Bull Market in Guns and Ammunition in this Bad Bear Market?

Over the last few months, we've seen the next leg down in this terrible bear market. Since the US Election on November 2008 to March 5, 2009, we've seen the S&P 500 go down 28.6% and the Small Capitalization Russell 2000 index go down 34.4%.

But yet, two stocks, SWHC (Smith and Wesson Holdings) and RGR (Sturm Ruger), two Gun and Ammunition companies, have gained 45.8% and 39.8% respectively.



Despite the Current Bear Market, we have had a Bull Market in Guns and Ammunition.

Different Articles, such as from Minyanville, have attributed this boom to two main factors:

1. The new Democratic U.S. Administration is traditionally not friendly to gun rights and gun owners.
   
2. Worsening economy increases crime and mayhem encouraging people to buy firearms and ammunition.
   

Anecdotal evidence also shows the high demand. This Orlando Sentinel article has said that sales of ammunition have been flying off the shelves and there is a high demand for it.

The FBI has reported that background checks on potential firearms purchasers increased 41.6% from November 2007 to November 2008.

Even the earnings report from handgun maker Sturm Ruger (RGR) suggests this national trend. Demand is so high, Sturm Ruger reported over 175,000 of 776,000 units ordered were on back order. Over the last year, the order book grow almost 50% from $156 million to $223 million.

SWHC (Smith and Wesson) is a small capitalization stock ($179 million) with a PE (Price to Earnings) ratio of 13, and a 5 year estimated growth rate of 21.7% for a Price Earnings to Growth Ratio (PEG) of 0.60 (PEG > 2 is expensive, PEG < 1 is a good deal).

RGR (Sturm Ruger) is also a small capitalization stock ($191 million) with a forward PE ratio of 24.

Both stocks appear to have broken out recently out of bases




The trends remain strong, but how long will it last?

If the economy and stock market continue to worsen, higher unemployment would lead to higher crime rates, which can boost sales of guns and ammunition.

We could also currently be in a secular Bear Market that started in 2000 and will end sometime around 2016 or 2017.

Today's SWHC Stock Chart

Today's RGR Stock Chart

Today's CAB Stock Chart

Performance Comparison of SPY, IWM, SWHC, RGR, and CAB

Cabela (CAB), is a retailer of outdoor items such as hunting, fishing and camping equipment.

Secular Bull and Bear Markets; Cyclical Bull and Bear Markets

According to Wikipedia, "A secular market trend is a long-term trend that usually lasts 5 to 25 years (but whose distribution is more or less bell shaped around 17 years, in the stock market), and consists of sequential 'primary' trends."

A Cyclical Market trend is a shorter term trend lasting around two to four years.

A Bull Market "tends to be associated with increasing investor confidence, motivating investors to buy in anticipation of future price increases and future capital gains."

A Bear Market, "is described as being accompanied by widespread pessimism. Investors anticipating further losses are often motivated to sell, with negative sentiment feeding on itself in a vicious circle."

Some would refer to the current market starting in 2000 as the beginning of a longer term Secular Bear Market, with a Cyclical Bull Market occurring between 2003 and 2007.

Secular Markets in History

Market Analysts and Historians would group the stock market periods from 1906 between Secular Bull Markets and Secular Bear Markets.

One grouping (by Amateur-Investor.net), would be as follows:

1. 1906-1921: Secular BEAR Market
   
2. 1922-1928: Secular BULL Market
   
3. 1929-1949: Secular BEAR Market
   
4. 1950-1965: Secular BULL Market
   
5. 1966-1982: Secular BEAR Market
   
6. 1983-1999: Secular BULL Market
   
7. 2000-????: Secular BEAR Market
   

How the 1950 to 1965 Secular BULL Market Looked Like



The Clear Trend is a powerful Bull Market.

A Buy the Dip strategy would have been profitable during this period.

How the 1966 to 1982 Secular BEAR Market Looked Like



Many say that we are in the middle of a Secular Bear Market which started in 2000.

If this is so, then we can look at the last Secular Bear Market, the Period between 1966 to 1982.

What is interesting is that even in this Bear Market, the Stock Market did rise, but at a much slower rate than during a Secular Bull Market. The Average Yearly Return on the S&P 500 (according to Amateur-Investor.net) during this period was 3.64%. Compare this to the Secular Bull Markets from 1922-1928 (17.90%), 1950-1965 (11.40%) and 1983-1999 (14.96%).

