This is the largest, and the most ambitious development effort of PEP in China to date. The Chongqing plant is the first “green” beverage plant ever built in China, and the first of its kind in the industrial center of Chongqing to comply with the rigorous sustainable engineering standards known as Leadership in Energy and Environmental Design (LEED) set by the Green Building Council.

The plant utilizes over 35 water- and energy-saving designs and operates under the world’s most advanced technology, including an environmental management system that monitors water and energy use on every production line and every piece of individual equipment in real time. Therefore, the state-of-the-art beverage facility is important to the company’s ongoing strategy to expand in emerging markets and broaden its portfolio of locally relevant products.

In addition, PEP also plans to fund a variety of major capital programs to grow its manufacturing capacity in China. Over the next two years, the company intends to open five new beverage manufacturing plants in Kunming, Zhengzhou, Quanzhou, Lanzhou and Nanchang, strengthen its local research and development capabilities and broaden its portfolio of Chinese-designed and developed products such as Tropicana Guo Bin Fen juices, Lay’s Lychee potato chips and Cao Ben Le drinks, which are inspired by traditional Chinese medicine.

Zacks Investment Research
View original at: Zacks.com News Feed

So far in fact, that we’re getting close to the price we talked about on March 9 – $.35 (or split adjusted $7.00).

At that time, we recommended readers go the route of John Templeton and pick up some penny stocks in the S&P 500. Moreover, just ten days later readers who jumped in were rewarded with a 437% gain.

We could be setting up for a similar situation.

The stock split does change the dynamics – mostly emotional – of the current stock plunge. Investors feel better about selling at $9.00 than they did at .40, even though the value might be the same.

On the other hand, we could see this stock slip much lower that it did in March simply because the dynamics of short sellers and a higher price come into play.

While the news today has been centered upon the government approving bonuses for AIG employees, it’s not terribly important. Most of the big news concerning AIG, and the main reason it has fallen so much, is because Citigroup (NYSE: C) reported that AIG might have no shareholder equity.

Ouch. But how does that change things?

Regardless of whether this stock sinks lower – or much lower – as an investor/speculator considering the long-term movement of this stock you need to ask yourself two things.

One, are the long-term prospects of this stock any different than they were in March? Two, do you think the stock will go bankrupt? If you can easily answer these questions, than you have a good idea of why AIG could be another great short-term investment.

We’ll be keeping our eye on this one. Today the price is down to $8.5 – and as the stock price moves closer to $7, the more interested we’ll be.

View original at: Investment Advice and Investment Research with a Contrarian Point of View

Studies show that the average investor does far worse than the Dow Jones Industrial Average or the S&P 500.

It’s not just that they’re not getting good advice. Most of them aren’t even asking the right questions.

As a former money manager, I found my clients spent the majority of their time asking about - and fretting over - what lay just ahead for the economy and the stock market.

Nobody knows the answers to those questions.

So it’s far better to ask, “What companies are likely to thrive - and report enormous profit gains - in the current economic environment?” The answer to that question is where the big money lies.

Let me give you an example.

Cerner Corporation Recommendation

In early February, I recommended Cerner Corp. (Nasdaq: CERN) to subscribers of The Momentum Alert.

As you may recall, the vast majority of stocks were in a freefall at the time, one that wouldn’t end until the market bottomed on March 9.

But that didn’t matter. You see, Cerner is a company with a mission: to take the pen out of doctors’ hands.

Cerner makes systems that automate records in hospital and doctor offices. This is much more efficient than handwritten notes.

It’s also much safer.

Automation reduces errors. Doctors - famous for nearly illegible handwriting - can cause the wrong drug (or the wrong dosage) to be inadvertently dispensed at a hospital or pharmacy. And they can forget to renew old prescriptions.

That’s why Cerner’s scalable Millennium software is already installed in 6,000 hospitals, pharmacies and doctors’ offices. A new federal push for records automation will only increase that footprint.

Despite the severe recession, I pointed out that recent earnings at Cerner were up 24% on a 13% increase in revenue. Plus, the company had a $3.4 billion order backlog.

It didn’t matter that most companies were struggling. Cerner wasn’t.

Cerner Corporation: Health Information Technology

The health information technology leader operates in a recession-resistant industry. And spending on electronic recordkeeping will only grow in the near future.

Since February, Cerner has performed like a champ. The company’s bottom line is still fattening at double-digit rates. And the stock hit a new 52-week high last week.

Look at the chart below. While the Dow is only slightly higher than it was in early February, our shares of Cerner are up over 75% - and I see plenty more upside ahead.

What’s more, we’ve already locked in profits of 146.15%, 197.95% and 669.23% in our Cerner June $40 calls.

Ironically, if we had known that the economic news was about to get worse - and the market was still weeks away from hitting bottom - it might have prevented us from making a fabulous investment.

It’s often a good thing that you don’t know what lies just ahead for the Dow.

In sum, forget about the market and instead focus on companies that are primed for a sharp jump in profits in the months ahead. That’s where you’ll see the biggest gains.

True, the vast majority of publicly traded companies will not report good earnings in the weeks ahead. (Quite the opposite, in fact.)

But so what? You don’t need the vast majority of companies. Restrict your purchases instead to those exceptionally well-managed firms with the best near-term business prospects.

They may not be plentiful but they sure are profitable.

Good investing

Alexander Green

View original at: Investment Advice and Investment Research with a Contrarian Point of View

Company Description

China Life Insurance is China’s largest life insurance company. It provides individual and group life insurance and accident and health insurance. With its network of agents, it is able to reach all provinces and areas in China compared to its competitors which have reach only in major cities.

Bullish on 2009

China Life saw first-quarter net income climb 55% year over year as investment income rose due to a rebound in the Shanghai stock market. China Life is one of China’s largest institutional investors.

Covering analysts are bullish on the company for the full year. 2 out of 3 covering analysts raised 2009 estimates in the last 30 days with the consensus rising 5 cents to $2.30 per share. 1 of those analysts raised in just the last week.

Growth

Analysts expect year-over-year earnings growth in 2009 of 39.19% which is much higher than the industry average of 3.80%.

Five year average growth rates are expected to be 24.25%, also above that of the industry average of 11.30%.

Income

The company pays a dividend with a current yield of 2.40%.

Fundamentals

China Life Insurance is a Zacks #2 Rank (buy) stock. It is trading with a forward P/E of 24.51. The company has a solid 1-year return on equity (ROE) of 22.99%.

The stock has been volatile. See the 6-month chart below:

Zacks Investment Research
View original at: Zacks.com

Company Description

RightNow Technologies provides on-demand software solutions designed to optimize customer service operations. The company prides itself in its self-learning knowledge base that supports web, email, telephone and other methods of communication.

Several major companies have recently elected to use RightNow’s services including CBS, Jackson Hewitt, TiVo, and several areas of the Department of Defense.

Back in Black

RighNow has just posted another quarterly profit, solidifying its emergence from the red it has spend the past few quarters in.

On March 31 the company reported first quarter results that included revenue of $36 million, up from $33 million one year ago. This yielded net income of $1.3 million, or 4 cents per share.

The Street was looking for a loss of 1 penny, but was pleasantly surprised for the ninth consecutive quarter.

Raising Guidance

While the company slightly lowered revenue guidance for the year, it raised its full-year earnings projection. RightNow expects earnings to be between a loss of $0.02 and gain of $0.03, up from previous guidance of between a loss of $0.07 and a gain of $0.01.

Bullish Analysts

Analysts’ estimates are coming in a the high end of the forecasts, predicting a profit of 2 cents this year. The consensus for 2010 is 10 cents.

These estimates would yield growth rates of 109% and almost 400% respectively.

The Chart

A recent pull back to just above the support level may have created a nice entry point. Take a look at the chart below.

Zacks Investment Research
View original at: Zacks.com

Company Description

Kongzhong Corp., through its subsidiaries, provides wireless interactive media and entertainment services to mobile phone users in China. The company was founded in 2002 and has a market cap of $352 million.

Shares of Kong have been rallying for most of the year, helped by the company’s better than expected first-quarter results, reported on May 13.

First-Quarter Results

Sales were up more than 35% from last year to $29.6 million. Income sky-rocketed, jumping to $2.5 million from $88,000, producing earnings of 8 cents per share, 5 cents ahead of the consensus estimate.

Share Buy Back

During the quarterly announcement, Kong noted that it had purchased a total of 568,994 ADS’s (22,759,760 ordinary shares) at an average price of $4.076.

Strong Balance Sheet

The company’s balance sheet also looks strong, with $141.67 million in cash and cash equivalents.

Estimates Jump

Analysts went ahead and boosted their earnings projection after news of the good quarter hit the street, with the current year tacking on 11 cents and climbing to 23 cents per share. The next-year estimate is projecting earnings of 30 cents, a 27% growth projection.

Valuations

Based upon the current-year estimate, this is a fairly pricey stock, trading with a P/E multiple of over 40X, a steep premium to the overall market.

The Chart

Shares of KONG have been on a steady rally for most of the year, recently topping off above $11. Take a look below.

Zacks Investment Research
View original at: Zacks.com

Company Description

TOTAL is a large integrated oil and gas company. Headquartered in France, the company is among the top 5 largest diversified energy companies in the world. TOTAL operates in exploration and production, refining and marketing and has a chemical business.

TOTAL operates a significant part of its production business in regions such as Kazakhstan, Qatar, Canada and West Africa.

First Quarter Results

On May 6, TOTAL reported first-quarter 2009 results that reflected the 54% drop in Brent crude prices since the first quarter of the previous year and significantly lower natural gas prices.

Additionally, production also fell as OPEC pulled back on production and the world entered a global recession.

Sales fell 32% year over year. The exploration and production segment (the upstream business) fell 46%. The refining and marketing segment (the downstream business) grew 93%.

Net income declined by 35% compared to a year ago.

2009 Outlook Brightens

With the not-so-great first quarter, then why is TOTAL a Zacks #1 Rank (strong buy) stock?

Crude prices have rebounded since the first quarter and earnings estimates are rising both for the second quarter and the full year.

In the last month, 1 out of 2 covering analysts raised for the second quarter by 17 cents to $1.30 per share.

Full-year estimates jumped 9.28% in the last 30 days to $5.65 from $5.17 per share with 3 out of 6 covering analysts raising during that time.

Value Fundamentals

TOTAL is trading with an attractive price-to-book of 1.64. The company has an outstanding 5-year average return on equity of 31.87%.

As an added bonus, the company also pays a dividend with a current yield of 5.20% which is much higher than the industry average of 2.63%.

Zacks Investment Research
View original at: Zacks.com News Feed

It is expected that stocks in the Consumer Staples sector will underperform as cyclical stocks begin to discount the recovery out of the current global economic recession.

OPPORTUNITIES

Stocks in the Consumer Staples sector have traditionally performed better than the stock market, and especially cyclical companies, during market declines. The fundamental explanation is that food, beverage, household products and cosmetics companies manufacture and market brand name consumable products, most of which are considered essential to daily life, such as food, drink, toothpaste, deodorants, toilet paper, etc.

Since product demand is relatively stable, the companies should report earnings in line with expectations and, hence, the stocks have outperformed. Generally speaking, food companies generate earnings growth at a mid-to-high single-digit rate.

Beverage companies, however, are structurally able to grow faster at the high single-digit to low double-digit rate. But, cosmetics companies can grow earnings a percentage point or two above beverage companies.

At year-end of 2008, Consumer Staples sector has outperformed the market on a total return basis for five consecutive years; therefore, the positive performance disparity is long-in-the-tooth. In addition, the relative performance has seasonal attributes with almost all the relative gain coming in the fourth quarter as investors flee more cyclical investments, which tend to disappoint near the end of the year.

In 2009, it is highly probable that Consumer Staples will underperform as stocks begin to discount the recovery out of the current economic abyss. During the second quarter of 2009, Consumer Staples stocks were only up 11.7% versus the 15% gain for the S&P 500.

WEAKNESSES

The outlook for the tobacco industry is negative due to the impact of a 150%+ increase in the federal excise tax, the high probability of additional federal regulation, and the recent losses in product liability lawsuits. In February, President Obama signed the congressional SCHIP (State Children’s Health Insurance Program) bill that included a $0.6166 per pack increase in the federal tobacco tax. Hence, the federal excise tax per pack of 20 cigarettes was increased from $0.39 to $1.01 per pack.

When federal excise taxes are increased, it is estimated that industry volume will decline by at least 8%, but the magnitude of the decline could be much greater, especially considering the backdrop of the weak economy. During the first quarter, industry cigarette volume declined 10.4% due to wholesale inventory reductions associated with the federal tax increase. A tobacco tax increase of this magnitude is unprecedented.

Additional regulation of tobacco products by the U.S. Federal Government is now expected. On June 8, 2009, the U.S. Senate again passed legislation, empowering the U.S. Food and Drug Administration (FDA) to regulate cigarettes and other tobacco products. Over the last several years, the House had not passed a similar bill, but in April, the House finally passed a comparable measure, indicating a more stringent regulatory framework for all domestic tobacco companies in the future.

The tobacco companies are losing product liability law suits. In late March 2006, the U.S. Supreme Court refused to hear an appeal in the Boeken case; therefore, Altria (MO) paid the $50 million judgment, despite claiming the judgment was excessive. Altria also lost the Bullock case; however, a new trial is scheduled to revise the amount of initial punitive damages of $28 million.

Lastly, in March 2009, Altria lost the Williams case when the U.S Supreme Court dismissed the Altria’s appeal of a 1999 punitive damages award of $79.5 million. However, the company is delaying payment by disputing an Oregon state law that requires 60% of any punitive damages should be paid to the state.

As a result of these negative developments, the ratings on both domestic tobacco companies, Altria and Reynolds American (RAI), are rated Sells.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

McDonalds Corp, operates one of the world’s largest fast food chains, with over 35,000 restaurants world wide. The company has a market cap of $63 billion.

McDonalds is set to report its second-quarter results on July 15, and if the company’s first-quarter results, reported on Apr 22 are any indication, investors should be pleased.

First-Quarter Results

Although sales were down 10% from last year, income was up to $979.5 million from $946.1 million last year. Earnings came in at 83 cents, one penny better than the consensus.

Global same-store sales were up 4.3%, with Asia/Pacific, Middle East and Africa regions leading the way at 5.5%.

McDonalds also noted that its McCafe initiative was trending ahead of schedule and producing more revenue than expected.

May Same-Store Sales

More recently, McDonals reported strong May same-store sales were up 5.1% from last year, with international sales leading the way and domestic results showing some weakness.

Estimates Rise

With a steady stream of positive data coming down the line, analysts continue to raise their estimates. The current year is up 6 cents in the last 30 days to $3.86 per share. The next-year estimate is up 6 cents in the same period to $4.25, a bullish 10% earnings growth projection.

Income

And to top it all off, McDonald’s is rewarding its shareholder with a very respectable dividend of 3.50%.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Genesco is a footwear retailer and wholesaler. Brands include Dockers Footwear, Nautica Footwear, and others. Additionaly the company runs Volunteer Leather Co., a leather tanning and finishing unit.

Crushed Earnings Estimates

On May 28 the footwear company released fiscal first-quarter results for 2009 that included adjusted earnings of $3.5 million, or 17 cents per share. Analysts were only expecting 3 cents per share, making this the second quarterly surprise in the past 4.

Net sales grew 4% on a year over year basis to $370 million.

Estimates Spike

Full-year estimates are up sharply following the report. The consensus for this year, ending in early 2010, is $1.73, up from $1.56. Forcasts for next year are averaging $1.98, up from $1.89.

Valuations Remain Strong

Curently shares are trading at just under 10 times current earnings and just over 10 times forward earnings. The PEG ratio is only 0.9, so even the growth, 15% next year, is a decent bargain.

The Chart

After a difficult 2007, Genesco looks to be righting the ship and once again reporting consistent earnings relative to estimates.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

The Anderson’s Inc., with its subsidiaries, operates in agriculture storage and transportation markets in the United States. The company was founded in 1947 and has market cap of $531 million.

The commodity markets continue to be volatile as overall global economic conditions remain uncertain. But the Anderson’s deftly navigated this territory, producing better than expected first-quarter results on May 6.

First-Quarter Results

Sales were down 2% from last year to $697.4 million. Earnings came in far ahead of expectations at 27 cents per share, blowing past the consensus of a loss of 1 cent.

Segment Results

The company noted that its grain and ethanol division produced operating income of $5.7 million, up from $2.2 million last year. On the flip side, its rail business suffered, with income dropping to $900,000 from $6.4 million on lower demand related to general economic weakness.

Estimates Jump

After the better than expected quarter hit the Street, analysts boosted their earnings projections. The current-year added 21 cents, climbing to $2.07 per share. The next-year estimate is pegged at $2.53, a 22% earnings growth projection.

