Time to “Go Underground” for Great Returns

Of course, you might think one of the last places for toe dipping would be the oil and gas industry. A recent OPEC announcement that no additional production cuts were planned for March should serve to keep oil prices low… for now.

That’s not good news for drillers, producers and anyone else in the oil industry supply chain. Many deep-water projects need oil prices of $60-70 a barrel to be considered economically viable.

But there’s one exception: pipeline operators. You see, they get paid to move or store oil and natural gas products.

One operator that sits apart from the rest is TransCanada Corporation (NYSE:TRP). TransCanada is actually two businesses: a pipeline operator and a power producer.

Its revenues are split nearly equally between the two businesses. And with shares down nearly 40% in the last year and trading at just 11 times projected 2009 earnings, the stock is sitting at historical lows.

In its pipeline operation, TransCanada owns and operates pipelines in both Canada and the U.S. It moves oil and gas from drilling sites to tank farms, refineries, processors and electrical power utilities.

Right now, the company is building its Keystone pipeline that will carry crude oil from Alberta’s oil sands operations to refineries in the south-central U.S. This line was one of four proposals that eventually won out over the competition.

It’s also applied to build a second 1,703 mile-long line that will carry crude oil, and it would supply mid-western pipelines and refinery operations in the states.

These projects aren’t cheap: this one has a projected cost of nearly $3 million dollars… per mile. But that’s fine as TransCanada has plenty of free cash flow to pay for it.

Unlike most other pipeline operators, TransCanada’s business model affords it some measure of protection from wild swings in volume and oil and gas prices, as it typically signs long-term contracts with its customers.

That’s a big plus, and one of the reasons TransCanada typically trades at slightly higher P/E multiples than its competitors.

And in a market where it seems every day another company announces it’s slashing its dividend to preserve capital, TransCanada announced just the opposite: effective at the end of March, it’s increasing its dividend. The stock now sports a yield of nearly 5%.

In summary, TransCanada is a great conservative way to play the oil & gas sector, and represents the best of the pipeline bunch.

Source: TransCanada Corporation (NYSE:TRP): Stock of the Day

This from the Smart Profits Report:

“It’s all the same… Only the names will change”
– Bon Jovi

Ah, “politics as usual” – I knew it wouldn’t take too long before this age-old scenario reared its ugly head once again.

Having swept into office on a tsunami-like wave of goodwill, President Obama saw it evaporate this week after the House of Representatives passed the $819 billion spending bill along traditional party lines.

Partisan politics as usual.

With a mandate from a highly expectant American public to back them, it was hoped that Obama and his Democrat-controlled Congress would enact some meaningful changes on Capitol Hill.

Alas, the bill appears filled with more pork than the dumplings at the House of Nanking.

The fact that House Republicans did not support the bill and that their counterparts in the Senate will likely do the same is bad for investors.

Wait a minute! You just said the bill is pork laden. How could opposing it be bad for investors? I’ll tell you why…

Washington Loves Whine With Its Cheese

Thanks to the large majority that the Democrats hold in Congress, the bill or one very similar is going to pass. No issues there.

But by having a divided Congress, Washington is basically telling the American people that, despite Obama’s warm, uplifting rhetoric, nothing has actually changed. The two political parties are still sniping away at each other with gusto, blaming each other for the nation’s problems – past, present and future.

But in order for the economy and the markets to stabilize and get healthy again, we need some darn consensus. You know, the idea that everyone is actually on the same page and are working to fix things.

I know… what a terribly old-fashioned, optimistic notion.

But make no mistake… this is critical to the fragile public psyche.

Confidence Breeds Cash

The market – and to some degree, the economy – is the product of emotion and sentiment. Yes, there are certainly structural issues and flaws that cannot be ignored, but the fact is that if people feel hopeful that change is coming and that progress is being made, they will start to open their wallets. And what will start with a trickle will eventually snowball and will get the economy moving again.

That obviously doesn’t hide the fact that we also need large fixes to the economy and financial system. But consumer and investor sentiment is an integral element.

So that said, I’ll hop down off the soapbox now and get to the meat of the situation – discussing some stocks that could be beneficiaries of the government’s largesse over the next few years…

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Forget Oil… This Is The World’s Most Critical Commodity

For all the talk about oil, there’s another critical commodity that the world simply can’t live without. In fact, it may be even more important than oil.

Water.

Under the government’s spending plan, water projects will receive $8.4 billion. I believe this is one industry that will receive a major boost from the increased infrastructure spending, with governments around the world expected to shell out hundreds of billions of dollars over the coming years.

This is why recently added one of the financially stable, fast-growing companies in the industry to the Xcelerated Profits Report portfolio – one that enables water desalination plants to save significant amounts of money by capturing wasted energy and recycling it back into the system. Desalination will be a critical component if the world’s water needs are going to be met.

I can’t reveal the name of the stock to you here, but what you can do is check out how you can become a member yourself and start profiting from this and our other recommendations right away. We’ve got all the details here.

Here are some more potential winners…

These Two Sectors Are Set For Huge Cash Injections… And Here Are Two Firms That Could Benefit

Energy: Energy projects will receive nearly $40 billion worth of federal funds. A good chunk of this will go towards renewable energy – a big part of Obama’s energy plan.

FPL Group (NYSE: FPL) is the largest solar and wind energy provider in the U.S., and is the electric company for most of Florida.

It’s no secret that the real estate collapse has crippled south Florida’s economy. And Miami is the metropolitan area that will receive the most federal dollars for infrastructure projects. Any rebound in south Florida economic activity should bode well for FPL. The stock also currently boasts a 3.5% dividend yield.

