#WeeklyInvestorReader | wk. 24

Note to readers: #WeeklyInvestorReader contains a few of the articles I read during the week. Visit my Twitter @HurriCap for any other articles that may not have been included. 

Another Swedish Company Aims to Be the Spotify for Books – Fortune, June 15, 2017 | “Fast-growing audio books company Storytel will expand into several new markets in the coming years while steering clear of English-speaking countries where rival Audible dominates, the Swedish company’s chief executive said.”

Mo’ Margins Mo’ Problems – Eric Cinnamond, June 14, 2017 | “Investors have a tendency to gravitate towards leading brands and high margins. Such traits are often an indication of a high-quality business and meaningful intangible assets. While brands can be very valuable, they are not free. Brands require considerable investment and ongoing maintenance. Furthermore, similar to many things in business, there are cycles, trends, and risks associated with even the best brands.”

HomePod – Above Avalon, June 14, 2017 | “Apple unveiled a brand new product category last week at WWDC: HomePod. On the surface, HomePod seems like an unusual product for Apple. The company’s most recent new products (Apple Watch and AirPods) form the foundation of an expanding wearables strategy. How does a stationary smart speaker fit into such a product strategy?”

Market Folly’s Summer Reading List – Market Folly, June 14, 2017 | “If you’ve got a vacation / holiday coming up and need some reading material, here are some recommended books on investing, hedge funds, business, decision making, and life in general. Some are newer books, others are classics you might have missed and should catch up on.”

10 Business Books For Your Summer Reading List – Dr. David Kass, June 14, 2017 | “The University of Maryland’s Robert H. Smith School of Business is excited to announce some favorite books in the 14th Annual Top-10 Summer Reading List for Business Leaders for 2017, as recommended by faculty members.”

How Adobe Got Its Customers Hooked on Subscriptions – Bloomberg, June 8, 2017 | “The switch to the cloud was risky, but revenue is way up.”

Is Wall Street Giving Netflix a Pass on Sky-High Content Costs? – The Hollywood Reporter, June 14, 2017 | “Netflix CEO Reed Hastings caused heart palpitations in Hollywood on May 31 when he said he wants to cancel more of his original shows. “Our hit ratio is way too high right now,” Hastings told CNBC.”

New: The Behavioral Economics Guide 2017 – Behavioral Economics, June, 2017 | “At the beginning of this year, I came across an attention-grabbing headline: “Behavioral Economics Isn’t Dead Yet”. It was written by Noah Smith on Bloomberg View. Despite some voices that may have questioned the future of behavioral economics (BE), Smith pointed to evidence that behavioral models may be slowly infiltrating macroeconomics.”

A U.S. Shoe Town Tries to Rebuild From Warren Buffett’s ‘Worst Deal’ Ever – Bloomberg, June 13, 2017 | “Two decades after Dexter Shoe closed, $325 hand-sewn penny loafers may hold the key to keeping the craft alive in Maine—and U.S. jobs onshore.”

P&C Insurance – A natural hedge against rising interest rates – S&C Messina Capital Management, June 11, 2017 | “The general consensus is that interest rates will rise. But the key question is when.”

Alibaba Stock’s Peculiar Legal Structure – The Conservative Income Investor, June 7, 2017 | “To receive capital from American investors—or investors anywhere outside China for that matter—Chinese business executives have begun to create variable interest entities (VIEs) that are designed to mimic the effects of foreign stock ownership.”

We Need to Talk About Uber: A Timeline of the Company’s Growing List of Problems – Longreads, June 10, 2017 | “In a piece for the Financial Times titled ‘Fire Travis Kalanick,’ Kadhim Shubber wrote of the founder of Uber: ‘One day we will look back at what will hopefully be the smouldering wreckage of Kalanick’s career and ask how a person so lacking in basic human and corporate ethics was allowed to run a company for so long.'”

2016 Financial Restatements Review – Audit Analytics, June 12, 2017 | “The annual Audit Analytics report on financial restatement trends is now available. This report provides a detailed analysis and comparison of trends in financial restatements over a sixteen-year period.”

JIM ROGERS: The worst crash in our lifetime is coming – Business Insider, June , 2017 | “Legendary investor Jim Rogers sat down with Business Insider CEO Henry Blodget on this week’s episode of “The Bottom Line.” Rogers predicts a market crash in the next few years, one that he says will rival anything he has seen in his lifetime. Following is a transcript of the video.”

Free Shipping Is A Lie – Fast Company, November 1, 2016 | “Free shipping is a top priority for online shoppers, but many merchants are struggling to keep up with the costs.”

Who Will Survive the Retail Reckoning of 2017? – Knowledge@Wharton, June 2, 2017 | “Legacy retailers’ ongoing struggle to stay relevant in a landscape increasingly dominated by Amazon and online upstarts has come to a head in the past year. Companies will close thousands of stores this year – and some may not survive at all. While it may seem that retail is headed for an apocalypse dominated by dead malls, in reality it’s a needed industry shakeout.”

Zalando’s Whizzy Website Doesn’t Come Cheap – Bloomberg, May 9, 2017 | “Online growth doesn’t come cheap. That has been the message from Europe’s big online retailers lately.While internet shopping is outpacing that in physical stores, avoiding the burden of bricks and mortar is no guarantee of runaway profit growth. The cost of fulfilling orders, dealing with a high level of returns and the need to enhance customer service is inescapable.In addition, traditional chains are improving their digital offerings, while Amazon.com Inc. is pushing ever-deeper into clothing.Zalando SE is the latest online retailer to spell out just how much it is spending in an attempt to stay one step ahead. The danger for it, and its rivals, is that profit growth doesn’t keep pace with sales expansion.”

Is the Company’s Product Attractive – Investment Masters Class, June 13, 2017 | “Charlie Munger has long reiterated the need to have multiple mental models to aid the investment process. This short essay looks at some of the product attributes that appeal to the Investment Masters.”

Judging GE’s Jeff Immelt Versus Jack Welch – Bloomberg, June 12, 2017 | “The two chief executives of General Electric Co. were dealt very different hands.”

The Mall of the Future Will Have No Stores – Morningstar, June 12, 2017 | “As retailers close bricks-and-mortar stores at an accelerating pace, shopping-center landlords like Starwood Capital are facing a vexing question: What to do with all this empty space? Their solutions are varied but all have a common element: reducing, or even eliminating, retail from the equation.”

Going Private Possible for Nordstrom – Morningstar, June 12, 2017 | “Nordstrom’s (JWN) share price soared after the June 8 announcement that the Nordstrom family is exploring the option of taking its namesake company private. Combined, the family owns just over 30% of the department store.”

Amazon and Walmart’s all-out price war is terrifying America’s biggest brands – MSN Money, March 31, 2017 | “Grocery suppliers are feeling the squeeze — big-time.”

Can Retailers Escape the Scourge of Free Shipping? – Knowledge@Wharton, June 6, 2017 | “If retailers are hurting today, among the wounds — both self-inflicted and imposed from outside — is free shipping. On the demand side, customers are increasingly expecting free delivery and even free returns. The problem for retailers, of course, is that free shipping cuts deeply into profits.”

The death of brick-and-mortar retail – Axios, June 9, 2017 | “First, it was Main Street. Americans stopped going to their neighborhood diners, grocers, haberdashers and five-and-dimes, shifting their business to big malls, and blighting the central business districts of towns and cities across the country. Now it’s the malls’ turn: Americans are snubbing them, and flocking to shop on-line, mostly at Amazon. Will brick-and-mortar retail survive?”

