By Sasha Cekerevac for Investment Contrarians | Oct 8, 2013
With news that Twitter Inc. is about to make an initial public offering (IPO), there’s already a lot of buzz and publicity surrounding the event.
And there’s one big question most investors are probably asking: should you consider investing in Twitter?
Generally speaking, investing in stocks after their IPO is extremely dangerous, and many investors have lost money doing so.
If one is fortunate enough to be allocated shares prior to the IPO, that is a different matter altogether. But for most of us, we are considering investing in stocks on the secondary market, once shares are publicly traded.
However, while Twitter is seeing growth in many areas, net income is not one of them. One of the issues when it comes to investing in stocks in the social media market sector is that growth is seen as the main target, while net income lags. With Twitter, the theory is build first, profit later; many investors are hoping that Twitter can turn a corner and start generating profits soon.
The company is looking to raise $1.0 billion, which will value the firm at an estimated $12.8 billion. For the first six months of 2013, Twitter generated revenues of $253.6 million, which is essentially double what the firm produced in 2012. On a trailing 12-month basis, Twitter’s valuation would be 28 times (X) its revenues, which is certainly … Read More
By Sasha Cekerevac for Investment Contrarians | Aug 22, 2013
While many Americans might be disturbed by recent news of the ongoing mass violence in Egypt, it’s unlikely that many have considered the economic impact the growing violence could have on America. And if you think the impact won’t be all that significant, you would be wrong.
Oil prices are already seeing the effects of the violence, as the market sector is extremely sensitive to any increase in political uncertainty on the world stage.
While it is true that Egypt doesn’t actually produce much oil, there are two crucial factors that play into Egypt’s significance to this market sector: the Suez Canal and the Suez/Mediterranean pipeline.
Most people are unaware of how tight the supply of oil is globally. Any interruption in the supply chain will send oil prices up significantly.
We’re already seeing the impact the riots are having on the market, as oil prices have risen substantially over the past couple of months. This market sector doesn’t run with a lot of excess slack, and making up the shortage of supply is extremely difficult to do on a global basis.
According to the U.S. Energy Information Administration (EIA), approximately seven percent of all oil transported globally by sea went through the Suez Canal. If this route is affected, oil prices would have to rise, and this market sector would need to adjust to the lack of available routes.
The next available route from Saudi Arabia would be to go around the bottom of South Africa, which means a massive amount of additional miles. These increased costs borne out by this market sector would then translate to higher oil … Read More
By Sasha Cekerevac for Investment Contrarians | May 2, 2013
With the introduction of monetary stimulus by many central banks around the world, a common question asked is: what’s a unique investment opportunity in a market sector that is not immediately obvious to the average investor?
If the global stimulus really begins to work, it should result in higher demand for commodities. If this occurs, an interesting market sector that might be an above-average long-term investment opportunity is the shipping industry.
Information just released shows that Greek shipping firms have recently ordered the most iron ore carriers since 2008. Greek shippers own a large number of vessels internationally. (Source: Sheridan, R., “Greeks Bet Ship Rout Ending With Most Orders Since 2008: Freight,” Bloomberg, April 30, 2013.)
While the average earnings per day for a Capesize ship (a type of cargo ship used to transport raw commodities) is only $4,900—a massive drop from the peak in 2008 of $229,000—many analysts are expecting this current level to be a bottom and are expecting earnings to increase to $17,500 per day next year.
Clearly, the Greek shipping market sector sees an investment opportunity over the next few years. From the time of ordering to delivery, the process of obtaining a carrier takes approximately two years. However, because of the economic slowdown, the costs of construction and secondhand sale prices have dropped precipitously.
As an example, a new ship that used to cost approximately $100 million to build in 2008, now costs only $47.0 million. Prices are even lower on the secondhand market sector for large ships, and some shipping firms see this time as an investment opportunity and are using the low prices … Read More