Also notice the general sideways action but with violent swings in the market.

We see Drops of 33%, 47%, and 23%, and Gains of 42%, 64%, and 122%.

So even in Bear Markets, it is possible to make good gains in the market if traded correctly. Of course, trading correctly (and calling market tops and bottoms) is difficult.

Using an index strategy, it would appear that even in Bear Markets, buying the index when the market drops 30% to 40% from a market peak would be profitable, in preparation for the next big gain in the next Secular Bull Market.

In fact, this blog studied the one year forward return based on an index's relation between the 52 week high and 52 week low. The more overextended the index in relation to the 52 week high (and the more underextended the index in relation to the 52 week low), the greater the one year forward return.

How the 1983 to 1999 Secular BULL Market Looked Like



Clearly, the primary market trend during this long period was up. There was a scary drop in 1987 (Black Monday), but during this entire period, this drop was just a small blip.

Accumulating stocks/equity during the long bear market from 1966 to 1982 would have paid off before the start of the powerful 1983 to 1999 Secular Bull Market.

How the 2000 to ???? Secular BEAR Market Looks Like



If we are in a Secular Bear Market lasting around 17 years, then if the Secular Bear Market started in 2000, the Secular Bear will end around 2016.

If the 1966 to 1982 market is any indication, we will be in for a wild ride in the market, as we have already experienced.


Today's S&P 500 Chart

Build Your Own High Gain Stock Portfolio, One Sector At a Time

There are many ways to construct your own stock portfolio.

One way to create a diversified portfolio is to choose stocks from different sectors that follow these criteria:

1. The stock is in a good sector.
   
2. The stock is a good stock in a good sector.
   
3. The stock has Reasonable Valuation:
   a. PEG < 2.0 (Price-Earnings to Growth Ratio).
   b. Forward PE < 40
   
4. The stock shows Strength:
   a. Stock is within reach of a 52 week high.
   b. Stock is above the moving averages (200 day, and even 50 day moving average).
   

Here are a few suggestions that mostly fit the criteria above. One could create a portfolio by choosing a stock or a few stocks from each sector below.

A. Tech: Internet and Information

We are in the middle of a society changing Information Revolution, and the Internet plays a central role.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GOOG	Google	0.91	31	33.88%

B. Tech: Mobile Convergence and Mobile Devices

One of the major trends is the trend towards Mobile Convergence. Rather than have separate devices, such as a cell phone, a camera, and a music player, all these features are being integrated into a single mobile device. The Apple Iphone is a web browser, a music player, and a cell phone. Cell phones now come with cameras and music playing capabilities.

In addition, globalization is helping this sector out as international and emerging markets are adopting these mobile technologies in great numbers. One Indian person has even said that in India, even beggars have cell phones.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
AAPL	Apple	1.66	37.52	22.63%
RIMM	Research In Motion	1.04	35.06	33.61%
NOK	Nokia	1.40	17.06	12.22%

Aside from the Apple iphone, Apple (AAPL) has many other products as well such as the Apple iPod music player, and the Apple iMac computer.

Nokia (NOK), is also a play on Global Positioning as it is acquiring Digital Map Maker Navteq (NVT).

C. Tech: Networking/Digital TV/Telecom Equipment

Another trend is in the Network.

1. There is a trend having greater Bandwidth for advanced services (for example, High Definition Video on Demand).
   
2. There's the conversion of analog TV to digital TV. On February 2009, companies are supposed to stop broadcasting analog television, and are supposed to broadcast digitally.
   
3. There is the Battle for the Digital Living Room. From IP Television (IPTV), to Digital TV, to High Definition TV sets, to Digital Video Recorder Technology (DVRs), to digital set-top boxes, to streaming content from computers to the big screen, the battle for the Digital Living Room is just beginning.
   
4. The trend also includes wireless telecommunication systems that help bring advanced services (video on a cell phone) to mobile devices.
   

Symbol	Stock Name	PEG	Forward PE	5 yr growth
CSCO	Cisco	1.25	17.64	14.10%
GLW	Corning	0.95	15.80	16.57%
NNDS	NDS Group	0.69	16.39	23.75%
HRS	Harris	0.58	15.68	27.00%

Cisco (CSCO) is the big company in Networking. They also have Set-Top Box exposure (access to the Digital Living Room) with their acquisition of Set Top Box maker Scientific Atlanta.