Amazon’s Pivot to Poor People – The Atlantic, June 6, 2017 | “On Tuesday, Amazon announced that it will slash the price of membership to its Prime program by almost 50 percent for low-income shoppers on federal welfare. The move might seem like a unique form of private-sector charity for poor Americans, after decades of disappointing wage growth. But it’s also a direct challenge to Walmart, the reigning king of American retail, which relies heavily on low-income shoppers and receives nearly one of every five dollars of its revenue through SNAP, or food stamps, each year.”

Apple Spruces Up the App Store – Bloomberg, June 6, 2017 | “About halfway through Apple’s more than two-hour product demonstration on Monday was a moment that wouldn’t have raised the heart rates of die-hard technologists but may be the most significant of the announcements Apple made.”

Why Amazon Is Buying Whole Foods – Forbes, June 16, 2017 | “We all know Amazon is the most powerful retailer online. They have been marching like a conquering army to increased dominance every day. The customer experience they provide, a critical part in consumers’ judgment about their satisfaction with retailers today, is second to no one. So why would a company with so much power and potential online, invest over $13 billion to buy Whole Foods, a business that functions virtually entirely in physical stores?”

Free Research Report: Village Supermarket – Gannon on Investing, June 16, 2017 | “Supermarket stocks are a good area for value investors to research now. One way to learn about the supermarket industry in the U.S. is to read the report Quan and I wrote on Village Supermarket (VLGEA) back in 2014. That stock is now at roughly the same price – $25 a share – it was when we wrote about it.”

‘Betting on Zero’ documentary achieves desired results: Righteous outrage, moral superiority – Washington Post, March 16, 2017 | “When “Betting on Zero” was shown at the National Portrait Gallery’s 346-seat auditorium as part of last year’s Investigative Film Festival, half the seats to the screening of the documentary — a searing exposé arguing that the nutritional supplement company Herbalife is a Ponzi scheme — went empty. According to the festival’s organizers, several employees of Herbalife’s Washington lobbying firm, Heather Podesta + Partners, bought tickets in large batches, which were never used. Earlier in 2016, at the world premiere of the film at Tribeca, paid protesters handed out leaflets in an attempt to discredit the movie, according to the “Betting on Zero” website. Why all the fuss?”

In Swedish

Flera analytiker sänker riktkursen för H&M – färsk analys tror på en svag halvårsrapport – Veckans Affärer, 16 juni, 2017 | “Analyshusen väljer att sänka riktkursen för klädjätten och affärstidningen tror på dåliga försäljningssiffror framåt.”

Bäddat för ännu ett svagt H&M-kvartal – Dagens Industri, 15 juni, 2017 | “Sveriges mest välmående krisbolag bjöd på en ny försäljningsbesvikelse i maj. Det är därmed upplagt för ännu ett svagt kvartal med sur lönsamhetsutveckling när H&M presenterar halvårsrapporten 29 juni.”

Så har det gått för årets nynoteringar – Affärsvärlden, 16 juni, 2017 | “Årets nynoteringar har följt två trender: de nya bolagen på Stockholmbörsen har i de flesta fall gått starkt, medan tillskotten på smålistorna har haft det tuffare.”

Getinge planerar nyemission på 4 miljarder kr – Privata Affärer, 14 juni, 2017 | “Getinge planerar en nyemission om cirka 4 miljarder kr i syfte att stärka koncernens balansräkning genom att sänka belåningen och därigenom skapa ökat handlingsutrymme.”

Så blev Gardell en beryktad aktieaktivist – Dagens Industri, 2 juni, 2017 | “Snabba räder under radarn, offentliga attacker för att snabbt höja värdet och ständigt en blick mot utgången. Det är receptet som har gjort Cevian så segerrikt och Christer Gardell så kontroversiell.”

Free Singular Diligence Issue: Village Supermarket (NASDAQ:VLGEA)

Want some good reading for the weekend? Check out this research report on Village Supermarket provided for free via Gannon on Investing.

You find the report here.

Disclosure: I am not receiving any compensation for any of the links provided. I have no business relationship with any company or individual mentioned in this article. I have no position in any stock mentioned. 

Jim Chanos Talks Tesla and Kidney Dialysis

I’m a great admirer of Chanos and I always try to learn something when I hear him speak. Here, an inter interview produced by Bloomberg. Two of the topics discussed, among others, were Tesla and the kidney dialysis industry.

To watch the interview, click here.

Below, two parts of the interview, the first one with a few words from Jim Chanos on the kidney dialysis industry (emphasis added).

*THE KIDNEY DIALYSIS INDUSTRY*

[12:45] Joe Weisenthal: Alright, to move it back from politics and theory for a second, I noticed you said there in your answer that you’re focused on some companies that may be in trouble with the potential rollback of the essential health care benefits. So, can you give us some insight into some specifics? Who’s vulnerable to a theoretical rollback there?

Jim Chanos: One area we would really focus in on, there’s only a handful public place, is the kidney dialysis business. I think that business is really heading for difficulties.

JW: Oh, we have a chart here of some different public companies…

JC: Oh, what a coincident.

JW: …in kidney dialysis. Amazing how that happened.

JC: There’s three of them, and I should say here that any companies that you either see a chart of or I mention, either intentionally or inadvertedly, you should assume that we are short that stock. Disclosure now done. And so, the kidney dialysis business is interesting because we have Obama care exchange insurance officials on record saying that kidney dialysis is almost single-handedly breaking the exchanges. Blue Cross of California has said that for every single kidney dialysis patient they have, they need 3,800 healthy lives to cover it. It is amazingly expensive, but not in the way you would think. In the way these companies have prospered, in a weird way, is they’re actually trying to push Medicare and Medicaid patients – where the reimbursement is much lower – into Obama care, and where they get two to three times the reimbursement rate, and under the essential health benefits factor, they gotta provide it. And so, taking an elderly person who’s on Medicare, why would they go into Obama care, right? It would costs them, an elderly person, a fair amount of money. Well, they get third parties to pay a big chunk of the premium, the former charities. And guess who donates to some of those charities? And so this is one of these sort of rent-seeking behaviours that I think is gonna go by the wayside. And I think these excess returns… one of those companies that you had up there actually has a slide in their investor dec that said 90% of their business is Medicare/Medicaid and that loses money. Ten percent of their business is commercial and that makes a 110% of their operating profit.

JW. So everybody can go search for that…

JC: Yeah, they can go search for one of those three companies. I think they quite figure it out.

Scarlet Fu: So has that gained momentum? Do you hear other people pressing the company on that? How that doesn’t seem to make sense?

JC: Well, there was a wonderful… I can’t mention networks, I know it’s no good on Bloomberg. But there was a wonderful Sunday night weekly news show on a cable network, chaired by a British guy, that actually did a 15 minutes segment about one of these companies about a month ago, and we were stunned when we saw it. We had no idea that anybody else cared. But they did a pretty good job at walking you through exactly what an issue this is.

So for all investors out there interested in the kidney dialysis industry, and for example DaVita Healthcare Partners (Ticker: DVA), a Berkshire stock investment, this might be something to dig deeper into to see whether Jim Chanos and his Kynikos is on to something here or not.

Following the chat about the kidney dialysis business is a discussion about Tesla, a company Jim Chanos has been talking about publicly before.

