Local sharemarket strengthens despite weak leads. 27 Jan 2012 4:25 PM
Kia Motors FY earnings jump
Saturday, January 28, 2012
Car maker attributes gains to overseas sales. 27 Jan 2012 4:05 PM
Nikkei opens little changed
Saturday, January 28, 2012
Trade sluggish following declines in US shares overnight. 27 Jan 2012 1:15 PM
EADS nominates Airbus boss to top job
Saturday, January 28, 2012
European aerospace giant names Tom Enders in role. 27 Jan 2012 8:49 AM
Unloved US Tech Giant Could Be A Great Buy
Saturday, January 28, 2012
Turn your computer on and there’s one word I can almost guarantee you’ll see: Microsoft.
It’s the world’s top software company. For positively ages, the company’s Windows operating system has been the industry standard for the PC business.
So you’d think that Microsoft (Nasdaq: MSFT) shares would have been a rip-roaring success in recent years. Yet the complete opposite is true.
Since the dotcom boom at the turn of the millennium, the company’s stock price has halved. Many people now shun Microsoft as being at best a very boring investment.
The good news is, this could be about to change for the better…
How Microsoft Fell From Grace
January can be a pretty miserable month. But for US stock market watchers, it does have one redeeming feature. It’s the first quarterly ‘earnings season’ of the year. In other words, it’s when America’s finest companies update us on how business has been.
So far, the latest earnings season has gone pretty well. Most firms’ profits have beaten analysts’ forecasts. That in itself is no great shock. Managements have become very good at giving investors ‘guidance’ on future earnings which – surprise, surprise – they then succeed in beating.
But when one of the firms that’s growing sales faster than expected is US software giant Microsoft, it’s well worth taking notice.
Why? Because this is a company that’s widely viewed as being ‘past it’.
Windows is no longer the driving force that it used to be. As Preston Gralla says for Computerworld, Windows’ “glory days are clearly gone”.
On top of that, the PC market is having a tough time, due to the recent flooding in Thailand, which has disrupted supplies of equipment. And analysts are fretting, among other things, that Microsoft can’t compete with rival Google on web searching tools and smart phones.
Yet Microsoft’s overall revenues for the last three months of 2011 rose by 5% versus the same period last year. In other words, the firm must have found something else to take up the growth baton.
Looking at the details – I’ll keep it brief – Windows-related revenues dropped by 6% on last year. But the Online Services Division’s sales grew by 10% year-on-year. Sales at the Server & Tools unit rose by 11%. And the Entertainment and Devices Division enjoyed a 15% rise in sales thanks to its Xbox operations.
Not bad for a company that’s ‘past it’.
In short, Microsoft keeps on finding ways to deliver the goods when it comes to sales figures. As Laurence Latif says in The Inquirer, these numbers “are pretty impressive for a company that has been painted as being in crisis”.
Sure, the firms’ profits in the last quarter were down a fraction on 2011. But history shows that’s nothing to get too concerned about. Take a look at this chart.
Source: Bloomberg
This shows Microsoft’s earnings per share (EPS) from continuing operations over the last 20 years. Sure, there have been one or two hiccups. But broadly, we’re looking at a picture of a progressive profit growth. Since 2000, EPS has trebled.
And that’s where it gets interesting. Because normally, strongly rising EPS should boost a company’s value. But in fact, over that same period, as I mentioned above, Microsoft’s share price has fallen in half. That’s because rising earnings have been more than offset by gloomy investors becoming less willing to pay up for those earnings, which has driven down the price/earnings ratio.
That spells opportunity for canny investors.
Microsoft Is Cheap
Nowadays, Microsoft has become like a utility, rather along the lines of an electricity or gas provider. Windows has a virtual monopoly. It would be too costly for either computer suppliers or users to switch to anything else. So Microsoft’s operating system will be a ‘cash cow’ for the foreseeable future.
What’s more, the company isn’t standing still. Over the coming year, it plans to launch several new products, including the latest operating system Windows 8. And the management is optimistic about the future.
Yet despite this, the stock has fallen so far out of favour with investors that it’s now downright cheap. On a current year price earnings (p/e) ratio of just over ten, Microsoft shares now offer outstanding value for a business with such a vice-like grip over its own market.
