Powershares Agriculture (DBA): Go for grains
"I remain a devoted long-term soft commodities bull; the grains and other soft agricultural commodities remain one of the most long-term compelling investment trends of our lifetime," says Eric Roseman.
In his industry-leading The Commodity Trend Alert, the advisor looks at the PowerShares DB Agriculture Fund (NYSE: DBA).
"The grains and other soft agricultural commodities remain one of the most long-term compelling investment trends of our lifetime. I’m convinced that we remain in a long-term bull market for agricultural commodities.
"This historical trend began in 2006 and remains extremely powerful as population growth exceeds arable food supply combined with unpredictable weather patterns attacking supplies and causing droughts.
"Leading up to last July when inflation peaked for this cycle, food inflation was at its most acute since the 1970s, especially in the emerging markets. Food riots ran wild in many developing countries as the price of grains and other foodstuffs went through the roof coupled by record low harvests in 2007.
"From their highs in 2008, wheat prices have crashed 56%; soybeans are down 42%; corn is off 53%; oats are off 58%; sugar prices are down 16% and Brazilian coffee is down 39%.
"The results are even more compelling if we factor inflation-adjusted prices since 1980 for these commodities. Many of these things are still 50-75% below their inflation-adjusted highs.
"Droughts, one of the most consistent weather phenomena attacking crop yields this decade remains a long-term nemesis.
"In Northern China, a massive drought is getting worse and has scorched the most arable land in fifty years. In Australia, the country has been marred by an unrelenting drought for almost five years. The worst drought in almost fifty years has turned Argentina’s once-fertile soil to dust.
"The current drought in California is the worst since 1977 and southwest Texas is is seeing the worst drought since1917-18. An incredible 88% of Texas is experiencing abnormally dry conditions.
"In addition to the above supplies affected by drought, consider the impact on farms as credit becomes much harder to secure even for successful farms.
"It’s a nightmare, especially as grain prices remain well below their highs from last summer. The obvious question after reading all of this is, 'why aren’t grain prices trading much higher?'
"My answer is two-fold. First, if not for the credit crisis and the near unraveling of the financial system last fall, grain and other foodstuffs would be trading much higher. This entire deflation episode has attacked all assets, including food and food consumption trends.
"Also, the big speculators in these markets have been knocked-out by margin calls on de-leveraging. No doubt a part of the bull market we saw last year was driven by frantic money chasing trends to the Moon. When commodities finally broke in July, the party ended. Hedge funds bailed.
"As the global financial system gradually heals, commodities will recover. The first group to rally is the precious metals since November and increasingly, the grains and other agricultural commodities will follow along with energy and the base metals.
"I think it’s very important for every investor to buy the PowerShares DB Agriculture Fund. This ETF is almost equally weighted in wheat, corn, soybean and sugar futures.
"It’s the purest way to speculate in these important commodities without the associated risk of futures or options trading. DBA stands 44% off its all-time high."
Semiconductors
It is widely expected that the true demand decline will bottom out at -20% y/y (best-case scenario), as we expect semi ASPs to largely remain on a stable curve. We look at Broadcom, Cypress, Atmel, Skyworks and Texas Instruments.Georgia Gulf Corp. (GGC)
Georgia Gulf Corporation (<a href=http://www.zacks.com/stock/quote/ggc>GGC</a>) is a leading North American manufacturer and marketer of two integrated chemical product lines, chlorovinyls and aromatics. The company also manufactures vinyl-based building and home improvement products. <p> Georgia Gulf overpaid for the acquisition of Royal Plastics, a supplier of housing products. The acquisition was entirely financed with debt, and the company is in danger of violating debt covenants. The remaining product lines of the company are suffering from overcapacity. <p> GGC is expected to report losses in the near term on the back of rising feedstock and energy costs. Demand for the company's products is also expected to remain weak due to the downturn in the US housing and auto markets.SunPower Corp. (SPWRA)
SunPower Corporation's (<a href=http://www.zacks.com/stock/quote/Spwra>SPWRA</a>) geographically diversified fortunes appear greener given the very high growth potential in the alternative energy industry, and specifically solar power energy, higher captive generation of panels, declining silicon cost and assured silicon supply. <p> In addition, extension of the ITC in the U.S., resolution of tariffs in Spain, higher average conversion efficiency, improved silicon usage, and gradually improving ASPs, adds visibility to the story. <p> Accordingly, we maintain our BUY recommendation on SPWRA common stock with a six-month target price of $40.00. Price appreciation to our near-term target price represents 24.6% upside potential.ShopNBC Announces Agreement to Restructure GE Preferred Stock
Company Approves Stock Buyback
View Systems, Inc. Retracts Previous Releases & Announces Acquisition
BALTIMORE, MD--(Marketwire - February 25, 2009) - View Systems, Inc. (
Material in news releases issued by View Systems, Inc. on February 10, 2009 and February 18, 2009, regarding contracts with Verizon, was stated erroneously and those news releases are hereby retracted.