Corning (GLW) makes glass and equipment for higher bandwidth optical networking. They are also a play on the Digital Living Room as their products are needed by those who make flat panel displays and High Definition TVs.

NDS Group (NNDS) is the United Kingdom's version of the overhyped Chinese company China Digital TV (STV). The company engages in the supply of open end-to-end digital technology and services to digital pay-television platform operators and content providers worldwide. They even supply middleware and Digital Video Recorder Technologies, and Set-Top Boxes, and they support high definition TV.

Harris (HRS) is a company which operates in four main segments from Government Communication Systems, RF Communications, Broadcast Communications and wireless networking through Harris Stratex (HPTX). Their Broadcast Communications Group is involved Digital TV. They also benefit from a good win rate on government contracts.

D. Tech: GPS and Global Positioning

A major growth area in tech is in Global Positioning Technlogies. This technology is more than just turn by turn directions on a navigation device. In the future, as part of Mobile Convergence, GPS will be integrated into almost any device which can move, such as a cell phone.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GRMN	Garmin	1.44	28.06	19.53%
TRMB	Trimble	1.86	28.94	15.60%
SIRF	Sirf Technologies	0.77	20.44	26.62%

Garmin (GRMN) mainly makes Global Positioning Devices. They are big in the car navigation and aeroplane navigation market. Recent concerns include the intended acquisition of their Digital Map Supplier Navteq (NVT) by Nokia (NOK).

Trimble Navigation (TRMB) makes GPS products. They are also a unique play on the good Agriculture market, as they even have GPS equipment for farm equipment and tractors.

Sirf Technologies (SIRF) makes GPS semiconductors. Their chips are finding their way into devices such as cell phones.

E. Tech/Consumer Discretionary: Computer, Video and Online Gaming

The strong Gaming cycle is continuing as three major console makers (Nintendo, Microsoft and Sony) have released major consoles.

There are also up and coming new trends such as online gaming, especially in East Asia (China).

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GME	Gamestop	1.36	28.92	21.22%
SNDA	Shanda Interactive	0.64	21.26	33.26%

Gamestop (GME) is the premiere gaming retailer. Why choose the winner of the console or software maker war when you can buy the retailer who sells all these products.

Shanda Interactive (SNDA) together with The9 Limited (NCTY) are dominant Chinese Online Gaming companies poised for great growth.


F. Energy: Oil and Oil Services.

Energy and Oil remain strong sectors. There's great demand as countries all over the world, especially the emerging market countries, need oil. Supply is limited as well, and harder to come by.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
COP	Conoco Philips	0.93	9.19	9.92%
NOV	National Oilwell Varco	0.60	17.89	29.67%

Conoco Philips (COP) is an integrated oil company, while National Oilwell Varco (NOV) is an Oil Services and Equipment Company, and operates three segments: Rig Technology, Petroleum Services and Distribution Services.

G. Energy: Coal

Energy sources such as oil are in great demand. Coal, a very inexpensive fossil fuel, benefits from the great demand in energy.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
BTU	Peabody Energy	0.93	9.19	9.92%

H. Materials

Freeport McMoran (FCX) is a gold and copper company, and both are needed by rapidly growing emerging market countries such as China.

Precision Castparts (PCP) manufactures metal components used in the aerospace, power generation, general industrial, and automotive markets. There's a bull market in aerospace and infrastructure, and Precision Castparts benefits.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
FCX	Freeport McMoran	0.98	10.82	11.00%
PCP	Precision Castparts	0.85	18.13	21.23%

I. Agriculture

There's a Bull market in agriculture, thanks to an influential US Farm Bill in 2002.

Monsanto (MON) makes seeds, including very specialized and drought resistant seeds. Deere (DE) makes agricultural equipment. Trimble Navigation (TRMB) is also an unusual play on agriculture as they provide GPS products to many places, including tractors and the agriculture industry.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
MON	Monsanto	0.95	29.53	30.93%
DE	Deere	1.75	16.21	9.25%

J. Aerospace and Defense

There's a Bull market in Aerospace and Defense thanks to the aeroplane replacement cycle. Many of the older planes have to be replaced.