*THE TESLA AUTOMOBILE*

[15:49] SF: Let’s move on to another company that you have spoken publicly about which is Tesla. And as I imagined…

JC: Who?

SF: Tesla. T-S-L-A.

JC: Okay.

SF: The company is holding its annual shareholders meeting right now, so they’re probably applauding themselves for their five-year return. If you look at a chart…

JC: They’re probably launching themselves to March right now…

SF: Perhaps, perhaps. The stock has somewhat launched itself. It’s gone from less than $30 five years ago to more than $350. That’s a return of more than 1,000 percent despite the absence of consistent profits and incredible cash burn. So, Joe and I were talking about this, we know you’ve been public on Tesla for some while. What would it take for you to throw in the towel? What would have to happen for you to throw in the towel and say “I give up on this short, this is not gonna work”?

JC: I think that have to see the company actually begin to make money selling products. And I should point out that we were also short Solar City that he bought in. That one worked out a little better than Tesla. So, the fact of the matter is, that this is a company that, as you pointed out, burns a lot of cash and we think they’re gonna be burning close to 750 million to a billion a quarter for the next handful of quarters. It has not finished its Gigafactory, the batteries are made by Panasonic. But most importantly it has its big test ahead of it; the Model 3. It has been loosing money selling $120,000 cars, but it hopes to make money selling a $35,000 car, which we think it will be a lot more than that. You have an executive departure list, the only one I’ve seen longer in the last two years is Valeant’s. There just people are leaving left, right and center.

SF: It’s a freight train…

JC: Well something… I mean, I don’t know. They’re certainly… they’re not waiting around for the company of the future, the stock price notwithstanding. And so we’ll see. I mean the car is supposed to go into production in July. They’ll be competing with real companies in 2018. I noted with some interest as I got here the opening remarks by Mr. Musk were talking about transforming to an energy company, an energy solution company or something like that. So he’s trying to reposition the company as something other than an automobile company. But it is an automobile company with a money-loosing solar roof company subsidiary. In addition he’s got to raise a lot of money. Rule of thumb is it takes about 50 cents in capital for every dollar of automobile revenues. So if he’s gonna be doing a 500,000 Model 3’s and 100,000 of the Model S’s and Model X’s, he’s gonna need something on the order – that’ll be thirty some billion in revenues – he’s gonna need about another ten billion in capital to do that, and he’s gonna need it soon. So the Teslarian should just embrace themselves cause they’re gonna get the chance to buy a lot more stock or convert here I suspect in the coming months.

JW: What’s the most likely way, in your view, in which the Tesla story ends? Is it something that in the Model 3 doesn’t live up to the high…

JC: He actually starts making money. That’ll be what ends it.

JW: No, but I mean like in terms your thesis becoming validated. Would it be more of a sort of an investor strike, as in conditions changed, there’s a market downturn, people aren’t able to fund the…

JC: If the Model 3 isn’t gonna be popular, that’s gonna hurt, right. That’s the one everybody’s waiting for, the one that the average person who can’t afford an S or X and wants to be part of the Tesla revolution and if the car is a lemon I think that will be a problem. […] But at the end of the day he’s gotta make a car for the masses that is successful, so that’s what we’re gonna watch.

Some takeaways from the above talk that you may want to consider putting into your investor’s toolbox are:

1. Are all customers contributing proportionally to the company’s profits?
2. What’s the downside to the business from any current or future regulatory changes?
3. How much capital is needed to support future growth (capital to revenues ratio)?
   • Who will provide the capital – debt or equity holder (any dilutive effects on current shareholders)?
   • Will the company be able to raise the capital needed?
   • How long is the business able to keep on going without further capital contributions?
4. Does the industry in which the business operates make it possible for companies to gain and sustain any sustainable competitive advantages?

Disclosure: I have no position in any stock mentioned.

#WeeklyInvestorReader | wk. 23

Note to readers: #WeeklyInvestorReader contains a few of the articles I read during the week. Visit my Twitter @HurriCap for any other articles that may not have been included. 

The Real Story Behind Elon Musk’s $2.6 Billion Acquisition Of SolarCity And What It Means For Tesla’s Future–Not To Mention The Planet’s – Fast Company, June 7, 2017 | The Tesla CEO’s merger with his cousins’ sustainable-energy company, SolarCity, is totally logical–and hugely risky. With eyes now on the private sector for environmental leadership, can Musk pull off another miracle?

The Bounty Hunter of Wall Street – The New York Times, June 8, 2017 | Andrew Left sniffs out corporate fraud — and gets rich doing it.

Retail Carnage (Part 1) – Perception vs Reality – Chad Brand, May 19, 2017 | As a value investor, it should not be surprising that I have been spending a lot of time on the retail and restaurant sector over the last year or so. The space has been pummeled by Wall Street in recent quarters, as the thesis gains steam that we have essentially reached “game over” for traditional businesses.

Retail Carnage (Part 3) – Sorry Wall Street, Balance Sheets Do Matter – Chad Brand, May 29, 2017 | Can you name a retailer than has gone out of business without having any debt on their balance sheet? The common characteristic of the recent retailing bankruptcy announcements is highly leveraged balance sheets.

Buffett Sells IBM, Jumps On Apple Bandwagon – Blessing Or Curse? – Chad Brand, May 11, 2017 | Warren Buffett’s decision to invest a large sum in Apple (AAPL) in recent quarters was so surprising because he once regarded tech companies to be outside his so-called “circle of competence.”

Zalando Busts the Myth of Cheap Online Retail – Business of Fashion, May 9, 2017 | Zalando is the latest online retailer to spell out just how much it is spending in an attempt to stay one step ahead. The danger is that profit growth doesn’t keep pace with sales expansion.

The Bernie Madoff Fraud: Five Lessons for Investors from ‘The Wizard of Lies’ – Advisor Perspectives, June 5, 2017 | Here are the top five red flags – and lessons – that more seasoned investors should have seen and that average investors should learn from the Bernie Madoff scandal.

There’s no good way to kill a bad idea – Quartz, May 1, 2017 | Millions of people refuse to recognize man-made climate change. Americans spend billions on homeopathy. Around 12 million people believe that lizards are secretly ruling the world. The world is filled with bad, baseless, factually inaccurate ideas that refuse to die.

Inversion: The Crucial Thinking Skill Nobody Ever Taught You – James Clear | This way of thinking, in which you consider the opposite of what you want, is known as inversion. When I first learned of it, I didn’t realize how powerful it could be. As I have studied it more, I have begun to realize that inversion is a rare and crucial skill that nearly all great thinkers use to their advantage.

Q&A With Steve Schwarzman: “There Are No Brave Old People in Finance” – Bloomberg Markets, June 6, 2017 | Steve Schwarzman seems strangely content—up to a point. A decade ago, the Blackstone co-founder, chairman, and chief executive officer was astride Wall Street as the private equity poster boy, armed with record-setting deals, a momentarily blockbuster initial public offering, and a birthday party that people are still talking about.

Testing Mattresses with Warren Buffett – Gates Notes, June 6, 2017 | When the weather turns warm, some people head to the beach. Some like a picnic in the park. Personally, there is one place I visit every spring no matter what: Omaha, Nebraska, the site of Berkshire Hathaway’s annual shareholders weekend with the company’s CEO and chairman (and my friend) Warren Buffett.

