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Engineering Archive

Badger Meter Profits Keep Flowing, up 29% in Q2

Badger meter is popping a nice 9% today on strong Q2 earnings. Compared to Q2 of 2007, Q2 2008 sales are up 20.1%, net earnings up 28.8%, and EPS up 26.3%. These results are in the face of what appeared to be a challenging environment for utility and industrial component suppliers. Chicago Bridge & Iron (CBI) confirmed the decrease in utility and local municipal spending (local municipalities have been hit by the credit crisis and the decrease in tax revenues due to rising foreclosures). However, Badger Meter showed us that water utilities are still buying the small infrastructure components such as meters and valves, even as larger projects such as those Chicago Bridge & Iron is involved in are being scrapped. This is another reminder of the big sea change I’ve been concerned with for a while: U.S. infrastructure is deteriorating fast and must be replaced and upgraded. If new big projects such as new utility stations or pipelines have to be canceled, that puts even more pressure on the existing system, requiring advanced technology such as Badger Meter’s AMR (Automatic meter reading) technology to make the existing system more efficient and reliable. Badger Meter also mentioned strength in precision valves and flow sensors due to the continued demand in the petroleum industry.

Also, Badger Meter’s recent acquisition of an automatic metering infrastructure (AMI) system is looking good. Watch for accelerating growth in this product line.

The majority of Badger’s sales are domestic, which is where the weakness concerns have been.  International infrastructure should still be strong across the board.  So if Badger can find strength in the U.S. domestic market, this is a good omen for both Flowserve (FLS) and SPX Corp (SPW), who are leaders in flow technology.

More on Badger Meter:

Additional Water Utility Resources featured on SuckingLess.com Research Tools

**Disclosure: I own shares of FLS and SPW as of this post**

ABB acquires U.S. Transformer Company Kuhlman Electric Corporation for America Presence

Transformers Optimus PrimeABB finally made the move I’d hope they make! In this A.D.D. market only able to focus on 2 things: financials and oil, great things are happening at individual companies and not even registering on the radar. ABB acquires U.S. transformer company Kuhlman Electric Corporation. This is one of the sweetspots (of the limited investable opportunities) for the power grid upgrade and buildout. I own SPX Corp (SPW) exactly for their transformer business, SPX Corp’s fastest growing business:

“Our Industrial Products and Services segment had revenues of $966.4, $836.7 and $716.0 in 2007, 2006 and 2005, respectively. Of the segment’s 2007 revenue, approximately 44% was from the sale of power transformers into the US transmission and distribution market.” ~SPX Corp’s 2007 10-K

One of my very first blog post dealt with the twin drivers for the power grid infrastructure suppliers: U.S. power grid outdated by some 30 yrs, always using near capacity and a system shock away from massive destructive blackouts. The complementary driver: BRIC (and then some..Mid East especially, no one talks about Saudi Arabia building 4 Dubai like cities….) countries building whole CITIES, of which the power grid is the foundation.

The problem with investing on this theme was Read the rest of this entry »

Engineering/Tech Linkage: Boeing reduces Fuel and Carbon Emissions with Air Traffic Control management

Non-stock related. Just thought this was interesting. Too early in development and deployment to have any significant impact. Let’s just look at this as a thoughtful science experiment with good results.

SEATTLE, July 11, 2008 — Boeing [NYSE: BA] and partners in industry and government achieved significant reductions in fuel consumption and carbon dioxide emissions during a recent deployment of an innovative Air Traffic Management (ATM) concept called Tailored Arrivals.

From Dec. 4, 2007 to March 23, 2008, United Airlines, Air New Zealand and Japan Airlines completed 57 flights into San Francisco International Airport that utilized a continuous descent rather than a series of level segments as now required. The Tailored Arrivals approach reduced fuel consumption during descents by up to 39 percent, depending on airplane type, and total carbon emissions by more than 500,000 pounds.

“Concepts like Tailored Arrivals potentially can be deployed quickly and at relatively low cost because the technology is in place today,” said Kevin Brown, Boeing vice president and general manager of Air Traffic Management. “As more airlines and airports use it, we move closer toward realizing the benefits expected from the Next-Generation Air Transportation System (NextGen).”

>>Read full news release at Boeing: Boeing Tailored Arrivals ATM Concept Cuts Fuel, Emissions in Initial Deployment

**Disclosure: No positions in the stocks mentioned.**

Apple Street Research at Apple Stores: a SuckingLess.com Stock Research Experiment

Tech analysts covering Apple (AAPL) have admitted they visit Apple stores regularly to keep up with the buzz and interest in Apple products. Jim Cramer has, I think, correctly classified Apple as a fashion and accessory company and NOT a computer/tech company. So, keeping tabs on the buzz is really important. I’ve been researching this way for my Apple (AAPL) shares for a while now, and it’s a lot of fun I admit!

My new research tool site, SuckingLess.com, is meant to help people do better research. So, I’m opening up this “field research” method of mine and asking all of you to help! Go to the Apple Store Street Research post and post pics of your visits to the Apple store, showing how crowded the stores are, or around which products. Or, just leave a comment about your experiences there and what impressions you got from the products!

