Tag - Px

Stocks jumped today after consecutively back to back good reports from Goldman Sachs (NYSE:GS) and Intel (Nasdaq:INTC) as well as a surprise from Gannett (NYSE:GCI) that it beat profit estimates by 9 cents, driving shares up 28%.

 

Good news kept flowing as investors were treated to revisions from the Federal Reserve Open Market Committee that the economy will shrink from 1% to 1.5% in 2009 as opposed to its earlier prognostication of 1.3% to 2%. The committee raised its inflation projection for 2010 to a range of 1.2% to 1.8%.

 

The Dow was up sharply by 256 points to close at 8,616, the highest its been in a month. The Nasdaq closed up 63 points to 1,863 and the S&P 500 roared to 933, up 27 points from yesterday's close at 906.

 

Small-cap stocks fared well with the Russell 2000 closing at 509, up 15 points. 
 

Today's volume leaders in the small-cap space include yesterday's leader, CIT Group (NYSE:CIT) with over 74 million shares traded, although trading was halted before the close on impending news concerning discussion with the federal government. Other small-cap volume leaders include Huntington Bancshares (Nasdaq:HBAN), and Sirius XM Radio (Nasdaq:SIRI).

 

Small-cap gainers were lead by Targacept (Nasdaq:TRGT) up 137% after news broke that its depression treatment drug candidate, currently called TC-5214, was able to significantly outperform a placebo drug in testing on patients with major depression disorders. The company announced that it expects to start late-stage trials of the drug in Q2 2010 and is in talks with several potential partners to help complete the drug's development.

 

Other small-cap gainers include a one-time holding with SmallCapInvestor PRO, Brigham Exploration (Nasdaq:BEXP) up 23%; Ferro Corporation (NYSE:FOE) up 35%; and beleaguered newspaper giant Gannett (NYSE:GCI) up 30%.

*****If you've ever wondered what it's like to be Warren Buffett and have more cash than you can spend or invest, just ask China. China just announced that it has over $2 trillion in foreign reserves.  

That is an unbelievable amount of cash to have accumulated. Bloomberg reports that China's reserves doubled in less than 3 years.  

This much money means two things: China can support it's GDP growth as long as it chooses to; and, China will continue to buy Treasuries. 
Sherman Chan, a Moody's economist in Australia said, "China has the strongest prospects out of all major economies, so it is not surprising that hot money is flowing back…China has certainly recovered from the downturn, and it is on a strong footing now." 

That's why we've been loading up on Chinese stocks in SmallCapInvestor Pro. It's not too late to profit from our top Chinese stocks. Click here for details.  

*****Yesterday morning it was Goldman Sachs (NYSE:GS). Then last night, it was Intel (Nasdaq:INTC). The world's biggest chip maker crushed earnings, but then did the unthinkable and offered a 3rd quarter revenue forecast that is as much as 14% higher than what analysts were expecting.  

Between Goldman and Intel, I'll take Intel. Intel is selling a product. And apparently, consumer demand for Intel's product is stronger than anyone imagined. Sure, much of the strength is coming from Asia (back to my China comment above), but, so what? Revenue is revenue. 

Other semiconductor companies were rallying in after hours, including Texas Instruments (NYSE:TXN) and Advanced Micro Devices (NYSE:AMD).   
As for Goldman, I didn't think that stock will stay over $150. Not that it matters. TradeMaster's Jason Cimpl has made money shorting Goldman. But as for me, Goldman is on the "Never Short" list along with Google (Nasdaq:GOOG) and Apple (Nasdaq:AAPL). They may have bad days, their stocks may get a beat-down once in a while, but these are solid companies with a penchant for finding profits no matter what the economy is doing. 

*****Government actions are currently filling in for an actual economy. That's how it is in our new "Managed America." Most expect the heavy hand of government to be temporary, and that Managed America can end sooner than later. We'll see… 

I expect the conditions of Managed America - high unemployment, sluggish growth, more regulations, higher taxes, and inflation to last years instead of months. And I've outlined my expectations for investing under these conditions in my new Special Issue of Top Stock Insights. The article is titled Managed America: The New Economic Reality. It's being released this morning. You can sign up for Top Stock Insights and get my blueprint for profiting in Managed America. Click here for your copy now.  

*****Now, as you know, it's Newsletter Advisors Wednesday. And by coincidence we're going to be speaking with Andy Obermueller about profiting from government-driven investing. It's essentially the flip side of the Managed America. Enjoy.

Best regards,

Ian Wyatt
Chief Investment Strategist
SmallCapInvestor.com

Newsletter Advisors Wednesday

This week's NewsletterAdvisors.com investment expert is Andy Obermueller, Chief Investment Strategist and editor for StreetAuthority's Government-Driven Opportunities.

