Buy Sell Hold
No Debt and High Yield Make Automatic Data Processing Inc. (Nasdaq: ADP) a "Buy"
Most people aren't incredibly familiar with Automatic Data Processing Inc. (Nasdaq: ADP), but it's a company every investor should know.
You see, ADP, which provides payroll and human resources services to businesses, has two important traits that investors need in their portfolios right now.
First, it has virtually no debt. Its unleveraged balance sheet has made it one of the few U.S. companies with a AAA credit rating from Standard & Poor's. It also has a perfect credit rating from Moody's Corp. (NYSE: MCO).
Companies with such a high rating from S&P are rare, and the number of countries with that rating is dwindling. Even the United States is no longer in the AAA group. But this isn't the only special category in which ADP belongs.
It's also a "Dividend Aristocrat." This is the title Standard & Poor's gives companies that boast a AAA rating and have a history of raising their dividends for at least 25 years. There are currently only three U.S. stocks that are both "Dividend Aristocrats" and have a AAA rating from S&P – two things investors should look for in this volatile environment.
That's why it's time to buy Automatic Data Processing, a debt-free, steady dividend payer with a solid future. (**)
Automatic Data Processing Inc.: Safe and Profitable
The once-deep list of U.S.-listed AAA companies has dwindled to a small group of four. I've recommended a couple of them before -Microsoft Corp. (Nasdaq: MSFT) and Exxon Mobil Corp. (NYSE: XOM). Johnson & Johnson (NYSE: JNJ) is the fourth.
Anadarko Petroleum Corp.(NYSE: APC) is a "King" in the U.S. Oil and Gas Industry
Anadarko Petroleum Corp. (NYSE: APC) has been a big player in U.S. onshore oil and gas production, and it's about to get significantly bigger, unlocking incredible profits for investors.
Anadarko has stakes in some of the most prolific U.S. oil fields in Texas, Colorado, Wyoming, Utah, and Pennsylvania. It's also an international leader in unconventional production, employing methods like horizontal drilling to increase productivity rates from deep wells.
But a recent major development will propel Anadarko to the top of the U.S. oil and gas industry.
You see, the company reevaluated one of its Colorado oil fields and now believes it holds between 500 million and 1.5 billion barrels of oil and natural gas. This is huge. A billion-barrel field is a rare find; only a handful have been discovered in the United States.
This new discovery could increase Anadarko's annual production rate in the region by 20% in 2012. It also prompted Tudor, Pickering, Holt & Co. analysts to name the company "King of the Rockies" and raise its net-asset-value estimate for Anadarko by 5% per share.
Anadarko was already solid, but the new discovery has made it a must-have investment in the oil and gas industry. It's time to buy Anadarko Petroleum Corp. (**)
Anadarko Petroleum Corp.: An Oil Industry "King"
Anadarko's big oil find came from the Wattenberg shale in northeast Colorado. The formation was first discovered in 1970 and is listed in the top 20 U.S. oil and gas fields.
Anadarko has been using horizontal drilling, the technology it uses in the Eagle Ford shale oil field in Texas, to unlock the liquid-rich Wattenberg. Based on 11 test wells, Anadarko is confident it can drill between 1,200 and 2,700 wells over time, and will ramp up Wattenberg's development by drilling 160 wells in 2012.
The Wattenberg wells also have a quick payback rate.
PepsiCo Inc. (NYSE: PEP) Is the Perfect Buy-and-Hold Investment
If they aren't already, long-term investors should be digging up some solid defensive plays, like PepsiCo Inc. (NYSE: PEP).
Everyone is familiar with PepsiCo, one of the leading manufacturers and marketers of food and beverage products. And with a strong business model, steady bottom-line growth, and a healthy dividend, PepsiCo is one of those rare buy-and-hold investments.
Although its name is typically associated with soda, PepsiCo has developed a diversified product line that supports a steady revenue stream from more than just fizzy drinks. PepsiCo, through its Frito-Lay and Quaker Oats subsidiaries, is the name behind consumer-favorite brands like Doritos, Tropicana, Gatorade, SoBe Lifewater, Cracker Jack, Rice-A-Roni, and Grandma's Cookies.
Many investors already know that, though.
What you might not know is that PepsiCo's future earnings are based on much more than delicious snacks for U.S. consumers.
This global powerhouse is investing in two areas that will drive food company profits going forward: emerging markets growth and "good for you" products.
It has struck deals to develop both initiatives this year, and the efforts are paying off.
Increased emerging markets sales boosted PepsiCo's revenue from those countries 33% last quarter. Sales of healthy products are on pace this year to hit almost $15 billion, and the company hopes to double that by 2020.
