The Future of Solar Energy and its Outlook in 2014

             It appears that nothing can stop the rampaging of the bulls this year, even as the world had its eyes on Ukraine and stocks all over the world fell on Monday, the markets bounced back on Tuesday and ended the week with gains.

                My last few articles I have been talking about the pros and cons of investing into certain industries, including casinos, electric cars, airlines, 3D printing and the pot industry. In this week’s article I want to talk about another industry, one that has been ripe with ups and downs, solar power.

                Solar energy is nothing new, and many solar energy companies like First Solar, Trina Solar Energy and Solar City have benefitted tremendously from last year’s bull market.

First Solar- Up 113% in the last year

Trina Solar- Up 332% in the last year

Solar City- Up 371% in the last year

                The question is how will solar energy stocks fare this year? Solar energy has traditionally been viewed as the best alternative to expensive and un-clean fossil fuels such as oil but in recent months the price of oil has fallen as the energy boom in the U.S continues. Also with natural gas also competing with solar energy it is possible that the solar industry might face serious problems in 2014.

                Personally I have had mixed results with Solar stocks, I briefly held shares of Trina Solar before selling them at minor gains and I held shares of First Solar for about a month until the stock fell 20% in the period of two weeks forcing me to sell at a moderate loss. So I have experienced the volatility of these stocks but the golden question is whether or not these stocks will continue going up.

                Various developments occurred in 2013 to help spark a comeback in solar energy stocks, first of all demand grew. Analysts estimate that solar demand in the U.S grew about 32% in 2023 and they are expecting another 35% gain in 2014. Another development that helped the surge in solar stock was when in June, 2013, Obama’s administration announced a new environmental plan that increased limits on coal powered plants. Coal produces 40% of the electricity in this country, and demand for it is falling meaning alternative energy like solar are picking up the slack.

                Without a doubt solar and other alternative energy products such as wind and hydro are the future, but it is questionable whether the solar industry could repeat the year it had in 2013. The drilling boom in this country and the abundance of oil and natural gas makes investing into solar energy look somewhat foolish.

                With that said however solar demand in the rest of the world is growing and solar energy companies competing in the international markets, like Trina could benefit.

Industry wise the solar industry could face problems in the U.S but flourish elsewhere around the world, but if you are a fundamental investor and critically look over the companies financials before investing solar energy might not be for you.

The solar energy industry is littered with bankrupt companies and financial disasters. Just take a look at First Solar in 2011. The leader of the solar energy industry saw its stock fall 70% in one year. Off course the market conditions in 2011 and now are different; the thing that did not change is that solar energy remains a capital intensive business with many solar energy companies drowning in debt.

Here is a brief snapshot of the financial health of several solar energy companies.

First Solar Inc.-

                First Solar is one of the largest solar energy companies in the world with a market cap of $5.6 billion. Evaluation wise the company is fairly valued with a P/E ratio of 15.2x, matching the current market average.

 In terms of revenue and profit though the company is facing a serious problem, 4^th quarter earnings came in at $768 million in revenue, this is about $497 million less than in 2012. What is more devastating for the company is its forecast for the 1^st quarter of 2014. The company expects to earn between $800-900 million in revenue which was below the streets estimates of $894 million, E.P.S is expected to be between $.50-.60 a share, and way below analyst estimates of $.84 a share.

So in terms of growth and expansion First Solar’s financials paint a grim picture, but the company does have a few things going for it. First Solar is building a solar energy plant in Texas, which currently represents 10% of solar demand in the U.S.

But even with this new plant First Solar faces obliteration in the marketplace due to its product simply being inferior to the product of its competitors. First Solar modules are more expensive and are less efficient then the product produces by competitors.

 

Trina Solar-

                Trina is no doubt one of First Solar’s greatest competitors in the international market. This Chinese solar company has a market cap of $1.4 billion and is just barely profitable. But the Chinese solar market is recovering from a collapse in 2011, and 2013 has marked a year of rapid consolidation.

                This recovery is reflected in the company’s earnings, in the 4^th quarter of 2013 Trina announced revenue of $525 million (up 73% from last year) and profit of $14 million, which is a considerable improvement over last year’s $70 million loss.

                Trina Solar’s growth mostly came from cutting $76 million in expenses, decreasing operating costs by 22% and growing markets in China, Japan and the U.K. Unlike First Solar I believe Trina has great potential to do well in 2014, especially as the company expands into new markets like South America.

