Awaiting the Papal Smoke while Rome burns

We didn't start the fire...

RBNZ — Rates stay the same. I think even a 25 bps cut, when it happens, is mostly superficial. CPI is too high. We have a few useless monopolies — the banks and supermarkets — who ought to be regulated more and/or broken up. Those are two things that are keeping CPI high — without any added innovation or contribution to the NZ economy.

Fletcher — Great piece by Rebecca and Olli in BD today (these two best in the game) on the steaming wreck that is Fletcher Building — former POT boss Mark Cairns has pulled out of the running for chair — says Cairns —

Rome continues to burn while the shareholders and employees of Fletcher Building await the papal smoke from the remaining board members

What a quote!

Remaining board members are Cathy Quinn, Peter Crowley, Sandra Dodds, and Barbara Chapman — I think they all ought to step down, frankly. I got a little bit of heat for my initial Fletcher commentary but I stand by it — stock is down 38% YTD. Buck stops at the board. Resign with honour and move on.

Warehouse — Ditto here. Grayston was a poor performer, as Luxon and those of that ilk would say (a “C” lister!) and hard to understand why a company, now trading below 1.00, maintains Joan Withers as chair. As I wrote above — the buck stops with the board.

Spark — Ever since the earnings downgrade my 5G has been particularly slow. Conspiracy?? Is Eden just a grumpy man? (yes). Who knows!!

Nada other news. School hols.

RAK — Continues to track up. Have faith, ye of little…

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Aus

Bapcor - You have to wonder if Bapcor is run by a New Zealander — knocking back a $5.40 bid from Bain for the company (remember the amount of NBIOs that have been rejected as of late — Comvita, E-Road, Sky TV, Arvida…). Per Street Talk, the board is not engaging with the PE giant. Look, it’s not the best offer, but the board ought to engage and seek a better price — it is hardly a good time for the auto market.

Droneshield — Bit toppy at $2.10…

CSL — Still buying, opportunistically. A

Dominos — You are going to think I am a bit mentally impaired for this one, but you have a very solid consumer franchise trading at 5 year lows. It has a few issues: ingredient costs, Japan (FX), and the COVID hangover. It still sells about $1.23bn of pizza, which is not nothing. It is a market cap of $3.31bn. Guzman Y Gomez has a $2.79bn market cap and has $135mn in revenue. Go figure.

All your money is in the buying — if you think Dominos will sell less pizza in the next five years and decelerate it is a bad investment; if you think it will continue to grow, albeit in the single digits, it is a no brainer.

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World

Nike — I bought a bit of Nike in my personal account because I am willing to wait 3+ years for it to correct. To do this they need to get rid of the CEO and inject new talent into the brand. In the mean time they will continue to buy back stock, which is inherently accrative given the stock trades just north of 20x earnings.

Most people don’t have the patience to hold something for three years (and they are lying to you if they say there do) and probably watch a flat or money-losing stock. Most fund managers can’t do this either. I was outside Nike today and noticed i) sullen, unenthusiastic staff and ii) nobody in there. Not a good look.

Paramount — David Ellison already getting into it. This piece is a must read, my dudes. Full steam ahead — we’ll see how he goes — they are committing billions to a cash-starved company. Shari walks away with a bit of cash, though nowhere near what Viacom/CBS (the precursor to Paramount) was worth a decade ago. Cable isn’t what it used to be.

Everyone is at Sun Valley — I am there right now of course, basking in the sun, talking to my good friend David Zaslav (joking — I am here in the crumbling Auckland CBD). But you have Zaslav at Sun Valley saying the Paramount takeover is “good for the industry” — I think more consolidation is likely and needed, which makes stocks like WBD, Lionsgate, and Disney interesting…