Valuations

Based on the current-year estimate, this stock has a P/E multiple of 14X, in line with the overall market.

The Chart

Shares of ANDE have rebounded nicely from the short-term low, recently crossing the $31 mark after bottoming out below $11 in early March. Take a look below.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Gymboree is a specialty children’s retailer with stores in the United States, Canada and Puerto Rico. The company operates 901 retail stores including 619 Gymboree stores, 126 Gymboree outlets, 118 Janie and Jack shops and 38 Crazy 8 stores.

It also has several online stores for its three brands.

Gymboree Surprised by 4.23% in the First Quarter

On May 20, Gymboree beat Wall Street estimates for the first quarter of 2009 by 3 cents reporting 74 cents compared to analysts’ estimates of 71 cents. Despite the surprise, it was still under the year ago EPS of 86 cents per share.

Revenue fell 5% to $228 million from $238.9 million in the year ago period. Comparable store sales were down 10% year over year.

The company has been actively reducing product costs and operating expenses which helped the quarterly numbers.

The company doesn’t expect the economic conditions to improve in the near term but is focusing on its core business of acquiring new customers and opening new stores.

Consensus Estimates Jumped

Despite the rough economic environment, covering analysts are optimistic about the second quarter and the rest of the year.

Second quarter consensus estimates rose 9 cents to 16 cents in the last 60 days. 2009 consensus estimates jumped 8.9% in the last 60 days with 1 out of 8 covering analysts raising in just the last week.

Value Fundamentals

Gymboree is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 11.67 and a price-to-book of 2.77. The company also has an outstanding 5-year return on equity of 23.25%.

Zacks Investment Research
View original at: Zacks.com News Feed

Volume is well above average at approximately 465,000, compared to 181,000.

HELE is a leading designer, producer and global marketer of brand-name personal care and household consumer products. It is 1 of 3 companies from the cosmetics & tltrs industry on today’s 224-stock Zacks #1 Rank List, which also includes L’Oreal ADR (LRLCY) and Revlon (REV).

A Good Start to the Fiscal Year

Earlier today, HELE announced earnings of 47 cents per share for its fiscal first quarter, which was 34% atop the consensus of 35 cents. In the year-ago quarter, the company announced earnings per share of 42 cents.

Sales declined, but by less than 1% to $143.9 million, compared to $145 million year over year. Sales at the company’s Housewares Segment advanced 11%, while sales at the Personal Care Segment declined 5%.

“The economic environment remains challenging,” said Chairman, CEO and President Gerald J. Rubin. “As a leader in our product categories to our retail partners, we believe we are poised to effectively react to changes in the marketplace as they occur. We stand ready to take advantage of improvements in the future retail environment.”

Estimates Could Pick Up

Earnings estimates on HELE are already higher than levels from 2 months ago, but today’s report could start a new round of upward revisions.

At the moment, a consensus of 3 covering analysts are expecting earnings per share of $1.73 for the fiscal year ending February 2010, which is up 18.5% from 60 days ago.

It’s still very early, but analysts are currently seeing earnings of $1.91 for next fiscal year, ending February 2011, marking a year-over-year advance of more than 10%. The past 2 months has seen a gain of as much as 46% for the period.

Zacks Investment Research
View original at: Zacks.com News Feed

Earlier this week, T. Boone Pickens, the 81-year-old Chairman of BP Capital, appeared on CNBC’s Squawk Box to discuss the progress of the “Picken’s Plan.”

Readers might remember it was during the heat of the Presidential campaign last summer, on July 8, that Pickens began his own campaign to wean the nation off of foreign oil.

Spending his own money, he bought time on the major networks and mobilized an “army” of believers in order to get the word out about the dangers of continued dependence on foreign oil.

Essentially, the Pickens Plan seeks to reduce the nation’s dependence on foreign oil with a combination of wind-generated power and natural gas powered vehicles. In the process, the need for foreign oil is drastically reduced or eliminated in as little as 10 years.

His timing  - with oil prices hovering around $150 a barrel - got him a lot of attention. He spent time last August meeting with both McCain and Obama in hopes that - regardless of the election’s outcome - the victor would understand the magnitude of the problem and get behind an energy plan for the United States.

In the last 12 months, to his credit no other plan has been articulated as clearly and succinctly as Pickens’ has.

Now it’s one year later: Obama is President, oil prices are less than half of what they were a year ago, and the country is sliding deeper into recession. Is shutting off foreign oil still a concern? Have we made any progress in doing so? Are we any closer to a national energy plan?

The short answers are definitely yes, yes and almost. Let me explain:

Still at the Mercy and Whims of Whackos…

While the price of oil has come down dramatically in the last year, our dependency on foreign oil is as great as it ever was. We still get over 70% of our oil from other countries, and it’s a huge security issue.

While the transfer of wealth - dollars out for oil in - is less, it’s still a huge net outflow of nearly $400 billion annually.

There’s no question that keeping that money here will not only have a positive effect on our trade balance, it’ll make a huge difference in the U.S. economy… a “free” $400 billion annual stimulus package, if you will.

Alternatively, according to Boone, “If we go 10 more years with no plan, we’ll be importing 75% of our oil and it will cost us $300 a barrel.”

Even if he’s wrong by 50% - which is unlikely given increasing world demand - it’s still a big problem. So how do we get rid of the rogues?

Closing the Door on OPEC: Light at the End of the Tunnel

In terms of our progress in displacing foreign oil, there’s only one quick way to do it: replace it with natural gas. Just a few weeks ago, the Potential Gas Committee - the nation’s authority on natural gas supplies - issued a report that shows a substantial increase in natural gas reserves here in the United States.

The report indicated that the nation’s gas reserves increased 25% to 2,074 trillion cubic feet (tcf) from 1,532 tcf in 2006 - the last time the report was issued.

This was the largest increase in the 44-year history of the committee, and its language was reflective of that fact:  “[The report] shows an exceptionally strong and optimistic gas supply picture for the nation.”

That’s an understatement: At 2030 projected U.S. consumption rates of about 25 tcf, that’s nearly a 100-year supply, and it pegs the U.S. reserves as the largest in the world.

John B. Curtis, a geology professor at the Colorado School of Mines and the report’s principal author, said, “New and advanced exploration, well drilling and completion technologies are allowing us increasingly better access to domestic gas resources - especially unconventional gas - which, not that long ago, were considered impractical or uneconomical to pursue.”

The findings have shifted the focus onto natural gas as a possible transition fuel as we move from coal and oil to solar, wind, geothermal and other non-carbon sources of power. It couldn’t have come at a more opportune time.

Moving Towards a National Energy Plan: Slowly

As I’ve often said in previous articles, the best thing the government can do to move us away from fossil fuels is to provide funding and tax incentives to develop and use something else (and then get the hell out of the way). It appears as though Congress is trying to do just that with natural gas.

H.R. 1835, known as the “New Alternative Transportation to Give Americans Solutions Act of 2009,” amends the Internal Revenue Code of 1986 to create jobs and encourage alternative energy investments.

Here are the highlights from www.gotrac.us on what this act does:

• An excise tax credit through 2027 for alternative fuels and motor vehicles involving compressed or liquefied natural gas (LNG).

• An income tax credit through 2027 for vehicles powered by compressed or LNG.

• A new tax credit for the production of vehicles fueled by natural gas or LNG.

• A tax credit for alternative fuel vehicle refueling property expenditures for refueling property relating to compressed or LNG and allow an increased credit for such property.

• Requires 50% of all new vehicles purchased or placed in service by the U.S. government by December 31, 2014, to be capable of operating on compressed or LNG.

• Authorizes the Secretary of Energy to make grants to manufacturers of light and heavy-duty natural gas vehicles for the development of engines that reduce emissions, improve performance and efficiency, and lower cost.

Now before I get a dozen e-mails pointing out that natural gas is just a different fossil fuel, let me head them off. There’s no argument there.

However, it’s much cleaner burning, produces less carbon emissions and, most importantly, it’s found here in abundance. It’s a walk in the park to produce new cars and trucks that run on it, and convert older ones as well.

And if it helps free of the grip of rogue nations around the world in 10 years or less, then I’m all for it. We’ll all be better off economically, and we’ll all have greater piece of mind.

How do you play it? Take a look at Clean Energy Fuels Corporation (Nasdaq: CLNE), a provider of natural gas as a vehicle fuel, primarily for fleet use in the United States and Canada. It designs, builds and operates natural gas fueling stations, and provides financing for natural gas vehicles. It and others in the sector will undoubtedly benefit from this legislation when it’s passed.

Next week, I’m going to take a look at the state of the wind power industry, and why it’s currently in stall mode.

Good investing,

David Fessler

View original at: Investment Advice and Investment Research with a Contrarian Point of View

On July 7, 2009, top Spanish telecom operator Telefonica (TEF) announced that it has been awarded the exclusive right to distribute Palm Inc’s (PALM) recently released smartphone “Pre” in the selected European markets.

The company’s wireless arms O2 and Movistar will exclusively sell the premium handset when it becomes available in specified European countries during the holiday season in December 2009. O2 has received the right to market Pre in the UK, Ireland and Germany, while Movistar will have exclusivity in Spain.

Like Apple Inc’s (AAPL) iPhone 3G (and the latest 3GS version), Palm Pre is equipped with the most advanced cellular technology and embedded features available in the 3G handheld market today. The high profile handset was launched in the U.S. on June 6, 2009 with Sprint Nextel (S) being the exclusive dealer. Palm Pre has generated strong market response, having sold 90,000 to 100,000 units in the first week of the launch.

Telefonica’s Spanish and European wireless operations are currently struggling with declining revenues and lower subscriber growth levels reported in the most recent quarter as weak economic conditions across these key markets are affecting customer usage levels supported by intense competition. Additionally, reduced tariff rates imposed by Spanish and European regulations are tightening wireless revenue per user.

Palm Pre represents the second most significant handset deal for both O2 and Movistar as they are already the exclusive distributors of iPhones (including 3GS) in Britain and Spain, respectively. The ability to market two of the most sought after handset brands will strengthen O2’s competitive position over its biggest rival Vodafone (VOD), which sells Research In Motion’s (RIMM) BlackBerry series of smartphones in Europe, a head-to-head competitor to Palm Pre.

We reaffirm our Hold recommendation for Telefonica as we continue to assess revenue and subscriber retention trends across its domestic and European operations, strongly challenged by the weakening local economies.

Zacks Investment Research
View original at: Zacks.com

In a filing with SEC on July 1, 2009, Continental Airlines Inc (CAL) unveiled an agreement with Wells Fargo & Company (WFC) and Wilmington Trust Corporation (WL) for aircraft financing. Continental intended to issue equipment notes to finance 12 Boeing aircraft it already owns and five of the seven Boeing planes that are scheduled for delivery through September.

However, On July 3, 2009, Wilmington Trust clarified that it is not a lender to Continental and has no credit exposure to the airline company. Wilmington is serving solely in corporate trust and agency capacities for Continental’s future issuance of approximately $390 million of equipment notes.

As a result, this transaction has no impact on Wilmington Trust’s financial condition. Wilmington Trust’s role remained restricted to serving as subordination agent, pass-through trustee, and indenture trustee, for which it has received a fee.

Wilmington is a mid-cap financial holding company whose primary subsidiary, Wilmington Trust Company, is a Delaware-chartered bank and trust company.  Wilmington Trust has a very well-balanced revenue stream relative to most mid-cap peers (Webster Financial Corp (WBS), Valley National Bancorp (VLY) and Fulton Financial Corp (FULT).

Moody’s downgraded the rating of the company in April 2009 based on concerns related to its real estate lending concentration and investments in bank trust preferred securities. Furthermore, recently, S&P lowered its outlook on Wilmington Trust to “negative” and also downgraded its ratings. As such, we maintain our Sell recommendation on the shares of Wilmington Trust.

Zacks Investment Research
View original at: Zacks.com News Feed

Zacks Investment Research
View original at: Zacks.com

The airline flew 6.7 billion revenue passenger miles (RPMs) last month, compared to 6.9 billion RPMs in the year-ago period.

Available seat miles (ASMs), which indicate capacity, decreased 3.8% to 8.5 billion.

The low-cost carrier also launched one of the biggest fare sales in the company’s history, in which one-way tickets priced between $30 and $90 are on offer to customers for a period of 2 days.

This move by Southwest comes after major airlines raised fares last month in an effort to improve sales.

Meanwhile, 8 of 13 covering analysts lowered expectations on the company’s full-year earnings over the past month, sending the consensus down by 10 cents to 26 cents per share.

LUV, a Zacks #3 Rank (”Hold”) stock, has slipped more than 2% so far today on volume of approximately 3.4 million, which is well below the average daily volume of about 7.5 million.

Zacks Investment Research
View original at: Zacks.com

Company Description

Jefferies Group, Inc., with its subsidiaries, operates as a securities and investment banking company domestically and internationally. The company was founded in 1962 and has market cap of $3.35 billion.

Jefferies share price took a big hit during the financial crisis in the fall of 2008, but has since rebounded very nicely as the company prepares to report much better than expected second-quarter results.

Second-Quarter Results Pre released

On June 24, Jefferies pre-released its second-quarter results, coming in much better than expected. Revenue should be a record $500 million, while income is expected to top $50 million, a sharp increase from a quarterly loss in the same period last year.

Earnings Details

The company said that the strong results were driven by trading in fixed income and commodities, sales and trading in corporate bonds, asset-backed securities and emerging markets debt. To top it off, Jefferies investment banking revenue is set to exceed $90 million, a 146% increase from last year.

Estimates Sky-Rocket

Estimates have been trending higher over the last 3 months, climbing from a loss of 12 cents to the current projection of 84 cents. The next-year estimate is pegged at $1.10, a 31% earnings growth projection.

The Chart

Shares of JEF have been rallying since early March, climbing from just below $8 to a recent high above $22. More recently, shares have bumped into some short-term resistance near the 6-month high, take a look below.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

SEI Investments Company provides asset management processing and investment operations software solutions to institutional and personal wealth management firms. The firm was founded in 1968 and has market cap of $3.25 billion.

First-Quarter Results

SEU has struggled in the weak economy of the last year, but the company was still able to beat analyst estimates on AR 23 when reporting its first-quarter results.

Revenue was down from the same period last year, but when removing one-time items, earnings came in at 23 cents per share, 1 penny ahead of the consensus.

One-Time Charges Clip Income

SEI noted that its income was effected due to a one-time charge of $14.4 million related to defaults in a structured investment vehicle.

Strong Growth Projection

In spite of the challenging environment and tough quarter, estimates are up, with the current-year climbing 4 cents in the last 60 days to $88 cents.

The next-year estimate is bullish, pegged at $1.09, a 23% earnings growth projection.

Income

SEI has carries a solid growth projection from the analyst community, but the company also pays a 1% dividend, adding a bit of cushion to the bottom line.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Merit Medical Systems, Inc. produces single-use medical products of high quality and superior value primarily for use in diagnosis and treatment of cardiovascular disease. The company’s products are designed to provide physicians and other health care professionals with devices that enable them to perform interventional and diagnostic procedures.

Net Income Up 28%

On Apr 28 the Utah-based company announced record sales of $58.4 million, 9% higher than the first quarter last year. Net income came in 28% higher at $5.5 million.

The record sales drove earnings per share to 19 cents, up from 15 cents in Q1 of 2008. Analysts were only expecting earnings of 16 cents, making this the first surprise in the past 4 quarters.

Analyts Raising Estimates

Since the report full-year estimates for 2009 and 2010 have inched higher. The consensus for 2009 is now 80 cents, up 1 penny. Forecasted for next year are averaging 98 cents, up 4 cents.

These estimates are calling for more than 7% growth this year and another 24% growth in 2010.

Valuations

Shares are trading at roughly 20 times forward earnings, not to bad for a medical company. However, given the growth prospects, the PEG ratio is just above 1.0.

The Chart

Shares are facing some resistance near $17, but if the momentum continues they could breakout soon. Take a look at the chart below.

Zacks Investment Research
View original at: Zacks.com

Company Description

Casey’s General Stores, founded in 1959 in Iowa, operates convenience stores affiliated with gas stations in small towns across the United States. As of March 31, the company operated 1474 stores.

Casey’s Had Record Year

On June 15, Casey’s reported fourth quarter results that missed on analysts’ estimates by 5 cents a share while reporting record earnings for the year.

Fourth-quarter earnings per share were 31 cents compared to analysts’ estimates of 36 cents but were higher than the year ago quarter of 28 cents per share. Adjusted fiscal earnings per share for the year were $1.80, which was a company record.

The Prepared Food and Fountain segment was the big winner in 2009 as same-store sales rose 9.1%, higher than the targeted 6.8%. Margins also increased slightly to 61.4% from 61.2%.

In 2010, the company is looking to expand its coffee and fountain selections as well as continuing the roll-out of its made-to-order sub sandwich program. Fourth quarter same stores sales climbed 7.2%.

