Author: Ben Dickey, BSG&L Financial
Ben’s Covestor Growth Plus Model owns CAT, FCX, LINE, EPD, KMP, MSB, SDRL and BUCY as of August 1, 2010.
August 1, 2010: Over the last two months, I have discussed how the markets need clarity on many issues to move ahead (https://interactiveadvisors.com/bsgl/pure-growth). Several of these have started to resolve themselves. The EU Stress test was passed by 82 out of 91 of the banks that were tested. The well blowout in the gulf has been capped and the relief well is within a few days of intersecting the well bore. The Senate has finally admitted they will not be able to cap greenhouse-gas emissions this session. Last but not least, there is a growing split in the ruling party in Washington over letting the Bush tax cuts expire. These items remove several problems that have been holding back the market.
These positive factors have been partially offset by the fall in Consumer Confidence and the looming implementation of the health care bill. The market has also realized the Emerging Markets, although slowed, are still expanding. China has now become the largest consumer of energy in the world, exceeding the US for the first time. Their iron ore, coal, oil and copper imports have slowed, but not declined.
As a result, Peabody Coal (BTU), Freeport-McMoran (FCX), Caterpillar (CAT), and several other export oriented manufacturing companies have greatly exceeded their earnings expectations. In addition, commodity trusts have expanded their dividends, driving up their prices. Linn Energy (LINE), Enterprise Products Partners (EPD), Kinder Morgan Energy Partners (KMP), and Mesabi Trust (MSB) have increased their dividends.
A portfolio of high dividend commodity trusts, manufacturers who derive a majority of their income in developing markets and deep water drillers not effected by the gulf moratorium, I believe, will do well between now and the end of the year.
I firmly believe, as I previously stated, that these corporate earnings will mostly beat analysts’ estimates.
