The administration’s health care summit takes place this week. It is widely expected that the president will make official his pledge to lift the limitations on embryonic stem cell (eSC) research. Last week, Democratic Sen. Tom Harkin and Republican Sen. Arlen Specter introduced a bill that would make it illegal for any future president to impose such limits.

Once again, the media are getting the stem cell story wrong. This change will have little impact on companies working on SC therapies. As I’ve said many times, the ability to create induced pluripotent stem (iPS) cells from adult cells has changed everything. The use of embryonic cells in future therapies is now unnecessary, if not foolish.

This is not to say, though, that lifting the ban on the use of federal funding will not produce winners. The reason is that stem cells have important uses beyond therapies that were stifled by the funding ban.

Theoretically, it was possible to privately fund research on unapproved eSC lines under the Bush ban. To do so, though, researchers would have had to cut themselves off from any other work involving federal grant monies. In most cases, disconnecting from the intricate network of federally funded research was a practical impossibility. You would be hard pressed to find a university or big pharmaceutical company that does not accept government grants in some form. The impact of the ban was, therefore, enormous.

The field of research that suffered most was genetic disease drug discovery. Specifically, it was research aimed at finding cures for the inherited genetic diseases that afflict millions of Americans alone. What scientists have long wanted is access to stem cells that carry the diseases they want to treat. With an unlimited number of disease-carrying cells, potential treatments could be tested and analyzed with far greater efficiency.

Now, let’s move to the thorium front…

I previously told you about The Thorium Energy Independence and Security Act of 2008. Sponsored by Senate Majority Leader Harry Reid and Republican Sen. Orrin Hatch, this bill is designed in large part to produce an alternative solution to the problem of nuclear wastes. Thorium reactor technologies fit that bill for two reasons. Not only do they produce fewer byproducts, they can be used to burn the wastes produced by other nuclear technologies.

Last week, President Obama dramatically moved the thorium industry forward. He announced that he would kill the Yucca Mountain nuclear waste depository project. This is despite the $9 billion already spent on the project.

Reid, of course, is bragging about his role in the decision. So where does this leave us? The Yucca Mountain project, located in Reid’s home state of Nevada, was considered critical to the future of nuclear power generation in America. Since Obama, Reid and Pelosi all promote nuclear power, this significantly increases the likelihood that thorium reactor technologies will be fast-tracked.

Sincerely,
Patrick Cox

March 4, 2009

The Media Are Wrong on Stem Cells… Again was originally featured in the Penny Sleuth.

It’s sometimes uncanny how history repeats. Historian Frederick Lewis Allen writes about the New Deal of the 1930s in his book The Big Change: “It rewrote a good many of the rules of the economic game as played in America.” The steps the government took resemble what’s happening now an awful lot.

“The New Deal,” Allen continues, “continued to prop up ailing corporations through Hoover’s RFC; made arrangements to prevent near-bankrupt firms from going broke; aided farm owners and homeowners in meeting their mortgage payments; underwrote the financing of new housing enterprises; insured bank deposits…” And on and on.

It also went into the business of stimulating the economy directly by “building dams, bridges, parkways and playgrounds on a grand scale.”

If FDR walked the Earth again, Obama’s stimulus would look familiar…

Over the past few weeks, we’ve gotten more details of Obama’s stimulus plan, which comes with a price tag of at least $820 billion (and climbing). Some of the projects of interest to us include:

• Renovate 10,000 schools
• Build more than 3,000 miles of new or modernized transmission lines and install 40 million “smart meters” in homes
• Weatherize at least two million homes and 75% of office buildings
• Launch 1,300 wastewater projects, 380 drinking water projects and 1,000 rural water and sewer system projects
• Repair and modernize thousands of miles of roadways.

“Shovel ready” is the hot new phrase in Washington these days. It means a project is all set to go as soon as the money arrives. The list of projects for Obama’s plan are shovel ready — so they say. As soon as Congress approves the deal, the money goes right to work, like a needle sticking into a vein.

The water pipe business, in particular, ought to benefit from the slew of water projects in Obama’s stimulus plan. Whether the companies build, repair or install pipes, they’re in a great position to cash in on the growing list of projects coming out of Washington these days.

