Principles of the Stock Market : The Principle of Understanding Value

IBD 100 'New Names': Using Sir John Templeton's Approach

Richard Schwartz — Tue, 15 Sep 2009 13:17:00 GMT

IBD 100 ‘NEW NAMES.’ Only three new names hit the latest weekly (September 14^th, 2009), computer-generated IBD 100 list of “leading growth companies,” those companies showing good fundamentals, having some institutional sponsorship, producing solid earnings growth and outperforming the average stock. Three new names is about the norm. And Investor’s Business Daily(IBD) in its commentary, is pretty calmed down and happy now that its list is acting normally, leading the general stock market, writing this week that: “Whenever leading stocks post the best gains, it’s a sign of health for the market and its leaders.” When this list lags, it worries IBD and until recently it had been lagging for many months now.

New Names Mkt IBD Industry

Price Cap Rank Rank Business Line

ECPG Encore Capital 16.47 378m 72 45 Resale of unsecured, discounted loans

CNSL Consolidated Comm. 15.26 451m 88 152 Local phone service in TX/IL

WLT Walter Energy 61.86 3240m 99 48 Goal miner/degasifies coal beds

Schwartz View: My continuing strong suggestion for growth investors searching for big winners is to research in depth all ‘new name’ companies when they first show up on the IBD 100 list. I believe this one approach alone could pretty consistently make you handsome profits. (My opinion is arrived at after trying out as many stock market approaches as I could unearth searching full time for over 20 years.) Many of these companies go on to become ‘ten baggers’ over time and you’re finding them, when they first appear on this list, before the crowd, and thus if you do follow through and finding out exactly why they are in fashion, you can be a ‘first mover’ in buying them. Plus your research -- so easy in today’s world of the Internet -- clues you in to many, not so incidental, trends in the economy providing you insight into the Big Picture as well. Again, because companies appear on this list for some reason, “your mission, if you decide to accept it,” is to find out EXACTLY why. One way to manage this approach, once you satisfy yourself about just why a company hit this list, is to use the Sir John Templeton approach, buy a small amount of each stock and put it away for some time. Remember Mr. Templeton bought 100 shares of all NYSE traded depressed stocks trading under $1 a share during WWII. A few years later he had quadrupled his money. His missive to us future generations is that some won’t work out, some will trade sideways but the big winners will provide you with a handsome overall profit. Thanks Sir John Templeton!

Let’s see, this week a cursory look tells me that Encore Capital seems to be in a sweet spot. There’s a ton of bad loans floating around today so business is there for the company which comes up with a way to profit. As for Consolidated Communications, I’m not sure why a company in a very low ranked sector (IBD rank 157 of 197) and a local phone service provider made the list. Maybe a takeover? Your job, again, is to find out why and if you’re satisfied there’s big potential, buy a few shares. Finally Walter Energy, a coal coking company, maybe made the list as coal companies surge as natural gas rebounds on speculation of increased steel output from China. I’m not sure I buy into that as a good enough reason but again there may be some hidden, deeper reason which in depth research will unearth. Net, net, if you find solid reasons for these and/or any ‘new name’ stocks, one fundamentally solid market approach would be to buy a small equal dollar amount of each. Then put ‘em away. Yes, ‘buy & hold,’ exactly the approach most advisors today are saying doesn’t work anymore. Remember, take the road less traveled in your stock market approaches and you’ll generally come out on top. Ask Mr. Buffett and others of his ilk.

Re-Regulation Begins a Multi-Decade Road

Richard Schwartz — Mon, 06 Oct 2008 14:39:00 GMT

THE BIG PICTURE

Today’s Big Picture view revolves around the probable coming re-regulation of the financial markets. History shows regulation of markets is similar to a grandfather’s clock pendulum swinging back and forth although not as regular. A brief look back to the start of the 20^th century, shows free markets and a first age of globalization, with the introduction of the telegraph and telephone, steamships and railways, at a peak. Millions even migrated without passports while trade flourished meaning free markets were in charge.

