Stimulus packages announcement seems never ending, from Barack Obama's recent $789 billion stimulus package, to the European nations and Asian Nations, every country is announcing stimulus packages to stop the economy from slipping further into recession.
There are 2 things that I would like to bring up here:
- Before there are any signs of the economy recovering, the economy will already been in the recovery process for around 6 months. Thus there will be a point where more stimulus packages are pumped into the economy than needed.
- The world is never fair, there are bound to be some industries that will benefit from these stimulus packages more than others.
A few industries that I would like to highlight here are:
- The "new oil" = Fresh Water; The human race can survive without crude oil, but not without water. We can’t live more than a week without it. The main problem with oil is finding more of it. With water, it’s the distribution system that’s the issue, as it primarily flows through pipes. In developed countries, there is always a need to repair and maintain the existing pipes, in developing and undeveloped countries, there is a strong need to build new pipes and supply of clean and fresh water is inadequate. In China alone, roughly 300 million of its 1.3 billion people don’t have access to clean drinking water out of the tap. While the recession has consumers hunkering down - and cutting back their purchases of computers, cell phones, toys and other discretionary items - it hasn’t decreased their demand for clean, fresh water. And the biggest company in the world that is able to provide the infrastructure is Veolia Enviroment (US:VE).
It provides bumper-to-bumper environmental management services for both water and wastewater. Whether it’s supplying clean water, recycling wastewater, or developing waste conservation systems, Veolia has a solution. In China, it’s operating freshwater plants, wastewater decontamination and recycling plants and sewerage treatment facilities.
And now you can add some shares to your portfolio at more than a 75% discount to what they were trading a year ago. Veolia currently trades with a P/E of 8.8 and sports an 8.1% dividend yield.
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Power - Similar to Water, there can only be an increasing hunger for power in this world. The largest producer of power generators in the world - General Electric is bound to benefit from those stimulus packages. General Electric, one of the most diverse corporation in this world, will be affected by the recession, but will not be forced to kneel down in front of the recession. The only affected division is GE Capital, which I believe is not as serious as Citibank, and they have already raised the needed capital earlier. The stock price is the lowest since 1995, and with a dividend yield of 13%, it is time to accumulate this stock. Do bear in mind that there is a risk of their AAA rating being cut by Moody, and there is a risk of them cutting their dividend, though they insisted that they will not.
Thus I have issued a buy call for GE and Veolia.
In addition, though prosperity may not be just around the corner, but statistical evidence is mounting to suggest that the worst of this recession may soon be past. Some evidences:
The Conference Board's index of leading economic indicators has risen for two months in a row.
Producer prices have increased for two straight months.
Consumer prices rose in January -- the first monthly gain in six months.
The Baltic Dry Index, which measures the cost of shipping key raw materials like copper, steel and iron, has more than doubled from its recent lows.
The ISM index of manufacturing went up last month.
The ISM index of services rose last month for the second month in a row.
The money supply is soaring, a sign that there's plenty of liquidity in the economy.
The 3-month London interbank offered rate, a measure of banks' willingness to lend to each other, has dropped to 1.2% from close to 5% a number of weeks ago.
All this said, the economy is still a long way from a pink-cheeked state of health. But remember, you've got to crawl before you can walk. And it looks like the economy is about to do just that.
