U.S. Department of Transportation Tentatively Approves American Airlines & British Airways Alliance

The Department of Transportation has tentatively approved American Airlines, British Airways and fellow Oneworld Alliance partners Iberia Airlines, Finnair and Royal Jordanian Airlines bid to expand their trans-Atlantic operations. According to thestreet.com, the proposed agreement would create a unified network of about 500 possible destinations in more than 100 countries. The carriers can jointly price, market and schedule international flights in their alliance without committing any antitrust violations that could lead to prosecution, provided that they agreed to cede to rival airlines four pairs of takeoff and landing slots at the United Kingdom’s Heathrow Airport.

American Airlines, a subsidiary of AMR Corp., British Airways and Iberia Airlines intend to create and operate a joint venture between the U.S., Mexico, Canada, the European Union, Switzerland and Norway. The obvious benefits of this alliance include lower fares on more routes for customers and better schedules. The alliance could have a negative effect on competition on some routes between the United States and Heathrow airport. The deal could also give the partners a dominant market position on routes between Heathrow and U.S. destinations like Dallas-Fort Worth, Boston and Miami. Alliances have become a viable alternative for air carriers who are struggling amid a downturn in air traffic. Many carriers are scrambling to reduce operating costs and are actively seeking new revenue streams.

There are similar trans-Atlantic partnerships in operation such as Lufthansa, Continental Airlines, United Air Lines and Air Canada of the Star Alliance and some members of the SkyTeam, Air France-KLM and Delta Air Lines. The Department of Transportation is allowing for a 60-day comment period before it makes its tentative approval decision final.

PetMed Express is a Good Defensive Addition to any Stock Portfolio

PetMed Express, on online pet-prescription retailer, has increased profit for 11 consecutive quarters and has been called a model of consistency. According to thestreet.com, during the last three years the company, based in Pompano Beach, Fla., has boosted revenue 15% annually. This is a good addition to the portfolio of any investor looking for a defensive play, especially in this economic climate.

PetMed is off to a good start in 2010, after it hit a speed bump last October following the release of fiscal second-quarter results. The stock has rallied eight percent in 2010, as the Dow Jones Industrial Average tumbled 3.7% and as the S&P 500 fell 4.2%. PetMed’s fiscal third-quarter net income jumped 14% to $5.6 million and earnings per share climbed 19% to 25 cents. The company’s operating margin has held steady at 17%.

PetMed, which bills itself as America’s largest pet pharmacy, market capitalization is $442,300 million and its shares closed Friday at $19.35, with a P/E ratio of 17.26%. The company pays a dividend yield of 2.07%. With the spending on pet medicine expected to increase over time, PetMed is well positioned to participate in any increase in the pet medicine market as a whole, as well as gain market share. The company, despite the United States being in a recession, attracted 802,000 new customers in 2009 vs. 710,000 in 2008. It is also highly unlikely that pet owners, who use PetMed, will actively shop around for pet medicine. The company, which is a market leader with the lowest prices, offers its customers a quick and easy platform for repeat purchases.

After the 2009 rollercoaster of layoffs, store closures, and Via instant coffee, Starbucks (SBUX) turned in a stunning first quarter earnings that now seem ripe for contrarian action. At the end of January, 18.81M shares were shorted.

Cynical investors might call this move less contrarian wisdom and more quick-profit bounce. After all, while December’s quarterly gross profits jumped to $241.5M from the previous year’s $64.3M earnings, history still indicates the company has some climbing left to do before matching the almost $5.8B earnings reported in September, 2008. Long-term holders might also be tempted to follow the shorts after glancing at a $22 share price and a $29.96 P/E ratio.

It’s certainly reasonable to ask whether this stock can continue its yearly upward run from a $9.41 share price past its current $22.59 price as of February 11, 2010. Shall we ignore the contrarians or leap onto the haymaking wagon as it trundles by?

Perhaps. But before jumping, consider whether this short bounce might actually be an ill-conceived bet against an inevitable ascent.

Last month, The Next Web reported on the company’s social media efforts to gain and retain an even greater customer base. The numbers are quite imposing.

• Almost 777,000 followers on Twitter
• Over 5.7 million fans on Facebook
• Over 5,000 subscribers to Starbucks YouTube

What’s more impressive is how this 16.8B market cap giant effectively uses these tools to create a individualized fan experience. Twitter answers questions, retweets comments, announces free drink samples, and new iPhone apps while Facebook is used for video uploads, blog posts, event invites, and fan forum discussions. For the geek enthusiasts, Starbucks YouTube has videos on anything from coffee blends to the company’s history to various charity work, including the recent Haiti relief effort.

