While advanced economies are still facing high levels of unemployment, more than a billion people in emerging markets are experiencing advancing standards of living.
As these emerging economies - especially China and India -grow, there is a strong trend toward urbanization. People are leaving the countryside for the cities in droves in order to reap the promise of the global economy. This secular process alone places huge demands on the existing infrastructure.
This growth is also boosting manufacturing and energy needs. China has surpassed the United States in both car production and energy consumption. And India's Tata Motors Ltd. (NYSE ADR: TTM) launched the cheapest car in the world, the Nano, which costs roughly $2,500. The critically acclaimed vehicle's mass appeal and affordability is creating additional congestion on India's famously overcrowded streets. Adding more fuel to the global-demand fire, most emerging economies implemented a strong dose of infrastructure spending within their budgets as a result of the global financial crisis of 2008.
The result of all that infrastructure development, urbanization and increased consumer affluence is a myriad of new road, bridge and building construction, additional urban development, and stepped-up production of cars, home appliances and other consumer goods. All of these developments require two key ingredients to become reality: Steel and energy.
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Buy, Sell or Hold: United Technologies Corp. (NYSE:UTX) is Really Taking Off
We have already seen strength in industrial sales in many companies, but today's recommendation may be the most promising yet. United Technologies Corp. (NYSE:UTX) is hitting on all cylinders and is poised for both long and short-term gains.
The company reported earnings and hit it out of the ballpark. UTC reported quarterly earnings of $1.20 per share - even including the loss of 12 cents a share due to restructuring charges. That's 4 cents higher than analysts had expected - 16 cents higher, if you take out the one-time restructuring charges.
The good news did not stop there, either. UTC raised its guidance and share repurchases for the year, despite new challenges in Europe. Sales beat expectations and profit margins were higher across the board. Engine maker Pratt & Whitney and international elevator brand Otis were especially strong. That's remarkable considering the market's fear of a double-dip recession and the U.S. Federal Reserve's "uncertain" status about the strength of the economy.
The company reported earnings and hit it out of the ballpark. UTC reported quarterly earnings of $1.20 per share - even including the loss of 12 cents a share due to restructuring charges. That's 4 cents higher than analysts had expected - 16 cents higher, if you take out the one-time restructuring charges.
The good news did not stop there, either. UTC raised its guidance and share repurchases for the year, despite new challenges in Europe. Sales beat expectations and profit margins were higher across the board. Engine maker Pratt & Whitney and international elevator brand Otis were especially strong. That's remarkable considering the market's fear of a double-dip recession and the U.S. Federal Reserve's "uncertain" status about the strength of the economy.
Buy, Sell or Hold: Joy Global Inc. (NYSE: JOYG) Could Be a Gold Mine for Investors
Uncertainty and volatility have plagued the markets of late but there's reason enough to believe a short-term up-trend is in store.
For one thing, the speed of recovery has varied from country to country but emerging markets and commodity-producing nations continue to post strong growth. And while the global slowdown has brought about very high fiscal deficits, particularly in Europe, fears that the Eurozone economy is edging towards collapse are beginning to dissipate.
The European debt problem should be addressed at the end of this month, when the European Central Bank (ECB) publicizes the results of its stress tests. I expect the results will bring renewed confidence in the system. It's likely that the largest financial institutions will most probably all be sound, while there will be some smaller institutions that need restructuring. These smaller banks will either quickly recapitalize or be absorbed by larger institutions.
That means we could soon see a strong short-term bullish market trend.
Meanwhile, the International Monetary Fund's (IMF) recent World Economic Report Update showed global growth estimates for the next year and a half that were much stronger than expected.
For one thing, the speed of recovery has varied from country to country but emerging markets and commodity-producing nations continue to post strong growth. And while the global slowdown has brought about very high fiscal deficits, particularly in Europe, fears that the Eurozone economy is edging towards collapse are beginning to dissipate.
The European debt problem should be addressed at the end of this month, when the European Central Bank (ECB) publicizes the results of its stress tests. I expect the results will bring renewed confidence in the system. It's likely that the largest financial institutions will most probably all be sound, while there will be some smaller institutions that need restructuring. These smaller banks will either quickly recapitalize or be absorbed by larger institutions.
That means we could soon see a strong short-term bullish market trend.
Meanwhile, the International Monetary Fund's (IMF) recent World Economic Report Update showed global growth estimates for the next year and a half that were much stronger than expected.
Buy, Sell or Hold: Even After a Near-30% Gain Campbell Soup Co. (NYSE: CPB) Still Has Room to Run
I first recommended Campbell Soup Co. (NYSE: CPB) on June 1, 2009. At the time of our recommendation, our price target was a minimum of $32. The stock is now trading just above $35 today - a 27% increase.
