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Stocks

Niska Gas Storage Partners LLC (NYSE: NKA) Can No Longer Afford Its High Payout

By , Money Morning - • Print | Email

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.

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The News-Making Stock That's a "Buy"

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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.

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Why Apple Stock Is Headed for $500 - And Beyond

By , Associate Editor, Money Morning • @DavidGZeiler - • Print | Email

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.

Tomorrow's TV

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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Inverse Funds: How To Profit From Inverse Funds - Without Losing Your Shirt

By , Chief Investment Strategist, Money Map Report - • Print | Email

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.

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We Warned You Not to Buy Bank Stocks - And Here's Why

By , Associate Editor, Money Morning - • Print | Email

If you weren't convinced before, hopefully you've seen the light now: Don't buy bank stocks.

Money Morning Global Investing Strategist Martin Hutchinson first warned it was time to bail on bank stocks on Aug. 17. He said the sector was headed for a "catastrophic decline."

"Margins are narrowing, government regulation is increasing, and the outlook for big deals is drying up," said Hutchinson. "In other words: The risks related to bank stocks are as present as they ever were – just the profitability is missing."

Hutchinson was right on with his call. Anyone who heeded his warning saved themselves from the losses U.S. banks have since sustained.

Share prices for many big U.S. banks tumbled in the period between the publication of Hutchinson's article and yesterday's (Wednesday's) market close. Bank of America Corp. (NYSE: BAC) lost 11.6%, Goldman Sachs Group Inc. (NYSE: GS) fell 9.3%, JPMorgan Chase & Co. (NYSE: JPM) 6.5%, and Morgan Stanley (NYSE: MS) 2.2%.

The Standard & Poor's Financials Sector Index now is down more than 18% for the year. Global bank stocks have hit their lowest valuation in 40 years.

And this industry's stock losses are just the beginning of the price pain.

Poor Earnings Reflect Banks' Struggle

Hutchinson pointed to key factors that would weigh on bank profits, like trading losses, decreased lending, and the overhang of dead mortgages.

This season's dismal bank earnings have supported Hutchinson's forecast.

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Do Bullish Investors Have an Ace in the Hole?

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Right now, there are planes full of travelers heading to Las Vegas with dreams of striking it rich. These starry-eyed gamblers would greatly improve their odds by learning how to count cards.

Yet, as we learned in the movie "21", where six MIT students team with Micky Rosa to become expert card counters and "bring down the house," this highly illegal technique carries dire consequences.

You may not be able to count cards at the blackjack table, but counting historical trends of the stock market and discovering inflection points are not only legal strategies, they are essential to successful investing.

One "card" worth counting is the Purchasing Managers' Index (PMI), which measures the manufacturing strength of any given country. A rising PMI indicates a growing economy and is considered a leading indicator.

There are three different types of indicators: coincident, lagging and leading. PMI is considered a leading indicator, meaning its movement historically occurs three to six months before the market reacts.

In China, the PMI just crossed above the three-month moving average. Historically, there's a 67% probability that Hong Kong and China stocks, as measured by the Hang Seng Composite Index, will trade higher over the following three months when this happens. So far in October, the index is up 3.2%, and if this historical trend is sustained, we should see continued positive performance.

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The Treasury Investment That's WAY Better Than Treasury Inflation Protected Securities (TIPS)

By , Money Morning - • Print | Email

I've made no secret of my aversion to Treasury bonds. Yields right now are irrationally low, and thus do not accurately reflect U.S. credit risk.

And since inflation is already running higher than bond yields – and is likely to rise even further – Treasuries offer an inadequate return at best, and at worst, a capital loss if sold before maturity.

Even Treasury Inflation Protected Securities (TIPS) aren't as safe as you might think.

Fortunately, the U.S. Treasury is finally thinking about issuing something useful: Floating rate notes (FRNs).

If the Treasury does end up issuing FRNs, and the pricing is reasonable (and the U.S. Treasury still has a credit rating better than junk bonds), then you should seriously consider buying some.

Don't Trust TIPs

Floating rate debt issues are not that common here, but there have been many in Europe. They were even more common in my early banking days in the 1970s – when interest rates were generally rising.

FRNs have one great advantage over fixed-coupon bonds: If interest rates go up, fixed-coupon bonds go down, sometimes by a lot if the bonds have a long time to maturity.

For example, if 30-year interest rates rise from 4% to 5%, the trading price of a 30-year bond ($100 face value) will drop to $84.48. If you were to sell at that point, you'd lose 15% of your principal – the equivalent of nearly four full years worth of interest.