· Governments Take Charge. Then, in August 1914, with World War I, that age ended abruptly. WWI left people disillusioned and looking for something better and many turned to socialism and communism. The Russian Revolution in 1917 drew followers and essentially sought to end capitalism for good, making private property illegal. Socialists and other government controlled economic systems were winning the battle of ideas, governments were in charge, free markets were in retreat. In less than 30 years, one third of humanity, including Eastern Europe, China and the Soviet Union, would be living under socialism or communism. Capitalism looked to be doomed except for in America. The 1920s in America was still a boom time, Americans buying cars, buying illegal gin, buying stock. Radio was the Internet of the 1920s. It was a classic bubble. Finally the 1929 stock market crash started Americans on the way to despair, a complete economic collapse "with no ability to earn, repay, spend, consume." Everything spiraled downward while about half the banks in the US closed. America turned toward government for help and thus re-regulation with President Roosevelt’s numerous new government regulatory agencies. Around the globe, governments gained power … over free markets. In Italy, Spain and Germany fascism took charge. World War II then arrived and even afterwards people all around the globe still blamed capitalism for causing the depression. The whole world kept moving towards more regulated economies. England even went socialistic as Winston Churchill, the great war leader, was beaten by the socialists! Most of the world operated under this sort of government planning process for the next 30 years.

· Free Markets Regain Control. But in the 1970s free markets began a resurgence. Margaret Thatcher came to power in England with free market thoughts as did Ronald Regan here in the US. with his Reganomics. Both cut back on government regulations, giving markets more ascendancy and free markets again starting coming to the forefront. England started privatizing its economy while President Regan cut taxes and let free markets regain control as epitomized by breaking the air controllers strike. Thus capitalism got a free hand which lasted for aboutt 30 years, even through the dot.com boom and bust. But after last year’s incredible debacle with investment banks, money center banks, insurance companies, etc. losing billions after irresponsibly leveraging up their investments 20 or 30 times, it’s apparent to most everyone that, just like in the 1930s, we can’t afford to have any similar financial market collapse spawning from totally free markets to happen again any time soon.

Schwartz View: So after reviewing the history of the 20th century and seeing how over long periods, market regulation swings back and forth, I have to figure we’ve just started a long term swing back on the way to re-regulation. For more on this topic, I recommend you watch Commanding Heights, the Battle for the World Economy, by Daniel Yergin and Joseph Stanislaw which was turned into a DVD and a PBS prouction, a wonderful esplanation of the battle for economic minds in the 20th century. Filled in some missing pieces for me and should for you all as well.

We Need To Move Past Oil!

Richard Schwartz — Fri, 25 Jul 2008 13:49:00 GMT

YOUR ALTERNATE CLEAN, GREEN ENERGY WEEKEND UPDATE

With not much stock market stuff to write about since I don’t want to recommend buying or selling this morning as we all should have our portfolios hunkered down and pretty much in place for a rocky and rough summer by now. Sure, stock market aficionados can always fine tune their portfolios and do some long and short trading, trying to scalp some profits here and there while long term investors stand pat, but with not that much going on, please let me rant and rave a little about those people out there who are slow in moving forward on American’s vital energy issue. And, don’t get me wrong, we all have to change our mindsets about energy and life in America and it will take everyone their own period of time since we’re all coming from different lifestyles, histories, jobs and places. Still, change is a coming now – I agree with George Soros who writes he sees America and the world moving from an established order and certainty to great change and thus greater uncertainty -- and we’ll all have to adapt. No problem for us Americans as that’s what we’ve always done; we’ve always adapted to change well.

“Drill, drill, drill!” I almost can’t believe Larry Kudlow on CNBC this morning. That’s his mantra: Drill, drill, drill. OMG (Oh my gosh!) I have to believe Larry, “a great American” no doubt and always bullish, is living on another planet or is somewhere back decades in time. He just doesn’t get it! But then I shouldn’t be so harsh on Larry. Millions of American’s still don’t get it as well. Though I’m delighted to see T. Boone Pickens gets it as he is now paying millions for TV ads publicizing The Pickens Plan, his idea to harness America’s wind corridor running north to south from Canada to West Texas, replacing natural gas as an energy source for cities and use that natural gas to power America’s vehicles.

