As we said in the October '09 post "U.S. stock-market investors may want to follow stimulus":
A corollary of last year's "Be long what China is short of and short what China is long of".The simple reason for looking at the ethanol producers, from our April 23 post "Ethanol Makes A Comeback" (GPRE; ADM; PEIX; VLO):
Here are the headlines:...The profitability of the ethanol business depends on the so-called crush spread, the price difference between a gallon of ethanol and the corn that goes into it. The crush spread got crushed. In November 2008 VeraSun, a high-flying new issue from 2006 and then the second-largest producer of fuel ethanol, filed for bankruptcy. In May 2009 Pacific Ethanol, (PEIX) a producer funded by Bill Gates' Cascade Investments, followed suit. Aventine Renewable Energy also collapsed that spring.
What didn't change was the federal mandate. The U.S. consumes 138 billion gallons of gasoline per year. The government has decreed that "renewable" sources contribute 13 billion gallons in 2010, rising to 14 billion next year and reaching 20.5 billion in 2015...
Reuters "Archer Daniels profit up as ethanol, oilseeds gain"
Associated Press "ADM Q3 profits spike on biofuels demand"
For a bit deeper insight:
Dow Jones via Fox Business "Archer Daniels 3Q Profit Surges Amid 2009 Charges; Segments Rebound"
TheStreet.com "Archer Daniels Net Rises but Shy of Views"
Finally, from Market Folly:
Jeff Saut Still Cautious But Not Bearish; His Latest Investment Recommendations
Raymond James Chief Investment Strategist Jeff Saut is out with his latest weekly market commentary. Saut begins his weekly investment strategy by pointing out that the Dow Jones has run an impressive "44 sessions without anything more than a one-to-three-session pause/correction." He reiterates his stance that he is cautious on this market, but not bearish. In fact, he believes we are in a profit-recovery cycle that drives inventory rebuild....Based on this Aug. 2008 Bloomberg video the convert. is not a spring fling for Saut.
...In terms of particular names, Saut recommends Noble (NE) as it is trading at 5x cash flow and has a ton of cash on its balance sheet. Shares have been negatively affected due to the oil spill. Additionally, Saut recommends Archer Daniels Midland (ADM) 7.8% yielding convertible preferred shares.
