Tesco need to help themselves a little.

Tesco are a company in crisis. There is no two ways about that. Or is there?

Investors would have you believe that Tesco is over. Finished. Yet why are their revenues still growing? A dead company to me is one that nobody likes, nobody has heard of or has seen sales retreat to next to nothing yet I don't believe Tesco qualifies for any of these. 

Tesco have what i like to think of as "duck syndrome" they have been floating around in the mid price, mid luxury level so long they have left the higher price market to be snipped by John Lewis and the low price market to be taken by Aldi and Lidl. Tesco benefited well for years by consumers not really knowing what price they want but now it seems they most definitely do.  

I feel that this could be a benefit for Tesco however. With a well established name from a likable country they can make a series of smart moves that will see them quickly beating the German opposition down just like Winston Churchill's men once did.

1. Split up. I feel it is important that Tesco stops trying to focus all it's efforts on sitting in the medium price bracket. The name Tesco needs to be retired except for an overall "Tesco group" and from there the actual store needs to be split into three sections. One high priced targeting Waitrose and Marks and Spencer's directly, one middle priced. (No matter what I said this is still a very important market that Tesco can't loose hold of) and one lower priced targeted directly at Aldi and Lidl. Each super store needs to be split into three parts with the respective names of each store above, logistical movements would be the same but consumers would be able to get the feeling of what they want. Waitrose's offers the experience of consumers feeling they are getting a better product. Shoppers here don't want to be looking at "Tesco market price" products while buying their premium steaks and likewise people who want to buy 20 meatballs for £1 don't want to see that 8oZ's of steak from the premium range costs more then their house. This is not how people want to shop and Tesco need to realize this. 
2. Use the subsidiary's they own as rewards. Tesco mobile is never going to challenge Vodafone and the likes for a real piece of the market so why not use it as a way to get the big customers back? I'm not talking about 1 million clubcard points = £1.99 off your next phone bill I'm saying it should be a really good deal. "Do three shops of £100 a month and get your most expensive contract free". Having shopped with my mum I have noticed how hard it is to stick to £100 and even if consumers somehow manage to spend £300 bang on a month what have Tesco lost? £45 of phone revenue. This doesn't seem like a bad swap to me.
3. (For Britain only) Play the patriotism card. Us Brit's are a terribly patriotic group of chaps and the idea of swapping our weekly shopping to a German supermarket is a somewhat unnerving  experience from what I have heard from people who have swapped their shop. Why haven't Tesco picked up on this? 
4. Provide a service. The moto "every little helps" doesn't apply anymore. You walk in store to find workers who are underpayed, hate the company and really would rather not help you if they can get away with it. Tesco need to back their slogan from now on with friendly staff and even going the extra mile with services such as taking your bags to your car. How much would this hurt Tesco's? Not a lot yet it would mean a great deal to Mum's, pensioners and many groups of people alike. My Nan used to visit Tesco's over other stores because the workers knew her, by name and what she gets up to now the only words spoken are "that'll be £____ please"
5. Act now. While they still have a few customers, while they still have the money before it's too late. 

These are the actions I believe to make but until Tesco looks like it is going to do anything radical it's definitely time to sell rather then buy Tesco shares.

Can a CEO be the sole reason to buy a stock?

I currently hold a position in Berkshire Hathaway, the reason Warren Buffet. I finally gave up on Blackberry, the reason Thornsten Heins. I'm considering taking a position in Facebook, the reason Mark Zuckerberg. A lot of the decisions I make aren't to do with products but rather the management of a company and this got me wondering is this a smart idea?

Warren Buffet is clearly an exception to the rule, he is Berkshire Hathaway, it really does say a lot about him that the company could be completely split up when the oracle becomes a ghost. Yet other companies CEO's can be the biggest factor too.

Mark Zuckerberg runs Facebook with the passion you would expect of a founder and although he may not be the best business mind on the planet it's fair to say that Facebook has only been so successful due to him. Other companies that sell out lose the original spark of inventive madness that Facebook has running behind it. "Move fast and break things" is one of the unofficial motos of Facebook and it's hard to believe a CEO with a degree in economics or management would allow this to be so yet because of this mad streak great things happen at Facebook.

