The Chairman’s Circle Wealth Cruise
Sydney to Bali, February 16-28, 2014
Aboard the Crystal Symphony
Chief Investment Strategist, The Oxford Club
- How to Inherit “An Embarrassment of Riches”
- Secrets of The Oxford Investment System
- Three Trading Systems That Actually Work
We began our journey in Australia’s capital city with an overview of the country’s investment prospects.
Australia is a beautiful country filled with attractive people. The men on the trip have been admiring the women, and the women on board seem to enjoy ogling the local men as well. It helps, of course, that obesity is not epidemic here. Australians are a lean, fit people. And who ever tires of hearing “G’day mate” or “No worries?”
Upon entering the city from the airport, an enormous cockatoo with a brilliant yellow crest flew in front of our cab. I thought perhaps someone’s pet had escaped. Then we turned the corner and a whole flock of them flew up in front of us. Beats the heck out of nasty grey pigeons, though Sydney seems to have its share of those too.
I’ve also been reminded of the little differences you notice whenever you’re traveling in the southern hemisphere. It’s summer here instead of winter, of course. At night, the constellations are different. You’re more likely to see the Southern Cross than the Big Dipper. And it’s always a bit odd to discover that the weather gets warmer as you travel further north, which we did as we steamed up Australia’s eastern coast.
To Sydney and Beyond
Our group kicked things off in Sydney with a pre-seminar at the Four Seasons. We heard from such luminaries as Bridgeworks Director Wayne Dyson, Bron Suchecki (manager and analyst at the Perth Mint) and Dan Denning, chief investment analyst and editor of The Denning Report, a high-level macroeconomic survey specializing in Australian investment opportunities.
Dan gave us a neat summary of the pros and cons of investing in Australia right now. On the plus side, Australia is blessed with natural resources, including oil, natural gas, copper, lead, zinc and gold. As an additional plus, it happens to be situated a lot closer to China than Europe or North America. China – with its voracious appetite for raw materials – is a natural market for much of Australia’s natural bounty.
But there are negatives too. Members of our group were surprised to discover how expensive things are here. One afternoon, for instance, we ventured over to Manly Beach to watch the Australian Open Surfing Championship. Poking around the stores, we found that men’s surf trunks sold for $200, t-shirts were $40, lunch was $80. Many of the women, eager to stimulate the local economy, bought nothing.
The Aussie dollar has plunged 17% from its peak in early 2013. Unfortunately, that’s not nearly enough.
A local Australian expression is that something is “safe as houses.” But housing isn’t cheap there… or safe as an investment. (Australia avoided the recent housing bust that afflicted so much of the United States and Europe by following sound banking practices. In short, it required actual down payments.)
The average home in Sydney currently sells for $765,000. (Closer to $700,000 in U.S. dollars.) And my Agora colleague Harry Dent made waves during our stay by forecasting that Sydney home prices are destined to fall 50%.
That forecast sounds a bit ambitious – though perfect for grabbing local headlines – yet there is no denying that trouble lurks around the corner when the average family cannot come close to affording the average home.
On the basis of purchasing power parity, the Australian dollar needs to come down. After all, the currency was worth less than US$0.50 14 years ago. It then rode the boom in commodity prices. Today, however, the Goldman Sachs Commodity Index is well off its highs. Yet the Australian dollar is still up nearly 80% from a decade ago. A currency adjustment would make the country much more attractive for exports and tourists.
Australia also has a problem with its labor unions. Like so many unions elsewhere, they have a bad tendency to overplay their hand. In recent negotiations, for example, Toyota Motors (NYSE: TM) offered factory workers an 11% pay raise. The union held out for 12% and went on strike for three weeks. After the strike was settled, a third of the work force called in sick.
Toyota decided to call it quits. It is leaving Australia. In fact, the unions have driven out all of the major international manufacturers over the last few years. (Unfortunately for union members, their negotiators have a hard time calculating 12% of zero.)
In sum, I think it’s too early for any big commitment to Australian equities. Commodity prices are falling. China’s economy is slowing. The Aussie dollar is weak. Unions are noncompetitive and uncooperative. Real estate is expensive. And stocks here are no great bargain either.
The Great Outdoors
After boarding the Crystal Symphony, we sailed north to Cairns (pronounced “cans”) and spent two days in port. The first evening, we traveled by motor coach up a scenic coastal road to Port Douglas.
