Buy Sell Hold Archives - Page 5 of 21 - Money Morning - Only the News You Can Profit From
Green Mountain Coffee Roasters (NASDAQ: GMCR) May Be Red Hot but It's Not a 'Buy'
Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) is one of the hotter stocks in the market right now. In fact, the stock is up 178% since the start of the year.
But if you know what's good for you, you'll steer clear. Green Mountain has shot up so high, so quickly that it has become a victim of its own success.
Let me explain.
Green Mountain started with a single café that roasted beans and sold coffee over the counter to customers in a small town in Vermont. Today, that same company is generating $2.3 billion of revenue.
To put that in perspective, Green Mountain has delivered double-digit net sales growth for the last 27 consecutive quarters. And, since the acquisition of Keurig, it has seen net sales growth of more than 39% for 12 consecutive quarters.
But while compounded growth is the key to long-term success, it also can become a drag on near-term profits.
Often a company feels it must continue to grow simply for growth's sake. And if that's the route Green Mountain takes, then it will find itself in the exact same place Starbucks Corp. (Nasdaq: SBUX) did a couple of years ago.
Indeed, Green Mountain has put so much emphasis on growth that high expectations could negatively impact the company's execution.
And in the economic reality of today, a company that has fixated on hitting lofty growth objectives could be setting itself up for a serious market disappointment.
So Green Mountain Coffee Roasters is "hold" – at least until global growth starts to rebound (**).
Deutsche Bank AG (NYSE: DB) Will Be Crushed Under the Weight of Europe's Debt
Don't get me wrong – it will survive the spiraling financial mess. Germany will defend it because it's the bellwether of big banking in Europe. It's their version of "too big to fail."
But as the continent's largest bank, it won't be able to escape unscathed from the capital crunch about to take over the European banking system.
So it's time to sell Deutsche Bank AG (**), before the region's financial system falls apart.
Europe's Coming Capital Crunch
Many European banks don't have enough money to survive a Greek default. They hold huge amounts of their home sovereign's debt, as well as debt of their troubled Eurozone neighbors. Any write-down of those holdings will slam their balance sheets.
These banks were already overleveraged when the financial crisis started in 2007, and they have relied on outside sources like the United States to maintain core capital ratios.
In the 2008 crash, the European banks turned to the U.S. Federal Reserve for trillions of dollars of liquidity injections. They also used sources like U.S. money market funds for short-term loans – commercial paper that matures in less than 270 days – to cover capital loaned out at longer maturities. In May 2011, U.S. money market funds had an average 40% of holdings in European commercial bank paper.
But then U.S. banks, afraid of the unfolding European sovereign debt drama, let these short-term loans mature. This brought the capital back home and took an estimated $350 billion in liquidity out of the European banking system.
Yamana Gold Inc. (NYSE: AUY) Shines On as Gold Prices Continue to Climb
Yamana has no net debt, which means it has grown to the point it is self-funding its future development. This is a testament to the quality of the company's assets and management.
It's also extremely rare in the gold mining sector.
You see, gold mines take large capital investments and years of development to reach a positive growth point. But Yamana is already past that point, and its profits and share price will soar as it continues to expand.
Just look at the last time I told you Yamana Gold was a "Buy." It was one year ago and Yamana was trading at $11.26 a share. Since then it's climbed 15% while other stocks have tumbled. And that's just the beginning. Yamana will keep climbing as the share price gradually starts to account for the company's growth outlook.
So if you didn't buy Yamana Gold Inc. following my last recommendation, you should do so now as the company rakes in profits without worrying about debt (**).
Yamana Gold Inc.
Yamana has spent the last decade building a diverse portfolio of low-cost mining locations. The company currently operates six mines, with 50% of its production coming from Chile, 30% from Brazil, and 20% from Argentina.
This global operations mix has big benefits for Yamana. First, it reduces the geopolitical risk threatening some of the company's competitors. And secondly, the low expenses grant Yamana a negative production cost of $80 per ounce, once byproducts are sold and taken into consideration.
This means that with an average sell price of $1,509 an ounce, Yamana enjoys an average cash margin of $1,589 an ounce in what is normally an extremely expensive sector to produce.
I absolutely love this cash margin, which will get even fatter with Yamana's projected production increases.