The Grocery and Other Merchandise segment saw same store sale growth of 8% in the fourth quarter and 7% for fiscal 2009. Gasoline was the more difficult segment as prices spiked at the beginning of fiscal 2009. The fourth quarter saw same-store gallons sold rise 1.2%.

Even in difficult economic conditions, the company managed to increase its store count by 2%, adding 16 new stores and 16 acquired stores. It also replaced 14 stores and completely remodeled 2 others.

Dividend Increased

Unlike many other companies which are slashing dividends during the global recession, Casey’s actually increased it by a penny to 0.85 cents from 0.75 cents payable on Aug 17 to shareholders of record on Aug 3. That is a current yield of 1.40%.

Consensus Estimates Move Higher

Covering analysts are bullish about the company’s outlook in 2010. First quarter 2010 estimates climbed 4 cents to 59 cents per share in the last 30 days as 2 out of 5 covering analysts raised.

Fiscal 2010 consensus estimates jumped 20% in the last month to $1.96 from $1.80 per share as 3 out of 5 analysts raised.

Value Fundamentals

Casey’s General Stores is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 13.02 and a price-to-book ratio of 1.80. The company has a solid 5-year average return on equity (ROE) of 11.27%.

Zacks Investment Research
View original at: Zacks.com News Feed

Back in February, I profiled a great infrastructure “pick & shovel” company. Praxair (NYSE: PX) is a global Fortune 300 company, the largest industrial gases company in the Americas, and one of the largest in the world.

Investors saw PX climb up almost 25% before pulling back. Since our recommendation, it’s up almost 10% - and we think it can run even more.

With 27,000 employees in 30 countries, Praxair produces, sells, and distributes atmospheric, process and specialty gases to a wide array of customers around the globe.

It’s also a manufacturer of high-performance surface coatings for metals. The company’s advanced manufacturing segment designs and manufactures cryogenic and non-cryogenic gas supply systems for various manufacturing processes.

In February, the company beat analysts’ earnings estimates. In May, it beat them again. In fact, it’s beaten estimates for the last 15 quarters in a row. It’s no wonder it consistently has one of the best analyst ratings in the S&P 500.

It’s one of the most profitable companies in the industrial gases sector. How does it do it? Good management, expense control, and downsizing when necessary.

Praxair’s CEO, Stephen F. Angel, is unloading 1,600 employees to shore up the balance sheet. “Demand appears to have stabilized, but at a lower level, with overall volumes down 12% versus the prior year.”

The company tightened its estimates for the full year, but only by a few percent. It’s using this slower period to make strategic acquisitions, recently acquiring Sermatech International, a global supplier of protective coatings. In the last year, Praxair has made 15 acquisitions, mostly to strengthen its distribution network.

The real growth story, however is in China and how it’s providing a significant buffer to the effects of the global recession being felt here in the United States.

The company’s Chinese subsidiary - Praxair China Investment Co, Ltd. - is the largest industrial gas supplier in China with over 18 locations and 1,200 employees.

Praxair China is supplying liquid argon gas to the Nanjing Puzhen Rolling Stock Works, a subsidiary of China South Locomotive & Rolling Stock Corporation Ltd.

Nanjing Puzhen is the premier state-owned manufacturer of rail cars and urban metro trains in the country with the fastest growing rail system in the world. The argon gas will be used at various welding stations in its railcar manufacturing lines.

The China rail system is the fastest growing in the world, with annual track increases of over 700 miles.

The company also announced a contract with Changhong Electric Company - one of China’s largest manufacturers of consumer electronics - to supply xenon gas mixtures used in the production of plasma display panels.

There are a number of other Chinese agreements as well, but the bottom line here is that Praxair continues to buck the recession with good old fashioned growth in what is turning out to be the largest market in the world for its products.

On July 29^th, the company will announce earnings for it’s second fiscal quarter. Given its amazing track record, and an increasing growth story in China, there’s a good chance it will beat estimates again.

Farther out on the horizon, the economic stimulus plan will spur many industrial and construction projects in the second half of 2009 and 2010, further increasing the demand for the company’s products.

If you’re looking for a great company in the industrial materials sector, you need look no further than Praxair.

Good investing,

Dave Fessler

View original at: Investment Advice and Investment Research with a Contrarian Point of View

Yesterday we were reading how Microsoft (Nasdaq: MSFT) has been getting pretty testy with reporters concerning questions over it’s strategy to break into the advertising market that Google (Nasdaq: GOOG) controls.

Microsoft finds itself in an unusual position of weakness as it struggles to play catch up. The word on the street was that they are throwing themselves at trying to edge Google off its position of strength in the ad market.

This morning we may have heard the “response” from Google. Google is going to be offering it’s own operating system called Chrome. This is the core strength of Microsoft, and going after it is a direct attack from Google.

While much is being made – and will continue to be for a while – of this new software competing with Google, the reality is that Microsoft has been competing with Google for a while now in terms of online applications. It just removed the “beta” tags from its online software of gmail and suite.

Apple (Nasdaq: AAPL) has 50,000 apps on its iPhone app store – this space has been cluttered for some time now.

The question is whether Google’s timing of Chrome is specifically meant to disrupt the roll out of Windows 7 slated for later this year. By pulling customers away from what looks to be Microsoft’s next big act, Google will be obviously competing toe to toe with the software titan in Redmond.

Any missteps could come back to haunt either company.

View original at: Investment Advice and Investment Research with a Contrarian Point of View

Company Description

HealthSouth Corp. provides inpatient rehabilitation services in the United States. The company own and operates more than 90 inpatient rehab hospitals, of which 65 it owns. HealthSouth was founded in 1983 and has a market cap of $1.2 billion.

Shares of HLS have more than doubled in the last 3 months, helped by the company’s strong first-quarter results, reported on May 5.

First-Quarter Results

Sales were up 2% from last year to $475.1 million. Income was up big, jumping to $38.4 million from $13.3 million last year, producing earnings of 39 cents per share, 19 cents ahead of the consensus estimate.

Estimates Climbing

Analysts continue to be bullish on HealthSouth, with the current-year estimate up 19 cents to $1.01 in the last 90 days.

The next-year estimate is also bullish, pegged at $1.18, a 17% earnings growth projection.

Valuations

Based on the current-year estimate, this stock is trading with a P/E multiple of 13X, in line with the overall market, but with the nice earnings projection in hand.

The Chart

Shares of HLS have been rallying since early March, rising from less than $7 to a recent high above $14. Take a look at the chart below.

Zacks Investment Research
View original at: Zacks.com

Company Description

Buckle offers casual apparel for young men and women. The company’s stores are located in malls across the U.S., but clothing and accessories can also be purchased through its web site.

Net Income Up 44%

Buckle released earnings results for the first quarter on May 2 that included a 25% increase in sales. Net sales for the quarter were just under $200 million, up from $160 in the same period last year.

Higher sales drove earnings to $27 million, or $0.58 per share which is a 44% year-over-year increase. The consensus heading into the announcement was just 49 cents, making it an 18% surprise.

Buckle is no stranger to beating estimates, in fact this was the company’s 11th consecutive surprise.

Estimates on the Rise

Since the press release all 10 of the covering analysts have raised their full-year estimates. The consensus is now $2.66, up from $2.46. Estimates for next year are now averaging $2.77, up from $2.45.

Analysts are projecting growth rates of 19% for 2009 and another 4% next year.

The Chart

Buckle has been consistently beating analysts’ forecast for the past 11 quarters.

Zacks Investment Research
View original at: Zacks.com

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

View original at: Investment Advice and Investment Research with a Contrarian Point of View

Beat the Street

On Apr 30 the Internet graphic designer topped Wall Street estimates when it reported third quarter earnings of $0.44 compared to an estimate of $0.37. EPS rose 37% on a year over year basis.

Revenue climbed 21%, to $127.5 million, since last year. The company currently holds no debt and almost $115 million in cash.

CEO Speaks

“VistaPrint executed well in the third quarter with revenue in line with guidance and earnings that exceeded guidance,” said Robert Keane, CEO, in the previously mentioned press release. “These results reflect our strategy of growing both revenue and profits through a combination of new customer acquisition, geographic expansion, and enhanced customer value propositions.

The Chart

Shares have almost doubled since the March 31st feature.

Zacks Investment Research
View original at: Zacks.com

Chinese growth has been the big story at the company as first-quarter sales grew 12% in China with profit climbing 21% prior to foreign currency translation. The company is still on track to open at least 475 new units for the year in mainland China.

The company warned in its first-quarter earnings release in early May that the second quarter would be its most difficult quarter.

However second-quarter consensus estimates have been holding at 43 cents over the last 2 months.

Covering analysts are more bullish on the full year.

2009 consensus estimates have moved 2 cents higher to $2.12 per share in the last 2 months which is 2 cents higher than the company’s own May guidance of $2.10. 3 out of 19 analysts raised in the last 30 days and 1 hiked estimates in just the last week.

Yum is scheduled to report second-quarter results on July 14.

Yum Brands is a Zacks #2 Rank (buy) stock. It is trading with a forward P/E of 16.6. Its current yield is a healthy 2.30%.

Zacks Investment Research
View original at: Zacks.com

Fourth-Quarter Results

Sales for the quarter were up 9% from last year to $117.1 million. Income came in at $3 million, up from $1.9 million last year, producing earnings of 15 cents per share, in line with the consensus.

Full-Year Results

Full-year income was up to $24.1 million from $21.9 million last year, with earnings up to a $1.20 per share, from $1.00. Revenue increased to $476.1 million from $439.4 million.

Aquisition Announced

While reporting its quarterly results, Monro also announced that it had agreed to purchase 26 Autotire Car Care centers from Am-Pac Distributors for $10 million.

Monro also reaffirmed its full-year earnings guidance, saying it expects to earn between $1.30 and $1.45 in 2010.

The Chart

Shares of MNRO have began trending higher in late November of last year, but have recently been mostly range bound. Take a look below.

Zacks Investment Research
View original at: Zacks.com

Tween Brand specializes in tween retail which includes fashion merchandise and accessories for girls between the ages of 7 and 14. Its brands include Justice and Limited Too.

After the closing of the transaction, Tween Brands stockholders will own about 16% of Dress Barn, Inc. Tween Brands outstanding bank debt will also be repaid.

Dress Barn expects the transaction to be earnings neutral in the first full year after the merger and accretive after that.

Dress Barn is a Zacks #1 Rank (strong buy) stock. It is trading with a forward P/E of 13.96.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

SYNNEX Corporation services resellers and original equipment manufacturers (OEMs) in regions around the world.

It distributes IT systems, peripherals, system components, software and networking equipment to more than 15,000 resellers throughout the United States, Canada and Mexico for OEM suppliers such as Hewlett Packard (HPQ), IBM (IBM), Intel (INTC), and Microsoft (MSFT).

SYNNEX Surprised By 18.75% in the Fiscal Second Quarter

SYNNEX kept its hot streak alive by surprising on estimates for the fourth quarter in a row. It has averaged a beat of 15.07% during that period. On June 30, the company reported earnings per share for fiscal second quarter 2009 of 57 cents compared to analysts’ estimates of 48 cents. EPS was 56 cents in the same quarter of 2008.

Net income rose to $19.2 million from $18.5 million in the year ago period.

Revenue, however, fell 3.5% to $1.81 billion from $1.88 billion in 2008 but rose 4.8% quarter over quarter.

There were some bright spots as the Global Business Services segment saw revenues jump 21.9% to $34.38 million compared to the year ago quarter.

Stronger Than Expected Third Quarter Outlook

The company offered a fiscal third-quarter outlook that is more optimistic than covering analysts. Earnings per share are expected to be in the range of 58 to 61 cents. Covering analysts were at 52 cents.

Because of the discrepancy, covering analysts have been scrambling in the last week to raise third quarter and full year estimates.

Estimates Climb

After the bullish third quarter outlook, 4 out of 4 covering analysts raised third-quarter consensus estimates to 60 cents.

Full year consensus jumped 8.8% to $2.47 from $2.27 per share with all four analysts again raising estimates.

Value Fundamentals

SYNNEX is a Zacks #1 Rank (strong buy) stock. It is trading at 11.5x forward earnings. Its price-to-book is 1.25. The company also has a solid 5-year average return on equity (ROE) of 11.53%.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Nordson Corporation manufactures dispensing equipment that applies adhesives, sealants and coatings to industrial products during manufacturing operations. It also provides equipment used in the testing and inspection of electronic components as well as technology-based systems used for curing and surface treatment processes.

The company’s customers include manufacturers of appliances, automotive, construction, electronics, food and beverage, packaging and life sciences. It has sales support offices in 30 countries.

Nordson Surprised by 62.9% in the Fiscal Second Quarter

On May 21, Nordson reported fiscal second quarter 2009 results which easily surprised on analysts’ estimates by 17 cents. Adjusted earnings per share were 44 cents compared to analysts’ estimates of just 27 cents.

While this was well under the 97 cents in the year ago period, it better than the first quarter results of 39 cents.

The global recession continued to play havoc with the company’s revenue as it fell to $189 million from $294 million in 2008. Nordson has instituted cost cutting as a response to the difficult conditions. It expects to save $80 million in 2009 from those initiatives.

Backlog

The backlog at the end of the second quarter fell 29% to $80 million compared to $113 million at the end of second quarter 2008 due to the poor economic environment. However, the company saw a 4% increase in the backlog quarter over quarter.

Order rates, which have dropped year over year, also showed an increase in recent months, rising 9% in the last two and one-half months compared to the first two months of the calendar year.

Estimates Jumped

Covering analysts are bullish on the company, which has surprised on estimates 3 out of the last 4 quarters by an average of 26.78%.

Third quarter consensus estimates spiked 13 cents to 49 cents in the last 60 days.

Fiscal 2009 consensus estimates rose 26.3% to $1.92 from $1.52 also in the last 60 days.

Growth

Analysts still expect 5-year average earnings growth of 12.5% which is higher than the expected industry average of 11.10%.

Income

Nordson pays a dividend with a current yield of 1.90%. Its dividend payout is much higher than the industry average, which is zero.

Fundamentals

Nordson is a Zacks #1 Rank (strong buy) stock. It is trading with a forward P/E of 19.92. It has a solid 1-year return on equity (ROE) of 16.13%.

Zacks Investment Research
View original at: Zacks.com News Feed

The holiday-shortened week saw pundits pondering the depth of the economic rabbit hole as the curtain closed on the second quarter. As investors vacillated, most financial markets were characterized by a roller-coaster ride. Friday’s worse-than-expected US jobs data left no doubt that the economy was in recession.

Given the economic malaise, it is safe to say that there have probably been better fourth of July celebrations than this weekend’s …

Source:Dave Granlund

The past week’s performance of the major asset classes is summarized by the chart below - a set of numbers that indicating that a degree of risk aversion has crept back into financial markets.

Source: StockCharts.com

Looking at the quarterly performance of the same asset classes, the picture is quite different from the chart above, with risky assets putting in a phenomenal performance to the detriment of the traditional safe havens such as the US dollar and government bonds.

Source: StockCharts.com

A summary of the movements of major stock markets for the past week, as well as various other measurement periods, is given below. The weekly gains/losses camouflage the fact that many indices experienced a rather bumpy ride during the course of the week.

Click here or on the table below for a larger image.

Stock market returns for the week ranged from top performers Egypt (+8.9%), Uganda (+7.9%), Bangladesh (+6.3%), Pakistan (+6.1%) and China (+5.5%) to Slovakia (-9.3%), Croatia (-8.7%), Vietnam (-5.6%), Mauritius (-4.0%) and Hungary (-3.6%) at the other end of the scale. Emerging markets make up all ten of the best-performing stock indices so far in 2009, led by Peru, Sri Lanka and China. (Click here to access a complete list of global stock market movements, as supplied by Emerginvest.)

John Nyaradi (Wall Street Sector Selector) reports that as far as exchange-traded funds (ETFs) are concerned, the winners for the week included iShares MSCI Turkey Index (TUR) (+5.4%), iShares MSCI South Africa Index (EZA) (+4.5%) and PowerShares Private Equity Portfolio (PSP) (+4.4%). On the other side of the performance spectrum, laggards were centered in the broader commodity category, including US Natural Gas (UNG) (-6.8%), iShares Silver Trust (SLV) (-3.9%) and PowerShares DB Commodity (DBC) (?3.7%).

The quote du jour this week comes from Bill King, writer of The King Report, and is related to Wall Street pay approaching 2007’s record levels, as reported by The Wall Street Journal. King remarked: “Will Ben, Hank, Little Timmy and Congressional leaders explain to the American people how it is possible for Wall Street to have near-record remuneration AFTER the US taxpayers were put on the hook for about $12 trillion of guarantees to The Street? And will they explain to Americans that while Street insiders ‘earn’ record pay they must suffer a severe recession or depression, possibly record future inflation, collapsing home values, job losses and an income contraction?”