Upon arrival, we enjoyed a superb dinner – including surprisingly tasty kangaroo steaks – under a black silk canopy in a torch-lit rain forest. (We got the full treatment. It drizzled outside the entire evening.)
Two Aboriginal brothers – complete with body paint and tribal garb – played the didgeridoo, shared a bit of local history and told us a centuries-old Aborigine tale.
It went something like this…
A duck wandered off one day and fell in love with a water rat. Her parents and the other ducks heartily disapproved, but as the young duck’s heart was set, they married and decided to start a family. When the eggs hatched, however, the other ducks were shocked to find that the children had the large, flat bills and webbed feet of a duck, but the shaggy body of a water rat. “And that, my friends,” the storyteller concluded, “is how we got the duck-billed platypus.” A charming story. Yet it may not have passed muster with the man for whom the country’s northernmost town is named: Darwin.
The next day in Cairns, our group embarked on a tour of the Great Barrier Reef. As you may know, this is not just the world’s largest reef but the planet’s biggest living organism. More than 1,300 miles long and covering 80,000 square miles – an area slightly smaller than Kansas – it is visible to astronauts zipping by in outer space. Scientists believe it may be more than 18 million years old.
Our adventure that day was one I know I’ll never forget. First we dove into the reef, seeing all sorts of beautiful coral formations, huge fish, giant clams and even a loggerhead paddling by.
Then we snorkeled it, which, if anything, was even more fantastic since it was a bright, cloudless day, and countless thousands of fish were frolicking near the surface, shining iridescent in the sun. Afterwards, we took a helicopter tour of the reef and got another spectacular view from above. I struck several items off my bucket list.
Back on board, we were joined by our old friend, Rustem Hayroudinoff, the internationally acclaimed classical pianist who has played at several Oxford Club events. He performed a solo recital for us, another bravura performance. Afterward, he told me he was surprised by the size of the crowd. I confessed that I shouldn’t have told so many passengers he would be performing the entire White Album. His selections actually leaned more toward Chopin’s Grande Valse Brillante Opus 18, Liszt’s Transcendental Etude in F minor and Rachmaninoff’s Etude-Tableau Opus 39.
We held investment sessions at sea the next day and arrived in Darwin the following day. From there, it was on to Komodo Island, home of the ferocious Komodo dragons. These giant, venomous reptiles roam the island freely, so – for their own safety – travelers are not allowed to step ashore except as part of an organized tour. With no fences or railing, it feels a bit odd to stand next to an 18-foot dragon with a venomous bite, but that’s what we did. (Makes a bear market seem relatively harmless.)
We disembarked from the Crystal Symphony in Bali, Indonesia, certainly one of the most beautiful places I’ve ever visited. Fortunately, several members of our group and I booked a couple of extra nights at the AYANA Resort on the Indian Ocean. It was hard to leave…
But while I was there, I also uncovered an intriguing investment opportunity: PT Telekomunikasi Indonesia (NYSE: TLK). You can read all about it in the April issue of the Communiqué.
Chief Income Strategist, The Oxford Club
- 20% Yields on Conservative Stocks
- What You Need to Know About Investing in BioPharma
Dear Fellow Traveler,
The Chairman’s Circle Cruise to Australia and Indonesia was one of the best trips I’ve ever taken. The ship was incredible, and the company was even better.
During the cruise, I had to take a break from the fabulous food, bottomless wine glasses and fascinating ports of call to deliver two presentations and participate in a panel discussion.
My first presentation described how investors can achieve 20% annual returns or more by selling covered calls on dividend stocks.
20% Yields… It is Achievable
When you sell a covered call, you are giving the buyer of that call the right – but not the obligation – to buy your stock at the agreed upon price, also known as the strike price. In return, you receive cash.
If your stock does not go above the strike price, you keep the cash and your stock. If it is above the strike price, you still keep the cash but will likely be forced to sell your stock at the strike price.
To boost your returns, you sell covered calls on stocks that will pay a dividend in the next month or two.
I gave several examples of how you can achieve 4% yields in as little as a month using this technique. Most dividend stocks pay 4% or less for the year. But using this strategy, which is the same one I use in the Dividend Multiplier service, you can make 4% in just a few weeks. Annualized, the returns should be 20%, 30%, 40% or more.
