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Which Credit Card Rewards Does the IRS Care About?Hilary Kramer
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Women Top the Home Foreclosure List: Here's What to Do
Despite recent signs of economic recovery, the mortgage crisis has proved to be one that has refused to go away despite valiant efforts of government bailouts, incentive programs and rate adjustments. In fact, with RealtyTrac projecting the foreclosure number for 2011 to be over 1 million for the second year in a row, it looks like the problem is likely to worsen before it gets better, especially in light of the government's failing "relief programs."At the top of the foreclosure list is female homeowners -- in a market where the number of women buying homes in the past decade has doubled and, in a recent poll, shown on average to control approximately 75% of the family finances.
Continue reading Women Top the Home Foreclosure List: Here's What to Do
APEI: A Diamond in the Rough
A great university, but an even better stock. Why? American Public University System (APUS), wholly owned by American Public Education, Inc. (APEI), makes a strong case for leadership in its segment by providing online programs to address critical challenges in higher education. As America faces the dual challenges of reining in crippling tuition costs while significantly increasing the number of college graduates receiving a quality education, APUS has found a business model that seems to accomplish both goals.
Continue reading APEI: A Diamond in the Rough
The Phone Is off the Hook in Europe
It has become a European tradition that the government owned airlines and phone companies are often "bossed" around by the politicians who have kept anything but an arm's length relationship when it comes to decision making. Many European countries hold ownership shares in the industries' major players, and it is very common for these governments -- including sometimes even their heads of state -- to meddle and interfere in their business affairs. Then, when there's even a whiff of economic endangerment, they run for the hills.
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Psst ... There's a Great Future in Bio Plastics!
Do you remember the scene in the classic 1967 movie The Graduate when Dustin Hoffman is advised that the best opportunity for the future is in "plastics"? Well, today, the future looks even brighter -- but for a new generation of green chemical additives that make poly vinyl choride (PVC) more bio-based and fully biodegradable.
PVC is widely used in construction -- roofing, flooring and electrical cable insulation materials. But, PVC is also used in electronics, clothing and upholstery as well as for inflatable toys and pools. Interestingly, 50% of the world's PVC resin manufactured annually is used for producing pipes for industrial applications.
Thus, this is massive market -- to say the least.
Continue reading Psst ... There's a Great Future in Bio Plastics!
A Truly Green Agricultural Company: Dole Food
Dole Food Is Doing Right
The USDA's press secretary released a statement a few days ago that reiterated the Obama administration's commitment to farming. Despite an interview with Reuters that said otherwise, he wanted to make clear "that it is imperative that we keep the farm safety net strong so that the American people can continue to have access to safe, affordable and abundant food." It's interesting that despite all the changes we've seen in response to market volatility and emerging technologies, the farming industry has been this country's constant source of growth and opportunity.
Continue reading A Truly Green Agricultural Company: Dole Food
Be Wary of the Defense Stocks
This is not the time to be loading up on defense stocks. The department of defense's fiscal year 2012 budget request will be submitted in February and the discussions leading up to it will pressure the defense stocks. Also, given a shrinking backlog for many of the companies within the sector, I believe that consensus estimates remain meaningfully too high and will be revised downward throughout the 2nd half of 2010, particularly if current pension assumptions (i.e., interest rates and asset returns) hold.
Northrop Grumman Corp. (NOC) on July 28th, Northrop reported adjusted 2nd quarter EPS ahead of consensus, and revised guidance higher --- highlighting improved margin performance. However, cash flow was weak and Northrop joined the list of defense companies to report declining backlog and weak bookings. Here are my concerns regarding Northrop and why it is a stock to sell: 1) the company is way too leveraged to the defense sector view where I expect pressure on Department of Defense spending and contractor margins. Northrop also joined the list of defense companies reporting weak book-to-bill on the back of another sequential decline in backlog. 2) While Northrop showed some margin improvement in the 2nd quarter --- outside of ships --- its margins and returns on capital remain the lowest in its peer group. 3) If interest rates and asset returns simply stay where they are today, 2011 and 2012 estimates could be reduced down by 11% (of current EPS) or even more.
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Three Tech Game Changers You Don't Want to Miss Out On
We are now in the most interesting time of each quarter for stocks and the market: earnings season. Sure, earnings are always important, but this one is about as significant as it can get because the U.S. economy and stock market are at such a crossroads.In our modern world, technology is now one of the most closely watched sectors in every earnings season because it is central to our economy. Here are 3 tech stocks to buy that are reporting this week and that deserve a close look.
Continue reading Three Tech Game Changers You Don't Want to Miss Out On
Packaging Corporation of America (PKG): Packing in the profits
Conventional wisdom says that growth in the America container-board market is heavily tied to the health of the U.S. economy, and a company's overall success is directly proportional to the size of the operation. But Packaging Corporation of America (NYSE: PKG), one of the most profitable of all of the U.S. container-board companies, defies both of these notions. PCA is a relatively small operation, when compared to its rivals. But the company is successful because of two fundamental strengths: a low debt load and flexibility of both fuel and fiber. The low overhead of a company operating with relatively little debt is easy to understand, but there are significant cost savings to be gained in this market as well by having the ability to adapt production to whichever raw materials are cheapest and most readily available.
