Economics
fiscal profligacy (Government spending as a percent of GDP is too high and the looming explosion in entitlement expenditures will make it worse. There is no good solution save spending discipline.).
http://www.clubforgrowth.org/2007/07/bully_porkers.php
And:
http://www.clubforgrowth.org/2007/07/milk_and_sugar.php
Must read (it’s short):
http://www.clubforgrowth.org/2007/07/ill_bet_you_didnt_know_all_thi.php
protectionism (Free trade is a major positive for world and
http://article.nationalreview.com/?q=ZTMxZTMyYzA5ODI5NzAxN2U0NWYxYzY4YmQzYzAyOTE=
Politics
Domestic
International War Against Radical Islam
The lesson of the Red Mosque:
http://www.tcsdaily.com/article.aspx?id=071207A
The Market
Technical
Fundamental
Well to paraphrase a quote from one of our heroes, the DJIA went through 13690 like c*** through a goose. Forgetting for the moment all those things that the Market is ignoring (mediocre retail sales [ http://bigpicture.typepad.com/comments/2007/07/retail-follow-u.html ], the unquantifiable (in our opinion) risk of the sub prime Market and the what looks like to us as the self immolation of our political class), what seems to have driven yesterday’s Titan III spike is the strength and liquidity of the global economy (very reminiscent of the factors that sparked the end of the first quarter Market performance). General consensus is that the primary beneficiaries of this world wide economic strength are the commodity, material and industrial industries. Unfortunately, the stocks of most of the major participants in these industries already reflect investor optimism and our Price Discipline prevents us from chasing them.
However, two companies that we just added to our Buy List provide exposure to the above mentioned industries. Illinois Tool Works (Dividend Growth Portfolio) manufactures components and fasteners for the automotive, construction and industrial applications; specialty products; machinery for the automotive, construction, food and beverage and industrial markets in over 45 countries. It has generated a 14-17% return of equity; has a debt to equity ratio of only 11%; and has grown earnings and dividends at a 12-14% rate over the past 10 years. The company should continue this exceptional record via its aggressive acquisition program and management’s skill in achieving cost savings in the integration process. The company is in the midst of a 31 million share buy back (10% of shares outstanding).
EPS: 2006 $3.01, 2007 $3.35, 2008 $3.70; DVD: $.84, YLD 1.6%
http://finance.yahoo.com/q?s=ITW
Donaldson Co (Aggressive Growth Portfolio) manufactures filtration systems utilized in automotive equipment, in-plant cleaning systems, industrial gas turbines and computer disc drives. The company has grown profits and dividends at a 13-14% pace over the last 10 years earning a 20%+ return on equity. The company should benefit from expansion in the global mining and commercial construction markets, growth in the demand for gas turbines and two new facilities currently under construction in
EPS: 2006 $1.55, 2007 $1.75, 2008 $1.95; DVD: $.38, YLD 1.0%
http://finance.yahoo.com/q?s=DCI
News on Stocks in Our Portfolios
3M (Dividend Growth Portfolio) is acquiring Rockford Thompson, a maker of optical character recognition passport readers, for an undisclosed sum.
EPS: 2006 $5.06, 2007 $4.85, 2008 $5.05; DVD: $2.00, YLD 2.4%
http://finance.yahoo.com/q?s=MMM
General Electric (Dividend Growth Portfolio) reported second quarter operating earnings per share of $.52 in line with expectations and versus $.46 recorded in the second quarter of 2006. The company also announced a $14 billion stock buy back of which $12 billion will be done by year end.
EPS: 2006 $1.99, 2007 $2.25, 2008 $2.50; DVD: $1.10, YLD 2.9%
http://finance.yahoo.com/q?s=GE
A positive write up on Chicago Mercantile (Aggressive Growth Portfolio):
http://www.thestreet.com/p/_htmlbtb/rmoney/financials/10367628.html
Market Analysis
More Cash in Investors’ Hands
Hexion is buying Huntsman for $6.5 billion in cash.
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