Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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Grab
Superior Gains by Investing in Legal Monopolies |
Published:
May 5, 2008
Andrew Carnegie. J.P. Morgan. Cornelius Vanderbilt. John
Rockefeller.
These titans of industry rank among the wealthiest and most
influential men in American history, and the mere mention of
their names conjures up images of power and grandeur. Not
coincidentally, these business barons are also all tied to
enterprises that were at one time considered to be monopolies.
Rockefeller, for example, founded Standard Oil in 1870, and
quickly began building an empire. In one six-week
stretch, he acquired 22 of his 26 closest rivals in the
refinery-heavy Cleveland region -- absorbing their operations
into his own highly efficient network.
By the turn of the century, the
company controlled a dominant 90% share of the market for
refined petroleum products.
Thanks to this monopoly, Rockefeller
would eventually stockpile a colossal fortune of $1.4
billion, equivalent to more than $300 billion in today's
dollars -- roughly five times richer
than Bill Gates.
Of course, the odds are decidedly against any of us amassing
that type of wealth. However, there is certainly a lesson to be
learned here, and investors who take note will have taken a big
first step -- as they say, the first million is the hardest.
From Textbook to Pocketbook
An economics textbook might describe a monopoly as a situation
where one company exerts dominant control over a specific good
or service -- meaning the firm is essentially the lone supplier
and can dictate availability and pricing as it sees fit.
Today, the term is broadly used to refer to any case where a
company has stifled the competition and somehow restricted fair
trade. But interpretations for what constitutes a
monopoly can differ greatly from person to person and from
jurisdiction to jurisdiction. For example, regulatory officials
from the European Commission have
recently leveled monopoly charges at
software giant Microsoft (Nasdaq:
MSFT) -- hitting the company with an
exorbitant $1.35 billion fine for
allegedly violating antitrust
violations.
Spotting a Monopoly in the Making
The list of firms that enjoy monopoly-like control over their
market is thin. Over the years, the federal government has
broken up a number of existing monopolies and blocked mergers
that might have created new ones. And those that do exist, such
as regional utility operators, are watched closely by regulatory
agencies.
However, that's not to say that all companies are either closely
regulated or have to grapple with dozens upon dozens of rivals for
market share. Others enjoy a tight hold over their market and
aren't really threatened by new competitors -- either because a
potential player is prevented from entering the game or simply
has little reason to.
These "barriers to entry" can take many forms, and below I'll
examine five of the most common that can help create
monopoly-like conditions for specific firms.
Emerging Industries: It's easy to assume
that almost everything worth having has already been invented,
but innovative companies can and do develop new products and/or
disruptive technologies all the time. In effect, these firms
have created a brand new market, and until someone comes along
with a better mousetrap, they have it all to themselves.
Strict Regulatory Oversight: Typically, the
government goes to great lengths to avoid a monopoly
environment, but in some rare cases it all but promotes one. For
example, not just any company can set up shop as a credit
ratings agency. The SEC has made it extremely tough for new
companies to attain the "Nationally Recognized Statistical
Ratings Organization" (NRSRO) designation that would allow them
to compete.
Massive Capital Requirements: It doesn't
take a whole lot of start-up money to open a neighborhood
pizzeria. By contrast, it requires hundreds of millions to buy a
single ocean liner, let alone an entire fleet that would be
needed to run a cruise line and ferry passengers around the
globe.
Technical Expertise/Patents: Many companies
can run retail chains, but developing a
treatment for B-cell non-Hodgkin's Lymphoma, that's a whole
other ballgame. And just think of what it takes to enter the
Pharmaceutical industry in the first place -- a multi-billion
dollar research & development (R&D) budget and an army of
Ph.D.-carrying scientists.
Brute Force: Anti-trust statutes warn
against coercive or manipulative
business practices, but they don't
say anything about simply
steamrolling the competition and
exploiting economies of scale and
supply chain efficiencies to
undercut rivals and muscle out
smaller companies in their path.
Adroit serial acquirers that expand their own reach by
swallowing competitors and assimilating their assets can also
occasionally climb to the top.
Your Turn to Spin
Pure monopolies are rare, but investors can always seek out the
next best thing: powerful market share leaders in highly
concentrated industries with daunting barriers to entry. Such
firms might not fit the classical textbook definition of a
monopoly, but their size, brand names and dominance alone are
more than enough to scare away most would-be rivals.
Important Note: In the remainder of this article,
Half-Priced Stocks editor Nathan Slaughter reveals two companies
that benefit from several characteristics of a "legal monopoly."
Both of these special firms have +15%-plus five-year estimated
EPS growth and the potential to appreciate more than +20% before
reaching their fair value estimates. Best of all, due to their
dominant positions in their respective industries, these firms
should be solid winning investments for years to come. However,
in order to view the remainder of this article, you'll need to
subscribe to our premium income-investing newsletter --
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receive immediate access to this full article, as well as our
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Stocks newsletter and a host of
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Nathan Slaughter
Editor
Half-Priced Stocks, The ETF Authority
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