A New Space Race is Starting! Which Company is going To Win?

            After a strong week of gains for markets stock fell heavily on Friday to make sure that the Nasdaq closed down for the week and that the Dow and S&P 500 erase most of the gains they made. Yet Friday’s 160 point loss should have been expected, in fact I was prepping for it since Wednesday, and I am sure that the selloff provides nothing but opportunity.  With that said Corporate earnings will be in focus this week and unfortunately they are expected to be poor.

                Off course I am not willing to analyze the already over analyzed market, what I am going to do is shed some light on a new industry that is behind the future of space travel, the rocket industry.

                Ok, that makes it sound like corporations are building ICBM’s (to confirm the fears of conspiracy theorists) but in the last few years as Congress begins to cut down ,at least a little, on its spending the National Aeronautic Space Administration (NASA) has been receiving cuts in funding. Basically this means no body will be going to the moon any time soon and NASA will not be building rockets to send various satellites into space.

                For all those young kids who want to become astronauts do not despair, instead of paying billions to build and launch rockets and satellites into space NASA has instead opted to spend only hundreds of millions on hiring private companies to execute the launches themselves. This creates a whole new industry that has yet to be completely realized.

With that said, however, I do think that this industry will be receiving a lot more scrutiny by Wall Street in the next few months. Especially after an article published by the Wall Street Journal titled SpaceX to Compete With Boeing-Lockheed Venture or Satellite Launch.  This article written by Doug Cameron raises new hopes and new life for the Space industry.

I say that because the Pentagon has recently announced its intention to start accepting bids from U.S companies to develop a cheaper American made rocket to replace the, ironically, Russian made rocket currently employed by the United Launch Alliance (ULA) that has until now held a virtual monopoly of the space launch industry.

The ULA is a 50-50 partnership between Lockheed-Martin and Boeing, the company until recently controlled the majority of the contracts from NASA, the Department of Defense and the Air force. The companies Delta and Atlas rockets have been the mainstays of the space industry for the last 50 years, there relatively cheap launches and disposability led them to replace the space shuttle and the rockets can probably be described as the AK-47’s of rockets, there is just one problem, they are built around Russian made engines.

Yes you heard me, in essence the Russians make our rockets, it’s disgraceful I know. With the recent tension with Russia over Ukraine apparently the Pentagon feels we need our own rocket, it’s about time too!

In a strange way by taking over the small Ukrainian Peninsula that until a few months ago few heard of or gave a damn about, otherwise known as Crimea, Russian President/Tsar Vladimir Putin has helped launch a new Space Race.

But this Space Race will not be a repeat of the Cold War, this time the competition to go to space will not be between the U.S and the Soviet Union competing over who gets there respected place in history. Instead the competition will be between American corporation competing for something considerably more valuable…..government contracts, the very things that can make or break companies.

It’s time to meet the players in this new race to the heavens-

                The company that arguably receives the greatest opportunity in the Pentagon’s call for a new rocket is unfortunately a private one. Space Explorations Technologies better known as SpaceX has decided that it wants to be the company to lead the U.S into space.

                SpaceX is another one of entrepreneur Elon Musk’s futuristic like companies focused on building the future. And although still privately held SpaceX already had several successful launches of its own and currently hold almost $5 billion in government contracts. Besides already having credibility launching small and medium payloads into space SpaceX claims to bring to the table a cheaper launch vehicle that according to Elon Musk can send large payloads into space for a third of the cost ULA is doing it for, just $100 million compared to $300-330 million.

                Clearly the United Launch Alliance is facing a problem, the joint venture between two of the biggest government contractors, Lockheed-Martin and Boeing is under siege by Elon Musk’s SpaceX. SpaceX has already sent an army of lobbyists to Washington hoping to open up 34 ULA launch contracts to bidding (although this is unlikely to happen since the government officials have stated that opening these contracts to open bidding would result in higher expenditures and cost overruns) .