What's more is that Campbell, which boasts a strong brand and above-average international sales potential, is poised to keep its winning streak intact.
The market sometimes offers us compelling propositions, like it did last year, when the stock inexplicably sold off. We took ready advantage of the situation. Campbell Soup has a very large, stable and increasing cashflow. It is so stable that it is almost boring. In fact, this company's stability qualifies it more as a dividend play than anything else.
In the two consecutive quarters following our initial recommendation, Campbell Soup torched estimates, as analysts on Wall Street had not caught on to our emerging markets growth story. The Street caught on in the last quarter but still has not fully recognized this company's potential.
What's more is that Campbell, which boasts a strong brand and above-average international sales potential, is poised to keep its winning streak intact.
The market sometimes offers us compelling propositions, like it did last year, when the stock inexplicably sold off. We took ready advantage of the situation. Campbell Soup has a very large, stable and increasing cashflow. It is so stable that it is almost boring. In fact, this company's stability qualifies it more as a dividend play than anything else.
In the two consecutive quarters following our initial recommendation, Campbell Soup torched estimates, as analysts on Wall Street had not caught on to our emerging markets growth story. The Street caught on in the last quarter but still has not fully recognized this company's potential.
Buy, Sell or Hold: Enbridge Energy Partners, L.P. (NYSE: EEP) Brings Some Stability to a Volatile Market
It seems like every week there's a new development that forces investors to rethink their investment strategies.
This week we will see the initial consequences of the weekend's all-important Group of 20 (G20) meeting. A lot of very important issues are up for debate among the world's top 20 countries, as are policies that will shape the intensity and distribution of global growth in the months and years ahead.
The meeting will be fraught with controversy as each economy is proceeding at its own distinct pace of growth and faces its own set of challenges.
China, which recently showed a superlative 50% year-over-year increase in exports, has run out of excuses to justify its undervalued currency. The country also is facing strong inflationary pressures, which include labor strikes by workers demanding higher pay.
This week we will see the initial consequences of the weekend's all-important Group of 20 (G20) meeting. A lot of very important issues are up for debate among the world's top 20 countries, as are policies that will shape the intensity and distribution of global growth in the months and years ahead.
The meeting will be fraught with controversy as each economy is proceeding at its own distinct pace of growth and faces its own set of challenges.
China, which recently showed a superlative 50% year-over-year increase in exports, has run out of excuses to justify its undervalued currency. The country also is facing strong inflationary pressures, which include labor strikes by workers demanding higher pay.
Buy, Sell or Hold: Cummins Inc. (NYSE: CMI) is a High-Powered Engine Maker That's Revving Up Its Revenue
Nestled in the heartland of America, Cummins Inc. (NYSE: CMI) is an icon of American manufacturing done right. And now that it's being powered by new technology, emerging markets growth and new regulatory standards, the company is ready to book serious profits.
Founded almost 100 years ago and publicly traded since 1957, Cummins dominates the diesel truck engine market in the United States and is strongly increasing its international presence.
The high quality, efficiency and durability of the engines Cummins designs and builds are the foundation of the company's leadership. And its strong and disciplined cost controls, inventory, and receivable management are vastly superior to that of its competition.
Founded almost 100 years ago and publicly traded since 1957, Cummins dominates the diesel truck engine market in the United States and is strongly increasing its international presence.
The high quality, efficiency and durability of the engines Cummins designs and builds are the foundation of the company's leadership. And its strong and disciplined cost controls, inventory, and receivable management are vastly superior to that of its competition.
Buy, Sell or Hold: A Copper-Price Rebound Could Mean a 50% Gain For Freeport McMoRan Copper & Gold Inc. (NYSE: FCX)
It's time to play "the metal of the economists"- copper. And that brings us to one stock: The publicly traded king of copper - Freeport McMoRan Copper & Gold Inc. (NYSE: FCX).
Let me explain ...
Last week, I provided a solid "defensive-investing" pick for readers who wanted to balance their portfolios - and wait for the latest global-financial storm to pass.
During the past week, we got very strong indications that strong hands see value in the market:
Let me explain ...
Last week, I provided a solid "defensive-investing" pick for readers who wanted to balance their portfolios - and wait for the latest global-financial storm to pass.
During the past week, we got very strong indications that strong hands see value in the market:
Defensive Investing: The Eight Ways to Tell If You Should Hold - or Fold - Your Mutual Fund
With the whipsaw patterns U.S. stocks have experienced in recent weeks - both the Dow Jones Industrial Average and Standard & Poor's 500 Index are down 12% from their highs for the year - even the most ardent buy-and-hold investors are studying their portfolios, searching for holdings to cull.
