Hope for California real estate
Politics - Dan Walters: Population increases drive state - sacbee.com
The above article from the Sacramento Bee reinforces my belief that the population growth of California will soon/someday turn home prices in an upward direction again. A quote:
“Those 438,000 additional Californians (the state number) will generate a need for at least 150,000 new housing units, which means that while the housing industry has been clobbered and there are many vacancies, within a year or two, demand will catch up.”
The numbers are the annual growth rates. Those that believe in the never-ending housing bear market seem to fail to understand where 400k new people in California are going to live. And with the price downturn in California approaching it’s 3rd birthday, I think 2008 could bring some surprises.
TETRA Technologies: Turnaround Candidate
I have taken a long look at this company before deciding to add it to my 20 Stock Portfolio. TETRA (TTI: 19.69 +0.31 +1.60%) is in the oil services industry and the different technologies and terminologies concerning their business are confusing someone not familiar with the business (me!). From reading their literature to company specializes is a couple of areas:
- Fluids: They are the largest producer of calcium chloride.
- Well Abandonment and Decommissioning
- Production Testing
- Wellhead Compression Services through their subsidiary Compressco, Inc.
2007 has turned out to be a very rough year for TETRA and profits have fallen about 25% after several years of excellent growth. The stock price has, of course, been battered, falling from a high of $30 in July to below $16 now. At this point I like the company for two reasons:
- The fall in profits appears to be a limited time occurance. The stock is now trading at 11 times 2008 projected earnings and any positive quarterly earnings reports should have a very positive stock price impact. From reading the company reports, it appears the management has figured out the causes of their loss of earnings growth and are taking positive steps to remedy the situation.
- The company has plans and has filed to spin off Compressco, Inc. as a MLP. They are doing this to “unlock” shareholder value. I like the idea of getting an additional dividend paying stock out of the company, and I believe the spin off could only be positive to total investment value.
The biggest issues for me are: Can management really do what they promise? And when will the MLP spin off actually take place?
At this time I think the future looks positive for TTI and am adding it to this site’s hypothetical 20 Stock Portfolio. Since this is year end, I will include it in the portfolio’s value tracking starting with the new year.
Note: I currently do not have a position in TTI.
Why negative financial news sells
Bill Rempel, a.k.a. NO DooDahs! » Keeping Perspective
I am pretty much of a permanent positive guy when it comes to investing and I try to find companies with positive stories that will make me outsized returns over the longer term. The news however, and many financial blogs are full of recession, crisis of the day/week/month and other negative stories. Bill Rempel, in the post linked here gives the best argument I have seen on why negative financial news is so popular. My favorite line:
The point is, at any given period in time, there is within us the ability to focus on the negative or the positive, and focusing on the negative at any one point in time results in a point of view that, in hindsight, pretty much always looks ridiculous. Unfortunately, our focus can color our reactions, and become self-fulfilling – as anyone who’s ever sold at the bottom can attest.
News Links for the Week: 12/21/07
City Bank (CTBK: 15.22 -0.12 -0.78%) to pay special $1.00 dividend.
Kurt Wolff on the prospects for Penn West Energy (PWE: 33.69 +0.68 +2.06%).
Thornburg Mortgage (TMA: 0.73 +0.02 +2.82%) declares dividend and promotes Larry Goldstone to CEO.
City Bank (CTBK: 15.22 -0.12 -0.78%) to pay special $1.00 cash dividend.
Silver Wheaton (SLW: 14.44 +0.20 +1.40%) signs contract for silver from new mining operation.
VeraSun Energy (VSE: 6.19 -0.01 -0.16%) begins work on corn oil extraction facility. Corn oil will be feed stock for production of biodiesel, increasing the amount of biofuel from the same amount of corn by about 7%.
Ethanol crush spread average: $1.58 ending week at $1.71. See this post on significance to VSE.
Mercado Libre vs. Gmarket
This pair of companies are recent start up attempting to repeat the success of eBay in their respective markets. Mercado Libre is South American focused, headquarters are in Buenos Aires, and offers their online auction in a dozen Latin American countries. Gmarket is a South Korean company, focusing their efforts on the local market.
