Aero Defense, Agriculture, Pigs and Chickens

Take a seat at my little buffet.


First, Aero Defense:

DCP, KBR and FLR won the Army Logcap IV contracts.

BAE won a $213m order for 287 MRPAs and 154 SOCOM MRAPs.

Military views Seator's Lugar and Voinovich flip flops on Iraq may bode serious trouble for the upcoming 2008 defense bill.Voinovich has already made a fool of himself crying at the John Boulton nomination and his Alzheimer-esque performance on a nationally syndicated radio show this week.Many are viewing some Republicans in the Senate as spineless and not in support of victory in the War of Terror. Of course, they despise almost all leading Democrats much more.

RTN protested the Army JCA award to LLL.

AH won a $50m order from AM General for Humvee armor.

LLL won a two year $700m ID/IQ ceiling increase from SOCOM for JOG.

CP; won a $400m ten year Army contract for GPS receivers.

American Air is accelerating its Boeing 737 deliveries.

China and Bombardier have agreed to partner on the development of the ARJ21-900 regional jet and the CSeries.

CRON acquired EaglePitcher Boron for $70m.



Second, agriculture:

Corn acreage has expanded beyond everyone's expectations. The price of corn has fallen from over $4.00 to $3.23/bushel. Ethanol is marginally helped. he increased corn production could allow an extra 950 million gallons of ethanol to be produced.

Soy production is down, except in Brazil. This helps Bunge (BG), but I think it is already fully priced.

Which leads me to the third point, pigs and chickens:

Analysts have been sour on pig and chicken (poultry) producers because of a forecast of $5.00/bushel corn. This is apparently not going to occur. Thus, I recommend a stock I have studied for a long time, Smithfield Foods (SFD), for consideration to purchase. It has great management, lots of fine brands here and abroad and has been boring me from the low 20s to low 30s when it could be a $50.00 stock by next year when their synergies kick in from acquisitions made the past year.
I do not like any other meat producer at this time.

June 28, 2007: E-TRADE ready to launch direct trading in six markets

I have several E-Trade accounts and think that their service, upscale research and execution are first-rate. I have never been disappointed with a trade and at $7.99, it is a good deal.

Now, E-TRADE is going global for those of us with the risk tolerance and research to invest directly in the international security market. I feel that this will be especially useful for environmental stocks (global warming, etc.) that are not listed as ADRs in the States and mature but less well known stocks in other growth industries. ETFs and other vehicles will also be available, if permitted under law. I cannot see a downside to this, unless one counts investor arrogance or stupidity(or both).

The Global Investing Platform, with support if needed, will commence in approximately two weeks. The countries that will have direct market trading are Canada, Germany, France, Hong Kong, Japan and the UK. Also, five currencies may be traded as a hedge against the US dollar.

With this latest effort to provide superior investment vehicles for clients, E-Trade continues to roll out outstanding bank and mortgage products, tutorials, top-notch trading platforms, respected research, sophisticated stock and bond screening tools and timely e-mail alerts.

Interested parties worldwide may want to explore this exceptional company and the new international direct trading options at www.etrade.com.

June 27, 2007: CSFB has a brainstorm..goes overweight on Asset Management stocks

Credit Suisse First Boston published a thorough analysis (78 pages) of the U.S Asset Management industry and has turned quite bullish on the group. I agree with their rationale.

CSFB expects a continuing asset mix shift into global and alternative products to be a key trend affecting business over the next several years.CSFB believes these asset classes are underrepresented in both US institutional and retail portfolios,and will "be a tailwind for money flows". Liability Driven Investing (LDI) and the acceleration of the retirement payout market as two other important developments that could change the landscape within the industry. In both instances, CSFB sees greater competition emerging from outside the industry, making scale, product breadth, coordination of global research and asset/liability management skills more critical to long-term success. CSFB sees a more than 50% upside for the top stocks in this universe.Congressional legislation to increase the tax burden on certain asset companies was factored into CSFB analysis.

