Archive

Posts Tagged ‘saudi-arabia’

The World’s 5 Largest Oil Consumers

October 25th, 2012

Jared Cummans: Crude oil is an addiction that our global economy will not be able to break anytime soon. The fossil fuel is involved in many facets of our everyday lives whether we realize is it or not, and demand for this commodity is only growing. As emerging economies Read more…

Commodities, Crude Oil, Energy, World News

Why An Islamic Revolution In Saudi Arabia Is A Surefire Way To Send Oil Prices To $300 A Barrel

October 1st, 2012

Marin Katusa: There is little that would rock the oil world more than a revolution in Saudi Arabia. But with a coming leadership crisis, it is becoming all too likely. Read more…

Commodities, Crude Oil, Energy

If U.S. Troops Fight WWIII, Who Fights The Coming American Civil War?

September 27th, 2012

U.S. troops available for deployment to fight a full-blown war is 1.4 million, with an additional 2.1 million, if all of NATO were to oblige. Read more…

Currency, Government, Markets, World News

WWIII Within Days; Food-For-Guns Program Next, Says Informant

September 20th, 2012

Dominique de Kevelioc de Bailleul: War drums beat in the Middle East and, now, the drums suddenly beat strongly between two Asian mights.  That, on top of a global financial system on the brink of entering the slide to hyperinflation has many thoughtful analysts suggesting Read more…

China, Economy, Government, World News

Former State Dept. Veteran Drops Bombshell: WWIII Starts Sept. 25, 2012

September 18th, 2012

Dominique de Kevelioc de Bailleul: Speaking with Infowars’ Alex Jones, former Assistant Deputy Secretary of State Dr. Steve Pieczenik says Israel plans to attack Iran before the U.S. elections of Nov. 6., and, that an attack on Iran will assuredly kickoff WWIII, according to him. Read more…

Economy, Government, World News

The Endless War: Saudi Arabia Goes On The Offensive Against Iran

August 28th, 2012

Felix Imonti: Saudi Arabia has gone on the offensive against Iran to protect its interests.  Their involvement in Syria is the first battle in what is going to be a long bloody conflict that will know no frontiers or limits. Read more…

Government

How Will OPEC Boost Oil Production?

June 7th, 2011

The chairs and nameplates are being lined up, the caviar is being prepped, the world’s finest hookers and blow are standing by. Tomorrow, OPEC gathers for one of their occasional price-fix…er, production quota meetings in Vienna, Austria. As always, the party will ensue.

But for a bunch of people who supposedly hold the world economy by the short and curlies…we can’t help but notice the ministers are looking decidedly feeble these days. As a consequence, the bickering – in Arabic, Farsi, Spanish, Portuguese and English – is liable to be more heated than usual this time around.

For starters, some of OPEC’s member nations are supporting a military campaign against another member nation. Kuwait, Qatar and the United Arab Emirates back the rebels trying to dislodge Libya’s Col. Gaddafi from power.

True, OPEC has been through this before… with Saddam Hussein 20 years ago. But it’s a lot harder for 12 guys in a room to reach a decision when three of them have bosses who are scheming to overthrow or even kill the boss of another. Just sayin’…

OPEC’s two key movers, Saudi Arabia and Iran, are also bitter enemies. That said, they appear to be in agreement this time on one essential issue: They think it’s time to bring more oil onto the market by boosting OPEC’s production quotas.

They’ve sat unchanged since they were lowered in December 2008 – when oil prices had crashed to $32 a barrel and it looked as if nuclear winter was descending over the world economy.

“OPEC is trying to compensate part of the shortage of supply of crude and create a balance in the market,” Iran’s OPEC governor Mohammad Ali Khatibi said recently. Usually, the Iranians are in the lead pushing for higher prices.

It’s one thing for OPEC ministers to say they want to boost production. It’s another to actually pull it off. This brings us back to an issue we’ve examined before – “spare capacity.”

Spare capacity is the ability of oil producers to jump-start new production within one month and keep it going for three months. Right now, there’s not much of it…

  • Libya’s 1.3 million barrels a day of production are out of the picture for the duration of the war there
  • Production in Venezuela, under the stunning mismanagement of our favorite caudillo Hugo Chavez, has been falling for years
  • Oil installations in Iraq have come under attack in recent months
  • Kuwait and the United Arab Emirates are already pumping full-tilt.
  • That puts the spare capacity burden, as usual, on Saudi Arabia.

Officially, Saudi “spare capacity” is estimated at 2.5-3 million barrels a day. In a world that burns 89.2 million barrels per day, that’s not much. When you consider most of that spare capacity is heavy crude – the viscous variety that’s a challenge for many refineries to handle, it seems like even less.

Those numbers get all the more alarming in light of a Morgan Stanley estimate of worldwide spare capacity that we shared on March 4.