And there’s another benefit here for new buyers of the stock. Like other utilities, Microsoft is now rewarding its shareholders with a decent income stream.
Since 2005, the company has hiked its dividend pay-out by 150%. While that only leaves the prospective yield at around 2.5%, there’s plenty of scope for future dividend growth. Not only is Microsoft producing oodles of cash, it’s already very well minted. At the end of last year, the balance sheet contained a cash hoard totalling $40bn.
Add it all up, and you have just the sort of solid defensive stock that makes complete investment sense in today’s tricky market.
David Stevenson
Associate Editor, MoneyWeek (UK)
Publisher’s Note: This is an edited version of an article that first appeared in Money Morning (UK)
From the Archives…
Are ASX Energy Index Stocks Worth The Risk?
2012-01-20 – Aaron Tyrrell
Why the World Bank Wants Your Money
2012-01-19 – Kris Sayce
Could $50 Billion In Unpaid Credit Card Debt Drag Aussie Bank Stocks To A Record Low?
2012-01-18 – Aaron Tyrrell
The US-China Power Struggle… and What it Could Mean For Oil and Australian Energy Stocks
2012-01-17 – Dr. Alex Cowie
How Global Oil Supplies Could Fall 40% Overnight
Is There a Reason You’re Not Using the 90/10 Strategy?
Saturday, January 28, 2012
Six years.
That’s how long it will have been from the financial meltdown in 2008 until the U.S. Federal Reserve plans to start raising interest rates.
That’s what they say this month.
Of course, it was only a few months ago the Fed said it would start raising rates in 2013. Now it won’t likely happen until 2014… at the earliest.
The bad news is markets will stay volatile. The good news is you’ll have plenty of chances to buy stocks at cheap prices. The only question is, how should you do it?
Well, that’s easy. You do what the old pro hedge fund managers used to do…
Back to 2005 Prices
For the past three-and-a-half years we’ve suggested a simple strategy: hold cash and gold for safety. Quality dividend-paying stocks for income. And small-cap stocks for growth.
We suggest this strategy because if you don’t keep your assets secure, market volatility could see 20% or more wiped off your savings.
You only have to look at the S&P/ASX 200 in 2011. Investors who bought “safe” stocks at the start of the year are down nearly 20% today. Naturally, the buy-and-hold mob will tell you to just hold in there… things will be fine.
But how long should you have to wait?
Today, the main blue-chip index is back to where it was in 2005. Buy-and-hold investors have waited seven years. For nothing. And we assume they didn’t sell at the peak in 2007 because… well… they’re buy-and-hold investors.
And what about those poor souls who bought in 2007? They’re down 40%. They haven’t even had the chance to make a profit yet. And odds are they won’t for a few more years… unless they change things.
In the old days hedge funds and capital protected funds used a pretty simple strategy. (Although they’re probably more “sophisticated” now.)
It was designed to make sure investors in the fund couldn’t lose money. It was almost fool-proof. The last thing these funds wanted was to blow up their clients. Because that would mean losing clients money. And if the client lost money, they may have closed their account and that would hurt the fund managers’ pay cheque.
But if they could just make sure the client didn’t lose money, they would be half way to making money for the client and making stacks for themselves.
Hedge Funds Aren’t What They Used To Be
As we say, things are probably different now. We’ve seen some of the hedge fund performance tables for 2011 and they don’t look pretty.
Even one of the world’s biggest hedge fund managers – John Paulson – had a terrible year.
According to a Bloomberg News report last November:
“Paulson’s main fund, the Advantage Plus Fund, which seeks to profit from corporate events such as takeovers and bankruptcies and uses leverage to amplify returns, reduced its year-to-date loss to 44 percent.”
Paulson’s fund manages USD$30 billion… or it does today. Doubtless it managed nearly twice that at the start of the year, before the losses.
Clearly Paulson and most other hedge fund managers aren’t using the 90/10 Strategy.
That’s a shame. Because the concept is simple. In fact, it’s so simple you can start using it today. So, what is it? Well, it works like this…
To protect and guarantee investor returns, hedge funds would take 90% of the client’s cash (say $90,000) and put it into a government bond. If the bond paid a 3.5% yield, after three years the client’s bond investment would be worth just over $100,000. They’ve broken even.