Revisiting Buffett’s 1999 Warning: Interest Rates, Orgies, and Value – SMEAD Capital Management, May 30, 2017 | We thought it would be very helpful to review Warren Buffett’s argument in 1999, the last time there was very high expectations attached to technology stocks and to the overall level of common stock prices.

Balancing Professional Values and Business Values – John C. Bogle, 2017 | As we move deeper into the 21st century, nearly every aspect of our society is confronted with extraordinary change. The very survival of some traditional fields of commerce is threatened, including print media, retailing, and intracity travel.

2017 Berkshire Hathaway Shareholders Meeting (Full Transcript) – Slow Appreciation, June 1, 2017 | Thank you and good morning! That’s Charlie, I’m Warren. You can tell us apart because he can hear and I can see, that’s why we work together so well. We each have our specialty.

The Power Of The Model And The Rich Valuation – Part I: Why I believe in Amazon’s model – Grahamites, June 5, 2017 | In retail, almost 100% of the time the answer to the first question is a quick Amazon (NASDAQ:AMZN). But in a recent meeting I was surprised when a member of the management team I visited said that if he were to short a company for the next 10 years in retail, it would be Amazon. Why? He said there was too much Bezos hype built in the stock.

Focus on Fundamentals – LPL Research, May 22, 2017 | What are we telling our investors? Focus on fundamentals.

Warren Buffett just confirmed the death of retail as we know it – Business Insider, May 8, 2017 | Warren Buffett says that in 10 years, the retail industry will look nothing like it does now.

Hot Stocks Can Make You Rich. But They Probably Won’t. – The New York Times, May 12, 2017 | Individual stocks can be hazardous to your financial health. You may not want to hear that right now, with the stock market regularly hitting new highs..

Retail Survivor – Eric Cinnamond, May 29, 2017 | Although I do not own DSW at this time, rising retailer pessimism and DSW’s declining stock has increased my interest.

FANGs or Patience = 5 Stars or 1 Star – Eric Cinnamond, June 5, 2017 | Since I didn’t have time to check on the markets last Friday, I turned to financial television for a quick update. I watched three networks and all were discussing the same topic – record high stock prices and the FANG stocks.

Keep It Simple – Seeking Wisdom, June 5, 2017 | I am a big fan of Matt Brice writings. Why is that? He keeps it simple and focuses on key variables that actually matters.

America’s Dying Malls Weigh On Retailers – Footnoted, June 5, 2017 | Last year was a terrible year for brick-and-mortar retailers as layoffs and bankruptcies climbed. But 2017 is shaping up to be even worse, particularly for those located in a mall.

Perrigo Restates to Correct More Than $1 Billion in Errors – Audit Analytics, June 1, 2017 | Restatements are notoriously hard to predict, yet, in some cases the writing is on the wall, or in Perrigo’s case, a late filing. Back in March, we predicted that Perrigo would likely restate its historical financial statements. What we could not predict is that 85 days after the late filing, Perrigo would join the restatements club with a staggering $1 Billion restatement of net income.

Media and the Market – Investment Masters Class, June 2, 2017 | The Investment Masters understand the need to maintain an independent thought process and not get swept up in the emotions of the market at any one point in time.

Payments Industry Overview – Analysis of Visa, MasterCard, American Express – 361 Slides – Value Seeker, May 18, 2017 | There are no specific recommendations in this slide deck. Most of that is due to the current valuations of the companies mentioned, which I find none of which are “cheap”.

The Secret to Investing in Bonds – The Conservative Income Investor, June 3, 2017 | No matter what type of bond investment you are contemplating, the analysis of bond safety will always require two steps.

Competitive advantage – The Economist, August 4, 2008 | “Competitive Advantage” is the title of a book by Michael Porter (see article) which became a bible of business thinkers in the late 1980s.

How Competitive Forces Shape Strategy – Harvard Business Review, March, 1979 | The essence of strategy formulation is coping with competition.

Spotify: How Spotify Turned Free Music into a $10+ Billion Valuation – Growth Hackers | Spotify is a truly remarkable growth story. In just six years the company is valued at more than $10 billion and has more than 50 million users, 12.5 million of which pay for the service. But how did the company get to where it is today and what is its growth engine?

Why Netflix Can Turn a Profit but Spotify Cannot (Yet) – Midia Research, January 19, 2017 | Netflix closed 2016 with 89.1 million subscribers and the temptation to benchmark against Spotify’s equally strong year is too strong to resist. Spotify (which celebrated its decade in June 2016) closed the year with around 43 million subscribers, 48% the size of Netflix. But a closer look at the numbers tells another growth story.

As Herbalife Executives Seem to Disappear, Betting on Zero Goes Viral – Quote the Raven Research, June 3, 2017 | Now, let’s address what appears to be four Senior Management executives possibly leaving the company since this 10-K was filed just months ago.

Oil Price Target: $0 (by 2050) – Absolute Return Partners, June 1, 2017 | Low-cost, high-grade coal, oil and natural gas – the backbone of the Industrial Revolution – will be a distant memory by 2050..

Differentiating Business Performance from Stock Performance – MicroCapClub, June 2, 2017 | Wouldn’t it be great to have the ability to see into the future? This ability would most certainly provide instant success.

Competitive Advantage & Capital Allocation – Dorsey Asset Management, 2017 | Capitalism works: High profits attract competition. But, a small minority of companies enjoy many years of high returns on capital. How? By creating structural competitive advantages, or economic moats.

Marc Andreessen explains how self-driving cars could create a bunch of American jobs – Recode, May 30, 2017 | It’s all about what comes next.

Can Uber Ever Deliver? Part One – Understanding Uber’s Bleak Operating Economics – naked capitalism, November 30, 2017 | This is the first of a series of articles addressing the question of whether Uber’s pursuit of global industry dominance would actually improve the efficiency of the urban car service industry and improve overall economic welfare.

Articles in Swedish

Modekjesaren är lättklädd – Richard Bråse, 6 juni 2017 | H&M har petats från tronen som Sveriges mest värdefulla börsbolag och aktien är tillbaka på samma nivå som för tio år sedan. Frågan alla ställer sig är vad som har gått fel. Frågan som borde ställas är hur modejätten har kunnat komma undan så länge.

Dubbla smällar för H&M – Anders Hägerstrand, 7 juni 2017 | H&M rasade till nytt årslägsta på onsdagen efter att marknadens högst rankade H&M-analytiker, Morgan Stanleys Geoff Ruddell, sänkte riktkursen för klädjätten till 150 kronor. Han lyfter fram ett ledningsbyte i klädkoncernen som ett potentiellt scenario.

Framtiden ser inte ljus ut för modebolagen – Richard Bråse, 7 juni 2017 | Under åren som ledde fram till finanskrisen 2008 var svenska modehandlare börsens älsklingar och miljardaffärerna avlöste varandra. Sektorn har långt kvar till gammal god form och det är svårt att bli läskad av vad Stockholmsbörsen har på modemenyn.

Uber’s Problematic Economics

A few days ago I found the podcast episode “Taxi! Taxi!” from Grant’s Interest Rate Observer. The episode contains an interview with Hubert Horan about the economics of Uber, with a focus on the fundamentals of Uber’s business model and whether or not it will prove strong enough to make it possible for Uber to earn any sustainable profits going forward to support its lofty valuation.

This interview is definitely worth listening to since it provides a lot of great insights into the fundamentals of Uber’s business model and competitive capabilities. If you’d like to improve your understanding of the Uber business, check it out here.

