Today, GPS Chip Maker SIRF Technologies (SIRF) dropped over 50% in value. They reported bad earnings, and bad guidance. SIRF says there is demand for GPS chips, but pricing has gone down over the last year, putting strain on SIRF.
There is weakness in the Personal Navigation Device Market, but in the future, GPS chips in the wireless handsets are going to be a big growth area.
Despite this long term bullishness, investors should still be careful about individual cases in the GPS area, and investors still have to control their losses. SIRF and Garmin (GRMN), another company in the Global Positioning arena, have been going down big percentages in the weeks prior, and if an investor had the discipline to sell, that investor would have saved themselves from much larger losses.
Even with long term bullish trends, you still have to control losses in individual stock positions!
Showing posts with label GRMN. Show all posts
Showing posts with label GRMN. Show all posts
Tuesday, February 5, 2008
Tuesday, October 16, 2007
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:
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.
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.
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.
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.
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).
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.
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.
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.
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.
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.
K. Infrastructure
With great global growth comes a great need for Infrastructure.
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.
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.
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.
O. Consumer Staples
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.
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.
R. Industrials
S. Healthcare
One way to create a diversified portfolio is to choose stocks from different sectors that follow these criteria:
- The stock is in a good sector.
- The stock is a good stock in a good sector.
- The stock has Reasonable Valuation:
a. PEG < 2.0 (Price-Earnings to Growth Ratio).
b. Forward PE < 40 - 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 | 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.
- There is a trend having greater Bandwidth for advanced services (for example, High Definition Video on Demand).
- 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.
- 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.
- 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% |
Friday, October 12, 2007
Another Global Positioning Company Gets Bought out: NGPS
The consolidation in the Global Positioning market continues.
Recent buyouts include:
And the most recent company:
Novatel Inc. (NGPS), the Canadian high precision global navigation satellite system company (GNSS), is bought out by Swedish comgolomerate Hexagon for $390 Million.
Now, there are only three pure plays on Global Positioning publicly traded in the US:
There should be high demand for these remaining companies as Location Based Services will continue to be a large growth area over many years.
Recent buyouts include:
- Pitney Bowes (PBI) buys GPS Software Maker MapInfo (formerly: MAPS)
- GPS Company Trimble Navigation (TRMB) buys @Road.
- Semiconductor Chip company Broadcom (BRCM) buys privately held GPS chip company Global Locate
- GPS Equipment company Tom-Tom (TOM2.AS) buys privately held Digital Map company Tele-Atlas
- Wireless handset maker Nokia (NOK) buys Digital Map company Navteq (NVT)
And the most recent company:
Novatel Inc. (NGPS), the Canadian high precision global navigation satellite system company (GNSS), is bought out by Swedish comgolomerate Hexagon for $390 Million.
Now, there are only three pure plays on Global Positioning publicly traded in the US:
- Garmin (GRMN): GPS Equipment
- Sirf Technologies (SIRF): Makes Global Positioning Semiconductors
- Trimble Navigation (TRMB): GPS Equipment
There should be high demand for these remaining companies as Location Based Services will continue to be a large growth area over many years.
Monday, October 1, 2007
Time to Take Profits in Garmin (GRMN) and Overweight Sirf Technologies (SIRF)?
The time to take some profits and underweight GPS device maker Garmin (GRMN) and overweight Global Positioning Chip maker Sirf Technologies (SIRF) might be now.
When cell phone maker Nokia (NOK) recently announced that they were buying Digital Map maker Navteq (NVT) for $8.1 Billion, Garmin's stock price went down around 10%.
Garmin had a close relationship with Navteq, and is a big customer of Navteq. Since the Digital Map space was a duopoly (Navteq (NVT), and privately held Tele-Atlas which was bought by European GPS Device Maker Tom-Tom (TOM2.AS)), Garmin (GRMN) might be squeezed out.
At the moment, Garmin (GRMN) is still reasonably priced with a forward PE of 27, five year analyst growth estimate of 20%, for a reasonable Price Earnings to Growth Ratio of 1.35 (a PEG over 2.0 is overvalued). In addition the automotive GPS market is growing very rapidly, and Garmin is ready to take advantage of this with around a 50% market share. There is also very low navigation device penetration of around 10%, so a lot of the growth is still ahead for Garmin (GRMN).
Garmin (GRMN) does seem to belong in a growth portfolio. But at the same time, the Nokia and Navteq deal signals a change in how the industry is positioning itself for the future.
Why would Nokia be interested in buying Navteq, a Digital map Maker? Global Positioning Services and Applications are a big growth area, and Nokia is aiming to position itself aggressively. GPS applications on cell phones and other mobile converged devices and anything that moves are the next big thing.
One big beneficiary of this is GPS chip device maker Sirf Technologies (SIRF). The company is the dominant GPS chip company and holds a 90% market share, though some say competition can reduce the market share to 70%. Still, a 70% market share in a very large growth business is still a very good market share.
For several months, SIRF's stock price had not been performing well, and has lagged other stocks in the location based service area such as Garmin (GRMN) and Navteq (NVT). Aside from earnings misses, they previously mentioned that there was a slow ramp-up with one wireless customer. Later news seemed to reverse this, as Motorola, the #2 cell phone maker, announced it was going to be using Sirf's GPS chips.
