April 2008 Archives (don barrett)

April 2008 Archives

Buy Potash. You must be smoking POT!

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I first heard of Potash Corporation last year from Mad Money ,when I used to watch the show. At the time I heard of POT,I did some research and found what I think is a much better investment than POT. Let me share some facts about POT and then I'll give you some facts about my choice. POT is located in Saskatchew,Canada and was formed in 1953 in Sakastoon,Canada. POT makes a variety of agricultural products including solid and liquid phosphate fertilizers,urea,nitric acid and numerous other animal supplements and fertilizers. POT used to ship solely to North America,but now ships a lot of products to China.

My selection as a better investment is CF Industries Holding. CF was founded in 1946 and is headquarted in Deerfield,Illinois. CF produces and distributes an array of fertilizers and has formed to divisions,Nitrogen Fertilizers and Phosphate Fertilizers. Nitogen Fertilizer Division produces urea and ammonia. The Phosphate Fertilizer Division produces diammonium phosphate and monnoammonium phosphate used as agriculture fertilizers.

Now lets compare the two companys:

POT CF

Market Cap $53B $6B

Shares 315M 56M

PE 56 16

EPS $2.83 $6.57

Dividend .40/.30% .40/.40%

ROE 31% 33%

ROI 22% 31%

CashFlow 23% 18%

4Q2007 Rev. $1.43B-Up 40% $852M- Up 62%

And the share appreciation for 2007 was: POT-202%

CF- 171%

Im my opinion no matter how you slice it I think CF is a better investment. I welcome any comment or insight about my selection.

Shining Star

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HEY SUBHA,

I like a few of the solar companys too. What I was saying was with the current technology it is not marketable to the general public due to extreme cost. The first solar company to use the technology to generate a kilowatt of electricty at the same cost as your local electric company will move ahead of all the other solar power companys.

I stated in my prior article that First Solar said they will supply solar power at a cost comparable to local electric companys in 2-4 years. Based on FSs projection that would seem to make FS the leader of the pack based on the 2-4 year projection. But,I don't think that will necessarily be the final outcome. It will take a combination of 2 or 3 current technologys to get solar power to the masses.

Akeena Solar is already using what will be part of the final solution. AKNS is already prefabbing the panels with the wiring,mounting brackets and grounding built into the panels. This reduces the installation cost which amounts to a great savings and the average person could then mount the panels themselfs.

HelioVolt(Private Company) and Octillion Corporation(Trades under OCTL) both are very near solving the other part of the high cost of solar panels. HelioVolt and OCTL both are near a economical way of making the solar cells much cheaper. Most of the cell makers use silicon which drives up the cost and then incorporating the silicon chips onto the panels is expensive.

OCTL is using a sray system to spray nanoparticles of silicon directly onto glass to make solar panels. OCTL says in the "months ahead" they plan to refine the process to make their NanoPower Window technology to take it from the lab toward larger-scale testing to production.

HelioVolt is a private company which has a process which sprays on the nanoparticles onto glass or building materials such as shingles or glass. To date Heliovolt seems to have the inside track on using their technology to spray the nanoparticles onto glass or some other building material and incorporating that into the structure.

So to dominate the solar energy industry someone has to come forward and incorporate the technology OCTL or HelioVolt are developing or at least something comparable and that solar company will be the "Shining Star" of solar power!

BCON-fident

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BCON is an example of the kind of contrarian view with great tech. data I look at. BCON is a cheap stock that most mutual funds or pretty much no one will notice. I would have liked to have found a better stock for this example but it will do.

BCON lost about $ 12 millionn last reporting which was a small improvement over last reporting. They really don't have anything new to report But the stock is still climbing. BCON has developed a flywheel which is used in power grid management and thats about all I know.

BCON is moving up on the tech. data I use. But why I dont know. When using funamentals such as earnings,PE,etc. you would not buy this stock. BUT,this stock is moving up for a reason we may never know. And on the other side it may drop like a rock in the future. But,at least for today I,m buying in and in a day or 2 or in a few days we'll know if I made the right call or not!

