Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Posts Tagged ‘investment opportunity’

Silver Prices to Double from Here?

By for Profit Confidential

Silver  Better Opportunity Than Gold YearIs silver presenting an even greater investment opportunity than gold bullion?

It’s been well documented in these pages that demand for gold bullion is increasing and supply is declining due to lower prices. The silver market is going through the exact same thing.

Last year, the Indian government decided to curb demand for gold bullion in that country by increasing the duty on gold imports. This resulted in a significant decline in gold bullion imports. But what went unsaid was that silver demand skyrocketed as gold bullion demand fell. In 2013, silver imports into India almost tripled to 5,478 tonnes. (Source: Reuters, March 4, 2014.)

Demand for silver is increasing here in the U.S. as well. The table below shows demand for Silver Eagle coins sold at the U.S. Mint in the first four months of each year since 2011.

U.S. MINT SALES OF SILVER EAGLE COINS

Month

2011

2012

2013

2014

January

6,422,000

6,107,000

7,498,000

4,775,000

February

3,240,000

1,490,000

3,368,500

3,750,000

March

2,767,000

2,542,000

3,356,500

5,354,000

April

2,819,000

1,520,000

4,087,000

4,590,500

Total Sold

15,248,000

11,659,000

18,310,000

18,469,500

Data source: U.S. Mint web site, last accessed May 1, 2014

From the table, you can easily see that the demand for silver coins in the first four months of 2013 and 2014 was greater than it was in 2011 and 2012. 2011 was the year silver prices were reaching $50.00 an ounce. In 2012, silver prices were relatively flat. In 2013 and this year, as silver prices declined, we saw more buying of silver coins; silver prices are bringing more buyers.

On the supply side, there are constraints in the … Read More

“Fast Casual” the New Buzzword Among Risk-Capital Speculators

By for Profit Confidential

Why This Restaurant IPO Stands Out from the PackThe great thing about noodles is that they’re cheap—and this is also what makes a restaurant chain selling noodles a very good investment opportunity.

Restaurant stocks should always be on any speculative investor’s radar. Consumers’ tastes change, disposable incomes change, and so on…but there is always fervor to eat out, especially at the right price point.

The latest buzzword in the world of chain restaurants is “fast casual,” a combination between a fast food quick-service outlet and a sit-down casual restaurant. There’s going to be more and more of these types of chains coming to the market, and there have already been some hot (and expensive) initial public offerings (IPOs) in this sector recently.

Among several fast casual restaurant stocks that recently listed, Noodles & Company (NDLS) out of Broomfield, Colorado just opened another 12 locations in its 2013 fourth quarter, bringing its total corporate-owned locations to 318, with 62 additional franchised restaurants.

Typically, developing restaurant stocks that can offer the most capital appreciation potential on the stock market are those with a large number of corporate-owned locations. This enables management to keep full control over operations, while improving the concept as business conditions and geographic locations dictate.

Noodles & Company came to market selling 5,357,143 shares at $18.00 a share with an overallotment of 803,571 shares. Illustrating the speculative fervor for restaurant stocks at the time, the company’s shares opened around $36.00, and then proceeded to appreciate to $47.00 a share before consolidating for the rest of 2013.

Recently, the company announced preliminary fourth-quarter results that came in just shy of the Street’s estimates.

Fourth-quarter 2013 sales are expected … Read More

Top IPOs to Watch for in 2014

By for Profit Confidential

My IPO Watch List for 2014The market demand for initial public offerings (IPOs) is strong, as investors search for additional sources of opportunities to make money.

While there have been some poor-performing IPOs this year, there have also been numerous stocks that have debuted to stellar gains. With strong market conditions for new issues, we are seeing a rise in the flow of companies wanting to come to the capital markets and take advantage of the current euphoria for IPOs. The reality is that the increase in IPOs also suggests some froth in the stock market that investors need to be careful about.

The biggest and most highly anticipated IPO this year was, of course, Twitter, Inc. (NYSE/TWTR), which has made many of its early investors rich. The stock was priced at $26.00, surged to $45.00 on its first trading day, and is currently trading at a new high above $50.00. The amazing thing is that Twitter doesn’t make money, and there’s no timeline as to when this will happen, as the company tries to monetize its users. (Read my take on Twitter in “How Small Investors Can Still Get a Piece of Twitter.”) Apparently, the stock market doesn’t really care if an IPO makes money, as long as the theoretical potential is there.

