Money
& Investing 
Keeping Close Tabs on New Products Can Put a “Halo” On Your Investments
A few years ago, I was at home in the afternoon when, all of a sudden, several cars pulled up to our house. Then, all these teenagers came streaming into the house carrying television sets, controllers and X-Boxes.
I asked my son, “Hey, what’s going on?” He replied, “Dad, we’re having a Halo party.”
I had no idea what that was. What it turned out to be was a group of guys and girls getting together and playing the video game Halo. For the next few hours, pizza and pop were flowing, and the yelling of battlefield noise echoed through the house.
Now, Halo 3 has arrived. It was released September 25 by Electronic Arts. Interestingly, the same kids who played the original Halo game are now looking to play Halo 3.
Not only that, most are in college now. One, who is a business major at Arizona State University, bought stock in one company he believes could benefit from strong sales of Halo 3. His purchase: Gamestop Corp. (GME).
An extensive study by one West Coast investment firm found that 95 percent of all big-winning stocks in the market had something new in the works, such as a new product or service, or, in some cases, just plain new management.
This year, we’ve seen big moves in stocks such as Apple Inc. (AAPL), aided by its iPhone, and Research in Motion Ltd. (RIMM), sparked by its BlackBerry smart phones. This year, Apple has soared from 86 to 140 and Research in Motion from 40 to 91.
How does one find stocks with potentially hot products? Two basic ways:
- Read the business news
- Check stocks making new highs
Companies are coming out with new products and services all the time. It is exciting and a mark of the dynamics working in the economy. The key is investors who have a keen insight into the potential of those products. It is they who will “point the finger” to possible winning stocks because their buying will push them to a new high with good volume. New high stocks are always worth investigating.
You do not need to get in on the ground floor. You just need to get on board a good stock associated with a company that has a hot product potentially on the way up. Often, if the hot product takes off, the stock will make substantial gains.
Keep in mind important factors, such as the impact of the product on total sales and profits and the response by competition. A hot new product by a big cap firm may not have much impact on the bottom line. Also, if competition can move quickly, the advantage of the new product may disappear.
So, you have to be on your toes. One way to do that is always to keep an eye on the technical pattern of the stocks. You can make a list of stocks with new products, keep it in an eSignal file and study the trading everyday by using an eSignal advanced chart.
By using eSignal’s technical tools, you should quickly be able to pick up on any unusual buying that could be a bullish tip-off or selling that might be a signal of possible problems. Remember: “The tape talks to those who listen.”
Getting back to Gamestop: The company has annual sales of 5.3 billion dollars. It sells video hardware, such as Xbox 360 and PlayStation 3 and video games. It has 4,800 stores here and overseas. It also publishes Game Informer, a video game magazine for some 2.7 million subscribers.
Halo 3 is a science fiction shoot-‘em-up video game. Halo 2 shattered sales records for a media release. Halo 3 is expected to surpass Halo 2. That should be good news for Gamestop.
As of this writing, the stock is already moving higher, sparked by an announcement of strong fiscal second quarter (July 30) earnings and a boost in fiscal third quarter (October) earnings estimates.
Gamestop’s net for the third quarter is projected by analysts to surge 94 percent to 21 cents a share from 11 cents a share a year ago.
For the fiscal year ending January 30, Gamestop’s net should be up 45 percent to 1.50 a share from 1.03 a year ago. Going out to fiscal 2009, analysts project a 28 percent gain in net to 1.93 a share.
The stock is making new highs, too. Since early this year, GME has climbed from 25 to 53 (as of mid-September), a new high. The stock broke out from a flat base at 44 in August and moved strongly to the low 50s.
So, Gamestop is working so far.Mr. Fasciocco’s articles appear at www.tickertapedigest.com. He is a contributing writer for several national publications. He is also president of Corona Investment Management.
Mr. Fasciocco can be reached at leo2@tickertapedigest.com
