TCS a 100 bagger?

TCS may look bad now, but in 20 years, they may be a 100 bagger. You just never know.

Hi Mazske, I just stumbled across this. Let’s see. The Container Store a 100 bagger in 20 years? Well you can think of them having 50% more stores than now, even 75% more. That would be a lot. Twice as many, I guess would be imaginable. Three times as many…No Way. Five times as many? They’d have to have one at every crossroads. One hundred times as many??? :wink:

Well, we have to think of something different. Maybe they’d improve their operating margins by a lot, by a real lot, maybe by 50%. And we’ll assume that each of these multiple stores out in the boondocks, and the less desirable locations, can get as much in annual sales as the current stores. Then they wouldn’t need 100 times as many stores as now, just 67 times as many. Ooops, cancel that idea.

And how about the capex that it would take to build 100 times as many stores as they have now? Nope.

Okay, we need a different approach. How about online sales? And shipping large empty storage tubs, and boxes, and shelving all over the country. I can’t imagine why they aren’t doing that now. And are there a hundred times as many customers out there?

Well maybe it won’t be a 100 bagger after all…

Saul

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Well maybe it won’t be a 100 bagger after all…

Hey Saul,

I was just throwing out an example. I probably should have said it could be a 10 bagger. Personally, I don’t think it will ever be a 100 bagger.

However, companies do evolve. Just look at Berkshire Hathaway as an example.

So, in 20 years, any company out there now could be a totally different company. We just don’t know as we cannot predict the future.

Keep in mind, I did write I sold my shares in TCS, so that means I don’t believe in their future.

However, I could be wrong. You just never know what may happen.

Back in the 70’s, who would have thought that Apple, in 2015, would be coming out with a watch?

Saul, do keep up the great work on this board.

Fool on,

mazske

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Hi Mazske,
I had a different take on TCS than Saul, but I came to the same conclusion. So happens I have a Container Store not far from my home, so when I needed a special container that’s where I went.

My wife is Chinese and she loves chocolate. High quality chocolate is prized by a lot of Chinese and it’s hard to obtain here. So, whenever I would visit, I would go to Whole Foods and buy 20 or more chocolate bars for my wife, she would keep some for herself (OK, both of us) and gift the rest to family, friends and colleagues (up until last month, we had a long-distance relationship, she now has a green card so we live and travel together).

Anyway, I wanted a plain metal box without some brand name embossed and enameled on it or a bunch of cutesy Christmas designs or whatever. I also desired specific dimensions so the chocolate bars would neatly fit in it. And I’ll be damned if I didn’t find the perfect box at The Container Store.

But that’s shopping, not investing.

TCS is a specialty retailer. So is Whole Foods. They have more in common than might be immediately apparent, but they both carry inventory from a host of vendors that fits within their special domain.

So why do I own WFM and not TCS? I think TCS was one of David Gardner’s recommendations. I pay attention to him. He’s got a good track record.

But look, I consider myself pretty much an average guy - I think I’m pretty much like a lot of other people. I go to WFM every week, often two or three times a week (when I’m in the US). I’ve been to TCS maybe twice total - like ever. I just don’t see what they’ve got to offer that makes for much repeat business.

True, they could change their business. Berkshire Hathaway was as a textile manufacturer with a dim future when Buffet took ownership. He completely changed the business into and investment/asset management business. Why wasn’t the name changed to Buffet-Munger Investment Club or something? Can’t answer that, I don’t know. But I do know that management at TCS is completely focused on expanding their current business, not on changing it. They may grow the business, but I can’t see how they will ever make it a run-away success.

So, I am not motivated as an investor to put any money into it.

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TCS management is really awesome. Employees and customers like the firm a lot and they are shareholder friendly. It is quite possible that someday this business will be acquired by Berkshire or its like. Going to the equity markets to expand the company was the right thing to do although I was apprehensive about the recommendation for quite a while. It may end up providing market beating results for the duration it exists independently. Who knows. I took two positions into it including the one at its lows. Overall, this is a small position in my port that I don’t have to track due to the nature of its management. We will see what happens.

