A summary of this week’s best articles. Follow us on Twitter (@INTRINSICINV) for similar ongoing posts and shares.
Amazon Slashed Prices at Whole Foods. Now They’re Climbing Back Up. (Heather Haddon, @heatherhaddon, Wall Street Journal)
When Amazon acquired Whole Foods in 2017, the online marketplace attempted to change Whole Foods’ reputation of being too pricey by cutting prices across the board. With rising costs of grocery items and pressure from many consumer-product makers, however, Amazon has chosen to raise some of their prices back up again. “At Whole Foods, a basket of 40 select items purchased from their stores cost $191 last month, according to the Telsey Advisory Group, up more than 3% from what the same basket of goods cost last fall.” Todd Wenning touched on the recent trend of consumer brands raising prices in his blog post The Many Ways to Mortgage a Moat.
“Twenty-two percent of apparel sales and 30 percent of computer and electronics sales happen online today, but the same can be said for only 3 percent of grocery sales, according to a report from Deutsche Bank Securities.” Due to the complexities and cost of delivering groceries (i.e., keeping frozen items cold, keeping chips from being crushed, keeping produce fresh), delivering groceries is a challenging proposition and one that might not make sense for many consumers.
Apple Lose Ground to Huawei as China Shipments Slump 20% (Dan Strumpf, @DanStrumpf, Wall Street Journal)
Apple continues to lose traction in China as more Chinese consumers choose Huawei over iPhones. Huawei has continued to release high-end phones that have contributed to its increasing market share gain over Apple. They expect to unveil a foldable 5G-ready phone in Barcelona later this month. “Apple, now the fourth-biggest vendor in China, was the country’s top smartphone seller as recently as early 2015.”
Trump Flexible on China Tariff Deadline as He Seeks ‘Real Deal’ (Saleha Mohsin, @SalehaMohsin, Andrew Mayeda, @amayeda, Margaret Talev, @margarettalev, Bloomberg)
Negotiators from the US and China continued talks this week to come up with a plan to resolve the trade war between the two countries. President Trump indicated that he would be willing to extend the March 1st deadline to come to an agreement if both parties were close to reaching a real deal. ‘“If we’re close to a deal where we think we can make a real deal and it’s going to get done, I could see myself letting that slide for a little while,” Trump told reporters during a cabinet meeting Tuesday. “But generally speaking I’m not inclined” to delay raising tariffs, he added.’
Automation is splitting the world into two very distinct worlds: highly educated professionals at good companies earning a substantial income, and then less educated workers who are stuck at businesses like hotels, restaurants and nursing homes and who generate much less income. Economists are beginning to rethink the assumption that technological progress helps raise everyone up financially.
Supercars That Will Put a Big Dent in Your Wallet but Not Drain It (Tom Voelk, @TomVoelk, New York Times)
“Modern engineering and materials have given automakers the ability to create performance vehicles with capabilities unheard-of 20 years ago. In today’s dollars, that circa-1985 Countach would start at $325,000. A car that’s infinitely more capable and better engineered can be had for half of that — obviously not inexpensive, but down from the stratosphere.” Arif Karim recently wrote about one famous supercar manufacturer in his recent blog post Joining the Winner’s Club with Ferrari.
While we do not accept public comments on this blog for compliance reasons, we encourage readers to contact us with their thoughts.
The information contained in this post represents Ensemble Capital Management’s general opinions and should not be construed as personalized or individualized investment, financial, tax, legal, or other advice. No advisor/client relationship is created by your access of this site. Past performance is no guarantee of future results. All investments in securities carry risks, including the risk of losing one’s entire investment. If a security discussed in this blog entry is owned by clients invested in Ensemble Capital’s core equity strategy you will find a disclosure regarding the security held above. If reviewing this blog entry after its original post date, please refer to our current 13F filing or contact us for a current or past copy of such filing. Each quarter we file a 13F report of holdings, which discloses all of our reportable client holdings. Ensemble Capital is a discretionary investment manager and does not make “recommendations” of securities. Nothing contained within this post (including any content we link to or other 3rd party content) constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instrument. Ensemble Capital employees and related persons may hold positions or other interests in the securities mentioned herein. Employees and related persons trade for their own accounts on the basis of their personal investment goals and financial circumstances.