Boeing (BA) makes airplanes and is a better play than competitor Airbus. Transdigm Group (TDG) is a $2B company that supplies parts to the Aerospace industry. Lockheed Martin (LMT) is a defense contractor that makes many defense products, including military aircraft.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
BA	Boeing	1.08	15.86	14.70%
TDG	Transdigm Group	0.64	18.24	28.50%
LMT	Lockheed Martin	1.33	15.31	11.52%

K. Infrastructure

With great global growth comes a great need for Infrastructure.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
ABB	ABB Limited	0.83	20.63	25.00%
MDR	McDermott	1.38	22.01	16.00%

L. Telecom: Emerging Market Wireless Telecom

Emerging Markets are using wireless products in large numbers. Many emerging countries have low wireless penetration so there is even more room to grow.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
AMX	America Movil	0.49	15.89	32.65%
VIP	Vimpel Communications	0.75	17.49	23.37%
CHL	China Mobile	0.98	24.66	25.14%

M. Financials

Goldman Sachs (GS) is the premier brokerage company, the gold standard.

Hudson City Bank (HCBK) is a fast growing regional bank that has very little exposure to the subprime problems, and some have speculated that along with other Northeastern banks, could be taken over by Canadian banks and other companies.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GS	Goldman Sachs	0.76	9.91	13.12%
HCBK	Hudson City Bank	1.09	18.73	17.15%

N. Asset Management Companies

Everyone is looking for the next Berkshire Hathaway (BRK.A), Warren Buffett's company.

One very good company in the mold of Berkshire Hathaway is the cash rich Leucadia (LUK), run for many years by super investors Ian Cumming and Joseph Steinberg.

Carl Icahn, another superinvestor, gives us Carl Icahn Enterprises (IEP), (Formerly American Real Estate partners (ACP)) and offers investors a way to invest with this great activist investor. Watch out for guru investors with a lot of cash to use.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
LUK	Leucadia	N/A	N/A	N/A
IEP	Carl Icahn Enterprise	N/A	N/A	N/A

O. Consumer Staples

Symbol	Stock Name	PEG	Forward PE	5 yr growth
PG	Procter and Gamble	1.60	18.07	11.31%
UL	Unilever	0.96	15.34	16.00%

P. Consumer Staples: Drinks and Beverages

Hansen (HANS) is a fast growing beverage company specializing in Energy Drinks.

Central European Distribution (CEDC) is a Polish drink and Vodka producer.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
PEP	Pepsi	1.74	19.22	11.03%
HANS	Hansen Natural	0.76	30.06	39.63%
CEDC	Central European Distribution	1.29	22.52	17.50%

Q. Consumer Discretionary: Gambling Equipment

Scientific Games (SGMS) makes equipment for Lotteries, Printed Products, and Diversified Gaming. Some say this is a recession proof stock.

International Game Technology (IGT) makes Gaming Equipment for Casinos.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
SGMS	Scientific Games	1.06	23.94	22.66%
IGT	International Game Technology	1.69	25.36	17.20%

R. Industrials

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GE	General Electric	1.47	16.31	11.09%
UTX	United Technologies	1.40	16.39	11.72%

S. Healthcare

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GILD	Gilead	1.35	23.30	17.20%

The Sectors in Bull Market Mode

We are in a bull market right now, with the S&P at all time highs, and the Dow near all time highs. So what sectors are working now? What are the long term trends worth investing in? (In this article, trends mean 3 years or longer.)

1. Agriculture:

In 2002, there was an influential US Farm Bill, "The Farm Security and Rural Investment Act of 2002." Prior to this, according to a Forbes Article, " few stocks had big moves prior to the enactment of the 2002 farm bill. Consider AGCO (AG), which sells combines and other farm equipment. Over the course of the year prior to the May 2002 signing of the farm bill, AGCO's shares climbed 150%, vs. a 14% decline for the S&P 500. Archer Daniels Midland (ADM) and Deere & Co. (DE), though not as frothy, also rose nicely in that time period." The push towards Ethanol is also another reason for the bull market in agriculture.

Jim Cramer prefers Deere (DE), who makes the agriculture farm equipment, Monsanto (MON), a biotech company that makes the seeds, and Chemical and Mining Co. of Chile (SQM), a fertilizer play in the agricultural sector.

