Saturday, October 10, 2009

He bought Apple at $7.82. What now?

The past six months show how the stock market can be both a source of bountiful gifts and a fast track to the poor house.  The bear market took top stocks for 2010 down 40% on average, some much worse.

But not everybody has been hurting. 

Great bargains are out there if you know where to look!

Look at these profits recently racked up by subscribers who followed the model portfolio of The Turnaround Letter. 

Company Recommended Issue Price @ Recommendation Current Price Change
Qwest November 2008 $2.74 $4.86 77%
Teradyne December 2008 $3.79 $6.81 80%
Flextronics January 2009 $2.27 $4.11 81%
Terex Corp. February 2009 $12.57 $16.37 30%
Tyco International March 2009 $20.05 $26.09 30%
Walt Disney April 2009 $19.06 $24.71 30%

The Turnaround Letter focuses on companies that are temporarily out of favor but are in the process of turning around.  My friend, George Putnam, editor, The Turnaround Letter, gets into investments before the good news is out, when prices are at their lowest and profit potential is at its highest.

The best time to own turnaround situations is when the economy and stock market are in recovery, and we're seeing strong evidence of this now.  The average annual return for the 3 years after the 1990 and 2001 recessions: 48.8%! All stocks look like turnaround opportunities right now, but many are going to wallow at current prices for a long time while others will possibly double or triple in value--maybe much more.

It has certainly happened before...

In November 2002, George Putnam recommended a well-known tech stock to the readers of his newsletter, The Turnaround Letter. It was a stock that had burned most of the brokers and analysts on Wall Street pretty badly as the tech sector crashed.

Everyone hated this stock. Contests were being held on the Internet to guess the date the company would declare bankruptcy. Wall Street had officially declared it "out of favor."

But that's exactly the sort of stock George loves to take a second look at . . . beaten up best stocks to buy that no broker dares to recommend. Stocks flying low under the radar but to a contrarian's eye, poised for a potential turnaround.

George discovered that this famous company had a dedicated core of customers who loved its products and actually had a good balance sheet. Even though its computer products were a little stagnant, they had recently launched a product called . . . the iPod.

In the November 2002 issue of The Turnaround Letter, George said BUY APPLE at a split-adjusted $7.82! His readers did and rode the profit wave of the revolutionary iPod. As most of us know all too well, Apple and its iPod--and now iPhone--is perhaps the most amazing corporate turnaround of our age.

Even after the bear market, Apple, near $130, is still up 1,600% from George Putnam's buy price in The Turnaround Letter

By the time brokers began looking at Apple again most of the big gains had already occurred and were in the pockets of George's very happy readers.

Click here to get George's NEW Special Report: 4 Losers You Should Love

George's simple investment philosophy is this: You never make money buying the easy stocks the Wall Street herd buys. You see, brokers tend to recommend stocks to the herd when they are 100% sure they are going back up.

But that's not the way George does it. He does the opposite - a true contrarian. He looks for stocks going down and waits for them to turn around. Then he recommends them, before the herd, before the big moves, before the profits start piling up.

That's why today's market is a mother lode of profit opportunity for the turnaround investor. Stock prices are at a real value today . . . if you know which stocks to buy!

Click here to subscribe and obtain George's latest Turnaround buys.

In 24 years of trading in these distressed and beaten up hot stocks market, George knows that looking at a stock's price history is no way to make a purchase decision. (But that's what many brokers and analysts do!) But George knows that it is more important to concentrate on future business prospects.

That's why serious turnaround investors always look for a stock that has severely declined in spite of it being a solid company with positive business trends to show for itself, i.e., core business health . . . positive cash flow . . . debt restructuring . . . change in management.

Start your subscription today! 
Mainstream investors rarely dump a stock for "no reason," so the trick is to find a situation where their concerns are faulty or shortsighted. This is what George calls the "inefficient niche."

Since the stock market is by nature efficient, the market bias against these turnaround stocks is extreme (or inefficient), and the company's true financial information is not being processed accurately.

