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Publication of

The
TRADINGMASTER
Weekly Review
(For the Trading Week Ended Friday 25th March)

Monday 28th March 2011


CONTENTS

1. Economic News
2. Market Wrap
3. Sector Performance
4. Australian Stocks to Watch
5. Australian Company Review
6. Mining for Bullish Plays in the Red-Hot Coal Sector
7. China's Demand for Commodities Remains Strong despite
Weekly Review

Government Tightening
8. Crude Oil Weekly Technical Outlook
9. Markets are more predictable than you think
10. Good and bad news for Apple at the ITC
11. As China Unveils Tax, Rare Earths Stocks Still Soaring
12. What Drives The Price Of Gold?
13. Japan, Uranium & Cameco (CCJ)
14. Japan's impact on US nuclear utility stocks
15. The Most Profitable Investing Trends Right Now
16. Top Commodity Producers with the Highest Upside
Potential
17. Tip of the Week
The
Economic News TRADINGMASTER

Singapore: February output data moderates further (March 25, 2011)


Singapore’s industrial production slowed to 4.8% y/y in February, from 11.0% y/y in the previous month. This was below
market expectations of 6.2% y/y, and was dragged by weakness in biomedical and electronics output. However, we would not
be overly worried about the moderation of industrial output data, as it partly reflects the statistical high-base effect from 2010.
Against a backdrop of strong economic conditions, we keep our view for the MAS to further tighten monetary policy in April.
Malaysia: Inflation rises to 22-month high (March 25, 2011)
Malaysia’s headline CPI accelerated to 2.9% y/y in February, from 2.4% y/y in the previous month. This was higher than
market expectations of 2.7% y/y and was largely attributed to higher food and energy prices. We believe inflation could trend
higher in the coming months on the back of rising global food and oil prices. We expect the BNM to remain vigilant on inflation,
and will likely hike policy rates at its next meeting scheduled in May.
Philippines: BSP hiked rates on inflation concerns (March 24, 2011)
In line with market expectations, the Philippines central bank (BSP) raised its borrowing rates by 25bps to 4.25%, the first rate
hike since August 2008. Inflation reached a nine-month high in February, but stayed within the BSP’s target band of 3-5%.
Nonetheless we believe the rate hike is a pre-emptive action to manage rising inflationary pressures. We expect BSP to be stay
vigilant on inflation, against a backdrop of strong domestic demand as well as rising global food and oil prices.
Singapore: CPI calls for more monetary tightening (March 24, 2011)
Singapore’s February CPI declined to 5.0% y/y from 5.5% y/y in January. Although it was below market expectations of 5.4%
y/y, the high rate of inflation is well above the historical long-term average level of around 2%. Price pressure was broad-based
and mainly attributed to higher transport, food and housing prices. We expect the Monetary Authority of Singapore (MAS) to
further tighten monetary policy at its April meeting via a stronger SGD, to curb imported inflation.

Equity Markets EU
European Equity Market Comment (March 25, 2011)
On Friday, European stocks swung between gains and losses as the economic uncertainty in Portugal offset a rally in
Construction and Technology stocks. Portugal continued to rule out a rescue plan after the parliament’s rejection of budget cuts
led Prime Minister to offer to quit. Construction stocks climbed, following gains in Asia, amid optimism that demand would
increase as Japan rebuilds. Cie. De Saint Gobain led construction stocks higher. SAP, the world’s largest maker of business-
management software, climbed after Oracle and Accenture posted better-than-expected forecasts. Health Care, Technology and
Telecommunications stocks led the gains in DJ STOXX 600 index, while Financials, Utilities and Basic Materials dragged the
markets down. Novartis, Unilever and GlaxoSmithKline were among the top gainers in the blue-chip DJ STOXX 50 index, while
BBVA and Barclays were among the top losers of the day.

Equity Markets ASIA


Asian Equity Market Comment (March 25, 2011)
Asian markets rose on Friday and posted the strongest weekly gains since November 2010 after concerns from Japan eased and
reports suggested that the US economy was on track to recovery. According to the latest data, Emerging Markets saw an outflow
of USD 2.4 bn during the week ending March 18. During the last nine weeks the total outflows from emerging markets now
stands at USD 24.1 bn with only one week seeing inflows. This amount is equivalent to 30% of the last year’s total inflow into
the Global Emerging Markets. Within Asia, China has seen the maximum outflow amounting to USD 5.6bn over the last nine
weeks or 33% of the last year’s inflow.

