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Major is not another stock expert. Major is an ordinary guy who believes that: by learning and disciplined investing little guy can beat many “experts”. Major grew up in China and came to US for graduate study in 1997. Currently Major works as technical consultant for a software company.... More
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  • Will Coach Ever Come Back To Its Previous Dominance Position?

    Coach, Inc. (NYSE:COH) has dominated the affordable luxury bag market for more than 10 years, until recently its momentum got taken by upstarts like Michael Kors, esp. in the US market. I recall a few years ago, amid the US financial crisis, specifically in June 2008, Starbucks (NASDAQ:SBUX) the coffee company has experienced a similar situation, at least in terms of the stock price, it went to about $7 to $8 range. The company came back now, the stock is worth about $70. Is there any similarities in those two companies or situations? Is there any good chance for Coach to come back?

    Personally I think the situation was a bit different. In the case of SBUX, the main problem was they expanded too fast, growth without profitability, and hit a perfect storm with financial crisis. They had some competitors such as McDonald, Panrea Bread (NASDAQ:PNRA), Donkin Donuts, etc. But no direct or strong competitor. Peet's coffee is much smaller. Their problem (growing too fast) was mostly self inflicted, and since Schultz came back, he righted the ship and the size, now everything is working the way it supposed to work.

    In the case of Coach, it's both their own mistake (too much discount, value conscious in outlet stores), plus the upstart competitors (MK is the strongest one). Can those be fixed? I guess it's possible, but not easy. Thus the recent investor conference, they laid out their plan: pretty much "throwing out kitchen sink" plan. It will work if they can achieve the new "modern luxury" as they promised, at the same time stabilize the US sales, and keep the China growth going. All are not trivial. For the investors, expect some bumps on the ride, it won't be a smooth ride, even if eventually they come back.

    PS, just saw Coach and Michael Kors China websites. Coach is much better than Kors. This is not a fair comparison, as Kors even does not have a Chinese name. Btw the Chinese name for Coach is蔻驰.

    Disclosure: The author is long COH.

    Jun 20 10:00 PM | Link | 1 Comment
  • A few words on PALM
    I remember one of my friends said investing in PALM is like venture capital. He is right not only from the past week's stock action, but also the biggest PALM backer Elevation Partner is a private equity/venture capital (people who can afford to lose). My problem was I forgot about it when I heard all the noises from analysts (and I thought they are helping short sellers). 

    Verizon launch
    The recent problem appears caused by the lackluster Verizon launch. Palm CEO Jon Rubinstein kind of mentioned it in press release (or internal memo). He also admit some problem caused by Palm itself. I think both are right. VZ spent $100 mil on Droid launch, according to analyst. Palm/VZ did not do a good marketing job with a small budget. But ultimately it's PALM's problem: from product quality, marketing and support. 

    Back in last June/July Sprint launch, Palm Pre is basically a crap, in terms of build quality. A lot of returns and exchanges. The last thing Carrier Sales rep (who works for commission) is customer comes back for return: taking away their time, and bring down their reputation. Now build quality problem is largely solved, but software update is still not perfect, and performance is sluggish from time to time. These problems continue to plague Pre and Pixi, both at S and VZ.

    Bigger picture
    Smart phone market is cut throat competitive at this time. iPhone and BB continue to be popular. Nokia is popular outside US. Google entered the race with Android (which developed for a few years) and boat loads of cash (and followers like Motorola and HTC). Last but not least, Mr. Softie (Microsoft) and Nokia are not backing down, they are working on next generation smart phones. All those guys can afford to throw a lot of money and get a bit more market share. 

    Suppliers (hardware manufacturers like Honhai and 3rd party developers), carriers and wall street don't live in vacuum. They usually work for the people who have the money. Unfortunately Elevation Partners (Bono included) does not have that kind of pocket. They could still survive if they can come up with a solid product (don't have to beat iphone, but got to be solid, I mean it works). But they did not do it successfully so far, at least they have not convince the sales reps at Sprint and VZ. 

    What's next
    Obviously a lot talk is around take over, and the value of new webOS. All these big guys RIMM, NOK, MSFT plus HP and Dell can afford to buy Palm. For RIMM, NOK and MSFT efforts are under way for new OS, so essentially the CEOs have to believe and persuade their people that (portion of) webOS is better than their own OS. Also, the final value of Palm may not be as high as many people liked.

    From Palm's side, blaming others is not the solution. Because if they can not fix the product, and marketing problem, it's likely the company will be gone in not-too-distant future.

    Bottom line
    Again bet on the money you can afford to lose. I am going to sell some tomorrow. Better late than never :-)

    Disclosure: no positions on PALM, RIMM, NOK, MSFT, DELL, HP, S, VZ
    Mar 20 2:44 PM | Link | Comment!
  • Portfolio management lessons: don’t sell all at once
     Was talking to this to a close friend yesterday. My rationale of “not selling all at once” is because: it’s usually happens a stock (or something else) will go up in price after a person sells it. Very simple.

    Appearently that’s what happened to some Tongkang Zijin shareholders in recent years (FT article “Woes after a windfall“). The story is a bit long, so let me summerize. Apprearently in June 2001 the residents in Tongkang villiage (in Fujian Province) received around Rmb1,338.85 ($196, £117, €138) Zijin stock for the compensation of their land use right. At the time Zijin was not in good financial shape and its stock was not listed. Eight years later, after the public listing at Hongkong and Shanghai (and fundamental change of the business), the stock is worth Rmb 800,000. Obviously not everyone kept the stock. Quote FT:

    Of the original 1,068 villagers, around 230 had already sold out, for prices ranging from the face value of Rmb1,338.85 to Rmb 652,000 ($95,000). “Some people who sold early regret it so much they want to jump in the river and drown,” says You Facai, whose household had sold one allotment for Rmb 100,000 to build a new house but still retained seven that were together worth Rmb 5.6m, an unthinkable fortune for a subsistence farming family in an area where a brand new 100-square-metre apartment in town costs only around Rmb 250,000.

    So the lesson here is: don’t sell all at once.

    Personally I can think of two reasons people sold out the stocks (the lottery ticket they got for giving up land rights).

    1) They need money. But this is lame for people sold it at Rmb 1300, because most people can make that money by a month’s work at toy factory.

    2) People feel disgusted (by the amount of stock being compensated), they just want to get rid of it and move on. Emotion should never be a rationale behind a investment decision, not to day that is a lottery ticket associated with giving up land rights. A very special lottery ticket.

    This story itself is very unique and the kind of reward does not happen in stock markets, but I think we can all learn a few things from it because in many instances, we could make similar mistakes. Your take on this?

    Aug 22 2:54 PM | Link | Comment!
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