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Carol Flake Chapman
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Carol Flake Chapman is a well-known journalist and book author who was one of the founding editors of Vanity Fair Magazine. She’s written for national magazines and newspapers like the New York Times, U.S. News & World Report, and the New Yorker. She’s turned her skills for investigative... More
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Woman with Portfolio
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  • Investing in Olympic Gold

    The Olympics are about emotions, proclaims David Lauren, executive of Polo Ralph Lauren (RL), the company that outfitted the American athletes for their march into Vancouver’s BC Place Stadium last week for the spectacular opening ceremonies of the 2010 Winter Olympics. That certainly seemed true, as the crowds cheered and flags waved for athletes of countries large and small, including many countries that had never won an Olympic medal and the tropical and desert nations that had never seen a snowflake falling from the sky.

    But if the Olympics are a boost to the sporting spirit, the cities, countries and companies that sponsor them are hoping that they may also be a boost to their bottom line. “There’s no better exposure for a brand than the Olympics,” Lauren told an interviewer in Vancouver. And so it’s not surprising that Polo Ralph Lauren, which also provided the official outfits for U.S. athletes in Beijing’s summer Olympics, had already begun selling jackets, hats and sweaters in its U.S. Olympics Collection three weeks before the opening ceremonies. The company has engaged in a major marketing campaign that coincides nicely with victories by American stars of the slopes and the half-pipe. David Lauren says the product is flying off the shelves.

    The Olympics, then, can be an investing opportunity: for the host city or country, for the sponsoring companies, and for the individual investors who are looking for winners in stocks as well as athletic competitors. For example, as I predicted right here on Seeking Alpha, the Beijing summer Olympics proved to be a boost for the swimwear company Speedo, a subsidiary of the publicly traded company Warnaco (WRC), based in the U.S. Everyone wanted those sleek, high-tech LZR racer suits made by Speedo that apparently helped Michael Phelps and other swimmers break world records and win gold medals. Warnaco stock jumped even before Michael Phelps dove into the water for his first race.

    The city of Vancouver obviously considered the 2010 Olympics a potential boost for its own bottom line, despite escalating costs. As of February 1, the total cost of the games, including infrastructure improvements for the region were estimated to be as much as US$6 billion with US$600 million of the spending directly related to hosting the games. But for those looking for the cost/benefit ratio, the long-term rewards appeared promising. The projected benefits and revenue to the city and province were said by some estimates to be as much as $10 billion, although a study by accounting firm Price-Waterhouse indicated the direct revenues would be in the range of $1 billion.

    What investors, from cities and countries to individuals, are actually looking for is something that is not so easy to pin down in numbers. And that is the “halo” effect of being part of an event that has global impact. For Nike (NKE), for example, having millions of viewers eyeballing that Nike Swoosh on Apolo Ohno's streamlined torso as he zips around the short track -- priceless. If you take a look at Nike's chart since the opening ceremonies, it looks like a nice upward slope.

    For those who prefer numbers, however, there is an index for measuring Olympic performance of companies rather than athletes. The Dow Jones Summer/Winter Games Index (which you can follow with the symbol DJOLX) measures the performance of publicly traded companies that are official partners, sponsors and suppliers of the current Olympic Games. Its 36 members, with a combined market cap of US$967 billion, include some of the world’s leading firms. The top components in the Olympic index are General Electric Co. (GE), McDonald’s Corp. (MCD), Royal Bank of Canada (RY), Coca-Cola Co. (KO), 3M Co. (MMM), Suncor Energy Inc. SU), VISA Inc.(V), Panasonic Corp. (PC), Dow Chemical Co (DOW). and General Mills Inc. (GIS).

    As of February 10, the index is up 36.46% since December 22, 2008, when the index components were changed to reflect the Vancouver games. Compare that to the Dow Jones Industrial Average in the U.S., which rose 17.82%.  Obviously, there is some sort of advantage to being an Olympic sponsor, although it is not clear whether this is a chicken-or-the-egg story. If a company can afford to be a sponsor, then it must already have a decent cash flow and a strong commitment to promoting its brand. Unfortunately, there is no ETF corresponding to the Games Index, so you'd have to buy stocks individually to take advantage of the games effect.

    An intriguing paper from the U.S. National Bureau of Economic Research suggests that hosting mega-events like the Olympics may yield long-ranging benefits – mainly that of boosting national exports -- that were not counted in the initial calculation of the cost/benefit ratio. A paper by Andrew K. Rose and Mark M. Spiegel found that the positive effect on exports was “statistically robust, permanent, and large; trade is around 30% higher for countries that have hosted the Olympics.” The researchers conclude that the Olympic effect on trade is attributable to the “signal a country sends when bidding to host the games,” rather than the act of actually holding a mega-event. The researchers’ most startling finding is that unsuccessful bids to host the Olympics have a similar positive impact on exports.

