When our nation faces big problems, Americans usually rise to the challenge, rallying around each other and working to find solutions. And then we sue. So, given that certain companies prosper when lawsuits fly and that suits over the subprime mess and other recent financial calamities are likely to drag on for years, it's worth looking for companies that benefit from our love for litigation.
One, Navigant Consulting (symbol NCI), seems especially promising. As its name suggests, the Chicago-based company provides consulting services to businesses around the world. It specializes in helping companies that are suing or being sued.
By Navigant's own estimate, these are boom times for the type of work it does. According to a Navigant study, about 280 lawsuits related to the subprime mortgage meltdown were filed in 2007. That's already half the number of suits filed over many years as a result of the savings and loan debacle of the early 1990s. A lot of additional subprime-related suits are likely.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
A better business environment (better for Navigant, bad for many financial companies) is already boosting revenues. So are a string of acquisitions. Navigant's top line has grown handsomely the past three years: $575 million in 2005, $681 million in 2006 and $767 million last year.
Until recently, the profit picture hadn't been as pretty. A couple of punk quarters last year pushed the stock down from $22 in 2007 to $11 in January. But the company turned things around in the first quarter. It earned $11.8 million, or 25 cents a share, up from 22 cents in the same period of 2007 and beating analysts' estimates by a nickel a share. The stock rebounded sharply and closed June 17 at $18.05.
The future looks bright. Says analyst William Sutherland of the investment firm Boenning & Scattergood: "We are increasingly convinced that NCI has done significantly more to date than its competitors to position itself for the subprime opportunity." Sutherland says the recent acquisition of Chicago Partners, a management-consulting firm, should boost Navigant's 2008 revenues by $30 million.
One potential negative was the announcement on June 9 that chief financial officer Scott Krenz plans to resign. Krenz, who left to take another job, was credited with several important profit-boosting initiatives. The stock dipped mildly after the announcement, suggesting that investors were not overly concerned. Neither is Sutherland.
Analysts on average expect Navigant to earn 95 cents a share in 2008, up from 77 cents last year, and $1.16 in 2009. The stock trades at 19 times estimated 2008 profits, which analysts see growing 17% a year over the next few years. Add the strong possibility that Navigant will beat earnings forecasts, and the stock looks like a good deal.
-
Stocks Rise to End a Volatile Week: Stock Market TodayThe market's fear index reached and retreated from a six-month intraday peak on Friday as stocks closed the week well.
-
Kiplinger News Quiz, Oct 17 — Longest Government Shutdown?Quiz We covered stories about the shutdown, Medicare and vehicle recalls this week, but why? Test yourself on the latest financial and business news.
-
If You'd Put $1,000 Into Bank of America Stock 20 Years Ago, Here's What You'd Have TodayBank of America stock has been a massive buy-and-hold bust.
-
If You'd Put $1,000 Into Oracle Stock 20 Years Ago, Here's What You'd Have TodayORCL Oracle stock has been an outstanding buy-and-hold bet for decades.
-
How to Invest for Rising Data Integrity RiskAmid a broad assault on venerable institutions, President Trump has targeted agencies responsible for data critical to markets. How should investors respond?
-
If You'd Put $1,000 Into Sherwin-Williams Stock 20 Years Ago, Here's What You'd Have TodaySherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
If You'd Put $1,000 Into UnitedHealth Group Stock 20 Years Ago, Here's What You'd Have TodayUNH stock was a massive market beater for ages — until it wasn't.
-
What Tariffs Mean for Your Sector ExposureNew, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
How to Invest for Fall Rate Cuts by the FedThe probability the Fed cuts interest rates by 25 basis points in October is now greater than 90%.
-
Are Buffett and Berkshire About to Bail on Kraft Heinz Stock?Warren Buffett and Berkshire Hathaway own a lot of Kraft Heinz stock, so what happens when they decide to sell KHC?