                Even so, ULA faces a severe problem, its Russian made RD-180 engines that are so critical to power there Evolved Expendable Launch Vehicle (EELV) that power the Lockheed made Atlas V and the Boeing mad Delta IV, are in short supply and there are few spares. Officials from both companies have tried to reassure the Pentagon that there are enough engines left for 2 ½ years, but a government report is due at the end of the month to determine if this is true.

                As for the Space race SpaceX has been trying to open all 14 launches planned for the next two years to bidding. Unfortunately for SpaceX this number this number might be dropped to 7-8 launches because of current satellites staying in operation longer. In any case the lobbying war between SpaceX and ULA will probably continue for the foreseeable future with the space race heating up over that time period.

                As for investors hoping to come along for the ride, it is highly unfortunate that SpaceX is not yet public although rumors of a potential IPO have been swirling around for years. But shares of both Boeing and Lockheed-Martin, the owners of ULA are publically traded. Also worth looking at if you are interested in investing in the space race are shares of Orbital Sciences (ORB).

                Orbital Sciences is the only pure play space company out there, and its Cygnus space capsule which was first shot into orbit in June 2013 is unmanned and has the ability to carry 20,000 kilograms of supplies. So far Orbital Sciences appears to be in the perfect position to become the leader in supplying the International Space Station. The down side to the stock is that the company does not have a manned capsule under development which is the one thing that will woo investors and send the stock through the roof. With that said however Orbital Sciences is a good stock to invest in if you are willing to invest into the new Space Race.

                Another company that might be a player in the new race to space is Alliant (ATK) this company is developing its Liberty Space Capsule due to launch in 2014. The company has had a history with NASA, it developed the Rocket boosters for the Space Shuttles. Unfortunately the company does not hold contract to develop the Liberty Capsule yet which means if the contract is not awarded to Alliant the stock might be a victim to a strong sell-off.

                In any case whether you are investing in Lockheed, Boeing, Orbital Sciences, Alliant or anticipating the IPO of SpaceX the truth is a new space race is starting and the victor will not only become rich but control the future of the space industry.  

 

 

 

IN THE NEXT FEW MONTHS I WILL BE MAKING A WEBSITE FOR INVESTMENT WEEKLY WHICH WILL INCLUDE WEEKLY STOCK TIPS AND POTENTIAL OPPURTUNITIES IN THE MARKET AS WELL AS WEEKLY ARTICLES ABOUT MARKET EVENTS AND ANALYSIS OF VARIOUS INDUSTRIES

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Facebook and Google are going Head to Head Over the Future of Tech

                As the 1^st Quarter draws to close two things have become very apparent. First of which is that 2014 is not shaping up to be another 2013, where the Dow Jones shot up a miraculous 22% including an over 1,030 point rise in the 1^st quarter (comparatively speaking the Dow is down some 181 points or 1.1% in the first quarter of 2014).

Another thing that has become apparent is that the technology giants of Silicon Valley are playing a vast game of Monopoly in which the victor gains control of the future of the technology industry. That sounds very dramatic but when you think about it, but the truth is large technology companies are going on a shopping spree, buying up start-ups that might be the key to diversification and continued dominance in the future.

The two main players in this so called “monopoly” game are Google and Facebook; both companies in recent months have made many highly publicized and in many cases expensive buys such as Facebook’s $19 billion deal to buy Whatsapp.

But while Facebook and Google wage war over who controls the future of technology other companies such as Twitter and Apple are being left behind in the dust.

(Below there is an analysis of various large tech companies and their strategies heading into th3 future.)

Facebook-

                I have never been a fan of investing in Facebook, the social media giant always seemed overvalued and one dimensional to me. With a P/E of over 100 and with only advertisements bringing in revenue I saw Facebook as the next big fad that was doomed to go the way of MySpace and Friendster.

                Yet despite what I think Facebook has had a stellar year, with its stock up 135%. And Facebook C.E.O Mark Zuckerberg has over the last few months sought to reassure skeptics (like myself) that Facebook is here to stay. I have to admit Facebook’s new strategy has led me to reconsider my stance on the company.