I provided two actionable ideas, one on TAL International Group (NYSE: TAL) as a short-term trade designed to yield a minimum of 4% in one month (7.4% if the stock is above the strike price).
A longer term idea was selling a January covered call on Sturm Ruger & Co. (NYSE: RGR), which should earn between 10.9% and 16.5% in less than a year.
Investing in Biopharmaceuticals
My second presentation was titled “What You Need to Know About Investing in BioPharma.” I kicked things off with a discussion about European biopharma stocks, and why I think those stocks are undervalued and a great opportunity right now. For example, European drug company stocks are more than 50% less expensive than their American counterparts. And they’re expected to grow earnings per share 9% per year through 2017.
Sentiment is not favorable in Europe, which is another reason I like it. I want to be in the stocks that everyone hates before they change their mind – which is usually after a 50% rally.
I also discussed “Pharmerging” markets: countries like China, India, Russia, Brazil, Turkey, Vietnam, Egypt, etc. These countries are expected to double their spending on pharmaceuticals and biotech medicines between 2011 and 2016.
I named my two favorite European pharma companies: Novartis(NYSE: NVS) and GlaxoSmithKline (NYSE: GSK).
Novartis’ Gleevec was a game-changer for multiple myeloma patients, changing it from a death sentence to a manageable disease for many. Gleevec goes off patent next year, but the company has a next-generation drug called Tasigna. The company has already converted 26% of Gleevec patients to Tasigna. The new drug is projected to generate $2.6 billion a year in peak sales.
GlaxoSmithKline is a contrarian pick, as it is not well liked on Wall Street after the company endured a bribery scandal in China. That’s all behind it now. It has a lower P/E than most drug companies, but a higher yield. And it had more FDA approvals last year than any other company. It has 93 approved drugs and 106 pipeline candidates. I urged the audience to get in before Wall Street rediscovers the stock.
Then there was a lively panel discussion on the best places in the world to invest. I agreed with Alex Green’s bullishness on emerging markets. Naturally, I said Europe was a good contrarian bet, but I also explained why I’m bullish on the United States.
The economy is improving, albeit slowly. There are still a large number of investors who are not participating in the markets and, despite our issues, we have the most transparent markets in the world. People forget how America and its markets are still seen in the rest of the world.
One of the highlights of the trip for me was my hosted dinner. The conversation was lively and covered a broad range of topics, including one Member’s World Series ring (which he passed around the table) and hearing about how another Member started and eventually sold a $750 million company.
Other highlights included the performance of concert pianist and Oxford Club friend Rustem Hayroudinoff. The audience leapt to its feet in a thunderous, standing ovation when he was finished.
As I mentioned at the top, the food was unbelievable. The cream of mushroom soup served in a bread bowl was as good as anything I’ve ever eaten.
My favorite port was Komodo Island. The scenery from the ship was breathtaking. And it was a thrill to be in the only place on the planet where you can see the Komodo dragon in its natural habitat, especially when we were just feet away from the deadly creatures.
Lastly, winning one poker tournament and coming in second in another put a little extra cash in my pocket to pick up boomerangs for my kids and mango wine (it’s better than it sounds) for me.
It was an amazing trip, and I’m already counting the days until the next one in 2016.
Investment Director, Oil & Energy Daily
- Global Energy Trends
- Three Ways to Play the Resurgence of Natural Gas
If there’s one certainty in life, it’s the fact that The Oxford Club knows how to put on a first-class event. The recent cruise between Sydney, Australia, and Bali, Indonesia, was no exception. While I participated on the journey between Sydney and Cairns, the inside scoop has it that the journey from Cairns to Bali was even more spectacular, with a memorable stop to see the famous Komodo dragons close up and personal on the island of Komodo.
For me, these cruises are a special time to actually meet and spend time with Members and listen to their fascinating stories. It’s no secret that Oxford Club Members are amongst the most successful people on the planet, and their thirst for knowledge and success is second to none. But what I find most admirable is their desire to share their knowledge and experiences with us in a candid manner.
By far, the highlight of the cruise for me was the hosted dinner, where I sat with many Members and we discussed everything from raising children to views on investing. It was a great setup for the following day’s presentations.
