pop quiz: which one to invest

jamesmith

Cobra is missing, hutong is in chaos. hutong 版主s asked NASA for help and NASA hired you for a space mission.
Your mission is to go on to the moon and bring Cobra back. The space shuttle is auto-pilot and will bring you back to earth after six months, so you cannot steal the space ship and immigrant to Mars.
Because going to space is dangerous, hutong decided to pay you $1 million dollars. The only requirement is, the $1 million have to be invested in one of four companies when you are in space.
hutong 版主s are really evil, they didn't tell you about this earlier, now the space shuttle is about to launch, and you only have about 20 minutes to decide. You took a brief look at the four companies and realize that they are all in retail service business. You then gather some historical information, but you know that past performance doesn't guarantee future performance.

Google Translation:
眼镜蛇失踪，胡同里是一片混乱。胡同版主请美国航空航天局帮助，美国航空航天局聘请你去太空寻找眼镜蛇。
你的任务是去到月球上，把眼镜蛇带回胡同。航天飞机是自动驾驶的，半年后将带你回地球，所以你不能偷偷移民到火星。
因为任务有危险，，胡同决定支付你100万美元。唯一的要求是，执行任务时你的100万美元将投资于四家企业之一。
胡同版主是真的很邪恶，他们没有早一点告诉你，现在的航天飞机即将出发，你只有大约20分钟来决定。您简单的研究了一下这四家公司，他们都是零售服务业。然后，您收集了一些历史信息，但你知道，过去的表现并不保证将来的表现。


Company A's revenue has annual average increase of 3.97% for last 4 years
net income has annual average increase of 14.78% for last 4 years
pays no dividend
A公司的收入年均增长3.97％，为过去4年
纯收入每年平均增长14.78％，为过去4年
不支付股息


Company B's revenue has annual average increase of 4.64% for last 4 years
net income has annual average increase of 6.78% for last 4 years
pays 1.63% dividend
B公司的收入年均增长4.64％，为过去4年
纯收入年平均增长6.78％，为过去4年
支付1.63％的股息


Company C's revenue has annual average increase of 0.92% for last 4 years
net income has annual average increase of 0.71% for last 4 years
pays 1.44% dividend
C公司的营业收入年均增长0.92％，为过去4年
纯收入年均增长0.71％，为过去4年
支付1.44％的股息


Company D's revenue has annual average increase of 3.47% for last 4 years
net income has annual average increase of 26.08% for last 4 years
pays 2.09% dividend
D公司的营业收入年均增长3.47％，为过去4年
纯收入年均增长26.08％，为过去4年
支付2.09％的股息

Based on the brief data you gathered, which one will you pick and why?
你会选择哪一个，为什么？

bububaba

D, as its CEO &Chairman is Diffusion 军师from HT.

It is a cash COW.

水明善

B

jamesmith

jamesmith

水明善 发表于 2012-11-20 03:38 PM
B

May I ask why you pick B?

Cold2012

B

jamesmith

May I ask why you like company B?

Cold2012

jamesmith 发表于 2012-11-21 12:43 PM
May I ask why you like company B?

revenue increasing is promising

jamesmith

Company A is EXPR
Company B is ANF
Company C is GPS
Company D is LTD

水明善

jamesmith 发表于 2012-11-21 10:21 AM
May I ask why you pick B?

I need to pick up my memory...

A: net income increase is not sustainable, considering about the mis-match between revenue growth and income growth;
C: nothing impressive
D: leverage too much, can be an excellent but risky investment
B: healthy balance sheet with persuasive growth prospect

Of course, I will not buy ANF at current price, in fact, I am less eager to invest in this industry...

水明善

As an expert, you may need to share your views too, otherwise, the interaction is not there.

jamesmith

水明善 发表于 2012-11-25 05:22 PM
As an expert, you may need to share your views too, otherwise, the interaction is not there.

