Don't Be Scared to Shop Around
Nathaniel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Last week's economic turbulence shook markets across the globe. As fears of rising interest rates and tighter monetary policy set in, the Dow tumbled over 300 points, marking the worst daily performance this year.
But why the huge sell off? Hadn't Mr. Market known this was coming? After all, the market is supposed to be efficient, and its long been stated by the Federal Reserve that its loose monetary policy would end sometime in 2014. So now I'm getting my shopping list ready and looking to add companies that shouldn't be affected by this madness.
Las Vegas Sands (NYSE: LVS), a casino oligopolist, sits atop my list. Las Vegas Sands is an integrated resort developer and operator with properties across the world including Macau. While some have argued the entire rally is a result of multiple expansion, you could argue the great chunk of this rally is a result of strong underlying performance.
Las Vegas Sands has dominated the Macau market with its portfolio of world class resorts. Macau, an administrative region of China, has performed exceptionally well amidst a broad Chinese slowdown. Generally, both GDP and gaming revenue growth in Macau outpace broader Chinese GDP growth. As a result, the company has been able to grow its earnings by an astounding 20% on a quarterly basis.
This great growth is spurred by 8.9% gaming growth, in combination with greater market share gains. Trading at 18 times forward earnings, this company looks inexpensive compared to its growth potential. Demand is actually set to increase as a greater number of people gain convenient access to the region.
Since pulling back from $60 per share, the dividend yield has jumped to almost 3%. Currently shareholders will receive ordinary dividends of $1.40, but I expect this number to rise. In recent shareholder presentations, Sheldon Adelson, the company's Chief Executive Officer, stated he is committed to returning money to shareholders through sales of non-core assets.
Another company you should be watching is Domino's Pizza (NYSE: DPZ). Shares have already popped, but are now starting to come in. Are people going to stop eating pizza if Bernanke ends his quantitative easing program?
The company is exploding both oversees and domestically. I'm sure we all remember the "we suck" commercials, well its true, the company really did turn itself around. Since 2008, it has grown internationally by 43% and still has room to run. South Korea, Turkey, Brazil, and Spain have been performing exceptionally well and management thinks it can add over 2,700 locations, to its top ten markets, in the years ahead.
Lastly, check out the Financial Select Sector SPDR (NYSEMKT: XLF) which attempts to mimic the performance of some of the largest banks on the planet. This ETF has performed well this year, in line with the strength of the financial sector. As we begin to see interest rates rise, our financial institutions should begin to see modest upticks in net interest margins. For the last few years, record low margins have forced the banks to work hard to achieve profitability.
These institutions are leaner and meaner than ever and ready to drive higher revenues as the spread in which they borrow and lend widens. Additonally, the entire sector stands well positioned to benefit from the housing recovery that's just starting to get into motion. While some markets have reached pre-recessionary levels, the majority of major markets have not fully recovered.
Mortgage rates have risen over the last few weeks which generally signals a rise in property demand. I fully expect the financial sector to continue its outperformance as retail investor demand has been high for these assets. Since the start of the year, this fund has needed to create roughly $3 billion to accommodate a rise in inflows.
Wrap it up
There are companies and indexes that should be largely unaffected by Bernanke's actions. So look at broad market weakness as an opportunity to buy investments with solid growth potential and rising earnings. As always do your own research, but all 3 of these investments should perform well during the Fed's easing.
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Nathaniel Matherson holds shares of Las Vegas Sands. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!