Neil MacNeale
2 for 1 Stock Split Newsletter

U.S. consumers’ confidence in the conditions for buying cars declined in June and July. Uncertainty about the U.S. economy tends to help Advance Auto, the second-largest domestic retailer of auto parts and accessories, as a higher volume of older cars on the road means more will need repair. The do-it-yourself business gained strength in the June quarter, while the newer commercial unit posted its 10th consecutive quarterly double-digit gain in same-store sales. Advance Auto is a Long-Term Buy.

Richard Moroney
Dow Theory Forecasts

As with everything I recommend, Intel is in rock solid financial shape. In the large high tech rally that ended in 2000, Intel was trading at over $75 a share. Today their stock is worth just around $19. Strangely, the company now has higher earnings than it did back when its stock value was higher. To me, this factor makes no sense. However, like our other technology stock, its value has gone down along with the rest of the technology stocks.

Intel pays a dividend of around 3% which is both solid and much higher than you probably would get on a lot of fixed income investments. Even if you have to wait for a while, you will see that its market value comeback will be worth the wait.

Russ Kaplan
Russ Kaplan Investments

The latest round of buying comes after surprising news that three-fourths of the oil in the gulf has been burned, skimmed, dissolved or chemically dispersed. Some are skeptical of that optimistic assessment, but the preliminary indication is that much of the toxic crude is gone and the environmental fallout could have been much worse. Don’t tell anyone on the Gulf coast that they dodged a bullet. But for the first time since the tragic explosion of the Deepwater Horizon, the headlines are getting better rather than worse. In fact, BP is reportedly on the verge of plugging the leak permanently.

Within a few weeks, this story will quietly fade away as journalists move on to fresher topics—sad for those affected, but reality. For investors, though, the end of the PR nightmare will remove a major overhang. The market hates uncertainty, so many are breathing a sigh of relief that things finally appear to be under control.

Meanwhile, an upbeat Wall Street Journal story on August 4th suggesting that Transocean is contractually indemnified from lawsuits and damages appears to have triggered a relief rally. Those who read my initial profile in the June Market Advisor already knew this:

“Keep in mind that Transocean’s contract clearly puts the lessee, BP, on the hook for any cleanup and containment costs associated with a blowout. So while the parties involved will point fingers in congressional testimony, Transocean won’t likely face stiff penalties.”

Hard to be much clearer than that. And now that Transocean has filed the extensive 400 page contract with the SEC, the message finally appears to be sinking in. That doesn’t mean the company is completely out of the woods, but it does seem to have the law on its side. It also has hefty insurance protection—collecting a $267 million insurance payment already from losses associated with the Deepwater Horizon explosion.

Second quarter results released on August 4th have also been warmly received by investors. Utilization rates were soft and the bottom line was muddied by one-time gains and charges. But revenues of $2.5 billion were on par with those from before the spill, and operating cash flows came in $100 million higher than in the first quarter.

And it doesn’t hurt that strengthening crude prices above $80 per barrel are supporting drilling activity and should help prop up day rates, the daily price an oil company pays to lease a drilling rig. For example, BP was leasing Deepwater Horizon from Transocean for $550,000 per day at the time of the explosion.

Action to Take
Even after this run-up, RIG is still incredibly attractive at this level. The world can’t function a day without oil, and its finest deepwater driller is trading at a P/E of of 6.4 compared to an industry average of 14.5. Barring another recession, I see the shares testing $90 within the next year, which is what investors were paying before this mess happened. … I also plan to add another 25 shares to our position at the opening bell on Monday, August 9th.

Nathan Slaughter
StreetAuthority Market Advisor

Wall Street is taking note of the bullish trend. Several analysts think SQM could make its way to $70, well above the $36 area where the stock currently trades. UBS analysts put a $73 price target on SQM earlier this year.

SQM plans to invest $350 million to bolster its lithium production.  This may lead some investors to look at SQM as a company focused solely on lithium, but that’s not the case. SQM also offers investors significant exposure to increased global food demand. The company is one of Latin America’s top fertilizer producers, competing with the likes of Agrium (AGU) and Potash (POT). The fertilizer exposure highlights the diversity of SQM’s business model.  Investors are buying much more than lithium when they purchase SQM shares. That said, it looks like lithium demand is driving SQM, at least in the short term. Last week, the company said it is talking with several Japanese automakers about their lithium needs. SQM is in what Fox Business News called “deep” discussions with Nissan. A sales agreement with Nissan to supply the Japanese auto giant with 10,000 tons of lithium per year could boost SQM’s top line by $55 million per year.

Valuations reflect that as SQM trades at 23.5 times forward earnings, but that really isn’t too rich as far as true growth stocks are concerned. SQM has undergone a strong runup in July and may be vulnerable to a short-term pullback, although it should find support at $34. To capitalize on rising lithium demand while still remaining diversified with fertilizer, go with lithium producer SQM.

Brandon Clay
Invest With an Edge

Granted, the deal increases the ExxonMobil’s exposure to natural gas, but as my rundown of upstream projects suggests, the company was already headed in that direction before the tie-up with XTO. This strategic shift reflects the company’s long-term outlook for energy markets; management expects demand for natural gas to accelerate at a much faster rate than the market for any other energy commodity between now and 2030. … This view isn’t that far-fetched when you consider the impressive demand growth in China and India. The market is paying too much attention to the near-term outlook for gas in North America; I expect gas prices to return to $6 per million British thermal units over the next one to two years. In addition, I don’t agree that Exxon overpaid. Although Exxon issued new shares for XTO holders, the deal doesn’t represent much of a financial burden for a company of Exxon’s size. And with gas prices depressed in late 2009 and sentiment weak, ExxonMobil wasn’t exactly buying into the industry at the height of euphoria—the deal is a value play on a business that will be of increasing strategic performance down the line.

This shortsightedness affords investors an opportunity to pick up a long-term value creator at a cheap price. Readers who received shares of ExxonMobil as part of the XTO transaction should hold onto the stock. Yielding 3 percent, ExxonMobil is a buy up to 65 in the Proven Reserves Portfolio.

Elliott H. Gue

The Energy Strategist

Gregory Spear
The Spear Report

Peter Hughes & Steven Check
The Blue Chip Investor

Elliott Gue
The Energy Strategist

Vivian Lewis
Global Investing