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Mid-Week Update 03-03-10

Qualcomm (QCOM), the newest addition to the Growth Portfolio and a part of our FundFinds Portfolio, is a tech franchise whose business revolves around wireless technology, in particular, CDMA, the heart of the new generation of cell phones. After posting disappointing earnings guidance in January, the company had some goods news this week.
 
The semiconductor company announced that its board authorized the new buyback worth $3 billion. This replaces the $2-billion buyback plan, $1.7 billion worth of shares from which have already been repurchased by the company. In addition, Qualcomm will increase its quarterly dividend by 12 percent to $0.19. Investors, as a result, will be receiving $134.4 million more per year from the company.
 
Moreover, the company provided a more optimistic business outlook. While back in January, Qualcomm’s CEO, Paul Jacobs, offered a fairly pessimistic view of the company’s prospects for the year, it seems conditions may be improving. Now, the company expects both the revenues and profit for the second quarter to approach the higher end of the earlier forecasts.
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Market Update 03-02-10

The bifurcated economy continues to plod along. The manufacturing segment is doing fairly well thanks in large part to strong export demand, which has risen for seven consecutive months. The service sector, however, continues to struggle.Read more...

Mid-Week Update 02-24-10

Despite some positive economic news that has come out in recent weeks, one area of the economy that has yet to show real signs of improvement is retail spending. American consumers are still reeling from the near collapse of the U.S. economy, and nearly 10 percent of them don’t have a job (many more if you count partially employed). This raises doubts about the sustainability of the recovery, given that personal consumption accounts for roughly 70 percent of U.S. GDP.
 
Consumer sentiment is still not back to normal. Yesterday the Conference Board announced that its consumer confidence index had fallen from an upward-revised 56.5 to 46.0. The historic average of the index is 95.6, which means that the recovery, from the consumer’s perspective, has a long way to go. When consumers were asked to assess the current-day conditions, the relevant index fell 5.8 points to 19.4 – its lowest level since 1983. Perhaps even more worrisome, the Expectations Index, which measures the six-month outlook, also declined, dropping 13.5 points to 63.8.
 
The main factor contributing to these declines was, not surprisingly, the dismal job climate.
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Market Update 02-16-10

The European Union’s plans for aiding the ailing Greek economy continue to dominate the financial headlines this week. Last Thursday, EU member states pledged to come to Greece’s rescue—should they ask for it—without offering solid details on an aid package. That news settled equity markets while simultaneously hurting rather than helping the euro. The news also buoyed precious metals.Read more...

Mid-Week Update 12-02-09

BHP Billiton (BHP), which is featured in both our Growth and Income Portfolios, failed to consummate a marriage with Rio Tinto (RTP) last year. But a subsequently proposed joint venture between the pair, the second- and third-largest iron ore producers in the world, could be nearing reality. The partnership between the two companies, if the deal is finalized, would merge their iron ore operations in Australia and create a synergy that could save around $10 billion a year on capital and production costs. The two companies are expected to ship more than 300 million tons combined of iron ore worldwide this year.
 
The joint venture is not written in stone yet. The companies are looking to finalize the deal by a December 5 deadline stated by Rio, while BHP’s CEO Marius Kloppers is less concerned about the date and is looking for completion before year-end. Regardless, the joint venture makes sense for both companies.
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Mid-Week Update 11-25-09

Petrobras (PBR), the Brazilian oil giant and one of the largest oil producers in the world, recently announced its third quarter results, bringing in R$7.3 billion ($4.2 billion) in earnings. Although down from R$9.84 billion in the same quarter last year, the figures narrowly beat Bloomberg’s average analyst estimates of R$7.25 billion.
 
The results reflect a challenging quarter, in which oil prices dropped 41 percent from a year ago. Indeed, Petrobras’ competitors all took similar hits on the back of lower crude prices, most of them to a greater degree than Petrobras (ExxonMobil’s third-quarter profit fell a whopping 68 percent and Royal Dutch Shell’s profits fell 62 percent). With production strong and on track to fulfill output targets, and with various long-term opportunities waiting to be exploited, we believe that Petrobras’ long-term prospects remain as strong as ever.
 
Petrobras has one of the world’s largest proven oil reserves and is among the top ten companies in the world in terms of oil and gas production, as well as total refining capacity. The CEO, Jose Sergio Gabrielli, said in a recent interview that Petrobras’ proven reserves could more than double to around 35 billion barrels in the next two to three years, up from roughly 14 billion now.
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Mid-Week Update 11-18-09

As we head into holiday shopping time, third-quarter earnings season is coming to a close with 95 percent of S&P 500 companies having reported. There have been many upside surprises (80 percent), but as consumer spending and the underlying economy have remained weak – most have been due to maneuvering by management, including inventory controls and cost cutting, as well as lowered analyst expectations. 
 
The market has cheered estimate-beating results, but we’re hardly convinced that the US economy is in the clear.
 
Wal-Mart (WMT), a Growth Portfolio resident and consumer bellwether has been no exception, as evidenced by the company’s recent earnings report. The retail giant saw U.S. same-store sales fall 0.4 percent versus the same period last year, short of the management’s expectations of flat to a 2 percent increase in sales. Earnings were up to $3.24 billion (84 cents a share) from $3.14 billion (80 cents a share) a year earlier as. Like so many others recently, the company beat profit expectations of EPS of 81 cents as CEO Mike Duke cut inventory by 4.1 percent and accelerated other expense-cutting mechanisms.
 
Looking towards the fourth quarter, management sees comparable sales flat (plus or minus 1 percent), but thinks even with the recession officially behind us, shoppers will continue to flock to Wal-Mart for value. We agree.
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Market Update 11-02-09

Short-Term Key: Negative Long-Term Key: -30 (Neutral)
 
This morning in our office, someone jokingly quipped that with gold over $1,000 an ounce we might have to stop using gold bars as doorstops. I said, “Don't worry, they're insured.”
 
Of course, we don’t actually have gold doorstops, but if we did, the only thing to worry about would be theft. Gold has the unique advantage of being virtually immune to the physical risks that plague other assets.
 
For instance, unlike other commodities, gold will not degrade over time. Its beauty endures in a way that makes ageing film stars and fashion models green with envy. It does not oxidize and corrode like other metals do, nor is it fragile in any way.
 
True, gold's chemical properties can be replicated somewhat using silver or platinum, but neither of these comes as close to gold in attaining the Platonic ideal of timeless beauty.
 
Moreover, the gold supply has remained fairly constant throughout history.
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Market Update 10-26-09

Short-Term Key: Negative Long-Term Key: -16 (Neutral)

Last week we mentioned the scientific principle that when the scale of things increases, new and unexpected phenomena emerge. And we pointed out that this will have profound implications for investors in the resource sector.

Coincidentally, the November issue of Scientific American came out last week bearing the cover story, “A Plan for a Sustainable Future,” that unfortunately misses this point. Nonetheless, the article is an important read because it speaks to some exciting opportunities in companies developing alternative energy. And, even more important, despite its faults, the article does give us hope that our children may be able to live a good life on this planet. And, who knows, it may not be too late for us as well.

Let us explain...

WIND ENERGY: WILL IT STAY CHEAP FOR LONG?Read more...

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