Amcol Goes On Sale

Yesterday's market crash has presented prudent investors with an unbelievable buying opportunity in a number of fast growing firms. One such firm is Amcol (ACO), which according to the company's website, is a leading international producer and marketer of value-added, specialty minerals and related products. Headquartered in Arlington Heights, Illinois, Amcol operates over 50 facilities worldwide and employs more than 1500 employees. The company recently reported fourth quarter earnings that handily beat the street consensus estimates and rose 43 percent year over year. Earnings for the year were also significantly better than consensus estimates and rose 22 percent from fiscal 2005. The company also boasts a return on equity of 18.22 and a five year projected growth rate of 30.11 percent according to Reuters. Furthermore, despite these solid fundamentals, the company still sales for only 13.47 times next years earnings. The bottom line is that smart investors can get a great growth company at bargain bin prices. For purposes of disclosure, I own shares in this company and am very bullish on its prospects.

Is the Chinese Stock Market Going to Burst?

Shanghai's Composite Index shed nearly 9 percent last night amid concerns that additional macro-tightening could be introduced following the annual session of the China National People's Congress, which gets underway in early March. Does this represent the beginnings of a correction or, worse, a recession or a mere blip in the indexes upward march? While this is a question that cannot be answered with absolute certainty, there are certain economic and financial truths regarding market cycles as well as statistical evidence that when properly analyzed can give investors insight as to the likelihood of a recession or a correction occurring in the Chinese Stock Market. The first and most important metric investors should consider is the valuation of the Chinese Stock Market. By the standard measure of price-to-earnings ratio, local currency denominated "A-Shares" are trading at a relatively high average ratio of about the mid 30s. Worse, many companies on the index are now trading at multiples much higher than the average. Indeed China Life Insurance trades at well over 100 times current earnings. One needs to ask him- or herself if these kind of valuations can be justified given China's economic growth. The answer, in my opinion is that they cannot be justified. China is growing its economy very quickly. Still, when compared to U.S. companies who are growing earnings at an equal rate to their Chinese counterparts, the Chinese companies trade at a premium to the U.S. companies. The same is true of for European, Japanese, Taiwanese, Korean, and many other countries. Investors are currently placing a premium on Chinese shares regardless of circumstances. These developments clearly indicate the Chinese Stock Market is overvalued at least in the short term.

Furthermore, the Chinese Stock market is coming off a year when its main index gained 134% and several years of extremely high economic growth. As the old saying goes, what goes up must come down. At this point, I would not invest any new money in Chinese stocks nor those industries, which are over reliant on Chinese demand for growth as I predict quite a bit of near term pressure. This being said, I do believe that the Chinese stock market is poised for rapid growth over the long term.

S&P Downgrade Creates a Buying Opportunity in Amgen Stock

On February 23 of this year, Standard and Poor's Equity Research downgraded and lowered their target price of Amgen (AMGN) stock, based in large part, on the decision by Thomson Corp. to remove one of the company's new drugs from the USP DI, a drug reference guide, for certain uses. This decision by Thomson Corp. is unlikely to have significant impact on earnings for Amgen in the foreseeable future. The drug, known as Aranesp, is used to treat anemia. However, recent data suggests that in cancer patients, who are not undergoing chemotherapy, the drug's potential risks may outweigh the rewards of use. As a result, Thomson delisted the drug for treatment of anemia of cancer, a condition many researchers believe is actually caused by cancer itself. The potential impact of this development upon sales of Aranesp could be as significant. 10 percent of Aranesp sales is believed to be derived from the treatment of anemia of cancer. Sales of Aranesp were $4.1 billion in 2006, so this development could, at most, reduce Amgen's overall revenues by $410 million dollars. Considering that Amgen's total revenue for the trailing 12 month period time period amounted to a whopping $14.27 billion, the worst-case-scenario in relation to this setback for investors is largely unsubstantial. Despite, this fact, Amgen's shares are down significantly YTD and represent an excellent value for long term growth investors.