Anyway, Larry just will have to realize that economic growth isn’t the be all and end all. Near term growth is just near term growth. We really need long term, sustainable economic progress to make the US and world a more prosperous place. And that switching from oil today, while a big burden now, is the best thing for us and for future generations to come. Thus we shouldn’t be doing anything to drive down oil and thus gas prices today. We need to leave them be because high and higher gas prices now will help drive America in getting off oil by creating profit in developing alternative power sources. That more and more Americans see this already and those that don’t will soon wake up to this fact going forward, and are or will be willing to sacrifice for the good of the country. And that this major change over – like moving to indoor plumbing, to railroads, to cars, to electricity in generations past – can be and should be done.

So my major #1 point is that we don’t want to drill for oil any more! Certainly not lift the moratorium on offshore drilling like President Bush has just proposed and Larry got all excited about. Or go up to Alaska and ruin one of the last remaining unspoiled parts of our planet and home. For what? Temporary relief and to lower by a dollar or so gas prices now? And then a few decades from now, when we use up that offshore and Alaskan oil, we’ll just have to address the same issue once again?

You’re not convinced? You still want to know more reasoning why we shouldn’t drill for oil any longer? Well, because we have to move beyond using oil as a power source. That’s the bottom line. We immediately have to start putting any and all plans in place now, today, to stop using oil and dirty coal as well. Now, I know what some of you are thinking: “Richard, get realistic! That’s impossible.” Maybe Larry Kudlow and George Bush 2 are thinking that too, that there’s no way to get off oil and coal. But someone has to give them a (loving) slap across their cheeks and wake them up to coming change. It is a total change of mindset but it’s happening here and all over the world. It’s happening here with movies such as Wall E. Lucy saw that movie with her granddaughter Elizabeth and says it make her more into a green believer. And the influence that movies have is great, thus every kid who sees the movie will be left with the unconscious thought that they’d better live a green, clean, low carbon footprint life.

And, as I’ve consistently written since December 2006, I’ve noted a critical mass already built up supporting a change in how we live on this planet. From scientists, to governments to large and small business alike, to venture capitalists, to individuals. Supported by logic, the reasoning that using a cleaner energy source will: (1) be a major, maybe knock out blow to global terrorism, (2) create millions of new jobs in the US and globally and thus spur the whole world into a new more prosperous phase and of course, be a big step forward in leaving Mother Earth at least as clean and healthy as we found it, just the right way to live. Back in December 2006 as a result, I took my own advice to you all and started using 95% of my IRA account to just buy small allotments of any and all companies involved in inventing, using, working on alternative, clean renewable energy sources. I’ve posited here time after time that fortunes will be made by those companies and individuals pursuing this same course. Thus I’ve listed many times in this space as many companies involved in alternative power as I could find. Solar companies, wind companies, battery technology, hydrogen tech, geothermal, thin film solar technology, energy savers, and on and on and on. And I must say this strategy has worked. My Ira has risen while the stock market has been on a slide for the last year now.

SCHWARTZ SUMMING UP. Sure we still need oil and coal today and let’s find more where we can, where we’re already drilling. But we need a new mindset in America and I see it as already occurring, already in place and inevitable that it’s going to change America and the world as we know now it. Better to ride this incoming tide, open up our minds to new thinking by ourselves rather than have it forced down our throats. Some will not see this major change coming or resist it, not being able to adapt to a new world ahead, but not so my readers, I hope. There’s so much support already that there’s no going back so the sooner we all cross over to the other side of this vital energy issue the better.

Respect The Bear But Nibble On Energy Savers

Richard Schwartz — Tue, 15 Jul 2008 13:52:00 GMT

MORE RECOMMENDATIONS ON MY NEW ENERGY SAVERS THEME

On Friday, June 13^th, I began a new investment theme, what I called the Energy Savings (Savers) Theme. Essentially a new theme is when some macro force is seen as boosting a whole group of companies, not just one hot company with a new product. And a macro force is one that isn’t going to dissipate quickly.

