Month: October 2013

By Profit Confidential

In any market, innovation spawns opportunity. While equity market conditions matter for companies that are raising capital, new industries are perpetually being born with the invention and adoption of new technology.

One industry that’s in its early stages and well worth your attention over the coming quarters is three-dimensional (3D) printing. This industry is very much on the cusp of migrating to the consumer’s level. It’s a very interesting investment theme for risk-capital investors.

One company we looked at previously is The ExOne Company (XONE). This company was one of the most successful initial public offerings (IPOs) this year, but the stock retrenched significantly after an earnings miss. However, ExOne’s failure to meet expectations does not mean that this innovative company won’t become a burgeoning enterprise.

ExOne is based in North Huntington, P.A., and it manufactures 3D printing machines that help industrial customers in the aerospace, energy, automobile, and heavy machinery sectors create prototype parts for their respective businesses. ExOne builds its printing machines in the U.S. and Germany, and a full expansion is underway.

In its most recent quarter, the second quarter of 2013 (ended June 30), ExOne generated $9.2 million in total revenues. Approximately 63% of these sales were for 3D printing machines and micromachinery, with 37% of sales coming from other related products and materials. This compares to total sales of $4.7 million in the second quarter of 2012.

According to the company, it sold four of its largest 3D printing machines to customers in Japan, the U.S., Russia, and India.

Revenues for the first six months in 2013 were $17.2 million, compared to $7.4 million, for a gain of 132%.

While the company is spending on research and development, it’s spending more on selling, general, and administrative expenses. Like most newly listed stocks, ExOne incurred quite a bit of expenses in effecting its IPO.

The company said its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were a loss of $300,000 in the second quarter of 2013, up from a loss of $2.7 million in the comparable quarter.

Net loss attributable to the company was $1.12 million in the latest quarter, compared to $3.5 million. Many investors expected the company to be profitable in the second quarter. The resulting loss caused Wall Street analysts to lower their estimates for this year and next.

When ExOne’s share listed on the stock market, the position drifted initially; it then proceeded to advance almost 200% before experiencing a major retrenchment beginning in September. The company’s chart is featured below:

Chart courtesy of www.StockCharts.com

The big retrenchment was partially due to ExOne’s second loss, but also because of the further issuance of new shares by the company and selling insiders. It isn’t a surprise that the company hit up the equity market for more cash, especially considering how strong the stock performed.

IPOs can be very tough equity securities to trade because valuation is often trumped by expectation. But ExOne is a company with a determined growth path. The Street currently estimates sales to grow just under 70% this year and over 50% again in 2014. (See “Hot IPOs Emerging in This Lucrative Sector.”)

3D printing is a relatively new industry and should be on every speculative investor’s radar. NASA plans to launch a toaster-sized 3D printer into space next year so astronauts can make plastic tools and parts as needed. This is a technology that’s going to grow significantly this decade.

Article by profitconfidential.com

By Profit Confidential

While the focus is on the government shutdown and debt ceiling, I’m getting ready for the start of another earnings season, to see if America delivers. Of course, the somewhat muted gross domestic product (GDP) growth has me fully expecting to see a drag in revenues across the broad.

Alcoa Inc. (NYSE/AA) starts the third-quarter earnings season when it reports after the markets close tomorrow. The company is a pretty decent indicator for the global economy, as aluminum is used in a broad assortment of industrial and consumer applications around the world.

The company is forecasted to earn $0.06 per diluted share on revenues of $5.71 billion, down 2.1% year-over-year, according to Thomson Financial. For this reporting year, Alcoa is expected to see revenues contract 2.8%, followed by 2.8% growth in 2014. This essentially means zero growth over two years. In my books, that’s not good; this clearly indicates a global economy that’s in trouble.

I don’t even think traders are expecting some miraculous jump in revenues or earnings in the third-quarter earnings season. Wall Street has already downgraded expectations for the earnings season.

Earnings growth for the third-quarter earnings season is estimated at 3.2%, according to a FactSet report dated September 27. (Source: “Earnings Insight,” FactSet Research Systems Inc. web site, September 27, 2013; last accessed October 4, 2013.) The number is well down from the estimate of 6.5% as of June 30.

The financial sector is expected to report the top growth, while the healthcare sector is projected to report the lowest level of growth in the third-quarter earnings season. Of course, should the U.S. government shutdown continue, this could change as we move forward.

But what is interesting is that of the 108 S&P 500 companies that have issued earnings-per-share (EPS) guidance for the third-quarter earnings season, a whopping 89 companies, or 82%, offered up negative guidance. This is much higher than the five-year average of 62%, so this is concerning, as it suggests a decline in the so-called economic “recovery.”