As stated, Amgen is a quality investment for those investors willing to look beyond the relatively, insignificant events of late and focus on the company's long term advantages within the biotech market and the extremely cheap multiples that the stock currently trades. Amgen has a significant advantage compared to most of its major competitors regarding its product pipeline, which is both deep and broad. Furthermore, management has proven itself very capable of navigating the very tumultuous landscape of the biotech industry. Furthermore, the company currently trades at a forward PE ratio of 13.33 and has a PEG of 1.01 according to data from Thomson and Capital IQ. This compares with a forward PE of 24.71 for Genentech (DNA) and 22.66 for Gilead Sciences (GILD). It should also be noted that Amgen has $6.28 billion in cash on its balance sheets, which can be used for acquisitions or returned to shareholders through dividends or buybacks, and the company is expected to grow at a 15 percent annual rate for the next 5 years according to analysts consensus provided by Capital IQ. For purposes of disclosure, I do not own any of the above stocks currently, but do recommend AMGN at current prices.

RTI International Is the Top Investment Choice Among Basic Mining and Metal Stocks

Titanium will rule in 2007, states Cleveland Research analyst Chris Olin, in a article appearing on Forbes.com in December of last year. According to Mr. Olin, the industry's growth will be driven, in large part, due to increased spending in the aerospace market. New airplanes, such as the Boeing 787 and the Airbus A-380, are increasingly being constructed with titanium as a primary metal. The Boeing 787, for instance, is constructed of 15 percent titanium according to the manufacturer. To understand the full significance that the increasing role of titanium in new jet designs will have on titanium demand, it is vital for investors to have a precise realization of the changes the entire airline industry is undergoing and what the projected demand for new aircraft is over the next several years. By one estimate, given by Airbus, the overall demand for new aircraft between now and 2025 could equate to over $2.6 trillion in aerospace spending. The company projects that over 22,700 new passenger and freight aircraft will need to be produced to meet the demand over the same time period. Aerospace is not the only catalysts for sales of titanium as many new weapon systems, such as advanced fighter aircraft, spy satellites, and missiles, are increasingly being constructed out of the lightweight metal. Titanium is also being utilized heavily in the energy industry due to its resistance to corrosion and extreme strength in stressful environments and could play a vital role in the future of biofuels. These developments will ultimately be a tide that lifts all boats, however, investors, looking for the safest and highest returns, should focus on the company with the best management and long term potential. The company that meets this description is RTI International for several reasons (For purposes of disclosure, I own shares in this company).

The company, which is one of Olin's favorites in the industry, is based in Ohio and is a member of the S&P 600 and S&P 1500. With a 7 percent share of the rapidly growing titanium market, RTI International has room to grow and capture additional market share. Furthermore, the company has a long history of beating earnings targets, which can be attested to by the company's recent blow out fourth quarter and full year results for the year 2006. Another positive for shareholders for RTI is the lack of analysts who cover the company's stock, which is indicative of many small companies. As Wall Street begins to discover this hidden treasure trove and analyst coverage grows, the stock is bound to appreciate for increased coverage, if positive, will generate buying momentum among institutional and retail investors. As for financial strength, the company boasts a healthy 5.8 current ratio and zero debt. Moreover, the company reported having $3.34 a share in cash, as of the most recent quarter, a sizable amount that can be used for increased capital spending or returned to shareholders through dividends or buybacks. In summation, RTI International is poised to continue to reward shareholders for many years to come.

