Tag - Cfw

Stocks were poised to open lower today and but for a brief few minutes in early trade they generally lived up to the prediction. The Dow shaved 34 points to close at 8,439. The S&P 500 sank 1.5 points to 919, while the Nasdaq closed up 9 points to end the day at 1,838.

Stocks in the Russell 2000 Index, a composite of the 2,000 largest small-cap stocks, bucked the downward trend for the index to close at 513, up 0.78%.

While there was good news about a very modest increase in spending rates, investors seemed most concerned about the boost to the U.S. savings rate to 6.9 percent, up from 5.6 percent in April and significantly up from rates below 1 percent for the period 2005 through 2007. While this could bode well for the longer term economic health of the U.S. economy many analysts see it merely as a side effect to consumer concerns about layoffs, cutbacks, and furloughs.

The increase in the savings rate has come at the expense of consumer spending, which accounts for roughly 70 percent of the U.S. economy. Indeed, many retailers have been battered over the past several quarters as Americans concerned they may receive a pink slip any day shut their wallets to defer spending and switch to lower cost brands for necessities.

Among the stand-outs in retailing are Wal-Mart (NYSE:WMT), Target (NYSE:TGT), and Costco (NYSE:COST). Despite more consumers turning to discount retailers, both WMT and COST have seen year to date share price declines. TGT shares are up nearly 20% for the year.

Despite the modest increase in household spending, retailers are girding for continued earnings pressures as American families prepare for unemployment to reach 10% later this year, up from the current 9.4%.

Leading small-cap gainers today was Zion Oil & Gas (AMEX:ZN) up 76%. Zion runs as a development stage oil and gas exploration firm. Based in Dallas, Texas, the firm holds exploration licenses for onshore development in Israel.

Other small-cap leaders included Cardium Therapeutics (AMEX:CXM) up 48%; Schmitt Industries (Nasdaq:SMIT) up 45%; and Caraco Pharmaceutical Laboratories (AMEX:CPD) up 35%.

Decliners were lead by Design Within Reach (Nasdaq: DWRI), a San Francisco-based furniture store, down 41% after announcing that it expects to delist from the Nasdaq on July 16 with trading ceasing July 6. DWRI has had trouble keeping its share price above $1.00 (a key Nasdaq requirement) for most of 2009 and has indicated that it does not have the working capital to meet the Nasdaq's requirements for staying listed.

Besides DWRI, small-cap price decliners were lead by NewBridge Bancorp (Nasdaq:NBBC) down 37%; Cano Petroleum (AMEX:CFW) down 25%; and Cumulus Media (Nasdaq:CMLS), also down 25%.

Yesterday, the Fed scaled back two of its liquidity-providing programs and announced it would let a third one expire on July 1, 2009.  

Each program was designed to provide liquidity to securities dealers and money-market funds that couldn't raise funds in the capital markets. The Fed noted that none of the programs were used anywhere close to capacity. And the improving economy and loosening of credit markets has made the programs less necessary. 

Investors took this as good news because it suggests the economy and financial system is starting to stand on its own. It's also good news because it shows the Fed is willing to be somewhat proactive in shutting off liquidity.  

To me, this is more important. 

*****In one form or another, the U.S. government has made (read:created) something like $11 trillion available to fight this recession. (I'm not sure anyone knows the exact number.) The government has been widely praised for its response to the financial crisis. Its moves are credited with averting a more serious problem.  

But that's only half the job, and it's the easy half, at that. I expect many of you have seen how a toddler reacts when it's time to give up the pacifier. Kicking and screaming is an understatement. And that's exactly how it will happen when the Fed really starts taking away the liquidity pacifier for good.  

Alan Greenspan never had the stones to give the U.S. economy the tough love it needed. And Wall Street became a spoiled bunch of delinquents.  

Will Bernanke have what it takes to guide the U.S. economy from dependent child to responsible adult? We'll see. And we better hope so, because I suspect the stakes are even higher this time around…  

*****While the U.S. is creating debt to support its economy, China is using its currency surplus to secure raw materials. I mentioned yesterday that China's state-run oil company Sinopec (NYSE:SNP) is trying to acquire an oil exploration company for $7.2 billion. And it wasn't that long ago that China tried to take a $19 billion stake in mining giant Rio Tinto (NYSE:RTP).  

When you're an investor, you have to be worried about opportunity cost. That's the cost of profits that you could have made, if your investment capital wasn't tied up in under-performing or illiquid assets.  

Right now, and probably into the future, the U.S. will be suffering opportunity cost as so much of our resources are tied up in simply supporting our economy. 

*****Case in point: Iraq. Iraq is one the verge of opening the deal-making process for international oil companies to upgrade Iraq's oil fields. This promises to be a very convoluted process - the Kurds and Parliament want input and the current oil minister appears ready to bypass them both.  

All Iraqis realize how important oil, and oil revenue, is to their future, and they're all fighting to get a piece of the action and avoid the exploitive situation that occurred before Saddam Hussein kicked Big Oil out of Iraq. 