Facebook, Inc. (NASDAQ/FB) was another hyped-up social media IPO that had more than a billion users when it first debuted but hadn’t figured out how to make money from them. The stock actually fell down to the $17.00 level from its $45.00 IPO high, but this was a great buying opportunity, especially if you believe the company … Read More

When High-Priced Stocks Become Attractive Investment Opportunities…

By for Profit Confidential

Why High-Priced Stocks Should Follow MasterCard’s ExampleWhile there continues to be a widening of the income gap between the rich and the poor in the world, companies like MasterCard Incorporated (NYSE/MA) continue to make a lot of money from every transaction made using their credit cards. Recently, MasterCard announced it would be splitting its shares on a 10-for-one basis while also increasing its quarterly dividend by 83%. MasterCard is also looking to buy back up to $3.5 billion of its Class A common stock.

The move by MasterCard makes sense and helps to boost the market value of the company for its current shareholders and future investors. The stock split will allow for trading liquidity and for smaller-scale investors and traders to participate in the stock, given that the company’s shares reached a record high at over $800.00 on Wednesday.

Mastercard NYSE Chart

Chart courtesy of www.StockCharts.com

In addition, the increase in dividends will attract income investors and the buyback will help to add some support and give the stock market some confidence in the stock as an investment opportunity.

What MasterCard has done is what other high-priced companies with high cash levels should also be doing.

Stock splits make sense for high-priced stocks as a way to increase liquidity to more investors and inevitably help to drive up the share price and create an investment opportunity.

The following are three higher-priced stocks that I feel could eventually see a stock split and offer an investment opportunity:

Apple Inc. (NASDAQ/AAPL) is under pressure from investor Carl Icahn to increase its share buyback program in a strategy to distribute some of its massive $147 billion of cash to shareholders. The … Read More

Theme Park Spending Splurge Bodes Well for This Stock

By for Profit Confidential

equity marketThe Walt Disney Company (DIS) just doubled its equity market capitalization over the last 24 months. It is a stunning performance and a breakout from its long-term trend.

What stood out in the company’s latest quarter was its earnings growth. Profitability is improving substantially due to increased spending at theme parks.

Once again, Disney’s parks and resorts business segment grew strongly, up eight percent in the recent quarter to $3.7 billion. The company’s largest revenue segment is from media networks, which is a very mature and saturated market. Media network sales grew only one percent to $4.95 billion in the most recent quarter.

Company management specifically noted that there was a noticeable increase in guest spending at domestic parks and resorts. This led to a big increase in Disney’s consumer products sales which grew 14% to $1.0 billion in the latest quarter.

If you want a very good breakdown of the company’s global operations, take a look at its annual form 10k, which breaks down all of the company’s holdings and their respective financial performance.

Consolidated sales include the Walt Disney World Resort in Florida, the Disneyland Resort in California, the Aulani Disney Resort & Spa in Hawaii, the Disney Vacation Club, the Disney Cruise Line, and Adventures by Disney. The company owns 51% of Disneyland Paris, 48% of the Hong Kong Disneyland Resort, and 43% of the Shanghai Disney Resort.

Two years ago, Disney and Shanghai Shendi Group Co., Ltd. got approval from the Chinese government to build and operate the Shanghai Disney Resort in the Pudong district of Shanghai. Targeted to open by the end of 2015, … Read More

How to Play the Success of Today’s Hollywood Blockbusters

By for Profit Confidential

technical analysisThe second installment of The Hunger Games trilogy, Catching Fire, debuted in theaters last Friday to heightened anticipation. The early bet is the film could set a new box office record.

Whether the lofty expectations pan out or not, believe it or not, there is more than one investment opportunity you can take advantage of to make money on the success of The Hunger Games series and other major Hollywood blockbusters.

The company behind the production of The Hunger Games is Lions Gate Entertainment Corp. (NYSE/LGF), which is already up over 100% from its 52-week low and could head higher if the film sets new records, meaning this production company may be an investment opportunity. In addition to films, Lions Gate also produces 28 television shows over 20 networks.

Lions Gate Entertainment Corporation Chart

Chart courtesy of www.StockCharts.com

Fundamentally, Lions Gate has delivered decent results, beating the Thomson Financial consensus earnings-per-share (EPS) estimate in each of the past four quarters, making it a possible investment opportunity. Revenues are estimated to grow 6.4% to $2.93 billion in fiscal 2015 ending in March. Fiscal earnings are estimated to rise 50% to $1.54 per diluted share in fiscal 2015. While the best gains are behind the stock for the time, longer-term, I see Lions Gate as a good investment opportunity.