View Systems has, however, acquired an experienced Tier I fiber optic installation company and has several installation contracts in the works.
Stocks with investor-focused managements
Concerning the current debate over executive bonuses. Charles Mizrahi contents, "As a shareholder, I have the choice of becoming partners with more than 7,000 businesses on the American stock exchanges."
In Hidden Values Alert he adds, "I've found two companies with managers who are aligned with shareholders. Their compensation packages put them in the same boat as shareholders, and as an owner that is exactly where you want them to be."
"Markel Corporation (NYSE: MKL) is a 79-year-old specialty insurance company that went public in 1986.
"The vice chairman, Steve Markel, is the founder’s grandson and incorporated its approach to shareholders from Warren Buffett’s Berkshire Hathaway.
"The letter to shareholders starts off by addressing them as business partners. Executive compensation is based on performance and focuses on the long term. All executives get competitive salaries in addition to benefits packages.
"Bonuses are paid based on growth in book value over a five-year period, and substantial portions of the bonuses are paid out in restricted stock.
"There are no stock options awarded to management and all senior managers are expected to own shares. Many of them own many multiples of their salaries in Markel stock.
"The company has in place a payroll deduction plan and offers low-interest loans to encourage stock ownership among its associates. As of the end of 2007, more than 10% of the outstanding shares were owned by associates.
"When Markel has a good year, everyone from top management to shareholders benefit. And it has had many good years since going public. Book value has increased more than 20% per annum over the 21-year period.
"At Staples (NYSE: SPLS), executive compensation is broken down by base salary, performance-based cash bonuses, long-term equity incentives, and retirement benefits. Base salary is set at the middle range (50th percentile) of comparable positions in the company’s peer group.
"Bonuses are based on performance measured by sales (20%), earnings (30%), return on net assets (30%), and customer service levels (20%). The maximum bonus in any one year can’t be more than $4 million.
"The company’s 10-K report provides actual examples of how total compensation was determined for top management. There is nothing pushed under the rug here.
"What is of interest is the requirement of each executive officer to have stock ownership based on a multiple of his or her salary.
"The CEO must own stock valued at 5x his salary, the CFO and COO at least 4x their salaries, and other officers ranging between 2x to 3x their salaries.
"Perhaps executive compensation has something to do with why Staples stands head and shoulders above its main competitors in the office supply sector.
"Overall, it is not hard to find companies that have their shareholders’ interests at heart. The first place to look for them is in the companies’ proxy statements.
"It is there that compensation is clearly defined. If you can’t understand how a particular company’s compensation is paid out or if it goes against your better judgment, take a pass and don’t invest in that company.
"Keep in mind that when you are buying a share of a business you are really buying a piece of the company. If management appears to be taking the lion’s share for itself and leaving the shareholders with crumbs, don’t buy their shares – there are lots of other companies from which to choose."
Inverness (IMA): A ‘fertile’ idea in diagnostics
In his newly-launched SmallCapInvestor.com Pro, growth stock expert Ian Wyatt looks to Inverness Medical Innovations (NYSE: IMA), a developer of consumer medical diagnostic products.
Here's a looks at the "growth drivers" behind the company whose products include consumer pregnancy and fertility tests.