With many growth stocks with forward PE ratios above 30, Sirf Technologies (SIRF) has a PE of only 19, a five year analyst growth estimate of 26.6%, for a very cheap PEG ratio of 0.71 (PEG under 1.0 is very cheap).
There is also great consolidation in the industry (Tom-Tom Buys Tele-Atlas, Broadcom (BRCM) buys Global Locate, Nokia (NOK) buys Navteq (NVT), Trimble (TRMB) buys AtRoad, Pitney Bowes buys Mapinfo (MAPS)), and the demand for pure plays on Location Based Services will be at a premium. With a market cap of less than $1 Billion, who knows if Sirf Technologies (SIRF) will eventually be bought out.
Also, those mutual funds holding Navteq (NVT) and already owning Nokia (NOK), might have to take profits in Navteq and reallocate their capital elsewhere, so they don't overweight Nokia (NOK) too much. Are the mutual fund managers thinking of reallocating the profits in Sirf Technologies (SIRF) as well?
So yes, Garmin (GRMN) may still belong in a Growth portfolio, but maybe now is the time to take some profits and start overweighting companies such as Sirf (SIRF) Technologies.
When cell phone maker Nokia (NOK) recently announced that they were buying Digital Map maker Navteq (NVT) for $8.1 Billion, Garmin's stock price went down around 10%.
Garmin had a close relationship with Navteq, and is a big customer of Navteq. Since the Digital Map space was a duopoly (Navteq (NVT), and privately held Tele-Atlas which was bought by European GPS Device Maker Tom-Tom (TOM2.AS)), Garmin (GRMN) might be squeezed out.
At the moment, Garmin (GRMN) is still reasonably priced with a forward PE of 27, five year analyst growth estimate of 20%, for a reasonable Price Earnings to Growth Ratio of 1.35 (a PEG over 2.0 is overvalued). In addition the automotive GPS market is growing very rapidly, and Garmin is ready to take advantage of this with around a 50% market share. There is also very low navigation device penetration of around 10%, so a lot of the growth is still ahead for Garmin (GRMN).
Garmin (GRMN) does seem to belong in a growth portfolio. But at the same time, the Nokia and Navteq deal signals a change in how the industry is positioning itself for the future.
Why would Nokia be interested in buying Navteq, a Digital map Maker? Global Positioning Services and Applications are a big growth area, and Nokia is aiming to position itself aggressively. GPS applications on cell phones and other mobile converged devices and anything that moves are the next big thing.
One big beneficiary of this is GPS chip device maker Sirf Technologies (SIRF). The company is the dominant GPS chip company and holds a 90% market share, though some say competition can reduce the market share to 70%. Still, a 70% market share in a very large growth business is still a very good market share.
For several months, SIRF's stock price had not been performing well, and has lagged other stocks in the location based service area such as Garmin (GRMN) and Navteq (NVT). Aside from earnings misses, they previously mentioned that there was a slow ramp-up with one wireless customer. Later news seemed to reverse this, as Motorola, the #2 cell phone maker, announced it was going to be using Sirf's GPS chips.
With many growth stocks with forward PE ratios above 30, Sirf Technologies (SIRF) has a PE of only 19, a five year analyst growth estimate of 26.6%, for a very cheap PEG ratio of 0.71 (PEG under 1.0 is very cheap).
There is also great consolidation in the industry (Tom-Tom Buys Tele-Atlas, Broadcom (BRCM) buys Global Locate, Nokia (NOK) buys Navteq (NVT), Trimble (TRMB) buys AtRoad, Pitney Bowes buys Mapinfo (MAPS)), and the demand for pure plays on Location Based Services will be at a premium. With a market cap of less than $1 Billion, who knows if Sirf Technologies (SIRF) will eventually be bought out.
Also, those mutual funds holding Navteq (NVT) and already owning Nokia (NOK), might have to take profits in Navteq and reallocate their capital elsewhere, so they don't overweight Nokia (NOK) too much. Are the mutual fund managers thinking of reallocating the profits in Sirf Technologies (SIRF) as well?
So yes, Garmin (GRMN) may still belong in a Growth portfolio, but maybe now is the time to take some profits and start overweighting companies such as Sirf (SIRF) Technologies.
Monday, September 24, 2007
52 Week High Stock Scan (Sept 24, 2007)
Today, Monday, September 24, 2007, there are 98 Nasdaq stocks and 107 NYSE (New York Stock Exchange) Stocks hitting New 52 Week Highs at one point during the day.
Some selected stocks and sectors:
1. Technology
Technology is a very strong sector:
2. Telecom Providers and Wireless Providers
Telecom Providers especially Wireless Providers are also in Bull Market Mode.
3. Aerospace
Aerospace is also another current bull market.
4. Biotech
5. Retail, Consumer Discretionary
6. Computer and Video Gaming
7. Oil, Oil Services, Energy
Oil continues to be strong, including Chinese and emerging market oil.
8. Beverages and Consumer Staples
9. Industrial and Shipping
10. Healthcare
11. Macau Gaming
There's a bull market in the up and coming Macau (China) market, to rival Las Vegas.
12. Infrastructure
The Global Growth Story needs Infrastructure.
13. Minerals and Materials
The Global Growth story needs minerals and materials.
14. Casual Dining
15. Defense
Defense is another strong area.