A second investment opportunity on the success of The Hunger Games series and other blockbusters is IMAX Corporation (NYSE/IMAX). IMAX offers venues in which you can see the film on a specialized 12,000-watt power-packed screen that could be as high as 98 feet. In general, every major blockbuster film is shown on IMAX screens around the world…. Read More

Booming Agriculture Business Makes This Solid Dividend Payer Even More Attractive

By for Profit Confidential

Booming Agriculture Business Makes This Solid DividendWell, it turns out that third-quarter earnings were pretty good for E. I. Du Pont de Nemours and Company (DD). The company surprised with solid volume growth and its cash balance soared.

DuPont recently broke out of a two-year-long stock market consolidation. Still yielding around three percent, this position is not expensively priced, and its latest numbers were very good, considering the size and maturity of this business.

The company’s third-quarter consolidated sales grew five percent to $7.7 billion. The strongest division was, once again, in agriculture, with a 15% gain in sales to $1.6 billion on stronger volumes and higher pricing in Latin America.

Every single operating division posted improved operating earnings comparatively, except for the company’s performance chemicals business. Sales in Europe, the Middle East, and Africa (EMEA) grew a surprising 10% during the quarter, while sales in North America and the Asia Pacific grew three percent; Latin American sales grew four percent.

Of note was the company’s strong improvement in shareholders’ equity, and as is typical with so many large corporations, DuPont’s cash and cash equivalents balance soared to $7.0 billion, from $4.3 billion at the end of 2012.

The company’s third-quarter dividend was $0.45 a share, compared to $0.43 in the same quarter last year. Another dividend increase is likely within the next two quarters; the company can certainly afford it.

As I stated before, the most important division for DuPont is its agriculture business. Third-quarter expenditures on research and development were $540 million, compared to $521 million in the same quarter last year. Virtually all of the increased spending was dedicated to the company’s agriculture … Read More

My Favorite Stocks to Watch in the Expanding Coffee Market

By for Profit Confidential

Favorite Stocks to Watch in the Expanding Coffee MarketI love the smell of coffee brewing in the morning—and in the afternoon and evening. As you can tell, I do enjoy my coffee—but I also like watching some of the market’s top coffee stocks.

At the top of my watch list in the coffee sector is Starbucks Corporation (NASDAQ/SBUX), just because of its strong brand recognition not only in the United States but worldwide. Whether it’s in Asia, Europe, or Latin America, you can always find that familiar green Starbucks logo.

However, when I have a craving for a baked treat (though I seldom do), I do like the “Boston Kreme” donut and “Cheddar Cheese Bagel Twist” at Dunkin’ Donuts, operated by Dunkin Brands Group, Inc. (NASDAQ/DNKN), which also owns Baskin-Robbins. Dunkin is known more for its donuts than its coffee; nevertheless, it is a coffee shop that many customers will venture out to for a sweet treat.

Dunkin Brands Group Inc Chart

Chart courtesy of www.StockCharts.com

Dunkin is still primarily an American brand, but the company is considering returning to the United Kingdom. The company is looking at opening 50 outlets in the greater London area within five years, but that number could run as high as 150 outlets in the United Kingdom. (Source: Rocco, M., “Dunkin’ Donuts Plans Return to U.K.,” Fox Business Network web site, September 12, 2013.) The company also has plans to move into Moscow.

While the expansion plans are encouraging, I really doubt the Dunkin brand can become the global icon that Starbucks has become. In China, for instance, Starbucks is rapidly growing.

An alternative investment opportunity to Dunkin—and a company that the people at Dunkin should be … Read More

Technology Stalling, but for How Long?

By for Profit Confidential

Technology StallingTechnology stocks underperformed the S&P 500 and Dow in the first quarter of the year, but that’s no big deal, as I continue to see technology as a market leader.

The month of April saw some buying return to technology stocks, with the NASDAQ managing to outperform the S&P 500—that’s a start.

While we have seen momentum dissipate from technology stocks and Apple Inc. (NASDAQ/AAPL) lose some of its shine, I remain bullish toward technology stocks.

The chart of the Technology Select Sector SPDR (NYSEArca/XLK) below shows the current sideways trading channel for this index and the current test at the upper resistance line, as indicated by the top blue line.

If my technical analysis is correct, I expect technology stocks to take a run at the resistance.

XLK Technology Select Sector SPDR stock chart

Chart courtesy of www.StockCharts.com

According to FactSet, earnings growth for the information technology (IT) sector is estimated at 0.2% in the first-quarter earnings season—if Apple is excluded. FactSet is optimistic the sector will rally in the second half of this year, with an estimated growth rate of 12.0% in the third quarter and 11.2% in the fourth quarter. (Source: “Earnings Insight,” FactSet, April 19, 2013.)

Of course, if Apple rebounds, the growth rate will likely rise.