Forex Markets
Quake impact should squeeze Japan's trade surplus (March 25, 2011)
The February trade data showed that exports rose 9.0% y/y, after a temporary pullback to 1.4% in January, and trade balance
returned to a surplus of JPY654 billion, from a temporary deficit in January. The trade balance, however, will likely be put
under pressure ahead, due to the quake-related damage over manufacturing activities in east-Japan area, as well as possible
expansion of crude oil imports, triggered by nuclear power issues, pointing to growing likelihood of weaker JPY going forward.
BoJ's swelling liquidity supply to help lower JPY (March 25, 2011)
Financial institutions' current account deposits at the Bank of Japan have tripled to a record JPY41.6 trillion, from the pre-
quake level of JPY17.5 trillion. Consequently, the BoJ's balance sheet is estimated to have grown by 20% to JPY160 trillion yen,
or 33% of GDP, which compares with the Fed's balance sheet at 18% of the US GDP. Since the earthquake, mega scale of BOJ's
money printing or liquidity supply has been underway, likely to help lower the relative value of JPY going forward.
PHP: First policy rate hike since August 2008 (March 25, 2011)
As expected, the Philippines central bank (BSP) raised policy rates by 25bps to 4.25%, its first hike since Aug 08. Inflation
reached 4.3%y/y in February, and is projected to rise further towards the upper end of central bank's 3-5% target range. We see
the rate hike as a pre-emptive move to curb inflation. The monetary policy shift signals more emphasis on inflation risks rather
than growth concerns, and supports our view for PHP to strength towards 41 versus the USD in the next 12 months.
EURUSD flirts with 1.42 (March 24, 2011)
The Euro is likely to have a hard time in the coming days. European government heads may find it difficult to agree on the
details of the construction of the European Stability Mechanism (ESM). Portugal will hold elections in June. Until then, it is
increasingly likely that the country will need to accept a bailout due to the high liquidity needs in April and June. We still feel
comfortable to maintain our broad 1.30 to 1.40 range trading view on EURUSD for the coming quarters.
Top

The
Market Wrap TRADINGMASTER

After showing a strong upward move in morning trading on Friday, stocks gave back some ground over the course of the
afternoon but remained mostly positive. While the markets benefited from upbeat earnings and economic news, lingering
overseas concerns limited the upside for the markets. The major averages ended the session well off their best levels of the day
but still closed above the unchanged line. The Dow rose 50.03 points or 0.4 percent to 12,220.59, the Nasdaq edged up 6.64
points or 0.2 percent to 2,743.06 and the S&P 500 climbed 4.14 points or 0.3 percent to 1,313.80.

With the modest gains, the major averages all closed sharply higher for the week. The Nasdaq surged up by 3.8 percent for the
week, while the Dow and the S&P 500 posted weekly gains of 3.1 percent and 2.7 percent, respectively. The upward move in
morning trading was partly due to the release of a report from the Commerce Department showing that the U.S. economy
performed somewhat better in the final quarter of last year than had previously been estimated.

According to revised figures, the U.S. gross domestic product, or GDP, grew by 3.1 percent in the fourth quarter of 2010, up
from the previous estimate of 2.8 percent. The upward revision came in line with economist estimates. The markets also
benefited from a positive reaction to quarterly results from business software developer Oracle (ORCL), which reported better
than expected third quarter earnings and revenues. Oracle reported third quarter adjusted earnings of $0.54 per share on
revenues of $8.8 billion, while analysts had expected the company to earn $0.50 per share on revenues of $8.7 billion.After
reaching a ten-year intraday high in early trading, shares of Oracle gave back some ground but still ended the day up by 1.56
percent.

Edwards Lifesciences (EW) also turned in a strong performance after Standard & Poor’s said the medical device maker will
replace Qwest Communications (Q) in the S&P 500 Index. Qwest is due to be acquired by CenturyLink (CTL).
Meanwhile, Research in Motion (RIMM) moved sharply lower after the Blackberry maker reported better than expected fourth
quarter earnings but provided disappointing guidance. Shares of RIM fell by 11.23 percent to a four-month closing low.

Concerns about the financial stability of Portugal also limited the upside for the markets after Standard & Poor's downgraded
Portugal's credit ratings by two notches. S&P attributed the downgrade to a potential escalation in political uncertainly
following Prime Minister Jose Socrates' resignation, which came after his government lost a key vote on its latest austerity
package.

Sector News

Despite the pullback by the broader markets, significant strength remained visible among railroad stocks. The Dow Jones
Railroads Index advanced by 1.5 percent, ending the session at a record closing high.

Oil stocks also ended the day notably higher, driving the NYSE Arca Oil Index up by 1.3 percent. With the gain, the index ended
the day just shy of the two-year closing high it set earlier this month.

The strength among oil stocks came even though the price of crude oil closed modestly lower, with crude for May delivery
slipping $0.20 to $105.40.

Dow Components

Oil giants Chevron (CVX) and Exxon Mobil (XOM) turned in two of the Dow’s best performances, rising by 1.33 percent and
1.08 percent, respectively. The strong gains came even as the price of crude oil ended the day modestly lower.
IBM Corp. (IBM) also posted a significant gain, advancing by 1.34 percent. Shares of AT&T (T) also showed a strong upward
move, climbing by 1.09 percent to a two-month closing high.

