Joseph Harry

Value, growth at reasonable price, long only, contrarian
Joseph Harry
Value, growth at reasonable price, long only, contrarian
Contributor since: 2012
"For almost a quarter of a century the stock traded in a range from $5-$15 per share."
Does inflation factor into any of this?
Perhaps, and that's a good point.
One thing about the gray market, however, is the chance that something goes wrong, as a buyer you get no warranty from the official manufacturer themselves. The grey market is "grey" because they are selling watches without the authorization of the actual manufacturer.
This becomes an issue with higher end brands that have unique movements that often need the manufacturer's expertise to service properly. Joe Blow watchmaker down the street can probably easily service and/or fix an ETA movement, but probably can't properly service a Lange 1 or fix any problems that might occur to it.
From my understanding, the grey market watches come from the authorized dealers, not the actual watch manufacturer themselves. Omega (owned by Swatch) actually sued Costco over this a few years back:
http://onforb.es/1lsiAQK
http://abcn.ws/1ISvUTl
Omega was mad that Costco (not an authorized dealer) was selling Omega watches in the States that they purchased from an AD overseas. If my memory serves correct, Omega lost the lawsuit.
Back in the day, grey market watches used to largely come with the serial numbers scratched off, but now a days I don't think that it's as taboo to sell excess inventory to grey dealers anymore, and I think there's less threat of retaliation from the watch brands themselves against their own AD networks.
I'm not so sure about authorized dealers, but they don't discount as heavy (if at all) from my experience. I wear watches and I've tried, but maybe I wasn't trying hard enough lol. The gray market sites usually get what isn't selling or new old stock. The more exclusive or newer models don't get discounted as frequently.
Sales in the gray market mostly only affect the authorized dealers who dump inventory they can't move though right? Richemont still gets the sales at wholesale.
As far as "Affluent millennials" I doubt there's enough of them yet to really make a judgement. I think once China rebounds that's where a lot of younger people will be buying jewelry and watches from brands with perceived prestige also.
I don't think that Richemont's primary brands who produce their own movements and largely craft watches, finish, and decorate them by hand (like JLC, A Lange Sohne, Vacheron Constantin, etc) overproduce as much either like Swatch does with more mass-produced brands like Tissot or mido who just slap a mass-produced base movement into a Chinese-made case and stick their brand name on it.
Only Baume uses relatively stock base movements from ETA, Valjoux, La Joux Perret, etc that I'm aware of and even these are usually nicely decorated. Richemont is even moving Cartier watches upmarket with collectors by introducing in-house movements going forward and even IWC heavily modifies their ETA-based movements. Richemont's starting to do this with Baume even (check out the Capeland Flyback with Baume's Pseudo-inhouse movement). I think that overproduction of lower-end pieces is more of a Swatch problem in my honest opinion.
Richemont gets half their sales from the higher margin jewelry business anyways. Just my two cents of the situation.
From Cisco's FQ1:
"Switching revenue +5% Y/Y to $4B. Routing (hurt by soft carrier demand) -8% to $1.8B. Collaboration +17% to $1.2B. Data center (UCS servers, gaining share) +24% to $859M. Service Provider Video -2% to $850M. Wireless (Wi-Fi) +7% to $645M. Security (a recent priority) +7% to $485M. Product sales overall rose 4% to $9.8B, and services 1% to $2.8B."
Looks like switching revs were actually below average growth-wise last quarter and routing was the weakest of the bunch.
The company still bumped its margin up 1.2% and grew by 3.6% overall though. As long as that trend (margins increasing or stabilizing, steady growth) continues, I'll be happy. IBM's revenues have been declining for years and I don't think HP is worthy of comparison to Cisco.
Hi jroegner,
Yes, you can buy/reinvest fractional shares, its like a DRIP program. I actually considered going with Vanguard, but in the end decided that Sharebuilder's fees were reasonable and worth it in the end, because then I can buy other funds and even individual stocks one day if I wish.
Not so sure about adding junk bonds, but Ive considered preferrers. Do you have any good funds to recommend?
Thanks for reading,
JH
Hi rijensen,
I don't think the drop in share price can be blamed by the one-time charge, I just think that the charge is the reason for the drop in PG's margins for 2015, and subsequently its ROE. I still think it needs to find a way to grow, but leaning-out the company should help it at least boost efficiency and profitability in the near-term imo.
Thanks for reading,
JH
It's definitely not as attractively valued as it was when I wrote this article, It's already increased 12%-13% since.
InvestRite, GILD did not pay a dividend at the time I wrote this article.
what about Banana Republic and Old Navy?
"I think the common thought is that Pepsi has a wider moat and is more diversified because of its snack business, but I'm part of the small minority that would rather have the "pure play" business with higher margins and better cash flow. I'm not a big fan of diversifying just for diversity's sake, but maybe my thinking is off a little in that regards."
