Daily Updates

The Bottom Line
The current short term correction in key sectors and markets is setting up a buy opportunity. Technical signs of a bottom to the current correction have yet to appear. Please be patient. The charts will let us know when new money can enter the market. The focus is on economically sensitive equities and ETFs that have favourable seasonal characteristics. Investors who currently hold favoured equities and ETF can continue to hold with the understanding that the current correction is unlikely to be severe from current levels. Prospects for gains beyond the correction are significant.

….view more analysis and 45 charts HERE

The 5 Most Valuable Stocks on the Planet

Posted by David Sterman - Seeking Alpha

on Saturday, 22 January 2011 15:35

Oil, technology, minerals and banking. Those are the industries that are host to the world’s most richly-valued companies. In fact, with a market cap of more than $250 billion, these companies are larger than the gross domestic product (GDP) of countries such as Portugal, Egypt or Chile.

I’ll tell you how you can profit from these titans of industry in a minute, but first, take a look at the five most valuable stocks on the planet:

5_largest

oining this exclusive club is quite an honor, but you can be kicked out at any time. GE (GE) was worth roughly $600 billion a decade ago, the biggest company in the world at the time, and now it doesn’t even rank in the top 10. Microsoft (MSFT) eventually overtook GE, but has since fallen to No. 6 in the world.

Just below Microsoft resides Brazil’s energy titan Petrobras (PBR), and China Construction Bank (CICHF.PK) isn’t far behind.

The fact that four of the nine largest companies in the world reside in China or Brazil should tell you we live in a changed world.

A Crystal Ball into the Future

How will this list look five years from now? Well, a look at each of the top companies’ prospects gives us a pretty idea about tomorrow’s titans – and how you can profit.

1. Exxon Mobil

The odds are against this energy company retaining its top spot for one simple reason: buybacks. Shares outstanding peaked at 6.9 billion and have been falling ever since, to less than five billion currently. Management intends to stick with that plan, and the share count could fall below four billion in the next five years. Shares would need to rise about 25% simply to offset that trend, and that’s not assured because this is now a slow-growth company. (2010 sales are likely to be on par with sales levels back in 2006). Then again, a fresh “super-spike” in oil prices would give a solid boost to shares. But surging oil prices have a way of creating conditions for a pullback as demand gets choked off.

Prediction: ExxonMobil’s market value will be less than $400 billion five years from now.

….read about the other 4 HERE

This may be a short commentary for the newsletter but I think it will have a lot of value for all traders. Print it out and read it often.

Market Buzz – Fortress, Boyd, K-Bro All Hit New Highs

Toronto’s main index ended Friday lower for the day and week this past Friday. South of the border, the markets played a different tune as a solid earnings report from General Electric was released, which made investors feel somewhat better about the U.S. economy.

The S&P/TSX composite index lost 72.75 points to 13,258.57, led by losses in the tech sector following an earnings report from U.S. computer chipmaker Advanced Micro Devices that beat analyst forecasts, but still disappointed investors. Meanwhile, resource stocks continued to back off on worries about a slowing Chinese economy.

A strong retail sales report for November helped put the Canadian dollar up 0.17 of a cent to 100.46 cents U.S.

Statistics Canada said Friday that retail sales increased 1.3 per cent to $37.3 billion in November, reflecting growth at most store types. The report marked the sixth consecutive monthly rise in sales and was the largest increase since March 2010. It was also much higher than the 0.4 per cent rise that economists had expected.

On the week, Toronto lost 205 points, or 1.52 per cent, influenced largely by lower base metal stocks. The Dow industrials gained 84 points or 0.7 per cent on the week, benefiting from a string of strong earnings reports.

Switching gears to our Canadian Small-Cap Universe (www.keystocks.com), a solid announcement from long-time favourite Fortress Paper Ltd. (FTP:TSX), lifting the stock to new all time highs with the stock closing the week at $54.32.

Fortress is now up 394 per cent since we upgraded the stock to a Focus BUY at this time last year at $11.01. The stock is up over 700 per cent from our original recommendation in 2008 just over two years ago. Needless to say, we are extremely happy with the company’s performance to date.

