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With Stock Markets at Record Highs, Is There Still a Smart Way to Buy?

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By Dan Caplinger

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The Dow Jones Industrials (^DJI) and the S&P 500 (^GSPC) have both climbed to new record levels recently, producing gains of almost 20 percent so far in 2013 as of July 18. Yet given how far stocks have come since the market’s meltdown in 2009 — the S&P 500 has risen more than 150 percent since then — some investors worry that buying stocks now is bound to turn out badly.

Before you swear off stock investing entirely, you should realize that not all stocks have equal prospects. Even with the market trading at highs, some stocks haven’t seen the same gains as the Dow and S&P. Moreover, even some stocks that are at or near their own record levels have the fundamental business strength to justify their share prices.

Let’s take a look at these two categories with some tips on how to find good stocks even with markets at record highs.

Strategy 1: Focus On Beaten-Down Industries.

Bull markets rarely take every stock higher. Inevitably, you’ll find some companies or industries that suffer setbacks and end up being big laggards. If the conditions that created those setbacks reverse themselves, though, then beaten-down stocks can catch up with market gains quickly.

We’ve already seen that phenomenon with homebuilders’ stocks. From 2009 to 2012, even as the rest of the economy started picking up steam, homebuilders performed badly as the housing market kept failing to post lasting home-price gains. In 2012, though, housing finally started showing considerable gains, with home prices rising double-digit percentages in the past year.

One possible place to look for a turnaround today is in commodity stocks.

A weak global economy has reduced demand for industrial metals like aluminum and copper, sending prices plunging and hurting producers like Alcoa (AA) and firms that that mine and refine those metals like Freeport-McMoRan Copper & Gold (FCX). Also, with fears of inflation and economic instability having significantly abated, gold and silver have seen dramatic price declines, and precious-metals mining stocks like Goldcorp (GG) and Barrick Gold (ABX) have fallen sharply as well. Those adverse conditions could last well into the future, but eventually, if the global economy starts to regain its strength, then commodity demand should rise and pull commodity-related stocks up.

Keep in mind, though, that turnarounds can take a long time to materialize. If you don’t have the patience to wait for other investors to see the promise of a struggling industry, then this strategy could leave you frustrated for months or even years into the future.

Strategy 2: Seek Out High-Flying Values.

Just because a stock trades at all-time highs doesn’t mean it’s not a good value. If a company expects its sales and income to grow at a fast rate in the future, …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Midwest's Drought-Busting Rains Shift Farm-Economy Prospects

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By Reuters

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Seth Perlman/AP

By Karl Plume and Sam Nelson

CHICAGO — Torrential downpours across a broad swath of the U.S. Midwest this week are easing the worst drought in more than 50 years, flooding streams, snarling river transportation, stalling corn plantings — and changing the outlook for the American farm economy in 2013.

The Army Corps of Engineers is closing locks along a 150-mile stretch of the Mississippi River from roughly Davenport in Iowa to Hannibal, Mo. Barge traffic was backing up Thursday, as water levels were too high for barges to take on grain.

The Mississippi and other major rivers are expected to begin cresting Sunday — and likely will run over levies in some areas. That is a sharp reversal from as recently as January, when low water levels disrupted the main water thoroughfares that bring grain from the nation’s breadbasket to the world’s markets.

“These rains are really helping bring most areas out of drought status. And the rain encompasses all of the western Corn Belt that was previously dry,” said Don Keeney, meteorologist for MDA Weather Services, a widely followed commercial forecasting firm.

If the drought is ending, it would represent a sea change for the farm economy, where expectations for another dry summer had been baked in. Continued rainy weather could further delay spring plantings, cause a sharp fall in the price of farm commodities, and lower the cost of everything from hog feed to cereal ingredients.

Lower feed prices would help livestock and dairy producers, but soft grain prices could cut into farmers’ incomes and perhaps even cause farmland values to retreat from recent record highs.

An end to drought conditions would bring a burst in economic activity across the agriculture industry — from farmers in the fields to those operating grain elevators, processing companies and shippers.

“If in fact the drought is easing, and if we are migrating to a situation that might afford better yields, to my mind, for the full value chain, it’s a godsend,” said Bruce Scherr, chief executive of agribusiness analytics firm Informa Economics. “Another year like last year would be devastating.”

The 2012 drought brought corn production to only 10.8 billion bushels, a 6-year low, with yields reaching a 17-year low of 123.4 bushels an acre. The production losses added to the impact of rising exports to China and domestic demand for ethanol production to drive corn prices on the Chicago Board of Trade to an all-time high last August.

