GRIN's ongoing trading conditions and Peter Lynch
As we await the arrival of GRIN's 4th quarter
earnings, sometime during the next 2 weeks, perhaps
it would be worth taking an up-to-date look at the
three problem areas for GRIN during the last twelve
months, namely currency, ToysRUs and transportation
costs.
CURRENCY - good news here. The CAN$ continues to
claw back the lost ground against the US$ and in
fact the improvement appears to be accelerating.
Here are the numbers since the Sept98 low. (value
of CAN$ in US$).
1SEP 64c, 1OCT 65c, 1NOV 65c, 1DEC 65c,
8JAN 66c, 5FEB 67c
An improving CAN$ directly translates to improving
gross profits for GRIN.
ToysRUs - Interesting to look at the effect of
ToysRUs' woes on other toy companies. TOY is
suffering a lot from competition from the big
discounters, such as Walmart and Kmart. Check this
link for the major effect TOY has had on Mattel
- a 69% loss in earnings, year-on-year !
biz.yahoo.com
Now GRIN has suffered nowhere near as badly as this
(after all, they supply Walmart and other competitors)
but TOY is still a significant customer. Fortunately,
the analysts are predicting a turnaround for TOY during
2Q of '99. If this happens then GRIN, as their distributor,
may see improved orders from them during the first
quarter...we'll see.
TRANSPORTATION COSTS - what is happening here is an
indirect (and negative) effect of the Asian crisis
on North American importers. Imagine if you will, the
pre-crisis situation where full container ships flow
equally east and west across the Pacific. Now during
the 'crisis', Asia basically can't afford to import
anything but N America still wants the same imports
(in fact we want more now as the cost of Asian goods
get cheaper). The only way to continue this unbalanced
flow is for container ships to return empty to Asia
- so who pays for the huge fuel/crew costs of that
trip ? Pre-crisis the Asian importers paid but now
this cost must fall onto the N American importers.
The question is: Is this situation getting worse,
better...what ? Well, IMO it can only really improve
as Asian currencies/economies recover. Here is a link
with occasional articles on this subject:
ttnews.com
Finally, the latest online edition of WORTH
magazine has an article by Peter Lynch where
his Wall Street colleagues do some stockpicking.
worth.com
The interesting part is his introduction where
he discusses the state of the market. He clearly
likes the small-cap area and sums it up in one
word...OPPORTUNITY!!!
FWIW
Frank |
