A Good way to "Stock Up"

Whenever you are selecting stocks or sectors, look for areas of strength. The U.S. consumer and the financial sector are under considerable stress at this time but there are plenty of bright spots.

Overseas growth, especially in emerging markets, is robust. The declining dollar has been boosting the export competitiveness of U.S. companies. The farm and energy industries are booming. One strategy is to find companies with pricing power: the ability to raise prices to offset higher costs. Tobacco is one such business, another might be steel, where companies can raise prices because they're shielded from foreign imports by the cheap dollar.

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Thoughts on the Business of Life

Those who believe that they are exclusively in the right are generally those who achieve something.

-Aldous Huxley


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Big Oil, Small Spending

In Business Week magazine we read that in recent years, major oil companies used their profits to buy back shares rather than using them to invest in new exploration and drilling. Capital expenditures as a percentage of revenues at the five largest players remained relatively unchanged between 2000 and 2007. Thus, Big Oil is struggling to increase its output.

By contrast, the 129 publicly traded energy companies, excluding the five biggest ones, more than doubled their overall spending last year. Those 124 companies increased production in 2007 by 16% while the largest five companies saw production decline.

While the majors play catchup on production, investors may find better opportunities in small to mid-sized energy companies.

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