Posts Tagged ‘china’
There’s a big push on buying green stocks, a move that has the ability to make investors feel good and make money at the same time. Here, we are talking about alternative energy stocks and companies that have mandated that their impact on the environment be one of their core values. (Read “My Top Stock Pick in the Innovative Alternative Energy Sector.”)
Then there are the stocks on the other end of the spectrum. Here I’m talking about the defense, gun, and military stocks that produce weapons and technology to defend and harm. These companies have made investors a lot of money, despite the fact that not everyone might agree with their line of business.
There are also those companies that are sought out due to their use of cheap and exploited labor. Of course, since so many goods are now made in China and other cheap labor markets in Asia and Latin America, it would be safe to say that many companies are pursuing this practice of seeking really cheap labor in order to maximize profits for investors. This is also the major reason why there are so many people looking for work across America; because companies cannot return strong margins while they’re paying the much-higher American wages or those of other Westernized countries, compared to the obscenely low wages found in places like China and Mexico and other low-wage countries.
While I’m not here to favor or condemn one group of companies, the reality is that nothing is perfect when you are operating in an extremely capitalistic global economy that needs to satisfy investors.
There’s … Read More
Currently, Apple Inc. (NASDAQ/AAPL) is largely considered a commodity stock that needs to excite investors with new innovations and growth in order to propel its long-term growth.
The stock has been stuck in a relatively tight range between $500.00 and $560.00 since late October 2013, as Apple looks for stronger growth opportunities and convinces the stock market that it can expand its business and not just depend on “iPhone” and “iPad” sales.
To this point, the company took a positive step forward after announcing it was launching its “CarPlay” solution for the auto sector that aims at making the iPhone a powerful add-on in the car. The solution will allow drivers with iPhones access to multiple services while driving. The solution will be initially launched with high-end automakers, such as Ferrari, Mercedes-Benz, and Volvo, but it will eventually be available across a much wider auto segment.
The introduction of CarPlay is critical, as it will expand the use of the iPhone for users and also help to drive sales. The car solution comes at a critical time in the recent aftermath of BlackBerry Limited’s (NASDAQ/BBRY) announcement that it would be replacing Microsoft Corporation (NASDAQ/MSFT) as the information solution in cars made by Ford Motor Company (NYSE/F). This is a key area of growth, and Apple’s innovation is the kind of development investors want to see.
While Apple continues to be the market leader in the premium smartphone and tablet market around the world, the company also needs to deliver alternative avenues of growth. Of course, Apple needs to grow its market share in the key emerging markets; so far, this … Read More
The bond market is in trouble.
As we all know, the Federal Reserve has been the biggest driver of bonds since the financial crisis. The central bank lowered its benchmark interest rate to near zero, then started quantitative easing, all of which resulted in the bond market soaring as yields collapsed to multi-decade lows.
The chart below will show you what’s happened to the U.S. bond market since the mid-1970s.
As you can see from the chart, the declining yields on bonds stopped in the spring of 2013 and have increased sharply since then.
Chart courtesy of www.StockCharts.com
What’s next for bonds?
The Federal Reserve is slowly taking away the “steroids” that boosted the bond market. The central bank is now printing $65.0 billion of new money a month instead of the $85.0 billion it was printing just a few months back. And now we hear the Federal Reserve will be slowing its purchases by $10.0 billion a month throughout 2014.
Since May of last year alone, when speculation started that the Federal Reserve would cut back on its money printing program, bond yields skyrocketed and bond investors panicked.
According to the Investment Company Institute, investors sold $176 billion worth of long-term bond mutual funds between June and December of last year. (Source: Investment Company Institute web site, last accessed February 26, 2014.) I would not be surprised if withdrawals from bond mutual funds are even bigger this year.
And China is slowly exiting the U.S. bond market, too. According to the U.S. Department of the Treasury, in December, China sold the biggest amount of U.S. bonds since 2011. In … Read More
The price action and euphoria towards battery-powered carmaker Tesla Motors, Inc. (NASDAQ/TSLA) clearly shows the demand for innovative companies that deliver a great story, as my stock analysis suggests.
