It will likely be a quiet day on Wall Street, as is usually the case.  

Other than some news from Target this morning, the headlines have been pretty quiet.  Target indicated that its same store sales results for December would likely be between -1 and 1%, well below the 3-5% growth that they had forecasted earlier in the month.  While its results were better last week, the strength wasn’t enough to make up for weakness at the beginning of the month. 

Amazon, on the other hand, issued a release saying that 2007 was a record year.  While we don’t own Amazon currently, we have long believed that their business model is a lower cost one relative to Wal Mart and Target.  The source of their lower costs, which will eventually be translated into lower prices for shoppers and higher free cash flow yields for shareholders, is their significantly lower infrastructure costs.  They don’t have stores.  Amazon’s one disadvantage has been shipping costs, but they are doing a good job of leveraging programs like PRIME to take additional share from the bricks and mortar folks.  

Some people love to shop, to be sure, but I’m not one of them.  The one drawback to the online world is returns, but even here, Amazon has made the experience hassle free and simple.  To return a product to Amazon, one click on a button on their website and they call you, keeping you from a long wait on hold.  They also send you everything you need to process the return, including the shipping labels.  You may have to wait a few days to complete the return, but it sure beats waiting in line at the store, especially on days like today. 

As the quiet continues into the rest of the week, we’ll spend some time reflecting on what worked and what didn’t work for our portfolio in 2007.  If we uncover insights worth sharing, we’ll be sure to pass them along.