16. Agriculture
Some selected stocks and sectors:
1. Technology
Technology is a very strong sector:
- AAPL (Apple): Forward PE: 33.55
- AMZN (Amazon): Forward PE: 60.12
- GOOG (Google): Forward PE: 29.08
- GRMN (Garmin): Global Positioning Product Company. Forward PE: 29.12
- BIDU (Bidu): The Google of China. Forward PE: 82.67
- EMC (EMC): Storage Company and Information Infrastructure. Forward PE: 25.01
- ARBA (Ariba): Software and Services: Forward PE: 24.11
- BCSI (Blue Coat Systems): Smallcap Security Software Company. Forward PE: 32.52
- GIGM (Giga Media): Taiwan Internet and Gaming Company. Forward PE: 18.93
- OIIM (O2Micro International): Fabless Semiconductor Company involved in power management, and security applications in many different markets. Forward PE: 18.10
- OVTI (OmniVision): Produces semiconductor image sensor devices such as CameraChip image sensors. Forward PE: 14.53
- SPIL (Siliconware Precision Industries): Taiwanese Semiconductor Company. Forward PE: 12.67
- ALVR (Alvarion): Israel based company produces wireless broadband acecss systems.
2. Telecom Providers and Wireless Providers
Telecom Providers especially Wireless Providers are also in Bull Market Mode.
- ROS (Rostelcom): Russian telecom company.
- CHL (China Mobile): Chinese Telecom Company.
- T (AT&T): US Based Telecom Provider. Forward PE 13.50, Yield: 3.40%
- VOD (Vodaphone): European Based Telecom Company. Forward PE 13.47, Yield: 5.00%
3. Aerospace
Aerospace is also another current bull market.
- TDG (Transdigm Group): $2B company supplies equipment for the aerospace industry. Forward PE: 17.69. 5 year estimate: 28.5%. PEG is a very good 0.62 (less than 1 is very cheap)
4. Biotech
5. Retail, Consumer Discretionary
- CROX (Crocs): Specialty footwear maker: Forward PE: 24.60
- FLWS (1-800 Flowers): Flower Retail Company. Forward PE: 25.80
- HLF (Herbalife): Nutritional Supplements, weight management, personal care products. Forward PE: 14.85
6. Computer and Video Gaming
- GME (Gamestop): Computer and Video Gaming Retailer. Forward PE: 28.66
- SNDA (Shanda Interactive): Chinese Online Gaming company. Forward PE: 19.89
7. Oil, Oil Services, Energy
Oil continues to be strong, including Chinese and emerging market oil.
- CEO (Cnooc): Chinese Oil Company
- CVX (Chevron): US Oil Company
- HAL (Halliburton): Oil Services Company
- NOV (National Oilwell Varco): Heavily involved in constructing and selling products for the oil and gas industry.
- PBR (Petrobras): Oil Company in Brazil
- PTR (PetroChina): Chinese Oil and Natural Gas Company
- SHI (Shanghai Petrochem): Process crude oil into synthetic fibers, resins, plastics, intermediate petrochemical products and petroleum products in China.
8. Beverages and Consumer Staples
- HANS (Hansen): Hansen, specialty energy drink maker. Forward PE: 25.35
- KO (Coca Cola): Drink company. Forward PE: 19.42. Yield: 2.40%
- PG (Procter & Gamble): Premiere Consumer Staple Company. Forward PE: 17.85
9. Industrial and Shipping
- DRYS (Dry Ships): Operates drybulk carriers including drybulk commodoties such as coal, iron ore, and grains. Forward PE: 8.15
- MMM (3M): Forward PE: 16.72
10. Healthcare
- SUNH (Sun Healthcare): Specialty healthcare for Seniors (Baby Boomers are aging!) Forward PE: 20.62.
11. Macau Gaming
There's a bull market in the up and coming Macau (China) market, to rival Las Vegas.
12. Infrastructure
The Global Growth Story needs Infrastructure.
13. Minerals and Materials
The Global Growth story needs minerals and materials.
- BHP (BHP Billiton)
- FCX (Freeport McMoran): Gold and Copper
- RTP (Rio Tinto)
- NEM (Newmont Mining)
- PKX (Posco): Korean Steel Company
14. Casual Dining
- CMG (Chipotle Mexican Grill): Forward PE: 45.98
- THI (Tim Hortons): Restaurants and Donus. Forward PE: 21.65
15. Defense
Defense is another strong area.
- RTN (Raytheon): Forward PE: 16.81
16. Agriculture
- POT (Potash): Fertilizers and other products. Forward PE: 25.36
Sunday, September 16, 2007
GPS Enabled Cell Phones: Find Friends/Businesses on Map, Emergency 911, and opportunity for SIRF, GOOG and others
GPS Chips inside Cell Phones: New Applications and How to Profit.
1. Find Friends on Map
Want to find friends and family on the map? It's easy.
There is a well funded startup called Loopt which does just that. Using selected cell phones with GPS (Global Positioning System) capability, mostly from Boost Mobile, Sprint, and Nextel, Loopt can let you find friends and family on a map (with their approval), for a subscription fee.
This Mobile Networking Application is just the beginning of location based services which take advantage of GPS chips inside a cell phone. This service allows users to be able to interact with other users based on geographical location.
2. Let Emergency 911 Responders Find People
Another important mobile application of the GPS chip in a cell phone is Emergency 911 service. With GPS chips inside cell phones, now, Emergency 911 Responders can easily find the location of the person who needs help. This will save many lives!