There is a lot more in their report, but for brevity, here are the picks:


Best stocks: INVESCO

Close second: Fortress Investment Group (FIG) -- this is my favorite at the moment.

other "best bets":

Franklin Resources
T Rowe Price
AllianceBernstein
Affiliated Managers Group

CSFB ranks most others as neutral, but NONE as an under perform. Even Janus may make a buck or two.

I am trying to provide credible investment ideas in this market. I hope my published thoughts over the past days have been useful.

June 26, 2007: More stock ideas off a criteria:Large Cap

"I feel strongly both ways" - average (successful) politician

That is how I feel at this stage of the stock market. My portfolios are holding steady to very slightly up the past month. Dividend-rich stocks have helped, but their price has been reduced a bit due to inflation fears. So, I took a few minutes off of renovating a pretty challenging 36 unit duplex complex courtesy of La Salle Bank and the courts. I am in charge of getting the place up to speed and I don't know whether to thank or head slap the attorney who recommended me for he operation.
One thing, I am having some fun with it. If I can change one or more of the seventy-two plus residents on public welfare to become self-reliant and a Republican while fixing the mess up, I will be happy.I would love to see some pandering Democrat politicians here to see what giving free goodies out for votes actually does to the human spirit.

The following screen consist of large cap stocks that have a low PE and PEG valuation as of today. This list is not a recommendation, just some ideas for you to wade through during this choppy time.

Allstate (ALL)
Banco Bradesco SA (BBD)
Unilever (UN)
XL Capital Ltd. (XL)
ACE Limited (ACE)
Valero Energy (VLO)
Travelers Insurance (TRV)
Deutsche Bank AG (DB)
Allied Irish Bank (AIB)
SK Telecom Ltd. (SKM)
Merrill Lynch (MER)
Morgan Stanley (MS)
Lehman Brothers Holdings (LEH)
Goldman Sachs (GS)
Chesapeake Energy (CHK)
Bank of Ireland (IRE)
CNOOC Ltd. (CEO)
Fannie Mae (FNM)
Freeport-McMoran Copper and Gold (FCX)
Sasol Ltd. (SSL)
CIT Group (CIT)
France Telecom (FTE)
Baker Hughes (BHI)
Aluminum Corp. of China (ACH)
XTO Energy (XTO)
UBS AG (UBS)
Cummins (CMI)
BASF AG (BF)
Global SanteFe (GSF)
Rio Tinto plc (RTP)
ASML Holdings NV (ASML)
Huaneng Power International (HNP)
Noble Corp. (NE)
Applied Materials (AMAT)
Diamond Offshore Drilling (DO)
Transocean Inc. (RIG)
Koninklijke Ahold NV (AHO)
National Oilwell-Varco Inc. (NOV)


Good luck and good hunting.

June 25, 2007: Inexpensive growth stocks...a random walk.Sub-prime advice.

Two thoughts before I proceed with a screen I ran today.

1. If you can't dazzle them with brilliance, baffle them with bull shit.
2. If enough crap is thrown against a wall, some of it will stick.

In this choppy market, sometimes fresh ideas help.

The following stocks have growth rates better than 25% and relatively low PE and PEG ratios:

Transocean (RIG)
Net Servicos de Communicacao S.A. (NETC)
Global SantaFe Corp. (GSF)
Pride International (PDE)
Atwood Oceanics (ATW)
Denny's Corp. (DENN)
Noble Corp. (NE)
Penford Corp. (PENX)
Brush Engineering Material (BW)
EPIQ Systems, Inc. (EPIQ)
Casual Male Retail Group, Inc. (CMRG)
Gold Fields Ltd. (GFI)
Diamond Offshore Drilling, Inc. (DO)
The Medicines Company (MDCO)
TETRA Technologies, Inc. (TTI)
American Oriental Bioengineering,Inc. (AOB)
RTI International Metals (RTI)
Greif, Inc. (GEF)
Ultra Clean Holdings, Inc. (UCTT)

New ETF and ETF-type funds keep hitting the investment market. I am a firm believer of the free market and choice. However, I have a gut feeling that many of the recent entrees have all the hype of the NFL, and the quality of a Yugo. I will comment on some from time to time. Right now, I would be watching your nest egg very carefully. We are not at the Jimmy Carter stage of malaise - far from it. Diversifying your investments to include rental real estate, which is on sale on a street near you, is a choice I have recommended to individuals who like the 20% or more return.I have increased buying real estate. The sub-prime panic (not a problem now, IMO) is exactly what you should be buying into.Make money when the buffoons have to sell.

