WINDSOR, ON / ACCESSWIRE / July 29, 2015 / The Radical
Consumerist, is an Investment Newsletter focused on
discovering and showcasing high-yield investment opportunities
along with breaking news and analysis geared at maximizing returns
for ordinary investors in the consumer products space.
The middle and lower classes in America are struggling and
experiencing declines in real income. The United States is the only
developed economy that has the distinction of more people living on
less than $50 per day than a decade earlier.
According to a Pew Research Center report, the share of
Americans living on more than $50 a day fell to 56% in 2011
compared with 58% in 2001. Median income also fell in the U.S. to
$56.44 from $58.56.
Along these lines, median income fell in the United States from
$53,646 in 2001 to $50,054 in 2011. This decline puts the U.S. in
the same group as Nicaragua, the Philippines, Dominican Republic,
El Salvador, Bulgaria and Serbia.
On the other side, housing is improving. The housing market is
one of the most important in any economy including the United
States. Housing resales in June rose the highest levels in eight
and half years. Pent up demand has helped drive sales.
Additionally, new housing starts and building permits also surged
close to eight year highs in June. But this may be the housing
markets own undoing, since incomes have not increased as quickly as
the costs associated with living in a home.
An improving economy driven by the housing market's "wealth
effect" should help a restaurant chain like Ruby Tuesday's
(NYSE: RT) and apparel and accessory retailer
Aeropostale (NYSE: ARO). But how can investors
benefit from this improvement in housing and the knowledge that the
middle class has less money to spend? Tuesday Morning
(NASDAQ: TUES) is a deep discounter and off-price retailer
that can gain share in a market with a middle class that has less
disposable income. However, there is a company called
Wisdom Homes of America (OTC: WOFA) that produces
manufactured homes that is uniquely positioned to benefit from both
of these trends, in the long-term.
Manufactured homes are more cost effective solutions to building
single family houses on a large scale. By approaching home
construction much more like building a large machine, a company
like WOFA can take advantage of economies of scale and mass
production methodology.
WOFA has a scalable business model and a
multi-year strategy that can not only benefit from a potential
decline in the housing market but gain market share from other
types of housing construction. Manufactured homes are a $4.1
billion industry in 2014 compared to $3.1 billion in 2011. It
increased by 11,000 units over four years to 63,000 in 2014 based
on data from the Manufactured Housing Institute.
In addition to strong industry fundamentals,
WOFA has an excellent marketing plan to gain share
and increase acceptance of manufactured housing. Management states
it plans to open 30 retail centers in the next five years in the
U.S., and it believes each can generate $2.3 million in annual
sales. We forecast net income of $69 million in five years based on
this revenue estimate.
In order to complement its retail channel, it plans on offering
subdivision sales. It plans on creating 20 - 40 lots in existing
subdivisions and selling them for a consistent profit. The Company
is approved with multiple mortgage service providers, and is in the
due diligence phase of creating its own mortgage origination
division.
We view WOFA as a great long-term play on two
key trends, the tighter budgets of the middle class in America and
the renewed growth in housing, especially if the housing market
experiences a downturn.
While there is discussion on what the new normal is for annual
housing starts, most believe it is between 1.25-1.5 million starts.
In June, there was a seasonally adjusted 1.174 million annualized
starts. This remains below the normalized level. Typically, housing
follows a cycle where starts are below normal, then fall within the
normal range and then exceed it for a period of time. Pent-up
demand can lead to an extended cycle in new builds. Starts have
remained below normal since 2007.This is positive for
WOFA.
Ruby Tuesday's (NYSE: RT) had stronger than
expected guidance from fiscal 2016 and reported solid results from
4Q15. This drove the shares up and made us also more bullish on its
long-term prospects. The improved outlook is also a positive
indicator for upward trends in consumer purchasing.
Aeropostale (NYSE: ARO) also finally had some
positive news when Dana Messina announced a 14.7% stake in the
retailer. His firm, Aria Partners, specializes in buying apparel
and retail stocks. The company has taken a beating with its current
value at just $114 million versus over $2 billion in 2010. The
stock may have found its bottom and things may start to
turnaround.
Tuesday Morning (NASDAQ: TUES) sells upscale
decorative home accessories, housewares, and season goods. It
operates 810 discount retail stores in the US in 41 states. The
company's position as a discount seller in the home goods category
means it can benefit from improved housing trends. As home sales
increase, people will look to furnish these new homes. Because
median incomes are down, consumers will look for greater value by
shopping at stores like Tuesday Morning. It is a stock that can
work for the same reasons as WOFA.
The housing starts and its unique retail business model should
help it target low-to-middle income buyers. If it can deliver on
its plan to open 30 retail centers and expand into selling
manufactured homes in existing subdivisions, early investors in the
stock should be rewarded. The upside potential for Wisdom
Homes of America (OTC: WOFA) is substantial at this
point.
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will continue to be compensated $25,000 per month by Wisdom Homes
of America Inc. The Wealthy Venture Capitalist's
controlling parent company has also been compensated $62,500 by
Wisdom Homes of America Inc. in the form of a convertible note and
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SOURCE: The Radical Consumerist
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