Meanwhile, Shares of Hewlett-Packard (HPQ) fell by 1.3 percent on the day, limiting the upside for the Dow. Bank of America
(BAC) and Microsoft (MSFT) also posted notable losses.

Other Markets

Stock markets across the Asia-Pacific region closed mostly higher on Friday, extending a recent upward move. Japan’s
benchmark Nikkei 225 Index and Hong Kong’s Hang Seng Index both rose by 1.1 percent.

The major European markets also moved modestly higher over the course of the trading day. The U.K.’s FTSE 100 Index rose
by 0.3 percent, while the French CAC 40 Index and the German DAX Index edged up by 0.1 percent and 0.2 percent,
respectively.
In the bond markets, treasuries came under pressure in afternoon trading, extending a recent downward move. Subsequently,
the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4 basis points to 3.444 percent.

Looking Ahead

Thisweek, economic data is likely to be in focus, with traders likely to pay close attention to the monthly employment report due
on Friday.

Ahead of the jobs report, trading may be impacted by reports on personal income and spending, consumer confidence, and
weekly jobless claims.

Top

Sector Performance The


TRADINGMASTER
The
Top

The
Australian Stocks to Watch TRADINGMASTER

AAC - AUSTRALIAN AGRICULTURAL COMPANY LTD


Australian Agricultural Company Ltd (AAco) says it's buying about 53,000 head of branded cattle for $26 million from the
Tipperary Group (TG).

GRK - GREENROCK ENERGY LTD


BHP - BHP BILLITON LTD
GreenRock Energy Ltd says it has "encouraging" results from temperature logging at its joint venture geothermal heat project
with BHP Billiton Ltd in the Collie Basin, south of Perth.

IOF - ING OFFICE FUND


ING Real Estate Investment Management (ING) has transferred the management of the ING Office Fund (IOF) to Investa
Property Group and has sold Investa a 2.5 percent stake in the fund.

LYC - LYNAS CORPORATION LTD


FGE - FORGE GROUP LTD
Rare earths explorer Lynas Corporation Ltd's $20.7 million deal to sub-lease two assets to fellow explorer Forge Resources Ltd
has been declared fair by an independent expert.

SIP - SIGMA PHARMACEUTICAL LTD


Sigma Pharmaceutical Ltd has almost halved its full year net loss after announcing in December that a major supplier had
withdrawn.

TSV - TRANSERV ENERGY LTD


AAI - ALCOA INC
Transerv Energy says it expects to start drilling at its Warro onshore gas project, a joint venture with Alcoa 200km north of
Perth, in two weeks' time.
Upgrades
Clean Global Energy (CGV)
Its aim is to become a major global alternative energy company by utilising underground coal gasification (UCG). It involves
exploiting coal that’s typically uneconomical to mine through conventional processes. Recent agreements place the company at
the forefront of commercialising UCG across the world. In the US, Clean Coal Energy has a partnership with energy
multinational, AES Corporation, while in India CGV has a binding heads of agreement with energy major, Essar.

Corazon Mining (CZN)


An advanced nickel explorer with a JORC (Joint Ore Reserves Committee) compliant resource in one of Canada’s oldest historic
nickel provinces. The aim is to increase the resource to commercial status and a drill program is underway. CZN’s Lynn Lake
nickel sulphide project is situated in Canada’s third largest nickel mining region, with 22 million tonnes of nickel/copper/cobalt
ore mined between 1953 and 1976. There has been only minimal exploration since this time.

Woodside Petroleum (WPL)


Woodside’s shares are still in a long consolidation phase. But with the oil price above $US105 a barrel, we can expect significant
upside. On our numbers, Woodside will more than double total output per annum over the next ten years, while our forward
price expectations are positive for oil and gas. At these prices, WPL is a mid-to-long term buy and hold.

AMP (AMP)
Now that the takeover for AXA Asia Pacific is done, AMP shares can begin to do what they have done historically - follow the
S&P/ASX 200 index. Because of the usual hedge fund related short selling, which is common on bidding companies in large
takeover plays, AMP, before the Japan earthquake, did lag the upside price activity for the Australian index. We forecast AMP
shares to climb to $6 in coming months.

Ausdrill (ASL)
This diversified mining and services company reported a 71.7 percent increase in interim 2011 earnings on the previous
corresponding period. Management has increased earnings guidance and expects to provide the market with positive news flow
regarding new contract wins moving forward. ASL’s African business exposure has been strengthened by its strategic alliance
with Barminco, which is expected to grow the company’s revenue during the next two years.
Cape Lambert Resources (CFE)
This company offers shareholders exposure to its unique business model based on capitalising on early stage growth assets.
Resource opportunities are identified early. They are acquired, further developed then sold at a premium. CFE is predominately
a venture capitalist involved in iron ore, gold and copper. A well managed company that has the right commodity mix at the
right time.