Mercado Libre (MELI: 54.70 +0.21 +0.39%) has been public since August 2007 and the stock has had a very nice run up, more than doubling. Gmarket (GMKT: 24.45 +0.265 +1.10%) has been traded in the U.S. for about a year and a half and is about 50% higher than the opening price. However, there have been a couple of pretty severe pullbacks along the way. Let me see if I can compare these two companies is some meaning full ways:
Financials:
- Market cap: MELI: $2.5 billion, GMKT: $1.1 billion
- PE: MELI: 320+, GMKT: 39
- Projected growth rates: both in the 40-50% range
Markets:
- South Korea, home of Gmarket, has a population of 50 million. The country has the highest Internet access percentage in Asia, at 51% and the world’s highest broadband penetration.
- Korea is a unique language country, so GMKT will succeed or fail based on how the Korean population takes to the concept.
- The market countries of Mercado Libre have a combined population of 480 million. However, internet access, especially high speed, is not readily available to a large percentage of all those people. Hooking up to the web is relatively expensive for many Latin Americans.
- These charts give you an idea of internet penetration, especially in Latin America.
- My Conclusions: I think the MELI definitely has the most long term potential, with a potential population base 10 times Gmarket’s. I do think initial growth may be less than believers in the stock may hope. Latin America is a region of the world where selling through the local weekend open-air market is much more accepted than buying & selling over the internet. (Note: I am currently in Montevideo, Uruguay, which is probably more tech savvy than most Latin America areas.) At a PE ratio of over 300 I think the share price of MELI is definitely getting ahead of the growth in revenues and profits.
- Gmarket is showing nice growth in earnings over the last several quarters, with one negative surprise. Future estimates show continued growth. The big question is where is the ceiling for revenues in a market the size of South Korea. Also, last quarters earning drop needs to rectified with continued growth. I think the PE ratio here is probably in-line with the companies prospects.
- eBay owns 18.5% of MELI and Yahoo holds 10% of Gmarket. Either one could be a future buyout prospect. At this time I would be more interested in GMKT, looking for strong earnings growth over the next few quarters. For me, MELI is currently too rich and I think there will be opportunities to pick up stock in the company at much better valuations.
- These stocks are currently listed on my Watch List, but neither has what I am looking for in my 20 Stock Portfolio.
- Note: I currently do not have a position in either company.
Mini Fuel Cell Companies
With over 1 billion portable electronic devices being sold world wide annually, freedom from the recharging cable will make some company’s investors rich. The idea of a refuelable or disposable fuel cell that will power cell phones, PDAs, ipods and laptop computers for extended periods of time without recharging is the goal of several companies. The development of tiny fuel cells that are safe, reliable and cost effective is on the horizon. Here is a list of publicly traded companies hard a work to develop the product that is battery of the future for small electronic devices.
- Neah Power Systems: This company has taken the direct methane fuel cell (DMFC) in a different direction by replacing the typical polymer membrane with a porous silicon wafer that is claimed to be generate a higher level of power in a smaller format. Neah Power trades on the OTC symbol: NPWS.
- Medis Technology: Here they have developed what they call Direct Liquid Fuel Cell (DLFC) technology using liquid borohydride. The DLFC is claimed to be passive technology without the internal fluid transfer mechanics required in the methane powered fuel cells. The stock is listed on the NASDAQ: MDTL.
- VIASPACE Inc.: The VIASPACE Energy subsidiary is working on disposable DMFC technology. VIASPACE uses technology licensed from NASA’s Jet Propulsion Laboratory. The stock trades on the OTC bulletin board: VSPC.
- MTI Micro: This subsidiary of Mechanical Technology Inc. (MTI) has their version of DMFC’s called Mobion. With 80 patents that improve the technology, MTI has licensing agreements with Samsung and Duracell to help get their technology into the market. MTI stock is NASDAQ traded: MKTY.
- Power Air Corporation: Power Air has developed a technology called the Zinc-Air Fuel Cell (ZAFC). Obviously, they use zinc vs. methane as fuel for their products. The company was covered by this site here, and are aiming to have products commercially available by next fall. Stock is OTC BB: PWAC.
Of these companies only Medis is not currently a penny stock. The others are micro-cap issues trying to make their technology the next big thing. Medis has a market cap of $450 million. After reading some of the on-line literature I like what Power Air Corp is trying to do. These are not companies I would invest in at this time, but definitely need to check in on them occasionally to see if a breakout is ready to happen.
Note: I do not have a position in any company discussed here.
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