Investors want to see less demand for energy produced by fossil fuels and more demand for the green energy movement, whether its wind, water, solar, or another form of green energy, according to my stock analysis.
A small company that I have been following for a while in the alternative energy space is FuelCell Energy, Inc. (NASDAQ/FCEL), which has a market cap of $421 million.
My stock analysis indicates that the company is very innovative, which is what we want to see in high-potential stocks.
Chart courtesy of www.StockCharts.com
FuelCell provides alternative fuel cell solutions via its stationary “Direct FuelCell” power plants that are built to deliver ultra-clean, efficient, and reliable green power. The process involves harnessing the use of renewable biogas from wastewater treatment and food processing.
As my stock analysis indicates, the company’s clients include commercial, industrial, government, and utility companies. Sectors served include the food and beverage, manufacturing, hospital and prison, college and university, hospitality, utilities, and wastewater treatment areas.
According to the company, the energy produced is up to two times as efficient as fossil fuel plants. The plants range from smaller 300-kilowatt to larger 2.8-megawatt plants, and they are expandable to above 50 megawatts. FuelCell said the power plants it has built have generated more than 300 million kilowatt hours (kWh) of electricity in more than 50 installations worldwide.
A major and growing market for FuelCell is in Southeast Asia, specifically in South Korea. The company … Read More
On February 24, the S&P 500 broke to a new all-time high. There was panic buying as soon as the markets opened that day, as the chart below depicts.
Looking at this, I can’t help but ask if investors have completely lost touch with reality. It seems the fundamentals that drive stock prices higher—corporate earnings—have been ignored.
And as investors are driving key stock indices higher, the state of the global economy is becoming worrisome. This can’t be stressed enough: the U.S. economy isn’t immune to a disturbance in the global economy. But this isn’t all; if the global economy sees an economic slowdown, the companies on U.S. key stock indices suffer as well.
One clear example of this, as it stands, is Caterpillar Inc. (NYSE/CAT), a giant industrial goods manufacturer and component of the S&P 500. The company reported that annual sales declined 16% in 2013. Caterpillar’s revenues were $55.65 billion compared to $65.87 billion. The company’s corporate earnings per share were down more than 32% in 2013. The reason for this: a challenging business environment in the global economy. (Source: Caterpillar Inc., January 27, 2014.)
The global economy is going to disappoint in 2014.
First in line is Asia. Look anywhere on that continent, and you will see economic slowdown looming in the air. China, the biggest economic hub in the region and the second-biggest in the global economy, is outright slowing down. In February, the manufacturing activity in the country dropped to a seven-month low. The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) registered at 48.3 in February compared to 49.5 in … Read More
Deutsche Bank just issued new “Buy” ratings on Caterpillar Inc. (CAT), Cummins Inc. (CMI), and Deere & Company (DE), which is quite a bold move.
It’s an early call on a sector turnaround. All three of these companies recently announced mediocre fourth-quarter earnings. Deere & Company expects its total sales to decline this year.
Caterpillar really hasn’t done anything on the stock market for the last couple of years, and Cummins has actually been kind of volatile on declining trading volume. Cummins is the outperformer among these stocks by a wide margin.
Anytime you get large, industrial equipment manufacturers being upgraded, it postulates a view that global economic growth is about to accelerate.
Whether this happens or not, it’s actually very useful to read what Caterpillar, Cummins, and Deere & Company have to say about their businesses. All three companies have tried to keep their earnings elevated in the face of weak or declining top-line growth.
Cummins’ largest customer (12% of total sales) is PACCAR Inc. (PCAR), which manufactures “Kenworth” and “Peterbuilt” trucks domestically, and “DAF” trucks for Europe and other international markets.
Cummins’ 2013 global sales were down slightly not only from 2012 but also from 2011. Management said that it expects market share gains in North American medium-duty trucks, but domestic and international mining markets as well as foreign currency instability are headwinds for earnings.
Caterpillar recently turned higher on the stock market, but the company’s most recent quarter wasn’t that great. It beat Wall Street’s consensus on revenues and earnings, but total sales were still down comparatively.
