Taipan Online: Hotline

Martin Denholm back with you – and back in the cozy confines of Taipan HQ in downtown Baltimore from my jolly 3-week jaunt back home to England. A most pleasant visit it was, too. My family and friends were happy to see me alive and well again and glad that America hasn’t corrupted me yet (well, not too much anyway!)

Before I go on, I must just amend one oft-mentioned stereotype: The weather. It was excellent over this particular period. I think it rained about twice while I was there, which for England is pretty darn miraculous!

Another miracle is that on my travels through London-Heathrow, Chicago-O’Hare and Baltimore airports, Northwest Airlines and Delta aircraft are still actually on the runway!

How much longer we’ll see this sight, however, is anyone’s guess. As my Red Zone colleagues reported earlier this week:

“Sure, the New York Times may have started a rumor about Northwest’s demise, but that merely created a prime opportunity for Extreme Volatility Speculator readers to bank quick, one-day gains. In fact, just hours after the NYT article hit, EVS readers were in the October 2.50 calls and the underlying NWAC stock, which they quickly sold for 38% and 22% gains, respectively, on a dead-cat bounce.

“But it wasn’t long before the stock resumed its downward march after company finally joined Delta in filing for bankruptcy protection. While Northwest was able to avoid filing back in the early 1990’s, it can’t dodge the bullet now.”

BIG EASY OPEN FOR BUSINESS

While those airlines are struggling to stay airborne and could actually be on the verge of shutting the aircraft doors forever, one place definitely opening its doors for business again is New Orleans.

Just two weeks after Katrina whipped through and pretty much destroyed one of America’s most popular cities, the watering holes and jazz bars of Bourbon Street and elsewhere in the famous French Quarter are opening their doors again this weekend.

Having seen the television pictures of the area, this is a pretty remarkable development. But although the French Quarter survived the worst of the storm, it’s a surprising one too, since the place still has no clean water. But hey, who drinks water in a bar anyway!

With the city split into “zones” for cleanup and restoration teams, state and city officials will apparently reopen the city one zip code at a time over the next few weeks and months, as basic amenities are restored and environmental health and hazardous waste teams remove the putrid, toxic waste and stench.

This is a city whose citizens and businesses ache to return to the civilization and normality they’re used to. But with the nasty floodwaters having reached almost to the rooftops of tens of thousands of homes, what happens to them? Yes, they’re still standing, but they’re essentially destroyed and beyond repair.

In short, great news for homebuilders and associated hardware stocks. As my colleague Brit Ryle says: “The cost of rebuilding the Gulf Coast is likely to rise. Offers to buy are outpacing offers to sell by 20 to 1. A two-bedroom condo in the Garden District, which cost US$145,000 two months ago, was recently offered for US$220,000. After a dozen inquiries, the seller pulled the offer, no doubt anticipating higher prices down the road.

“The short list of stocks I suggested on August 30 after Katrina are all still doing well. Deltic Timber (DEL:NYSE) is the top performer, up around 12%. But watch out for Louisiana Pacific (LPX:NYSE). The stock is up 10% since August 31 and 3% today on an upgrade from Prudential.”

And besides the residential rebuilding, it also offers the city a good chance to rebuild and upgrade its business, commerce and public services. The Convention Center, which, along with the Superdome (which might be demolished in due course, pending a “raze or restore” evaluation from building and environmental teams), served as a place of utter misery for thousands of folks, has now done a 180-degree turn and is acting as a hub for those efforts, the destination for building supplies and other essential equipment. Congress has already approved US$62 billion in emergency aid to facilitate the cleanup and restoration efforts, with insurance payouts on top of that.

One a related theme, the Taipan team and I will be producing your October newsletter next week, with one of the articles focusing on a hotshot company helping to overhaul and upgrade America’s rather outdated and overly expensive communications network. With the destruction done to communications throughout New Orleans, the city is serving as a trigger for these efforts.

Speaking of Taipan picks, here are a couple of updates on current positions.

CALIENTE GAINS

When Erin Beale first recommended a buy on Mexican media conglomerate Grupo Televisa (TV:NYSE) on November 29, 2004, it was only trading at US$62. Today, not even a year later, it has tacked on almost US$10 (16%) to close at US$71.93 on Friday after earlier hitting a new 52-week high of US$72.10.

It tacked on US$2 last Wednesday alone and while there’s no news to speak of, this breakout is gaining momentum. Erin is up 13% in this position, and recommends holding.

DAWSON HITS 53%

Erin’s also recommending that you continue holding Dawson Geophysical (DWSN:NASDAQ). From the US$19.70 entry price on May 3, 2005, the stock is up a hefty 53% at US$30.21. On Friday, Advest initiated a buy on DWSN. We’re holding. Congratulations on the gains so far.

That’s all for this week. Enjoy the rest of the weekend.

Martin Denholm

Executive Editor, Taipan

MMM

Current Issue | Hotline | Classified | Members Club Home