For this reason, the proposed development contracts are not guaranteed. There is the risk that a subsequent Iraq government could nullify them and there would be no recourse.  

The risks are high enough that Exxon-Mobil (NYSE:XOM) isn't even sure yet if it will enter the bidding process. But I'll bet you dollars to doughnuts that Sinopec's parent company, China National Petroleum & Chemical Corp. will be bidding.  
Now, obviously, the recession has nothing to do with Exxon's uncertainty. But for China's state-run oil companies, national interests are sometimes more important than profits. And that can be a good thing.

*****Now, here's Jason Cimpl's video analysis of this week's action and look ahead to next week. So far he's batting a thousand. You can view the video HERE or go directly to trademasterstocks.com/videoreport. 

Today was options expiration and it made for dull trading. The S&P 500 finished up 2.74 at 921, the Dow Industrials finished down 16.85 at 8,538XXX. The Nasdaq was the strong index, it finished the day up 19.75 at 1,827 on a Goldman Sachs (NYSE:GS) upgrade of Microsoft (Nasdaq:MSFT). 

Oil prices fell below $70. But even better, gasoline futures dropped below $2 after inventory data showed a huge surplus. That suggests prices at the pump may start to head lower.

Large cap oil stocks like Exxon-Mobil (NYSE:XOM) and Chevron (NYSE:CVX) were down in the 1% range, but several micro-cap oil & gas exploration stocks were up. Brigham Exploration (Nasdaq:BEXP) was up 4.36%, Kodiak Oil (AMEX:KOG) was up 7% and Cano Petroleum (AMEX:CFW) was up 3.5%.

The Russell 2000 finished much like its large-cap brethren, with a minimal 3.16 point gain.

Top small cap winners for the day included TerreStar (Nasdaq:TSTR) up 30%, Sealy (NYSE:ZZ) up 20.5% and Smith and Wesson (Nasdaq:SWHC) up 21.9%.

Small cap decliners of note include A-Power Energy (Nasdaq:APWR) down 12%, E*Trade (Nasdaq:ETFC) down 11% and Cost Plus (Nasdaq:CPWM) down 13%.

So now the government is actually going to subsidize car sales with up to $4,500 in incentives for car buyers who get rid of cars that get 18 mpg or less.  

I understand that the auto industry is hurting. And I also get that more efficient cars help reduce our dependence on foreign oil. But is it appropriate to use tax payer dollars to fund auto purchases?  

Perhaps if we were talking about something that is a necessity, like farming, subsidies make some sense. After all, we need farmers. I think we have to consider cars a luxury, or at least a discretionary purchase.  

Not only that, but a car subsidy can only create temporary demand. And given the precipitous drop in car sales (10 million vehicles will be sold this year as opposed to 16 million in 2007), it's highly unlikely any momentum can be created. Not with unemployment on the rise. And not with home values still falling.  

*****Increasing demand based on stimulus spending is a temporary fix. The government is just buying time hoping that the economy will recover. But many of the signs of recovery are based in stimulus spending.  

*****Analysts are now acknowledging that oil has been rallying on a falling dollar and on expectations of price inflation. Of course, the potential for price inflation is, once again, directly related to government stimulus spending.  

The massive amounts of Treasury bonds that have been and will be sold are boosting interest rates and driving the value of the U.S. dollar down. So any asset priced in dollars is rising in price. Like oil. Mind you, that doesn't mean its value is rising, just its price.
 
At some point, higher oil prices will affect the prices of other goods. But as I've noted before, it's likely to be a while before producers are able to raise prices in the current economic environment. Remember, it wasn't until 2007 that inflation really started to become an issue.  

*****Another catalyst for commodity prices in general is supply. Global demand is down, credit has been difficult to get, and miners and producers have not been investing in increasing supply.  

That sets the stage for supply/demand imbalances when economic growth returns.  
We'll be discussing these topics and our bullish outlook for commodity stocks in next Wednesday's Video Conference. It's titled Inflation Busters: Discover the Stocks to Grow and Protect Your Wealth and will air on Wednesday, June 24 at 6 pm. It's free to attend, you can sign up HERE.  

*****Jason Cimpl, technical analyst at TradeMaster Daily Stock Alerts, has his latest video chart analysis ready for you. Last Friday, Jason absolutely nailed this week's trading. I hope you find this week's analysis just as useful. Here's the LINK.  

Ian Wyatt is the chief investing strategist of SmallCapInvestor.com and the chief executive officer of Bushiness Financial Publishing, a publisher of both free and paid subscription newsletters, e-letters, special reports and financial websites. Prior to Business Financial Publishing, Wyatt launched BizFN.com, a free investment website where individual investors could access research and analysis from money managers and financial advisors around the country. In 2007, Wyatt was selected as one of 60 entrepreneurs to participate in the Entrepreneurial Masters Program (formerly Birthing of Giants) at the Massachusetts Institute of Technology Sloan School of business, a three-year executive development education program.

