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This Defense Company has 24% Upside – Even with the Pentagon's Spending Cuts
When George W. Bush was first sworn into office on January 20, 2001, shares of defense contractor Lockheed Martin Corp. (NYSE: LMT) traded for $31.
By the end of his first term, they had doubled to about $60. And by mid-2008, prior to the October crash, Lockheed Martin had climbed to nearly $120 a share.
Those were the boom years – not just for Lockheed, but for most defense contractors.
Northrop Grumman Corp. (NYSE: NOC) shares doubled in the period stretching from December 2000 to January 2008, and General Dynamics Corp. (NYSE: GD) surged more than 133%.
But times have changed.
The last U.S. troops left Iraq in December and forces are expected to end combat operations in Afghanistan next year.
Meanwhile, the Pentagon is looking to cut spending by a half trillion dollars over the next 10 years. And war spending, which is funded separately by Congress, will likely fall from $115 billion this year to $88 billion in 2013.
Indeed, it's a new, leaner military that's taking shape amid talks of belt-tightening and austerity.
"Capability is more important than size," is the way General Martin Dempsey, the chairman of the Joint Chiefs of Staff, put it.
That means a change of tactics is in order for defense companies.
Some will rely on share buybacks and dividend increases, but that still might not be enough to fortify their stock prices. True success will only be accomplished by adapting to the new military's changing needs.
And right now there's only one company that fits the bill. We're talking about…
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The Keystone Delay Won't Stop These Canadian Oil Sands Stocks
I'm not a knee-jerk hater of the Obama administration.
But the President's decision to reject the Keystone pipeline was one of his worst.
Aside from creating jobs, the pipeline would have decisively swung U.S. energy supplies more toward domestic sources and those of our friendly neighbor Canada.
Granted, the pipeline wouldn't create energy independence but it would mean importing less oil from the Middle East.
It is the kind of switch that could help save the U.S. large amounts of blood and treasure in the future.
Because in practice, our dependence on Middle Eastern oil forces us to incur huge foreign costs – after all, we just finished paying $800 billion for the Iraq war. As you know, that is just a drop in a much larger bucket.
Add in the human losses and the costs are incalculable.
In this case, caring less about what goes on in the Middle East – other than ensuring the safety of our ally Israel – would save us all those costs, and get us that much closer to balancing the damn Federal budget.
So let's just say shelving the Keystone pipeline wasn't exactly the president's finest hour.
Bullish on Canadian Oil Sands Stocks
However, while the Keystone Pipeline continues to twist in the wind, investors shouldn't ignore the Canadian energy sector – especially the Athabasca tar sands.
Because with oil prices on the rise, these Canadian resource plays are likely to offer investors serious returns.
Here's why: oil prices are headed higher.
In fact, Fed chairman Ben Bernanke's recent promise that U.S. interest rates will remain near zero until the end of 2014 has given a huge boost to commodity and energy prices.
What's more, the $600 billion injection into EU banks and the promise of another $600 billion this month just adds more fuel to the inflationary flames.
Eventually, oil prices will get so high that they will cause a recession all by themselves, just like they did in 2008. But remember, that happened at $147 per barrel, so we've still got quite a way to go. This time oil could get closer to $200 per barrel.
That's bullish for places like the Athabasca tar sands.
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This New Spy Technology Could Be Worth Billions
Using GPS to track a risky teenage driver or a cheating spouse is about to become old hat.
You see, we are actually on the verge of a revolution that will allow us to locate and track every physical object made in the world.
Not to mention literally every person on planet Earth.
And best of all, this new technology can be used to solve a wide range of problems.
From checking on patients at home, to finding stolen cars, to locating soldiers lost from their units, the possibilities are endless.
Then again, as privacy advocates are quick to point out, there is also the potential for abuse.
Consider this: In the near future, Big Brother will even be able to track your clothing. It's right out of "1984."
That's why I believe the Supreme Court's recent ruling that curbs police use of GPS trackers is a big win for citizens and high-tech investors.
That's because the high court used a broad brush that will give police units pause before they abuse the new tracking technology.
We need these broad safeguards for one simple reason: In the Era of Radical Change, the pace of breakthroughs is so fast that no court or government agency can hope to keep up.