Downgrades
Bathurst Resources (BTU)
A New Zealand coal company that’s generated a 60 percent return in the past three months. BTU owns a premium coking coal
deposit in NZ that can be developed on a modest scale to generate very strong earnings. Now is the right time to lock in some
profits. Sell half, but retain exposure to first coal production in this year’s fourth quarter and strong coal prices.

Cobar Consolidated Resources (CCU)


A silver producer that’s generated a 40 percent return in the past three months. CCU owns Wonawinta, which hosts Australia’s
largest undeveloped silver resource near Cobar in NSW, comprising more than 50 million ounces. Now is the right time to
pocket profits. Again, sell half, but retain exposure to first silver production in this year’s fourth quarter and record silver prices.
There’s more upside ahead.

BlueScope Steel (BSL)


The recent profit result came in below expectations and the forward outlook was also downgraded. Although steel prices are
good, volumes have been low. BSL’s factories are operating well below capacity and their input prices (iron ore and coal) are
rising. With a soft outlook and no way of telling when things might improve, BSL could continue to fall away. Avoid.

Qantas (QAN)
Rising oil prices are bad for airlines. Qantas recently announced another increase in the fuel surcharge levy to balance higher
input costs. In our view, this can only hurt demand for seats from people who are already hurting from higher petrol prices.
Sell.

Downer EDI (DOW)


Although Downer’s revenue increased 20 percent, its underlying EBIT (earnings before interest and tax) was down 6 percent.
The company has offered a 1-for-4 fully underwritten renounceable entitlement offer to raise $279 million. Although this would
enable the balance sheet to fund growth, the Waratah Rail project is a major cause for concern.
Mincor Resources NL (MCR)
The company missed analyst expectations across its nickel and coal production levels. Both mines, Mariners and Miitel,
experienced significant delays and lower production mostly due to manpower shortages. The company has renegotiated mining
agreements to develop higher-grade ore bodies, which will increase mining costs by about 15 percent. Investors will most likely
be able to buy the stock at a lower price in the future.

Top

The
Australian Company Review TRADINGMASTER

Datamotion Asia Pacific (DMN.AU), Australia's 30th largest software & services company by market capitalisation, has
strengthened above its trend. The 200-day moving average price (MAP) was 0.23c. The price to 200-day MAP ratio is 1.3, a
bullish indicator. In the past 200 days this ratio has exceeded 1.3 75 times suggesting further upside. The stock is trading above
both its MAPs and the 50-day MAP of 0.28c is higher than the 200-day MAP of 0.23c, another bullish indicator. The stock price
soared 0.10c (or 50.0%) to close at 0.30c, after a third day of trading unchanged at 0.30c. Compared with the All Ordinaries
index, which rose 77.4 points (or 1.7%) on the day, this was a relative price change of 48.3%.

1-day 1-month 1-year


Price Change %
DMN Unch 50%

Software & Services 0.4% -3.7% -55.8%

All Ordinaries 1.7% -6.2% -3.3%

TECHNICAL ANALYSIS

Uptrend

Resistance: the stock hit a new five-day high of 0.30c on decreased volume index of 0.1 on Friday. Previous rallies have been
met with firm resistance at 0.40c. Volume was 2.5 times average during the five occasions when the resistance price was
breached in the last three months. In the last three months the highest was at 0.40c on Jan 04, the second highest at 0.40c on
Jan 17. The third advance halted at 0.40c on Jan 25, the 4th at 0.40c on Jan 24. and the 5th at 0.40c on Jan 21.

PRICE VOLUME DYNAMICS

Volume: there were 900,000 shares worth $2,700 traded. The volume was 0.1 times average trading of 8,152,649 shares.

% Discount to high: the last price is at a discount of 40.0% to the 12-month high of 0.50c four months ago on 02 Dec, 2010.

PRICE PERFORMANCE RANK IN INDEX AND SECTORS

The stock is in 1 index and 2 sectors.

The following index and sectors rose setting the trend for its rise of 50.0%:
The Total Australian Market of 1361 stocks and 76 units traded today, which was up 67.9 points or 1.7% to 4,126.9,

All Ordinaries index which was up 77.4 points or 1.7% to 4,715.8,


Software & Services sector of 39 stocks traded today, which was up 10.4 points or 0.4% to 2,555.

1-day 1-month 6-months


Percentile Rank
DMN 100 76 97

Software & Services 38 66 39

All Ordinaries 49 56 45

RELATIVE VALUATION INDICATORS [RVI] TECHNICAL ANALYSIS


Bullish Signals;

- The price soared 50.0% in the last week.


- This has been propped up by high volume of 4.1 times average for the week.
- In the Australian market of 1,361 stocks and 76 units traded today, the stock has a 6-month relative strength of 97
which means it is beating 97% of the market.
- A price rise combined with a high relative strength is a bullish signal.
- The price to 200-day MAP ratio is 1.3, a bullish indicator. In the past 200 days this ratio has exceeded 1.3 75 times
suggesting further upside. The stock is trading above both its MAPs and the 50-day MAP of 0.28c is higher than the
200-day MAP of 0.23c, another bullish indicator.

