Top Stock #1 – Amazon (AMZN)
Amazon (AMZN) started as Earth's biggest bookstore, but has rapidly become the planet's biggest anything store. Relentless expansion has propelled Amazon in countless directions in the quest of bigger sales and profits. The company's main Web site offers anything from books to auto parts to groceries! Shoppers can also download digital content such as games, MP3s and movies to their computers or handheld devices — including Amazon's innovative portable reader, the widely successful Kindle.
A recent report in The Wall Street Journal indicated Sony is going to go up against the Kindle with two low-priced offerings of its own. But I'm not worried — the e-readers will be priced at $199 and $299. The fact is, you can get an entry-level Kindle for the same price of $299 and get the scale of Amazon's website that contains a massive library of books and music.
Besides, some pundits are already expressing their doubts that Sony can maintain its competitive pricing without putting its bottom line at risk. Even if Sony cuts into sales, it could actually take a loss for a few quarters on this effort in a quest to get some of the market share — a very risky proposition right now.
As a result, I remain confident the Kindle will stay the industry standard in e-readers and will continue to give AMZN a competitive edge.
In fact, Amazon is faring much better than just about any retailer out there. The company earned 32 cents per share in the second-quarter, which was a penny higher than Wall Street's estimates. Additionally, the company was able to grow its revenue 14% and expects its 3Q sales to range between $4.75 billion to $5.25 billion in the third quarter — an 11% to 23% increase compared with the same period in 2008, and above the consensus estimate of $4.9 billion.
AMZN is a great buy.
Top Stock #2 – C.H. Robinson Worldwide (CHRW)
A leading third-party logistics provider, C.H. Robinson Worldwide (CHRW) arranges freight transportation on trucks, trains, ships and airplanes that belong to other companies. This allows the company to handle about 6.5 million shipments per year without the massive overhead a fleet of trucks and deliverymen would create. As a result of this streamlined business model, the stock has been able to stay firm even during lean times.
Due to the weak global economy, the company's services are now more important than ever since it can often provide a better deal than Federal Express, UPS and other more established carriers. Other shippers are eager to fill the extra space on their trucks or planes, and CHRW is happy to oblige.
Shipping and freight companies are quite accurate indicators of economic growth. As businesses rebuild inventories and consumers start buying more, goods move around the world faster and shipping traffic ramps up. CHRW will be one of the very first companies to break out when the recovery takes shape because of its unique position at the top of the food chain — or rather, freight chain.
Top Stock #3 – Enersis (ENI)
Enersis (ENI) is the largest utility in Latin America. Based in Chile, the company distributes power to almost 12 million customers (approximately 45 million people) in regions of Chile, Argentina, Brazil, Colombia and Peru. Enersis also owns a 60% of Empresa Nacional de Electricidad (known as Endesa Chile), which is Chile's largest power generator, with 13,700 megawatts of generating capacity. This emerging market is seeing booming demand for energy right now — and additionally, has fewer pollution controls and regulations that cut into profitability.
ENI posted a 50% increase in earnings in the first quarter, proving that even in a recession this stock is booming due to strong energy demand in the region. This jump is only the beginning, since like China, Latin America's economy has been much stronger than developed nations. Consider that while U.S. GDP declined nearly 6% in the second quarter, Brazil's economy grew 2%! Just imagine how much electricity demand will spike once the worldwide recovery takes hold.
Top Stock #4 – Sociedad Quimica y Minera (SQM)
Sociedad Quimica y Minera (SQM) is one of my favorite stocks right now and is perfect for just about any portfolio.
Based in Chile, this company provides a host of chemicals for agricultural, health care and industrial applications. SQM is also a world leader in lithium — the material that is used in batteries for hybrid cars. Lithium batteries charge much faster than alternative power cells, and that makes this material crucial to any low-emission vehicle.
Fuel efficiency is now one of the most important aspects of any vehicle, and demand for fast-charging lithium batteries will soar in the automotive market over the next 12 months. Chevy's Volt will debut late next year with lithium cells under the hood, and Toyota is racing to bring a lithium-powered electric car to the market soon after. This will add up to big profits for SQM.
SQM reported second-quarter profits of 32 cents per share in mid-August and revenues of $344.8 million. While these numbers are down a bit over last year, the company continues to strongly outperform its competitors thanks to its 30% share of the global lithium market.
While the company's lithium shipments fell 35% the first half of this year, the first wave of hybrid electric vehicles that use lithium-ion batteries are starting to hit showroom floors. That means as auto sales recover thanks to the "cash for clunkers" program, lithium demand will only firm up in the coming months as more hybrids hit the road. And don't think lithium is solely used in hybrid vehicle power cells — portable electronic devices like laptops and smartphones also frequently use lithium batteries.
It's also important to note that compared with its competitors, SQM is in a financially better position long-term due to its low debt position.
Top Stock #5 – AutoZone (AZO)
Americans are as dependent on automobiles as they ever have been, and that means more older cars are on the road, and demand for parts is up dramatically. With 4,100 stores, AutoZone (AZO) is the #1 auto-parts chain in the U.S. and is the best stock to capitalize from this trend.
Though the "cash for clunkers" program has caused a brief uptick in new car sales, I remain convinced that this is temporary. With the rebates for old cars now gone, new vehicle sales will stay soft and AutoZone will remain a great retail play.
I still believe that this stock is a great buy right now and will deliver big profits in the final months of 2009 and beyond, even though AZO has had a tough go of it lately. First, the Census Bureau indicated that sales at auto-parts and tire stores fell 4% in May from a year earlier, despite rising significantly across most of the preceding months. Then Wedbush Morgan initiated coverage on AutoZone as "neutral," on fears that the company's margins are plateauing. Lastly, new auto sales have seen a brief uptick thanks to the government's "Cash for Clunkers" program, and some think that pent up demand for new cars is going to spark a return to the showroom very soon for many Americans.
That's a bunch of gloomy news to digest all at once, and the stock was held back recently. But this stock is still firmly rated a solid B in Portfolio Grader and has seen continued success. The stock's is a bit of a laggard to the earnings party, since its last quarterly numbers were released at the end of May, but I fully expect this company to show its powerful sales and profits once it sets a date for its next earnings report.
Stick with AZO for now because I fully expect it to bounce back quickly.
No comments:
Post a Comment