Aside from companies who setup the E911 system, companies which provide GPS chips to cell phones, such as Sirf Technology (SIRF), who makes the GPS chips, will benefit, as well as companies such as Navteq (NVT) who provide digital maps, which are especially useful to GPS location based service applications.
3. Connect Business to Mobile Users
Another important application of GPS chips on cell phones involves connecting users to businesses and advertisers. With the original Navigation Device (non-cell phone) from companies such as Garmin (GRMN) or Tom-Tom (TOM2.AS), one could use the device to search for a local business such as a restaurant, hotel, or gas station, even if that business is a few miles away from a major freeway. Businesses that have their information embedded in these Navigation Devices will see increased business and revenue. Any company that profits from having businesses pay to be included in the Navigation Device Search function also would benefit.
Now if this Portable Navigation Device would be extended to GPS enabled cell phones, this market would explode. Now, if a GPS enabled cell phone could somehow connect to a central information center to help connect mobile users to particular business, that would allow companies who provide local business information to mobile users to profit.
A company such as Google (GOOG) would profit. They already have Google Local Search, Google Maps, Internet Search, and mapping services. If a mobile user could interact with Google, Google would read the mobile cell phones GPS location, and connect the mobile user with businesses near that area.
Profit from GPS Chips on a Cell Phone
The GPS Chip on a Cell Phone is still in its infancy. Sirf Technologies (SIRF), previously cited some problems as a wireless customer was slow to ramp up to their GPS chip in a cell phone. Sirf (SIRF) has recently bounced back as Motorola, the #2 cell phone maker, will be using Sirf's GPS chips in their cell phones.
Sirf currently has a 90% share in the GPS chip market for Personal Navigation Devices. However, Bank of America analyst Sumit Dhanda says that Sirf's market share could go down to 70% share thanks to competition from STMicroelectronics (STM), Taiwan's MediaTek, and Broadcom (BRCM), which recently bought private company Global Locate for less than $200 Million.
Analysts have also said that GPS customers such as Garmin (GRMN) are looking for "dual-source key inputs."
While there is pressure on Sirf's market share, Sirf is still the dominant leader, and will continue to produce the best chips.
Current Valuation is still very reasonable. Sirf (SIRF) has a forward PE of 16.37, five year estimated growth of 26.62%, for a very cheap Price Earnings to Growth (PEG) ratio of 0.61, which is very cheap (PEG less than 1 is very cheap).
Compare this with Broadcom (BRCM) which has a forward PE of 25.36, 5 year growth rate of 22.37%, for a PEG of 1.13.
The company has virtually no debt, is cash rich ($4 cash per share for a $20 stock), and belongs to a very rapidly growing segment.
Sirf (SIRF) has shown recent momentum, and still remains a long term buy as its performance has lagged other Location Based Service companies such as Garmin (GRMN) and Navteq (NVT).
Location Based Service Companies
1. Find Friends on Map
Want to find friends and family on the map? It's easy.
There is a well funded startup called Loopt which does just that. Using selected cell phones with GPS (Global Positioning System) capability, mostly from Boost Mobile, Sprint, and Nextel, Loopt can let you find friends and family on a map (with their approval), for a subscription fee.
This Mobile Networking Application is just the beginning of location based services which take advantage of GPS chips inside a cell phone. This service allows users to be able to interact with other users based on geographical location.
2. Let Emergency 911 Responders Find People
Another important mobile application of the GPS chip in a cell phone is Emergency 911 service. With GPS chips inside cell phones, now, Emergency 911 Responders can easily find the location of the person who needs help. This will save many lives!
Aside from companies who setup the E911 system, companies which provide GPS chips to cell phones, such as Sirf Technology (SIRF), who makes the GPS chips, will benefit, as well as companies such as Navteq (NVT) who provide digital maps, which are especially useful to GPS location based service applications.
3. Connect Business to Mobile Users
Another important application of GPS chips on cell phones involves connecting users to businesses and advertisers. With the original Navigation Device (non-cell phone) from companies such as Garmin (GRMN) or Tom-Tom (TOM2.AS), one could use the device to search for a local business such as a restaurant, hotel, or gas station, even if that business is a few miles away from a major freeway. Businesses that have their information embedded in these Navigation Devices will see increased business and revenue. Any company that profits from having businesses pay to be included in the Navigation Device Search function also would benefit.
Now if this Portable Navigation Device would be extended to GPS enabled cell phones, this market would explode. Now, if a GPS enabled cell phone could somehow connect to a central information center to help connect mobile users to particular business, that would allow companies who provide local business information to mobile users to profit.
A company such as Google (GOOG) would profit. They already have Google Local Search, Google Maps, Internet Search, and mapping services. If a mobile user could interact with Google, Google would read the mobile cell phones GPS location, and connect the mobile user with businesses near that area.
Profit from GPS Chips on a Cell Phone
The GPS Chip on a Cell Phone is still in its infancy. Sirf Technologies (SIRF), previously cited some problems as a wireless customer was slow to ramp up to their GPS chip in a cell phone. Sirf (SIRF) has recently bounced back as Motorola, the #2 cell phone maker, will be using Sirf's GPS chips in their cell phones.
Sirf currently has a 90% share in the GPS chip market for Personal Navigation Devices. However, Bank of America analyst Sumit Dhanda says that Sirf's market share could go down to 70% share thanks to competition from STMicroelectronics (STM), Taiwan's MediaTek, and Broadcom (BRCM), which recently bought private company Global Locate for less than $200 Million.