 

These are not the only two solar companies out there, others like Solar City, focus on installing solar panels rather than build them. This strategy seems to be working with Solar Cities revenue up 79% year over year and upn15% since the last quarter.

So to conclude my analysis of the solar industry I want to say that 2014 might prove a tough year for solar companies focused on the U.S market. Those focused on the international markets on the other hand will flourish, another note would be that any person who is focused on fundamentals will not want to invest into solar since the industry is capital intensive and is vulnerable to the price fluctuations of products like silicon.           

                 

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A New Casino War in Japan! Who Will Win?

               Investors appear to be over the downswing that occurred in January, with stocks surging in February and closing at or near all-time highs.  Stocks are now poised to continue their march upwards, yet some industries are in the perfect position to outperform the rest of the market. The industry I plan on talking about in this article is the Casino industry.

                Casino stocks have been on a tear as recently as last year, and I have repeatedly expressed my bullish opinions on them. As the global economy recovers people, now more financially secure, are having the opportunity to spend their money on fun, a trip to Las Vegas or Macau for example. All major casino companies have so far reaped the rewards of a resurgent economy and there stock shows it.

MGM Resorts International- Up 121% in the last year

Las Vegas Sands Corp- Up 66% in the last year

Wynn Resorts- Up 108% in the last year

Melco Crown Entertainment- Up 121% in the last year.

                These casino companies (All of which have an international presence) have easily outperformed the Dow and the S&P 500 which were up 16% and 22% in the same period of time. But what drove these particular companies to higher earnings and increased market share was there investments and expansion into Macau, which has become the new gambling capital of the world with six times the revenue of Las Vegas.

                While Las Vegas recovers slowly from the collapse in 2008, Macau has grown in leaps and bounds. As the only place in China that has legal Casino gambling, the gaming the tables of Macau draw in customers from all over Asia (In 2013 Macau generated $41 billion in gambling revenue, at the same time Las Vegas made just $6.5 billion). In 2013 Macau provided 61% of all revenue Sands generated, another 30% came from the Sands casino in Singapore.  

                These numbers show just how important Asia is to the big players in the Casino market. Other Asian countries like Singapore and the Philippines have seen the success of casino gambling in Macau and have legalized it as well. But another enormous gambling market seems to be close to opening, Japan.

                It is well known that the Japanese are enormous gamblers and estimates show that the gambling market in Japan could be as large as $10 billion, making it potentially the second biggest casino market in Asia and potentially the world. With the 2020 Olympic games being held in Tokyo It has become probable that the Japanese government will legalize Casino gambling come spring and if they do the question becomes which companies are in the best position to exploit the new market.

                The top 3 American Casino companies; Las Vegas Sands, Wynn Resorts, and MGM Resorts are all contenders in a Japanese market and all 3 companies have announced that they are willing to invest billions into developing integrated casino resorts in Japan. But which company stands the best chance of gaining the dominant share in a Japanese market?

Las Vegas Sands-

                In terms of capital The Sands might be in the best position to develop Casino resorts in Japan. The Sands is currently the largest Casino Company in the world with a market cap of almost $70 billion, compared to Wynn’s market cap of $24.5 billion and MGM’s capitalization of $13.5 billion.

                Sands also seems committed to Asia, with 5 of its 8 casinos located in Eastern Asia (1 in Macau, 3 on the Coati Strip, and 1 in Singapore, with the intention of building more in the Philippines and Taiwan.) C.E.O of the Sands, Sheldon Adelson has recently abandoned the plan to build a $30 billion mega resort in Spain and instead decided to focus his attention on Asia with a possible $10 billion investment in Japan.

                It is clear Sands is serious about Asia and Japan and the company is already the largest foreign casino operator in Macau, with clear advantages over its rivals in Japan.

 

Wynn Resorts-

                When it comes to the world of Casino gambling Steve Wynn is a legend, after inventing modern Las Vegas and selling his Mirage Resorts to MGM, Wynn has started another Casino company which he has grown into a company worth over $20 billion with a casino in Las Vegas and Macau (with another under construction).

                Wynn has expressed interest in Japan, saying that the company would invest well over $4 billion once casino gambling is legalized. Wynn is in a strong position to expand into Japan but with another $4 billion casino project currently going on, on the Coati strip it is conceivable that breaking ground on another multi-billion dollar project could be seen as over expanding.