In fact, investors' outlook is so pessimistic on our current markets that inefficient niches are opening up faster than ever. The investors are so glum that they just can't believe that a stock that has taken a tumble is really going to turnaround. Brokers, most investors and Wall Street are just plain afraid of these beaten up stocks . . . regardless of the company's actual financial situation. Their good judgment is simply skewered by bad news and uncertainy about the economy.

But this is where George swoops in and yells BUY! And his readers profit . . . many with triple digit profits such as:

ENSCO +470%
Veritas DGC, Inc. +286%
McDermott Int'l +205%
El Paso Electric +265%
KCS Energy +175%
Loews Corp +152%
Service Corp +189%
Allstate +168%
Korn Ferry International +178%
Kaman Corp. +151%
Syms Corp. +149%

You can too. You'll find great turnaround bargains at low prices each month in The Turnaround Letter. Click here for immediate access to the latest issue of The Turnaround Letter.

Plus you'll have access to George's past issues as well.

The Turnaround Letter contains a wealth of information at your fingertips for only $59 for 3 months or $195 per year. Each issue is straightforward and easy to read with clear buy, hold and sell recommendations. Sign up now.

George is currently following 50 top stocks to buy in three portfolio sizes: small-, mid-, and large-cap stocks. But each month, he offers up to 20 BUY recommendations with his reasons clearly explained.

Click here to get George's NEW Special Report: 4 Losers You Should Love 

More Turnaround Success Stories...

Just so you're clear about George's success in picking these triple digit profit stocks, here's two more turnaround success stories: energy drilling concern Parker Drilling and retail giant J.C. Penney!

In the case of J.C. Penney, its stock had dramatically fallen down to $19.71 in March 2002 when George recommended it as a BUY. Wall Street was staying clear of retail and J.C. Penney in particular. J.C. Penney was considered overextended in its debt structure. It received the Wall Street snub.

But George saw BIG turnaround potential. J.C. Penney had just brought in a new management team who immediately began improving the balance sheet. (George's rule of thumb - old management can't solve the old problems they created. New fresh ideas are needed.)

The new team sold off Penney's catalog business and their drugstore business - two non-core businesses that were having a fatal drag on their solid but suffering retail outlets. They also centralized management and closed retail stores in towns where sales had declined.

The result . . . J.C. Penney's stock turned around. In May 2005, George told his readers to sell for a 149% profit!!

In the case of Parker Drilling, the Houston company had fallen on hard times by 2002 when more than 75% of its capitalization was in the form of debt! Putnam figured that the company was still a premiere oil and gas driller and also predicted that the prices of crude and liquified natural gas would drive company growth here and overseas.
In November 2004 George told his subscribers to buy the stock at a beaten up $3.85. Less than three years later his subscribers took profits when Parker's stock hit $11.35. A gain of 195%!

The Only Two Reasons to Own Gold Stocks

I always get a real kick out of hearing that "the consumer is 70 percent of the economy," mostly because it gives me a chance to heap ridicule and scorn on whoever said it, and I say that the consumer is 100 percent of the economy!

One CAN say that, with or without the heaping of ridicule and/or scorn, but at least with an arrogant and smug authority that comes from 100 percent certitude, that "The Mogambo is 100 percent certain that the consumer is 100 Freaking Percent (100FP) of the economy!"

I make this Bold Mogambo Assertion (BMA) for two reasons. First, I hope that by debunking this silly "the consumer is 70 percent of the economy" crapola, I will win a Nobel Prize or some other award that has a cash-award component of the prize winnings, perhaps one that has a LARGE cash-award component.

My argument is that the ultimate consumer pays the price for everything by buying and consuming, for instance, a frozen pizza or delicious candy bars, and maybe something nice to drink, knowing that a slice of the purchase price is used to pay back creditors and producers for the use of capital, labor and land invested in producing these - and more! - delicious 'ready-to-eat' snacks and treats of high caloric content, of which the sugary, chocolaty and salty varieties I find particularly good. Yum!