But what if your buy-and-hold strategy has been implemented using mutual funds? As part of a solid "defensive-investing" review, should you consider bailing out of your current mutual-fund holdings at this point and start looking for better funds to ride into any future recovery?
But what if your buy-and-hold strategy has been implemented using mutual funds? As part of a solid "defensive-investing" review, should you consider bailing out of your current mutual-fund holdings at this point and start looking for better funds to ride into any future recovery?
Defensive Investing: Four Reasons to Sell a Mutual Fund Laggard
When it comes to poor performance in a mutual fund, how long is too long?
Evaluating the performance of a mutual fund is a bit different than evaluating the performance of an individual stock, chiefly because of the time frames involved. Mutual-fund investors should actually evaluate the performances of the funds they hold over a longer time period than they might use to gauge the returns generated by a stock.
Let's face it: Six-month or one-year returns on a mutual fund aren't terribly significant in a long-term portfolio that is based on a well-conceived allocation plan. Short-term weakness could just be a sign that the particular sector in which a fund invests -; or even the fund's particular investing style (growth, value or momentum, for instance) -; is currently out of favor.
Evaluating the performance of a mutual fund is a bit different than evaluating the performance of an individual stock, chiefly because of the time frames involved. Mutual-fund investors should actually evaluate the performances of the funds they hold over a longer time period than they might use to gauge the returns generated by a stock.
Let's face it: Six-month or one-year returns on a mutual fund aren't terribly significant in a long-term portfolio that is based on a well-conceived allocation plan. Short-term weakness could just be a sign that the particular sector in which a fund invests -; or even the fund's particular investing style (growth, value or momentum, for instance) -; is currently out of favor.
Buy, Sell or Hold: TransCanada Corp.'s (NYSE: TRP) Low Risk and High Dividend Yield Break the Waves of Uncertainty
The U.S. stock market has been choppy these past few weeks and it's no secret why.
The European debt crisis is taking center stage and eliciting strong policy responses from key European governments. And while those policy responses have moved in the right direction, we're still waiting on sustainable progress.
In addition, we are dealing with the uncertainties related to the oil spill in the Gulf of Mexico, which could have very important economic and financial implications. As if this were not enough, we saw an escalation of the rhetoric in the seemingly endless animosities between North and South Korea, and Hamas and Israel. And Iran continues to pursue a nuclear arsenal.
The European debt crisis is taking center stage and eliciting strong policy responses from key European governments. And while those policy responses have moved in the right direction, we're still waiting on sustainable progress.
In addition, we are dealing with the uncertainties related to the oil spill in the Gulf of Mexico, which could have very important economic and financial implications. As if this were not enough, we saw an escalation of the rhetoric in the seemingly endless animosities between North and South Korea, and Hamas and Israel. And Iran continues to pursue a nuclear arsenal.
Buy, Sell or Hold: Deere and Co. Thrives on Strong Global Trends and Flawless Execution
Deere & Co. (NYSE: DE) beat earnings estimates by a mile last week. It reported $1.58 earnings per share, beating most analysts' estimates by 50 cents! In addition, the company raised its earnings outlook.
In typical fashion, Deere continues to be conservative in guidance. And as I will explain below, the agricultural cycle this year is poised for a large upside surprise, as it is at the very beginning of a prolonged secular pickup.
The bottom line of Deere's performance last quarter is a prelude of things to come. Agriculture is zooming, and thus machinery in that sector is - and will continue - to command premium pricing. At the same time, global inflation is picking up slightly, but is still very subdued, which will help margins some more.
In typical fashion, Deere continues to be conservative in guidance. And as I will explain below, the agricultural cycle this year is poised for a large upside surprise, as it is at the very beginning of a prolonged secular pickup.
The bottom line of Deere's performance last quarter is a prelude of things to come. Agriculture is zooming, and thus machinery in that sector is - and will continue - to command premium pricing. At the same time, global inflation is picking up slightly, but is still very subdued, which will help margins some more.
Buy, Sell or Hold: Citigroup Inc. (NYSE: C) Is a Turnaround Play that Investors Can't Afford to Miss
Citigroup Inc. (NYSE: C) is truly a global bank. With operations in more than 100 countries, it leads in consumer banking, credit cards, corporate lending, investment banking and brokerage. But its forays into the U.S. mortgage market, and its huge exposure to the U.S. retail and corporate banking markets, created huge losses from which the company is still recovering.
