Jimbobwae: Thanks for noticing. How in the world did you even find a thread that had only one post, and that was six months ago?
Actually, RMCI still may have a ways to go, although obviously it is unlikely to triple from here. It looks like earnings are going to be coming in a lot higher than even upwardly revised estimates. The issue is, will the Fed's dumping of liquidity into the system revive the economy enough to reduce the layoffs? It usually works, but usually we aren't coming off of a massive bubble, and the impact of that factor may overwhelm the Fed's efforts.
I don't have a lot of other great long plays on a recession. One I'll mention, is HPII, Home Products ($2.86). It is not a very good company by most standards, being a maker of numerous plastic items, mostly commodity items like storage containers, hangers, dish drainers, etc., sold to big discount stores like WM, KM, and TGT.
The recession angle isn't demand for its products, which does get a little soft in slow times, but in raw material costs. HPII uses a huge amount of polypropylene, a plastic resin for which the greatest demand comes from car makers and housing products. In 2000, when the economy was real strong, PP prices zoomed, and that squeezed HPII's margins, and drove it to near bankruptcy. The stock, which had peaked earlier in the year at around $13, fell down to a buck.
Now that the economy is weaker, demand for PP is dropping, just as some major new PP capacity has come on stream. Prices are under pressure, and would take a big hit if the economy got any weaker. While some of that cost drop could be passed along to customers, HPII would put a lot in its pocket.
Due to a lot of acquisitions in the late 1990's for cash, financed by debt, HPII is very financially leveraged. It has agreed to sell a division that will allow it to pay down a lot of the bank debt (details of the transaction, such as price, to be forthcoming in about two or three weeks.) Because it runs through about 15 lbs. PP per share of stock, a several cent drop in PP prices could have a big impact on its stock price. To put in another way, earnings of over a buck a share next year are quite possible, although it is way too early to make such a prediction. And of course the risk level on something like this is very high.
If you want to know more about it, check out the Yahoo thread for HPII, where I write under the screen name "Bibbicif." I started posting last fall, but the thread can go many days without a single post, so it shouldn't take you too long to catch up. |
