Up 32% This Year, This Health Stock Is Set To Really Take Off

As we head into the final weeks of 2013, European central bankers are on pins and needles. They're hoping the fourth-quarter economic data reveal signs that the Continent is truly on the mend.

An early November report from the European Commission sees signs of that upturn coming. The report's main takeaway: "The signs of hope that we saw last spring have started to turn into tangible positive outcomes. After six consecutive quarters of stagnation or contraction, the EU economy has posted positive growth in the second quarter of 2013. The recovery is expected to continue, and to gather some speed next year."

Indeed, while the European economic region likely contracted a bit in 2013, these economists predict GDP will likely grow 1.5% in 2014, and perhaps 2% in 2015. And where will that strength come from? "Domestic demand is expected to take over as the main engine of growth," they predict.

If they're right, then it's useful to make sure you have European exposure in your portfolio. Heading into Labor Day, my colleague David Goodboy profiled the Vanguard FTSE Europe ETF (NYSE: VGK).

A quick look at a five-year chart of this ETF against the S&P 500 Index shows the extent to which European blue chips have lagged. The outperformance for U.S. stocks really began to pull away in late 20109, when it became apparent that the U.S. economy was on the mend while Europe was not. Now, with Europe perhaps on the mend as well, global investors are likely to allocate more funds to European stocks and funds.

Dividend investors crave predictability. Once they lock onto payment streams, they don't want to hear about any interruptions. And if a company dares to withhold a quarterly dividend payout, then many investors simply head to the exits.

I discussed this phenomenon recently with regard to Carl Icahn and his big stake in CVR Refining (NYSE: CVRR).

As I noted earlier this month, CVR had a big hiccup with its third-quarter dividend, but it appears positioned to pay out $3 or $4 per unit in dividends next year. Shares trading around $22 don't begin to reflect that potential income.

Amazingly, a virtually identical scenario has just played out with another oil refiner. And the setup is every bit as compelling.

A series of technical problems at a key refinery led to a sharp drop in output for Alon USA Partners (NYSE: ALDW), the master limited partnership (MLP) of Alon Energy (NYSE: ALJ). In fact, the quarterly production was so weak that Alon USA Partners didn't simply make less money -- it lost money. And though investors were bracing for a smaller than usual dividend, they got nothing. Shares of ALDW, which traded up toward the $30 mark in the spring, are now below $14.

The cost of energy production isn't just about money. There are also environment effects.

Last year, according to one environmental group, hydraulic fracturing (commonly known as fracking) alone generated an estimated 280 billion gallons of toxic wastewater, enough to flood Washington, D.C., to a depth of 22 feet. It's no wonder that there's a strong push to institute cleaner practices.

Green initiatives have come to dominate the corporate landscape and are attracting investment flows in record numbers. The performance in alternative energy this year is evidence of this growing trend -- the iShares S&P Global Clean Energy Fund (Nasdaq: ICLN) is up more than 50% year to date. While most of the attention has been focused on renewable energy and clean coal, environmentally friendly sectors like pollution and treatment controls have gone relatively unnoticed.

Calgon Carbon Corp. (NYSE: CCC) is a small-cap stock involved in the purification and treatment of water, air and food, as well as the poisonous emissions from coal-fired power plants. The company has been making tremendous strides in cost reduction, improving operating margins to around 20% from 13.6% just a year ago. (Calgon's leaner operation is one reason the research staff at StreetAuthority's Top 10 Stocks advisory recently named CCC a Top 10 small-cap stock.)

Calgon reported earnings on Nov. 5 and the results were right on line with expectations at $0.22 per share. Gross margins continued to grow, to 33.3% in the most recent quarter from 27.3% a year ago. The demand for activated carbon cloth, used in water, food, and other specialty markets, contributed to a 28.2% gain in consumer sales. The company's cash position climbed 65% from last year to about $30 million, while long-term debt increased only 8.7%, to $48.3 million.

Calgon's stock looks like a value in comparison to CECO Environmental Corp. (Nasdaq: CECE), its closest competitor, trading at around 25 times earnings while CECO trades at over 38. It also looks better from a debt standpoint, with a debt-to-equity ratio of just 0.54 compared to CECO's 1.09. While Calgon's stock is up 44% year to date, CECO's is up 58% and could be due for a pullback.