Meanwhile, the more important revenue growth rate is projected at 2.6% in the third quarter, down from three percent as of June 30. This number appears to be in line with the country’s GDP growth, but I expect it could worsen if the shutdown and debt ceiling talks falter.

Based on these estimates, I don’t think I would be diving in and buying in this stock market right now. You need to be careful and be selective in choosing your stocks; look for situations where the growth is above average. Companies delivering better growth than their peers will be rewarded. Otherwise, I really don’t expect much more for gains in the fourth quarter, based on the current climate.

As we move forward, I would look at opportunities in China, as we have seen numerous Chinese stocks record some stellar gains over the past few months. For more coverage on Chinese stocks, read “Your Portfolio Stop Growing? Here’s Why You Really Need to Think Chinese.”

Article by profitconfidential.com

By www.CentralBankNews.info Here’s today’s Central Bank News’ link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

By MoneyMorning.com.au

Sorry to use a cliché here, but like beauty, share market value truly is in the eye of the beholder.

That’s not unique to today. It’s not a side effect of the current volatile market. It’s how markets always behave.

That’s how you get buyers and sellers trading ownership of a stock at the same price. The buyer thinks it’s undervalued and heading up, the seller thinks it’s probably overvalued and heading down.

The trick is to know whether most investors think stocks are expensive or cheap right now. Because the answer will largely determine the market’s direction over the next few months…

So, how do you know if stocks are under- or overvalued?

It would be nice if each stock had a label telling you the answer. Unfortunately, that’s not the way it works. In order to figure out if a stock is worth buying you have to do some grunt work.

You either have to work it out yourself or use a computer program to work it out for you.

But even then your work isn’t over. The answer you get still won’t guarantee that your shares will go up. In that case, what’s the point?

The Share Price is Only Part of the Story

Investing is all about making predictions about the future.

You look at a company and figure out if you think it will do better in the future than it has in the past.

If you think it will do better in the future, then it’s a stock you should consider buying.

But notice we said ‘consider’. It still doesn’t mean you should definitely buy the stock. You may ask why. Well, for the simple reason that you may not be the only investor to think the stock will do better in the future.

If you come across the company too late, after other investors have gotten the same idea, it’s possible the stock has the good news already built into the share price.

Take innovative US electric car company Tesla Motors [NASDAQ: TSLA]. This morning the share price closed at USD$183.07 per share. That’s not so unusual for US companies, many of which trade for big double-digit or even triple-digit figures.

(Warren Buffett’s Berkshire Hathaway [NYSE: BRK/A] trades for USD$169,455.00 per share!)

The share price has gained 451% this year, as you can see on the chart below:

Source: Google Finance

The question for investors is whether it’s still good value. You could argue that it isn’t. But we’re certain many investors said the same thing at $50, $100 and $150.

That’s where you look at more than the share price, because the share price only tells part of the story.

Tesla’s market capitalisation (share price x number of shares issued) is USD$22.2 billion. Compare that to General Motors [NYSE: GM] which has a market cap of USD$52.2 billion.

But again, we’re still only looking at price. What you need to do is compare the relative value of these stocks…

The Difference Between Price and Value

This is where you’ll see what we’re talking about when we refer to predicting the future prospects for a company.

Despite Tesla’s big market cap of USD$22.2 billion, the company only sold USD$413 million of cars during the last financial year.

Compare that to GM, which sold USD$152 billion-worth of cars last year.

In other words, GM is only two-and-a-half times the price of Tesla and yet it sells 53-times as many cars in terms of revenue.

So which company represents better value? Is it the new high-tech company that’s starting from a low base and which could become a new force in the car industry? Or is it the established carmaker with billions in sales and an existing worldwide market presence?

We’re afraid we don’t have the answer for you. Our inclination is towards the high-tech Tesla. But that’s because we like technology stocks. And if you think Tesla could one day achieve the same sales numbers that GM has now then it’s a no-brainer.

But there’s no guarantee that will happen.

So we’re sure you can now see just how tricky it is to identify which stocks represent better value than others.

A Buyers’ or Sellers’ Market?

Of course this is just one example, but this same analysis of stocks is playing out across the market every day.

Investors are sizing up one stock against the other or one stock against the whole industry, or one industry against another industry. Or even one economy against another economy.

The answers these individual investors and the market as a whole come up with will have a huge impact on where the market goes next.

If investors view the market as a ‘Tesla’ with plenty of growth opportunities then you should see the market head higher. But if investors view the market as a ‘GM’ with limited growth opportunities then it could spell trouble for stocks.

