Let me draw your attention to a recent corporate story caused by a massive data breach which easily can be a decent case study for business schools and tech universities as well. Equifax is a consumer data reporting agency aggregating info about more than 800 million individual and over 80 million businesses globally.
In September 2017, the company announced a cyber-security breach between May and July 2017, where cybercriminals gained access to appr. 140 million U.S. Equifax consumers’ personal data. This hack was one of the largest and most descructive data breach in world history. Needless to say, the recent sale of appr. 2 million stock by top executives didn’t help to handle the situation and might easily be the of the most disadvantageous timing of an insider activity ever occured.
Despite these numerous drawbacks the company’s cash rich profile with stable historical growth still offers a good entry point with high risk. On 15 September 2017 long position has been opened at USD 91.4.
The negative environment related to traditional US department store titans has already been mentioned in the previous post. In case of Foot Locker the shares are under heavy pressure on the news Nike – its most important partner – might team up with Amazon. Needless to say, this would be very disruptive for FL which operates more than 3000 footwear stores globally.
Historical share price performance of Foot Locker (USD), source: Yahoo Finance
Based on this significant share price decrease, this company seems to have the lowest RSI level currently with relatively high number of buy recommendations. In my opinion it is worth to try it on for some days at least 🙂
On 21 June 2017 long position has been opened at USD 45.4 and on the same trading day I closed it at USD 46.98. The realized 1-day return before any taxes and fees is 3.48%.
On 31 May 2017 the long position in TSCO has been closed at USD 54.02 due to reaching the stop loss level. The realized 1-week profit before any taxes and fees is 1.92%.
As we all know from Ocean’s trilogy, playing a story once again is probably not the best. In case of Tractor Supply Co. this feeling has been underlined by different segment and company specific factors as well:
- The outlook of the classic US retail players have been weakened mainly due to the increasing dominance of e-commerce business models. Year-to-date number on retail store closures is already outpacing that of 2008 (year of latest recession in the States) and appr. 2,880 have been announced so far this year according to Credit Suisse.
- TSCO’s share price dropped significantly and its valuation (and its expected dividend yield) is far more expensive compared to its peers.
Historical share price performance of Tractor Supply Company, source: Yahoo Finance
On the other hand the low-debt company could offer some locked in potential. Based on the analysts’ consensus the long-term growth prospects remain roboust despite the disappointing quarterly performance and the 12m projected share price might offer more than 20% return.
Considering all these pros and cons a new long position in TSCO has been opened at USD 53 on 24 May 2017.
On 7 February 2017 the Macy’s position has been sold at USD 31.4. The realized appr. 1 month returns is 2.88% before any taxes and fees.
On 10 January 2017 the Aegon position has been sold at EUR 5.082. The realized appr. half year profit is 30.24% before any taxes and fees.
On 9 January 2017 long position opened in Macy’s at USD 30.52.
The share price of Macy’s – one of the biggest retailer in the US and has appr. USD 10 bn market cap – decreased significantly after the CEO anticipated that sales values would be stronger (especially the watches and handbags segments delivered weak results). The envisaged OPEX cut initiatives are expected to result in more than half billion USD savings per year.
Historical share price development of Macy’s (USD), source: Yahoo Finance
Historical profitability metrics (mn USD), source: company reports
Key investment considerations:
- the falling share price pushed the RSI into the oversold territory from technical perspective
- current fundamental trends seem to be disadvantageous, however majority of the analysts maintained buy or hold recommendation in respect to the stock
- over 4% expected dividend yield