                The strategy of buying tech startups in order to diversify and expand is nothing new, but Facebook has certainly captured Wall Street’s eye by making a number of purchases that have been amazing in their size and scale.

                A few weeks ago Facebook purchased the messaging company Whatsapp for $19 billion. That’s an amazing sum considering that Whatsapp is not even monetized yet. Personally I feel that Facebook overpaid but that is merely my opinion that facts are that by buying Whatsapp Facebook is betting huge on the future of social messaging.

                This is probably not a bad idea considering that social media and messaging are replacing email as the prime choice for communicating information. With that said Whatsapp is still not making any money and it will take years until Facebook see’s any return on investment.

                Another high profile tech purchase recently made by Facebook, is its $2 billion buy of virtual reality headset maker Oculus Rift. The headset has not hit the mainstream market yet but its applications for gaming are obvious.

                Whether these particular investments work out or not is yet to be seen but one thing is clear Facebook is not done. I believe Facebook will continue buying up startups and continue gaining footholds in various tech related industries solidifying Facebook as a tech giant and a significant rival to the likes of Google.

                As for Facebook stock, it has enjoyed a good run in 2014 so far but as the last few week’s has shown it is highly prone to market volatility (something that is not in short supply now a days). I believe Facebook stock still has some room to go up but do not invest unless you are ready to experience times of extreme volatility.

Google-

                Rest assured Google, the undisputed king of technology, has not stayed silent as its up and coming rival, Facebook, continues buying up hot new startups. Google has made some high profile purchases of its own.

                One of which was the buying of smart house appliance maker, Nest, for $3.2 billion. By buying Nest Google is entering into the next market to be revolutionized by advances in technology, the home. The investments in Nest will definitely payoff for Google in the near future but Google has not always made wise investments. The $8 billion buyout of Motorola clearly did not payoff. Only a few months after the buyout Google sold Motorola’s hand set division for a mere $2 billion.

                Yet Google shareholders should not despair, Google has a market cap of over $376 billion, giving it a distinct advantage over Facebook’s 153 billion. So in terms of investing in Google I would think it would be a good idea. Since as long as Google remains innovative its stock should continue to go up and up.

 

IN THE NEXT FEW MONTHS I WILL BE MAKING A WEBSITE FOR INVESTMENT WEEKLY WHICH WILL INCLUDE WEEKLY STOCK TIPS AND POTENTIAL OPPURTUNITIES IN THE MARKET AS WELL AS WEEKLY ARTICLES ABOUT MARKET EVENTS AND ANALYSIS OF VARIOUS INDUSTRIES

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Are 3D Priting Stock's now Cheap?

            After last week’s volatility markets seem to have regained their momentum with the Dow gaining 132 points this week. The situation in Ukraine that had investors so nervous two weeks ago seems to be subsiding, with Crimea voting to join Russia. Unfortunately with sanctions being thrown left and right the situation is still fragile. The good news is if the political war between Putin and the West does not escalate past this current position it seems that the bull market might continue for a while longer.  

                So far in 2014 the stock market has mostly been up and down, with markets falling in January, up and February and mixed in March. Some industries have so far fared well in the New Year, such as solar energy stocks that recently have seen amazing gains due to good forward guidance. Other industries though, have dramatically underperformed.

                One such industry, that was one of the larger gainers in 2013, is the 3D printing industry. So far this year 3D printing stocks have been hammered, companies like 3D Systems, Exone, and Stratasys, have all seen their stocks fall but has this recent sell-off made 3D printing stocks cheap?

Exone- stock down 40.09% year to date.

3D Systems- stock down 38.87% year to date

Stratasys- stock down 20.97% year to date

                Clearly these losses are immense but the fact that 3D printing stocks have fallen this much in such a short period of time might suggest that they might be ready to bounce back. But before I discuss whether 3D printing stock is now a buy it is important to understand why investors have been dumping 3D printing stock.  

                3D Printing stocks enjoyed a god run-up last year with shares of major players in the market increasing as much as 50-100%. Plus 3D printing is being viewed as the future of manufacturing which it may be, unfortunately this might have created a bubble in 3D printing as investors all rushed to buy into the industry which is selling the future.

