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Yale Bock is the President of Y H & C Investments, a Registered Investment Adviser based in Las Vegas, NV. My educational background is a B.A. in Economics from UC-Irvine, a MBA from UC-Irvine, and have earned the right to use the Chartered Financial Analyst designation. I have been managing... More
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Y H & C Investments
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Y H & C Investments Blog
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  • The Wolf Of Wall Street, Oil Issues, Security, And Earnings!

    This past week I was in the locker room at my gym when I ran across a friend who told me he went to see the movie "The Wolf of Wall Street." My reaction was one of disgust as I went to see the it a few weeks ago and found it to be lacking of any redeeming quality. It is even more amazing, at least to me anyway, the film has been nominated for five academy awards. What does this say about Hollywood? Charlie Munger has a very appropriate saying which is applicable (and in many other cases as well), "Eat my bread, sing my song."

    Martin Scorsese uses the life of a criminal, drug addict, and misogynist to glamorize everything wrong with the investment world. In fact, probably 90-99% of those responsible for investing other people's money are trying to do a good job for people. In a sad, but memorable scene with Matthew Mcconaugey, there is only derision given to the idea of a mutually beneficial relationship between the client and those who invest their capital. Leonardo Dicaprio is a good actor who has done fine work in many other films. However, he is as complicit as Scorsese in making a production which is garbage, at best. The bottom line is the film is typical of what Hollywood has now become, a place where studios churn out anything in search of a buck, irrespective of the validity or ramifications of what it produces. I find it interesting there are so many good stories around in history and in all areas of life and yet the major studios in Hollywood make gutless choices like this as a way to attract audiences to their films. I certainly won't be seeing any more Dicaprio or Scorsese productions, and I hope you won't either.

    Moving from fantasy to reality (although many valuations of companies these days could very well be thought of as make believe, too), this past week opened the earnings season for corporate America. A few of the major money center banks performed nicely, while Citi had a subpar report. In the consumer space, two enterprises which had poor reports were Sodastream and Best Buy. The stocks were obliterated, one down nearly 20% and the other 40% over the course of two days. These two situations are just further proof volatility remains at least one constant in the equity market. Fluctuations can either be feared, or embraced, depending on the approach of the participant.

    In the energy market, the big news came from Shell, who guided down their results for the final quarter of 2013. Shell has been hurt by the tough refining environment in Europe and Asia, as well as poor choices related to shale projects in North America. Still, with a new CEO on board, Shell as indicated their priority will be return on invested capital as opposed to finding sources of new production growth. All across the energy sector, the rationalization of investment versus returns on capital will be a theme which have a permanent seat at the table. In addition, choosing projects with stable operating environments certainly is going to have to factor into these decisions. When it costs billions to invest in a project, the prospect of facing terrorists while trying to find a very valuable resource just does not make much sense.

    Elsewhere in the energy world, the most recent railcar crashes in North Dakota yet again highlight the danger of working with resources like oil. As more and more "black gold" gets moved by railroads, accidents like these have a higher probability of occurring . Historically, the safest method of moving oil has been pipelines. North America actually remains underserved by the pipeline network, which is why the Keystone proposal has plenty of merit to it. However, the decision has been delayed for going on four years now. In fact, the Canadian government has indicated it's frustration with the slow pace by the notoriously ineffective Obama Administration. Essentially, it's (bleep) or get off the pot. I am afraid the Canadians are probably going to be disappointed by the ultimate outcome.

    All over the globe, a more apparent problem are the security issues related to the use, storage, and processing of data facing businesses, government, and consumers. You see this with the lapses at Target, the NSA, and most recently, Starbucks (if you consider it a breach). As technology evolves, these issues are going to take on even more importance as the public is not going to accept situations where their data could be compromised. Especially in business, where every lawyer under the sun is looking for any reason to sue a company with financial resources, it is becoming more obvious that paying more for proper data security is going to be a fact of life going forward.