Global Energy Situation
The focus of my presentations was the global energy situation and also the domestic energy boom in the U.S. We are entering a brand new world when it comes to energy, with everything on the table as far as sources and uses are concerned.
Energy has always been the most critical part of economic growth, and that is no different today. What is different is the recent “discovery” of new techniques to extract energy, and the advent of alternative energy that may threaten the fossil fuel industry in the future.
The focus of the first presentation was an overview of the energy users, suppliers and costs. Right now, the greatest growth in usage is coming from the emerging markets, with China leading the way. However, India is the fastest growing destination for energy use. These countries are reliant on fossil fuels, especially coal, followed by oil and then natural gas. People don’t realize that almost 70% of the world’s energy is still provided by coal.
But the coal industry is one that is being targeted by environmentalists, as it is by far the most polluting resource. In order for alternative energy sources to be substitutable, they must be both plentiful and cheap. That rules out oil, which is available but expensive. Alternative energy sources like solar and wind are plentiful and available, but the cost to generate the same amount of energy per non-subsidized dollar is still exponentially higher than that of fossil fuels.
The answer for the near-term points to increasing usage of natural gas, which is both plentiful and cheap… in certain parts of the world. Within a decade, the use of liquefied natural gas (LNG) will have a significant impact, as the cheaper energy will be transportable worldwide. One of the leading producers will be Australia, followed by Qatar.
The U.S. is only beginning to find its footing when it comes to LNG. Ultimately, the world’s energy sources will still be coal, oil, natural gas and alternative energy. In that order. However, the growth is definitely coming from the increased usage in natural gas, and that is where the future profits will come from as well.
Natural Gas to the Rescue
In the past decade, the U.S. has become a natural gas giant thanks to fracking technology, which has unearthed a massive supply of natural gas and oil, and is the base rock of the current economic expansion in the country. On the second day, I focused on three plays to take advantage of this revolution.
The first is the second largest natural gas company in the U.S: Chesapeake Energy (NYSE: CHK). The company has had its share of problems stemming primarily from mismanagement of assets and hyper-growth in debt. Those problems have been solved with new management and a massive disposal of non-core assets. Chesapeake now stands to benefit the most from the increase in natural gas prices over time, and it’s a pure play on the growth and usage of natural gas.
The second company is Basic Energy Services (NYSE: BAS), a small-cap company that provides gas and oilfield services. The shares continue to tear higher as investors realize they are a growing “pick and shovel” play on the energy renaissance in the U.S.
Finally, I mentioned a very speculative company called Clean Energy Fuels (Nasdaq: CLNE), which is the leading supplier of natural gas – both liquefied and conventional – to the commercial transport market through its “gas” stations, which it is building on truck routes nationwide. The company is backed by T. Boone Pickens, a major proponent of natural gas usage. It is speculative only in timing, since technology to use natural gas for trucking needs to be adopted on a major scale and on a timely basis for CLNE to succeed.
The world will always be reliant on energy. That is a fact. The question is which types of energy – and in which form – will provide profits for investors moving forward. In my opinion, natural gas looks to be the clear winner.
Emerging Trends Strategist, The Oxford Club
- The Prime System and Building Profits One Season at a Time
- The Best Small-Cap Stocks for 2014
This February was my first visit ever to Australia. And I found it fascinating… touring Sydney, Cairns, the rainforest and the Great Barrier Reef (where, within five minutes of being in the water I saw a shark).
But obviously, beyond the cultural experiences and the lavishness of our accommodations on the Crystal Symphony, we were there to discuss the markets and investing.
For Every Season, There’s a Sector
In my first presentation, The Prime System and Building Profits One Season at a Time, my topic was: The Super Bowl is Over… Now What?
I discussed and highlighted two companies that demonstrate trends at this time of year.
One of the tenets at Emerging Trends Trader is “For every season, there’s a sector…”
And the Prime System helps us identify those times of year when one industry is down but provides a good entry point before shares pop.
Now, February is home to Valentine’s Day. A holiday about love, where the decorations are heart-shaped. And that’s kind of ironic considering one of the sectors the Prime System focuses on in the month.
In February, I begin looking at medical device companies.
Many of these companies are in the business of keeping heart failure or heart transplant patients alive.
These companies have a tendency to pop during the Prime Period from February to August. In fact, the Prime System’s Medical Device Index, which is made up of 38 companies, returned an average of 21.52% during this stretch in 2013.
