It is always interesting to see how businesses in the same industry are operated, and last week I experienced a notable difference between two theme park operators. Both are located in San Diego, and one is a public company which recently had an IPO. The other is owned by a European family and also by Blackrock. Both parks charge premium rates to attend their locations. The former had very old facilities, and for lunch, we had to stand in line for an hour to order a sandwich. When we got to the front of the line to place my request for a healthy turkey burger, we were then told they were out of those burgers, it would be another half hour before they would have them. In this eating area, they had one register working, and the other two registers were not being used. They also had no trays to place food on. An interesting way to treat ones guests.
The second park was noticeably different in there were eating locations all throughout the park. The facilities, while not new, have been recently upgraded. The food establishments also offered an assortment of good nutritional choices for those of us who are interested in maintaining a healthy lifestyle. There were a few areas where this park could have improved on as the long wait times for rides were a turn off. In graduate school, we had to take a mandatory course on manufacturing and part of that entailed line theory. At the time, the object was to understand how to reduce plant waste and make manufacturing situations as efficient and profitable as possible. However, the queing issue is important because customers don't like to wait. I hate waiting in lines and think companies which force you to wait don't respect other people's time. The group which is the most responsible for this is doctors, but they have the insurance companies to partly blame. Anyway, the big theme park operators have a captive audience because parents are not going to leave a theme park after dropping a lot of money for a once a year event. Still, having to wait 30 minutes to an hour for a ride is indicative of design and operational weakness. All in all, I will only say the company which recently went public is not on my buy list, while the European group most definitely is one which I am eagerly awaiting for an IPO.
Regarding recent events in the market, investors are discovering that macroeconomic predictions are a fools errand. The most recent economic numbers out of Europe have been encouraging, in addition to better growth figures from China. Today, the July retail numbers in the U.S were also a bit better than many predicted. Investing in stocks does require one to pay attention to the global economy, but I think investors are far better off reading trade journals and specific 10-Q's, annual reports, and 8-K's than placing too much emphasis on specific macroeconomic or country reports.
As part of the recent information the market has received, it now appears oil demand in the United States is increasing, and not on the decline as it has been for a number of years. Some in the media are making it a priority to highlight the stock market performance of the independent oil producers, especially in the shale area, versus the lack of success over the last five years by the major integrated companies. I would not be so quick to discount the majors, as whenever they want, they can buy these smaller enterprises. With size, comes strength, especially in the the very capital intensive oil business. Here is a nice link to a recent Financial Times story illustrating this very issue-http://www.ft.com/intl/cms/s/0/843f1b9c-fea1-11e2-b9b0-00144feabdc0.html#axzz2bsMl5xTl
Another positive for the large integrated oil companies is the fact that Mexico is now looking at opening up it's energy sector for foreign investment. As always, the devil is in the details, but certainly, having another possible area to produce oil could be a very good thing for the large oil companies. Here is a link to that story-www.ft.com/intl/cms/s/0/edb0ed38-0263-11e3-a9e2-00144feab7de.html#axzz2bsMl5xTlhttp://www.ft.com/intl/cms/s/0/843f1b9c-fea1-11e2-b9b0-00144feabdc0.html#axzz2bsMl5xTl
The horse race between Google and Apple is an interesting one because there are a few different dimensions involved. Most developers currently make the Apple system a priority, but because Google has nearly double the number of users on Android based devices, there are some who believe Google has a definitive advantage in the future. There are reports Apple will release a low cost I-phone in September to help address the low end area of their product line. Other areas where the two will probably go head to had would be in televisions, wearable devices, and connected devices for all sorts of appliances like cars, washers and dryers, sprinklers, locks, security systems, microwaves, and who knows what else.
Politically speaking, the summer is almost over and the next travesty the public has to endure will be the battle over how to extend the debt limit. The deadline is October 1, so we get to see a lot of the politicians in September. I am sure you cannot wait.
I hope the last few weeks of summer are great and I appreciate you reading the blog. If you have any comments or thoughts regarding this or any other post, please share them. Thanks for taking the time to hear my voice and have a great week!!
Y H &C Investments, Yale Bock, and the family of Yale
Bock own positions in securities mentioned in the blog post. Investing
in stocks can lead to the complete loss of your capital. As
always, on any company mentioned here, past performance is not a
guarantee of future returns. Investing involves risk of losses on
invested capital. One should research any investment and make sure it is
suitable with your objectives, risk tolerance, risk profile liquidity
considerations, tax situation, and anything else pertinent to your
financial situation. Also, the CFA credential in no way implies
investment returns will be superior for any charter holder.
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