Andy was a journalist before joining StreetAuthority. He worked for the business desks of the Philadelphia Inquirer and the Star-Ledger, New Jersey's largest paper, before going on to lead business coverage for a Texas daily. Andy briefly left the industry to get an inside look at corporate finance as a commercial lender for Wells Fargo's business banking group. He lives in Austin.

Andy, thanks for joining us today, now let's get started.   

Can you explain your investment process and criteria for investments?

I keep a very close watch on the executive branch of the government, including each cabinet department, as well as Congressional action. This gives me a pretty good sense of what Washington is up to. I study the legislation and regulatory proposals and track all the data I can -- there's a lot of it. I then look at which companies will be affected by government action and what that's likely to mean for them.

For instance, the FDA is part of the Department of Health and Human Services. I have a database of every drug in the approval process. For some giant drugmakers -- a Merck, say, or a Pfizer -- a new drug might not have much impact on the bottom line. But when the government approves a drug for a smaller drugmaker, the effect is huge. Those small drugmakers can be extremely lucrative investments -- all because of a government action.

What do you believe gives the government-driven investment style an edge over other investment styles?

Two words: Billion and trillion. These are the dollar terms of the government programs that the newsletter deals with. The U.S. federal government is gargantuan. It's the most powerful financial force on the planet. Every time a public dollar is spent, a private sector profit is realized. That has enormous implications, especially in light of the bailout, the stimulus bill and the administration's willingness to expand the role and reach of government.

Look, I'm passionate about this topic for one reason: it works. I've personally invested using a number of strategies over the years. Like you, I've tried various combinations of value, income and growth strategies. However, I'm not sure I've ever seen anything with as much potential as the government-driven stocks I'm finding.

What sectors do you think offer the most opportunities to profit from government action today?

I like energy and finance. Mr. Obama's move toward a green-collar economy, that is, merging the environmental movement with the gross domestic product, has far-reaching implications for every industry. And the banking system offers vast possibility: Though most large banks have entered a post-bailout phase, many small and midsize financial institutions are still struggling. They will come back -- they are as vital to the national economy as the large banks are too big to fail -- and their stock will follow suit. These two areas are outstanding for investors seeking large returns over the long term.

Ok, let's look at energy. Tell me about a government-driven stock you've dug up in this area.

Well, everyone knows that clean energy is a major part of the Obama agenda.  He hasn't even been in office a year yet and his green initiatives are already playing out.  On June 28th the House passed the "cap-and-trade" bill - which calls for a dramatic reduction in the amount of CO2 that industry can emit. This is historic.

The problem is, 35% of America's carbon emissions come from coal-fired power plants. Why? Because coal is both abundant and cheap in the U.S. -- we're sitting on enough of the stuff to power every home in America for the next 400 years. And at the same time, these coal plants are simply too expensive to replace. It would take $672 billion and several years.

But 'cap and trade' is a major thorn in the side of coal. The only solution I see is to find a way to burn coal without producing CO2. A handful of companies have actually figured out how to do this. Their method, called oxy-coal, is recognized as being perhaps the most promising environmentally-friendly technology on the planet. My favorite pick in this area is Praxair (NYSE:PX). It owns more than 200 patents related to oxy-coal.

What are your top three stock recommendations, and what attracts you to each?
I like Verenium Corporation (Nasdaq:VRNM). It's a small company that has engineered the leading biofuel process. It can make ethanol using cellulose, which is in all plant material found on earth. The government has put a ceiling on corn-based ethanol while at the same time mandating a +15,900% increase in the production of these "advanced biofuels" by 2022. What sets this company apart is that the government just gave it the nod to build the world's first commercial-scale cellulosic ethanol plant. There's no reason the explosive growth in this biofuel won't be mirrored by Verenium's stock.

Next I like Energy Recovery (Nasdaq:ERII). It makes a device that's critical to the efficiency of large desalinization plants, which are typically owned by governments. Without its equipment, desalinization is cost-prohibitive. ERII has 70% of the worldwide market, which is expected to double in the next ten years as water becomes ever scarcer. This issue is a lot closer to home than most people realize: Water supplies aren't just critical in the Middle East, they're increasingly important in places like California.

Finally, I like several players in the digital medical records space. The stimulus bill provides for $19 billion for these companies to upgrade the way the health-case system stores patient information. Storing these files digitally will improve physician access to information and not only improve the quality of care but reduce its cost, such as by eliminating unnecessary and potentially redundant medical tests. Among my recommendations here is Quadramed (NYSE:QDHC), which helped the Veterans Administration develop its VistA Program, the first and most successful large-scale electronic medical records system.  

Andy, thanks for the insights on how to profit from government spending and for the recommendations you're following. I'm sure readers will want to follow-up on those. This is certainly an exciting time to invest in companies making billions off the federal government.