That far outpaced the 13.94% return of the S&P 500 or the 12.75% gain the Dow Jones Industrial Average saw during that same stretch.
And only seven companies in the Prime System Medical Device Index ended the period from February to August in the red.
So we’re going to focus on one of the stars of the Prime System Medical Device Index over the last several years: ABIOMED, Inc.(Nasdaq: ABMD).
ABIOMED is a medical device company that provides circulatory support products for acute heart failure patients. Its main product is the Impella 2.5 catheter – the world’s smallest heart pump.
In the second quarter of fiscal year 2014, ABIOMED reported $44.3 million in revenue – up 19% from a year earlier – with revenue from Impella accounting for $40 million of that total. And that revenue was up 23% from the second quarter of FY 2013, as Imeplla usage in patients increased 24%.
Revenue for the company has been steadily on a positive incline, though the third and fourth quarters will be the best time of the year, with a slight step down in the first quarter.
ABIOMED reports for first quarter earnings in August (and that’s important to remember). Third quarter earnings take place at the end of January/beginning of February, while fourth quarter earnings are released in May.
It wouldn’t seem like an industry that has share price fluctuations… But it does…
Here is the Average Monthly Move of ABIOMED shares over the last five years…
What we see by looking at this movement in shares is that January, August and December are the worst months, with September averaging a slight negative return. But August is by far the worst month for shares over the last five years and has been the worst month for the S&P 500 as well. Unfortunately, shares of ABIOMED have under-performed the S&P during the month of August by a wide margin…
But on the flip-side, we see that April and June are the best month for ABIOMED shares on average, followed by October and November.
Now, April and June haven’t been perfect, but the months have a much higher chance of success and a higher average return.
So if we just target shares of ABIOMED during that six-month stretch of green, we get a very strong Prime System.
So, the Prime System trade did result in three losses, but the rest were double-digit gains. And the 10-year average for this six-month Prime System trade is a return of 20.05% with a 70% chance of success. Meanwhile, the five-year average is even stronger, with an average return of 34.14% and a success rate of 80%.
Plus, over the last two years, this trade has returned gains over 70% twice, with a gain of 20% or more in four consecutive years.
During ABIOMED’s Non-Prime Period – from August to February – shares have averaged a loss of 5.72% during the last five years and a gain of just 2.65% over the last 10 years.
Movin’ On Up
The second company I covered was in a different sector… but had a strong trend following Super Bowl weekend.
If you’re looking for a new home, there’s one place you end up: Realtor.com.
Even though there is a slowdown in real estate price growth, it doesn’t mean the housing market is dead or cooling down. There’s a seasonal slowdown every year from the third quarter to the fourth quarter… But this year’s easing off in prices is the smallest we’ve seen in a few years…
Home prices increased 6.9% year-over-year in November and declined just 0.7% from October.
But we’re about to enter the busiest times of year for real estate: spring.
There’s a lot of inventory that’s pulled from the market during the last couple months of the year. There’s a long-standing belief that homes don’t move during these months because of the holidays, both for the seller and buyer.
Now, I don’t necessarily believe that holds true anymore… If you’ve shopped for a new home in the last several years, you know that you’re able to shop 24/7. In the morning, sipping your coffee or eating breakfast, you scan through online listings… During your lunch break or any free moment you get during the day, you scan through online listings… Before you turn out the light at night to roll over and go to sleep, you scan through online listings…
This is where sites like Zillow, Trulia, Redfin and Realtor.com fit in. They allow nearly unlimited access to all the homes available regardless of the time of day.
But the majority of consumers like one site the best: Realtor.com.
This website is owned by Move, Inc. (Nasdaq: MOVE), which also operates a number of other real estate websites, like HomeInsight, Move.com and SeniorHousingNet.com, to name a few. In total, its websites attract more than 20 million visitors per month. And more importantly, these are available on mobile platforms.
Move, Inc. also owns software, like ListHub, FiveStreat and SocialBios for real estate professionals.
In the third quarter, the company announced its eighth consecutive quarter of sequential growth. Revenue increased 19% to $58.8 million, with consumer advertising increasing 14% to $45.6 million. The biggest gains Move, Inc. saw was in its Software and Services segment, where revenue increased 41% to $13.2 million.