Tesoro-Making more by doing less.

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Tesoro Corporation is a oil refinery company headquartered in San Antonio,Texas. TSO operates 7 refinerys with capacity of 660,000 barrels a day capacity. Higher oil prices cut the "crack spread",the profit made per barrel,but TSO has a way of fighting rising oil prices. All they have to is do is cut back refinery time and thus drive up the cost of gasoline. TSO has cut refinery operating time from 89.6% in June 2006 and $2.26 dollar a gallon gas to March 2007 refinery operating capacity at 82.2% and gas at $3.29 a gallon. And lest you feel we are facing a shortage of gas were not. Gas supplys in March 2007 are at 11% over March 2006 levels.
TSO net earnings were $801 million or $5.73 per share in 2006 compared to net earnings of $566 million or $4.06 per share in 2007. Net earnings were down in 2007 but TSO has reduced debt,lowered oil costs buy buying more local oil and expanded retail outlets through acqusition.
With the current reduced refining rates by TSO and the other oil companys following TSOs lead it should be a record year. Staying at current reduced refining capacitys,it wont take long to burn off the 11% build in gas inventorys and the media will be screaming "gas shortages" and it will all result in higher gas prices this summer. Despite what the media and other big wigs tell you oil consumption is down in the U.S. and worldwide and we are paying higher prices due to the reduced usage.
TSO has another ace up their sleeve and I guess all the oil companys do. TSO has over 900 retail outlets so as they reduce production and operating costs,at the same time they are driving up gas prices and all their retail outlets jack the cost per gallon up and TSO has a monster year!
So,in conclusion I don't see how you can go wrong with TSO. If they want a bigger profit they just work less and profits go up. Pretty sweet deal!

TWO STOCKS ON THE MOVE!

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Two companys I have mentioned on my blog are in the news and moving up nicely today.
OCTL is the company that I reviewed a couple of weeks ago. OCTL has developed a system to spray nanoparticles of silicon on to different materials such as glass,plastic,etc. A solar power specialist on CNBC didnt mention OCTL specifically but said the process of OCTL will have to be used to move forward with solar power. OCTL is up 18% today and seems ready to move up.
ANPI is a medical company I bought for the challenge and it has gained almost 20% since I bought it and about 9% today. ANPI had a new stint approved by the FDA and apparently Wall Street liked it.

Refiners are refining the art of deception!

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I stated on my post for TSO the con game the refiners are using and after reading Tom Armisteds post and a comment by the AP a minute ago I want to clarify a couple of things.
Tso and the other refiners had reduced profits fot 2007 when compared to 2006. Before you shed any tears for TSO their net for 2007 was down to $566 million or $4.06 a share compared to $801 million or $5.73 a share. Lest you think their CEO may be hurting after a down year he took home over $10 million for 2007.
Tso cut run times from 89.6% of capacity in June 2007 to 82.2 % of capacity at the end of March,2008. It took from June 2007 until the last of March 2008 for gas inventorys to drop,even though they had reduced plant run time by over 7%. And the reason it took gas supplys that long to finally drop,was you the American consumer. The consumer cuts back on gas usage and how is he or she rewarded for this? Paying over a dollar a gallon more for gas.
Tom wondered how by cutting back on run time they would make more money. As gas supplys begin to drop,the price per gallon goes up and the "crack spread" widens. TSO and the others have cut operating costs by working less and also increasing profits by creating the illusion that gas supplys are short.In June 2007 TSO was operating at 89.6% of plant capacity and gas was $2.26 a gallon. By the end of March 2008 TSO was operating at 82.2 % of plant capacity and gas had increased to $3.50 a gallon. Oil prices have risen,but TSO is making more money. The ace in the whole these refiners have is they have their own retail outlets. As they drive up gas prices their own retail outlets sale a portion of what they produced and they sale the rest on the market at the inflated prices they caused.
And then you may think we do have reduced gas supplys,but you would be wrong. At the end of March 2008 gas supplys were up over 11% over 2007 levels. And as i stated on my earlier post on TSO the media would work everyone into a frenzy over how low gas supplys are,when it just isn't true. I just read the headline for AP talking about the gas shortage a few minutes ago. That leaves me something for later. AP and some of these people will print anything without doing the research to verify what their printing. Later!

