Going to Cash Will Cost You
 Despite a major rally in the foreign markets this morning, U.S. investors are waking up around the country with their collective finger on the sell button hoping to move their assets quickly to cash.
However, most of the research that I've come across lately indicates that heading for 'greener' pastures is not historically as profitable a decision as holding tight and weathering the storm.
According to a recent New York Times article that takes a look at a 2005 study conducted by the University of Michigan, "From 1963 to 2004, the index of American stocks tested gained 10.84 percent annually in a geometric average, which avoided overstating the true performance. For people who missed the 90 biggest-gaining days in that period, however, the annual return fell to just 3.2 percent. Less than 1 percent of the trading days accounted for 96 percent of the market gains."
Timing is Everything
Timing is everything folks, and most investors like ourselves never seem to end up getting back in before the market bounces back. Unless the world disintegrates over the next 5-10 years, a market rebound is inevitable. Since there indeed is not much upside potential in cash today other than short-term safety, if you have the money, I suggest looking hard for value in today's bargain basement environment.
Here are a few potential candidates
Outside of the small cap arena, I've fallen in love with CreditCorp (NYSE: BAP) over the past few months only to watch share price erode nearly 50% from its 52-week high. Peru's biggest bank should benefit greatly from the country's booming economy which is expected to grow by 9.2% this year despite the ongoing global meltdown. Shares now trade at around $40 vs. $73 on September 10th.
Also, some very sexy Asian and South American ETFs including the iShares FTSE/ Xinhau China 25 Index Fund ( (NYSEArca: FXI) and the iShares MSCI Brazil ETF(AMEX: EWZ) have been battered over the past few weeks as well. Although both nations have been severely impacted by the slowdown in the U.S., both stocks are now down 50% to 60% since January 1st. If the global markets rebound majorly, these could be two of the first stocks to rally.
On the other side of the fence there is Quantum Fuel Systems (Nasdaq:QTWW). The stock ran from under $.40 to over $3.20 earlier this year and has given back most of its gains despite commenting publicly on a number of very positive developments in its solar energy business over the past month or so.
Net-Net
With Wall St. bouncing back this morning in early trading after a global market rally and a number of solid companies now trading at major discounts, we suggest thinking twice before moving too heavily into cash.
Note:
Microstockprofit.com and its affiliates hold no position in any of the companies mentioned in this edition.
Labels: BAP, EWZ, EXI, Market Rally, Panic Selling, QTWW
Even Vegas Loses Sometimes
 As consumer spending tightens, industries once thought impervious to economic slowdown are starting to feel the pinch.
A report issued by Nevada's Gaming Control Board reveals that "winnings" for Las Vegas Strip casinos have declined in three consecutive months. Reportedly, a 4.8% dip in March followed decreases of 3.1% and 1.3% in February and January respectively. From what I've read, until recently, Vegas hadn't seen a dip in winnings since 2001.
With even the most 'recession proof" investment ideas falling by the wayside as of late, I'd like to provide you with two ideas that should flourish despite the current economic downturn in the U.S. But first, more on Vegas.
Quote of The Day:
"I think there is a recession and we're certainly feeling a slowdown in Las Vegas,"
Steve Wynn
High Gas Prices Hinder Vegas Casino WinningsThe Las Vegas Convention and Visitors Authority (LVCVA) recently reported that the number of conventions declined more than 10% and the average daily room rates nearly 4% during the first two months of the year. Things are certainly changing.
The fundamental flaw plaguing Strip casinos today lies in their revenue mix between gaming and non-gaming activities. Today nearly 60% of revenues are derived from non-gaming activities. In the early 1990's non-gaming revenues contributed a far lesser 42% of the overall figure. The problem is that non-gaming activities such as food sales and hotel reservations are far less resilient against recession in comparison to activities such as sports betting and table games.
Even the allure of the weak dollar to foreign tourists eager to make their voyage to "gamblers Mecca" hasn't been enough to help Vegas hedge against the ongoing slowdown.
"Price of Gas Forcing People to Avoid Vegas: Gamble at Online Casinos Instead"
Casino Shares Tumble
 MGM (NYSE: MGM), the largest of the publicly traded casinos (1yr. chart to left), has seen shares tumble nearly 50% since October. MGM's profits took a 30% nose dive during the first quarter of 2008 amid higher construction and energy costs and decreased tourism. In addition to the MGM Grand, the company's other Vegas properties include: Bellagio, The Mirage, and Mandalay Bay.
