For all the technical minded investors or traders, you should put Enzo Biochem (ENZ) on your radar. The stock is near to breaking through a level which it touched recently. If it surpasses around the $6.30 point, the next stop could be between $7 and $8 per share. Keep your eye on this stock to see if it can keep it’s positive momentum. Remember, the trend is your friend.
Rail transportation is a main conduit in fostering economic activity throughout the world and particularly in North America. Peering back through history will lead you to understand that many of the largest cities/centers for economic activity developed around main rail road junctions. While rail roads are not a revolutionary force today, as they were in the 1800’s, they still serve as a key part of the world’s economic infrastructure. Data pertaining to freight carried on vial rail cars is a valuable data point in gauging the health of the economy.
The Association of American Railroads releases data regularly that measures rail activity in both the U.S. and Canada. Below I am including two charts recently updated by the association. The 2016 trend is certainly downward compared to the prior three years. The 2014 year, in terms of car loads is the post-recession high water mark. Prior to that period, transportation topped out in 2006.
Historically, the levels we are seeing so far in 2016 look more like 2010 and 2011.
Rumor has it that the UFC (Ultimate Fighting Championship) is ‘advanced talks’ to sell the company. This story broke via ESPN on May 10th. For those not aware, the UFC is the premier mixed martial arts (MMA)/cage fighting company in the world and is owned by its parent company Zuffa LLC. In the fighting world it’s equivalent to what the NFL is in football.
The potential purchase of the UFC is a big deal on a number of fronts. For investors, it could be welcomed news because the sport of MMA has been largely a private realm. Outside of a very few penny stocks that exist or once existed, getting some skin in on the game of MMA was close to nonexistent.
For potential investors, what would a purchase by the named parties mean in terms of public investor access to a rapidly growing sport? Let’s take a look.
Blackstone Group – Publicly traded (BX). The company has around $344 billion under management. This is a very large and very diverse company. Though acquiring the UFC might make sense for BX, I wouldn’t expect the UFC’s performance to have an overwhelmingly strong impact on the stock’s future growth. The acquisition would be comparable to throwing a rock into a lake, not like throwing a rock into a small puddle. It would make a splash, but BX’s pool is very large.
China Media Capital – Private company. From what I have read the concept of the company is akin to what Blackstone is, except being based out of China.
WME/IMG – Private company. This company is an agency y focused on the development of sports and media talent. As with China Media Capital, it’s not listed on a public exchange. No luck here if you’re on the outside as an investor.
Dalian Wanda Group – Publicly traded (3699:HK)…Kind of. The company is in the process of delisting itself from the Hong Kong exchange. Trading has been suspended and some news articles point to the company’s management potentially not delisting based on a valuation cap between its public listing and private reception. I don’t follow the stock, so I have no clue. Not much of a chance getting in on this company, even though it’s technically listed on an exchange. What does the company do? They manage a lot of international properties.
In short, if you’re hot to invest in the world of MMA, I would not get too excited about the UFC’s potential sale given the names listed above. All but one is currently accessible via a public market and none provide any form of direct exposure to the sport’s growth.
If you saw the WWE listed among the companies above, then it would be a very different story. That’s not the information we were given to work with. What we have been told are mega companies that have business exposure in a wide array of areas.
Where’s an investor to go, if they want exposure in the world of MMA? It’s a hard call. Some indirectly associated companies like Muscle Pharm (OTC: MSLP) are public, but carry horrible performance records.
Have an idea? Share it below! The MMA investment world would love to hear your thoughts!
Does the Presidential Election cycle mean anything for the overall market? First, you’d want to logically make some type of connection as to why the election would impact the market. One might say that the ruling party would leverage government spending and payments to goose certain industries in order to give the market a little more ‘juice’. Some might point to the influence of the government on Federal Reserve policy and actions. I’m sure a few other reasonable hypothesis could be crafted in addition to the two obvious ones I’ve listed. Developing the proof to confirm such hypotheses would be rather difficult.
I’m not here to develop a model and pile on data to prove that the Presidential Election has the ability to direct the course of the market for the better part of a year. A lot of factors exist that have the ability to move the market and any election (small or large) does not occur in a vacuum. Keep this in mind as you look at the chart below.