However, a floating rate note on a good credit rating should always trade near par. If short-term interest rates go up from 1% to 5%, the note will pay 5% in the next interest period, so it will still trade close to par. That means you have principal protection as well as interest rate protection.

Theoretically, TIPS should offer similar protection. And they do if interest rates always stay at the same margin above inflation. But in periods like the present, interest rates trade below inflation, so the price of TIPS gets bid up above par.

Today, 10-year TIPS yield only 0.19% and 30-year TIPS yield only 1.00%. Since real bond yields in normal markets should be in the 2% to 3% range, there is potential for the loss of principal here. Indeed, in real terms there is a certainty of loss of principal – the "on-the-run" 30-year TIPS trade at a price above $128, so over the next 30 years you are bound to turn $128 into $100 in real terms – not a good deal.

Sidestepping Uncle Sam

Additionally, there is another problem with TIPS: The government sets the price index to which TIPS are linked. And if you think the government is too honest to fudge the price statistics to make its debt cheaper, I have some sad, disillusioning news for you.

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7 Dividend-Paying Water Company Stocks Bound to Make a Splash

By , Associate Editor, Money Morning • @DavidGZeiler - • Print | Email

When it comes to commodities, attention typically focuses on gold and oil. But there's only one commodity that humans truly cannot live without – water.

Water covers nearly three-fourths of the Earth's surface, but 97.5% of that is undrinkable seawater, and 70% of what remains is frozen in glaciers.

Climate change, pollution and mismanagement of water resources have already created problems supplying the world's 7 billion people with fresh drinking water. None of those problems are going away, and all are likely to get worse – the earth's population, for example, is expected to reach 9 billion by 2025.

At least 80 countries already are suffering from water shortages, and the United Nations (UN) estimates that 67% of the world population will be "water-stressed" by 2025.

Even parts of the United States have increasingly suffered from droughts and water shortages, particularly in the West and sections of the South, like Texas.

"Water isn't just the oil of the 21st century; water is the raw material for life, for everything,"
said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "I truly believe, as we see this all play out, that water could end up being even pricier than oil – on a per-liter basis."

Just as companies like ExxonMobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) have profited from a high-demand commodity like oil, so too will many of today's water companies profit as fresh water becomes increasingly scarce.

Still, no one is quite sure when water company stocks will start to take off, so the smartest way to play this industry is to look for companies that pay you to wait by offering up a healthy dividend.

Fortunately, since many companies in the water business are utilities, quite a few fit this definition.

Here are seven water company stocks that are in a position to profit from the "blue gold" and that will put cash in your pocket in the meantime:

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Don't Worry: Apple Stock Will Bounce Back

By , Associate Editor, Money Morning • @DavidGZeiler - • Print | Email

Suddenly, Apple Inc. (Nasdaq: AAPL) appears mortal.

With Apple stock falling 5.59% yesterday (Wednesday) to close at $398.62 following an uncharacteristic earnings miss Tuesday, the company has lost its aura of invincibility.

Apple delivered $7.03 a share on $28.27 billion in revenue but analysts had expected earnings of $7.28 a share on revenue of $29.45 billion.

"The implications of an Apple miss means more than is typical, given the importance of its auraof brilliance in sustaining premium price points and product loyalty," Alex Gauna of JMP Securities wrote in a research note. "This will likely also add to well-placed investor anxiety around how the company sustains its momentum under new leadership."

The earnings disappointment – Apple's first since the second quarter of 2002 – was just one of several recent bruises suffered by the Cupertino, CA-based tech giant.

Concern started brewing in August when Steve Jobs resigned as CEO, but Jobs' death from pancreatic cancer earlier this month seemed to rob Apple of some of its magic.

Then the Oct. 4 introduction of the iPhone 4S was met with disappointment because it wasn't the much-rumored iPhone 5.

The series of stumbles has Apple investors wondering whether their days of huge gains are over. But the emotional reaction to Apple's earnings is a mistake.

"While the Q4 miss – following management transition – may restrain near-term investor sentiment, we think the new management team should be given its opportunity to show what it can do," RBC Wealth Management analyst Mike Abramsky said in a research note.

Abramsky also pointed out several strengths that show why abandoning Apple stock now would be premature: "Apple's key franchises (iPad, iPhone) remain early and underpenetrated, with significant growth drivers (4G, China, emerging markets, enterprise, etc.) ahead," he said.

In fact, a comprehensive look at the company's fundamentals as well as its prospects shows that there's still tremendous potential for growth.

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