Monday, September 29, 2014

Bought Lululemon (LULU)

I bought a small amount of Lululemon (LULU) within recent weeks at an average price around $40.  This is intended to be a short to medium term trade.

Support for the trade:

  • Stock is down 50% from recent historical highs
  • The scuffle with founder Chip Wilson has calmed after the deal with Advent International
  • Advent knows this business very well and their involvement is a positive signal
  • No debt, strong cash position
  • A profitable business with loyal customer base
  • I don't believe the core customer will migrate to cheaper alternatives--do you really want to show up at mommy&me yoga wearing the discount brand?
Potential catalysts:

  • M&A, inversion transaction?
  • Share buybacks
  • Continue to 'beat' quarterly analyst expectations
  • Positive signals from international expansion
  • Less appealing acquisition target from use of cash for buybacks and the U.S. crackdown on the tax inversion trade
  • Continued downward trend on comparable store sales
  • Poor execution in the direct to consumer channel
  • Poor results from international foray

Friday, September 26, 2014

Good news, bad news in U.S. jobs data

I looked at some Canadian labour force charts quite a while ago (here and here).

It is a pain to manually create charts in Excel so I thought I'd look at some U.S. charts using the amazingly awesome charting tool, FRED, at the St Louis Fed.

First up, the good news.  The underemployment rate (as measured by the "U-6") has come down markedly from its highs.  There seems to be some debate among economists (at least the kind on TV and radio) as to whether or not unemployment rates will ever go back to 'normal' levels.  In other words, is there a new NAIRU.  But for now, the trend seems to be for lower rates of unemployment and underemployment.  Supporting this idea, hours worked has recovered nicely from the lows.  Clearly, more people working and firms requiring more labour hours is a good thing.

Now the less good news.  While the quits rate has also improved from the lows, it's still below a 'normal' 2%-ish rate (although we'll have to wait and see if it continues to trend higher or flattens out here).  This may be hinting at continued friction or lack of choices for workers trying to move jobs, and improve their lot in life.  The big bad news is the size of the working population.  Post-Great Recession, a great percentage of the population seem to have stopped working--or at least stopped being counted.

Wednesday, September 24, 2014

Sold stocks

In line with my thoughts in a previous gold post, I've finished selling substantially all of my general stock market exposure.  For me, this was XIU, ACWI, VIG, and EEM.  This took place over several months and a good deal of it was reinvested into gold ETFs.  The remainder is in cash.  So far, this has been a terrible trade as stocks have continued to trend higher and gold has gone the other way.

I continue to hold most of my portfolio in single name stocks.

Monday, September 22, 2014

Gold, and the end of the world as we know it

From time to time I come across websites describing the imminent financial end of days, and how only those with gold (and presumably guns) will survive.  The basic idea goes like this: weak economies and decaying civilizations are being propped up by governments and central banks through manipulation of financial markets, unduly benefiting the elite in the process, and the price of gold must be artificially suppressed to mask any signal of the true (i.e. low) value of fiat currency and financial assets.  The day of reckoning is coming.

While this all seems a bit extreme, I do wonder what harm all the extraordinary monetary measures, deployed over the last several years, are causing.  Presumably there is a bubble forming somewhere. Add to that concern, the disproportionately lackluster response from the real economy reveals deep problems that will not be solved any time soon.