                The casino in Coati is scheduled to be finished in 2016, building a Casino in Japan would take another 5 years. Although Wynn will most definitely expand into Japan the financial burdens of continuing two large projects might adversely affect the company.

                Now I am not saying Wynn will not be a player in the Japanese casino market it will be but Wynn might have to delay the construction of a Japanese Casino until its Wynn palace is finished in Coati.

 

MGM Resorts International-

                The day after Las Vegas Sands announced that it would invest about $10 billion into Japan; MGM announced that it too would consider investing about $5-10 billion to develop Casinos in Japan.

                Unlike the Sands and Wynn, who derive most of their income from their Asian properties, MGM makes about 65% of its revenue in the U.S and the rest from its sole property in Macau (MGM Macau in which MGM owns 51%).

                MGM’s financial position though is not as strong as Wynn’s and the Sands, the casino company is still recovering from a collapse in 2008 and the company posted a $38 million loss in 2013, even though is a great improvement from the $1.2 billion loss in 2012. MGM will likely see a return to profitability this year but it is questionable whether the company could even afford to expand into Japan.

 

All three companies have expressed interest in partnering with local Japanese companies such as Mitsubishi to help develop the casinos. Also MGM, Sands, and Wynn are not the only companies planning on entering the Japanese market. Caesars Palace and Melco Crown have also expressed interest.  

It is expected that Japan will legalize gambling by June and once the news is out all the major casino companies of the world will try to get a piece of the market. But in the end the company I think that will triumph and gain the largest market share is Las Vegas Sands, with the greatest financial might of any Casino company in the world, the Sands should have no problem breaking into and taking over the soon to be second largest casino market in the world.  

 

 

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The Future of Tesla and The New pot Industry

               So far this year’s stock market is proving to be more treacherous to navigate then last year’s unprecedented bull market. The course of the market is no longer straight up, yet after January’s sell off stocks have bounced back and are just shy of all-time highs.

                The Dow was up over 109 points this week, and fears over emerging markets seem to have subsided (yet this could change due to the situation in Ukraine) a possible debt ceiling crisis has also been averted. Yet there are a number of companies and industries that have caught my eye in the last few weeks. One of which is Tesla Motors.

Tesla Motors-

                I am certainly not the first person writing about Tesla, and I am certain I’m not going to be the last. The maker of all electric cars has seen its stock increase 480% in the last year and on Friday closed at 209.60 a share, just shy of its all-time high of 215.21.

                Now this amazing surge in the stock is not completely undeserved, Tesla has made great strides in the last year and most importantly the company has become profitable. During the 4^th Quarter of 2013 Tesla posted a profit of $45.9 million or $.33 way over the streets expectation of $.23, in addition the company beat estimates on its revenue as well, grossing over $761 million blowing past estimates of $684 million.

                Tesla also said it sold almost 6,900 vehicles in the 4^th quarter and 22,477 during the entire year. Relatively speaking that’s nothing considering Ford sold nearly 2.4 million vehicles in the same period of time. But even so, Tesla has grown its sales, and brand considerably in 2013, now the question becomes, what’s next?

                Tesla’s stock is certainly not cheap, considering the company is valued at close to 600 times earnings, comparing to the marker average of 15 that is outrageous. Granted Tesla’s unique position as the world’s sole auto maker to offer a purely electric luxury car does warrant some type of premium but from a fundamental standpoint Tesla stock is simply too expensive.

                But if you want to know if Tesla stock is going to go up in the short term, the answer is probably yes. Since Wall Street seems to be in a good mood at the moment and with Tesla providing nothing but good news (such as the company announcing its buying of a lithium battery factory, to lower the cost of Tesla’s battery pack for its cars.) it seems that the stock will continue going up.

                In the long term though, investors in Tesla might be looking at increased volatility in the stock, considering how expensive it is. If you are a long term value investor then you might want to avoid investing in Tesla, as the stock becomes more volatile in the coming months. If you are a short term speculator on the other hand, Tesla might just be an interesting investment, since it is without a doubt the future.

 

Pot Stocks-

                Another industry that has caught my eye recently is the somewhat new and very controversial industry of legalized marijuana. In one of my previous articles I wrote about the pros and cons of investing in legalized marijuana. Truthfully though, the companies that are currently involved in the business are too small, to undercapitalized and too unpredictable to invest in.