If we exclude Apple, FactSet estimates the IT sector will grow at 10.0% and 12.4%, respectively, for the third and fourth quarters. These are pretty darn good numbers.

My top areas for growth going forward include the mobile, Internet, communications, networking, IT, and cloud computing sectors.

I suggest adding both small and large companies across different businesses, which will add diversity, making your tech holdings less … Read More

Facebook Does an About-Face: Set to Move Higher?

By for Profit Confidential

Facebook Does an About-FaceFacebook, Inc. (NASDAQ/FB) has attracted over one billion pairs of eyeballs, and my stock analysis suggests its share price may really explode upward if the company can monetize this massive user base. The future for the company will clearly lie with its aggressive shift into mobile advertising, an area that numerous companies, including Google Inc. (NASDAQ/GOOG), are trying to control, based on my stock analysis. (Read “Google Could Be the First $1,000 Stock.”)

The problem with Facebook is that it needs to have better control over its social networking platform. My stock analysis suggests this could only happen if the company can more effectively integrate its product into the operating system of a smartphone, which appears to be the case, as Facebook is expected to launch a new “Android”-based product. The speculation is that a Facebook phone will be produced by HTC Corporation and will focus on the integration of Facebook. (Source: Ortutay, B., “Eyes on Facebook mobile event as company evolves,” Associated Press, April 4, 2013.)

In the article, the potential stakes for Facebook and other companies in social networking are growing exponentially. Spending on U.S. mobile advertising is estimated to surge 77% in 2013 to $7.29 billion, according to eMarketer. Facebook is estimated to corral $965 million.

Based on my stock analysis, I like the company’s focus on pumping up its mobile advertising area. In the fourth quarter, mobile revenues accounted for 23% of Facebook’s total $1.33 billion in advertising revenues, up from 14% in the first quarter. The interesting number was the company’s total mobile monthly active users, which came in at 680 million in … Read More

Gold’s Decade-Long Reign Near an End?

By for Profit Confidential

Long Reign Near an EndI have been a major supporter of gold for the past decade during the run-up in prices, but I can’t say I’m that confident at this moment.

Of course, there are still the issues in the eurozone, tension in the Middle East, and the crazy man running North Korea, but I sense the party may be coming to a halt for gold investors.

This is sad, but the shining yellow metal has made money for investors for a decade, so perhaps it’s time to take a siesta.

Here’s my thinking.

The U.S. economy is on the mend. The global economy is recovering; albeit, there are some concerns in China and Europe. The world’s central banks have created a low interest rate environment that has helped to drive global economic renewal and recovery in stocks. It’s all about risk and return at this juncture. While I feel the eurozone could still offer a surprise and America continues to tread on massive debt accumulation, gold is not seen as a viable investment opportunity at this time. Unless the stock market reverses course to the downside, the immediate outlook for the yellow metal looks dull in my view.

Even the recent rally back above $1,600 an ounce on the Cyprus concerns was short-lived and void of any major momentum. There was no reason for the metal to hold above $1,600.

While just recently there was talk of gold retracing back to the high-$1,600 level witnessed earlier in the year, I now feel it could be a challenge for the metal to hold $1,500.

Just take a glance at the chart below. Note the … Read More

As Airline Sector Flies Higher, These Airline Supplier Stocks Look Interesting

By for Profit Confidential

As Airline Sector Flies HigherThe airline sector is sizzling, with rising demand from China and other emerging economies, based on my stock analysis. Revenues in the global airline sector are estimated at $671 billion this year, with profits of $10.6 billion, according to the International Air Transport Association. Plus, my stock analysis suggests that there are significant plane orders flowing in, which you can read more about in “Aerospace: The Only Way Left to Play Global Growth.”

My stock analysis indicates that with the rise in demand, there is also a rise in the need for the materials used to build planes. A key material is carbon fiber—a compound used for applications that demand a high strength-to-weight ratio and rigidity, such as planes.

The global carbon fiber market is estimated to grow annually at 17% over the next five years to around 118,600 tonnes and a market value of about $7.3 billion by 2017, according to The Future of Carbon Fiber to 2017 report produced by Smithers Apex. From 2012 to 2020, the annual growth for carbon fiber-reinforced plastics is estimated at 16%. These metrics make carbon fiber plays an intriguing opportunity, according to my stock analysis.

My stock analysis indicates a potential play in the carbon fiber market for aggressive investors is small-cap special situations play Zoltek Companies, Inc. (NASDAQ/ZOLT), which is still attractive as it nears its 52-week high of $12.25. My stock analysis notes that Zoltek represents an above-average risk-to-reward opportunity in the equities market. (Please note: this is not a buy recommendation, but simply an example of a good investment opportunity for aggressive investors.)

