A Turnaround Stock
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Last weekend I had the pleasure of visiting Fallingwater, the famed American architect Frank Lloyd Wright's crowning achievement located about 50 miles outside of Pittsburgh in rural Pennsylvania.
I've visited a Wright creation before, the Zimmerman house in Manchester, New Hampshire, and became totally taken by his style and design philosophies. (I also read a great book called Loving Frank by Nancy Horan, fictionalizing the true story of Wright and his mistress, Mamah Borthwick Cheney, that really got me interested in the architect's life.)
Wright was born in 1867 and died in 1959 and spent much of his time in the Mid-Western U.S. In his lifetime, he designed over 1,000 architectural projects, resulting in 500 completed structures. In addition to architecture, Wright was an accomplished interior designer, writer and educator.
The center of Wright's philosophy was organic architecture and he was a leader of the Prairie School movement, eventually creating the Usonian (a sort of synonym for American) home that later inspired many ranch tract homes across the country. Wright is also credited with coining the word carport.
Wright's style was completely different than what was happening in the architecture world when he came of age and began designing structures. He was creating open, organic homes with deep connections to nature in the Victorian Era, which is characterized by highly decorated structures with elaborate ornamentation and features such as turrets, bays and odd angles.
Wright designed Fallingwater in the mid-1930s for the Kaufmann family, who owned a popular department store in Pittsburgh. They wished to use the house as a weekend residence to connect with nature and leave the hustle and bustle of the city behind.
The main (and most unique) feature of Fallingwater is an active waterfall running underneath the house. The calming sounds of rushing water can be heard from nearly every room. Wright was very concerned with bringing nature in and he accomplished this magnificently at Fallingwater with special features like windows that lead directly into the stone walls with no metal frame in between.
Wright was particularly taken with Japanese art and architecture, reflected in the design of Fallingwater and much of the art displayed inside. In addition to Japanese art, the home boasts a few pieces by Pablo Picasso and Diego Rivera. Wright designed most of the fixtures in the home, which was common in his projects.
The house and adjoining guesthouse cost about $155,000 to build at the time of construction (remember this was during the Great Depression), which would translate to about $2.5 million today.
I particularly enjoyed the main living space of the house, which features lots of low seating built into the walls and a huge hearth that is partially formed out of a boulder that forms part of the flooring in that part of the home. Next to the fireplace rests a large cauldron that can swing over the fire and hold mulled wine or hot cider during a party. Also in the living space, a staircase descends right to the waterfall, creating a deep connection between the structure and its surroundings.
One other notable feature of the house is the low ceilings. Wright himself was not a tall man (most estimates put him somewhere between 5'6" and 5'8") and the Kaufmanns weren't large either. Wright designed the bedrooms to have low ceilings to encourage people to go outside onto the many decks and terraces attached to the home.
In 1991, the American Institute of Architects named Fallingwater the "best all-time work of American architecture" and the Smithsonian lists the home as one of the top 28 places to visit before you die. The house is truly beautiful, utterly unique and a true showpiece of American architecture. I highly recommend a visit; you won't be disappointed. Not only is Fallingwater one of the greatest houses ever built, but it's also one of the greatest works of art that you'll ever encounter.
We aren't likely to see another architect of Wright's singular genius anytime soon. But the world still needs new buildings. And of course, new building construction is a key economic indicator that analysts scrutinize when trying to divine the direction of the economy. One construction company that's benefiting from the rebounding economy is Manitowoc (MTW), which was recommended in Cabot Top Ten Trader earlier this year. Mike Cintolo had this to say about it in late March:
"While three out of every four big winners in market history are growth stocks, one in four is a turnaround stock, usually a dominant player in a stagnant field that suddenly comes to life because of something new, such as new management, a new product, or, in Manitowoc's case, new industry conditions. Specifically, demand for the firm's cranes--used in huge, usually commercial construction--went kaput from late-2008 through last year, but now demand is picking up; in the fourth quarter, earnings came in well ahead of estimates and sales were higher than a year ago for the first time in eight quarters. More important, though, is that the company's crane backlog jumped 28% from the prior quarter (and total orders were up 70% from a year ago), convincing investors that the long-awaited upturn in Manitowoc's business had arrived. Historically, when the turn comes, business remains robust for many quarters, if not longer; analysts see the bottom line leaping to 65 cents a share this year and $1.42 next, which could be conservative. The company also does good business in food service equipment, but the upturn in cranes is why the stock is so powerful.
"MTW rallied from a bear market low of 2 to a peak of 16 in the spring of 2010. Then the stock built a huge base into January of this year, before a great fourth quarter report blasted the stock out of that base on enormous volume. It rallied above 21, and after dipping below 18 during this correction, found strong support at its 10-week moving average and is perched just a few percent below its recent high. We think you can buy a little in this range, use the 50-day line (around 17.5) as a stop and look to average up when the market re-enters an uptrend."
You could buy MTW here and hope for the best (an especially dicey option when you consider the market's performance this week), or you could get Mike's latest advice on this and other top stocks in Cabot Top Ten Trader.
In this week's Stock Market Analysis Video, Cabot China & Emerging Markets Editor Paul Goodwin says it's been an interesting week in the stock market, not a disaster, but there has been weakness as earnings season grinds on. We don't have a distinct sell signal on our China-Timer, but we are pulling in our horns a bit. Stocks discussed: Polypore (PPO), MercadoLibre (MELI), Green Mountain Coffee Roaster (GMCR), OpenTable (OPEN), Netflix (NFLX), Molycorp (MCP) and RealD (RLD). Click here to watch the video!
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In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
Cabot Wealth Advisory 5/2/11 - The Phrase "It's Different This Time" Can Be Costly
On Monday, Rick Pendergraft discussed the dangers of the phrase "It's different this time" and two sentiment indicators that are reaching bullish extremes (which has Rick worried). Rick discussed some exchange-traded fund (ETF) safe havens for a possible market correction. Featured ETFs: S&P 500 SPDR (SPY), ProShares UltraShort S&P 500 Fund (SDS), ProShares Short S&P 500 (SH), ProShares UltraShort QQQ (QID) and ProShares Short QQQ (PSQ).
Cabot Wealth Advisory 5/3/11 - Living in a $100 Oil World
On Tuesday, Chloe Lutts discussed a trend that's been more resilient than any other recently: rising oil prices, and how to profit with a stock from the oil alternatives group. Chloe also wrote about her recent travels in Amsterdam and the prevalence of bikes and small, efficient cars on the city's streets. Featured stock: Sasol Ltd. (SSL).
Cabot Wealth Advisory 5/5/11 - The "Facebook of China"
On Thursday, Paul Goodwin discussed the challenges the Baby Boomer generation faces when preparing for retirement and how they can get ahead, even now. Paul also wrote about a stock that's been dubbed the "Facebook of China." Featured stock: Renren (RENN).
Until next time,
Editor of Cabot Wealth Advisory