Welcome to the Surveillance Society
In that regard the Supreme Court's timing is right on the money.
The Federal Aviation Administration (FAA) is set to approve new, small helicopter "spy" drones for local police to use in cities.
In fact, AeroVironment Inc. (Nasdaq: AVAV) has a new device especially tailored for law enforcement. The mini-copter weighs just 5.5 pounds and fits in a car trunk.
It costs about $40,000, roughly the price of a police cruiser. But the drone is often much better than a car at tracking suspects.
Big energy also has shown interest in these new drones. They work well for checking on remote assets like oil rigs and pipelines.
I also recently told you about AeroVironment's new hummingbird-sized spy drone. I predict that in a few short years, the scale of these robots will shrink to the size of a fly.
Believe it or not, there is even "talking" underwear courtesy of the Pentagon.
LNG Stocks Are Set to Take Off
As I have discussed over the last two years, liquefied natural gas (LNG) is going to be a complete game-changer.
And along the way, a small group of LNG stocks will become the main focus for investors.
Remember, the LNG process cools natural gas to a liquid form, allowing it to be shipped over long distances. Upon arrival, the liquefied gas is returned its original state before being injected into pipeline for delivery to foreign consumers.
Already, the construction of LNG receiving terminals in Asia and Europe is accelerating.
Here's why.
The European and Asian markets have the biggest need for imports. These markets have a need to meet rising demand and restrain the prices commanded by long-term pipeline-delivered gas.
Luckily, LNG can do both.
Traditionally, natural gas has only been able to develop regional "spot" markets. These are locations where the availability of volume provides an opportunity for traders to execute a price for a quick sale (usually within 72 hours).
This is because the availability of product depends upon the development of import pipelines, which are multi-year, capital-intensive projects.
LNG, on the other hand, can be delivered to a terminal, so it can provide an immediate increase in available local supply.
To the extent that the LNG trade can be sustained, new spot markets are immediately formed around the hubs that develop at the intersection of terminal and delivery pipelines.
And now Qatar – one of the world's largest producers of conventional gas (that is, from freestanding gas fields) – has banked on LNG being the wave of the future.
Qatar has become the first country to commit all of its production to the LNG trade.
And that is a huge vote of confidence for this market.
Considering the number of new tankers involved, this single decision jolted the global shipbuilding industry into one of the most significant increases in business ever recorded.
The Qatari decision was just the first step…
A Global Boost for LNG Stocks
New export terminals are being built by other major gas producers – Russia, North Africa, and Canada. Our neighbors to the north have clearly signaled where the U.S. will be moving next.
A project is moving forward at Kitimat, British Columbia, on the North Pacific coast. It is scheduled for completion in 2014.
Developers originally intended this project to be an LNG receiving facility. But by the time the construction began, the intended flow of gas had changed by 180 degrees.
Today, this facility will be 100% committed to exporting LNG.
And the reason is the same one that is prompting so much U.S. discussion…
Buy Timber Stocks and Watch Your Money Grow on Trees
Chances are you've never considered timber stocks in your investing strategy.
But if that's the case, then you've been missing out.
Timber is a long-term investment that can reward your portfolio in good times, and protect it in bad.
In fact, investing in timber has proven to be more profitable – and less risky – than any other asset class for almost 100 years. Investing in timber stacks up well against stocks, bonds, oil and other commodities-even gold.
Here's why…
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Not Much of a Debate: Inflation is Part of the Plan
Forget about lost decades. Forecasts that we'll be turning Japanese couldn't be further from the truth.
Here's why.
It's simple, really. Deflation is not in the interest of anybody in power, so it's very unlikely to happen.
The U.S. Federal Reserve's policy move to target inflation last week just re-emphasizes this point.
That's not to say deflation is a bad thing for everybody.
For savers and those living on fixed incomes, deflation would be a very good thing indeed.
Their income would gradually increase in real terms, and their savings would become steadily more valuable. Holders of Treasury bonds would also gain mightily from deflation.
However, the very people who would gain from deflation are not in power.
The People's Bank of China can't vote in the U.S. (yet!), Ron Paul is not president, and there is not an organized and powerful savers' political movement. After all, this is not Germany or Japan!