                In the last week though this fledgling industry received two pieces of good news that might lead to a large and very profitable future. The first of which was by a new law that allowed banks to lend to marijuana companies.

                Before the marijuana industry (which exists in its recreational form in the states of Washington and Colorado) was a strictly cash based because due to marijuana being illegal on a federal level banks did not want to lend to marijuana companies due to fear of federal persecution. Now though the government is allowing banks to lend to marijuana distributors in states where it’s legal. This is a great boost to the industry since it provides legitimacy and opens up the opportunity and capital for marijuana companies to expand.

                The second piece of good news the pot industry has received this week was the announcement by Colorado of how much tax revenue was raised by taxing recreational marijuana. Colorado raised $184 million in additional tax revenues in one month. This is a huge sum of money that benefits the state greatly, and might just lead to other states legalizing recreational pot. Already states such as New Jersey and California have explored legalizing marijuana due to the enormous tax revenues it could generate, this expansion would open up new markets for marijuana distributors and their affiliates.  

                Personally I think that individual pot stocks which in most cases are small penny stocks are too risky to invest in, and I am by no means advertising them as a good investment. What I am saying is that the marijuana industry as a whole is in a position to benefit from the new outlook that seems to be presenting itself.

                If you wish to invest in pot stocks I would recommend investing into multiple companies this will give you a large spread over the industry which will inevitably grow and produce profits within the next few years.

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Where Is The Market Heading this Week? Down Down Down

               Wow what a week, a massive 300 point drop on Monday followed by huge triple digit gains on Thursday and Friday. Add in a cloudy jobs report, mixed earnings, and an announcement by the Secretary of the Treasury that the U.S might run out of money by February 27^th and it makes for a wild and potentially very volatile future.

                Personally I had a very flat week, until Friday when a wrong bet against three major DOW components (J.P Morgan Chase, American Express, and Intel) left me treading water when the rest of the market soared. This just goes to show you how volatile and unpredictable the current Market really is. But instead of venting my frustration I want to discuss what Friday’s shady jobs report really means for the future of the U.S stock market and the recovery of the American economy.

                Realistically after taking a close look at the report, which stated that the U.S economy added 113 thousand new jobs in January (way below estimates of 180-185 thousand) I saw that many things could of negatively impacted the jobs report.

First thing, which many over optimistic bulls have labeled as the reason the jobs report disappointed in both December and January, is the frigid weather. The weather might have played a small part in the poor jobs report, but job sectors that traditionally lose jobs to weather such as construction, actually added jobs in January. My opinion as to why the jobs report disappointed was that January was a bad month for just about everyone, I am not just talking about the stock market that lost over 5% in the first month of 2014 I am talking about small businesses and the world wide picture in general. With the emerging markets falling part, the winter storms hammering our Country and the stock market in decline it is easy to label January as an off month.

So as to whether the January jobs report was a good or bad indication about the strength of the rest of the economy I am obliged to say that it does not show as bad of a picture as the headline suggests. I consider the jobs report as another indication January shaped up to be a terrible month, but what really shocked me was how the stock market reacted to the news.

When I got the alert on my phone that the jobs report missed expectation I immediately checked the futures which all fell after the news, and I was overjoyed (considering I had puts betting against several DOW components). Unfortunately for me, the market quickly reversed itself and in the day climbed to the triple digits and closed with a 163 point gain. What I do not understand is why? I agree the jobs report might not have painted as bleak a picture as at first glance it suggested but neither did it warrant such rapid gains. After doing some digging I came to the conclusion that investors bought on the presumption that the Fed will suspend its taper and continue pumping money into the economy. This might help stocks in the short term but in reality it is bad, by suspending the taper the Fed would acknowledge that the U.S economy needs support. And if the current moodiness of the market is any indication stocks will react violently.

For those of you who made money on Thursday and Friday I would take your profits and run. Volatility in the market has returned and I expect the gains made will be reversed in next week’s trading. Plus the market will not be helped by the fact that the U.S will not be able to pay its debts unless the debt ceiling is raised by February 27^th. But that topic is probably going to be discussed in next week’s blog entry.

So my analysis of the current market is that the gains made on Thursday and Friday will be wiped out next week when a number of factors, such as a reevaluation of the jobs report and possible debt ceiling problems starting up again, converge and send the market lower.

