Episode 411: The Secret to Investing in Retail
On this week's Stansberry Investor Hour, Dan and Corey welcome Alex Morris to the show. Alex is the founder of TSOH (The Science of Hitting) Investment Research and an author. TSOH, which boasts more than 20,000 subscribers, aims to generate attractive long-term returns while providing complete transparency on the research process, portfolio decision-making, and returns.
Alex kicks off the show by discussing the inspiration behind his new book, Buffett and Munger Unscripted: Three Decades of Investment and Business Insights From the Berkshire Hathaway Shareholder Meetings. He goes in depth on what he learned from Warren Buffett and Charlie Munger in the process of crafting his book, including understanding incentives, management turnover, and which macroeconomic factors are important. Alex notes...
If you asked a lot of people, "Here's a list of 10 securities. Tell me which ones are buy, sell, hold." Well, I know for sure you can turn on a couple of TV channels and you can find people who would very happily answer those questions for you for all 10 of those securities. And I think part of [Buffett and Munger's] approach has been more so, "We don't need to answer it for nine of them. If we can answer for one of them with a reasonable level of conviction – it's something that we're willing to truly put some chips behind – then that's all that really matters."
Next, Alex talks about the "pointed" questions Buffett and Munger got during the dot-com era from shareholders who doubted their abilities. Then he breaks down his own investing style, how that style has evolved over the years, and how he got interested in investing in the first place. This leads to a discussion about struggling retailer Five Below (which Alex is keeping an eye on to see if it can turn its business around) and Dollar Tree (which Alex owns and still likes today)...
Dollar Tree had almost all their price points at $1. Then a handful of years ago, largely due to the impacts of inflation... they went to $1.25 across the whole store basically... I think it effectively allows them to truly continue meeting a need for their core customer in a way that they were artificially constrained from doing basically with that $1 cap.
Finally, Alex delves further into the retail space. He discusses Costco Wholesale versus Walmart, the importance of retailers understanding their core customer base, why Dollar Tree is misunderstood, geographic retail strategies, President Donald Trump's tariffs, and a U.K.-based mixers company he finds attractive...
I do own Fevertree... They make premium tonic waters... If you go to a local grocery store, you probably see a liter of tonic from Schweppes. It'll be $2.49 or whatever. And the private label will be $0.79. And Fevertree came into this market and is selling four-packs of 10-ounce bottles for $6. The difference is that the ingredients are much higher quality, and the taste is much better as a result.
Click here or on the image below to watch the video interview with Alex right now. For the full audio episode, click here.
(Additional past episodes are located here.)
The transcript is coming soon.
This Week's Guest
Alex Morris is the founder of TSOH Investment Research and author of Buffett and Munger Unscripted. He launched TSOH in early 2021 after a decade in the finance industry as a buy-side equities analyst. The objective of TSOH – which now boasts more than 20,000 subscribers – is to generate attractive long-term returns while providing complete transparency on the research process, portfolio decision-making, and returns.
Alex is a CFA charterholder and holds a Master of Business Administration and a finance degree from the University of Florida.