    In the emerging markets, the major story which has broad implications is the effort of the Chinese government to move their economy from one heavily dependent on infrastructure spending to one which is more based on domestic demand. For countries whose economies are very much based on exporting raw materials, worries about sharp reductions in GDP growth has resulted in some currency weakness and capital flight. As a result, the investment world is starting to become far more interested in different growth possibilities in countries like Mexico, Indonesia, Vietnam, and Malaysia. The world is a big place with plenty of possibilities, and the quest for investment returns never stops.

    Thank you for reading the blog, I hope you have a healthy, happy, and productive week!!!

    Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.

    Disclosure: I am long BBY, C, .

    Jan 18 5:47 PM | Link | Comment!
  • Winners Are Bold-Liberty, Apple, Marissa, And T-Mobile-

    In the competitive environments of business, politics, and sports, the most applicable saying is- "To the Victor Goes the Spoils." If you are a participant in the business or investment world, in many industries there are typically one or two large companies which control the vast majority of market share, and the remaining entrants are left to scrap for the crumbs. As a result, the largest valuations and premiums in the market are given to the biggest winners. Taking this reality even a step further, companies are in a competition to acquire as many customers as possible and fight as hard as they can to maintain, keep, and grow their bases. The natural conclusion is every public company has to strive to create the perception in the public eye that they have the best offering in market.

    As an investor, I think you have to try and identify situations where leaders realize they have to be bold and make big bets which are rational and have good risk reward potential. In addition, it is not enough to take swings, companies have to execute on the leaderships vision. For example, JC Penney thought they had a trans formative leader in Ron Johnson and tried to change the company. It failed because of an inability to implement his plans in an organized, coherent, and predictable manner. So, it is not enough to have grand plans, the ability to "Bring it to life," is the name of the game.

    When it comes to grand leadership, John Malone and Greg Maffei at Liberty Media stand out in a universe of, shall we say, mediocrity. Malone's latest plan is to buy the rest of Sirius XM Satellite and exchange it for a new class of non voting Liberty Media shares. Naturally, the Sirius-XM shareholders don't like the price being offered. The noted consumer advocate and long time want to be serious presidential candidate Ralph Nader even weighed in on the supposedly ridiculous offer, even commenting that Carl Icahn should get involved. Law firms from all over the country have announced they are looking at the proposal for fear the Sirius shareholders are being taken advantage of. As a shareholder of Liberty's for well over 15 years now, the plan is classic Malone, and if Sirius shareholder don't think they are getting a fair price, they can vote no on the offer. However, I would just note that this is not Malone's first rodeo and I suspect eventually Liberty will buy in the rest of Sirius and move on to the main event, which, for those of you following the saga, is Time Warner Cable. If you are a Sirius shareholder, just a thought, you might want to stick with the Malone guy.

    Turning to the next large wager, Apple has decided to place their retail stores in the hands of ex-Burberry CEO Angela Ahrendts (here is a nice article exploring her background even further-http://www.macrumors.com/2014/01/06/how-angela-ahrendts-burberry-experience-could-drive-the-future-of-apple-retail/). She is very familiar to me as a Burberry shareholder and did a great job of positioning the company perfectly for the future. I was sorry to see her leave and go to Apple. She will have a large task ahead as the Apple retail opportunity is currently about $20 billion in size, compared to $6 billion or so at Burberry. In time, I suspect she will make a big impact on Apple and it is a great example of how human capital and strong leadership skills could potentially have a major impact on an already important industry leader.

    Another lady who is not afraid to make massive wagers is Marissa Meyer, the CEO of Yahoo. She spoke this week at the CES show in Las Vegas while announcing an acquisition. Yahoo investors essentially get a call option on her big bets as their existing position is almost based entirely on the their ownership stake of the Chinese giant Alibaba, which will have an IPO later this year. If managements investments in human capital, a change in the corporate culture, and a overhaul of their mobile platform begin to work, shareholders potentially could have a reason to "Yahoo."

