Thursday, March 26, 2009

5 Stocks For The Long-Term: Stock #5

Caterpillar, Inc. (CAT) is the fifth and final stock you should be looking at for the long-term. This stock has been beaten to within an inch of its life because the implosion of the housing market. This company produces construction equipment, mining equipment and engines that run on diesel and natural gas. Many investors view this company as dependent on the housing market, particularly new home sales to drive its revenue. Less than 10% of this company’s revenues are actually tied to the housing market. This is a company that is involved in many different markets and because of the overselling of this stock over the past year, it is currently sitting at a bargain price.

It is currently trading a few dimes shy of $30, which is a few bucks off its low of about $21 and change. Its 52 week high was in the mid-$80’s, which I think was a little too high, but it was still riding the housing high that started in 2004. The current dividend yield is 5.7% and the EPS is at about 5.5, which is extremely low for this company. Also, the dividend has been increased each and every year since 1992, with no missed dividend disbursements. Through thick and thin, this company always delivers that all important dividend.

Three catalysts will drive this stock back up. First is the Stimulus Plan. A major part of this plan is to create jobs by strengthening the country’s infrastructure. Once this gets started, equipment sales should skyrocket. This, however, is contingent on the second catalyst, which is the loosening of the credit market. Once financing is available, Caterpillar’s customer base (the ones who survived the debacle) will start purchasing at the same levels they were before the economy went bust. These guys will be trying to boost their production and grab up market share left by the ones who had to shutter their operations. Lastly, the housing market will turn around (assuming the credit market loosens) and all the bums who thought this company was dependent on the housing market will begin buying up shares.

Two big red flags for this company is that currently it is loosing money, but that will be short-lived when the three catalysts kick in and the second is the $30+ billion in debt it currently has on its books, with only $1.5 billion in cash. If the growth prospects for this company weren’t so great, I would normally steer clear of a balance sheet like that. This baby has nowhere to go but up, however, be cautious, because it could still dip a few bucks. Again, this risk can be reduced by buying in slowing and building a position while the stock is underpriced. Remember, this company should not rise at the same rate it declined in the fall. Be patient and think with your head and put your emotions on the back burner. Actually, take your emotions and put them in the garbage and take the garbage out to the curb. They have no place here!

Friday, March 20, 2009

Five Top Stocks For The Long-Term: Stock #4

Exxon Mobile Corp. (XOM) is stock #4 of this five part series. Yeah, yeah, I know, everyone hates the oil companies. I say, “If you can’t be ‘em, join ‘em!”. Also, even with demand having slowed considerably, the company continues to set new quarterly net profit records each and every quarter. When the price of oil is low, the company still makes a ton of money and when the price is high, the company still makes tons of money. Even better, when the price of oil drops, the average idiot investor sells his XOM lot, for fear of the stock nose diving. Bitch Please!! The stock has dropped nearly 30% since its high of $96 during last summer. Revenue and earning for XOM are down about 30% each, but management has still been able to have the ROA and ROE return 20% and 39% respectively.

Another huge reason to love this company besides the fact the stock is trading far below it’s 52 week high is that it has about 3.5 times the amount of cash in its holdings as it does total debt. Also, the price to sales ratio is under 1, which is another indication that this stock trading at just shy of $70 is priced right to buy. The current dividend yield on this stock is about 2% and with all that cash in its holdings, the company can easily raise that dividend every year in the foreseeable future.

Since the dollar appears to be heading for a downward spiral in the short-term, the price of oil should start to creep up, which again will help XOM gain more folks buying the stock. Be smart and start building your position before the late arrivers being to buy up the stock when oil starts to surge up.

Remember to buy incrementally and not go all in. This is not No-Limit Texas Hold-Em. The movement of this stock is directly affected by the price of oil. It may move more or less relative to the movement of oil, but the relationship between the two is direct. Even though oil is low right now, it will most likely move up in the future, however, it could fall even further down into the low 30’s or even the high 20’s should demand continue to decline. OPEC has price controls on this and can at least choose a bottom on price by cutting supply, but it is still a good idea to buy smaller chunks periodically in order to minimize risk. Yes, you will leave some gains on the table, but you will also mitigate potential losses as well, should your timing be less than ideal.

Monday, March 9, 2009

Five Top Stocks For The Long-Term- Stock #3

Hello again! I know you've been waiting with baited breath for the third installment of this series. So far, we have a retailer and a company that lives off of discretionary spending. You must be thinking that these two companies are terrible choices, because the current economy has changed the spending habits of the average American, so that we are no longer a nation of hedonistic whores. This is precisely why these are great companies for the long-term. They've been kicked around pretty badly and when the dust settles from this economic meltdown, slowly but surely, the old spending habits will return to the previous norm.

