Tuesday, April 10, 2012

This Sector Is Trading Below "End of the World" Prices

In the past seven weeks, stocks are up 7%. But major U.S. companies in one sector are down an average of 19%.
The sector is now cheaper than it was during the "Great Recession [2]." At today's prices, the market [3] expects worse than the end of the world.
If things simply get "less bad," we could make a quick 48% return over the next 12-18 months. Let me explain...
Right now, investors HATE coal. And for good reason...
According to the U.S. Energy Information Administration, coal-based electricity generation fell 21% in 2011. Electricity generation accounts for 93% of U.S. coal consumption. That puts current coal demand at a new 35-year low.
Falling demand is pushing prices down. The price of "thermal" coal – the kind that utilities use to generate electricity – is down nearly 20% since October.
What's to blame for the fall? The easy answer is natural gas...
Natural gas prices have cratered in the past year... falling 50%. Natural gas is now dirt-cheap. So many utility companies are switching from coal to natural gas.
All the bad news has investors fleeing the sector. The easiest way to see the exodus is through the "shares outstanding [4]" of the Market Vectors Coal Fund (KOL). Take a look...
When investors flee a fund, the number of shares [5] shrinks. In the case of KOL, the number of shares has fallen 60% since last April. (To put that in context, the number of shares of the largest S&P 500 fund are up 10% over the same period.)
With crashing prices come cheap valuations. Today, U.S. coal stocks trade at their lowest valuation in 14 years, based on price-to-book ratios. Take a look...
Unbelievably, coal stocks are 18% cheaper today than they were at the bottom in 2009. If these companies can simply return to their median price-to-book, we will see 48% gains from today's price. I think this could easily happen over the next 12-18 months...
You see... even with coal prices and demand falling, coal producers earned solid profits last year. In fact, Peabody Energy, the largest U.S. coal producer, reported record earnings [6] in 2011.
And get this... while this year's earnings will likely be down from last year, estimates for major U.S. producers are MUCH higher looking past 2012...
Wall Street [7] could have it wrong here. Some energy experts believe coal prices will continue to decline, which will cause these companies to fall short of their earnings expectations.
But right now, these companies are selling at cheap prices. Walter trades for just 8.3 times 2013 earnings. Peabody trades for seven times 2013 earnings. If things simply get "less bad" for coal companies, they could soar.
The only problem is the uptrend... We don't have it. KOL has been trending down for the last two months. And the major producers listed above are all down double digits over the same period.
Speculators can buy today and get a solid risk/reward setup. KOL trades 12% above its October low. Using that as a stop loss gives us 48% upside and just 12% downside.
Personally, I don't want to try to catch a falling knife [8]. These companies WILL bottom eventually. But I'm more comfortable waiting for an uptrend before we get long.
For now, keep coal stocks on your radar. When the absolute worst passes for these companies, an uptrend will appear... And we'll have an extremely low-risk, high-upside trade.

John Williams – Unemployment Rate at a Staggering 22.2%

from KingWorldNews:

John Williams, of Shadowstats, notes that manipulated government statistics are not changing the fact that the true SGS Unemployment Measure now sits at a staggering 22.2%. Williams also demonstrates that despite the hype from Wall Street about a recovery, parts of the economy remain collapsed. Here is what Williams had to say about the situation: “Adding the SGS estimate of excluded long-term discouraged workers back into the total unemployed and labor force, unemployment—more in line with common experience as estimated by the SGS-Alternate Unemployment Measure—notched lower to 22.2% in March from 22.4% in February.”

John Williams continues @ KingWorldNews.com

An Internet Bubble Survivor That Could Double

Many of the hottest stocks from 1999 were underfunded ideas. When the bubble popped in early 2000, many tech companies with weak financials went bankrupt. The crash served as a stress test for tech companies. Those that survived generally had sound financials and better business models.

One of those survivors looks ready to move much higher. Its shares [2] are still 85% below their all-time highs, but they've caught the attention of traders: Shares are up more than 1,100% in the past three years.

