Companies can make brilliant moves, but there are also times when things don't work out quite as planned. From a home furnishings retailer turning heads with a huge burst in store-level sales to a yoga apparel chain losing its CEO, here's a rundown of the week's smartest moves and biggest blunders in the business world.
Sony (SNE) -- Winner
You don't often see the struggling consumer electronics giant taking victory lap, but Sony deserves it after putting Microsoft (MSFT) in its place during this week's E3 showdown.
Sony and Microsoft will be facing off this holiday shopping season as the PS4 and Xbox One hit the market.
Microsoft seemed to have the early momentum, unveiling a $499 price point and November availability. However, Sony followed a few hours later with a $399 price tag for its PS4. Sony also took jabs at Xbox One's online requirement for disc-based games and the potential restrictions in trading used games.
Sony won the gamers this week, and that's half the battle.
Lululemon Athletica (LULU) -- Blunder
Investors don't like abrupt resignations, especially when CEOs are doing so well.
Despite Lululemon's challenges in recent months the chain's market cap popped sixfold during her five-year tenure. A change at the top is only welcome when a company's going the wrong way.
Restoration Hardware Holdings (RH) -- Winner
Results have been mixed for many retailers this earnings season, but there's no doubt about Restoration Hardware's blowout performance.
The chain that sells high-end home furnishings reported a 41 percent increase in same-store sales for its latest quarter late Thursday. Think about that. The average store rang up 41 percent more in sales than it did during the same three months a year earlier.
Restoration Hardware is also naturally raising its guidance. Investors looking for a smart way to play the housing boom may have it here. As real-estate sales pick up new home buyers are turning to Restoration Hardware to give their new digs a personal touch.
Apple (AAPL) -- Blunder
Microsoft and Sony tried to hog the spotlight at E3, but Apple didn't have to share at its own WWDC event for developers.
As expected, Apple announced the update of its iOS mobile platform and introduced its music streaming service, iTunes Radio. The only real head-turning announced was the cylinder-shaped Mac Pro, but that wasn't enough to win over Wall Street.
Shares took a hit after Apple's keynote presentation. Innovation-hungry investors hoping for bigger iPhones or bolder entries into wearable computing and smart televisions will have to wait a while longer.
Comcast (CMCSA, CMCSK) -- Winner
Like Sony, Comcast is a company that doesn't get invited to the winner's circle too often these days. The country's largest cable television provider continues to lose video customers, and its reputation for customer service isn't exactly something to brag about.
However, Comcast announced that it will be beefing up its Internet service by giving customers using its routers an additional signal for enhanced connectivity. Xfinity Internet customers will have access to a "xfinitywifi" signal that is completely independent from the home's own WiFi signal. It will give customers running a lot of wireless devices on a Comcast router an extra signal to get connected.
It won't be very useful if the Internet itself goes out, but that's the curse of any broadband provider.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple and Lululemon Athletica. The Motley Fool owns shares of Apple and Microsoft.
If You Only Know 5 Things About Investing, Make It These
Sony, Microsoft Face Off; Investors Sour on Lululemon
Warren Buffett is a great investor, but what makes him rich is that he's been a great investor for two thirds of a century. Of his current $60 billion net worth, $59.7 billion was added after his 50th birthday, and $57 billion came after his 60th. If Buffett started saving in his 30s and retired in his 60s, you would have never heard of him. His secret is time.
Most people don't start saving in meaningful amounts until a decade or two before retirement, which severely limits the power of compounding. That's unfortunate, and there's no way to fix it retroactively. It's a good reminder of how important it is to teach young people to start saving as soon as possible.
Future market returns will equal the dividend yield + earnings growth +/- change in the earnings multiple (valuations). That's really all there is to it.
The dividend yield we know: It's currently 2%. A reasonable guess of future earnings growth is 5% a year. What about the change in earnings multiples? That's totally unknowable.
Earnings multiples reflect people's feelings about the future. And there's just no way to know what people are going to think about the future in the future. How could you?
If someone said, "I think most people will be in a 10% better mood in the year 2023," we'd call them delusional. When someone does the same thing by projecting 10-year market returns, we call them analysts.
Someone who bought a low-cost S&P 500 index fund in 2003 earned a 97% return by the end of 2012. That's great! And they didn't need to know a thing about portfolio management, technical analysis, or suffer through a single segment of "The Lighting Round."
Meanwhile, the average equity market neutral fancy-pants hedge fund lost 4.7% of its value over the same period, according to data from Dow Jones Credit Suisse Hedge Fund Indices. The average long-short equity hedge fund produced a 96% total return -- still short of an index fund.
Investing is not like a computer: Simple and basic can be more powerful than complex and cutting-edge. And it's not like golf: The spectators have a pretty good chance of humbling the pros.
Most investors understand that stocks produce superior long-term returns, but at the cost of higher volatility. Yet every time -- every single time -- there's even a hint of volatility, the same cry is heard from the investing public: "What is going on?!"
Nine times out of ten, the correct answer is the same: Nothing is going on. This is just what stocks do.
Since 1900 the S&P 500 (^GSPC) has returned about 6% per year, but the average difference between any year's highest close and lowest close is 23%. Remember this the next time someone tries to explain why the market is up or down by a few percentage points. They are basically trying to explain why summer came after spring.
Someone once asked J.P. Morgan what the market will do. "It will fluctuate," he allegedly said. Truer words have never been spoken.
You need no experience, credentials, or even common sense to be a financial pundit. Sadly, the louder and more bombastic a pundit is, the more attention he'll receive, even though it makes him more likely to be wrong.
This is perhaps the most important theory in finance. Until it is understood you stand a high chance of being bamboozled and misled at every corner.