Bed Bath & Beyond (BBBY) – Fade the Double Algo Drop

Many value-based stocks fall on the ex-dividend date on the basis that some corporate cash was distributed to the prior owner, and some owners who were waiting until the dividend to cash out might sell after getting the dividend.

The combination of both of the above can create a serious downdraft in a stock, particularly if it is a poorly performing one which is seeing declining margins.

Mix in an analyst downgrade & look out below.

Bed, Bath & Beyond does have some decently differentiated goods in their stores. And when a first-time parent buys things for their children touching & feeling them is important.

I think BuyBuyBaby and Cost Plus World Market (both subsidiaries of Bed, Bath & Beyond) are perhaps 2 of my wife’s favorite 3 or 4 stores. That said, the demographic headwinds from record low domestic fertility rates  coupled with the continued squeeze of the middle class from all the health care scams have put a crimp on the company’s performance.

If the scams in healthcare ever get dealt with then the new parent category has a lot of people ready to join the ranks & that could put a serious bid under BBBY. But that isn’t a bet worth holding your breath for as being early is the same thing as being wrong.

Yesterday Bed, Bath & Beyond fell over 6% on a quarterly dividend distribution of 16 cents a share (a bit under 1% of the share price) and an analyst downgrade.

Their stock is off about 75% since the 2014 peak, so it absolutely hasn’t participated in the retail recovery narrative & isn’t something I would want to hold long-term until the turn around efforts start to show some promise.

Not a great idea to catch that falling knife, which has been the wrong trade for close to a half-decade straight, even as QE has inflated global financial asset prices.

Not sure if the early morning rise today is a dead cat bounce (likely) or something heading higher on a sustained basis (not so likely) so I sold out 15 minutes ago for a ~ 1.3% gain.

AT&T (T) The Opposite of Momo

I like reading Howard Lindzon’s blog where he shares his strategy with following momentum stocks.

Some people are great at chasing momentum and leaning into a trend that is working, but others are too tightly wound to make it work.

  • Either they need to make position sizes so small as to be inconsequential to where
    • most their capital remains in cash, or
    • they have so many positions they are a closet indexer adding ill-timed trades to further lower returns, or
    • they have too much savings at risk in a particular play they might not know well enough to stick with if the trade goes against them

Who knows if the day after you invest in a foreign tech stock sanctions get announced, or if the CEO of a fast-growing money losing Chinese startup like JD.com gets arrested over the weekend, driving the stock price down 14%, from near the bottom of the range the stock price was already in.

If you don’t look at the scoreboard every day and a trade you deeply understand and believe in temporarily goes against you that isn’t so bad. But if you keep looking and feel the need to keep doing something (even when things seem like they are not working) then each additional move feeds into the prior mistake.

Make a few shitty trades like that and it is easy to want to beat your head on your monitor.  If trades go against you & you are actively trading then perhaps sometimes the only way to recalibrate your approach is to liquidate positions and sit on the sidelines for a few days to decompress. I did that a few weeks ago (hence the lack of blog posts).

It is not hard to be an honest and decent human being. As long as you are honest you will know when you need to take a break or to pull back from risk.

Around the time of the Amazon $1 trillion story I saw how AT&T was once again getting pounded into the ground when the tech stocks were flying. I didn’t have the mental cycles or capacity to chase the momentum stocks at the time, but felt the AT&T dividend acted as nice ballast which would be appreciated whenever the next risk-off narrative came about.

A 6% dividend is getting paid to wait. And that dividend is stable, with a good coverage ratio. They’re a dividend aristocrat stock which has a long history of increasing dividend payments.

In isolation that  return is substandard if you look at the 10% total returns the stock market has earned in recent history, but that dividend has been growing over time.  If you look at what other media assets are selling for, AT&T didn’t overpay for Time Warner. And the idea that carriers are going to lose consumer appeal is highly suspect while reading all the articles about the modern crisis of attention & widespread cell phone addiction.

Many people would likely dumpster dive for their meal before foregoing using their cell phones.

Verizon & AT&T do not have much competition from other wireless providers on a forward basis as the increased costs of 5G roll out require T-Mobile & Sprint to merge to try to keep pace with the market leaders. And those companies have every bit the issues with debt load as AT&T does.

Even Warren Buffett described his large Apple stake as a bet on the real estate of the iPhone screens.

Carriers get an annuity for selling access.

Other competition also remains at bay as 5G will enable the cell phone companies to encroach on the cable companies faster than the cable companies can seriously compete with the cell phone carriers. Google Fiber was much hyped, but ultimately a flop.