Next, a quick textual analysis of my week’s reading. No surprises here, with all the usual suspects such as “market”, “banks”, “economy” and “financial” featuring prominently. Interestingly, “China” also moved up the ranks as its economy seems to be on a strong growth path.

Back to the stock markets: the key moving average levels for the major US indices are given in the table below. With the exception of the Nasdaq Composite Index, the indices are all trading marginally below the 50-day moving average. Whereas the S&P 500 Index, Nasdaq Composite Index and Russell 2000 Index are trading above their respective 200-day lines, the Dow Jones Industrial Average and the Dow Jones Transportation Index are a notch below this key line. In order for a major uptrend to manifest itself, an upturn in the 200-day average itself also needs to take place.

Click here or on the table below for a larger image.

For more about key levels and the most likely short-term direction of the S&P 500 Index, Adam Hewison of INO.com prepared another of his popular technical analyses, arguing that one should be on the sidelines in this market. Click here to access the short presentation. (The analysis was done on Tuesday, but is still as relevant today as it was a few days ago.)

Richard Russell, veteran publisher of the 50-year-old Dow Theory Letters, remains in the bearish camp, saying: “Lowry’s Buying Power Index as of yesterday [Wednesday] was only 6 points above its level of March 9. That puts the market on very thin ice. It means that the desire to buy stocks has been steadily fading. All that’s needed now is a rise in selling pressure, and this market will unravel.

“Every day I compute the span between Lowry’s Buying Power Index and their Selling Pressure Index. The wider the span, the more bearish the situation. Yesterday the span closed at 872, the widest since March 9. This is the weakest reading of the entire rally. Extreme caution is warranted.”

Over in London, David Fuller (Fullermoney) commented as follows: “In terms of timing, now that we have seen big rallies off the lows, I would wait until investors are clearly fearful once again before adding further capital to stock markets. … if one was unprepared to ride out a stock market correction, then it was time to take some money off the table while prices were still firm.

“Meanwhile, I remain cautious, regarding a further stock market reaction and consolidation in response to the 14-week surge from the March lows as at least a 50/50 possibility. Moreover, this could easily develop into a correction, including base formation extension for lagging OECD country markets.”

In my opinion, US stock markets are mapping out a base development formation, whereas a number of emerging markets have already bottomed out and subsequently confirmed primary uptrends. However, in the short term it is quite likely that markets could consolidate further and possibly retrace more of the prior gains.

Economy
“The global Business Confidence Survey results at the end of June were the strongest they have been since last October. Expectations regarding the outlook toward the end of this year jumped last week to their highest level since the summer of 2006,” said the latest Survey of Business Confidence of the World conducted by Moody’s Economy.com. “Sentiment remains consistent with a continued global recession, but the downturn is quickly moderating.”

Source: Moody’s Economy.com

Moving to the Far East, the Japanese Tankan Survey’s index of current conditions among large manufacturers improved to -48 in the second quarter from -58 in the first quarter. The rise of 10 percentage points is the first improvement since the fourth quarter of 2007 and follows the worst reading on record during the first quarter.

In Europe, the European Central Bank (ECB) left its monetary policy unchanged as expected. It has kept its key policy interest rate at a historical low of 1% since May. However, the Swedish central bank, the Riksbank, reduced its repo rate from 0.5% to 0.25% and also cut the deposit rate to -0.25%, effectively charging savers interest on deposits.

A snapshot of the week’s US economic data is provided below. (Click on the dates to see Northern Trust’s assessment of the various data releases.)

Thursday, July 2
• June labor market report - details less bearish than headlines

Wednesday, July 1
• ISM Factory Survey - improving at a gradual pace
• Auto Sales fell slightly in June, but Q2 sales rose
• Pending Home Sales Index advances for fourth straight month
• Residential Construction remains weak; outlook Non-Residential Construction Spending is fuzzy

Tuesday, June 30
• Case-Shiller Home Price Index - home price declines are moderating
• Consumer Confidence Index slips in June

Also, according to Bloomberg, delinquency rates on the least risky mortgages more than doubled in the first quarter from a year earlier, climbing to 2.9% through March 31 from 1.1% at the same point in 2008.

Summarizing the US economic outlook, BCA Research said: “All eyes will be on the US consumer sector in the coming months. We are cautiously optimistic that a sub-par economic recovery will get under way in the second half of the year, allowing the riskier asset classes such as stocks, corporate bonds and commodities to outperform Treasuries and cash. However, there will be plenty of volatility and the main risk is that the mild consumer recovery we expect is delayed, serving to reinforce cost-cutting pressures in the business sector.”

Week’s economic reports
Click here for the week’s economy in pictures, courtesy of Jake of EconomPic Data.

Source: Yahoo Finance, July 3, 2009.

Across the pond, the Bank of England (BoE) will make an interest rate announcement on Thursday (July 9), while in the US economic highlights for the week include the following:

Monday, July 6
ISM Services

Wednesday, July 8
Consumer credit

Thursday, July 9
Initial jobless claims
Wholesale Inventories

Friday, July 10
Trade balance
University of Michigan Consumer Confidence

Click here for a summary of Wachovia’s weekly economic and financial commentary.

Markets
The performance chart obtained from the Wall Street Journal Online shows how different global financial markets performed during the past week.

Source: Wall Street Journal Online, July 3, 2009.

Who is to blame for the financial mess the world finds itself in? There are many possible culprits, ranging from Alan Greenspan and the Federal Reserve to the rating agencies, the big Wall Street firms, structured investment vehicles, and so on. Dan Quayle offered one of the most original (and inconveniently true) suggestions: “Bank failures are caused by depositors who don’t deposit enough money to cover losses due to mismanagement.” (Hat tip: Tim Price.) Hopefully the news items and quotes from market commentators included in the “Words from the Wise” review will keep Investment Postcard readers on track in these crazy times.

For my American friends (the bulk of my readers), I hope you have had happy and safe fourth of July celebrations and enjoyed the fireworks.

That’s the way it looks from Veysonnaz, a quaint Alpine village in the south-western part of Switzerland where I will be spending the next week. (For short comments - maximum 140 characters - on topical economic and market issues, web links and graphs, you can follow me on Twitter by clicking here.)

Source: Larry Wright, July 3, 2009.

Barry Ritholtz (The Big Picture): Who is to blame
“Who and what was at fault in the entire debacle, from housing to credit to collapse? In what order would you assess the blame?

“In Bailout Nation (Chapter 19) my list went something like this:

1. Federal Reserve Chairman Alan Greenspan
2. The Federal Reserve (in its role of setting monetary policy)
3. Senator Phil Gramm
4-6. Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings (rating agencies)
7. The Securities and Exchange Commission (SEC)
8-9. Mortgage originators and lending banks
10. Congress
11. The Federal Reserve again (in its role as bank regulator)
12. Borrowers and home buyers
13-17. The five biggest Wall Street firms (Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley, and Goldman Sachs) and their CEOs
18. President George W. Bush
19. President Bill Clinton
20. President Ronald Reagan
21-22. Treasury Secretary Henry Paulson
23-24. Treasury Secretaries Robert Rubin and Lawrence Summers
25. FOMC Chief Ben Bernanke
26. Mortgage brokers
27. Appraisers (the dishonest ones)
28. Collateralized debt obligation (CDO) managers (who produced the junk) 29. Institutional investors (pensions, insurance firms, banks, etc.) for buying the junk
30-31. Office of the Comptroller of the Currency (OCC); Office of Thrift
Supervision (OTS)
32. State regulatory agencies
33. Structured investment vehicles (SIVs)/hedge funds for buying the junk

“Several names were omitted for reasons of avoiding repetition: CEOs of major banks and investment firms, the crony boards, the AWOL mutual funds. While the list in chapter 19 is somewhat incomplete, the book as whole is not.”

Source: Barry Ritholtz, The Big Picture, June 29, 2009.

CNN Money: Lawmakers attack Fed for being too secretive
“US lawmakers, during a hearing Thursday on the central bank’s role in Bank of America’s acquisition of Merrill Lynch, attacked the Federal Reserve as a secret agency unworthy of new enhanced regulatory powers.

“‘It’s time to yank the shroud off the Fed and shine some light on these events,’ said US House Committee on Oversight and Government Reform Chairman Edolphus Towns, D-NY, who in an opening statement repeatedly described the Fed as being ’shrouded in secrecy’.

“‘I believe that before Congress acts on the president’s financial services reform proposal, we need to have a thorough understanding of what caused the current financial crisis and how the federal government responded.’

“The heated congressional hearing got under way Thursday with Federal Reserve Chairman Ben Bernanke defending the central bank’s role in negotiations with Bank of America (BAC) and with members of the House Government Reform committee expressing skepticism of the Fed’s decisions.

“Usually, the Fed chief goes to Capitol Hill to take questions on monetary policy and the economy. But the economy was barely touched on at Thursday’s hearing.

“Instead, lawmakers criticized the Fed as an agency that has too much power and yet too little transparency and questioned whether the Fed should become the uber regulator of the financial system envisioned by the Obama administration.

“Bernanke, in his first congressional appearance since the administration rolled out its controversial regulatory-revamp proposal, defended the planned overhaul of US financial rules. It’s clear something has to be done to prevent firms from growing so big that they pose a risk to the financial system, Bernanke said.

“‘Too big to fail is not a policy. It’s a major problem,’ he said. ‘I hope the system will be changed.’

“Lawmakers are reluctant to boost the Fed’s powers. Even though it could help prevent companies from becoming too-big-to-fail, critics have argued that the central bank didn’t do enough before the crisis began to protect consumers and discourage firms from taking on riskier strategies that led to the credit crunch.

“Bernanke, however, said the administration’s plan for overhauling US financial rules won’t greatly boost the central bank’s authorities.”

Source: Maya Jackson Randall, CNN Money, June 25, 2009.

Fox News: Mr. Sunshine? Ron Paul wins support to audit Fed Reserve
“All of a sudden, Congress is paying close attention to Ron Paul.

“The feisty congressman from Texas, whose insurgent ‘Ron Paul Revolution’ presidential campaign rankled Republican leaders last year, now has the GOP House leadership on his side - backing a measure that generated paltry support when he first introduced it 26 years ago.

“Paul, as of Tuesday, has won 245 co-sponsors to a bill that would require a full-fledged audit of the Federal Reserve by the end of 2010.

“Paul attracted just 18 co-sponsors when he authored a similar bill, which died, in 1983. While the impact Fed policies have on inflation is once again a concern, fears about loose monetary policy and excessive federal spending appear even more widespread in 2009.

“‘In the past, I never got much support, but I think it’s the financial crisis obviously that’s drawing so much attention to it, and people want to know more about the Federal Reserve,’ Paul told FOXNews.com.

“With the Federal Reserve holding interest rates at rock-bottom levels, pumping trillions into the economy and now poised to have new powers to oversee the financial system under President Obama’s proposed regulatory overhaul, Paul said lawmakers want transparency.

“‘If they give them a lot more power and there’s no more transparency, that’ll be a disaster,’ he said.

“The bill would call for the comptroller general in the Government Accountability Office to audit the Fed and report those findings to Congress. The GAO’s ability to conduct such audits now is severely restricted.”

Source: Judson Berger, Fox News, June 30, 2009.

Telegraph: China’s banks are an accident waiting to happen to every one of us
“‘China’s banks are veering out of control. The half-reformed economy of the People’s Republic cannot absorb the $1,000 billion blitz of new lending issued since December.

“Money is leaking instead into Shanghai’s stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump.

“Fitch Ratings has been warning for some time that China’s lenders are wading into dangerous waters, but its latest report is even grimmer than bears had suspected.

“‘With much of the world immersed in crisis, China appears to be one of the few countries where the financial system continues to function largely without a glitch, but Fitch is growing increasingly wary,’ it said.

“‘Future losses on stimulus could turn out to be larger than expected, and it is unclear what share the central and/or local governments ultimately will be willing or able to bear.’

“The regime is so hellbent on meeting its growth target of 8% that it has given banks an implicit guarantee for what Fitch calls a ‘massive lending spree’.

“Bank exposure to corporate debt has reached $4,200 billion. It is rising at a 30% rate, even as profits contract at a 35% rate.

“Two facts stand out about China’s green shoots. While the Shanghai composite index is up 70% since November, Chinese imports are down 25% from a year ago. China is still draining real stimulus from the global economy.

“If the world’s biggest surplus state ($400 billion) is too structurally deformed to help offset the demand shock as Western debtors retrench, we are trapped in a long deflation slump.”

Source: Ambrose Evans-Pritchard, Telegraph, June 28, 2009.

Financial Times: Putin urges banks to boost lending
“Vladimir Putin told the heads of Russia’s leading banks on Monday to scrap their summer holidays and help overcome the steep recession by lending more - even as the country braces itself for a surge in bad loans.

“The prime minister called on state banks to boost lending by up to $16 billion in fresh loans to shore up the economy, which has been battered by plunging commodity prices and the lack of international credit and is forecast to contract by 8.5% this year.

“‘I am asking the heads of financial institutions to control this situation and not to plan any summer holidays until the moment that this has been dealt with as it should,’ Mr Putin told officials at a government meeting.

“VTB, the state-controlled second-biggest lender, said bad loans had already surged three times this year to 6% of the total, and gave warning that it would face losses in 2009.

“The Russian government has already pledged more than 1,000 billion roubles to boost the capital of the biggest state banks.

“The government is locked in discussions about a new bail-out plan for the banking system that would see the government issue banks with Treasury bills in exchange for preferred shares in order to boost capital.”

Source: Catherine Belton, Financial Times, June 29, 2009.

MoneyNews: JPMorgan CEO - over regulation will cost the country
“Too many regulators will only increase costs and reduce credit opportunities for consumers, JPMorgan Chase & Co Chief Executive Jamie Dimon warned in a column he wrote in Saturday’s Wall Street Journal.

“While praising President Barack Obama’s efforts to reform the US financial system, Dimon said the emphasis should be on strengthening existing regulators over creating new ones.

“‘Any regulatory overhaul should ensure that governmental oversight of the financial system is efficient,’ wrote Dimon, who is widely regarded as the top banker to have been least tarnished by the financial crisis. ‘We should avoid the temptation to have multiple regulators just for the sake of having them.

“‘Three or four different regulators all looking at (and fighting over) the same issue is not a wise use of taxpayer money,’ he said. ‘Companies can’t operate that way. Neither should the government.’

“Obama last week unveiled a sweeping package of reforms to rewrite the rules for banks and capital markets in response to a severe financial crisis that has dragged down economies worldwide for more than a year.

“Dimon said he supports the creation of a single bank regulator, a move he said was long overdue.”

Source: MoneyNews, June 29, 2009.

MoneyNews: FDIC seeks deeper pockets for rising bank failures
“The Federal Deposit Insurance Corp. proposed new guidelines Thursday for potential buyers of failed banks as the government seeks to sell a growing number of closed financial institutions.

“The FDIC wants to attract a new class of private equity fund buyers for banks that collapse during the financial crisis, but must provide more transparency than some of those potential investors are accustomed to.

“One proposal would require investors to keep the banks they acquire well capitalized at a 15% leverage ratio - or the bank’s capital divided by assets - for at least three years.

“Investors also would face limits on their ability to sell assets and lend from the banks they acquire. Investors that operate so-called ’silo’ organizations where it’s hard to determine ownership of the group would not qualify as potential buyers

“FDIC Chairman Sheila Bair said some of the proposals likely will be ‘contentious’, especially the one on capital requirements. But she said the FDIC wants to attract more potential investors to auctions for failed banks.

“‘We want nontraditional investors,’ she said at an FDIC board meeting. ‘There is a significant need for capital and there is capital out there.’”

Source: MoneyNews, July 2, 2009.

Financial Times: Data give signs of global recovery
“The global downturn appeared close to a bottom on Wednesday after manufacturing figures from across the world suggested the worldwide recession was running out of steam in all big economies.

“The welcome news comes after nine months of the sharpest contraction in global manufacturing output since the second world war and a dramatic plunge in world trade as buyers of capital goods and consumer durables effectively went on strike

“Stuart Green, global economist with HSBC, said the signs from around the world indicated that ‘a spell in the financial wilderness now looks less likely for the major economies … with a slowly improving cyclical picture factored in for the rest of 2009 and 2010 across many regions’.

“But he and policymakers around the world fear that the coming upturn will be neither durable nor strong.

“The recovery in global manufacturing has come primarily because companies have sold off much of their accumulated stocks and are re-starting mothballed production lines. Once this temporary boost is completed, serious questions remain about the source of longer-term demand to maintain the current momentum.