June 21, 2007: An ETF for a choppy market: iShares EPAC Select Dividend Income Fund (IDV)

Scrooge McDuck may like this fund.


Regular readers know that I am fond of dividends, so long as they are reasonably protected and reasonably certain to be increased in a timely fashion. Stocks and funds that provide a dividend yield floor have traditional been excellent performers in a choppy market. The dividend helps protect the price of the security. Of course, if inflation rears up in a significant and prolonged fashion, all bets are off.

iShares has recently launched a new ETF which has appeal for me, and may be worth a look for you as well. This ETF is the EPAC Select Dividend Income Fund (IDV) which represents non-US holdings that pay worthwhile dividends with the prospect of continued dividend enhancements.

IDV has a .50% expense ratio and is priced close to $50.00/share. The fund seeks investment results the mirror the Dow Jones EPAC Index and is proprietary.
The fund initially has approximately 43% in financials, 15% industrials, 14$ consumer services, 7% consumer goods, 7% telecommunications, 6% utilities, 6% basic materials, 2% oil and natural gas and less than 1% in tech and S-T securities.

Although a bit heavy on the financials, I will take the overall blend as it is uniquely light on natural resource stocks which many of us hold already.

The top holdings include:

Perpetual LTD
Commonwealth Bank of Australia
Westfarmers Limited
National Australia Bank
Royal Bank of Scotland
Sims Group LTD
Alliance & Leicester PLC
St. George Bank LTD
Telecom of New Zealand
Carpetright PLC
Great Southern LTD
Orient Overseas International LTD
Australia and NZ Banking Group
Westpac Banking Corp
Provident Financial PLC
HSBC Holdings PLC
Unilever NV-PLC
Tabcorp Holdings Limited
Singapore Petroleum Co Ltd
CLP Holdings LTD
Manitoba Telecom Services Inc
EMAP PLC
ENEL SPA
and three score more for very nice regional non-US diversification and currency hedging.

I am a likely buyer of this security, which may replace one or two holdings presently in my portfolios. Or, I may add it to continually overweight foreign market exposure without having to go somewhere in Bulgaria to find some naked ROW exposure.

June 15, 2007: Can you have both growth and yield: Ask Curly..."Soitonlee"!

Pictures: Curly of the Three Stooges, The USCG Tall Ship Eagle, the United States Coast Guard Academy in New London, Ct.


Talking heads are all over the map regarding the future direction of the market. "If this does that, and he does this, and they do that because it is this"....yadayadayada...it reminds me of the old comic, Jackie Mason. Even Mr. Kindheart, talk show host Michael Savage imitates him quite well (whether he realises it or not).

Growth or value or sell? I did a screening for growth stocks that actually pay a nice dividend.You might be interested in taking a look for your portfolio. They are:

The Standard Register Company (SR) trading at 12 dividend 7.90%
Highland Hospitality (HIH) trading at 19.25 dividend 4.77%
Equity Inns (ENN) trading at 19.72 dividend 5.00%
Atlas Pipeline Partners, LP (ALP) trading at 53.90 dividend 6.39%
Crawford and Company Class B (CRD.B) trading at 6.66 dividend 3.71%
Ferrellgas Partners, LP (FGP) trading at 26.08 dividend 8.40%
Sunstone Hotel Investors (SHO) trading at 28.75 dividend 4.45%
Vicor Corp. (VICR) trading at 12.46 dividend 4.93%
Maguire Properties, Inc. (MGR) trading at 34.81 dividend 4.59%
DiamondRock Hospitality Company (DRH) trading at 18.35 dividend 5.18%
Spirit Finance Corporation (SFC) trading at 14.52 dividend 6.07%
EV Energy Partners, LP (EVEP) trading at 38.07 dividend 4.90%

Due diligence, please, on each stock on the list.