The Irony of Blackrock

Blackrock (BLK), an investment management company, which offers a range of equity, fixed income, cash management, and alternative investment products, boasts an incredible three year annualized return of 46 percent as of 1/31/07 according to Morningstar. Moreover, the Street.com rates the company has one of the top ten fast growth stocks, indicating Wall Street is still very keen on the stock, despite the recent run-up in price. The streets optimism in Blackrock shares has so far been richly rewarded in 2007 as well. The company’s shares have, already, put in a 14.6 percent performance YTD, due in large part to Blackrock raising full year guidance for the year. The company now expects 2007 earnings of $7.25 to $7.55 per share on an adjusted basis. Given its dominate position in the alternative investments, fixed income, and risk management businesses, I expect BLK to continue to outperform the market and recommend this stock for those investors who have a long term time horizon. Unfortunately, for those investors banking on Blackrock mutual funds, I am not so optimistic. While shareholders in the company have reaped huge profits from the mutual fund side of Blackrock’s business, shareholders in the actual mutual funds have not done so well because of several factors. At this point, I would not recommend a single Blackrock fund to any investor. Outrageous expense ratios, front-end loads often exceeding five percent, and sub-par performance mark this company’s offering. Moreover, the company often steers its best investment management talent to its alternative asset business leaving mutual fund shareholders with those who could not cut it at the firm’s more prestigious hedge fund offerings and other exotic investment vehicles. Those investors, unlucky enough, to have invested assets in Blackrock funds should sell their holdings and seek better opportunities at a more shareholder friendly mutual fund establishment. Fidelity, Vanguard, Dodge and Cox, and Selected Funds instantly come to mind as solid recommendations.

Zoltek: A Promising Alternative Energy Stock for the Long Run

Zoltek (ZOLT), according to Forbes magazine, manufactures carbon fiber, a new age material that is simultaneously light-weight and 100 times stronger than steel. Currently, the major applications for Zoltek's carbon fibers are the propellers for wind mills and aircraft brakes. However, applications for the use of carbon fibers are increasing everyday. BMW has announced, that by 201o, they hope to build an automobile entirely out of carbon fiber.

For shareholders, Zoltek has offered a bumpy ride. Things are looking up, though, as the company reported an incredible first quarter. Gramercy Capital Management, regularly featured in Forbes magazine, has gone on record with a 2008 target price of $40 for the company's shares. If obtained, that price target represents a 103% gain on investment for those investors who bought shares in the company at the beginning of this year. As for those of you who do not already own this potentially break-out stock, I recommend waiting for dips before establishing a position in the company, as the company's stock has appreciated significantly in the past month and a half. For purposes of disclosure, I do not own shares in ZOLT.

Electricity Transmission Constraints Pose a Formidable Challenge to Policymakers and Significant Opportunity and Risk for Investors

In August of 2006, the United States Department of Energy (DOE) released a study detailing electric transmission congestion in the United States. The report, which is titled the “National Electric Transmission Congestion Study,” identifies several areas of the country that are either affected by or will be affected by in the near future, unless remedial action is taken, severe congestion in the transmission of electricity. The DOE identifies the cause of such congestion as being due to either inadequate transmission capacity, inadequate base load power generation, or both. According to the DOE, the costs of high levels of congestion can be extremely high, in terms of basic costs for electricity and power outages (both localized and regional) caused by grid failure.

The two areas of the country, which are identified as “Critical Congestion Areas,” by the report, are:

• The Atlantic Coastal Area from Metropolitan New York southward through Northern Virginia, and

• Southern California

“Critical Congestion Areas” are areas of the country where it is critically important to remedy existing or growing congestion problems because the current and/or projected effects of the congestion are severe. As stated, the DOE has identified two such areas, each of which is large, densely populated, and economically vital to the Nation.

The four areas of the country, which are identified as “Congestion Areas of Concern,” by the report, are:

• New England

• The Phoenix - Tuscan Area

• The Seattle – Portland Area

• The San Francisco Bay Area

“Congestion Areas of Concern” are areas where a large-scale congestion problem exists or may be emerging, but more information and analysis appear to be needed to determine the magnitude of the problem and the likely relevance of transmission expansion and other solutions.

Several areas of the country have been identified as “Conditional Congestion Areas,” by the report. The following is a representative sample of these areas:

• Montana-Wyoming (coal and wind)

• Dakotas-Minnesota (wind)

• Kansas-Oklahoma (wind)

• Illinois, Indiana and Upper Appalachia (coal)

• The Southeast (nuclear)

These are areas where there is some transmission congestion at present, but significant congestion would result if large amounts of new generation resources were to be developed without simultaneous development of associated transmission capacity. According to the DOE, these areas are potential locations for large-scale development of wind, coal and nuclear generation capacity to serve distant load centers.

