Make no mistake: Government and privately funded investment in public works projects - not bubble inducing, debt-financed consumer spending - will be the guiding light that leads the way out of this recession.

The American Recovery and Reinvestment Act - otherwise known as the “Stimulus Bill” - provides $120 billion to begin to address our nation’s crumbling infrastructure.

It’s the largest infrastructure investment since Eisenhower’s Federal-Aid Highway Act of 1956, which created the U.S. interstate highway system.

Infrastructure investment - under-funded since the 1960s - will be unprecedented over the next three to five years, and let’s face it: the need is huge.

According to the National Surface Transportation Policy Review Study Commission, $225 billion needs to be spent annually for the next 50 years… that’s over $11 trillion, and that’s just for the transportation sector.

Of course, public infrastructure projects such as roads, bridges and water and sewer systems are by their very nature huge, expensive undertakings, requiring massive amounts of capital and manpower.

But very little actual construction activity is getting underway. Here’s why, and what you can do about it in the meantime.

What’s Going on in Big Infrastructure Project Financing?

So, why is little construction happening? Simple.

The current economic environment has upset the applecart with regards to funding these capital-intensive projects. As tax revenue continue to plummet, over 30 states have serious budget shortfalls, and most have shutdown funding for large capital projects. Most municipalities aren’t in any better shape.

At the Federal level, Congress is transfusing the Highway Trust Fund every year - last year it was $8 billion - as consumers drive less and switch to more fuel-efficient cars and trucks.

Clearly, new and innovative ways to fund infrastructure projects are needed. Last week, the fourth annual U.S. Infrastructure Investment Summit was held in New York to address this issue, and I was delighted to be in attendance at this important two-day event.

This high-level gathering annually brings together a small, but influential group of individuals in the world of infrastructure finance and investing.

In addition to yours truly, attendees included directors and managers of a number of infrastructure investment funds, together with those from Barclays Capital, UBS, the Blackstone Group, Jolene Molitoris (Ohio DOT). Several managers of large pension funds rounded out the group.

This year, the discussions and panel sessions focused on several key areas. Below are a few of the highlights:

• The Federal Infrastructure Spending Bill

Besides the $120 billion earmarked for infrastructure in the stimulus bill, the Federal Transportation Authorization bill provides for an additional $450 billion of funding over six years, in the form of a national infrastructure bank.

It accomplishes two things: It relies on bonds to provide the necessary funding for major infrastructure projects and it eliminates the huge, upfront payments. Clearly, there will be plenty of capital available from the government for infrastructure projects.

• The Impact of the Global Financial Crisis on Infrastructure Spending

The global financial crisis has changed the financial landscape for the foreseeable future. Retail lenders are far more conservative, warning potential homebuyers that they will need “serious skin in the game” in order to qualify for a mortgage.

The same thing is happening with infrastructure, according to Ben Heap, Executive Director of Infrastructure Asset Management at UBS, and Stephen Howard, a Director at Barclays Capital.

Most of the deals being done right now are more like partnerships with other investors and pension funds. And they have much more equity in them today as opposed to those done several years ago. The reason is that traditional debt financing is hard to come by with state budgets in crisis mode.

As a result, political acceptance of private funding deals is warming fast (money talks) - especially at the municipal level - where partisan politics is often non-existent. At the local level, most deals are small, bottom-up deals involving a few million dollars.

• The Current Lending Environment and Infrastructure Valuation

“Not all infrastructure is the same… many perform differently from an investment standpoint”, says Michael Dorrell, Senior Managing Director of Blackstone Group. Toll roads have very low earnings volatility, airports are higher and seaports are the highest.

According to Dorrell, earnings for infrastructure are off only 3% to -5%, versus the S&P index that’s off nearly 85%. Even infrastructure stocks are off 35% to 40% from their highs. His main criteria for valuing good infrastructure assets?

Making sure the capital structure of the underlying asset is durable and robust. In the past, over-enthusiasm on the capital structure side has had a significant impact on asset valuation.