    This conclusion that making the effort to compete is as important as actually winning may be a very heartening message to all those aspiring athletes who participate in competition against all odds, without the hope of winning a gold medal. 

     

     

    Disclosure: Long RBC

    Disclosure: Long RY
    Tags: RL, GE, RY, KO, MMM, SU, V, PCRFY, DOW
    Feb 18 10:32 AM | Link | Comment!
  • The Flu Stock Bonanza
     Flu Bonanza

    When the swine flu first began claiming victims back in April, I predicted here in one of my posts that a number of stocks would be affected, including makers of preventative vaccines, flu tests, treatments and sanitary products like surgical masks. As it turns out, every stock I mentioned has risen, from vaccine maker Roche (OTCQX:RHHBY) and test makers Quidel (QDEL) and Life Technologies (LIFE) to mask maker Alphaprotec (APT). The more speculative stocks I mentioned have risen the most, including Novavax (NVAX), Biocryst (BCRX) and Sinovac (SVA).

    Here are the percentages of gains from April to Sept. 1:

    RHHBY: 40%

    QDEL: 45%

    LIFE: 52%

    APT: 500%

    BCRX: 800%

    NVAX: 745%

    SVA: 850%

    Disclosure: I am long RHHBY, LIFE, QDEL, BCRX and SVA.


    Sep 01 3:02 PM | Link | Comment!
  • How Much Is a Wrinkle Worth?

    A very good friend in her early 80s recently had to use a prescription skin cream to remove some precancerous spots on her face. Her face turned red and blotchy for a week, but after the treatment, not only were the lesions gone; so were some wrinkles. I made a note, wondering if this was the usual result. If so, I thought, here's an inexpensive and effective wrinkle treatment, similar to Retin A, but stronger. And maybe a promising stock. And this morning, I came across a report confirming what I had suspected.

    According to a study in the June issue of Archives of Dermatology, a skin cream containing fluorouracil, a chemotherapy medicine that treats precancerous skin patches, also reduced sun damage and wrinkles on the faces of 21 people who used the drug. Researchers saw improvements over 24 weeks in dark spots, yellow skin tone and hyperpigmentation, according to the study. The fluorouracil caused the skin to become red and irritated, making it peel as it worked to eliminate unhealthy skin, study authors said.

    The result was consistent with my friend's experience, who described her face as looking like raw hamburger for a few days. She was pleasantly surprised, however, by the quality of her skin after it healed.

    Doctors use cream with fluorouracil, which is available as a generic and under the brand name Efudex from Valeant Pharmaceuticals International (VRX), to treat skin lesions caused by intense sun exposure. Those spots, called actinic keratoses, are considered to be precancerous. Lead study author Dana Sachs told a reporter she’s not sure if fluorouracil would reduce wrinkles in those with healthy skin and that a study is needed to answer that question. Sachs, an associate professor of dermatology at the University of Michigan in Ann Arbor, said that the study says only that it works for moderate-to-severe sun damage. That benefit also comes with a drawback, she said, emphasizing that the inflammation and irritation in the skin are necessary in order to gain the improvement. She told an interviewer, “This is a rough treatment.”

    This was the first study to show that fluorouracil cream improves sun-damaged skin, which includes dark spots, hyperpigmentation and sallow complexion as well as wrinkles. I looked at the fundamentals and valuation of Valeant Pharmaceuticals, and found that it rates about a B. But that doesn't include any benefits yet from this new study. Analysts give it a price target of $27 a share, although, again, that doesn't reflect any potential boost from the study. I also saw a recent pattern of insider buying at a price close to its current price of just under $23

    The two main questions that affect future sales of the cream for cosmetic purposes are whether it will work on women with healthy skin, and whether women will be willing to accept the inconvenience of a very red face for a week in order to gain the benefits. But then nearly every woman over a certain age has sustained some sun damage. That's a large group of potential users. And from my experience, with friends who are willing to undergo hours on a operating table for a facelift, or two weeks of seclusion following a chemical peel, a week or so of redness is a minor inconvenience by comparison.

    It's important to note that within 10 weeks of starting the cream, 19 of 20 participants in the study said the sun damage to their skin was improved. Also, 16 of 19 said their wrinkles were improved, including 8 who called that benefit “mild.” Although 12 of 19 patients reported the treatment was uncomfortable, 17 said they would be willing to undergo the therapy again, according to the authors

    Women are willing to undergo some discomfort and inconvenience for the sake of appearances. Just look at enduring popularity of spike heels.

     


    Jun 16 12:17 PM | Link | 2 Comments
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