But you’re not out of luck just yet…

Many countries around the world will be able to steer around this extended recession. Some are even in prime position to explode.

And it’s not as difficult to invest abroad as it may seem. Today, it’s as effortless as buying an American Depositary Receipt — same thing as a stock — through your online broker. Figuring out which ones to buy is the hard part.

In Lifetime Income Report, we’ve ramped up our portfolio to reflect our favorites: Asia, Africa and Latin America. Today I’m letting Penny Sleuth readers in on two south-of-the-border plays you can play immediately…

Escape the Second Downturn on Lula’s Coattails

Our favorite international plays come from Brazil. This probably doesn’t come as a surprise. We’ve been bullish on Brazil for over a year now.

The Brazilian economy has never looked better. For starters, the democratic government of President Luiz Lula da Silva is both popular and smart. Instead of leading the Brazilian people down the same road they always seem to end up on — collapsing currency and enormous income disparity — Lula re-cemented the federal and state budgets, brokered trade deals across the globe, and brought the country’s economy into top-ten status.

This success helped him win a landslide reelection in 2006. Even his political opponents can’t discount the success he’s had in making sure Brazil didn’t fall into the same recession that’s now captured the rest of the globe.

Sure, smaller export numbers and commodity prices have put a small hold on Brazil’s growth. But by this time next year, the country’s GDP should be back up to a 3.5-4% growth rate.

Lula has been able to do this by placing a little fiscal responsibility into a system that’s rarely had it. It’s been just 11 years since Brazil suffered from its last currency crash. Thankfully, the country adjusted its currency after that fiasco, completely taking the real off the U.S. dollar peg.

This is probably the most important reason Brazil is now starting to garner some recognition as a safe haven for growth investing.

The federal deficit and spending habits here in the U.S. can only hold for so long. Even China — the country holding more U.S. Treasury Notes than any other — recently remarked that it would like to drop the dollar as the world reserve currency.

Having a currency that’s not pegged to the dollar is a huge benefit in today’s inflationary world.

But besides a superior currency, Brazil investments come with many other perks that interest smart investors.

The Brazilian Advantage

Take tax rates for instance. It’s easy to find foreign plays that pay large dividends. It’s difficult to find ones that don’t have a cut taken off the top just because you’re a foreign investor.

Canada is the most common example. Until very recently, Canada had some of the best royalty plays in the world. The vast resources of our neighbor to the north translated into large income distributions for investors.

That all changed in 2006, when the Canadian Finance Minister Jim Flaherty decided to take advantage of all the rich American investors coming across the border for those large yields. Now, if you are an American, you have to pay his government 15% on all Canadian income trust distributions you receive.

This is a new trend developing throughout the investing world. Fortunately, there are a few safe income havens left. Brazil, Great Britain, Indonesia, Hong Kong, and Mexico are the five zero-tax-withholding countries that we are focused on.

Another perk Brazil has to offer is its rapid acceleration on the world stage. Lula’s popularity and successful reforms have helped put a spotlight on South America’s largest country.

Not only is Lula’s voice highly anticipated in any international gathering, his ability to highlight his country’s tourism-friendly assets helped Brazil lock in the 2014 World Cup and 2016 Summer Olympics.

Of course, just having a great investment location isn’t enough. You need to have the perfect investment to take advantage of it. And we have two of them…

Grab Green Income with the World-Leading Hydro Generator

When most people think of renewable energy, they think of wind farms and solar plants. But one of the most widely used forms of renewable energy is hydroelectric. And no country knows more about hydropower than Brazil.

The Itaipu hydroelectric dam, located on the Panara River between Brazil and Paraguay, is currently the largest in both capacity and annual generation in the world. The site generates nearly 100 billion kilowatthours (Bkwh). That would be enough to power 11.2 million U.S. homes. That might be why the American Society of Civil Engineers picked it as one of the Seven Wonders of the Modern World.

Brazil entered into an agreement with Paraguay in 1973 to build and share the electricity produced from Itaipu. Currently, Paraguay uses it to power more than three quarters of its electricity needs, selling the rest of its share to Brazil.

It was during that 1973 treaty signing that Brazil decided to go headlong into the hydropower business.

The South American leader now generates more than 372 Bkwh per year from hydroelectricity — 85% of total generation.

Brazil is also expanding its capacity at a rapid rate. Over the next 20 years, only China will be generating more electricity from hydropower plants.