There’s even a My Starbucks Idea forum where customers can suggest and vote on new ideas while the Ideas in Action Starbucks blog, tells customers what the company’s actually doing with the winning proposals.

Time will tell whether all the social media hype and pizzazz will convert these statistics into actual cash sales. But before writing all of it off as a cynical effort to further push over-priced, burnt coffee on clueless customers, consider one last point.

Not too long ago, hitting the local Starbucks was one of the easiest luxuries to dump for financially-pressed consumers. Now it’s roared back in true contrarian fashion, as one of the few affordable perks in a continued recessionary grind.

Short at your own risk.

On Feb 5th, I saw Jim Cramer’s “Mad Money.” For the record I think Jim’s show is great (that’s right we are on a first name basis). It is rare to find a financial show that can educate and entertain on a consistent basis and Jim has clearly mastered this.

During this episode he talked about the current earnings season results and how many of the companies were blowing away the estimates. My sentiment is analysts have been watering down earnings estimates, since the economy is such a tough spot. This watered down effect makes it much easier for companies to surpass earnings estimates. In my opinion the majority of companies that are surpassing their earnings estimates are doing so because of deep costing cutting and productivity gains, and not so much from top line growth. But this is not the focus on this post.

What I was most shocked by during the show was Cramer’s statement, “Earnings this week will overshadow Europe and the unemployment figures….” My jaw dropped! Nothing could be further from the truth! Unemployment is a central theme in economics and politics at this critic juncture. The unemployment rate is at its highest since the early 1980s. We have roughly 10 million people unemployed. That is not a modest figure! The employment situation made the President do an about face and shift his focus from purely health care to JOBS and health care.

Across the Atlantic, the PIIGs (Portugal, Ireland, Italy, and Greece) debt situation has the entire world’s attention. Today the EU stated that they will aid Greece with their debt problems. Unfortunately, the details of this aide are sketchy at best and there was no mention of any assistance for any of the other debt-laden EU zone nations.

The employment and EU debt saga has totally eclipsed every aspect of the investment community. Sorry to say it, Jim was wrong about this one!

Hi-Tech stocks have a real good chance of being an extremely conducive place for investors to invest their money in 2010. Keep in mind that technology companies typically do not carry much debt on their balance sheets, which allows them to purchase other companies when the opportunities arise. In addition, technology companies do a lot of business in foreign economies and couple that with the falling dollar and prices of U.S. products will be very attractive to overseas customers.

There are certainly discussions out there about quality tech opportunities as presented here. In addition, to some of those names I have other areas you might want to consider as you look to garner profits in the technology sector over the course of 2010.

Some of the stocks that are poised to have a very rosy 2010 include Apple Computer (AAPL), Baidu Incorporated (BIDU) and Amazon.com (AMZN). All these stocks have tremendous fundamentals and are in a great position to takeoff to the upside. Another way to participate is to buy the QQQQ exchange traded fund, which closely mirrors the NASDAQ. For more aggressive investors you could purchase the QLD exchange traded fund which move twice as fast the QQQs.

Trading Tips to Help Cash in on Hi-tech Profits

One way to lower costs when thinking about trading in the hi-tech area is to use options. You can use straight calls or spread them to even lower the costs further. There are also the possibilities of implementing covered calls or selling puts on the underlying to lower the overall cost basis. All of these option trading tips can go a long way in improving your total return on investment.

During a recent segment of Jim Cramer’s Mad Money which aired on Feb 1st, he highlighted Natural Gas. Jim interviewed CEO of EQT Murray Gerber. EQT is a 120-year-old company based out of Pittsburgh, PA, that drills natural gas in the Appalachian basin. EQT trades on the NYSE and as of the close on Feb 11, 2010 its closing stock price was 42.01, which is down YTD approximately 5%.

Cramer stated that he felt natural gas was a great oil alternative and didn’t understand why it doesn’t get more attention in America’s efforts to reduce her dependence on foreign oil sources. Cramer went so far to say that “If you are not for natural gas, then you are for buying foreign oil,” and I would have to agree. According to many natural gas experts America has at least 125 years of supply. T. Boone Pickens is probably the most notable leader in this alternative/transition energy phase. He states that “America is the Saudi Arabia of natural gas.”

