Saturday, June 23, 2012

Review of Barron's -- Dated 25 June

It was a gloomy day here, and yet with lots for me to do.  Well, after reading this issue of Barron’s, I went and did some Tai Chi, so at least some good things happened today…  We did watch two episodes of “Dexter” as well, so the day turned out OK.

And before I get started, I offer up TWO Challenges to my readers!  You can win $5.00 (each Challenge, first one to email me wins) of Robert’s money by correctly identifying two things: a word in THIS Review with all five vowels and the interesting thing to be found in the Delaware Investments ad (page 26 of my edition), you have to really LOOK CLOSELY and think outside the box to get the latter, not to mention actually have to buy or read Barron’s…  Winners would have to supply me a mailing address for the $5.00.

***

The Cover Story (“World’s Most Respected Companies”) immediately captivated me, so it was not hard for me to part with my $5.00 (plus sales tax).  Author Michael Santoli writes of their procedure: they surveyed about 116 investors / money managers to rate each of the 100 largest companies in the world (by market capitalization as of April 13).  A point value (1 – 4) was given by each to the four ratings (Don’t Respect – Highly Respect, 4 being highly respect) to each company.  The responders are mostly American, so this does tilt the field towards the American companies, but it always HAS before.  But, it is even a little bit more skewed this year Santoli writes.  I list off the Top 10 most respected companies by Barron’s methodology:

1)    Apple (AAPL)  ß by a LOT over No. 2 (AAPL No. 1 last year as well)
2)    IBM (IBM, No. 4 last year)
3)    McDonald’s (MCD, No. 5 last year)
4)    Amazon.com (AMZN, No. 2 last year)
5)    Caterpillar (CAT, NR last year ß What?  Not rated?)
6)    3M (MMM, No. 7 last year)
7)    United Parcel Service (UPS, No. 13 last year)
8)    Coca-Cola (KO, No. 8 last year)
9)    Nestle (NESN, Switzerland, No. 19 last year)
10)    Intel (INTC, No. 17 last year)

FYI, the bottom five:

      96)  American International Group (AIG, NR last year, what a surprise)
      97)  China Construction Bank (China / 939, No. 94 last year
      98)  Ecopetrol (Colombia / EC, No. 93 last year)  ß Barron’s recently had a positive piece on Ecopetrol
      99)  Sberbank Rossia (Russia / SBRCY, No. 99 last year)
      100)  Gazprom (Russia / OGZPY, No. 100 last year)

Companies that had problems or whiffs of scandals went down a lot.  Ethical breaches (JP Morgan from No. 14 last year to No. 49 (respect) and unpopular political stances (Berkshire-Hathaway, from No. 3 to No. 15).  Wal-Mart Stores and Pepsico also had big drops.  TBTF banks Citigroup (No. 91) and Bank of America (No. 94) did not come out well either.

Other companies of note:

Walt Disney (No. 11 this year, No. 12 last year)
ExxonMobli (No. 12 this year, No. 11 last)
Google (No. 16 this year, No. 6 last)
Microsoft (No. 19 this year, No. 22 last)

***

Alan Abelson continues to be amazed by Ben, the Master Magician, who managed to put the rabbit back into the hat…  Bernanke and Co. came out with a relatively disappointing same old, same old Twist.  And scaring away investors the next day with a 250 point price plunge.  He wonders WHAT it would take to get the Fed to do something big (Dow at 800?).  He offers up the notion that Bernanke might be playing a little hardball with Congress, to get them to fix the budget…  Abelson thinks the Fed should have done more [Ed. note: not me!], or maybe that Fed is out of bullets [Ed. note: they still have a few they can fire in July or September].

He then goes on to write that a Bloomberg poll found that Americans favored sitting next to Obama (57%) vs. Romney (31%) on their next long flight.  Frivolous?  It could be worse.  In Mexico the presidential candidates include a Hitler admirer, a self-confessed adulterer and ex-Playboy model.  Uh, OK.

Abelson then finishes with comments on the Moody’s bank downgrades and the situation in China and Europe.  He then tells us that the latest edition of the “Bank Credit Analyst” predicts gold will go down as it did in 2008.  Abelson disagrees…

***

Michael Santoli (they keep their writers busy over there) writes in “Streetwise” that crude coming down and the wringing out of excessive pessimism re Europe has held the market up pretty well.  He thinks that may be ending…, that the next moves might be down.  He also notes that certain specialty retailers are down (LULU, FOSL, BBBY) and are vulnerable to the slightest bad news (Tractor Supply (TSCO)), which has grown a LOT in recent years, but may be in danger of disappointing…

***

“He Said”:

“We don’t gamble.  We do make mistakes.”

Jamie Dimon, CEO of JP Morgan, testifying on Capitol Hill

(Barron’s needs to find people other than Dimon, Bernanke, and Soros to quote)

***

Andrew Bary writes “TARP’s Last Stand”, in which he says that one of the last pieces of TARP business not completed is the Treasury’s task of selling all the Preferred Stock in smaller banks that they still own.  He writes that if you do your homework right that you can make double-digits on these preferreds…  I dunno, I had not EVEN HEARD of any of the seven banks…  And I would not trust my homework on them…

***

Jonathan R. Laing writes a bullish piece on Corrections Corp. of America (CXW), the company that houses some 80,000 inmates in their facilities in 20 states.  The company has lots of unfilled beds, but they have reason for hope, they are about to offer cash upfront to municipalities and states to allow them to run their prisons (at a lower cost).  CXW might also turn itself into a REIT, which would probably offer a nice big dividend.

