The Strongest Consumer Environment in Years

Retailers are releasing earnings reports this month and for many stalwarts second quarter results were excellent: Walmart saw comparable sales in the US increase 4.5%, its best result in more than ten years. Off-price retailer the TJX Companies, owner of TJ Maxx, Marshalls and HomeGoods, saw comparable sales rise 6% with increased customer traffic as the primary driver. If one thought good results from discounters Walmart and TJX were a sign of a struggling customer “trading down,” Nordstrom saw comparable sales rise 4% in the quarter, its highest since 2015. The Home Depot saw comparable sales rise 8% in the…

Continue Reading →

Are We Climbing the Wall of Worry or Is It Time to Be Cautious?

Bloomberg ran an article last week headlined “JPMorgan Says Clients Are Clinging to Risk Despite ‘Palpable’ Anxiety”: At JPMorgan Chase & Co., the bank’s clients are in the throes of that conflict. Despite concerns, they’re unwilling to stray from benchmarks and take on defensive trades, according to John Normand, head of cross-asset fundamental strategy at the U.S. bank. “The sense of anxiety is more palpable in client discussions and in the news flow than it is in investor positioning,” Norman wrote in a Thursday note. “As much as they sympathize with late-cycle risks, they cannot run such tracking error for…

Continue Reading →

CalPERS Urged to Increase Returns. Bad Idea.

Back in 2016, CalPERS decided to lower their expected investment return from 7.5% to 7.0% by 2020.  Now California’s cities are concerned that target may be too low: The legislative representative to the League of California Cities urged the CalPERS Investment Committee Monday to think “out of the box” in finding a way to exceed its 7% investment return projections, saying that cities won’t be able to pay their monthly contributions to the pension plan if returns are that low. CalPERS sets contribution rates based on a variety of factors including assumed rate of return, and lower returns means contributions…

Continue Reading →

Applying Peter Lynch’s Categories to Investing

“Know what you own, and know why you own it.” – Peter Lynch This quote has become such a mantra of my own that I had forgotten that it came from Peter Lynch.  Lynch’s book, One Up on Wall Street, is one of my favorite investing books and has heavily influenced my own investment approach.  This is one of the first books I recommend to beginning investors as there are great insights for amateurs and pros alike. Lynch is particularly skilled at distilling complex ideas into simple concepts.  In a chapter entitled “I’ve Got It, I’ve Got It – What…

Continue Reading →

Trade Wars and Political Risk

Investors are facing a new risk: A potential trade war.  What changes, if any, should investors make to their strategies?  It’s too early to tell as the course of policy is undefined.  The following is excerpted from my recent letter to investors: One major cause of the recent volatility is talk of a “trade war” following the announcement of tariffs on steel and aluminum by the Trump administration.  Despite the President’s campaign promises to impose such tariffs, the market was caught off guard by the announcement, perhaps assuming the President would refrain from implementing policies that would pose such obvious risk…

Continue Reading →

Sears in Roseville Closing

This week we learned that Sears (ticker: SHLD) is closing its stores at the Westfield Galleria in Roseville and the Sunrise Mall in Citrus Heights.  The closures are expected to happen in July. The news should come as no surprise, as Sears had already slated 166 stores for closure this year.  It is a surprise to see the Galleria store among them as the Roseville mall is quite healthy despite troubles at many malls in the region and nationally.  I suspect the store will turn over quickly, however. The stores are not owned by the malls, but are owned by…

Continue Reading →

Welcome to the Granite Bay Investor

I’m Gregory Shea, Founder and Portfolio Manager at De Novo Capital LLC, an independent investment management firm based in Granite Bay, California.  In location and in spirit, I’m about as far from Wall Street as you can get. This blog is my commentary and musings about stocks and investing, as well as local business issues in Granite Bay, Roseville, and the Greater Sacramento area. Want to know more?  Please check out my firm’s website, or feel free to contact me at greg@denovocapital.com.

Continue Reading →