Sincerely,
Chris Mayer

February 3, 2009

Stimulus Stocks and Infrastructure Plays in 2009 was originally featured in the Penny Sleuth.

It is important that we understand that the stock market is not the economy. Even people who are not investors tend to make this mistake. It’s easier to make that mistake if you’re personally invested. On the surface, however, it’s obvious that economies don’t change as dramatically as the market does. Paper losses can be painful, but they don’t translate directly into the destruction of real assets.

I am pointing out the obvious because I’m so sick of mainstream media’s economic coverage. We know, in fact, that our so-called Fourth Estate has the collective IQ of an underachieving adolescent. We know this because the mainstream media utterly failed to cover the oncoming credit crisis. They did so even as rational analysts were screaming that Fannie Mae and Freddie Mac were headed for a cliff. When the media spin current events, remember how wrong the pinheads were until now.

So let me quote someone who is not a pinhead: economist Thomas Sowell. He wrote a great piece recently criticizing the media’s constant connection of the 1929 stock market crash and the Great Depression.

“Let’s start at Square One, with the stock market crash in October 1929. Was this what led to massive unemployment?” Sowell asks.

He then presents the fact that the unemployment rate was at 5% in November 1929, a month after the stock market crash. “It hit 9% in December — but then began a generally downward trend, subsiding to 6.3% in June 1930.

“That was when the Smoot-Hawley tariffs were passed, against the advice of economists across the country, who warned of dire consequences.

“Five months after the Smoot-Hawley tariffs, the unemployment rate hit double digits for the first time in the 1930s.

“This was more than a year after the stock market crash. Moreover, the unemployment rate rose to even higher levels under both Presidents Herbert Hoover and Franklin D. Roosevelt, both of whom intervened in the economy on an unprecedented scale.”

So the real question is will the Obama administration duplicate the Hoover and Roosevelt fiasco? Frankly, I don’t think it could if it wanted to. I say this for several reasons.

One is Obama’s choice of economic advisers, a group praised by free-market economists and criticized by those who want a new deal. Moreover, there are significant international factors driving economic growth that simply didn’t exist in the 1930s. Specifically, India, China and the old Soviet satellite countries have been growing at double-digit rates for years.

In many ways, policymakers in these countries are smarter than their American peers. This is because they are playing catch-up for populations that demand real economic improvements. In fact, my Breakthrough Technology Alert portfolio will expand this year to include breakthrough technologies in these unstoppable markets.

The Obama administration has the power to end the influence of the anti-nuclear energy movement. His science adviser, in fact, has stated that he intends to do just that. More importantly, he has been personally involved in researching next-generation nuclear technologies. I’ll have more for you in the future, but somebody is going to make a fortune as these long-repressed technologies finally come to market. We’ll be there.

Until next time,
Patrick Cox

January 19, 2009

Nuclear Energy Will Power Enormous Gains Under Obama was originally featured in the Penny Sleuth.

If we all had time machines, we would be millionaires. But we have not had the luxury of playing Monday morning quarterback with our investments. Until now, that is…

Thanks to the recent stock market crash, we have the opportunity to pick up seriously cheap shares that were flying high until mid-September. In some cases, this is a chance to hop into a time machine and buy these stocks before they became household names. Until recently, these stocks were the darlings of Wall Street. And when the market stabilizes, these stocks could quickly return to favor…

There are few defensive plays like health care – after all, people don’t stop getting sick, and health benefits aren’t something that cost-conscious employers can cut without enduring the wrath of angry employees. But despite health care’s promise for weary investors, the sector hasn’t been immune from the losses seen across the board in the last year.

As a whole, the health care sector has fallen almost 30% since the beginning of 2008. Health insurers have had it worse – these names dropped 40% in the last quarter alone.

If you’re wondering why one of the most regularly profitable sectors in the market has taken such a beating, you’re not alone. Billionaire Carl Icahn is among the many investment pros that have seen their health care losses mount this year. So are Warren Buffett and George Soros.

Explains BusinessWeek’s Ben Steverman:

“On a basic level, investors are worried that Democrat-led health care reform in Washington is going to shake up the health care sector and hurt profits. But it’s actually more complicated than that. The U.S. health care system is astonishingly complex and few people know exactly what President-elect Barack Obama may propose nor what Congress would approve. And few can predict how that legislation (if it passes at all) would impact particular subsectors, industries and individual companies.”