• What it Takes to Create Public-Private Partnerships (P3s)

People don’t want to pay twice for infrastructure. They think it should be free, given that they’ve already paid taxes. The federal gas tax - due to its fixed nature - has lost much of its value as a proxy for the use of roads and bridges.

Paying for use is coming as a result of all of this. Proper tolling is a way for people to understand the value of the asset they are using. Expect toll roads to proliferate across the country.

States and municipalities will partner with private equity funds and pension funds as a means of raising capital and reducing annual budgets. These P3s will proliferate at the local level, where partisan politics is relatively absent. Some state deals will happen, particularly in those states with budgetary crises, where raising capital by any means is paramount.

What it All Means for Investors

The bottom line is this: The funding issues are being solved, albeit slower than initial expectations.

Dorrell said it best: “Now is a terrific time to buy infrastructure assets. They are extremely undervalued.” Of course infrastructure stocks are good buys as well… and for all the same reasons: nobody likes them.

Jacobs Engineering Group, Inc. (NYSE: JEC), Fluor (NYSE: FLR) and Foster Wheeler AG (Nasdaq: FWLT) are three great examples of companies that stand to benefit as the infrastructure cash gets deployed this year and next.

As credit markets loosen, it will begin to free up billions in capital that will be put to work on infrastructure projects all across America, creating hundreds of thousands of jobs in the process.

As most of you know, I’ve been following the energy and infrastructure sectors for some time now for both Investment U and The Oxford Club - I believe that in the next three to five years there will be incredible investment opportunities in these two sectors.

And the prospects are exciting enough that we’re looking to devote an entire service to profiting from them. So stay tuned for more information as things unfold.

Good investing,

David Fessler

by The Investment U Research Team

The mainstream media is reporting that markets are down is based on declining payrolls, fears that the broader economy will continue to slide, and concern that economic recovery will not be as quick as expected.

The reality is that we’ve been in a holiday weekend pattern. Volume was sharply down late last week as the markets dropped.

When volume for any movement isn’t strong, you can assume that the market isn’t sure of that direction. On days when many workers are out – or wishing they were out – you can be sure that there will be little true direction.

And it makes sense if you think about it. In the days around long weekends and holidays many workers take extra days off or mentally “check out” early. It happens on Wall Street as well.

The result is that the traders still on the floor have more influence and once a direction or mentality is set, that’s where it moves. This time it happened to be down.

We may not see a boost in volume or positive movement today, but as the week goes on and traders get back to their desks, we could see some up days on heavier volume as the institutional money managers get back in.

We need to remember that we’ve got a lot of negative news out there, and that’s not going to stop. Look for strong movements with large volumes to confirm any up or down motions.

by Louis Basenese, Advisory Panelist

Back in January, I advised you to dump everyone’s sweetheart dividend stock, General Electric (NYSE: GE) in favor of TEPPCO Partners (NYSE: TPP).

Many balked at the idea. But the results don’t lie…

Year-to-date, General Electric is the worst-performing stock in the Dow, down 22.3%. Meanwhile, TEPPCO is up 69%, including dividends.

(If any of you took me up on my income investment recommendation, e-mail us and let us know how you did at comments@investmentu.com.)

Of course, part of the move higher for TEPPCO can be attributed to news that Enterprise Products Partners (NYSE: EPD) is buying the company, as I predicted.

For those of you that purchased the stock, I recommend you take profits now. And whatever you do, don’t reinvest them in GE.

GE: Reasons Why It’s Not a Safe Income Investment

My reasons for disliking GE as a safe income investment remain the same.

The company defies the golden rule of income investing - go with simple businesses, because simple businesses make money and can pay dividends, consistently.

Remember, GE’s business is all over the place with sales in water, security, railroads, oil and gas, media and entertainment, lighting, health care, consumer lending, commercial lending, energy, electrical distribution, consumer electronics, aviation and finally (drum roll) appliances.

And it’s only getting more complicated. This week, the company announced it’s getting involved with embryonic stem cell research.