Looking to the future, Calgon sees opportunity in the mercury removal business. The current annual demand for mercury removal stands at 130 million to 180 million pounds and could grow to as much as 765 million pounds by 2016 as the EPA begins enforcing mercury removal regulations on industrial boilers and cement manufacturers.

The number of Starbucks coffee shops that flooded the market during the mid-2000s was almost comical. In 2008, there were more than 230 Starbucks stores in New York City, with over 180 just in Manhattan.

There were literally Starbuckses right across the street from each other. As a coffee lover and Starbucks fanboy, I didn't mind.

But rapid expansion and market saturation turned out to be an unsustainable business model, which led to a large number of underperforming stores. As a result, Starbucks brought back former CEO Howard Schultz in 2008, and the company closed a number of U.S. stores and ceased expansion efforts.

Yet half a decade later, Starbucks (Nasdaq: SBUX) is back in full-blown growth mode.

Despite concerns that Starbucks might again be hitting a saturation point, the coffee company is still very much a growth story. Starbucks has a number of growth levers it can pull this time around beyond just rapid store expansion. These include the company's innovation on the food side and its single-serving products, Verismo and Teavana.

With the likes of McDonald's (NYSE: MCD), Tim Horton's and Dunkin' Donuts all fighting for a piece of the market, the competition in the coffee market has increased over the past half-decade -- but Starbucks continues to set itself apart.

For a couple years there, it looked as though Starbucks and its chief rival, Dunkin' Brands (Nasdaq: DNKN), were going to trade in lockstep forever. However, after upgrading its fourth-quarter guidance and announcing its partnership with Danone, Starbucks begin pulling away and appears to be leaving Dunkin' in the dust.

Markets were headed higher at the beginning of Thanksgiving week. The National Association of Realtors announced that for the fifth month in row pending sales of existing homes fell in the U.S. During the month of October pending sales fell 0.6% following a 4.6% decline in September. This was below the expected 1% gain economists were calling for. This can partially be attributed to rising mortgage rights, prices increasing on existing homes as well as a smaller supply of available homes. Patrick Newport, an economist with IHS Global Insight, said, ?When mortgage rates went up, people got spoiled and rushed into the market to seal deals. The numbers that we?re seeing for pending home sales are payback for the stronger numbers earlier this year.? Overall for the 2013, sales of existing homes are expected to top out around 5.1 million, and remain around the same in 2014. During 2012 there were nearly 4.7 million existing homes sold.

There was a revise of economists short-term growth forecast for the U.S. in the final quarter of this year. Analysts are now predicting growth of 1.8% in the fourth-quarter; the previous prediction came in at a 2.3%. Expectations for growth in the first-quarter of 2014 are a gain 2.5%, also down from the original estimate of 2.7%. Growth for this entire year is expected to be 1.7%. Despite the decrease in projections for growth, hiring expectations have been revised higher. Analysts are projecting average monthly job growth over the next two quarters to come in around 187,000 then increasing to 202,000 by the end of 2014. They also expect the jobless rate to decrease to 7% by the end of next year.

Shares of Wal-Mart (WMT) were trading slightly higher on Monday after the company announced their new CEO of their international division. Doug McMillon will replace Current Chief Executive Mike Duke on January 31, when Mr. Duke retires. McMillon will step up to the plate once the holiday season is over and the competition between retail stores increases. He has held several big roles within the company, including president and CEO of the company?s retail warehouse chain Sam?s Club and head of Wal-Mart International. Walter Loeb, president of retail consultancy of Loeb Associates, said, ?McMillon was responsible for the growth area for Wal-Mart-international sales ? and that?s why he got the nod.?

That?s all for the day.
All the best,
Jack Aubrey, Oakshire Financial

Related Articles

A recent piece of correspondence by a regular reader has prompted us to make a brief macro-review before we take on the week.
Please remember where we?ve been.

This is a bull market that has weathered ?

the much ballyhooed ?fiscal cliff?,
the ?sequester?,
the European debt debacle,
the highly anticipated Chinese hard landing,
QE 1,2 and 3 in all its iterations,
a year and a half rise without a correction,
the latest government shutdown,
Bernanke screaming,
Janet Yellen,
Obama Liking it and Keeping it,


and a host of other crises large and small, real and imagined, that have been hammered into our ears by the media for almost five full years.

