Flirting With Disaster

Why betting against an economic recovery is still a smart play

Markets were dallying last we checked, up a bit, but not enough to sway an opinion. The majors in the US are up on average 5% for the past month, aided, as far as we can tell, by slapdash political rhetoric, myopic investor optimism and cherry-picked data analysis. That said, a 5% gain is a good month by just about anybody's measure. So why are we so dour?

The short answer is, "we're not...we're just cautious."

Read more: Week of March 22nd, 2010

A Key Government Contractor Has Become an Obvious Value Play

Investors tend to avoid companies that generate too much revenue from one key customer or project. If that project ends, sales could easily plunge. That fear is the key reason behind a sharp sell-off in shares of Dyncorp (NYSE: DCP), a key government contractor in Iraq. Shares have fallen from over $20 last summer to a recent $11. But things are beginning to look up...

To be sure, the recent elections in Iraq indicate that the U.S. presence in the country is bound to diminish, and Dyncorp is poised to generate weaker sales and profits from projects in Iraq. Yet investors appear to be overlooking the fact that Dyncorp has been building a robust backlog elsewhere in the world, and looks set to keep boosting sales and profits.

Dyncorp offers a very wide range of services to Uncle Sam and other governments including: police and military training, intelligence services, security, linguistics and translation services, aviation fleet management and logistics. Contracts for these services typically appear large in terms of dollar size, but profit margins are fairly thin. Dyncorp typically generates operating margins of around 5% or 6%.

Read more: Week of March 15th, 2010

Demand from China and India Could Reap Billions for this Company

The trend toward increased worldwide industrialization is undeniable.

The growth of China and other emerging markets has exponentially and permanently increased industrial production across the globe. In the past decade, world trade has exploded to a level far beyond what the world has ever known.

The global exchange of goods increased nearly +80% between 2005 and 2008, according to the World Trade Organization. That number plummeted by about a third in the darkest days of the financial crisis.

But things are turning around. The International Monetary Fund recently forecast that growth in worldwide output, which was negative in 2009, will strongly rebound to +3.9% in 2010 and +4.3% in 2011. Leading this rebound: China, where gross domestic product is expected to grow by a sizzling +9% per year for the next five years.

Read more: Week of March 8th, 2010