Motley Fool Updates

[Conrad Alvin Lim]

The Fool's Look Ahead

By Rick Aristotle Munarriz (TMFBreakerRick)
April 21, 2006

Content, chicken, and construction will color in the week that lies ahead.

Monday
Even though CNET Networks (Nasdaq: CNET) is no longer associated with last year's wild buyout rumors, that's actually a blessing now that we can dissect the online content juggernaut for its organic worth as a stand-alone company. CNET kicks off the new week with its March quarter report, and even though the story over the past few quarters has been the huge growth at Webshots.com, now we can kick the tires to see how the company's ability to monetize its booming traffic is coming along.

Even though CNET has produced a profit for six consecutive quarters, analysts expect a $0.02-per-share loss for this recent Rule Breakers newsletter service stock pick.

Tuesday
You may not be familiar with Buffalo Wild Wings (Nasdaq: BWLD), but the fast-growing chain of casual eateries that serve up chicken wings dipped in signature sauces is a pretty popular company to Motley Fool Hidden Gems subscribers. Tom Gardner singled out the company a couple of years ago, and it continues to grow briskly. Analysts expect the company's bottom line to improve by 36% for a $0.38-per-share quarterly profit showing come Tuesday.

If you're looking for a bigger name stepping up to the podium, be on the lookout for online retailing bellwether Amazon.com (Nasdaq: AMZN) to produce its first-quarter financials. The longtime Stock Advisor pick is coming off a healthy 2005, and it will be interesting to see whether new initiatives like its Amazon Prime membership service are paying off here in 2006.

Wednesday
There will be more than 100 public companies chiming in with quarterly numbers on Wednesday, but the one that intrigues me the most is Pulte Homes (NYSE: PHM). Like most leading homebuilders, the company has had fantastic results in the past, but investors feel as if higher borrowing rates will send home prices lower. That's why you'll see investors focusing more on the company's outlook and backlog of new home orders than on the company's actual trailing performance.

Thursday
If you like your software companies the way I like my pancake stacks -- and that's pretty darn big -- then you'll want to tune in to Microsoft's (Nasdaq: MSFT) quarterly report on Thursday. After freaking out the market last month by delaying the release of its Vista operating system platform, you can bet that analysts will want a little more visibility out of the company as to how these next few quarters will shape up.

Some folks think the company is geared for a turnaround. Philip Durell, our resident value stock guru with the Inside Value newsletter, singled out the stock as an attractive investment last year.

Friday
Can a company that provides online shoppers with great deals on closeouts and manufacturer overruns also be a good buy for investors? That's what we'll find out on Friday, when Overstock.com (Nasdaq: OSTK) reports its first-quarter numbers. A steep loss is expected, but that's fine, because Overstock is in the seasonally sluggish part of its fiscal calendar. I'd say more about the former Rule Breakers recommendation, but I hate getting sued. Just kidding! You know I would never keep a bold opinion from you.

What I'm hoping to hear out of Overstock on Friday is a sound strategy to get the company back to profitability for the 2006 holiday season. You know, a little more Patrick Byrne and a little less cash burn.

Until next week, I remain,

Rick Munarriz

[Conrad Alvin Lim]

Oil Sands Set to Explode
By Robert Aronen
June 5, 2006

Rising energy prices are driving oil sands production to new heights. Last week, Canada's National Energy Board (NEB) released a report giving an update on the opportunities and challenges facing Canada's oil sands between now and 2015. (Link opens a PDF.) A follow-up to a 2004 report, the document takes into account current market conditions, such as the doubling of the price of crude oil and natural gas since the original report came out. We've given our own report on Canada's oil sands, but now let's take a revised look, based on the new NEB report.

Oil sands production
Capital expenditures to fund oil sands development have exploded in the past two years. Current investment totals $106 billion ($125 billion Canadian) to develop projects that will be completed between 2006 and 2015. If all of these projects are completed, oil sands production in 2015 will total a high estimate of 4.4 million bpd (barrels per day), up from 1.1 million bpd in 2005. Assuming that even 75% of the high estimate is achieved, production will increase to 3 million bpd.

That much expansion will place Canada among the world's top oil producers and exporters. As things stood in 2004, Canada ranked eighth among world oil producers and didn't even make the list of the top 14 exporting countries. This was back when it produced just in excess of 3.1 million bpd, with 1 million bpd coming from the oil sands. Assuming that conventional production remains near 2 million bpd, Canada will be producing 5 million bpd in 2015 -- enough to place Canada fourth in global oil production.

These estimates assume that Iran is unable to increase production by more than 1 million bpd, but I consider this assumption reasonable, since Iran is having difficulties meeting its OPEC quota, and its government has created an environment inhospitable to the type of foreign investment needed to boost production.

