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Backed by fresh viewpoints from the youth perspective, Collegiate Stock Solutions seeks to report from the eyes younger investors looking for alternative angles. Collegiate Stock Solutions aspires to inspire further research and discussion among the investment community. The objective of... More
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Collegiate Stock Solutions
  • Points To Consider On A Trans-Atlantic Ryanair

    Introduction:

    During the most recent earnings conference call Ryanair (NASDAQ:RYAAY) revealed that profits had fallen (as guided) year over year by nearly 21%. The announcement caused shares to fall nearly 3.5% to around $51.79 during trading the same day. A decrease in average fares by 4% and an increase in operating expenses by 8% were cited as factors behind the decrease in profits. In an earlier article I had cited strengths in Ryanair including prudent closure of less profitable routes, reduced operating expenses due to utilizing one aircraft type, and a lack of competitor success as factors that may add intrinsic value to Ryanair shares. Trans-Atlantic could be a future growth option for Ryanair, an airline looking for growth opportunities. Ryanair has a substantial cash position that could be used to bankroll long haul expansion. However investors should consider additional points beyond the balance sheet as Ryanair continues to expand.

    Trans-Atlantic Visions:

    CEO Michael O' Leary has made it clear that he envisions a low cost trans-Atlantic fare, as low as $10, becoming a reality in the near future. However,a recent Bloomberg article noted that many low cost carriers have tried and failed to enter the Trans-Atlantic market. These players have included names such as Skytrain, Laker Airways, People Express, and Tower Air. The article also goes on to suggest that a Trans-Atlantic business model is not conducive to the current Ryanair model. Investors should look to the following points when considering a Trans-Atlantic Ryanair:

    • Trans-Atlantic crossings are much more time consuming that inter-European flights. Ryanair would not only have to invest in Aircraft equipped for Trans-Atlantic travel, but would also have to reduce the frequency at which the company would operate flights (with a single aircraft) to Trans-Atlantic destinations. Ryanair currently operates a fleet of 737-800 aircraft which in a default 2 Class configuration can only fly 5725km. A flight from Dublin to Boston for example would require an aircraft that was capable of flying 4824 KM putting, Ryanair planes within the safe operating range (I am however no aircraft expert and one should note that factors such as weight of cargo, distance traveled over water, weather conditions, etc will impact which planes an airline can use). Furthermore other prominent destinations such as Chicago, Atlanta, Etc would fall outside of the operating range of the aircraft. Atlanta for instance is nearly 6990 KM from Dublin. Investors should note that Ryanair recently placed a record order with Boeing (NYSE:BA) for 175 737-800 aircraft.

    • Like Southwest Airlines (NYSE:LUV), Ryanair is able to cut costs by flying to lesser known airports, operating one type of aircraft, and maintaining near full utilization of aircraft. Trans-Atlantic flights would require Ryanair to fly into more expensive airports with customs facilities, operate more that one type of aircraft, and operate flights with lower overall utilization and frequency.

    • It has been speculated that failed Ryanair attempts to buy out Irish rival Aer Lingus were a means to gain access to long haul aircraft. However Ryanair has stated that it is now willing to sell its 29% stake in the competition. Failure to purchase Aer Lingus could be a factor influencing increased costs to a Trans-Atlantic venture. Furthermore Ryanair has come under fire as regulators feel that a Ryanair stake in Aer Lingus hurts competition on many routes.

    • Ryanair could be impacted by changes in funding to less profitable or money losing small airports in Europe. It was recently suggested by regulators that Ryanair had received money from small airports that was intended to sustain the airports and not Ryanair. A loss in subsidies could lead to potential airport cost increases, thus eliminating the advantage Ryanair has by operating at such airports.

    Summary:

    Investors need to consider that Ryanair does not presently have aircraft suitable to long haul travel and would need to spend money in order to engage in Trans-Atlantic routes. Likewise investors need to consider that long haul travel is a departure from the current Ryanair operating model. Changing the operating model could lead to increased costs and reduced profits. Furthermore, Ryanair missed a potential opportunity to enter the long haul market at a reasonable cost by being vetoed in attempts to purchase rival Aer Lingus. Finally, investors should continue to evaluate changes in European airport subsidies as changes could substantially increase Ryanair operating costs. In essence, Investors need to remember that adding long haul service could impact profits and thus impact shareholder value.

    Aug 06 9:53 PM | Link | Comment!
  • A Common Problem Limiting Collegiate Investors

    Ready to take the Plunge

    You've taken your financial management course, listened to your parents talk about the importance of saving money early on, and read all of the headlines about the bull run within the US stock markets over the past year. You feel intrigued. You feel ready. You want to invest your money to get ahead of many of your peers who seemingly have no idea of the advantages you are about to bestow upon yourself. However you don't want to let your eagerness overcome your intellect and ability to suceed. Here are some common problems collegiate investors face as they aspire from prosperity.

    Problem: I Don't Have Enough Money

    Forget minimum account balances, many collegiate investors try to bite off too much too soon. We get blinded by the sexiness of big name companies, the thrill of dividend payments, and the excitment of owning a share in a company, that we don't think rationally. In some cases we simply don't have enough money to invest. Lets say you have $100 to invest. Your broker charges a trade commission of $6.99. You want to buy two shares of stock in Company A at $46 per share. Right off the bat you are allready one step behind. At your current investment levels you'll need to make 8% gains just to cover the cost of the commission to buy your first shares. Want to sell for a profit? Your shares will have to gain at least $14 in value (over 15%) just to breakeven on your investment. A general rule of thumb is to keep commissions to 2% of transaction costs. At your $6.99 trade commission this can be accomplished with just over $300.