Lula’s government has spent plenty to back hydropower expansion. Most of the $221 billion earmarked for infrastructure, transport and energy in Brazil’s stimulus plan is slated for hydro capacity increases.

To take advantage of Lula’s hydropower initiatives, and reap the rewards of Brazil’s fast-growing economy, you should take a serious look at these two hydro giants:

• Companhia Paranaense de Energia (NYSE: ELP) is a major player in the Brazilian hydro market. The company owns 17 different hydro plants, most of which are located on the Panara River. The stock is in position for an easy double from here.

• Enersis (NYSE: ENI) owns and operates 53 power plants — most of which are hydroelectricity plants — that have an installed capacity of more than 14,000 MW. We could see units of ENI continue to climb over the next year. Meanwhile, you’ll be able to collect large dividend yields for as long as you hold it.

While they’re bigger than most of the opportunities that we talk about in the Sleuth, they offer the some of the best exposure to the burgeoning utility sector in Brazil. I expect them — and other Brazilian ADRs — to do well in the coming months regardless of where the market heads here at home.

Sincerely,
Jim Nelson

November 6, 2009

Two Brazilian Plays to Beat the Market was originally featured in the Penny Sleuth.

Here’s how to know if your next penny stock play is legit…

For many investors, the idea that a stock could be representing itself incorrectly is unthinkable. After all, we’ve got the SEC, the exchanges – like NYSE and NASDAQ – and independent auditors taking a look at every filing that a company puts out to shareholders. But in the world of microcap stocks, many of those same protections just aren’t there.

While Securities and Exchange Commission (SEC) was created, in part, to protect investors from nefarious activities in the stock market, the countless securities scandals of the last couple of years have shown us that the agency simply doesn’t have the resources to make sure that the smallest companies are reporting accurately. And in fact, many of the smallest microcap stocks are completely exempt from reporting to the SEC.

Serious listing requirements (almost always) ensure that stocks trading on major exchanges are legitimate businesses, but for stocks that trade OTC or on the Pink Sheets, the requirements to get shares trading are slim to none.

And while most investors think of audited financials as a safeguard that keeps a company’s financials accurate, many companies also aren’t required to get their books audited because of their size.

Even if you’re thinking about investing in a Pink Sheets stock that’s exempt from registering with the SEC and getting an audit performed, you might still be looking at a perfectly good penny stock investment… but you have to do your homework.

Verify the Business

The first step to determining whether a penny stock is legitimate is to verify that the business exists and does what you think it does.

You can start off by entering the stock’s ticker on a major financial site – like Google Finance – and checking out the description of the company. Those descriptions come from SEC filings, so you can generally trust what they say since thanks to the Sarbanes-Oxley Act, it’s a felony for management to lie on company filings.

Also, log onto the SEC’s website and look for company filings to get the full look at a company’s operations. And don’t forget to look at its ticker… an “E” at the end means that the company is delinquent in providing its regulatory filings – a very big red flag.

For companies small enough to not file with the SEC, ask your broker for a copy of the company’s “Rule 15c2-11 file”. In it, you’ll find a slew of information that the company was required to provide to prove their exempt status.

Check the Auditor

When you’re reading a company’s financials on the SEC website, look for the audit opinion (generally near the end of a 10-K annual report filing). It’s a statement from the independent auditors that explains the steps an auditor took to verify a company’s financials as well as whether the financials are accurate in their opinion.

Checking who the auditor is makes a big difference too. Bernie Madoff’s “independent” auditor was neither – he trusted Madoff too, blindly signing off on the scamster’s financials and losing millions of his own in the process. Checking into the accountant’s CPA firm would have showed that it was a tiny storefront with only one CPA and without the manpower to audit a multi-billion dollar financial firm.

Getting audited by one of the “big four” accounting firms – PricewaterhouseCoopers, Deloitte, KPMG, and Ernst & Young – is generally the domain of big blue chips that can afford to have prestigious accounting firms handle the audit, so don’t stress if the auditor’s name doesn’t look familiar. Take the time to research who the auditor is, though, and whether they’re qualified to handle a company audit. A quick Google search should solve that…

Give Them a Call

Hard-to-find contact information is another red flag that should be watched out for. Since most companies are constantly on the lookout for new business, their sales team should at least be easily accessible. If you have concerns about whether or not the company is legit, go ahead and call the phone number on their website. If you can’t find a number or address, check back on the SEC website – companies have to include their corporate contact information on the cover of all 10-K and 10-Q filings.