I began this theme by recommending five companies which should benefit from business in general looking for ways to save themselves energy, and thus money, listed below. Then on Wednesday, June 18^th, I followed up recommending another four stocks, also listed and updated price-wise below. Today, let me recommend two more companies which fall under this same energy savers category as well, also listed below. I first recommended stocks in established uptrends but that strategy is sketchy because when a bear market is on, most all stocks go down, it’s just a matter of time. Today chart patterns show one stock in a sideways trend which just dropped considerably, Altai Nano, and one stock in an uptrend on a sharp pullback, American Superconductor. Summarizing what’s in the table below, I’ve updated my two previous recommended groups and added the two new recommendations below that.

June 13^th, 2008 Recommendations

ENERGY SAVERS

Buy Current

Price Price Business Line

CPST Capstone Turbine Corp. $3.41 3.50 Low-emission turbines; hybrids

BCON Beacon Power $1.72 1.30 Flywheel-based power systems

WGOV Woodward Governor $37.78 35.64 Energy control systems

MXWL Maxwell Technologies $12.57 11.11 Power conversion/purification

CHP C&D Tech $8.40 8.74 Reserve power systems

Disclaimer! I own a small amount of CPST. And plan to buy small portions of the stocks above. Update: I now own a small amount of Beacon Power as well.

June 18th, 2008 Recommendations

ENERGY SAVERS

COMV Comverge Inc. $12.73 13.95 Peak electric demand reduction

ENOC EnerNOC, Inc. $15.65 20.74 Manages electricity consumption across networks

ITRI Itron, Inc. $94.75 88.60 Computerized electric, gas & water meter reading

BMI Badger Meter $50.04 52.50 Water meter measurement

Disclaimer! I own a tiny amount of COMV and may buy some of the others as well.

Schwartz Update: Comverge and EnerNOC both had big up days yesterday. In spite of the down stock market. They seem to being coming into fashion now, being discovered as the notoriously, tortoise-moving utility industry is starting to realize what they offer and employ their energy saving products.

Today’s New Recommendations

Price Mkt Cap

ALTI Altair Nanotech $1.80 152m Supplies a variety of nonmaterial & nanotechnology

AMSC American Superconductor $32.15 1258m Provides superconductor products

Disclaimer! I own a little of Altair and am watching America Superconductor to buy a small position.

Altair is testing their battery and energy storage products with AES Corp (a utility company). American Superconductor is testing chilled superconductor wires in the Holbrook Superconductor project on Long Island. AMSC is seeing much increased revenues; ALTI is still in the revenue start up phase. Please check both company’s business lines and satisfy yourselves before dipping your toe in the water.

Schwartz View: Since we’re deeply enmeshed into a big, bad bear stock market, proper strategy is not to jump into the above recommendations with your normal financial allotment or size. The best way I’ve found is to buy a small portion of stocks you like, figuring that they will probably go down for awhile with the general market. But buy a little since you don’t want to miss the boat departing! And buying a little gets you actively involved. Holding shares makes you more aware of daily or weekly price movements and keeps you interested in what news comes out about your investment and what news comes out about the industry. Again, today’s modern technology, a.k.a the Internet, allows you to list this stocks and prices you bought them and get a free dynamic update whenever you want it. And you can designate also having any related news reports for a stock or industry come right to you automatically as emails. It’s great!

Again, I would suggest buying a small amount of some of the above 11 recommendations, on weakness. Then keeping yourself informed as to their price progress or regression and the industry news with the plan to buyi more down the road.

Good investing!

Is This Your Portfolio?

Richard Schwartz — Fri, 27 Jun 2008 15:14:00 GMT

WHERE YOU SHOULD STAND TODAY. The Ideal Portfolio (another Schwartz View).

