8/14/08

Economics

a disruption in global oil supplies (It is not the price of oil but its availability that will cause severe economic dislocation.). The article below by political pundit Dick Morris suggests that the Dems aren’t going to have much choice but to fold on the issue of offshore drilling. Pelosi seemed to be suggesting as much on Larry King. Were that to happen, the outlook for the oil service companies would surely be enhanced. Read Smith Int’l and Schlumberger (Aggressive Growth Portfolio):

http://www.dickmorris.com/blog/2008/08/13/republicans-have-energy-move-up-their-sleeves/

More bad news on housing:

http://bigpicture.typepad.com/comments/2008/08/july-2008-us-fo.html

Some perspective on gasoline prices:

http://www.cato.org/pub_display.php?pub_id=9585

Politics

Domestic

International

This has nothing to do with Your Money; but it is the lead headline this week. Krauthammer on Georgia:

http://www.washingtonpost.com/wp-dyn/content/article/2008/08/13/AR2008081303365.html

The Market

Technical

After two down days, the DJIA (11532) remains within the July 2008 to present uptrend (circa 11385-12146); ditto the S&P (1285) (circa 1269-1348).

Fundamental

The number of S&P companies beating their quarterly estimates has turned positive. That bodes well for stock prices:

http://bespokeinvest.typepad.com/bespoke/2008/08/historical-sp-5.html

Subscriber Alert

At the Market open this morning, our Portfolios will continue to put cash to work, taking cash positions from 18.5% to 18.0%. The Dividend Growth Portfolio will Buy additional shares of CR Bard (BCR-$93) and Marathon Oil (MRO-$47). The High Yield Portfolio will Buy additional shares of Bank of Nova Scotia (BNS-$46) and Plains All American Pipeline (PAA-$45). The Aggressive Growth Portfolio will Buy additional shares of Suncor Energy (SU-$53).

http://finance.yahoo.com/q?s=BCR

http://finance.yahoo.com/q?s=MRO

http://finance.yahoo.com/q?s=BNS

http://finance.yahoo.com/q?s=PAA

http://finance.yahoo.com/q?s=SU

Company Highlight

Exxon Mobil is the largest publicly traded oil company. The company produces approximately 2.6 million barrels of oil and 9.4 BCF of natural gas daily, has reserves of over 21.5 billion barrels of oil equivalents and manages a best in class upstream operation including refining and chemical operations. XOM has grown profits at a pace in excess of 15% over the last 10 years and earned a return on equity of between 25-30%; While the pace of Exxon’s dividend growth has not kept pace with profits (5% over the past 10 years), it is expected rise dramatically. The financial performance of XOM should be solid over the coming years as a result of:

(1) the company’s aggressive exploration and production program. Despite its size, XOM has a record of replacing 112% of its reserves over 10 successive years.

(2) in addition, those reserves are diversified geographically as well as by product [conventional oil and gas, heavy oil, tight gas, liquefied natural gas],

(3) substantial investment in its upstream operations. Importantly, it has successfully integrated its chemical business with its refining operations creating substantial operating efficiencies,

(4) the company has an exceptional balance sheet [it has a debt/equity ratio of 5% and has more cash than debt], has raised its dividend every year for the last 26 years [the most recent increase being 14%] and spent $32 billion in 2007 to buy back its stock.

The company is rated A++ by Value Line and its stock yields 1.9%.

http://finance.yahoo.com/q?s=XOM

Perspective on Exxon’s earnings:

http://mjperry.blogspot.com/2008/08/exxonmobil-ceo-defends-high-profits.html

News on Stocks in Our Portfolios

A positive write up on the railroad industry (and Canadian National [Dividend Growth Portfolio]).

http://www.thestreet.com/p/_htmlrmd/rmoney/transportation/10433018.html

A positive write up on Peabody Coal (Aggressive Growth Portfolio):

http://www.zacks.com/rank/zcommentary/?id=8296

A positive write up on General Dynamics (Dividend Growth Portfolio):

http://www.zacks.com/newsroom/commentary/index_pdf.php?id=8303

More Cash in Investors’ Hands