PS I think all the refiners will be much more profitable in 2008 and I would refine my pick of the refiners to a buy!

WaMu-Whats that smell?

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I have heard investors asking since late 2007 have financials hit a bottom and when should I jump in. I don't think the economy is in near as bad a shape as most think,but I wouldn't buy these financials with your money! Citi seems to have begun to right the ship,but if you listen to most of the prognosticators,you have the other shoes ready to be dropped-credit cards and commercial loans. I think the losses or write-offs are over $200 billion and lay offs at least 50,000 and thats just in the U.S! So,if you want to take a chance on suicide and catch a falling knife,by all means jump in. But,I can think of many other companys that will out perform WaMu and they pay a nice dividend!.
In conclusion I will say that buying a sinking stock and trying to time a market bottom for a stock is very difficult to do. A lot of mutual funds and money managers are going to have a lean year by trying to time time the bottom for these financials.
A lot of great companys are trading at or near a 52 week low and have much less risk than WM. I am a contrarian investor to some degree and I like to find a good company trading at bargain prices,but WaMu and the other financials just have to much risk for me. The wrong move here can haunt you for the entire year!

LockheedMartin-Love Em or Hate Em

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Lockheed Martin announced earnings this a.m. and results were impressive. Before I discuss the earnings of this company I would like to say that I think an investment in this company may find something rare in the investment world. LMT requires some contemplation as to what this company stands for and regardless of profit margin,I would hope each individual would look inside themselves and invest or not invest due to their personal convictions. This company requires more thought than a solar company or any green company. This company is at the apex of the American military machine due to their involvement in some of the most lethal parts of our defense or as some will think,part of Americas aggression machine
I think an investment in LMT will also fall along party lines to some degree as I think Democrats tend to want to negotiate to find a resolution. Republicans tend to try and negotiate,but come to the conclusion quicker that talking to some is a waste of time. Hitler,Castro. and others come to mind as some that no amount of negotiating is going to change their minds or motive.
LMT is a company that will be looked at as a part of our defense and by others as part of the American aggression.
Regardless of your decision LMT is a integral part of the American business world and 1st quarter 2008 earnings were impressive. Revenue for the 1st quarter 2008 was $10 billion an 8% increase over 1sr quarter 2007. Net earnings were up 6% over 1st quarter 2007 to $730 million.
Cash flow was $882 million for the quarter.
Regardless of your decision LMT will continue on. The only obstacle in their future may be the election this year. A Democratic win may hurt LMT down the road and a Republican win I don't think will have much of an effect either way.

I fell for the oldest trick in the book!

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I first would like to thank Jamie for allowing me to be the featured blogger for the week. At the time he was sending me the email to tell me I would be the featured blogger I was dumping my portfolio and abandoning the strategy I had used to get into the top 100 and within sight of the leaders.
If you look at my first post you'll see I said set your game plan and stick with it. And although this is a learning process for me I have made some terrible mistakes and if you don't learn from your mistakes you will never beat the market to any degree. What i did yesterday was something I have done before with my real money. I have placed an order in the real world with a limit price and by the time the order hits the ask has moved past my limit price. So I rush and enter a higher limit and I'm too late again. Enter a higher limit and hey,I got in. And then 5 minutes later watch the stock start dropping. If you chase a stock you will end up losing. And you are breaking the simplest of rules to making money in the market" Buy low-Sell high.
This can also be accomplished by chasing a sector,which is what I did yesterday. Oil and oil stocks had gone up 7 or 8 days in a row. So even though I had been doing fairly well I abandoned all my strategy and jumped over to the "hot' sector. and the oil stocks tanked today
Also,one trait I have never been known for is patience. Sometimes the market moves slowly and sometimes its a whirlwind and sometimes it does nothing. But the one thing you have to do is go with the flow and don't try swimming upstream. If you are chasing a stock or sector you are getting impatient and going against the flow. Always let the stock come to you and at your price. If it doesn't come back to you on your terms,let it go for now and move on to the next stock. If you chase something I can almost guarantee you will lose money.
As I told you on my blog this morning,my strategy is based on cheap or value stocks. And you have to stick to your plan and wait for the optimal time. Develop your style and strategy and other than a "tweek" once in a while stay with it.
I hope I haven't bored the more experienced traders to tears,but after Jamie let me be the featured blogger for the week,I just wanted to let everyone know why I fell out of the pack. Also,as Arnold Schwarzenegger stated at that crisis in American history: I'll be back!"