When you combine its new business focuses with its existing profitable product lines, PepsiCo is strong enough to weather a global economic storm – exactly what our portfolios need to include right now.
So it's time to buy PepsiCo Inc. (**).
EOG Resources Inc.(NYSE: EOG) Is Looking to Lead U.S. Oil Production
EOG Resources Inc. (NYSE: EOG) has undergone a massive change in its business model – and it's paying off astoundingly.
EOG Resources used to be known as a leader in natural gas exploration and production.
But low natural gas prices led to declining profits. In fact, the company lost $70.9 million in 2010's third quarter.
So it embraced a major production and technology change. EOG perfected horizontal drilling techniques to access shale rock formations trapping large reserves of oil – instead of reserves of gas, as many competitors were doing.
Now EOG has transformed from a leading gas drilling company to a major oil producer, increasing its liquid production last year by 49%.
With this new production model, EOG's profits are driven by high oil prices instead of depressed natural gas prices. The company just reported its third-quarter earnings and the results are astonishing – it turned a loss from the same quarter last year into a blowout earnings surprise this year. Net income hit $541 million.
The bottom-line growth helped the company's share price rally 20% since earnings were released Nov. 2.
By changing its focus to profitable oil production, EOG Resources is now a low-risk, high-reward energy stock, making it a "Buy" for investors looking to cash in on rising oil prices. (**)
EOG Resources Inc.: Unlocking Profits from Shale Oil
EOG Resources is one of the largest independent (non-integrated) U.S. oil and natural gas companies, with proven reserves in the United States, Canada, Trinidad, the United Kingdom, and China.
It's the largest oil producer in North Dakota's Bakken Shale, and the largest producer in the Eagle Ford Shale in South Texas. These two shale oil fields have played a key role in ramping up U.S. oil production over the past few years, with each having an estimated 4 billion barrels of recoverable reserves.
EOG's extensive operations in these fields have pushed its total liquid production to 130,000 barrels per day, and Chief Executive Officer Mark G. Papa said he expects to reach 200,000 barrels per day in 2012. That could make the company the second or third largest oil producer in the United States.
Marathon Petroleum Corp (NYSE: MPC) May Soon Be the World’s Richest Refiner
There's an oil price trend that's giving some oil refining companies a huge competitive edge.
Specifically I'm referring to Marathon Petroleum Corp. (NYSE: MPC).
You see, production from North Dakota's Bakken oil shale formation – the largest known reserve of light sweet crude in North America – is soaring. It went from a mere 3,000 barrels a day in 2005 to 225,000 in 2010, and could hit 350,000 barrels a day by 2035, according to the Energy Information Administration.
Currently, there aren't many ways to ship oil out of the basin, and supply in the region is outpacing refining capacity. That's helped keep the price of West Texas Intermediate (WTI) crude lower than the price of Brent crude in London, with the spread now around $17.
Since U.S. East Coast refineries usually source Brent-priced crude oil, their input costs have skyrocketed. This is one of the reasons major integrated oil companies have shed their refining capacities.
But Midwest refineries have been able to save money by running WTI-priced oil, getting crude at significantly cheaper prices than globally sourced locations.
With the Bakken formation ramping up production in coming years to meet growing demand, the region's refineries will continue to enjoy low input costs. It also means refineries that have access to Bakken oil will have a steady supply that's cheaper than their competitors.
This is why Marathon Petroleum Corp., the largest Midwest refiner, is a "Buy." (**)
Niska Gas Storage Partners LLC (NYSE: NKA) Can No Longer Afford Its High Payout
Niska Gas Storage Partners LLC (NYSE: NKA) at one time was a great way for investors to play the natural gas market.
The company is designed to pay back a high percentage of its cash flow, as its stock pays a $1.40 dividend that equates to a whopping 12% yield.
Unfortunately that won't be the case much longer. Niska's cash flow has stalled, and the company doesn't expect to generate enough cash in this fiscal year to maintain its dividend.
The problem simply is that the price for natural gas currently is cheap and it won't be headed higher anytime soon.
You see, to cover its basic costs, Niska needs the price difference, or spread, between current natural gas prices and January future prices to be about $1.00. Those spreads right now are around 47 cents – quite a fall from the January 2010 spreads of $1.50.
"[W]e anticipate weaker financial results of the full fiscal year ending March 3, 2012 due to continued deterioration in market conditions," Interim Chief Executive Officer Simon Dupéré told investors Nov. 3. "[W]e expect low seasonal storage spreads, combined with reduced volatility, to have a more pronounced negative impact on our financial results through the third and fourth quarters."
The stock is down 45% so far this year. It could rise again, when natural gas prices increase and improve the cost of storage – but that doesn't look like it's going to happen in the near-term.