In exports, oil sands production will have a much more significant impact for Canada. In 2004, Canada's oil consumption was 2.3 million bpd, resulting in net exports of only 800,000 bpd. I estimate that Canada will consume around 2.7 million bpd in 2015, assuming annual growth of 1.6%. With 5 million bpd of production, net exports will total 2.3 million bpd. Returning to our table of Top World Net Exporters, we thereby find that Canada will move into the top 10 exporting countries by 2015. If oil sands production meets the high estimate, Canada could move as high as third place among exporters, behind only Russia and Saudi Arabia.

Producers
It should be no surprise that the major oil sands producers have announced the largest expansion projects:



Other large projects have been announced at Imperial Oil, Shell Canada, Petro-Canada (in partnership with UTS Energy and Teck Cominco), Husky Energy, and a whole host of other companies, including Shell EP Americas, which recently shocked the oil sands by purchasing 10 properties in northern Alberta.

The future direction of oil prices and production costs will dictate the profitability for these producers. The NEB report estimates profitability at an oil price of $30 to $35 per barrel of West Texas Intermediate (WTI) light sweet crude oil. These prices are up significantly from the 2004 report, mostly because of higher capital costs and higher natural gas prices. So the global commodity boom that has increased oil prices has also increased the cost of expanding oil sands production.

Production methods
There are two methods of converting oil sands into liquid that can be refined into gasoline and other petroleum products -- mining operations and in situ, or "in place," recovery. Both methods will grow through 2015, with in situ production showing the larger increase.

The NEB report estimates that mining operations will account for 52% of total production in 2015. Expansions at Canadian Natural Resources, Imperial Oil, and Petro-Canada all include new mining operations. This prospect for new installations has been partly responsible for creating joy for shareholders of Joy Global (JOYG) and Bucyrus (BUCY). Mining operations work where the oil sands deposits are close to the surface and have a lower natural gas requirement than do in situ methods. On the downside, environmental groups question the effectiveness of land restoration after mining operations have taken place, and in situ methods allow access to deeper deposits.

The most common in situ production method is Steam Assisted Gravity Drainage, or SAGD. The advantages are that only the bitumen is removed from the ground, and deeper formations can be exploited. But the downside is that SAGD production requires more natural gas. Because it uses traditional drilling methods, growth in SAGD production should create new business for drilling companies. However, this production is so small compared with global oil production that any incremental business is unlikely to have a serious impact on the major players.

New in situ production methods are also being investigated. Petrobank is building a pilot project to demonstrate its toe-to-heel air injection (THAI) technology. Other companies are experimenting with the vapor extraction process, or vapex, which is similar to the SAGD process, but hydrocarbon solvents are injected instead of steam.

Challenges
Environmental concerns pose the greatest challenge to oil sands production growth. Greenhouse gas emissions, land reclamation, and water usage are the most common issues. The combination of issues has led various environmental groups to call for a moratorium on oil sands development and created bureaucratic obstacles to new projects.

These are serious concerns. Oil sands production emits higher greenhouse gas emissions than conventional oil production does. To meet the requirements of the Kyoto Protocol, Canada will need to invest in clean energy to obtain credits to offset the increase in carbon dioxide, or else capture and sequester the carbon dioxide. In part to balance its oil sands production, Suncor (SU) has become one of the largest wind power producers in Canada.

Mining operations remove the surface of Canada's boreal forest to expose the oil sands below. While these lands are to be reclaimed after oil sands production is complete, the resulting landscape will be significantly different, with fewer wetlands, more lakes, and no peat lands. Local groups question the impact on the local ecosystem and the effectiveness of reclamation efforts.

Water usage poses both environmental and technical challenges. Mining and in situ operations require huge volumes of water, which is diverted from the Athabasca River. Current licensing approves the withdrawal of 2.3 billion barrels of fresh water per year from the river, but the planned projects will push the requirement to 3.3 billion barrels per year. The environmental concern here is that insufficient flows exist to ensure the river's ecological sustainability. The technical challenge is that the river flow rates are lower in the winter, a reality that could lead to seasonal shortages. It is likely that oil sands producers will need to implement efforts to reduce water usage, increase recycling, and implement on-site storage to avoid seasonal production losses.

Conclusions
There is little doubt that the Canadian oil sands are booming. If the current projects proceed to completion, Canada will be one of the world's leading producers and exporters of petroleum products.

