There Goes the Neighborhood
We’ve moved. Our new office is now located on the top floor of the “Coca-Cola” building in Rogers. Stop by and see us anytime to talk about retail and supplier company stocks/finances.
Insult to Injury – Which Profit-Sharing Plans Fared the Worst in 2008?
Though many consumer products companies stocks held up well during the market malaise in 2008/2009, their pension, profit-sharing, and savings plans did not fare as well. We found that those plans with heavy exposure to mutual funds loaded with overpriced international and domestic stocks did worse than plans with heavier exposure to safer, higher quality bonds. Though few investors are aware of it, retirement plan financials are available in 11k filings with the Securities and Exchange Commission, usually in June for companies operating on a calendar year. For example, Wal-Mart’s 11-K for last year is available here and fiscal year 2009’s should be filed within a few weeks. Our back of the envelope calculation takes the beginning balance, nets out contributions and payouts to retirees and then divides this total by the investment loss less any interest and dividends. To ease comparisons, all companies in our graph have the same plan year-end. Our list is not all inclusive because some companies have different year-ends (Proctor & Gamble, Hormel) making comparison imprecise while some companies file their profit-sharing plan financial documents with the SEC in such a way as to prevent online access (Clorox, Kimberly-Clark, Sara Lee). *Alberto-Culver merged two plans which may have affected our calculation of returns. Source: Company filings
Proctor & Gamble’s Big (Ad)Venture
P&G isn’t just investing in car washes (Mr. Clean) and biofuels (LS9, Inc.). Earlier this year P&G made an investment for an undisclosed amount in the British online retailer, Ocado. Ocado, which does about $750 million (US Dollars) in annual revenue, is rumored to be planning an initial public offering (IPO) next year. If memory is correct, P&G avoided investing in Webvan and Peapod during the Internet heyday. For sure, venture investing is a very different business than selling soap. Wonder how Wal-Mart, Kroger & Safeway feel about one of their top suppliers investing in a competitor? Source: The Times.
Happy 35th Anniversary Bar Code
The NY Times did a nice write-up on the bar code industry (read it here). Highlights: On June 26, 1974 the bar code was first used to swipe the price on a pack of Juicy Fruit gum. Bar codes are scanned over 10 billion each day. RFID technology adoption has been slow due to cost –Bar codes cost a half a cent each compared to 5 cents apiece for RFID tags. Our observations: the bar code changed retailing, enabling retailers and suppliers who embraced technology to extend their inventory planning, merchandising & cost advantages to accelerate the extinction of slower competitors. Second, many people working in retail/CPG industry have no idea what retail was like before the bar code. Source: New York Times
Smile When You Say That, Partner
Omron Corporation, a manufacturer of RFID technology for Wal-Mart suppliers, has had its smile recognition technology used in an interesting way (full article here). Though originally developed for use in cameras to help the camera focus on smiling faces, employees of Keihin Electric Express Railway in Japan are being bludgeoned with a different application of the technology. Employees must submit to a “smile police machine” as they come to work. The machine, using Omron’s technology, measures and ranks each employees smile. Sour-faced employees receive helpful email reminders throughout the day like “smile more” or “you look too serious” to help improve their smile scores. Call us old school, but public recognition, promotions, & large cash bonuses always seemed to put people in a good mood. Source: LiveScience.com
Wal-Mart Makes You Skinny
An economics professor in Memphis has sliced, diced, pureed, and pruned data on big box retailers and obesity and has discovered that the closer one lives to Wal-Mart, the “healthier” one is. Though the effect on weight was apparently just statistically measurable, the professor suggests that “Wal-Mart does not have the sort of harmful effect on American society that its most heated detractors assert.”
Our take: Obviously Wal-Mart enables consumers to purchase items at lower prices, which increases our income. And, as one’s income rises the quality and nutritional content of food that we consume rises. While Wal-Mart is great for its communities economically, the statement that proximity to a large retailer makes one healthy may have more elastic in it than my Uncle Bob’s pants. Correlation does not equal causation. Read the article here. Source: Forbes
The Napa Valley of Consumer Products Marketing
The article “How the Crash Will Reshape America” in the Atlantic was more hat than cattle. However, one insight was notable: A profound shift in U.S. population patterns is occurring (read it here): According to Harvard researchers, “the ability of different cities and regions to attract highly educated people—or human capital—has diverged…thirty years ago educational attainment was spread relatively uniformly throughout the U.S., but that’s no longer the case. Cities like Seattle, Austin and Boston now have two to three times the concentration of college graduates” of other cities.
Nobel Laureate Robert Lucas believes that the “spillovers in knowledge that result from talent-clustering are the main cause of economic growth. Well-educated professionals and creative workers who live together in dense ecosystems, interacting directly, generate ideas and turn them into products and services faster than talented people in other places can.”
Our take: If that isn’t a description of the Wal-Mart/Vendor community, I don’t know what is. Let’s face it, Kraft, Hershey and others aren’t sending down the “B” team to service the world’s largest retailer. The presence of the vendor community and the burgeoning class of “suppliers-to-the-suppliers” are less than a generation old. Look for innovation, more new business formation and Northwest Arkansas to become the Napa Valley of consumer products marketing. Source: The Atlantic.
And One More Thing…Cattle rustling is up sharply because of the downturn in the economy. Rustling in Texas, the nation’s largest cattle state, has tripled since 2007. Source: Reuters.
And One More One More Thing…courtesy of my teenage daughter. Since the iPhone App Store launched a year ago with 500 applications, applications have proliferated with some 55,000 apps now available. Some apps are useful, most aren’t. Here’s one of the least useful: iNap@Work. For $0.99, this app generates random office sounds – mouse clicks, keyboard taps, coughs, rustling paper. Handy “sliders” are available to increase or decrease the frequency of each sound or your “productivity.” Source: Krapps.com
Quote of the day: “We are taxing $30-an-hour schoolteachers to help out $59-an-hour autoworkers.”
–William Baldwin, Editor, Forbes, on the auto industry bailout
The Odds Are…
1 out of 23,483 that you will be wrongly declared dead this year as a result of a data entry error by the U.S. Social Security Department staff.
1 out of 9 that you live with your parents or in-laws if you’re between age 35 and 44.
1 out of 414 that you rely on eBay for your primary or secondary source of income.
1 out of 7 that you have a tattoo.
1 out of 5 that you regret getting a tattoo.
Sources: The Week Magazine, San Diego Union, USPS.com
Scott Alaniz, CFA
scott@bostonmmm.com
Joe Chumbler, CFA
joe@bostonmmm.com
Rogers (479) 657-6940
Information in this report has been obtained from sources that we believe to be reliable. Boston Mountain Money Management does not guarantee its accuracy or completeness and assumes no responsibility for actions taken with respect to information contained herein. The authors held a position in Wal-Mart Stores and Johnson & Johnson at the time of this newsletter.