New technology has also made it much easier to verify a business’s contact information. Just type in a company’s address into Google Maps, and select “Street View”, and you can actually see the building where its offices are located. If the offices for a publicly traded stock are showing up as someone’s home or a mailbox rental store, be very wary of going forward.

Follow the Money

If you really want to know about a company, you have to follow the money – its customers…

For any company that markets its products to consumers, a quick web search should give you an idea of how well – or poorly – the company is treating the people who use its services. Reading customer experiences will also give you an idea of whether or not people are jibing with the company’s offerings.

Googling your way to customer experiences isn’t always an option, especially when a company caters to enterprise or government clients. In these cases, where more money is generally involved, lawsuits are more likely as a result of business disputes. Check an online legal database – like the U.S. PACER System – to see whether your potential microcap investment is being sued by customers.

Check for Promotions

It’s possible for a company to be legitimate while the news that “independent parties” are touting isn’t. These so called “stock promoters” are publishing faux research reports and stock recommendations in hopes that investors will catch on to the penny stocks they’re selling. They do this through websites and newsletters that seem legitimate on the surface, but are essentially nothing more than schemes to get people to buy these stocks.

While we’ve never accepted money to write about any stock here at the Sleuth, some in the industry do… And believe it or not, it’s completely legal as far as the SEC is concerned.

There are a few ways that you can tell whether a stock’s being pumped by a promoter. For starters, go to the horse’s mouth – check out StockPromoters.com – the site features a listing of which stocks are paying for which promoters, as well as what the promoters are getting in return.

Promoters aren’t ashamed about what they do – they want companies to know how good they are at their jobs…that’s why they’re so easy to spot.

More Homework, More Profits

To be sure, doing the research is tough and time consuming. But it’s also the only way to be completely sure that the next penny stock play you’re putting your hard earned money on the line for is legit. Small stocks have some of the greatest gain potential out there – and if you know what to look for, you can make sure that you don’t get burned in the process of pursuing profits.

Cheers,
Jonas Elmerraji

November 5, 2009

How to Tell if Your Next Penny Stock Play Is Legit was originally featured in the Penny Sleuth.

“Junk stocks” have dramatically outperformed the broad market since the bottom in March. There’s a reason that junk stocks — stocks in which total debt is three, four, or five times the value of equity — have rallied so sharply.

Written off as imminent bankruptcy risks, the market left these types of stocks for dead, assuming that equity value would be wiped out in any balance sheet restructuring scenario. But the credit markets have thawed enough to allow most of these stocks to hang on a little longer, in exchange for refinancing debt at much higher interest rates.

These temporary reprieves from bankruptcy court merited perhaps 100% or even 200% rallies in these stocks. But in the market’s frenzy to assume risk, it has bid up some junk stocks anywhere from 500% to 2,000% from the March lows!

Car rental stocks are classic junk stocks — especially in protracted periods of depressed consumer and business travel. These companies operate with massive debt loads in a brutally competitive, commodity business. They’ve all been cutting employee head count and car fleets at incredible rates in order to stem losses. Yet even in good times, competition is so fierce that car rental companies tend not to return capital to shareholders via dividends (unless they are debt-funded dividends paid to private equity owners — as in the case of Hertz prior to its IPO). These companies also tend to repurchase stock only at peak prices, which destroys per share value.

It’s All About Fleet Management

Over the past few years, car rental companies have transitioned away from having mostly “program cars” in their fleets. Program cars are a convenient way for the likes of GM and Chrysler to sell heavy car volumes in a pinch, but these carmakers must sign agreements to repurchase the sold cars or guarantee a rate of depreciation during a specified period of time. Due to recent financial turmoil of both parties in this arrangement, this doesn’t make as much sense as it used to.

Now the car rental companies are adding mostly “risk cars” to their fleet.

These cars are bought without the security of repurchase agreements, so they will be sold into an uncertain future used car market. This gives car rental companies more control over the length of time they own the vehicles, but it’s transforming their balance sheets into speculations on the health of the used car market. If used car market values soften, then the car rental companies have to either accelerate their depreciation expenses or risk taking capital losses upon disposal. Used car prices have temporarily spiked since April, as demand exceeded temporarily tight supplies.

