Phil Town

SITE CORRECTION

For anyone who's had trouble getting the Why Rule #1 Works post to click through (see right-hand side bar, under "Get Mentored"), the link has now been fixed. You can also get there by clicking here. Sorry for the inconvenience.

WFMI TODAY

I've been mentoring Major Clay Edens about getting him the money he needs to retire comfortably in a few years. His goal is to buy a 42' boat and travel the Caribbean islands.  He's started doing his homework by practicing the 4M's and taking a look at my WFMI posts.  But he still had a few questions about identifying a wonderful company. Read on to learn where WFMI is today, and how I as a Rule #1 investor interpret its position. For those of you who need visuals, there are charts and graphs with this post.

Phil,

As you will see with some of my figures I did have some trouble, but I am hoping that based on your experience and familiarity with WFMI, you will be able to quickly identify them. I used your Blog to try and build a YUMMMY report with enough detail to show myself I had the ability, I was confused as to where to find the information for the MOAT, and doing the calculations for the MOS.

Clayton

4M ANALYSIS: BP

People ask me a lot of questions about retirement funds and packages. Here's a letter from S____.

[Edited for length.]

Phil Town,

Most of my parents' retirement acccount is invested in BP (British Petroleum) stock. Either 50% or 100% of the portfolio. My father has 3 years to retirement - even though he'd like to retire now.

As you may be aware, BP is the only individual stock they are allowed to invest their retirement in at this date. That's how 401k's, etc. work.

One of the reasons I wanted to buy the program you offered is to make sure they can better determine when to buy and sell to maximize the growth. The last thing I want to see is for something unforseen to come up with BP stock and them lose a chunk of their portfolio due to a drop in the price.

Is there a fee a could pay you to watch this stock for my parents and educate them on what factors are effecting their stock and whether it's likely to go up or down drastically so that they can continue to maximize their 401k versus taking a potential hit?

Kind Regards,

S____

I think the deal is that her father works for BP and is sort of forced to buy BP stock for his retirement 401(k), and it's the only stock he has.  She thinks he's 100% invested in just BP for his retirement (or maybe 50%) and she is worried.

S____, a student, is interested in finding someone who can advise her parents directly about what to do.  I'm flattered but I don't do advice or OPM investing simply because frankly, it's usually a huge pain to advise people or invest their money.  They call you.  Ughhh.  Those phone calls can interfere with golf, fishing, snowboarding, hunting and travel.  I'm learning to tango.  I don't have time for phone calls.

HOW TO READ A QUARTERLY CONFERENCE CALL (PART FIVE)

Here's the fifth and final installment on how to interpret a company's Quarterly Conference Call. In this case, the company is WFMI (Whole Foods).

I will now turn to our growth goals for fiscal year 2006 and beyond. Please refer to our press release for more detailed guidance information.

In fiscal 2005 we produced very strong operating results which exceeded our own expectations and our initial guidance. The strength and consistency of our top-line growth along with the number and quality of the stores in our development pipeline have given us the confidence to raise our 2010 growth goal from $10 billion in sales to $12 billion.

Whoa Nellie!  He's raising the company goal to $12 bil.  Up 20% from where he was last year.   When he announced this goal a couple of years ago, he was going to have to grow at about 22% a year to get there.  Which is where I got my 22% growth rate.   But he's expecting to do even better.  Good news for our MOS.

HOW TO READ A QUARTERLY CONFERENCE CALL (PART FOUR)

More analysis on WFMI's Quarterly Conference Call... Picking up from where we left off yesterday...

We currently operate eight stores within the 60,000 to 80,000 square-foot range, with an additional 21 stores of that size in development, five of which are relocations. We are confident about the potential future returns of these larger stores, as we believe they appeal to a broader customer base, take longer to reach maximum capacity, and are less vulnerable to competition as they create a higher barrier to entry.

John is saying that WFMI is digging a wider MOAT. The brand is becoming harder to compete with.

HOW TO READ A QUARTERLY CONFERENCE CALL (PART THREE)

Continuing from yesterday... Interpreting WFMI's quarterly conference call.

During the fourth quarter we opened five new stores: a 51,000 square foot store in Baton Rouge, Louisiana; a 74,000 square foot store in Columbus, Ohio; a 59,000 square foot store in Denver, Colorado; a 38,000 square foot store in Boston, Massachusetts; and a 61,000 square foot store in Omaha, Nebraska. Baton Rouge, Omaha and Columbus are new markets for us. We ended the year with 175 stores and 5.8 million square feet in operation.

They got 175 stores.  Good thing to know, right?   Because how many can they have and how fast are they opening them up?

HOW TO READ A QUARTERLY CONFERENCE CALL (PART TWO)

OK. Picking up from where we left off yesterday... reading WFMI's quarterly report.

Our gross margin, direct store expenses and G&A results as a percentage of sales were consistent with our historical averages and with our stakeholder philosophy of producing earnings growth through sales growth rather than through significantly leveraging these particular expenses.

More jargon for kinds of expenses and kinds of net income.   Fuggettaboudit.

HOW TO READ A QUARTERLY CONFERENCE CALL (PART ONE)

It is now illegal for a business to tell the Big Guys anything before they tell me.   Yeah, baby!  You gotta love that!  So to make sure they don't end up in Martha's cell block, the CEOs now hold a quarterly conference call open to anyone.   

The magic of technology lets me and you sign in for the call just like a Big Guy -- and we can even ask questions.  But usually I let the Big Guys ask since they get paid for it and usually ask lots of harder questions than I can ever think of.   

The call starts with summary of how my business (remember its ALL MINE (or yours) is doing.  Since the language these guys use to say how they are doing is business language, it can sound incomprehensible and scary.   But it isn't after you've had a bit of language training.  Really good businesses that really do believe their owners should know what's going on even transcribe the call for us to read later (or even listen to).   The briefing below is from Whole Foods.   I'm going to translate it for you guys.  (I chopped it wherever it got boring so here's the link for the whole thing.)  My comments will be in bold.