The 21st Century Marshall Plan: Stock Strategy Part 2

To reiterate: non-Western countries are modernising at a rapid clip. The revenue will flow to infrastructure projects and to consumer products. Remember: there are more middle class Indians than there are in the entire United States.

Infrastructure first
Remember: when a product is in huge demand and supply constraints exist, the manufacturer's vendors are calling the shots. From an investment strategy - higher risk means higher potential upside....and downside.
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Planes - Boeing is nice but ZOLT, PCP and TIE are nicer. Their margins and sales and profits continue to grow, largely because of Boeing demand. Imagine what happens when Boeing increases production.
In order of highiest risk to lowest risk
ZOLT is the trickiest one here: small, bad management, and very under the radar. I lost money on them when they recently crashed. They stumbled on basic management issues tied to execution of ramping up production. The CEO is an engineer, not a manager. In fact, on the conference call, one analyst asked when he would turn over management to a professional. Ouch.
However, ZOLT has a near-monopoly on carbon fiber and that material is the basis for the 787 Boeing and for many windmill blades. Those weaknesses are also potential strengths: this is when a Dupont would buy them out. Another reason to be positive: with titanium prices sky high, CF is a nifty alternative. BMW is testing ZOLT products, accordingly.

TIE - The next trickiest only because the market doesn't love them as they should. At some point, momentum will return.

PCP - The real winner here. They build the damn planes. They have both market excitement behind them AND they are ready for a split.

There are other plays as well. Car companies like Toyota and their suppliers. Manufacturers of trains.

ENERGY - As with planes, the final manufacturers are nice, but their vendors are nicer. Considering the windfall profits being made, it is surprising that stock prices are relatively flat for suppliers like XOM and refiners like VLO. Even drillers like ESV & DO are growing massively but he stock price is flat. The only oil industry companies are the ones helping with finding oil or building pipes: IO, CLB, MDR, GRP.
But here's something I recently noticed - that 'flatness' for oil extraction and production is clearly seasonal: stock prices peak in the summertime, in synch with oil prices. In fact, that statistical year-over-year flatness will shift to 100% growth when we start the clock in July.

Coal, nuclear and solar are other areas of possible investment. Interestingly, nuclear and coal suppliers like CCJ, CNX, and ACI are not moving. Natural Gas like BTU is even worse. Feeling contrary - buy BTU. Natural gas is in the doldrums and drilling is weak - look at HAL's recent report. But that won't last long - a year at most. Last winter was unseasonably warm. A real winter combined with the growth of natural gas usage is the recipe for a NG shortage. BTU meanwhile is growing 46% with a P/E of 15.

ENI – Supplies energy.
Shipping may also be an interesting play, but I haven’t looked in some time.

RAW MATERIALS
Concrete & Steel are the backbone of construction. But I don’t like them because of potential oversupply via China. As always, extraction and related supply constraining gate keepers get my attention. I’m thinking JOYG, and I’m not alone. A recent 5.2% purchase of their stock suggests some interesting moments ahead.

Motley Fool likes BAK, a Brazilian petrochemical company.

CONSTRUCTION –
Here I think mainly pipeline and oil infrastructure. I am led to MDR time and time again. I think the collapse of construction in the US is simply not outweighed by construction elsewhere.

HIGH TECH
I like internet buildout opportunities, Mobile phones, and flat panel TVs.
TRID - Flat panel TVs is only TRID. Panel makers are suffering from the PC industry sluggishness. But TRID has a major dominant position where it counts. Better yet, TRID is suffering from their 1 year inability to produce a qualified earnings release. In fact, be aware that April 2nd is the threatened delisting. They may either get another deferral or actually release the damn thing.

AAPL – Yes, I actually support AAPL now. As a PC and iPod maker, Apple is overdone. Their glory days have come and gone. However, the iTV and iPhone will push them back to strong growth.

STX – They are growing in many ways. The iTV uses storage, for example. And then there’s the servers. I think the profit impact of the Maxtor acquisition are over and they will be better positioned going forward.
IVAC is a related play but I think that they are running down.

UCTT - Chips chips and chips. And chip makers. UCTT shines out. Revenues are ore than doubling, earnings were up 5x, but the P/E is a measly 22. I haven’t bought back because of technical reasons. First, it is far above its 100 day and 200 day moving average of $14~$15. UCTT does have a tendency to stay above it but also revisit it. Then the RSI and MACD are waaaaay overbought.

Internet & Wireless
I like 3rd world companies for their growth
AMX – latin American cellular – still a good buy
GLDN – Russian internet access. Very risky, but an interesting play.
ESCH – No sooner do I point out ESCH than it jumps 15%. On a takeover. Oh well, better move faster I guess.
HTC – Hungary’s telephone system. High risk and I don’t know the reward, but a monopoly is a monopoly.
PWR – This is a US play, but I just love them. They just bid to buy out the competition (IFS) and expand reach. That’s what I like to see.
AKAM - I have stayed out because I thought that the iPod excitement was slowing down. But the iTV would put more zip into the business. Especially because – despite my own predictions to the opposite – no one has presented an alternative system for downloading. Not Google or Yahoo. NFLX wants to, but they simply lack the back office hardware. Limelight is an emerging competitor that supports Google (Youtube) and Microsoft.
NUAN – Just buy them.
T – AT&T is just going to do well, especially with Cingular in their pocket.

HEALTHCARE/BIOTECH
I like product companies in this space, or at least ones that make and sell products with global application. I frankly have a rather low opinion of Middle East healthcare and corresponding investment, but I expect India to move rapidly. China as well.

HOLX – Mammography. They are also near their 52 week high
IMA – Home pregnancy tests as well as a host of other items. I love their growth: 60% expected earnings growth.
DIGE – HPV is here and DIGE has the test. They are incredibly oversold and I think a reasonable buy
ILMN – The double hit of buying another company (and overpaying) and spending more on sales (and impacting earnings) has really pushed them down.
I like HOLX and IMA best.

OTHER
KSU - Trains have been doing phenomenally well primarily from coal shipments. KSU is unique because of its position to transform the US/Mexico/Central America transportation and shipping infrastructure. This will be a huge play in the next 2 years. It is only now beginning.

OCN – They are misunderstood and I like that. I have re-visited my due diligence. OCN does not originate loans – they service them. They are a collection agency. They get a fee to try and collect the loan and they get a % every time they collect. With defaults picking up, lenders will need OCN. They are almost 100% run by outsourced Indian callers. The current market bodes very well for OCN’s services. They tried –this last year I fact – to get into the lending market and they screwed it up royally, writing down $7M and badly missing estimates as a result.