Farmers filed a record $11.8 billion in crop-insurance claims, according to Agriculture Department data. And farm income fell last year by 3 percent from a record set in 2011.

Transformation

“Isn’t it ironic that all winter we’ve been worried about dry soil, and all of that has changed in a period

From: http://www.dailyfinance.com/2013/04/19/rain-ends-midwest-drought/

Business, Finance, Occupation & Industry

Alcoa's First-Quart Profit Rises, Beats Wall Street Expectations

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By The Associated Press

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Saul Loeb/AFP/Getty Images Alcoa CEO Klaus Kleinfeld gives President Barack Obama a tour of the company’s factory in Bettendorf, Iowa, in June 2011. The aluminum manufacturer Monday reported first-quarter earnings that beat analyst forecasts.

NEW YORK — Alcoa kicked off earnings season Monday by reporting a larger first-quarter profit than analysts expected, helped by strong demand for aluminum used to make airplanes and automobiles.

The company still sees demand for aluminum growing 7 percent in 2013, with gains cutting across many industries.

Alcoa Inc. (AA) is the first company in the Dow Jones industrial average (^DJI) to report first-quarter results. Because its products wind up in so many things, from cars and buildings to soda cans, investors study Alcoa’s results for hints about earnings at companies in other industries.

Alcoa said net income in the first quarter was $149 million, or 13 cents a share, compared with $94 million, or 9 cents a share, a year earlier.

Excluding special items, the company said it would have earned 11 cents a share, beating analysts’ forecast of 8 cents a share, according to FactSet.

Revenue fell to $5.83 billion from $6.01 billion a year earlier and was below the $5.91 billion that analysts predicted. Alcoa blamed lower aluminum prices and curtailed production in its European primary metals business.

Over the past decade, Alcoa has shifted more of its business away from mining and refining and into the production of parts for industry. The company is benefiting as airplanes and autos get lighter for better fuel efficiency by using more aluminum parts.

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Airlines have been ordering new planes to reduce their spending on fuel, the largest cost for many of them. That trend should continue for several years, making aerospace a growing aluminum market, chairman and CEO Klaus Kleinfeld said in a conference call with analysts.

U.S. auto sales are booming, too, as customers who put off purchases during the recession trade in their aging vehicles. In March, sales hit 1.45 million vehicles, the highest total since August 2007, according to Autodata Corp.

Alcoa believes that government fuel standards and customer demand for better mileage will push car makers to use more lighter materials like aluminum. Some drivers think heavy vehicles are safer in a crash — truck sales were a major factor in the strong March figures — but Kleinfeld argued that lighter cars can brake to a stop faster, potentially avoiding accidents.

Sales of aluminum for nonresidential construction is finally recovering in North America and will grow much faster in China, Kleinfeld said.

Alcoa released its earnings after the markets closed. Its shares rose 15 cents to close at $8.39 in the regular session. They fell 12 cents in after-hours trading.

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Source: FULL ARTICLE at DailyFinance

Science & Technology

U.S. Crude Oil Inventories Rise to Highest Level Since 1990

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By Reuters

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Damian Dovarganes/AP

By Robert Gibbons

NEW YORK — Oil prices fell more than 2 percent on Wednesday as U.S. crude oil inventories grew to their highest level since 1990 and weak economic data stoked worries about U.S. energy demand.

U.S. crude stocks rose 2.71 million barrels last week, the Energy Information Administration said in its weekly report.

The rise was slightly more than the build of 2.2 million barrels expected in a Reuters survey of analysts and put U.S. commercial inventories at 388.62 million barrels, the most since 1990 and close to the record 391.9 million barrels reached in 1982, the year the EIA started tracking inventories.

“The report is somewhat bearish given the build in crude oil inventories and modest decline in gasoline inventories, which are the focus of the market,” said John Kilduff, partner at Again Capital LLC in New York.

“The rise in the refinery utilization to above 86 percent also signals further easing of the concerns over refined product inventories,” Kilduff said.

U.S. RBOB gasoline futures fell 3 percent, more than 9 cents, after or dropping 6 cents on Tuesday, as the EIA said gasoline stocks fell 572,000 barrels, less than expected and much less than the drop of 5 million barrels reported late on Tuesday by the American Petroleum Institute.

Brent crude was down $2.72 at $107.97 a barrel at 12:52 p.m. EDT, having fallen as low as $107.78.

