MF Global Holdings Ltd. (NYSE: MF), Nabors Industries Ltd. (NYSE: NBR), and JetBlue Airways Corp. (Nasdaq: JBLU) are all making headlines today based on huge developments that could shake up share prices. Money Morning Capital Wave Strategist Shah Gilani joined Fox Business' "Varney & Co." to tell investors which stock is a "Buy" and which ones should be avoided.
Archives for October 2011
October 2011 - Money Morning - Only the News You Can Profit From
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Even with the product lineup it has now, Apple Inc. (Nasdaq: AAPL) stock has enough fuel in the tank to propel it to at least $500 a share.
But it's about to add a booster rocket.
According to several analysts, Apple is working on a TV-set device that could disrupt the TV set industry much as its other devices have done in their industries.
This new device – to simplify, let's call it the "iTV" – is not to be confused with the existing Apple TV, a set-top box that allows users to access digital content from the Internet on their televisions.
We're talking about a full-fledged television, albeit one with Apple's special touch. And that is what will push Apple stock even further skyward.
In a note to clients last week, Piper Jaffray analyst Gene Munster made a case that Apple is already building the iTV, which he expects could add billions of dollars to the Cupertino, CA company's top line.
"We believe that of the estimated 220 million flat panel TVs sold in 2012, 48% or 106 million units will be internet-connected, of which Apple could sell 1.4 million units," Munster wrote. "We believe an Apple Television could add $2.5 billion or 2% to revenue in 2012, $4.0 billion or 3% in 2013 and $6.0 billion in 2014."
Munster said he had met with Asian component suppliers that said they knew of prototypes of the new Apple device, and that the company had filed several patents for television interfaces.
But the definitive piece of evidence is a quote from Steve Jobs biographer Walter Isaacson's just-released book in which Jobs makes it clear that an iTV was the company's next major project.
"I'd like to create an integrated television set that is completely easy to use," Jobs said. "It would be seamlessly synced with all of your devices and with iCloud. It will have the simplest user interface you could imagine. I finally cracked it."
That "simplest user interface" is the key to why an iTV would be such a game-changer.
The iTV will not use a remote of any kind. It will be voice-controlled, using the same Siri technology Apple introduced earlier this month with the iPhone 4S.
"It's the stuff of science fiction," writes Nick Bilton in The New York Times. "You sit on your couch and rather than fumble with several remotes or use hand gestures, you simply talk: "Put on the last episode of Gossip Girl.' "Play the local news headlines.' "Play some Coldplay musicvideos.' Siri does the rest."
The iTV was waiting for Siri – technology that allows people to simply tell their television what they want to watch, whether it comes from the Internet or from a programming provider like Comcast Corp. (Nasdaq: CMCSA) or DIRECTV (Nasdaq: DTV).
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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. (**).
The world's 7 billionth person is likely to be born today (Monday).
However, this birthday isn't something to celebrate.
Since the global population passed 6 billion only in late 1999, we've added more than 80 million people each year on average. And the environmental footprint of those people is expanding rapidly as emerging market populations modernize.
The planet may be able to accommodate these extra people and their consumption – but then again, it may not.
And if it can't, the drain on our planet's resources could harm us all.
So we'd better find a way to reduce population growth – fast.
Of course, if you think I'm about to propose something along the lines of China's one-child policy, you couldn't be more wrong.
We have economic means of population control that are neither coercive nor costly. And the sooner we implement them, the better.
A Disaster in the Making
When Thomas Malthus warned of overpopulation in 1798, the global population was approaching 1 billion – a level it reached in 1804. It had grown in the previous three centuries from 500 million in 1500. Thus, if the gradually increasing prosperity of 1500-1800 had continued – without the Industrial Revolution increasing world production capacity artificially – it would have reached 1.62 billion by 2011.
There is a very good case to be made that 1.62 billion is today's natural population, and that the growth since 1800 is artificial, caused by the Industrial Revolution removing previous limits on production. At that level, almost all serious environmental problems would go away. Even if all 1.62 billion of the world's inhabitants enjoyed Western living standards, the global warming and pollution effects of their output would be easily absorbed by the planetary ecosphere.
Around 2004, U.N. population projections had us reaching a population of 8 billion by 2027, then peaking at around 9.3 billion just before 2050 and declining slowly thereafter. Alas, the latest projections are not so sanguine. They have no peak in population this side of 2100, with population passing 10 billion and reaching 10.12 billion in 2100.
