Paul Cerro's avatar
$36.7m follower assets
Nice post. Do you or anyone like $VMEO here? Saw you covered it awhile back. Now down like 90 percent seems kind of intriguing at like 1.2 forward sales with strong gross margins.
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Luka 🦉's avatar
$103.6m follower assets
Williams-Sonoma 💸 $0.78/share (in-line)
Periods of market turbulence are normal from time to time; what is important is to be invested in reliable and profitable businesses that reward shareholders with a stable/growing dividend. Many thanks to the $WSM team for the great job
Yield 2.25%
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Nvidia Earnings, Pending Home Sales, Durable Goods Orders
Good morning contrarians! Futures are quiet a day after low volumes. Individual stocks are moving however. $BBBY is gaining after receiving a loan. $JWN is down 14% after reporting earnings.

Durable goods orders at 0830. Pending home sales at 1000. $NVDA reports after the open along with $CRM and $WSM.

Probably things should continue to be quiet ahead of Powell’s speech on Friday.

More here
$WMT earnings highlights
Looking at both Walmart and Sam's Club merchandise highlights, I gain a better gauge on which retail niches are doing well and which aren't.

Here are Walmart's quarterly merchandise highlights:

And here are Sam's Club's merchandise highlights:

From looking at the two brands, here are a few highlights we can gather:
  • grocery sales grew by low double digits
  • health and wellness products grew by single digits (people prefer to buy smaller containers of those products than in bulk)
  • technology, office and entertainment product sales continue to see declining sales
  • back to school spending has provided some growth for retailers in areas like merchandise and apparel

Overall, this earnings report makes me slightly bullish on $NKE $VFC $FL $DKS $JNJ $ABT while making me bearish on $WSM $BBY $ETD $RH $W $YETI $MLKN.

Being the bellwether of the retail sector, $WMT tells us what consumers are shopping for and what they aren't in the market for.
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When you say you are bearish/bullish on these adjacent companies, is that more of a short to medium term outlook?
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Patience Child🤦‍♂️
I’ve mentioned before that I don’t trade, but will do relatively short-term swing trades if I believe something is undervalued, but don’t love it enough to give it permanent residence in my portfolio Just wanted to put on display my lack of patience and what it cost me this time.

I bought $DDS mid-July @ ~$197/share. Sold $DDS around August 5th ~$250. Took a peek the other day and noticed it had shot up to $300 already. I saw my other retail got a little pop today so checked on Dillard’s again; it’s up to $324 already🤯. Nice 70% gain in 30-35 days if I’d held. I’m okay with 25% in 3 weeks; but patience, at least in this case, would’ve rewarded me.

I just wanted to make note here to track my decisions live.

Seems a little crazy looking at the price of these retail companies now compared to pre-Covid levels and how high they’ve got. Specifically the ones I’ve dabbled with recently; $WSM , $DKS , $DDS , $SCVL , and $BKE.
Spectator Sport
I’m not much for short term action but I do watch daily just to see if I can add anything on bigger dips. Funny to see how the market acts to whatever catalysts it may be driving any particular action. My retail holdings all went like this today:

$BKE +4%

$SCVL +7% (my buy the dip candidate, up 20.6% since purchase)

$DDS +8%

$BBW +6%

$DKS +4%

$WSM +5%

$LULU was flat, held in kids’ custodial account (I’m a value investor)

My picks are value positions and mostly for the swing trade/shorter-term part of my portfolio; not one of my core holdings like Google or Microsoft. Positions I buy to hold, not forever, but until they reach a price closer to fair value and providing a sufficient ROI. I figure after tax Buffet numbers are a nice goal to shoot for. I always intend to hold for 1-3 years, until market sees the value, but sometimes it happens a little quicker than I expect. These positions are all up 20%-28% since purchase in May, June, and July, however, $WSM is the only retail I intend to hold long term currently, the rest I will be watching closely to sell the position at a nice gain. I’d rather be early than late, that’s usually one of the weaknesses of value investors. But I always remembered the quote I read early on that ends with “pigs get slaughtered”. I’d rather take a 28% gain in 40 days than wait on 40% or some other arbitrary number that I thought I should see.

Keeping this journal after the Covid rebound and subsequent correction will be a great tool for the future me. Knowing what I was thinking and when will be priceless.

It is fun to be a spectator and watch the market swing prices wildly up & down every quarter based on fears of recession, the joy of no recession after all, inflation, wars, etc.; all problems the market has faced before and things I don’t let affect my investment decisions. Watching entire industries swing almost 10% in a day shows the irrationality of the market; whether there are legitimate macro fears or not. History has proven problems are short term for excellent businesses. This is what makes it easier, IMO, to take advantage of. It seems the algorithmic bot trading and rise of day trading EVERYwhere, has made it easier for broad (longer-term) swing trading, driving the price irrationally high or low, creating a feedback loop of retail investors and bots chasing each other up or down.