And yet?

The market keeps rising.

So when the good folks who read our rantings (and we?re forever grateful for each and every one of you!) say that we only have a few hundred Dow points before the top, that the coming January debt ceiling showdown will mark a decisive market turning point, and that the fear of midnight is soon to befall us, we remind you once a

This is one of the more hilarious charts documenting the impossibility with which price targets and market forecasts are made each year by Wall Street?s analyst community.

Here?s a Morgan Stanley chart via @ukarlewitz of Fat Pitch Financial:

Random Thoughts


I'd like to give thanks to all the folks at Traders Expo, especially Tim Bourquin and Elaina Lowe.

Well, things looked a little iffy way back last Wednesday before I left for Vegas. The Quack had pulled back into its prior trading range. And, the Rusty appeared to be on its way to the bottom of its trading range.

As I said, with things mixed and the overall market not too far from new highs, a few big up days would be just what the Doctor ordered. And, that's exactly what we got on Thursday and Friday.

This action puts the Ps back to all-time highs. The Rusty is also at all-time highs. And, the Quack closed at multi-year highs.

The sector action looks great. Biotech, which had been rolling over, has now come back with a vengeance.

There are a few areas stinking up the joint such as Metals & Mining (especially Gold & Silver), Real Estate, and the Semis (which have been mostly sideways). Overall though, most areas are looking pretty good. Chemicals, Manufacturing, Defense, Brokerages, Regional Banks, Drugs, Insurance, Health Services to name a few are all at new highs.

The above is why we take things one day at a time and resist the urge to get too bearish when a market is not too far from new highs. Sure, fire off a short if you really really like the setup but for the most part, you want to wait to make sure the market isn't just taking a breather.

Okay Big Dave, things are looking good. So, do we buy, buy, buy? Well, not just yet. Enjoy the ride on existing longs. Make sure you take partial profits as offered and trail those stops higher. Since the methodology requires a pullback, hold off on new long side positions for now until the market follows through and pulls back. I'd avoid the short side for now. No need to fight it.

Click here to watch today's Market in a Minute.

Best of luck with your trading today!

Dave
omgmachines.com/ericx
__________

Expert swing trader Dave Landry comments on the charts for the major markets, indexes and sectors for the upcoming trading day in his daily one-minute video.

Make sure your sound is turned up. A new browser window will open and the video will begin playing within a few seconds.

Click here to watch today's Market in a Minute.


You can contact Dave Landry by email at dave@davelandry.com or visit his website DaveLandry.com.

The cost of energy production isn't just about money. There are also environment effects.

Last year, according to one environmental group, hydraulic fracturing (commonly known as fracking) alone generated an estimated 280 billion gallons of toxic wastewater, enough to flood Washington, D.C., to a depth of 22 feet. It's no wonder that there's a strong push to institute cleaner practices.

Green initiatives have come to dominate the corporate landscape and are attracting investment flows in record numbers. The performance in alternative energy this year is evidence of this growing trend -- the iShares S&P Global Clean Energy Fund (Nasdaq: ICLN) is up more than 50% year to date. While most of the attention has been focused on renewable energy and clean coal, environmentally friendly sectors like pollution and treatment controls have gone relatively unnoticed.

Calgon Carbon Corp. (NYSE: CCC) is a small-cap stock involved in the purification and treatment of water, air and food, as well as the poisonous emissions from coal-fired power plants. The company has been making tremendous strides in cost reduction, improving operating margins to around 20% from 13.6% just a year ago. (Calgon's leaner operation is one reason the research staff at StreetAuthority's Top 10 Stocks advisory recently named CCC a Top 10 small-cap stock.)

Calgon reported earnings on Nov. 5 and the results were right on line with expectations at $0.22 per share. Gross margins continued to grow, to 33.3% in the most recent quarter from 27.3% a year ago. The demand for activated carbon cloth, used in water, food, and other specialty markets, contributed to a 28.2% gain in consumer sales. The company's cash position climbed 65% from last year to about $30 million, while long-term debt increased only 8.7%, to $48.3 million.