PCA's flexibility also gives it an advantage over the competition when it comes to the international markets. Other countries, especially in Asia, require different products than the U.S. market does, and PCA's ability to adjust its production process to meet this foreign demand with relatively little change in expense leaves the company able offset any instability in the U.S. economy with income from foreign markets (especially China).
Continue reading Packaging Corporation of America (PKG): Packing in the profits
Ruth's Chris Steak House Inc.: A stock that still sizzles
If you're going to invest in the food service sector, fine dining is a good place to look. As baby boomers age, they are hitting their prime earning years, which, when combined with their increased disposable income as their children move out of the house, means that there are 78 million potential customers in America with the money and the leisure time to spend on fine dining. But food service can be a tricky industry. There's a high rate of failure, and a lot of a company's worth is derived from the cachet attached to the brand name. That said, every once in a while you find a company that manages to have an organization that is strong enough to ride out these risks and provide some real money making potential. Ruth's Chris Steak House, Inc. (NASDAQ: RUTH), the leading upscale steakhouse chain in the U.S., is one of those companies.With more than 100 restaurants scattered around the country, Ruth's Chris has the diversification to ride out any localized failures, which are more often than not caused by changes in the economic environment in a restaurant's community. And the company plans to keep expanding, with hopes that the chain could eventually run to over 250 restaurants in the U.S. alone.
There's also potential for international growth; there are already 10 Ruth's Chris restaurants around the world, in markets as diverse as Hong Kong and Taiwan, with tentative plans in the works for up to 50 more in the future, starting with the recently announced plans for a Tokyo outpost. And all of this expansion seems to be paying off -- Ruth's Chris reported revenue up 20% last quarter.
Continue reading Ruth's Chris Steak House Inc.: A stock that still sizzles
Monsanto Co. (MON): How you can reap what it sows
This was a banner year for corn yields, and the rising demand of corn for ethanol production has also kept the price of corn high. At the same time, however, there is some consensus among experts that in the coming years, the amount of farmland currently devoted to corn production will become lower as more acres are planted with soybeans instead. How can you, the investor, find the opportunity here? The answer lies in finding a company that helps farmers get more corn out of less acres, and Goldman Sachs (and I!) think that Monsanto Company (NYSE: MON), the world's leading producer of bioengineered seeds for the commercial farming market, is just that company.
Monsanto maintains its position as market leader by staying well ahead of its competition in the research and development of seed technology that create crops that are high yield, resistant to herbicide and bug resistant -- creating a product so advanced that many of the company's competitors choose to work with Monsanto, either via co-development deals or straight licensing of the technology, instead of trying to compete against it.
Continue reading Monsanto Co. (MON): How you can reap what it sows
Illinois Tool Works (ITW): Growing bigger every day
Illinois Tool Works Inc. (NYSE: ITW) is a company on the move. This manufacturer of diversified industrial goods is currently aggressively growing its business, primarily through acquisitions of both domestic and international companies -- in fact, the company has acquired 56 companies over the past year alone. And ITW's revenue has increased in kind; the company has posted double-digit growth for the past two quarters. This trend, which has been steady over the past two years, looks to continue as ITW seems to be staying the course with its growth-by-acquisition strategy. More importantly, ITW knows what to do once it acquires a company. The company's management operates under what is known as the 80/20 principle: That is, 20% of a company's customers generate 80% of a company's profits. This helps ITW focus attention on its most profitable customers, which helps it allocate resources where they will do the most good, and keep its margins high. ITW combines its aggressive acquisition plan and the 80/20 principle in an unusual, but highly successful, way: each newly acquired company is broken down into small units that continue to service the existing customers, which assure that those closest to the customers are the people who know how best to make them happy. And this strategy seems to work: on average, ITW increases the operating margins of its acquired businesses by 100%.
There are, of course, worries that any industry that is tied to U.S. construction is at risk in this fragile housing market, but Goldman Sachs doesn't see any reason to worry here. First, while ITW's engineered products division, which accounts for roughly 47% of revenue, includes many products involved with the construction industry, it also includes other products like auto parts and industrial fasteners, while more than half of the company's income is derived from sales and manufacture of specialty systems, like food and industrial equipment, packaging and more. More to the point, however, ITW has been able to easily offset the current downturn in the construction market with its international sales, which make up almost 45% of its revenue, and this looks to continue as ITW expands in the booming construction markets of China and India.
