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Stocks

Looming Loss of Federal Incentives Darkens Future of Solar Power Stocks

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

The reduction or elimination of several federal energy subsidy programs later this year could further dim prospects for solar power stocks – bad news for a sector already in a months-long slump.

The goal of the programs, which include loan guarantees and grants, was to support the early stage growth of renewable energy companies until they became viable enough to attract conventional investors.

But several of the federal programs created as part of the 2009 stimulus package have expiration dates that assumed the economic woes of the recession would have eased by now.

Instead you have a solar power industry worried about what happens after the programs begin to expire – the first as soon as Sept. 30.

"Is the solar industry going to die if we lose these programs? No, but we're going to stall," Roger Efird, managing director of Suntech America, a subsidiary of Suntech Power Holdings Co. Ltd. (NYSE ADR: STP) told USA Today.

Helped by such programs, the solar industry grew 67% last year, but could see that growth flatten as cash-strapped governments both in the United States and Europe begin to cut back.

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Hot Stocks: Star-Crossed Sony Corp. (NYSE ADR: SNE) Will Continue to be Bad Luck for Investors

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

What else can go wrong for Sony Corp. (NYSE ADR: SNE)?

After years of struggling to invigorate its turnaround strategy, Sony got slammed with Japan's March 11 earthquake and a devastating hacker attack on its PlayStation network in April.

The quake forced Sony to take tax credit provisions in its March quarter that resulted in a $3.2 billion loss for its 2011 fiscal year – the once-dominant consumer electronics company's third consecutive annual loss.

Investors have grown increasing disenchanted with Sony, sending the stock down about 30% this year. It has made several new 52-week lows in the past few months, most recently touching $24.21 on June 24. In 2008, the stock was trading at more than $50 a share.

"Sony said this was going to be its year but it looks like it then got a smack in the eye," saidShiro Mikoshiba, an analyst at Nomura Holdings Inc. (NYSE ADR: NMR) in Tokyo.

Sony said last month that the combination of the March 11 disasters and the hacker attack would erase $2 billion from its operating profit in the current fiscal year, though it still forecast a net profit of just under $1 billion.

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Profit From a Market Misstep with Valero Energy Corp. (NYSE: VLO)

By , Money Morning - • Print | Email

The latest stock market pullback has given value investors a chance to go shopping again – and Valero Energy Corp. (NYSE: VLO) is a great example of the kind of steals that are available.

That is, Valero's assets are worth significantly more than what the market is currently pricing them at.

At its core, the company is a vertically integrated, independent crude refiner with ethanol production that can be blended into the feedstocks of its own network of gas stations.

Right now is the perfect time to be grabbing assets on the cheap, and Valero is giving us an opportunity that's too good to pass up.

So it's time to buy Valero Energy Corp. (**).

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What the Future Holds for U.S. Stocks in Light of the Fed’s Failings

By , Contributing Writer, Money Morning - • Print | Email

Major U.S. stocks were under pressure during most of the past week as new worries about Eurozone sovereign debt and a disastrous press conference by U.S. Federal Reserve Chairman Ben Bernanke corroded confidence.

This time, it was not just Greece that was pushing sellers' hot button, but also Italy, as the Mediterranean nation's banks are believed to have excessive exposure to troubled loans in the region. But at the center of the troubles was Bernanke, who looked helpless as an Econ 101 student in a master's class when asked by the media to explain why the economy was not improving as fast as expected.

On the plus side of the ledger this was a stronger-than-forecast increase in U.S. durable goods orders, some very upbeat inflation comments from China, and an improvement in German business confidence.

So where are we now?

Well, my premise at the start of the year was that you would not have to get too fancy to beat the broad market indexes, which are weighed down by troubles at the banks. The idea was you would not even have to get as fancy as picking the right world regions or sectors, like last year. Instead, you could put a large part of your portfolio in something as prosaic as the growth half of the S&P 400 Midcap Index – the iShares Midcap Growth Fund ETF(NYSE: IJK) fund – and let it ride.

That worked for my through mid-May, then it stopped out for a fat gain. Now it looks good to go again, as long as bulls man up and make a stand right here, right now.

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Gold Prices: Will Gold Equity Investors Reap Big Gains?

By , Money Morning - • Print | Email

Gold prices passed the $1,500 per ounce mark for the first time ever in mid-April and, aside from a couple of short pullbacks in early May, have set up shop in the neighborhood of $1,525 to $1,550 an ounce (gold closed at $1,553.40 on Wednesday).

So far in 2011, it's been relatively status quo for those investors who've embraced gold as a way to protect themselves from currency debasement, excessive money printing and inflation as prices have increased 7.67%. Bank of America-Merrill Lynch (NYSE: BAC) analysts are forecasting gold prices could fall to $1,400 an ounce during seasonal weakness in July before rebounding as high as $1,650 an ounce by early fall.

While the party continues for gold bullion prices, stocks of gold companies have been a no-show. The NYSE Arca Gold Bugs Index (HUI) has fallen more than 13% year-to-date and the Philadelphia Gold & Silver Index (XAU) has toppled more than 16%. Companies such as High River Gold Mines Ltd., Jaguar Mining Inc. (NYSE: JAG) and NovaGold Resources Inc. (AMEX: NG) are off more than 45% from 2007-2008 highs.