Aetna Insurance- Insuring the working.

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I watched several companys report earnings yesterday and most were in line with Wall Street expectations One company caught my eye with their quarterly report that gave me as much insight into the overall economy as it did into the companys own personal outlook.
Aetna is a company that offers health insurance to working people. With all the prognosticators saying we are in a recession,we will be in a recession or we have been in a recession,Aetna shows me some evidence maybe things are quite as dire as most are telling us.
In a recession I would think an insurance company such as Aetna would be one of the first to have a downturn. A recession to me is a period of high unemployment,negative GDP growth and high inflation and so far I don't see any of these factors becoming overly excessive. In a recession you would expect Aetnas membership to be dropping as health care costs soar due to inflation and unemployment rises as companys lay off workers or to put freezes on hiring. With Aetna this just isn't the case as membership for their health care products is rising!
Aetnas membership actually grew last quarter by 614,000 to over 17 million members. Premiums surged but companys are still insuring their workers. And if you read my post on WAMU you will know why this really surprised me and I think you will be surprised too. Aetna affirmed 2008 guidance and will be adding 350,000 new insured members from I thought one of the most unlikely of sources; Bank of America. In this "recession","credit meltdown" housing crisis' and all the other terms to tell us how bad things are 2 companys are actually doing better than they should be. Bank of America adding 350,000 employees to Aetnas health plan doesn't make me think things are collapsing around me in this "election" year.
While all the talk from the media is painting such a dire picture,a lot of companys are doing very well. Granted we do have some problems and some sectors of the economy are suffering,but overall we are not doing that badly. Aetna and BAC seem to be painting a different picture than the media. With Aetna and BAC seeming to be doing business as usual and the other quarterly reports yesterday and new unemployment claims dropping by 32,000 yesterday I don't see things as bleak as most of the media.

ADM-Ethanol is Driving Their Profits.

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ArcherDanielsMidland is a corporation that a lot of people are not familiar with,but ADM is a company that has an impact on the lifes of many. ADM is the world's largest producer of corn-based ethanol. And if you aren't burning their ethanol fuel,there's a good chance something you consume today may have passed through the ADM supply chain. ADM stores,transports and markets a wide range of agricultural products.
ADM operates in 3 main areas,oilseed processing,corn processing and agricutural services. The oilseed division processes oils from soybeans,corn,canola and flaxseed into vegetable oil. The corn division operates in wet and dry milling. The divisions deliver corn meal,syrup, starch and sweeteners. The agriculture services division procures,stores,cleans and transports corn,wheat,milo,barley and oats and processes the grain for marketing.
ADM earnings are like the company,nothing flashy,just steady gains in profits and share price. A 5 year chart will show ADM has gone from a $10 stock to it's current price of $47.31 which is near its 52 weeh high of $48.95.Fourth quarter 2007 earnings had a mixed results with
a 50% increase in sales to $16.5 billion,but a 10% gain in net revenue to $473 million or .73 cents a share which was below wall streets forecast of .74 cents.
ADM is a stable company in an expanding market. Love it or hate it,ethanol will be around another year or two at least. Their exports and domestic sales are going to increase as the worlds population grows and I think they could have tremendous growth in exports. Share prices should continue to grow and their earnings will follow suit and they pay a 1.1% dividend which should grow as earnings do. My advice is to buy ADM stock,go to the mail box and get your dividend checks and sleep at night because this company is solid.

don barrett

don barrett

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