The chart below looks at Presidential Elections from 1988 through 2016. The election is held on the first full week of November. The chart goes to the end of November. What I notice is that many election years are pretty darn tame. In just about every line chartered the first half to two-thirds of the period is rather dull. In our current year, the price changes we’ve seen are rather uncharacteristic compared to the other election years. Also, the ’08 election was uncharacteristic because it marked a period of time when the market fell apart (Great Recession). This would be one of those external factors that’s beyond any election.
My two takeaways from this simple chart
- The potential for greater market volatility should increase as we move closer to the election.
- The market is likely to stay pretty range bound until near or after the election. (Though the range set in the first four months of this year is pretty wide.)
Why have and why do so many people continue to migrate to the USA? One reason is because of the belief that life in the USA is superior to where they are coming from. In short, they believe their life will be treated better here in the areas of life that matter most to them. This is no different with money. In general, money migrates to where it feels it will be treated the best given its owner’s desires and risk tolerance.
Large cap dividend stocks are a place where many investors see their money being treated best, given the Federal Reserve’s perpetually low interest rates. The quest for yield has brought a significant share of investors to a realm where risk is much higher than it ever existed in certificate of deposit (CD). Paradoxically, the hive minded investing class finds comfort in the Fed’s new normal of scant borrowing rates. If the market is the only game in town for a decent return, then how bad could the market actually get? We’ve all got to drink to cool-aide or dehydrate. Drink we do.
If the market continues to fail to top the last top seen, how long does the punch drinking party continue before panic strikes and the greater fool theory rapidly unwinds before the eyes of the watching world? To think investors have recovered from skittishness brought on by the last decade’s market crash would be a great error in judgement. One aspect of ‘the new normal’ for investors is bouts of extreme volatility. It becomes almost a self-fulfilling prophecy. Spikes in volatility spark fear, fear sparks further selling and the cycle continues until a rush of bargain buyers convenience themselves the market, and society for that matter, are not doomed.
This is not meant to sound bearish. We live in a time where we’ve convinced ourselves the Fed and other like groups around the world have thrown their best punch and come up wanting. All the while we see Baby-Boomer after Baby-Boomer leave the job market and face the 2nd half of their life. A wave of wealthy individuals that want to live off of the yield of their savings, but do not need to establish themselves, buy new homes, start new families or start up new businesses. The main block of their offspring, the Millennials, have slipped, fallen and then slipped again as they’ve attempted to establish a career. Progress is coming, just at a much slower pace than anticipated.
While growth exists, it’s not comparable to what was seen after the 2nd World War or even the tail end of the last century. We live in a different time. We live with much different demographics. We live with a radically different job market. Over the last eight or so years we heard “Change we can believe in!” For those years and even before that we were in the midst of change we could believe in, yet it wasn’t the change to bring us to some social promise land. It was a change that would reshape the way we see the world, invest and plan for the future.
We’re often told that the market doesn’t reflect the economy and maybe to a certain extent that’s correct. I’m not sure what you or I are supposed to take away from that, besides from abstaining from gloating that the S&P 500 hit a new high. The market is a reflection of something more than itself. The market is a reflection of where money is treated best.
Given all the calamity whether social, political, economic or otherwise, people will migrate over time to where they are treated best and they’ll manage their money the same way. What is the best today might not have been the best yesterday and so on. A six-month teaser rate CD at 7% is a pipe dream today, yet wasn’t in 2006. Best in investing is relative to the current market conditions and those conditions feed off of the multitude of factors influencing the world we all live in.
The bottom line is, no matter how good you swim, you’ll always swim faster with the tide than against the tide and it’s vital to know the difference between the two. Retired people need a constant return on their savings. Savings accounts, CDs and bonds yielding next to nothing and will likely continue to be that way throughout the year and maybe even 2017. Where in this environment is money treated best?
The advent of a new year ultimately brings a thousand predictions and forecasts from a thousand different commentators. My thoughts to follow are not so much a forecast, but an extrapolation of what we have already experienced in 2015 and forces we know will be in play until the end of 2016.
This year, 2016, is a major election year in the U.S. If you are an investor, this event should interest you. Why? In 2015 a simple speech by Hilary Clinton made the entire pharmaceutical sector go into a tail spin for a number of weeks. Mrs. Clinton noted how if she is elected she would impose certain caps on prescription drug prices. Such action would thus marginalize the profits from companies making such drugs. The market reacted with a prompt sell off across the board for pharmaceutical companies.