Below, my own short transcript of the introductory parts of the interview.

Evan Lorenz: You’re work on Uber showing that most of the cost are variable, and that losses scale as revenue scales has been incredible. How did you come to your conclusion?

Hubert Horan: All I was doing was collecting numbers from other published reports, you know, and putting them into one place so you could see; “Wait a minute,” this has been unprofitable from day one and it’s still getting worse in year seven.

GIO: Yeah.

HH: And so, when you see a lot of the recent news reports you will now see something very in paragraph five or six, by the way you know, they lost billions of dollars last year. But you know, this is, none of this is confidential information, none of this, you know the accuracy of this has been confirmed completely. But the idea that this is a company that’s got, shall we say, problematic economics is still not of great interest to a lot of reporters.

EL: What actually made you start looking into Uber?

HH: Just having been in transportation my entire career, and on the sort of strategic business planning end of things. All of a sudden all of these stories started coming out about Uber five, whatever, years ago saying that it was the, you know, biggest most, you know, highly valuable private company in the world history. And it was going to compete and solve all the problems in urban transport and we’re going to replace private car ownership at some point. And I sort of scratched my head and said; “That’s interesting, wonder how they did that?” And everything that was being claimed in all of these articles completely contradicted everything that I and anyone else had known about the economics of transportation. And digging a little more, and digging a little more, and suddenly found sort of the empty core.

Hubert Horan has written a few articles on the subject of Uber worth checking out:

• Can Uber Ever Deliver? Part One – Understanding Uber’s Bleak Operating Economics
• Can Uber Ever Deliver? Part Two: Understanding Uber’s Uncompetitive Costs
• Can Uber Ever Deliver? Part Three: Understanding False Claims About Uber’s Innovation and Competitive Advantages
• Can Uber Ever Deliver? Part Four: Understanding That Unregulated Monopoly Was Always Uber’s Central Objective
• Can Uber Ever Deliver? Part Five: Addressing Reader Comments and Questions
• Can Uber Ever Deliver? Part Six: Latest Data Confirms Bleak P&L Performance While Stephen Levitt Makes Indefensible Consumer Welfare Claims
• Can Uber Ever Deliver? Part Seven: Uber’s “Narrative” and The Vox and Stratechery Critiques of Naked Capitalism’s Uber Series – Defending Uber Requires Ignoring Industry Economics
• Can Uber Ever Deliver? Part Eight: Brad Stone’s Uber Book “The Upstarts”– PR/Propaganda Masquerading as Journalism
• Can Uber Ever Deliver? Part Nine: The 1990s Koch Funded Propaganda Program That is Uber’s True Origin Story

Disclosure: I am not receiving any compensation for any of the links provided. I have no business relationship with any company or individual mentioned in this article. 

Marc Andreessen’s Favorite Book: Poor Charlie’s Almanack

Marc Andreessen joined Barry Ritholtz for the Masters in Business episode on May 19, 2017. At the end of the interview Marc shared a few of his favorite books.

To listen, click here.

To find out what Marc’s favorite books are, just keep reading the transcript below.

Barry Ritholtz: The question I get from listeners more than anyone, ask your guests what their favorite books are.

Marc Andreessen: Favorite books… So I have three quick nominations, and I’m gonna getting the hook here. “Poor Charlie’s Almanack”, the compendium of Charlie Munger’s speeches I think is tremendous. “Extreme Ownership” has been a favorite recent book by a guy named Jocko Willink, he’s a former Navy seal commander.

BR: “Extreme Ownership”…

MA: “Extreme Ownership”, one of the best books on leadership I’ve ever read and a tremendous, by the way, war story book as well. And then, what is the… man, there are so many. There is a brand new book by Robert Sapolsky I just started on human behavior, it’s sort of his magnum opus on human behavior. He’s the great evolutionary theorist, and so that would probably be the third one. That’s the new one but it looks very exciting.

Disclosure: I am not receiving any compensation for any of the links provided. I have no business relationship with any company or individual mentioned in this article. 

#WeeklyInvestorReader | wk. 22

Note to readers: #WeeklyInvestorReader contains a few of the articles I read during the week. Visit my Twitter @HurriCap for any other articles that may not have been included. 

50 Of The Best Investing Blogs On The Planet (2017) – The Acquirer’s Multiple, May 29, 2017 | Every year Tobias and I sit down to pick out fifty of the best investing blogs on the planet. This list is by no means complete and is certainly not in any particular order. If you’re an investor take some time to read through the great blogs on this list, they’ll provide you with an awesome starting point for your investing education.

A Dozen Thoughts from Charlie Munger from the 2017 Berkshire Annual Meeting – Tren Griffin, June 2, 2017 | Teaching people anything, particularly about investing, is hard.

The big missteps that brought an American retail icon to the edge of collapse – Wahington Post, June 1, 2017 | Walk into a Sears these days, and you’ll see an icon of American retailing collapsing before your eyes.

Uber, But for Meltdowns – NYMag, May 29, 2017 | Sexual harassment, corporate-espionage charges, taking advantage of drivers: The company that practically courts bad PR is in an existential crisis.

Why Is Amazon Building Brick-and-mortar Bookstores?– NYMag, June 1, 2017 | Amazon’s first physical bookstore in New York, located in the high-end shopping center at Columbus Circle, was quietly bustling when I visited on a recent muggy spring day around lunchtime.

Iceland’s first Costco is so popular that one-fifth of the population has joined its Facebook group – Quartz, May 30, 2017 | Costco, the US-based chain of warehouse stores, opened its first branch in Iceland on May 23. This year.

The Security I Like Best Checklist #Buffett #GEICO – Greg Speicher, June 1, 2017 | This simple checklist was produced by inverting Warren Buffett’s classic article on GEICO: what mental or written checklist can we imagine Buffett used to think about GEICO and write the article?

DEAR FELLOW SHAREHOLDERS… Over 30 Years of Value Insights from Martin J. Whitman – Marty J. Whitman, November 10 , 2016 | For over 30 years, Legendary Value Investor, Martin J. Whitman, has written comprehensive shareholder letters that provided readers with thorough lessons in his investment philosophy, security analysis and value investing. The collection of excerpts from letters in this book comprise the “best of” Marty’s writings organized thematically to give readers an opportunity to dive into specific topics of interest.

Why the Construction Industry May Be Robot-Proof – strategy+business, May 24, 2017 | What gives? Well, there is something unique about housing. Typically, home construction activity is custom work — remodeling, renovation, teardowns replaced by a single home, maybe a few homes built on a cul-de-sac. And it is difficult to gain economies of scale — or to automate processes — when every job, or close to every job, is unique. If every T-shirt were made to order — different sizes, styles, cuts, fabric — it would be very hard to get a $3 T-shirt. Think about the sheer, overwhelming amount of choice people have when building a home: gravel or asphalt in the driveway, 500 different shingle styles to choose from, gas or electric heating, landscaping, appliances, bathrooms, and windows. To be sure, there are plenty of planned developments and apartment buildings built in the U.S. But even here there is a great variation from project to project, and within projects.

The Housing Market Is Ripe for Tech Disruption – Bloomberg View, May 31, 2017 | The process of buying and selling a home in the U.S. is needlessly inefficient. That will inevitably change.

Finding Moats: The Best Opportunities Require More Than A Surface Scan – Geoff Gannon, May 31, 2017 | The way to compound your money is to find a wide moat stock at a 12 to 15 P/E, hold it for a long time and then sell it at a 25 to 30 P/E.