There are many reasons for this temporary spike in wholesale prices of used cars, but a big one has to do with the fact that “cash for clunkers” needlessly destroyed an estimated 700,000 vehicles that otherwise would have flowed into the supply of used cars. This spike is likely sowing the seeds for a bigger decline in the future values, because it squeezed dealer profit margins to the point that it’s brought financial stress to a huge swathe of regular buyers: small “mom and pop” used car dealers.

Fleet management has a huge impact on earnings, because most car rental companies turn their entire fleets over every 18 or 24 months. This makes the visibility of free cash flow for these highly levered businesses very uncertain.

Nevertheless, like moths to a flame, value investors fly to these stocks after getting burned over and over. They hope that one day these companies will deliver attractive returns in a utopian scenario in which cash flow doesn’t have to be reinvested into the fleet and customers will not flee to lower-priced competitors.

In the real world, we can see from history, car rental companies must constantly reinvest most of the cash flow into refreshing their fleets, servicing debts, and posting collateral for off-balance sheet fleet financing. Also, we know that the Internet prompts more and more consumers to shop for the best possible deal. The Federal Reserve board may appreciate a “welcome” rise in prices for car rentals, but consumers certainly do not; they’ll shop for alternatives in this commodity business if faced with higher prices.

Lower Volumes, Competition, and Debts Are a Recipe for Disaster

All of the car rental stocks were left for dead in early 2009, because it was doubtful whether they could renew the billions in financing commitments for their gargantuan fleets. The car rental business, in my view, is a dinosaur left over from the era of cheap credit and steadily growing business and leisure travel. In the future, we can expect to see an overlevered, capital-intensive set of competitors battling it out for scarce business. This may be good for consumers, but it’s terrible for owners of car rental stocks.

The biggest driver of car rental stock prices during this rally has not been a revival in sales, but rather the hope that because the industry is shedding capacity at a fast rate, pricing power will return. I have my doubts, because once the most-anticipated “V-shaped” economic recovery in history fails to live up to expectations, many rental companies will resort to price cutting to generate cash for newly tightfisted creditors.

Shareholders of these companies are thus left with the claims of the skimpy, infrequent free cash flow that’s left over after the following senior claimants are satisfied: employees, landlords, suppliers of car parts, advertising, insurance, lenders who finance their fleets, and the tax man.

It’s time to bet against these “junkers” and collect serious gains in the process. I’ve already alerted my Strategic Short Report subscribers to what I think is the best way to play these soon-to-fall rental companies (you can learn more by clicking here), but it’s not too late for you to position yourself too.

With more than a half dozen car rental stocks out there, your options are far from limited.

Regards,
Dan Amoss

November 4, 2009

Make 50% By Selling These Junk Stocks Short was originally featured in the Penny Sleuth.

Last week we heard everyone saying you have got to buy stocks in the falling market.

That’s a classic herd mentality – what’s the point in buying stocks after we’ve already run? But the fact is, despite Friday’s sell-off, the uptrend remains intact and we simply followed the plan we laid out for you last weekend — ride our shorts down to support in the charts of the indexes, cover them there and look to buy stocks that are at support.

This Week’s Game Plan

Last week, the market was at resistance, so the game plan was to stay in our existing short-sell positions until the market hit support where we would cover and go long on stocks that were also at support. And this week, the game plan is exactly the opposite.

Why’s that? Because the market is right at support — yes, it’s only been five trading sessions and that’s all it took to take the market from resistance to support.

So as long as support holds, the game plan for this week is to stay in our existing long positions as the market attempts to stage a snap back rally.  When that occurs, we’ll take our profits on the long side and look to go short again as the rally set-ups stocks on the short side.

We don’t make up the game plans though — all we are doing is simply reacting to what the market is telling us and trading what we see. And here’s what we see:

As you can see from this S&P 500 index chart, our big picture uptrend is still intact and oversold at current levels. That doesn’t mean that they can’t go lower here, it just means that we’re at levels that ought to act as floors below.

Make note of is the pink bearish channel back in June and July…I’m bringing it up because it’s what we want to be on the lookout for with any rally from this point forward. It’s called a snapback rally and it’s a reaction to oversold market conditions that causes a fast bounce upward. But when the fundamentals are still bad on a snapback rally, it’s actually a very bearish signal that means stocks are headed decidedly lower.

To give you an example of what a snapback rally ought to look like, take a look at OmniVision Technologies’ (NASDAQ: OVTI) chart below…

The name of the game for next week is watch for a snapback rally or dead cat bounce. When all said and done it ought to look like some sort of bearish channel then we take profits on all long positions and start shorting.