And speaking of spending, I was surprised to see that the current- account balance of the USA has collapsed to $673.3 billion in the last 12 months, down from its high of over $800 billion, and the trade balance has fallen to $730.4 billion in the last year, which is down about 20 percent from its high of a couple of years ago, too.

And while the 12.8 percent fall in industrial production in the last year seems like bad news for us Americans, it is worse by whole orders of magnitude other places. Japan has industrial production down 34.2 percent over the last 12 months, and in the euro area it is down by 20.2 percent.

Just when I thought I would go berserk at such horrific economic news, I see John Stepek at Money Morning newsletter had a subhead that caught my eye, which was "Three sound reasons to own gold stocks in 2010."

I admit that I did not read the article, but as far as I know, there are only two good reasons to own gold stocks for 2010; to preserve wealth when prices are stable, and to make a lot of fiat wealth when your government acts so stupid as to create, or allow to be created, excess money and credit that eventually destroys the currency, especially when undertaken so as to enlarge the size of government, like now, which makes the problem of inflation worse because those more government weenies have a bigger incentive to save their own phony-baloney jobs, but can only make things worse.

Like, I said, I did not read the article because I am lazy, but the advice to buy gold stocks for 2010 is the lesson of the last 4,500 years of governments acting irresponsibly when given control of a fiat currency with which they could create as much money as they wished; inflation in prices inevitably caused chaos, misery, starvation and revolution.

I tried to explain to the employees that inflation in prices was essentially just a mismatch between gains in income, if any, versus gains in prices that must be paid with that income, which I hoped would prove to be a valuable insight when I then told them how I was slashing their salaries by a lousy 5 percent, and if they did not like it, then they could all go to hell because we are on our way to bankruptcy anyway.

I was going to suggest that the lesson, which they would immediately grasp if they were not so stupid, is to immediately buy as much gold stocks 2010, silver and oil as they could, but they were not in the mood to hear good advice gleaned from history, and instead wanted to whine about their puny pay cuts.

If they were not so stupid, they would see that buying gold stocks for 2010 now would easily make up for their meager income reductions, and if they had been buying gold stocks for 2010, silver and oil all along, they would be miles ahead!

Whee! This investing stuff is easy!

Wednesday, October 7, 2009

World War III Anybody?

When Alan Greenspan predicted three percent economic growth showing up in the reported figures for the third quarter of 2009, did he mean executive compensation packages? Maybe the lesson here is: don't ask a crackhead to predict the future supply of crack. Greenspan's greatest success may be to drive economics into such disrepute that it will be cut loose from the universities and only be taught by mail order or internet subscription from the same outfits that offer PhD's in astrology. That is, before the universities themselves go broke.

The predicament that the USA finds itself will not be "solved" at the scale of operation that we're accustomed to, and we should just stop wasting precious time and dwindling resources in the idle hope that it will be. The failure to recognize this dynamic is the most impressive part of the meltdown. The only thing that the federal government is likely to prove in the process is the ineffectiveness of its actions as applied to any of the raging current problems from the killing burden of hyper-debt to the brushfires of geopolitics. Congress will only make the health care system more complex. Both congress and President Obama will do everything possible to keep housing prices unaffordable ― in a quixotic effort to protect the collateral of the big banks. Capital will continue to vanish in the black hole of default.

Something's got to give in the remaining three months of 2009. My guess is that attention will shift overseas for a while. This will not be due, as many probably think, to a cynical effort by the government to divert attention from the financial fiasco, but because the intrinsic tensions in the Middle East are reaching the snapping point. Iran is being called out on its nuclear program. If, from the start, it had just maintained the need for electric generating power in the face of dwindling fossil fuel reserves, they might have gone unchallenged. As it happened, though, the elected leader of Iran made too many intemperate remarks about wiping other nations off the face of the earth, and this has only prompted the leaders of other nations to take his remarks at face value and presume that Iran's nuclear program was devoted to armaments, not electric power generation.

