Rule #1 Finance Blog
how to invest
HOW TO READ A QUARTERLY CONFERENCE CALL (PART THREE)
Continuing from yesterday… Interpreting WFMI’s quarterly conference call.
During the fourth quarter we opened five new stores: a 51,000 square foot store in Baton Rouge, Louisiana; a 74,000 square foot store in Columbus, Ohio; a 59,000 square foot store in Denver, Colorado; a 38,000 square foot store in Boston, Massachusetts; and a 61,000 square foot store in Omaha, Nebraska. Baton Rouge, Omaha and Columbus are new markets for us. We ended the year with 175 stores and 5.8 million square feet in operation.
They got 175 stores. Good thing to know, right? Because how many can they have and how fast are they opening them up?
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
HOW TO READ A QUARTERLY CONFERENCE CALL (PART TWO)
OK. Picking up from where we left off yesterday… reading WFMI’s quarterly report.
Our gross margin, direct store expenses and G&A results as a percentage of sales were consistent with our historical averages and with our stakeholder philosophy of producing earnings growth through sales growth rather than through significantly leveraging these particular expenses.
More jargon for kinds of expenses and kinds of net income. Fuggettaboudit.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
HOW TO READ A QUARTERLY CONFERENCE CALL (PART ONE)
It is now illegal for a business to tell the Big Guys anything before they tell me. Yeah, baby! You gotta love that! So to make sure they don’t end up in Martha’s cell block, the CEOs now hold a quarterly conference call open to anyone.
The magic of technology lets me and you sign in for the call just like a Big Guy — and we can even ask questions. But usually I let the Big Guys ask since they get paid for it and usually ask lots of harder questions than I can ever think of.
The call starts with summary of how my business (remember its ALL MINE (or yours) is doing. Since the language these guys use to say how they are doing is business language, it can sound incomprehensible and scary. But it isn’t after you’ve had a bit of language training. Really good businesses that really do believe their owners should know what’s going on even transcribe the call for us to read later (or even listen to). The briefing below is from Whole Foods. I’m going to translate it for you guys. (I chopped it wherever it got boring) My comments will be in bold.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
Here’s an interesting workup. Notice how Shane is seeing the CEO discuss MOAT. The things the CEO thinks of as protection against competition – customer service, being the best – add up to one kind of moat: Brand.
If they continue to execute on these things, people will continue to buy the brand. And if they don’t, then the moat will be breached and the sales will deteriorate. So, Shane, if you do this one, you will need to watch to see if the Moat is still good in your business. Keep an eye on customer service. Now, on to Shane’s letter, and my critique at the end.
Phil,
I am doing an analysis on Staples. Here is what I have so far. Let me know what you think.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
Ben is a SWAT officer. I really like this guy. He deserves to do
what he wants with his life when he's done protecting us. I'm going to
help him make that happen.
This post is also a great starting place for all beginners.
On 11/3/05, Ben S. wrote:
Mr. Town, Ben S. here from Apollo. I wanted to see
about getting started? I know ur very busy any suggestions on were to
begin Thanx Ben
From: Phil Town
To: Ben S.
Date: Thu, 3 Nov 2005
Hi Ben!
Great. Let's get started. First read my blog. Find the Archives and click on February this year – start there and just go
through the posts to get a feel for what's going on. If you see the
post on Garmin, the guy who found that one is a cop in Kansas and he
just rocked it. About 50% gain in 4 months. So read through, then let
me know when you're done and we'll go through one business together:
Harley Davidson. And see if we want to own it these days.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
Well folks, Jason Hawkins has just pulled up what might turn out to be a very nice gold nugget. Read his analysis (from 2 separate emails), then go to the bottom to see what I think.
Email #1:
Phil,
Let me give this stock evaluating thing a try. I would appreciate your feedback. I ran a Global Search using the InvestTools website and below was the criteria:
Phase 1 : Minimum 5 green Arrows
Phase 2: MG/Zacks min. 3.25
Price Pattern: min. 2.5
Volatility : min. 2.0I figured a sticker price of $54.01 taking into account the 50% margin of safety. The current stock price is $22.97. (Did I do this right???) ASVI… The stock recently got the 3rd green arrow representing a buying signal.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
HOMEWORK: MSC INDUSTRIAL DIRECT CO. (MSM)
This Homework was submitted by Chad, an Investools user. Read on:
Phil,
I have noticed the investools valuation analysis numbers are much different than what I find on other sites. What numbers would you say are correct? Am I just looking at them incorrectly? For example Projected P/E for MSM. I looked at Yahoo finance and it shows a P/E 1 yr @ 19.32 but the investools shows a 1 yr P/E of 57.34. If I want an accurate assessment of P/E what should I be looking at?
I have looked into this company for a couple reasons which lead me into my 4M’s:
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
HOMEWORK FOLLOWUP: STRYKER CORP. (SYK)
Remember our Stryker Homework? Here’s a followup from Lyn: "I did a little more research on Stryker and found out that the earnings dip in 1998 and 1999…
In 1969, Warren Buffett faced a dilemma. Some Buffett Partership limited partners were voicing their disappointment that Mr. Buffett had been sitting mostly in cash for a long time and, as a result, they were not making the wonderful 20% plus returns of the past decade. They wanted him to invest. But Mr. Buffett knew that in every bull market Mr. Market gradually becomes used to paying more and more for a business — and eventually the prices get so high that there just is no rational choice but to stay in cash and wait for the inevitable crash. 1969 was 4 years past the peak of the bull market that started in 1942, but the market was still overpriced, so Buffett wasn’t investing — and the partners were getting antsy. Now what to do? Should he pay more for a good business or fold the partnership? Would the market do what it had always done and crash, or somehow continue to defy business gravity?
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.
Phil,
Here’s my homework. If it’s any good, maybe you can post some of this on the website. First the BIG 5 numbers:
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.