But in the words of Jim Cramer “there is a bull market somewhere” so read my page on possible investment opportunities, to see how to make money even in this wild unpredictable market. (That page should get posted sometime next week.)

 

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Profit in a Market Correction and Investment Oppurtunities

       It's been a bad week for markets around the world. The U.S markets had there worst week since 2011, as the Dow fell 539 points including a 318 point drop on Friday. It appears as though the over due market correction has started. Now the question becomes how to make money as the stock market retreats from it's all time highs? The answer is buying up Put options on companies that have yet to fall with the rest of the market, one notable company is Microsoft, the best performing stock in the Dow on Friday. 

Microsoft corp-

       Microsoft was spared from the correction that consumed most of its fellow Dow components due to its good earnings announcement on Friday.

       Microsoft was up 2.08% on Friday, as the company announced Quarterly earnings of $24.52 billion in revenue (a rise of 14% from last year) and net income of $6.56 billion (above last years $6.38 billion) the company also made $.78 a share once again posting a higher number then last years $.76 and trumping estimates that predicted net earnings of $.68 a share. These better then expected quarterly earnings were achieved due to good sales of Microsofts X-box one game console and it's surface tablet.

       Microsoft might of been able to avoid Fridays drop but if the correction continues Microsoft will join the ranks of its fellow blue chips and watch its stock price fall. Microsoft shares have already fallen .26% in the premarket on Friday and I expect them to fall on Monday.

       So if you were one of the people who were hit hard by last weeks sell off (and believe me I was hit to) a good way to make up some of those losses is to buy put options on Microsoft, so when the market heads lower you could profit while your fellow traders lose.

Delta Airlines-

       Microsoft is the perfect company to bet against going into next week but one company that was hit hard during the sell off but you should hold off selling is Delta Airlines.

       Friday was maybe the worst day for the airline industry since August (when the Federal Government said it was suing to stop the American Airlines- U.S Airways merger). Due to a combination of the general market correction, weather related flight delays and cancellations major airlines including Delta, JetBlue,Southwest, and American all saw there stocks deflate.

Personally I am great fan of investing in Airlines, I have had success in investing in them before and as Fuel prices drop Airlines are becoming a strong and stable business, and I find this sell off an amazing opportunity in investing into them.

       Now I am not the first person to say this but Delta Airlines is arguably the best airline to invest into. With a large profit margin of nearly 10% and with its own refinery and did I mention the stock trades at just 2.5x earnings!

       Yes you read right, Delta trades at just 2.5x earnings, since the company posted 4th quarter profit of $13 a share, while the stock trades at just $31.11. Let me put this into perspective, the S&P 500 trades at a p/e ration of 15. If Delta was valued at the same evaluation the S&P 500 is that means the stock should trade at $186.66 a share. Now I am a realist, I know that it's unlikely Delta airlines will see its stock increase 6 fold, but it is a very real possibility this stock will double in the upcoming year.

       Personally I bought stock and call options on Delta on Thursday when the stock was down 1.09%, I figured that Delta stock would bounce back.....how wrong I was, Delta shares fell 4.28% dealing me a heavy hit. But I am not selling my stock, in fact I plan on buying more.

I Believe Delta Airlines is the buy of the year, and with the market correction putting pressure on the stock there is no better time to buy then now.

      But how about the rest of the stock market? As January unfolds many feel as though 2014 will be the year of the bear. The last week has reinforced that opinion, but if you assess Friday's trading day you will see that the orders to sell are coming from small individual investors.

       Hedge Funds and Mutual Funds are not rushing to sell there investments. And why not? Because the managers of these firms know that this is not a panic but an orderly retreat. The correction that has been awaited for a long time has finally arrived and it might send the markets down another 2-3% but in the long term it is a good thing.

       Once this correction occurs there will be bargains and investors could go shopping for opportunities and the stock market will continue its march upwards. So if you got burned on the market this week do not despair, panic and sell your investments. Instead wait it out, or buy some put options betting against the market where you could get some short term profit and nullify your losses. Also I would suggest to liquidate a piece of your portfolio so when the market bottoms out you have cash on hand to exploit the opportunities the sell off presents




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Investment Oppurtunities or Danger Zones? BestBuy, CSX, and GE

        As the big banks reported earnings this week the stock market was ripe with volatility, and if you were lucky you managed to capitalize on the upswings. But I do not want to analyze earnings from the big banks since most beat earnings instead I want to discuss potential opportunities in some of the market movers this week.