Debt pile-up in US car market sparks subprime fear – Financial Times, May 30, 2017 | In an echo of the subprime housing crash, delinquencies of US car loans are rising amid allegations of mis-selling

When High Yield Becomes Low Yield – Pension Partners, May 30, 2017 | In December 2008, as the “world was ending,” European junk bonds hit a record high yield of 25.97%. Forecasts of financial Armageddon were widespread, and few could envision a scenario in which subordinated bondholders would receive anything but pain. But the world did not end in December 2008. And over next five years, European junk bondholders would receive nothing but pleasure, earning a record return of 23% per year. Fast forward to today and we have reached the opposite extreme, with European junk bonds at an all-time low yield of 2.67%.

First impressions of an Amazon bookstore – The Shatzkin Files, May 29, 2017 | The new just-opened Amazon bookstore in Manhattan made my wife think of an airport bookstore or a “gallery, where the books are displayed rather than sold”. Everything is faced out. The selection is limited. An airport bookstore would almost certainly have a different mix of titles: far fewer cookbooks (the Amazon store gives them quite a bit of space) and a much bigger selection of novels, particularly genre novels (of which there seemed to be relatively few at Amazon).

Suppliers Bargaining Power – Dr. Andrew Stotz, May 30, 2017 | Michael Porter’s five forces analysis is a framework for understanding the degree of competition in an industry. Strong forces drive down industry profitability. The five forces model acknowledges that a company operates in a system of suppliers, customers, and existing competitors. In addition, there is always the threat of new entrants and in some cases substitutes.

Airbnb might go public if Spotify has a successful listing – Business Insider, May 30, 2017 | Airbnb is apparently keeping a close eye on Spotify’s rumoured listing.

Apple is stepping up its war to steal Android customers – Business Insider, May 30, 2017 | Apple is trying to steal away Google’s customers.

Proximate vs Root Causes: Why You Should Keep Digging to Find the Answer – Farnam Street, May 29, 2017 | The mental model of proximate vs root causes is a more advanced version of this reasoning, which involves looking beyond what appears to be the cause and finding the real cause. As a higher form of understanding, it is useful for creative and innovative thinking. It can also help us to solve problems, rather than relying on band-aid solutions.

A legendary hedge fund that raised $5 billion in 24 hours expects ‘all hell to break loose’ – Business Insider, May 25, 2017 | A hedge fund led by an investing legend expects “all hell to break loose.”

Iconic hedge fund manager Seth Klarman says investors are missing huge risks – Business Insider, May 26, 2017 | An iconic hedge fund manager says investors are misperceiving risks in the markets – at a time when markets are hitting historic highs.

Route to Air Travel Discomfort Starts on Wall Street 584 – New York Times, May 28, 2017 | “There’s always been pressure from Wall Street,” said Robert L. Dilenschneider, a veteran public relations executive who advises companies and chief executives on strategic communications. “But I’ve been watching this for 30 years, and it’s never been as intense as it is today.”

Amazon Just Invented Borders Books – M.G. Siegler, May 22, 2017 | A quick trip to Amazon Books in NYC…

Ipsos Global Trends– Ipsos, May, 2017 | The Ipsos Global Trends survey is the largest study of its kind, providing a unique snapshot of the world today. It explores the attitudes and behaviours of over 18,000 consumers and citizens in 23 key countries around the world and with over 400 questions, covers everything from tradition to trust, from brands to business, from society to social media and much, much more. Our analysis features both ‘Megatrends’ – the known technology, demographic and environmental changes happening now and in the future – alongside eight global master trends. We also share the full data, which shows trends from our 2014 study along with downloads for additional material.

Transcript: A16z’s Marc Andreessen with Barry Ritholtz on Masters in Business – Zach Ullman, May 26, 2017 | Andreessen Horowitz’s Marc Andreessen was a guest on Masters in Business hosted by Barry Ritholtz. The content is timeless, so I transcribed the interview. That way, we can refer back to it from time to time.

Were Munger, Dalio and Soros CIA Trained? – Investment Masters Class, May 28, 2017 | Mr Fogerty cited “ The Psychology of Intelligence Analysis’ from the CIA’s website by Richards J. Heuer [CIA Book] as guiding his investment principles. Always interested in finding an edge I printed out a copy. I think Mr Fogarty has stumbled across one of the most useful guides an investment analyst could find on improving one’s investment decisions.

Why Brains Are More Reliable Than Machines – Wall Street Journal, May 26, 2017 | The data part may be easy for machines, but the human part isn’t.

Free Reading: Dear Fellow Shareholders

Well-known investor Martin J. Whitman has published a book called Dear Fellow Shareholders that is publicly available via his website. Check it out here. 

Disclosure: I am not receiving any compensation for providing this link. 

#WeeklyInvestorReader | wk. 21

Note to readers: #WeeklyInvestorReader contains a few of the articles I read during the week. Visit my Twitter @HurriCap for any other articles that may not have been included. 

Being Wrong in an Interesting Way – Hussman Funds, May 22, 2017 | My friend Mark Hulbert once had a philosophy professor at Oxford, who distinguished two ways of being wrong: “You can be just plain wrong, or you can be wrong in an interesting way.” In the latter case, Mark explained, correcting the wrong reveals a lot about the underlying truth. The willingness to learn from our own errors, and those of others, is how a great deal of learning comes about. That’s certainly true biologically, where most of our skilled movements rely on feedback and progressive error-correction. It’s also true of invention and research. As Thomas Edison said, “I have not failed. I’ve just found ten thousand ways that won’t work. Many of life’s failures are people who did not realize how close they were to success when they gave up.”

What a Weakening Dollar Really Means for Investors – Morningstar, May 24, 2017 | I keep hearing that the dollar is weakening. What does that mean for investors? Will stocks decline, too?

Lessons about leases and liquidation value: a bebe stores, inc case study – Cigarrfimpar, May 25, 2017 | I got a comment in the BEBE analysis post related to their $186M in operating lease obligation and what my view was as the company announced that they are closing down all their remaining stores. As I started to write an answer in the commentary section I came to realize that this might be a good time to put my view about operating leases into print. Also, as the BEBE situation is currently playing out in real-time it makes it a good live case study for how to view operating leases when it comes to investing in net-nets and companies selling below liquidation value. At least I hope it makes the post about operating leases a bit more interesting.

Ultimate Stock-Pickers: Top 10 High-Conviction and New-Money Purchases – Morningstar, May 23, 2017 | With over 95% of our Ultimate Stock-Pickers having reported their holdings for the first quarter of 2017, we have a good sense of what stocks piqued their interest during the period.

Value Investing In A Bull Market – Science of Hitting, May 25, 2017 | I am currently looking at a company that has a pretty good underlying business. It has grown like a weed over the past decade and has attractive economics. The only problem is the stock trades for roughly 45 times forward earnings (based on management’s guidance).

The Unbundling Of Excel – Tomasz Tunguz, May 24, 2017 | Microsoft Office has more than 1 billion users globally. Assuming a 33% penetration of Excel, that’s a user population 300M users. Like Craigslist in the consumer world, Excel became the tool for nearly everyone to get stuff done at work.