When the market makes a noticeable bounce, watch very closely before going long. If the market turns tail, it’ll happen quick and you won’t want to be on the wrong side of the action.

Sincerely,
David Grandey
AllAboutTrends.net

November 3, 2009

How to Trade the Market’s Next Bounce was originally featured in the Penny Sleuth.

And it’s a list worth watching… if you kept up with our Penny Stock Watchlist last Monday, you could have made 12%, 24%, even 89% on a single play. This week, we’ve got five more stocks that are worth watching between now and Friday.

There’s no question that last week’s Watchlist was impacted by a stock market that pushed investors down four out of five trading days. But still, we managed to leverage that negative sentiment with our short recommendation in Synovus Financial (NYSE: SNV) for a potential 24% gain.

And while our Watchlist errs on the safe side of small-caps, using technical analysis to tell us where a stock is headed, we opened the comments up to readers last week, giving you the chance to offer up more speculative penny stock plays – and win a special edition DVD of I.O.U.S.A. in the process…

Well, the results have been tabulated, and last week’s best-performing penny pickers were Kevin H. who suggested shares of Signature Devices (PINK: SDVI) for an 89.19% gain and Jay V. who suggested shares of Artificial Life (OTC: ALIF) for a gain of 39.13%. Both of our winners will be getting a Penny Sleuth Prize Package in the mail for their trouble.

You’ll get another chance to win this week. More on that in a minute…

First, onto this week’s Penny Stock Watchlist:

Nabi Biopharmaceuticals (NASDAQ: NABI) – This $163 million biopharma stock has been facing intense pressure from shareholders of late. Right now the stock is sitting right below its key resistance levels, which could be a very big deal. If this stock pushes above its 50-day moving average, expect the ensuing breakout to send shares up double-digits. Otherwise, this stock should be left to the short sellers this week.

LiveDeal (NASDAQ: LIVE) – This internet Yellow Pages publisher has fallen on tough times as advertising rates have fallen through the floor, posting yet another consecutive loss in its latest quarter. That said, things could be looking up for shareholders this week as the stock bounces off of support and back up into gain-range.

Sunwin International Neutraceuticals (OTC: SUWN) – Sunwin is a Chinese company produces and sells a natural sweeteners and medicinal herbs. Right now shares of this small and volatile company look like they’re consolidating, which with the help of a bullish overall market could be one sweet stock for careful investors.

Newpark Resources (NYSE: NR) – As with LiveDeal, Newpark Resources just found support at its 200-day moving average, and could be signaling for a big bounce. Newpark, an oilfield service provider, has taken some hard hits this year as oil prices fell from record highs down to $30 per barrel. But as oil prices make a resurgence, this stock should benefit from additional drilling activity.

Imation Corp (NYSE: IMN) – This digital media company is exhibiting a bearish pattern right now despite solid earnings number in late October. An uptick in volume on this stock doesn’t bode well for investors who are long.

Share Your Penny Stock Picks

Once again, we’re going interactive this week… And giving readers the chance to win a free copy of I.O.U.S.A. in the process.

Just post your recommendation below in the comments section of this article between now and the market’s close on Friday, November 6. The two readers with the best performing picks each score a Special Edition DVD of the award-winning documentary.

Cheers,
Jonas Elmerraji

November 2, 2009

Monday Penny Stock Watchlist: And the Winner Is… was originally featured in the Penny Sleuth.

I’ve discussed before how transformative commercially competitive nuclear fusion would be. Clean and inexpensive fusion would completely disrupt the foundation of the global economy: energy. We don’t, in fact, know that it can be done. It looks like it, but there are many unknowns, and the timeline is even more obscure. The impact would be so profound, however, that we have to keep track of developments.

Until now, the challenge has been the production of a sustainable fusion reaction that yields more energy than is initially required to keep the reaction “burning.” Since most of the methods for generating a fusion reaction require extremely high, sun-like temperatures, it has proven no easy task.

Most of the recent attention and funding in the fusion area are garnered by ITER, a large multinational research reactor being built in France. Several European governments have been throwing billions of Euros at this nuclear fusion research megaproject. Despite this, some of the most promising research is actually taking place here in the U.S., albeit on a much smaller scale and with much less attention.

