In Part 1 of this two-part series on my investment gleanings from a Las Vegas auto show, I discussed the explosive growth of the compact performance segment (think loud mufflers that resemble a sound inappropriate for the dinner table) of the auto industry. I also talked about how eBay
Video games: the need for speed
The video game industry itself has picked up momentum; one of the hot new genres is arcade-style street racing, fueled in no small part by the popularity of hot rodding.
Last year, Motley Fool Stock Advisor selection Electronic Arts
But this is better for all the companies involved, as I believe there is now room for all five games to have their own varying degrees of success.
Namco released Street Racing Syndicate in September. While that game was fun, it got played out in about four days, and gamers were ready for another title.
Last Monday, EA released Need for Speed Underground 2, which, as I wrote last week, I believe is the game to beat among street racers (see Electronic Arts Tops Fast Company). Of course, I had already beaten the game by the end of the weekend, and am well on my way toward conquering it a second time -- just in time for the release of GranTurismo 4 next month.
Whether you're into the import scene or not, the single most important upgrade you can make to your car is to purchase a new set of tires. That fact shows up in statistics, too: Tire and wheel mods top the list of exterior modifications. An estimated 60% of modifiers have upgraded or plan to upgrade their tires, and 65% either already have or plan to purchase aftermarket wheels.
In general, higher-performance tires improve grip, enhance handling, and reduce braking distances. Lighter, low-profile tires also reduce rotational inertia and can improve acceleration and handling. They are also priced at a premium and wear out faster, meaning that you will be replacing more expensive tires more often.
The trend is also toward larger-diameter wheels. In the hip-hop inspired DUB segment, the consumer tries to put the biggest wheel possible on his (note gender-specific wording) luxury car or SUV. (For the curious, a DUB is a 20" or bigger rim). As wheels get larger, the tires also become exponentially more expensive.
You can see where I am going with this: More and more people buying bigger and more expensive rubber that needs to be replaced more often means more money (the countertrend being that better technology will lead to longe- lasting tires) for tire makers.
The three largest tire makers in the world are Goodyear Tire & Rubber
However, Goodyear has been the subject of well-documented accounting issues, and carries a burdensome debt load to boot. And aside from the trends that we discussed, there's not a lot that's particularly investment-worthy about a tire business, either, in my opinion. That said, with a stock that is still trading at a fraction of its all-time highs, Goodyear might at least be worth further inspection.
I'd like to point out that this is not a directive to buy; it is an invitation to do more research, decide which companies you like, figure out how much you think their shares are worth, and wait to buy at a sufficient discount. Hopefully, you've found something you like, and a reason to dig deeper for more.
I wanted to illustrate that the average investor can dig up investment ideas just by exploring his or her areas of interest. The advantage in doing so is that you are more likely to have a good understanding of the businesses as well as first-hand knowledge of who the best players are -- keys to any successful investment.
Of the companies I mentioned, I think the best bet is with the video game makers. I am partial to Electronic Arts as the biggest and strongest independent publisher in the industry, though I think both Take-Two and THQ are legitimate plays as well. While eBay has the most attractive business, the question of value lingers, meaning that I will most likely never buy the stock again. As for Goodyear, I believe it should be left to only the most dedicated or informed investor.
For more on the street racers, as well as Electronic Arts, Take-Two, and THQ, check out:
For more on Goodyear, check out:
Fool contributor Jeff Hwang owns shares of both eBay and Electronic Arts. Jeff owns a lightly tuned Mazda RX-8. Look for his car on the front cover of an upcoming issue of RX Tuner, or check out his online garage here. The Motley Fool has a disclosure policy.