The company also saw its number of unique users increase 22% to 28 million.
When it releases fourth quarter results, Move, Inc. expects to report $227 million in revenue for 2013.
This will be a 14% increase over total annual revenue for 2012… and up more than 18% from what the company did in 2011.
Because of the ebbs and flows of the real estate market, Move shares also exhibit a similar trend, particularly since 2009.
Here’s what the average monthly return of Move shares looks like for the past five years…
We see the first four months of the year are strong, and then we get another two solid months on average in June and July.
April has been hit or miss the last five years, with the last three years not providing anything particular to rave about. But March, June and July have consistently been good months for Move shares.
On the other side of the coin, May, August and November have been particularly bad months for shares.
Interestingly, if you look at the average monthly return chart, you notice a rhythm. Specifically, February has an okay return sandwiched between two strong monthly averages. Three months later, May is not so good. Three months after that, August isn’t so good. Three months after that, November isn’t so good…
In February, Move releases fourth quarter results…
In May, the company reports first quarter results…
August is its second quarter release…
November, the company announces third quarter earnings…
Investors apparently like the idea of Move’s results, just not particularly the reality.
So our Prime System trade on this is from January to the beginning of August. It’s been a rocky trade, with some swings lower; but staying the course has paid off. We’re also targeting the best periods for quarterly reports: the fourth quarter – with next year guidance – and first quarter results.
Over the last five years, as the housing market has pulled itself back from the brink of oblivion, this Prime System trade has resulted in a loss once. And it has averaged a gain of 42.59%.
Holding shares from August to January has been far less profitable, resulting in losses three of the last five years. And it averages a return of -10.31%.
Now, you can also wait out the entire months of January and February – avoiding that fourth quarter report – and begin your Prime System trade at the start of March. This is a little less volatile of a trade, but some of the gains during the Prime Period haven’t been as high…
The Best Small Cap Stocks of 2014
In my second presentation, I discussed three companies that are key players in the continuing emergence of Smart Cities, wireless devices and, ultimately, The Internet of Things.
I like these three companies as long-term prospects because of this continual shift towards interconnectivity of all devices.
And no company, in my opinion, is more important or integral than Skyworks Solutions (Nasdaq: SWKS)…
The company is a manufacturer of high-performance analog semiconductors, used in everything from broadband and cellular devices to synthesizers.
Skyworks has a current market-cap of $5.68 billion, a P/E of 19.08, no debt and $648.6 million in cash.
Some of its customers include:
- Cisco •Honeywell •Nokia •Northrop-Gruman
- Google •Motorola •Samsung •Sony
In the first quarter, Skyworks’ profit increased 44% as revenue increased 11% to $505.2 million. The company expects second quarter revenue to also increase 11% year over year to $470 million… And it announced it will provide navigational assist content for all Volkswagen models next year.
As for Skyworks Solutions quarterly revenue performance…
This is how the number of components its supplying to smartphones has increased in just the last few years…
In the mobile field, the company expects a 10-15% compound annual growth rate (CAGR) for the next several years. And Skyworks expects the number of units in mobile devices to increase at a 4-5% CAGR, with the premium smartphone and entry level smartphone markets representing the largest growth areas.
With all of the chips being created and employed globally, there has to be a company that’s working to lower the manufacturing costs of semiconductor companies. And that’s where PDF Solutions (Nasdaq: PDFS) fits in.
PDF Solutions operates in the semi-conductor sector. But it doesn’t produce or manufacture chips. Instead, it offers output improvement technologies and services for the integrated circuit (IC) manufacturing process. Clients include Toshiba and Texas Instruments.
It’s a fast-growing company, with EPS growth over the last five years at 70%. And it’s currently pursuing new technologies like 3D printing transistors.
The company isn’t big, with a total market-cap of $763.98 million, sports a P/E of 20.66, has no debt and has total cash of $89.4 million.
In the fourth quarter, revenue increased 6% sequentially to $27.1 million, which was up 14% compared to fourth quarter 2012. And total revenue for 2013 increased 13.3% from $89.54 million to $101.453 million. PDF Solutions has also beat expectations in six out of the last nine quarters.
Like Skyworks Solutions, this small-cap’s quarterly revenue has continued to increase…
Finally, let’s talk about how cellphones are evolving. Companies are looking at bendable glass, curved phones and even pen-sized tablets that unfold.