Yep, let me offer up one man’s view of what the ideal portfolio should be today and why:

· Very minimal exposure to the stock market! This major, modern day margin call on institutional investors is causing havoc. I’ve likened this margin call to the one which wiped out many individual investors quickly back after the 1929 stock market crash, only this time around its institutional investors getting slaughtered and thus the process of meeting their margin calls is being stretched out. All are deleveraging their portfolios big time and since the securitized investments killing them are so opaque and illiquid, it’s a terrible, long, drawn out process.

· Where you do have exposure, have some in the Energy Service sector. Business is going to remain strong and money is going to funnel into this sector as long as oil stays up there, even if oil tanks 50%. The world is in now in a new competitive battle to secure our energy futures. Thus companies which help countries like Brazil find and produce oil should do well.

· Where you can, hedge your long stock exposure. One does this by having some inverse mutual funds and/or ETFs (exchange traded funds). Happily today, investors have access to this modern day invention of being able to go short (bet on declines) with inverse investments. You just buy a fund or ETF which goes up as the market goes down. I would recommend having small inverse positions, especially in financials. This allows you to ride through a day like yesterday knowing that a part of your portfolio is rising while your long positions are falling. The next day you check your portfolio’s value and see how you did. That’s what I do each morning. Say the stock market fell -3.00%, like yesterday, & your account lost just -0.20% like my ProFunds managed account did you might figure your hedge is just right. Just tinker with the hedge until you get it right.

· Hold NO BONDS. I’ve been recommending this for some time now. Yes, we may get a deflationary collapse at the end of this 25 year “too much of everything” Kondratieff disinflationary economic backdrop we’ve been in since former Fed chairman Paul Volker broke the back of runaway inflation in the early 1980s. But the world is now experiencing our first return to higher inflation jolt. Thus we’ve started a new bear market in bonds. I can’t help but remember when I first became a stockbroker with Merrill Lynch back in the late 1970s, the client who say she would never, ever buy a bond again, after losing money on bonds going back two or three decades. Well, we’ve had a 25 year bull market in bonds and its over or close. Thus, my recommendation is no bonds. (Except some very short term laddered US Treasuries for income.)

· Hold a little Gold. Yes, some will keep warning of a deflationary collapse ahead, when the economy really tanks and thus say gold will collapse as well. But gold is in a long term uptrend, a bull market, and no one knows quite how it will react in various market and economic scenarios. Buy SPDR Gold Trust (symbol GLD) as opposed to the miners themselves, thus eliminating one unneeded uncertainty. FYI, I’ve seen gold rise and gold sector funds fall, so watch yourselves.

· Hold a little foreign currencies. Again, in today’s modern day investment world, the individual investor can easily bet on foreign currencies … by buying their ETFs or tracking stocks. I’ve been recommending & still am, buying Swiss francs & Japanese yen, symbols FXF and FXY. Both are Big Picture superstar guru Jim Rogers’ picks and are in long term bull markets and dipping now so it’s a good spot to buy in on weakness. Today let me add the Chinese renminbi, symbol CNY, to the buy list since there is a exchange-traded note in existence. Not a fast mover but it’s also in a long term bull market and probably is now one of the most reliable bull markets going.

· Hold a little agricultural commodity position. The middle class global world has grown tremendously, yay!, and thus the general commodity bull market has now spread out to foodstuffs. A larger global middle class, means more and better food is needed, especially increased protein. Food commodities are up so only buy on pullbacks here if you don’t own any now. My picks have been and remain symbols RJA and DBA. Again buy the commodities themselves as much as possible and not the companies which produce such although ETFs like MOO have been doing well to this point. Today, let me add iPath Livestock ETN (symbol COW) to the buy list if I haven’t already, a livestock play. Looks like with corn prices so high, cattle is being killed off (thus one can still get steak and hamburger at $1.99 a pound) because it costs too much to feed ‘em. But that will change too and red meat prices will skyrocket.

· Finally, hold small positions in lots of alternative, clean green energy stocks. I see new fortunes being made by those riding the wave of the US and globe getting off oil. The best way I’ve found to buy these is to keep the shopping list of alternate, clean green stocks I’ve compiled and posted for you back on June 6^th in this space handy. (If you don’t have it email me and I’ll send you a copy.) Buy a bunch of these stocks on weakness. I bought one for myself yesterday.