That doesn’t mean that moves in Washington won’t impact the health care sector – they will, though not necessarily in a bad way. Analysts recognize that whatever plans are put into place will most likely involve the private sector. Government changes could actually be good for scores of health care companies, especially health insurers.

Best,
Greg Guenthner

January 5, 2009

Buying into the Health Care Comeback was originally featured in the Penny Sleuth.

I’m talking about Franklin Delano Roosevelt in 1933. But the same thing could apply to the 44th president of the U.S. in 2009. Barack Obama plans to spend $700 billion over the next two years as part of a new plan to give a jolt to a flagging economy. It’s a kind of “new” New Deal.

His stimulus package is big – it’s more than what the U.S. has spent on Iraq in the last six years. It also rivals the Paulson bailout plan. And Obama’s stimulus plan just gets bigger and bigger. During the presidential campaign, it was $175 billion. Heck, by the time he takes office, we could be talking about numbers that begin with a “T.”

Where is all that money headed? It’s basically new money for public works projects to repair the nation’s crumbling infrastructure. It’s a lot of money for highways, bridges and water infrastructure projects. It will also include a fresh infusion of cash to promote alternative energy and green technology.

China has its own $586 billion new deal, too. When the world’s two largest economies plan to spend that much dough, you’ll want to know where it’s going. The short answer is infrastructure. As investors, we have a window to cash in on a sort of government-guaranteed prosperity. You don’t have to like it, but you can profit from it.

Most of it will go toward highways, railroads and airports. Already, China’s infrastructure spending has grown at a pace of 20% annually for the last 30 years. The impact on China’s economy has been transformational. For example, new highways now connect small far-flung rural towns to much larger booming cities. As a result, the economic activity between the two areas is in full bloom.

This transformation in China reminds me of the effect canals had on trade in the U.S. during the 1820s and ’30s. The Erie Canal alone cut transportation costs by 90%, according to Tomorrow’s Gold by Marc Faber. It linked the Great Lakes grain markets to New York. Canals more closely knit the interior part of the country with the Eastern seaboard, resulting in explosive growth in trade.

How to pay for these plans is a question neither country seems all that concerned with at the moment.

There is this belief that you must stave off economic contraction at any cost. Meanwhile, the U.S. government’s fiscal position is atrocious, with a deficit closing in on $1 trillion and the federal debt approaching $10 trillion. China is in much better financial condition. But China’s stimulus plan is still a big bet. It’s about 14% of the Chinese economy. As The Wall Street Journal reports: “The central government likely will have to significantly boost its own debt sales to fund the stimulus.”

Both big expansion plans will probably end badly eventually. America’s infatuation with canals that began in the 1820s led to a canal boom that ended in tears by 1836. Canal stocks collapsed, over 1,500 banks failed, nine-tenths of Eastern factories closed and a depression began that would last to 1842. Ultimately, these plans likely lead to wasteful spending and overinvestment. In finance, as in an Argentine steakhouse, everything gets overdone.

For now, investors have a window to capture huge gains from the global infrastructure spend. As I write, the U.K. just announced a $30 billion stimulus plan – with huge chunks of money for infrastructure. Argentina quickly followed with its own big plan. The news agency AFP calls it “a massive public spending plan to pump more than $21 billion into Argentina’s infrastructure.”

This is the dominant theme – think of it as a kind of contagion. Soon every government with a slowing economy from Capetown to Moscow, from Brasilia to Bangkok, could follow suit. All of which spells a possible golden age for those that make asphalt, water pipes, wind towers and the like. It should be a nice ride for investors who get in now, especially as prices for these stocks have become so cheap.

Until next time,
Chris Mayer

January 2, 2009

Investing in the Global Infrastructure Boom was originally featured in the Penny Sleuth.

During the second presidential debate, Obama and John McCain were asked to prioritize what they would do in their first 100 days of office.

“Energy, we have to deal with today… That’s why I’ve called for an investment of $15 billion a year over 10 years,” Obama said, “So, that would be priority number one.”

Green energy technology is something we’ve discussed time and time again. But, instead of simply waiting for green energy breakthroughs, we should prepare for them…

You can’t have cars without steel, water without wells, or crops without seed. So, how can you have an energy revolution without energy infrastructure? Infrastructure is truly “Priority No. 1” in the Obama administration. Without it, we can’t have energy reform.