Southern Copper Corp. (NYSE: SCCO) Gives You High Yield, High Profit Potential
Here's a company to get genuinely excited about: Southern Copper Corp. (NYSE: SCCO).
Because Southern Copper has world-class assets and high profit potential, but its share price has taken a dive amid all of the recent market turmoil.
I love to find a sound business whose stock price has been pummeled in the uncertain markets. It screams bargain and is a major buying opportunity.
And in this case, the fact that Southern Copper's stock price has dropped means its already-juicy dividend has increased. Currently the company's $2.48 dividend equates to a 9.5% yield.
Plus, it's consistent: Over the last five years, Southern Copper has averaged a payout of 83% of its after-tax profits.
Given all that, it's time to buy this high-yielding, high-quality mining company (**).
Southern Copper Corp. Outshines the Competition
Southern Copper Corp., founded in 1952, engages in mining, smelting, and refining mineral properties in Peru, Mexico, and Chile. It has the largest copper reserves of any publicly traded company, and last year mined more than 1 billion tons of copper. That means it is perfectly positioned to profit from increasing global demand for copper.
The company operates the Toquepala and Cuajone mines in the Andes Mountains located southeast of Lima, Peru, as well as a smelter and refinery in the coastal city of Ilo, Peru. It also operates underground mines that produce zinc, gold, and lead, as well as a coal mine that produces coal and coke.
BP Prudhoe Bay Royalty Trust (NYSE: BPT) Offers Consistent 9.9% Yield as Oil Prices Climb
With oil prices far from record highs, but expected to rise in coming months, it's time to examine oil-related investments – especially those with high yields.
The West Texas Intermediate (WTI) benchmark was approaching $90 a barrel two weeks ago, but has since slipped more than 7% due to concerns over the European debt crisis.
Recent oil price fluctuations also stem from crude oil supply issues. Libya's revolution trimmed production of light sweet crude normally destined for the European refining complexes. This has helped keep a floor under oil prices, while the global economies start to price in a slowdown in growth.
But prices won't stay down for long.
Paired with supply constrictions, growing global demand will again push prices over $100 a barrel next year. The International Energy Agency reports that worldwide oil demand will rise by 1.2% (to 89.3 million barrels a day) this year and 1.6% (to 90.7 million barrels a day) in 2012.
That's why I like this energy investment that pays a juicy dividend.
It's the largest conventional U.S. oil and gas trust, has assets in the largest North American oil field, and, best of all, it yields 9.9%.
That's pretty amazing when you consider that the U.S. government will pay you less than 2% per year to hold one of its 10-year bonds.
And as oil prices climb, that dividend will only get sweeter.
I'm talking about BP Prudhoe Bay Royalty Trust (NYSE: BPT), a high-yielding energy stock that's a "Buy" in this uncertain market environment.
Buy Coeur d'Alene Mines Corp. (NYSE: CDE) – While Silver's On Sale
Silver was hardly the only casualty: Investors pulled money from stocks and metals in favor of cash, U.S. Treasuries and the U.S. dollar.
But here's the key point: This silver pullback won't last forever, and fleeing silver – or top silver stocks like Coeur d'Alene Mines Corp. (NYSE: CDE) - will prove to be a costly mistake.
As ugly as this week has been – and even if it carries over into this week, or even beyond – this will prove to be just a temporary reversal.
And once it's over, silver prices will "break out" and head for much higher highs.
Europe's Banking Crisis and Silver Prices
Weak European banks are driving the current metals price pull back. The European Union (EU) reported Thursday that 16 "fragile" European banks need more capital. They're facing margin calls, much like the U.S. banks were in the fall of 2008.
But someone will come to the banks' rescue.
They'll be fixed when the European Central Bank (ECB) prints fresh batches of money and pushes them into the weakest institutions.
When that money is released into the system and the extra liquidity is sloshing around, silver will soar to new all-time highs – just like when the U.S. government bailed out banks in 2008, and the "white metal" started a tear that's led to gains of 200% to date.
If you avoid the silver market now, you'll miss out on these significant gains, like the ones headed for Coeur d'Alene Mines Corp., the largest U.S.-based silver producer.
You see, this mining giant is about to bring online some of the largest silver mines in the world. The higher silver prices soar, the more money this miner rakes in.
