Growing Rich - Arabictrader.com

KIRK KAZANJIAN
INTERESTING IDEAS FROM BORING PLACES
Roy Papp gets his ideas from all over the place, including such
unlikely sources as the weekly magazine Morbidity and Mortality,
which his son Harry subscribes to. He also pays close attention to the
world around him and is always sniffing around for profitable opportunities.
He found one recent investment while he and his wife, Marilyn,
were on a cruise to the Baltic. “Marilyn and I have taken a dozen
cruises, and we always notice that the women go nuts over the spas
and beauty parlors on board,” he says. “They’re on the ship with a
boyfriend or husband and want to look beautiful. They’re competing
with everybody else and are willing to spend money to look good.
On our latest trip, I saw this up close and found out there is one
company, Steiner Leisure, that supplies 80 percent of the beauty parlors
and spas on the world’s cruise ships. I then started to do my
homework.”
Sure, Papp called the company and asked for more information.
But he also read-up on the industry to find out how many new ships
were scheduled to come on line in the next few years and how many
of those would buy their spas and parlors from this company. “I found
out that capacity’s going through the roof, and 80 percent of them
will use Steiner Leisure’s products,” he shares. “What’s more, these
new ships are bigger, which is a good sign. By reading the company’s
annual report, 10-Qs and 10-Ks, I found out Steiner Leisure had zero
debt on the balance sheet. I also learned that it had a 40 percent
market share until 1994, when it bought its biggest competitor. If the
market grows as expected, Steiner Leisure should do very well. It has
been in business a long time, has a dominant position in a rapidly
growing industry, and (as this book goes to press) is trading at 20
times earnings, less than the market. That’s my ideal stock. It’s unknown,
nobody understands it, it’s attractively priced, and it has a
lead position in its industry.”
The reason Papp does so much ancillary research is that initially
he’s more interested in the philosophy than in the particulars of a
single company. “If you’re not following Wall Street, which I’m not,
you’ve got to do all of this work yourself,” he says. “Then you concentrate
on the specifics of the stock. Is it loaded with debt? Are the
earnings real and sustainable? What’s the competition like? I noticed
Steiner Leisure had some tough times before 1994, but people were
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