To all of you who are still non-believers, I shall bestow an energy stock on you, so that you can relax and get on board. Terra Nitrogen (TNH) is the energy stock of the future. This stock is as volatile a mid-cap (middle size company) as I have ever seen, however, despite the craziness going on in the market, it has remained relatively stable. What does this mean? I haven't a clue, because the market is as irrational as ever and nothing makes a bit of sense. Everything nowadays is so uncertain, it is difficult to pick a stock. Remember this, good companies will come out on top in the end.

TNH is an alternative energy company specializing in nitrogen energy products for industrial and agricultural use. By having both sides of the equation covered in terms of clients, this gives the company excellent stability and growth prospects for the future. Since it is an option to oil as a fuel, it poses an excellent position for the long-term, when oil becomes scarce. It is also a wonderful alternative fuel for all of you hippy, tree-huggers out there worrying about the health of the planet.

TNH has traded as low as the mid-$70's and as high as the low-$170's during the past twelve months. It is currently just shy of $120 per share, so you can argue that in terms of valatility it is in the middle of it's price range. The key factors are that this company with a market cap of about $2.5B has no debt and is currently paying a dividend of $11.88 annually, which at the current price is just under a 10% yield. It is a solid company with a future and wonderful balance sheet that pays a dividend equivalent to a junk bond and not near the same amount of risk.

Another attractive aspect of this stock is that it trades at just 8 times earnings, which for an alternative energy company with huge potential for growth is extremely cheap in my opinion. The management is exellent and simply the fact that the company is able to flourish in this market is proof enough it is a strong company. The only possible bump in the road for this company is that it has to make some changes to its plants in order to comply with the Clean Air Act. Luckily, these expenses are relatively low and the competition has to undergo the same changes.

Remember, this stock is volatile and make sure that you do your due diligence and if you do not have tons of money, buy in small increments to lessen the risk. Until next time.....

Sunday, March 1, 2009

Five Top Stocks For The Long-Term- Stock #2

Yeah baby! Ticket Master is the shizznit! Unfortunately, I hate ticketmaster, but as a business, it has a natural monopoly that the government has overlooked. Anyhow, to make it better, Ticket Master's stock has gotten crushed recently and it looking better than ever at less than 3 times earnings. The reason why it has been destroyed lately is because people have stopped shelling out $350 clams for Billy Joel type acts. Pearl Jam had it right about 15 years ago, when it took Ticket Master to task for inflating concert tickets. Remember back in the day when you could go see a top notch band for less than $20? Those prices pre-date 1995, but Ticket Master ruined it all. However, when Pearl Jam cannot get the "man" to change it's evil ways, you must concede. It's basically, "If you can't beat 'em, join 'em!" I think of this company the same way I think of Exxon.


Because people are idiots as a whole (present company exclued), they will eventually pick up the pace of purchasing from Ticket Master, once they get used to the garbage economy that we have, will go back to their hedonistic ways as reinflate the company with overpriced purchases of tickets for entertainment. Let's put it this way, the last concert I was at was in 2004, when I went to see Deftones in front of a crowd of less than two thousand people a MCC's hockey rink for $17 and the icing on the cake was a duet with Chino and Stan from Linkin Park who was playing the following night at Blue Cross Arena in Rochester, NY. Ticket prices are out of f'ing control. Look at Hanna Montana ticket prices. People are remortaging their houses in order to finance those ticket prices. Ok, ok, enough of the complaining. I'm endorsing this company for good reason and here's why.

1. As already mentioned before, the P/E ratio is below 3, which is ridiculous.

2. Price/Book ratio is at .21, which, again, is ridiculous. Think about it this way. You pay a two dimes for every dollar of assets. Don't use this stat by itself, because companies who are having problems could fall this low before going out of business. Think about it this way as well, this company is still making money and is trading at 1/5th it's book value. This would be an excellent company to buy bonds from, because if the company goes out of business, you would be ahead in line of the shareholders to collect on your money.

3. It has nearly 30% of its shares held by insiders, so you know they feel the value and the company's financial health are good. On the flip side, only 1.5% of the shares are being shorted, which shows that investors know people are stupid and would rather go to a show than feed their kids.

4. This type of business is cyclical and this stock will be down for as long as the economy is down. Once unemployment recedes and people start spending again, this stock should take off. This is a good time to buy as just so you know, I do not own this stock.............yet.

5. FYI-this stock does not currently pay a dividend and also, it's 52 week high was $27 and it is currently trading at just under $5. Be sure to do your homework before buying or selling.

Peace, and I'm out!!