Despite Exxon posting $11.68 billion in profits, the stock is dropping today along with other major American oil companies. The reason for these shares’ struggle to go up is that these companies are facing headwinds to grow production. The most promising oil and gas exploration opportunities are being held by state owned oil companies. A lot of the private major oil companies are being shut out. For the best oil stock investments, look for energy companies that are growing their production and reserves in politically favorable jurisdictions. Many of these companies operate in the Alberta oil sands. They include Suncor and Canadian Natural Resources.
When it comes to farming equipment, Deere comes to mind. The stock has corrected significantly from its high of $94.89. The fundamentals for the company remains strong as the world is grappling with how to feed its population. Agriculture productivity needs to be significantly increased in order to meet the greater food demand. As long as the upward momentum is intact, the stock is positioned to retest the $85 level and ultimately its 52 week high.
Despite the stock market taking a bashing, the agriculture stocks such as Monsanto and Terra Industries are still in positive uptrends and are poised to hit new highs. The reason is simple, more people are enjoying a higher standard of living. They are eating more proteins. Coupled with more bio-fuel production and climate changes, there is strong demand for seeds, fertilizers and equipment that can significantly boost crop yields. For these companies, it means good demand and healthy profits for the coming years.
Due to its size and limited prospects for rapid growth, Microsoft is trading more like a mature industrial stock than a high growth tech stock. It has a P/E of just 14X and a dividend yield close to 2%. Investors are saying the company’s rapid growth days are over. Given the recent drop off, the stock could recover back to its 200 day moving average around the $30 range. The stock is currently at $26.09. Buy this one on weakness.
The broker has revealed it sold $11 billion of CDOs and is raising $8.5 billion in stock. As a result of the move, Merrill’s future is more secure though it is dilutive for current shareholders. Today’s trading action suggest we could have seen a bottom for the stock. It opened down at $22 and climbed back up to close at $26.25, near its high of the day. Trading volume was 10 times the average volume. The stock could retest its 50 day moving average around $37. This stock looks like a trading buy.
This beaten up car company had one of its worst quarters ever. Thanks to $4 plus gas, its sales of its once profitable truck are dropping fast. In the very near term, Ford will be coming out with vehicles that the public actually wants. These are well designed, fuel efficient and reliable products that could even make the Japanese take notice. Thanks to their CEO’s efforts, he is consolidating product lines globally, cutting costs and selling non-core businesses. There is hope for this company if they can survive the next year. With the stock trading around $5, it could be worth looking into. It’s still too early to buy but it should be put on your radar.
Even if $120 plus oil is dampening demand in the developed nations, demand is still expected to grow in Asia and the Middle East. In many of these countries, oil is being subsidized by the governments. Any attempts by the governments to bring the price of oil to market levels will likely result in riots and political instability. Affordable energy is needed to keep the economies going and keep the governments in power. Despite countries such as the United States calling for ends to these subsidies, the citizens of these developing nations want a better life. After all, we drive around in gas guzzling SUVs and live in McMansions.
During these harsh times in the markets, investors are dumping small cap stocks for the safety and liquidity of large cap stocks. When markets go through storms, investors are looking for highly liquid stocks that they can quickly trade in and out of. Once the tight credit conditions loosen up, these stocks will be bid up again. One should focus on high quality small cap companies. These are companies that are successfully growing sales and profits. Their operations are generating free cash and do not need to go to the capital markets for additional financing.
During these volatile economic times, infrastructure stocks could present to investors steady returns. To maintain economic prosperity, both developing and developed countries need to invest in infrastructure such as roads, power plants, dams and bridges. Because it is mainly funded with government funds, infrastructure spending is less immune to the economic cycle. The ideal companies to invest in are those with a good track record of winning and successfully completing projects. They have strong balance sheets and have a diversified portfolio of projects.
The golden era, since the 1980s, for financial stocks is over. Investors should not expect banks and brokers to deliver share price appreciation and healthy dividend payouts. They are too busy trying to shore up their balance sheets after years of leveraging their operations. Survival, not growth, are their priorities. Equity dilution and a tepid profit picture are what investors will see have to deal with. As a result, these stocks are to be traded. The long term investor should look else where for suitable stocks to hold.