Bearish Signals:

- The price to 50-day EMAP ratio is 0.97. In the past 50 days this ratio has been under 0.97 just eight times suggesting a
support level.

Breakout:

- The bulls are maintaining control with price open, high, low and close exceeding yesterday's levels.

SHAREHOLDER RETURNS

Trailing one week: the stock was unchanged three times (60% of the time), fell once (20% of the time) and rose once (20% of
the time). The volume was 4.1 times average trading of 40,763,245 shares.

Trailing one month: the stock was unchanged ten times (50% of the time), fell four times (20% of the time), rose four times
(20% of the time) and was untraded twice (10% of the time). The volume was 1.3 times average trading of 179,358,278 shares.
The value of $1,000 [vs $943 for the All Ordinaries index] invested a month ago is unchanged.

Trailing one year: the value of $1,000 invested one year ago is $1,500 [vs $999 for the All Ordinaries index], for a capital
gain of $500. The total return to shareholders for 1 year is 50.0%.
Trailing five years: the value of $1,000 invested five years ago is $429, for a capital loss of $571.

1-month 1-year
PV$1000
DMN $1,000 $1,500

Software & Services $966

All Ordinaries $943 $999

FINANCIALS

Half Yearly Report; year-on-year comparisons with previous corresponding period:


In the half year to December 31, 2010 net loss of $136,015.

Annual Report for the year ended June 30, 2010 (year-on-year comparisons with previous corresponding period)-

Favourable Changes: total revenue up 10.21% to $A391,336 ($US333,223); total liabilities to total assets down 77.73% to
0.1; Net tangible assets per share up 1.31% to $A0.00032 (US0.0c); total revenue to total assets up 4.02% to 0.6.

Unfavourable Changes: loss of $A1.5m ($US1.3m); EPS reduced 54.76% to -0.1 Australian cents (US-0.08c); losses in all of
the last 5 years; operating cash flow is negative; total number of shares outstanding up 64.23% to 1,560,901,845; Retained
earnings to total assets down 1.87% to 6,222.3%.

Major Common Size Ratios: total current assets to total assets up from 49.22% to 63.6%; cash to total assets up from
38.15% to 61.11%; total non-current assets to total assets down from 50.78% to 36.4%; fixed assets to total assets down from
35.73% to 24.73%; intangibles to total assets down from 15.05% to 11.67%; depreciation to sales down from 31.78% to 16.0%;
cost of goods sold to sales down from 8.02% to 0.001%.
FUNDAMENTALS

DMN Rank in Software & Services


Size
MCAP ($) 11.1 million 30

Assets ($) 625,213 64

Revenue ($) 391,336 59

ISSUED CAPITAL
Based on 3,690,022,710 issued equity shares the market capitalisation is $11.1 million. It is Australia's 64th largest Software &
Services company by assets.

ACTIVITIES
Datamotion Asia Pacific is a diversified Internet security, systems and services company based in Perth, Western Australia. The
Company is focused on generating transaction, storage and licensing revenues through its DataCentre and software.

Top

The
Mining for Bullish Plays in the Red-Hot Coal Sector TRADINGMASTER

Contrarian analysis points to ARLP and PCX as potential bullish picks


With coal stocks attracting attention in the wake of Japan's nuclear crisis, it seemed like an opportune time to highlight the
standouts in the sector -- namely, Alliance Resource Partners, L.P. (ARLP) and Patriot Coal Corporation (PCX).
So, with the entire coal sector attracting attention, what drew us to ARLP and PCX? The answer is simple: Both stocks boast
strong price action, combined with a preponderance of negative sentiment on Wall Street. From a contrarian perspective, this
combination suggests that ARLP and PCX could benefit as more and more skeptics capitulate to the bullish bandwagon.
To see what we mean at a glance, just look at the table below (both ARLP and PCX are highlighted). The two stocks have racked
up some of the best year-to-date returns within the sector, yet most analysts maintain a lukewarm "hold" or "sell" rating. Going
forward, this leaves ample room for future upgrades to draw more buyers to the table.

In fairness, sector peers MEE and AHGP also seem to have fewer "buy" ratings than their healthy year-to-date gains seem to
deserve -- but since the former is a takeover target, and the latter has only four analyst ratings to its name, it's probably best not
to impose too much contrarian significance on these statistics.
This leaves us with ARLP and PCX as our contrarian sector standouts. What do we like about these equities specifically? Here's
a quick breakdown of a few key indicators.
Turning to ARLP, the stock has soared nearly 99% during the past 52 weeks, boosted by double-barrelled support at its 10-week
and 20-week moving averages. In light of this positive price action, ARLP looks a little overdue for upgrades from the bearishly
biased brokerage community.
There's also room for ARLP to benefit from a shift in sentiment among traders. Despite the equity's technical prowess, options
players on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX
(PHLX) have bought to open 2.46 puts for every call on ARLP.
Plus, short interest rose by 18.9% during the most recent reporting period, and now accounts for more than 2% of the stock's
float. As ARLP extends its longer-term uptrend, these skeptics will eventually be forced to throw in the towel -- resulting in a
fresh influx of buying pressure.
Likewise, PCX has cruised higher since October 2010 along the support of its 80-day moving average, which neatly contained
the stock's most recent pullback. This continued uptrend will likely have short sellers hitting the exits -- despite a 12.6% drop
during the most recent reporting period, short interest still represents more than 9% of PCX's float.

