Friday, June 28, 2019

This week's interesting finds

June 29, 2019

Next will be net store closures? Real estate implications 
  • The rise of online sales has triggered a re-allocation of capital from retailers
  • Walmart, for instance, is only selectively expanding their network
  • The company, however, is investing more in IT, supply chain and innovation
  • Interestingly, it is also investing more to upgrade and transform its existing stores

Banks’ cash return yield

Most predictions turn out to be wrong.

In 1967, the Keuffel & Esser Co. commissioned a study of the future. Keuffel & Esser was a leading manufacturer of slide rules and was thought to be ahead of the curve in innovation. Their "visionary" study ended up being a huge dud, with most of their predictions being completely wrong. One thing they failed to predict was that within five years the company's own slide rule would be obsolete, falling victim to the electronic calculator. Keuffel & Esser would cease production only a few years later.

Steven Schnaars wrote a book “Megamistakes” that goes over the story of Keuffel & Esser and countless other examples of predictions that turned out to be very wrong. His message in the book was simple. Don’t be fooled by prevailing opinion, and don’t extend trend lines into the future. Instead, challenge your assumption and think for yourself. Work hard to distinguish fad from growth markets.

Today's low interest rates mean the risk is on and caution is old-fashioned. Companies selling at 20 times revenues instead of earnings (Beyond Meat is at 43 times its 2019 sales forecast, and Tableau Software recently sold for 16 times its 2018 revenue.) How long will this last?

Brand loyalty and online shopping trends: Shopify’s State of Commerce Report
  • 73% of North American respondents agree that once they find a product or brand they like they stick with it. 
  • 36% of North American respondents agree that they often buy things to cheer themselves up. 
  • Americans shop most frequently, Germans the fastest, and Japanese shoppers are the biggest spenders. 
  • November is the most popular shopping time worldwide. This is likely due to big retail events like Black Friday, Cyber Monday, Singles Day and pre-holiday shopping.
Investment Placebo Effect
  • The placebo effect is both fascinating and real, with compelling evidence of its impact in both a medical and marketing context. What about in the investment context?
  • An investment placebo is an activity or action taken to make us feel better when there is no evidence that it will have a positive impact. Often investors feel better over the short-term as they satisfy that urge to act and do something when the market makes its volatile swings. In the investment industry, there is a strong preference for action over inaction amidst the incessant news flow, erratic price fluctuations and obsession with the latest headline risk, the urge to do something can be irresistible. What if things go wrong and I have done nothing? How can I just sit here when all of this is happening?
  • While placebos in other areas can actually deliver a positive end outcome, in investing these activities do not assist in meeting our end objectives and in fact, often come at a long term cost. 

Announcing the winner of the EdgePoint Photo Contest, Part III-Even Furrier: Olivia (and Winston)