To address these concerns, the DOE is calling for further deregulation of the power industry to foster inter connectivity between regions, advancements in power generation and transmission technology, conservation, and greater decentralization within the overall power infrastructure. Investors should take notice of these growing problems for they represent phenomenal investment opportunity and phenomenal risk if the problem is not addressed.

High Temperature Superconducting technology is, according to the DOE, a key and vital cornerstone of any long term solution to our nations energy woes. Furthermore, the DOE predicts that widespread adoption of the technology is only a few years out. This is significant for several reasons. One, current grid losses have grown to more than 10% of all electricity generated, and transmission limitations have recently caused widespread blackouts in the United States. Second, the DOE estimates that 2,200 miles of underground transmission cables are quickly becoming outdated and could be replaced with HTS lines that may carry two to five times the power within the same duct size. The DOE has partnered with numerous corporations and university labs to develop HTS grid applications.

The DOE, also, is conducting three large scale projects concerning energy storage and has partnered with numerous university labs and corporations to develop advanced energy storage technology. These projects includes the largest Battery Energy Storage System in the world with an output capacity of 20MW and 14 MWh of stored energy.

The DOE has also funded numerous research and development activities related to distributed energy, control systems security, and advanced electric distribution.

In my opinion, investors wishing to reap the proceeds from these developments should focus on emerging micro-cap, small, and smaller mid-cap companies with quality balance sheets, strong management, realistic plans for profitability if not already profitable, and leadership in their respective market niche in relation to the firms' technology.

Companies that fit this mold are, in my opinion, American Superconductor (AMSC), Zoltek (ZOLT), Itron (ITRI), and SunPower Corporation (SPWR).

For purposes of disclosure, I do not own any shares in the above companies.

For those investors wishing to read a complete copy of the DOE report on grid congestion go to the DOE website at www.energy.gov

American Capital Strategies (ACAS): It Is Time To BUY!!!

I recently bought shares of American Capital Strategies (ACAS) for a number of reasons. They pay a great dividend, which management is committed to growing, and are the class of their industry. Peers such as Apollo Investments and Allied Capital simply cannot compete at the same level as ACAS. Moreover, ACAS is increasingly turning to alternative-asset management for future growth. The company's current investment in alternative-asset management now stands at $11 billion. However, this number is expected to roughly double in the next year to somewhere between $17 and $23 billion dollars. This is significant for two, related reasons. One, this type of business is highly profitable and offers incredible profit margins. Two, because alternative asset management is so profitable, companies that are involved in this type of business command very high multiples. Take Blackrock (BLK) and Fortress Capital (FIG) for example. Both companies trade at price to earnings (trailing 12 months) multiples of over forty. Now one should not assume that American Capital Strategies will soon be trading at a similar price to earnings (trailing 12 months) multiple to BLK or FIG any time soon or ever for that matter. One should assume, however, that as Wall Street realizes that ACAS is not just your typical Business Development Firm and that the company is entering into a new and very lucrative business arena, the price to earnings multiple on the company will expand considerably. This will, in turn, create even more wealth for American Capital Strategies' shareholders.

Wealth Creation Through Common Stocks: The Power of Dividends

The surest and safest way for investors to build wealth is to take advantage of the power of compounding. Compounding is the process of accumulating the time value of money forward in time. For example, interest earned in one period earns additional interest during each subsequent time period. One way for investors to take advantage of this process is by investing in dividend paying companies. Such companies are not hard to find. Indeed, most well established companies, both foreign and domestic, pay dividends. The key to unlocking real gains, however, is to, first, invest in a company that both pays a great dividend and is committed to growing that dividend over time.