“The June data on Wednesday came from a series of surveys of purchasing managers in the manufacturing sector, the area of the global economy hardest hit by the recession. Although the headline figures were positive only in China, the manufacturing output element of the data was positive in the US, the UK and Japan as well.

“The speed of contraction in continental European economies has also decreased substantially since the start of the year, when pessimism was at its height, registering the most positive signs from industry in the past 10 months.

“Chris Williamson, the chief economist of Markit economics, said: ‘The global manufacturing economy is being led out of recession by China, which registered a third consecutive monthly rise in output and the largest increase for a year.’”

Source: Chris Giles, Financial Times, July 1, 2009.

MoneyNews: Romer - US economy nearly stable
“The US economy will get a substantial boost from the Obama administration’s emergency spending package over the next few months, said Christina Romer, who heads the president’s council of economic advisers.

“‘We are going to get some serious oomph from the stimulus,’ Romer told the Financial Times. ‘The big impact starts to hit from about now onwards. It should make a material contribution to growth in the third quarter.’

“Romer, who has warned against tightening monetary and fiscal policy before a recovery is well established, said she’s now ‘more optimistic’ the economy is close to stabilizing.

“‘It is important to think about it now but policymakers should not start acting until we are really recovering well and are approaching full employment,’ she said.

“Romer said stimulus money was being disbursed at almost exactly the rate projected by the US Office of Management and Budget.

“An expert on monetary policy, she thinks the risk of inflation is ‘very low’.

“‘With unemployment and unused capacity high, it is not as if inflation is going to creep up on us,’ she said. ‘We will have a long period of time to figure out what to do.’”

Source: Julie Crawshaw, MoneyNews, July 1, 2009.

MoneyNews: Roubini - recession for another nine months
“Economist Nouriel Roubini is living up to his Dr. Doom nickname. He sees continued woes ahead for the economy and financial markets.

“‘This recession … is going to last another six to nine months,’ he told Bloomberg TV.

“‘People are talking a lot about these green shoots. But if I look at macroeconomic data for employment conditions, sales and consumption, about industrial production, housing, I see more yellow weeds than green shoots,’ Roubini said.

“By next year, oil prices will move toward $100, the economist said. In addition, the budget deficit will surge, and ‘therefore pressure on central banks to monetize is very significant, because otherwise long-term rates are going to spike much higher’.

“When recovery finally occurs, it will be ‘anemic and subpar’, with US growth registering 1% to 1.5% over the next couple years thanks to ‘fundamental imbalances in the housing sector, financial system, corporate sector and now the rising budget deficit’, he told CNBC.

“Unemployment might reach 11%, he said.

“Roubini sees the risk of a double-dip recession, with negative economic growth late next year.

“The effect on financial markets: ‘I believe there’s going to be a significant market correction for equities, for commodities and even for credit,’ he said.”

Source: MoneyNews, June 30, 2009.

Reuters: Soros predicts “stop-go” economy and higher rates
“Billionaire investor George Soros on Tuesday predicted a ’stop-go’ economy for the United States, saying fears of inflation will drive up interest rates and choke off growth.

“Soros, one of the world’s most successful hedge fund managers who was speaking at a breakfast hosted by the Wall Street Journal, said borrowing costs are the major headwinds for the economy.

“‘As markets revive, fear of inflation will drive up interest rates, which will choke off recovery,’ he said.

“Rising US Treasury yields have driven mortgage rates back up, threatening a recovery in the housing market and a refinancing boom that has helped preserve the still-fragile health of recession-weary households and the banks that lend to them.

“The rise in bond yields and mortgage rates may also act to check the huge recent rally in global stock markets of the past three months, with the Federal Reserve trying to end an 18-month recession and yet not spur inflation.

“Soros went back into retirement earlier this year after leading his self-named firm through the 2008 crisis. He made about $1.1 billion last year, according to Institutional Investor’s Alpha Magazine.”

“‘The idea of self-correcting markets is a misconception,’ he said. What governments need to do, he said, is recognize they cannot prevent bubbles but instead try to control them from getting bigger.”

Source : Joseph Giannone and Jennifer Ablan, Reuters, June 30, 2009.

CNN Video: Krugman versus Taylor
“Paul Krugman and John Taylor debate the origins of the financial crisis and the proposed health care plan.”

Embedded video from <a href=”http://www.cnn.com/video” mce_href=”http://www.cnn.com/video”>CNN Video</a>

Source: CNN Video, June 28, 2009.

MoneyNews: CBO report - US deficit to balloon
“Crushing government deficits loom, unless the Obama administration reins in its propensity to spend.

“That was the cautionary statement from the Congressional Budget Office in its latest long-term budget forecast, reported recently in The Wall Street Journal Real Time Economics blog.

“Government deficits will increase substantially, according to the CBO report, hitting more than 5.5% of Gross Domestic Product in 2035, 8% in 2050, and a whopping 19% in 2084.

“As a consequence of these potentially crippling deficits, the government would have to borrow more money and wages would be depressed.

“The obvious solution: The administration must put a lid on spending and boost taxes, according to the report.”

Source: MoneyNews, June 30, 2009.

Asha Bangalore (Northern Trust): ISM Factory Survey - improving at a gradual pace
“The ISM manufacturing survey results of June indicate that the factory sector is contracting but the composite index has advanced for the sixth consecutive month. The composite index of manufacturing was 44.8 in June, up from a cycle low 32.9 in December 2009. Readings above 50.0 denote an expansion and those below 50.0 point to a contraction. In June, indexes tracking production (52.5) and supplier deliveries (50.6) crossed the critical 50-point mark. Indexes measuring employment, new export orders, and imports moved up in June but they remain below the level indicative of an expansion.”

Source: Asha Bangalore, Northern Trust - Daily Global Commentary, July 1, 2009.

Asha Bangalore (Northern Trust): Auto sales fell slightly in June, but Q2 sales rose
“Sales of autos fell to 9.7 million units in June from 9.9 million in May. However, in the second quarter, auto sales have risen at an annual rate of 5.2% versus a 28.3% annualized drop in the first quarter. This will mark the first quarterly increase in auto sales since the last quarter of 2007 (+1.1%), which bodes positively for consumer spending and headline GDP of the second quarter.”

Source: Asha Bangalore, Northern Trust - Daily Global Commentary, July 1, 2009.

The Wall Street Journal: Car makers see end to sales slide
“The three biggest car makers in America called a bottom to the long decline in US auto sales as the industry reported its smallest monthly sales drop this year.

“New-vehicle sales in June fell 28% from a year earlier to 860,000 cars and light trucks, according to the market-research firm Autodata Corp. That would be the smallest decline in any month this year.

“‘We believe the industry is moving beyond the bottom,’ said Bob Carter, group vice president of Toyota Motor Co. in the US. ‘The weak economy’s grip on the auto industry appears to be lessening.’”

Source: The Wall Street Journal, July 2, 2009.

Standard & Poor’s: Case-Shiller Home Price Indices - pace of home price declines moderate
“Data through April 2009, released today by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, show that, although still negative, the annual decline of the 10-City and 20-City Composites improved.

“The chart below depicts the annual returns of the 10-City Composite and the 20-City Composite Home Price Indices. The 10-City and 20-City Composites declined 18.0% and 18.1%, respectively, in April compared to the same month in 2008. These are improvements over their returns reported for March, down 18.7% for both indices. For the past three months, the 10-City and 20-City Composites have recorded an improvement in annual returns. Record annual declines were reported for both indices with their respective January data, -19.4% for the 10-City Composite and -19.0% for the 20-City Composite.

“‘The pace of decline in residential real estate slowed in April,’ says David Blitzer, Chairman of the Index Committee at Standard & Poor’s. ‘In addition to the 10-City and 20-City Composites, 13 of the 20 metro areas also saw improvement in their annual return compared to that of March.’”

Source: Standard & Poor’s, June 30, 2009.

Barry Ritholtz (The Big Picture): Case-Shiller - 100-year chart
“Regular The Big Picture reader Steve Barry created a 100-year Case-Shiller chart last year which projected forward the ongoing housing losses. Below is Steve’s most recent version.”

Source: Barry Ritholtz, The Big Picture, July 1, 2009.

Asha Bangalore (Northern Trust): Pending Home Sales Index advances for fourth straight month
“The Pending Home Sales Index (PHSI) of the National Association of Realtors increased 0.1% in May, which is a small but noteworthy fourth consecutive monthly increase. PHSI captures the number of home sales contracts pending to be closed in the following 1-2 month period. The string of four monthly gains of the PHSI augurs positively for sales of existing homes in the June-July months.”

Source: Asha Bangalore, Northern Trust - Daily Global Commentary, July 1, 2009.

Bloomberg: Delinquencies double on least-risky loans
“Delinquency rates on the least-risky mortgages more than doubled in the first quarter from a year earlier as US efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure.

“Prime mortgages 60 days or more past due climbed to 2.9% of such loans through March 31 from 1.1% at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22% from the fourth quarter, the report said.

“‘I’m very concerned about the rise in delinquent mortgages and foreclosure actions,’ Comptroller of the Currency John Dugan said in a statement with the report. President Barack Obama’s plan to create ’sustainable, payment-reducing modifications is a positive step that should show significant benefits in the coming months,’ Dugan said.

“Obama’s program, unveiled February 18, aims to help as many as 4 million homeowners by modifying loans and calls for Fannie Mae and Freddie Mac to refinance mortgages for as many as 5 million borrowers who owe more than their houses are worth. Foreclosure filings surpassed 300,000 for a third straight month in May, according to RealtyTrac., and the US economy has shed about 6 million jobs since the recession began in 2007.”

Source: Margaret Chadbourn, Bloomberg, June 30, 2009.

Asha Bangalore (Northern Trust): Labor market report - details less bearish than headlines
“Household Survey - The jobless rate inched up to 9.5% in June from 9.4% in May. The unemployment rate is a lagging indicator which is most likely to peak in 2010. In June, the broad measure of unemployment (includes those working part-time because they cannot find full-time jobs and those not looking for work but want and are available in addition to those included in the tally of unemployed in the headline jobless rate) increased to 16.5% from 16.4% in the prior month.

“Establishment Survey: Nonfarm payrolls fell 467,000 in May after an upwardly revised 322,000 decline in May. The April and May revisions of payroll employment led to a net increase of 8,000 jobs. The headline number includes a loss 49,000 government jobs related to the 2010 Census.

“The path of economic recovery is not a straight line; ups and downs in hiring are part and parcel of the expected trajectory of employment. Stepping back in time, payroll employment showed a firm trend only in 1993 (+2.1 million jobs) although the 1990-1991 recession ended in March 1991. Payroll jobs declined in 1991 (-1.106 million) and rose only 338,000 in 1992, reflecting tepid quarterly gains. After the 2001 recession, hiring gathered momentum only in the fourth quarter of 2003.

“Therefore, it is important to note that payroll growth occurs well after a recession has ended. At the present time, the recession has not ended yet and it follows that it is premature to see significant gains in employment in the near term. In fact, it is noteworthy that on a quarterly average basis, payroll employment fell 1.551 million in the second quarter compared with a loss of 2.065 million jobs in the first quarter of 2009.”

Source: Asha Bangalore, Northern Trust - Daily Global Commentary, July 2, 2009.

CNBC: Mounting jobless claims force states to borrow funds
“Fifteen states have depleted their unemployment insurance funds so far, forcing them to borrow from the US Treasury.

“A record 30 of the country’s 50 states are expected to have to borrow up to $17 billion by next year, said Rick McHugh of the National Employment Law Project, a nonpartisan advocacy group.

“‘We are setting the stage for big pressures for states to restrict eligibility and benefit levels,’ McHugh said. ‘Those type of restrictive actions undercut the (Depression-era program’s) economic and social stability purposes.’

“The state-run unemployment insurance programs are normally financed with payroll taxes paid by employers on each worker. But the funds’ tax revenues are falling at the same time as benefit demands are rising.

“Nine million Americans are receiving jobless benefits, triple the number who got checks at the beginning of the year. Experts predict the number of recipients will peak sometime this summer as long-term unemployed run out of benefits, which were recently extended and last for 59 weeks in most cases.”

Source: CNBC, June 26, 2009.

Asha Bangalore (Northern Trust): Consumer Confidence Index slips in June
“The Consumer Confidence Index fell to 49.3 in June from 54.8 in the prior month. Both the Present Situation Index (24.8 versus 29.7 in May) and the Expectations Index (65.5 versus 71.5 in May) fell in June.

“The outlook about the job market turned pessimistic with a larger percentage of respondents indicating that it is hard to find jobs in June versus May (44.8 versus 43.9 in May) and a fewer percentage of respondents noting that jobs are plentiful (4.5 versus 5.8 in May).”

Source: Asha Bangalore, Northern Trust - Daily Global Commentary, June 30, 2009.

BCA Research: Jump in US income bodes well for spending
“Tax cuts, aggressive monetary easing and some pent up demand suggest that consumer spending should grow at least modestly in the coming quarters, now that the saving rate has adjusted higher.

“Personal spending rose 0.3% in May, as households saved most of a 1.4% boost to income from government social payments and tax cuts (the saving rate rose to almost 7%). The ability of the equity market to advance hinges importantly on consumer spending. A modest upturn in spending would provide investors with greater confidence that the economy will not lapse back into recession in 2010.

“It is always difficult to see how consumers will boost spending when payrolls are shrinking, especially given the tremendous loss of wealth. However, in a typical recovery consumers become more upbeat on the outlook and spending edges higher. This generates increased income and sets off an inventory restocking phase, which then feeds back into stronger consumer confidence and spending. With a lag, payrolls begin to expand again.

“The chart compares the current recession with the average of past cycles, each aligned with the end of the recession. One difference this time is that real disposable growth income has accelerated before the upturn in consumer spending. The contraction in wages and salaries has been more than offset by lower taxes and government transfer payments. This year’s tax cut has a greater chance of being spent than the one-off rebate checks mailed out last year. The jump in income provides some leeway to increase spending without resorting to credit cards.

“Bottom line: there are good odds that the equity market will benefit in the coming months from better news from the consumer sector.”

Source: BCA Research - Daily Insights, June 29, 2009.

Charlie Rose: A conversation about the sentencing of Bernie Madoff
“A conversation about the sentencing of Bernie Madoff with Diana Henriques of ‘The New York Times’, and victims of Madoff’s ponzi scheme, Dominic Ambrosino and his wife Ronnie Sue Ambrosino.”

Source: Charlie Rose, June 29, 2009.

Bespoke: Equities - a wild ride so far
“lf you went to sleep at the end of 2008 and just woke up today, you’d see the S&P 500 up 1.78% for the year and probably assume it’s been a pretty boring six months in the market. Oh how you’d be wrong, however. As shown below, the market has taken investors for a wild ride so far this year. On March 9, the index closed the day down 25% for the year. From March 9 through today’s close, the index has rallied 36%. Down 25% and then up 36% turns into up 1.78% at the midway point.

“And while the S&P 500 is up as a whole, only three of the index’s ten major sectors are positive in 2009. Technology has been the big winner so far with a gain of 24.08%. Materials is up the second most at 12.28%, and Consumer Discretionary ranks third at 7.52%. And even though sectors like Industrials and Financials have been going up for months now, both are still down for the year. The Industrials sector is down the most at -7.68%, while Financials are down 4.76%.

“While the year started off horribly for the market, it is heading into July in a nice uptrend even though it has been floundering for a few weeks now. While some investors are getting frustrated with the market’s inability to break to new highs, they easily forget how bad things were just a few months ago. Up 1.78% in ‘09 with everything that has happened - we’ll take it!

Source: Bespoke, June 30, 2009.

TimesOnline: Ten top investment tips from Mark Mobius
“Dr Mark Mobius is one of the most experienced fund managers in the industry. He has been managing the Templeton Emerging Markets Investment Trust since its launch 20 years ago.

“Here Dr Mobius draws on his years of experience to offer ten investment tips to Money Central readers.

1. Keep an eye on value
Is a share selling for below its book value? What is the relationship between the earnings and the price?

2. Don’t follow the herd
Many of the most successful investors are contrarian investors. Buy when others are selling and sell when others are buying.

3. Be patient
Rome was not built in a day and companies take time to grow to their full potential.

4. Dripfeed your money into the market
No one knows exactly where markets are going so dripfeed your money into the market by making regular investments. That way you will average out the ups and downs of the market.

5. Examine your own situation and your appetite for risk
You should not go into equities if you are the type of person who is nervous every time you read a stock market report.

6. Diversify your portfolio
You must never put all your eggs in one basket unless you have a lot of time to watch that basket - and most of us don’t.

7. Don’t listen to your friends or neighbours when it comes to making investment decisions
Your own situation is different from everyone else’s so you should be making the decisions.

8. Don’t believe everything you read in newspapers, because things tend to be exaggerated
Don’t be swayed by headlines and look at what is going on behind the scenes.