This isn’t “actual” statistical research…but I think it’ll be fun, for all of us!

Again, I’m running my research open handed at SuckingLess.com, then posting my research analysis here as always!

SuckingLess.com, My New Investor Research Site, Debuts!

SuckingLess Logo

Jim Cramer has always said, its not “buy and hold” but “buy and homework.” Too many “investors” do not know what they own when they buy a stock, which is just reckless, but I don’t think its completely their fault. Most people don’t now how to do proper research, or have the background to understand how to do it. Even my friends who work at mutual funds often ask me where I get my info for the analysis I put on this site. This is why I started SuckingLess.coman investor research and education magazine/community.

SuckingLess.com is a collection of the best industry and company websites to learn about the companies you own. When you own a stock, you’re, in a sense, an owner in the company. So, you should at least understand the basics of the business or industry, which means you should probably read what someone who works in that industry would read. Still, this ISN’T you’re actual job and making it so would be too time consuming, so I’ve also tried to filter SuckingLess.com to have only the most relevant and easiest to understand websites.

I want SuckingLess.com to be a COMMUNITY, a tool for ALL OF US. So, I invite everyone to come and participate on the site, SUBMIT your favorite research resource to help others learn the way I’m trying to get this started with my own favorite bookmarks. Please RATE the sites you’ve used before to help others know what’s most useful, and leave comments on how you’re using the sites or anything you’ve learned. Again, to help others. I’m sure you’ll learn something from the site, so give back a little and share your investing knowledge and experience with us!  Sometimes its not immediately obvious what you can learn from a website, so give people a little insight too if theres a special way you’ve found to tap into the markets with a certain website.

For example, I don’t have many resources on financials, healthcare, or retail/discretionary because, as readers of this site you know, I focus on industrials, tech, and energy sectors. So, help me learn a bit too!

Finally, PLEASE PLEASE send me feedback on how to make the site more useful to you. This is a tool for all of us, so lets make this what WE need to do the best research. And get your friends and trading buddies to help build SuckingLess.com too. Thanks and hope this is what we all need to become better investors, i.e. Suck Less!

P.S. 90% of mutual funds underperform the markets…so sucking is not something to be ashamed of. We just have to suck less as we learn more.

Precision Castparts: Part 2 – Drivers for PCP’s Power Generation/Industrial markets

We’ll group these two markets together because the use of special metals from the likes of PCP for power generation and industrial markets are often very similar.

INDUSTRIAL GAS TURBINE (IGT)

This is the main driver for these two markets and why the power generation/industrial markets have so much potential for PCP. What are IGT’s? IGT is just a fancy name for jet engines that are used to generate power. Jet Engines just might be the most common way of generating power for heavy duty jobs from natural gas power plants to huge cargo ships. Since PCP is already the best at making jet engine parts for planes, making jet engine parts for other uses is a piece of cake.

Note: The momentum in IGT should prove even more lucrative for Woodward Governor, who has more than 60% in Turbine control technology. Basically, Woodward Governor’s control technology makes the IGT’s smart: allows IGT’s to operate under more situations, allows the IGT’s to self adjust during operations, and makes IGT’s more efficient and last longer, etc.

Estimates for IGT production will grow from about $9 Billion in 2007 to $15 Billion in 2011. IGT aftermarket and services are expected to grow from $1.3 Billion in 2005 to $1.7 Billion in 2010. The biggest players, GE and Seimens, are too big and diversified for this growth in IGT’s to significantly move their stock, which is why we’re turning to component players like Precision Castparts and Woodward Governor.

Why are IGT’s selling like hot cakes? Read the rest of this entry »

Reuters: ANALYSIS-U.S. coal production unlikely to sate world demand

Same concerns all the major utilities spoke about at the Goldman Sachs Eighth Annual Power and Utility Conference on May 13-14, 2008. The long term problem of electrical power shortage due to shortage of coal and high quality coal is just rearing it’s ugly head. I’ll have to do a bit more research to see if coal miners like Peabody Energy (BTU) and Arch Coal (ACI) are the ideal plays in this situation. If they can’t open new mines and increase capacity, their long term (5 years or more) potential to benefit is still unclear to me. I’m not saying they won’t…they’re great companies and great companies find ways to profit, especially off of ginormous trends like this. Just got to do more research. Same with the mining equipment like Joy Global (JOYG) and Bucyrus (BUCY). One thing’s for sure though, electrical power use will only grow, so power plants will have to become more efficient. I’m thinking engineering and construction companies like McDermott (MDR), Fluor (FLR), Shaw Group (SGR), and Foster Wheeler (FWLT) will do well along with power plant components like Flowserve (FLS), SPX Corp (SPW), Woodward Governor (WGOV), and Thomas and Betts (TNB). Preliminary thoughts…more on this later…

RPT-ANALYSIS-U.S. coal production unlikely to sate world demand

“By Bruce Nichols

HOUSTON, June 16 (Reuters) – U.S. coal production has room to grow, but expansion is unlikely to meet surging world demand because miners fear a boom-bust cycle, key reserves are declining, and regulation has tightened.