Another problem? GE will always be fighting the law of large numbers. At a market cap of $125 billion, it takes an awful lot of growth to move the earnings needle and in turn, share prices.

Right now, that’s not happening.

Income Investing: The Smart Way to Pick Dividend Stocks

Again, it’s not fair of me to bash GE without offering up an alternative. So here it is: Windstream Corp. (NYSE: WIN).

The company is the country’s largest rural wireline telecommunications company. It was formed in mid-2006 through the combination of ALLTEL’s wireline business with VALOR Communications Group.

It operates in 16 states… in the sticks! Off-the-beaten-path markets, where big carriers like AT&T and Verizon don’t focus because the upfront costs are too high. Just to give you an idea, in most suburban and urban markets the number of access lines per square mile are over 110. In most of Windstream’s markets it’s below 20.

Obviously, this lack of competition confers notable advantages on Windstream. Namely, high and steady profit margins. Even in this declining market, Windstream’s been able to maintain its operating margin of 35%.

Even better, at current prices, the stock yields 12%. (In comparison, GE currently yields 3.4%).

Here are the four main reasons I believe this dividend is safe:

• Wide Economic Moat. Many carriers are losing traditional phone customers to cable phone services. However, Windstream is partially insulated from this trend. About 30% of its customers don’t even have the option to get cable modem services. The cable companies just don’t serve those markets. At the same time, the severities of this recession are forcing many larger carriers to cutback or suspend expansion efforts into Windstream’s territories. The delay only allows the company to solidify its competitive position and minimize the impact of new entrants over the long term.

• It’s Growing for Free. The big old honking stimulus bill included $7.2 billion in funds for Internet expansion. Windstream qualifies for the grants and can use the “free” money to expand its footprint in rural markets.

• Solid Cash Flow. In the last year, cash flow improved 14% to $763 million thanks to lower capital expenditures and cost cutting efforts. In 2009 we can expect the same, as management doesn’t anticipate the need to increase capital expenditures.

• Credit is No Concern. Windstream’s got a sizable $5.4 billion debt balance, but it’s reasonable relative to cash flows (interest expense should consume less than 28% of cash flow), lower than the industry average leverage and there’s no immediate need for refinancing. The earliest debt maturity is in 2011 for $457 million. If necessary, the company could pay off the balance from current cash flows and the money in the bank. After that, the next significant debt maturity doesn’t come until 2013.

Like TEPPCO, Windstream comes with a kicker - it’s also a takeover target.

In the last five years we’ve seen larger carriers, eager to juice growth, acquire rural carriers with high margins for a hefty premium. Windstream possesses the same qualities of past takeover targets, so a deal is certainly possible in the next six to nine months. A cheap valuation, at just 9.5 times forward earnings, increases the odds.

Bottom line, Windstream provides reliable income and the potential for significant capital appreciation like we witnessed with TEPPCO. Sadly, we can’t say the same about GE. So dump it if you own it! And Buy Windstream instead.

Good investing,

Lou Basenese

Editor’s Note: If you’d like to get all of Lou’s latest picks, take a look at The White Cap Report.

Tony Daltorio, The Investment U Research Team

At times it is extremely easy to make money in the financial markets. All it takes is a bit of common sense and using your head – your “bean”.

For instance, there is a basic truism – people need to eat. Yet investors, including many on Wall Street, ignore that truism and go off in search of the next trendy hot technology stock or unproven miracle stock.

Perhaps they think people can exist simply on their Blackberry or iPhone and no longer to eat food.

I am here to tell you that people still do indeed eat food, lots of it, every day. After a year about worrying about their piggy bank, some alert investors are turning their attention again to the cupboard. And, oh my, the cupboard is nearly bare…

Here’s how to use your old “bean” to profit from this basic fact of life and the profitability of other beans.

The Grains Story

Almost unnoticed by Wall Street, agricultural commodities prices have returned to levels not seen since the start of the 2007 to 2008 food crisis. Prices for soybean, corn and wheat have moved to their highest level in over 8 months and are up more 50% from their December 2008 lows.