Las Vegas Sands Corp. (NYSE: LVS) shares are also down nearly 50% since October. LVS logged an $11.2M loss during Q1 2008 and appears to be increasingly relying on international business, particularly in Asia, to fuel future growth.
Judging by the most recent Q, the company's Asian business is not performing quite so well at this point and Vegas operations are bringing in more money. However, costs are increasing at a much higher rate than sales. Consequently, KeyBanc Capital Mkts downgraded shares from "Hold" to "Overweight" on 5/1/08.
In the private sector, Tropicana Entertainment recently filed for bankruptcy. The company currently owns the famous Tropicana Casino in Las Vegas as well as 8 others across the country.
"MGM Mirage outlook cut to stable; 'BB' rating affirmed - S&P"
Creditcorp: A Great Play on Peru's Growth
 One investment idea that I like in the same relative price range as LVS is CREDICORP LTD (NYSE: BAP), Peru's largest financial services company. I'm patriotic, sure, but sometimes you have to look outside of the U.S. for growth in these trying times.
Since I mentioned the company on April 10, the stock is up about $4.50 to $80.89. Not a bad little return. However, despite posting a 125% year-over-year revenue increase ($179M) shares were recently downgraded by Citigroup (3/07). They have been wrong before. We actually saw a 52-week high of $84.64 on 5/7 and are still trading far higher that the $72.56 we saw at the close of that day.
JP Morgan has also recently downgraded their opinion, from from overweight to neutral (5/8). Regardless of the recent negative shift in analyst opinion, I still like the stock over the longer term, say 6-12 months. After a green finish on Friday, the stock appears to be shrugging off another downgrade and showing promise for a move higher next week.
While shares trade at a relatively high price in comparison to more established peers including Unibanco (NYSE: UBB), Peru is an emerging market worth examining closely, and BAP is the country's biggest financial services company. Fitch Ratings, a leading independent global rating agency, recently upgraded Peru's long-term foreign currency issuer default rating to BBB-, investment grade, from BB+, citing strong improvement in fiscal and external solvency ratios.
Peru's economy grew by about 7.5% in 2007 and is set to expand by about 6.3% this year. The past five years have seen average year-over-year economic growth of roughly 5%. The country is also busting at the seams with natural resources including: natural gas, lead, copper, zinc, silver, gold, iron ore and coal. The middle class is "movin on up" and finally becoming qualified for loans which they pay back religiously.
At this point in time I believe only about 1% of the company's loans are past due. In stark comparison, Bank of America (NYSE:BAC) wrote down $1.9B on bad debt during the first quarter. BAC also set aside another $6B for loan and credit losses, almost double the $3.3 allocated in Q4. All in all, BAP is a very timely investment opportunity given the current economical and political climate in the country.
"Peru's Born-Again Free Marketeer"
In the $80 range, I'd rather speculate on the growth of the Peruvian banking system than gamble on the turnaround of the Las Vegas casino business.
Labels: BAP, Creditcorp Ltd., Las Vegas, Las Vegas Sands, MGM, Vegas
Increase Profit Potential. Expand Your Horizons
 With the U.S. market down for the count in recent weeks, things appear to be perking up as of late. However, the final outcome of the fight looks increasingly uncertain.
But what if there was a market thriving on exactly that ails ours? Where the middle class was gaining wealth, catching up to an amazingly wealthy upper crust and for the first time becoming qualified for loans. And of course paying back with rapid, almost fanatically religious fervor? 1950's America all over again anyone?.
More on that in a moment, but first, let's take a look at one of our newest portfolio companies that could prove to be drastically undervalued at current levels.
Quote of The Day:
"The dogmas of the quiet past are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew." Abraham Lincoln
EMOT: Severely Undervalued?
 Electric Moto Corporation (OTCPK: EMOT) gained nearly 50% on Tuesday, closing the day up $.04 at $.12. After perusing the company's competitive landscape it finally dawned on me just how undervalued this stock may prove to be.
Vectrix Corporation, a Massachusets-based company that trades on the London exchange under the symbol VCF is one of EMOT's biggest potential market foes.
