Three Conflicts for Value Investors, Athens Talk Oct 7 2022 v3
Negative Sentiment and Lower Prices Meet a Positive Signal
Dutch Brothers (BROS) Investment Deck Cyprus Value Investor Conference September 19 2022 v2
Quo Vadis Capital President Zolidis was among the few equity analysts, who sounded the alarm on Luckin Coffee’s accounting problems early on, and he remained bearish while the company was under bankruptcy.
But he turned bullish after the company emerged from bankruptcy in April of 2022 and continues to be. Most notably, Zolidis thinks that the new company that emerged from bankruptcy early this year is a different company in many respects. First, it is almost free of debt, after redeeming $110M of 9% debt securities. “It’s a rare situation for a company that emerged for bankruptcy recently,” he told International Business Times in an email. “In addition, it’s a good indication that management feels confident about the company’s financials in the future.”
Friday’s stock swoon argues investors have more work to do to understand the scope and duration of higher interest rates. Run away? We discuss how we’re investing in this climate.
“Ms. Dillon is a leader with a strong voice and will represent a meaningful change in tone for Foot Locker. We think the ripples within the organization could be very positive,” John Zolidis, president and founder of Quo Vadis Capital, said in emailed comments. “We also believe communication to investors will be upgraded based on the significant credibility she will bring to crafting a strategy and establishing an outlook. In short, this is very good news.”
In our opinion, some of the conditions for the market to bottom are in place. We discuss the signal we think is important and has yet to be triggered in our July letter.
Our contrarian suggestion is that demand destruction is already well underway, which should be expected to contribute to lower inflationary pressures and ultimately be positive for stocks.
Yet, retailers such as Academy Sports and Outdoors (ASO) have painted a brighter picture. Even Walmart hasn’t warned that inventory will further hurt results. “Target’s problems definitely look to be company-specific,” says John Zolidis, president of Quo Vadis Capital.
“We’ve only really had one quarter of negative surprises,” said John Zolidis, founder of Quo Vadis Capital. “Normally in a recessionary cycle there will be several rounds of cuts before the outlook and stocks bottom. Unless we see a reversal of inflation data and a less hawkish approach from the Federal Reserve, our guess would be that we’re closer to the beginning of the pain than the end of it.”