All of this requires the development of new types of glass that is not only strong to withstand the punishment of everyday wear-and-tear but is also flexible.
And in this space, Corning (NYSE: GLW) has been the king.
The industrial glass manufacturer reported that sales in the fourth quarter were $2 billion, down slightly for Q4 2012. But full-year sales were up 5% to $7.95 billion.
Since October 2011, Corning has doubled its dividend and repurchased 13% of outstanding shares.
And at the time, shares were currently 3.56% off their 52-week high of $19.12.
The company’s future is pinned to glass ceramics, low-cost optical fiber and LCD glass substrates, with Corning’s two big products being “Gorilla Glass” and “Lotus Glass.”
Gorilla Glass is used in 2.4 billion devices worldwide, in 2,400 product models and by 33 major brands.
It’s used in smartphones, tablets, notebooks, architecture (elevators, etc.), interactive displays, automotive and household appliances.
Lotus Glass is for high-performance uses, like organic light-emitting diodes (OLED) and next generation liquid crystal displays (LCD).
This market is anticipated to grow 35% over the next couple of years.
And already, Corning reported record LCD glass volumes for 2013. Plus, the recent acquisition of Samsung Corning Precision Materials Co. will add an additional $2 billion in sales this year to the Display Technologies segment.
Here’s Corning’s quarterly revenue and how the company continues to rebound…
This is particularly apparent in Corning’s annual revenue…
Bond Strategist, The Oxford Club
- The Bond Cure
- A Bond Strategy for All Markets
Cruising on the Crystal line is almost like being a member of the court of Versailles under Louie XIV. We just don’t change our clothes as often.
At Versailles, the members of the court changed clothes six to eight times a day, were served food and drink all day, every day, and were entertained several times a day.
That’s exactly what a cruise on the Crystal Symphony is like. Nonstop food and drink – all free – every kind of entertainment imaginable, daily guided excursions, organized receptions and dining every night. But we only change our clothes three times a day for touring, exercising and dining.
The Royal Treatment
We started our aristocratic odyssey in Cairns, Australia, in the Northern Territory: the gateway to the Great Barrier Reef. Virtually the entire ship went snorkeling or diving, or just cruising the reef. And of course, we all came back to the ship for a quick nap and another six or seven-course dinner.
Just another day for the royalty of the sea!
The last night in Cairns, we were transported to a feast in a private grove in a rain forest, lighted by thousands of tiny bulbs. We dined on Kangaroo, shrimp, steak, local vegetables and fruit.
The entertainment included a local Aborigine who played a digaderoo, the ancient instrument of his people, and told us the story of the platypus. It was essentially a Pygmalion tale.
Just another day on the cruise.
Next up was two days at sea in route to Darwin, Australia. The story was the same: relaxing by the pool, being served any and all kinds of food, six and seven-course meals, dancing nightly, movies, live singing and dancing performances, and desserts. Endless desserts.
One day out of Cairns, one particular lunch included endless lobster tail, shrimp, prime rib, seven different salads, vegetable and pasta dishes, and two entire tables of desserts. Every dessert you ever imagined!
And that was just the first day out! Oh, and of course, a seven-course dinner with wine pairings.
I couldn’t help but think of how the French aristocracy would envy the treatment we were receiving.
The second day was a lunch built around American favorites: ribs, chili, roast beef, roast pork, salads, shrimp and burgers. It was ridiculous.
Oh, and of course, a seven-course meal with wine pairings that night.
Bonds Are Different You Know
My presentation included a discussion of the misconceptions about bonds and bond investing, and how Wall Street’s marketing machine has convinced investors it is ok to lose money.
The point was driven home with the idea that everyone buys stock in multiple companies, but no one expects to make money in all of them. The underlying assumption is that it is ok to lose money on some of them.
In bond investing, we never plan to lose money.
The idea of consistent smaller earnings was explored by asking how much each person in the audience would be worth if every investment they ever owned paid between 6% and 15%. Which is the average return on the OBA.
The fact that bonds allow you to know what your minimum expected annual return will be before you invest one cent was discussed to further develop the idea of the reliability and predictability of bonds. And how the higher level of reliability of bond returns gives bond buyers a psychological edge that allows bond owners to know how much profit they’ll receive and when they will receive it.