The Other Auto Story – Morningstar, May 22, 2017 | Everyone talks about Tesla (TSLA), and for good reason: Its stock is up 48% year to date as of this writing, and it sold 25,000 cars in the first quarter, a quarterly record for the company. But while Elon Musk’s car company may seem to be the stock of choice for auto stock-buyers these days, it’s not the only auto story investors should be paying attention to.

Tulips, Myths, and Cryptocurrencies – Stratechery, May 23, 2017 | Thanks to Mackay’s vivid account, tulips are a well-known cautionary tale, applied to asset bubbles of all types; here’s the problem, though: there’s a decent chance Mackay’s account is completely wrong.

Pandora Media Facing Stiff Competition As First-Mover Advantage Fades – Forbes, May 22, 2017 | First-mover advantages erode quickly when first movers ignore new competitors.

Waiting for the Market to Crash is a Terrible Strategy – SVRN Asset Management, May 19, 2017 | In my experience, investors sitting on a lot of cash are usually worried about equity valuations or the economy, and tell themselves and others that they’re going to buy gobs of stock after a crash. The strategy sounds prudent and has commonsense appeal—everyone knows that one should be fearful when others are greedy, greedy when others are fearful. But historically waiting for the market to fall has been an abysmal strategy, far worse than buying and holding in both absolute and risk-adjusted terms.

Uber has no incentive to keep cars empty – Felix Salmon, May, 2017 | I’m perennially fascinated by the way in which different people read the same news story. After reading Eric Newcomer’s Bloomberg piece on Uber pricing, Marshall Steinbaum wrote a short tweetstorm about what it implies for Uber’s incentives, which I suspect is exactly wrong.

iPhone Evolution – Above Avalon, May 23, 2017 | The iPhone’s most remarkable quality is the degree to which its role in our lives has changed.

Confirmation Bias: Why You Should Seek Out Disconfirming Evidence – Farnam Street, May 24, 2017 | “What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact.” — Warren Buffett

Tweedy Browne’s Letter to AkzoNobel’s Supervisory Board re: PPG’s Buyout Offer – Tweedy, Browne Company LLC, May 4, 2017 | Tweedy, Browne has owned shares in Akzo Nobel since 1992, and we think we brought patience and a long-term perspective to our investment. Being shareholders for 25 years has unfortunately not been a fruitful experience and our patience is wearing thin. In our calculations, the growth of the value of each Akzo Nobel share hardly held up with inflation.

Uber Starts Charging What It Thinks You’re Willing to Pay – Bloomberg Technology, May 19, 2017 | The ride-hailing giant is using data science to engineer a more sustainable business model, but it’s cutting drivers out from some gains.

Stock Spinoffs and Indiscriminate Selling – Stock Spinoff Investing, May 21, 2017 | So the key takeaway from my analysis is its good to wait for at least 6 trading days to buy a spinoff that you suspect will be indiscriminately sold. You should also track how many of the spinoff’s shares outstanding have traded. Avoid establishing a position until at least 30% to 40% of the spinoff’s shares outstanding have traded.  There will always be exceptions to the rule, but following this advice will generally serve you well.

Today in Market History: Netflix – The Irrelevant Investor, May 23, 2017 | Netflix has done incredible things for its customers and for its shareholders, or share traders, anyway. Over the last fifteen years, Netflix is up 14,500%, the NASDAQ 100 is up 383%, and consumer discretionary stocks are up 268%..

Why I am an Optimist – Pragmatic Capitalism, May 22, 2017 | The key lesson here is, when we understand the financial markets inside a capitalist system our natural starting point is one of progress, of optimism. In my opinion, this is the great lesson of the financial crisis.

Barriers to Entry in the Markets – A Wealth of Common Sense, May 23, 2017 | Being a pioneer in the business world can give you a huge edge over the competition. Being a pioneer in the investment world can give you an edge but the opportunity set can close very quickly these days. There’s simply more competition than there’s ever been and when you add the growth in computing power into the mix it makes it very difficult to continue earning easy profits.

Tesla: Over-Hyped, Lousy Company Destined for Bankruptcy (Vilas Capital) – Investor Almanack, May 21, 2017 | Tesla is an over-hyped, lousy company, from a financial perspective that is destined to go bankrupt

‘Moat’ Is the Latest Jargon Encircling Silicon Valley – Bloomberg Technology, May 13, 2017 | Tech executives are fond of using an old term to describe the strength of their businesses.

Marc Andreessen Answers the Tech Valuation Question – Bloomberg View, May 22, 2017 | The venture capitalist says many investors don’t grasp what’s changed.

The Qualities of a Good Analyst; 100-to-1 Master Class – CSInvesting, May 22, 2017 | Without fail, the aspiring investment professionals will eventually ask about the characteristics we look for when we hire analysts at Oakmark or, more generally, What do you think makes a good investment analyst? Perhaps the answer might give some insight into how we think at Oakmark.

The Most Contrarian Theme: Long-Term, Fundamental Investing – Bank of America Merrill Lynch, March 16, 2017 | Whatever happened to “stocks for the long term”? A seismic shift in assets and resources toward data-driven, fast-money strategies leaves a gaping opportunity for long-term, fundamental investment strategies, in our view. One of today’s greatest market inefficiencies may stem from the scarcity of capital devoted toward long-term, fundamental investing. The risk/reward of holding stocks decreases with time horizons, and our work continues to support the fact that fundamentals grow more, rather than less effective as time horizons increase.

The First 8 Things to Look at When Researching a Stock – Gannon on Investing, May 22, 2017 | Basically, I start by finding the longest series of financial data I can (GuruFocus, Morningstar, whatever) and then look at that along with reading the newest 10-K and the oldest 10-K in detail. So, 10-year+ financial data summary, 20 year old 10-K (or whatever), this year’s 10-K, and then the investor presentation if they have one, and the going public/spin-off documents if that’s online. Also, I read the latest proxy statement and the latest 10-Q as needed for info on management, share ownership, the balance sheet etc.

If America Were a Company, Would You Keep Trump as CEO? – The Big Picture, May 19, 2017 | So out of all the ways in which Trump might want to be measured, judging him as a chief executive would seem to be the fairest to him. Forget about ideology, his political agenda, or whether you voted for him; just judge him on whether he has been a competent executive. Would you want to leave him in charge? Or would you be calling an emergency board meeting?

Almost all iPhone users will buy another iPhone, says survey – The Loop, May 19, 2017 | A recently published survey by Morgan Stanley shows that 92 percent of iPhone users are “somewhat likely” or “extremely likely” to upgrade their phone in the next 12 months plan on getting another iPhone. The research note was distributed on Wednesday and later picked up by CNET. In comparison, the same Morgan Stanley survey found that Samsung had a 77 percent retention rate, while LG had 59 percent and Motorola had 56 percent.

Who’s Afraid of Amazon? 9 Surprising Retail Winners – Barron’s, May 21, 2017 | Traditional retailing is far from dead, to judge by the success of Best Buy, Home Depot, Wal-Mart, and others.

Which Companies Have the Highest Revenue Per Employee? – Priceonomics, May 24, 2017 | We decided to analyze every company in the Standard & Poor’s 500 Index to see which ones had the highest and lowest revenues per employee.

#WeeklyInvestorReader | wk. 20

Note to readers: #WeeklyInvestorReader contains a few of the articles I read during the week. Visit my Twitter @HurriCap for any other articles that may not have been included. 

Bruce Greenwald: Channeling Graham and Dodd: Everyone thinks the market is expensive – Barrons, May 13, 2017 | Everyone thinks the market is expensive. It isn’t, says Greenwald.