U.S. crude was down $2.19 at $95 a barrel, having fallen to $94.89, just above the 50-day moving average at $94.64. Brent’s premium to U.S. crude fell back below $13 a barrel on Wednesday, after it reached $14.66 on Tuesday.

The spread between the two contracts had been widened because of expectations that crude stocks at the Cushing, Okla., hub, delivery point for the U.S. crude contract, would be increasing after Exxon Mobil Corp. (XOM) shut its Pegasus pipeline on Friday.

The pipeline moves crude oil from Illinois to the refinery-rich Texas Gulf Coast and a prolonged shut down would curb efforts to relieve the glut of crude oil in the Midwest.

Economic Concerns

Crude stocks at Cushing fell 287,000 barrels in the week to last Friday, the EIA report said.

With the North American heating fuel season waning and crude futures sliding, U.S. heating oil futures, the benchmark distillate contract, also fell and pushed below the 50-day and 100-day moving averages, technical levels monitored by chart watching analysts and traders.

Total distillate stocks fell 2.27 million barrels last week, the EIA said, more than expected, but the inventory drop and data showing demand over the previous four weeks was up 5.5 percent from the year-ago period didn’t prevent heating oil’s price slide.

U.S. companies hired at the weakest pace in five …read more
Source: FULL ARTICLE at DailyFinance

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Monsanto Raises Profit Forecast on Strong Corn Sales

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By Reuters

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Dan Gill/AP

By Carey Gillam

Monsanto, the world’s largest seed company, raised its full-year profit forecast on Wednesday after reporting a better-than-expected second quarter driven by strength in its global corn business.

Its shares rose nearly 2 percent in premarket trading after the company, a leading developer of genetically engineered corn, soybeans and other crops, said it expects to sell a record amount of corn this year.

Monsanto Co. (MON) said strong demand for its products allowed it to raise its fiscal 2013 earnings forecast by 10 cents a share to a range of $4.40 to $4.50 per share before certain after-tax items. That compares with a target set in January of $4.30 to $4.40 per share.

The outlook for net earnings for the full year was raised to $4.42 to $4.52 a share, up from $4.31 to $4.41.

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Monsanto said net earnings were $1.48 billion, or $2.74 a share, in the second quarter, ended Feb. 28, compared with $1.21 billion, or $2.24 a share, a year earlier.

Before certain after-tax items, it earned $2.73 a share, up from $2.28 a year earlier. Analysts were looking for $2.58, according to Thomson Reuters I/B/E/S.

Net sales for the quarter increased 15 percent to $5.5 billion, led by sales of corn seed and genetic traits, which rose more than 16 percent to $3.28 billion. That offset a nearly 2 percent decline in sales of soybean seeds and traits, a 7 percent drop in vegetable seed sales, and a 9 percent slide in cotton seeds and traits.

Monsanto said strong corn sales in Brazil and in the U.S., where farmers are preparing to plant spring crops, drove results.

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16 Big Bubbles That Are Getting Ready to Pop

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By Business Insider

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Alamy

With stocks hovering around all-time highs, many are wondering if equities are the next great bubble getting ready to burst. But stocks aren’t the only things that look frothy: There are a lot of other asset classes that sure look like bubbles.

We’ve compiled a list of the assets that analysts now believe are flashing the warning signs of over-inflation.

If you think we reached the peak of bubble-calls last spring when Robert Shiller diagnosed a “bubble on bubbles,” think again.

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JPMorgan Reaches $546M Settlement with MF Global Trustee

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By The Associated Press

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Mark Lennihan/AP

NEW YORK — JPMorgan Chase has agreed to a deal that will return $546 million to former customers of trading firm MF Global Holdings Ltd., which collapsed in 2011 with $1.6 billion missing from its accounts.

MF Global failed in October after a calamitous bet on European debt spooked its investors, partners and clients. The bankruptcy was the eighth-largest in the U.S. and the largest on Wall Street since the 2008 collapse of Lehman Brothers.

Much of the missing money belonged to farmers, ranchers and other business owners who used MF Global to reduce their risks from fluctuating prices of commodities such as corn and wheat. A House panel has said credit rating agencies and federal regulators contributed to MF Global’s collapse. But it pinned most of the blame on risky strategies by ex-CEO Jon Corzine, the former New Jersey governor.

JPMorgan Chase & Co. (JPM) held MF Global funds in several accounts and also processed the firm’s securities trades. The trustee tasked with getting customers’ money back, James W. Giddens, threatened to sue the New York bank if it didn’t return money that was transferred to the bank from MF Global. By June 2012, JPMorgan had returned $608 million to the firm.