The CEO is the person all staff should look up to and they really need to encapsulate the whole business. I have such problems with Elon Musk at Tesla as he just strikes me as a bit confused. Although he seems to genuinely care for innovation I feel like he has his eye on too many ball games and needs to hand over the reins to someone else to really get going at Tesla. I have yet to see my first Tesla vehicle on the roads over here in the United kingdom and I believe part of the reason for this is because the CEO in himself isn't a brand. 

Start up companies need to be hand in hand with their CEO and the leader of the pack needs to become as big as a figure head as the business I believe this much to be true. With larger companies (unless they are produce software) I feel that rather then a quirky figure upfront there needs to be a leader rather then a little boy in charge. 


Side note:I just did a search of Elon Musk to find a rather interesting feature on him talking about colonizing mars, I wonder how many people invested in Tesla would choose to have someone who talks about things like that in charge of a $31.8billion company... Just a side thought. 

Bad times calls for good stocks.

In times of falling stock prices I have been known to act a bit gung-ho as a result I have bought stocks at the wrong time and held on to them too long.

Lat time I watched the stock market fall consistently for about a week I took a stake in one of the most overpriced shares on the market. Tesla is a stock that i have made money on before and so when I watched it fall and fall I decided on pure instinct to buy. A couple of weeks later I sold the share for a loss (okay it was a small one but a loss is a loss in my books). This isn't the first time i have done such a thing but i shall not bore you with the endless list of bad trades now in the back of the William Martin closet. However I made a promise to myself that it would be the last.

I believe in maths, when it comes to the stock market figures speak. Good figures rise bad figures loose and so this week when prices seem to be falling into a never ending pit I was faced with a metaphoric cross roads. To the left was my heart telling me to buy $DDD yet to the right was my brain and maths telling me to take a stake in a company I had been scouting lately. Recently I liquidated 30% of my portfolio after selling $CMG for a 130% return and so was sitting on an uncomfortably large cash pile which i so nearly blew.

Yet at the last moment I remembered my promise to myself. It's not always good to "Move fast and break things" as Mark Zuckerberg would say, especially not when it comes to the stock market because the only thing likely to break is your wallet. Instead I have learned to look into the future and listen to Warren Buffet "Buy good companies, doing good thing, run by good people". Because of this I took a rather low bet on a rather big business doing rather good things. It may not be as exciting but I would sure as hell rather look at another green +ve figure rather then a -ve figure. 

Touch Tesla and get shocked.

In one month Tesla has made a return of 20.13% (at the time of writing this article). Zacks analysts along with many other have it ranked at "Strong buy" status yet this article shall focus on why you are indeed setting yourself up for a dangerous shock in buying this prince of the NASDAQ.

Point one: patents
Taking a look at the fundamental facts behind Tesla should give any investor the shakes. recently they released not just a few of their patents all of them. That's right Tesla are the "revolutionary car company" who own no patents at all. Instead they are fronting the costs for other big companies to step forward and take control of the market. It's one thing to try and do the planet good but you have to do it in an ethical business manner surely. 

Point two: over valuation
This section may be a touch hypocritical of me as I do have a stake in perhaps the most overpriced stock on the market yet Tesla surely has to be seen as ludicrously over priced at nearly $33 billion dollars total market capitalization I think it's fair to say Tesla is already priced at what it may become rather then what it already is leaving no room for growth in the future. The price of Tesla is nearly half of Ford's and I am yet to see a Tesla vehicle on the roads yet I can't leave the street without seeing at least half a dozen Fords at Tesla's value I would expect to see a few cars a journey yet they are nowhere to be seen because they REALLY AREN'T SELLING MANY.

Point three: pricing
Tesla vehicles are expensive is an understatement, they are damn right over priced. I don't care how much they help the planet I would never feel as good driving around in a 100k Hippy-mobile with bog standard settings compared to a 100k top of the range Mercedes and i'm sure people facing this decision don't even consider Tesla a viable option and why should they?

