Walgreens (WAG) comments on Wal-Mart (WMT) “will put them out of business strategy” on the company conference call: For the 291 drugs that Wal-Mart will sell for $4, the average co-pay at Walgreens is $5.30 and for Medicare Part D patients it’s only $3.18. Wal-Mart’s program covers less than 300 generic medications while Walgreens pharmacies’ [...]
Are low oil prices good for the US economy? Of course. But are they good for retail stocks? That depends on the retailer, and on the mental account that consumer spending is coming from.
A “mental account” is not a new form of a cheque or savings account. Rather, the term comes from behavioural finance – a relatively new science that tries to explain our financial decisions. Our brain uses shortcuts to process information. And it creates “mental accounts” for different financial decisions.
We will buy a nice entertainment centre with a windfall from a risky gambling excursion – it was “found” money after all. With an inheritance from a grandmother, the money goes to a more conservative type of mental account, maybe even making it into our retirement fund.
This morning, Walgreen(NYSE: WAG) and CVS(NYSE: CVS) investors found their stocks chopped up by a bit of news from Wal-Mart(NYSE: WMT). It seems the retail giant will introduce a pilot program next year to sell generic drugs for $4 a month in its Florida stores. This is opposed to the $30 a month that CVS and Walgreen charge. Should investors hit the panic sell button?
I own all three stocks. So when I turned on the TV and heard comments like “WMT will drive CVS and Walgreen out of business!” I walked to the water cooler, got a drink, sat down, and put on some opera music (loud — it helps me think). I came to the conclusion that it’s a brilliant move for Wal-Mart (way to go, Wal-Mart!) and almost a non-event for Walgreen and CVS.
By Vitaliy N. Katsenelson, CFA I wrote this article on the impact that Wal-Mart’s (WMT) brilliant (I think it’s a stroke of genius) actions will have on CVS (CVS) and Walgreens (WAG) – which is not much, unless grocery stores will follow WMT’s lead, possibly diminishing my “convenience” argument. I failed to mention in the [...]
The Russian government’s threat to suspend licenses for two giga-billion projects by TNK-BP, in part owned by BP (BP) and Royal Dutch Shell (RDS-A), is not uncharacteristic of Russia and its very short term thinking. The Russian government argues that it is based on environmental concerns. Nothing, I repeat nothing, in Russia gets done based on environmental concerns. The government simply wants to muscle in on a larger stake in the projects.
After reading my comments on Toll Brothers (TOL), I got the following argument from a reader that I thought was interesting:
I wrote about Mr. Toll, CEO of Toll Brothers (NYSE: TOL) before. But Mr. Toll still keeps amazing me. Reader sent me the following link to Mr. Toll’s latest interview.
I just love when a person who made hundreds of millions on building houses pleads ignorance. This comment insults everybody’s intelligence: “The current slowdown is ‘strange’ because it cannot be explained by macroeconomic factors such as interest rates or unemployment that traditionally reduce demand for houses,” Toll said. “We have an apparently decent economy.”
I wrote an article in July 2005 titled “China Speed — Running Into the Great Wallâ€, making a case that Chinese economic slowdown will send that great country into a severe recession. Last month I updated that article adding some minor twists. I found an interesting counter point to my article on this website that I thought I should share with readers:
Dell (Nasdaq: DELL) is hitting multi-year lows and, at 16 times trailing earnings, is attracting value investors that have coveted the stock from afar for years. Some of this latest decline can be traced to the company’s recent downward revision of earnings estimates. And this is precisely the noise that a contrarian investor looks to capitalize on.
But are Dell’s problems short-term in nature? Though the valuation appears alluring on the surface, I don’t yet own the stock. Here’s why.
Jos. A. Bank (Nasdaq: JOSB) has reported its second-quarter numbers, and they aren’t good — they’re great!
To start with, sales were up 20.8%, and gross and operating margins improved, mainly driven by maturation of the company’s fairly new store base. But the Jos. A. Bank story is not about growth — it always had plenty of that. It is about inventories, and they were the bright, shining star of this quarter. Specifically, inventories increased only 11.7% over the second quarter last year. So why is that great news?
To answer that question, it’s necessary to understand the issues surrounding Jos. A. Bank. First, it has double the inventory days (a measure of how long it takes to convert inventory into sales) of its closest competitor, Men’s Wearhouse (NYSE: MW), and second, it had a terrible first quarter due to too much seasonal inventory. I have written two long articles on the first issue, so let me address the second issue here.
The Chinese economy reminds me of the movie “Speedâ€, where Dennis Hopper wires a bus with explosives and sets them to blow if the bus goes slower than 50 miles per hour.
The Chinese economy has 1.2 billion unsuspecting people on board. It could all blow if economic growth drops below its current pace of more than 8 percent. Even a small, otherwise harmless speed bump is likely to send this gigantic economy into a severe recession. Here are the reasons why:
Investing isn’t for the faint of heart. A Foolish investor must be strong enough to change his or her mind when a stock’s underlying facts change — or hang on tight, even in the face of a share-price decline, when they don’t. I wrote a very favorable article about Jos. A. Bank (Nasdaq: JOSB) about a month ago, and I wouldn’t change a single line in that article, despite news that the retailer’s same-store sales for August fell 6.1%.