Forbes likes companies such as Archer Daniels Midlands (ADM), AGCO (AG), and CNH Global (CNH), among many companies in the list they provide as beneficiaries of the farm bill.

2. Machinery

Similar to the farm bill, the $287 Billion US Transportation-spending law in 2005 has been good to machinery stocks. Beneficiaries include companies such as Caterpillar (CAT), and Terex (TEX). As a bonus, companies like Caterpillar (makes of construction equipment), have international exposure as well.

3. Infrastructure

In this area, Jim Cramer likes Foster Wheeler (FWLT) and McDermott (MDR). Foster Wheeler, "provides engineering and construction services to the oil and gas, oil refining, chemical/petrochemical, pharmaceutical, environmental, power generation, and power plant operation and maintenance sectors worldwide. It operates through two groups, Global Engineering and Construction Group (Global E&C Group), and Global Power Group." McDermott (MDR) "operates in three segments: Offshore Oil and Gas Construction, Government Operations, and Power Generation Systems."

Fluor (FLR), is another company in this area. Again, this sector also benefits from global growth.

4. Aerospace and Defense

All those old civilian and military planes need to be replaced. We are in the middle of long aerospace cycle. The main play is Boeing (BA), who benefits from the cycle and also from Airbus' troubles. Other companies in this area include BE Aerospace (BEAV), which manufactures and markets cabin interior products for commercial aircraft and business jets, Northrop Grumman (NOC), an aerospace and defense company, Embraer (ERJ), maker of jet and turboprop aircrafts for civil and defense aviation markets, and Transdigm Group (TDG), a 2 Billion Market Capitalized Company that "engages in the design, production, and supply of engineered aircraft components for use in commercial and military aircraft worldwide." Indirectly, companies such as Allegheny Technology (ATI), creator of specialty metals, benefits from this cycle, as newer planes need lighter materials to save fuel.


5. Oil, Gas, and Energy

Oil, Gas and Energy are in bull market mode because demand is high, and supply is low. The US and Emerging Markets need these to continue their fast growth. And supply is limited, so aside from oil, oil services company which do offshore drilling, supply services to oil companies, companies which search for oil, companies that make and manage offshore rigs are benefitting greatly.

Companies include integrated oil companies such as Exxon Mobil (XOM) and Conoco Philips (COP), oil services companies such as Halliburton (HAL), and Schlumberger (SLB), refiners such as Valero (VLO), offshore drillers such as Global Santa Fe (GSF) and Ensco (ESV), transport vessels for offshore oil services such as Tidewater (TDW), and oil services and rig companies such as National Oilwell Varco (NOV) and Transocean (RIG).

6. Minerals

Gold, Copper, Silver, and other materials are in bull market mode. Once again, this is low supply, high demand. The US, as well as emerging and other international markets are growing! They have an insatiable appetite for these materials. Companies include Freeport-McMoran (FCX), a gold and copper company, and Jim Cramer suggests Lundin Mining (LMC) as well, as the runner up.

7. Telecom especially Emerging Market (Wireless) Telecom

Wireless use, and advanced telecom services such as mobile internet, are growing around the world. Products such as the Apple (AAPL) Iphone, and Research in Motion's (RIMM) Blackberry help drive demand, and countries around the world are increasingly using these services. In the US and in Europe and in Japan, wireless penetration is reaching levels from 70-100%. However in Emerging Markets such as Mexico, and Latin America, wireless penetration is at much lower levels, and is expected to hit 60% penetration in the region only in 2010. That means that there is great opportunity and growth in this area. As an example, Mexican (and South American) telecom play, America Movil (AMX), still has a forward PE of only 15.51, and a 5 yr estimated growth rate of 31.6%, for a PE to Growth ratio of around 0.5, very cheap!

While AT&T (T) is a play on North America Telecom, the greater growth (at a reasonable price) is in emerging markets. Companies include America Movil (AMX), for Mexico and South America, NII Holdings (NIHD) for Latin America, Vimpel Communications (VIP) for Russia, China Mobile (CHL) for China, and Vodaphone (VOD) for Europe, Middle East, Asia and Africa.

