Summer Investing: The biggest -- and the best companies -- to own come summer 2007 (They are NOT the same thing)
By Adam Lass
In this article
Is big retail winning or losing its war with big oil?
Three of the Fortune 500' top five listings this year are oil companies averaging an ROE of 25.83%.
Wal-Mart (WMT:NYSE) can't match its one week high while Chevron (CVX:NYSE) has just set its all time high at $77.80.
Summer Investing: The biggest -- and the best companies -- to own come summer 2007 (They are NOT the same thing)
Today's headlines quite prominently feature Wal-Mart (WMT:NYSE)'s dislodging of Exxon Mobil (XOM:NYSE) from the top spot on the Fortune 500. To my memory, this is the big W's fourth time in six years in the top spot.
Congratulations, Wal-Mart: Only Los Angeles, New York City and Chicago have more residents than you have employees. But are they all gainfully employed? Do they actually make you the money one hopes that they might? Or are they running in circles like maddened gerbils on some sort of demonic treadmill?
Despite the best efforts of the analysts and spies in your glass-walled “Threat Center,” do you really even know anymore if you are making progress, or has it all become too, too much to manage? A clue might be found in your 18% return on equity.
Summer Investing: Not how much but how well is a better definition of “winner”
The company that you “displaced,” that is somehow now a lesser player, Exxon Mobil, has an ROE of 34%. In point of fact, three of the five top listings this year are oil companies averaging an ROE of 25.83%. (Number 3 is GM with an ROE of, well, naught, as it is losing money. Is this a harbinger of things to come for the big W?)
Seems to me that there is a war going on here, and while the big W certainly has the boots on the ground to win a battle or two, (it is now par size wise with the Red Chinese army), the oil companies are truly winning the war by steadily siphoning cash out of Wal-Mart's tank.
The wonder of Wall Street is that it offers historians the best scoreboard in the world, and WMT is losing where it counts: at $47.81, WMT is 32% below its all-time high. Heck, it's more than 8% below its 52-week high. In fact, on a day when retail stocks are supposed to be enjoying the golden glow of a relatively good performance report for last March, WMT is 74 cents below its seven-day high.
Summer Investing: While WMT wallows, CVX sets all time highs
Today's “loser,” XOM, has just set its 2007 high at $78.05. But I did not recommend that readers should buy XOM. I did recommend that they buy shares of the fourth entry in the top five, Chevron (CVX:NYSE), which has just set its all-time high at $77.80.
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If you did nothing else but buy shares back on February 21, when I first started mouthing off about them, you are up about 10%. If you bought at the low back in March when I was pounding the table with my shoe like some kind of latter-day Khrushchev, you'd have some 19% in pocket.
And if you bought the call options Bryan and I recommended in the February 20 issue of WOW, you're up 147% in about 45 days.
Summer Investing: 300% by mid-summer without ever leaving the safety of the S&P 100
Today, oil is “down” to $63.70/barrel. I say down because that is how a major Internet and cable “news” source described it, as it was crediting it for today's 100-point Dow rally.
But let's not quibble. Instead, I will be generous and take it at its word. But if this is down, I just can't wait to see “up.” I anticipate that the summer driving season will push oil approximately 10-25% higher. This should allow big oil to continue rising over the next few months, and will push WOW readers' basket of options yoked to this move even higher.
And yet, this basket, which includes both calls on energy companies and puts on Wal-Mart, is still quite attractively priced, considering how this war will end. Indeed aggregate gains of over 300% by midsummer are not out of the question.
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Adam Lass is the founder and manager of the WaveStrength Group, and is a contributing editor for Taipan Financial News. As the creator of WaveStrength's proprietary analysis system, Adam's expertise has shaped a franchise of successful investment newsletters and services, including WaveStrength Options Weekly and WaveStrength Apex.
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