Fund managers and other major players in the financial markets always have their eyes set on the horizon ahead. What is to come next and how does it change the current landscape of investments? Each time a candidate that is believed to have a good chance of winning the Presidency makes a statement that could impact that bottom line of a company, sector, or industry, the market will react. The reaction could send prices up or down depending on the statement made.
If you want guidance as an investor as we travel further into the year that is now upon us, look no further than the political circus that will continue to run through November. Which candidates have the best shot at winning? What are those candidates saying about certain types of businesses, technologies, and regulations? Their words will have the power to move the market.
Note – The market has a tendency to overreact to things said by the Presidential hopefuls. Therefore, you need to be aware if the trend you see is short or long-term. If you are waiting for a buying opportunity, negative news can cause sharp declines that are often exaggerated. The severity is often over-pronounced for only a short period (a few trading days or less), then a rebound will occur when the manic mood swing is normalized. The same goes with positive news that drives up prices. Euphoria will cause spikes in prices that are often followed by sell-offs, which bring prices back down to a more rational level.
If El Nino results in a winter and spring comparable to that of what was seen in ’97-’98, a good deal of California will experience extreme weather that will result in flooding and other negative outcomes. For insurance companies, such conditions don’t necessarily spell above average, but for disaster service companies the outlook could be quite bright.
ServiceMaster (SERV) is one company that is well footed to benefit from an increase in weather related disasters from El Nino or other sources. The company’s two main operations are its franchise services and Terminix. The franchise portion provides a wide variety of disaster recovery services. For example, when your building is flooded, SERV provides industrial fans and other drying devices to mitigate the damage of water in a commercial or home structure. Terminix is a pest control service provider, which is primed to deal with greater insect and rodent activity based on the impending shift toward a period of more inclement weather.
The basic fact is that if we assume El Nino will bring a break in the drought California has been in for the past 4-5 years, then the changes of local and regional flooding will increase significantly. Whether it is large scale run off of water from hills into homes or simply roofs that have not been tested with a sizable rainfall in years, the potential for flooding in California is much higher than normal because of the extended drought. Flooding translates into increased business for SERV. When disaster strikes, SERV benefits. The stronger the El Nino, the better the business for SERV.
Note – SERV is currently trading near its 52-week high. You may want to watch for a pullback to establish a position within the stock. At the current price, the dividend yield is 1.2% annually.
Disclosure: No Position
Last Friday’s terrorist attacks in Paris were yet another reminder of the way in which the Western world has changed. No matter what Western leaders do or do not do in reaction to the current and future attacks, public and private organizations will take steps to ensure security is maintained and future attacks are thwarted, if possible.
When investing, you are in a sense voting for the services and goods you believe will thrive (be demanded). As the West is dragged further into a war with radical Islam and other malcontents, the need for terrorism deterrents and solutions will be needed within the communities and cities we live in.
Here are some public traded companies that are working to provide anti-terrorism solutions.
- American Science & Engineering (ASEI) – X-ray equipment specifically used by homeland security.
- FLIR Systems (FLIR) – Manufactures and distributes thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems and advanced threat-detection solutions.
- Analogic Corporation (ALOG) – Is in the business of making and marketing security technology products, explosive detection systems, and weapon and threat detection aviation security systems, in addition to their medical imaging business.
For a more extensive list of anti-technology stocks, see http://wallstreetnewsnetwork.com/AntiTerrorismStocks.xls
We live in a data driven age. Today data is being collected at every turn; from what you’re visiting online to the type of food you’re buying at the supermarket. Concurrently, data captured in decades prior is being unlocked to the public. This mass of data can be overwhelming, yet create various potential opportunities for idea seeking investors.
National Parks across the U.S. attract millions of domestic and foreign tourists annually. It’s a big business for the Park Services. Now, you can’t invest in the actual Park Service, which is part of the Federal government, but you can think about businesses that profit from increased tourism to National Parks. The first thing that comes to mind is outdoor sporting goods manufacturers and stores.
Changes in attendance to our National Parks, in my mind, reveal a larger trend that is occurring. If more people are visiting these parks, the general trend is likely the same for all general outdoor actives. Thus, their should be increased demand for outdoor gear and accessories. This is how trend tracking can lead you to investment ideas.
From the mid 90’s until 2014 you will notice a similar trend occurring within the three most popular National Parks in the U.S. In the mid to late 90’s Yosemite, Yellowstone and the Grand Canyon all experienced declines in visitation that continued for about 10 years. In the latter part of the first decade of the 2000’s, visitation began to increase and has continued to trend higher year after year.