Disclaimer! I hold or plan on holding many of the ideas recommended above.

Energy Savers New Theme: More Buys

Richard Schwartz — Wed, 18 Jun 2008 13:51:00 GMT

MORE ON MY NEW Energy Savings Theme. To review, just last Friday I introduced my latest theme. An investment theme is more than recommending you buy this stock or that. It’s about finding a trend, generally an economic trend based on changing economic fundamentals, which should support business for some time in a whole industry sector, whereby most all companies doing business in that sector are buoyed and pushed forward by some bullish tide. Like today’s increase in wealth in many developing countries translating into a larger global middle class and thus increased demand for energy, metals, foodstuffs and most all commodities. Thus leading to a long term commodity bull market whereby most any commodity and companies involved rises over time.

Well, my newest theme is that the recent high and higher costs of energy, metals and other industrial manufacturing inputs is going to drive businesses into finding and employing most any/all energy savings devices, products and services. Since most companies are becoming believers that energy is going to stay high priced for a long, long time to come. Thus last Friday’s recommendation of those five stocks from the Energy Controls sub-category of my Alternative, Clean Green shopping list. Again, those symbols are CPST, BCON, WGOV, MXWL and CHP. And again, please check into these carefully before you buy. Three are low priced stocks and normally I don’t even track stocks that low priced but in this case of looking for new breakthroughs to come in clean energy, I’m looking for and buying possible up and comers. Disclaimer! I own tiny amounts of two of these five and am interested in buying the others.

Today, let me add to my recommended list of Energy Savers. First off, these energy saving stocks can come from far and wide places, sectors and industries. Since the common thread is that they all have some product, service, etc. which can save businesses energy & thus big money in today’s new high energy cost world. Down the line I plan on applying the same concept to the public as well. Also finding companies that offer products and/or services which can save us as individuals energy and thus money but for now with businesses flush and consumers squeezed, I’ll concentrate on energy savers for business. So, again, below are four more companies going on my Energy Savers shopping list today for you all to consider.

ENERGY SAVERS

Price Mkt Cap Business Line

COMV Comverge Inc. $12.73 278m Environmentally responsible peak electric demand reduction

ENOC EnerNOC, Inc. $15.65 309m Manages electricity consumption across networks

ITRI Itron, Inc. $94.75 3191m Computerized electric, gas & water meter reading

BMI Badger Meter $50.04 730m Measures & controls flow of liquid & gas, like water meters

Disclaimer! I own a tiny amount of COMV and may buy some of the other two as well.

Chart Views: Comverge & EnerNOC are basically in the same industry niche, energy management, and have similar histories. Both were new IPOs last spring, Comverge in April 2007 at $18 and EnerNOC in May 2007 at $26. Both rose nicely until late last year, COMV hitting $38.78 and ENOC hitting $50.50, both peaking on October 18^th. Then late last year, early this year, while the general market sank, both companies experienced lots of insider selling, possibly after lock-up periods ended, which knocked them both down. Then on February 27^th EnerNOC plunged on worse than expected earnings and COMV fell in sympathy, both falling on analysts’ realizations that there were no real metrics on how to value them. After falling further, both have been building bases every since. You can see their current prices above. So neither are in uptrends but patient investors start nibbling on both now, buying them on weakness.

Schwartz View: Itron & Badger Meter are both meter readers but have different charts. BMI is in an uptrend like my first five recommendations from last Friday and is a recent entrant on the IBD 100 list of leading companies so you know the fundamentals are good. ITRI in trading in a sideways pattern. Net, net, I would buy small amounts of all four stocks above and add them to the five buys from last Friday in a new Energy Savers portfolio. Buying small portions of a lot of stocks is like building your own little mutual fund. In this case a sector specific mutual fund so don’t go overboard, especially right now while the stock market is still in bear market mode.

New Investment Theme Unveiled!