Being noticed by traders is critical to a stock’s success. No matter what the fundamentals show, the only thing that moves a stock price higher is increased demand for the stock. If traders never notice a company, the stock price will at best move in line with the market [3]. #-ad_banner-#

To find stocks that traders want to own, I look at a simple screen to see which stocks have had the biggest gains in the past 26 weeks. A number of studies have shown that the biggest winners from the past 26 weeks are likely to outperform in the next six months.

This week I found a company that makes equipment needed to clean machines used to make circuit boards. It’s a high tech survivor with long-standing customer relationships that could deliver steady sales in the future.

FASII appears to be undervalued based on earnings [4]. Analysts have been raising their estimates in the past few days after a great earnings report in March. They now expect the company to report earnings of 41 cents per share this year. The stock market is trading with an average price-to-earnings (P/E) ratio of about 13. FSII is growing much faster than the market and should support a higher than average P/E ratio. Yet based on next year’s earnings, the P/E ratio is only about 11. If FSII traded at 15 times earnings, a small and reasonable premium to the market for a company with earnings expected to grow by 94% this year, the stock would be trading at $6.15.

For next year, analysts think that FSII could earn 68 cents per share. At a P/E ratio of 15, that level of earnings gives us a price target [5] of $10.20 for long-term investors, a gain of about 120% from recent trading levels.

In addition to fundamentals, the chart of FSII also says it’s a buy. Relative strength [6] is high and momentum indicators such as MACD [7] are bullish [8].

Potential rewards are so high because FSII has disappointed investors in the past. They have a long history of sales but have only been profitable for the past two years. The company seems to have turned a corner to steady profits, but traders need to manage risk on this trade, just as they do on any other trade.

The daily chart shows that FSII would break below its lower Bollinger Band with a close below $4.20. Risk is limited to less than 10%, and the potential gains are three times that level in the short-term and more than ten times that level in the long-term.

The Foreclosure Crisis in America is far from over

Despite what mainstream media calls a recovering economy, the reality is Americans are still losing their house to foreclosure. The foreclosure crisis is far from over and it is apparent as Main St. continues to struggle.The government and the banks ARE the problem , These bunch of corporate prestitutes who in a very sleazy way allow poverty, indignity of people, blood shed swells of UNNEEDED wars to continue. They are the CANCER oF HUMANITY . Stop going to these institutions, stop using banks. Stop buying into their evil, corrupt schemes and let the 'communities' help themselves. Get the government out of our lives and let the constitution be what we go by, not the UN and international law. Just stop participating in the corruption and 'they' the institutions will have nobody but fools to loan to.

A Primer On Palladium

Palladium is one of the rarest metals on earth, about 15 times more rare than platinum and 30 times more rare than gold. Belonging to the platinum group of metals, around 80% of the world's palladium production comes from two countries: Russia and South Africa. In fact, Russia alone accounts for roughly half of the world's production, which is estimated to be 200,000 ounces per year. This can create cause for concern as any decrease in exports from these countries can contribute to volatility in palladium prices.

In comparison to platinum, palladium shares similar chemical properties but is less dense and has a lower melting point.

Uses of Palladium
With this in mind, it is important to take a look at the various uses of the metal. The unique composition of palladium makes it ideal for the auto industry, dentistry, electronics and fuel cell production. However, the most important use of palladium by far is the auto industry. Used in catalytic converters, the auto industry accounted for over 60% of the demand in 2010. To put this in perspective,about 80 million vehicles will be produced in 2011 and on average each catalytic converter requires about 1/20th of an ounce of palladium or platinum. Jewelry and industrial use, which comprises of dentistry and electronics, are the next highest users with approximately 29 and 7% of the demand in 2010 respectively.

Supply and Demand
Because Russia controls roughly 50% of the worldwide palladium pricing, and South Africa around 30%, palladium prices can be quite volatile. Between 2005 and 2011, palladium has gone from a low of about $168 per ounce to approximately $858 per ounce, settling around $630 per ounce as of Dec. 29, 2011.

Demand has also contributed to this volatility. With China's auto industry booming this could put a strain on supplies. Furthermore, the size of Russia's stockpile is a state secret so it is unknown how much supply they will export in future years.