Under a settlement agreement filed Tuesday in Manhattan bankruptcy court, JPMorgan Chase has agreed to pay $100 million to reimburse customers and will relinquish claims on $417 million that it previously returned. JPMorgan also will return over $29 million that it is holding as security on an MF Global credit line. The recovered money will eventually be passed along to customers.

The deal must be approved by Bankruptcy Court Judge Martin Glenn and District Court Judge Victor Marrero.

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Source: FULL ARTICLE at DailyFinance

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Gold Is Cheap Again: 5 Ways to Get It Into Your Portfolio

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By Dan Caplinger

Gold bars are cheap again

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More than nearly any other investment, gold inspires strong opinions among investors.

On one hand, superinvestor Warren Buffett has said that buying gold merely locks up your money in an asset that in his words is “neither of much use nor procreative.”

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On the other side of the coin you have advocates arguing that gold is the best choice to preserve purchasing power when central banks are pouring huge amounts of money into the world financial system, posing a threat to the value of ordinary currencies.

The debate over gold will never end, but what’s indisputable is that gold prices rose more than 600 percent from mid-1999 to mid-2011, topping out around $1,900 an ounce, but have fallen by about $300 an ounce in the two years since.

If you’re inclined to take advantage of what gold bugs might call a bargain opportunity, here are five ways you can add gold exposure to your investment portfolio.

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BofA/ML RIC Report Great For Stocks, Not For Gold & Bonds

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By 24/7 Wall St.

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Bank of America Corp. (NYSE: BAC) is out with its so-called RIC-Report for its clients. There is good news for equity investors, but not such good news for investors in municipal bonds, corporate credit, and even gold. Now that markets have improved drastically, the report is urging investors to be a little more picky about what they invest in. Its four spring investment ideas are including Japanese equities, US housing, technology and copper. Central bank liquidity has soared from $8 trillion to $21 trillion over the past six years and BofA noted that the liquidity tap is still flowing.

The report says, “Some of the most loved asset classes of recent years are now facing significant obstacles in 2013 and beyond. In short, munis may be vulnerable to a cap on interest exemption, higher interest rates are a headwind for corporate credit, and gold could suffer as risk appetite improves.”

The RIC report shows the positioning as very solid for equities despite the bounce. It shows that long-only equity funds have seen close to $550 billion worth of outflows since 2006. The firm’s US equity and quant strategist, Savita Subramanian, noted that pessimism on equities remains at extreme levels relative to history with the Sell Side Indicator down to 46.7 for the first time in seven months in March. Investors may want to pay attention here: When that indicator has historically been below 50, the total returns for stocks have been positive over the following 12 months. How positive is why it is impressive. BofA noted that stocks have performed with a median return of 30% over the period.

The March 12 RIC Report also showed that the consensus expectation for 2013 earnings growth for global equities is at a solid 10%. It even noted, “Even if equities do not replicate their 2012 returns this year, relative to other asset classes, we continue to forecast stocks will offer the most attractive returns in 2013, particularly on an inflation adjusted basis. For 2013, BofA Merrill Lynch Global Research continues to forecast regional equity returns of 10-20%; US, EU and EM credit returns of 2-8%; and G4 government bond returns of -2-2%.”

It said that the firm’s commodity strategists lowered their 2013 and 2014 average gold price forecasts to $1,680 and $1,838, respectively. That will not be good for the SPDR Gold Trust (NYSEMKT: GLD). The team does not expect that gold will reach their $2,000 price target until 2014. Copper is different, and strategist Francisco Blanch sees a small supply deficit in copper this year with exposure noted in miners like Freeport-McMoRan Copper and Gold (NYSE: FCX).

The firm’s Japan equity strategist is Naoki Kamiyama and he has now revised his target higher for the TOPIX to 1,250 from a previous 1,050 and that implies 20% or so upside from current levels. That would translate to good news for the iShares MSCI Japan Index (NYSEMKT: …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Pricing/Demand Trends Get Favorable For Beer, Wine and Spirits Makers

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By 24/7 Wall St.

Beer Taps

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Good news is headed the way of beer, wine, and spirits makers. Those past cost pressures are abating and trends are starting to look up as a report from Moody’s Investors Service on Monday is signaling good news for the growth of the sector. Moody’s even went as far as to raise its outlook for the global beverage industry to “Positive” from its prior “Stable” outlook. Before you get too excited about winners, keep in mind that much of this is due to emerging market growth as well as “easing of commodity pressures” which are expected to be seen over the next 12 to 18 months.

