The basic rule of successful trading is to ask yourself what company will benefit from a certain event.
If there is a bad winter in New York City, where they trade natural gas futures, then you can expect natural gas futures prices to go up.
If there is a drought in the corn belt, like there was two years ago, there is a good chance a bushel of corn will double in price.
If corn goes up, then ranchers will slaughter their steers because they can’t afford to feed them through the winter. A year after that meat prices will hit records…
Trading is simple: you see the trends and get in early.
But there are other, more catastrophic events under the sun beyond a prolonged drought. And sometimes stocks move fast…
When the BP oil spill hit the Gulf of Mexico back in 2010, I wrote about a stock that claimed it was in the oil cleanup business. It was called EnviroXtract, Inc. The company was little more than a business plan doodled on a napkin. But that didn’t stop the stock from going up 800% in two days.
Special Situation Stock: Malaysian Air Flight MH370
Four days ago, a flight from Kuala Lumpur to Beijing fell off the radar screen and disappeared without warning.
According to CNBC:
“Malaysia Airlines flight MH370 — carrying 227 passengers and 12 crew members –vanished from radar screens less than an hour after taking off from the Malaysian capital early on Saturday, March 8.
The aircraft was flying in good weather conditions and disappeared without a distress call — unusual for a modern jetliner.
Thus far, nothing is known publicly to indicate what happened to the plane or its whereabouts, with Malaysian authorities exploring all possibilities — from technical failure to foul play — for its disappearance.”
As I write this, there are 12 countries trying to locate the wreckage. There have been terrorists that have claimed responsibility. Two Iranian men were traveling on stolen passports. The Malaysians were slow to share radar data. There is some evidence that the plane turned around and went in an opposite direction for one hour. And there have been no sign of signals from the black boxes.
In short, no one knows what happened.
But the bigger question, in this day and age of instant and all-encompassing information, is how does a Boeing 777 just vanish? The answer is obvious: there are gaping black holes in coverage, mostly over the oceans and in Africa.
The graph on the left shows current satellite coverage of airliners. The one on the right shows the coverage one company has plans to implement.
Iridium (NASDAQ: IRDM), a satellite communication company, created a subsidiary called Aireon to provide the first global air traffic monitoring service starting as early as 2017.
According to its website:
“Aireon is built on the world’s furthest reaching network. Scheduled for launch between 2015 and 2017, Iridium NEXT’s low-latency, 66 cross-linked Low Earth Orbit (LEO) satellites make it uniquely suited to meet the technical demands of global air traffic monitoring.”
The company’s system will detect signals from equipped commercial aircraft all over the world — even over oceans, mountains, remote areas, and polar regions — and relay them seamlessly to air traffic controllers on the ground.
The company expects its near real-time data to save airlines money by optimizing fuel savings, increasing flight path efficiency, and improving safety.
IRDM was up 6% yesterday
As I write this, I can find no news stories pointing out the connection between Iridium and the Malaysian aircraft disaster.
That said, the volume on Wednesday was double the daily average, and the call volume exploded. The April $7.50 went from $0.10 to $0.40 on 1,167 new contracts. This is the smart money getting in. I expect they will start putting out press releases over the next few days and the stock will jump.
Full discloser: readers of Technology and Opportunity are already in this stock and are up 30.76% since December. We bought based on Iridium’s low value and the new private space race. The Aireon factor will be profit gravy.
Good hunting,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