Richard Schwartz — Fri, 13 Jun 2008 13:54:00 GMT

A NEW INVESTMENT THEME FOR YOU TODAY. Quiet, don’t tell anyone about this new theme until you get invested. Anyway, finding a successful theme early on, before the crowd finds it, is one of many different ways to profitable investing in the stock market. I’d say it’s one of the best for all time frame investors. Regular readers will remember we found the REITs theme early on, rode that for years and how well it served us. Then, more recently, a year and a half back or thereabouts, we got on the fertilizer theme, stocks like Potash, Mosaic, Agrium, etc. which is still ongoing, and the solar energy theme. The solar energy theme gave us doubles on stocks like First Solar, Suntech Power and SunPower. Other themes I haven’t been as lucky with have been energy and global infrastructure. But I must say I’m learning, and hope you are too, that we need to stay with a theme when we find a good one like a dog with a bone as many super investors/traders advise. Themes can and generally do run a lot longer than anyone would believe. Anyway, today let me introduce my new theme to you.

The Energy Savings Theme. Let me call it, for lack of a better name, the Energy Savings Theme. You see I’m reading about how now, after $4.00 gas has became a reality, how individuals are coping by “lowering the thermostat, eating out less, buying cheaper version of products then need, spending less on clothes and medicines and changing the education plans, …” Also by buying less food, driving less, buying fewer necessities, closing off parts of their home, spending more time outdoors (to save on AC), taking on 2^nd jobs, buying more efficient energy systems and appliances, using less water, changing to compact florescent light bulbs and more. So it only makes sense to me that businesses and corporations are already doing the same thing or discussing the same, how they can use less energy in their business models, where to get energy savings. If I was a top honcho at just about any company, I’d be holding meetings centered on this issue, that’s for sure. And from what I read many companies like General Motors and many industries like airlines believe higher energy costs are here to stay. Thus they have to plan for that long term scenario, start changing how they operate now. To me, that’s the beauty of and necessity of today’s high energy prices, this tough love. Americans absolutely need to change our lifestyles toward using less energy. Doing so will pay off very handsomely over time in key ways. It will get us off oil and thus our dependence on people and countries who don’t like us and want to harm us. It will get America’s finances, so badly out of whack, back in shape. And it will help preserve and respect the planet we live on as it’s quickly becoming too late. Have you noticed the 50-year snow storms in China, their massive horrific earthquake and the 100-year floods plaguing Iowa & our Midwest right now?

Anyway, this energy savings theme is going to be widespread, and go corporate as well as individual, with company after company jumping on board in some form or manner, one group of businesses interested in and investing in new energy savings products and services, doing the buying, while another corporate sector will be highlighting their products and services they offer which save energy, doing the selling,

Thus let’s start this theme today by highlighting one sub sector of my already ongoing alternative, clean green energy theme. That is what I’ve previously termed the Power Conversion/Energy Controls companies. Thus below I’ve pulled out of last Friday’s fairly all-encompassing shopping list of companies working on powering the world with clean green energy. I went through each stock and looked for stocks already in uptrends and that save other businesses energy by using their products. Here’s the list:

ENERGY SAVERS

CPST Capstone Turbine Corp. $3.41 Low-emission turbines; hybrids

BCON Beacon Power $1.72 Flywheel-based power systems

WGOV Woodward Governor $37.78 Energy control systems

MXWL Maxwell Technologies $12.57 Power conversion/purification

CHP C&D Tech $8.40 Reserve power systems

Schwartz View: While I believe we’ve in for an extended bear market, I do believe there may be some groups and stocks which can make some upside progress. And remember, I’ve posited that energy and related stocks should outperform early on in this first year of this bear market. While I wouldn’t bet too much on anything right now, I would suggest starting a small in size portfolio with the above fire stocks.

Disclaimer! I own a small amount of CPST. And plan to buy small portions of the rest of the stocks above.

Seeing the Other Side: The Bull's Case

Richard Schwartz — Tue, 20 May 2008 18:17:00 GMT

THE BIG PICTURE: Written Monday, May 19th, 2008

Let’s make the three-pronged bullish Big Picture case this morning. About time, right?