Clearly the United States has been addicted to oil for quite some time. It is a hard addiction to shake! You would think that the 70’s oil embargoes, the Iran crisis in the late 70’s, and exponential price increases in 2008 would motivate the country to check into oil detox programs immediately. But just like any junkie, we still continue to look for our oil fix.

Natural gas prices are approximately $5.35 per MMBTU (10,000 million British Thermal Units) versus oil’s $73 a barrel. It is cleaner and cheaper then oil, so you would think the natural order of supply and demand theory would easily introduce natural gas as a better substitute and increase its overall usage throughout the country’s entire energy mix. But since this natural order has been disturbed, could possible mean that some outside force has interrupted this process, perhaps a political one, supported by a strong lobbyist organization?

Market fundamentals still indicate a very bullish 2010 forecast for selected emerging markets, which is backed up by a country by country analysis here.

For instance, recently the World Bank raised its growth forecast in China for 2010. The strength of regions like China and Latin America really was crucial to powering through the worst of this worldwide economic downturn. The collective spending power of this ever growing middle class in these emerging markets is immense and should be very profitable in 2010.

Some emerging market stocks that look really good for 2010 include American Tower (AMT), CNOOC (CEO) and even multi-national companies such as McDonalds (MCD) and Coca-Cola (KO) look like very attractive buys for 2010. There is also a very good exchange traded fund like the iShares Emerging Market Trust (EEM), which is a way to participate in the strength of some of these emerging market powerhouses without incurring some of the volatility that sometimes comes with individual issues.

Trading Tips for Taking Advantage of this Opportunity

Of course these stocks and ETFs can be purchased to capture the predicted bullish opportunity. However, one of my key trading tips is to employ options and get a far bigger bang for your buck. You can buy a bullish long-term call for far less than purchasing the underlying.

In addition, you can reduce the outlay even more by using a long-term bull call spread. By selling a further out strike call you can reduce what you had to pay for the lower strike call. Finally, if you do decide to purchase the underlying stock or ETF then consider selling a long-term out-of-the-money call to enhance your overall returns.

The long-term economic outlook remains gloomy, but stocks should advance in 2010. Though 2009 had you on the edge of your seat, with the longest and steepest recession since World War II, gross domestic product eked out a modest growth of 3.5% in the third quarter. The stock market, which bottomed on March 9, 2009, soared 60% in the last seven months. For 2010, the growth will be anemic, with GDP predicted to be between two and three percent.

Investing in blue chip stocks is always a safe bet for any portfolio. Look for blue chip companies with strong foreign sales on their balance sheets, as well as those with a presence in China. Companies fitting this criterion include Apple Inc. (AAPL), Nike Inc. (NKE), Procter & Gamble (PG) and Monsanto Co. (MON).

Commodities such as oil and iron are traded globally and are priced in dollars. Demand from emerging markets, along with a weak dollar, will drive up prices, making this sector attractive in 2010. Natural resource producers will benefit significantly from these market trends. Players in this sector include Halliburton Company (HAL), Baker Hughes Inc. (BHI) and National Oilwell Varco Inc. (NOV).

Many investors are understandably skittish about the health of the U.S. dollar and other major currencies. Gold is a great choice to balance out any portfolio. Companies such as Barrick Gold (ABX) and Newmont Mining (NEM) are power plays. Not to be ignored, silver may outshine gold in 2010, as spot prices for the white metal rise due to a surge in industrial demand. Silver inventories will be replenished by the traditional industrial end users such as the electronics industry and that could take up to six months or more. Additionally, new market places for silver will be created, such as the demand for silver-zinc batteries used in “smart” automobiles. Silver Standard Resources Inc. (SSRI) is one player in the mining of silver.

Lastly, health care is an enormous and growing domestic industry. The focus should be on companies that benefit significantly from cost reduction and expanded insurance coverage, as these will be players in 2010. These companies include Quest Diagnostics (DGX), which provides testing services and drug distributor, McKesson Corporation (MCK). If investing in the individual stocks isn’t what you are looking for, then consider mutual funds that invest in those stocks.

After a grueling 2009, people around the world are looking to 2010 with hope, but hope seems to remain elusive. Though officially most of the world’s economies have begun to grow again, there is still a lot of economic pain in the foreseeable future.

The good news is that the US stock market is back up about 50%, though still 25% off its highs in 2007. The US stock market usually predicts how the US economy will fare 6-12 months in the future, so if this is any indication 2010 will mark a slow economic climb out of the pit. People can at least exhale and take comfort in the fact that at least the economy has stopped shrinking.