       - Best Buy Co Inc.

       Lets face it this week proved to be a disaster for the technology retail giant. The stock was off almost 35% this week as the company announced disappointing holiday sales which fell 2% from last year. This dramatically underperformed Wall Streets expectations which were that holiday sales would rise 4-5%.

       The crash in Best Buy stock was surprising for some since the company seems to be in the middle of a turn around with the stock up nearly 150% before this weeks crash. And with C.E.O Hubert Jolly's plan of matching the prices of online competitors like Amazon. 

       Realistically speaking Best Buy's stock crash should of been foreseen since the companies earnings although stable did not grow enough to justify the rapid growth of the stock, and with consumers shopping more and more online Best Buy would of had to post a dramatic gain in holiday sales if it was to continue being a momentum stock.

       Those sales did not materialize and the Best Buy bubble popped. Now the question becomes, what's next for the technology retailer? Based on fundamentals I would not touch Best Buy, the company is unprofitable, and rapidly losing ground to online competitors.

       With this said BestBuy is not a lost cause. The company notified shareholders that online sales were up. This means that if BestBuy focuses its time and money on its online retail business then the company would continue to survive well into the future.

       As of right now though BestBuy is a dinosaur that will inevitably go out of business and I would not invest.

       - CSX corp

       Normally I would not invest in railroads because as gas prices fall across the country the advantages of shipping freight by rail become nullified. But on Thursday CSX, a multi billion dollar railroad giant announced disappointing 4th quarter earnings that sent shares of the company spiraling down. (The stock was down almost 7% at the close of Thursday's trading day.)

       CSX announced earnings of $426 million on $3 billion of revenue. This is a decline of nearly 5% from last year. Profits were dented mostly because of low demand for coal, coupled with a rise of expenses attributed with it.

       A drop of profits by a margin of 5% is not a good thing but the sell-off that followed was overdone. I agree shares should of fell but not as heavily as they did. Also besides the shipment of coal falling other parts of CSX's business were good.

       Chemical shipments which include the shipment of crude oil increased 18%, agricultural shipments increased 16% and the shipment of intermodal containers increased 11%. Also CSX is by no means a troubled business, the company operates 21,000 miles of track in 23 eastern states and 2 Canadian provinces. Also after the stocks slide on Thursday the stock trades at only 14.9x earnings which is well below the industry average of 18.5x. 

       I bought up call options on CSX stock and expect a large profit sometime next week, if you are lucky you can get in on the action on Tuesday when the market reopens. For the short term anyway this stock in my opinion is a buy. 

- General Electric

       GE was another corporate giant that announced earnings this week, but unlike the previous two companies I have mentioned GE stock did not have some kind of dramatic swing. General Electric stock was down just 2.28% on earnings. Normally this is what should happen when a company announces poor earnings that did not meet expectations, the hing GE announced 4th quarter earnings that did meet expectations. 

       GE announced operating earnings of $5.4 billion or $.53 a share, an increase of over 20% from last year. In what way does this warrant the stock falling. Honestly I think this is an opportunity to buy into GE but this is not a short term buy. Like I said on previous posts I think GE is a perfect retirement stock and if you need a place to put your money right now GE is the place to put it. 

       These three companies are just a few that were impacted by last weeks events. Other movers were credit card companies American Express and Capital One, both of which missed earnings estimates by the way. Most of the major banks announced earnings that were mixed some like Morgan Stanley ended 2013 well others like Citigroup not so much.  

       Some of these companies provide good opportunities to invest and I don't have to the time to talk about them all, you will have to do the research yourself and make your own decision on whether investing in these companies is the right decision. 

       Some notable companies that announce earnings next week are Dow components IBM and Johnson & Johnson. But in my opinion the companies to look out for this week are Netflix and Delta Airlines, both of these companies were heavy gainers last year and if BestBuy was any indication these companies have to deliver fantastic earnings to keep Wall Street on the hook.

       If I was to make a prediction I would think that Delta will exceed expectations since the company although seeing its stock price more then double still trades at a decent value. Netflix on the other hand I think will disappoint since the company has seen its shares triple last year and currently trades at a very high premium to the market. 

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Exploding Industries of 2014! Marijuana and 3D Printing

       It appears the stock market is starting off 2014 in the red, with a tepid jobs report which dramatically missed expectations. Many analysts are now expecting 2014 to be the year of the bear. Yet some industries are poised to explode in 2014!