We’ve seen forecasts of lower supplies due to reduced planting and the impact of a drought in Latin America and Argentina. However the biggest price increase for grains comes on the back of very strong demand from China. The world most populated nation has been migrating its diet from vegetables to meat.

For example: In 1985 the average Chinese consumer ate 44 pounds of meat per year. Today, it has more than doubled to 110 pounds of meat per year. That may not seem to extreme. But when you consider that it takes 17 pounds of grain to generate one pound of beef you can start to see how it adds up quickly.

Unfortunately, we’re not seeing a comparable increase in supply from the 2009-10 season. In response to low prices last autumn many farmers cut their planted acreage. In addition, higher costs for inputs such as fertilizer and pesticides combined with difficulties in securing financing due to the financial crisis – particularly in countries such as Brazil and Ukraine – all impacted plantings as well.

The International Grain Council, an inter-governmental organization, forecasts that global grain supplies would fall in the 2009-10 season by 4.3%. At the same time, they are forecasting a rise in demand for grains by 0.8% Many agricultural experts would add that we are not well prepared from a supply and demand standpoint to absorb any weather-related surprises globally and that it is essential that the United States have a good growing season.

The Soybean Story

The area with strongest fundamentals by far is the entire soybean complex – soybeans, soymeal and soy oil. It’s a simple supply and demand story which has created extraordinary pressure on U.S. supplies of soybeans.

On the demand side, there has been voracious demand from China. China’s imports of soybeans rose in excess of 36% in the first four months of this year. Chinese demand has dominated the soybean market for a decade. In 2000, China was responsible for 35% of global trade in soybeans. By 2008, that figure had risen to 73%.

The root of the current supply problem lies in Argentina, the world’s third largest exporter. Argentina produces 21% of the global supply, Brazil produces 28% and the US produces 33%. Argentina’s soybean crop is expected to fall by nearly a third due to a devastating drought. Other areas in Latin America, such as Brazil, are also experiencing drought related problems and their crop production will also be lower by about 7%.

Some experts warn that the United States’ inventory of soybeans falling below the psychologically significant level of 100 million bushels appears increasingly likely.

The U.S. Department of Agriculture is more optimistic, saying that inventories would only drop to 130 million bushels – which is still just one week’s global supply and a 40-year low inventory level!

The USDA figures are probably too optimistic as U.S. export sales are already above the government’s forecast target of 1.24 billion bushels, with 14 weeks left to go in the current season. The hope is that the Chinese and others will delay their purchases until the new harvest is available in October and November.

The price of soymeal – critical for fattening livestock such as chickens and hogs – has moved above $405 a ton, a level only seen for a brief period in 1973 and during four weeks at the peak of last year’s crisis. The soymeal supply shortfall from Argentina is estimated at 2.2 million tons.

This shortfall cannot easily be made up from the U.S., which consumes most of its soymeal domestically.

One example of the effects of the rise in the price of soymeal is that the price of ready-to-cook chicken in the US has risen to the highest price in a decade at 87.11 cents per pound.

Playing a Surge in Soybeans

So how do you make money from the soybean story besides trading the futures?

There are two iPath ETNs which offer large exposure to the soybean complex – iPath Dow Jones-UBS Agriculture Subindex Total Return ETN (NYSE: JJA) and iPath Dow Jones-UBS Grains Subindex Total Return ETN (NYSE: JJG).

The Grains ETN (JJG) consists of only three grains – corn, wheat, and soybeans with soybeans making up approximately 45% of the index.

The Agriculture ETN (JJA) is broader based and includes corn, wheat, sugar, coffee, cotton, soybeans and soybean oil. Soybeans are roughly 27% of the index and soybean oil is a bit less than 10% of the index.

Investors need to keep in mind that ETNs or exchange-traded notes are senior, unsecured, unsubordinated debt instruments of the issuer. As such, they are subject to the risk that the issuer may run into financial difficulties.

