Review of Barron's -- Dated 6 August

In a way, it is almost hubris fro someone like me to attempt to review Barron's, the weekend newspaper/magazine put out each weekend by Dow Jones.  But, attempting to do so forces me to more carefully read and think each issue I review.  Because it covers a LOT of ground, I am forced to pick & choose what to review.

This weekend's Barron's Cover Story ("How To Play Energy Now") has a nice picture of five of the big oil companies as playing cards, Ace down to 10, a straight in poker!

Author Andrew Bary writes a timely piece on these oil industry stocks.  They have lagged the market fairly badly this year (price of crude has come down) yet many of them have low P/E ratios and high dividend yields.  Stock prices of these companies are down as well because many think demand, even from the emerging markets, may well come down because of recession fears.

While they have lagged the S&P this year, over the past decade they handily beaten it by well over 100% (graph provided int eh article shows this as well as the price action of crude oil).

Morgan Stanley's Evan Calio and JP Morgan's Thomas Lee both like the oil sector, Calio recently wrote that many of these stocks trade "near liquidation value,".

Not everything is cheap though, the US natural gas producer stocks have run up some, in belief of higher NatGas prices.

The oil sands plys of Canada have come down though (Suncor, ticker SU and Canadian Natural Resources, CNQ) are both down double digits percentages this year and have low dividend yields.

I cherry-picked information that I thought was most useful from Bary's table, Comments and Notes are mine:

Company	Ticker	2012 P/E	Div Yield	Comment	Note
ExxonMobil	XOM	11.3	2.7%	Major Oil Producer
Chevron	CVX	8.6	3.3%	Major Oil Producer
Royal Dutch Shell	RDS.A	8.1	4.2%	Major Oil Producer
ConocoPhillips	COP	9.9	4.8%	Major Oil Producer	1
Total	TOT	6.8	4.9%	Major Oil Producer
Baker Hughes	BHI	12.4	1.3%	Oil Service Company
Halliburton	HAL	10	1.1%	Oil Service Company	2
Sclumberger	SLB	16.4	1.6%	Oil Service Company
Weatherford	WFT	10.5	0.0%	Oil Service Company
Holly Frontier	HFC	6.1	7.0%	US Refining
Marathon Petroleum	MPC	6.5	2.9%	US Refining	3
Phillips 66	PSX	7	2.1%	US Refining	1
Valero Energy	VLO	7.2	2.6%	US Refining

Notes:

1)  Conoco Phillips recently spun off its refining assets, refiner company now is "Phillips 66"
2)  Halliburton a few years ago spun off Kellogg Brown & Root
3)  Marathon Oil split into Marathon Oil (upstream) and Marathon Petroleum (downstream)

Among the majors, Calio and Deutsche Bank's Paul Sankey like Chevron, in part because they will be producing LOTS of NatGas from its giant fields in offshore Australia, and the 3.3% dividend is not bad either.

Exxon has been hurt somewhat by low gas prices, the company made and expensive acquisition of XTO Energy in 2010 when NatGas prices were higher.  ExxonMobil DOES have a big piece of Qatar's huge NLG (NatGas Liquids) and the overseas price of NatGas is much higher than US prices.

ISI Group's Judd Bailey says that among the Oil Service companies that he likes Schlumberger,as they have worldwide presence, the best technology and diversification.

And the refiners could get a boost from turning themselves into master limited partnerships (as recent IPO Northern Tier Energy, a refinery in Minnesota) is, this leads to better tax treatment of dividends.

He briefly describes a few ETFs in energy.  There are LOTS of ETFs in energy...

An excellent article on the current state of the oil business!

***

One would think that perhaps Alan Abelson might go after the "Scandal de la Semaine", and so he does, namely Knight Capital's "Algo Gone Wild", after which Knight lost over 50% of its market value and over 100 stocks were bought AND sold by the bots in a crazy fashion until the slowpokes at the NYSE (alone affected I believe) stepped in.  The affected stocks were "flash crashed" up AND down.  It is not yet clear whether Knight Capital will even be open for business tomorrow (Monday)...