9. Go into emerging markets because that is where the growth is
Emerging markets have consistently grown much faster than the developed countries in virtually every year since 1988.

10. Look at countries where populations are relatively young
Countries with young populations are going to be the most productive in future years.”

Source: TimesOnline, June 30, 2009.

Gareth Williams (ING): Peak seen in profit warnings
“The European profits warning cycle looks like it has peaked, boding well for the second quarter results season, according to Gareth Williams, equity strategist at ING.

“‘As the first half of the year draws to a close, the tally of profit warnings so far in 2009 stands at 65,’ he says.

“‘This is less than half of the 142 total recorded in the second half of 2008 and is also lower than the comparable?first?half?figures for both 2007 and 2008.’

“But the improvement needs to be placed in the context of a number of companies abandoning profit guidance altogether, as well as greatly reduced expectations.

“‘Twelve-month forward earnings forecasts have been cut by around 40% over the last year.’

“Even so, current warnings trends point to a shorter downturn than in 2001-03, he says.

“At the rate implied by the first half, the number of warnings in the whole of 2009 looks set to come in at 138, 35% lower than in 2008 and back to pre-crisis levels.

“Mr Williams says an analysis of warnings by size reveals that mid-cap stocks are still suffering, in contrast to an improving picture for large and small caps. “‘We would attribute this to a greater degree of domestic cyclicality within mid-caps.’

“Profit warnings are addictive, he says. ‘Nearly half of the large-cap stocks warning this year warned last year too.’”

Source: Gareth Williams, ING (via Financial Times), June 29, 2009.

Bespoke: Q2 EPS growth expectations are ugly, but getting less ugly
“The second quarter reporting period begins next week with Alcoa’s (AA) earnings release, and below we highlight the Q2 consensus earnings growth expectation for the S&P 500. As shown, analysts currently expect S&P 500 earnings to decline 33.5% versus Q2 2008. While this is an ugly number, it’s a little less ugly than it was in May and early June.”

Source: Bespoke, June 29, 2009.

Financial Times: Record fundraising buoys banks’ earnings
“Buoyant capital markets activity underpinned US banks’ second-quarter earnings, with a boom in equity and debt issuance helping offset continued losses on toxic assets, bankers and analysts said.

“With two days to go before the end of the quarter and a fortnight before banks begin reporting results, executives said the strong performance in trading and underwriting in the first quarter was exceeded in the three months to June.

“The completion of the US government’s stress tests set off a flurry of activity on Wall Street, with financial institutions reaping large fees for helping rivals raise equity to plug capital shortfalls and repay federal aid.

“Banks and other financial groups raised $89 billion in equity via 92 deals in the second quarter, the highest number of deals on record and the highest dollar volume for a year.

“US groups’ second-quarter equity issuance of $259 billion was more than three times the $71.3 billion raised in the first quarter, according to Dealogic.

“A rebound in high-yield bond activity and unusually high margins in fixed income trading also contributed to what one Wall Street executive called a ‘perfect storm for investment banking businesses’.

“The boom in securities’ markets has benefited banks such as Goldman Sachs and Morgan Stanley, whose business models had been called into question at the turmoil’s height due to fears over their ability to fund themselves without retail deposits.”

Source: Francesco Guerrera, Saskia Scholtes and Michael MacKenzie, Financial Times, June 28, 2009.

Bespoke: Percentage of stocks above 50-day moving averages
“Another down day in the market has sent the percentage of stocks above their 50-day moving averages in the S&P 500 back below 50%. Currently, 45% of stocks are above their 50-days. The worst sector by far is Energy. Just 8% of Energy stocks are above their 50-days, even as oil has been strong for the past few months. Industrials is the second worst at 22%, followed by Consumer Discretionary, Telecom, and Materials. Technology, Consumer Staples, Health Care, and Utilities are the four sectors that still have a reading above 50%.”

Source: Bespoke, July 2, 2009.

Richard Russell (Dow Theory Letters): Stock market forming head-and-shoulders
“Below is a daily of the Dow covering the last three months. The potential ‘head-and-shoulders’ formation that I have been warning about can now be seen very clearly. The blue horizontal line defines the support at 8,300. Note that volume is contracting as the head-and-shoulders pattern is forming. A Dow close decisively below 8,300 should send the Dow heading south to join the weak Transportation Average and probably mean a top-out for the whole rally since March 9.

“Remember, and this is crucial, the Obama government is doing everything it can to create asset inflation. If the Dow breaks down here, I think the market will be saying that the government has failed and deflation is the winner. I’ve said that Bernanke will stay on the inflation path until the bonds say they must stop their spending. Wait, it may be the Dow that will say, ‘You’ve failed, and the forces of deflation are stronger than the government’s attempt to inflate’.

“The primary trend of the market remains bearish. The primary trend is more powerful than the Fed and the Treasury and Congress and the president taken together.”

Source: Richard Russell, Dow Theory Letters, June 30, 2009.

Richard Russell (Dow Theory Letters): Lowry’s statistics behaving bearishly
“The Lowry’s statistics back up my Dow Theory suspicions. After the March 9 widely-held ‘bottom’, Lowry’s Buying Power Index (reflecting demand) rallied from the March 9 low to a May 8 peak. But enter weakness - as of June 23. Buying Power lost 86% of its gains from its March 9 low to its May 8th peak. Moreover, Lowry’s Selling Pressure Index (reflecting supply) has moved basically sideways since March 9. In new bull markets, the Selling Pressure Index typically declines well before the bottom and then continues to decline after the bottom has passed. Thus, neither the Buying Power Index nor the Selling Pressure Index has behaved as though March 9 was a bear market bottom.

“Let’s look at the actual Lowry’s figures:

March 9 - Buying Power Index at 96.
May 8 peak - Buying Power Index at 172 - an increase of 76 points from the March 9 low.
June 26 - Buying Power Index back at 110 - a loss of 62 points from the May 8 peak. Buying Power has been declining ever since May 8, a bearish indication.”

Source: Richard Russell, Dow Theory Letters, June 29, 2009.

David Fuller (Fullermoney): Equities - probable bumps in the road
“Recoveries since last October by the world’s leading emerging markets, or progressing markets as I have often described them, will come as no surprise to Fullermoney subscribers. Now we need to be aware of potential and probable bumps in the road, while also considering the longer-term outlook.

“First among the probable bumps is a an extension of the reactions to date, which have affected all important stock markets recently except for China. This is likely to be triggered by Wall Street and / or China - by far the two most important markets in terms of global investor sentiment.

“In some respects, the next reaction or correction by China could be the most important trigger, even though the USA’s stock market capitalisation is still much larger. The difference is narrowing and China is the ascendant power. Global investors have poured money into China and other leading emerging markets in recent months - wisely in my view, but these remain high-beta markets.

“The higher China moves in the short term, and it is currently accelerating, the sharper the reaction is likely to be. I think we are close to the commencement of a medium-term correction. Some may wish to sell in anticipation of this move or on the first downward dynamic shown on the Shanghai Composite Index. Certainly that would be preferable to selling after a reaction or correction.

“I personally will hold on to my long-term investment positions in China, provided the mild acceleration to date does not become extreme, because I think it most unlikely that China will end a bull trend in one sustained, reaction-free advance. I would regard either a ranging reaction or a sharper correction as buying opportunity.

“Meanwhile, the Wall Street leash effect, which was positive from early March into early May, and no worse than neutral subsequently, is in danger of turning negative once again. This would be signalled by a break beneath the current narrow range, the first evidence of which would be a close beneath 885 for the S&P 500 Index.

“Of course there are many other stock markets of interest to all of us but these are the two which really count in terms of leash effect, thus my focus on them. A reaction by China combined with a downward break by the S&P would have an immediate bearish effect on global stock market sentiment. Moreover, Wall Street would quickly become the bigger concern because whereas China leads in terms of bullish expectations, the US’s economic problems remain shocking.

“Technically, while the Shanghai Composite Index confirmed its bull market status months ago, the S&P 500 Index has yet to complete a base formation. Until it does by sustaining a break above 1,000, many investors will understandably remain nervous.

“The other big bump in the road to recovery is the price of crude oil. This has probably commenced at least a reaction. However a sustained move above $75 will introduce a headwind, increasing in strength with each additional dollar to the upside. It will happen and almost certainly before we have evidence of a synchronised global economic recovery, which I suspect will be modest in terms of OECD countries.

“Other bumps will include the next rise in long-dated government bond yields. Currently these are in retreat and therefore not a near-term concern. Also, the next decline in the USD, should it gather pace, would weigh on sentiment.

“Last but certainly not least in terms of the medium to longer-term outlook for stock markets will be monetary policy. Monetary policy tightening will eventually kill off the current bull market, such as it is. This is not a near-term risk for the US market or that of any other OECD country. My guess is that monetary tightening will eventually be led by China, as we saw in the last bull market cycle. When that occurs, and I expect it to be a leading indicator, we should plan our exit strategies.”

Source: David Fuller, Fullermoney, July 2, 2009.

Bloomberg: Emerging markets outlook is “optimistic”, Faber says
“The outlook for emerging markets is ‘far more optimistic’ than for developed economies as growth picks up, said investor Marc Faber, who advised investors to buy gold before its eight-year rally.

“‘We are living through major changes in the world,’ said Faber, the publisher of the Gloom, Boom and Doom report. Emerging markets such as China are becoming more significant to the global economy, and ‘I don’t think this will be reversed’, he said today at an Asian Investor magazine forum in Seoul.

“The MSCI Emerging Markets Index has jumped 35% since the end of March, headed for a record quarter after inflows from investors surged and stimulus plans from China to Brazil bolstered confidence. That compares with a 21% increase in the developed-market MSCI World Index.

“‘I agree that emerging markets’ fundamentals are improving, as some leading indicators show,’ said Christian Jin, a global-equity fund manager at HI Asset Management Co. in Seoul, which oversees the equivalent of $7.6 billion in assets. ‘The developed nations are still saddled with the problems in their financial sectors and housing markets caused by subprime.’

“No developed markets rank among this year’s 10 best performers out of 89 global indexes, according to data compiled by Bloomberg. Peru and China have led gains.”

Source: Kyung Bok Cho, Bloomberg, June 30, 2009.

Bloomberg: Mobius says Russian stocks to “pick up nicely”
“Russian and Polish stocks may ‘pick up nicely’ this year as rising oil and metals prices help boost profits at commodity producers, Templeton Asset Management’s Mark Mobius said.

“The Russian Micex Index’s 13% decline this month is ‘just a correction’ and prospects for the market ‘remain good’, Mobius said at a meeting with investors and the media during a visit to the Warsaw Stock Exchange today.

“‘A new bull market has already started,’ said Mobius, who helps oversee about $24 billion of emerging-market assets as executive chairman of Templeton. ‘The overall trend on commodities is upward.’

“Russia’s Micex has rallied 91% since a four-year low on October 24, as investors returned after oil more than doubled and the nation’s currency, the ruble, recovered from a 19% slide against the dollar last year.

“Mobius expects oil prices to continue rising because of demand from China and India, and as investors use commodities to hedge against a weakening dollar.

“‘The reason why we’ve been so bullish on commodities is of course this demand-supply issue and also because commodities are denominated in dollars,’ Mobius said.”

Source: Pawel Kozlowski, Bloomberg, June 29, 2009.

MoneyNews: Rogers - dollar on shaky ground
“Super investor Jim Rogers hasn’t changed his pessimistic view of the global economy, but he sees no need to change any of his trading positions at the moment.

“He expects to sell US dollars soon and remains enamored with commodities.

“‘I have no shorts for one of the first times in my life,’ Rogers told Reuters TV. ‘On the other hand I don’t see much to buy.’

“The massive fiscal and monetary stimulus around the globe, and the debt burdens it will create, means trouble ahead for most major currencies, he said.

“Rogers likes the Canadian dollar, one of the ’soundest’ currencies, whose fate is closely tied to commodities.

“‘I’ve got out of my pounds. I will be getting out of my (US) dollars soon,’ Rogers said.

“Commodities are his real favorite.

“‘I’d rather be a farmer than a stockbroker for the next couple of years,’ he said. ‘No one you went to school with became a farmer … so we have a shortage of farmers.’

“Rogers also still favors Asia over competing economies.”

“Asked if he still sees the economy in ’shambles’, Buffett said, ‘I’m afraid that’s true.’”

Source: Dan Weil, MoneyNews, June 30, 2009.

Reuters: China requests reserve currency debate at G8
“China has asked to debate proposals for a new global reserve currency at next week’s Group of Eight summit in Italy and the issue could be referred to briefly in the summit statement, G8 sources said on Wednesday.

“One G8 source who was involved in the negotiations said China made the request during preparatory talks about a joint statement to be issued on the second day of the summit in L’Aquila by the G8 plus the G5 (Brazil, India, China, Mexico and South Africa) and also Egypt.

“This forum, the so-called ‘G14?, meets on July 9 to discuss the financial crisis, trade and climate change and for the first time a G8 summit will also produce a joint G14 statement.

“A European source with knowledge of preparations for the summit also said China had raised the subject of a reserve currency debate and that it might be mentioned during the meeting, though the source added: ‘Any country at the meeting can raise issues they see fit.’

“The debate centres on proposals by some emerging powers that an alternative should be found to the US dollar as the global reserve currency, to reflect the shifting balance of power in the globalised economy.

“China’s central bank governor said in March the world should consider using the International Monetary Fund’s Special Drawing Rights (SDRs) as a super-sovereign currency. The SDR is an international reserve asset allocated to IMF members and its exchange rate is determined by a basket of dollars, euros, sterling and yen.”

Source: Reuters, July 1, 2009.

Richard Russell (Dow Theory Letters): Gold is getting interesting
“I want to say a few words about gold, because the situation is getting kinda interesting. Below we see a weekly chart of gold. The blue horizontal line is the resistance at 1004. You can see that gold has made four stabs at the resistance, and each time gold has been turned back. Gold is now fluctuating just above its 10-week MA. But what’s so interesting is that the rising blue 10-week MA is above the rising red 40-week MA, and gold is trading bullishly above both rising MAs.

“Does gold have the strength to attack the 1004 resistance level again? That’s what we’re going to find out in this fateful month of July. The red arrow points to the juncture where the 10-week MA bullishly crossed above the 40-week MA.”

Source: Richard Russell, Dow Theory Letters, July 2, 2009.

Bespoke: Baltic Dry Index stuck in a holding pattern
“After an impressive rise (547%) off the lows of devastating decline (-94%), the Baltic Dry Index is currently stuck in a narrow range making lower highs and higher lows. With investors searching high and low for signs that the global economy is coming back to life, you can bet you’ll be hearing about it if it breaks out to the upside.”

Source: Bespoke, June 30, 2009.

Financial Times: Japan past worst of slump, says minister
“Japan has passed the worst of its current slump and is on course for growth in its next fiscal year, but the recovery of the world’s second largest economy could yet prove vulnerable, Kaoru Yosano, finance minister, warned on Tuesday.

“The comments by Mr Yosano, who is also minister for economic and fiscal policy, came just before a quarterly Bank of Japan survey showed that business confidence had risen for the first time in two and a half years.

“In an interview with the FT, Mr Yosano cited industries such as automaking, steel and electrical machinery as leading the rebound after an ‘unthinkably bad’ first quarter of 2009.

“‘Previously, economic conditions were akin to diving head-first off the Eiffel Tower, but since April indicators for all sectors have shown gradual improvement,’ the finance minister said.

“He said the government was likely to announce an economic growth forecast of 0.5% or 0.6% for the year from April 2010, compared with an expected 3% decline for the current fiscal year.

“‘This year will be a year Japan must endure. But I’m convinced that next year there will be positive growth,’ he said.

“Optimism about Japan’s prospects has been fuelled in recent weeks by rising industrial output and the end of an export rout, with further cheer offered on Tuesday by the news that household spending in May was up 0.3% year-on-year.

“However, economists said spending had been supported by the short-term effect of the government’s Y2,000 billion ($20.8 billion) cash handout. Data released on Tuesday showed unemployment rising to a half-decade high of 5.2%.

“Mr Yosano warned that the recovery could still be hit by ‘many kinds’ of possible negative factors, citing in particular uncertainty about whether the US and Europe had truly resolved the problems in their financial sectors.”

Source: Mure Dickie, Financial Times, June 30, 2009.

James Pressler (Northern Trust): Japan - is the worst truly over?
“During the last quarter of 2008 and the first quarter of this year, Japan’s economic performance has truly been abysmal, and not to many people’s surprise. Exports accounted for almost 20% of the Japanese economy as of Q3 2008 (the highest level in over 30 years), so when global demand suddenly seized up, one-fifth of the economy took it right on the chin. Now after two quarters of severe contraction, the recent Tankan report suggests that the situation is looking up - albeit from a very low point.