The most promising method of producing energy through fusion may belong to a U.S. firm called EMC2. EMC2 was founded in 1984 by the late physicist Dr. Robert W. Bussard, well known for his work on nuclear rocket propulsion and power. While Dr. Bussard was very interested in nuclear fusion as a means to power spacecraft, it is his ground-based nuclear designs that are currently being developed by the company he founded.

Apart from private funding, EMC2 has received funds from the U.S. Navy over the years. After test runs of early prototypes showed promise, the U.S. Navy again funded the EMC2 to develop the next-generation prototype. The Navy is very interested in EMC2’s fusion reactor as a possible means of powering submarines and surface vessels.

The Department of Energy’s current director, Steven Chu, has also expressed interest in EMC2s technology, commenting in 2007 that he “wants more information.” I can only hope that the information he has received since then has been convincing, as EMC2 got $2 million in funding under the American Recovery and Reinvestment Act of 2009.

The actual fusion power plant, which Bussard called a polywell, produces no long-lasting nuclear waste. “Polywell”, by the way, is a combination of the terms “polyhedron” and “potential well,” which clues us in on the geometry and function of the device.

The current EMC2 fusion project leader, Dr. Richard Nebel, estimates that electrical production from commercial polywell fusion reactors would cost about 2–5 cents per kilowatt hour. This is cheaper than any current source of electricity, including coal and fission nuclear power. We’ve been in contact with Dr. Nebel, by the way, but he has told us that he is not free to discuss the details of the project at this time.

EMC2 is currently constructing the latest demonstration version of the polywell, designated WB-8, in order to validate the results received from a previous prototype, WB-6. EMC2 expects to know if this is a truly workable technology within two years. If this is the case, the second phase of its research track is to produce a full-scale example reactor.

If EMC2 is successful in its work, there’s little question that the company’s private backers will be sitting on one of the biggest investment windfalls in history. And it also opens the doors for a public offering of shares in the future. We’ll keep you posted on what’s to come.

For transformational profits,
Patrick Cox

October 30, 2009

Only Two Years to Practical Nuclear Fusion? was originally featured in the Penny Sleuth.

Unfortunately, most businesses resort to lay-offs during tough times. But in service-oriented business like retail, banking and entertainment, someone still needs to provide customer service and support.

That’s where the machines come in…

Retail, hospitality and health care businesses spent $2.8 billion on self-service technology last year, according to VDC Research Group. This spending is expected to grow 15% annually over the next four years.

It’s no surprise that businesses would turn to automated help during tough times. Transactions made using an automated system such as a ticket booth or automated teller machine cost a tenth of what the very same transaction would cost if it involved a human employee, according to The Economist.

Small-cap standout Coinstar Inc. (NASDAQ: CSTR) is an obvious choice in this sector. If you’ve set foot inside a grocery store or fast food restaurant in the past few years, you’ve probably seen one of Coinstar’s machines.

The company’s namesake machine automatically converts your spare change into cash or gift certificates to various popular stores, keeping several cents for every dollar in the transaction.  But the company also owns Redbox, the self-service movie rental kiosk found in fast-food restaurants and other retail locations.

Coinstar’s purchase of the Redbox brand fits in beautifully with its business model. After all, the kiosk rental market looks very strong right now. It’s a niche in the automated services industry that has the ability to perform very well during almost any economic climate.

DVD sales are down double-digits this year as consumers continue to tighten spending habits. But rental revenue is up more than 8% across the industry. After all, spending $1 a night on a DVD rental from a kiosk is an easy choice compared with what a consumer would spend buying or going to a theater.

Coinstar enjoys fat margins and growing profitability because it can employ a lean technical support staff. Fewer salaries, and in these days of rocketing insurance costs, fewer benefit expenses can go a long way.

Providing a meaningful, convenient machine-based service can also strengthen customer loyalty. An impressive 85% of customers prefer brands that offer self-service technology, according to The Economist. The last thing anyone wants to do is wait in a long line. Fast, reliable kiosk service isn’t just a way to save money—it’s a better way to cultivate satisfied customers.

Best,
Greg Guenthner

October 29, 2009

Profit From the Rise of the Machines was originally featured in the Penny Sleuth.

If Friday’s action is any indication of what next week’s early action is all about then it’s “Pullback Off Highs” time in the indexes. Last week we saw some big kingpin names report their earnings results (AAPL, GOOG, MSFT) and they couldn’t even bust through the last 3-4 days’ high. Why? It’s trend channel resistance.

