Archives for April 2011

April 2011 - Page 3 of 9 - Money Morning - Only the News You Can Profit From

Low-Priced Stocks: Four Profit Plays That Show How to Separate the Treasure From the Trash

Investors have a weakness for low-priced stocks. The logic is pretty easy to see: If you buy shares at $1.00, and the stock takes off, you can pocket a bundle.

But if you're wrong, this line of reasoning goes, you only lose a buck.

Unfortunately, when it comes to low-priced stocks, the situation isn't always that simple: That $1.00-a-share stock isn't always "cheap" – while that $100-a-share stock can end up being the real bargain.

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Buy, Sell or Hold: AMR Corp. (NYSE: AMR) Has Nowhere to Go but Down

In February, I made my case against United Continental Holdings Inc. (Nasdaq: UAL), – owner of both United Airlines and Continental Airlines – saying high fuel prices would be too much for the company to bear.

Well the same is true for AMR Corp. (NYSE: AMR), which is best known as the parent company of American Airlines – the fourth-largest airline in the world. The rising cost of fuel has put a squeeze on the company's margins, leaving it a hostage to higher oil prices.
So let's "Sell" AMR Corp. (**).

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A New Dot-Com Bubble? Frothy Valuations for Facebook and Groupon are Sparking Worries

With valuations of Web-based companies like Facebook Inc. and Groupon Inc. zooming ever higher, questions have been raised over what these companies are truly worth and whether we're seeing the early stages of a new dot-com bubble.

"The markets are showing signs of speculative froth," Martin Sorrell, chief executive officer of marketing giant WPP PLC (Nasdaq ADR: WPPGY), told the trade journal Information Age in a recent interview.

And the social media companies seem to be whipping up the bulk of that froth.

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CWS Market Review

First-quarter earnings season is kicking into high gear and, so far, Wall Street likes what it sees. The S&P 500 has rallied strongly for the last three days. In fact, the index is getting close to its pre-quake high.

The Dow, which isn't as cyclically focused as the S&P 500, has already broken those highs. On Thursday, the Dow closed at 12,505.99 which is its highest close since June 5, 2008.

To give you some context on what Dow 12,500 means, the Dow first closed over 12,500 in late 2006. Going back in time, the Dow first broke 125 in 1925 and it first cracked 1,250 in 1983. That's 58 years to grow 10-fold, followed by another 28 years to grow 10-fold. A 100-fold gain over 86 years works out to about 5.5% per year.

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Emerging Markets Forecast: Which Ones to Hold, and Which Ones to Fold

Late last year, as part of Money Morning's "Outlook 2011" economic-forecast series, I suggested investing in emerging markets that were relatively cheaply priced, and whose economies seem poised to do well in 2011.

My favorite recommendation, Chile, gave a mediocre performance, down 3.2% on the year.

On the other hand, I recommended Russia at several different points last year. That's not a market that I normally favor. But I'd been suggesting that low Price/Earnings (P/E) ratios and a commodity or energy orientation in an economy would be the keys to finding successful emerging markets in 2011.

Currently, the Russian market is up 19.2% in dollar terms, the best performance of any market except Hungary (which also satisfied my "low P/E" criterion, as it is recovering from a very deep recession).

In this installment of the current Money Morning "Quarterly Report" series, let's take a tour of the world's emerging-market economies. We'll study their most recent performance, and we'll identify the best investment candidates for the months to come.

We separate the potential winners from losers. Read on to see which is which…

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Haynesville Shale a Key Producer in U.S. Natural Gas Industry

U.S. interest in renewable energy sources like natural gas has increased as oil prices continue their steep climb.

Natural gas futures on the New York Mercantile Exchange (NYMEX) yesterday (Thursday) rose 2.48% to $4.42 per million British thermal units (btu) after the U.S. Energy Department reported a smaller than expected storage increase.

A recent Money Morning Mailbag installment addressed how rising natural gas demand has turned investors on to shale gas, the unconventional gas found in tight shale rock formations.

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Crude Oil Prices: What's Behind the Spike to $112 - And Why There's More to Come

Crude oil prices rose for the third straight day yesterday (Thursday) – with more of the same to come.

West Texas Intermediate (WTI) crude for June delivery rose to $111.50 a barrel on the New York Mercantile Exchange, and traded as high as $112.48, the highest intraday price since April 11. Crude prices are up by a full third so far this year.

Brent crude is trading at $123.70 a barrel on the ICE Futures Europe exchange in London.

The latest surge in oil prices is not a result of new geopolitical developments – although they continue to weigh on the market.

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Uranium Prices: How To Profit As Uranium Prices Hit $140

Uranium spot prices and shares of uranium mining companies have plunged amid fears that the situation in Japan could deteriorate into a nuclear meltdown on par with Chernobyl. Investors fear that the explosion and subsequent radiation leaks at the Fukushima nuclear power plant will force other countries to tighten restrictions, or worse, abandon their pursuit […]

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A Slowing U.S. Economic Recovery Faces Strong Headwinds in 2011

The U.S. economic recovery has been heading upward, but high unemployment and rising energy prices will weigh heavily on consumers and slow U.S. growth.

Many economists don't think the U.S. economy will maintain the 3.1% growth rate it established in 2010's fourth quarter. The International Monetary Fund (IMF) says that while global growth this year will continue at a rate of 4.8%, advanced regions like the United States will grow at a slower rate than emerging economies.

The IMF lowered its 2011 U.S. outlook to 2.8% from 3%, citing a weak real estate market and a high jobless rate as the biggest factors.

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Cloud Computing Helps Revive Corporate IT Spending, Boosts Intel and IBM

Better-than-expected earnings this week by several major technology vendors suggest a rebound is underway in corporate IT spending – much of which was postponed by the recession – and a big surge in cloud computing investments.

Intel Corporation (Nasdaq: INTC) reported a 34% rise in first-quarter profit due to strong sales of chips for high-end servers used in data centers in addition to a surprising increase in PC chip sales. And International Business Machines Corp. (NYSE: IBM) reported its highest revenue growth in a decade as businesses bought more servers and equipment for data centers.

Other tech vendors posting positive earnings included EMC Corporation (Nasdaq: EMC), a manufacturer of corporate data storage products, and VMware Inc. (Nasdaq: VMW), which develops virtualization software used on corporate servers.

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