Sector Stories

Investor writing on substack

[Sector Stories @sectorstories]

@internpierre No dispute on the quality of the business; it's an expectations issue

[Sector Stories @sectorstories]

@internpierre Even if Leather was v. good, the issue right now is that margins are too high and need to come down if OSG is < 5%. Mgmt will keep investing even as growth slows (rightly for the long term). But then the multiple is actually higher than it looks and the stock will go ⬇️ more

[Sector Stories @sectorstories]

@FRValue I am thinking along those lines too but no need to rush this one

[Sector Stories @sectorstories]

@Invesquotes I don't believe they will I think the co has been over earning since covid and margins will mean revert, just my opinion

[Sector Stories @sectorstories]

@Invesquotes Basically it's an expectations + failure-to-consider-base-rates issue, rather than a debate on the franchise quality.

[Sector Stories @sectorstories]

@Invesquotes Even if Leather was v. good, the issue right now is that margins are too high and need to come down if OSG is < 5%. Mgmt will keep investing even as growth slows (rightly for the long term). But then the multiple is actually higher than it looks and the stock will go ⬇️ more

[Sector Stories @sectorstories]

@Loris_Dalleau Still over earning. After growth slows, we have to wait for operating deleverage to kick in, which will start to happen with organic growth of +4%. Margins are going back to pre-covid levels. Then it will be interesting.

[Sector Stories @sectorstories]

4/4

https://t.co/KDtE8yyJSZ

https://t.co/6DV2cCAqJH

[Sector Stories @sectorstories]

1/4 $RMS: we are not there yet. Fair value = €1,000/share.

Q3 sales growth of +4% cFX. On this trajectory investors should expect near-term operating deleverage (slightly buffered by stronger Leather performance). After a few years of over-earning, margins will mean-revert...

[Sector Stories @sectorstories]

3/4 This isn’t a judgement on the long-term quality of the franchise. But it does mean more near-term weakness.

Notes on $RMS and how Asian currencies influence luxury spending linked below 👇

[Sector Stories @sectorstories]

https://t.co/KDtE8yyJSZ

https://t.co/6DV2cCAqJH

[Sector Stories @sectorstories]

This isn’t a judgement on the long-term quality of the franchise, which is world class with management investing for the long term. But it does mean cont. near-term weakness.

Notes on $RMS and how Asian currencies influence luxury spending linked below 👇

[Sector Stories @sectorstories]

...operational/post-growth FCFPS is -3%/-8% a year. For an analyst with concerns over cash management and sustainable investment levels, the KPIs do not provide reassurance; Whiting would get paid more if marketing investment was cut.”
https://t.co/QJfNt5Vcg7

[Sector Stories @sectorstories]

Interesting scoop released recently about inter-family disputes and certain Brown family members being dissatisfied with management and the board of Brown-Forman. $BF
https://t.co/5sqXQlnQ8a

[Sector Stories @sectorstories]

A good reminder of just how powerful incentives can be, as I wrote last year:
“Brown-Forman’s shareholders should be unhappy with how the CEO is remunerated…
…CEO comp has grown at a 17% cagr 2020-25, while the stock price is -14% a year and...

[Michael Fritzell (Asian Century Stocks) @MikeFritzell]

Special episode on Global Cinema Stocks

Julian Robertson was known to pit bullish analysts against bearish analysts to battle each others' arguments publicly.

So today, we'll try to recreate that experience, by playing devil's advocate against each other, this discussing the global cinema industry:

✅ BULL: Michael Fritzell (Asian Century Stocks)
❌ BEAR: Hugo Navarro (Undervalued & Undercovered)

We discuss:
• Hugo's background
• The threat from streaming
• Why today's movies suck
• The impact of AI
• Why cinemas are the new airports
• The parallel to live concerts
• How the exclusivity window creates a "buzz"
• How smartphones won the attention game

Highlights:
01:46 Introduction to Hugo
03:22 Cinemas have survived many shifts (Michael)
05:06 Attendance is clearly down (Hugo)
10:08 With better movies, sales will go up (Michael)
11:39 Home cinemas cheap, same experience (Hugo)
13:53 Cinemas are a great date option (Michael)
14:26 People don't date anymore anyway (Hugo)
15:46 Netflix/Amazon now opting for cinemas (Michael)
17:15 Studios have bad incentives: milking IP (Hugo)
20:51 Cinemas create buzz that's unparalleled (Michael)
22:57 Cinemas = airports: captive audiences (Michael)
23:57 Cinema chains are commodity services (Hugo)
28:25 We treasure shared experiences (Michael)
29:57 But the experience isn't all that good (Hugo)
33:00 It's become really expensive in Europe (Hugo)
34:44 Smartphone usage already plateaued (Michael)
35:47 Smartphones can not be used in cinemas (Hugo)
37:58 Exclusivity window is lengthening again (Michael)
40:29 Cinemas not part of the zeitgeist anymore (Hugo)
42:01 Conclusion

Asian Century Stocks: https://t.co/HFob2w3mHm
Undervalued & Undercovered: https://t.co/78jI6qqtqR

Disclaimer: https://t.co/Gnzm7M1eDM

[Sector Stories @sectorstories]

https://t.co/St72k65VzF

[Sector Stories @sectorstories]

Quick notes on some earnings of interest this week (link below):
1. Hermès: the path to EUR1,000. $RMS
2. EXLService: compounds earnings at 15%, still at 15x cash earnings. $EXLS
3. Sika: a missed opportunity? $SIKA

[LVMH_Presse @LVMH_Presse]

Merci : la réaction de Bernard Arnault à « l’enquête » du Monde