Resistance, the level that a stock or index’s price has trouble breaking through, is one of the strongest technical indicators out there. Stocks’ difficulty breaking through their resistance levels tell you just how strong trend channel resistance is currently. No matter, we don’t buy resistance anyway. Instead, we sell at it.

As you can see trend channel resistance and support are clearly defined by the green lines in this 6-month chart. As I’ve been saying the last few weeks, it’s all about buying stocks at trend channel support and selling them trend channel resistance.

You can also see that the S&P 500 has tried for 4 days in a row to bust through to higher highs but as of yet hasn’t been able to do so. A pullback to trend channel support may be just what’s needed to get a running start. Should that occur then we want to be buyers of stocks that fit a similar pattern that trade in tandem with the market.

Should trend channel support fail, below is another chart that shows an even larger trend channel support level.

So what could cause a running start? For starters, I’m looking for that pullback to trend channel support. That’s essential. Coupled with a news driven event tomorrow in the form of 3rd quarter GDP numbers, a catalyst is there to make stocks bounce back up.

Those GDP numbers are slated for Thursday before the market opens, and the estimates out there are for 2.2% to 3% growth. Remember it’s headline news that’s paid attention to, not the internals of the results that only economists will focus on. Either way this is a market moving news event.

When the market bounces tomorrow, we want to focus on buying only stocks that are sitting right at support.

How to Buy Stocks at Support

Be on the lookout for stocks that have pulled back from their recent highs to their support levels at either a trendline or 50-day moving average.  The chart of Goldman Sachs (NYSE:GS) is a good example of what we are looking for:

As you can see, GS is pulling back to support at its trendline channel and close to support of the 50-day moving average.  And if the market gets closer to support at the bottom of its trendline channel, then you have all the right conditions for a good long side trade.

And Goldman’s not unique. There are tons of similar plays out there right now – it’s just a matter of opening your favorite charting program and mapping out trendlines.

Sincerely,
David Grandey
AllAboutTrends.net

October 28, 2009

Learn to Profit By Buying Stocks at Support was originally featured in the Penny Sleuth.

Regular investors can actually take a cut of every single bill payment you and your neighbors make. Today, we’ll show you how…and give you three small-cap plays you need to get into right now…

When embattled in a game of Monopoly, the three sets of properties we typically shoot for are Boardwalk and Park Place, the railroads and the utilities. Why would Parker Bros. make such a fuss over these three assets?

Well, luxury real estate like the dark blues is typically lucrative. In today’s world, however, that probably isn’t your best bet.

How bout the railroads? Owning transportation and shipping systems is always a profitable venture. But with competition from cheap air cargo and trucking, railroads just don’t have the appeal they once did.

That leaves the utility companies. If you can own the transfer of water or electricity, chances are you’ll make a pretty penny. That’s why we’re big proponents of utilities.

These companies can pay such high dividends because they make so much money off the growing demand for natural gas, electricity and even water.

Buy why is now the best time to load up on utilities? Because they are as recession proof as it gets.

Time to Take a Trip on the Electric Avenue

Josh Peters of Morningstar writes, “Even during recessions, people have to heat their homes, take showers and keep that TV set aglow.” Even if television doesn’t sound like a necessity, try telling that to the majority of Americans. While ad revenue has crashed in the last 12–18 months, TV viewership is as steady as before…if not better.

While we think natural gas is the investment you need to make right now, electricity is the easiest and most lucrative. You see, the average American will actually use more electricity during recessions…a lot more time spent in their living rooms watching TV and surfing the Web.

Sure, industry has slumped a considerable amount. But electricity companies have seen only a nominal drop in revenue, most of which is already factored in. Meanwhile, they are paying larger and larger dividends.

When looking for an electric utility, the No. 1 characteristic to seek out is cash flow. The more cash running through a company, the better. You also have to consider whether the company is taking steps to curb spending. Today’s we have three small-cap utilities that have done expert jobs of both.

Buy These Three to Shore Up Your Income Portfolio

First up is UIL Holdings Corp (NYSE: UIL). UIL is an electric utility in New Haven, Connecticut. The company has a solid customer base of nearly 325,000. Only 5.6% of its revenue comes from industrial businesses, which helped the company escape the last market collapse relatively unscathed.

But the best part about UIL is its dividend. The company has paid out its income to shareholders dating back to 1977. Over that period, its dividend grew considerably. Now you can get a solid, consistent 6.3% dividend yield, without worrying about where the stock goes. You can’t get that with a savings account.

