Sell Titan International (TWI)

On December 9 Titan International (TWI) told Wall Street to expect sales for 2011 to be around $1.4 billion (that’s slightly below the Wall Street consensus of $1.48 billion) and 2012 sales of $1.7 billion to $1.9 billion (the Wall Street consensus for 2012 stood at $1.82 billion)

Nothing wrong with those numbers—or with Wall Street’s estimates of a whopping 194% increase in earnings for 2011 from 2010 or with the 59% earnings growth rate projected for 2012.

But as anyone who bought this stock when I recommended it in my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ on July 1, 2011 knows, Titan International is an extremely volatile stock that rises and falls with fear and hope about growth and earnings in the commodities sector. Since that purchase date the stock has traded as low as $13.83 on October 3 and as high as $24.81 on January 24. That’s not unexpected of a company that sells tires to the makers and users of giant earth moving equipment used in mining (as well as tires for farm equipment and construction), but it does give me pause. Read more

Don’t fight the Fed. It’s an important piece of Wall Street wisdom built on the often-repeated power of changes in the Federal Reserve’s policies on interest rates and the money supply to overwhelm all other financial market trends. When interest rates are headed down and the money supply is headed up,  most of the time, stocks will head up too.

Not always, of course, since the Fed itself can get overwhelmed by a global financial crisis here or a euro debt crisis there that can lead to a situation where the real economy doesn’t respond to the Fed’s monetary prodding.

But the saying is true frequently enough so that aligning your investment strategy with Federal Reserve policy makes sense most of the time.

So what about when it isn’t just the Federal Reserve that’s lowering interest rates and pumping money into U.S. economy, but the European Central Bank pursuing the same course in Europe, and the Banco Central do Brasil in Brazil, and, just beginning but accelerating, the People’s Bank of China in China?

Is this flood of cash enough, by itself, to push stocks higher in 2012—no matter what the real global economy is doing? Traders and investors have started 2012 by answering that question with an emphatic Yes. January’s rally in U.S., European, and emerging market stocks is based on a belief that the huge wave of cash that the world’s central banks have unleashed—or are about to unleash—on global economies will send stock markets higher and set economies to growing faster.

Let me give you two reasons why the global version of Don’t fight the Fed won’t work out quite as well as the current optimism suggests this time around. Read more

An early Lunar New Year holiday will make figuring out China’s markets and economy especially tough this week

The markets are going to be even tougher to read this week than they’ve been lately.

You can blame some of that (although the Greek debt crisis will certainly help) on the Lunar New Year holiday that started on January 21 and stretches until January 29. The Shanghai stock market is closed for those dates. The Hong Kong stock market is closed from January 23 through January 25.

There’s a good chance that the Luna New Year already distorted data last week, especially in the commodities markets. Companies in China, for example, always stock up on raw materials and on inventory in the weeks before the holiday. For example, China cut gasoline exports to a three-year low in December as companies stockpiled fuel for the big surge in travel during the Lunar New Year festival. The month also saw a big surge in diesel imports for the same reason.

If looking at those figures, you drew any conclusions about the direction of the Chinese economy, the likelihood is that you would have been wrong. Read more

Now that’s more like it. When I dropped Kinross Gold (KGC) from my long-term Jubak Picks 50 portfolio http://jubakpicks.com/jubak-picks-50/ on January 13 I said that what I wanted in a gold mining stock was a company with low production costs and rising production. Kinross, I opined, didn’t fit that bill any longer. (See my January 17 post http://jubakpicks.com/2012/01/17/sell-kinross-gold-kgc-in-my-long-term-jubak-picks-50-portfolio/ )

But my replacement for Kinross, Yamana Gold (AUY) does. The company’s cost of production is at the low end for the industry—at $450 a gold equivalent ounce in 2010–and it has one of the best profiles for increasing gold production among gold miners. That’s why I added it to the Jubak Picks 50 portfolio on January 13. (See my post http://jubakpicks.com/2012/01/13/10-stocks-for-10-years-2012-edition-my-annual-update-of-my-long-term-jubak-picks-50-portfolio/ for all the changes to the portfolio.)

Low production costs for a gold mining company largely hinge on the richness of the ore grades in its mines. Read more

Sell First Solar (FSLR) out of my long-term Jubak Picks 50 portfolio

I dropped First Solar (FLSR) from my Jubak Picks 50 long-term portfolio  http://jubakpicks.com/jubak-picks-50/ on Friday, January 13 (See my post http://jubakpicks.com/2012/01/13/10-stocks-for-10-years-2012-edition-my-annual-update-of-my-long-term-jubak-picks-50-portfolio/ on January 13 for all the changes to the portfolio.)

Why?  Because the kind of good news that First Solar announced on December 15 simply doesn’t count in the current solar energy market.

That day, in a conference call, First Solar announced new targets for manufacturing costs and solar panel efficiency that would put the company significantly in front of solar cell manufacturers that use silicon-based technology. Costs would drop, the maker of thin-film panels projected, to 50 cents to 54 cents a watt by 2015, from an earlier target of 52 cents to 63 cents a watt, and the efficiency at which the company’s panels convert sunlight to electricity would climb to 14.5% to 15% from an earlier target of 13.5% to 14.5%. According to First Solar that would mean that silicon solar companies would need to hit a cost target of 57 cents a watt to be competitive in 2015. Currently, again according to First Solar, silicon solar companies are guiding to 72 cents a watt by 2015.

Great news for First Solar, right?

Except that in the current market for solar power I’m afraid it just doesn’t matter. Read more