8. Mobile Convergence/Wireless Integrated Devices/Handsets

Mobile convergence, where different technologies such as voice, data, and video come together in a single handset, is continuing to grow at a rapid pace. Leaders include Apple (AAPL) with their new handset, Research in Motion's (RIMM) popular Blackberry product, and other companies like Nokia (NOK). As new services emerge, the infrastructure to provide fast, high quality video on these mobile devices will play an important role.

9. Location Based Services

Location based services currently depend on GPS, the Global Positioning System. The companies which use these technlogies are doing well in the market, and will continue to do well, as anything that moves, from cars, with automatic navigation devices, to military weapons, to people holding mobile converged devices such as advanced cellphones will have GPS. Garmin (GRMN) is a company which provides Location Based Product devices. Navteq (NVT) is a company which provides the digital maps, and its competitor is a private company called Tele-Atlas. Sirf Technlogies (SIRF) makes GPS chips. Though it has struggled in the recent past, there are signs that the stock is stabilizing. Competitor includes Broadcom, who bought out their competitor Global Locate. Trimble Navigation (TRMB) is another company providing GPS systems. They even bought the company AtRoad, which tracks fleets of vehicles. Software maker MapInfo (formerly MAPS), was recently bought out by Pitney Bowes (PBI). Indirectly, telecoms will benefit, advanced handset makers will benefit, and companies such as Google (GOOG), may be prime candidates in creating location based service applications such as local GPS search supported by location based advertising. There is great growth in this industry!

10. Computer and Video gaming

Computer and Video gaming are in the middle of a strong cycle, as three major gaming consoles are out from Sony (SNE), Microsoft (MSFT), and Nintendo (NTDOY.pk). Sony also has the portable gaming device Sony PSP, and Nintendo has the portable gaming device Nintendo DS. Demographics also support growth as Generation Y is the 2nd largest group (after the Baby Boomers), and many people in Generation Y like to play games. There are many plays in this sector from Retailers (Gamestop (GME)), console makers (Nintendo (NTDOY.pk)), game makers (Electronic Arts (ERTS), Activision (ATVI)), graphic chip makers (NVidia (NVDA)), and gaming accessories (Logitech (LOGI)). More on this sector and analysis by the numbers here.

11. Online Gaming in Emerging Markets such as China

There is great growth in online gaming, especially in China. There is a growing middle class, and increasing broadband penetration (internet cafes included). In China and Korea, online gaming has become a very popular pasttime. Two good online gaming plays in China include Shanda Interactive (SNDA), and The9 Limited (NCTY) who has the right to bring World of Warcraft to China. Shanda Interactive has a free model where people can play the games for free, but pay real money for items in the game. Article on the Growing Online Gaming Market in Emerging Markets here.

12. Internet, Search, and Internet Video

The internet, the backbone of the major Information Revolution, remains strong. People need to find relevant information from all the data, and companies like Yahoo (YHOO) and Google (GOOG) help do this. Google (GOOG), the groups bellwether company, even purchased YouTube, a popular internet video company. Baidu (BIDU) and Rediff (REDF) service both the Chinese and India markets. Brick and Mortar Retailing continues to be challenged by internet retailing spearheaded by Amazon.com (AMZN) and EBay (EBAY). Infrastructure companies, such as Akamai (AKAM), help make delivery of information better and faster.

13. International Emerging Markets

Emerging markets such as Taiwan, Korea, South Africa, China, Mexico, Brazil, India and China are in bull market mode. This trend will last more than a few years, and this would appear to be part of a much longer trend. Since many companies benefit, an investor could invest in a broad based Emerging Market Exchange Traded Fund such as ishares EEM, and Vanguard's VWO.

---

Other Sectors to Watch

Besides the sectors which are working well right now, there are other sectors worth watching. Some may start their run right now, while others may take more time to make their gains.

1. Optical Networking and Networking

More data is being placed on the internet, especially internet video. High Definition (which requires more bandwidth) will become more of a standard. Advanced services such as Internet TV (IPTV), and video demand will require much greater bandwidth. Eventually, the system will not be able to handle the demand for greater bandwidth. Next generation applications will require much greater bandwidth. Right now, even AT&T's top DSL Broadband package supports 6 Megabits per second (mbps). In Korea, broadband penetration is around 70%, and their internet speeds go up to 50 mbps, over 8 times faster than AT&T's top speed. The US is behind some countries such as Korea!