Unemployment will slow the recovery, as it hampers consumer spending, and the excess housing and manufactured goods will contain inflation and wages. Credit is still hard to come by, which will hit small businesses the hardest, another indicator that the economic recovery will remain lackluster into 2010. Taking into account people working part time who would rather be working full time and people who have given up looking all together, the true unemployment rate is closer to 18%. So it will be a long, slow climb through next year with fits of growth and plenty of setbacks.

Still, there is good news. IT companies are likely to do well, as businesses seek to utilize software to make the employees they retained more productive. Online enterprises will allow some of those who were let go to start new businesses for next to nothing, and this is the real wave of the future. The Internet will drive the recovery in 2010.

Some people are still talking about the possibility of a double dip recession, with the economy shrinking again in 2010, albeit more slowly. This is a possibility, especially if the economic supports put in place by governments to keep the economy from falling apart are scrapped too soon. If governments (aka taxpayers) are able to continue to support the world’s economies, we will escape this.

As for investing, commodities are likely to be strong, especially gold and silver. First Solar (FSLR) looks to be a good investment for 2010, though its prospects look hazier into 2011 due to competition from China and lack of incentives for consumers. With continuing international pressure to green the US economy, this may change next year. Medco Health Solutions (NYSE: MHS) looks like a good bet too, as it posted better than expected profits for the third quarter and announced projections for 20% growth in the next year. The maker of generic drugs has secured $4 billion in new business for 2010 and has retained 99% of its clientele, making it look very promising next year. Genpact (NYSE: G), an offshoot of General Electric (NYSE: GE), may be a bit riskier, as it is still sucking from GE’s tit for nearly half of its 2008 revenues. Still, Genpact offers IT solutions that enable businesses to keep costs low.

Two stocks to stay away from in the coming year are the New York Times (NYSE: NYT) and Garmin Limited (Nasdaq: GRMN). They are both moving towards obsolescence.

The New York Times and other newspapers are being supplanted by online news organizations. Since its stock price bottomed on March 9, 2009, it has skyrocketed 131%. As advertising is down, costs can be cut no further, and print media in general suffers from an identity crisis, look for the New York Times’ stock price to flounder next year. Though eventually their online business may save the organization, it does not make up a significant part of it yet for the newspaper to turn a profit.

Garmin Unlimited, the leading makers of GPS systems in automobiles in the US, rose 79% from March 9. This only means it has that much further to fall. With the auto market showing no signs of picking up, its sales are set to be flat in the New Year. With cell phones and Google (Nasdaq: GOOG) offering GPS services for free, there seems little hope that Garmin will survive past the end of 2010.

All in all, prospects for a prosperous 2010 look better than 2009, but looking back on the year that was, it really does not mean very much…

Power & utility companies will also be driven by the creation of the Smart Grid, which has the potential to revolutionize the entire power sector. According to Deloitte, the average efficiency of the world’s existing electricity grids is only about 33 percent versus 60 percent based on the latest technology. Smart Grids can potentially reduce energy consumption by approximately 30 percent, thereby reducing the need to build new power plants.

The Obama administration has allocated roughly $11 billion for utilities to transition their energy supply networks to digital technology. Smart technologies are expected to grow as they make significant inroads into the consumer market over the coming months. Smart metering technologies could potentially enable consumers to time shift their power usage, for example, to take advantage of off-peak rates, thereby saving them as much as 20% from their electricity bills, according to industry estimates.

SmartGrid solutions providers will likely encourage merger and acquisition activities, which savvy energy companies will want to capitalize on. SmartGrid technology solutions providers includes, General Electric Co.’s (GE) GE Energy, Xcel Energy Inc. (XEL), Florida Power & Light (FPL), Itron Inc. (ITRI), Comverge, Inc. (COMV) and Smart Grid start-up Silver Spring Networks.

With the cap-and-trade debate raging, the opportunity exists for energy companies to create their own sector-specific carbon trading platform as a way to mitigate the attempts by legislators and policymakers to create legislation in 2010. A cap and trade system is a method for managing pollution, with the end goal of reducing overall pollution in a nation, region or industry. For 2010, renewable energy production is expected to intensify in the Middle East and North Africa, two places known for fossil fuels.

The geographic and demographic conditions in both areas are ideal for a new type of renewable leadership. Africa and the Middle East have climates conducive to renewable energy production — hot temperature with significant sea breezes during the day and a close proximity to the developed population centers of Europe.

The Cleantech Index (AMEX: CTIUS) and Next Generation Energy Index (NYSE: NGX) are two ways investors can capitalize on this growing sector.