Oil is a viscous chemical hydrocarbon that is liquid at normal temperatures. Oil is used as a fuel and lubricant. It is refined to become gasoline, diesel, and jet fuel. Low oil prices are typically associated with the prevalence of economic globalization.
While business conditions are pretty good in the domestic oil and gas business, they’re also holding up very well in the railroad sector.
If railroad companies and related services are old economy, they are still important economic benchmarks and they continue to be great businesses producing excellent returns to stockholders.
Union Pacific Corporation (UNP) is an important company to follow, even if you aren’t interested in owning a position. What the company reports about its business conditions is material and helpful in advancing your own market view. Union Pacific reports on Thursday.
Norfolk Southern Corporation (NSC) just hit an all-time record-high on the stock market. This time last year, the stock was around $77.00 a share; now, it’s close to $107.00.
CSX Corporation (CSX) is not as large in terms of market capitalization as Norfolk Southern or Union Pacific, but it is still a $31.0-billion company with extensive operations in the eastern United States and Canada.
Its second quarter of 2014 was a record quarter with sales growing seven percent to $3.2 billion on an eight-percent gain in volume.
Earnings growth was more modest, coming in at $529 million, or $0.53 per diluted share, compared to $521 million, or $0.51 per diluted share, for second quarter 2013. But management expects margin expansion going into 2015, and the Street wasn’t fazed.
Like so many other large-caps, the company is buying its own shares, including some $131 million worth during the most recent quarter.
By April of next year, the company will have spent $1.0 billion on share repurchases over the last two years.
Notably, CSX saw double-digit volume and revenue gains … Read More
Crude oil has pulled back from its recent price strength, but it’s still holding up pretty well above the $100.00-per-barrel mark for West Texas Intermediate (WTI).
Energy is still a top sector for equity portfolios, but it is the case that many oil stocks have already moved up tremendously and valuations are a little stretched.
I’m a big believer in energy infrastructure and pipelines for income-seeking investors and junior energy stocks for risk-capital investors.
It’s more difficult to find value in this market; that’s for sure. But domestic oil and gas production, transportation, and storage remain a growth industry.
Halliburton Company (HAL) just reported another great quarter, with its oil and gas services still being pretty robust worldwide.
In particular, Halliburton’s management noted solid strength in the U.S. market for energy services, and that’s on top of several tremendously good years in recent history.
According to the company, 2014 second-quarter sales came in at $8.1 billion, up solidly from first-quarter sales of $7.35 billion and comparative second-quarter sales of $7.32 billion last year.
Recent quarterly revenues were a new record for Halliburton, with notable strength in its North American operations. In fact, domestic operations are so strong that management plans to immediately add new equipment, transportation capabilities, and work crews for hydraulic fracturing.
The company’s operating margins are rising (internationally, as well), and the board just increased its share repurchase authorization by a huge $4.8 billion to $6.0 billion in total.
Halliburton’s share price is up 40% year-to-date, and I’d say there’s a good probability the position is going higher yet, as it’s not overpriced for double-digit growth.
The company’s … Read More
Stocks are going to gyrate around second-quarter earnings, but that’s exactly what this market needs—the corporate bottom line and expectations for the rest of the year.
With so many stocks trading at their all-time record-highs, I view investment risk in equities as being high at this time.
This is actually a tough environment in which to be an investor looking for new positions. There’s not a lot of value around and good businesses have already been bid.
It’s been years now since the stock market was first in need of a material price correction, and the next one will probably come out of nowhere.
It could be a shock from the Federal Reserve, but the central bank has been extremely delicate in how it effects and communicates monetary policy. More likely, stocks will be vulnerable to an unforeseen shock like a geopolitical event or a big derivative trade gone bad.
The risks are out there and stocks are long overdue for a reckoning.
With this in mind, I’m still a fan of the market’s existing winners, especially dividend-paying blue chips. In the absence of a shock, I think they’ll just keep pushing new highs going right into 2015.
3M Company (MMM) is an enterprise worth following and owning as a long-term, income-seeking investor.
The company’s earnings are material and offer good market intelligence, even if you aren’t interested in owning the stock.
The position has tripled in value on the stock market since the beginning of 2009, while also paying some great dividends.
The stock is still strong in the current environment, and the company represents exactly the kind of … Read More
Union Pacific Corporation (UNP) is a company that’s getting upgraded by the Street and earnings estimates are ticking higher. It’s great news for this benchmark stock and top wealth creator.
The business cycle in old economy industrial businesses still has legs, and while Union Pacific’s share price is up some 25 points over the last 12 months, I think this stock can keep ticking higher into 2015.
The railroad business has proven to be a good one over the last several years. Most railroad companies have been able to increase their prices for freight without affecting demand, and that’s a very important metric and telling indicator.
Union Pacific’s share price was around $26.00 a share this time in 2009. Now it’s just over $100.00 (the company recently effected a two-for-one stock split) and the company has increased its dividends paid seven times since 2009. This is a good business, and it continues to pay as a stock market investment.
The company’s volume growth is coming from both agricultural and industrial products. And even its coal transportation business is showing improvement.
Union Pacific is moving a lot of freight cars related to the domestic oil business. While many might see this as carloads of crude, the company actually ships more carloads of fracturing sand than oil. It’s a growth area for the business, and it has been for several years.
The company’s one-year stock chart is featured below:
Chart courtesy of www.StockCharts.com
This is a stock that has proven to be a worthy buy when it’s down. It hasn’t been down for long, and it remains a favorite among institutional investors, … Read More
It’s a difficult environment in which to be constructing new equity portfolios right now, mostly due to the very simple reason that the stock market is at an all-time record high and it’s likely that monetary policy will change soon.
But there is still a great deal of interest in equity securities and in a lot of cases, individuals require the income that they provide.
There are a lot of really good investment funds and money managers in the marketplace; but for those who wish to build and manage their own stock market portfolios, you want to approach the process methodically and with a great deal of care.
As a stockbroker, I learned a long time ago that financial products are typically sold not bought. Don’t let anyone sell you anything in this market—stocks are at all-time highs.
If you’re looking to the stock market to create a portfolio of companies, just remember that there is no rush to do so. Because of the financial crisis and subsequent recession, policy has been about the re-inflation of assets (mostly financial), and the stock market’s been going up based on the certainty that the Federal Reserve will be extremely accommodative.
Right or wrong, institutional investors used that certainty to buy equity securities.
Traders might like to buy high in order to sell higher, but momentum trading isn’t investing and as an investor, it’s tough buying stocks at their highs.
But the current environment is a good one in which to identify good businesses that can become core positions in a portfolio over time.
In terms of creating a new, risk-averse stock market … Read More
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