Mr. Market Needs Some Culture
There's a fundamental problem when the very people buying and selling stocks never leave their cubicles to enter the real world. Instead of seeing a company's shares as ownership in a living, breathing organization, stocks are seen as tokens in an almost make-believe reality.
The problem is exacerbated when our cubicled buyers and sellers are dealing with companies that operate in a culture fundamentally different from the one you find on Wall Street.
I'll show you two examples of how you can take advantage of such silliness, and then I'll offer you a report on three companies that promise to do well no matter what culture or region of the world they're operating in.
Easter is kind of a big deal
Yesterday, shares of Latin American warehouse leader PriceSmart (NAS: PSMT) were down more than 6% on news that same-store sales had grown only 8.6%. If you look at how that compares with the past six months, you'll see why investors got nervous.
|April 2012||8.6% (yikes!)|
Source: PriceSmart Investor Relations.
My guess is that some of these thoughts crossed traders' minds. Of course, those who sold off on this month's news are completely off base. There's a much more simple explanation for lower growth -- the timing of Easter.
Easter is a huge deal in Latin America. Communities shutter their stores for Semana Santa -- the Holy Week -- and relatives travel vast distances to spend the week with one another. Of course, this means that the days and weeks leading up to the holiday produce heavy volume for any company. Not only do customers need to buy the necessary gifts and food to entertain guests, but they also know that businesses will be closed for a number of days.
Last year, Easter fell on April 24, meaning there were a full two weeks during April leading up to Semana Santa. This year, Easter fell on April 8, meaning there was almost no buying associated with the holiday in April.
Comparing the two is like comparing apples to oranges, but all we need to see is that same-store sales are up an impressive 16.5% this year to know that the company is still executing on its plans to grow profitably in Latin America.
Isn't the first time; won't be the last
If you don't believe professionals on Wall Street can make oversights like this, think again. Especially when it comes to smaller market players, history is full of such mistakes.
Digging deeper, however, revealed good reason for the slowdown. First, consumers were buying so much of lulu's clothing that the company was running out of inventory. And second, "its deliveries from China [fell] off significantly [because of the] celebration of the Chinese new year."
Some may have thought this was a poor attempt at an excuse for troubles in the supply chain. But in reality, businesses usually shut down for a week to celebrate the new year.
Misreading the situation, some analysts started predicting the end for lululemon. Of course, shares have gone on to grow by 60% since then. The company has proved that its supply line is just fine and that its products are more than a fad -- something fellow retailer Deckers (NAS: DECK) , for example, is having a tough time doing right now, given the rising costs of sheepskin.
Benefit from the cultural differences
For those who understood the variables at play with lululemon, there's been quite a bit of profit to be made. I believe the same will occur with PriceSmart, and I've backed that assertion up on my All-Star CAPS portfolio.
But make no mistake about it: Keeping tabs on these obscure pieces of information can be difficult. If you'd like to invest in American companies that will dominate no matter the culture or country they're in, I suggest you take a look at 3 American Companies Set to Dominate the World.
Inside this special free report, you'll get the names of three familiar companies that are showing their business models will be successful in the world's growing economies. Get your copy of the report to see which companies they are today, absolutely free!
At the time this article was published Fool contributorBrian Stoffelowns shares of Deckers, PriceSmart, and lululemon athletica. You can follow him on Twitter, where he goes byTMFStoffel. The Motley Fool owns shares of lululemon athletica.Motley Fool newsletter serviceshave recommended buying shares of Deckers Outdoor, PriceSmart, and lululemon athletica, and creating a diagonal call position in Wal-Mart Stores. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days..
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