Chinese and German Manufacturing Now Both Contracting
By Michael Lombardi, MBA for Profit Confidential
A recession for the global economy is becoming an increasingly likely scenario.
The Chinese economy, the second-biggest in the world, witnessed a contraction in manufacturing in May. The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) registered 49.6 for May, declining from 50.4 in April. (Source: Markit, May 23, 2013.) Any number below 50 represents contraction in the manufacturing sector.
The Chinese economy exports a significant amount of what it produces to the global economy. Contraction in Chinese manufacturing shows exports are falling—the global demand for goods is falling.
Similarly, Germany’s Flash Manufacturing PMI showed continuous contraction in the manufacturing sector. The index stood at 49.0 in May. (Source: Markit, May 23, 2013.) The German economy is important to observe, because it’s the largest economy in the eurozone and an economic slowdown in the nation can send the common currency region into another downward spiral, again affecting the global economy.
Looking at other key indicators, they are pointing to an economic slowdown ahead in the global economy. Consider the copper market. Demand for copper is suggesting activity in the global economy is sluggish, even deteriorating.
Copper prices are down more than 10% since the beginning of 2013, and stockpiles of the brown metal, tracked by the London Metals Exchange (LME), are up a staggering 95% this year! (Source: Bloomberg, May 23, 2013.)
Other industrial metal prices, such as aluminum, lead, nickel, and zinc, are in decline as well.
How can the U.S. economy possibly improve when the global economy is in trouble?
The U.S. is highly affected by any shift in demand in the global economy.
After the financial crisis of 2008, U.S.-based companies were able to show growth because of robust demand in the global economy. Some say the growth in the global economy pulled the U.S… Read More
Can the Electric Car Save the Global Economy?
By Mitchell Clark, B.Comm. for Profit Confidential
It’s a very interesting concept: I absolutely believe that energy innovation will help the U.S. economy tremendously over the coming years.
Under that vast umbrella of energy innovation, alternative energy has the potential to become a genuine economic engine that can revolutionize personal transportation and the economic landscape.
There is excitement surrounding automaker Tesla Motors, Inc. (NASDAQ/TSLA). This company just doubled on the stock market in a little over a month.
I haven’t driven any of Tesla’s vehicles, but the company’s new four-door sedan looks fantastic, and the quality of the paint job really stands out.
I definitely see more “Chevrolet Volts” around. According to General Motors Company (NYSE/GM), it delivered 5,550 Volts in the first quarter of 2013, up 3.2% comparatively. The company is likely employing new sales incentives.
Virtually every automaker is getting in on the electric vehicle action. Even Porsche has a new electric “supercar.” The company is bringing to market the “918 Spyder,” which has a 4.6 liter V8 engine and two electric motors. The two electric motors provide an additional 218 horsepower on top of the more than 500-horsepower V8. The car can operate on its batteries alone, but I suspect the range would be extremely short.
Trucks and SUVs are bread-and-butter for domestic automakers. But the migration to electric vehicle production (a loss leader right now) is all about range and economies of scale. A $40,000 compact Chevy sedan is a misnomer.
While insider ownership with a company like Tesla is high and its valuation is extreme, the company would be an attractive takeover candidate for a successful automaker. The illusion can become real. BMW AG (XETRA/BMW) perhaps?
Range, costs, and availability of charging stations are obvious barriers for electric automakers.
But there’s been a sea of change with Te… Read More
Denny’s Serves Up Grand-Slam Returns
By George Leong, B.Comm. for Profit Confidential
We all know that McDonalds Corporation (NYSE/MCD) is the reigning king of the fast food sector and one of the top performers over the past decade, based on my stock analysis.
In fact, my stock analysis suggests that McDonalds’ rivals are trying to emulate what is working at the company rather than compete against the seller of the iconic “Big Mac.”
Burger King Worldwide, Inc. (NYSE/BKW) may be pursuing a similar strategy to McDonalds’ by diversifying its menu offering with new items and value-conscious options, based on my stock analysis.
Yet while Wall Street focuses on McDonalds and its burger-oriented rivals, my stock analysis reveals that a stock that I feel offers better valuation and potential upside is Denny’s Corporation (NASDAQ/DENN). With a market-cap of $552 million, Denny’s is dwarfed by the $102-billion market cap of McDonalds, but that doesn’t mean there isn’t a buying opportunity with Denny’s, based on my stock analysis.
In fact, Denny’s is up 50% over the past 52 weeks and has easily outperformed the S&P 500’s advance of 26.8% and McDonalds’ 11.8% gain, according to my technical analysis.
Chart courtesy of www.StockCharts.com
Denny’s is best known for its “Grand Slam” breakfast offerings. The company has gone through a major structural reorganization in which it sold many of its stores to franchisors, thereby reducing its own operating costs and collecting fees instead. As of March 27, 2013, 1,525 of the company’s 1,689 restaurants were franchised. The end results have been stronger operating numbers and a steady rise in the company’s share price, according to my stock analysis.
About 98 restaurants are situated in Canada, Costa Rica, Mexico, Honduras, Guam, Curacao, Puerto Rico, Dominican Republic, and New Zealand.
And in an aggressive and bold move, Denny’s has been looking at expanding into the highly compe… Read More
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