    Solution #1

    Look for a brokerage with low or no account minimums. Sharebuilder (formerly of ING, now of Capital one) for instance, has no minimum account balance requirement for individual investment accounts. Move money to your brokerage account a little bit at a time, in quatities that you can manage. You'll notice that at even $30 per week you can accrue the $300 you need to make your investment in around 10 weeks.

    Solution #2

    Look for promotional incentives to open new accounts. Furthermore look at brokerages that periodically offer free trades to clients. Simply put one can scour the internet for coupon codes and potentially redeem a free trade or two. Having a free trade can really take the bite out of a commission for one looking to invest with a small amount of money (your trade costs have been reduced by 50%)

    Solutions #3

    Look for brokerages that offer no transaction fee ETFs. ETFs offer some distinct advantages over mutal funds. For one there is usually no minimum initial investment required on ETF purchases. This is becasue ETFs trade like stocks with prices that are updated throughout the trading day. ETFs can be bought on margin, sold short, and even ETF futures can be traded. Simply put ETFs allow for a greater degree of price control for young investors. Fideliuty investments for example offers access to 60 Blackrock Ishares ETFs at no transaction fee (however they will charge you $7.99 if you sell before 30 days).

    Solution #4

    Wait to invest until you are ready. If you dont have the money to invest right now, consider parking your money in a savings account. Investing not only requires one to have more funds, but is also not risk free. Simply put if you cannot afford to possibly lose the money you invest you should consider putting your money into your savings account. Rates might be paltry in comparison to stock market returns. However compound interest can still be a powerful tool over time and should not be neglected. Also consider savings certificates. Many banks and credit unions offer CDs at low minimums and improved rates for younger members.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: One should complete their own due dillegence before selecting a broker. Collegiate Sock Solutions does not condone selecting a broker without first researching one's needs, goals, objectives, wants, and financial situation. Collegiate Stock Solutions does not endorse one broker or brokerage house or investment firm over another. Firms mentioned were mentioned based upon services that they offer and not because of financial compensation.

    Aug 06 11:21 AM | Link | Comment!
  • The Long Case For Las Vegas Railway Express

    Elevator Pitch

    Las Vegas Railway Express (OTCQB:XTRN) is seeking to capitalize on an underserved transportation need. The company intends to open a "party train" from Southern California to Las Vegas. No current rail service exists and over twelve million travelers make the trek from California to Las Vegas each year. Customers would have food, beverage, and other entertainment amenities for the duration of the journey.

    Company Description

    LVRE intends to provide services to those who want the Las Vegas style experience as soon as the board the train. LVRE intends to commence operations in the first week of 2014 from Fullerton to a station behind the Plaza Casino in Las Vegas. The company currently has twelve railcars that it intends to refurbish for a "Vegas Class" service. Additionally the company intends to make additional revenues by partnering with hotels and other entertainment options for direct booking through the railroad. As of now plans call for services on Thursdays, Fridays, Saturdays, and Sundays, when most travel occurs by tourists. Railcars would be configured in a first class environment with additional seating options available. The company has a revenue plan that includes matching or beating the fuel costs associated with driving to Las Vegas, as well as matching customer preferences in booking times and preferences.

    Valuation

    LVRE does not have to build any new track as they will use existing routes operated by Amtrak, BNSF, and Union Pacific. LVRE just recently signed an agreement with Union Pacific, contingent upon infrastructure improvements intended to allow both Union Pacific and LVRE service to operate without delay.

    LVRE does not have to train engineer and other railroad personnel as they will be using an Amtrak train crew.

    The Fullerton transportation hub is much closer to downtown Los Angeles than the station proposal for Victorville, CA that was made by the competing Xpresswest high speed rail project. Additionally twelve million passengers pass through the Fullerton transportation hub already due to existing Metrolink train service.

    Interstate Fifteen between Clark County Nevada and Southern California has been recognized as one of the most dangerous roads on a recurring basis. Most noteworthy reasons include carelessness and drunk driving. Recent customer feedback suggested that a train service would be convenient as one could continue to party on Saturday night without worrying about driving impaired. As noted in a Yahoo article on the Xtrain service, "if you part really hard, it sucks driving back."

    There is no currently existing service on this route. Amtrak last continued the Desert Wind service in the late 1980's and again in 1997. The company intends to have fares around $100 each way. A recent fare inquiry showed the cheapeast airfare was from Southwest Airlines at just under $250 each way.

    The company has recently hired a human resources manager and plans to add 100 employees before service commences. Additionally the company has a facebook presence for social media networking opportunities.

    Competitive Landscape

    Presently there is one competing service vying to offer service to Las Vegas. The Xpresswest high speed rail project would consist of service from Victorville, VA to Las Vegas. As of present, plans call for the proposed service to follow the interstate fifteen corridor. However, the Xpresswest service wont commence until 2016. Additionally, the Xpresswest service in contingent upon receiving a sizable federal loan of 5.5 billion dollars. This issue has been under some debate and without funding the project cannot commence. Additionally LVRE CEO Michael Barron recently noted that there would be room for both firms as the Xtrain and Xpresswest are offering two different products.

    Risk Factors

    In the latest quarterly report LVRE mentioned that they would need another $150 million in order to commence operations. Other risks include greater than anticipated success of the Xpresswest project, failure to fulfil the terms of infrastructure agreements with Union Pacific, and a lack of demand for first class customer travel between cities.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 03 4:28 PM | Link | Comment!
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