Abelson then digs into the very mixed non-farm job numbers, which had big minuses beyond the positive job number (+ 163,000, consensus estimate was 95,000 jobs added).  But, the unemployment rate inched up to 8.3%.  Abelson then notes that Gluskin Sheff's economist Dave Rosenberg and Zero Hedge both pointed out the downsides ("MISH" too, I believe, Michael Shedlock) to the various numbers.  This could have been a "head-fake" in that these numbers are not pointing to a decent recovery...

Abelson then steers us to smart Jeremy Grantham's latest piece at gmo.com/websitecontent/GMOQ2Letter.pdf which is long buy interesting.  It IS long, but describes a future with lots of resource shortages...  Well worth reading.

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Michael Santoli ("Streetwise") is another skeptic that the job numbers paointed the way to a brighter future, indeed he came out with three indicators showing that things are slowing...

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In "Review and Preview" there is a short piece by DC pro Jim McTague describing the the latest Congress as the most partisan and unproductive in modern memory.  And they just headed out for five weeks of vacation and campaigning...  NO progress on the "Fiscal Cliff".  NO progress on repealing ANY part of Obamacare.  NO progress on a farm bill or an energy bill.  McTague finishes (colored background):

A lame-duck Congress conceivably do better than this after the election.  But, as Republican Rep. Tom Price of Georgia observed last week: "The public seldom is well-served by a lame-duck Congress."   Sigh...


"He Said:"


"Looking beyond the short term, we expect the euro area economy to recover only very gradually."


ECB President Mario Draghi.  Really, Mario?


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Sandra Ward writes a bullish piece on Activision (ATVI), a major producer of online video games.  I have abslolutely NO FEEL for this sector, readers are invited to send me their comments...


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Leslie P. Norton write up "Blueprint for the Euro Zone" in which she presents hedge-fund chief Pierre Lagrange's (a unit in Man Group of the UK) and his idea of how to fix Europe.  It is a short and simple idea, but, they likely will not do it (my words, condensing his):


That the Euro Zone will guarantee the future long-term debt of ANY of its sovereign governments IF they achieve their budget and deficit reduction targets, within, say, five years.  Miss the targets, that debt will no longer be guaranteed.

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Tiernan Ray ("Technology Week") writes that CABLE COMPANIES have been going gangbusters so far this year (and Comcast (CMCSA) was mentioned earlier in another Barron's piece).  Most of the cable stocks are up big this this year and have been raising their dividends, despite competition from despite competition from wireless (T, VZ) and satellite (DTV, DISH).  Ray expects things to be just fine for cable, even with technological challengers from the other players, as it will take a long time to wean us off of cable TV...

Disclosure: My wife and I had a long dragged-out dispute with Comcast, we finally git it resolved in our favor, but it was very unpleasant.

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"Our Gadget of the Week" is really a story about how the Tibetan Buddhist Research Center over the past 10 years has been scanning a huge number of Buddhist texts and Tibetan writings and putting them on the 'Net.  Many of these scanned writings are rare.  Want to see?  TBCR.org is your place...  Apparently they did a great job of saving a lot of knowledge...

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Brendan Conway ("ETF Focus") writes that there are several ETFs out now focused on preferred shares, which usually get a higher dividend yield than common stock (and dividends are paid to preferred stock owners before any common stock owners get any).

There's and ETF for just about anything now...

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I skip reviewing Leslie P. Norton's interview with value-investor Bruce Geller, because I do not know the five companies he picks (CHS, DOV and ICLR as longs; FNP (was Liz Claiborne) and Ctrip.com as shorts).

I will mention that Geller believes that they will make a deal before we run over the "Fiscal Cliff" and he does NOT see a bear term recession.

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"Economic Beat" author and economist Gene Epstein also takes his pokes at the latest job numbers and remembers great economist Milton Friedman (dead six years ago, but would have been 100 last Tuesday), Gene had a friendship with Friedman.

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Editor Thomas Donlan also remembers Milton Friedman in his Editorial.  Milton Friedman believed, heavily, in persoanl freedom to choose and in capitalism.  He fought hard with the "Keynesians" (Paul Krugman perhaps the most famous current Keynesian).

