Company Notes Digest 6.14.13

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.


Count Jamie Dimon as another believer in housing:

“Housing has turned the corner…Supply and demand are in balance, if not in short supply in a lot of cities” (JP Morgan)

The regulatory environment is getting better:

“you can make a very coherent argument that the political environment will get better not worse…The regulatory environment will probably get better…[in the] second term of Presidency, new regulations come way down.” (JP Morgan)


“you got to remember America still has the best economic system by far in the world, okay. It’s got the best military, the best universities, the best hospitals. It’s got the best businesses large, medium and small. The rest of the world has a lot of very good stuff, still the best here. It’s got the most innovation, the most R&D innovation from the factory floor to a Steve Jobs. It still got a very strong work ethic here. It’s got the lowest corruption and the widest, deepest most transparent financial markets the world has ever seen.” (JP Morgan)

But Europe is still not healed:

“Europe is going to be a little bit roller coaster, because they’ve so many things to do.” (JP Morgan)


Smaller banks are getting healthier, coming back to market:

“on the pricing front, there are pockets that have been pretty stable, and then there are pockets in the community middle market that things have been getting more aggressive as those banks — those smaller banks have rebuilt their capital bases and are coming back in, but we stay competitive” (US Bank)

Banks with lower costs of funding (the big guys) can afford to be more aggressive in pricing loans:

“our rating…offers us tremendous funding advantages…I think we rarely, if ever, lose on pricing. We have an advantage on that. We’re very disciplined in terms of structure, but pricing is not an issue…I mean, we’re clear with all the relationship managers not to lose on price.” (US Bank)

Don’t be looking for any acquisitions from JP Morgan:

“there will be no major acquisitions in our foreseeable future… overseas I would rather grow organically and there’s plenty room organically.” (JP Morgan)

The big guys are going to war over the mortgage business, can Wells maintain its share?:

“We are going to be in the mortgage business. We want to be a winner, it’s too important a product not to do it.” (JP Morgan)

Blackstone is the “largest owner of real estate in the world.” Is that really a good thing?

“Our latest Real Estate fund is up 32% compounded in the last 2 years…And as a result of that, we are getting hugely disproportionate allocations from almost everyone…We’re currently operating at roughly 4x the size of anyone else” (Blackstone)


I’m not really sure I understand how these numbers from Restoration Hardware are even possible:

“we delivered industry leading sales growth with a net revenue increase of 38%…an outstanding 41% comparable store sales increase, which was on top of a 26% comp increase in the year-ago quarter…We also operated fewer stores overall with 70 galleries open at the end of the first quarter versus the 74 we had open last year.” (Restoration Hardware)

Dollar General not seeing people trade back out of discount retailers if economy gets stronger:

“There is no evidence at this time that there’s a change with the trade-down customer or the trade-in customer…[when we did a survey] there was no indication from the higher demographic that if the economy got significantly better, that they were going to trade out of the channel…right now, the fastest-growing customer segment we still have is that customer that’s around $50,000 to $70,000 a year, which is above the income of our core customer.” (Dollar General)


Doctors are getting squeezed (more small businesses getting hammered):

“what we’re seeing is this declining physician take-home compensation. And so we see physicians looking for income stability. That’s got 2 sides to it. The obvious side is the declining physician professional reimbursement…on top of that, the expense base for the physicians has been growing, not just from the standpoint of labor, but the IT initiatives, the electronic health record, has rarely perhaps resulted in core operational efficiencies, but certainly has added overhead and initial costs…You put all those things together and the net result is in the small practices, you end up seeing declines.” (HCA)

The future for physicians may be to be employed by the hospital:

“mom and pop practices that have not been perhaps as deeply operationally managed. They’ve not had the leverage of scale…So in many cases, we’ve been able to…integrate them into larger practices…and create some pretty important efficiencies that might have otherwise, stabilized them.” (HCA)

Industrials, Materials, Energy

Danaher’s acquisition philosophy is worth noting:

“what we bring to capital deployment, and we really kind of comes down to really 3 simple themes for us. One is the strategy first mentality. We don’t think about businesses first. We think about markets that we want to be in and invest in, and then we think about what are the companies within those markets that we want to attempt to acquire…Two is to have a model to run those businesses…three, to bring financial discipline” (Danaher)

Counterintuitively, Sometimes high margin businesses have more fat to trim than low margin businesses:

“I think we learned, as we look at some industrial businesses, that with 30%, 35% gross margins, you went into one of their facilities, they’re often pretty well run. They were thoughtful about the supply chain…[alternatively] we’d find a 50% gross margin business…They didn’t have the best players running the facilities, they didn’t have the best people focused on the supply chain” (Danaher)

Miscellaneous Nuggets of Wisdom

You can’t predict the future but you can prepare for it:

“we’re just trying to grow our businesses and some of these things are like the weather. We have to manage through it. We’re not going to guess the bad weather time.” (JP Morgan)

Investing in Real Estate has its advantages:

“It’s much easier to invest in real estate than it is in the company. Companies are very complex, very dynamic and what you find about real estate that’s very comforting is first of all, buildings don’t talk, right?” (Blackstone)

It’s not easy to start a business:

“I remember, when we just started the firm and almost everybody turned us down for everything. Our first fund, our 17 closest relationships turned us down.” (Blackstone)

But you know you’re successful when…

“As an entrepreneurial business, you know when you’re successful because it’s when people really want to join you who have enormous records of success.” (Blackstone)

The most important thing in business? People, People, People:

“go into other businesses that would be great on their own but would make the existing mix stronger, and you had to do it with people who were 10s on a scale of 10.” (Blackstone)