Andy Obermueller is the Chief Investment Strategist for StreetAuthority's Government-Driven Investing newsletter. Andy invites you to follow his Government-Driven Investing blog, where he publishes his investing insights for free, at http://www.Government-DrivenInvesting.com

Small-cap stocks opened higher, bolstered by hope that a rescue package for embattled U.S. automakers is finally within reach. Still, Republican lawmakers have been threatening some type of filibuster, so tension about the proposed $15 billion bailout remains high. Worries about fresh corporate profit warnings could take some starch out of buying enthusiasm, but an early bounce in commodities should provide support to stocks with commodity themes. At 10:01 a.m. ET, the Russell 2000 (NYSE:IWM) was up 6.21, or 1.33%, at 471.92.

The wholesale inventory report came out at minus 1.1%, which was quite a bit worse than the forecast for a drop of 0.1%. Earlier this morning the weekly MBA Mortgage Application Index slipped 7.1% after a stunning 112% rise last week. That dramatic jump in mortgage applications last week sparked a three-day upside run for homebuilder stocks, but the move has cooled a bit in recent days. Mortgage rates are now at the lowest point since March 2004, but activity could be hindered a bit by the ongoing credit crisis, which has heightened lending standards and in some cases clamped down lending altogether.

All eyes today will be watching progress on the auto bridge loan package. Optimism that a deal was close sparked a rally in Asian carmaker stocks and the overall Asian equity market overnight. For instance, Honda shares were up 10.3%, Hyundai up 9.1%, Kia up 8.5% and Nissan up 5.2%, with Asian stocks overall up more than 3%.

Crude oil prices were on the rebound this morning, climbing about $2 a barrel amid talk of OPEC production cuts. Commodities in general were solid performers early on, especially the metals segment. Energy stocks were up 3.2% shortly after the open. Within the commodities realm, mining stocks were in the news overnight as Rio Tinto, the world’s third-largest miner, announced plans to eliminate 14,000 jobs, trim capital spending and sale assets to raise cash. Rio Tinto shares rallied sharply in Europe on the news and were up 17% in early U.S. trading.

Tuesday’s slide in U.S. equities appeared to be sparked by a spooky four-week bill auction, which came in at 0.000% with a 4.20 bid-to-cover ratio. When . . .

U.S. stocks are expected to open higher Wednesday in anticipation of a bridge loan package for automakers and higher equities in Asia; but gains could be limited by worries about fresh profit warnings. The Dow is seen up about 80 points at the start, while the Russell 2000 (NYSE:IWM) should open up 0.7% near 469.00. Traders will be watching how debt markets trade after a stunning 0.000% yield on four-week bills Tuesday. So far today, things are a little better on that front, with Treasury yields on 10-year notes up about 2% to 2.70% overnight.

Hope on the automaker front appeared to provide a boost to Asian stocks. Japan was up 3.1%, Hong Kong jumped 5.5%, China rose 2.7%, Taiwan was up 4.1%, Singapore up 3.8%, South Korea up 3.8%, India up 5.3% and Australia up 1%. Honda shares were up 10.3%, Hyundai up 9.1%, Kia up 8.5% and Nissan up 5.2%.
 
The MBA Mortgage Application Index came out this morning, and showed a mild dip off last week’s record advance when the index doubled. Mortgage rates actually dipped a tad again last week, which should bolster activity, but tighter credit standards are making it more difficult to refinance and get new home loans.

On the company front, it will be interesting to see how other miners react to news that Rio Tinto (third-largest mining firm) will slash 13% of its workforce, reduce capital spending and sell assets to raise cash. In London, the market embraced Rio’s moves, sending the stock up some 14%.

As for U.S. companies, profit news and outlooks continue to be bleak. This morning saw Praxair Inc. (NYSE:PX), the nation’s largest industrial gases firm, lower . . .

ATMI Inc. (Nasdaq:ATMI) is trading 17% lower today after the company’s ahead-of-the-opening announcement it was lowering its 2008 guidance and that it had settled a patent suit with Praxair Inc. (NYSE:PX). ATMI now expects earnings per share of $1.25 to $1.40 for 2008, down from previous estimates of $1.32 to $1.48 a share. Full-year revenues should be about $375 million to $400 million, compared with prior estimates of $400 million to $420 million. The company said it was lowering its guidance because of product shipment delays and slow sales growth.

ATMI’s guidance drop comes on the heels of a settlement with Praxair on a 2003 patent infringement case. According to the settlement, the companies can market and sell their mechanical, sub-atmospheric delivery containers – the products at the core of the case. ATMI provides materials to semiconductor producers while Praxair is an industrial gas supplier.

In today’s trading, shares of ATMI are at $22.62 at 9:47 a.m. ET, down $4.70 from Friday’s close.