You know where we stand on this. Despite the macro-economic problems facing many economies (including the Aussie economy) we’re positive about the future, and that’s why we’re using the current pullback as an opportunity to buy.

Just be warned, our view is by no means the consensus view. There are many more analysts who say investors shouldn’t waste this opportunity to sell before the big crash arrives.

Cheers,
Kris+

Special Report: UNAVOIDABLE: Australia’s First Recession in 22 Years

By MoneyMorning.com.au

The recent conflict in Syria is fanning flames across the entire Middle East. It’s another tragic, gruesome aspect of the ‘Oil Wars’ scenario that I’ve developed in these pages over the past few years.

For now, the heat has died down and Pres. Obama has postponed airstrikes against Syrian targets. But there’s no telling where things will stand a few weeks from now. Either way, the whole area is ugly, and could get uglier in a hurry.

As an investor, you need to move away from this looming conflagration! Expanding Middle East conflict has the potential to drive global energy prices through the roof. Thus, you want to preserve your wealth in the days to come and angle toward the best prospects for future gains in a tumultuous world. I’ll give you my best ideas in this article…

The Middle East is a hotbed of religious strife, and I do NOT just mean the shopworn list of contentions between the Jewish state of Israel and its Arab-Islamic neighbours. No, I’m referring to the long-standing divide between two main factions of Islam, Sunni and Shia. These two factions seethe with hatreds that go back to the founding of Islam in the seventh century.

Iran (for many millennia called Persia) is predominantly Shiite. Meanwhile, numerous Arab nations in the region are mostly Sunni, but with large Shiite areas in strategic locales.

What Do I Mean by Strategic?

Take a look at the map below. You can see a breakdown of the territory the two factions control, centred on what I call the ‘oil corridor’, which spans the bottom of the Arabian Peninsula up into the southern reaches of the former Soviet Union:

Click to enlarge

Looking at the map, it’s clear that many of the largest oil-producing areas in the Middle East are in Shiite-dominated jurisdictions. This is certainly the case with Iran. That, and Shiite domination is also the case for many major oil fields of the Kingdom of Saudi Arabia (KSA) and Iraq, as well as up into the ‘Stans’ of the former Soviet Union – source of many a jihadist warrior, not coincidentally.

Saudis Surrounded

Now let’s look at larger patterns of conflict across the Middle East using the world’s largest petro state, Saudi Arabia, as the focus. Here’s the map, and I’ll explain the flaming symbols in a moment:

Click to enlarge

Look at the world from the Saudi/Sunni perspective. Virtually all Saudi oil exports pass through what navy people call geographic ‘choke points’. That is, tankers pass through narrow oceanic zones that are subject to closure or make for relatively easy attack.

For the kingdom of Saudi Arabia (KSA), the problem begins with the Strait of Hormuz in the east, where Iran could make quick mischief if the mullahs were so moved. To the south, KSA is hemmed in by the narrow opening of the Red Sea. To the northwest, Saudi sea access is limited by the need to travel through the Suez Canal. Thus, right away, KSA has a strategic issue with access for its oil to world markets.

Over and above the maritime choke points, eastern KSA oil fields are populated by Shiite groups with questionable loyalty to the Saudi government. How bad are things? Well, for many decades, Shiites have been barred from serving in the Saudi army or a parallel internal paramilitary organization called the Saudi Arabian National Guard. The top Saudi people simply don’t trust the Shiites.

Just across the gulf from Saudi Arabia to the northeast is Shiite Iran, a traditional rival to KSA in all manner of geopolitical issues. Directly north of KSA is Iraq, and in the aftermath of US withdrawal, there’s new and growing Iranian influence there as well.

To the northwest of KSA is the entire mess of Syria-Lebanon, where Iran and Russia support the Syrian government as a client state. Meanwhile, also northwest, Israel is hardly an ally of the Saudis, although there’s more of a modus vivendi between the two nations than most people think or either nation likes to advertise.

To the west, across the Red Sea from KSA, Egypt is in turmoil. Saudi leaders have made no secret of their dislike for the now deposed Egyptian Muslim Brotherhood, whose brand of Islam has long made trouble for KSA rulers, within Saudi Arabia and across the globe. As things now stand, Saudi sheiks are bankers to Egypt’s military government, paying for most day-to-day operations as well as large imports of food and fuel to Egypt.

To the south of KSA, Yemen is a hotbed of anti-Saudi activity. Press reports state that the Saudis permit US drones to operate from Saudi territory and fly over Yemen to blast insurgents. That, and KSA has configured much of its military to fight against Yemeni forces, to include direct airstrikes and ground combat against Yemeni insurgents in the past few years.