If investors wish to avoid the ETN risk, they can turn to an ETF that actually owns the commodities futures. The best choice in the ETF arena is the InvescoPowerShares DB Agriculture Fund (NYSE: DBA). This ETF has 25% devoted to each of the following four commodities: sugar, wheat, corn and soybeans.

So next time you feel hungry, instead of reaching for a snack, reach out to purchase some agricultural commodities like soybeans.

Good investing,

Tony Daltorio

Tony Daltorio, The Investment U Research Team

One sector that is extremely sensitive to global economic activity is the international shipping industry.

As the financial crisis turned into a category 5 hurricane last year, it blew the entire global economy off course –and along with it, the shipping industry. The sudden drying up of credit, finance institutions and collapsing trade volumes led to a sharp drop in shipping rates.

Fast forward to today, and we’re now seeing ships being backed-up in Chinese and Australian ports: demand is rising.

If these are indeed signs of a bottom, then we need to look for companies positioned correctly in the right shipping sector. And this is important, because each sector in the shipping industry – container, dry bulk, and oil – is fundamentally different from the others.

While they may all be shipping, the profitability varies greatly from line to line. It’s exactly why we like to focus on the sector with the best fundamentals – oil tankers.

Unlike some other sectors where demand for services has fallen off a cliff, global oil demand and, more importantly, the demand for oil tankers, has been relatively unfazed – it’s down less than 2%.

As far as the supply/demand situation for ships is concerned, the oil tanker market is more seaworthy than other sectors of the shipping industry, and more profitable. Here’s one company that’s positioned to profit from the potential bottom of global shipping and the strong fundamentals in the oil tanker market.

Nordic American Tanker

Bermuda-based Nordic American Tanker Shipping Ltd. (NYSE: NAT) is engaged in the global transportation of oil products. To give you an idea on its growth, in less than 4 years the company’s fleet has grown from 3 to 16 Suezmax oil tankers, which each carry about 1 million barrels of oil.

Nordic American was exposed to the recent falls in shipping rates because it operates all of its ships on the short-term spot market instead of leasing them with longer-term contracts. While this may hurt them in a declining environment, it also means that they can take advantage of a rising price climate best.

One of the biggest reasons why Nordic American is on the top of our short list is because the company has NO net debt. During this age of over-indebted and over-leveraged companies, it is rare to see companies that have no debt like Nordic American Tanker.

While the absence of debt on their balance sheet gives them the ability to weather many pressing market environments, it also lowers the breakeven point on their vessels. The company will make a profit on their ships on any rate above $10,000 a day per vessel.

Typical competitor rates currently hover around $20,000 per day, while many need almost $25,000 per day. Nordic American has a natural advantage in pricing and debt, but that’s not all that makes it such a good investment.

Juicy Dividend

Currently there is a juicy dividend yield on the stock, which makes it ideal for income investors, but more importantly allows us to truly gauge how financially strong this company is. Many investing gurus consider the dividend stream the ultimate barometer of a healthy company.

The company’s dividend payments are part of Nordic American’s unique business model. Their business model combines high dividend payouts with low financial risk – no debt and unused credit lines of $500 million.

It also has an interesting policy of declaring quarterly dividends. The dividend is substantially equal to the company’s net operating cash flow during the prior quarter after reserves.

So far in 2009, the company has made dividend payments of $0.87 and $0.88 per share. Nordic American has now made dividend payments for 47 consecutive quarters which for the shipping industry is remarkable. The recent additions to the company’s fleet, paid for by stock issuance, are expected to increase distributable cash flow by 25%.

The stock of Nordic American tanker has had a rather remarkable performance, particularly if you are an income investor. The company’s stock began the century at $10.75 per share and has paid out $36.18 in dividends during the 9+ years since.

But income investors aren’t the only ones happy with this stock.

Over the past several years, the stock price for Nordic American has ranged from the low $20s to the low $40s. Currently it’s in the middle of that range, at about $32 per share. The stock has recovered from the panic low set in March at $22.41 – which was an absolute steal.

We think it has just as much potential now with the improving market conditions.