I’ll continue to spectate most days rather than participate in the folly. I said my goal was Buffet returns; Buffet gained ~20% annually, I assume 28%-40% pre-tax gains should be sufficient to come close to that. I look at each position to meet that goal; if it happens in 2 months, it just gives me time to find another under valued position to compound my returns.

As for $WSM they will be in the Berkshire Hathaway wing of my portfolio. Excellent businesses I collect with impressive track records and long histories of execution, that I just occasionally check in on.
Luka 🦉's avatar
$103.6m follower assets
Williams-Sonoma 💸 $0.78/share
I am an Ikea guy when it comes to buying home furnishings, but I am definitely a $WSM fan when it comes to cash dividends 🤣
Yield 2.7%
I can now buy myself a new KIVIK sofa. 🤩
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They continue to have good results when everyone expects the worse from them. I'm totally a happy long-term shareholder in them. The dividend doesn't hurt either.
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Finding Gems
Been kicked twice trying to write this up, so here’s a short summary and some pics. I wanted to explain why I bought $WSM this week. Before a 20% bounce after earnings. Finding quality undervalued businesses is not difficult.

Coming from Graham & Buffet, quality and stability are most important to me. This protect me from downside, and still offers more upside than most investments demonstrate.

1) Unprofitable companies are automatically eliminated. If I’m supposed to be buying future earnings, I’m going to need to see some earnings before I pony up. I’m a man of science, not faith.

2) Negative growth rates. I’m okay with 5%-10% growth, if profitability & valuation are exceptional, but I prefer a sustainable 10%-30% growth in earnings, revenue, income, cash flow, etc., relative to peers.

3) I will not buy the most expensive (valuation, not price) stock in a sector. $AMD & $MA are perfect examples. Everything looks great, but their valuation is limiting my returns. I did add $NVDA, which clearly breaks this rule, but more as an experiment and just small positions in my kids’ portfolios.

Here is some data I look at to determine performance relative to peers:

These are 5 year averages relative to peers, for profitability & growth and current comps for valuation metrics, because current valuation is what matters. They are significantly outperforming industry averages while being significantly cheaper than industry average. Analysis done🤙

Source: Seeking Alpha

After my analysis of this and other data, I will go get a few opinions from trusted second sources that have similar investment philosophy.

Source: Jitta

Source: Simply Wall Street

Source: Bloom

This is just basically to see if everyone else agrees there IS a margin of safety, and to find any red flags I may have missed, which all three sources are excellent tools for.

Finding no red flags, excellent long term performance, undervalued in every way you can measure, is a buy all day every day in my world. I don’t care if they’re selling crack, popsicles, or teddy bears. Okay, maybe avoid the former, but the point is, performance is performance, and valuation is valuation, all the other noise is irrelevant.

Keep it simple🤙
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Looks like a great company and I know my wife and I certainly have tons of their product! Great pick!
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Strangest Bear Market Yet
This “bear market” has been a little strange personally; while it looks like my portfolio is getting destroyed every day, and I keep adding to companies I love at ever better prices, my April 21-May 21 buys are actually doing surprisingly well. These few companies were all bought between those dates. I personally believe (from Philip Fisher) that hefty returns in the first year is more luck than skill; just best not to confuse luck with skill😉
Thought some may be new companies for some to check out🤙
I hate that my top returning position, $WSM was bought 6 days ago. That type of irrational movement in price usually triggers me to sell because irrational price movements snap back the other way pretty quick, allowing me to sell for 20% gains in a week and buy back in cheaper when it snaps back. I don’t study charts but I’ve done this enough times to have an unshakable belief in it. Over reaction always corrects to some degree back the other way. The more irrational the movement, the more confident my action. This position is tiny so I won’t be doing anything. Just wanted to initiate a position in a strong company. Just pointing out some strategies I have/do take advantage of.
Source: Stash

And, to prove this is a no flex zone, here is the bottom of that same portfolio, my current worst performers😉. I am perfectly comfortable adding to every single one of these companies at current valuations. Their “current performance” is of absolutely no relevance to me. I am a long term investor and am not shaken by short term drama. I’m glad that the companies I know LESS about are doing better. Verifies again that my system is much better than I am at picking stocks. All the stocks I chose are the losers, my system chose all those at the top.

I can’t say what exactly makes me sell. I am trying to reduce activity and let wealth compound quietly. It’s just difficult when positions jump 20% in a week🤦‍♂️
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There’s the bottom of that portfolio of “winners” I mentioned. Companies I am comfortable holding long term, down currently, meaning I can continue adding to holdings of companies I believe will do wonderful things for the next decade, at better prices than I’ve seen since 2020.

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