"Specifically, the company is a supplier of consumer pregnancy and fertility tests and other rapid point-of-care diagnostics. It also offers a range of vitamins and nutritional supplements.
"Inverness Medical is profiting from the growing home diagnostic trend. The company has taken its products global and is looking to add more monitoring systems to its pipeline.
"Management has a proven track record in technology and innovation and also has a significant equity stake in the company. Growth drivers for the stock are:
- Growing political support for health-care reform.
- Health-care system is trending away from an activity-driven reimbursement system to a quality-driven reimbursement system.
- Wellness testing is a crucial component to reduce overall health-care costs.
- Inverness is a defensive growth stock.
"In the fourth quarter of 2008, the company recorded revenue of $459.3 million, from $288.0 million in the fourth quarter of last year.
"Net income was $16.4 million, or $0.14 per diluted share, from a net loss of $15.8 million, or $0.24 per diluted share a year ago. Non GAAP net income registered $54.7 million, or $0.66 per share, which beat our estimate by 10%.
"The company is difficult to value, mainly because most of its growth has come through acquisition. As a result, projecting future sales and earnings can be tricky.
"An easy way around using traditional earnings metrics is to look at the company's cash flows and Non-GAAP income. Here we see that the company actually earned $2.04 in 2008 and is expected to earn $2.56 this year.
"Using Non-GAAP EPS estimates, we project that the company will earn $2.56 this year and grow earnings 17% to $2.99 in 2010. Shares currently trade at 9 times our 2010 EPS estimate, which is shocking.
"Fair value for such a company is at least 16 times forward earnings. Accordingly, our one year target price is $37."
ETF for Treasury bond decline
The latest buy recommendation from Jack Adamo is a leveraged ETF that rises in value when long-term Treasury bonds fall in price.
In Insiders Plus, he looks at ProShares UltraShort 20+ Year Treasury Bond (NYSE: TBT), noting, "Given that the government is printing money by the carload with nothing to back it, inflation has to rebound at some point."
"This is an easy proposition to understand. Short-term interest rates are as close to zero as you can get, and the yield on the 30-year Treasury Bond is 3.5%.
"It has been in steady decline since 1982, as the hegemony of financial assets grew ever stronger, and the risk premium on them was steadily eroded.
"Now we are in a new era. While short-term interest rates will remain low for at least another year because the Fed can control them, long-term interest rates are set by the market based on market risk and inflation expectations.
"Long-term rates can conceivably fall a bit more in the short-term if the economy remains weak (as it certainly will), and if market panic makes investors flee to Treasurys of all types.
"Given the all-time lows at which yields are now, it would not take much of a rise in overall prices to push long-term rates up, and the prices on long-term Treasury Bonds down. It is just a matter of time.
"The UltraShort 20+ Year Treasury ProShares are structured to mimic the reverse of long-term Treasury Bond prices, at twice the velocity.
"In other words, they rise twice as fast as Treasury Bond prices fall, or, put another way, twice as fast as Treasury Bond yields rise. The prices of bonds move inverse to their yields.
"I particularly like this anti-Treasury investment because you have two ways to win, and only one way to lose, and even that is temporary. If the market recovers, money will flow out of Treasurys into riskier assets, making bond prices fall.
"And if things don’t improve, the Fed must keep throwing money at our financial problems. At some point, bond buyers will demur from accepting the increasingly worth-less paper, and bids on bonds will fall.
"The 'losing' part here is only short-term. Panic in the markets will create short-term demand for T-Bonds, but that has a limited life span. The only other short-term negative force is the threat of the Fed buying long-term bonds to keep rates low.
"But that too can only produce a short-term knee-jerk reaction. The Fed would have to buy the bonds by issuing more dilutive paper. Sooner or later the sleight-of-hand becomes so clumsy that even the most naïve buyers must see.
"The Japanese and Chinese, who are the biggest buyers of our Treasurys, are hardly naïve. In the past they had to buy these bonds because they had nothing better to do with the huge dollar reserves they got from our consumer spending on their goods. That flow is now a trickle, and the impetus to buy T-Bonds has dried up."