Spare Oil Capacity

Trouble is, if spare capacity is all up to the Saudis now, and the most they can do is 3 million barrels a day, the chart is already out of date. Spare capacity could be gone even before Morgan Stanley’s estimate of 2013. Even if the bank’s estimates are right, the world is going to need some energy assistance very soon.

Addison Wiggin
for The Daily Reckoning

How Will OPEC Boost Oil Production? originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
How Will OPEC Boost Oil Production?




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

How Will OPEC Boost Oil Production?

June 7th, 2011

The chairs and nameplates are being lined up, the caviar is being prepped, the world’s finest hookers and blow are standing by. Tomorrow, OPEC gathers for one of their occasional price-fix…er, production quota meetings in Vienna, Austria. As always, the party will ensue.

But for a bunch of people who supposedly hold the world economy by the short and curlies…we can’t help but notice the ministers are looking decidedly feeble these days. As a consequence, the bickering – in Arabic, Farsi, Spanish, Portuguese and English – is liable to be more heated than usual this time around.

For starters, some of OPEC’s member nations are supporting a military campaign against another member nation. Kuwait, Qatar and the United Arab Emirates back the rebels trying to dislodge Libya’s Col. Gaddafi from power.

True, OPEC has been through this before… with Saddam Hussein 20 years ago. But it’s a lot harder for 12 guys in a room to reach a decision when three of them have bosses who are scheming to overthrow or even kill the boss of another. Just sayin’…

OPEC’s two key movers, Saudi Arabia and Iran, are also bitter enemies. That said, they appear to be in agreement this time on one essential issue: They think it’s time to bring more oil onto the market by boosting OPEC’s production quotas.

They’ve sat unchanged since they were lowered in December 2008 – when oil prices had crashed to $32 a barrel and it looked as if nuclear winter was descending over the world economy.

“OPEC is trying to compensate part of the shortage of supply of crude and create a balance in the market,” Iran’s OPEC governor Mohammad Ali Khatibi said recently. Usually, the Iranians are in the lead pushing for higher prices.

It’s one thing for OPEC ministers to say they want to boost production. It’s another to actually pull it off. This brings us back to an issue we’ve examined before – “spare capacity.”

Spare capacity is the ability of oil producers to jump-start new production within one month and keep it going for three months. Right now, there’s not much of it…

  • Libya’s 1.3 million barrels a day of production are out of the picture for the duration of the war there
  • Production in Venezuela, under the stunning mismanagement of our favorite caudillo Hugo Chavez, has been falling for years
  • Oil installations in Iraq have come under attack in recent months
  • Kuwait and the United Arab Emirates are already pumping full-tilt.
  • That puts the spare capacity burden, as usual, on Saudi Arabia.

Officially, Saudi “spare capacity” is estimated at 2.5-3 million barrels a day. In a world that burns 89.2 million barrels per day, that’s not much. When you consider most of that spare capacity is heavy crude – the viscous variety that’s a challenge for many refineries to handle, it seems like even less.

Those numbers get all the more alarming in light of a Morgan Stanley estimate of worldwide spare capacity that we shared on March 4.

Spare Oil Capacity

Trouble is, if spare capacity is all up to the Saudis now, and the most they can do is 3 million barrels a day, the chart is already out of date. Spare capacity could be gone even before Morgan Stanley’s estimate of 2013. Even if the bank’s estimates are right, the world is going to need some energy assistance very soon.

Addison Wiggin
for The Daily Reckoning

How Will OPEC Boost Oil Production? originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
How Will OPEC Boost Oil Production?




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

From Employment to Housing: “Reality” in a Great Correction

May 10th, 2011

We can barely keep up.

One report tells us things are getting better. The next tells us that they are getting worse.

Last week, for example, we thought we might finally be seeing the sell-off we’ve been waiting for. But yesterday, the Dow rose. Gold rose. And oil rose. Gold’s back over $1,500…and oil is back over $100.

As for the economy, same story. We got back-to-back updates on the employment situation, for example. No sooner had we absorbed this news on Thursday:

WASHINGTON (Reuters) – The number of Americans filing for jobless aid rose to an eight-month high last week and productivity growth slowed in the first quarter, clouding the outlook for an economy that is struggling to gain speed.

While the surprise jump in initial claims for unemployment benefits was blamed on factors ranging from spring break layoffs to the introduction of an emergency benefits program, economists said it corroborated reports this week indicating a loss of momentum in job creation.

Other reports this week showed weaker employment growth in the manufacturing and services sectors in April and a step back in private hiring, suggesting Friday’s closely watched data could prove weaker than economists have been expecting.

But come Friday, the news was entirely different.

The report in The Financial Times told us the “stock market was boosted by [a] good jobs report.”

According to Friday’s news, employment had gone up!

A similar flip-flop came to us in the housing market – but in the other direction. Last week, there was a story that told us that sales had been surprisingly strong…hinting that the housing market had finally “bottomed out.”

