We are initiating coverage on the Little People sector with the following ratings.
Gnomes – UNDERWEIGHT
Sky Gnomes – OVERWEIGHT
Dwarves – OVERWEIGHT
Elves – EQUALWEIGHT
Gnomes have been fading after a strong 2 year run fueled by gnome icon Giles Standish’s turn as the Travelocity spokesman. Giles took gnomes to previously unattained levels and improved the group’s overall reputation. Unfortunately, all good things must end and Travelocity recently announced a revamped marketing plan that included an early retirement for Giles. We wish him the best but downgrade the group as it appears unlikely that gnomes as a whole will be able to comp against the Giles loss, at least for the next year. Sell.
We must confess that prior to today, we were completely unaware of sky gnomes. Luckily, we listened to the BSkyB (BSY) quarterly conference call this morning before publishing this initiation and learned of their incredible discovery of sky gnomes. Consider that 1) SkyTV plans to market these sky gnomes to their entire SkyTV subscriber base, 2) sky gnomes did not exist before today, and 3) we are talking about gnomes in the sky here — they are traditionally highly earth-bound creatures. Buy and hold.
The increased interest in dwarves has been well documented but they have further to go. As the Wall Street Journal noted, “some people are just into lavish dwarf entertainment.” Indeed. Increased desire for lavish dwarf entertainment is a long-term secular trend that we see continuing for the forseeable future. In fact, dwarf-related leisure options have heretofore been available only to the uber-wealthy including former Tyco (TYC) CEO L. Dennis Kozlowski and star Fidelity traders. However, we fully expect that time-shares and other financing options will make delightful dwarf diversions increasingly affordable to the middle class. Buy and hold.
Elves pose an interesting conundrum for any fundamentals-oriented investor. Clearly the group has benefited from Lord of the Rings exposure over the past three years. Now, with Peter Jackson’s masterpiece in the rearview mirror, elf investors are left with the historical (and unfair, we believe) association with fairies. Hold.
Compare and decide: