Let me be perfectly clear: I can pretty much care less about the musings of money managers and traders. Whether a person has $1 million in assets under management or Larry Fink with zillions, it doesn't wow me one bit (it shouldn't wow you, either). Here is why I yawn.
As a financial services professional, at the very least, I had better know as much as the 80-year-old self-perceived market master who also happens to wield the title of financial services professional. If I have a gap in knowledge, to fill it out I could: (1) read a CFA textbook; (2) read The Intelligent Investor; (3) study the market to see what the money managers and traders are not so secretly doing. Do not be mesmerized by the assets-under-management figure and random stock picks that were purchased at 25% cheaper levels three years ago. Gawk and you will lose; I have seen it time after time.
The money manager or trader is a mover of capital from point A to point B based on their interpretations of sourced information. That sourced information is derived, in most cases, from the financial statements and earnings calls/presentations of companies. You have access to this information. Happen to own some shares of Chipotle (CMG)? Did you know the company presented at an analyst conference on Wednesday? Of course not. Why not? Shame on you for not setting alerts on a company's news, which is free to do via its investor relations page.
Low bond yields? Stocks rising? Inflation? Whatever! I am tired of observing the general bewilderment regarding an investing attack plan on the part of the retail portion of my firm, Belus Capital Advisors. Portfolios are a mishmash of hot stocks of the moment and lame calls from 2011. There is no diversification, and certainly no list of "10 Reasons Why I Own This Stock" for each holding in the portfolio. Maybe this is a sign the market has gotten reckless and is nearing a top. Either way, had enough? Focus on companies' products, services and highly compensated managers -- they are the ones shaping an economy and the investment decisions of the whales. Stop crushing on the Gucci-wearing person thieving ideas developed from a team of 27 analysts.
Here are a few thoughts to get your mind right.
Come on, dig deeper folks! Sure, Michael Kors (KOR) earnings beat consensus by $0.10 per share and guidance was in line -- complete opposites of the disaster that is competitor Coach (COH). But trends are super important in analyzing a company's short-term and long-term prospects and determining a fair valuation. Kors shares deserved to selloff and these comparisons explain why.
Toll's (TOL) CEO Douglas Yearley sounded his usual cheery self on the earnings call, noting that "significant pent-up demand is building." The one thing he neglected to mention: How is that pent-up demand unlocked if his company is jacking prices? The average price for a Toll Brothers home surged to $706,000 in the quarter from $533,000 a year earlier. Given this pricing dynamic, and the real possibility of a reversal in rates later this year, I would sit this dance out.
Your Reckless Trade
Having a sell recommendation on Aeropostale (ARO) in 2014 has been my firm's fourth-best call of 2014; clients are up north of 50%. Although I remain concerned on the company's long-term viability, there could be a long trade here as we enter early back to school and nicer weather. Aeropostale has received a badly needed capital infusion that alleviates going-out-of-business signs before the holiday season, and new fashionable sub-brands in the store have started to create increases in average unit retail prices and conversion (which has not been the case for quarters upon quarters).
Apple & Beats
Why this deal went down:
- Apple (AAPL) wanted the subscription music service of Beats, and to own the space.
- Based on my research, Beats could have an interesting pipeline of new products set for release over the next year.