What explains the change in the trend that happened in the 90’s and then reversed about 10 years later? I speculate that demographics played the most significant role. A large part of the echo-boom population was in or around their teenage years. This age range in general is not very interested in family vacations, especially the outdoor flavor. If you look back at the early 90’s and 80’s the attendance at these parks was experiencing growth. The demographic group was younger and more conducive to outdoors family functions. Fast forward to around 10 years ago and you find the echo-boomers starting families and thus a increase in attendance starts to occur at the parks; a signal that more outdoors activities are occurring.
I can only speculate what cause the trend to shift, but I do know that the current trend is for more year over year park visitations. This implies more outdoor activities happening across the country. If the general public behavior is shifting to more outdoor functions, then companies that provide such products for those functions are going to have an easier time growing their existing business. This creates a more hospitable climate for investors in such companies.
Where do you turn to when looking for pure plays in the outdoor recreation market? One option is Sportsman Warehouse Holdings (SPWH). SPWH operates 49 stores in 18 states that provide outdoor sporting goods including hunting, shooting, fishing and camping gear. It’s very well positioned to benefit from any increase in society’s inclination to venture into the great outdoors.
The bottom line is that piles of data are now accessible to us with the click of the mouse. A little work can reveal helpful observations that can lead us to achieving investment success.
At what point does the Las Vegas hotel/resort industry surpass the point of general profitability and fall into a dog-eat-dog scenario where profitability becomes a mirage in the desert sands? I recently returned from last Vegas and noticed that the building of new mega resorts is still in full swing. Yet, I couldn’t help myself from thinking about the point at which the tourism industry breeds an unsustainable environment?
Currently, Las Vegas boasts roughly 150,000 rooms available to rent for a night stay or longer. On The Strip, occupancy rates typically average around 90% per month, while the Downtown region averages around 80%. While these are respectable numbers, these are what is to be expected by owners/investors and do not speak to room rate pricing and other promotions.
In its present state, the newest mega resort on The Strip, know as CityCenter along with the Cosmopolitan have a track record being unable to turn a profit. The Cosmopolitan has reporting annual losses of roughly $100 per year since opening in 2010. The neighboring CityCenter reported a $2.1 million operating loss for the 2nd quarter.
This isn’t to say all resort properties are struggling. Take the Wynn hotels for example, 2nd quarter results show revenue up 12.5% from the prior year and their cash flow up 18.3%. What’s even more impressive is that the Wynn property’s annual cash flow is in the neighborhood of $500 million, while the CityCenter property is $330 million. When you compare the total construction prices of each property ($5 billion vs 8.7 billion) the contrast becomes even more stark.
When you visit the Wynn properties in Las Vegas, you notice something strange compared to the majority of other hotels along The Strip. What is different is the fact that the gaming area isn’t overly large and it’s not the focal point of the common first floor level. As a result, and to Wynn’s benefit, the majority of revenue is derived from restaurants, clubs, and retail shops. Gaming does play an important role, but it’s not THE role to riches for Wynn.
The contrast in resort profitability gives insight to how things will likely play out in the future for a heavily saturated tourism market in Las Vegas. In times economic growth, as we are in now, certain resorts with the correct marketing and attractions will be poised to survive and grow, while others that lack the necessary appeal will be shunned and find themselves in a very sticky financial bind.
Crown Resorts along with the Genting Group are in the process of constructing two new mega resorts north of where the Wynn properties are located. The Genting Group is planning on building the Asian themed Echelon Place, which will have 3,000 rooms and 3,500 slot machines in operation by 2017. The Crown Resorts property is expected to be smaller in size and open in 2018. Both will bring yet another attraction and a boost to the number of rooms available for rent in the area.
The growth Las Vegas experienced in the 90’s and early 2000’s is a thing of the past. The size of the overall inventory, whether it be rooms, slot machines, restaurants, or a different measurement, paint a picture of a behemoth. Under such conditions, growth, in comparison to the whole, is much more difficult to achieve compared to when activity was on a smaller scale.
From my experience there and research, I would anticipate the Downtown area to continue to experience a re-birth, while the main drag of the strip continues to fight for and re-define its customer base. It’s what I see as the changing dynamics and composition of what tourists know as ‘Vegas’.
Disclosure: No Positions