But what about the other 10% ($10,000) the client invested at the start?
That’s where the fund manager was smart. They would take this cash and – for want of a better term – use leverage to punt on the markets. It could be anything: stocks, currencies, commodities or even high-risk bonds.
If they made the right bets it would mean big returns for clients and big fees for the hedge fund guys.
Sounds great right? Even better, you don’t need to be a big hedge fund client to put this strategy into practice. Because it’s something you can start today, with your own 90/10 Strategy.
Your Personal 90/10 Strategy
You start off putting 90% of your savings into “safe” assets.
Around half this amount should go into cash and term deposits. Put some in a high interest online bank account and the rest in a couple of term deposits (for instance a one-year and two-year term deposit). When they mature, reinvest for the same period.
With the rest, split this between good quality dividend stocks for income (if available, take part in the dividend reinvestment plan if you don’t need the income now) and precious metals (gold is our favourite, but we like silver too).
That’s the 90 of the 90/10 Strategy (we said this was simple). Now for the 10…
This is where old hedge fund managers leveraged into high-risk/high-return plays. You can do this too. And like the hedge fund guys, you don’t have to choose one type of investment.
Our personal choice is small-cap stocks. Simply because you get the benefit of leverage if the stock goes up, but you know your maximum loss if the stock goes down. And the great thing with small-caps, you can start with as little as $500.
That means even if you’ve only got $5,000 in savings, you can invest like a hedge fund today. Like this…
- Stick $3,000 in a high interest bank account and/or term deposit
- Buy $1,000-worth of a good dividend paying stock
- Buy about one-quarter of an ounce of gold (or about 15 ounces of silver)
- Buy one high-risk/high-return small-cap stock for potentially explosive gains
It’s simple. Then for every $5,000 you save, just repeat the steps above.
If you’re not investing using the 90/10 Strategy you should stop and ask why. In our view there’s no reason you shouldn’t use it. Once you’re convinced it’s right for you, drop everything and start implementing the 90/10 Strategy today.
It’s the best way of keeping your money safe while still benefiting from volatile markets.
Cheers.
Kris.
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Potash West: assays show broad potassium intercepts at Dandaragan Trough
Saturday, January 28, 2012
Potash West (ASX: PWN) has intersected over 20 metres of glauconite rich greensands in a number of locations during aircore drilling at its Dandaragan Trough Potash Project in Western Australia’s mineral-rich Mid-West region.
Assays from 18 of the 41 holes drilled in November and December 2011 have been received showing a best intersection of 22 metres at 4.12% potassium from 74 metres below surface.
Although the intersection is deep it points to the potential for higher grades in selected areas of the sequence.
Encouraging results were also encountered in another hole drilled along the southern boundary of E70/3635, with an intersection of 20 metres at 3.24% potassium from 16 metres below surface in the Poison Hill Greensand.
Located downslope from a laterite ridge, this result provides confirmation of the geological model targeting active erosional surfaces, which expose near surface mineralisation.
While laboratory assays are pending, portable XRF results and visual logging indicate that the two holes drilled in E70/3418 along the Coorow-Greenhead Road have intersected near fresh greensand from 4 metres below surface.
The intersections are notable in that they appear to contain between 60 and 70 metres of the target Poison Hill Formation. Both holes are located along the edges of a topographic high.
Potash West is in the process of negotiating access to properties on both sides of the road and will submit an application to undertake grid drilling of the area.
A zone of phosphate enrichment characterises the top and bottom of the Molecap Formation in some areas of the Dandaragan Trough.
The highest phosphate grade encountered in the recent drilling is a 2 metre intersection at 3.16% phosphorus and 2.84% potassium at the top of the unit.
Drilling is ongoing with the current program expected to be completed by the end of February.
Earlier this week Potash West announced that ongoing test work has identified a number of process options for the production of potash from its greensands resources in Western Australia.
Following testing over the past nine months the company has defined two flowsheets that have successfully produced laboratory quantities of potassium chemicals.
Potassium chemicals have the potential to be important ingredients in the production of fertilisers for domestic and international markets.
Potash West is aiming to have at least one process developed in sufficient detail to form the basis of a Scoping Study by mid-2012.