There are a lot of reasons why a Wall … Read More
Good businesses have a tendency to remain that way, and when they experience a material price retrenchment on the equity market, it’s often worth a look.
Chart Industries, Inc. (GTLS) is a company we’ve looked at before in these pages. This enterprise operates as part of the energy infrastructure build-out that’s such a strong investment theme.
The company, out of Garfield Heights, Ohio, is a specialized metal fabricator that manufactures storage solutions for liquefied natural gas (LNG), petrochemical and natural gas processing, gases for medical use, and related storage equipment. Quite a bit of the company’s specialized containers are sold to PetroChina Company Limited (PTR).
Chart Industries reports its fourth-quarter financial results next week. In its third quarter, sales grew 19% to $301.8 million. Earnings increased to $24.4 million, or $0.74 per diluted share, up from $18.5 million, or $0.61 per diluted share, in the same quarter of 2012. The company’s backlog grew 12% to a record $743 million.
In the company’s third-quarter financial report, management slightly reduced their expectations for revenues and earnings going forward due to changes in customer schedules and higher-than-anticipated costs. But the company still has a solid outlook for 2014, and this is very much a growth story, as order activity for LNG equipment is strong.
The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
Another stock that’s following a similar trading pattern is A. O. Smith Corporation (AOS), which is a water heater business that sells its product all over the world. (See “The One Place New Money Can Go to in This Stock Market Right Now.”)
For a mature, … Read More
For the first time in more than three years, Chinese stocks are beginning to show some promise for growth investors looking for opportunities outside of the United States.
The benchmark Shanghai Composite Index has moved to just above its close of 2013; hence, it’s more or less in line with the S&P 500 and Dow Jones Industrial Average.
Many of you are aware of my continued bullishness for China, as I have talked about this in recent commentaries.
We saw some encouraging estimates on Tuesday. The country’s industrial output is estimated to rise 9.5% this year, which could support gross domestic product (GDP) growth of 7.5%, according to Industry and Information Technology. (Source: “China targets factory output growth of around 9.5 percent in 2014,” Reuters, February 17, 2014.) What’s interesting is that the key areas of growth for this year include telecommunications, along with a big jump in business for software and information technology (IT).
You can play the growth in these areas via Chinese IT services firms, such as iSoftStone Holdings Limited (NYSE/ISS, $5.15, Market Cap: $297 million), a provider of IT services to clients and globally. Services include consulting and solutions, IT services, and business process outsourcing. The company is growing with its headcount increasing 27% to 17,702 in the third quarter compared to the same time in 2012. Broken done, 65.1% of the company’s global sales came from the Greater China area, 21.4% were from the U.S., Europe accounted for 7.3%, and Japan made up 5.8%.
Analysts expect iSoftStone to report revenue growth of 13.6% to $432.81 million in 2013, followed by 17.8% to $510.06 million … Read More
Oil prices have rallied back to the $100.00-per-barrel level on some near-term supply and inventory concerns.
While the upside move is rewarding the buyers of oil stocks, I don’t think oil prices are set for an extended rally.
The chart of the West Texas Intermediate (WTI) crude oil shows oil prices bouncing higher after the formation of a bullish double bottom, based on my technical analysis. And while oil prices can head higher on the chart, I just don’t see any moves being sustainable.
The catalyst for higher oil prices has more to do with tight inventories driven by a rise in demand. The inventory of oil contracted by 1.5 million barrels per day in October to December 2013, according to the International Energy Agency (IEA). The IEA suggests the demand for oil will rise by 50,000 barrels per day to 1.3 million barrels in 2014. (Source: Johnson, C. and Sheppard, D., “Robust demand tightening oil market, IEA says,” Reuters, February 13, 2014.) If this estimate pans out, oil prices could edge higher and hold above $100.00, but I doubt the move will last that long.
Now, if China jumps out of its sluggish growth (read “Investment Opportunities in Depressed Chinese Stocks”) and Europe can drive its economic renewal, then we could see brighter prospects for oil prices.
On the supply side, America is relying less on the Organization of the Petroleum Exporting Countries (OPEC) and foreign oil as American oil companies continue to squeeze more oil out of the ground, specifically shale oil.
