11/7/07

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.). A discouraging review of the politics of the Water Resources Bill:

http://townhall.com/columnists/RobertBluey/2007/11/04/bush%e2%80%99s_bold_veto?page=full&comments=true

Now comes the Farm Bill:

http://www.usatoday.com/news/washington/2007-11-05-farmbill_N.htm

The Club for Growth’s new report card on each Senator’s record on pork barrel spending:

http://www.clubforgrowth.org/2007/11/the_clubs_2007_senate_repork_c.php#more

Politics

Domestic

International War Against Radical Islam

Iran reaches nuclear landmark:

http://haaretz.com/hasen/spages/921111.html

The Market

Technical

Fundamental

This morning the Dividend Growth Portfolio will:

Sell ConocoPhillips (closed 85.14) December 95 calls (COPLS) for $0.625 against one quarter of its position.

Sell General Dynamics (closed 93.5) December 100 calls (GDLT) for $1.00 against one quarter of its position.

The High Yield Buy List

Company Close 11/6 Buy Value Range

USB $31.84 $29-33

KMP 52.06 51-58

DRE 30.23 31-35

FUN 23.40 23-26 (has not been purchased)

RAI 63.65 58-66

PAA 53.70 51-58 (has not been purchased)

News on Stocks in Our Portfolios

Peabody Energy (Aggressive Growth Portfolio) reported third quarter earnings per share of $.12 versus expectations of $.32 and $.53 recorded in the comparable 2006 quarter. Revenue, coal production and revenue per ton were all up above expectations. The earnings shortfall was related to the acquisition of its Australian company subsidiary. It also reiterated its 2007 earnings guidance, ex discounted operations.

EPS: 2006 $2.23, 2007 $1.75, 2008 $3.10; DVD: $.24 YLD .6%

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

Emerson Electric (Dividend Growth Portfolio) reported its fourth quarter earnings per share of $.78 versus expectations of $.75 and $.65 reported in the similar quarter in 2006.

EPS: 2006 $2.24, 2007 $2.65, 2008 $3.00; DVD: $1.10 YLD 2.4%

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

I am seeing very positive research reports on Medivation describing the results of their recently announced prostate cancer trial. Earnings estimates and price targets ($40+) are both rising. Anyone with an interest let me know and I will email more detail to you.

American Vanguard (Aggressive Growth Portfolio) reported third quarter earnings per share of $.20 versus $.16 recorded in the comparable 2006 quarter.

EPS: 2006 $.57, 2007 $.75, 2008 $1.00; DVD: $.07 YLD 0.4%

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

More Cash in Investors’ Hands

11/6/07

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.). An analysis of the ‘logic’ behind earmarks:

http://article.nationalreview.com/?q=N2ZhYTJjZmQ3NTAzMTZlMWJhMDkxZGJhMzlhYWExMWY=

Politics

Domestic

International War Against Radical Islam

The Market

Technical

Fundamental

Idea of the Day

One of the themes that I have focused on this year is that of globalization and its positive impact on corporate earnings. Today the stock of one of the premiere global companies is selling within its Buy Value Range.

The 3M Company (formerly Minnesota Mining and Manufacturing) is a broadly diversified manufacturer of great brands in industrial, health care, graphic and display, office, communications, transportation, and safety and security products. In recent years, the company has enjoyed a resurgence of growth in sales and profits as it transformed its business strategy. The pillars of its new business plan are:

(1) transform its manufacturing footprint from US oriented to international based and improve its productivity,

(2) invest in strengthening and streamlining its supply chain,

(3) increase its brand building marketing focus on high growth overseas markets, using local or regional brands where it makes sense,

(4) raise its investment in R&D to advance the 3M brands,

(5) improve its brand mix by developing new higher margin ‘franchises’ such as its optical film business and divest slower growth, lower margin units

The company has an amazing 30% return of equity with a debt to equity ratio of only 15%. Earnings have grown at a 9-10% annual rate over the past 10 years. While dividends have not kept pace as the company reinvested cash flow in new businesses, we expect the dividend pay out ratio to increase in the next several years.

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

Buy Value Range: $78-85, Stop Loss: $66, Sell Half: $131

Home Depot is being Removed from the Dividend Growth Buy List. Its stock price fell below the lower boundary of its Buy Value Range. The Dividend Growth Portfolio never bought this stock, so no additional action will be needed.

The Dividend Growth Buy List

Company Close 11/5 Buy Value Range

JNJ $64.49 $60-69

ABT 54.00 51-59

ITW 55.52 53-61

MDU 27.18 25-29 (has not yet been purchased)

CAJ 50.37 47-54

MMM 85.00 78-85

News on Stocks in Our Portfolios

More Cash in Investors’ Hands

11/05/07

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.captainsquartersblog.com/mt/archives/015800.php

If you want the bear case on the economy, here it is:

http://norris.blogs.nytimes.com/2007/11/02/making-up-jobs/

http://www.financialsense.com/fsu/editorials/andros/2007/1102.html

Politics

Domestic

International War Against Radical Islam

The Market

Technical

Fundamental

Third quarter corporate earnings increases thus far in the double digits. How do you have a recession with full employment and strong earnings gains?:

http://www.zacks.com/newsroom/commentary/?id=6247&ref=ZFEED5

I have mentioned several times that part of the problem with the sub prime loan market is that no one knows who owns them, how much they own and how they are being priced. Some help appears to be coming from the accounting profession:

http://www.urbandigs.com/2007/11/level_3_assets_credits_next_co.html

News on Stocks in Our Portfolios

` Medivation (10 Bagger) announced positive Phase II results for its prostate cancer treatment:

http://www.marketwatch.com/news/story/story.aspx?guid={6A64B518-8F80-4D54-B9A7-94994BFFFEFF}&siteid=nbs&symb=

ParkerVision (10 Bagger) reported third quarter earnings per share of ($.19) versus ($.16) recorded in the third quarter of 2006.

More Cash in Investors’ Hands