But yesterday, The Wall Street Journal reported that the bottom had already given way:

Home Market Takes a Tumble
Turnaround More Distant After 3% Drop, Steepest Quarterly Decline Since 2008

Home values posted the largest decline in the first quarter since late 2008, prompting many economists to push back their estimates of when the housing market will hit a bottom.

Home values fell 3% in the first quarter from the previous quarter and 1.1% in March from the previous month, pushed down by an abundance of foreclosed homes on the market, according to data to be released Monday by real-estate website Zillow.com. Prices have now fallen for 57 consecutive months, according to Zillow.

What’s the real story?

The real story is that we’re in a Great Correction. But it is one that is having a hard time expressing itself. Every time it opens its mouth, the feds come along with duct tape.

The Great Correction wants to tell the truth – that there’s too much debt in the system; that most of today’s ‘growth’ is phony, and that bad debt needs to be erased. The feds want to shut it up…they want to lend more money…and pretend the problem will go away.

As a result, the ‘news’ we get is garbled…unclear. We have to listen hard to figure out what it really means.

Here’s one of the stories that has gotten jumbled up and mis-reported. The rich have gotten richer, but why? The dumbbells blame ‘capitalism’ and ask the government to ‘do something.’

The real culprit is the government itself. Here’s one report that got it right:

How the Fed made the rich richer

The ‘QE2’ project was supposed to ease borrowing and get consumers to spend again. Instead, it has benefited only a few while raising most people’s cost of living.

There’s a good reason for this: As inflation surges at the store and the gas pump, the economy is stalling. And the heart of the problem could very well be the Federal Reserve’s $600 billion ‘QE2’ money-printing initiative, which was implemented last November to great fanfare on Wall Street and is set to end in June.

While the program has helped push up the cost of living for all of us – sending inflation into the red zone and damaging consumer confidence – evidence suggests its benefits have accrued only to the top tier of the net-worth ladder.

Yes, the stock market has posted impressive gains since the idea of QE2 surfaced, with the Standard & Poor’s 500 Index ($INX) up nearly 31% from its low last August. And that has pushed up household net worth by $2 trillion. The hope has been that this will translate into new spending and drive the economy forward.

But stock ownership is concentrated among the wealthy: On average, just 12% of households worth $100,000 or less own stocks and mutual fund shares outside their retirement plans – a group that comprises 74% of the total population. While many more own shares through 401ks and IRAs, they’re not in a position to easily tap that wealth for current spending.

At the same time, QE2 has pushed up borrowing costs, pressing down the prices of homes – a much more widely held asset. The Case-Shiller Home Price Index started falling last summer as the idea of QE2 was floated, and it hasn’t stopped since. The broad 20-city index now sits below 2009 levels.

[Alan] Meltzer believes the Fed is making the same mistakes it made in the 1970s, focusing too much on unemployment while ignoring the inflation threat. The Fed dismisses that threat as transitory and says inflation expectations remain under control.

This is “simply wrong” according to Meltzer, since inflationary pressures reflect real, lasting shifts in the supply/demand balance as countries like China grow and those like Saudi Arabia struggle to feed their growing appetite for resources. And while unemployment is a problem, “it’s not a monetary problem.”

Regards,

Bill Bonner
for The Daily Reckoning

From Employment to Housing: “Reality” in a Great Correction originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Bill Bonner, the founder of the the Daily Reckoning released his latest book Dice Have No Memory: Big Bets & Bad Economics From Paris to the Pampas in April 2011.

Read more here:
From Employment to Housing: “Reality” in a Great Correction




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Mutual Fund, Uncategorized

4 Blue Chip Stocks with 50% Upside

May 5th, 2011

4 Blue Chip Stocks with 50% Upside

It's been a heck of a run for small-cap stocks. The Russell 2000 Index has risen roughly 80% in just two years and a number of individual stocks have doubled, tripled or even quadrupled. The move is understandable; Small stocks were so badly beaten-up during the downturn that a rebound seemed inevitable.

But now it's time to shift gears. The average stock in the Russell 2000 now trades for roughly 21 times trailing earnings and more than two times book value. Both of these metrics are roughly 20% above the historical norm. More importantly, key themes expected to play out in the U.S. economy are estimated to benefit larger rather than smaller companies. First, the weak dollar is likely to boost the prospects of large cap companies with a high degree of international exposure. Second, consumer spending may finally move up as employment trends strengthen.

Most major retailer stocks are mid and large caps residing in the S&P 500. And that's where I'm setting my sights for 2012: the S&P 500, which has also had a strong run but still has its share of laggards. Four companies in particular have largely missed out on the strong bull market but look poised to catch up in the next few months. I see at least 50% upside potential for each stock.

1. Citigroup (NYSE: C)
Bank stocks remain out of favor. With the housing market still quite weak and lending activity accordingly slow, there are good reasons for caution. As I noted a few weeks ago, many bank stocks can be obtained for right around book value.