AT&T is still hated (off over 18% from their 52-week highs & about 1/3 from their August 2016 highs as a low-beta high-yield stock) but it is less stressful to trade in and out of AT&T than the momentum stocks.

If the trade goes the other way you get paid to wait & the lower stock price drives in demand from value-seeking dividend investors. If the stock gets a decent pop over 2 or 3 days you could easily trade a portion of the holdings and then re-consider entering again if it touches $32 again.

I sold out of my AT&T trade about 45 minutes ago, but if the stock falls another dime or two I might jump back in.

Long Yandex (YNDX)

Since their IPO on March 23, 2011 Yandex has consistently grown revenues just like other leading internet companies have, but their stock has went basically nowhere.

They IPOed at $25 a share raising $1.3 billion, then quickly jumped to $35 before sliding to $11 a share in 2015.

Why did they crater so hard?

The second issue has been solved as Russian antitrust regulators fined Google after ruling against their monopolistic bundling in September 2015.

Since September 2015 Yandex’s share of mobile search has jumped significantly, from around 29% of the market to around 45% of the market.

As people update their phones it will increasingly shift mobile search share away from Google toward Yandex.

That is a big part of what led to their stock more than quadrupling to a high of $44.49 in early March of this year.

The other thing which helped big was the local Russian currency stabilized & actually started to strengthen after oil prices rebounded from a low of around $30 a barrel in 2016 to around $75 now.

Yesterday Yandex was down huge. First on the announcement they bought a fuel refilling start up for a non-material sum & then later on an announcement the US will apply further sanctions against Russia in response to a nerve agent attack against a former Russian spy living in the UK.

Yandex fell from $35.40 to $32.14, which was a 9.2% decline.

At the end of the day, Yandex is still akin to other tech monopoly plays in other countries, but at a far lower multiple due to broad distrust of the Russian economy.

  • they are the dominant local search engine
  • they have a voice assistant & speaker
  • they have a web browser
  • they have a popular email service
  • they make good money from classified ads & are moving some e-commerce offerings away from a PPC model to more of an Amazon marketplace styled model
  • they have an Amazon Prime-like subscription service for music
  • they dominate the Uber-styled business in Russia, with Uber selling their Russian entity to Yandex.Taxi for a minority stake

The big potential negatives in Yandex would be the Russian economy tanking once again, or Google taking a dominant share of the search market.

I don’t think the Russian economy will tank hard again because it already tanked so hard. I also think the US moved on the sanctions because it was a requirement rather than because it is something they really wanted to hammer them on. That the sanctions were announced over a month after they were required to be implemented & President Trump recently met President Putin in Helsinki makes me think the US doesn’t really want to push to collapse the Russian economy.

Russia has also sold off most their treasury holdings, has accumulated large gold holdings & if the US wants to push hard on Iran then the US can’t have too many oil producing enemies at once which are all being leaned into hard.

If the Russian economy did start to tank there is a good chance they would respond by promoting nationalism & undermine foreign tech competition with more strict regulations along media licensing, local hosting requirements, security narrative, etc.

I don’t see Google taking over Russian search market either, as Yandex has a dominant share in desktop & has been growing search share on desktop for over 4 years straight.

Bing & Yahoo Search never took off & Mail.ru’s search feature has been on a steady decline in share over the past 4 years. They’ve been taking share from Google for almost a half decade now & that is in spite of Google Chrome being the dominant web browser in Russia & Google Chrome growing marketshare. In fact, Yandex’s browser is the only non-Google browser which has had stable or growing share.

As people adopt some of the other Yandex features like Yandex.Plus, the Alice voice assistant embedded in Yandex.Station (which is sold at a loss to win share in voice search),  mapping & navigation, food delivery, e-commerce, car sharing & taxi service, etc. that should cause greater ecosystem lock-in which grows overall search marketshare.

The big potential positives would be

  • if the Russian economy doesn’t falter, that should re-rate domestic company values upward. Russia’s thinly traded Sberbank ADR (OTCMKTS: SBRCY) was also smashed down from $13 to $11.93 on  yesterday’s sanction news. It sports an extremely low P/E ratio & a respectable dividend.
  • Yandex is planning to spin out their Yandex.Taxi with a US IPO in the first half of 2019. Hype around the eventual Uber IPO might drive interest in Yandex ahead of the Yandex.Taxi spin out.
  • As Yandex builds out their e-commerce offering & keeps growing their music streaming customer base that will further drive lock-in & have the company seen as more of a disruptive playing in new markets along with having hard to compete with passive recurring revenue streams to augment the core search ads business.