But, infrastructure goes much further than just energy. As Obama himself recognized, “[We must] put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels…” These are all included in infrastructure.

That’s why we found a crucial player involved in many infrastructure fields. This company’s products are essential to everyone who’s ever used a road or turn on a light switch. Now, you can buy it for cheap…

The National Infrastructure Reinvestment Bank

President-elect Obama is not exactly wet-behind-the-ears when it comes to infrastructure. He co-sponsored a bill in 2007 that could change the entire infrastructure industry.

In the National Infrastructure Bank Act of 2007, Chuck Hagel and Chris Dodd put aside their party differences and attempted to address the most important problem in infrastructure — funding.

The bill calls for an establishment of a trust of federal money to be used on infrastructure. Everything from roads to wastewater plants would fall under this category. The one caveat is private spending. The bank would maximize return by working with private investment firms to co-fund projects. All money borrowed would be paid back with interest, just like a regular bank loan. The only difference is it can only be spent on infrastructure…

The credit crunch has taken an enormous toll on spending. Without money floating between lenders and borrowers, many projects are put on the back burner. The new bank is expected to open up with $60 billion in its reserves and plans to spend aggressively. You can count on private borrowers lining up to start new projects with that cash.

The arrangement of this bank also depoliticizes infrastructure. Since most projects are necessary expenditures, politicians shouldn’t be involved. Unfortunately, infrastructure spending is political. Congressmen fight tooth and nail about which projects are funded until Congress adjourns and nothing is agreed upon. This new bank will fix that problem.

The National Infrastructure Reinvestment Bank will be a separate entity from the government. It will be made up of a five-member Board of Directors, modeled after the Federal Deposit Insurance Corp. (FDIC). This Board will make decisions on where to spend the trust money… not politicians.

Obama co-sponsored the bill when it was first drafted, and because the wheels fell off it in committee, he plans to reintroduce it as part of his “first priority” energy plan. This new bank will help kick start the hundreds of thousands of projects that were delayed or scrapped because of funding.

In the next week, we’ll be presenting the absolute best investment idea for Obama’s first 10 days in office to our Penny Stock Fortunes readers. This small cap has a minimum upside of 205%, but we expect somewhere between 261% and 711% gains. You can sign up for Penny Stock Fortunes and get in early enough to see these potential gains.

Sincerely,

Jim Nelson

December 10, 2008

Top Infrastructure Penny Stock for 2009 was originally featured in the Penny Sleuth.

Take solar energy for example. After the introduction of the Solar Energy Research and advancement Act of 2007, investors watched as solar companies’ share prices exploded.

One of the biggest winners was First Solar Inc (FSLR: NASDAQ). The bill was brought before the House of Representatives on June 19, 2007. Over the next 12 months, First Solar’s shares jumped 300%.

Another was SunPower Corp (SPWRA: NASDAQ). SunPower’s shares blew up 151% in just six months.

Both of these gains can be directly contributed to a small bill being read in the House. This can happen on any particular day with any particular piece of legislation. We never know which bill or act will cause such run ups. But after November 4, we have a pretty good idea.

Obama Profit Opportunity No. 1: Science’s Most Important Breakthrough in Centuries

While on the campaign trail, Barack Obama called for the ban on stem cells to be peeled back. He said that we have a duty to advance science in any way we can to cure the sick and improve the health of the world.

This should send all stem cell stocks through the roof. But if investors can pinpoint the right biotech/R&D firm, they’ll see the largest of these gains. Potentially collecting triple or even quadruple digit profits.

Fractured Spinal Cord? No Problem

Neuralstem Inc (CUR: AMEX) is an industry leader in Human Neural Stem Cell technology. Simply put, Neuralstem is working on cures for central nervous system diseases. The company currently has four issued patents and 12 more pending. Each of these are crucial to the industry. It limits competition, while providing a lucrative asset for future growth.

These patents cover a specific regenerative process where neural stem cells are administered to the area where a spinal cord fracture occurred. These stem cells grow and heal the fracture, which restores motor functions to the parts of the body where it’s been cut off.