The dim sector view is obscuring a brighter picture for Citigroup. With each passing quarter, it's becoming more apparent that this is really a play on international economic activity — especially in places such as China, Brazil and India — and less of a play on the moribund U.S. economy.

Right now, quarterly results are mixed, as strong international results offset tepid domestic results. Yet profits are building, which is pumping up book value. Merrill Lynch believes that Citigroup's book value will hit $6.21 by the end of this year, more than 30% higher than the current share price. By the end of 2012, book value could approach $6.75 if current trends continue. Assuming investors finally warm to the stock later this year and set their targets on that end-of-2012 book value forecast, shares look to have 50% upside.

2. Best Buy (NYSE: BBY)

Conventional wisdom says that this major consumer-electronics retailer is in disarray, steadily losing market share to aggressive players such as Wal-Mart Stores Inc. (NYSE: WMT). The fact that sales are expected to rise just 3% this year gives little reason for optimism. Yet if you dig deeper, then you'll see a company suffering from internal missteps and a still-weak consumer economy — not one that has lost its competitive edge.

To be sure, Best Buy's move of placing a big promotional emphasis on 3-D TVs now looks misguided. Consumers simply didn't want them, and that's the nature of electronics retailing — there are hits and misses.

But management appeared chastened at a mid-April management meeting as it laid out a game plan that looks more sound. In coming quarters, Best Buy will place an even greater emphasis on mobile devices such as tablets and smartphones, while also helping consumers navigate the “connected home.” That's a fancy way of describing the next wave of consumer electronics from TVs to radios to car stereos set for release in coming quarters that will have Internet connectivity at its core. This level of actual “interaction” with products is something rivals such as Wal-Mart and Amazon.com (Nasdaq: AMZN) simply can't replicate. In addition, Best Buy is boosting its efforts in the area of new and used video games and is ramping up its presence in China.

These initiatives, coupled with the fact that employment trends should continue to strengthen, has me convinced that expectations for the mere 2% sales growth in calendar 2012 (fiscal 2013) are far too low. Whereas the analyst consensus sees per-share profits of about $3.67, I see them rising to $4. Shares currently trade for less than seven times this admittedly bullish view. If that multiple expanded to 12, which is not unreasonable, you'd be looking at 50% upside.

3. GM (NYSE: GM)
My colleagues and I have written about the disappointing post-IPO performance of GM. Rising fuel prices clearly bear some of the blame, but it didn't help that management has decided to sharply boost engineering spending in 2011 to have a fresher product line down the road. Unless tensions in Egypt and Libya spread to Saudi Arabia, the risk premium could eventually come out of the oil market, helping prices to ease down toward the $90-a-barrel mark. As oil prices cool, GM's shares could get a solid lift. [Here are other reasons this is a good long-term stock to own.]

Analysts at UBS spot another catalyst: “Given its size, we believe GM will be the biggest beneficiary of the upcoming Japan-related inventory shortages, with the potential to gain of as much as 110 basis points of additional (market) share in 2011. We expect these gains can boost 2011 EBIT by $1billion and EPS [earnings per share] by $0.60/share.”

Yet it's the product line that will serve as the main catalyst for this stock. GM's entire car line is in the midst of a revamp, with a big focus on quality and fuel efficiency. Steadily rising market share, coupled with ongoing increases in industry volume, should help GM to operate its factories closer to full capacity and push up margins. As that happens, analysts look for EPS to hit $5 in 2012 and perhaps $6 in 2013. I'm betting investors will begin to focus on that 2013 outlook later this year. Slap a price-to-earnings (P/E) ratio of just eight on that 2013 outlook, and shares would rise to $48, or 50% above current levels.

4. Akamai Technologies (Nasdaq: AKAM)
The bloom is off the rose for this former tech highflyer. Shares have fallen nearly 40% since December and are now touching 52-week lows. Investors have grown concerned that tough competition in the company's core business of providing content delivery networks (CDNs) is leading to steady price erosion. That's surely the case, as it has been for a number of years.

Yet investors are missing the bigger picture. Akamai is also rolling out a wide range of ancillary products and services that are just now being tested and deployed by customers. These new offerings carry far higher profit margins than the commoditized CDN business.

Right now, analysts think profits will rise in the low double-digits in 2011 and again in 2012. Yet that view assumes a significant shrinkage in profit margins as further CDN price cuts take hold. But the new offerings hold the promise of sustaining and even boosting margins. If that happens, then profit growth will be in the upper teens, not the lower teens.

In recent weeks, management has cleared the decks and set a very low bar. Once investors see that future results will be above the currently pessimistic view, then the profit multiple could expand again and push shares back up toward the 52-week high of $54, more than 50% above current levels.

