Monthly Archives: July 2015

Costco: You shop there but should you buy the stock as well?

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Costco 1Dear Mr. Market:

Take a moment to think of a ‘big-box’ retailer – is it a position that you would like to own in your portfolio? Over the last several years investors have been burned by these stocks as the retail industry has been hit with negative headlines and security breaches while at the same time resisting change in consumers preferences and technology. When investors think of ‘big-box’ retailers the two names that often come to mind are Wal-Mart (WMT) and Target (TGT). There is, however, a name that has become a leader posting impressive returns for years and in our opinion will continue to do so for the foreseeable future.

Costco Wholesale Corporation (COST) is a leader in the Consumer Staples industry that truly embraces and drives change enabling it to earn the loyalty of its members while also recruiting new ones. At the end of 2014 the company operated 664 warehouses with 469 in the United States, 88 in Canada, 33 in Mexico and the remaining 74 in the United Kingdom, Japan, Korea, Taiwan, Australia and Spain. The company was founded in 1976 and is currently based in Issaquah, Washington.

When we look at Costco there are several key factors that differentiate COST from their competitors and in our opinion make a case for why it can serve as a core holding in a diversified portfolio. Today we will not be wearing our ‘analyst hat’ and dig into the financial reports instead we will highlight several compelling points that make Costco a leader and innovator in their industry. Continue reading →

MPG Core Tactical 60/40: June 2015 Performance Update

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Dear Mr. Market:

Like clockwork you set us up for another stretch of pretending that you wanted to inch up higher and then sold off the last week of the month. How you behaved in May is similar to what you did in June except this time your volatile temper began to show more of a resolve and rattled investors. You began the month with some semi-positive economic news along with dovish Fed commentary all to have it dampened by the Greek debt fiasco.

The S&P 500 lost -2.17% for the month of June. The poor performance turned in by our domestic markets pales in comparison to what has transpired in China. If you’re waiting for another proverbial “bubble” to burst…perhaps it’s here. In about three weeks Chinese stocks sold off sharply losing -30%. We’ll talk more about this later in this article but for those “experts” claiming that this is a good time to buy Chinese stocks, consider the reality that they are still quite expensive. If you think our markets are frothy after a six-year bull market run and a current P/E ratio of 20.5, the median P/E ratio for Chinese companies is still at 55 (down from 108!).

Here’s the current summary of the MPG Core Tactical 60/40 portfolio mix, which is updated as of this writing (July 2, 2015).

Click here to compare our portfolio against the benchmark.

What adjustments did we make? Continue reading →

It’s All Greek To Me!

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Greece 1Dear Mr. Market:

The financial media loves to move from crisis to crisis and spice things up by creating eye-catching headlines! Over the course of the last few months an old friend has popped back up as the lead story and it isn’t due to being the birthplace of the Olympics or tasty baklava. Greece is once again in a financial crisis and its future will not only impact Europe but also economies around the world.

While the issue is complex and there are many moving pieces what it ultimately comes down to is Greece has a spending problem. The country is like a college freshman that just got their first credit card and has gone on spending spree oblivious to any repercussions. Picture that freshman opening their first bill after they have decked out their dorm room and realizing they can’t make even the minimum payment. This is the dilemma that Greece is facing… again!

How did we get here?

 To keep it simple, Greece has built up a mammoth amount of debt by spending more than it generates. The balance sheet for the country is essentially covered in red ink. The retirement age in Greece is 57 (62 in the U.S.) creating an additional burden on the country. Tax evasion is also a huge issue for the country; Greek politicians have often referred to it “as the national sport”. It’s estimated that over $30 billion per year goes uncollected in taxes. Continue reading →