Simply put: Coeur d'Alene Mines shows all the signs of becoming a future silver king, and is a "Buy" before silver prices take off again. (**)
Don't Miss the Stock Breakout for Ag Leader Monsanto Co. (NYSE: MON)
Higher food prices aren't disappearing any time soon – meaning it's time to revisit one of the best "Buys" in the agricultural industry – Monsanto Co. (NYSE: MON).
I first called Monsanto Co. a "Buy" in October 2010, when I told you the company had started a rebound that would pay off for investors. The stock was trading at $56 a share and down 34% for the year – compared to an 11% gain in the Standard & Poor's 500 Index.
Since my recommendation, Monsanto has reversed its downward trend and is up more than 23% — almost triple the S&P 500's 3.4% rise. The stock hit a 52-week high of $77.09 on July 25 before recent volatility dented its comeback. Monsanto stock closed Friday at $69.77.
If you missed getting a position on Monsanto the first time around, it's not too late. This innovative global Ag leader is still taking off.
You see, St. Louis, MO-based Monsanto is the largest producer of seeds to commercial farms. With food prices expected to increase 4% next year, and global reserves dwindling, demand for Monsanto's products will rise.
This means Monsanto should see record-high seed prices and margins.
Not only that, Monsanto has a competitive edge: It's a leader in creating genetically modified seeds that help crops reach levels of productivity unimaginable a few decades ago.
So it's time – again – to buy Monsanto Co. (**) – especially if you didn't get a chance to pick it up last year. If you already have shares, I suggest you continue holding them and possibly look to add to your position.
Chesapeake Energy Corp. (NYSE: CHK) Could Be the Sector's Best Takeover Target
When you hear the term "takeover target," you typically think of a small biotech or technology company – but that's not the case here.
I've found a company that logged $1.4 billion of adjusted EBIDTA and $1.2 billion of operating cash flow. And it just happens to be the second-largest natural gas producer in the United States.
I'm talking about Chesapeake Energy Corp. (NYSE: CHK) - a company that has increased production for 21 consecutive years.
In addition to being the second largest U.S. gas company, Chesapeake is the No. 1 horizontal-well driller in the world, and the most active new-well driller in the United States. The company holds a large portfolio of shale properties, and it plans to triple profitable liquids production.
Even aside from the fact that the company is an attractive takeover target, Chesapeake has enough going for it that it deserves a place in our portfolio.
So it's time to buy Chesapeake Energy Corp. (**).
Potash Corp. of Saskatchewan Inc. (NYSE: POT) Is Reaping the Rewards of a Global Ag Boom
Not only are populations growing, but middle class consumers in emerging markets are developing a taste for meat as well. This insatiable hunger for more choices has resulted in greater demand for corn-fed livestock, which is taking a hefty chunk out of crop yields.
And when you include new biofuel demands, crops are now being used for feed, fodder and fuel.
Of course, there's only so much arable land in the world, so fertilizer has become one of the primary drivers of increased crop yields.
When it comes to capitalizing on this evolving trend, Potash Corp. has the size and global diversity to dominate. That was clearly evidenced when the company reported record earnings in the second quarter.
So it's time to buy Potash Corp. of Saskatchewan Inc.(NYSE: POT) (**).
Alliance Bernstein Holding LP's (NYSE: AB) 9.4% Dividend Yield is Too Juicy to Pass Up
In a market denoted by volatility, stocks with a high dividend payout typically come at a premium, but in the case of AllianceBernstein Holding LP (NYSE: AB) we have a bargain.
This is a company that has broad global exposure, no debt to service, and a 9.4% dividend yield.
Better still, AB stock has been beaten down of late, which means we have the opportunity to snap up this gem at a bargain-basement price.
For patient investors looking for cash flow, it doesn't get any better than this. So it's time to buy AllianceBernstein Holding LP (NYSE: AB) (**).
Why AllianceBernstein Holding LP (NYSE: AB) Is a Buy
AllianceBernstein isn't a household name but it's one of the largest asset managers in the world. The $1.5 billion company is the end result of Alliance Capital Management acquiring Sanford C. Bernstein in 2000.
The company has offices in New York, London, Frankfurt, Tokyo, Hong Kong, Sydney and Chicago, giving the company a truly global reach.
Another great thing about AllianceBernstein is that it pays 100% of its earnings per share to investors. That's why the stock currently sports a yield of 9.4%.