Action to Take –> Each of these stocks is in the midst of a tough period, which has led to a sharp contraction in their profit multiples. Yet each of these companies possesses a strong brand and meaningful operating leverage that will begin to show once operations start to turn. With just a few breaks, these stocks could see a nice uptick in the multiple — and perhaps a 50% gain.


– David Sterman

P.S. — We've just identified six surprising events that could break your portfolio wide open in 2011. Knowing these pivot points in advance lets you focus your investing strategy like a beam of light in the dark… and make a lot of money in a hurry. Get them free by simply watching this video presentation.

Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: David Sterman
4 Blue Chip Stocks with 50% Upside

Read more here:
4 Blue Chip Stocks with 50% Upside

Uncategorized

4 Blue Chip Stocks with 50% Upside Potential

May 5th, 2011

4 Blue Chip Stocks with 50% Upside Potential

It's been a heck of a run for small-cap stocks. The Russell 2000 Index has risen roughly 80% in just two years and a number of individual stocks have doubled, tripled or even quadrupled. The move is understandable; Small stocks were so badly beaten-up during the downturn that a rebound seemed inevitable.

But now it's time to shift gears. The average stock in the Russell 2000 now trades for roughly 21 times trailing earnings and more than two times book value. Both of these metrics are roughly 20% above the historical norm. More importantly, key themes expected to play out in the U.S. economy are estimated to benefit larger rather than smaller companies. First, the weak dollar is likely to boost the prospects of large cap companies with a high degree of international exposure. Second, consumer spending may finally move up as employment trends strengthen.

Most major retailer stocks are mid and large caps residing in the S&P 500. And that's where I'm setting my sights for 2012: the S&P 500, which has also had a strong run but still has its share of laggards. Four companies in particular have largely missed out on the strong bull market but look poised to catch up in the next few months. I see at least 50% upside potential for each stock.

1. Citigroup (NYSE: C)
Bank stocks remain out of favor. With the housing market still quite weak and lending activity accordingly slow, there are good reasons for caution. As I noted a few weeks ago, many bank stocks can be obtained for right around book value.

The dim sector view is obscuring a brighter picture for Citigroup. With each passing quarter, it's becoming more apparent that this is really a play on international economic activity — especially in places such as China, Brazil and India — and less of a play on the moribund U.S. economy.

Right now, quarterly results are mixed, as strong international results offset tepid domestic results. Yet profits are building, which is pumping up book value. Merrill Lynch believes that Citigroup's book value will hit $6.21 by the end of this year, more than 30% higher than the current share price. By the end of 2012, book value could approach $6.75 if current trends continue. Assuming investors finally warm to the stock later this year and set their targets on that end-of-2012 book value forecast, shares look to have 50% upside.

2. Best Buy (NYSE: BBY)

Conventional wisdom says that this major consumer-electronics retailer is in disarray, steadily losing market share to aggressive players such as Wal-Mart Stores Inc. (NYSE: WMT). The fact that sales are expected to rise just 3% this year gives little reason for optimism. Yet if you dig deeper, then you'll see a company suffering from internal missteps and a still-weak consumer economy — not one that has lost its competitive edge.

To be sure, Best Buy's move of placing a big promotional emphasis on 3-D TVs now looks misguided. Consumers simply didn't want them, and that's the nature of electronics retailing — there are hits and misses.

But management appeared chastened at a mid-April management meeting as it laid out a game plan that looks more sound. In coming quarters, Best Buy will place an even greater emphasis on mobile devices such as tablets and smartphones, while also helping consumers navigate the “connected home.” That's a fancy way of describing the next wave of consumer electronics from TVs to radios to car stereos set for release in coming quarters that will have Internet connectivity at its core. This level of actual “interaction” with products is something rivals such as Wal-Mart and Amazon.com (Nasdaq: AMZN) simply can't replicate. In addition, Best Buy is boosting its efforts in the area of new and used video games and is ramping up its presence in China.

These initiatives, coupled with the fact that employment trends should continue to strengthen, has me convinced that expectations for the mere 2% sales growth in calendar 2012 (fiscal 2013) are far too low. Whereas the analyst consensus sees per-share profits of about $3.67, I see them rising to $4. Shares currently trade for less than seven times this admittedly bullish view. If that multiple expanded to 12, which is not unreasonable, you'd be looking at 50% upside.

3. GM (NYSE: GM)
My colleagues and I have written about the disappointing post-IPO performance of GM. Rising fuel prices clearly bear some of the blame, but it didn't help that management has decided to sharply boost engineering spending in 2011 to have a fresher product line down the road. Unless tensions in Egypt and Libya spread to Saudi Arabia, the risk premium could eventually come out of the oil market, helping prices to ease down toward the $90-a-barrel mark. As oil prices cool, GM's shares could get a solid lift. [Here are other reasons this is a good long-term stock to own.]

Analysts at UBS spot another catalyst: “Given its size, we believe GM will be the biggest beneficiary of the upcoming Japan-related inventory shortages, with the potential to gain of as much as 110 basis points of additional (market) share in 2011. We expect these gains can boost 2011 EBIT by $1billion and EPS [earnings per share] by $0.60/share.”