The point is that Saudi Arabia — essential to the global oil supply — is surrounded by strategic choke points as well as restive groups of Shiites. Entire populations and Islamic sects across the Middle East want to see KSA go down, either through internal strife or external meddling. And if that happens, it could instantly drive oil prices much higher.

Saudis on the Defensive

Of course, the Saudi ruling class is savvy to all of these issues. KSA has strong military forces, as well as the above-noted National Guard to keep the peace internally. That, and KSA has a remarkably good intelligence capability based on excellent development of personal contacts across the Middle East and throughout the world.

Still, if conflict in Syrian or other Middle East hotspots escalate, risks climb. If the US shoots missiles or drops bombs, all bets are off. As I said above, it could get ugly in a hurry.

In Syria, the Saudis have backed the rebels who fight against that nation’s government. In the event that the rebels lose – which is likely, sooner or later – it will be a major strategic and policy disaster for the Saudi government. And then, there’s no predicting exactly what might happen next within KSA, along its borders, at its strategic choke points or in any other respect.

Invest Away From the Middle East

If bad things happen to Middle East oil exports – certainly if something bad happens inside KSA – stand by for global oil disruptions and price spikes. Oil will quickly cost more, and the price you pay at the pump will soar.

You should invest away from the turmoil in the Middle East. Focus your energy portfolio far from the ancient strife and oil wars of that region.

What are some of the best ideas? Well, current oil price levels support strong drilling programs in North America and across the world. I expect continuing, long-term support for North American land drillers as well as drill pipe makers.

Long term, prospects for oil service companies are excellent – my paid-up readers have long-known my ‘trifecta’ of favourite oil service plays. Indeed, as oil continues to command a premium price, worldwide, the service companies that help bring oil to the surface stand to make a buck.

Then there are the offshore plays, far from the fighting of the Middle East. Deepwater oil production is one of the last great frontiers for global oil production. In the medium to long-term I expect great things from offshore oil.

One final point. For as well as the offshore space has performed since the BP blowout in 2010, there’s much more still to come. That is, development in the US offshore space is highly restricted by federal policy. Indeed, only a small portion of the US offshore is open for leasing. The rest is what I call the ‘No Zone’.

When (not ‘if’) things get even worse in the Middle East and oil prices soar, we’ll see public pressures to open up large new areas of the US offshore space. The unintended consequence of impending disaster in the Middle East will at least serve the beneficial purpose of forcing the US government, policy and media elite to construct a coherent narrative about what’s happening to the nation – or so I hope.

Over the long term, the above-noted offshore and oil service companies will do even better as the US scrambles to develop its domestic energy resources. Not a moment too soon, some might say.

Byron King
Contributing Editor, Money Morning

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Article by Investazor.com

Worldwide is known the fact that Twitter Inc. has filled in its IPO offering up 472,613,753 shares of stock in this initial release. Under these circumstances, Twitter had to reveal its revenues which for 2012 were $316.9 million and in the first half of 2013 they have already earned $253.6 million. The company is having 218.3 million monthly active users which have created over 300 billion tweets so far. As it concerns the IPO, Twitter is expecting to raise $1 billion.

JOBS (Jumpstart Our Business Startups) Act made possible the Twitter IPO as it allows companies with less than $1 billion in revenue to file for an IPO. JOBS Act is design to encourage funding of United States small businesses. The company will list as “TWTR” and news about this event already alerted investors. On the other side, the situation could look like a double-edged sword as the listing of the company has both advantages and disadvantages. On the one hand the company is raising more money for investments and is getting cheaper access to capital, increasing its popularity. On the other hand, it exposes its financial and business information, risks that money won’t be raised and also risks that influential users may consider other investments more relevant and thus will lose its credibility as a safe investment.

As it concerns Twitter’s main rival in the social media field, Facebook is considered to be a strong competitor. Even if the two companies have their own advantages which are offered to the customers, it is expected to see the two giants always being compared and correlated. One aspect is clear, Twitter is still developing and it needs more time and a smart strategy in order to survive in the market.

Twitter is expected to begin trading later this year and speculations have started to appear. Thus, SunTrust Robinson Humphrey (a full-service corporate and investment banking arm of SunTrust Banks, Inc) already set a price target of $50. Given the fact that the company seems to start with the right foot, by the end of the year, investing in Twitter may be considered the best choice for an investment.

The post Twitter Inc. Chirps Louder Now appeared first on investazor.com.

By The Sizemore Letter

‘You can’t call yourself a global macro trader until you have lost money shorting Japanese government bonds.’

John Mauldin delivered that one-liner, which he attributed to George Soros, in his outlook for 2013.