Analysts have also said that GPS customers such as Garmin (GRMN) are looking for "dual-source key inputs."
While there is pressure on Sirf's market share, Sirf is still the dominant leader, and will continue to produce the best chips.
Current Valuation is still very reasonable. Sirf (SIRF) has a forward PE of 16.37, five year estimated growth of 26.62%, for a very cheap Price Earnings to Growth (PEG) ratio of 0.61, which is very cheap (PEG less than 1 is very cheap).
Compare this with Broadcom (BRCM) which has a forward PE of 25.36, 5 year growth rate of 22.37%, for a PEG of 1.13.
The company has virtually no debt, is cash rich ($4 cash per share for a $20 stock), and belongs to a very rapidly growing segment.
Sirf (SIRF) has shown recent momentum, and still remains a long term buy as its performance has lagged other Location Based Service companies such as Garmin (GRMN) and Navteq (NVT).
Location Based Service Companies
Tuesday, August 21, 2007
Strategic Portfolio Re-Allocation as Fed Cuts Rates (Aug. 21, 2007)
Fed expected to Cut
We've been experiencing a painful market correction centered around subprime problems, mortgages, and a US liquidity crunch. Because of all this, the Fed is now expected to cut the Fed's Funds Rate from 0.50% to 0.75% by First Quarter of 2008 from various sources.
Sector Rotation Model based on Fed Cutting Rates
When the Fed acts to raise or cut rates, we should act accordingly. These are important turning points. According to Standard and Poor's Sam Stovall's Sector Rotation Model, and Jim Cramer's Sector Rotation Model (Page 115 of his Jim Cramer's book: "Real Money: Sane Investing in an Insane World
") as the Fed tightens or cuts rates, it is profitable to get out of certain sectors and into others.
In Jim Cramer's Sector Rotation Chart, we should be doing the following (Interpretation of the chart can differ depending on whether you look at GDP growth or look at the actions of the Fed):
1. Sell "smokestack" stocks such as Caterpillar (CAT), or 3M (MMM).
2. Sell metals and mineral stocks such as Alcoa (AA) or Newmont Mining (NEM)
3. Buy high multiple tech stocks such as Google (GOOG)
4. Buy Banks and Financials such as JP Morgan (JPM) or Wells Fargo (WFC)
5. Eventually, as the economy slows, buy Retailers.
However, there is another story that may conflict with the advice above: The Global Growth Story.
The Global Growth Story
Because emerging markets like China are growing fast, they need materials such as Copper, and industrial equipment like those made by Caterpillar (CAT). This goes against some of the advice based on the Sector Rotation model above.
I do believe the Global Growth Story is a multi-year/multi-decade long cycle.
Portfolio Strategic Repositioning
So what can we do to strategically position ourselves for the intermediate future?
I have several different portfolios with different styles (most are well diversified portfolios). However, in one of the portfolios, I apply a more concentrated method, and this is what I've been doing during the last month with this portfolio:
1. Sell Oil and Oil Services
Oil and Oil Services have not been doing well recently as crude prices have been going down and may settle in the $60 to $65 per barrel range. If we are to see an economic slowdown in the US, demand could weaken. Yes, over the long term, the global growth story needs oil. So while my concentrated portfolio has no oil, my long term diversified portfolios have sufficient exposure to this sector.
2. Sell Coal
Coal, as embodied by the stock Peabody Energy (BTU) has been going down. Peabody Energy reported reduced guidance because of delays in ramping production at recently acquired mines.
3. Sell Minerals
I took profits in Freeport McMoran (FCX) whose stock price had been dropping like a rock. Also, the Sector Rotation model above suggests that we do sell mineral stocks. However, I still believe in the Global Growth Story. I am looking for ways to get back into Freeport McMoran (FCX), a Gold and Copper company.
4. Sell Selected Financial Companies
Goldman Sachs (GS) is a quality company, but it had been dropping hard, and during the time when it was uncertain that the Fed was going to do anything, I had to sell Goldman Sachs in order to stop the freefall and to raise cash to purchase other securities. Some of Goldman Sach's Hedge Funds suffered big losses.
5. Reduce Emerging Market Wireless Telecom (Overweight to Neutral)
I still believe in the strength of Emerging Market Wireless Telecom especially companies such as Mexico's America Movil (AMX). I had overweighted America Movil, but I reduced it to a neutral position so I can invest in other names.
6. Hold Computer and Video Gaming Company
I am continuing to hold Gamestop (GME), a retailer of computer and video game consoles, equipment and software. Gamestop has been doing well, and is part of the great Computer and Video Game Cycle. This cycle will remain strong, and Jim Cramer even mentions this very positively in a discussion with TheStreet.com's Michael Comeau.
7. Hold Infrastructure Company
Countries around the world needs infrastructure as they grow, and I continue to hold ABB Limited (ABB), a Swiss Infrastructure company providing power and automation technologies to utility and industry customers worldwide. Infrastructure is still needed around the world.
8. Overweight High Growth Tech:
Currently continuing to hold Google (GOOG), Apple (AAPL), and added Garmin (GRMN) and all have been doing well recently. These are the key high tech growth stories that can be owned for many years. They are the leaders, and innovators, and their forward PE ratio are all under 30 for their great growth. The sector rotation model also suggests this, and these stocks have held up well during the downturn and will do very well in the future.