With more than $100 billion in investment planned for the next decade, there should be plenty of profits available for investors. Unfortunately for investors, the opportunity is widely known, and finding discounts is tough. I still prefer investing in the infrastructure -- the picks and shovels. The companies providing these implements benefit from oil sands development and the global oil and commodities boom. Joy Global has dropped quite a bit recently and might begin to entice some investors at current prices. Alternatively, a good portion of that $106 billion in new construction will be paid to engineering contractors such as CB&I (NYSE: CBI) and Jacobs Engineering.

Investments in the oil sands are not without risk. As mentioned, a global collapse in oil prices will hurt the oil sands more than it will conventional oil producers because of the higher production cost of oil sands. To date, Canada has managed the environmental concerns to allow development to continue, and with oil above $70 a barrel, I expect this trend to continue. However, environmental concerns could derail specific projects, accelerate a switch away from mining operations, or cause production costs to increase. Finally, because this opportunity is very well known, you should take care to avoid the growth trap and avoid overpaying for oil sands investments.

[Conrad Alvin Lim]

Coming Week: Winds of Change
By Gregg Greenberg
TheStreet.com Staff Reporter
9/23/2006 12:47 PM EDT

The third quarter winds to a close in the coming week, along with a September that has been unusually uplifting for investors.

So far this month, the Dow is up by 127 points, or 1.12%. The S&P 500 has gained 11 points, or 0.84%, while the Nasdaq has tacked on 35 points, or 1.61%.

"September is traditionally terrible for investors, but this year, the stock trader's almanac has been proven wrong," says Larry Wachtel, senior market analyst at Wachovia. "The big problem going into the final week is that the market is overextended, and we started to see that with the selloff at the very end of last week."

Last week ended on a down note after a report on business activity from the Federal Reserve Bank of Philadelphia came in softer than expected, sending stocks lower Thursday and Friday.

In the market's favor for the coming week, says Wachtel, is that the fundamentals that have driven the market higher over the past two months are still intact, as well as the possibility that fund managers will do some "window dressing" before the quarter ends.

"Interest rates have been falling, oil prices have been coming down and the market has seen a change in leadership from commodities back into tech and financials," says Wachtel. "That's a nice tailwind."

Randy Diamond, sales trader at Miller Tabak, agrees that the market may have trouble in the coming week, but disagrees on which way the proverbial winds are blowing.

He says weak economic data, which the market embraced during the Federal Reserve's rate-hiking campaign, now are less likely to be looked upon as favorable. That was demonstrated in last week's market downturn Thursday and Friday.

"With the 'Fed done' theme pretty much running its course, headwinds for stocks are now blowing in the wrong direction," says Diamond. "The new reality for stock investors is focusing on the weaker economy. Or in other words, bad data has now become bad data."
Housing Focus

Among that bad data are increasingly negative signs about the housing market. And housing was in the uppermost of the Fed's thinking at last week's meeting. In its policy statement, the Fed observed that "the moderation in economic growth appears to be continuing, partly reflecting a cooling of the housing market."

More color on the housing market arrives on Monday, with the release of August existing-home sales. According to Thomson First Call, economists are expecting homes to have sold from an annualized rate of 6.25 million units, down from 6.33 million in July. Of key importance will be inventory figures, which reached record levels in July.

On Tuesday, the lone economic indicator slated for release is the consumer confidence index. Economists are expecting the index to jump to 103, up from a reading of 99.6 the prior month.

Housing will be back in the spotlight Wednesday, as the Commerce Department releases August new-home sales. New-home sales are anticipated to drop to a rate of 1.05 million on an annual basis, down from 1.07 the month before.

Meanwhile, August durable good orders also will be released Wednesday. The orders are expected to rise 1% for the month, a big turnaround from the decline of 2.4% in July.

"Housing is going to see continued weakness and could possibly surprise on the downside, but that will only make the economy look weaker than it actually is," says Milton Ezrati, chief economist at Lord Abbett. "On the other hand, the durable goods data should come in relatively strong because corporations are cash rich and they are spending on new equipment."

The finalized second-quarter gross domestic product figures are scheduled for release on Thursday. The expectation is for growth of 2.9%, while the chain deflator is anticipated to remain unchanged at 3.3%.

Friday's big economic announcements include personal income and spending data for August. Economists predict 0.3% growth in incomes, down from a 0.5% rise in July, while spending for the month is expected to show growth of 0.2%, down from 0.8% the month before.

The Chicago PMI also will be released on Friday. It's expected to fall to 57 in September from 57.1 in August.

Earnings Calm Before Storm[/u]
Though the coming week marks the end of the quarter for most, there are several companies ready to report results for their own periods. Still, the pace is relatively light compared to the onslaught of third-quarter reports set to begin in a few weeks.

The market will hear on Monday from Walgreen (WAG). Analysts expect the drugstore chain to post fiscal fourth-quarter earnings of 41 cents a share, up from 36 cents last year, on $12 billion in revenue.

