On Friday, my younger brother will take the plunge and get married. For years I have attended and enjoyed a great deal of weddings -- but, of course, one involving a close family member is a whole different ballgame, entailing an endless amount of preparation for the big day.
This entire experience has reinforced that, when it comes to investing and building wealth, it's vital to appreciate the less obvious nuances of a company's operations. Whether we're talking about finances or weddings, how do you go about understanding the things you can't really see? You have to step back from the day-to-day grind and use what's left of your imagination, together with your future spouse -- or your money manager.
For instance, I assure you that investing does not simply mean buying Chipotle (CMG) on sexy post-earnings headlines. A single quarter's worth of numbers is certainly important, but it's not the end-all, be-all. A CEO interview on TV is not the end-all, be-all, either, as these appearances are designed to focus solely on current issues, so as to boost clicks and traffic on the networks' websites. Trust me, this is how folks are playing the game nowadays.
With all that in mind, let's go over a couple of interesting longer-term ideas.
Cruise line operators: For the past week, The Street has been running my three-part video interview with Norwegian Cruise Line (NCLH) CEO Kevin Sheehan. I encourage you to watch and share it, and do pay attention to my questions, as they have zero to do with any single earnings release.
Behind the scenes, one tidbit shared by Sheehan is that Norwegian is investing in fuel-efficiency improvements such as bubble technology. Apparently, this technology lifts the ship a bit underwater for a better glide -- and this initiative is joining at least "100 others," as Sheehan told me, in order to reduce fuel consumption. If Norwegian is doing this, rest assured that rivals Royal Caribbean (RCL) and Carnival (CCL) are as well. That, in turn, suggests these companies may not assume as much risk as you might think the next time fuel prices skyrocket.
Lodging: In all honesty, my life is all work, and I definitely don't go on vacation. So it should come as no surprise that, when I ventured to Atlantic City's Borgata this past weekend for the brother's bachelor party, my analytical self went into overdrive. Tons of stock tickers flew in front of my face -- among them, Starwood (HOT), and even casino operators such as Las Vegas Sands (LVS). For investors in these names, I think many folks don't get that these companies are implementing new efforts to boost revenue and profit.
For instance: I can't confirm this, but our hotel in particular seem to have instituted a meaningful price hike for access to high-speed Internet connections and wifi. Beyond that, these companies are charging a pretty penny for new experiences, including cooking demonstrations by celebrity chefs.
In English, lodging companies are showing investors that they possess untapped earnings power emanating from their large fixed assets.
And Now, a Couple of Earnings-Season Shots
Chipotle: This company is set up for a material acceleration in earnings growth later this year due to price increases and, I believe, a new menu item or two. However, here's one thing that has caught my attention recently: the company's store clustering strategy in existing markets. As the concept matures, and as new competition enters the market, do watch for cannibalization eating into sales in the longer term.
Starbucks (SBUX): The more flagship stores this company opens, the more I believe new branded shops will appear on the sales floor (think Teavana and La Boulange shops). I think Starbucks stores are being refreshed to increase productivity, and that they have greater long-term earnings power than the market realizes today.