9. Add Selected Financials with No Subprime Risk
After discovering that a financial company, Hudson City Bank (HCBK) had been holding up well during the most recent market correction where financial companies stock prices were being punished, I decided to look deeper. James Altucher, of TheStreet.com pointed out a link to the Bergen Reporter. The article, written by Dunstan Prial, says that "Officials at Hudson City Savings Bank, Columbia Bank and Valley National Bank said fallout from the subprime mortgage crisis that has roiled markets in recent weeks has so far been minimal. The primary reason, said Hudson City Chief Executive Officer Ron Hermance, is smaller regional banks tend to hold on to the mortgages they generate instead of reselling them into so-called secondary markets, where they are resold as investment products." CNN even reports that Hudson City Bancorp is the Anti-Countrywide. Jim Cramer also is bullish on regional banks in this part of the cycle.
Hudson City Bank is also a fast growing bank with conservative lending practices. In a falling rate environment with many financials suffering from a liquidity crunch and subprime problems, Hudson City Bank (HCBK) stands to benefit.
10. Hold and Add to Cash Rich Companies with Great Investors
Leucadia (LUK) is a cash rich company run by two Guru investors, Ian Cumming and Joseph Steinberg. American Real Estate Partners (ACP) is a very cash rich Real Estate company that recently includes veteran activist investor Carl Icahn. In a cash strapped environment, whoever has cash holds a very valuable commodity. And if the allocator of Capital is a talented investor such as Ian Cumming, Joseph Steinberg, and Carl Icahn, who like to buy undervalued and distressed securities, then the return on investment is even better.
I continue to accumulate Leucadia (LUK) and have added a position in ACP (American Real Estate Partners). Both have held up very well during the market downturn and both will do well in this environment.
11. Hold Aerospace Company
The Aerospace Cycle is still strong. Boeing (BA) would be an obvious play, but I continue to hold Transdigm Group (TDG). Transdigm Group is a $1.8 Billion company, with a forward PE of 15.55, a five year estimated growth rate of 28.5% for a very low Price Earnings to Growth (PEG) ratio of 0.55, very cheap! (less than 1 is very cheap).
12. Hold Defense Play
The defense bull market is still there, and is levered more to government spending than consumer spending. Obvious names include Raytheon (RTN) or Lockheed Martin (LMT), but I prefer investing in Harris (HRS).
Harris (HRS) is a $7.7 Billion company that provides special equipment to the government and the military. They operate four segments, Government Communications Systems, RF Communications, Microwave Communications and Broadcast Communications. It has a forward PE of 15.11 and a five year estimated growth rate of 27% for a very low PEG of 0.56.
13. Hold Emerging Market Beverage Play
I continue to hold Wimm Bill Dann (WBD), a high growth diary and juice producer in Russia. This play should not have a large correlation with the US Financial situation and is more levered to the local Russian economy. TheStreet.com Ratings often lists Wimm Bill Dann as one of its five top growing stocks.
We've been experiencing a painful market correction centered around subprime problems, mortgages, and a US liquidity crunch. Because of all this, the Fed is now expected to cut the Fed's Funds Rate from 0.50% to 0.75% by First Quarter of 2008 from various sources.
Sector Rotation Model based on Fed Cutting Rates
When the Fed acts to raise or cut rates, we should act accordingly. These are important turning points. According to Standard and Poor's Sam Stovall's Sector Rotation Model, and Jim Cramer's Sector Rotation Model (Page 115 of his Jim Cramer's book: "Real Money: Sane Investing in an Insane World
") as the Fed tightens or cuts rates, it is profitable to get out of certain sectors and into others.In Jim Cramer's Sector Rotation Chart, we should be doing the following (Interpretation of the chart can differ depending on whether you look at GDP growth or look at the actions of the Fed):
1. Sell "smokestack" stocks such as Caterpillar (CAT), or 3M (MMM).
2. Sell metals and mineral stocks such as Alcoa (AA) or Newmont Mining (NEM)
3. Buy high multiple tech stocks such as Google (GOOG)
4. Buy Banks and Financials such as JP Morgan (JPM) or Wells Fargo (WFC)
5. Eventually, as the economy slows, buy Retailers.
However, there is another story that may conflict with the advice above: The Global Growth Story.
The Global Growth Story
Because emerging markets like China are growing fast, they need materials such as Copper, and industrial equipment like those made by Caterpillar (CAT). This goes against some of the advice based on the Sector Rotation model above.
I do believe the Global Growth Story is a multi-year/multi-decade long cycle.
Portfolio Strategic Repositioning
So what can we do to strategically position ourselves for the intermediate future?
I have several different portfolios with different styles (most are well diversified portfolios). However, in one of the portfolios, I apply a more concentrated method, and this is what I've been doing during the last month with this portfolio:
1. Sell Oil and Oil Services
Oil and Oil Services have not been doing well recently as crude prices have been going down and may settle in the $60 to $65 per barrel range. If we are to see an economic slowdown in the US, demand could weaken. Yes, over the long term, the global growth story needs oil. So while my concentrated portfolio has no oil, my long term diversified portfolios have sufficient exposure to this sector.
2. Sell Coal
Coal, as embodied by the stock Peabody Energy (BTU) has been going down. Peabody Energy reported reduced guidance because of delays in ramping production at recently acquired mines.
