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Minyan Morning Mailbag

By

What a Rush!

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Minyan MM "mmmm Good" Writes:

My daughter's computer had a virus so I called a local Best Buy (BBY) which, I assumed, would have one of the better staffs, given the high-traffic area of the store.

To my frustration, they had a shortage of help- though little traffic. They said my computer would take about a week to fix (it took 2). My Geek Squader told me it would cost $79 to remove the virus crushing my computer.

Turn the clock to last Friday... My other daughter goes on this "fixed computer" and the virus is back. I called the Best Buy Manager who told me that I "should've had a diagnostic test for $59 and then the virus elimination for $79."

Basically, I was out of luck and unless I wanted to now pay the $59, plus another $79 to take out the virus again! An appeal to the manager fell on deaf ears.

What happened to the customer is always right? What happened to the Geek Squad Best Buy always advertises?

They lost my business and really, really ticked me off.

MM

I feel your pain, my Minyan friend. One of my favorite retail customer service axioms was always "If you give a customer great service, you'll be lucky if they tell one other person about it. If you make a customer mad you can be certain they will tell at least 10 others."

The emergence of the internet ups the estimate on the number of folks who hear about the bad experience about 100-fold.

I'm happy to be part of that expansion by posting your letter here.

Minyan PS "Sssst" Writes:

Greetings,

I have been following your retail reports at Minyanville with interest, and share a skeptical view of Best Buy. One thing that has tempered this perspective is the fact that BBY is taking share from Circuit City (CC) and Sears (in appliances). That development has led me to start to look at SHLD as a short candidate. Past work I have done has shown how difficult large-scale mergers are in retailing, especially combining two subpar players. Sears also plays in the broad middle of the demographic spectrum that is getting squeezed by higher energy costs and weak employment/income growth.

Do you have a view of SHLD? Any high level thoughts on sales trends, merchandising, status of the merger integration effort? Thoughts on valuation?

Thanks!

Psst,

My opinions on Sears Holding, off the top of my head and worth exactly as much as quicky, half-arsed opinions are always worth (read: "Not much, if anything"):

  • The easy work has been done on their integration. They fired the guys who got both companies in so much trouble to begin with.
  • Now SHLD has to do actual retail, which hasn't really been the best "thing" for either Sears or Kmart in recent decades.
  • I still dislike the ticker SHLD and am repeatedly, albeit briefly, confused by seeing the old Sears "S" scrolling with a new company.
  • Eddie Lampert, by all accounts, is a scary guy to be short against but he's got a bit of an uphill battle on this one, at least on the fundamentals.
  • Regarding valuation, I defer to Mr. Lampert (and others) on all things Real Estate, which was the angle Lampert seemed to originally see in his Kmart play. As ongoing retail concerns Sears and Kmart generate a ton of revenues ($40B+) and just about no margins. Considering the merged chain now releases almost no operational data beyond that in a timely manner, it's sort of hard to argue value either way, in my opinion.
  • Which leaves me out of the stock; beyond finding it an interesting story.

Minyan "Towering" Franklin writes:

Bill Gates has been adding to his Berkshire (BRK/A) stake, paying about $18M. Chump change for Bill or would this open your eyes to do further homework?

If SHLD is "tough" to value Berkshire is a well of impenetrable financial darkness where only the boldest or most foolish dare lurk. Which would be why exactly one analyst publishes research on a company with a market cap of over $120B.

Mr. Gates could be buying BRK/A because he feels the stock is undervalued and Warren whispered something in his ear. On the other hand, Bill could just be settling a golf bet, day trading his Schwab (SCH) account or parking some money he found tucked under the seat of his time-share jet.

My official advice for those looking to learn about Berkshire is to pour through Mr. Buffett's annual letters to shareholders. Collectively, I think they are the best Stock Research Primer available (for free).


On a related insider-esque stock buying point, Minyan "Insert Reference to Grease here" Sandi writes:

Barrons Online Inside Scoop claims PetCo's (PETC) Danhakl purchased the 1.8M shares on behalf of Green Equity Investors IV, a private equity fund run by Leonard Green & Partners.

Minyan S,

I've said it before and I'll certainly mention it again after this: the Power of a network of motivated people sharing what they know and think, stock by stock, market by market, never fails to impress me.

For those just getting on-board with our PetCo discussion, MS is picking up a stream from a couple weeks ago, when we noted that a board member at the pet-care juggernaut had purchased about $40M worth of stock.

To bring us up to speed on what we've learned so far through our Minyan network: Mr. Danhakl purchased about $40M worth of stock on the open market at $21 and change after selling a major slug of the stock last year at over $35 per share. Now we've got a decent idea of for whom Mr. Danhakl purchased the stock (for Green Equity, which now becomes the 12th largest holder of PetCo).

I still find the PetCo buy an unusually compelling one, particularly vs. the above Bill Gates purchase of Berkshire, for the following reasons (as per our long-standing policy, listed in the order which they leapt from the top of my head):

  • Danhakl bought aggressively and in the face of a large drop in PetCo's stock.
  • Whether he made the buy for a third party, for himself or for his kid's college fund, there's only one reason to buy 3% of the float of a stock down 40% ytd (and down about 20% immediately prior to Danhakl's buy): Because he thinks the stock is going higher.
  • Mr. Danhakl's prior activity in PetCo's stock suggest that it's worth paying some attention when he gets long.

Mr. Gates' BRK purchase has any number of explanations, including "can't find nuttin' better to get long." Danhakl is making a rather obvious (though still implicit) "call" on PetCo's stock.

Danhakl could be wrong with his bet. Plenty of smart guys have made horrendous stock calls over the years.... that doesn't mean they aren't worth listening to.

Position in BBY

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