Healthcare Information Technology: This sector will receive $17 billion. Even without the government cheese, I like this area, as it’s a necessary component for streamlining the healthcare system.

Consider a stock like Quality Systems (Nasdaq: QSII). Its earnings are projected to grow by 18% per year over the next five years, yet the stock is trading at 19 times forward earnings. QSII has plenty of cash, no debt, is cash flow positive and sports a 3% yield.

As we’ve said numerous times before here, there are quality companies that will not only survive, but thrive during the economic malaise. And although it may seem far off now, we will eventually return to an environment where many more companies have the opportunity to grow and reward their shareholders and employees.

In the meantime, our elected officials seem to be telling us (with half-hearted apologies to John Bon Jovi) that, “Bad medicine is what you need.”

Note to Washington: No, it isn’t.

Source: Three Sectors And Two Stocks That Could Benefit From “Hope And Change”

You have ExxonMobil to track Big Oil… Goldman Sachs to track Wall Street… Google to track Internet commerce. More entertaining, though, is following the little bellwethers…

For example, we follow Harris & Harris to check sentiment toward nanotech. We follow St. Joe to check on Florida real estate. And for the water industry, we follow Veolia Environnement.

Veolia is the world’s largest publicly traded operator of clean water projects, sewage systems, and desalinization plants. It’s a French company, but let’s not hold that against it. Veolia is one of the fund industry’s favorite ways to invest in the booming demand for clean water.

Veolia has enjoyed huge growth over the past five years… but shares have fallen by a third in six months. Debt and profit concerns weigh on the company, but most water stocks have similar charts. We’re sure the developing world’s need for clean water will help Veolia resume its uptrend someday. But for now, water is finding its way lower.

Source: The World´s Largest Water Stock Is Falling

I’ve been covering the Pilbara and its huge iron ore deposits since moving to Australia three years ago. I consider the place ground zero in the resource bull market. Like most bull markets today, the Pilbara’s boom is related to Australia’s neighbor to the north, China. China is consuming iron ore, coal, natural gas, copper, zinc, and crude oil at a pace we’ve never seen before in human history.

Most of us know China’s boom is a huge driver in the bull market in infrastructure, energy, metals, and minerals. But there’s another developing region you’ve probably never considered… one that could make you a rich investor over the coming years: the Middle East.

The Economist reports the six nations of the Gulf Cooperation Council (Saudi Arabia, Kuwait, Bahrain, Omar, Qatar, and the UAE) earned $381 billion from oil exports in 2007. The cumulative earnings will reach into the trillions if oil remains over $100 for several years. The region literally has more money than it knows what to do with. A lot of that money is flowing into infrastructure.

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From Dubai to Kuwait, there’s an estimated $2.4 trillion in construction projects either underway or in development in the world’s biggest oil patch.

Surprisingly, $1.4 trillion of that total is for projects in civil construction. This means spending on residential and commercial construction projects in the Middle East outweighs construction on oil, gas, power, petrochemical, industrial, and water projects combined.

The three largest civilian projects are:

1. King Abdullah Economic City, Saudi Arabia: $120 billion. The leading firm is Dubai-based developer Emaar.

2. Silk City Project, Kuwait: $86 billion. The leading firm is Tamdeen Real Estate.

3. Dubailand, UAE: $60 billion. The leading firm is Tatweer.

The Saudi Arabian government wants to diversify the Saudi economy from its current “Three Pillars” strategy of oil, petrochemicals, and industrials. This building strategy is just one of the forces driving up steel prices, which are now over $1,000 a ton.

The Saudis know their 262 billion barrels of oil reserves won’t last forever. They are attempting to plant the seeds for self-sufficient regional growth that’s not related directly to the oil economy. This means building six brand new cities as centers of commerce and enterprise.

That’s right… They’re building giant new cities out of nothing. Four have already been launched. They are:

1. King Abdullah Economic City
2. Jizan Economic City
3. Knowledge Economic City
4. Prince AbdulAziz Bin Mousaed Economic City

Whether the Saudis can build economic prosperity from nothing is an open question. They certainly have the capital to try. High oil prices have guaranteed that.

From an investment perspective, the long-term success of the Saudi’s grand economic strategy doesn’t matter. The money is going to be spent. Any sensible investor, seeing such gaudy capital expenditure figures, would do the only sensible thing: follow the money.

It is not just Saudi money either. And it is not just residential and commercial growth. A lot of it is industrial, petrochemical, and power related.

For example, in the United Arab Emirates, Dubai recently announced plans to build the world’s largest aluminum smelter ever. It’s a $5 billion project with the aim of producing a smelter that can generate 700,000 tons per year. Saudi Arabia has plans for its own $3.8 billion aluminum smelter. Oman has plans for a $2.2 billion smelter.

That’s $11 billion for just three projects.

How can you profit from all this? As I’ve written in my previous columns, the global building boom is going to require awesome amounts of iron ore and base metals… so producers of this “stuff” still have years of gains ahead of them.

You can also buy engineering and construction firms. Someone has to receive the contracts to build all of this stuff. Go through the holdings of the PowerShares Building & Construction ETF for some ideas.

Whichever investments you choose… realize the infrastructure boom isn’t just focused on China. The U.S. is spending to upgrade its “F” infrastructure rating. Russia is spending. Latin America is spending. And now, the Middle East is spending its oil money. It all points to big returns in infrastructure stocks.

Good investing,

Dan Denning

Source: How Arabs Will Drive the Next Great Infrastructure Boom