3. Sell Minerals
I took profits in Freeport McMoran (FCX) whose stock price had been dropping like a rock. Also, the Sector Rotation model above suggests that we do sell mineral stocks. However, I still believe in the Global Growth Story. I am looking for ways to get back into Freeport McMoran (FCX), a Gold and Copper company.
4. Sell Selected Financial Companies
Goldman Sachs (GS) is a quality company, but it had been dropping hard, and during the time when it was uncertain that the Fed was going to do anything, I had to sell Goldman Sachs in order to stop the freefall and to raise cash to purchase other securities. Some of Goldman Sach's Hedge Funds suffered big losses.
5. Reduce Emerging Market Wireless Telecom (Overweight to Neutral)
I still believe in the strength of Emerging Market Wireless Telecom especially companies such as Mexico's America Movil (AMX). I had overweighted America Movil, but I reduced it to a neutral position so I can invest in other names.
6. Hold Computer and Video Gaming Company
I am continuing to hold Gamestop (GME), a retailer of computer and video game consoles, equipment and software. Gamestop has been doing well, and is part of the great Computer and Video Game Cycle. This cycle will remain strong, and Jim Cramer even mentions this very positively in a discussion with TheStreet.com's Michael Comeau.
7. Hold Infrastructure Company
Countries around the world needs infrastructure as they grow, and I continue to hold ABB Limited (ABB), a Swiss Infrastructure company providing power and automation technologies to utility and industry customers worldwide. Infrastructure is still needed around the world.
8. Overweight High Growth Tech:
Currently continuing to hold Google (GOOG), Apple (AAPL), and added Garmin (GRMN) and all have been doing well recently. These are the key high tech growth stories that can be owned for many years. They are the leaders, and innovators, and their forward PE ratio are all under 30 for their great growth. The sector rotation model also suggests this, and these stocks have held up well during the downturn and will do very well in the future.
9. Add Selected Financials with No Subprime Risk
After discovering that a financial company, Hudson City Bank (HCBK) had been holding up well during the most recent market correction where financial companies stock prices were being punished, I decided to look deeper. James Altucher, of TheStreet.com pointed out a link to the Bergen Reporter. The article, written by Dunstan Prial, says that "Officials at Hudson City Savings Bank, Columbia Bank and Valley National Bank said fallout from the subprime mortgage crisis that has roiled markets in recent weeks has so far been minimal. The primary reason, said Hudson City Chief Executive Officer Ron Hermance, is smaller regional banks tend to hold on to the mortgages they generate instead of reselling them into so-called secondary markets, where they are resold as investment products." CNN even reports that Hudson City Bancorp is the Anti-Countrywide. Jim Cramer also is bullish on regional banks in this part of the cycle.
Hudson City Bank is also a fast growing bank with conservative lending practices. In a falling rate environment with many financials suffering from a liquidity crunch and subprime problems, Hudson City Bank (HCBK) stands to benefit.
10. Hold and Add to Cash Rich Companies with Great Investors
Leucadia (LUK) is a cash rich company run by two Guru investors, Ian Cumming and Joseph Steinberg. American Real Estate Partners (ACP) is a very cash rich Real Estate company that recently includes veteran activist investor Carl Icahn. In a cash strapped environment, whoever has cash holds a very valuable commodity. And if the allocator of Capital is a talented investor such as Ian Cumming, Joseph Steinberg, and Carl Icahn, who like to buy undervalued and distressed securities, then the return on investment is even better.
I continue to accumulate Leucadia (LUK) and have added a position in ACP (American Real Estate Partners). Both have held up very well during the market downturn and both will do well in this environment.
11. Hold Aerospace Company
The Aerospace Cycle is still strong. Boeing (BA) would be an obvious play, but I continue to hold Transdigm Group (TDG). Transdigm Group is a $1.8 Billion company, with a forward PE of 15.55, a five year estimated growth rate of 28.5% for a very low Price Earnings to Growth (PEG) ratio of 0.55, very cheap! (less than 1 is very cheap).
12. Hold Defense Play
The defense bull market is still there, and is levered more to government spending than consumer spending. Obvious names include Raytheon (RTN) or Lockheed Martin (LMT), but I prefer investing in Harris (HRS).
Harris (HRS) is a $7.7 Billion company that provides special equipment to the government and the military. They operate four segments, Government Communications Systems, RF Communications, Microwave Communications and Broadcast Communications. It has a forward PE of 15.11 and a five year estimated growth rate of 27% for a very low PEG of 0.56.
13. Hold Emerging Market Beverage Play
I continue to hold Wimm Bill Dann (WBD), a high growth diary and juice producer in Russia. This play should not have a large correlation with the US Financial situation and is more levered to the local Russian economy. TheStreet.com Ratings often lists Wimm Bill Dann as one of its five top growing stocks.
Wednesday, August 15, 2007
Stocks Above 50 Day Moving Average after Drop Today (August 15, 2007)
The Stock market has been experiencing a correction, and the S&P 500 Index ($SPX) only has 7.6% of its stocks above the 50 day moving average. This is very low!
What are these stocks holding up?
I used Yahoo Finance and selected the larger capitalization stocks above the 50 day moving average and above a $4 Billion market capitalization:
I'm not surprised seeing consumer staples companies such as Procter and Gamble (PG) and Kellogg (K). I'm not surprised seeing healthcare stocks such as Celgene (CELG).
As many commentators have pointed out, technology can be good. Ebay (EBAY) is on the list, and Location Based Service stocks such as Garmin (GRMN), Navteq (NVT), and Trimble (TRMB) are good. I'm surprised that Broadcom (BRCM) is on the list.
