Disclaimer: this s not investment advice. PLEASE DO YOUR OWN RESEARCH !!!
Naked Wines released their full earnings last week and the result was a full disaster with the share price down a whopping -43% despite the fact that the headline numbers were already known. It is a good reminder that even being down more than -60% from its top, a stock can still fall another -40% on one day. Although the stock was only a 2,9% position prior to that drop, it still warrants a deeper dive than usual.
The signs were already obvious
Before moving to the actual numbers and the report, I have to criticize myself for not acting on the stock despite the following issues that I had identified already some time ago:
The Wirecard scandal has resulted in a couple of books already, most of them quite good. But the ultimate book is of course the one from FT reporter/investigator Dan McCrum who dedicated more or less 7 years of his career to this and significantly contributed to the ultimate revelation of this “House of Cards”.
Disclaimer: This is not investment advice. PLEASE DO YOUR OWN RESEARCH !!!!
Inflation & Pricing power
One of the obvious strategies for for investors in an inflationary environment is to pick companies that have “Pricing power”. Pricing power means that companies should be able to raise prices at least as quickly as costs rise.
Now one could try to do some deep thinking if and how different business models react to inflation. As I am a more “hands on” guy, my solution is to look at actual numbers and then try to draw my conclusion.
For any company that is producing material goods, the best indicator for pricing power in my opinion is Gross profit, i.e. the difference between selling price of a product minus the direct costs to produce them.
A company with pricing power should keep the gross margin or ideally even improve gross margins in an inflationary environment.