In fact, PCX could be a particularly appealing play for option premium buyers. The stock's Volatility Scorecard is perched at a
lofty 99, suggesting that options are attractively priced relative to the likelihood of an outsized move in the shares. In other
words, option buyers seem to have a decent chance of generating more bang for their buck on a PCX play.
Overall, ARLP and PCX are two stocks to watch in the red-hot coal sector. With an improving fundamental backdrop, strong
price action, and a preponderance of skepticism surrounding both stocks, this duo could be poised to outperform during the
near term.

Top

The
China's Demand for Commodities Remains Strong TRADINGMASTER

despite Government Tightening


Commodities moved sideways in European session but oil, gold and silver prices stayed at elevated levels. Preliminary Chinese
PMI reading climbed in March, signalling acceleration in the momentum of manufacturing activities. Base metals should be
supported by the data. PGMs rebounded after plunging over the past 2 weeks. However, gains were limited as investors
remained worried about disruption on Japan's auto market after recent natural disasters and radiation leaks.
According to data China's manufacturing PMI rose to a 2-month high of 52.5 in March from 51.7 in the prior month. This is the
first increase in 4 months as driven by acceleration of output growth. A final reading will be released but judging from the
preliminary PMI, the Chinese government should feel comfortable to tighten further in coming months as economic growth has
remained resilient. In our opinion, inflationary pressure in China should slow by mid-year when accompanied with several
rounds of rate hikes and increases in RRR. The risk of hard landing has reduced and an improved long-term economic outlook
should be positive for base metals.

China's oil demand should remain strong in coming years. The former head of National Energy Administration said that the
country may exceed its 2015 energy demand forecast due to the growth of energy-intensive industry. In the new 5-year plan, the
government stated to reduce its energy intensity (the amount of energy required for every dollar produced in the economy) by
16-17% by the end of 2015. The government has also been aggressively developing renewable energies such as wind, solar and
nuclear energies. In our opinion, the predefined oil demand will likely be exceeded as China pauses construction of nuclear
plants after the nuclear crisis in Japan.

Platinum and palladium recouped most of the losses made after the earthquake and tsunami in Japan as several huge auto
makers said they will resume operations in coming weeks. However, demand for the metals will remain constrained for some
time as it may take several months before inventories and other parts of the industry are back to normal. Nissan said it will
resume production of parts at 5 plants on Monday before resuming vehicle production on Thursday. Meanwhile, Honda Motor
said it will suspend automobile production until Wednesday while Toyota Motor said it has shut its assembly plants through at
least Tuesday. The shutdown of plants in Japan has also affected carmakers in other countries. For example, GM said last week
that it would halt production at a plant that relies on Japanese-made transmissions for the 2 small pickups it produces. Some
plants in Germany and Spain were also closed. Traders for PGMs should remain cautious on the outlook of the global auto
market.

Top

The
Crude Oil Weekly Technical Outlook TRADINGMASTER

Nymex Crude Oil (CL)

Crude oil rebounded further to as high as 106.69 last week but lost momentum ahead of 106.95 resistance. Initial bias is neutral
this week with 4 hours MACD staying below signal line. Below 101.43 will bring another fall to extend the consolidation from
106.95. But downside is expected to be contained by 95.62 cluster support (50% retracement of 83.85 to 106.95 at 95.40) and
finally bring rally resumption. On the upside, a decisive break of 106.95 will confirm up trend resumption for 100% projection
of 64.23 to 92.58 from 83.85 at 112.20.

In the bigger picture, medium term rebound from 33.2 is still in progress and stronger rise should be seen towards 100%
projection of 33.2 to 83.95 from 64.23 at 114.98. Nevertheless, there is no change in the view that such rally is the second wave
of the consolidation pattern from that started at 147.27 (2008 high). Hence, we'd start to look for reversal signal again above
114.98 projection level. But after all, 83.85 support is needed to be the first sign of medium term reversal and break of 64.23 is
needed to confirm. Otherwise, outlook will remain bullish.

In the long term picture, rebound from 33.2 might not be finished yet. But overall view remains unchanged. Crude oil is in a
long term consolidation pattern from 147.27, with first wave completed at 33.2, second wave from there unfolding. Decisive
break of 64.23 support will confirm that the second wave is finished too and the third wave, which is a downward wave, should
have started.

