The Daily Update
TJ Maxx, Stolen ether, Short seller Andrew Left,George Clooney.
The WSJ had an article on how T.J Maxx is surviving the crisis in retail.[WSJ]
From the article:
It relies heavily on the instincts of its merchandise buyers, many of whom have been with the company for decades. TJX stores rapidly turn over limited quantities of products that are all sold at bargain prices. The result is a rarity in retail — a constant treasure hunt.
From above-”It relies heavily on the instincts of its merchandise buyers, many of whom have been with the company for decades”.
Michael Porter, in his book competitive advantage speaks of this as a “learning curve”. Meaning, certain companies develop expertise in some area that as time goes on, they become better at and thus make it harder for competitors to come in and copy them.
Also from the article:
Buyers undergo intensive schooling. Trainers travel with new buyers for their first three years on the job. Buying techniques are codified at TJX University, an in-house training program that teaches employees how to identify value. Staff learn to evaluate products based on a formal formula that rates brand, fashion, quality and price on a scale of one to four. A total score of 16 is considered the perfect buy.
I know technology is a disruptive force in the retail space, but I have my doubts that something like this can be phased out with technology, at least in the short term. I think the the more likely solution down the road is a combination of technology and humans. Tech to do the math and analytics with a human, who has decades of experience, adding the nuance and using his or her instincts.
Scarcity and treasure hunting:
T.J. Maxx is an off-price retailer, meaning they buy high end and designer brands in bulk at a discount and sell them at affordable prices in their stores. Overtime, they have trained their customers to expect high-end brands at great prices, but, and the but is everything, those high end goods are scarce and might not be there if you wait.
The store is laid out by category, not brand. Typically, malls have specific areas for specific brands. Our J.C Penny has one area for Ralph Lauren, one area for Under Armour or Nike. See below.
T.J. Maxx is laid out by category, making it like a treasure hunt.
Scarcity is a powerful force, especially in the retail business, when most things are just a click away.
From a technical perspective, T.J. Maxx is coming up on a support level around $64. I will be looking to buy on dips, not sure where or when, but I will update the model portfolio if and when I do.
As time goes, I will update my notes on T.J. Maxx. You can use this link here to stay updated.
Stories from the street
Great piece on famed short seller Andrew Left. You just have to be a different kind of person to be on the short side of the business at his level.[NYT]
A thief made off with $55 million of ether. The most fascinating story I read all day. These are the wild west days of the cryptocurrency market. I expect we will see more stories like this in the future.[Bloomberg]
The trader’s corner
Crude oil appears it is heading toward $40. XLE breaking down through $64, next stop $60.
Below the fold
An interesting idea hack. Joseph Smith at CLS Investments uses Vanguard Dividend Appreciation ETF[VIG] to find high quality companies. This ETF holds around 200 companies excluding RETIs that have a history of increasing dividends for 10 consecutive years.[Bloomberg]
While most of these stocks are not cheap. It should be a good initial screen for investors whenever they are searching for high quality stocks.
At some point, I will go through all of them and try to cut the list down to 10 or so that offer the best reward/risk.
George Clooney makes a killing. George Clooney and his co-founders are selling their tequila brand Casamigos to Diageo for $1 billion dollars.[Bloomberg]