To see how this strategy can pay off, consider the following data:

Company	Price on Jan. 2, 1985	2006 Dividend Per Share	Percent of original investment received in 2006
Pfizer (PFE)	$1.68	$0.96	57.1%
Johnson & Johnson (JNJ)	$2.23	$1.46	65.3%
Aflac (AFL)	$0.63	$0.55	87.0%
Citigroup (C)	$2.08	$1.96	94.1%
Altria (MO)	$3.33	$3.32	99.8%
Wells Fargo (WFC)	$0.96	$1.08	112.7%

All values split-adjusted.

Data Provided by the Motley Fool

The second key is to reinvest the dividends in more company stock. Consider the following example:

• A hypothetical investor who bought ten shares of Pfizer in April of 1960 for a total of around $350, who reinvested all dividends, would currently own 9,100 shares. Those 9,100 shares would pay $10,500 in dividends alone to our hypothetical, but very lucky, investor. That represents a yield, on the original investment, of around 3000%.

I could provide numerous other examples just like these, but why bother. I think the point is crystal clear. To create wealth one does not have to be a genius or, for that matter, much of anything. All it takes is discipline, patience, and a little starting capital. Good luck investing everyone!

Why Tax Cuts Do Not Stimulate The Economy

The common belief among most investors is that tax cuts stimulate economic growth. Indeed, there is even a group of misguided theorists known as Supply Side Economists (Supply Side Economics is Crank Theory and it is not Taught at a single accredited University in the Country, however, many politicians as well as voters believe such non-sense so it is worth mentioning here) who go so far as to state that a Government can cut the tax rate, which will then result in economic growth, and actually receive more revenues in the form of tax receipts. According to Supply Side Theorists this is because there is a larger "economic pie" to tax despite the fact that the "economic pie" is actually being taxed at a lower rate. To see the fallacy in the Supply Side Economists theory and the fallacy in the idea that cutting taxes can stimulate economic growth itself, one only has to ask oneself what actually makes an economy grow? The answer is, of course, an increase in the capital supply. Supply Side Economists insist that by cutting taxes a government is increasing the capital supply because there is more capital in the hands of consumers and less in the hands of government. While, this last assertion may be true, Supply Side Economists miss one crucial and, in my opinion, obvious fact. That being, the government is a consumer just like an individual citizen is. By cutting taxes all a government actually accomplishes is the shifting of the capital supply one from one consumer (the government) to another group of consumers (the citizens of that government). Thus, the capital supply is not increased from tax cuts and there is no economic growth as a result of said tax cuts. Now some may argue that individual citizens are better or more efficient spenders and investors of capital than the government and, therefore, economic growth does arise from tax cuts as tax cut advocates assert. This is not the case either. While the government (lets take the United States for instance) may be enormously wasteful in its spending so are citizens. It is true the government may spend billions and billions of dollars on military goods, far above what the country needs, that have no economic value and, thus, zero possible return on investment or it may allow billions of dollars it collects in tax receipts to go down the drain because of fraud, as what happened after Katrina and what is currently happening in Iraq because of lack of oversight. It is also true, that individual citizens are highly wasteful with the capital they earn or receive from investments. Think of how many people buy very expensive cars only to see them plummet in value ten minutes after buying them or those people who smoke tobacco, an addiction that not only costs tremendous amounts of capital but also ensures a short and unhealthy lifespan. All in all, most citizens are unwise when it comes to deploying their capital and so are the governments that these citizens form. The only way to artificially boost an economy is to either increase the education level of that economy's workforce, increase the number of individuals that comprise the workforce of an economy, or through deficit spending, which only is beneficial in the short term and is disastrous in the long term. Notice, however, that all of these actions will increase the supply of capital either in either tangible or intangible ways unlike tax cuts. Tax cuts can not stimulate an economy and investors who constantly desire tax cuts on the basis that it will improve economic growth should be careful for what they ask for. Especially, if those tax cuts result in either deficits or cuts in government services they rely on. That said, I will state that there are certain forms of taxation, such as the double taxation that dividends used to receive in this country and others, that are harmful for economic growth.