The Tao of N.W.A. - Investing in 2007 like a true Gangsta'
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Another potential pearl for 2007 and oft-reflected upon topic in N.W.A. lyrics is the U.S. prison system:

And don't let no pail face, they throw your ass in a cell race
Have you resident suck a pie in a jail space
That's what they want to do 'cause the system is fu%$*d

It sure is, MC Ren. Fortunately for equity investors, there is a way to make bets on increasing prison overcrowding and federal/state government's desire to utilize private management companies instead of taking the difficult political stance of reducing sentences. Add Corrections Corp. of America (CXW) to the list. This private prison operator had a big run-up this year - a product of continued upwards earnings revisions. With California's prison overcrowding in crisis mode, CVW will be more than happy to house felons at $60/day for the governator. Or, we let this whole thing work itself out instead, like in No Escape. I'll call Ray Liotta and let him know we actually need him this time.



No discussion of violent criminals should fail to mention the tools of the trade, and N.W.A. was never shy about that topic:

AK-47 is the tool
Don't make me act the motherfu$*&n fool...

Any daily viewing of online news sites will reveal two things 1) Britney is crazy 2) The world is crazier. And if the entirety human history is any indication of the future, then we are in store for flying bullets, AK wielding rebels, and fool actin'. We will turn to a pair of securities to help us with this unfortunate reality: reigning ammunition king Alliant Techsystems (ATK) and beneficiary of global rebel violence, Halliburton (HAL).

So what to do with all those bodies? Well if the deceased are fortunate enough to not end up in as ashes in Jeff Lebowski's beard, a good ol' fashioned funeral will be in order. Although an increasing number of Americans are opting for cremation, the funeral industry is still an $11B+ annual industry - with around half ending up in some type of casket. MC Ren was the king of macabre lyrics, and on the subject of the business of death, he offered this stanza:

Murder was a dirty job. To rob a dead man
Was the best plan 'cause a dead man never ran.

Sage advice. Hillenbrand Industries, Inc. (HB) is the way for an investing gangsta to reach into the dead man's pocket in 2007. HB's Batesville Casket division manufacturers caskets, urns, and other funeral goodies - at nice margins due to favorable industry positioning (so favorable in fact as to the draw legal assaults of independent casket makers). Talk of splitting the casket business away from the health care division at HB has us interested in the potential.

Collecting debts on the streets isn't always as easy as robbing a dead man, and in the N.W.A. classic, Alwayz Into Somethin', Dre appropriately exclaims:

I gotta get paid, paid in a hurry see
I gotta have it if I'm not paid fully
I start takin', makin' sure my sh*t is steady bumpin'

Dr. Dre might as well have been speaking on the earnings call of Asta Funding (ASFI). Asta "acquires, manages, collects and services portfolios of consumer receivables." Debt collection company based in New Jersey with a 20% ROA? This pick plays well with our belief that there will be plenty of bad consumer debt for everyone in the industry next year. We'll push to get Dre scheduled at next quarter's call.

Lack of growth catalysts?!?! I made Eminem, motha f*^ka! You ever usher in the G-Funk era? Oh, I musta forgot... that's an impossibility. I did that sh*t...
(a hush falls over the call as the sophisticated conference phone mic picks up the Ryan Beck & Co. analyst awkwardly urinating in his pleated chinos before the intro to "Nuthin' but a G Thang" fades in to signal the end of the call)

It may be easy to discard the financial wisdom of N.W.A., but both Dr. Dre and Ice Cube are reputedly worth in excess of $100M. Both knew the value of viral marketing and the irrelevance of the media empires that are crumbling before us today. Perhaps Dre put it best when he rapped, "Cause I don't give a f*^k about radio play" In this light, the pioneers of gangsta rap where also among the first to commercially leverage the power of the Long Tail. As it turns out, the only thing that ever mattered was cash - and employing less of it to put more of it in your pocket. Create something funky and allow access to those who seek da' funk. Then perhaps the foundation of investing like a gangsta in '07 can be found in this verse:

To be a dope man boy you must qualify
Don't get high off your own supply
From a kid to a G it's all about money

Well said, gentlemen, well said indeed.

Article written by: Henley Frey
Article posted on: December 28th, 2006

Note: Our 2007 Gangsta Index: WFC, GOOG, AEA, CXW, ATK, HAL, HB, ASFI - check back throughout the year to see how it performs.

Disclaimer: The author is long a scratched copy of Straight Outta' Compton, owns none of the securities mentioned in this article, and would be glad to accompany Warren G and the ladies to the East Siiiiiiiiiiide Moohhhtellllll....

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