Optical Networking is a way to get much better download speeds. The best way to play this is througn Corning Glassware (GLW), who have the added benefit of servicing LCD and flat panel displays (another growth area). Ciena (CIEN) is an optical networking play. Speculative plays include $6 stock Level 3 Communications (LVLT) and $4 stock Finisar (FNSR).

I believe we are the verge of a breakout in the Optical area.

2. Obesity

Obesity is a long term problem. Two possible ways to play this trend are through Weight Watchers (WTW) and NutriSystem (NTRI). NutriSystem looks like the good growth play right now.

3. Specialty clothing

Certain companies just have a special story and product. A good example is Crocs (CROX), maker of a very popular type of footwear. Other companies include UnderArmour (UA) and Gildan Activewear (GIL).

4. Long-Term Care Facilities

Parents of Baby Boomers and eventually the Baby Boomers may need to use Long Term Care Facilities such as Manor Care (HCR), Brookdale Senior Living (BKD), and Sunrise Senior Living (SRZ). We need to watch this group for better action.

5. Healthcare Information System

Eventually, healthcare needs to have integrated software systems. The companies which provide these solutions include Cerner (CERN), Allscripts (MDRX), and Quality Systems (QSII). While this is a growth area, we may have to study the companies carefully to determine the better play.

6. Specialty and Niche Product Companies

Companies which provide a specialty or niche product have a competitive advantage. Examples might be #2 Energy Drink Maker Hansen Natural (HANS), and robotic surgery company Intuitive Surgical (ISRG).

7. Gambling Companies

There is great growth in the gambling and gambling equipment industry. Macau, in Asia, is being transformed into the Las Vegas of the East, and many companies can benefit. If internet gambling (which has taken a hit based on some laws restricting them in the US) comes back, this group will grow even more. Some companies in the gambling and gaming area include Las Vegas Sands (LVS), and MGM Mirage (MGM). Gaming equipment companies include International Gaming Technlogy (IGT), Scientific Games (SGMS), and ShuffleMaster (SHFL).

8. Leisure and Entertainment

Baby Boomers are in their peak spending years which may finally peak in 2010, until Generation Y comes of age. Also, Generation Y, as represented by Generation Y reporter of TheStreet.com Cliff Mason, appears to be more willing to spend money on leisure and entertainment. During these periods, leisure and entertainment companies should benefit.

Companies in this sector include gambling companies and gambling equipment companies (as mentioned above), hotels and resorts such as Starwood Hotels and resorts (HOT), Cruise Ship Companies such as Carnival Corp (CCL), and companies such as Vail Resorts (VAIL) and food and restaurant companies such as Darden (DRI). Powershares ETF "PEJ" covers this area, and the companies in the ETF are listed here.

9. Water

Some people say that water, and clean water, may be the next oil. An ETF which covers this area is powershares PHO, which holds companies such as Mueller Water Products (MWA) and Tetra Tech (TTEK).

10. Environmental Cleanup and Waste Management

Some companies have to cleanup our mess and all or waste including industrial waste, and radioactive waste. According to a Motley Fool article, the trends driving growth in this sector include growth in consumer spending on disposable items in growing populations. Also, there is a rise in industrial waste services as more companies utilize hazardous products in production facilities. There is a greater concern for the environment, so these companies will benefit. Companies in this area include Waste Management (WMI), Clean Harbor (CLHB), and American Ecology (ECOL).

11. Stock Exchanges

Stock Exchanges are in bull market mode. There is great consolidation in this area, and people speculate there may be only a few worldwide stock exchanges. Companies include the InterContinental Exchange (ICE), Nasdaq (NDAQ), New York Stock Exchange-Euronext (NYX), CME Group (CME), and Nymex (NMX).

12. Future Gen Y Plays: Housing, Automobiles, Weddings, Babies

Yes, housing is down right now, but we have to look many years into the future. Generation Y is a very large group, second only to the Baby Boomers. They will eventually (many years from now) be buying their first homes. They will also make other large purchases such as automobiles, and many will be getting married, and having babies. This sector trend will be good for companies in these areas, but we may have to wait many years to play these trends.


Credits

Through my research and experience, I found these bull markets. Jim Cramer mentions six wild bull markets, and those six are incorporated above (with my comments), and a long time ago, Jim Cramer also suggested looking into areas such as HealthCare Information Systems.