Yet it's the product line that will serve as the main catalyst for this stock. GM's entire car line is in the midst of a revamp, with a big focus on quality and fuel efficiency. Steadily rising market share, coupled with ongoing increases in industry volume, should help GM to operate its factories closer to full capacity and push up margins. As that happens, analysts look for EPS to hit $5 in 2012 and perhaps $6 in 2013. I'm betting investors will begin to focus on that 2013 outlook later this year. Slap a price-to-earnings (P/E) ratio of just eight on that 2013 outlook, and shares would rise to $48, or 50% above current levels.

4. Akamai Technologies (Nasdaq: AKAM)
The bloom is off the rose for this former tech highflyer. Shares have fallen nearly 40% since December and are now touching 52-week lows. Investors have grown concerned that tough competition in the company's core business of providing content delivery networks (CDNs) is leading to steady price erosion. That's surely the case, as it has been for a number of years.

Yet investors are missing the bigger picture. Akamai is also rolling out a wide range of ancillary products and services that are just now being tested and deployed by customers. These new offerings carry far higher profit margins than the commoditized CDN business.

Right now, analysts think profits will rise in the low double-digits in 2011 and again in 2012. Yet that view assumes a significant shrinkage in profit margins as further CDN price cuts take hold. But the new offerings hold the promise of sustaining and even boosting margins. If that happens, then profit growth will be in the upper teens, not the lower teens.

In recent weeks, management has cleared the decks and set a very low bar. Once investors see that future results will be above the currently pessimistic view, then the profit multiple could expand again and push shares back up toward the 52-week high of $54, more than 50% above current levels.

Action to Take –> Each of these stocks is in the midst of a tough period, which has led to a sharp contraction in their profit multiples. Yet each of these companies possesses a strong brand and meaningful operating leverage that will begin to show once operations start to turn. With just a few breaks, these stocks could see a nice uptick in the multiple — and perhaps a 50% gain.


– David Sterman

P.S. — We've just identified six surprising events that could break your portfolio wide open in 2011. Knowing these pivot points in advance lets you focus your investing strategy like a beam of light in the dark… and make a lot of money in a hurry. Get them free by simply watching this video presentation.

Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: David Sterman
4 Blue Chip Stocks with 50% Upside Potential

Read more here:
4 Blue Chip Stocks with 50% Upside Potential

Uncategorized

How I’ll Profit from Possibly the BIGGEST Oil Find in U.S. History

April 27th, 2011

How I'll Profit from Possibly the BIGGEST Oil Find in U.S. History

In 1999, just months before his death, a respected geochemist named Leigh Price was working on a research paper that would soon send shockwaves through the energy sector.

Dr. Price had spent much of his career with the US Geological Society (USGS) assessing the hydrocarbon potential in an area known as the Bakken Shale, a geologic sweet spot straddling parts of North Dakota, Montana and southern Canada. The culmination of his work was a manuscript suggesting that the area held more oil than anyone ever dreamed.

Around 413 billion barrels.

The report generated some controversy. After all, the entire country of Saudi Arabia only has 250 billion barrels of crude reserves. Could it be possible that North Dakota could dethrone the king of OPEC?

The answer to that question is the subject of endless debate among geologists. A master's thesis done by a University of North Dakota grad student back in 1974 pegged the resource potential at 92 billion barrels. Work done a few years ago using extensive sampling data and powerful computer modeling put the total at 300 billion barrels.

For its part, the USGS has calculated that 3.65 billion barrels of oil are recoverable. But most think that's a lowball figure. North Dakota's director of mineral resources says 11 billion. And the top executive of a leading oil producer believes the area could ultimately yield 24 billion barrels. North Dakota is now pressuring the US Dept. of Interior and the USGS for another review.

New technology unlocks the Bakken
The productivity of oil reservoir rock is determined largely by two factors: porosity and permeability. The more porous the rock, the more empty space available to store oil and gas. And the more permeable, the easier fluid can flow through and be captured.

Some prolific oil fields have porosities of 30% and permeability measures of 1,000 millidarcies or more. By contrast, the Bakken is a tight shale formation with low porosity of 5% and permeability of 0.04 millidarcies. So while there is plenty of oil, bringing it to the surface is a challenge.

Many oil companies have come and gone in the Bakken Shale since production first began in 1951 — and a lot of dry holes to show for their efforts. Of course, it's easy to have hit-and-miss results when you're drilling two miles down into a thin layer of 5 to 100 feet. And even if that bulls-eye was hit, producers still had to hope for natural cracks and fissures in the rock to release trapped oil.

But the past few years have brought two game-changing technological advancements. The first was horizontal drilling, in which a company drills down 10,000 feet or so to reach the most productive level, at which point it makes a 90-degree turn and creates a horizontal leg.

