Dear International Friend,
Here is a valuable way to spot rising shares now.
Yesterday's message looked at the marketing impact of nostalgia in a depressed economy. This message showed that one way to invest now is to find and hold shares that will succeed even because of the slow economy and turmoil in the world. Companies that deal in nostalgia fall into this group. This fact was reinforced by the note below from a reader.
“Dear Gary, I have thousands of styles in my business and am well known by wholesalers for having many old and nostalgic styles of jewelry. Sales to wholesalers and stores are good but sales at our own in-store displays, shows and stores are poor. What seems to be happening is that the customers are spending fewer total dollars and are buying things which are cheaper and which remind them of better times. We sell more ringstyles which were popular in the 1960's and 1970's to the late teens and early twenties group than to their parents or anyone in between.”
So one way to find shares with rising potential in a falling market is to look for businesses that sell nostalgia.
Harley Davidson is one example and we can see that their share price of $46 on August 1 is significantly higher than its 52 week low of $32. The PE ratio of 28 is too high in my opinion, but this shows that the market is treating the motorcycle manufacturer with great respect.
Once we understand the power of nostalgia we should not be surprised that the company's annual report at www.harley-davidson.com says: “Harley-Davidson, Inc. (NYSE: HDI) today announced record revenue and earnings for its second quarter ended June 30, 2002. The Company's second quarter revenue was $1.0 billion, an increase of 16.1 percent over the same period last year. Diluted earnings per share for the second quarter were 47 cents, a 25.4 percent increase compared to last year.”
Nor is it unexpected that MSNs Moneycentral at http://moneycentral.msn.com/investor/srs/srsmain.asp?Symbol=HDI gives Harley the highest ten rating and says:
* Harley-Davidson, Inc., a large-cap growth company in the consumer durables sector, is expected to significantly outperform the market over the next six months with less than average risk.”
Moneycentral's quick summary writes that positive factors include:
* The price-to-sales multiple is significantly higher than the average for all stocks in the StockScouter universe. Very positive for a medium- to large-sized company like HDI
Earnings growth in the past year is holding steady compared to earnings growth in the past three years. Neutral
One or more analysts has modestly increased quarterly earnings estimates for HDI. Positive”
However Moneycentral agrees with me when it adds: Con
The price-to-earnings multiple is higher than the average for all stocks in the StockScouter universe. Negative”
None of us have the ability to see into the future, so we do not know if Harley shares will rise or fall. We can however look into the past and know that nostaligia sells. So look for companies that have nostalgic products such as Harley-Davidson or for businesses that switch their marketing to a nostalgic theme.
“One technique that works well at all times but even better in depressed economies is to take advantage of a human phenomenon called Cohort Synchronization. This essentially says that we as age groups are affected for life by what happens to us at around the age of 18. For example Jonsers (people born 1952-1956) think differently than boomers, (born in 1946 through 1952). Boomers were promised the world and we got it. Jonsers were promised the world but came onto the job market during a recession caused by the oil crisis. Thus Jonsers have always been more conservative, price conscious buyers than Boomers until recently. Suddenly as they approach the age of 50, they can see that life is passing them by and they had better get while they still can.
Cohort synchronization also works with music. Music that was popular when we were about age 18 maintains high emotional impact. So music that works for boomers may not for Jonsers or Generation X.
Watch for these clues. Companies that turn nostalgic and who focus their marketing music and merchandising at a targeted market may have success in the bad times. Learn more about nostalgia from yesterday's message at – see https://www.garyascott.com/articles/610/ – or last week's message https://www.garyascott.com/makingwealth/605/
Until next message, good global investing! Gary
P.S. While on the subject of nostalgia, I invite you to visit us here on the farm where old values still exist. Visit and just stay (details on rentals are at http://www.littlehorsecreek.com/) or attend our two autumn courses – see https://www.garyascott.com/courses/
These courses filled up so fast that we have added new facilities so more delegates can attend. Plus we still have tipi space available.
Here is what a few people have said about being on the farm.
“In the month we stayed my blood pressure dropped from 135 over 85 to 110 over 65” ES Texas.
Dear Gary and Merri, “It is now two weeks since I left your farm after the Inspired Investing Seminar. What an understatement that name is! I needed to let some time go by to get a little perspective on where the growth stimulated by the seminar will take me. It is still early, but I cannot go on postponing this letter to you.
As you know, I arrived at your farm in pretty poor shape: I was exhausted, stressed out by factors apparently out of my control and lacking focus as to how to continue to develop my business. Merri's care very rapidly turned that “burnout” state into a vibrantly alert well being.
The company present was wonderful. We were a very diverse group, from very different origins in all senses, and all ready to explore our lives and how we work and play in them to make the experience of living it as joyful as possible.
I am already corresponding regularly with most of the participants and dare say that there is a number of friendships that are growing, a wonderful gift.
As to focus, I have learned much and am vibrantly stimulated. You will hear more about this in coming days, as I inform you of some of the ideas and developments since our meeting.” SR Buenos Aires
“Thank you for sharing the exhilarating weekend and program the first part of July. I really enjoyed the solitude and comfort that I found while staying in the Homer Buffalo tipi. Although this is the ONLY tipi that I have stayed in, I imagine that when I stepped inside one of your tipis, onto the welcoming Persian carpet… it was just a little amenity that only the Scotts would think of!” WR North Carolina