Alas, it appears I’m now part of the fraternity. I lost money shorting Japanese government bonds this year.

In May and June, it looked like the bond vigilantes had finally awakened from their long coma. The 10-year yield more than doubled, shooting from 0.44% to nearly 1.0% in less than two months. The bond market seemed to believe for a moment that Abenomics might—just might—be successful in shaking Japan out of its two-decade deflationary funk.

So much for that idea. Yield have trickled lower ever since, and the 10-year now yields 0.64%…or about 75% less than the 10-year Treasury yield in the U.S. One prominent Japanese analyst sees the yield falling all the way to 0.25%.

This is madness.

At the risk of whipping a dead horse, Japan is sleepwalking into a major debt and currency crisis. It is not a matter of “if” but “when.”

Related: “Japan Distracts Investors With Olympic Five-Ring Circus”

Video: “China, Japan and their Demographic Time Bombs

As I wrote earlier this year, debt service now accounts for 43% of Japanese government revenues and quarter of all spending. Furthermore, more than half of all Japanese government spending is financed by new borrowing. This means that half of every yen borrowed is used to service existing debts. It’s a debtor’s nightmare that gets worse every year with budget deficits that are consistently higher than 7% of GDP.

All of this might be manageable if Japan were a young and growing country. But it’s not, and it never will be again (or at least not in our lifetimes). Japan is the oldest country in the world, a place that sells more adult diapers than infant diapers. It’s population—and tax base—is shrinking, and its national savings rate—once among the highest in the world—is now lower than that of the United States. This means that the Japanese government cannot depend on a pliant domestic investor base to lend it money. It will have to depend even more heavily on the Bank of Japan or—worse—go to the international bond market cap in hand.

At some point, the bond market is going to collectively realize that the game is up and that Japan’s massive debts—currently pushing 250% of GDP—are not payable. As yields rise, the Bank of Japan will be forced to intervene, which will cause the value of the yen to plunge. In short order, Japan will shift from a deflationary monetary regime to a hyperinflationary one.

That day isn’t here yet. If anything, the bond market is more complacent now than it was a year ago. But when it comes, you will have your choice of available trading options. In my last attempt, I used the PowerShares DB 3x Inverse Japanese Govt Bond ETN(JGBD), which is a leveraged version of the PowerShares DB Inverse Japanese Govt Bond ETN (JGBS). Both are viable options for individual investors.

WisdomTree also has a product in the works, one that would pair a bearish bet on Japanese bonds with a long position in U.S. bonds.

With yields already as low as they are, your risk of loss is tolerable. In fact, your greatest risk is not to your wallet but to your reputation: you could end up becoming a member of the illustrious club of macro traders that shorted Japan too soon…

This article first appeared on InvestorPlace.

Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter and the chief investment officer of investments firm Sizemore Capital Management. As of this writing, he had no position in any security mentioned. Click here to learn about his top 5 global investing trends and get your copy of “The Top 5 Million Dollar Trends of 2013.”

This article first appeared on Sizemore Insights as Japanese Bond Market: Armageddon Postponed…For Now

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Investors have reacted pretty calm to all the noise from the US government shutdown. The general feeling is that politicians are gonne find a asolution to both the shutdown and the debt ceiling.

Senior Strategist Ib Fredslund Madsen comments on this weeks most important themes and events.

Legal information

Video courtesy of en.jyskebank.tv

High Probability Bull for AUDUSD

By StreetPips.com

The chart below shows the AUDUSD daily chart with Ichimoku indicator and candlestick patterns drawn.

Chart from Bloomberg

After a strong downtrend which lasted from the bearish Kumo break in April all the way till late August, we see a bullish Kumo break right around September 16.The future Kumo also performed a bullish Kumo twist, and the green 9 period Tenkan Sen is also currently well above the red 26 period Kijun Sen. These indicators are painting a potential bullish upstart.

For the bulls, the entry also looks attractive. Prices are retracing towards the flat red Kijun Sen line, after a bearish Belt Hold Line pattern indicated with the red letters “BH”.  Bearish belt hold opens on high and closes at or near low of candle after a preceding uptrend. The body must be the opposite color of the prevailing trend. There must be a significant gap, no shadow at open and a markedly long body. Right after the bearish BH, prices are heading towards the flat Kijun Sen.  This offers a retracement entry for a bullish trade.

Further confirmation of a bullish movement can be made with a thickening future Kumo cloud, as well as the lagging black Chikou Span piercing above the Kumo.

Written By: Streetpips.com – Streetpips.com scans books and websites for trading strategy ideas. We then select those which are programmable, code them, and share these with our members.