Nymex Crude Oil Continuous Contract 4 Hours Chart Nymex Crude Oil Continuous Contract Daily Chart
Nymex Crude Oil Continuous Contract Weekly Chart Nymex Crude Oil Continuous Contract Monthly Chart

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The
Markets are more predictable than you thin TRADINGMASTER

Stock movements may seem irrational, but they tend to follow patterns even in times of crisis.

The threat of severe nuclear contamination from a breached Japanese nuclear reactor still looms. The outcome of the escalating
war in Libya is uncertain. Yet The Standard & Poor's 500 index ended the week up 2.7 percent. The Dow Jones industrial
average rose 3.1 percent. So what happened to all that headline-driven volatility from two weeks ago?

If you look at historical patterns, the week's rebound isn't so surprising. The numbers suggest stocks will likely keep rising for
the next few months.

Catastrophic events can move stock prices dramatically: at one point during the week after Japan's devastating earthquake and
tsunami, the Dow gave up all its gains for the year. Within six trading days it had returned to where it was before the disaster.

That may seem quick, but it's not. We have studied the effect on the Dow of six major disasters. In all but one case the index
declined at first, but returned to its pre-disaster level in an average of fewer than four days. In the fifth case, last year's oil spill
in the Gulf of Mexico, it didn't decline at all.
The Dow fell as much as 4.6 percent after each of the five other calamities: the 1979 nuclear accident at Pennsylvania's Three
Mile Island; the 1986 Chernobyl nuclear accident; the 6.9-magnitude earthquake that struck Kobe, Japan, in 1995; the 2004
Indian Ocean Tsunami; and Hurricane Katrina in 2005. The longest it took the Dow to recover was 15 days, after the Kobe
earthquake. In the case of Chernobyl, the Dow recovered in a day. In that context, last week's stock recovery took slightly longer
than average.

There's another clue that the rebound is for real, in spite of the recent dips and leaps in the market. It can be found in the 50-
day moving average of the S&P 500, which measures the average value of the index over the most recent 50 days.

Comparing an index level to its moving average shows what general direction the market is taking, without the interference of
short-term spikes and plunges. Analysts fretted when the S&P 500 fell below its 50-day moving average on March 10. On
Thursday, it climbed back above the average.

But the moving average can also signal longer-term trends. Before March 10, the S&P 500 had stayed above its 50-day moving
average for more than 100 days. That has only happened five other times since 1980. After each of those blocks ended, the
index rose by an average of 6 percent in the following three months. Four out of those five times, it rose an average of 3.3
percent after just a month.

Then there's the macroeconomic view that sayss stocks are probably safe from a steep drop for the next six months. We expect
the economy to follow the patterns of the last three recessions.

In the last three economic downturns, the Federal Reserve started to unwind the interventions it had made to keep markets
afloat well after the economic picture started to improve. In the six-month periods leading up to each of those turning points in
Fed policy a "sweet spot," the economy is in one now.

The Fed raised interest rates in May 1983, six months after the economy began to recover from the 1981-1982 recession. The
Fed waited nearly three years to raise rates after the recession that lasted from July 1990 to March 1991. And in January 2004,
three years after an eight-month recession, the Fed reversed its "unconventional policy" of pledging to keep interest rates low,
although it didn't raise rates until June.

We expect the Fed to end its purchases of Treasurys, allow its balance sheet to shrink, and eventually raise interest rates
between September and November. In past sweet spots, the S&P 500 didn't fall more than 7 percent. That's less than the 10
percent drop market analysts call a "correction," or a temporary downturn within a bull market.

If you're really getting into the middle of a business cycle, even if you're getting shocks to growth, you shouldn't be seeing a 10
percent correction.

Even though the impact of major disasters on the market has typically been short-lived, it's important to remember that Japan's
nuclear crisis isn't resolved yet and the long-term economic effects of the disaster are uncertain.

In a worst-case scenario, a cloud of radioactive steam could reach Tokyo, crippling the world's third-largest economy. For the
quake and its nuclear aftermath to dent global growth, there would have to be "some sort of extended shutdown in the Japanese
economy and a major shutdown in the supply chain" of weeks or months. That possibility is small, and the market seems to
have taken that into account.

From a distance, the market can seem prone to unpredictable swings. Yet even as a long list of international threats rattle
investors, stocks are still moving more or less by the numbers.

