Yesterday was a Big day. Amazon lowered prices at Whole Foods as they completed their purchase of the grocery chain. ‘Whole Foods lowers prices.’ Never thought I’d see that line in print. As any student of the markets knows, however, the more you think you’ll never see something, the more prepared you should probably be for it to happen. Remember when home values were “never” going to go down. OK, that was easy…
Two related stories, in my mind anyway, came out recently. Another Amazon story was that the company was going to use an old mall as a warehouse. Love it! In fact, I think I must have heard it a few weeks earlier somewhere because I proposed almost the same scenario to my wife lately [I proposed (So I thought…) that the larger anchor sites would be warehouse space and the interior stores could be “departments”]. With mall traffic going down, in spite of my daughter’s regular field trips there, what to do with that real estate certainly becomes a question. I’m not going to go into analysis of the mall real estate companies, but needless to say Westfield Corp. stock, listed on the Australian Stock Exchange but a name familiar to mall goers, is not doing well…
As far as “The Neighborhood” is concerned, Applebee’s recently announced that they are “giving up” on Millennials. Gathering places like Applebee’s, TGI Friday’s, Chili’s, etc. have done a great job through their existence in understanding people’s tastes, both for food and pricing, and successfully drawn crowds to their establishments. I even remember my daughter calling out TGI Friday’s when they changed the recipe for macaroni and cheese. I guess she wasn’t the only one…they went back to the original not soon after. What that demonstrates is that these restaurants had a willingness and ability to listen to their customers and act based on opinions and trends.
I don’t believe they’ve lost that willingness. Listening to your customers is not a new recipe for success. It’s been tested and proven over time. So what’s the problem at Applebee’s? Well, that’s where we begin tying this together.
Amazon has changed our shopping habits. No one wants to leave home if they don’t have to…like going to Applebee’s for dinner or ordering in via seamless.com. And when it comes to books, where it all started, or virtually any other consumer item, we find it, buy it, and review it on Amazon. Amazon (Jeff Bezos) figured out where we’d end up and decided to help us get there, while becoming a behemoth of a company. It was an extremely long term vision…Extremely. That’s not what family restaurants have done. They do what they did with the macaroni and cheese at Friday’s. They sense small changes in the moment or not far ahead of it and react to beat or at least meet the new demand trend.
And malls? Talk of the not too distant demise has risen with Amazon’s stock price, and is now undeniable (unlike global warming?). We don’t need to move from our chairs anymore to shop. So why bother? Add Amazon Prime to the mix and returns are not any tougher than shopping at the mall either. And now we can add Whole Foods to the equation. “Whole Paycheck” is how the chain has been affectionately known. But that’s not what Amazon does. They do what they just started doing on Day 1. They make parts of life less expensive and more convenient. Now you can get Whole Foods quality at an affordable price. Sounds like a successful model to me. I can’t wait to buy some avocados at a reasonable price in time for Labor Day weekend guacamole.
The point here is that if we look at these companies as just stocks, we may do well on an individual basis, but you’ll do much better if you look to macro and behavioral aspects as well. It’s the same as the advice I give on using charts in general. Whatever time period you’re analyzing for your own decisions, look at a chart that is one level of time above as well, i.e. if you analyze hourly charts, look at a daily – if you analyze daily charts, look at a weekly, etc. It gives an idea of the overall tide, not just the last couple of waves on the beach. Much more accurate when you’re deciding where put that beach chair.
We’ve connected Applebee’s and the like, with malls, Whole Foods, and Amazon. Not the first connections you might make, but all can help you make decisions on trading or investing in the respective securities. And as for time horizons? Well, if you’ve got patience, you can be Amazon and lose money for years on your way to world domination. If you’ve got patience, you’ve been long the S&P 500 for a lifetime and have done extremely well, but had to endure a couple of rather painful selloffs. I like to say that “Traders may get rich, but investors get wealthy.” So look at the big picture. Even if you can’t trade that way. At least understanding the long term horizon will keep you from becoming the next Applebee’s.
NOTE: It’s been a slow summer on my blog front but I’m looking forward to returning to a more regular schedule now that it’s school season again.
NOTE 2: I’ve been doing this for about a year now. I know that many blog’s disappear in less time. This one hasn’t because of the feedback and steady increase in readership over that period. I want to say “Thank You!” to all of you that have kept interested in my perspective, as well as to Jason for all the proof reading and pre-publish feedback. I hope you have all managed to find the value in listening carefully to other’s opinions even when you disagree, since those ‘others’ are the sellers every time you buy, and the buyers every time you sell! Looking forward to year 2…