--Couple of typos in that last paragraph, fixed it above ^^^
Thanks for the kind words Paul, it's always appreciated and I'm glad you find my stuff helpful.
Pepsi's FCF has grown faster, and I think a lot of it has to do with its great management. I wish Coke could grow it's free cash on par with Pepsi, but I'm happy with the business as it is now as a shareholder. Pepsi's at the top of my watch list right now too though.
JH
I agree, the Coke made in Mexico definitely tastes better, the old school glass bottles they come in are cool too.
It might not be "fair" to compare the two, because as you said, I think the food business does drag down margins. I do think it's appropriate to compare the two, however, because I think most investors do as direct comparative companies.
I think the common thought is that Pepsi has a wider moat and is more diversified because of its snack business, but I'm part of the small majority that would rather have the "pure play" business with higher margins and better cash flow. I'm not a big fan of verifying just for diversity's sake, but maybe my thinking is off a little in that regards. That said, there's a very high chance I will own PEP shares one day.
Back on track,
I've held shares for almost a year now, and they haven't done much either, but the lower the share price, the more "bang for your buck" if you're reinvesting that high-yielding dividend in my opinion. Capital appreciation would be welcome too though, but I view DEO as more of a bond-like investment until growth comes later on down the road. I think it will eventually, but as long as cash flow is healthy, I'll keep holding.
As a side note .... I'm doing my job drinking Guiness as well, especially in winter and fall. In the summer I've transitioned more towards Red Stripe though (also DEO owned). Thanks for reading.
JH
Hi Mike,
I think that the data from "GE CY14 Supplemental Data" (1/23/15) (page 17)" is outdated and doesn't include the company's two most recent quarters, which accounts for the discrepancy in free cash flow.
I own both, and would have a tough time deciding between the two if I was forced to pick either one. I like JNJ more as a business, but PG has a higher yield. I think it depends on the individual investor's situation and where the companies fit within the overall context of their portfolio.
Tigerkz,
I just did a write-up on Procter & Gamble if you're interested:
http://seekingalpha.co...
Thanks Scott, I added a little as well last week.
Thanks for reading CapeCapMgmt, it's one of my top 5
Why would the SEC look at their balance sheet?
thanks for reading tiddlywinking. Perhaps I will update annually, or maybe even quarterly.
Hi Tiki Bar Capital,
I was going to go with that fund, or the "ex-financials" one at first, but ultimately decided to break out the funds by market cap so I can weight them however I want. I can do this cost effectively the way my fees are set up, so even though it's more work, I thought it worked best for me to buy the three separate funds instead.
Hi dwhaartz,
I have a taxable account with 23 individual companies where the bulk of my investments are held. I chose the ETF's for my roth because index funds don't really have the individual risk that individual stocks have, just systemic risk.
The risk of permanent loss, therefore, is much less with an index fund imo. I keep the individual companies in my taxable account because I'm not constrained by the $5,500 annual limit and can load up on as many bargains (if there are any) at any time, in any amount.
With Sharebuilder, as long as I buy on Tuesdays I pay $12/month and get 12 "free trades" and then every other trade is $1 after that. So essentially nothing, except that monthly fee that I'm charged regardless if I trade or not.
I think that I'll get plenty of capital gains from VUG and the small and mid cap funds. Emerging markets should grow nicely over 30+ years imo as well. Dividends also tend to account for a large majority of investment returns over time, so I don't think this portfolio will lack for total returns over a long time period either.
Ultimately, I only want 10%-15% in bonds, but the portfolio above is my first year contributing funds, so the allocation I outlined above is more of a starting foundation than one set in stone, if that makes sense.
I figured ETF's were the easiest, most cost effective way to build a globally diversified portfolio, considering the $ amount limitations of IRA's. I have a portfolio of individual stocks in a taxable account.
Another reason I chose ETF funds is because of the Roth structure. If I invest $5,500 in an individual stock that wasn't such a good idea and I lose some of that money permanently, I can't add any more funds to the Roth if I'm already maxed out. Funds don't have much individual risk, just systemic risk.
theboss201,
I wanted the freedom to strip out and separate emerging markets from developed international economies. That way I can add more to whichever looks more attractive the moment funds are available.
Thanks for the links, I'll give them a read
I think that they will likely be negatively impacted, especially TLT. I'm going to dollar cost average into them though and get the compounding process started. I plan to buy them up more aggressively if they drop.
I meant in regards to a taxable account, dividends are taxed there. They aren't in a roth. I want my roth to add a decent amount of tax-free income when I'm retired. I'm counting on VUG and the small cap fund to add some decent capital appreciation along the way too.
Also, monthly compounding is faster than quarterly compounding. I also like getting a payment every month, as opposed to once a quarter. I'd rather spend the interest without touching the principal.