Triple Crown Madness: 5 Stocks to Watch After the Race
With the Belmont on Saturday, I'll Have Another has a chance at history. Could these New York-based stocks pass the "test of the champion"?
[Editor's Note: After this story was published, I'll Have Another was reported scratched from the Belmont, ending the Triple Crown bid. Given that the horse's owner, J. Paul Reddam, has scheduled a news conference, these reports are almost certainly true. This makes the still impressive horse the third horse in history that won the Derby and Preakness but did not race in the Belmont. There have been 19 that won the first two legs of the Triple Crown but lost at the Belmont.]
The first leg of the Triple Crown, the Kentucky Derby, is owned by Churchill Downs (CHDN), and a local company YUM Brands (YUM) is the official sponsor of the event. (For more on Kentucky companies, see 5 Stocks to Watch After the Race.)
In New York, things are not so simple. On May 22, the state government took control of the New York Racing Association, responsible for Belmont Park and other thoroughbred horse racing, following decades of scandal culminating in charges that senior executives had shortchanged bettors of millions of dollars. The takeover is set to last three years and, since Governor Cuomo has yet to appoint a board, the Belmont technically belongs to the People of New York.
On the sponsor front, the Belmont Stakes is being supported by Swiss-based watch manufacturer Longines, which is owned by the Swatch Group (SWGAY) also based in Switzerland.
Back in the Empire State, there's been a sudden flurry of technology start-ups. At the other end of the spectrum, regarding established corporations, New York and California are tied for first place with 98 Fortune 1,000 companies apiece. Here's a look at five New York companies that could be worth watching after the race.
Corning (GLW) had a tough year in 2011 in spite of increased revenues and it was hit particularly by the drop in glass spot prices. In the first half of the year, people were saying Corning needed a "Gorilla" effort for earnings to lift stocks, referring to the tough glass it produces for millions of mobile devices like Apple's (AAPL) iPhone 4, Android's (GOOG) Droid line, and Microsoft (MSFT) Windows phones made by Nokia (NOK). It turned out what it needed was Willow, an "innovative and exciting" ultra-thin flexible glass that had many saying that Corning had topped itself and that the original Gorilla glass would soon be extinct. Corning sees the flexible glass in consumer electronics by next year. For someone betting on the technology of the future, Corning might be worth a serious look. (See also: Gorilla Glass on Brink of Extinction After Willow Glass Unveiling.)
McGraw-Hill (MHP) certainly wouldn't have been on many investors' short lists until the Ontario Teacher's Pension Fund joined with Jana Partners to purchased 5.2% of the company -- a larger share than held by CEO Terry McGraw. Long story short, McGraw-Hill will separate into two different companies by the end of 2012. So, McGraw-Hill represents a nearly immediate two-for-one opportunity: The two divisions will be slow-growing education and cash-rich financial services. Although by all accounts the financial part of McGraw-Hill is strong and full of cash, some actually see the education business having better economics. Either way, it looks like a good bet.
MetLife (MET) took a hit to its reputation when it failed the Federal stress test. Many cried foul saying the company is not a bank and should not have to meet banking requirements. Actually, it is a bank, in that it has bank assets, which are in the process of being sold to General Electric (GE). Another business it's exiting is the reverse-mortgage sector. What it will be at the end of this shedding process is a leading financial and insurance company. In this light, many say MetLife shares look like a cheap long shot.
PepsiCo (PEP) is frequently considered to be the same as Coca-Cola (KO), but from an investor's perspective, this is not so. Coca-Cola is entirely a beverage company while PepsiCo is a mix. At Pepsi, the snack-foods division (Frito-Lay) represents 45% of the value of the company while the eponymous drink (regular and diet versions) are only about 10% of the company. By contrast, the Coke-branded franchise is close to 50% of the value of its parent. Coke, with its Sprite, Powerade, and other divisions, is a pure non-alcoholic beverage play, making it more likely to suffer from the "beverage crackdowns" sweeping the country. Pepsi is insulated in this regard. Plus, PepsiCo is a potential two-for-one, a company that may possibly split. Many analysts think Pepsi may be sub-optimizing its beverage sector, and few would be surprised to hear about pressure to break the company in two.
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