This underperformance has been exacerbated in recent weeks making it a hot topic of discussion among investors, analysts and portfolio managers.

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The Facebook IPO: Why Facebook Subscribers Should Get a Piece of the Action

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

Mark Zuckerberg… you need to share the wealth from the Facebook IPO.

During a Wednesday morning appearance on the FoxBusiness "Varney & Co." program, Money Morning's Shah Gilani said the Facebook Inc. founder and CEO should reserve 20% of the potential $100 billion initial public offering (IPO) for some of the company's 6 00 million subscribers – since they're the folks who really made Zuckerberg the king of social networking (as well one of the youngest billionaires in history).

Given that the Facebook IPO is likely to be one of the hottest ever when the company goes public next year, Gilani said that his proposal would probably be the only way the average investor could get a piece of the company at the offering price. Otherwise, retail investors who really want to own Facebook shares will be forced to buy in on the secondary market after Facebook's share price has experienced what's expected to be a stratospheric zoom. So he challenged Zuckerberg to make this pioneering move.

"Zuckerberg made history with Facebook – and now he's the king of social media and social networking – the man with the Midas touch," said Gilani, a former Wall Street insider and Money Morning commentator who operates the Capital Wave Forecast advisory service. "But now it's time for him to give some of the gold that he's earned as the head of Facebook back to the people who helped make that happen."

Added Gilani: "Facebook was Act One for him. This kind of pioneering move with the Facebook IPO could be Act Two – the encore. If social media is a force for good, this would be Zuckerberg's opportunity to once again prove he's a real social innovator."

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Hot Stocks: Toyota Motor Corp. (NYSE: TM) Won't Be Back on Track Any Time Soon

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

Don't count on Toyota Motor Corp. (NYSE ADR: TM) to regain its place as the leader in global auto sales any time soon.

Because even though the company is ahead of schedule as it looks to bounce back from the horrible wave of disasters that engulfed Japan in the spring, it now faces another roadblock in the strengthening yen.

Indeed, the good news for Toyota is that it now expects full production in Japan to resume by September, two months earlier than originally predicted. But the bad news for the company is that the dollar has slid from over 90 yen a year ago to about 80 yen now, making all Japanese exports increasingly expensive. The break-even point for Toyota is around 85 yen to the dollar.

For every yen of appreciation, Toyota would need to raise the price of its autos in the United States by 1.25% to maintain the same profit, an unappealing alternative in a challenging economy.

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Predict the Dow Contest Update: Where Do You Think the Dow Will Close?

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

The Dow Jones Industrial Average ended its six-week losing streak last week as fears of debt defaults eased and the global economy appeared to improve.

The blue-chip bellwether rose for the third straight day yesterday (Monday) to close at 12,080.38 as bargain-hunters moved in and investor concerns about a Greek debt default continued to ease.

But where does the Dow go from here?

That's what we're asking Money Morning's readers as part of our "Predict the Dow/Win an iPad2" contest, which started last week. We're asking readers to predict where the Dow will be when the second quarter comes to a close on June 30. Deadline for entries is June 26.

Margaret Riddagh of Wilmington isn't sanguine about the market's outlook. She sees a second-quarter Dow close of 11,489.25 – a drop of more than 500 points, or about 5%, from present levels.

"I believe that the market will reflect more closely how the economy is really doing," she wrote with her entry. "The decline will start slow but continue as people realize that bad times are ahead, due to governmental policies."

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After 100 Years of Service, IBM Corp. (NYSE: IBM) Is Still a 'Buy'

By , Money Morning - • Print | Email

IBM Corp. (NYSE: IBM) has provided information technology (IT) products and services worldwide for 100 years, making it the very definition of a blue-chip stock.

And when the market gets weak and starts to show signs of volatility, it usually is the blue-chip stocks that are the strongest in the pack.

So with the markets going through a bit of a rough patch, let's look for an opportunity to pick up shares of IBM during any pullbacks (**).

Four Reasons to Buy IBM

There are four big reasons why I like IBM right now:

  • It's 100 years old, so you know it's stable.
  • The company generates $100 billion in sales, which is a level few companies ever reach.
  • IBM has an unleveraged balance sheet with $40 billion in gross profits.
  • And the stock is relatively strong, as it's currently trading near its 52-week high, even as the greater market declines.

When I think about IBM, I think about stability. The company has never been accused of trying to be sexy from a marketing point of view. Yet, IBM has grown into one of the largest companies on the planet and has built a good reputation for being conservative.

In high growth periods, stocks like IBM fail to keep up – but in uncertain times, they really shine.

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Hot Stocks: Don't Let Groupon Inc. Play You For a Fool

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

Groupon Inc. will try to get you to jump on its initial public offering (IPO) by touting its extreme growth and its profit potential – but don't believe it.

Even though Chicago-based Groupon, an e-commerce player that offers daily discounts to subscribers via e-mail, has exploded since it entered the online coupon world in 2008, that growth is threatened by the company's competition and mounting losses.

"The market opportunity isn't as big as the industry players would like you to believe," Sucharita Mulpuru, an analyst with Forrester Research Inc. (Nasdaq: FORR) wrote in an open letter to investors considering Groupon. "This IPO game isn't about finding value, it's about finding a greater fool who actually believes the valuation is true. Trust me, you will be the fool."

Here's why buying into what Groupon's saying about its profitability is a foolish move.

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