Independent Research, US Dominant Players, Investment Talk

Investment Talk

Independent Research, US Dominant Players

Investment Talk is for readers who wish to learn about companies that are potentially outside of their own circle of research, as well as those who are longing to become part of a community of like-minded investors and learn more about investment research. I would describe myself as a long-term investor who typically takes a 3Y to 5Y outlook, before reassessing once that period matures. I follow the adage that one should research, reach a conclusion, and then verify and continue to hold so long as the thesis remains intact. My own investing style is one that seeks to find dominant players within their respective market who have shown signs of monopoly or oligopolistic behaviour, unlikely to be disrupted, in tandem with discovering market disruptors who have a high likelihood of disrupting their respective market. Equally (and weighted accordingly) I seek to discover more nuanced, misunderstood, situations with a shorter time frame.

Equity Bottom-Up

Burberry Group PLC is a global luxury brand with British heritage, core outerwear, and large leather goods base. The Company designs and sources apparel and accessories, selling through a diversified network of retail, digital, wholesale, and licensing channels worldwide.

<ul><li>It was hard to imagine a worse first quarter for Burberry.</li><li>At a time when investors were desperate for some positive news following a torrentially bad fiscal 2024, Burberry’s Q1 trading update emphasised a “luxury market that is proving more challenging than expected” with the weakness highlighted coming into FY25 having “deepened” .</li><li>Retail revenue for the quarter of £458 million came in 22% below the prior year.</li></ul>

It was hard to imagine a worse first quarter for Burberry.At a time when investors were desperate for some positive news following a torrentially bad fiscal 2024, Burberry’s Q1 trading update emphasised a “luxury market that is proving more challenging than expected” with the weakness highlighted coming into FY25 having “deepened” .Retail revenue for the quarter of £458 million came in 22% below the prior year.

BRBY: New CEO & Yet More Bad News for the Troubled Retailer

lululemon athletica Inc. designs and retails athletic clothing.  The Company produces fitness pants, shorts, tops and jackets for yoga, dance, running, and general fitness. lululemon serves customers throughout the world.

<ul><li>On March 21st, Lululemon reported FY23 results. All things considered, the results were good. Guidance, however, caused some upset. Lululemon shares are down ~29% this year; after being down just 6% before the report, and is currently the 8th worst-performing stock in the S&amp;P 500.</li><li>Lululemon’s implied 11.5% revenue growth for 2024 is a notable deceleration from years prior; having averaged an annual revenue growth rate of 24.4% over the last 5 years.</li><li>This year’s revenue guidance is closer to, but still behind, the 5 years before that; where Lululemon averaged 15.7% annual revenue growth.</li></ul>

On March 21st, Lululemon reported FY23 results. All things considered, the results were good. Guidance, however, caused some upset. Lululemon shares are down ~29% this year; after being down just 6% before the report, and is currently the 8th worst-performing stock in the S&amp;P 500.Lululemon’s implied 11.5% revenue growth for 2024 is a notable deceleration from years prior; having averaged an annual revenue growth rate of 24.4% over the last 5 years.This year’s revenue guidance is closer to, but still behind, the 5 years before that; where Lululemon averaged 15.7% annual revenue growth.

Thematic (Sector/Industry)

<ul><li>I was today-years-old when I learned that Europe has its own version of the Magnificent 7; the basket of giga-cap US tech companies comprised of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla.</li><li>The GRANOLAS Dubbed the “Granolas” by Goldman Sachs in 2020, this basket was chosen because it echoed themes present amongst the Mag 7 (back then it was just “FAAMG”) .</li><li><p>Namely, they were market leaders in the STOXX 600 Europe Index, they had grown to become an increasingly larger share of the market, and their earnings had far outpaced the broader index.</p><div></div></li></ul>

I was today-years-old when I learned that Europe has its own version of the Magnificent 7; the basket of giga-cap US tech companies comprised of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla.The GRANOLAS Dubbed the “Granolas” by Goldman Sachs in 2020, this basket was chosen because it echoed themes present amongst the Mag 7 (back then it was just “FAAMG”) .Namely, they were market leaders in the STOXX 600 Europe Index, they had grown to become an increasingly larger share of the market, and their earnings had far outpaced the broader index.

Chipotle Mexican Grill / Equity Bottom-Up

Chipotle Mexican Grill, Inc. owns and operates quick serve Mexican restaurants. The Company manages restaurants throughout the United States.

<ul><li>Chipotle has notoriously been somewhat of a perpetually <em>“expensive”</em> stock if you take an optical approach.</li><li>Today it trades at ~49x forward earnings; on par with the 10Y mean.</li><li>On a price-to-free cash flow basis, the 58x multiple is slightly below to 10Y mean of 62x, but still relatively expensive. </li></ul>

Chipotle has notoriously been somewhat of a perpetually “expensive” stock if you take an optical approach.Today it trades at ~49x forward earnings; on par with the 10Y mean.On a price-to-free cash flow basis, the 58x multiple is slightly below to 10Y mean of 62x, but still relatively expensive. 

Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables and accessories, and sells a variety of related accessories. The Company also offers payment, digital content, cloud and advertising services. Apple Inc.'s customers are primarily in consumer, small & mid-sized business, education, enterprise and government markets worldwide.

<ul><li>The world does not need another opinion on the Vision Pro, the Apple mixed reality device whose launch coincided with Meta earnings, but I will share mine so I can understand my thought process in the future.</li><li><em>I have the right to be wrong.</em> The revenue share of Meta’s FRL is so small it might seem redundant to give it so much limelight.</li><li>But, directionally, it’s an important category for the company. With a launch of this scale, the hyperbole and sensationalism rhyme with things we’ve seen in decades past.</li></ul>

The world does not need another opinion on the Vision Pro, the Apple mixed reality device whose launch coincided with Meta earnings, but I will share mine so I can understand my thought process in the future.I have the right to be wrong. The revenue share of Meta’s FRL is so small it might seem redundant to give it so much limelight.But, directionally, it’s an important category for the company. With a launch of this scale, the hyperbole and sensationalism rhyme with things we’ve seen in decades past.

I am a 27-year-old who grew up in Germany & England before migrating back to my homeland of Scotland. I have worked since the age of 14, spent five years as a student of economics, and have served in various roles across the fintech and start-up landscape. I am currently a product manager and head of partnerships at Koyfin, and have been writing consistently since 2020. Investment Talk was my first newsletter, and I later started writing NTS. Investment Talk is where I write articles about the stock market, the companies within it, and human behaviour. I focus on writing about what I find interesting, in a way that will be both enjoyable and informative to the reader.