So, now the USA has picked up the gauntlet. If Iran doesn't act to demonstrate the de-activation of its bomb-making capacity, then the USA will try to impose sanctions depriving Iran of necessary imported supplies. (Iran actually imports gasoline, due to inadequate refineries.) For sanctions to be effective, support will be required by other nations, including Iran's chief gasoline supplier, China. What a delicate calculus this will be! I rather imagine that China would not like to see the Middle East blow up. I'm not so sure about the nations of the Middle East though, or at least major parties in certain nations. The rulers of Saudi Arabia would probably enjoy seeing Iran get into big trouble, since Iran is Saudi Arabia's most active antagonist, working tirelessly to destabilize the Kingdom. Al Qa eda interests dispersed in many nations would certainly cheer any mayhem. The Taliban would love anything that takes the spotlight off them in Afghanistan. The Russians are conflicted between the wish to enhance their own leverage in world affairs and their need to discipline Islamic maniacs along their own borders. Europe is probably scared to death of anything that might threaten their energy lifeline. Pakistan is too tormented to have a position, but its radical Islamist factions are probably on the side of disorder ― as the best remedy for the status quo. If any of that spills over on India, as in the Mumbai bombing, then that flashpoint could turn to conflagration very quickly. We forget about Turkey, which was the hegemonic player in the region for centuries until its swift decline after 1914, but it has potent military capability and very mixed feelings about the the Jihad to ruin the West (since it is partly of the West). And finally there is Israel, the object of Iran's intemperate public statements.

This is a dangerous situation. I'm not so sure that Israel could launch an effective attack on Iran's nuclear infrastructure, but it might try anyway, especially if a US-backed sanctions effort fails to coalesce quickly. I'm not sure Israel would seek permission from the US to do this, though the US would certainly be tasked with defending the shipping lanes in the Persian Gulf. Iran might succeed in sinking more than a couple of US ships-of-the-line with sunburn missles and other toys, and this would lead to the bigger danger of oil supplies being choked off to the rest of the world. The US air response would be impressive, but possibly not effective against hardened targets. The leaders of Iran might exult even if the Iranian people were swept into a maelstrom. I imagine that what followed would be a very extravagant military frenzy amounting to World War Three, with European air forc es and navies dragged in, with Hezbollah and Syria striking back at Israel, India and Pakistan possibly incinerating each other, and mayhem galore among the bystanders in Iraq, Egypt, Saudi Arabia, and Afghanistan. There could easily be internal mischief in the UK, France, and Germany from angry immigrant populations, and "sleepers" could work some overdue hoodoo in the USA. I don't know what Turkey would do, but it could be the biggest beneficiary of a bad regional meltdown, providing the only effective governance what remains in the region. China and Japan would probably just gape at the spectacle in wonder and nausea from the sidelines as they saw their energy supplies for years-to-come go up in flames.

The G-20 nations would be crippled as global oil supplies were choked off indefinitely. And if anyone ― Iran, or its friends inside the Kingdom ― managed to pull off a stunt such as blowing up the Ras Tanura oil terminal ― then a darkness will spread across places that were used to being lighted and they will stay dark a long time.

I don't know if any of this will come to pass, but as I said, tensions have reached a breaking point, including the greater tensions of history, which seem to require periodic release no matter how poignant the Pete Seegar songs are. It is perhaps, just another prime symptom of "overshoot," the world's way of shedding some of the toxic organisms that are making it so unhappy ― Gaia in a really bad mood.

If nothing develops along these lines on the geopolitical scene, the USA is still stuck in its predicament of trying desperately to maintain an overscaled living arrangement, with no coherent public discussion of downscaling, re-scaling, or re-arranging things. My guess is that this kind of restructuring only occurs when all other options have been exhausted. The last time the USA found itself in an intractable economic morass, World War Two came along and it made things all better here (after considerable sacrifice for us and catastrophe elsewhere). After World War Two, we ruled the world for a couple of generations. The outcome of World War Three would not be so favorable for us. At the very least, it would leave us attempting to run things on about one-quarter of the oil we're used to. That does not suggest a seamles s transition between how we behave now and how the future will require us to behave differently.