“The Tankan survey focuses on manufacturers, thus providing an excellent look into the export sector. Not surprisingly, the headline index has hit all-time lows of late, but the Q2 reading rose just a touch - to -48 from -58 in Q1 and from +5 in Q2 2008. Not a huge gain in itself, but compared with the economy’s trajectory of late, any good news is appreciated.

“More importantly perhaps, this rise between Q1 and Q2 signals a brief respite for the manufacturing sector and for the economy in general, even though the figure came in below the consensus forecast of -43. It appears that this slight recovery had something to do with companies replenishing some of their inventories last quarter, perhaps related to fiscal stimulus measures implemented in the new fiscal year that started in April, and perhaps spurred by some of the talk about ‘the worst is over for the global economy’ and ‘green shoots of recovery.’

“Whatever the reason, analysts are now forecasting that Japan’s Q2 GDP on a quarter-on-quarter basis grew by 0.4%. And as surprising as that may sound, we generally agree with the consensus. A reading of -48 still suggests a manufacturing sector truly in dire straits, but viewed in isolation the difference between quarters is still +10, and that difference tracks quite nicely with the quarterly change in GDP.

“Looking past this brief burst of growth, however, we are definitely not as bullish as Japanese manufacturers. The Tankan’s forecast index suggests that in Q3, business conditions will rise another 20+ points, furthering the gains already witnessed last quarter, and we just do not see it. Last quarter, economies across the globe felt the rush of huge fiscal stimulus packages being initiated and dramatic monetary easing, and they showed up in plenty of indicators. However, most of the effects were sharp, one-off jolts rather than the resumption of economic activity, and of late analysts are recognizing that the burst of fiscal energy is being replaced with a sobering recognition that even if the worst is over, any type of self-sustaining recovery is still a long way away.”

Source: James Pressler, Northern Trust - Daily Global Commentary, July 1, 2009.

Financial Times: UK economy shrinks most in 50 years
“Official figures on Tuesday confirmed the UK had suffered its worst slump in output for 50 years. Economists warned Britain would almost certainly have to wait at least two years before it regained the output lost over the past year.

“The figures showed a 2.4% quarter-on-quarter fall in gross domestic product for the first three months of 2009 - much sharper than the 1.9% initially calculated.

“Not since the time of Harold Macmillan have we ‘had it so bad’. It was the worst quarterly performance since the second quarter of 1958. The 4.9% drop compared with a year earlier was the largest since records began in 1948.

“Macmillan told Britain in 1957 it had ‘never had it so good’. The economy nosedived the next year. But the 2.7% fall in output in the second quarter of 1958 was a blip between two periods of rapid growth.

“This year’s disastrous start underscores the depth of the current recession, following three consecutive quarters of shrinking output. Come the election, Gordon Brown, the prime minister, will struggle to paint as rosy a picture as Mr Macmillan did.

“Even if the economy recovers in the second quarter to its normal 2.5% annual growth rate, something economists think is highly unlikely, it is likely to take until 2011 before output returns to its pre-recession levels.

“More worrying for the Treasury was the sharp downward revision in the cash value of the economy, since this will depress tax revenues and add to government borrowing. Nominal GDP fell 3% in the first quarter, even faster than inflation-adjusted output, because prices had fallen, said the Office for National Statistics.

“‘You’ve never had it so bad’ seems the most apt summary of the state of the UK economy in the first quarter,’ said Ross Walker, economist at RBS. ‘Although to some extent this is ‘old news’, it does serve to emphasise the size of the hole out of which the UK must climb.’

“Since the end of March, there have been signs the economy is stabilising. Manufacturing output grew in March and April, while survey data suggest the economy has returned to growth.

“The National Institute for Economic and Social Research, a respected forecaster, said it thought the economy began to grow again in April.”

Source: Daniel Pimlott, Financial Times, June 30, 2009.

Nationwide: UK house prices - a significant improvement
“The second quarter saw a significant improvement in house price trends across all UK regions, but especially in London, the South East, East Anglia and Wales. Each UK region saw a moderation in the annual pace of decline, and in some cases these improvements were quite substantial. In addition, eight out of thirteen regions saw an increase in prices between the first and second quarter of the year. For the UK as whole, prices rose by 1.1% in the second quarter, leading to an improvement in the annual rate of change from -16.5% in the first quarter to -11.7%.

“Following five consecutive quarter-on-quarter declines, house prices in Greater London rose by a seasonally adjusted 4.8% in the second quarter of 2009. This increase pushed the annual rate of change up from -18.2% in the first three months of the year to -10.2% in the second quarter.

“Although the fall in employment and incomes in the City of London remains a headwind for the capital’s property market, the substantial fall in the value of the pound against major currencies does appear to have attracted some significant interest from foreign buyers, especially in prime locations. A limited supply of good quality homes also appears to have underpinned prices over the spring months.”

Source: Nationwide, June 30, 2009.

View original at: Investment Postcards from Cape Town

Source: Plexus Asset Management (based on data from I-Net Bridge)

Not surprisingly, a strong historical relationship exists between the Barron’s Confidence Index and the S&P 500’s 12-month rate of change.

Source: Plexus Asset Management (based on data from I-Net Bridge)

The improvement in the Barron’s indicator augurs well for the outlook for equities - specifically for the return of confidence - and provides further evidence that US stock markets are in all likelihood mapping out a base development formation. However, in the short term I still maintain it is quite likely that markets could consolidate further and possibly retrace more of the prior gains.

View original at: Investment Postcards from Cape Town

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

View original at: Investment Advice and Investment Research with a Contrarian Point of View

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 (BRKA) 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…

View original at: Investment Advice and Investment Research with a Contrarian Point of View

In particular, demand for storage devices and smartphones is showing signs of strength. During the past 2 weeks, several brokerage analysts have raised their profit projections on makers of these products.

Storage Device Revenues Higher Than Anticipated

Two storage makers recently raised their quarterly guidance.

Seagate Technology (STX) said last week that both unit demand and pricing were “tracking favorably”. As a result, the company expects fiscal fourth-quarter revenues to be in a range of $2.2 to $2.3 billion. Previously, STX had guided for revenues of $1.9 to $2.2 billion.

Gross margins should also be better at approximately 15%.

Ten of the 17 covering analysts promptly raised their projections in response, narrowing the expected loss by 15 cents to 16 cents per share. Expectations for fiscal 2010 were revised as well, with profit of 52 cents now expected.

Strong sales of its ZeusIOPS solid-state drive led STEC, Inc. (STEC) to recently raise its second-quarter guidance. Solid-state drives are faster and use less energy than the hard drives currently used by most computers. Though still more costly, solid-state drives are starting to appear in more high-end laptops.

STEC now expects second-quarter non-GAAP profits to total between 32 and 36 cents per share, versus the previous forecast of 20 to 22 cents per share. Nearly all of the covering brokerage analysts raised their forecasts in response, pushing the consensus earnings estimate up to 32 cents per share. (Full-year projections were also revised, sending the consensus estimate 36 cents higher to $1.08 per share.)

Smartphones Selling Well

The bullish guidance for the hard drive makers came as smartphone makers Research in Motion (RIMM) and Palm (PALM) delivered comparatively good earnings reports.

Though RIMM’s fiscal first-quarter results were not well received, the company did beat expectations with profits of 98 cents per share. More importantly, 29 analysts raised their fiscal 2010 projections. The revisions sent the consensus earnings estimate 18 cents higher to $4.11 per share. (One analyst revised his forecast within the past 7 days.)

PALM, one of the year’s hottest stocks, saw its shares jump even higher following last week’s report. The company generated a fiscal fourth-quarter loss of 40 cents per share, which was 32 cents better than the analysts had projected. PALM’s results were aided by the initial shipments of the Pre, though the new phone will have a much greater impact during fiscal 2010.

Following the report, 4 of the 6 covering analysts revised their projections for the current year. The consensus estimate now calls for a loss of 28 cents, 88 cents narrower than the average forecast of a week ago.

Of course, any discussion about smartphones would not be complete without mentioning Apple (AAPL). One million units of the iPhone 3GS were sold during the launch weekend, an impressive number.

Two analysts have since raised their fiscal 2009 forecasts. Though the revisions were not significant enough to move the consensus earnings estimate (36 analysts cover AAPL), they do suggest that the average projection of $5.50 per share could be too conservative.

PALM and STEC are a Zacks #2 Rank (”buy”) stocks. AAPL, RIMM and STX are Zacks #3 Rank (”hold”) stocks. STX and STEC is classified in Computer-Storage Devices. PALM and RIMM are classified in Telecom Equipment. AAPL is classified in Computer-Micro.

The Zacks Industry Rank List can be viewed at http://www.zacks.com/zrank/zrank_inds.php. This interactive list allows you to see all of the companies, and their Zacks Rank, within more than 200 industries. Shown below is the Zacks Sector Rank List, which shows the trend in estimate revisions on a broader scale.

Sector Rank as of Jul 1
Sector	This Week’s Zacks Rank	Last Week’s Zacks Rank	FY09 Revisions Ratio	FY09 Estimates Revised Up	FY09 Estimates Revised Down
Retail-Wholesale	2.65	2.57	1.96	325	166
Consumer Staples	2.75	2.78	2.35	190	81
Medical	2.87	2.87	1.11	231	208
Consumer Discretionary	2.92	2.89	1.10	151	137
Business Services	2.93	3.02	1.36	68	50
Computer and Technology	2.94	2.93	1.97	540	274
Oils-Energy	3.01	3.01	0.99	347	350
Utilities	3.03	2.98	0.79	65	82
Industrial Products	3.08	3.16	0.82	89	109
Conglomerates	3.11	3.07	0.77	10	13
Basic Materials	3.12	3.13	0.76	152	199
Finance	3.13	3.17	0.78	450	578
Auto-Tires-Trucks	3.15	3.11	0.38	19	50
Aerospace	3.18	3.08	0.70	16	23
Construction	3.19	3.05	0.57	47	82
Transportation	3.35	3.30	0.33	64	194

Charles Rotblut, CFA, is the senior market analyst for Zacks.com. He can be reached at crotblut@zacks.com.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Kinetic Concepts manufactures health care products in the areas of advanced wound care, negative pressure wound therapy (NPWT) and Therapeutic Support Systems.

The company has three business segments: Advanced Wound Care which includes the Vacuum Assisted Closure system; Regenerative Medicine which includes tissue-based products for use in reconstructive, orthopedic and urogynecologic surgical procedures; and Therapeutic Support Systems which includes specialty hospital beds and mattress replacement systems.

On June 29, Kinetic announced it would acquire the patents and intellectual property of Hill-Rom’s Negative Pressure Wound Therapy. It included both U.S. and foreign patents. Terms of the deal were not disclosed.

Revenue Rose 12% in the First Quarter

On Apr 21, Kinetic Concepts reported first quarter results that missed on analysts’ estimates by a penny. However, revenue was up 12% to $470.1 million from the year ago period. Adjusted earnings per share were 82 cents compared to 94 cents in the first quarter of 2008. Analysts expected 83 cents.

The tough economic conditions, especially weak global demand, impacted first quarter results.

“Despite this challenge, we were encouraged as demand for our innovative and high-value therapies in the areas of Wound Healing and Regenerative Medicine was solid and we increased gross margins through improved productivity and product mix,” said Catherine Burzik, President and Chief Executive Officer of KCI.

2009 Guidance

The company provided guidance of adjusted earnings per share for 2009 of $3.95 to $4.10.

Earnings Estimates Rise

Analysts have scrambled to keep up with the company’s guidance range for the year. Full-year estimates jumped 11.23% in the last 30 days to $3.86 from $3.47 per share.

Second-quarter estimates also climbed by 9 cents to 95 cents during the same period with 2 out of 4 covering analysts raising.

Value Fundamentals

Kinetic Concepts is a Zacks #1 Rank (strong buy) stock. It is cheap, trading at only 7.26x forward earnings. Its price-to-book is 2.09. The company has a stellar 1-year return on equity of 31.78%.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Altera provides innovative custom logic solutions and has been ever since inventing the world’s first reprogrammable logic device in 1984.

Altera’s comprehensive solutions portfolio contains fully integrated software development tools, versatile embedded processors, optimized intellectual property (IP) cores, reference designs examples, and a variety of development kits.

Bullish Forecasts

In early June, the company reaffirmed its revenue guidance, noting that second-quarter sales are projected to increase by 2% to 7% sequentially. Altera added that its new products, the 65-nanometer devices and 40-nanometer devices, have been the company’s growth drivers during the second quarter

Analysts are forecasting second-quarter earnings of 16 cents per share, versus estimates of 14 cents 3 months ago.

Wall Street is calling for full-year earnings of 67 cents per share, which is above last month’s 66 cents. For the following year, Street estimates of 89 cents were increased from last month’s 88 cents.

The company’s second-quarter report is scheduled for release on July 14, 2009.

A Strong First Quarter

Altera’s first-quarter earnings of 17 cents per share topped the consensus estimate by 6%. During the past 4 straight quarters, earnings came in, on average, 9.37% ahead of analysts’ forecasts.

Dating back to September 2004, the company’s earnings were below analysts’ expectations only twice, matched forecasts 3 times and exceed the estimates during all the other quarters.

Favorable Industry Comparisons

Altera offers a return on equity (ROE) of 39%, well ahead of the industry average of 0.42%. The company’s net profit margin stacks up well against a negative industry average reading. The Growth and Income pick pays am industry-leading dividend yield of 1%.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Flanders designs, manufactures and sells air filters and related products, and is focused on providing complete environmental control systems for end uses ranging from controlling contaminants in residences and commercial office buildings through specialized manufacturing environments for semiconductors and viruses.

Doubled the Consensus

The company is quickly approaching its next earnings announcement on Jul 22 and has earnings momentum from its latest report on Mar 16. Flanders reportedly cut its annual net loss by nearly 80% to $4.1 million, from a loss of $19.7 million.

Overall the company generated 7 cents per share, 4 cents higher than the consensus estimate. This was the second surprise in the past 4 quarters.

Flanders also said that it expects annualized revenue to grow between 8% and 13% in 2009.

Analysts Catching Up

Following the report, analysts quickly raised full-year forecasts to catch up to management’s expectations. The consensus for full-year 2009 is now $0.28, up from $0.21 in the past 2 months. Forecasts for 2010 are now averaging $0.33, up from $0.27 in the same time span.

Last year the company lost 8 cents per share, giving theses projections a 450% EPS growth rate. An additional 18% of growth is expected in 2010.

The Chart

Shares of FLDR are fairly volatile represented by the long intraday bars. The stock also is on a roll as it continues to set higher highs and lows. Take a look at the chart below.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Dr. Reddy’s, together with its subsidiaries, specializes in developing pharmaceutical and medical technology. The company focuses on drug discovery, generics and care products and has a market cap of $2.8 billion.

Fourth-Quarter Results

Dr. Reddy’s reported fourth-quarter results on May 18 that were very solid but impaired by one-time charges.

Sales were up big, climbing 50% from last year to $407 million. When stripping out one-time items related to a German subsidiary, earnings came in at 48 cents per share, 15 cents ahead of the consensus.

Generics Drive Growth

The company noted that its sales growth was driven by a generic version of GlaxoSmithKlines migraine drug Imitrex.

Estimates

Estimates have been a bit volatile over the last few months but the general trend is higher. The current-year estimate is up 12 cents from 90 days ago to $94 cents per share. The next-year estimate is up 19 cents to $1.16, a 23% earnings growth projection.

The Chart

Shares of RDY have been locked into a fierce rally since bottoming out just above $7 in early March. Since then, shares have topped the $16 mark, an impressive short-term return of more than 100%. Take a look at the chart below.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Qualcomm Incorporated provides digital wireless communications products and services based on CDMA and other advanced technologies. The company is headquartered in San Diego, CA.

Qualcomm Incorporated Lifts Guidance

The company recently increased its earnings guidance on strong worldwide demand. Dr. Paul E. Jacobs, chairman and CEO of Qualcomm said the increased guidance reflects stronger than expected demand for more data-capable chipsets and increased licensing revenues. Jacobs added that in light of the current economic environment, the company remains cautious and currently projects a modest sequential decrease in chipset shipments.

Analysts responded with higher forecasts of their own. Earnings forecasts for the fiscal year ending September 2009 are at $1.46 per share, versus last month’s $1.34. For the following year, analysts are projecting earnings of $2.07 per share, an increase from last month’s $1.98.

The most accurate forecasts are more bullish at $1.51 per share for the year ending September 2009 and $2.10 for the following year.

Qualcomm’s third-quarter repost is scheduled for release on July 22.

Favorable Comparisons

The company compares well to the industry. Qualcomm offers a return on equity (ROE) of 16%, soaring past the industry average of 2%. The company also boasts a strong balance with no debt. Qualcomm’s net profit margin of 15% compares well to a negative industry average profit margin.