I will be in Mississippi and Alabama (Gulf coastal areas) practicing real estate and hopefully school others in one of my vices:blackjack. I also will be touring the USAF bases in the area and will be having a much anticipated evening meal with the lead pilot for the USCG Hurricane Watch team. He had to loose about 60 lbs. since attending the United States Coast Guard Academy in New London, CT. where he was a football guard blocking for my son, the halfback, during four years of starting. I have no doubt he saved my boy from many a nasty tackle, so this is payback in a small way.

Speaking of the Coast Guard Academy, if you have a high school student looking for a superb career and a wonderful Ivy League-quality education, I heartily recommend he US Coast Guard Academy for a college choice. It is extremely competitive to get into, as it is the only service academy that bases entrance solely on merit and not upon the political recommendation of a Senator or Congressman. They have a nice website (Google United States Coast Guard Academy) official site.

Due to my travels and obligations, my posts may be sporadic this weekend. If I have something important to say, I will so state in a blog post when I have time to compose.

June 12, 2007: ETF babies: don't throw them out with the bathwater - yet

Over the past few weeks several new ETFs or related instruments have been launched. Since these may be lost in the shuffle with all of the other clutter in our investment world, I thought it would be a service to list some without commentary:

Wisdom Tree presented a dividend-related REIT ETFs, the International Real Estate Fund (DRW).

The SPDR DJ International Real Estate Fund was launched in December of 2006 and has accumulated almost $1b in assets to date (RWX).

Barclay's has filed for nine commodity-related ETNs (similar to ETFs), Agriculture, Energy, Ex-Energy, Grains, Industrial Metals, Livestock, Petroleum, Precious Metal and Soft Goods. www.ishares.com has the prospectus for each.

Covered call ETFs were recently released, Advent/Claymore Enhanced Growth and Income (LCM), Enhanced S & P Covered Call Fund (BEO), Dow 30 Premium and Dividend Fund(DPD), First Trust Fiduciary/Asset Management Covered Call Fund (FFA), Madison Claymore Covered Call Fund (MCN), S&P Covered Call Fund Inc (BEP). Good luck.

Healthshares have a series of parsed medical ETFs. Their most recent is Healthshares European Medical Devices and Devices (HHT).

The world's largest hedge fund manager, Man Group PLC, initiated the Man Dual Absolute Return Fund on Friday. It is listed on the NYEX and will operate as a closed end, high performance security. Trading at about $20.00/share.

State Street brought forth five fixed income funds, SPDR Lehman 1-3 month T-bil (BIL), Barclays TIPS (IPE), Lehman Aggregate Bond (LAG), Lehman Intermediate Term Treasury (ITE),Lehman Long Term Treasury (TLO).

Barclays enhances their ETN series with the CBOE Standard and Poors 500 BuyRite Index (BWV). Yield is approximately 9%.

And www.vanguard.com. the low cost ETF/mutual fund company has launched a bundle of ETFs over the past month. I recommend you go to their website for a look.

As almost all ETF observers predicted a while ago, ETFs are making major inroads in the traditional mutual fund arena. In addition, many new ETFs are parsing the worlds markets into more select and dicier pieces. I do nor subscribe to trying to get rich quickly buy putting too many chips into eclectic ETFs or their cousins. Steady as she goes is my maxim. Consider it to be yours as well.

June 9, 2007: Aero Defense update and SFD, a pig in the pork

LHA-6 Amphibious Ship (click to enlarge) and one hog.


A few surprises in Aero Defense this week:

Raytheon (RTN) beat out General Dynamics for the $11.2b/10 year Army FOCUS program, for O and M of live, virtual and constructive training programs.