I am not an expert, we are all classmates in investing :)
I found this sector difficult...and I don't have a complete idea on any of the 4 companies, that's why I was hesitating to write...I have pieces of ideas I can share

1) (Company B)ANF has a high gross margin, much higher than the other three. It also has a much higher operating expense. I am wondering if it recognized its sale event as operating expense (it has been giving discount aggressively earlier this year) or the operating expense is racked up by heavy advertisement or to hire models outside of its stores. This require more in depth look at the report...
I think ANF is a good investment but it went up 30+% after the recent ER, now its a bit too expensive for me :(
ANF is expanding internationally, a friend from HK came back to US to visit. She said ANF opened a store in HK, selling same clothes 30-40% more expensive and people are rushing in to buy.
60+% of revenue still come from US stores and US store sale is improving, that's what brought share prices up so much.

2) (Company C)GPS has the best balance sheet. Cost of Sale has been lowered in recent quarter resulting in higher income, these are good signs. It also have a decent inventory turn over. (cost of sale / avg. inventory). Price could be too high now, both Eddie Lampert from RBS Partners and Stephen Mandel from Lone Pine reduced their holding in Q3.

3) (Company D) As you mentioned, LTD is too leveraged, it has been expanding in the previous years. I probably won't buy it now with P/E of almost 21 and high leverage. Something interesting is that ANF and EXPR are originally owned by Limited Brand before they spun off. So I think LTD has a good CEO with a good past record. LTD currently owns some famous brands such as Victoria Secrets and Bath and Body Works...

4) (Company A) I bought a small position in EXPR. There's something I didn't mentioned in the post, ANF, GPS and LTD all posted their recent Q3 report and beat estimate. EXPR is reporting their Q3 today. I got in hoping they will beat like other stores(wishful thinking...)
EXPR is the smallest of the four with market cap of $1 Billion, so Price / Sale is good. TTM Profit Margin is 7.15%, not bad comparing with the other cloth retailers. Inventory turn over looks good (highest in these 4 companies) for the past year. Share price dropped a lot recently because management lowered Q3 earning a lot. Let's see what they report today.

The tricky thing about cloth retailer is fashion can change and its hard to tell how it changes, if the change is benefiting the company or not...and I don't buy clothes often...so...but I learned a lot about shopping from my girl friend recently... -_-!

I try to look at management efficiency by looking at things like inventory, operating cost...

jamesmith

jamesmith 发表于 2012-11-26 10:22 AM
I am not an expert, we are all classmates in investing :)
I found this sector difficult...and I ...

correction, EXPR earning is actually 28th or Wednesday, not today...

by doing market cap / TTM income after tax, we get P/E

At the time of initial post: Company A has P/E of 6.62
Company B has P/E of 32.57
Company C has P/E of 16.79
Company D has P/E of 19.88

水明善

jamesmith 发表于 2012-11-26 11:22 AM
I am not an expert, we are all classmates in investing :)
I found this sector difficult...and I ...

Thank you for your sharing! You are right, both gross margin and turnover of inventory are very important. I

I agree with you that fashion industry is hard to make any forecast, I believe Buffet have no interest in such industry at all. However, with the help of love, you may find real good chances:-)

I bought COH some years ago, then, considering about its industry, I sold it out very early, then, it hit $60. Again, the key is brand + comeptitive advantage.

wsjboy

Good discussion, need to spend more time to read carefully, and learn

jamesmith

wsjboy 发表于 2012-11-27 12:07 PM
Good discussion, need to spend more time to read carefully, and learn

welcome :)

jamesmith

EXPR went up in Pre-Market :)
Management cut estimate down to 0.16 to 0.20. Earning went down as warned by management, but at high end of the estimation at $0.20
Gross profit fell to 32.3%, about the same with previous quarter, down from 36.2% last year.
Reported record breaking black Friday sale. (They are doing 50% off everything on Black Friday, I checked two Express store, both are packed with people)  I am not sure how this would effect gross margin though...
The Earning is inline with what management estimated.

The earning announcement
http://phx.corporate-ir.net/phoe ... 2355&highlight=

wsjboy

cobra pays respect to your story, has not showed up in this thread.

jamesmith

wsjboy 发表于 2012-11-28 10:11 AM
cobra pays respect to your story, has not showed up in this thread.

We are still looking for Cobra on the moon~~ maybe he is playing hide and seek with Chang E

jamesmith

Express raised guidance for earning. up 19.63% currently :)