There may even be a time down the road when … Read More
We all know about some of the insane valuations with social media and Internet services stocks, such as Twitter, Inc. (NYSE/TWTR), Facebook, Inc. (NASDAQ/FB), and Yelp, Inc. (NYSE/YELP), as I have discussed in these pages before. (Read “Two More Internet Stocks to Watch.”)
These valuations make it extremely risky to buy, as a change in the market perception and valuation could lead to a sell-off in the stock, as was the case for Twitter recently.
Now, if you are willing to assume the risk, there are some more attractive Chinese Internet and social media stocks that offer far better valuations than their American counterparts, but these China-based companies also come with much higher risk.
A look at the valuations of these Chinese stocks really doesn’t tell us much, but based purely on strict metrics and valuations, these Chinese stocks look pretty good—in fact, the prices of these Chinese stocks seem too good to believe. And therein lies the risk: due to the questionable reliability of the financial reporting, auditing, and statements in China, these Chinese stocks carry a lot of risk. Sometimes, it seems as though numbers have been made up to suck in investors and drive the share price higher.
The U.S. Securities and Exchange Commission (SEC), as I said in a previous commentary on China, has been trying to clean up the reporting requirements and offer some potential hope that the numbers being reported are valid. While it’s a good step forward, there’s still no guarantee that crooks will not escape the watch of the SEC.
I was reading how there may be 30 or so … Read More
The Securities and Exchange Commission (SEC) is currently shutting down numerous Chinese shell companies trading on U.S. exchanges, such as the over-the-counter market and the highly speculative Pink Sheets stock exchange.
This is good and is something the SEC needs to continue to pursue and enforce, so domestic investors can regain some lost confidence towards Chinese stocks.
The American appetite for Chinese stocks has been picking up; albeit, it’s nowhere near where it was a few years ago when Chinese stocks were all the rage.
Yet if you think there’s little interest in Chinese stocks, take a look at some of the sizzling debuts of the few Chinese initial public offerings (IPOs) that listed in the U.S. last year.
There are now worries China may be set for a downside slide. I have been hearing how the Chinese economy was set to burst, especially regarding the real estate and financial sectors in China. So far this has yet to happen, but we are continuing to hear continued bearish comments towards China.
It’s true the Chinese economy is stalling and may find it difficult to get back to its former double-digit growth, but with gross domestic product (GDP) growth at 7.7% in 2013 and estimated to rise 8.2% this year, according to the Organisation for Economic Co-operation and Development (OECD), these are not bad numbers. By comparison, the U.S. economy is predicted to grow 2.9% in 2014, according to the OECD. (Read “OECD Predicts China #1 Economy by 2016; Consumer Spending to Soar.”)
A recent showing of contraction in Chinese manufacturing in January was used by the Chinese bears … Read More
Fasten your seatbelt, dear reader. We’re in for a global financial crisis, a currency fiasco, and a stock market collapse all in the same year!
I’m being too bearish? Not after you read this…
In their search for economic growth in 2009, the Federal Reserve and other major central banks in the global economy started lowering interest rates and printing paper money.
While the central banks of the world wanted economic growth, they inadvertently created the “trade” for big investors like financial institutions and banks. I talked about this last Friday. (See “Stock Market: The Great Collapse Back to Reality Begins.”)
The “trade” had investors borrowing money from low interest rate countries and buying bonds in high interest rate countries, pocketing the spread. In the world of finance, this is often referred to as the “carry trade.” It works as long as the currencies of the low interest rate country and the higher interest rate country stay stable.
But now, the “trade” is backfiring as the currencies of emerging markets go into free fall.
China, the biggest economy in the emerging markets and second-biggest in the global economy, got most of the “trade” money. According to the Bank for International Settlements, in 2013, foreign currency loans and borrowing by Chinese companies from other countries was close to a trillion dollars. In 2009, it was only $270 billion. (Source: Telegraph, February 1, 2014.)
European banks have the biggest exposure to emerging markets, having lent them $3.0 trillion. Breaking down this number even further, British banks have loaned $518 billion to the emerging markets; Spanish banks come in second … Read More
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