Finance Articles

By admin September 26, 2012

I’ll take some Turkey, Potatoes, YHOO and HNH Please…

What’s on your list for Thanksgiving?

With earnings reports due before the big turkey day, what tasty delights will your stocks offer up?

You might want to take a look at what Yahoo (NASDAQ: YHOO) is dishing up. In 2005 Yahoo purchased Alibaba Group Holdings Limited. Alibaba serves China and Japan with various commerce and retail websites. Yahoo purchased Alibaba to expand its influence in this market and take advantage of the increasing consumer web trend.

Yahoo reported it will return $3.6 billion of the $4.3 billion proceeds from the sale of its stake in Alibaba to shareholders. Whether this will come as a one-time dividend or repurchase of stock is unclear. However, it reflects a $2.54 return on investment for each share of stock owned. At $16/share that’s close to a 16% one-time return.

Yahoo has an enterprise value of 16.83B. It’s trading at $15.73 about $1 under its 52 week high. Yahoo has almost no debt and sits on 1.91B of cash. At a Price/earnings of 17.81, Yahoo is about mid-range with other companies in its sector. However Yahoo’s forward P/E is 13.5 which is in the lower end of the Tech sector.

Yahoo offers an 8.1% return on equity and analysts expect a 16% increase in the next year.

If Yahoo’s too big to swallow, try a micro cap.

Look at this White Plains, NY company for your next Thanksgiving treat. Handy & Harman LTD (NASDAQ: HNH) is an industrial company manufacturing precious metals, tubing, engineered materials, and electronics materials. It has created a specialized niche within the highly competitive field that includes 3M, General Electric, and Alcoa.

Customers for the company’s pipes and fittings include commercial and residential construction, electronics, telecommunications, home appliance, transportation, utility, medical, semiconductor, aerospace and aviation markets.

HNH came out of restructuring in 2010 and its stock rose 400% in 2010. It has a market cap of only 201.97M and with a price of $15.36 it has an extremely low P/E of 1.35. So upward movement seems likely. Currently the return on assets is 30.45%– extremely high—as are the return on equity of 450.57% and return on investment capital of 45.47%.

HNH still carries a debt level higher than 92% of its peers in the silver and gold industry. It compensates for this with an efficient operating margin of 8.47%. Trailing earnings per share for the past 12 months was 10.782% and
EPS share growth rate is an impressive 694.1%

As with any small company, one checks out insider buying. Handy & Hartman has seen consistent insider buying and absolutely no insider selling since 2010.

Reuters, MarketEdge, and SmartConsensus all favor the stock.

Take a deeper look at both of these stocks. New earnings statements will pop up before Thanksgiving. Will you gobble up these stocks and find tasty returns for the holiday?

Of course past performance is no promise of future results. You will need to do your own investigations to see if these appetizing stocks are right for your portfolio.

But it may be, that come Thanksgiving, you will have a chance to give thanks for great new stocks with satisfying returns.

Posted in: EG Stock Picks, Featured Stories

By  October 4, 20123 Comments

Invest in China, but Do it through the USA

Investors seeking greater returns have turned to China for the next big strike.  Its GNP and domestic spending outshine the recession in the USA. China has deep reserves of copper, silver, and other resources and fast-growing middle class eagerly buys foreign products.

People with money have jumped into Chinese companies by means of the New York Stock Exchange (NYSE) and NASDAQ.  Youku Tudou Inc. (NYSE: YOKU) has been a favorite.  This Chinese version of Netflix caters to a growing middle class.  Renren Inc. (NASDAQ: RENN) offers that same group a strong social media platform.

However both stocks show the rollercoaster path of most other Chinese stocks. Youku Tuduo Inc. has a 52 week range of $14-46 and now hovers just under $20.  Renren Inc. has a 52 week spread from $3.21-$7.87 and now rest midway around $4.

Are rocky rides the norm for Chinese stocks?  First let’s identify three reasons to look carefully at Chinese stock investments.  Then I’ll show you a more secure way to spread your investments into China.

China and Japan dispute islands

Today, China and Japan are arguing over the Senkaku or Diaoyu islands. Tensions increased because Sept 18th is the anniversary of the day Japan invaded China in WWII and recently Japanese activists landed on the islands– sparking a sharp reaction from China.  Will this unrest escalate?

It’s already churning waves in the economic front.  Chinese stocks dropped. Anti-Japanese demonstrations in China have caused factories closures.  Japanese are rejecting Chinese imports and at the very least—trade between the two countries is suffering.

China rejects oversight laws of the SEC

US laws, court cases, and China’s stonewalling have stopped the laws for transparent auditing practices.  The SEC and courts have struggled with this since 2009 and there is no end in sight.  Will the SEC cave in yet again kick the compliance can down the road?

Why does it matter to investors?  There’s no method to determine if the earnings statements or any company numbers are accurate.  Indeed, there is evidence some companies deliberately cook the books.  Chinese IPOs start out looking fantastic.  Investors jump in.  Then the numbers go south.  When pressured to produce accurate figures, the companies bail out of the stock exchange. Focus Media Holding (NASDAQ: FMCN) is the 15th Chinese company to pull out of the US stock exchanges since 2010.

China’s growth figures are suspect

Because there is no way to independently verify the statistics for growth in China they too need to be taken with a grain of salt.  Its GDP has dropped from 9.5% in 2011 to 7.6% today.  Will the market continue to slow?  Are these numbers accurate… or inflated?  Investing with shaky numbers leads to uncertain results.

Profitable ways to safely invest in China

Regardless of the slower pace of the Chinese economy, friction with Japan, or questionable accounting, China is a powerful force in today’s world.  Income is rising rapidly, communism is accommodating more independent ownership, and the increasing middle class is hungry for goods.

Take a look at three US companies—just within the technology sector– with a strong presence in China. Nvidia (NASDAQ: NVDA) offers graphic chips for PC’s Smart phones, tablets, etc. and 30% of their revenue comes from China.  Analysts look for 20% growth in the coming year. Jabil Circuit (NYSE: JBL)offers electronic servicing and solutions worldwide.  Currently it does about 20% of its business in China and pays a 1.4% dividend. Applied Materials (NASDAQ: AMATfinds solutions to semiconductor, solar, and display industries.  It does 26% of its business in China and trades in its mid-range at just under $12.pp per share.

When you trade US companies, you spread the risk through national and international markets.  You avoid some of the China/Japan tension, and you can have greater confidence in the numbers.

And you still cash in on China’s growth.

Posted in: International