Northrup (NOC) received a $191m DDG-100 award, following a $2.4b award for the LHA-6 amphibious ship.

Dyncorp (DTN) beat the street estimate of 38 cents by a nickel. I really like this stock!

Boeing (BA) reported orders for 92 aircraft in May, triple the 33 orders in May of 2006.

Spirit AeroSystems (SPR) has expressed an interest in purchasing four of the six Airbus plants.

Boeing is not happy with Vought's performance on the 787 Dreamliner program. Look for a head or two to roll at Vought.


Smithfield Foods (SFD)

Smithfield Foods has a bright future, although most analysts do not see it that way at present. Feed costs are skyrocketing (thanks, global warming whackos and Ethanol),
SFD is not the lowest cost producer despite synergies via acquisitions that should have made it so and pork is still too cheap in the marketplace, plant utilization is approximately 80% (should be at 90% or above), premium cattle operations are not generating expected profits as SFD feeds its cattle longer on grain for quality, thus being caught in the same grain expense situation as hogs, lack of definitive programs to increase value-added meat products (and by-products, such as bio diesel fuel), poor European operations (especially Romania) and a full stock price valuation based upon current numbers (approximately $32./share).

That said, I like Smithfield Foods. Management knows the problems and, IMO, has the expertise and game plan to succeed. SFD made some wonderful acquisitions over the past few years which need time to breed success. Alternative energy bio diesel using animal carcass remnants and byproducts has yet to scratch the surface, eastern Europeans love pork - and that is where SFD is at, and once corn prices begin to cheapen, SFD will achieve the margins hoped for (some have researched using feed other than corn for many of the SFD operations).

I recommend SFD as a stock for an occasional glance over the next few months. It is a long term story that is now midway through Chapter One.

June 4, 2007: Aero Defense and a few Alternative Energy stocks

Pictures: Oshkosh MRAP and an LED power chip


First up, some Aero Defense news:

NAVZ won a $623m/1200 vehicle MRAP order from the USMC.

RTN beat HRS for a $960m NMT program.

HRS announced the purchase of IT provider Multimax, Inc. for $400m and raised 08 guidance 28%.

CAI will acquire the Wexford Group Int.

DRS won a $139m contract for night vision devices.

Ryanair ordered 27 Boeing 737s for $1.9b. It will not be a 787 customer.

In a politically charged order, Qatar Airway's ordered 80 Airbus A350s worth $16b. It was implied that Boeing never had a chance to win this order although sources indicated it had a superior product and bid. Unfortunately, capitalism only works when the playing field is level.

India will order 6 C-130Js from LMT for $1b.


Here are some Alternative Energy stock ideas:

DOWA Holdings in Japan (5714), is a mining company that produces gallium as a by-product of refining zinc and through recycling, which accounts for 50-60% of its gallium production. Gallium prices have risen 90% since January, 2007. Experts believe that LED using gallium is a superior play on energy efficiency.

Rentech (RTK) is a US stock that is a pure play on coal-to-liquids technology (CTL). Although carbon emissions are a problem to be solved with this process, I believe that it will be overcome. This CTL technology is profitable when oil is over $50.00 the barrel.

E.ON in Germany us a great play on CO2 allocation arbitrage. Carbon trading will benefit E.ON over other conservative investment vehicles of that genre.

The UK stocks looking good now are British Energy (BGY.L), and National Grid (NG.L).

Solar is not gaining investment traction. The only decent play I saw was E-ton, a China company with little stock float.

In Japan, Toya Tenso (5310) is strong in the LED area.

An interesting company in the UK is Pennon (PNN.L) which extracts landfill gas for power generation, mostly as a result of the lucrative Renewable Obligation Certificates (ROCs).

Watch old chestnut Phillips Electric in Holland for new lighting systems that are up to 90% more efficient than current moderately energy efficient bulbs and other light sources.I owned Phillips back in the late 1980s and remember making a modest profit and then gladly dumping it because of its hundredth restructuring program that misfired. Could this 800 pound gorilla be getting it right now?