Palladium Investing
There are a variety of ways an investor can gain exposure to this metal, whether through physical palladium, palladium futures, palladium miners or palladium exchange-traded funds (ETFs). Many miners are engaged in mining a variety of metals however, and since palladium is so rare it only makes up a small portion of a miners output. Nevertheless there are a few pure play mining companies that an investor can invest in.

As for palladium ETFs, the ETFS Physical Palladium Shares (ARCA:PALL) holds physical palladium and moves in tandem with the market price.

Lastly, palladium futures can be used to gain exposure. They are traded on the New York Mercantile Exchange (NYMEX) and are available over 15 months, starting at the current month, then the next two following months before going onto the quarterly cycle of March, June, September and December.

Sample Futures Contract
A sample palladium futures contract is shown in this table:

Palladium Contract Specifications

Ticker Symbol

Open Outcry: PA (NYMEX)
CME Globex Electronic: PA (NYMEX)

Contract Size

100 troy ounces

Deliverable Grades

In fulfillment of each contract, the seller must deliver 100 troy ounces (±7%) of palladium, not less than .9995 fineness and with no single piece weighing less than 10 ounces. Each contract unit may consist of ingots or plates, each incised with the lot or bar number, weight, grade, name or logo of the assayer and symbol identifying the metal.

Contract Months

All months

Trading Hours

NYMEX Open Outcry: Monday-Friday 8:30 a.m.-1:00 p.m. EST

CME Globex Electronic: Sunday-Friday 6 p.m.-5:15 p.m. EST

Last Trading Day

Third to last business day of the contract month. Trading terminates at the close of business on the third business day prior to the end of the delivery month.

Last Delivery Day

Last business day of the contract month

Price Quote

U.S. dollars and cents per troy ounce

Tick Size

NYMEX: 5 cents per troy ounce ($5 per contract)

Palladium Futures Contract in Detail
Every commodity has its own ticker symbol, margin requirements and contract value so it is important to know how to read the ticker. A palladium quote would look like this for example:

PAF9 @ 650

This would be like saying Palladium (PA) 2009 (9) January (F) at $650 per ounce.

Using the information in the chart above, the palladium contract equals the equivalent of 100 ounces multiplied by the $650, so: $650 x 100 ounces = $65,000

Metals are traded based on margin and this rate can change based on the volatility of the market. Typically if the margin rate increases, the price of palladium will drop and vice versa. The leverage gives speculators a higher risk return investment.

Palladium trades on the NYMEX and the Tokyo Commodities Exchange (TOCOM), each have their own contract size and minimum price fluctuation.

Change in Price
Each metal has its own contract size so the change in price can differ from other metals. For palladium, every 10 cent move is equal to $5, or 100 cent move the equivalent to $50. This is demonstrated below:

Buy Price

Sell Price

Total Value

Palladium Contract Price (100 cents move = $50)



$100 or $5,000

The Bottom Line
Palladium is one of the rarest metals on earth and is often neglected in favor of its more popular brother, platinum. However because of its unique qualities it is being used more and more in the auto industry, and as it is cheaper than platinum and comes from a limited number of sources, prices should rise in tandem. With this in mind, if traders and investors want exposure to this precious metal they can start looking at specific stocks, futures and ETFs.

This Growing Company is Giving 2 Giants a Run for their Money

Whenever you hear that a company is a "growth-through-acquisition story," you should be cautious. Investors tend to shun these types of stocks, as acquisitions bring plenty of risk. The acquired company may not generate the revenue growth that management had been banking on, or hoped-for cost cuts or other synergies may simply never materialize.

But a knee-jerk dismissal of these types of companies is a mistake, and investors instead need to differentiate between the two types of deal-making.

[block:block=16]Some companies do deals just to grow larger, while others do them to fill holes in their business model. It's this latter focus that actually can yield major gains, and where you should be focusing.

Filling in the gaps in its platform has been the key driver for Toronto-based MDC Partners (Nasdaq: MDCA [2]), North America's third-largest advertising agency behind Omnicom (NYSE: OMC [3]) and Interpublic (NYSE: IPG [4]). Publicis, WPP and Havas are also larger than MDC, but are domiciled in Europe. (Please note that many investors mistakenly look up MDC Holdings (NYSE: MDC [5]), which is a home builder.)