Meanwhile, in the real world, the U.S. government is spending far more than it takes in, and its debt is rising to dangerous levels. This has been happening on a bipartisan basis since at least 2001.
The Tea Party may have elected a Congress committed to reducing spending, but none of the battles of 2011 actually reduced spending – they just slowed the rate of growth somewhat.
Since much of the debt is borrowed long-term at low interest rates, the best way to reduce its burden on future generations is to encourage inflation.
Savers may lose out on the deal, but to those in Washington, the idea of inflating our way out of debt is irresistible.
Of course, sometimes we can depend on an independent central bank to resist this temptation. But at present, Fed Chairman Ben Bernanke is committed to near-zero interest rates in his fight against deflation.
Now you don't have to be a conspiracy theorist to realize that, if the power structure is committed to at least moderate inflation, inflation is what you are going to get.
In fact, it is already brewing.
Congress' Next Bad Idea Would Destroy the Shale Boom
Last week, six Members of Congress, led by Rep. Dennis Kucinich (D-Ohio), introduced the "Gas Price Spike Act."
With concerns over the likelihood of higher gas prices this summer, the bill and its sponsors propose the creation of a "Reasonable Profits Board" that would control the profits of oil and gas companies.
Under the bill, this board – made up of unelected bureaucrats – could apply a "windfall profit tax" on the sale of oil and gas at rates of 50% to 100%. These taxes would take aim at corporate profits that the board feels are "unreasonable" or "unfair."
Congress would then appropriate the money raised to subsidize electric vehicles and mass transit.
Now you may want to take a second and breathe, because this is no satire.
Oh, and the proposed bill offers no specific guidance on how the board would determine what represents a "reasonable profit." How do we even begin to define this term? Are some profits more unreasonable than others? And who decides what is "reasonable?"
Apple Inc. (Nasdaq: AAPL) last week shattered earnings expectations. The electronics company has a profit margin north of 20%; meanwhile, the oil and gas industry has a sector-wide margin a little less than 10%.
And though the price of oil and gas will rise in the future – and despite the name of the bill – a reasonable profits board would do nothing to improve consumers' plights at the pump.
In fact, it would only make things worse for people like you and me.
Better Than Brazil: How to Invest in a Colombian Safe Haven
What's an investor to do?…
The Eurozone is about to collapse. The United States is struggling out of the deepest recession since World War II. And the IMF forecasts global growth will drop from 5% in 2011 to 2.6% in 2012.
How about investing in a safe haven far away from all of these troubles – one where you can actually watch your money grow?
I have found one in Colombia. Let me tell you why.
It is because Colombia is no longer a place controlled by drug kingpins or ripped apart by civil war. Colombia is a country on the comeback.
This revival began in 2002 when former president Alvaro Uribe decided to take on both the leftist guerillas and the drug barons. Since then, his successor Jose Santos has followed up on those policies, and they have worked.
In 2011, Colombia's homicides dropped by 5% to 14,746 and its murder rate dropped to 33 per 100,000 of population.
Admittedly, that's still five times the U.S. level, but these things are relative – it's half the level it was just four years ago.
Foreign investors have noticed, and last year, foreign investment in Colombia was up 56% to $14.8 billion.
Colombia Beats Brazil
In fact, according to the World Bank's "Doing Business" survey, Colombia ranked 42 out of 183 countries.
That was near the top spot in Latin America and far above Brazil's appalling rank of 126. Only Chile was higher with a rank of 39.
Stock market investors have noticed this, too – in the second half of 2011 Colombia had $4.9 billion of initial public offerings, the most in Latin America – and yes, again ahead of Brazil!
On the macroeconomic side, Colombia is sound, with public debt at just 45% of gross domestic product (GDP), a modest budget deficit, inflation just over 3% and the central bank base rate at 4.75% — no Ben Bernanke nonsense of zero interest rates!
Colombia has also gotten a boost by a surge in oil production, with exploration now possible in areas that had been "no go" for foreign investors for decades.
In November 2011, oil production was 920,000 barrels/day, up 17.5% from the previous year. Oil and minerals were responsible for 82% of Colombia's 2011 foreign investment, so the potential for investors is immense.
However, the real reason why Colombia is so attractive [To continue reading, please click here...]
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