Editor's Note: To view John Layfield's video take of this 'Celebrity Investor' column, click here.
There's something about family-run businesses and entrepreneurs. Today I have a couple of stocks of family-run companies in sectors that are not very popular. Both are revolutionizing their respective areas of the transportation industry.
On Dec. 17, 1903, Orville and Wilbur Wright, a couple of bicycle mechanics from Dayton, Ohio, showed the world man could fly. Since the Wright's maiden flight more than 100 years ago at Kitty Hawk, N.C., the so-called legacy carriers have shown the world companies can go bankrupt flying.
I have flown more than four million miles traveling to more than 60 different countries because of my job with the
. I certainly know something about the consumer side of transportation.
This is a besieged industry, and rightfully so. The big carriers couldn't make money at a lemonade stand if they were given the lemonades, sugar and water for free.
Even with soaring oil prices, the discount carriers have been making money. If you want to learn how to make money running an airline, then you should follow their lead. This is what Constantino de Oliveira Jr. has done in Brazil.
Mr. Oliveira Jr. grew up working at his parents' bus companies. He wondered why it was too expensive for Brazilians to fly. By opening his airline,
Gol Linhas Aereas Inteligentes
, in January of 2001, he provided Brazilians an option to the bus system. In less than five years, he has built one of the most profitable and fastest-growing airlines in the world, and arguably the best.
Here are some highlights:
On Oct. 31, Gol said its third-quarter earnings per share grew 71%. In a world of shrinking airline margins, Gol increased its profit margin 1.1 percentage points to 19.8%.
The airline's system-wide passenger traffic increased 70% year over year in October. Brazil's passenger-traffic growth is the second-fastest in the world behind China's.
Gol has increased its fleet this year from 27 to 39 aircraft. The company plans to double it by the 2010, expanding its routes throughout South and Central America.
Gol's labor costs make up just under 10% of total expenses, compared to more than 40% for most U.S. carriers. Its pilots earn between $30,000 to $55,000, which is $10,000 to $15,000 less than competitors. Yet Gol is a meritocracy with a generous profit-sharing program; I believe this is the best way to run a business.
Oliveira Jr. has patterned his airline after
. It certainly appears he has positioned Gol to replicate the success of those discounters.
in Brazil is a major carrier on the verge of bankruptcy. The government said it would help -- sound familiar? Just as the North American major carriers have tried to compete with domestic startups, the majors in South America will try to compete with Gol. But they won't succeed.
It's true there are problems investing in Brazil. However, with a forward price-to-earnings multiple of around 14, consensus earnings growth estimate of nearly 15% and zero debt, Gol is too good an opportunity to pass up.
I don't own shares of Gol, which rallied more than 12% this week on the company's stellar earnings report. I'll be buying at the first pullback, however.
Sailing the Seven Seas
Since Ferdinand Magellan first circumnavigated the earth, global shipping has become a huge business.
is a family-run Greek shipping business. Starting with four ships in 1994, the company now has 26 and is working to add another 11.
Tsakos' modern fleet has an average age of 6.1 years, compared to a worldwide average of 11.7. The company also has the right kind of ships. In order to prevent another Exxon-Valdez-style tragedy, regulations require oil tankers to be double-hulled by 2010. Tsakos has only one single-hulled ship.
Furthermore, Tsakos has managed to keep over two-thirds of its fleet assigned to charter services, instead of to the spot market where price fluctuations can be significant.
Also working in Tsakos' favor: While global fleet capacity is increasing, demand is keeping pace with capacity. There is huge demand for liquid natural gas carriers, dry bulk containers and cruise ships. This means that tanker-building is not the top priority for shipyards.
Meanwhile, the latest energy bill in Congress will assure the oil shippers strong demand for years to come. Bipartisan efforts to block new refineries and fuel-efficiency standards mean that we are doing virtually nothing to solve our energy needs. This is not good for America, but it's great for the shipping companies.
Tsakos has a forward P/E of around 6 with a dividend yield of around 6. The nine-month highlights released before the market opened Friday showed record net income of $100.9 million vs. $89 million a year ago, EPS of $5.06 compared with $4.77. The company also repurchased 738,790 shares.
Net revenue decreased to $198.03 from $215.03 million on lower utilization and charter rates. Tsakos benefited by $24.81 million from the sale of four of its older tankers.
I own shares of Tsakos and recently added more.
The Crusher Gets Pinched
first column for
, which issued a profit warning this past week. Dell had $450 million in restructuring and other charges related to a defective part, and said earnings would come in at the bottom end of forecasts.
While Dell is not the growth engine it once was, it is still a solid company. Shares of Dell have slid from my recommended level of $32.08 to under $30 as of Friday's close. While I might not be buying shares here, I still own shares of Dell and I would not recommend selling them.
Being poor is bad, staying that way is stupid.
At the time of publication, Layfield was long Tsakos Energy and Dell, although holdings can change at any time.
A former All-America offensive lineman at Abilene Christian University, John Layfield played professional football for the then-Los Angeles Raiders and later in the World League. After wrestling in Japan, Mexico and Europe, Layfield arrived in the WWE in the mid-1990's. A former WWE Champion, JBL was a featured wrester at WrestleMania 21 and can also be seen on Friday Night SmackDown! on UPN.
Outside of the ring, 'JBL' is a self-taught investor who was recruited to write a personal finance book, "Have More Money Now," which was released in the summer of 2003. He has been seen on finance shows on CNN and Fox News Network. He is co-chairman of the Smackdown Your Vote! Campaign and he has joined both the USO and Armed Forces Entertainment (AFE) for tours through Iraq, Afghanistan and other Middle East countries. He regularly visits Walter Reed and Bethesda Naval hospitals to meet with wounded troops.