Friedman backed up his views with some math.  I am not familiar enough with macro-economics to really comment with authority, but Donlan is.  Friedman, for example, wanted abolition of the Departments of Agriculture, Commerce (no dispute there), Education (nor here either), Energy (check), Housing and Urban Development (check), Interior, Labor (check), Transportation and Veteran's Affairs.  He also wanted to terminate farm subsidies (yes), rent control (yes), the minimum wage antitrust laws (ahh, I dunno...), and Social Security.  He was FOR unilateral free-trade, school vouchers and ending the "War on Drugs".  Controversial!

He was a big believer in personal freedom and personal responsibility.

Nice Editorial, Thomas Donlan!

***

In the Market Week section, I note two things in Jonathan's Buck's "European Trader":

1)  European markets will continue to drift as Draghi and Germany are far apart...

2)  He likes Enel (ENEL.Itay) and operator of green energy (wind, hydro, geothermal and solar around the globe), cranking out 7,554 megawatts (call it 10 typical nuclear power plants) and is growing at a double-digit pace.

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Owen Fletcher ("Commodities Corner") believes that wheat prices may come down hard.  Wheat is much less affected by the current drought, and even though some WOULD be used as a corn substitute, there should be plenty of wheat this year.

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I what looks like a welcoming development, Barron's may have introduced a new column!  Reshma Kapadia ("Emerging Markets") writes that because so many of the larger foreign stock markets so tightly correlate with our own (the MSCI Emerging Markets Index apparently is heavily weighted to the BRICs and has a very high 0.88 correlation with the S&P 500).

So she recommends doing some shopping in markets like Turkey, Indonesia, the Philippines and Peru!

She even gives us some specific names to check out: Mitra Adiperkasa (MAPI.Indonesia, a department store chain there, Alicorp (ALICORC1.Peru, consumer goods) which has a long history of surviving tough periods in Peru and Manila Water (MWC.Philippines).

She finishes by noting that when liquidity gets squeezed (think 2008) that these investments go down faster...

I will send the author an email with the hope that Barron's will see fit to keep this column every week!

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I am happy with the job that Michael Aneiro is doing at "Current Yield", he too looks at the jobs numbers with a skeptical eye, and of course how they affected Treasury debt, rates were up a bit but within their recent trading ranges.

In the adjacent "Bond Center" (those four graphs I like so much)I note that euro short term rates took another dive (that's 4 big dives down, 1 up in the last 5 weeks), and are essentially now the SAME as Japan's...  I believe this is a signal that something bad is about to happen in Europe...

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Barron's has two places where they show what the "insiders" are up to: the "Insider Transactions" and the "144 Filings".  I am not clear on the differences (perhaps reporting differences), but although they are often pretty similar, they do not report exactly the same information.  I have used and arbitrary number of $30 million in looking at sales by insiders.  There was a lot of selling last week, the first list is from Insider Transactions, the other three names from 144 Filings that were missed:

$90.4 million     Natural Grocers (NGVC, 7 insiders)
$62.1 million     eBay (EBAY, 6 insiders)
$61.2 million     Amgen (AMGN, 7 insiders)
$57.3 million     Alexion Pharmaceuticals (ALXN, 6 insiders)
$40.2 million     Splunk (SPLK, 6 insiders)

$32.6 million     Visa (V, 1 insider)
$26.7 million     Danaher, 1 insider, the CEO)
$24.8 million     Kimberly Clark (KMB, 2 insiders)  <-- was in the Insider Transactions

In aggregate, these are some the biggest numbers I have seen....

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I have not commented much yet on this, but shareholder activist Carl Icahn has been steadily building up his stake in troubled truck manufacturer Navistar, his Icahn Associates now owns almost 10 million shares (14.5% of the company).


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The Might Peruvian Sol climbed a tiny 0.15% vs. the US $, reaching $0.3805...  While that's great for our company there, it WILL definitely mean a more expensive haircut while there (almost $5.00...).  Don't worry though, I will still leave "Mery" a good tip, as she does good work!