7/2/2013 6:00 PM ET|
6 great stocks made in America
While it's premature to talk about energy independence, the nation's aggressive push into oil and gas development is helping many companies become more competitive in global markets.
The United States is in the midst of a natural-gas boom that is remaking the nation's energy sector and painting the first brushstrokes of a potential manufacturing renaissance.
Someone has to manufacture the hydraulic fracturing equipment used to extract natural gas from shale rock, after all, and make the pipes needed to move the gas to market.
Additionally, shale gas is a boon to the domestic petrochemical industry, which has reopened plants to make products such as ethylene as feedstock costs come down. Today, more than 115 major industrial facilities are in the works, according to the American Chemistry Council, up from 10 as recently as five years ago.
Cheaper energy is welcome news for workers and local economies, and it presents an opportunity to savvy investors looking to buy into the companies and sectors that stand to benefit from revived industrial base.
One place to look is on the farm: American farmers, already the most productive in the world, should become more competitive as energy costs stabilize at lower levels.
More broadly, the Boston Consulting Group projects that by 2015, U.S. manufacturers will reap a 10% to 15% cost advantage over rivals in Europe and Japan because of the domestic energy boom.
While talk of U.S. energy independence may be premature, it's not too early for investors anticipate a renewed vigor in select sectors of the economy. Here's a look at stocks in a half-dozen sectors that deserve to be on investors' watch lists.
Oil and natural gas sector: Transocean
Transocean (RIG) provides contract drilling services to companies and countries exploring for oil and natural gas beneath the sea floor. It builds and leases rigs. Transocean's day rates, combined with current construction of new platforms, show a promising future.
Transocean shares have declined by 5% over the past three months, creating a buying opportunity. The stock has been volatile due to efforts by corporate raider Carl Icahn to get a special dividend out of the company.
Recent trading activity obscures Transocean's role as a provider of the technology needed to find and tap oil and gas deposits from the deep-water and other extreme environments that the oil industry increasingly must master.
Go to TradersReserve.com for five more companies riding America's energy boom.
Shale-gas sector: USA Compression Partners
USA Compression Partners (USAC) is a one-stop shop for producers, processors, gatherers and transporters of natural gas. The company's compression units force gas into high-pressure volumes that make it easier to produce and transport.
This Austin, Texas, outfit is focused on shale. The company went public in January.
Even though the stock has a seemingly ridiculous price-to-earnings ratio, it is likely to quickly grow into that valuation.
The company generated $118 million in revenue in 2012, and management is using the proceeds from this year's IPO to try to grow more quickly than competitors.
USA Compression generates revenue by leasing its equipment -- and hydraulic fracturing, or fracking, is an equipment-intensive endeavor that entails drilling wells that run out of value far more quickly than traditional wells.
Go to TradersReserve.com for five more fracking plays.
Petroleum products sector: Calumet Specialty Products Partners
Calumet Specialty Products Partners (CLMT) refines crude oil into gasoline, diesel and jet fuel. In addition, it converts crude into such specialty products as lubricants, solvents and waxes that are used by industrial customers in the production of a variety of consumer and industrial goods.
The Indianapolis company is the global leader in aviation lubricants, a booming business. Calumet even makes the wax used in lipstick. This unique product mix shields a good deal of its revenue and profits from the ups and downs of the gasoline market.
Calumet's existing refineries are in the Midwest, near the North Dakota oil fields. It's building a new refinery right in the middle of the Bakken shale-gas country in that state. Once the refinery opens, Calumet's profits will climb.
Meanwhile, shareholders can enjoy a dividend yield of nearly 7.5%.
Go to TradersReserve.com for five more core industrial stocks.
Automotive sector: Ford and General Motors
The key to auto sales is not a buyer's income; it's the relative cost of a new-car payment compared to owning an older vehicle, as well as the credit score needed to get a loan.
Today, the average car on the nation's roads is more than 10 years old. The math for an upgrade works when a motorists trades in that clunker for a car requiring no maintenance and getting much better gas mileage. Credit is available for almost anyone, so demand for new autos is strong.
Both companies have announced plans for natural-gas-powered pickups -- even more profit margin to capture -- and I see many years of solid growth ahead. At present, I like Ford stock better than GM stock; it has more room to run.
Go to TradersReserve.com for five more manufacturing stocks.
Agricultural sector: Archer Daniels Midland
This company is the most important grain and food processor in the United States, the middleman between the farmer and the restaurant, grocery store or packaged food company.
Archer Daniels Midland (ADM) recently announced a deal for GrainCorp, a crop handler based in Australia, as it pursues growth in Asia's burgeoning middle class.
Once ADM digests the acquisition it should be able to expand rapidly into Asian and Middle Eastern markets without having to build infrastructure from scratch.
Go to TradersReserve.com for five more agricultural stocks.
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