Calgon's stock looks like a value in comparison to CECO Environmental Corp. (Nasdaq: CECE), its closest competitor, trading at around 25 times earnings while CECO trades at over 38. It also looks better from a debt standpoint, with a debt-to-equity ratio of just 0.54 compared to CECO's 1.09. While Calgon's stock is up 44% year to date, CECO's is up 58% and could be due for a pullback.

Looking to the future, Calgon sees opportunity in the mercury removal business. The current annual demand for mercury removal stands at 130 million to 180 million pounds and could grow to as much as 765 million pounds by 2016 as the EPA begins enforcing mercury removal regulations on industrial boilers and cement manufacturers.

The company has been positioning itself to take advantage of the new market by landing long-term contracts in February and September of this year for deals worth an estimated $50 million.

Even better for investors, the company -- which just wrapped up a successful $50 million share buyback program -- may initiate a far more aggressive $150 million to $200 million plan at the suggestion of Starboard Value, which owns about a 10% stake.



Risks to Consider: Like most "green" companies, Calgon is depending upon continued trends in corporate sustainability and tax credits for businesses purchasing their environmental controls. While the company expects the demand for mercury removal to increase by 2016, supply exceeds demand and could continue to do so for the short term.

Actions to Take --> The stock was upgraded to "buy" by BB&T Capital Markets on Nov. 11, suggesting that Wall Street may have finally caught on to Calgon's performance. The stock is currently trading at just over $20, which based on future earnings potential, placing it at about a 25% discount.

- Daniel Cross

The cost of energy production isn't just about money. There are also environment effects.

Last year, according to one environmental group, hydraulic fracturing (commonly known as fracking) alone generated an estimated 280 billion gallons of toxic wastewater, enough to flood Washington, D.C., to a depth of 22 feet. It's no wonder that there's a strong push to institute cleaner practices.

Green initiatives have come to dominate the corporate landscape and are attracting investment flows in record numbers. The performance in alternative energy this year is evidence of this growing trend -- the iShares S&P Global Clean Energy Fund (Nasdaq: ICLN) is up more than 50% year to date. While most of the attention has been focused on renewable energy and clean coal, environmentally friendly sectors like pollution and treatment controls have gone relatively unnoticed.

Calgon Carbon Corp. (NYSE: CCC) is a small-cap stock involved in the purification and treatment of water, air and food, as well as the poisonous emissions from coal-fired power plants. The company has been making tremendous strides in cost reduction, improving operating margins to around 20% from 13.6% just a year ago. (Calgon's leaner operation is one reason the research staff at StreetAuthority's Top 10 Stocks advisory recently named CCC a Top 10 small-cap stock.)

Calgon reported earnings on Nov. 5 and the results were right on line with expectations at $0.22 per share. Gross margins continued to grow, to 33.3% in the most recent quarter from 27.3% a year ago. The demand for activated carbon cloth, used in water, food, and other specialty markets, contributed to a 28.2% gain in consumer sales. The company's cash position climbed 65% from last year to about $30 million, while long-term debt increased only 8.7%, to $48.3 million.

Calgon's stock looks like a value in comparison to CECO Environmental Corp. (Nasdaq: CECE), its closest competitor, trading at around 25 times earnings while CECO trades at over 38. It also looks better from a debt standpoint, with a debt-to-equity ratio of just 0.54 compared to CECO's 1.09. While Calgon's stock is up 44% year to date, CECO's is up 58% and could be due for a pullback.

Looking to the future, Calgon sees opportunity in the mercury removal business. The current annual demand for mercury removal stands at 130 million to 180 million pounds and could grow to as much as 765 million pounds by 2016 as the EPA begins enforcing mercury removal regulations on industrial boilers and cement manufacturers.

The company has been positioning itself to take advantage of the new market by landing long-term contracts in February and September of this year for deals worth an estimated $50 million.

Even better for investors, the company -- which just wrapped up a successful $50 million share buyback program -- may initiate a far more aggressive $150 million to $200 million plan at the suggestion of Starboard Value, which owns about a 10% stake.



Risks to Consider: Like most "green" companies, Calgon is depending upon continued trends in corporate sustainability and