Good investing,

Tony Daltorio

by Marc Lichtenfeld, Advisory Panelist
Wednesday, July 1, 2009: Issue #1031

There are a number of health care reform plans on the drawing boards right now, and they all seem to come with mind-numbing sticker shock. The administration’s new plan and Senator Kennedy’s plan are both estimated to cost $1 trillion over 10 years.

I’ll believe that when I see it. When was the last time the government completed any project on budget?

And I’m not the only one with doubts.

Health Systems Innovations, a health care consultant that has worked with private health insurers, estimates that Senator Kennedy’s bill would cost $4 trillion over 10 years.

Ouch…

Should a health care plan be passed that even resembles anything like the current proposals, $2 trillion in final costs would be a minor miracle.

A trillion here, a trillion there. Pretty soon, you’re talking about real money.

As these health care reforms gather momentum, I’m going to explore a few more investments that should thrive in the face of a major health care system overhaul, regardless of any health care reform plan that may be passed…

Health Care Reform : Protecting Against Inflation With Bond Funds

Despite the President’s popularity, he’s not likely to get everything he wants. Some sort of compromise is to be expected. One thing we can assume is that the cost of any health care reform plan - regardless of whose it is - will be a 13-figure number (i.e. more than $1 trillion).

On a macroeconomic level, that would likely be inflationary and cause bond prices to decline. So if you’re a bond bear, here are two instruments for you…

• UltraShort 20+ Year Treasury ProShares (NYSE: TBT): This ETF is not for the faint-hearted. It seeks to perform at twice the inverse results of the Lehman Brothers 20+ Year U.S. Treasury Index. So if the Index drops 5%, TBT should rise about 10%.

• ProFunds Rising Rate Opportunity (RRPIX): This is a mutual fund that also seeks the inverse performance of the bond market. Its results aim to correspond to 125% of the inverse of the daily movement of the 30-year Treasury bond.

Profit From Health Care Reform with Biotech & Selling Put Options

Recently while researching stocks that would profit during the health care reform process, I discussed the attractiveness of investing in biotech companies that treat rare diseases.

One of the companies I’ve recently discussed, Genzyme (Nasdaq: GENZ), had a major setback when it disclosed problems at one of its manufacturing facilities. The stock price took an immediate hit.

I believe these difficulties are temporary and I still like the company. But if you’d prefer to reduce your risk further, you can look at selling put options on GENZ at a lower strike price. My colleague Lee Lowell just talked about a put selling strategy earlier this week.

I explained to Lee why I like GENZ, but wanted a good put-selling trade for investors who want to own the stock at a lower price. Here’s what he suggested…

• Sell the October 2009 $47.50 puts, currently trading at $1.50 on the bid. This means for every put that you sell, you will collect $150.
• Keep in mind that one put contract represents 100 shares.

• If GENZ never sees the $47.50 strike, you keep the $150.

• If the stock drops to or below $47.50 at expiration, you’ll be required to buy the stock for $47.50 (100 shares of GENZ for every put contract you sell). But remember that you collected $1.50 already, reducing your cost basis to $46 per share.

So if you like GENZ, but would prefer to own it at a lower price, this is one trade to consider.

Health Care Reform: Two Biotech Companies Set For Profits

I’ve recently suggested a few other biotech stocks to my subscribers, including:

• Best-in-class generic drugmaker Teva Pharmaceuticals (Nasdaq: TEVA).
• Another generic drugmaker to look at is Watson Pharmaceuticals (NYSE: WPI). Watson just announced its acquisition of privately held Arrow Group, a generic biotech drugmaker, with significant international operations.I like this move by Watson, as it broadens the company’s reach both in products and markets served.

The bottom line is that while health care reform could very well change the investing landscape within the sector, you can always find opportunities if you know where to look.

Good investing,

Marc Lichtenfeld

by David Fessler, Advisory Panelist

Analysts are starting to pile into the biotech bandwagon now. And for good reason: the AMEX Biotech Index is actually lower today than it was nine years ago.

