Fletchers CEO steps down, chair to resign; CPI was bad; A BBR Valentine’s

14 February 2024

Happy Valentine’s, Upper East Siders, Gossip Girl here with some news of the unfortunate demise of “rate cute soon”— spotted at the Fed from some numbers hot off the press — CPI was pre-tay pre-tay pre-tay bad.

Core CPI came in at +0.4% which annualises at +4.8% and core services came in at +0.8% — +10% YoY. Look at what happened last time supercore spiked — Jan 2022. Are you getting the same vibes I’m getting, lovers? It’s giving “recession” — both figures are far off the Fed’s target. We don’t feel optimistic…NASDAQ is only down a mere ~1.80%…markets went into this year one-sided priced for a soft landing…Magnificent 7 earnings are priced like its 1999…and about that Federal US debt issue…

OK then! Very cool! Everything is ok!


Today was supposed to be the Valentine’s issue where I wrote about the companies we love, but there’s too much news to get through first — first of all Fletchers. You’ll recall we called from the CEO to step down yesterday and spoke of some of the issues that has besieged Fletchers for years — was quoted in BusinessDesk here.

Anyway, today both CEO and Chair stepped down — as per the release to the NZX:

Group Chief Executive Officer (CEO) Ross Taylor has given notice to the Board of his retirement and that as part of a Board renewal review being undertaken, Chairman Bruce Hassall will step down from the Board at the Company’s Annual Shareholders Meeting later this year.

Heads rolling, etc. Swung to a loss after tax of $120mn. The question is: will a new CEO and Chair do any good? Reminded of Buffett’s quote on purchasing toads at toad-like prices:

We have tried occasionally to buy toads at bargain prices with results that have been chronicled in past reports. Clearly our kisses fell flat. We have done well with a couple of princes — but they were princes when purchased. At least our kisses didn’t turn them into toads. And, finally, we have occasionally been quite successful in purchasing fractional interests in easily-identifiable princes at toad-like prices.

Fletchers is no doubt a toad. It has been a toad for a long time. If you are tempted to purchase a toad at a toad-like price (FBU is currently trading at ~$3.60) just think of what the prophet Buffett quoteth…

We had some interesting discussions with a few people yesterday and we kept coming back to the same thing — competition. Fletchers exists as a oligopoly in NZ — sometimes monopoly-like traits breeds laziness or complacency. Might it be time to break up Fletchers into multiple listed businesses that better reflect each segment’s value and encourage competition? I don’t know — right now — Fletchers is looking pre-tay pre-tay bad, as is US CPI…

I made a TikTok, of course — I’m down with the new media —

And more bad news (but good for the stock)…Paramount cuts 800 jobs

About 3% of the co. If everyone & their dog didn’t know that Paramount was up for sale then they’d believe the reasoning – “cost cutting” etc — but we all know the reason is when a company is getting ready to be sold, all production, etc, is placed largely into a halt while potential acquirers do the due diligence. Expect this is the same here. This is positive for those holding PARA stock.


A BBR Valentine’s

Now that we’ve written about what we don’t like (and some of what we do — we think Paramount’s acquisition is just a matter of when), we’d like to write Valentine’s to our favourite companies of the past year.

A Valentine’s to — LVMH and co…

What’s not to love? A fat net margin, an empire than spans from the obvious – Louis Vuitton — to the not-so-obvious — Loro Piana, Sephora, etc. 15% ROIC and a 5 yr CAGR of 13%. Its stock has returned 172% in the past year. I’ve written to you plenty about how much I love LVMH — I love how they can increase prices with little pushback, given their market; I love how they “own” history (i.e. LV, Dior, Loro, etc); I love how much mindshare they have with the luxury consumer. A red rose for you, Bernard.


A Valentine’s to — Mainfreight

Gotta love a firm that keeps on truckin’. Don is a “legend”. Whenever I talk to someone about the firm I tell them they have a P&L board in every cafeteria — the whole staff knows the profit and loss, and profits are shared on a per-branch basis. Show me the incentive and I’ll show you the reward. A Valentines to a very unglamorous company.


A Valentine’s to — Richemont

Same deal as LVMH, though this one took me longer to understand (your correspondent is a bit slow, really, and sometimes struggles with these things). Cartier is the main engine of growth here though don’t write off those watch brands — how many of you how got a Mont Blanc pen or an IWC watch? Or a Panerai, for that matter? Performance has been obscured by the Net-a-Porter unit but we’re assuming that’s something they get rid of sooner rather than later (BTW, Gucci-owner Kering just pulled all of its brands from being sold on melting-icecube/sinking-disaster Farfetch). What convinced me was seeing lines for Cartier in Paris — I’ve also noticed a lot more spend on advertising lately — prediction: the smaller watches, including the Cartier Tank, become “the watch” of the next few years.


A Valentine’s to — Duratec

OK, they’re really boring, I’ve talked to you about them before, and here’s their spiel:

Duratec Australia specialises in the protection and remediation of steel and concrete structures, and through the intelligent engineering of solutions, material selection and quality installation, we deliver the best solution to extend the life of your assets.

Still awake at the back? Here’s a picture of Boris Johnson looking a few drinks in to wake you up.

We like Duratec because they do what they say on the tin — 34% ROIC, long-lived boring govt and municipal contracts, typically grown revenues in the double digits and has plenty of room to grow. Have a bouquet, boys…


A Valentine’s to…Uranium

We all know why I like Uranium by now — there’s global undersupply until ~2028. Supply/demand. High school economics. But if you need a refresher here’s my write-up on URNM. Think it has room to move higher…I’m hungry for Uranium

Source post: Blackbull Research - Substack

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