- Legalized Marijuana

     On January 1st Colorado became the first state to legalize recreational marijuana, and in that time stocks in companies that produce the federally banned substance have seen there stock increase dramatically.

     And yes you read correctly there are actually such things as pot stocks! These companies like greengro and Cannabis are in most cases penny stocks with valuations of rarely more then $150 million and like all penny stocks fluctuate wildly. But this these "pot stocks" gained national attention as there prices went through the roof as investors rushed to buy into an industry that made $1 million dollars within one day.

     Personally I find most marijuana companies as foolish investments with no real future but investing in weed does have upside. First of all the substance is being legalized for both medical and recreational use in many states (Washington is the next state after Colorado to legalize recreational marijuana) so as an industry weed has room to grow. Also as we have seen in Colorado marijuana is very profitable considering its easy enough to grow and could be sold at very high prices. 

     Clearly investors who buy stock in marijuana companies are betting on the fact that the substance will be legalized nationally and the company they are invested in will expand to these new markets. Unfortunately many seem to have forgotten that the weed companies they are invested in do not have the resources or the capital to expand past the area they already operate.

     The reason for this is that most banks will not lend money to marijuana companies because since the substance is illegal by federal law the banks might get fined for lending money for its distribution. Hence forth weed companies are forced to conduct there business in cash which hampers there ability to expand to other states.

     Also as marijuana is legalized in states throughout the country current marijuana companies will face competition from local marijuana distributors. This means that although the industry as a whole might prosper in the future it will not be dominated by large companies but rather small regional ones. 

     This reason coupled with the fact that all public marijuana companies have horrible evaluations and show little or no real profit turns me off to investing in marijuana. In essence marijuana is a large bubble.

     If you are interested in investing into marijuana though here's a tip, instead of buying stock In marijuana distributors like Greengro invest in companies that dispense services for marijuana. These type of companies would benefit most from marijuana getting legalized throughout the country since they have the ability to borrow from banks since they do not handle the physical weed and would not have to compete with local competitors.

     One such company is Medbox (MDBX) this company manufactures marijuana dispensers, basically vending machines. As marijuana gets legalized in more states Medbox can have the ability to set up more machines throughout the country. Also Medbox, unlike most other marijuana associated companies, is not a penny stock. On Friday the stock closed at $34.01 a share, with a market value on the company of $416 million.

     Unfortunately just because the size of the company is larger does not mean its stock fluctuates any less then it's penny stock cousins. On Tuesday the stock was up over 65% while one Wednesday it fell 35% and fell another 20% on Friday at one point last week the company had a $1 billion dollar evaluation.

     Another negative is that the company only has a little more then $4 million in revenue. So you could call this company remarkably overvalued. But as weed is legalized that number is likely to grow. 

     So if you are gambler and wish to gamble on marijuana invest in companies that are associated and profit from substance but do not actually handle the distribution of the substance itself. This way they don't have to deal with the federal regulations and scrutiny from the banks.

- 3D Printing

     Marijuana is definitely shaping up to become a huge bubble but another far less federally scrutinized industry is all shaping up to become huge. That industry is 3D printing. 

     It is obvious that 3D printing is the future and companies like 3D systems corp (in which I hold stock in) and Stratasys with it's makerbot to subsidiary, have already seen national attention and have seen there market valuations swell into the billions. Unfortunately at its current state 3D printing technology is more like a novelty then a practical technology but.... As technology improves 3D printing has the ability to revolutionize the world as we know it.

     Also 3D printing has made strides in recent years with Makerbot even announcing a 3D printer with a price tag of less then $2,200. This no doubt makes having a 3D printer in every house possible, what's even better about these companies is that there evaluations although trading at a premium to the market are not completely crazy.

     For example 3D systems corp trades at 202x earnings, this seems like way over the market average of 15 and the S&P's current average of 17 but 3D printing technology deserves to trade at a premium. What's even more shocking, at least to me is that some 3D printing companies like 3D systems are profitable.

     The fundamentals of the 3D printing industry are sound and over the next few years I'm sure that 3D printing will form a bubble but as of right now I consider 3D printing to be a great industry to get into considering the fact that the technology will only get better and as it does the market will grow translating into massive profits for these companies and investors that get in now.

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