Translated into investor-speak, the opportunities in biotech today are fantastic. I’m not a biotech guy, but my fellow analyst Marc Lichtenfeld is, and he writes about them regularly.

Now that Investment U and our sister publication – Smart Profits – are combining forces, you’ll be hearing about the biotech sector from Marc on a regular basis. Nevertheless, there is something that I do know about the healthcare and biotech sector.

All biotech companies – regardless of whether or not they turn out to be a good investment – need laboratory services and equipment. Therefore, it stands to reason that any boom in the biotech sector would drag along these companies for the ride.

Becton Dickson and Company (NYSE: BDX) – a large-cap medical technology company – is one that stands to benefit from the biotech boom.

The company sells an extensive range of medical supplies and devices. It also has an extensive array of laboratory equipment and diagnostic products used by life science researchers (biotechs), healthcare institutions (hospitals and doctor’s offices), clinical laboratories and the public.

Let’s take a quick look at each division:

The BD Medical division manufactures a complete line of medical devices and other items used in just about every facet of the typical healthcare setting. Needles, catheters, syringes, scalpels and home healthcare products are just a few of the thousands of products offered by BD Medical.

The BD Diagnostics division is similarly broad.

It provides for the safe transport and collection of specimens and instruments associated with a wide range of infectious diseases. The next time you are in your doctor’s office, take notice of the “sharps” collection device mounted on the wall. Chances are it’s a BD box put there and serviced by BD Diagnostics.

The division services microbiology laboratories, physician’s offices, home patients, laboratories and clinics, biotech labs, and hospitals.

BD BioSciences manufactures tools focused squarely on the research and clinical segments of biotechnology. Its tools enable the study of cells and their components. Its products also include state-of-the-art cell imaging systems, cell culture media, reagent systems for life sciences research and other diagnostic tools.

BD Biosciences’ tools directly impacts drug discovery and development.

Moreover, any increases in biotech R&D bode well for Beckman. And as the government strives to drive down the cost of healthcare, diagnostic tests that take the place of expensive MRIs and CT Scans are on the increase.

Investors that want some exposure to the biotech space, would do well to consider a company that will do well regardless of the success or failure of any given biotech company.

Good investing,

Dave Fessler

by The Investment U Research Team

In many ways Steve Jobs return to Apple (Nasdaq: AAPL) was overshadowed by the demise of Billy Mays and the Bernie Madoff’s sentencing.

However, there are lessons for Apple in both of these men.

Billy Mays tragic loss should give iPhone and iPod creators pause to consider what would happen if the company did lose Steve Jobs. While Tim Cook has performed strongly by many analysts accounts, he does not bring true star leadership power that Jobs does.

Apple should start addressing this now. Even Berkshire Hathaway’s (NYSE: BRK.A) Warren Buffett has Charlie Munger, and I’m sure a host of recorded and written statements of contingency plans in the meantime.

The other lesson for Apple is from Bernie Madoff. The New York Times was a little blasé when they mentioned Jobs return, “With Mr. Jobs’ return widely expected, Wall Street’s reaction to the news on Monday was muted.”

The reaction may have been muted, and there may be no change in stock price, but what wasn’t mentioned was the innumerable lawsuits that are being prepared right now on behalf of dissonant shareholders.

You see while Apple is famous for its secrecy, this case of protection may have gone too far. A CEO’s life, and especially one as pivotal and influential as Job’s, is a material fact for a company.

Omitting the true state of Jobs’ health is akin to forgetting to mention that your brand new product has production flaws. The lesson from Bernie for Apple should be clear: do not lie, cheat or steal, or there will be consequences.

The real question for Apple is whether the consequences will affect the stock price…

Symbols mentioned in this article: AAPL and BRK.A.

by Jim Stanton, Contributing Editor, Sector Watch
Tuesday, June 30, 2009: Issue #1030

When oil prices moved to over $30 a barrel in the mid 1980s, it was considered a significant event.