Why Amazon is Eating the World – Tech Crunch, May 14, 2017 | Amazon’s lead will only grow over the coming decade, and I don’t think there is much that any other retailer can do to stop it. The reason isn’t the bullet-point moats that are talked about in headlines, and it isn’t the culture of innovation or Bezos’s vision as CEO (though I do think Amazon’s culture is incredible and Bezos is the most impressive CEO out there). It’s the fact that each piece of Amazon is being built with a service-oriented architecture, and Amazon is using that architecture to successively turn every single piece of the company into a separate platform — and thus opening each piece to outside competition.

The Mac is Turning Into Apple’s Achilles Heel – Above Avalon, April 12, 2017 | Apple’s decision to change course and develop a new Mac Pro has received near-universal praise from the company’s pro community. While developing a new Mac Pro is the right decision for Apple to make given the current situation, it has become clear that the Mac is a major vulnerability in Apple’s broader product strategy. The product that helped save Apple from bankruptcy 20 years ago is now turning into a barrier that is preventing Apple from focusing on what comes next.

Full Transcript: Billionaire Investor Warren Buffett Speaks with CNBC’s Becky Quick on “Squawk Box” – CNBC, May 9, 2017 | Following is the full unofficial transcript of a CNBC interview with Berkshire Hathaway Chairman & CEO Warren Buffett on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Monday, May 8th. Video from the interview is available on CNBC.com.

Sorry, we’re closed: The decline of established American retailing threatens jobs – The Economist, May 13, 2017 | A love affair with shopping has gone online

Retail Ripe For And Resistant To Disruption – Greenwood Investors, May 14, 2017 | A favorite cocktail party question we had a few years ago was, “which business do you think will get amazoned next?” At the time it seemed slightly novel. Now, it seems like the norm. In fact, your GreenWood Researchers recently overheard two grandmothers from Long Island saying there was no need to be entrepreneurial anymore, “because Amazon is just going to destroy your business.” In some respects, this is equivalent to the taxi driver investing in tech stocks in the late 1990s, but in other respects, it’s a sign that retail disruption has gained critical mass.

EBITDA and Gross Profits: Learn to Move Up the Income Statement – Focused Compounding, May 10, 2017 | I think both EBITDA and EPS are “bullshit earnings” when they are the only numbers reported to shareholders. Of course, EPS and EBITDA are literally never the only numbers reported to shareholders. There is an entire income statement full of figures shown to investors each year. Profit figures further down the income statement are always more complete – and therefore less “bullshit” – than profit figures further up the income statement.

Is EBITDA as Bad as Buffett Says? – Morningstar, May 18, 2017 | In Berkshire Hathaway’s annual report to shareholders, Warren Buffett expressed disdain for financial reporting practices that deliberately inflate earnings figures in an attempt to “make the numbers.”

Berkshire Hathaway: A Safe, High-Quality, Growing Company With 30% Upside Over the Next Year – Kase Capital, May 4, 2017 | Berkshire Has Everything I Look for in a Stock: It’s Safe, Cheap and Growing at a Healthy Rate

A Few Notes About the Spotify Stock Market Listing – Felix Salmon, May 14, 2017 | Everybody’s writing about this idea that Spotify might go public not through a traditional IPO, but rather through a direct listing. Direct listings are rare beasts, and so in order to understand them, reporters phone up bankers who work in equity capital markets. But the problem is that bankers who work in equity capital markets hate direct listings, because they mean they get much lower fees. And so they start spreading misinformation. So let’s go through some of the assertions.

Amazon’s epic 20-year run as a public company, explained in five charts – Recode, May 15, 2017 | Soaring revenue and cash flow, plus intentionally tiny profits

5 Media Stocks Worth Tuning In For – Morningstar, May 16, 2017 |What’s ailing these companies? Though many issues are company-specific, there are also general concerns contributing to media stocks’ malaise. Subscription revenue is one. In addition, advertising revenue continues to be an issue among many media players.

How the iPhone triumphed in business – Financial Times, May 17, 2017 | Apple’s ubiquitous smartphone outdid rivals but can it hold out for another decade?

An ‘asset class du jour’ is emerging out of the retail apocalypse – Business Insider, May 17, 2017 | Industrial real estate is emerging as a winner out of the crisis in brick-and-mortar retail

Spotify revenues rise but losses widen – BBC, May 24, 2017 | Spotify saw revenues reach €1.95bn ($2.2bn; £1.5bn) over the past year, but the Swedish music streaming platform has still not made a profit.

Stock Buybacks: What corporations are not telling you Arne Alsin, Founder, Worm Capital – Worm Capital, May 8, 2017 | Trillions of dollars of shareholder wealth have been spent on nonproductive buybacks since rules were liberalized in 1982—and much of it has bHen wasted. Just since 2010, over $3 trillion of shareholder cash has been withdrawn from corporate accounts and sent to the stock market for buybacks, generating zero tangible benefit for shareholders. We will establish in this report that stock buybacks are wildly excessive, and that investors are being harmed. Among those harmed include index fund investors, pensions, retirees, and unsophisticated investors. Among those that benefit from buybacks include corporate insiders—primarily executives and boards of directors.

An Industry in Disruption, AUTOS. Notes from a Capital Junkie. Tit-for-Tat Analysis – CSInvesting, May 19, 2017 | An electric vehicle has drastically fewer moving parts than an internal combustion vehicle and is, by design, far more modular, meaning that barriers to new entrants are significantly lower.

Cognitive Bias Survival Guide Manage the Mind to Make Better Decisions – GeekWrapped, 2017 | You know the feeling: Every day you get flooded with new ideas and information. You barely have enough time to process it all. Sure, you’re a smart and rational person that puts a lot of thought into the decisions you make. But the brain still takes decision-making shortcuts all the time. It especially happens when you need to act quickly, there is too much information, or limited memory. Here’s the deal: Research suggests that there are a number of intellectual stumbling blocks which can get you entangled in wrong judgment without you even noticing. They are called Cognitive Biases. The result is errors and irrational decisions that can hold you back. To help all of us escape this mental quicksand we’ve put together this real-world Cognitive Bias Survival Guide. It’s designed to reduce wrong conclusions and bad choices, plus protect you from charlatans trying to exploit ignorance. Think of it as anti-virus software for the brain!

In Swedish

Magnus Dagel: Tre aktier som sticker ut på börsen – Di, 17 maj 2017 | Från börsens alla balansräkningar har vi plockat ut tre som är intressanta på olika sätt. En vars nettokassa gradvis har sjunkit, en som har stärkt balansräkningen rejält det senaste året och en där kapitalet går runt i ett kretslopp.

Magnus Dagel: Allt ljus på balansräkningen – Di, 16 maj 2017 | Har du undrat över vilka bolag som har börsens starkaste balansräkningar, vilka som är högst skuldsatta och vilka som har mest goodwill? Di har lämnat vinsterna ett tag och i stället gått igenom börsbolagens balansräkningar på längden och tvären.

“Därför tvingas Izettle samarbeta med Swish” – Di, 18 maj 2017 | Izettle var länge förknippat med sin lilla dosa för kortbetalningar. Avtalet med Swish visar att man klippt navelsträngen – och byter kortavgifter mot ambitionen att växa som ett bolag för digitala kassaregister, skriver Di Digitals Jonas Leijonhufvud.