Archive for the ‘stock market’ Category
This Stock’s 24% Year-to-Date Gain Signaling a Buy Opportunity?
By Mitchell Clark, B.Comm. for Profit Confidential
“Opportunity cost”—it’s a phrase used in microeconomic theory to denote the costs that are forgone by not having your resources in the highest returning assets.
It is a phrase that’s pertinent to the stock market.
Without question, I remain completely taken aback by what has transpired with the stock market since the beginning of the year.
Looking at the numbers, not being invested in many corporations has been costly.
Excluding the reasons why, the simple fact is that the Dow Jones Industrial Average is up 16% since the beginning of the year (not including dividends).
The S&P 500 is up 15.7%. The NASDAQ Composite is up 14.8% and the Russell 2000, an index of small-caps, is up 16.6% (not including dividends).
I think this stock market can smell the end of quantitative easing.
More meaningful, however, is the Federal Reserve’s policy regarding interest rates, which are going to continue to be low for the near future, as it has been made very clear.
This is a huge, perhaps neglected, certainty for the stock market and corporations.
Making the case for being a buyer in this market is extremely difficult. Institutional investors have already placed their bets and a lot of corporations—good companies with real staying power and solid prospects for earnings growth going forward—are fully priced.
Johnson & Johnson (NYSE/JNJ) is a benchmark stock. Like many large corporations, Johnson & Johnson does everything it can to squeeze every penny out of its bottom line. The company lays off employees, closes plants, and does everything to minimize taxes. Johnson & Johnson’s 10-year stock chart is featured below:
Chart courtesy … Read More
Wealth, Lower Oil Prices, Increased Spending—Airline Stocks Headed Higher?
By George Leong, B.Comm. for Profit Confidential
The improved global economy has helped to drive up the spending habits of consumers, and an area that has really benefited from the income creation is the travel sector.
Airlines around the world have reaped the benefits from the improved travel sector.
The airline sector is estimated to earn $10.4 billion in profits this year, up from the previous estimate of $8.4 billion, according to the International Air Transport Association (IATA). (Source: “Small Boost to Airline Profitability – Industry Profit Margin Improves to 1.6%,” International Air Transit Association web site, March 20, 2013.)
According to the IATA report, the top market in the airline sector is predicted to be the Asian-Pacific airlines, with estimates calling for $4.2 billion in net profits this year, up from $3.9 billion in 2012 and accounting for a 40.4% share of the total global airline sector.
The North American airline sector is also looking good, with profits estimated at $3.6 billion this year, well ahead of the $2.3 billion recorded in 2012.
Coming in third is expected to be the Middle Eastern airline sector, with $1.4 billion in profits, more than 50% higher than the $900 million in 2012.
The airline sector has been improving since the end of the recession. Lower fuel costs and increased bookings and travelling have helped to drive up the sector.
Take a look at the Dow Jones US Airlines Index in the chart below. Notice the beautiful uptrend since November 2012 in correlation with the S&P 500, as highlighted by the green line.
Chart courtesy of www.StockCharts.com
In the low-cost discount side, a carrier that I frequently fly with … Read More
How the Shock in New Oil Production Could Be the World’s Greatest Scam
By Mitchell Clark, B.Comm. for Profit Confidential
“Shockwave,” “revolution,” “bonanza,” and “paradigm shift.”
These are just some of the provocative words in the Medium Term Oil Market Report-2013 that was just released by the International Energy Agency (IEA).
I don’t think I’ve ever read a more enthusiastic and fervent document from a government body in my life.
The IEA is an organization funded by 28 countries that was created after oil prices skyrocketed in 1973 and 1974. As policy, the agency doesn’t forecast oil prices.
The IEA’s executive director, Maria van der Hoven, said, “North America has set off a supply shock that is sending ripples throughout the world.” (Source: “Supply shock from North American oil rippling through global markets,” International Energy Agency web site, last accessed May 15, 2013.)
The IEA forecasts the North American oil supply will grow by 3.9 million barrels of oil per day (mbopd) from 2012 to 2018. That’s significant.
Chart Industries, Inc. (NASDAQ/GTLS) out of Garfield, Ohio is an oil and gas storage manufacturer that was recently featured in these pages. (Read “This Is an Investment Theme Worth Paying Attention To.”)
But the biggest gain of all, according to the IEA, will be in global oil refining capacity, which is expected to surge by 9.5 mbopd over the next five years, led by China and the Middle East.
The report said that higher oil prices over the past few years provided the backdrop for the “revolution.” Lofty oil prices helped make fracturing technology (used to extract oil from under rock) and Canadian oilsands production economically viable.
What’s most interesting (and worrisome) is that the report said the supply “revolution” … Read More
A Real “Made in the USA” Retail Stock That Supports Your Portfolio, Not Sweatshops
By George Leong, B.Comm. for Profit Confidential
The recent devastation of the garment building collapse in Bangladesh was both horrific and a reminder that many of these sweatshop operations that make your clothing are not operating according to American standards. But the fact is that many of these operations in Bangladesh and other low-cost labor markets in Asia produce the clothes you buy; this is what allows prices to be cheap for American buyers and others. The low cost of production also allows companies to reap more earnings.
Yet while the collapse of the factory building was a total shock, the underlying issues of major apparel makers using cheap labor in these poor countries have been going on for decades as a way of improving earnings.
In the pursuit of earnings growth, The Gap, Inc. (NYSE/GPS) and Wal-Mart Stores, Inc. (NYSE/WMT) have long been accused of turning a blind eye to the extremely poor working conditions of the third-party factory workers who produce cheap goods for consumers here and abroad. The reason is the need to deliver earnings.
The reason why the conditions are largely ignored is simply a matter of cutting costs and increasing earnings. Consumers in the richer countries want cheaper clothing and goods. Companies want lower costs and higher earnings. The demand for low costs places immense pressure on the third-party manufacturers to run a very tight operation, which is why the incident in Bangladesh was allowed to happen and why similar incidents will continue to occur as long as earnings are key. (Read “Market Near Record High, but Where’s the Revenue?”)
For those who want to support the local manufacturing … Read More
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