It also signaled the birth of small ethanol companies in the Midwest. Many of them managed to hang around long enough to get a second wind when Iraq’s invasion of Kuwait and the ensuing Gulf War pushed oil prices past $40.

But the renewed interest in ethanol proved to be short-lived, as oil retreated below $20 a barrel just four months later. As a result, many of those smaller ethanol companies couldn’t survive as profitable alternative energy investments.

Flash forward to today, where we’ve seen crude oil prices double in just the past four months. Worldwide oil demand has soared, particularly from fast-growing countries like China and India, and although the global downturn has seen the pace of demand slow, when the global economy gets back on track, it should prove even more bullish for oil.

But there’s another sector that should rise, too…

Rising Oil Prices Spark Interest In Alternative Energy

With oil prices rising again recently, it’s sparked yet another conversation about the viability of certain alternative energies.

One ETF that tracks the performance of clean energy firms is the PowerShares WilderHill Clean Energy (NYSE: PBW) - a widely traded vehicle that gives you exposure to this still-growing sector in a safer way than investing in individual companies.

While firms like Exxon Mobil (NYSE: XOM) rake in billions of dollars per quarter from oil, PBW invests almost entirely in experimental, technology-focused “green” companies. And while these guys stand to benefit from higher oil prices just like specific oil companies, their success depends more on regulatory changes, subsidies and a global recognition of the need for alternative energy solutions.

The Alternative Energy Market Gets More Attention

When it comes to the alternative energy market, wind power, solar, hydroelectric, geothermal and nuclear power have all received attention over the past couple of years.

But when the oil market first began its march towards record high prices, it was the ethanol industry that took center stage and triggered the wider debate over cleaner energy resources.

However, the ethanol market faces a battle. Despite the government’s intervention and subsidies for the industry, newer technologies are needed in order to make ethanol more viable - and the industry’s companies profitable. A good example is Pacific Ethanol (Nasdaq: PEIX) - a company that Bill Gates invested in heavily a few years ago, paying $12 a share. Today, the stock trades for just $0.40.

Below is a daily chart of PowerShares WilderHill Clean Energy (NYSE: PBW), which is currently at a critical juncture:

Chart: http://www.investmentu.com/images/iu063009chart.gif

Three Scenarios for the Clean Energy Fund

As you can see, when the stock market bottomed out in March and oil prices retested their lows, PBW’s Clean Energy Fund did the same.

Since then, however, PBW has doubled off those lows to the June 10 high of $11.37. This is right around the swing high of $11.40 that it tested back in November, before it pulled back to the trendline drawn off the March lows.

In addition, the 50-day and 200-day moving averages are very close to crossing one another - a development that sometimes indicates a short-term top.

So what we have here is a relatively clear-cut conclusion…

• A close above $11.40 would be bullish and should lead to higher prices.
• However, a close below the trendline, currently around $10, would be bearish over the short-term.
• A close or two below the 50-day and 200-day moving averages, which are currently around $9.50, could lead to a move down to $8 or lower.

Good investing,

Jim Stanton

by The Investment U Research Team

As we come to the close of the second quarter, many average investors are confounded by what seems to be a flurry of activity in some of the best performing stocks in the market.

Professionals know it as window dressing. It’s when professional fund managers stuff their funds with large portions of winning stocks so that their quarterly reporting looks like they own lots of winners.

And for many investors who don’t do their homework, that’s what they’re getting a majority of the time - window dressings of a variety of sorts.

Ahh, the games Wall Street plays.

Speaking of window dressing and games… Bernie Madoff found out today that it doesn’t matter whether you’re a senior citizen or not - when you defraud thousands out of billions there’s going to be a price.

Ultimately, no one is going to look out for your investments like you, and the more that you know about them - the better.

Ask questions, do your homework and know for yourself if any investment is right for you. That goes for any and every investment: regardless of who introduces you to it. Be it your friend, relative, hot web tip or even trusted Investment U…

The fact is that if you own an investment, it’s your responsibility to understand it. If you don’t, start studying - lest your entire portfolio be window dressing.