Taipan Daily Special Report: Post 50% With This Tech Leader
Sunday, August 16, 2009
I hope you are enjoying our reports from Taipan's 2009 Global Opportunities Summit in Chicago. Jim will have a final e-mail to you tomorrow with a wrap-up of all the presentations, recommendations and discussions. I wanted, though, to forward to you a report that one of our speakers, Sara Nunnally, sent to me. I found her topic so interesting – and so potentially profitable for you – that I wanted to get it to you immediately. In this Special Report Sara speaks about the annihilation of the American Brand, what it means to you... and also how you could post 50% from this crisis. Take a few minutes and read what she has to say. I know you'll find it as interesting as I did.
All I have to say is two words, and you'll understand what I'll be talking about today: General Motors...
In its 100 years of existence, General Motors has been at one point the most successful company in the world. Too big to fail, analysts said... Well, we've heard that line before... and we've seen it proved wrong. On June 1, General Motors filed for bankruptcy.
Chrysler had also filed on April 30, and both companies shut down dealerships across the nation. That left a vacuum... And foreign automakers are sure to gain surprising market share on the back side of this recession.
Now, you might be thinking that GM and Chrysler – and we'll talk about the auto industry more in a minute – are just the unfortunate victims of the current global economic crisis.
You'd only be half right.
The crisis has certainly brought about these companies' demise in quick fashion, but American automakers have been losing ground for the past 30 years or more.
A Brand Under Fire
And it hasn't just been the auto industry. Movements in sectors like energy, materials, technology and pharmaceuticals have all seen major acquisitions in the past three decades.
Take, for example, the $369.8 million acquisition of WCI Steel, Inc., based in Ohio a year ago. The buyer? OAO Severstal, a Russian company. Or the $352 million acquisition of Bentley Pharmaceuticals last year by Israel's Teva.
The point? The American Brand has been under fire since before I was even born. And what does that mean? Two numbers...
The first: 16,613.
This is the number of U.S. companies that have been bought by foreign companies in the past 30 years. That's more than 10 acquisitions a week... And according to one source, the average amount paid by a foreign company for a U.S. company is $201.2 million.
And that brings us to our next number...
This is the value of U.S. companies that have been bought by foreign companies in the past 30 years. That's more than $960 million a week...
The top industries by value are Oil and Gas, Telecom, and Drug. Let me break some numbers down for you:
$156.8 billion in Oil and Gas acquisitions
$143.3 billion in Telecommunication acquisitions
$132.1 billion in Drug acquisitions
But there are other industries that are integral to this country's infrastructure, like electricity and gas distribution, and metal and metal products. Transportation. And importantly, the acquisitions made over the past 30 years have had another effect: A full 20% of America's exports are now made by foreign-held companies.
That's a bit scary. So...
How to Take Advantage of This Trend
If the global economic crisis is any indication, this trend will continue... But what does this mean for American investors?
Well, we can fall back on rhetoric, as though we were running a political campaign, and commiserate with each other about the death of American brands.
Or, we can take advantage of this trend and identify key sectors that you can invest in. It's easier than you think... and it doesn't require fancy brokerage accounts with high international investment fees...
I told you we'd get back to the auto industry. But you have to ask yourself, what's the next step for the auto industry? The trend, as I see it, leaves you several choices...
You can, if you want, buy the foreign automakers: Toyota (TM:NYSE),Honda (HMC:NYSE),Hyundai (005380:Seoul and pinksheet listings), Nissan (NSANY:NASDAQ) or Fiat (F:Milan).
Of these, Hyundai is the only one positive for the last year... up 25%. Toyota and Honda are down between 5-10%, Nissan is down about 5%, and Fiat about 26% down. But if you consider the movement over the past six months, Nissan, Hyundai, and Fiat are up more than 80% while Toyota and Honda are up only 30%.
Or, you can buy U.S. automakers, hoping that leaner, meaner companies will come out strong on the other side of this recession. Ford is up about 340%. GM ended its history at just under even. But Ford is looking awfully toppy after its amazing run higher.
Neither of these two choices is ideal, and both rely on the resilience of the American consumer.
But there is one choice that will cover both of these categories without the risk of the penny-pinching consumer.
The Best Way to Profit From Technology
If tomorrow's cars are trending toward fuel efficiency and hybrid technology, then automakers across the board will be implementing technology. That means battery technology.
Battery components... Particularly for nickel metal hydride and lithium ion batteries.
EV World and Freedonia Group estimate that battery demand will jump to $22.8 billion a year by 2012. The main components of batteries are metals, chemicals and polymers. And while nickel metal hydride batteries currently hold the lion's share of the market, lithium ion batteries are proving to be a more efficient and powerful type of battery.
Interestingly, lithium is a difficult element to pin down, and its uses are so varied that it's hard to get specific production and usage data. There is one thing though... The U.S. Geological Survey from 2008 says that only two companies produced a large array of downstream lithium compounds in the United States from domestic or South American lithium carbonate. One of those companies is FMC Corp. (FMC:NYSE).
FMC has a whole division dedicated to lithium production that has been in existence for more than 60 years. It is a worldwide leading developer and supplier of lithium-based materials for primary and rechargeable batteries.
In mid-December 2008, FMC announced it was joining an alliance of more than 14 companies in order to pursue the commercial production of lithium ion batteries for auto manufacturing.
The alliance is called the National Alliance for Advanced Transportation Battery Cell Manufacture, and it is receiving support from the Department of Energy, the Department of Defense, and U.S. truck and auto makers. The alliance is expected to need between $1 billion and $2 billion in funding over the next five years, much of which will come from the government.
No surprise, the U.S. has been lagging behind Asia in battery technology, and this alliance is trying to balance the scales. So let's take a closer look at FMC Corp.
In the second quarter of 2009, FMC's earnings were $1.10 per share, in the face of a strong recession and a slashing of revenue by 13% compared to the prior year.
The company had a profit margin of 8.98% and an operating margin of 16.86% in the second quarter of 2009. Both are better than the industry averages.
It's P/E ratio is at about 10.91, significantly lower than competitors like Dow Chemicals or DuPont.
What's the potential? If we take a look at the company's chart, and extend the recent uptrend out a few quarters, FMC climbs back nearly to its all-time high of $76.56. That's about a 50% gain from current prices... a fantastic way for you to profit, especially from the auto industry – an industry so many investors are avoiding these days like the plague.
Editor's Note: Learn more about the annihilation of the American Brand, including the key industries affected today. I discussed this crisis in more detail at Taipan Publishing Group's 2009 Global Opportunities Summit, along with two additional moneymaking recommendations. You can order your copy of the live audio recordings of the conference to get the complete information. The media package is available in two formats: CD and MP3... or you can order both.
And I'm not the only speaker you'll hear. All the Taipan editors were with me at the conference. In this live audio recording you'll also receive their presentations – and moneymaking strategies... starting at the low price of $79. But supplies are limited. So please order your set now.
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