Zoltek’s stock chart, featured … Read More

Google Could Be the First $1,000 Stock

By for Profit Confidential

Google Could Be the FirstThe top player in the Internet space is Google Inc. (NASDAQ/GOOG), based on my stock analysis. The company is innovative and has grand plans to rule the Internet space. Google believes it can and so does the market, as the stock traded at a record $844.00 last Wednesday.

My stock analysis is that what makes Google an excellent company is its strategy to improve its business and expand into non-traditional areas, including its “Android”-based “Nexus” mobile smartphone, and the licensing out of its Android platform. Already, Google’s Android mobile operating system is tops. As far as mobile applications, Android apps will account for about 58% of all downloads this year, versus 33% for “iOS” by Apple Inc. (NASDAQ/AAPL), according to ABI Research. (Source: Perez, S., March 4, 2013, “ABI: With 58% Market Share, Android Will Top iOS In Smartphone App Downloads This Year, But Apple Will Win On Tablets,” TechCrunch March 4, 2013.)

And to compete against Amazon.com Inc. (NASDAQ/AMZN), Google is testing out its “Google Shopping Express” service that will ship out products on the same day.

Even with the $800.00 price tag, my stock analysis is that Google has a better chance of reaching $1,000 than Apple. The chart of Google shows the upward trending channel and strong relative strength. You also need to be careful, as the stock could retrench, which could signal a buy based on my technical analysis.

GOOG Google, Inc Nasdaq Gs stock market chart

Chart courtesy of www.StockCharts.com

Knowing what I have learned over the past eight years, I wish I had picked up some shares of Google, but then there will always be opportunities available based on my stock … Read More

Play the Travel Space with This Former Highflier

By for Profit Confidential

Play the Travel SpaceThe online travel market segment is projected to account for nearly one-third of the total global travel market by 2012, according to the Global Online Travel Report 2012 by yStats.com, and provides a good investment opportunity. The report suggests that while the U.S. is the top online travel-booking market in the world, emerging economies in the travel segment, such as China, India, and Brazil, are growing and are a good investment opportunity.(Read “Why China Is Hot for Travel Stocks.”)

The top investment opportunity in the online travel segment is priceline.com Incorporated (NASDAQ/PCLN), which with a stock price of nearly $700.00 and a market-cap of $40.0 billion, is by far the “best of breed” in the online travel segment. Expedia, Inc. (NASDAQ/EXPE) is the second-largest player, but with a market-cap of $8.7 billion, it’s well behind priceline.com.

If you’re looking for a small-cap investment opportunity in the sector and don’t mind the extra risk, then take a look at the sector’s poorer cousin Travelzoo Inc. (NASDAQ/TZOO),which has a market-cap of $324 million. What makes Travelzoo an interesting investment opportunity is its potential and current valuation. The stock is also well down from a high of $90.80 on July 19, 2011, so there could be a major investment opportunity here. The stock has underperformed the S&P 500, declining 18.2% over the past 52 weeks compared to a 10.6% advance by the S&P 500.

Founded in 1998, Travelzoo is an online provider of travel, entertainment, and local deals that works with about 2,000 companies from around the world. Products offered include airline, hotel, cruise line, and vacation packages. The company has … Read More

Small High-Risk Biotech Offers Potential Big Returns

By for Profit Confidential

040313_PC_leongThe biotechnology sector provides some of the best investment opportunities for significant returns. This is especially true with the emerging smaller biotech companies that are in the early stages of clinical trials and commercialization. Yet the risk is high. Success in clinical trials from phases one to three could reap major price appreciation for shareholders. On the other hand, many drugs in the pre-clinical and clinical trial stages also fail and never reach commercialization. This is the risk; but in our view, success could easily compensate for taking a chance.

As an investor, you can simply invest in Pfizer Inc. (NYSE/PFE) with its proven track record and market-cap of $198 billion; but the upside investment opportunity, while positive longer-term, will not make you rich in the shorter term due to the lack of strong revenue growth. Just take a look at the Thomson Financial estimates: revenues at Pfizer are estimated by Thomson Financial to contract by 2.5% in 2013, followed by another 1.8% in 2014.

Pfizer is an excellent long-term investment opportunity for the conservative investor looking for income and some capital gains; but for us, most of the easy money has already been made. We want to see stellar growth and superlative price appreciation. Given this, companies such as Pfizer are out of the equation for us, unless you’re happy with small capital-gains potential and a 3.5% dividend.

When I search for emerging biotech stocks as an investment opportunity, I look for a strong drug pipeline. The ideal investment opportunity would be a company with at least one drug in commercialization or close to it, more drugs in … Read More

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