                In addition to the over speculation in 3D printing stock the industry is capital intensive and has not gone mainstream. Although many have speculated that 3D printing will replace the current $10.5 trillion industrial manufacturing infrastructure, this has so far not happened, and with companies like Exone recently announcing poor earnings it is appearing that the hype over 3D printing is collapsing.

                Yet what could be even more detrimental to the plight of 3D printing companies like 3D Systems and Stratasys is the news that Hewlett-Packard might be going into 3D printing (the $60 billion giant that is a major player in the standard printer market). H.P’s entrance into 3D printing will create an enormous competitor to current 3D printing companies, especially since H.P is considerably larger than even the largest 3D printing companies out there (3D Systems has a market cap of $5.9 billion, Stratasys has a market cap of $5.2 billion).

                All these factors, over speculation, slow entry into the mainstream market; poor earnings and lowered expectations for the next year coupled with the possibility of an enormous new competitor have clearly put pressure on 3Dprinting stocks and have caused them to fall.  

                But are 3D printing stocks reaching a bottom? Well judging by their fundamentals they are not, the only 3D printing company that is so far profitable is 3D Systems which showed a $44.1 million profit last year. Earnings per share were about $.44 which gives 3D systems a P/E ratio about 66, not exactly cheap when compared to the S&P 500 which trades at a P/E ratio of just 15.

                Normally I would say that futuristic like technology companies like 3D systems should trade at a premium when compared to the rest of the market but in this case 3D systems is showing that its growth is slowing meaning that it is not giving investors any reason to maintain the stocks premium status. Other 3D Printing companies are not profitable at all and have evaluations even worse than those of 3D Systems.

                So in my opinion 3D printing stocks have not reached the bottom yet, but this does not mean that the 3D Printing Industry is doomed. I am convinced that 3D Printing stocks will start going up again to all-time highs, but I do not believe that right now is the right time to buy.

                With that said to those of you who want to invest into 3D Printing but do not want to deal with the volatility and bearish sentiment surrounding 3D Printing stocks a good alternative would be investing into Hewlett-Packard. If H.P goes into 3D Printing as they are expected to then it is obvious H.P will shoot up.  

                H.P does not have many of the problems that other 3D Printing companies are facing, first of all H.P has an alternative revenue stream which includes its line of PC’s and standard printers, this gives the company resources to develop its own 3D printers that are superior to those of the competition. H.P also has a good evaluation, trading at just 11 time’s current earnings, which is below the market average of 15.

                So to conclude this week’s article, 3D Printing stocks are not yet a buy, since even after the sell-off there evaluations and fundamentals are still not aligned to that of the rest of the market, making 3D printing still a premium industry to invest in, even as sales begin to slow down. If the sell-off continues though, within a few months we could see a comeback in 3D printing stock but for the moment Hewlett-Packard, the technology giant, is probably the best company to invest into if you are looking to invest into 3D printing.  

WILL BE POSTING ONCE EVERY WEEKEND ABOUT MY OPINIONS ON THE MARKET AND VARIOUS INVESTMENT OPPORTUNITIES I HAVE FOUND.

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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.  

 

 

WILL BE POSTING ONCE EVERY WEEKEND ABOUT MY OPINIONS ON THE MARKET AND VARIOUS INVESTMENT OPPORTUNITIES I HAVE FOUND.

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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.

WILL BE POSTING ONCE EVERY WEEKEND ABOUT MY OPINIONS ON THE MARKET AND VARIOUS INVESTMENT OPPORTUNITIES I HAVE FOUND.

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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.)

 

I WILL BE POSTING ONCE EVERY WEEKEND ABOUT MY OPINIONS ON THE MARKET AND VARIOUS INVESTMENT OPPORTUNITIES I HAVE FOUND.

IF YOU LIKED THIS ARTICLE FEEL FREE TO SPREAD THE WORD SINCE I AM CURRENTLY ADVERTISING SOLELY THROUGH WORD OF MOUTH

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