    On the audacious leadership front, T-Mobile CEO John Legere certainly does not lack for chutzpah. He decided to crash an AT&T presentation at CES and the publicity he received from the stunt has been through the roof, which won't hurt the business. In fact, Legere has been very innovative in going after Verizon and AT&T customers and during the recent quarter, a record 1.6 million consumers became subscribers. Just last week, T Mobile began an offer to pay hundreds of dollars as an incentive to get AT&T customers to jump to T Mobile. Do you think that had anything to do with why Legere was thrown out of the AT&T presentation?

    Finally, it appears the markets is starting to reprice assets which probably needed to be adjusted. Last week, a very good friend of mine commented on Twitter's valuation and how it was probably a very easy short. I dismissively thought otherwise, for any number of reasons, but the bottom line is the stock is now down 17% since that time. No, we don't own shares and I think Twitter has a bright future, however, in many cases, market prices in no way reflect business reality, and this may have been one of those situations.

    Thank you for reading the blog and if you have any comments, opinions, or questions about the blog, please feel free to email them to me at information@y-hc.com!

    Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.

    Disclosure: I am long LMCA, BBRYF, .

    Jan 09 3:26 PM | Link | Comment!
  • Obamacare, Oil, And Twitter-

    As the year winds down towards 2014, the biggest story over the last few weeks has been the introduction of the new Federal Health Insurance exchanges to the country and how few people have been able to use the new web site to enroll for coverage. I read a venture capitalist blog where the software community is absolutely incredulous that a great majority of the site was not open-sourced to help save the government money. It is amazing the cost of the site is now being projected at nearly $600 million and it still does not function correctly.

    There are quite a few Republicans who think the various execution problems, and you could probably add other kinds of issues as well, are going to be the gift that keeps on giving as the 2014 mid-term elections approach a year from now. Last night's surprisingly close governor election in Virgina and the re-election of Chris Christie in New Jersey will provide more ammunition to strategists who believe the health care debacle is just what 'the doctor ordered' for Republicans to strengthen their control in the House of Representatives and even take back the Senate. The problems with these exchanges may have only just begun as web site bugs and "glitches" may soon take a backseat to real life issues like doctor and network availability, dropped coverages, and last but not least, price.

    President Obama is discovering what many people in the business community have long know, and that is execution and implementation is much harder to deliver than sales speeches and puffed up ideas. General George Patton was a big believer in violent and ruthless execution delivered swiftly. I am sure many democrats would take a working web site by the end of November and would breathe a big sigh of relief at the very thought of no more complaints about the exchanges. I suspect that is not going to be in the cards.

    Twitter will make it's public company debut with the long awaited and much publicized IPO tomorrow. I would expect it will soar and be valued at over $20 billion. Elsewhere in a different part of the equities market, the large integrated oil companies reported their earnings over the last few weeks and generally speaking, production growth has been muted while downstream margins have compressed quite significantly. The largest companies are taking different approaches to dealing with the current environment, with some selling assets, while others continue to invest heavily. Institutional investors have delivered a firm message to big oil in that they want the capital expenditures to slow down if they are not going to yield more production growth. Return on capital is back in vogue, at least as far as investors in big oil are concerned.

    In Europe, many refineries are closing as profitability is very difficult to achieve. All over Europe, energy and electricity costs are very high, in fact I saw a report where the average household in England spends nearly 10% of their monthly revenue on energy and electricity. Many are starting to question the effectiveness of alternative energy programs and the high taxes on traditional carbon based production. The leaders in Europe have to be looking at the energy sector and wondering how they are going to get competitive in the midst of the current political environment.

    The NBA season started last week and the NFL is entering the part of the season when, "the games to remember are played in November." Oops, that was college football. Anyway, at this time of the year in basketball, many teams are just learning how to play with their new teammates. Of course, interestingly enough, you could say probably the same thing at the end of the year as well. Hope you enjoy the games everyone!

    Finally, next Thursday, November 14, 2013, I am presenting a webinar at 11:00 PST to the Opal Financial Group- here is the link if you are interested in attending- http://www.opalgroup.net/webinars.php

    I hope you have a great week and thank you for reading the blog!

    Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.

    Nov 06 4:06 PM | Link | Comment!
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