What qualities do you look for in a small-cap stock? Have your criterion changed given the current macro environment?

“Increasing cash flow remains the single best measure to separate the haves from the have-nots. If a firm’s cash flows aren’t increasing, be wary. We look for strong top and bottom-line growth of 25% or greater on a quarterly and annual basis, a build up of cash on the balance sheet, a trend of successive upside earnings surprises and upwardly revised estimates. The company should operate in a favorable industry and markets that contain extraordinary growth potential.

“In the current environment we wouldn’t expect to find as many companies with 25% revenue and earnings growth, so in that sense, yes my expectations have been lowered. We pay closer attention to guidance in this environment, as the probability for downgraded outlooks is more likely.”

What are your favorite small-cap stocks with market caps of under $1 billion for the year and why?

“T-3 Energy Services (Nasdaq:TTES), Life Sciences Research (NYSE:LSR), Cano Petroleum (AMEX:CFW) and Merit Medical Systems (Nasdaq:MMSI) because of the specific niches they operate in.

“T-3 Energy manufactures and repairs equipment used in the drilling and completion of new and existing oil and gas wells, and for the production and transportation of oil and gas. The company has three product lines: pressure and flow control, wellhead and pipeline. Since April 2003, T-3 Energy has introduced 43 new products. As of March 9, the company had 18 manufacturing facilities located throughout North America.

“Equipment failure in the energy industry is not an option and as such T-3 Energy’s customers — namely many of the big exploration and pipeline companies . . .

With the price of oil surpassing $125 per barrel and Goldman Sachs (NYSE:GS) warning us that it could go as high as $200 at some point in the next two years, the oil trade continues to be an intriguing play regardless of where your sentiment lies.

One small-cap oil and natural gas company that has been siphoning the benefits of rising oil prices is Fort Worth, Texas-based Cano Petroleum (AMEX:CFW).

The company was incorporated in 2003 as Huron Ventures. It changed its name to Cano Petroleum following a merger with Oklahoma-based Davenport Field Unit, Inc. in May of 2004. Cano has been publicly traded since June of 2004 and has experienced rapid growth during this time period. The company’s common stock has risen nearly 35% in just the past year alone. Shares closed at $6.91 on Wednesday — a level at which at least one analyst still sees a great deal of upside.

Mark Lear, an analyst for Sidoti & Company, currently has a “buy” rating on shares of Cano with a price target of $10. “Cano trades at a sharp discount to its peers on an EV/proved reserve basis; we contend that this valuation does not reflect potential upside of several core enhanced oil recovery projects,” he wrote in a May 9 research note.

The enhanced oil recovery (EOR) projects that Lear refers to are central to Cano’s business model. EOR utilizes methods such as waterflooding and gas injection to increase the amount of oil that can be extracted from a reservoir. Unlike many large-cap oil companies, $259-million market-cap Cano focuses its business on mature oil fields. Among the benefits of focusing on mature oil fields is limited competition as well as virtually no exploration risk since the company’s portfolio is comprised of . . .

Fuqi International, Inc. (Nasdaq:FUQI), Aspect Medical Systems, Inc. (Nasdaq:ASPM) and Provident Bankshares Corp. (Nasdaq:PBKS) are among the biggest percentage gainers in Thursday's trading among companies with market capitalizations under $750 million.

Cano Petroleum, Inc. (AMEX:CFW), Texas Capital Bancshares, Inc. (Nasdaq:TCBI) and Knoll, Inc. (NYSE:KNL) are also among the top small-cap percentage gainers.

Here are Thursday's biggest percentage gainers among small caps:

Air filters and piping systems maker MFRI, Inc. (Nasdaq: MFRI) said strong sales prompted its first-quarter profit to multiply six times over the year-ago period. The Niles, Ill.-based company reported income for the first quarter ended April 30 was $1 million, or $0.15 per share, up from $151,000, or $0.03 per share, a year earlier. Analysts polled by Thomson Financial predicted earnings of $0.10 per share.

NeurogesX Inc. (Nasdaq: NGSX) announced it has completed enrollment for the third trial phase of its postherpetic neuralgia treatment NGX-4010.

Boosted by increased pricing and operational improvements, Exide Technologies’ (Nasdaq: XIDE) fourth quarter loss narrowed from the year-ago period. The battery maker reported a quarterly loss of $21.6 million, or $0.35 per share, compared with a loss of $76.3 million, or $2.98 per share, a year earlier.

Cano Petroleum, Inc. (AMEX: CFW) said it sold its Rich Valley, Okl. property to a private company for $7.0 million.

Solar energy equipment maker Amtech Systems, Inc. (Nasdaq: ASYS) announced $4.1 million in new orders from Asia. The Tempe, Ariz.-based company said it expects to deliver the orders in six months.

Rock Hill, S.C.-based 3D Systems Corp. (Nasdaq: TDSC) announced its Tangible Express technology will be featured in the July issue of “Plastics Technology” magazine.