Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Is Natural Gas Price Ready For An April Rally? - 8th Apr 20
Market Predictions And The Business Implications - 8th Apr 20
When Will UK Coronavirus Crisis Imrpove - Infections and Deaths Trend Trajectory Analysis - 8th Apr 20
BBC Newsnight Focuses on Tory Leadership Whilst Boris Johnson Fights for his Life! - 8th Apr 20
The Big Short Guides us to What is Next for the Stock Market - 8th Apr 20
USD Index Sheds Light on the Upcoming Gold Move - 8th Apr 20
The Post CoronaVirus New Normal - 8th Apr 20
US Coronavirus Trend Trajectory Forecast Current State - 7th Apr 20
Boris Johnson Fighting for his Life In Intensive Care - UK Coronavirus Crisis - 7th Apr 20
Precious Metals Are About To Reset Like In 2008 – Gold Bugs, Buckle Up! - 7th Apr 20
Crude Oil's 2020 Crash: See What Helped (Some) Traders Pivot Just in Time - 7th Apr 20
Was the Fed Just Nationalized? - 7th Apr 20
Gold & Silver Mines Closed as Physical Silver Becomes “Most Undervalued Asset” - 7th Apr 20
US Coronavirus Blacktop Politics - 7th Apr 20
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Recession Investing: Spam, Guns and Gold

Stock-Markets / Investing 2009 Mar 04, 2009 - 10:11 AM GMT

By: Money_and_Markets

Stock-Markets Best Financial Markets Analysis ArticleSean Brodrick writes: In these tough times, a good investment is hard to find. In fact, the S&P 500 was down 18.2 percent year-to-date through Friday. And the Dow Jones Industrial Average dropped more than 19 percent at the same time — so good investments are pretty scarce indeed.


Here, I'll give you three investments that are doing well … and more importantly, should continue to do well.

Pick #1: Spam

I'm talking about the canned meat — “Shoulder of Pork and hAM” made by Hormel Foods Corp (HRL). You might say Spam is saving Hormel's bacon and turning the food manufacturer into a solid pick for your portfolio.

Rising Spam sales helped boost Hormel's profits above analysts' expectations.
Rising Spam sales helped boost Hormel's profits above analysts' expectations.

Hormel's net earnings fell 8 percent in the most recent quarter … but it still delivered 60 cents a share, which was better than the 51 cents a share that analysts had expected. This was mainly due to sales of Spam and Hormel's Dinty Moore Stew, another product that is greater than the sum of its parts.

What's more … Hormel affirmed its 2009 earnings outlook, saying it still expected to earn $2.15 to $2.25 per share. And while other companies are ducking for cover from the recession, Hormel plans to spend more on advertising this year than it spent last year, in part to market new products.

So Hormel is obviously optimistic about its future, despite a worsening recession.

Pick #2: Guns

Exchange-traded examples include Sturm, Ruger & Company (RGR) and Smith & Wesson (SWHC). Smith & Wesson has been a doormat until recently. But both it and Ruger enjoyed nice moves in the past couple weeks.

While Smith & Wesson has announced big plans for future growth, I prefer Ruger. Its revenues and earnings are increasing, and the company's backlog in orders jumped 72 percent from the 3rd quarter to the 4th quarter.

Why is the outlook improving for gun manufacturers?

Maybe because while other industries are sliding down a slippery slope of lower demand, the output of U.S. small arms manufacturing is forecast to grow at an annual compounded rate of 2 percent between 2008 and 2013, as seen on the following chart …

Output Forecast for U.S. Small Arms Manufacturers
Output Forecast for U.S. Small Arms Manufacturers

The sales of both guns and ammo are flying partly due to worries about economic calamity and partly because the National Rifle Association is fanning the flames of rumors that President Obama wants to confiscate guns and raise ammunition taxes by 500 percent.

Will President Obama tighten the rules on gun sales? I have my doubts. With the economy collapsing, he has bigger fish to fry. Nonetheless, if history is any guide, the NRA will constantly ring the alarm bell for the next four or eight years … and gun manufacturers will reap the benefits.

Pick #3: Gold

If you're a regular reader of my Money and Markets columns, you probably aren't surprised that I'm recommending gold …

I firmly believe that the long-term fundamentals for gold are strong and seem to be getting stronger. And to make it even more appealing, gold looks like it could go lower for a bit — a pullback that would give traders a great buying opportunity.  

There's a pile of reasons for liking gold right now —

I see a pullback coming in the price of gold, which could give investors one heck of a buying opportunity.
I see a pullback coming in the price of gold, which could give investors one heck of a buying opportunity.
  • ETFs are adding to their holdings at an enormous rate — the SPDR Gold Trust (GLD) saw its gold holdings jump 14 percent in one month to nearly 1,000 metric tonnes. Much of this is fueled by investors who look at gold as a refuge of safety in an uncertain world.
  • Despite growing global demand, gold mine production just isn't keeping up. Precious metals consultants at GFMS, believe that supply in 2008 has dropped by about 4 percent to 2,385 tonnes, the lowest in 13 years.
  • Another source of supply — producer hedging — is also drying up. With an eye on higher prices, producers have dehedged (squared their forward positions) to the tune of 346 tonnes (or 14.5 percent of world production of 2,385 tonnes) in 2008.
  • While the U.S. dollar is the world's reserve currency, gold is fast becoming a second reserve currency.
  • Russia has recently stated its intent to raise total gold holdings to 10 percent of total reserves. According to the World Gold Council, Russia held 495.9 tonnes of gold as of December ‘08 — accounting for just 2.2 percent of reserves.
  • China has a mere 0.9 percent of its reserves in gold (600 metric tonnes). That's the lowest of any industrialized economy. In contrast, the U.S. has 77.3 percent of its foreign reserves in gold. Just to raise its gold reserves to 5 percent, Beijing would have to purchase nearly $100 billion worth of bullion. I think that's going to happen, and it will light a fire under gold prices.

Spam, Guns, and Gold Are About to Hit the Fan

We'll probably see $1,500 gold in the next 12 to 18 months. And that's based on my “optimistic” outlook for our society. In the worst-case scenario, the global financial system could run off the rails. If that happens, you'll want plenty of gold … and Spam and guns, too.

Let's hope it doesn't come to that. But even without a worst-case scenario, you may want to consider putting Ruger, Hormel and gold in your portfolio.

Look at their year-to-date performance compared to the S&P 500 …

Consumer confidence falls to lowest since data began in 1967
Consumer confidence falls to lowest since data began in 1967

Consumer confidence is the blue line on the bottom of my chart. It plunged more than expected in February, falling to a new low of 25 — the worst level since the index began in 1967. And it's dragging the S&P 500 down with it.

… and that makes Hormel, Ruger and gold look all the better.

Yours for trading profits,

Sean

P.S. Traders can't live on Spam alone. If you'd like to invest with someone who is putting their money where their mouth is, check out Martin's new “ Million-Dollar Contrarian Portfolio “. To find out more about it, click here .

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules