Up 32% This Year, This Health Stock Is Set To Really Take Off

[John Thomas]

361 Capital portfolio manager, Blaine Rollins, CFA, previously manager of the Janus Fund, writes a weekly update looking back on major moves, macro-trends and economic data points. The 361 Capital Weekly Research Briefing summarizes the latest market news along with some interesting facts and a touch of humor. 361 Capital is a provider of alternative investment mutual funds, separate accounts, and limited partnerships to institutions, financial intermediaries, and high-net-worth investors.

361 Capital Weekly Research Briefing
November 18, 2013

Timely perspectives from the 361 Capital research & portfolio management team
Written by Blaine Rollins, CFA

[John Thomas]

Every home has at least one. From the White House to a shotgun shack in Appalachia, this product is notable for its widespread use across every demographic.

Virtually all of us spend nearly a third of our lives using this product, which commands a wide range of prices -- from less than $100 for basic versions to well over $10,000 for custom-built ones. In addition, this product is so commonplace you might not give it a second thought after the purchasing decision. U.S. manufacturers produce about 35 million units a year, and the industry's revenues neared $6 billion in 2009.

If you haven't guessed it yet, I am referring to the lowly mattress. I recently had a great experience with a particular brand over the last several years, but right now I would avoid or even short the stock.

When my wife and I were newlyweds, one of the most important purchases for our new household was a mattress. I'm a restless sleeper, and my wife sleeps so silently and still that sometimes I have to check to be sure she's still breathing. My rolling about at night disturbs my wife when we sleep on spring-based mattress, so much so that we often sleep in separate beds when in hotels.

The memory of a TV commercial from the late 1990s -- in which a person is jumping on a bed but not spilling a wine glass sitting on the same bed -- sent me looking for this mattress brand. Considering the hyperbole used in commercials, I wasn't expecting the mattress to live up to the TV ad -- but I was willing to give it a try.

Talk about being pleasantly surprised! Not only was this mattress exceedingly comfortable, I could roll around with abandon and my wife would barely feel the movement on the other side of the bed. It truly is the rare product that performs exactly as advertised. It's been three years since our purchase, and this mattress has held up as the most comfortable and practical mattress either of us have ever used.

Based on this positive experience, I took a close look at the company as a potential investment. The mattress is called Tempurpedic, and the manufacturer is Tempur Sealy International (NYSE: TPX).

The world's largest bedding manufacturer, Tempur Sealy was formed by the merger of Tempur-Pedic International and Sealy Corp. this year . The Lexington, Ky.-based company's brands include Sealy, Tempur-Pedic, Posturepedic and Stearns & Foster. The Tempur-Pedic mattress was the result of 10 years of research, originally for NASA, culminating in the founding of the U.S. Tempur business in 1992. The Sealy part of the company was founded in 1881.

[John Thomas]

The ?Furious Five? 3D stocks have gone absolutely ballistic this fall. Below, the unbelievable performance for each over the last 23 days:

[John Thomas]

You don?t get the good without the bad in this world. There are no free lunches and everything costs something.

Elon Musk is getting an education on that very subject as we speak. The brilliant inventor and entrepreneur was given a full year in the spotlight as his Tesla Model S became the darling launch of Wall Street. His halo shone so brightly it even illuminated the stock price of Solar City, another company he?s leading. Each appearance he made was accompanied by a built-in cheering section on the networks.

Every corporate milestone was greeted with fanfare and accompanied by massive upside for the shares of both stocks.

He could do no wrong and his every utterance became chyron?d on-screen, complete with the ?BREAKING? and ?EXCLUSIVE? headlines.
Billions upon billions in shareholder value had been created as the real-life Tony Stark become a media star.

But then Tesla hit a rough patch. A few of the cars went on fire and the media was quick to seize upon this new, less flattering angle of the story.

And now Elon believes the coverage of him and his Tesla company is ?disproportionate.?

Unfortunately that?s how it works. That disproportionate coverage enabled the man?s company to get a lot done and to grow up really quickly. It generated awareness for the cars and legitimacy for the business model in a way that actual advertising never could. But there?s a price.

Musk has been named the CEO of the year and with good reason ? he?s a visionary with the capability to actually execute and build. He?s probably changing the world.

But the media, like the market, is a two-way street. First they love you, then they hate you, then they fall in love with you all over again when you start to win once more.

[John Thomas]

Are the goldbugs all fleeing for crypto currencies?

Hilarious chart posted by Tyler yesterday, I had to nick it:

[John Thomas]

When I wrote early this year about the coming Internet boom, my purpose was to highlight dot-com 2.0 stocks and companies that would benefit from an increase in domain names and advertising.

I recommended four names: Verisign (Nasdaq: VRSN), Google (Nasdaq: GOOG), Marchex (Nasdaq: MCHX) and ValueClick (Nasdaq: VCLK) as companies ready to ring the cash register. Since that article was published in January, all but ValueClick have easily beaten the market, with 40% to 50% gains in Google and Verisign and a whopping 120% gain by Marchex.

But there is another facet of the Internet boom coming -- and no one is talking about it. When it happens, I think it will be one of those things that people look back on and ask: "In hindsight, it was so obvious. Why did I not invest?"



This next big wave is something that is already affecting the way people use the Internet and bringing about massive changes in the software and hardware space. It plays on the same emotions that made YouTube and Facebook (Nasdaq: FB) household names.

[John Thomas]

Random Thoughts



In Monday's column I was discussing a conversation that I had about Obamacare and the markets with a long lost friend. One thing that I didn't mention was a question he asked: "So, when, exactly, is this market going to crash?" My answer was that many of fortunes throughout history have been lost betting on a crash. Right now (Sunday, November 17th, 2013) things look pretty good with the market and many sectors at or near new highs.

Yes, there are naysayers calling a top. The Fed, Obamacare, and a fifth of a fifth wave inverted triangle extension might suggest that the market is done. However, as long as the market goes higher, does this matter?

It only matters when it matters. Again, as I wrote in The Layman's Guide To Trading Stocks, "unless you're Bill Clinton, what is, is."

The above doesn't mean that things are all rosy. Yesterday stunk. After probing all-time highs, the Ps reversed to form an outside day down. The new high might have attracted some "Johnny-come-latelies" and this fast money might be looking to bail now that they are faced with an immediate loss. So far though, the breakout in the Ps remains intact.

Yesterday's action in the Quack looks a little uglier than the Ps. It's now all the way back to its previous breakout levels.

I'm sure the candle people will be quick to point out that this is the ominous "Fat Baby With A Poopy Diaper" signal. Me? Yesterday sucked but I'm not going to call the end of the world based on one really crappy day-no pun intended.

As you would expect, many sectors which were just breaking out-like the indices themselves-are now right back to their prior breakout levels.

What's interesting is that I'm still not seeing a lot of meaningful setups on the long side. This might be the database telling me to hold off for now and let things shake out. The database continues to generate quite a few shorts. I don't see any reason to fight the overall trend just yet, but I'm keeping an eye on this situation.

So, what do we do? Considering the above, I think sitting on your hands is probably a good idea at this juncture. If things worsen, then stops will take us out of our longs and we'll look to put on more shorts. If the market turns right back up, then we keep our trend following hats on and follow along. That's how we roll. I suppose all of the above is long winded way of saying don't make any big picture predictions. Take things one day at a time.

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Dave
omgmachines.com/ericx
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