Next is NorthWestern Corp (NYSE: NWE). With both electricity and natural gas operations, the company has over 650,000 customers in South Dakota, Montana and Nebraska. NorthWestern has little-to-no competition in its operating region, which makes it a true semi-monopoly.

While it’s only been paying dividends for a little over a year, the company has already raised its payments to 34 cents per quarter. That works out to a solid 5.4% yield. Now is the time to lock in this growing income.

Finally, we found Empire District Electric Co (NYSE: EDE). Empire generates, transmits, and distributes electricity in Kansas, Oklahoma, Arkansas, and its home state of Missouri. While the company’s stock is a bit more volatile than others, it does offer another upside most don’t.

Empire also has water operations in various places in Missouri. This could become a lucrative business, as the cost of water continues to skyrocket.

Empire’s 7% dividend yield is enough to give it a serious look. High yielders like this don’t come along too often. We suggest you jump on it.

All three of these should be consistent income generators for years to come. If you are worried about a second market drop, or you just want to get your share of your neighbor’s energy bills, these are your best bets.

After all, where else can you get safe income in this market?

Sincerely,
Jim Nelson

October 27, 2009

Get Paid When Your Neighbor Turns on His Kitchen Light was originally featured in the Penny Sleuth.

Here’s our list of penny stocks to watch for the coming week.

Last week, we told you to watch five stocks – three long and two short – that exhibiting abnormal volume, strong technicals, upcoming news, or another catalyst that suggested they might be making a material move in the coming week. Sure enough, four out of five of our watchlist stocks moved in line with our expectations, generating an overall average gain of 6% in just a week – that’s 312% annually!

And while our Watchlist errs on the safe side of small-caps, using technical analysis to tell us where a stock is headed, we opened the comments up to readers last week, giving you the chance to offer up more speculative penny stock plays – and win a special edition DVD of I.O.U.S.A. in the process…

Well, the results have been tabulated, and last week’s best-performing penny pickers were Randy Moory, who recommended shares of China Finance (OTC: CHFI) for a 235% gain and L. West, whose XTEND Medical Corp. (PINK: XMDC) recommendation yielded a 150% gain. Both of our winners will be getting a Penny Sleuth Prize Package in the mail for their trouble.

You’ll get another chance to win this week. More on that in a minute…

First, onto this week’s Penny Stock Watchlist:

Synovus Financial (NYSE: SNV) – Synovus has been having a rough year in 2009. Since January, shares of this regional bank have slipped nearly 67%. And investors shouldn’t expect that trend to change anytime soon. The beginnings of a bearish descending triangle are starting to appear, and newfound resistance at the stock’s 50-day moving average is a good sign for Synovus’ short sellers. This stock could ultimately fall to $2.50 before finding any kind of support.

United America Indemnity (NASDAQ: INDM) – While insurers took their knocks last year along side the rest of the financial sector, things are looking up for United America Indemnity. A swing to thick margins in the company’s third quarter financials prompted investors to turn bullish on this stock, and the technicals are now starting to support a case for going long. Watch the increased volume on this play.

Middleburg Financial (NASDAQ: MBRG) – Middleburg is another financial stock that has made this week’s list. This regional banking company may be small, but with operations based in one of the most affluent parts of Virginia and still strong margins, this bank should continue to do well as investors pile into shares. It’s worth noting that MBRG is thinly traded, so it’s more volatile than most of our watchlist plays.

Fusion Telecommunications (OTC: FSNN) – This small over-the-counter VOIP operator has been rallying hard lately, pushing up nearly 42% in the last three months alone. While FSNN’s financial’s make the stock a somewhat dubious long-term play, the short term financials look strong enough to sustain a rally through Friday.

Hallwood Group (AMEX: HWG) – This textile and energy holding company may be small and under the radar, but traders have taken note recently pushing share up 145% in the last quarter. While the volume is thin on this stock as well, the technicals look enticing enough to make this week’s watchlist.

Share Your Penny Stock Picks

Once again, we’re going interactive this week… And giving readers the chance to win a free copy of I.O.U.S.A. in the process.

Just post your recommendation below in the comments section of this article between now and the market’s close on Friday, October 30. The two readers with the best performing picks each score a Special Edition DVD of the award-winning documentary.

Cheers,
Jonas Elmerraji

October 26, 2009

Monday Penny Stock Watchlist: Don’t Miss These Five Small-Caps was originally featured in the Penny Sleuth.