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Yale Bock
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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 Blog
  • Thoughts On Earnings, Loyalty, And Lovely Lawyers! 0 comments
    Jul 29, 2013 4:49 PM

    The earnings reports came in hot and heavy last week, with more of the same this week as media and energy companies will share their financial results with the investment world. It was certainly, shall we say, interesting, as definitive differences were revealed among high profile reports. Watching McDonald's slump and Starbucks soar based on different results brought a little pleasure to this observer as I have long noted where my loyalty (and investment dollars) are placed. Certainly, no victory laps are being taken as the market is a marathon and not a sprint. Looking at the results from Sirius, Amazon, Sandisk, Logitech, Build A Bear, and others makes me feel comfortable that placing high priority on a company's digital strategy will continue to be of primary importance in how I evaluate long term strategy in the capital allocation process.

    One of the noteworthy aspects of last week was how Amazon.com reported a down quarter, yet the stock did not sell off. In the business press, Amazon.com is always viewed as a different kind of company because it has such a premium valuation and yet many believe it's financial disclosure and transparency leave much to be desired. What many investors and the business press do not realize is that institutional investors are inclined to stick with companies which they have done well with. If you were an institution who bought Amazon.com 15 years ago when its valuation was anywhere from 500 million to a billion dollars, and it is now worth $140 billion, you are probably going to give Mr. Bezos and his management group plenty of latitude. One quarter of mediocre results is not going to cause their investor base to give up on them.

    This week we will hear from Exxon-Mobile, BP, and others about how the large integrated oil companies have been executing. One tangential aspect of the large oil companies I want to comment on is how the legal profession, if that is what you want to call it, sees fit to sue anything which they view as being fair game. Really, if a company is generating a large amount of cash, in any field, not just oil, lawyers believe it is fair game to go after (extract money from). As an investor, I have found ways to try and profit from the shall we say, aggressive practices of the different kinds of lawyers. Still, I think the legal system in the United States has become a travesty in terms of "justice" or "fairness." You will hear more from me on our legal system during the next blog post. Let's just say I am not a big fan of lawyers though I do have several who are friends.

    Mergers continue to heat up as the very low interest rate environment makes the risk reward ratio for aggressive expansion or consolidation far less costly. I continue to believe the smart money is borrowing and acquiring, and certainly not paying down debt. I am not saying take on an unmanageable amount of debt to buy an questionable asset or merge with a company where the growth and synergy opportunities are not clear. Still, I suspect nearly every industry is full of potential combinations where scale and getting rid of duplication can potentially make a great deal of sense.

    The U.S. medical system is the best in the world in all kinds of areas (drug discovery, biotechnology, genetic and genomic testing, just to name a few), but the costs of our medical care are still very high relative to GDP. Here is one example, and I am sure this does not include all factors so it is not a judgement, but it is an interesting (and eye opening) comparison of heart surgery cost-http://www.bloomberg.com/news/2013-07-28/heart-surgery-in-india-for-1-583-costs-106-385-in-u-s-.html

    I keep reading these kinds of articles about cash being king and wonder what Buffett would say. I do agree you need some just in case the market has a hiccup-http://www.bloomberg.com/news/2013-07-26/cash-is-trash-not-to-these-value-fund-managers.html

    These two guys have been great investors for a long time and now they are trying to produce more great stock pickers. Who says capitalism is not full of generous people? http://www.bloomberg.com/news/2013-07-29/gabelli-samberg-pledge-40-million-to-columbia-business-school.html

    Thank you for reading the blog this week. I hope you are having a good summer and if you have any comments, questions, or thoughts about the post, please share them!!!

    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 SBUX, BBW.

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