Despite soaring prices, the U.S. Energy Information Administration has cut projections of U.S. output rather than raised them, and now foresees a total of 1.166 billion short tons by 2010, barely up from a record 1.163 billion in 2006.

That is not enough to overcome what some coal officials see as a shortage of 25 million to 35 million tons this year in the 6-billion-ton world market and a shortfall of perhaps 70 million tons next year.

Closing the gap with U.S. coal would require spending billions of dollars to expand mines, rails and ports, investment difficult to recover if — as has happened before — supply growth exceeds demand and prices fall…”

Full Article: http://uk.reuters.com/article/oilRpt/idUKN1637587220080616

**Disclosure: I own shares of MDR, FWLT, and SPW as of this post. **

Precision Castparts: Part 1 – Overview of an Abandoned Growth Story

Precision Castparts (PCP) has been on a nasty slide down to $100 since tapping $130 when it reported earnings on May 6, 2008. Stocks who supply products going into commercial airlines, including PCP, continued to be sold off. Investors seem spooked by recent fleet downsizing by the major U.S. carriers on the back of high oil prices and struggling consumers. Or, PCP is getting dumped along with all other stocks related to Defense just because Obama won the Democratic nomination, which people take to mean Obama will be president and that the U.S. will never need a single bullet again or sell our weapons of war to the rest of the world. Geez investors are imaginative!

I don’t believe things have gotten worse for PCP since May 6th. The U.S. fleet downsizing has a minimal, if any, negative impact on PCP’s aerospace business. Like other airplane parts supplier, PCP’s aerospace business is levered to GLOBAL commercial airline demand, which is still flying off the charts. PCP’s direct exposure to Defense compared to its overall aerospace business is limited. More importantly, PCP has large exposure to the hot hot hot global power generation and oil & gas infrastructure. This segment, which PCP calls it’s power generation segment, is growing like a weed such that PCP has to expand 2 new factories to meet demand.

Here’s the plan. Overview of PCP, then the opportunities in power generation, and finally addressing the more complex concerns of the U.S. commercial airline exposure. Read the rest of this entry »

Schwarzenegger proclaims that California is in a drought – LaTimes.com

Here’s just the latest incident of our under-invested aging infrastructure leading to a crisis. This won’t be pretty for those of us in California, but should be yet another boost to the opportunities in infrastructure construction and infrastructure components. Read the article first, trades/investment ideas to come later…

“SACRAMENTO — Gov. Arnold Schwarzenegger proclaimed a statewide drought Wednesday, warning that California’s water supply is falling dangerously low because of below-average rainfall and court-ordered water restrictions aimed at protecting fish.”

Full Article: Schwarzenegger proclaims that California is in a drought

Coal Continues to be Strong

While crude oil prices has been spasming (trying to find a direction) the last few days after hitting an all time high last week, coal continues to march ahead. globalCOAL’s NEWC weekly index reports coal trading at $138.35/tonne for the week of May 23 versus $134.85 the week before. The record high was $139.16 back on February 15th.

Problems on both the supply and demand sides continue to support higher coal prices:

  1. China continues to be forced to close power plants due to shortage of coal. Current coal supplies will only last for 3.1 days of power generation which is much lower than the 7 day minimum supply usually needed.
  2. Export train from Colombia’s Cerrejon mine was derailed on its way to Puerto Bolivar due to terrorist attacks.
  3. Bottlenecks at Australia’s Newcastle port has caused coal exports to decline by 18%. Furthermore, queue of coal ships waiting to carry the coal has increased, tying up coal ships for 13.5 days while waiting to load coal versus the 0.38 days average loading time for general cargo ships.

More Coal news at globalCOAL

These supply and demand problems should continue to act as a driver for coal and all of coal’s supporting infrastructure. Even as coal stocks are at or near all-time highs, coal miners like Arch Coal (ACI), Patriot Coal (PCX), and Peabody Energy (BTU) can still be bought on dips. Likewise, methods of transporting coal such as the rails, barges like Kirby (KEX), and dry shippers should still have momentum. Finally, coal mining equipment makers Joy Global (JOYG) and Bucyrus (BUCY) has products that are in high demand to continue to open new mines and bring out coal.

No need to chase these. This is just to highlight how real the problems with coal and power generation is. The bottlenecks at ports like Newcastle won’t be fixed overnight, or even over a year, as whole port cities might need to be constructed and railways built in order to get all the coal out. In China, even with the earthquake temporarily knocking out several provinces and thus their energy use, China is still 4 days short of coal. For a country that big, it will take a lot of coal just to bring coal supplies back to that 7 day minimum (not even a slight surplus for rainy days). Meanwhile, summer is approaching and U.S. utilities will be fighting the foreign buyers as U.S. utilities try to keep their requirements of coal from being exported.

**Disclosure: I own shares of PCX and BUCY as of this post**

SuckingLess.com: globalCOAL feature – Coal Prices & Data, News & Analysis, Trading system

SuckingLess.com: Energy Sector Resources