On Tuesday, companies announcing quarterly results will include Dress Barn (DBRN), Lennar (LEN), Jabil Circuit (JBL) and Red Hat (RHAT).

Wednesday will be a slow day on the earnings front, though spice maker McCormick (MKC) and industrial products company Actuant (ACTU) will release their numbers.

Among the companies reporting Thursday are Accenture (ACN), Family Dollar (FDO) and Topps (TOPP).

Research In Motion (RIMM) will be the tech highlight of the day. Analysts expect the BlackBerry maker to post earnings of 71 cents a share before certain items, with $546 million in revenue.

The week will be rounded out with reports from Republic Bancorp (RBNC) and Global Payments (GPN) Friday.

[Conrad Alvin Lim]

Coming Week: Heavy Hitting
By Gregg Greenberg
TheStreet.com Staff Reporter 10/7/2006 9:04 AM EDT

Earnings season gets well under way next week with traders expecting fat corporate profits amid slowing economic growth.

"Last Friday's unemployment report stepped up concerns about the slowing economy, and that's going to heighten the focus on the sustainability of corporate profits," says Larry Perruzi, equity trader at Boston Company Asset Management.

The Labor Department said last week that the economy added 51,000 jobs in September, well below economists' expectation for a gain of roughly 120,000 jobs. The data, however, were somewhat mixed. Payroll numbers for August were revised higher to 188,000 jobs added, from the previously reported 128,000. The unemployment rate dipped to 4.6% from 4.7%.

The stock market will be open for business on Monday; however, most federal government offices, including the Federal Reserve and the U.S. government bond market, will be closed in observance of Columbus Day.

All of the markets will be open on Tuesday when Dow component Alcoa (AA) kicks off earnings season with its quarterly results.

According to Thomson Financial, economists are expecting 14% year-over-year earnings growth for the S&P 500 in the third quarter. That's down from 15.3% on July 1 and 16.3% growth in the second quarter.

In terms of sectors, John Butters, research analyst at Thomson Financial, says earnings at consumer discretionary companies were forecast to grow 20% in the third quarter, but that number has recently narrowed to 8%.

"The most significant downward revisions since July came from consumer discretionary stocks, with Ford (F) and the homebuilders really leading the way," says Butters.

Third-Quarter Kickoff

After a light preannouncement period, third-quarter earnings season begins in earnest on Tuesday with results from Alcoa. According to Thomson First Call, the consensus estimate is for the aluminum giant to earn 79 cents a share, up from 33 cents last year, on revenue of $7.68 billion.

Other heavy-hitters reporting earnings Tuesday include the likes of Genentech (DNA) and CMGI (CMGI).

Wednesday's highlights include reports from Monsanto (MON), Gannett (GCI) and Lam Research (LRCX).

Wednesday will also be a big day for restaurant stocks, with Yum! Brands (YUM) and Ruby Tuesday (RI) scheduled to announce results.

Among some of the notable names on tap for Thursday are Domino's (DPZ), Winnebago (WGO) and PepsiCo (PEP).

Also reporting on Thursday will be Costco Wholesale (COST). Analysts expect the bulk retailer to earn 73 cents a share, up from 66 cents last year, on revenue of $19.1 billion.

A Whale of a Sales Report

The start of earnings season won't be the only thing keeping traders on their toes next week. There are also some heavy-duty economic data on the docket.

Wholesale inventories for August arrive on Tuesday. According to Thomson First Call, economists are expecting an increase of 0.6%, down from growth of 0.8% in August.

On Wednesday, the minutes from the Federal Open Market Committee's September meeting will be released.

Speaking of the Fed, its "beige book" is scheduled for release on Thursday afternoon. Published eight times a year, the beige book contains anecdotal information on current economic conditions in each of the Fed's 12 districts.

"You had mixed Fed reports from the regions recently, so hopefully the beige book will provide some clarity on what is going on out there," says Phillip Neuhart, economist at Wachovia.

Also on tap for Thursday is the August trade balance, which is predicted to be a deficit of $66.5 billion, a narrower figure than July's deficit of $68 billion.

Friday's slew of data releases includes import and export prices for September and business inventories for August. The Michigan sentiment index for October is on the docket as well with the consensus estimate looking for a reading of 86, as compared with 85.4 in September.

September retail sales are also scheduled to hit the market on Friday. The market is looking for the month's sales to rise 0.2%, the same as in August.

"Retail sales feed directly into many companies' earnings reports because consumer spending makes up roughly two-thirds of GDP," says Wachovia's Neuhart. "So the markets will especially be watching this number -- and Michigan sentiment -- to see if lower gas prices have bolstered the all-important consumer."