In a report from JPMorgan (NYSE:JPM), they advised investors to focus on companies which would benefit from an economic rebound, including commodity companies like Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) and Newmont Mining (NYSE:NEM), and those providing equipment for them like Deere & Co. (NYSE:DE) and Caterpillar (NYSE:CAT).
Some other companies noted were CMS Energy Corp. (NYSE:CMS), Entergy Corp. (NYSE:ETR), and Ashland (NYSE:ASH), among a number unrelated to raw materials.
The report focuses on what JPMorgan called the “Circle of Life,” which refers to companies holding assets which follow cycles of peaking, breaking down, bottoming and recovery, said the banker.
What seems to be the major problem with the premise is it's completely based on JPMorgan's guess that the U.S. economy will actually recover, which most data show it isn't, and taking away the stimulus, probably has never left the recession.
JPMorgan Chief U.S. Equity Strategist Thomas J. Lee, said this in the report, “We remain confident that the U.S. economy is unlikely to enter a ‘double-dip’ scenario. It is more appropriate to focus on the areas that are likely to benefit as activity levels normalize.”
That is so unlikely as to not be taken seriously, but even as the recession continues, that doesn't mean some of these companies may prove to be profitable.
Newmont, for example, will no doubt surge, as the price of gold continues to rise, and possibly those providing equipment and machinery to miners and agriculture, like Caterpillar and Deere, could also move higher as demand continues to grow. But that should probably be looked at as long-term scenarios rather than short-term, as far as machinery providers go.
The weak housing market could possibly offset the revenue and earnings from big equipment companies, but they at least have some positive support in some of the segments.
Showing posts with label Ashland. Show all posts
Showing posts with label Ashland. Show all posts
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