- The chart to the right shows the estimated average check per meal in Las Vegas using data from the Las Vegas Convention Authority. Note that the significant increase in check has corresponded to rapidly expanding casino hotel EBITDA margins. I don't know about you but $20 per meal (including breakfast!) sounds like a lot of money to me and hardly sustainable. Look for a resurgence of the cheap buffet and the food court.
From a sports Blog..
The Olympics are supposed to be about the spirit of competition among nations although we all know the games are about making money. With that in mind, McDonald's is seizing the opportunity to promote its brand - even if it's at the expense of America. Ronald, Grimace, the Hamburglar, and the other characters at McDonald's have chosen the slogan Wo jiu xihuan Zhongguo ying, for their Chinese marketing campaign. When translated the phrase means I love it when China wins. Think I'm Lovin' It with a sino addendum.
- Levi Strauss & Co is not public, so naturally no one in the equity world on Wall Street cares about it. But let's not forget that Levi is 50% bigger than VFC's Jeanswear business. Levi's and the VFC brands combined account for about 50% share of denim in mass channels. This is a zero sum game, and while slight shifts in share one way or another happen all the time, any major swings in results for one usually flow through to the other. Not good then that Levi's sales in the Americas were down 20% this quarter.
- Granted, VFC just preannounced on the positive side - which suggests that its portfolio in aggregate is tracking better than Levi's (which is dependent on a narrow brand set -- Levi's and Dockers). But when such a big competitor prints the sharpest revenue slowdown in over 5 years, increased order cancellations, and gross margins rolling over on the margin, how can this NOT matter? Tack on the fact that Levi's is not public, and does not have to worry as much about external quarterly expectations and they can make the right business decision when times like this get tough. Top it all off with increased problems in implementing its new ERP system, and exposure to now-defunct Goody's, and it is not a pretty picture as it relates to control over its business.
- Increasingly desperate giants in this business are usually angry and destructive giants. Levi's is huge and its temper is flaring. With VFC, now we face promise of an EPS growth ramp in 2H that is baked into estimates (consensus calls for 14% growth), which also coincides with VFC having to anniversary recent acquisitions. At the same time, short interest remains low, and VFC has been a perennial favorite among the sell side. In fact, there are no sell ratings, and the 'buy rating ratio' of 67% is as high as it has been in over 5 years. While it may not seem expensive at 7-8x EBITDA, it's tough to ignore that it has seen 4-5x in the past. Granted, it was a more asset-based and commodity-driven model during those periods. But even high quality names like Ralph Lauren are at 8x EBITDA. Others in the space are much cheaper.
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Short interest is only 2% of the float and we have some "concentrated" hedge fund players on the top holders list that are getting pretty good at buying tops. This continues to look like a great cyclical short.
Earnings season has officially begun.
(chart courtesy of stockcharts.com)
Attached is the chart of GLD. It's up over +7% since the mid May US bear market rally high in US stocks.
*Full Disclosure: I own GLD in my fund.
That story is getting a lot of air time today, and it should - 18 year lows are statistically significant. Can you imagine what these numbers would look like if they back tested 25,000 PM's performance across real bear market cycles like that of 1973-75?
The numbers for June's quarter end are rolling in, and the tide is rolling out on the levered long community. To borrow Buffet's analogy, now we can see who was swimming naked, without a risk management process.
I've been making this call since November of 2007 when I left the buy side. So now, at the very least, I do not have to endure the countless "you have an axe to grind" emails I was getting 9, 6, and 3 months ago from strangers. They were levered long, and ultimately proven wrong.
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