As a Growth and Income pick, QCOM pays a dividend that translates into an industry-leading yield of 1.5%.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Wright Express Corp, together with its subsidiaries, provides payment processing and information management services to the commercial and government vehicle fleet industry in the US, Canada, Australia and New England. The company was founded in 1983 and has a market cap of $955 million.

Shares of Wright Express have been trending higher since November of 2008, helped by the company’s strong first-quarter results, reported on Apr 29 that handily beat estimates.

First-Quarter Results

Earnings came in at 42 cents per share, 16 cents ahead of the consensus estimate. The company noted that the average number of vehicles it serviced was up 6% from last year while total Mastercard purchasing volume grew 23% from last year to $649 million.

Estimates Jump

Estimates spiked higher after news of the good quarter hit the Street, with the current-year climbing 30 cents to $1.68 per share. The next-year estimate is up 22 cents in the last 30 days to $1.89, a 12.5% earnings growth projection.

The Chart

Shares of WXS have been rallying since November of last year, bottoming out just above $9 and recently topping at $28. Shares have pulled back a bit lately after the nice run, but the longer term up-trend is still in play. Take a look below.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Aaron’s operates more than 1,575 stores in 48 states and Canada that offer affordable rental payment plans on a variety of merchandise, including home appliances, office furniture and electronics, to moderate-income customers.

The company also operates under the MacTavish Furniture brand which manufactures furniture and bedding at 12 facilities in 5 states.

Aaron’s Posts Record Revenue

On Apr 27, the company reported record first quarter results that saw revenue jump 15% to $474 million from $412.7 million a year ago. Same store sales were humming, gaining 12.3% year over year.

The number of customers at its stores and its franchisees stores soared by 20% over the year ago period as consumers had difficulty obtaining traditional credit and sought out Aaron’s rent-to-own alternatives.

Earnings per share climbed 55% to 65 cents from 42 cents in the first quarter of 2008, easily surprising on analysts’ estimates of 51 cents.

2009 Guidance Rises

The company is bullish about 2009 given the record first quarter results. Second quarter earnings are expected to be in the range of 45 to 50 cents.

For the full-year, guidance was raised to the range of $1.90 to $2.05 from $1.72 to $1.87 per share. The company expects new store growth between 5% to 9% over the store base at the end of 2008.

Earnings Estimates Jump

Given the optimistic guidance, covering analysts moved to raise estimates in the last 60 days. Second quarter consensus is at 48 cents which is right in the middle of the forecast range.

Full-year estimates rose 18 cents to $2.00 per share.

The company is expected to report second-quarter earnings on July 21.

Value Fundamentals

Aaron’s is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 14.6. Its price-to-book is 1.95. The company has a solid 5-year return on equity (ROE) of 13.65%.

Additionally, Aaron’s pays a small dividend with a yield of 0.20%.

Zacks Investment Research
View original at: Zacks.com News Feed

Company Description

Geokinetics provides seismic data for the oil and gas industry. The company has a strong footprint in North America, but also targets several international markets.

Crushed Estimates

On May 7 the Houston-based company reported first-quarter results that included earnings of 37 cents per share. This was 26 cents higher that the consensus of 11 cents.

Revenues were $147 million, a 22% improvement over the same period last year.

Investments Paying Off

Geokinetics invested more than $170 million in equipment and can now decrease debt from additional revenue generated by those projects. Projects included increasing the transition zone fleet and Ocean Bottom Cable capacity.

Estimates Spike

Following the previously mentioned report, analysts quickly raised EPS forecasts. The current consensus for full-year 2009 is 33 cents, up from a 2 cent loss 2 months ago. Estimates for 2010 are averaging 34 cents, up from 9 cents.

The company lose 51 cents per share last year, meaning the year-over-year growth rate is 165%.

The Chart

After the latest quarterly release investors have become increasingly interested in shares of GOK. Shares have been surging on heavy volume. Take a look at the chart below.

Zacks Investment Research
View original at: Zacks.com News Feed

We found out that Tesla Motors joined the growing list of automakers receiving federal funds this week. It locked up $465 million to develop and produce battery-powered vehicles.

But as we know too well, large government checks are hardly ever the answer to our problems. And one of the biggest right now is that we’re seeing gas prices climb slowly higher.

While $147-a-barrel oil served as a wake-up call for the car-driving consumer, it was also the catalyst that shifted the plug-in electric vehicles industry into high gear (pun intended).

I’ve talked about Plug-in Hybrid Electric Vehicles (PHEVs) before, and I’ve heard a lot of reader comments on the hybrids on the market right now. So let’s take a look at some of the major car companies’ efforts so far, as well as what lies ahead for consumers and, more importantly, for investors…

GM’s Escalade - An Implausible Hybrid SUV

Starting with the ridiculous, GM has a hybrid version of the Cadillac Escalade that seats eight…

• While a miniscule market for large SUVs still exists, these $70,350 base-price behemoths aren’t exactly flying off dealer lots in this economy.
• Even if you’re willing to choke down the expensive sticker price, the hybrid version of the Escalade gets a mere 21 MPG on the highway… and that’s only 10% better than its non-hybrid brethren (19 MPG).
• Incidentally, that difference amounts to a paltry $1,506 savings in fuel over the life of the vehicle, assuming a vehicle life of 100,000 miles and $3.00/gallon gas.

Compare that to the new five-passenger Honda Insight that gets 50-plus MPG and comes with a $19,000 price tag, making it the most affordable high-mileage hybrid on the market.

Gasoline-Electric Hybrid Cars: Don’t Believe The Hype

While gasoline-electric hybrids are a small improvement over straight internal combustion engine-based vehicles, they’ve been over-hyped by the media and the car manufacturers.

Sadly, many consumers have the perception that gasoline-electric hybrids are the answer to our oil import problem. Getting a feeling of deja vu?

You should be: Corn-based ethanol was going to seriously put a dent in our oil imports, too. Of course, it’s turned into one of the biggest government-sponsored boondoggles of the 21st century.

Like all other large, successful, problem-solving exercises, this one is going to be solved by private industry. The government’s role will (hopefully) be limited to providing tax incentives for the manufacturers, as well as similar incentives for the buying public. The wheels are already in motion on both fronts.

Let me make a bold prediction: In the next 10 years, gasoline-electric hybrids will go the way of their fossil-fuel predecessors. The automobile market is rapidly moving to all-electric vehicles, and it’s going to happen faster than anyone can possibly imagine. Here’s why…

• The problem with the two gasoline-electric hybrid vehicles mentioned at the beginning of this article - and all hybrids, for that matter - is that they are just that: hybrids. You still have to visit the gas station, just not quite as often. (Although with the Escalade, you’d be hard-pressed to notice the difference in your wallet.)
• There’s only one reason hybrids have been so popular the past few years: The federal government - and public pressure - has forced the car companies to come up with something to give the perception of reducing our oil imports. Voila: the $70,000, two MPG-less Escalade hybrid.

The problem is that the amount of premium paid for these vehicles as a whole negates the miniscule benefit derived by the slightly better mileage. Clearly a better solution is needed.

Plug-In Electric Vehicles: Passing By the Pump… Permanently

Fortunately, the automobile industry is hard at work on one. Coming right behind the hybrids are PHEVs. These all-electric vehicles have no internal combustion engine. Instead, they sport a large bank of batteries that store power and feed it to an electric motor that powers the car.

Now if you’re thinking it will take you forever to accelerate to highway speed, think again:

• Electric motors have fantastic torque characteristics that translate into neck-snapping acceleration when they’re integrated into a vehicle’s drive train.
• Electric vehicles will ultimately out-accelerate their fossil-fuel predecessors, and leave nothing in the atmosphere in the process.
• The driving public won’t have any trouble making the transition from their old gas-guzzling clunkers.

PHEVs have other advantages as well. Braking can actually be accomplished in part by turning the motor into a generator, and dumping the generated power into the battery bank.

This technique - referred to as dynamic braking - puts a load or drag on the motor/generator and slows down the vehicle. Diesel/electric locomotives have used dynamic braking for years to help to slow down freight and passenger trains.

PHEVs - A Potential Game-Changing Technology

While PHEVs are a potential game-changing technology, efforts up until this point have been essentially relegated to the automakers’ development labs and display stands at auto shows.

All that’s about to change:

• Nissan (Nasdaq: NSANY) just announced that it will be mass-producing PHEVs for sale in 2012. That’s a few short years away.
• Mitsubishi (NYSE: MTU) has unveiled a PHEV, but it comes with a $48,000 price tag.
• Of course, the newly restructured GM introduced the Chevy Volt with much fanfare. It remains to be seen, however, if GM can pull it off - and how much the restructuring process will affect its introduction schedule.
• And there are other PHEVs that will be announced over the coming months, as no major manufacturer wants to be left out of the game.

The bottom line is that car buyers in the next few years will have a number of PHEVs to choose from, with prices starting in the $20,000 range. This puts them squarely in the high-volume, mass-produced car market.

Your choices as an investor are directly related to your appetite for risk. At the high end of the risk scale, we have the restructured General Motors. At the low end, Nissan, Ford and perhaps Mitsubishi represent less risky ways to play a surge in PHEV sales.

To put it in perspective, however, any investment with PHEVs as a focus should be viewed with a three- to five-year timeframe. It will take at least that long for the sector to flesh out the winners from the losers.

For investors, it represents potential long-term gains that could rival anything the auto sector has produced to date. I’ll be following the space on a regular basis, and will report all of the interesting developments right here.

Good investing,

David Fessler

View original at: Investment Advice and Investment Research with a Contrarian Point of View

In what may be one of the sickest cases of irony we’ve seen this year, China has decided to block Sichuan Tengzhong Heavy Industrial Machinery Co from buying General Motor’s (OTC: GMGMQ) Hummer brand for – wait for it – environmental concerns.

We’ll give you time to stop laughing.

We know. It’s pretty much what we thought. China has a well-deserved reputation for being one of the most polluted nations in the world. It’s cities round out the worst of the worst lists.

But apparently there is a strong push inside the great wall to at least appear like they’re doing something. They’ve cut back the construction on a number of projects like the Xiaonanhai dam and the Yunnan dam.

Hmm. Sounds like a lot of Chinese infrastructure construction to us. And where there’s construction, there’s profit. And apparently that’s exactly what’s happening at Komatsu Ltd. ADR (OTC: KMTUY).

Taking on U.S. based Caterpillar (NYSE: CAT) Komatsu has been enjoying the benefits of China’s stimulus package and the ever-growing Chinese economy. They’re producing 30% more heavy machinery based on June sales, and are seeing jumps across the board in demand.

Our construction hat is off to the green governors of China, though it is a pity they won’t be able to drive Hummers to their worksites.

View original at: Investment Advice and Investment Research with a Contrarian Point of View

OUTLOOK

We have a negative outlook for the business consulting services industry, based upon the difficult economic environment facing the companies’ existing and potential customers.

Business consulting companies provide a wide range of services to their clients.
Typical services include litigation support, business strategy planning, market and demand forecasting, policy analysis and consulting in the areas such as corporate finance, human resources, technology and restructuring.

With the economy currently in recession, companies in all industries are searching for ways to control expenses. Even in situations where a customer attributes significant value to the services provided by business consulting firms, these services may not be deemed critical in the short-run. As such, we expect that the operating environment faced by the business consulting firms will be challenging for the foreseeable future.

There are several ways in which we expect the current recession to negatively impact the business consulting industry.

First, existing clients may either delay decisions on whether or not to retain a consultant firm until economic visibility improves, or add fewer services than they would in periods of economic growth. With demand down, utilization rates (the amount of time billed in relation to amount of time worked) would likely continue to fall, and operating margins would contract. This scenario would lead to the most significant short-term impact on the consulting firms.

Second, existing clients that delay services may find that they can get by without the support provided by consulting firms. This scenario could potentially have a
longer-term impact on the business consulting firms. Just as it is more difficult for retail companies to raise product prices after they have been lowered, so too would it become more challenging to convince customers to increase their expenditures on consulting services after a period of going without.

Third, customer growth could slow significantly, as potential new customers would be significantly less likely to add consulting services when budgets are tight. This
scenario is the most significant, in our opinion, as it has the potential to cause the
greatest long-term negative impact on the business consulting industry.

The amount of revenue growth that can be generated by existing customers is naturally limited. In order to significantly grow revenues, the consulting firms must continually add to their roster of clients. While the consulting firms may offer some price discounting in an attempt to win new business, this too would put pressure on margins and profitability.

In the current economic environment, we anticipate that some combination of all three scenarios detailed above will impact the business consulting industry in various degrees.

OPPORTUNITIES

We currently have no Buy-rated stocks in the business consulting services industry.

Companies that we would expect to be best positioned through the recession are those that provide tangible outsourced services that customers simply cannot avoid. Going forward, we will pay close attention to the utilization rates and operating margins posted by companies in the industry, as an indicator as to which firms will be best positioned upon an improvement in economic conditions.

WEAKNESSES

In light of the macroeconomic challenges facing existing and potential customers, we expect the business consulting firms to face a difficult operating environment in the near term. Our Sell-Rated stocks in the industry include The Corporate Executive Board (EXBD), Navigant Consulting (NCI) and CRA International (CRAI).

Each firm posted earnings results that fell short of Street expectations in 2008,
and we anticipate further pressure on utilization rates in the case of NCI and CRAI, and on contract-value growth in the case of EXBD. As a result, we expect that margins will remain constrained in the current environment.

Indeed, CRAI recently reported that utilization rates fell again in the second quarter versus the year-ago period, despite headcount reductions and restructuring activities undertaken by the company. Likewise, EXBD reported that contract value and cross-sell ratio deteriorated further in the first quarter.

We anticipate that these types of challenges will persist for the industry going
forward.

Zacks Investment Research
View original at: Zacks.com News Feed

Right now, bunches of savvy investors are getting paid cold, hard cash for nothing more than agreeing to buy stocks. Investors are giving them money to buy stock that they were looking to purchase anyway.

Sound crazy? Well it isn’t.

There’s an incredibly profitable, but little-known trading and investment strategy that you will come to love as much as I do because of all the “instant cash” it can generate for you.

In the lucrative world of options trading, this strategy is called “selling a naked put option.”

Sounds sexy, and to some it is, but really it’s an incredibly simple way to buy stock you want to purchase at a specific price - while having someone pay you to do it. It’s easy to do but there are a few things you need to know first…

Here’s how you can use this powerful options strategy to get paid for buying stocks.

Understanding Put Option Contracts

If someone has a bearish outlook for a particular stock, they can either sell the stock short or purchase a put option contract. My colleague, Karim Rahemtulla, discussed put options at length in “Short Selling Strategies” last week, but there are some terms to be aware of.

• When you purchase a put option contract, you gain the right to sell that particular stock at a particular price within a specified period of time. To do this, you must pay a fixed amount of money upfront, which is called the “option premium” to the option seller.
• The option seller gets to keep this upfront cash regardless of any future outcome of the transaction.
• The amount at which you can sell the stock is determined ahead of time by the “strike price” - the only price you’ll sell the stock at.
• The time period that the option is active for is also determined ahead of time - and it’s referred to as the “expiration date.”

So as a put option buyer, if the stock you choose ends up falling in price below the strike price you have chosen within the time frame, you will have a winning trade.

It sounds simple enough for most investors to make money hand over fist, but it’s not.

• In about 80% to 90% of option buyer’s transactions, the option will expire worthless and the option buyer ends up forfeiting the option premium he paid upfront to the option seller.
• Most option buyers (both calls and puts) do not end up picking the correct strike price and expiration period to give them a profitable trade.

So who really comes out ahead? The option seller of course - he gets to walk away free and clear with the money. So let’s put ourselves on that side of the trade.

The Secret to Selling Options

Sounds like being an option seller is no-brainer? Well, it is - if you do it correctly.

For getting paid upfront, the option seller also has an obligation to fill if certain conditions arise. His obligation is to buy the stock from the option buyer (remember, the option buyer wants the stock to fall in price) if the stock falls to a certain price within the expiration time period.

Here’s where it gets good.

As a put option seller, you also can determine ahead of time where you would feel comfortable buying a stock if it dropped in price, and then collect the cash from the option buyer.

This is how to be a smart put-option seller - only sell put option contracts at strike prices at which you would like to own the stock if called upon to do so.

That’s it.

The secret to selling naked put options is to pick a stock that you would potentially like to own at a cheaper price than where it currently trades, sell the corresponding strike price, collect the money from the option buyer, and then sit back and wait until option expiration to occur.

These are the profitable types of trades we do all the time.

In fact, since launching The Instant Money Trader service in November 2008, we’ve had a 100% win streak, meaning all the options have expired worthless, allowing us to bank all the money paid to us upfront from the option buyers.

And it couldn’t have been easier.

Good investing,

Lee Lowell

View original at: Investment Advice and Investment Research with a Contrarian Point of View