Posts Tagged ‘Europe’
A few years ago, investors couldn’t get enough of Chinese stocks. This led to numerous frauds committed by crooks in China that has since tarnished the reputation and reliability of all Chinese companies, whether they’re legitimate or not, despite their operating in one of the top growth areas in the world.
While I’m not focused on Chinese stocks at this moment due to better trading opportunities in the domestic stock market, I monitor the country and remain convinced it’s still a key place to have some risk capital invested in. When the broader market understands this, I would expect renewed buying in Chinese stocks sometime in the future.
My view is that the country’s current leadership under President Xi Jinping, who assumed power in March 2013, has a vision to create a country of consumers, just like the United States; albeit, I doubt it will come close to what we see here with consumer spending driving 70% of gross domestic product (GDP) growth. In China, consumer spending drives about 30% of GDP so there’s work to do. In the second quarter, retail sales continued at a double-digit growth of 12.4% year-over-year.
The objective to cut the country’s dependence on exports and foreign investment makes sense. With a potential market in excess of one billion people, it’s the right move.
China may not be in the spotlight for investors now, but you cannot ignore the country. With the recent years of underperformance, I see great longer-term upside in Chinese stocks.
The Chinese economy is growing at well below the double-digit growth of the past, but comparatively, the growth is far superior … Read More
It’s no surprise that the railroad business is doing well. We’ve been looking at Union Pacific Corporation (UNP) and other railroad stocks consistently in these pages for a number of years.
But not only are pure-play railroads doing well, offshoots within the industry are also booming.
It’s a good time to be in railroad stocks, and if you believe that the economy is ready to experience a new business cycle like I do, then these stocks have a lot more legs in this market.
I still like Union Pacific and Canadian National Railway Company (CNI) both for capital gains potential and income for investors.
The railroad business isn’t complicated. If there is demand for the shipment of freight, railroad companies add railcars. Accordingly, a company that manufactures railcars and other related products is likely doing pretty well considering how strong railroad stocks have performed over the last several years.
The Greenbrier Companies, Inc. (GBX) is a company we’ve looked at before. This business is headquartered in Lake Oswego, Oregon and business conditions are pretty good.
The company manufactures railcars for the North American market as well as Europe. But it’s not just a pure-play railcar supplier; the company makes barges for marine transportation and also sells specialized industrial fabrication for electrical, construction, and energy customers.
A lot of stocks related to the transportation/freight/railroad industry are doing great. The Greenbrier Companies is riding a wave of new manufacturing demand, and the stock just hit a new all-time record-high after reporting another great quarter. (See “Why These Four Rail Picks Are on My Radar.”)
According to the company, its bottom-line … Read More
If you cannot get through the day without that cup of coffee, you may need to prepare to spend a little more to get it.
Coffee prices have been surging, up more than 30% year-over-year. The cost to have that morning cup of java has edged higher, but not at the same rate as the cash price of coffee.
The coffee industry is a multibillion-dollar industry in the United States and is a competitive marketplace, but at the top of the coffee heap is Starbucks Corporation (NASDAQ/SBUX), which has developed into an iconic brand both domestically and worldwide. In Asia, Europe, and Latin America, no matter where you are, it seems there’s a Starbucks near you. In China, the brand is rapidly growing, and the company plans to expand in this region with thousands of outlets.
Starbucks has also expanded into providing more menu alternatives and is involved in the tea market via its acquisition of the Teavana chain. The company is also marketing juices and operates a small chain of hamburger outlets in California.
For long-term investors, you cannot go wrong with Starbucks, which could serve as a good core holding in your portfolio.
Chart courtesy of www.StockCharts.com
However, in the traditional coffee and donut market, the top player at this time is the “Dunkin Donuts” chain, operated by Dunkin Brands Group, Inc. (NASDAQ/DNKN). The company also operates the “Baskin-Robbins” ice cream chain. Unlike Starbucks, Dunkin is primarily a U.S. brand that doesn’t have much recognition outside American borders; albeit, the company is looking to expand to the United Kingdom via the planned opening of 50 outlets in Greater … Read More
The global airline sector is probably at its brightest point in history, having seen a significant improvement following the effects of 9/11 that nearly killed the industry.
The factor that’s pushing up the airline sector has been the renewal in the global economy, particularly the massive buildup of newfound wealth in the emerging markets in Asia, Latin America, and Eastern Europe. The growth is especially strong in Asia, as China continues to develop a significant middle class and consumer generation who want to spend and travel both domestically and internationally.
Future prospects look bright for the airline sector and are on target for higher profits for the second straight year, based on research by the International Air Transport Association (IATA). North America is estimated to retain its top spot in the airline sector, but the Asia-Pacific region is a fast-growing second. (Source: “Industry on Track for Second Year of Improving Profits – Rising Fuel Costs Largely Offset by Increased Demand,” International Air Transport Association web site, March 12, 2014.)