Fortress Paper announced it had entered into an agreement with a syndicate of underwriters, led by Raymond James Ltd. and including Dundee Securities Corp., RBC Capital Markets, Cormark Securities Inc., TD Securities, and Acumen Capital Finance Partners, pursuant to which the underwriters have agreed to purchase from Fortress Paper and sell to the public a total of 967,000 common shares of the company priced at $51.75 per share. The company has also granted the underwriters an option to purchase up to an additional 145,050 common shares of the company at the offering price, exercisable in whole or in part for a period up to closing of the offering, to cover overallotments and for market stabilization purposes, if necessary.

The offering will result in gross proceeds of approximately $50 million, assuming that the overallotment option is not exercised, and approximately $57.5 million if the overallotment option is fully exercised. Closing is expected to occur on or about Feb. 10, 2011, and is subject to customary conditions and regulatory approvals, including the approval of the Toronto Stock Exchange. The offering will be conducted by way of a short-form prospectus to be filed by Fortress Paper in each of the provinces of Canada, as well as in the United States under applicable private placement exemptions.

Fortress Paper intends to use the net proceeds of the offering to finance certain capital expenditures and for working capital and general corporate purposes.

Quick notes from K-Bro Linen Inc. (KBL:TSX) and the Boyd Group Income Fund (BYD.UN), which both recently hit new highs as well.

K-Bro Linen declared a dividend of 9.167 cents per common share this past week for the period from Jan. 1, 2011, to Jan. 31, 2011, to be paid on Feb. 15, 2011, to holders of record of common shares on Jan. 31, 2011.

Boyd Group Income Fund declared a cash distribution for the month of January 2011 of 3.5 cents per trust unit. The distribution will be payable on Feb. 24, 2011, to unitholders of record at the close of business on Jan. 31, 2011.

Looniversity – Goodwill

Goodwill is an asset that is created when one company acquires another. Typically, it represents the difference between the price the acquirer pays and the “fair market value” of the acquired company’s assets. For example, if Dick’s MotorCar Inc. bought Ford Motor for $15 billion and the accountants determined that Ford’s assets (plant and equipment) were worth $13 billion, $2 billion of the purchase price would be allocated to goodwill on the balance sheet. In theory, the goodwill is the value of the acquired company over and above the hard assets and it is usually thought to represent the value of the acquired company’s “franchise,” that is, the loyalty of its customers, the expertise of its employees, namely, the intangible factors that make people do business with the company.

What is the effect on book value? Well, book value usually tries to measure the liquidation value of a company — what you could sell it for in a hurry. The accountants look only at the fair market value of the hard assets, thus goodwill is usually deducted from total assets when book value is calculated.

For most companies in most industries, book value is next to meaningless, because assets like plant and equipment are on the books at their old historical costs, rather than current values. But since it’s an easy number to calculate, and easy to understand, lots of investors (both professional and amateur) use it in deciding when to buy and sell stocks.

Put it to Us?

Q.   I own a U.S. resource stock which recently “delisted” from the AMEX. Where would I look to sell the shares if there is any option?

– Lloyd James; Vancouver, BC

A. When a stock is officially delisted from a larger traditional exchange in the United States, there are two main places it may trade:

  • 1. Over the Counter Bulletin Board (OTCBB) – This is an electronic trading service offered by the National Association of Securities Dealers (NASD); it has very little regulation. Companies will trade here if they are current in their financial statements.
  • 2.  Pink Sheets – Even riskier than the OTCBB, the pink sheets are a quotation service. They do not require that companies register with the Securities and Exchange Commission (SEC) or remain current in their periodic filings. The stocks on the pink sheets are very speculative.

Delisting doesn’t necessarily mean that a company is going to go bankrupt (but, if forced, it is not often a good sign). Delisting can make it more difficult for a company to raise money. If it has not already occurred, delisting may trigger a company’s creditors to call in loans, or its credit rating might be further downgraded, increasing its interest expenses and potentially even pushing it into the red.

KeyStone’s Latest Reports Section


A mixed start to the day with European bourses up almost across the board on
debt rescue package optimism plus news that the German Ifo business
confidence index rose to a record level in January (those Germans must love
ponying up for bailouts) as well as French business confidence just hitting a new
three-year high.  Asia is down for the most part on Chinese policy tightening
pessimism.  U.K. retail sales, however, were very weak today (-0.8% in
December).

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