It’s Wednesday June 7, 2006, and for the third day in a row the street is bloodied as the concern of another interest rate hike not only affected the U.S. Markets but Spectrum Email it dragged down markets overseas. From China and Japan to Europe, this was a ripple effect.
Oil markets have stood steady at over $70 a barrel as oil traders and the world await the Iran outcome. Metals have been sliding, everything from Gold, Silver to Copper and Aluminum, so the high flyers have been pushed down a bit. But there are still opportunities out there that we will bring to the surface this week.
Now, we need to talk, we received a lot of calls and emails from our listeners/readers wanting some direction as the market has been on a downward spiral. So we’re going to try to do that but one thing that I do not want is for you to get emotional when it comes to the stock market. I said it yesterday and need to say it again because when emotion comes into play mistakes are made. This is the time to bottom fish and look for those gems that are being sold off.
Do your homework and it could pay off nicely for you.
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Now we are going to start this morning with Waste Management (NYSE: WMI), this is a name that’s been around the block a few times. But let me reintroduce you to it, like the name indicates that are involved in waster management. They provide integrated waste management services, from dumpsters to regular garbage pickup, not only to commercial customers but also to industrial, municipal and residential customers throughout the United States, Puerto Rico and Canada.
They also provide portable fence and toilet rentals, these are those port-a-potties that you see at constructions site. They own over 277 solid waste landfills and 6 hazardous waste landfills as well as 370 waste transfer stations in North America. One of their subsidiaries is Recycle America Alliance L.L.C, which handles their recycling business, so that cover the spectrum in waste management. They also recently cut the ribbon for their new Redwood Landfill in Novato, California. The management of this company you have to like because about a year ago they actually walked out of negotiations with Teamsters Local 330 demanding that the union revoked a contract that they didn’t like. Well look at them now.
The stock has a 52 week low of $26.80 and a 52 week high of $38.34, it closed up 64 cents at $36.66 yesterday. This is a company that pays a dividend of 88 cents a share and has an EPS of $2.18 a share with a P/E of a little over 16. We see growth in Waste Management, with their new landfill in Novato, CA and the clean up in New Orleans, yes all of that needs to go somewhere, Waste Management is in good shape to have organic growth in 2006.
American Ecology Corp (NASDAQ: ECOL) is the oldest provider of radioactive, hazardous and industrial waste management services to nuclear power plants, medical institutions, steel mills, refineries and chemical production facilities, both commercial and government agencies throughout the United States. The stock has a 52 week low of $12.52 and a 52 week high of 27.56, so it is currently trading very close to its high as it closed at $26.97 yesterday up 22 cents on the day. Back on May 10, 2006 the company resolved their Nasdaq listing issue and is currently in compliance, they also recently appointed John Poling to their board of directors and Michael Hannon as VP of corporate development.
This is a company that not only pays a 60 cents dividend but also has an EPS of $1.04 a share with a P/E of 26. their 1st quarter earnings came in at 23 cents a share and that is compared to a nickel which they posted for the same period a year ago. We feel that they will continue this growth pattern in 2006. their 52 week high which they made in May is the beginning of a base and their 2nd quarter earnings should beat the analyst estimates by a large margin.
Lets go South of the Border and head to Mexico with Grupo TMM SA (NYSE: TMM) , they are a Mexico based cargo and transport company. Now before you jump to conclusions let me map this scenario out to you. Their main business is transporting for clients throughout Mexico, whether it is trucking, railcar or container. Now the stock has a 52-week high of $5.70 and a 52-week low of $2.70 with an EPS of $1.67 and a P/E of almost 3. The industry average is a P/E of 11. Now the interest in little Grupo TMM is not high but institutions hold over 69% of the float and insiders and 5% holders hold over 45% of the outstanding stock.
Now this is all good stuff, but we need to dig deeper. If you have been keeping up with the immigration debate as of late, then you know that the United States is planning on building a 300 to 700 mile wall to separate Mexico from the United States. This is something that Mexico is not happy about, they make reference to the Great Wall of China and the Berlin Wall, so if you are the United States how do you make this fly?
Well you give some business to Mexican based ready mix or materials companies in regards to this wall, and use a Mexican based transport company to bring it to the sites. We think that Grupo TMM could be a beneficiary if that should occur, as transporting construction material via railcar or truck is right up their alley. Now that takes us to another stock by the name of Cemex (NYSE: CX) which is a global building solutions company and their claim to fame is the production, distribution, marketing, and sale of cement, ready-mix concrete, aggregates, and clinker worldwide. Cemex closed at $56 yesterday about 16 points off of its 52-week high of $72.08.
Now keep this in mind that the United States may throw a trickle of business to Mexico but the bulk of that business will be here in the States. I’m now going to give you three companies in the Steel industry that stand to benefit, it wouldn’t be fair just to mention the Mexican companies. So you are going to want to take a look at U.S. Steel (NYSE: X) , Nucor Corporation (NYSE: NUE) and Steel Dynamics (NASDAQ: STLD), as they are the most likely companies to benefit from the Great Wall of The USA.
Now lets enter into the Drug Store zone, a company that doesn’t make much movement but has the potential to do much better is Rite Aid (NYSE: RAD). I don’t know if you have ever stepped into one of their stores but it pales in comparison to CVS Corp (NYSE: CVS). They have all of the components to actually make a run at CVS, Rite Aid has over 3,323 in over 27 states while CVS has over 5,471 in 37 states. The difference between Rite Aid and CVS beyond the earnings is the management team. The management at CVS understands their customer base under the direction of its CEO Tom Ryan, while Rite Aid is somewhat disconnected.
They have ancient technology in place at their locations, that I made an effort to see first hand, but as I said they have the components in place, they just need the direction to get it done. Maybe a change in management will give the company a different view and they can finally make headway both in earnings and in the stock price as the stock has been stuck in the high $3 to low $4 range for a year. So the moment you hear that Rite Aid is upgrading their systems and giving the company a better public image then you should be all in. I would be open to having Ms. Mary Sammons on “Wall Street to Main Street” in the future as I am sure that being the CEO of the company she can give us a really good view of Rite Aids direction.
Since we are on the topic of drug stores, I have a big “What’s up with That” for drugstore.com (NASDAQ: DSCM). How can a company that sells drug store products such as beauty products, vitamins and both over the counter and prescription drugs not turn a profit?
The profit margin on generic drugs is huge but since its inception it has lost in the vicinity of $700 million. They posted a 6 cents loss for their latest quarter, but on a good note their revenues did rise. This is another company that seems to have management issues because even though they announced that they are restructuring the company, there is no reason why they should be losing 6 cents a share a quarter. They cut their advertising to just include Yahoo (NASDAQ: YHOO) and Google (NASDAQ: GOOG) and flushed a wholesale agreement with Amazon.com (NASDAQ: AMZN) down the tubes, oh yes they are trying to get a better deal from United Parcel Service (NYSE: UPS) for shipping but that is not enough.
Until they focus on the high profit items such as generic drugs and be less focused on the low profit items they will never make the turn around the corner. I do like the concept but there is something wrong in the implementation of their business plan. If they work out the kinks this may be one to look at but not until they work out those kinks. I should also tell you that they cover the prescriptions picked up by customers at Rite Aid stores