The author has a position in Yandex.

Free Stock Price Quotes & Price Information in Microsoft Excel

Microsoft recently re-added the ability to add stock quote information to Excel spreadsheets. The date is delayed by 15 minutes, but you can click the update button to automatically have data for hundreds of stocks update.

They offer many fields in their data including:

  • ticker symbol
  • price
  • open
  • previous close
  • change %
  • change $
  • day’s high
  • day’s low
  • 52 week high
  • 52 week low
  • ticker symbol
  • beta (for most stocks, though on some this is blank)
  • today’s volume
  • average daily volume
  • stock float
  • market cap
  • industry
  • exchange
  • year founded
  • company description
  • CEO
  • employee count
  • headquarters

You can see the sort of spreadsheet you can create mostly automatically (though with a few manual tweaks) from the following image.

On the initial roll out of the feature they made it available for people who have active Office 365 subscriptions & who enabled the Office Insiders feature.

  • If you have an older version of Office or bought a key card the first step is to buy an Office 365 subscription.
  • The next step is to update to the latest version of Office, which may require restarting the computer. You can see if there are updates available by clicking on the “Account” link in the left rail menu of Excel. Then click on “Office Updates” to see if there are any updates available by clicking on the “Update Now” submenu that appears after clicking on the “Office Updates” button.
  • After that, open up Excel and once again click on the “Account” link in the left menu. Now in the right rail of the page you can click on the “Manage Account” button. That should either open up a pop up which lets you select Office 365 connection, or send you to a page on Microsoft’s site to enable Office 365. Here is a screenshot to show the areas referred to in this text. When you are done you should see Microsoft Office 365 listed in the right column.

Now the only step left is to enable Office Insider. Here are instructions directly from Microsoft on how to do that.

  1. In any Office 2016 app, click File > Account > Office Insider. Select the Get early access to new releases of Office box, specify an update level, and then click OK.
  2. Visit the Additional Install Options page of My Account. Sign in with your Microsoft Account, if needed. In the Version menu, click the type of Insider build you want to install, and then click Install. If you already have Office 2016 installed on your Windows desktop, you do not need to uninstall it first. You’ll be updated to the Office Insider build. If you don’t see an Insider option on the Version menu, you may not have an active Office 365 subscription.

Once you have done the above, make sure your Office Insider level is selected to Insider

After you save that, you can once again click on Update Options and click on Update Now from that menu.

You may have to close out of all Office documents & restart your computer again to get it to work, but you will know it works when you see the stock data type in the header area.

From there, you follow the instructions  given here to add stock data to a spreadsheet.

  • Type ticker symbols or company names into cells.
  • Create a table ( Insert > Table)
  • Select the cells with ticker symbols or company names in them
  •  Click on the top data tab in Excel & click on Stock data type. This should automatically link the stocks to the company name. Then you can click on the top right row in the table to add fields like current price, change, etc.
  • To update stock pricing data click on the “Refresh All”

If you have multiple computers and are struggling to update the second computer to the insiders setting you may have to visit this page.

For your convenience, here are a few sample stock spreadsheets, though they will only work if you have an Office 365 account, are an Office Insider & completed the above steps.

These spreadsheets use sortable columns which make it easy to quickly see

  • what has went up or down the highest percent
  • what had the biggest move today relative to its beta
  • what has gained or lost the most market cap today
  • how far a stock would need to fall to touch its 52-week lows
  • how much a stock would need to go up to touch its 52-week highs
  • the range of the stock today
  • the range of the stock this year
  • the range of the stock today vs the range of the stock this year
  • where stocks are in their 52-week channel & in its range for the day

A couple notes on the above spreadsheets.

  • Where the automated data connections worked we used whatever data Microsoft includes.
  • If automated data connections did not work for a particular data point, then we might have manually entered in the beta level for the stock price at that point in time.
  • Most the data is quite reliable, but in some cases the 52-week high or low data point seems to be stuck on a couple stocks like Ctrip. As Microsoft improves the offering & rolls it out more widely these issues will likely be fixed.
  • The weighting aspects on the indexes were based on data from SlickCharts from about a week ago.

The official Microsoft stock data integration is easy to update on an automated fashion quickly. If you prefer to have real-time stock data & have the data update without having to click on a refresh button then Michael Saunders offers a nice third-party plug-in. His plug-in is free & it offers real-time data for a one-time Paypal donation of only $10. He offers a downloadable spreadsheet for automated portfolio monitoring. His plug-in is great for watching a couple stocks or a small portfolio, but is less idea for looking at a broad index like the S&P 500 as you have to manually connect each stock one at a time.

