MarkReeth (50.54)

Investing Like a Rock Star: Journey

February 01, 2012 – Comments (2) | RELATED TICKERS: COH , LVS , IHG

You’ve got your Morningstar Portfolios, your Rising Star Portfolios, but now it’s time to introduce Rock Star Portfolios.  This week’s portfolio goes out to the legendary arena rock group Journey. 

*Author’s Note: To properly read this article, download Journey’s Greatest Hits and begin playing it at the highest possible volume.  Right now.

If you’re anything like me, by the middle of Wednesday you’re ready for the week to be over.  The weekend is still years away and you can feel both your energy and your soul being drained by the large pile of work stacked on the desk in front of you.  The office is just the right temperature to get your head drooping and as your mind starts to wander you begin to nod off, when suddenly you are struck by a vision; a vision of a scarab with eagle wings flying across a rainbow in space!  And that’s when from out of nowhere you say to yourself “I could really listen to some Journey right now.” 

But wait, you can’t ignore that pile of work.  Luckily Steve Perry didn’t just croon epic love ballads in his girl-man voice; he dispensed some excellent investing advice as well.  That’s why if you listen closely to Journey’s Greatest Hits (the ’88 version, not the ’04 version you bandwagoner) you’ll not only learn a little something about the human heart, but also something about investing. 

In The Beginning  

Let’s start with Journey’s biggest Billboard hit, Open Arms.  As we all know, in this ditty Perry sings about how we sailed on together, we drifted apart.   Clearly he was referring to Monday’s Mad Money episode, in which Jim Cramer espoused the promising outlook for Brunswick, the world’s biggest boat engine manufacturer.  Boating accounts for 75% of Brunswick’s business, and according to their earnings report on Friday business is booming (for more info, check out the excellent summary here) thanks to a lowered cost structure and wider margins.  This, claims Cramer (and apparently Perry), is a good indication that as the economy improves so too will the market for high end consumer goods.

Evolution 

Yes, it’s clear from his songs that Perry not only understood heartbreak, but he also understood how to properly invest in discretionary consumer-focused companies. Obviously Perry knows that for a company to succeed it has to be willing to tell customers any way you want it, that’s the way you need it, and we’ll get it for you.  But Perry also knew that sometimes you have to be good to yourself, when nobody else will.  That’s why he wouldn’t only invest in Coach, a leading high end accessory manufacturer; he’d probably shop there too.  Coach has been pushing its men’s stores around the world, and according to the company this portion of their business is set to produce more than $400 million during 2012.  Combine this with the increased revenue from Coach’s push to new markets around the world, including an estimated $300 million in sales in China this year, and Coach begins to look like a very well rounded company.  Check out their earnings report from the 24th here for more info.  But what happens when balancing proper investing techniques and rocking your face off get to be too much for Perry and the boys from Journey?  Every now and then Perry just has to stop, look around, and say to himself I’m ready for a long vacation.

Escape

That’s why sometimes, when Journey’s on the road again, Perry takes a night off and relaxes in the same hotel, the same old room.  He’s probably referring to a room at an InterContinental Hotels Group hotel.  IHG is the largest hotel owner in the world (as measured by number of rooms) and its hotel portfolio contains large mid-priced brands like Holiday Inn as well as luxury brands like Crowne Plaza, giving IHG a broad appeal to a variety of travelers.  It’s a low risk, low volatility stock that, when combined with an excellent recurring fee business model, stands to benefit greatly from an increase in travel during 2012.  Although the stock price is down 4.08% over the last 12 months, since the beginning of January the stock price has had a nice little rally and it may be time to buy.

Infinity

But when Perry and the boys take a night off from singing the songs of heartbroken lovers, they don’t just sit around in their hotel rooms.  No, Perry has been working hard to get his fill.  He knows that everybody wants a thrill, and the fellas from Journey are no different.  That’s why they always stop at the Las Vegas Sands.  You see, most people don’t mind payin’ anything to roll the dice just one more time, which pretty much explains LVS’ profitability.  Well, that and the fact that the company’s EPS has increased dramatically over the last year, it has a ton of cash, and should be beating earnings expectations after the market closes today.  Oh, and have you heard that things are going well for casinos in Macau?

Departure 

Who knew that Steve Perry would have so much to say about high end consumer stocks in 2012 when he wrote most of these songs in the 1970’s and ‘80’s?   You can’t deny that he had some pretty darn good ideas, but even Steve would admit that the wheel in the sky keeps on turnin’.  You see, I don’t know where I’ll be tomorrow and the same can be said about the stocks listed here.  What happens will happen.  Yet you can’t deny that the wheel in the sky keeps me yearnin’, and because of that I keep coming back to the Fool and keep on investing.  Happy Wednesday everyone!

*Final Author’s Note: This post was strictly from the "I was bored and it's Wednesday" files, so I hope you enjoyed it.  Many thanks to elyrics.net for the lyrics to the Journey tracks listed here.  If any of the lyrics are wrong blame them, not me.  If you follow the investing advice listed here blame Steve Perry, not me.  If you don’t follow the advice here, you only have yourself to blame.  Invest wisely, live Foolishly. 

Song and Paragraph Order:

Paragraph 1: Open Arms

Paragraph 2: Be Good To Yourself, Any Way You Want It

Paragraph 3: Send Her My Love

Paragraph 4: Don’t Stop Believin’

Paragraph 5: Wheel in the Sky