Azure Minerals’ JV partner JOGMEC increases exploration budget for El Tecolote to US$2.27m
Saturday, January 28, 2012
Azure Minerals (ASX: AZS) has recommenced diamond drilling at its wholly owned El Tecolote Project in Mexico with an increased exploration budget from its joint venture partner, Japanese Government organisation Japan Oil, Gas and Metals National Corporation (JOGMEC).
Following the evaluation of positive results received to date, JOGMEC has increased its 2011-12 total budget to US$2.27 million to include an additional 1,000 metres of diamond drilling within the current stage of the El Tecolote exploration program.
Situated between the company’s San Eduardo and La Tortuga Projects, El Tecolote covers 178 square kilometres of land containing abundant evidence of base metal mineralisation with potential for both porphyry copper and skarn copper-zinc-silver deposits.
The El Tecolote Mine – which previously produced 1.4 million tonnes at 1.9% copper, 7% zinc and 47 grams per tonne silver – closed in 1984 due low commodity prices, with unmined copper and zinc mineralisation remaining around the old mine workings.
An intensive US$1.5 million exploration program has identified several new targets, including Reyna del Cobre (skarn), extensions of the El Tecolote Mine (skarn) and several nearby porphyry copper prospects, all of which will be tested by the increased 4,000 metre drilling program.
To enable this program to be completed by March, Azure has mobilised a second drill rig to site.
Azure/JOGMEC JV
JOGMEC manages Japan’s stockpiling of oil, liquefied petroleum gas (LPG) and rare metals, including the construction of national LPG stockpiling bases.
Under the terms of the joint venture, JOGMEC will spend US$5 million on exploration over three years for a 51% interest in El Tecolote, and can earn an additional 19% stake by spending a further US$8 million during the following three years, which would increase the interest to 70%.
Importantly, these funds not only ramp up exploration at the highly prospective El Tecolote Project, but provide a huge vote of confidence for Azure.
Precious Metal Resources: one of the best performing IPO’s of the past three months
Saturday, January 28, 2012
Precious Metal Resources (ASX: PMR) has been one of the best performing IPO’s in the past three months, with the company trading at a 10% premium in its two months of public life, after a successful IPO which offered 10 million shares at $0.20 to raise up to $2 million.
The company has some very interesting projects, which includes granted tenements located at Halls Peak, which is located 80 kilometres south-east of Armidale in New South Wales, and is also targeting VMS deposits.
Precious Metal Resources ultimate aim is to host a high-grade deposit of between 30,000 and 170,000 tonnes within a global exploration target of 5 to 70 million tonnes of mixed grade mineralisation.
Providing a boost to the prospectivity of the area, several geochemical and geophysical anomalies are also present that should identify further high grade, near-surface sulphides.
Halls Peak provides a compelling position
A plus for the chances of exploration success for Precious Metal Resources is the strategic location in Halls Peak, which is an inferred volcanic centre for extensive small but high grade VMS deposits.
A substantial body of exploration data has been generated over the years by the Geology Survey of New South Wales and a number of major mining companies including, BHP Billiton (ASX: BHP), MIM Ltd., The Zinc Corporation, Allstate Exploration NL, Carpentaria Exploration Co. Ltd., CRA Exploration Limited and Amoco Minerals Australia Co.
Precious Metal Resources will look to expand on this work.
General Mining Corporation in pre open pending material transaction announcement
Saturday, January 28, 2012
General Mining Corporation (ASX: GMM) has been granted a trading halt by the ASX pending the release of details surrounding a proposed material transaction, with the company’s shares placed in pre-open.
General Mining has not yet elaborated any further on the transaction, but the company is currently in a very interesting position and recently earned an 80% interest in the Shoemaker joint venture project, with Galaxy Resources (ASX: GXY) 20%.
The technical overview by Coffey Mining in 2010 concluded that the Shoemaker project had good potential for iron-ore mineralisation in both the bedded and taconite styles in banded iron formation and some potential for near surface direct shipping ore hematite.
General Mining also has Mongolian based thermal coal projects, in the Uvs Basin.
The halt will remain in place until the earlier of an announcement being made to the market, or the open of trade on Tuesday 31 January.