 

 

Long Zillow (Z)

Zillow plunged hard on a revenue miss & announcing they were acquiring a loan origination shop named Mortgage Lenders of America for an undisclosed sum.

It is the second quarter in a row where Zillow bombed out after announcing soft earnings & jumping into a new business line.

However, in between the two earning reports, Zillow reached an all time high of $64.42. As of typing this Zillow is off $10.45 a share today, down 17.71% to $48.55, which puts them 24.6% below all time highs.

As much as some investors hate the Zillow Offers model which is essentially home flipping, Zillow expanding in that direction is probably a good call just to limit some of the potential investments in competitors who could start with that business model, build a destination site & then move across to compete against the core Zillow or Trulia sites.

With Softbank’s Vision Fund throwing hundreds of millions or even billions of Dollars around, preventing smaller startups from getting a solid footing with even a tiny vaporware side business is a big win.

And while owning a loan origination shop will have Zillow competing directly against other players on their platform, it shouldn’t be a significant risk as there are not many sites who have access to the core audience in the buying mode & most of the smaller independent players are way behind in share, brand awareness & technology.

If you are not one of the big 4 or 5 US banks (JP Morgan Chase, Bank of America, Wells Fargo, Citibank, US Bank) then you need to acquire customers through some other channel with a connection to the consumer. There’s only a few players with a strong footprint: Google, Zillow, Realtor.com, Bankrate. From there it is likely either a big step down in volume with something like Bing or a big step down in quality with sort of mystery meat clicks & leads from a lot of other providers.

If you look across the web a lot of the vertical destination sites have been bought out. Pure play sites like WebMD & Blue Nile have been going private for years. IAC & their former companies have rolled up players in categories like travel, dating, & home improvement.

One of my favorite tools for tracking how strong businesses are online is SEMrush. Here is a screenshot for some of their Zillow data.

This provides a quick “at-a-glance” view of their historical Google performance along with where they sort of fit in with their competitive set.

From that graphic you can see:

  • they keep getting stronger year over year
  • most of their ranking positions are in the top 20
  • their closest competitor is Realtor.com, which is on par with Trulia in terms of search engine exposure & estimated traffic

There are lots of estimates baked into data from such tools & maybe dominating the category means they won’t have a lot of room to grow via search directly, but if they are a strong destination site many people will bypass general search engines and visit the sites directly.

The SEMrush traffic analysis section estimates Zillow gets about half their desktop traffic directly from end users.

Zillow’s current market cap is a bit under $9 billion.

Silver Lake acquired Zoopla for £2.2 billion (equivalent to $3 billion at the prevailing exchange rate at the time the offer was made). Zoopla is one of the leading UK property platforms along with Rightmove.

Zoopla’s search traffic profile for their core site looks similar to the chart for Zillow.

Zoopla’s parent company which was acquired by Silver Lake also owns other properties like Uswitch, Money.co.uk, PrimeLocation & SmartNewHomes.

A few big differences between Zoopla & Zillow are:

  • Realtor.com is a distant second to Zillow in the US & is roughly tied with Trulia for search traffic.
  • Zoopla has a strong direct competitor which is publicly traded in RightMove, which is valued at around £4.48 billion or $5.8 billion.
  • The United States has a much larger population (& thus real estate market) than the United Kingdom does. The Census population clock puts the US population at 328.3 million. The same tool puts the UK population at 65.1 million.
  • The UK still has the looming Brexit related political risks.
    • If there is a hard Brexit that could in turn lower immigration, which would lower demand for property & thus property price appreciation rates.
    • Economist Steve Keen has mentioned how the UK having their own currency while being inside the EU has sort of made them act as a relief valve for some of the population movements as some of the southern European periphery countries have had migrations due to structurally weak economies from being tied into the same Euro currency that export powerhouse Germany uses.
    • The UK has also started pushing laws to go after ill gotten wealth from foreign oligarchs who parked their money in the London real estate market.
    • Between the two of those it could impact both the high and low ends of the UK real estate market.
    • Meanwhile the US real estate market is still quite strong, as it is heavily subsidized by long-term fixed rate loans which do not immediately increase ownership costs the way floating rate loans do & the U.S. Federal Government owning Fannie Mae & Freddie Mac.

Disclosure: the author was not paid to write this article & has established a position in Zillow stock today.