Point four: the reason it's up
I have considered for many hours how Tesla can be so highly priced and then the answer came to me. Tesla must be the next Pump 'n' dump stock traders are waiting to burn people over. My advice stay away. 

(At the time of writing this the Tesla stock was at $264.37)

To buy back banks or to bank on buying others? Are our banks repaired enough for you to profit on.

It always gets to me when people say "well we are in a recession you know" or "times are harder these days" referring back to the 2008 crash. People who do not understand basic Monterey factors should not be aloud to comment on the economy and how it is or isn't performing. Yet I am a hypocrite for I won't invest in banks for the fear they are once again doomed to collapse in on themselves (I refuse to accept Berkshire Hathaway is a bank as I see it more as a VERY large hedge fund).

Yes six long years after the annum of the crash I still won't be seen with a bank in my portfolio and so I thought it was an ideal time too look at if this was me merely being stupid or if I was on to something. Another problem I have with investing in banks is the book value. Yes most banks sit on assets in the hundreds of billions if not trillions but their debts are excessive too.

Too see if this point stood I took the yearly growth rate of (in my opinion) the five largest American banks and using google finance plotted them. Here we see Wells Fargo, J.P.Morgan, Citigroup, Goldman Sachs and Bank of America all against one another.

 

 

Here we can see how diverse the growth rates are, admittedly all are above the 2% inflation rate here in the u.k  the average is just 21% this is a little shy of my "big three technology companies" seen bellow.

 

 

The average of these three is 36% in the last year showing that although the banks are returning they are still not quite doing as well as the technological equivalents. As with anything in the stock market though it all depends on who you buy and when you buy them, personally I have had a position in google for a year now and so I have seen a large return, had this been shares in apple I would be rather annoyed at myself now that it wasn't Bank Of America.

 

This post has been much longer then expected so I will conclude this with a second entry soon.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Looking for something new

I recently shorted my Tesla and Cisco shares. The reason? Well Tesla hit the profit margin aim I had given them and Cisco felt like it was getting nowhere at any point in the future. I could be wrong, in fact I probably am yet other car manufacturers are quickly catching Tesla up if they have not already surpassed them and so I believe that dogs day is nearly over.

That therefore leaves me in a predicament as I now have a lot of cash floating around and no idea what stock to buy. I could therefore invest in something I have previously tried and that list is every growing eBay, Microsoft or Facebook for example but instead I feel like I want to try something new, heck you don't lean from keep repeating your trades (look at the blackberry saga I went through).

So I am weighing up many opportunities but it seems right now I have a stake in all the companies I feel I want to be involved with and so maybe I shall just increase my stake in one of them, for now though the hunt is on.

Why daily fluctuations DO matter in the long run....

We all have our heroes in the career we want to enter. 50 years a go a potential astronaut may have looked to the skies and muttered the name "Neil Armstrong". Today however I look to the markets and mention the name "Warren Buffet". As much as I idolize this true icon for investing I believe his methodology has some floors.

Warren Buffet is known as standing by the principle that daily fluctuations of a stocks price don't matter. In a recent article he had been quoted as saying it was like a farmer shouting out prices to sell his farm to his rival or to purchase the rival depending on the state of his finances. Mr Buffet believes this would come down to a mental disposition but I would argue against that. We live in a world of mathematical trends and algorithms, fluctuations in a price shouldn't mean nothing instead it should signify uncertainty. Nobody on this earth with any financial knowledge would purchase a car if the price of the car was up and down 5% at a time each and every day so why should stocks be any different? Stocks work on the simple principle of supply and demand with the price being set at the equilibrium point yet some days supply being greater then demand lowers the price and vice versa. For too long now traders have sat back and said "who cares" to daily trends when instead there is a lot of money to be earned from capitalizing on these fluctuations.

I can not disagree that Mr Buffet is an icon and has earned a lot of money however could this be because the principles he set into place were revolutionary and have spawned a generation of imitators when instead what we need are revolutionaries. Value trading is a great idea but only if the person sitting next to you isn't doing the same thing, until then come up with something new and hit the pendulum trading books.