Continue reading Illinois Tool Works (ITW): Growing bigger every day
Ingram Micro Inc. (IM): The big just get bigger
Sometimes, a company is so far ahead of its competition that the only way for the company to grow is to expand into new markets. Ingram Micro, Inc (NYSE: IM) is the largest technology distributor in the world, offering almost 100,000 different hardware and software products to its customers for resale, along with a host of value-added services like product support, warranty management and financing. Servicing customers in more than 150 countries from 100 distribution centers worldwide, Ingram enjoys a great economy of scale.So where does a company with such an enormous market-share go from here? In today's global economy, the answer is easy: Asia. The 2004 purchase of Australian-based Tech Pacific doubled the size of Ingram's Asian operation, and has helped the company gain traction in the region. Now, Ingram is starting to see great returns -- recent third quarter reports show Asian-Pacific revenue up 35% over the previous year. With its solid competitive advantage and expanding markets, it's no wonder that Ingram is currently reporting 15% higher revenue than last year, and is currently predicting 18% net income growth for the final quarter of 2007.
As I've said before, however, tech stocks are inherently risky: there's a lot of movement in the technology sector, and, due to a lack of competition for resources, it's relatively easy for new companies to enter the market -- particularly a rapidly growing one such as Asia. That said, Ingram is operating so far ahead of its competitors that it would be hard for any other company to achieve the same margins that keep Ingram strong. But Ingram is sensitive to the risks, and the company's recently-announced $300 million share buyback program should help reduce volatility over the next three years.
Type of Stock: Ingram Micro Inc. is the world's largest technology distributor and a leading technology sales, marketing and logistics company.
Price Target: Goldman Sachs rates this one slightly above many other sell-side analysts at $24. I'd look to pick up shares at $19 or less (slightly below where it is currently trading).
Hilary Kramer,author of the newly released Ahead of the Curve, is a financial editor and money coach for AOL and an authority on investing.
Domtar Corp. (UFS): Paper profits in the age of email?
In a world where we write emails instead of memos, read newspapers online, and reuse office paper as much as possible, it's little wonder that the market for paper isn't thriving like it used to. This is particularly true for uncoated free-sheet paper (UFS), the kind generally used in business settings. Demand for UFS has fallen more than 15% since 2000. So why then is Goldman Sachs rating Domtar Corporation (NYSE: UFS), a company that derives much of its business from UFS sales and manufacturing, a buy?In a tough market, Domtar has taken an interesting approach to the fact that demand for its product is decreasing: It has cut back on its operations and increased its prices. The plan is to make Domtar the lowest cost producer of UFS in North America, in an attempt to stay competitive with companies like International Paper (NYSE: IP), who have the advantage of operating in traditionally lower cost countries in South America.
Continue reading Domtar Corp. (UFS): Paper profits in the age of email?
Hexcel Corp (HXL): The whole is greater than the sum of its parts
Composite materials -- putting two building materials together to make them stronger than they would be on their own -- have been around for as long as mankind has been building structures. But we've come a long way since we first figured out that straw and mud together can make a brick, and modern composite materials, like carbon fiber, are becoming increasingly important in a number of technology markets, especially the aeronautics field. Lightweight and super-strong, Goldman Sachs estimates at the next generation of aircraft could be made up of as much as three-fourths composite material, and this is why I think there are some great opportunities to be found in Hexcel Corporation (NYSE: HXL), a California-based company that has been making technologically advanced composite materials since the 1940s.
Hexcel's strongest sales have always been to the aeronautics industry. The company's longstanding relationship with Boeing (NYSE: BA), among other aircraft builders, has kept profits high over the past year, with operating earnings up 26% in the last quarter.
Continue reading Hexcel Corp (HXL): The whole is greater than the sum of its parts
Peabody Energy Corp. (BTU): The fuel of the future is ... coal?
If you want to invest in an energy resource that's cheap, has a dependable supply and a proven track record, don't forget about coal. In the very (very) long term, it may become obsolete, but for the foreseeable future coal is an excellent investment for an energy source that can immediately step in to cover the rising cost and dwindling supply of oil, while alternative energy sources need to be more fully developed before they can take over as primary suppliers of electricity and more.And if you're going to invest in coal, Peabody Energy Corporation (NYSE: BTU) is an excellent bet. Frequently considered the best coal producer in its class, Peabody has the resources and size to weather any blips in the sometimes volatile coal market. Its U.S. operation is immense -- in 2006, 20% of all coal mined in America was produced by Peabody, and today, 10% of electricity produced by any source is fueled by the company's coal.
By far the most profitable part of its American operation are the company's mines in the Western states, primarily in the Powder River Basin in Wyoming and Montana, which account for 75% of Peabody's production. By contrast, the Eastern states production is less profitable, mostly due to transportation problems. To that end, Peabody has recently spun off Patriot Coal Corp. (NYSE: PCX), based out of Appalachia and Illinois, which analysts say should reduce costs without having a significant impact on the income stream.
Continue reading Peabody Energy Corp. (BTU): The fuel of the future is ... coal?
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