With about 265 million shares outstanding, the stock currently trades at a lofty $9 British Pounds (about $20 USD). Just like EMOT, the company's engineers spent more than a decade perfecting their vehicles. However, VCF, which commenced production and shipping in 2007 and logged nearly $820K in revenues, also had a net loss exceeding $54M (USD) for the year.
With nearly 1/4 of the shares outstanding (65M), EMOT is currently trading at an enormous market discount to VCF. If the market wakes up here soon and the stock begins trading at anywhere near the valuation of VCF, we could have a massively under priced opportunity on our hands here.
Peruvian Profits?
 While the market possess its own set of risks including some dandies including poverty, corruption, and labor freedom issues, Peru also holds an exorbitant amount of growth potential.
Peru's economy grew by about 7.5% in 2007 and is set to expand by about 6.3% this year, while inflation remains low (around 2.3%). The past five years have seen average year-over-year economic growth of roughly 5%. The country is also chock full of natural resources including: natural gas, lead, copper, zinc, silver, gold, iron ore and coal.
In a testament to the country's growth potential and current strength, Fitch Ratings, a leading independent global rating agency, recently upgraded Peru's long-term foreign currency issuer default rating to BBB-, investment grade, from BB+, citing strong improvement in fiscal and external solvency ratios.
Boo Yah! Cramer Right On With BAP!
 My favorite financial television personality - Jim Cramer - presented a very exciting idea on last Monday's edition of his Mad Money program. The Boo Yah man himself thinks that Peru is the next hot South American market.
His big play in the market is CREDICORP LTD (NYSE: BAP), Peru's largest financial services company. With less than 1% of loans due and 2007 loan growth of 40%, Cramer appears to be right on in his assessment of the market being America's "polar opposite".
Although the stock appears to be trading at a premium, it is becoming one of the most researched equities on the market today, is well-positioned for growth, and appears to be extremely well-managed. In my opinion, the stock is very interesting, both as a short-term trading opportunity and a longer term value-play. If you have the dough to play with here, this is certainly worth a closer look.
So, there you have it. One large-cap prospect in a hot emerging market that could be in for a small-cap like growth over the next few years and a micro-cap player making moves that could quickly transform the company into much larger industry player. In times where value is of the essence, here are two value picks that should do you right.Labels: BAP, Creditcorp Ltd., E Moto, Electric Moto Corporation, EMOT
Jim Cramer "BAP's" Us Over The Head With CreditCorp. Maybe a Good Play If You Have the Dough.
 With U.S. Markets Lagging. All Eyes Are on Latin America
With the U.S. markets sucking wind as of late, wouldn't it be great if there were other markets out there showing the characteristics once boasted by the good ole U.S. back in it's heyday? You remember, when paying off debt was the "in thing"?
Well, my favorite financial television personality - Jim Cramer - presented a very exciting idea on the Monday night edition of his Mad Money program. The Boo Yah man himself thinks that Peru is the next hot South American market..
Peru's economy grew by about 7.5% in 2007 and is set to expand by about 6.3 this year, while inflation remains low (around 2.3%). The country is littered with natural resources including: natural gas, lead, copper, zinc, silver, gold, iron ore and coal.
There is also a great deal of fertile soal for growing crops, a solid tourism industry, and the middle class is starting to catch up to the richer upper crust and is becoming more and more qualified to receive loans, which they reportedly pay back with religious fervor.
With major banks in both Brazil and Columbia already bringing some hefty returns to investors in recent years, Peru appears to be following in their footsteps with BAP! For those unfamiliar with what I'm talking about, the company is CREDICORP LTD (NYSE: BAP).
Here's another article that provides Jimbo's take: "There are no signs that domestic economic woes are abating, and Cramer says 20% of all portfolios should consist of international stocks. On Monday, he ventured to Peru, with a GDP of 5.6% and an inflation rate of only 2.3%, to recommend BAP, a banking and insurance company. Peru’s economy is booming thanks to rising mineral prices and there is no credit crisis. Cramer likes BAP because it trades at 11.4 times 2008 earnings, has superb management and growth."
Although the stock appears to be trading at a premium, there should be room for growth here. The stock gained $4.24 today, or more than 5%, and investor interest is growing rapidly.
Labels: BAP, Creditcorp Ltd., Peru
|
|
Despite a major rally in the foreign markets this morning, U.S. investors are waking up around the country with their collective finger on the sell button hoping to move their assets quickly to cash.