$100 oil has profits gushing

Thanks to the developments mentioned above, oil companies in the region took out 113 million barrels just last year. And with oil at current prices, increasing the productivity of the Bakken is more compelling than ever.

Action to Take –> With production rates widely expected to double to 700,000 barrels per day over the next couple of years, the Bakken will be swimming in cash. A lot of companies should profit from this trend — from drillers like Precision Drilling (NYSE: PDS) to midstream players like Enbridge (NYSE: ENB).


– Nathan Slaughter

P.S. –

Uncategorized

Forget Alternative Energy Stocks, Buy This Instead

April 15th, 2011

Forget Alternative Energy Stocks, Buy This Instead

In the world of investing, no news can often be good news.

A wide range of energy sources have been hit by bad news in recent months. Yet one key energy source has been out of the spotlight, but is likely to actually benefit from the unfolding events of 2011. I'm talking about coal, which now stands to play a greater role in global energy generation than many had previously thought.

Not like tobacco
During the past decade, many investors have viewed coal stocks in the same light as tobacco stocks. Each industry appeared headed toward the sunset due to changing values regarding health and the environment. And with growth prospects dimming, shares of many stocks in these two industries were stuck with very low price-to-earnings (P/E) ratios and EBITDA (earnings before interest, taxes, depreciation and amortization) multiples. Indeed, almost all of the key coal players are also very cheap in relation to free cash flow (FCF). Shares of Arch Coal (NYSE: ACI) and Alpha Natural Resources (NYSE: ANR) sport eye-popping 18% (FCF) yields, based on consensus 2012 projections.

Yet coal now looks to shake off the perception that is in decline, if only because other energy sources are running into their own troubles. For example:

ETF, Uncategorized

Why High Oil Prices Are Likely Here to Stay

April 12th, 2011

A number of forces continued to push oil prices higher last week, reaching their highest levels in the U.S. since September 2008.

One factor fueling the run has been the continued decline of the U.S. dollar. You can see from the chart that oil and the dollar historically are negatively correlated. This means that a rise in oil prices generally coincides with a decline in the dollar, and vice versa. The U.S. dollar has seen a dramatic decline since the beginning of the year as oil prices have moved some 30 percent higher. This could be due to fact that roughly two-thirds of the U.S. trade deficit is related to oil imports.

Despite the run up, oil’s upward rate of change is still within its normal trading pattern over the past 60 trading days. Accordingly, this may imply that it isn’t a spike and we haven’t crossed into the extreme territory like we experienced in 2008 and 2009.

Conversely, oil prices are positively correlated with gold prices, which also saw a bounce this week. Looking back over the past one- and 10-year periods, oil and gold have roughly a 75 percent correlation. This means that three out of four times, when prices for one go up, prices for the other increase as well.

Another factor pushing prices higher is the seasonal strength that oil prices historically experience leading into the summer driving season. This chart shows the five-, 15- and 28-year patterns for oil prices. You can see that prices historically bottom in February before rising through the end of the summer.

Rising oil prices are also a result of what the Financial Times calls the “new geopolitics of oil.” The FT says three elements creating this new environment are becoming clear:

1.    Young populations with high unemployment rates and a skewed distribution of income are a volatile combination for the people in power.
2.    To placate these groups, oil-producing countries are increasing public expenditures.
3.    Governments are also to extend energy subsidies to shelter the country’s consumers from rising energy prices.

A Deutsche Bank chart plots the share of population under the age of 30 for selected North African and Middle Eastern countries against the unemployment rate of this group. You can see that large oil producers such as Saudi Arabia have a high level of unemployment among youth populations.

This is why King Abdullah of Saudi Arabia has announced a total of $125 billion worth (27 percent of the country’s GDP) on social programs for the public. For King Abdullah, this is the cost of keeping peace but has driven up the breakeven price for Saudi oil production to $88 per barrel, according to the FT.

Keeping these young populations happy and working is not only domestically important for these governments but for global oil markets as well. You can see from this chart that a significant portion of the world’s oil production comes from the Middle East.

With the unrest in Libya—a top-20 oil producer—essentially knocking out the country’s entire production, any further unrest in another country could threaten global supply. Upcoming elections in Nigeria have the potential to disrupt production for the world’s fifteenth-largest producer.

But it’s not just geopolitics that is threatening production. Natural decline rates from mature fields such as Mexico’s Cantarell oil field are starting to make a dent in global production. Reuters reported this morning that Norway, the world’s eleventh-largest oil producer, is experiencing a significant slowdown in production from the Oseberg oil field in the North Sea. Production is expected to be cut by 26 percent in May to only 118,000 barrels per day.

Meanwhile, oil demand has been picking up significantly in both emerging and developed markets. Oil demand in China and the U.S. has been rising since mid-2009, well before the uprisings began in the Middle East.