For instance, if someone falls and fractures their spinal cord, there’s a good chance that person will lose control over the lower half of his or her body. In the past, that person would never be able to walk again. With Neuralstem’s technology, a simple injection can restore the person’s control.

Currently, the market values Neuralstem at just $51 million. Shares can be bought for around $1.60. That’s obviously too cheap. It’ll only take one bill, announcement, or speech to send shares flying. It appears that the stem cell ban will be lifted in the first 100 days of the Obama Presidency, so Neuralstem could see a huge boost in early 2009.

Obama Profit Opportunity No. 2: Fixing Renewable Energy’s Fatal Flaw

There is only a certain amount of time during the day when windmills can produce energy. The average capacity factor for wind power is about 30%. The rest of the time, these windmills sit like giant statues, waiting for the next gust of wind. During that period — the “energy time gap” — no new electricity is going onto the power grids.

The same goes for solar power. The sun doesn’t shine 100% of the time. Even in the vast deserts of the U.S. Southwest in the peak of summer, the sun is up only about 14 hours per day. When it is up, there are problems with cloud coverage. The average capacity factor for solar power is around 25%.

Round-the-Clock Energy Storage

ZBB Energy Corp (ZBB: AMEX) designs and manufactures a special type of fuel cell storage device called Zinc Energy Storage Systems (ZESS). ZBB’s systems are used worldwide in the renewable energy fields. For instance, wind and solar farms use ZESS to store extra energy during peak hours. Then, in off-peak periods (no wind or at night), the ZESS can transmit its stored power to the grid. This system allows for continuous electricity 24 hours a day.

Here’s the best part… It only takes three to four hours to charge a ZESS. That’s plenty of time to store the solar or wind power during peak time. The company sells its systems to wind and solar farms, utilities, and commercial/industrial sites.

Banking on the First 100 Days

Within the first 100 days of Obama’s Administration, the demand will likely multiply. Obama plans to invest $150 billion to help create five million jobs in clean energy over then next 10 years. You can bet that a good portion of that money will be sent to wind and solar farms. Those farms will need to increase efficiency and storage. That’s when they’ll call ZBB.

On top of the spending, Obama has already declared he’ll push for new, strict mandates on energy and efficiency. For instance, he’s calling for 10% of our electricity to come from renewables by 2012 and 25% by 2025.

Obama Profit Opportunity No. 3: It’s Upgrade Time

Many investors run from the defense industry when they hear a Democrat coming. We think you should jump right in. You see, the largest defense contracts in our nation’s history have come under Democrats. In fact, almost every period of the military buildup has come from a left-of-center White House…with the exception of Ronald Reagan.

As we enter our sixth year of the Iraq War and our eighth year of the one in Afghanistan, our weapons, vehicles, and equipment are desperately overdue for repairs and upgrades.

Whether you are a Democrat or a Republican, you still provide our troops with the best equipment available. It certainly wouldn’t look good for Obama to enter the oval office on day one and cut equipment upgrades to the troops in war zones.

We think he’s going to take the opportunity to “reach across the aisle” and upgrade our military’s technologies and defenses. He’ll want to do that early if he plans to get any of his agenda passed.

Niche Player in a Mega Industry

That’s why we recommend you check out Herley Industries (HRLY: NASDAQ). Herley is a leader in RF microwave and millimeter wave components. These components are crucial to flight instrumentation, weapons sensors, guidance systems, and radars.

The company currently has a backlog of $157 million, with a market cap of just $139 million. Herley’s list of customers include Northrop Grumman, Boeing, Lockheed Martin, and the U.S. government.

While you might not have heard of it, Herley has been around since 1965. It’s been designing microwave devices for the defense industry for over 40 years. The company’s technology has been implemented in such projects as the F-16 Falcon, E-2C/D Hawkeye, and the AMRAAM air to air missile.

This kind of background puts it in the front spot for any future defense upgrades. On top of that, it’s stock is extremely cheap. It’s trading at just 0.72 price-to-book, and 0.63 price-to-sales.

Defense is likely a top priority for the incoming Obama Administration. The time is right to jump in on a niche defense company like Herley.

Sincerely,
Jim Nelson
December 2, 2008

Best Stocks for the First 100 Days of the Obama Presidency was originally featured in the Penny Sleuth.