At this level, an environmental disaster is very likely.
Investing legend Jim Rogers said that although the latest Eurozone deal for Greece is more generous than he expected, it's not enough to solve Europe's problems.
"Politicians have delayed addressing the problem yet again," Rogers told Investment Week. "It will come back in a few weeks or a few months and the world will still have the same problem, but this time only worse because the European Central Bank and other countries will be deeper in debt."
The deal European leaders hammered out on Thursday includes boosting the region's rescue fund to $1.4 trillion (1 trillion euros) and asking bondholders to take a voluntary 50% haircut on Greek debt.
So-called "inverse funds" are widely misunderstood and can be tricky to use, but these specialized investments have a place in most portfolios.
In fact, with U.S. stocks having zoomed more than 80% off their market lows, now could be the ideal time to add inverse exchange-traded funds to your portfolio.
But there's definitely a right way and a wrong way to use them.
So it's worth taking a closer look.
A new EU deal has U.S. investors hopeful. But there's only one European stock that Money Morning Chief Investment Strategist Keith Fitz-Gerald would put his money in right now. And he told Stuart Varney why he likes it – and no others – on Fox Business Varney & Co…
Everybody loves a rally.
After European leaders announced a plan to stem Eurozone and global panic over Greece's potential default and shore up capital at beleaguered banks, positive contagion is lifting stock markets from one end of the planet to the other.
What's not to love?
Well, the plan itself, for one thing. It's so full of holes that unless it's tightened-up, detailed, actually agreed to, financed and executed, it's nothing but an outline in the sand.
Don't get me wrong, it's a start. But, the question investors have to ask themselves is, if the plan isn't written in stone and if they've missed this rally, is now the time to jump back into equities?
The answer is yes and no.
Understanding where the risks are and how to position yourself to profit on the heels of this new global positivity requires looking at the European bailout plan as proposed, and measuring it against the realities constantly unfolding in the future.
Let's start with the plan and measure it against what you should be watching in the days, weeks, and months ahead.
The Devil's In the Details – Especially When There Are None
What has been proposed is a plan to ask private banks to "voluntarily" exchange some $300 billion (210 billion euros) of current Greek debt for new debt to be issued by Greece. The banks are being asked to take a 50% haircut. That means the debts they were owed will be cut in half. Instead of Greece owing $300 billion, the country will owe its creditors $150 billion (105 billion euros).
The two immediate issues here are:
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High corn prices are creating misery for meat processing companies that are getting squeezed on profits and consumers who are getting squeezed in their wallets.
Just about the only group to benefit from high corn prices will be agribusiness companies that make the equipment and supplies farmers will need to grow more corn.
Persistently high corn prices have put the pork, beef and poultry industries under tremendous pressure. Companies like Pilgrim's Pride Corp. (NYSE: PPC), Smithfield Foods Inc. (NYSE: SFD), Hormel Foods Corp. (NYSE: HOR) and Archer Daniels Midland Co. (NYSE: ADM) unable to pass on the full price increases to customers.
And with demand for corn growing at a pace faster than farmers can match, there's no relief in sight. Corn harvests fell short of demand by 5.8% for the year ending in August, and analysts don't expect much improvement next year.
In fact, the U.S. Department of Agriculture (USDA) expects America's corn stockpiles to hit a 16-year low for the 2011-2012 marketing year.
"Last year, corn and soybean crop harvests were not adequate to fulfill the needs for ethanol, for feed and for export," Bill Roenigk, vice president of the National Chicken Council, told Gannett. "It's been difficult, if not impossible, to pass on those higher feed costs to the consumer."
And yet consumers have still struggled with food costs inflated by high corn prices. According to the USDA, beef prices were up 10.1% in September from a year earlier, pork prices up 7.5% and poultry up 3%. The price of eggs zoomed 6% in September alone.
Why Corn Prices Are High
Several factors are at work keeping corn prices high.
On the supply side of the equation, the corn crop in the United States – the world's leading corn grower – got slammed by floods and drought earlier this year. This resulted in the USDA lowering its forecast for the 2011 harvest three consecutive months to about 12.433 billion bushels, similar to last year's.
Meanwhile, demand for corn has never been greater. Production of fuel additive ethanol, for example, now consumes 40% of the U.S. corn crop.
And global demand for corn is rising rapidly in emerging nations, particularly China. Morgan Stanley (NYSE: MS) estimates that China will quadruple its imports of corn to 4 million tons this year, and further increase to 9.4 million tons by 2014.