In China, a big driver has been growth in the Chinese automobile market. Auto sales increased 2.6 percent in February, and March data released by the Chinese Auto Association over the weekend shows auto sales grew 5.36 percent on a year-over-year basis in March.

The G7 economies have been in an up cycle since last year. In the U.S., employment rates and consumer spending have been steadily improving. Oil prices rising too fast remains a threat to this recovery but BCA Research estimates that oil prices need to rise above $120 per barrel before “significantly undermining consumer and business confidence.”

Regards,

Frank Holmes,
for The Daily Reckoning

P.S. For more updates on global investing from me and the U.S. Global Investors team, visit my investment blog, Frank Talk.

Why High Oil Prices Are Likely Here to Stay originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

.

Read more here:
Why High Oil Prices Are Likely Here to Stay




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Record Oil Price: A Ways to Go, But Time to Get There

April 4th, 2011

Light Sweet Crude is touching another post-Panic of ’08 high this morning.

Crude Today Higher Than 3 Years Ago

At $108.25, we’re still a stretch from the record $147 price set in July 2008. But it’s $2 higher than it was on this date in April of that year. So we’ve got time.

No single factor lies behind the latest run-up as we begin the trading week. Rather, a confluence of events across the Middle East and North Africa continues to make the markets nervous:

  • The civil war in Libya drags on. Gaddafi’s forces and the rebels are stalemated and US airstrikes are doing little to shift the balance
  • Bahrain’s government has shut down the leading opposition newspaper. Bahrain’s Shiite majority is ruled by a Sunni minority. The US Fifth Fleet, stationed in Bahrain, watches nervously
  • Troops have opened fire on protesters in Yemen, killing 12 and wounding 30 critically.

Yemen has little oil to speak of, but it sits on the eastern side of a narrow waterway crucial to the world oil trade, described in Byron King’s “New War” scenario as the Bab-el-Mandeb, “the Gate of Tears.”

Iran's First Move

Yemen is home to a volatile religious mix – 52% Sunni, 46% Shiite. The dictator, Ali Abdullah Saleh, has ruled the place for 32 years.

Saleh has been helping the United States wage a secret war against al-Qaida sympathizers since Sept. 11. So unlike with Libya, the US government doesn’t want to see him go.

The problem is how Saleh is suppressing the protests – especially on the country’s northern border with Saudi Arabia.

“What Saleh’s been doing,” explains Nation Institute fellow Jeremy Scahill, “is taking sides with really extremist Wahhabi factions from Saudi Arabia and allowing the Saudis to go in and try to exterminate the Shiite minority inside of Yemen.

“So the Houthis [Shiite tribesmen] see him as a puppet of the US and the Saudis.

“The US and the Saudis are creating a situation that could draw in Iran to defend the Shiite population there. The dangerous game the US is playing in the north of Yemen could well draw in the Iranians because this is Shiites being exterminated, and it gets covered a lot on Iranian state television.”

“Saleh has lost allies,” the BBC reports this morning, “Yemen’s army is split. The government has lost control of entire areas of the country. And the economy is collapsing.”

Yemen, as we described in Apogee a year ago, is a demographic time bomb waiting to blow. Perhaps the fuse has already been lit. The desolate, arid country is also another front in the 1,354 year-old Sunni-Shiite conflict Byron’s describes in his New War scenario.

A year ago, the media laughed when Mr. King suggested the New War could send oil to $220 in a heartbeat. At $108 – and rising – journalists are beginning to sober up and ask different questions.

On the other side of the peninsula, Egypt state media reports police have thwarted an attack on a natural gas pipeline that supplies Jordan, Syria, Lebanon and Israel. The same pipe was recently reopened after an explosion at a terminal shut the pipe down for six weeks in February and March.

In response to the first incident, Israeli leaders ramped up efforts to develop a gas deposit known as Leviathan. With some 16 trillion cubic feet of gas, Leviathan is one of the world’s largest new gas fields of the past 25 years:

Leviathan Gas Fields

“The geology off the coast of Israel,” Byron explains, “has every indication of meeting criteria for a major ‘petroleum system.’ It has analogues with other of the world’s best hydrocarbon-rich areas. There are salt layers similar to, but not as thick as the pre-salt of Brazil. There are structures and stratographic traps, like off West Africa, with oil plays like Angola and Namibia.

“Plus, I think it’s fair to speculate that the really deep stuff offshore Israel has some similarity with what I’ve seen of the Wilcox Trend beneath the Gulf of Mexico.”

Regards,

Addison Wiggin
for The Daily Reckoning

Record Oil Price: A Ways to Go, But Time to Get There originally appeared in the Daily Reckoning. Daily Reckoning founder Bill Bonner recently wrote articles on stagflation and introduced his new book Dice Have No Memory: Big Bets & Bad Economics From Paris to the Pampas.

Read more here:
Record Oil Price: A Ways to Go, But Time to Get There




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

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