Among the winning beer makers are Anheuser-Busch InBev (NYSE: BUD), Molson Coors (NYSE: TAP), SABMiller, Heineken and Foster’s Group. Wine and spirits makers like Diageo PLC (NYSE: DEO), Beam Inc. (NYSE: BEAM), Brown-Forman (NYSE: BF-B), Pernod Ricard, and Bacardi are expected to benefit as well.

Moody’s went on to say that A more benign commodity environment will help offset headwinds facing the industry. Those cost pressures have been very costly for producers, no pun intended. The headwinds include the following:

  • slow growth or declining consumption of mainstream beers in developed markets,
  • declining consumption of carbonated soft drinks,
  • new excise taxes or consumption and advertising restrictions in some markets,
  • and continuing economic challenges in Europe.

Global beer consumption is still growing at the same time that demand for wine and spirits is expected to remain strong. This is in the face of declines in beer sales in the UK and in the face of recent declining trends in the United States. An expanding middle class is expected to boost demand for premium beers, high-end wine and spirits in countries like China and also in parts of Latin America.

Another commodity price abatement will come from all of the hedges rolling off that were put in place when prices were high. The price hikes put in place will also lead to higher profits now that commodity prices are abating.

If you have been a reader of 24/7 Wall St. for long, you know we have tracked these issues in depth. These may be consumer products, but as “favorites” they also end up impacting society’s personal finances. All you have to do is look at the implications of our own piece called “9 Beers Americans No Longer Drink” and you can see how important these issues are. Also, here are the states where people drink the most beers.

Filed under: 24/7 Wall St. Wire, Analyst Calls, Commodities, Commodities & Metals, Compensation, Consumer Goods, Consumer Product, Economy, Editor’s Picks, Food, International Markets, Personal Finance, Retail Tagged: BEAM, BF-B, BUD, DEO, TAP

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Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Sugar Games: A Behind-the-Scenes Look at a High-Stakes Investing Gamble

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By Reuters

Sugar mill

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By David Brough

LONDON — A handful of the world’s biggest merchants play a tense, high stakes game every few weeks and a well-connected newcomer from Asia just sat down at the table.

The stakes are in sugar often worth hundreds of millions of dollars; the occasion is the expiry of futures contracts.

Five leading American and European trade houses — Cargill, Louis Dreyfus, ED&F Man, Sucden, and Bunge — have typically jockeyed for the best position ahead of the delivery and receipt of sugar when futures contracts expire, which happens nine times a year.

At the latest raw sugar futures expiry last week, the exclusive club was joined by Singapore-based Wilmar International Ltd., sole receiver of 152,762 tonnes of Central American and Brazilian sugars worth around $61 million.

The expiries are risky because a bet that leaves a player holding large amounts of physical sugar can reap huge rewards when supplies are tight and prices are rising, but a trade house can face eye-watering losses if the harvest’s outlook improves or demand is dented at the last moment.

Wilmar is taking delivery through a sugar futures expiry for the first time since entering the market three years ago.

Need to Move Fast

This delivery is barely more than a quarter of the size of the previous raw sugar expiry, for the October 2012 contract, which saw Bunge receive almost 600,000 tonnes, valued at roughly $240 million.

Analyst Jonathan Kingsman said Wilmar will have to be nimble to sell the Brazilian sugar that it acquired through the expiry ahead of the country’s coming crop, which starts around April and is expected to be abundant — potentially weighing on prices.

“People [traders] were wary of taking delivery of Brazilian sugar with a big new Brazilian crop expected to start early — you would have to move quickly to get it out if values come down,” said Kingsman, head of agriculture at data and information provider Platts.

Much futures business is done by financial investors who trade promises involving sugar but close out the bets before they risk taking actual delivery of the raw sugar traded on InterContinental Exchange (ICE) or white sugar from NYSE Liffe.

As the expiry draws closer for a contract such as the ICE current front month futures, only those players with a real interest in the physical commodity remain.

Trade sources said Wilmar fits the bill, with strong business ties in Central America, and would have no difficulty finding customers for Central American sugars within that region or in big importers China or Indonesia.

Cargill Setback

U.S. agribusiness Cargill was often in the past a major receiver of sugar but has been keeping a lower profile after an aggressive bullish bet misfired.

In January last year Cargill reported its worst quarterly earnings since …read more
Source: FULL ARTICLE at DailyFinance