MDC Partners went through a solid growth spurt before the economy headed south in 2009. (Sales rose from $247 million in 2004 to $583 million in 2008.) The company was able to snag a number of key accounts from the industry's bigger players by a tight focus on online media advertising. Yet management realized that further gains would be hard to come by as MDC lacked several key services and offerings that clients expect from an ad agency. MDC has recently completed several small deals to round its platform, but those deals have soured investors who shun deal-making companies.

Yet MDC is now in a position to again take share from rivals and also generate more sales from existing customers. The company is on track for more than $1 billion in sales this year, which finally puts its name in discussions when Fortune 500 companies are looking to award major accounts.

Despite the company's newfound heft, shares are off 22% in the past six months, even as Interpublic and Omnicom's stocks have risen more than 35% in that time frame.

As a result, MDC is now the most inexpensive stock in the group -- but it is also the fastest-growing. While Interpublic and Omnicom are expected to boost sales 3% this year, MDC's sales are expected to rise in the low teens to around $1.06 billion.

Sure, the company has done some minor acquisitions in the last few quarters (and just announced another one this week), but the bulk of that growth is coming from new client wins. In just the first quarter of 2012, MDC landed new accounts with Arby's and Applebee's, as well as Target's (NYSE: TGT [6]) grocery business. Equally important, the company's broadened suite of offerings is enabling MDC to move deeper into client account relationships, which is boosting pricing and profit margins.

The company expects to generate 10.5% profit margins in 2012, roughly 100 basis points higher than in 2011. That's leading to an estimated $1.45 a share in free cash flow, which works out to a free cash flow yield of more than 13% ($1.45 FCF / $11 stock price = 13%).

This helps support an annual dividend of $0.56 per share (good for a 5.4% dividend yield).

I had been waiting to see how MDC's quarterly results looked, but management just pre-announced solid projections for the first quarter and the full year. Look for first-quarter sales to rise roughly 7% from a year-ago to around $233 million, and full-year sales to rise more than 10% to around $1.06 billion. Though the company is expected to be unprofitable on a GAAP basis due to a high level of amortization, cash flow should be quite strong, as noted above.

Strong top and bottom-line momentum, a robust dividend, and low valuations help explain why I'm adding this company to my $100,000 Real-Money Portfolio [7].

The Downside Protection -->
Ad agencies derive a high degree of recurring revenue thanks to multi-year contracts, so a fall-off in business is unlikely unless the U.S. economy hits a big air pocket. Meanwhile, shares are washed out, trading near a two-year low and sporting a double-digit free cash flow yield. It's hard to see this stock falling much below $10.

Upside Triggers --> Management understands that the recent spate of acquisitions must help bolster the bottom line as well as the top line. The company has been rightly criticized for neglecting free cash flow in the past as it invests in acquired businesses and extends its broad sales platform. Management's 2012 free cash flow [8] targets show that it gets the message. Assuming few new major acquisitions this year, you should expect to see free cash flow surge even higher in 2013 as the era of internal investments winds down.

This is also a play on GDP growth. As the U.S. economy creates 200,000 jobs each month, corporations will respond by boosting spending on advertising. A handy rule of thumb is that ad spending moves at two to three times the direction of GDP growth, so MDC should see a 5% to 10% boost to growth, even before assuming any further market share gains that come from the company's recently expanded service offerings.

Bob Chapman - The Financial Survival - 09 April 2012

Bob Chapman - The Financial Survival - 09 April 2012 : today was a good day for Gold , Gold is in fact up while the DOW is down quite unusual , despite the government trying its best to keep gold and silver prices down says Bob Chapman

This Watch-Maker Could Deliver A +34% Return

Fashion stocks can be notoriously tricky to trade, but shares of this stylish watch, jewelry and apparel maker appear to offer a solid profit-making opportunity.

