Morningstar antaa leiman "wide moat", vahva kilpailuasema, niille yhtiöille, jotka pystyvät kaikkein parhaimmin nähdäksemme pitämään kilpailun paineen puremasta marginaalejaan. Viime vuonna viisi tällaista yhtiötä koki kovia. Kerromme taustat ja pohdimme, onko syytä epäillä joidenkin näiden yhtiöiden vahvuutta.
Jason Stipp: I'm Jason Stipp for Morningstar and welcome to The Friday Five.
2014 was a good year for stocks, including wide-moat stocks, but not all wide-moat stocks came along for the ride.
Here with five wide-moat stocks that were left behind is Morningstar markets editor Jeremy Glaser.
Jeremy, thanks for being here.
Jeremy Glaser: Thanks, Jason. Happy New Year.
Stipp: Happy New Year to you, too.
One of the wide-moat names that didn't make it with the winners in 2014 was ExxonMobil. It got caught in the oil downturn.
Glaser: One of the biggest stories in the back half of the year was the decline in oil prices and how quickly the price of crude declined. ExxonMobil got hit by this, as you'd expect, but they were hit a little bit less hard than the energy sector and the oil sector as a whole.
This speaks to the power of its business and the power of having a wide economic moat. Because Exxon is more diversified, because they have the resources to be able to wait out any period of lower oil prices, they are not going to be buffeted in the wind if this turns out to be a relatively short-lived decline in prices. They were able to look a little bit better, and their stock performance is able to look a little bit better.
Generally speaking, this is what you'd hope to get out of a wide-moat business--that it's going to have the kind of heft so that short-term factors are not going to get [the firm] into trouble; they are going to be able to withstand it, and over the long term, they will be able to keep making economic profits.
We think ExxonMobil is still very much in that category of wide-moat businesses that will be able to make lots of profits for shareholders over time, even if we see some dislocations temporarily in the price of oil.
Stipp: Wide-moat Amazon had a tough year; it was off more than 20%. You hear a lot about Amazon's growth and growth potential. So, how do you explain this underperformance?
Glaser: Amazon did not have a great year in the stock market, although I should say this comes after a couple of years of very good performance, so this is just kind of backing off a little bit.
2014 this was another year where investors were questioning when Amazon is going to start turning to profit instead of just being focused on growth. On the growth front, things looked pretty good. They kept adding users, they kept building on their network effect, and they were growing faster than the e-commerce market as a whole, showing that they are gaining share and are doing even better.
But the concern is, are they going to be able to grow profitably and are they going to be able to reinvest in projects that are going to pan out? We saw the Fire Phone this year, which was a complete flop, and they had to take a big write-off on that, which hurt profitability for 2014. Those kind of capital-allocation missteps made investors pause a little bit about what the future of this business is.
But R.J. Hottovy, our analyst who covers Amazon, thinks that over the long term Amazon is going to be able to be profitable, and that they are laying the groundwork for that right now. And if investors can be a little bit patient, they are going to be rewarded.
Stipp: And wide-moat firm Swatch also had a tough year.
Glaser: Swatch has been under a lot of pressure this year. I think what's causing this could be summed up by the Apple Watch effect. There were some concerns that as Apple introduced its watch that there was going to be a big consumer shift away from traditional watches and more toward smartwatches.
But Paul Swinand, our Swatch analyst, thinks that some of these fears are unfounded. Apple may have a successful product, but there is still going to be a large group of people who want to make a fashion statement, who want to make the personal statement of having a luxury Swiss watch; Swatch not only has the Swatch brand but has other high-end brands as well.
Also remember that Swatch is a vertically integrated company that does possess some great competitive advantages, which puts them in a good position to compete against the rise of the smartwatches and to make the kind of branding efforts and to use their intangible assets to convince consumers that it's still worth having a real watch versus a smartwatch. We'll have to see exactly how this plays out, but given that the shares do look fairly cheap right now, investors could be paid if it turns out that consumer preferences don't shift so rapidly.
Stipp: Over in financials American Express was up this year, but not as much as the financials sector.
Glaser: American Express shares are up around 4% this year, which is really quite a bit below the over-15% increase seen by the S&P 500 financial sleeve.
I think what's happening here is not that investors all of a sudden are questioning the moat of American Express or are questioning the strength of the business. They continued to have a good year. They are making some investments in prepaid debit cards, which maybe raised a few questions. And there are always concerns about some big disruptive payment technology, which has weighed on the stock for quite some time. But really we didn't see any big material changes to what the American Express business looks like.
I think the underperformance really comes down to valuation. The shares still look pretty overvalued, so it could just be that expectations were too high or were baking in an unrealistic type of scenario, and they are starting to come back down to earth a little bit. But they still aren't there; we still think that the shares are in 2-star (overvalued) territory.
This is a good example of a company that's still a good business, so when you see some underperformance, you might think, good business + underperformance, this must be a buying opportunity. But that's not always the case. The stock could be coming off of very expensive levels, and it's always important to look at what the valuation looks like today.
Stipp: Last week we talked about the strength in health care in 2014, but not every health-care stock did well, including wide-moat Sanofi.
Glaser: Health-care stocks looked very strong in 2014, driven partially by an M&A boom. But Sanofi looked a lot weaker, and there are a few things happening here.
One were fundamental concerns about the business. Questions about what's going to happen with their insulin drug when it comes off patent? Is there going to be more competition? Is their pipeline going to be able to produce? Those are somewhat understandable.
But there were also some concerns about stewardship, where we saw the board oust the CEO in very much a surprise move. The board basically said that he wasn't working well with them, wasn't communicating well, and they just didn't think it was a good fit. The shares sold off pretty strongly on this news.
This just shows how important stewardship can be, and how you need to keep stewardship in mind. The fundamentals of the business, the strength of the competitive advantages, are clearly the most important things. But you need to make sure that the stewardship structure is there to make sure that your interests are going to be looked out for as a minority shareholder, and that … over time, you're going to be able to actually reap those cash flows.
We saw this stewardship hiccup at Sanofi, and investors weren't happy about that. I think this highlights the importance of making sure that strong stewardship is there instead of just looking only at the fundamentals.
Stipp: Another great week, and another great year, of insights for The Friday Five, Jeremy. Thanks for joining me.
Glaser: Thanks, Jason.
Stipp: For Morningstar I'm Jason Stipp. Thanks for watching.
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