The 80-year average success ratio of 94% for corporate bonds was presented as evidence of the reliability of the asset class.
The second part of my presentation included a discussion of the one problem with bonds: increasing interest rates. And I also included a presentation of how to structure the maturities in a bond portfolio to limit price volatility to as little as three percent.
The concept of duration was explored in terms of coupon, calls and maturity, and a model staggered bond portfolio of five bonds was presented.
Two bond ideas were recommended: Arch Coal, cusip 039380AJ9; and Rent-A-Center, cusip 76009NAH3. Both were from the open positions of the OBA portfolio.
Frankly, I was impressed by how many of our members broke themselves away from the daily entertainment on board to come and listen to our money presentations. If I were not a speaker, I’m not sure I would have been there.
Darwin, Australia – my first stop – was a quiet, small town that had just celebrated the anniversary of the Japanese attack in 1942. This little outpost endured 22 months of bombing by the Japanese but never yielded. The residents are very proud of their stand, as they should be.
The entertainment included the chance to be submerged in a tank with a salt water crocodile (not my idea of fun), tours of the local water falls, giant ant mounds and local nature preserves.
When I think about the crocodile, maybe we were living more like Romans than the French. The Coliseum had nothing on this croc show!
And of course, back to the ship for a nap before our seven-course meal with wine pairings and endless desserts. And after dinner, it was karaoke, a piano bar, cheek-to-cheek dancing in the Starlight lounge and more desserts. And the casino.
Next stop: Komodo Island! We have all seen the Komodo dragons on TV or in pictures, but nothing prepares you for being six feet away from one in the wild. No fences, no cages, in the wild at a waterhole waiting for their prey to come to drink.
And yes, they eat tourists, too!
The water hole where the dragons were lying in wait for an unsuspecting deer or boar, or a tourist who gets too close, was ringed by rangers who kept us at a safe distance but…
The dragons can outrun a dog, climb trees and swim. Our guide told us to be sure to run in a zigzag pattern if one happened to charge us.
300 pounds of prehistory fury that can outrun a human and might charge unsuspecting tourists… And the best the ranger could offer was to zig and zag. I have done more exciting things, but I can’t think of any right now.
One of the groups who visited the waterhole later in the day had a dragon come out of the bush behind them and casually walk into the watering hole, splitting the panicking group in two.
A little too much adventure for me.
Next stop: Lombok, Indonesia
This port was a wake-up call for those of us from the developed world. It was a poor, remote island where people lived in thatched huts in conditions that we would consider unfit.
The wakeup call was not that there are people on this planet who live in what many would consider sub-human conditions; it was that they were so happy with their lives.
Every person beamed when you spoke to them, and everyone seemed excited to talk about their homes and village. These were happy, content people.
And in the midst of poverty and a high level of filth were beautiful schools. It was amazing the weight the residents of this poor island put on education.
The one thing that was really unusual about Lombok was the divorce laws. Only the man can decide to divorce, and all he has to do is say “I divorce you.”
That’s it! Not exactly up to speed with the rest of the world.
Back to the ship for more drinks by the pool, a poker tournament and the usual six-course meal with pairings and dancing into the night.
Even the French didn’t live this well.
Finally Bali! This was the biggest surprise of the cruise.
Here’s a bustling, clean, very crowded island where everyone seems to own a motor bike. There are so many they seem like flies. They’re everywhere.
Our tour included visits to artist communities that worked in gold, silver, wood, batik and oil paintings. The painters were really amazing.
In the middle of nowhere, literally in a rice paddy, was a huge art school with some of the best student art I have ever seen. Most of the paintings had a Hindu or tropical theme, and the detail was excellent.
If I had room in my suitcase I would have taken home several pieces.
And then it was back to the ship for our last night celebration. By now, you know what that included.
The way we were pampered, waited on and served really was on the same level as the court at Versailles, but that wasn’t the best part of the cruise.
The best part was getting to know so many Members. Here was group of successful, accomplished people who were a real pleasure to know and spend time with. It really was the best part of the trip, and many addresses and emails were exchanged before we parted ways.
Traveling 30 hours by plane, eight days at sea, and another 28 hours in the air to get home seemed like an enormous effort before we left, but the people alone made it worth the trip. I’d do it all again.