Anurag

So, in 20 years, any company out there now could be a totally different company. We just don’t know as we cannot predict the future. Keep in mind, I did sell my shares in TCS, so that means I don’t believe in their future. However, I could be wrong. You just never know what may happen. Back in the 70’s, who would have thought that Apple, in 2015, would be coming out with a watch?

Hi again mazske. Let me first apologize for my irony in my previous post. In reading back, it sounded like I was making fun of what you said about TCS possibly becoming a 100 bagger, which wasn’t kind. I guess it’s one of my pet peeves in MF thinking. That you should hang on to every loser because it might become a 100 bagger someday. I feel you should at least have an idea how that could be possible. Not every company doing terrible today will be a big winner tomorrow, just because MF recommended it once upon a time. You’ll do better looking among stocks that are doing well today, to find the ones that will do well tomorrow. Now Brittlerock had an interesting take on TCS. They are a fairly big box, with an overhead approaching a Whole Foods store, but you go to Whole Foods every week. And it’s always mobbed. You go to the Container Store once or twice a year, and probably spend less than any single visit to Whole Foods.

As to

So, in 20 years, any company out there now could be a totally different company. We just don’t know as we cannot predict the future… You just never know what may happen. Back in the 70’s, who would have thought that Apple, in 2015, would be coming out with a watch?

Mazske, I just don’t think you should hold on to a poorly functioning company on the basis that it may transform itself into something successful 20 years from now. The chance of The Container Store transforming itself into an Apple is about nil in my opinion.

They were recommended twice at $33.55 and $41.28 in Nov and Dec of 2013. They are now at $19.09. Here’s this off their most recent quarter report

Adjusted net income was $3.2 million or 7 cents per share.
Net sales were $190.9 million, up 1.4%.
Company comparable store sales for the third quarter were down 3.5% which were at the low end of the Company’s guidance.
Online sales increased 13.2% year over year.

Does this sound like a company tearing up the markets, or a blah, struggling along company?

Best,

Saul

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Does this sound like a company tearing up the markets, or a blah, struggling along company?

I agree. That is why I sold my small position in TCS. In all my years in investing, excusing when first started in individual stocks in 1999, I mistakenly listened to the hype on this company by TMF.

In hindsight, I should have done my own DD like I normally do.

mazske

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TCS management is really awesome. Employees and customers like the firm a lot and they are shareholder friendly. It is quite possible that someday this business will be acquired by Berkshire or its like.

Anurag, I have to disagree here. I dont think Kip Tindell is a good CEO. TCS has a history of keeping employees happy and in its long existence as a private company has never been profitable.

Just keeping employees happy is not a way to reach the top. My logic of not investing in TCS at all (and I have articulated this many time on the SA boards) is that I dont think it is a place where people would go and buy multiple times. Also what goes in my closet is not something I truly care about. If I find stuff for cheaper elsewhere, I will definitely go for it. There is no added benefit for me to shop at the Container store.

I dont think this is a sustainable business for the long run and dont believe it has much room to run. I may prove to be wrong in the long run, but I have never believed in this business and never will invest. I think there are plenty of other places to invest your money in.

Vish

TCS has a history of keeping employees happy and in its long existence as a private company has never been profitable.

I had similar concerns but my chat with KitKat (MonsterFluff) on TCS boards helped me understand the history better. In a nutshell they had to buy out their investors and partners to gain independence and in that process ended up with debt. Going public has given the firm an avenue to escape its rut and expand its operations. Customers who have actually visited there are very happy.

I may prove to be wrong in the long run, but I have never believed in this business and never will invest. I think there are plenty of other places to invest your money in.

It is the difference of opinion about a firm that creates the market. If you strongly believe this business is going downhill going forward, you could consider shorting.

Also what goes in my closet is not something I truly care about. If I find stuff for cheaper elsewhere, I will definitely go for it.

Well, not everyone thinks that way. I recently spend nearly $5K to build quality cabinets in my garage. They look nice, are completely customized and are very durable. I dislike the sight of bent board and unsightly frames - feel like blight. Now we have budgeted $10K for installing cabinets indoors. Unlike India, American houses although big have poor storage. We have to be careful with the indoor cabinets. We don’t want to adversely influence the house’s cultural context but at the same time we want to create more storage that adds value to life and eventually to the house itself.

Anurag

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