Still, with the share price so low, it's not an ideal time for investors who are long on the stock to sell it.
That's why investors should hold Niska Gas Storage Partners LLC (**) – until U.S. natural gas prices rise again, making storage business models more attractive.
Natural Gas Storage a Tough Business – For Now
The United States has the largest natural gas storage facilities in the world. This allows it to easily capture cheap natural gas produced in the summer and store it for the peak winter months, when increased demand exceeds production and prices climb.
Niska Gas Partners provides over 204 billion cubic feet (bcf) of storage facilities, with an estimated additional 12 bcf of future storage being brought online in the near term.
But natural gas storage investments aren't very profitable – right now.
To continue reading, please click here…
Rising Food Prices Will Boost Debt-Free Mosaic Co. (NYSE: MOS) to New Highs
With so many companies – and countries – choking on the combination of slow growth and massive debt, investors are finding that there's a definite formula for success.
You need to look for companies that have healthy cash reserves, a global presence in a high-growth sector, and whose shares are available at a bargain price.
I've already found one to help get you started.
I'm talking about The Mosaic Co. (NYSE: MOS), an agricultural leader that's positioned to benefit from the worldwide run-up in food prices.
Mosaic is the world's leading producer of concentrated phosphate and potash, two of the primary nutrients required to grow food crops.
One of the main reasons I really like Mosaic is that it has enough cash – $3 billion – to fund its own growth. It doesn't need to borrow from banks to continue generating profits from crop-nutrient sales.
That's a profitable niche, since global food prices are expected to increase 4% next year, and could climb higher on supply squeezes. Increasing food demand and poor harvests have caused sharp climbs in the price of corn and other crops. And those price increases have translated into higher prices for pork, beef and poultry. The profitable agricultural industry outlook is enticing farmers to grow more, and will create a steady profit stream for Mosaic.
Mosaic's shares recently hit a 52-week low; but don't let that price dip fool you: While the market is currently pricing Mosaic for a significant slowdown in earnings, the reality is far brighter. It's time to buy The Mosaic Co. (**).
Premium
Vale SA (NYSE: VALE): This Emerging Market Mega-Miner Is Taking Production to Another Level
You might think you know everything you need to know about Vale SA (NYSE: VALE), but you don't.
This is a company that, while big, is rife with hidden profit potential.
Vale is what I like to call a "mega-miner." It's best known as the world's largest iron ore producer, but few realize that it also controls railroads, ports and shipping fleets.
Indeed, Vale is a vertically integrated company with a diverse mix of assets that includes more than 6,000 miles (10,179 kilometers) of railroad infrastructure, eight seaport terminals, five general cargo ports, and two iron ore export terminals. Beyond that, it generates its own energy through hydroelectric power plants.
And better still, Vale has the internal capital to self-fund further development.
These characteristics imbue the company with major profit potential.
So Vale SA is an unequivocal "Buy" (**).
Taking Charge of the Iron Ore Market
Vale is the world's second-largest mining company, behind only BHP Billiton Ltd. (NYSE ADR: BHP).
It's the world's largest producer of iron ore, and the world's second-largest producer of nickel. And that gives the company significant leverage in the fast-growing economies of Asia, especially China.
Historically, Vale had to battle the added costs of longer-term production contracts and short-term shipping rates. But that's no longer the case.
Last year, iron ore pricing moved to short-term contracts based on the spot market — to the benefit of producers. And to combat shipping costs, Vale recently bought its very own fleet of large ore-carrying vessels. Now it controls its own shipping rates.
These new developments mean that Vale will no longer be held hostage to long-term production contracts or to short-term shipping rate demands.
Now that Vale has full control over its iron ore business, it can look forward to newer ventures. And it has a big-time market in its sights.
Kinder Morgan Energy Partners (NYSE: KMP) Buys Out El Paso Corp. (NYSE: EP)
On June 6, I identified El Paso Corp. (NYSE: EP) as a "Buy." The stock at the time was trading at $20.40 share.
Well, on Sunday (Oct. 16), Kinder Morgan Energy Partners LP (NYSE: KMP) said it would buy El Paso for $26.87 a share. That's a 32% premium to the price the stock was trading at at the time of my recommendation. EP stock yesterday (Monday) rose more than 24% to close at $24.45.
The Standard & Poor's 500 Index has slumped nearly 8% since June 6, so readers who followed my advice would have enjoyed a nice rate of return over the last four months, compared to the overall market.
The case that I made for El Paso back in June was a simple one: The company's assets were valued at less than the equivalent assets held by its peers. El Paso at the time was in the process of breaking itself into two parts, so it could unlock some of the trapped value.
Kinder Morgan recognized that, as well, and acted.
RSS