Citi, guided by a prudent and savvy investment banker, Vikram Pandit, has embarked in one of the most ambitious and difficult transformations ever attempted by a financial institution. It is shedding bad assets, cutting costs, raising capital and has segregated the impaired assets and businesses that Citi would like to dispose into a so-called "bad bank," a subsidiary by the name of Citi Holdings. The success of the restructuring will depend on both Citigroup's execution and on the underlying strength of the U.S. and global economies.
But therein lies the huge upside. As I have written before, there are few investment opportunities more profitable than the restructuring and turnaround of a business. And given the huge size of Citi's balance sheet and the fact that banks are pro-cyclical to the economies in which they operate, the potential gains are extremely large.
Citi, guided by a prudent and savvy investment banker, Vikram Pandit, has embarked in one of the most ambitious and difficult transformations ever attempted by a financial institution. It is shedding bad assets, cutting costs, raising capital and has segregated the impaired assets and businesses that Citi would like to dispose into a so-called "bad bank," a subsidiary by the name of Citi Holdings. The success of the restructuring will depend on both Citigroup's execution and on the underlying strength of the U.S. and global economies.
But therein lies the huge upside. As I have written before, there are few investment opportunities more profitable than the restructuring and turnaround of a business. And given the huge size of Citi's balance sheet and the fact that banks are pro-cyclical to the economies in which they operate, the potential gains are extremely large.
Buy, Sell or Hold: Cypress Semiconductors Boasts a Strong Showing Since Dec. 14 Recommendation
Back on Dec. 14 of last year - as the market had "inexplicably" risen and investors were jumping ship - afraid that the market would correct - I issued a call to buying Cypress Semiconductors Corp. (Nasdaq: CY).
I mentioned back then that, at $10.40 per share, the stock was a steal and that several factors would propel it much higher. Today, with the stock having rallied some 10%, we will review these reasons to analyze their validity moving forward:
Buy, Sell or Hold: Altria Group Inc. (NYSE: MO) - The 'Sin Stock' You Have to Own
With more than 1 billion smokers worldwide, it is hard to conceive that companies selling cigarettes would not be extremely profitable. In addition, the majority of people who are smokers also tend to be alcohol consumers. One company that services both of these vices is Altria Group Inc. (NYSE: MO).
Altria Group is a holding company; its wholly owned subsidiaries consist of Phillip Morris USA Inc., U.S. Smokeless Tobacco Co. (prior to 2001 it was known as United States Tobacco Inc.), John Middleton Co. and Phillip Morris Capital Corp.
On Jan. 6 2009, Altria Group purchased UST Inc. in a $10 billion deal that gave the maker of Marlboro cigarettes an entrée into the "smokeless tobacco" market, thanks to UST's ownership of the Skoal and Copenhagen brands.
Altria Group is a holding company; its wholly owned subsidiaries consist of Phillip Morris USA Inc., U.S. Smokeless Tobacco Co. (prior to 2001 it was known as United States Tobacco Inc.), John Middleton Co. and Phillip Morris Capital Corp.
On Jan. 6 2009, Altria Group purchased UST Inc. in a $10 billion deal that gave the maker of Marlboro cigarettes an entrée into the "smokeless tobacco" market, thanks to UST's ownership of the Skoal and Copenhagen brands.
Buy, Sell or Hold: Bank of America Corp. Could Offer Investors a "Double Play"
On October 6, 2008, I recommended readers buy shares of Bank of America Corp. (NYSE: BAC).
Bank of America at the time had just agreed to acquire Merrill Lynch and Co. The strategy I recommended called for taking a prudent position in the bank by buying increasing amounts of shares on any market pullbacks.
The strategy appeared to go as planned at the very beginning as the shares dropped in value as predicted, improving the average buying price. But Bank of America subsequently revealed large amounts of troubled assets that had not been evident in prior releases. The company's president and chairman lost his job as a result, and the stock continued to drop. Today, after a very strong recovery BofA stock is still trading some 30% below our initial recommended entry price. So, depending on how one executed the entry strategy, one would be some 10-15% down even today.
Bank of America at the time had just agreed to acquire Merrill Lynch and Co. The strategy I recommended called for taking a prudent position in the bank by buying increasing amounts of shares on any market pullbacks.
The strategy appeared to go as planned at the very beginning as the shares dropped in value as predicted, improving the average buying price. But Bank of America subsequently revealed large amounts of troubled assets that had not been evident in prior releases. The company's president and chairman lost his job as a result, and the stock continued to drop. Today, after a very strong recovery BofA stock is still trading some 30% below our initial recommended entry price. So, depending on how one executed the entry strategy, one would be some 10-15% down even today.