***

Tiernan Ray (“Technology Week”) writes about the various moving parts of Microsoft’s brand-new foray into tablet computers.  But, this of course will aggravate two of MSFT’s own big customers (Hewlett-Packard and Dell).  But, Microsoft feels like it has to do something to stay in the game vs. Apple, which is cleaning everyone’s clocks with iPads and iPhones (our daughter owns both iDevices). 

***

For the second time in a month, Barron’s features a money manager who likes Japan, this time Toru Hashizume, who runs a hedge fund there.  He sells short, avoids big multi-nationals and hunts for bargains.  For example, he avoids Honda Motor, as Hyundai of Korea now has technology on par with Honda, and Hyundai’s cars cost less.  [Ed. note, as a buyer of Korean bearings I would urge everyone to go look at Hyundai…).

***

Lawrence C. Strauss interviews Randy Heck and Bradley Purcell of the Goodnow Investment Group.  They have four picks:
Polypore International (PPO, a maker of membranes and filters, which is fairly heavily shorted, incorrectly so in their view), NeuStar (NSR, this company provides addressing and routing for every single phone call and every text message in the USA, it was founded in 1996 from AT&T), Green Mtn Coffee Roasters (GMCR, they apparently dominate single-serve coffee) and Vistaprint (VPRT, which provides marketing materials and tools for small businesses).  [I might go with PPO (barriers to entry) and NSR (same) if I had to pick two]

***

Jim McTague, their Washington, DC pro, writes that the US Navy experiment to use lots of biofuels looks to be a turkey program (gobble-gobble).  Big surprise.  While there ARE some proponents of using US-produced biofuels (very expensive though), it looks like the drawbacks outweigh the plusses…  Big maritime shipper Maersk (Denmark) has ruled out a “Green Fleet” because of high cost.  And the US Navy would not be able to refuel with biofuels in faraway ports, you know, where the ships might actually go into combat.

***

I was pleased to see one of the letters written To the Editor (“Mailbag”).  FINALLY someone else takes note that the last two times the “investment pros” offered up their advice, their returns were LOWER than the S&P 500.  THANK YOU, Maxine Blumberg (and of course Barron’s for publishing it)!

***

Editor Thomas Donlan (this time I checked to see it was him…).  Donlan writes that California's pension systems are in so much trouble that the state wants to expand them.  He mentions that one of the definitions of insanity is doing the same thing over and over, and expecting a different results.  So, California wants the private sector to have a pension system like the state's?  Gov. Jerry Brown MIGHT veto that one...

Donlan goes on to write that the eurovians (eurovians?, I guess those would be Europeans who use the euro) list their action points, but with no specifics.  Ah, nothing new under the sun here either!

***

In the Market Week section, Vito J. Racanelli, Andrew Bary and Kopin Tan write that investors were disappointed that the Fed did not do much, that is their explanation of why stocks went down about 1% last week.  They finish their piece with the only discussion of guar gum I have ever seen.  What is guar gum? It is derived from a bean grown in India and is an important additive used in the hydraulic-fracking fluids in the oil services business.  Guar gum prices are high now, and prices won't ease much until new production comes in 2013.  This will somewhat affect profits of Halliburton (HAL), Baker Hughes (BHI) and C&J Energy Services (CJES).  Just thought I'd give you a heads-up guys...

First Solar makes its second recent appearance on "Charting the Market".  Los Angeles will now permit the company to resume work on its huge solar power farm.

Jonathan Buck ("European Trader") suggests that we consider investing in mostly the UK and Germany as relatively safe places.  The UK is out of the euro-zone (and so, I suppose, they are not "eurovians") while German exports would go up on a euro decline.  [Ed. note, no thanks even for Germany and the UK]

Kopin Tan ("Asian Trader") suggests that big Chinese offshore oil producer CNOOC (ticker: 883.Hong Kong) looks cheap now.  IIRC, CNOOC seems to be well run, but...

Tatyana Shumsky writes the edition of "Commodities Corner" and is about lithium. Lithium is used in high-powered batteries for cellphones and laptops (and for electric cars too I believe).  Demand for lithium is expected to increase 20% + per year.  Lithium pricing is opaque she writes, it is not traded on any exchanges and lithium is sold in various salt forms or as a metal with special specifications.  The way to play lithium would be to look at the four major producers: Talison Lithium (TLH.Canada), Rockwood Holdings (ROC) -- these two vie for the top spot in producing, and Sociedad Quimica y Minera (SQM) and FMC (FMC).  There is an ETF for lithium if you want broad exposure (probably a good idea): Global X Lithium ETF (LIT). Nice article Tatyana!

Randall W. Forsyth ("Current Yield") notes that the new Twist did not bring rates any lower...  Shooting blanks now Ben?

There was no huge ($30 million or more) action among insiders last week, but there was one item of interest to me: two insiders at Molycorp (MCP, the rare-earths miner I have discussed various times here at my blog) BOUGHT $350,000 worth of stock.  Veyron!  I have now given you TWO trading ideas, both times positive news has come out since, you know where to send me the check...


The Mighty Peruvian Sol continues to push its way higher vs. the hapless US$ (and everything else I guess), the Sol was up another 1% last week.  I guess all my haircuts down there will soon have a "5 dollar" handle now...

2 comments:

  1. eurovians

    but is it a word .....

    if im a winner use the paper to treat yourself to 1/10000 of a kilo of yellow

    ReplyDelete
  2. Which is better Pepsi or Coke?
    SUBMIT YOUR ANSWER and you could receive a prepaid VISA gift card!

    ReplyDelete

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