Driven by strong fundamentals, this stock is already up nearly 73% year-to-date. Just this past April 2nd trading week, shares hit an all-time high, while bullishly emerging from a rounded bottom basing pattern. With no overhead resistance is in sight, the stock looks poised to move higher.

On April 3rd, Fossil (Nasdaq: FOSL) became part of the S&P 500 Index ($SPX). The watch retailer replaced Medco Health Solutions, which was acquired by Express Scripts (Nasdaq: ESRX). Its placement in the S&P gives Fossil increased prominence, but what's really driving the stock is its aggressive international marketing.

The company has made large capital investments in developing areas and is now reaping the rewards. It is experiencing strong demand in regions like Asia and Europe, where fourth-quarter net sales increased nearly 19% and 16%, respectively.

Further propelling international growth is the recently completed acquisition of competitor Skagen designs. Skagen, a Nevada-based watch, jewelry, sunglasses and clock maker was acquired for $231.7 million. The company was attractive to Fossil because of its well-established presence in Europe, the Middle East and Eastern Asia. The purchase should help Fossil further leverage the European and Asia markets.

Fossil owns more than 390 stores worldwide. Over the 2012 year, the company plans to open 70 to 75 new stores in both the U.S. and internationally. As Fossil continues to expand across the globe, its growing brand presence should continue to drive profit growth.

Traders certainly seem convinced.

As the two-year chart below shows, Fossil was on a strong uptrend from June 2010 through July 2011. Over that time, the stock rose over $100, from a low of $33.86 to a high of $134.98.

Peaking at this level, shares proceed to fall dramatically. In four short weeks, the stock lost nearly half its value, sinking to a low of $69.57 before finding support. The Major uptrend line was broken in the process.

Knocking against support, the stock struggled to regain ground, rising to a high of $110.74, only to fall back, touching a low of $76.72 in late December 2011.

During this trading activity, a rounded bottom basing pattern formed. Note the gradually decreasing volume trend during the fall and early winter of 2011 and the dramatic increase of volume in February when the shares broke $110 resistance in January 2012.

Since that time the shares has formed an Intermediate-term uptrend line and Fossil has been on a tear.

This holiday-shortened April 2nd trading week, the stock went through resistance, hitting a new all-time high near $138. With no historical resistance in sight, shares could move much higher.

The strong technical outlook is supported by solid fundamentals.

In mid-February, the watch-maker reported upbeat fourth-quarter and full-year results.

Driven by double-digit sales growth across all major brands, products, and geographies, fourth-quarter revenue increased 18.5% to $830.8 million, from $701.1 million in the year-ago period.

Due to increased sales of watches and leather goods, full year 2011 revenue increased 26.4% to $2.6 billion, from $2 billion a year earlier.

For the full 2012 year, analysts project revenue will increase 16.5% to $3 billion and gain a further 15.2%, to $3.5 billion, by 2013.

The earnings picture is similar.

Driven by strong product demand, fourth-quarter earnings surged 28% to $1.87 per share, from $1.46 in the comparable year-ago period.

Due to success with its lifestyle and multi-brand watch business segments, full-year 2011 earnings were up 16% to $4.61 per share, from $3.77 per share a year earlier. A favorable currency exchange, combined with a lower outstanding share count, created by an ongoing stock repurchase program, also helped fuel the gain.

For the full 2012 year, the company expects earnings will be in a range of $5.40 to $5.50 per share, representing at least a 17% increase from $4.61 last year. By full-year 2013, analysts expect earnings to increase an additional 22% to $6.68.

Given the strong fundamental outlook, supported by bullish technicals, I plan to go long on the watch maker.

Risks to consider: Fossil is currently at an all-time high and could peter out from here. Although the high-end retailer is currently doing well in a tough retail environment, watches, jewelry and accessories are discretionary items. Cost-conscious consumers could move on to the next hot brand. As such, I will enter the position with caution. I will place a buy-on-stop order just above psychological resistance of $140, at $141.74. This means if the stock does not hit or go above $141.74, I will not enter the position.

With no historical resistance in sight, my target is $189.39, well under round-number resistance at $200. My stop-loss is $109.89, just under $110 support. The risk to reward ratio is approximately 1.40:1.