China is estimated to require 5,000 new planes over the next two decades. The key plane makers fulfilling the need will be The Boeing Company (NYSE/BA) and Embraer S.A. (NYSE/ERJ). Yet China is aggressively developing its own domestic plane for the airline sector called the “COMAC,” which is expected to launch its first regional airliner soon and has plans to deliver longer-range planes by 2018.
The S&P Aerospace & Defense ETF (NYSEArca/XAR) is near its highest levels in a year and is trading in an upwards channel, based on my technical analysis of the chart below.
Chart courtesy of www.StockCharts.com
While … Read More
In today’s U.S. economy, we have a very small portion of the population earning most of the total income generated by the economy, while the majority of people suffer, as their incomes have failed to rise at the pace of the rich.
According to a study by the Paris School of Economics, the richest 0.1% of Americans takes home nine percent of the U.S. national income. The bottom 90%, which is pretty much everyone else, earns just 50% of the national income. (Source: MarketWatch, February 26, 2014.)
Income inequality in the U.S. economy is worse now than it was during the 1920s in Great Britain.
Aside from income inequality, the other big problem with the U.S. economy is that the majority of Americans simply don’t have liquid wealth. Liquid wealth is assets that can be quickly converted into cash if needed (a home is not considered liquid).
According to Phoenix Marketing International, 25% of U.S. households hold about 75% of the liquid wealth in the U.S. economy. (Source: Phoenix Marketing International, January 16, 2014.) The U.S. is becoming more and more like Europe, where there are the very wealthy and the very poor. The middle class, who should be the backbone of the American economy, well, they have all but disappeared.
Consider that in December of 2013, 22.7 million households in the U.S. economy used food stamps. Not long before then, in 2010, that number was 20.6 million households. (Source: U.S. Department of Agriculture, March 7, 2014.) And that’s after the U.S. government cut back on food stamps funding!
For economic growth, you need personal incomes rising at … 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
Copper prices are collapsing, a sign that manufacturing activity in the global economy is slowing.
The chart below shows copper prices are down more than five percent so far this year. Notice the steep decline in copper prices starting this January.
Copper is a major commodity used as a material ingredient in a wide variety of manufactured goods. If copper prices are declining, which means demand is falling, we get an early indication that manufacturers are producing less because customer demand is soft.
At the same time, in another startling development, the Baltic Dry Index (BDI), the next chart below, has collapsed 50% from the beginning of the year.
Chart courtesy of www.StockCharts.com
The BDI basically tracks shipping prices of raw materials in the global economy. When the BDI declines, it means fewer goods are being shipped in the global economy, a sign that the worldwide economy is slowing.
Chart courtesy of www.StockCharts.com
Last but not least, as we have been hearing in the news, the emerging markets in the global economy are in trouble.
Manufacturers in the global economy, not being able to sell enough to developed countries like the U.S. and Europe, were hoping to sell more of their goods to once “fast”-growing emerging markets. But now, economic growth in these countries is slowing, too.
Russia, one of the major emerging markets in the global economy, reported its 2013 economic growth rate was the lowest since 2009! The Russian Federal Statistics Service said the economy grew by 1.3% in 2013 compared to 3.4% in 2012. (Source: Bloomberg, January 31, 2014.)
Other emerging markets like India and China have … Read More
Apple sold a whopping record 51 million “iPhones” and 26 million “iPads” in its fiscal first quarter, which is great stuff at first glance. So why did investors scramble for the exits?
The problem is that the market expectations placed on Apple are enormous. But that’s what happens when you’re the top seller of smartphones in the United States. Wall Street wanted to see the company sell 55 million iPhones, so its four-million-unit miss was a disappointment.
What’s failing the company is its reluctance to sell a really cheap iPhone that caters to the emerging markets, which is, in reality, where much of the growth is for smartphones.
Apple has a deal with China Mobile Limited (NYSE/CHL) to mass market its phones in the massive Chinese market, where there are more than 750 million users. (Read “Apple Finally Takes Step That Will Take the Company to the Next Level.”) But while the deal was only recently formalized, the early indications are that sales of the iPhone in China aren’t all that great.
The problem is (as I have discussed on numerous occasions) Apple’s reluctance to sell a cheap iPhone. Price points are critical when selling products in the emerging markets, so the lack of a cheaper offering from the company will hurt its sales in China. China is not like America, Japan, or Europe as far as available discretionary income. When the per-capita income in China hovers around US$6,500 or so annually and Apple wants to charge $600.00-plus for an “iPhone 5S,” there’s clearly a disconnect.
CEO Tim Cook doesn’t seem to get it or it’s simply an … Read More
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