By Michael Robinson
Thursday, May 5, 2011
The American Turnaround Is Gaining Ground
By Michael Robinson
This is a great time to be a turnaround investor. I can say that with confidence because I have followed this field for more than 30 years.
I covered the great recession of the early 1980s, the stock market crash of 1987 and the recession of the early 1990s. I had a public relations business decimated by the dot-com crash of early 2000.
And if that's not weather-beaten enough for you, I started picking stocks for the Taipan Publishing Group in late 2008, literally right near the market's bottom. So, "this ain't my first rodeo." Not by a long shot.
Of course, I could take a pessimistic view and focus on the millions of foreclosed homes out there and China's trade deficit with the U.S. Both are drains on the economy that keep unemployment stubbornly high.
I mention that in passing so you understand I'm not naÃ¯ve about the challenges this country faces.
And yet... I see signs of economic and political progress coalescing to give us a great environment for turnaround stocks. Like you, when Standard & Poor's warned about a negative rating for America's debt earlier this week, I was at first concerned.
Then I got thinking... This is just the wake-up call those politicians in Washington need to get the budget under control and restore at least some confidence in the value of the dollar.
I believe we will finally see some progress in slashing bloated spending in the near future. At the very least, the rate of increase will slow dramatically.
On the economic front, we got two good pieces of news this week. Intel Corp. (INTC:NASDAQ) on Tuesday reported blow-out earnings for the first quarter, a 35% surge. That means businesses are spending heavily on computers, servers and software.
Intel closed Wednesday at $21.41, up nearly 8% for the day. The world's largest semiconductor company and tech bellwether stock is up 72% from its closing low in March 2009 of $12.41.
Consumers continue to spend heavily on tech products as well. Apple Inc. (AAPL:NASDAQ) smashed Wall Street's expectations on Wednesday when it said profits nearly doubled in the first quarter. Sales of iPads were below expectations but iPhones and Mac computers flew off the shelves in record numbers.
Apple's stock trades above $342 compared with a closing low in March 2009 of $85.30, for a 300% turnaround.
I list these two companies as proxies of overall U.S. economic liquidity. Consumers and businesses are confident enough in the recovery to open their wallets and propel corporate earnings.
Earlier I mentioned my concern about the value of the dollar, which declined this week on heavy volume. But 180 Traders are profiting from that trend.
During the beta-test of this new service that went to Millionaire's Circle members, I recommendedEndeavour Silver Corp. (EXK:NYSE). Since entering the 180 Trader test portfolio on Jan. 10 the stock is up 85% as of deadline today.
We're also doing well on our energy position. Calpine Corp. (CPN:NYSE), which operates natural gas and geothermal plants, is up nearly 14% since it entered the portfolio on Jan. 31.
And we benefited from good timing on our uranium position. I recommended selling Denison Mines (DNN:AMEX) on Friday, March 10, for a gain of roughly 35%.
The very next day, Japan suffered an earthquake and tsunami that caused extensive damage to nuclear reactors. Denison stock got killed; it's down 25% since we exited the position.
Meantime, new subscribers to this service got a special report on MoneyGram International Inc. (MGI:NYSE). The stock is enjoying strong support.
It closed Wednesday up nearly 3% to $3.53, which is above both its 50-day and 200-day moving averages, a bullish sign. More importantly, the turnaround curves show solid momentum, indicating investors are waking up to MoneyGram's turnaround story.
The company recently said it has completed a $540 million recapitalization plan. A small-cap leader in global payment services for underbanked consumers, the company is in a sweet spot for the global recovery.
Millions of U.S. borrowers still need non-traditional sources of financing. As unemployment slowly ebbs, workers are getting back on their feet but still have spotty credit histories.
In emerging economies millions more need to send or receive money across borders but don't have bank accounts. So, the long-term economic trends here and abroad favor MoneyGram.