What we’re reading (9/1)
“Walmart Tries Again To Find Its Answer To Amazon Prime” (Wall Street Journal). “Walmart Inc. is trying again to build a membership program that can rival Amazon Prime, the Amazon.com Inc. service with more than 150 million members. On Sept. 15, the retail giant will launch Walmart+, a $98-a-year membership that includes free grocery delivery, a discount on gas from Walmart parking lots and the ability to check out via a mobile phone in stores.”
“Job Growth Expected To Slow Sharply Over The Next Decade, Labor Department Says” (CNBC). The BLS estimates an annual growth rate in new jobs of 0.4 percent for the 2020-2029 period, compared to the 1.3 percent annual growth rate in the 2009-19 period, citing a decline in the active labor force and an aging population.
“Child Care Has Always Been Essential To Our Economy—Let’s Start Treating It That Way” (The Hill). U.S. Representative Katherine Clark and U.S. Senator Lisa Murkowski make the case for congressional action to expand access to childcare. Stoney Point agrees.
“Here’s An Overlooked Way To Play The ‘Stuck-At-Home’ Trend In The Stock Market” (MarketWatch). “As Americans have been forced to stay at home for work, school and even visits to the doctor, shares of cloud-services providers have soared. But there’s something else going on that points to a long-term trend investors need to know about: a housing shortage outside cities, and a boom in home renovation and improvement.”
“Delta And American Follow United In Permanently Dropping Some Change Fees” (New York Times). We’ll see how “permanent” this really is, but for the moment it shows exactly why competition is important (for consumers) and also demonstrates a fundamental point about valuing stocks: when you’re thinking about a company’s cash flows over the long, long term, canonical economic theory says you cannot earning excess returns on capital (in excess of your cost of capital) indefinitely—eventually, competition will whittle the excess returns to zero. A little “inside baseball” here, but few people modelling stock professionally on Wall Street—so far as I can tell—get this right in their valuation assumptions, perhaps because it’s an insight from economics, not finance theory per se and it’s very easy to unwittingly assume ROIC > cost of capital forever unless you peel back some layers in your valuation model.
