Yellowstone Partners Blog

We at Yellowstone Partners see social networking as a major tailwind in the global economy.  The world and its people are becoming more and more connected.  It only makes sense that we take advantage of these resources to communicate with clients and associates.

Please visit the Yellowstone Partners Facebook page and join today!

http://www.facebook.com/pages/Idaho-Falls-ID/Yellowstone-Partners-Wealth-Management/110460138969598?ref=ts

In the Economic section of our Quarterly Update, I reference this graphical depiction of the economic cycle.

To offer a brief review, consider, simply that the economic cycle is a chain of cause and effect. Inflation, Consumer Sentiment, and Personal Income drive Consumer Spending, which, in turn, spurs Manufacturing and Services. That production determines Capital Spending which is a core determiner of Corporate Profits. Profits lead into Employment, and Market Valuation, which feed back into Consumer Sentiment, and Income, and thus the cycle continues.

For more Yellowstone Partners graphical depictions, please visit www.yellowstonepartners.com/library.

In December we made a portfolio adjustment in the Yellowstone Partners All-Cap Global Strategy, selling Amazon.com (AMZN) and buying Carnival Cruise Lines (CCL).

Our thoughts were simply that Amazon was fully valued, having risen drastically throughout the Christmas season. In fact, it reached a point where by some metrics it could be seen as double the valuation of other retailers with similar margins. The other major area of concern was the possibility of cash-strapped states looking to tax online retailers. Breaking news today showed that at least one state, Colorado, took a step exactly in that direction.

We added Carnival (CCL) to the Yellowstone Partners All-Cap Global strategy, seeing it as a great way to play the value vacation theme with strong fundamentals that seemed to be improving. After listening to the CCL CFO today, we feel even more encouraged by the prospects for the company, and confident that management will continue to navigate the Cruiseline operator to smoother seas.

What has always impressed us about Carnival is that they have operated with a very clear, consistent strategy. They operate 11 brands, each of which is specifically targeted to a particular customer group. Additionally, with 80% of Americans, and less than 10% of Europeans having ever cruised, they see broad opportunity to increase passengers, and consequently, profits.

In terms of tangible metrics that we feel give CCL an edge, we see that they have held their cost per berth in line at an industry low for almost 20 years. Thier numbers show that their costs are a little more than 10% lower than their competitors, and even still they see opportunity to continue to reduce costs.

Recently they’ve keyed in on fuel efficiency, developing systems to optimize usage. For example, they find that if they can keep the “cut line” of the ship within a certain range, they can reduce costs. So because passengers are always moving, they have ballasts which they adjust in order to maintain that balance. They’ve also begun treating the hulls with silicone paint, which reduces algae and drag.

More than anything, what is apparent is that the company, from the managment to the staff, is extremely cost-concious – exactly the kind of operation that is primed to take advantage of similarly cost-conscious cruisers.

As always, please remember that these statements should not be interpreted as a soliciation to buy or sell any security. Investing in securities entails risk which may not be suitable for all clients. Investments, while offering the potential for gain, may also lead to loss and no performance guarantee can or will be made.

CCL is owned in the Yellowstone Partners company 401(k), which is managed in the All-Cap Global Strategy. Neither CCL, nor AMZN is owned in personal accounts held by individuals at the firm.

Sometimes work is tough. This isn’t one of those times. Each year we have the opportunity to attend the Raymond James Instiutional Investor Conference in Orlando, Florida. Each year, a number of company CEOs and CFOs provide information to anxious fund managers, analysts, and other interested parties.

This morning, we’ve already listened to presentations from a number of companies, in some cases confirming ideas and tailwinds we had already discovered, in other cases, introducing us to new ideas and opportunities. In a market that has finally begun to return to the core of investment valuatuion – corporate earnings, this is truly the meat of asset selection.

To pass along just a couple little bits, this morning, Allegiant Travel Co, (ALGT), a company that has been on our watchlist (and in a few satellite portfolio strategies), has announced that they are purchasing a number of 757 aircraft to begin offering service to Hawaii from the West Coast. While this is a departure from the model they have developed, it remains in keeping with their overall strategy and focus, and provides another avenue for significant revenue growth.

In a small breakout session with Cinemark Holdings (CNK), which we recently added to the Yellowstone All-Cap Global Strategy, there were some interesting details which materialized, which we anticipate will have a positive impact on profitability, and, in the long run, earnings. Cinemark anticipates that they will have close to 1,000 screens with 3D capability by the end of the year. Additionally, CNK has opted for equipping some key theatres with what they refer to as the “XD” experience, a larger, more sound-intense presenation, comparable to IMAX, but without the need to share revenue.

These are just a few early stories from the conference, and we anticipate that there will be many more.

As always, please remember that these statements should not be interpreted as a soliciation to buy or sell any security. Investing in securities entails risk which may not be suitable for all clients. Investments, while offering the potential for gain, may also lead to loss and no performance guarantee can or will be made.

CNK is owned in the Yellowstone Partners company 401(k), which is managed in the All-Cap Global Strategy. Neither CNK, nor ALGT is owned in personal accounts held by individuals at the firm.

I once had the opportunity to hear the Oracle of Omaha speak in person at a Utilities conference. I was enthralled by his remarkably simple wisdom. If there’s one thing that makes Buffett who he is, it’s his ability to distill difficult concepts into easy, memorable phrases. This article draws out some of the best recommendations – the same exact principles that have guided his investment philosophy for dozens of years.

http://articles.moneycentral.msn.com/learn-how-to-invest/buffetts-tips-for-new-investors.aspx