1. The bullish argument starts with the assumption that the “worse financial crisis since the Great Depression” is behind us. Many Wall Street CEOs say this is the case but since they have so much skin in the game we have to look askance at what they say. Sort of taking a large dose of salt with what the Federal Reserve Banks says, we know they won’t outright lie but spin, jawboning and moral suasion is the name of that game. Still common sense tells us the flash point for the credit crisis was the run on Bear Stearns back in mid-March. Before that another critical juncture was when MBIA and Ambac Financial were on the verge of losing their AAA ratings and the negative ripples that would cause and before that the danger was were Fannie Mae and Freddie Mac were under severe pressure. And before that came Washington Mutual and Countrywide. You get my point. We’ve been through a heck of a lot, through multiple quarterly billion dollar bank write-offs, the commercial market paper seizing up, Libor rates heading higher, the auction-rate market collapsing, losses from banks all over the globe, a run on an English bank and one on an American investment bank. The troubles have gone on and on, starting last July and continuing for the last nine months. So from an extent and duration perspective, it does look like we could be past the worst of it. Of course, there will be additional write-offs and bearish surprises but still will it get worse than it was? Maybe not. So there is a case to be made that the worst is over.

2. Next we have an US recession to handle. But this is quite a slow-motion, economic slowdown. The “R” word continues to loom out there on the horizon but hasn’t hit us full force. This is probably because of the balming effects of globalization having gained much traction in the world economy over the last couple of decades. As a result, today, the United States is just one part of a much larger one global economy or marketplace. Thus our economic weakness and financial problems here in America isn’t putting the kibosh on the whole world like has been the happenstance in decades past. While America’s housing market has gone bust and while our financial firms have lost billions and while the US consumer is getting severely squeezed, things are different, much better elsewhere. Chinese, Russians, Brazilians, Middle Easterners, Eastern Europeans all have more, not less money, in their pockets today and are thus feeling and indeed are wealthier than just a couple decades past. Indians are seeing their incomes rise 10% to 15% to more each year as are others in today’s more shared wealth. Yep, the wealth on this planet gets, and has been, redistributed when trade barriers come down, when communication is instantaneous and when transportation is positively effected by miniaturization and other new breakthroughs like “just-in-time” inventories. Bottom line, as former Federal Reserve Chairman Alan Greenspan remarked, America’s economy is much more resilient, flexible, open, deeper and stronger than ever before. So why wouldn’t it also be logical that big layoffs, suddenly bloated inventories and other signs of past recessions don’t happen this time? Couldn’t we just skirt along the fringes of a recession this time around? I suppose that could unfold and end up being the case today.

3. Finally we have the value proposition. Many value investors and others see stocks as representing solid, even great value today. Big time, long term, value players like the richest man in the world Warren Buffett, mainly look past the economy’s ups and downs, they forget what’s going on in the economy today, and thus see stocks are cheap. Mr. Buffett, the “Oracle of Omaha,” in point of fact increased his holdings in a number of stocks in the first quarter and says he’s now on the lookout to buy more. Another value guy this morning, on CNBC, says many financials, I assume not the banks, have been pounded down for no discernable reason, and are incredibly cheap. Net, net, if we put current concerns aside, forget where we stand on the business cycle time line, etc. stocks can be looked upon as undervalued and a great opportunity.

Schwartz View: The bulls argue that stocks are now going to resume their upward movement. That what we’ve just gone through was just another financial crisis, the latest in a long line of crises, like the S&L problem in the late 1980s, the Asian Contagion, the 1987 worst one-day-crash in history, even for you market historians out there, the Eisenhower heart attack, Kennedy versus Big Steel, etc. And that because of much market and economic strengthening evolvement over the years, the stock market and economy can handle this hiccup as well. The argument goes that even that looking back in a few years, the credit crisis of 2007-08 will just be a faint memory. And that stocks will be much higher in price. Maybe, maybe not.