What About Those Recessions? (From STOR's 4Q18 Call)

I bought STORE Capital back in mid-2017, right after news came out that Berkshire/Ted Weschler bought it. I remember reading the news at 10pm that night and got so excited that I jumped out of bed, stayed up all night researching, just in time to put in a buy order the next morning.

Since then STOR has provided good returns. More than that, I learned quite a bit about the real estate business by following a good management team.

The 4Q18 earning call was educational. You know one of these moments of mental clarity, when some one says something that (you thought) you knew all along, yet a light bulb just goes off in your head? It's one of those.

I had been thinking about cycles quite a bit, and STOR's CEO Chris Volk says this:

"So the first thing I would talk about is cycle, the notion of cycle, and this gets - a lot of analysts focus on the expansion cycle that this economy has been in for a long period of time and...somehow we must be getting near the end of the cycle..."

"...I think that this economy can grow at 2% to 3% at a margin, but inside of that 2%, 3% there's plenty of recession activity that's happening."

"...So if you were working for Sears Roebuck you might have thought you were in a recession, if you are working for Radio Shack you would have thought there was a recession.

Payless shoes I mean any one of the 9,000 retailers price closed toward and you would have felt pretty bad, right. A fewer in the oil industry, as oil prices plummeted in the Dakotas and elsewhere. And you are located in one of those states, you were thought there was a recession. 

So inside of that 2% to 3% growth there is a lot of kind of creative destruction that's happening that's buried in that."

Duh! Of course!

Instead of waiting/worrying about a big recession all the time, we're better off recognizing that mini "recessions" by sectors have always been with us. Its called creative destruction.

Sometimes real insight is simple and elegant, and right in front of you.

I'm not sure I can add much more without sounding banal. So I'll stop here.