Ambev May go Flat. Spilled Suds Maybe. Bear Case Scenario Probably. $ABEV

Canada is a disaster zone. Margins and growth are poor and show no signs of improving. Curious that a supposed strong beer brand cannot make adequate inroads in a strong beer market. Do you realize how much beer Canadians drink while watching hockey. Second fact: Canadians watch more than just hockey.

Ambev distributes Pepsi products in Latin America including Brazil and Argentina. Coca-Cola is very strong in these markets. Ambev will need a miracle to become dominant in these lines.

Governments are looking for more ways to tax. Public health frowns on profitable beer consumption. There can be significant regulatory head winds impeding Ambev growth.

George Gutowski writes from a caveat emptor perspective

 

Ambev Enjoys Heady Foam Bull Case Scenario for Cold Beer. $ABEV

Ambev enjoys profit margins above 40% which is higher than even the largest competitors. They clearly are doing a lot of things right. This dominant financially pleasing fact is because of huge concentrated market share. Brazil has the highest margins of all markets.

Large sporting events from FIFA cups to tiddly winks drive beer consumption. You just have to show up at the right time. Ambev has done that.

Per capita consumption in Brazil and Argentina are much lower than supposed mature markets for beer. This bodes well for the domestic olde school portion of the business.

George Gutowski writes from a caveat emptor perspective.

 

FedEx Difficulties Continue Bear Case Scenario $FDX

International is critical to growth but also brings in large volatile risks. Most of the world is not a liberal democracy subject to the rule of law which evolved from a Judeo-Christian ethic.

The fleet of aircraft is very capital intensive and requires constant repairs and upgrading. FedEx cannot take the loss of prestige with a major malfunction or crash. This means you spend spend and spend again.

FedEx will always be exposed to energy price risk. Everything from local trucks to air freighters guzzle energy. Very thirsty business.

FedEx is finding their US labour model to be under siege. Unions and Democratic government/regulators know these jobs cannot be outsourced. Labour will continue to become more expensive and less flexible. FedEx cannot shrink their US market share without declaring capitulation.

George Gutowski writes from a caveat emptor perspective.

 

FedEx Strong Franchise will Survive Current Challenges Bull Case Scenario $FDX

Over FedEx’s 40 year history they have weathered various economic environments including volatile energy costs. They can be expected to continue this trend.

FedEx has a huge fleet of air freighters, drop boxes and other resources. Even large competitors find it hard to compete.

International Volumes provide very high margins. FedEx is well positioned to grow this business. Everyone else is fighting to get in. FedEx frequently has the established business.

George Gutowski writes from a caveat emptor perspective.

 

Adobe Days May be Numbered. Flash is Dead; Bear Case Scenario $ADBE

Adobe is still highly reliant on Flash which has a limited future. It’s just that simple.

Changing enterprise customers to a cloud application is fraught with danger and opportunities for disaster.

Digital marketing will pressure margins over time. Technology eats its own babies

Monthly subscriptions will generate demand for dividends. But with other problems management may have to disappoint and create a train wreck in expectations.

George Gutowski writes from a caveat emptor perspective.

 

Adobe Continues to Dominate; Time for Dividends Bull Case Scenario $ADBE

Adobe products are the industry standard by which everyone is measured. The brand is ultra-solid. Microsoft tried a seven year experiment with Expression Studios and went home with their tail between their legs.

By switching the license fee model to monthly fees the product becomes more affordable which is always good for enterprise value. The monthly fee can also increase over time without any significant marketing or erosion costs.

With a sustainable cash flow the shareholder deserves a decent dividend. Once the dividend kicks in the buy and hold yield investor will change the dynamics. Less volatility coming.

George Gutowski writes from a caveat emptor perspective

Kiss of Death or Bull Case Scenario for Met Life $MET, $AIG, $PRU, $XLF

Financial Stability Oversight Council may have given Met Life an odd kiss of death. They have declared Met Life to be systemically important. Not too many details out there but size seems to be important just as it was for AIG and Prudential.

Regulation and oversight are nice but you need some transparency. The financial community should understand why. The investing public and stakeholders in Met Life should understand why and how come.

Regulators cannot expect the marketplace to respond if no one understands the why and how of it all.

George Gutowski writes from a caveat emptor perspective.