With a jackpot of $1.5 billion as of Wednesday afternoon, tonight's Powerball drawing could produce a new billionaire, or rather, hundred-millionaire, after allowing for taxes and other factors.
Either way, the $930 million purported cash value of Wednesday's Powerball jackpot is more than most people could spend in their lifetime. Surely most winners would eventually tire of acquiring mansions and sports cars. A more charitable winner is likely to find that even after taking care of their nearest and dearest and fully funding some of their favorite charities, they still have massive amounts left over.
Meanwhile, some may find that rather than investing their money in a mix of stocks and bonds, they may want to just own some companies outright. With that in mind, we polled our Real Money contributors to see which companies they would buy with a winning ticket.
Kansas City Life Insurance (KCLI): "The need for life insurance is not going away unless someone eliminates mortality," said Real Money contributor Sham Gad. While life insurance, or even millions of dollars, cannot prevent mortality, the Missouri-based insurance company does offer a 3% dividend (should the winner find they need a steady income stream). Kansas City Life Insurance has a market cap of $400 million, which leaves the lottery winner with plenty of money for other pursuits. In December, shareholders voted to approve a reverse/forward stock split transaction, with the expectation of decreasing the number of shareholders of record for the company's stock. With a winning ticket, the number of shareholders could be reduced to one!
Kratos Defense and Security Solutions (KTOS): While Kansas City Life Insurance was recommended because of the inevitability of death, Kratos Defense was recommended on a similarly pessimistic note:
"War is the only eternal aspect of man. Only the nature of it changes and these guys are at the leading edge," Real Money's Tim Melvin said when submitting his pick. Kratos is also in David Peltier's Stocks Under $10 portfolio. It trades for roughly $3 and has a market cap of $180 million.
"Defense spending is rising and the company operates in hot areas, like unmanned systems and cybersecurity," Peltier said. "The company is also on the verge of returning to profitability after five years in the red."
Luckily, our other Real Money contributors had a sunnier world view when giving us their picks.
TUMI Holdings (TUMI): "Anyone lucky enough to hit the Powerball jackpot is likely to want to do some traveling," said Real Money's Paul Price. "With prize money of more than one billion, why not simply buy Tumi Holdings and get your bags for free?"
Furthering Price's support of Tumi is the fact that it is debt-free and had $72.7 million in cash as of July 2015. Earnings per share have also risen since Tumi's IPO in 2012 and are expected to come in at $0.90 per share after fourth-quarter results are released, Price said. Tumi currently has a market cap of $1.09 billion, which may put the company just out of reach for an outright acquisition, but surely a newly minted millionaire could try to negotiate a sweetheart deal.
Tropicana Entertainment (TPCA): "Face it, winning the lottery is a gamble. Why not capitalize on other people's desire to gamble with this casino and resort operator?" Real Money's John Reese asks. Tropicana has a market cap of $427 million, which means the lottery winner would have leftover funds for other gambles -- or investments. Reese also notes the Nevada-based company has consistent earnings per share, positive free cash flow and a solid net profit margin. Not bad, considering many of the gamblers in its casinos would be unable to say the same!
Synergy Pharmaceuticals (SGYP): Shares of this company soared to $10 last summer on positive results from its Phase III trials on a drug used to treat irritable bowel syndrome. However, since then the stock retreated to $4 on broader worries in the small-cap biotech world, Real Money's Bret Jensen said. The company is expected to file a new drug application with the Food and Drug Administration this month, which could put the drug on the market at the end of 2016, Jensen said. Synergy has a market cap of $460 million and the median price target for the company is $11.
As for how this Real Money writer would use the Powerball windfall, it would likely look something like this:
