer to anyone?
The above points are more likely in-line with the actual dream. The reality is much different. First of all you do have to answer to people, your customers and the people that loaned you money. If you don’t answer to those people you are done! As for being the life of the party and having a drink on the job, you will soon find yourself being taken advantage of by your employees and your customers. Watch enough “Bar Rescue” episodes and you will eventually see one where the bar owner really just wanted to buy a party.
I personally know a very successful bar owner who has expanded from one location to five more in the greater Seattle area. One thing I can tell you he does not do is sit at his own bar to have a drink with the regulars, and he is extremely aware of his costs.
Its great to have dreams, but when you buy or start a business you better bring yourself back down to reality because if you are not making money at the end of the day you won’t be around long.
In the interest of time, I think I will cover the second point tomorrow. Well… in the interest of my time. 😉 I would also like to point out one of my favorite books on starting a business called “The reluctant Entrepreneur”. More on the second point and the book tomorrow.by
Staples is taking a lot of flack due to making its employees adhere to the 25 hour work week. Many politicians including my own congressmen seem to be chiming in on how to run Staples. Both seem to say that the 25 hour work week has nothing to do with Obamacare, even though a recent small business survey seemed to indicate a growing concern with health care costs, and that health care costs are still rising a lot.
Lets note some differences between Staples in the Federal government.
Staples can borrow money by issuing bonds. The bonds coupon rates will be floated based on the market. And individual investors can buy the bonds with the risk of default. If the company goes bankrupt, the bond holder will receive as much money back as possible through their liquidation. Any stock holders will get what is left. Just the bond holders and stock holders are effected in this scenario
Obama’s budget is $4 trillion dollars btw, and the CBO predicts the biggest budget cost in a decade will be interest payments on the debt. There is no way to conceptualize $4 trillion dollars. Maybe government employees should be more concerned with costs and operations of the Federal government.