I also noticed several resorts such as WYNN and Las Vegas Sands (LVS), most likely because of Macau presence and eased Macau rules, and that even in slowdowns, people can still gamble.
Hotels such as Hilton Hotels (HLT) and Intercontinental Hotel (IHG) are also on the list.
I'm surprised by Hudson City Bancorp (HCBK), a Financial. How is this surviving?
I'm also surprised by American Real Estate (ACP). How is this surviving in this market?
What are these stocks holding up?
I used Yahoo Finance and selected the larger capitalization stocks above the 50 day moving average and above a $4 Billion market capitalization:
- Procter and Gamble (PG)
- Cisco (CSCO)
- Pepsi (PEP)
- Ebay (EBAY)
- Alcan (AL)
- Las Vegas Sands (LVS)
- Kimberly Clark (KMB)
- Southern Co (SO)
- FPL Group (FPL)
- Celgene (CELG)
- Kellogg (K)
- Garmin (GRMN)
- Broadcom (BRCM)
- Macronix Intl (MXIC)
- Hilton Hotels (HLT)
- LG Philips (LPL)
- Biogen Idec (BIIB)
- Paychex (PAYX)
- Wrigley (WWY)
- Juniper Networks (JNPR)
- Wynn Resorts (WYNN)
- Lyondell Chemical (LYO)
- Nidec (NJ)
- Leucadia (LUK)
- Intuitive Surgical (ISRG)
- Intercontinental Hotel (IHG)
- Hudson City Bancorp (HCBK)
- American Real Estate (ACP)
- Amylin Pharma (AMLN)
- Waters Corp (WAT)
- Tim Hortons (THI)
- Dade Behring (DADE)
- Whole Foods Market (WFMI)
- Barr Pharma (BRL)
- Iron Mountain (IRM)
- Navteq (NVT)
- Dow Jones (DJ)
- Vertex Pharma (VRTX)
- Covance (CVD)
- Trimble Navigation (TRMB)
- Intersil Corp (ISIL)
- LDK Solar (LDK)
- Weight Watchers (WTW)
- Stericycle (SRCL)
- Hansen Natural (HANS)
- China South Air (ZNH)
- Checkfree Corp (CKFR)
- Chaparral Steel (CHAP)
I'm not surprised seeing consumer staples companies such as Procter and Gamble (PG) and Kellogg (K). I'm not surprised seeing healthcare stocks such as Celgene (CELG).
As many commentators have pointed out, technology can be good. Ebay (EBAY) is on the list, and Location Based Service stocks such as Garmin (GRMN), Navteq (NVT), and Trimble (TRMB) are good. I'm surprised that Broadcom (BRCM) is on the list.
I also noticed several resorts such as WYNN and Las Vegas Sands (LVS), most likely because of Macau presence and eased Macau rules, and that even in slowdowns, people can still gamble.
Hotels such as Hilton Hotels (HLT) and Intercontinental Hotel (IHG) are also on the list.
I'm surprised by Hudson City Bancorp (HCBK), a Financial. How is this surviving?
I'm also surprised by American Real Estate (ACP). How is this surviving in this market?
Saturday, July 14, 2007
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.
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.
Wednesday, June 6, 2007
Next Generation Apple iPhone will have GPS chips
According to AppleTech TV news, the next generation of Apple iPhone may have GPS chips.
This makes sense as Location Based Services are going to increasingly integrated into anything that moves from cars, to cell phones, to cameras.
SIRF, the Leading maker of GPS Chips looks to benefit from this trend and it is very cheap here. Using information from Yahoo Finance:
Price: 22.98
Forward PE: 17.28 (yesterday, it was 16.39)
5 Year Estimated Growth: 30%
PE/G: .57
A PEG ratio of .57 (less than 1 is dirt cheap) for great growth is a bargain. GPS chips will be everywhere, and SIRF is a leader in this area. Global Locate, a private company, is a competitor, but I see SIRF remaining dominant in this area.
When you compare other companies in the location based service area by looking at their forward PE:
Garmin (GRMN): 19.98
Navteq (NVT): 27.60
SIRF looks cheap here for its growth.
Lenny Dykstra of TheStreet.com also had some good things to write about SIRF.
For the long term, SIRF looks like a buy here, but be aware of the volatility and keep your eye out for any real competitors which I do not see right now.
This makes sense as Location Based Services are going to increasingly integrated into anything that moves from cars, to cell phones, to cameras.
SIRF, the Leading maker of GPS Chips looks to benefit from this trend and it is very cheap here. Using information from Yahoo Finance:
Price: 22.98
Forward PE: 17.28 (yesterday, it was 16.39)
5 Year Estimated Growth: 30%
PE/G: .57
A PEG ratio of .57 (less than 1 is dirt cheap) for great growth is a bargain. GPS chips will be everywhere, and SIRF is a leader in this area. Global Locate, a private company, is a competitor, but I see SIRF remaining dominant in this area.
When you compare other companies in the location based service area by looking at their forward PE:
Garmin (GRMN): 19.98
Navteq (NVT): 27.60
SIRF looks cheap here for its growth.
Lenny Dykstra of TheStreet.com also had some good things to write about SIRF.
For the long term, SIRF looks like a buy here, but be aware of the volatility and keep your eye out for any real competitors which I do not see right now.
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