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The
Good and bad news for Apple at the ITC TRADINGMASTER

Commission says Apple did not infringe Nokia patents, but reawakens probe into whether it violated Kodak's

Apple lawyers spend a lot of time talking to the US International Trade Commission these days, and Friday saw good and bad
news for the iPhone maker. On the plus side, a judge said the firm did not infringe five Nokia patents, but another judge said
the ITC would review an earlier decision in favour of Apple and RIM, in a dispute with Kodak. If that goes against the handset
makers at the final hearing in late May, it could add more than $1bn to the photography giant's revenues, said Kodak CEO
Antonio Perez.
In a blow to Apple and RIM, the ITC said it would review a January ruling that the OEMs did not infringe Kodak patents in
their smartphones. The Commission could now rule that, in fact, the patents are being infringed, which would force the vendors
to make a licensing deal with Kodak, or see the offending products - including the iPhone - barred from being imported into the
US.
Eastman Kodak is asserting its digital imaging IPR aggressively as smartphones become increasingly media-oriented. The firm
settled with Samsung and LG last year and then went after the north American smartphone majors. It alleges various
infringements, particularly of patents related to previewing of images. There are also two additional suits against Apple, in the
US District Court for the western district of New York. One relates to image preview, and the ability to process images of
different resolutions, and is specific to the iPhone. The second concerns computer processes and extends to any Apple product
that uses these.
Kodak says it has held talks with both vendors over several years, but failed to resolve the issue amicably. "Our primary interest
is not to disrupt the availability of any product but to obtain fair compensation for the use of our technology," said Kodak chief
intellectual property officer Laura Quatela in a statement in January.
The firm licenses its digital imaging technology to about 30 companies, including Nokia, LG, Motorola, Samsung and Sony
Ericsson. Its legal precedent appears to be favourable - the patents in the second Apple suit were also involved in Kodak's 2002
suit against Sun Java, which it won two years later. Kodak has more than 1,000 digital imaging patents, and almost all of
today's digital cameras rely on that technology.
Separately on Friday, an ITC judge ruled that Apple does not infringe on five Nokia patents. As with the Kodak initial decision,
the rest of the ITC panel now has the chance to review that ruling, so it could be changed or even reversed in subsequent
rounds. The ITC is also investigating Apple's own claims of patent infringement against Nokia.

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The
As China Unveils Tax, Rare Earths Stocks Still Soaring TRADINGMASTER

Rare Earth stocks continued their strong move higher on Thursday. Momentum moves are pushed the Rare Earths Stocks
Index up another 4.3%, and the Index has jumped 20% in the past week. Meanwhile news continues to come out of China, the
world's largest exporter of rare earths metals commonly said to control 95% of the market.

China plans to levy a tax of about $9 per ton starting April 1 according to Xinhua. The tax will increase production costs for
Chinese rare earth producers, though only nominally, as rare earths prices just surpassed $100,000 per ton for the first time in
February.

Molycorp (NYSE: MCP), the largest U.S.-based rare earths miner, continues to shine, surging 8% to add to a 31% gain over the
past week. Rare Element Resources (AMEX: REE) is up 4% and has gained 32% in the past week. Summit Atom Rare Earth
Co, co-owned by Kazakh state uranium miner Kazatomprom plans to start producing 1,500 tonnes a year of rare earths.

Avalon Rare Metals (AMEX: AVL ) enjoyed another solid day with a 2% gain while Lynas Corporation (Pink Sheets:
LYSCF) was up 4%. Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX), the rare earths ETF, was up 2%
and has soared 13% in the past week.

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The
What Drives The Price Of Gold? TRADINGMA

The ancient Egyptians performed the first smelting of gold circa 3,600 BC. A thousand years later, gold jewellery appeared as
the goldsmiths of ancient Mesopotamia crafted a burial headdress made of lapis, carnelian beads and leaf-shaped gold
pendants. Since these early days, mankind has been fascinated by gold, and the desire to own it has led to great gold rushes and
to wars: King Ferdinand of Spain declared in 1511, "Get gold, humanely if you can, but at all hazards, get gold!"
Today, gold is sought after not only for investment purposes and a strong jewellery market, but it is also used in the
manufacturing of certain electronic and medical devices. Gold (as of March 27th 2011) was $1,426.80 per ounce and making
record highs. What factors drive the price of this precious metal?

Central Bank Reserves


Central banks hold paper currencies and gold in reserve. The World Gold Council has stated that central banks have recently
begun buying more gold than they are selling, the first time this has happened in decades. As the central banks diversify their
monetary reserves - away from the paper currencies they've accumulated and into gold - the price of gold rises. Many of the
world's nations have reserves that are composed primarily of gold, including the United States, Germany, Italy, France,
Portugal, Greece and the Euro area.
Value of the U.S. Dollar
The price of gold is generally inversely related to the value of the United States dollar: a stronger U.S. dollar tends to keep the
price of gold lower and more controlled; a weaker U.S. dollar is likely to drive the price of gold higher. This is because people
have a tendency to invest and trade in dollars when the dollar is strong. During times of economic uncertainty and when the
dollar is weak, however, people prefer to invest in gold, through vehicles such as gold funds or coins.

Worldwide Jewellery and Industrial Demand


In 2010, jewellery accounted for approximately 54% percent of gold demand, which totalled 3,812 tonnes, according to the
World Gold Council and The London Bullion Market Association. India, China and the United States are the largest consumers
of gold for jewellery in terms of volume. Consumer demand in China, for example, for the first two months of 2011 reached 200
tonnes - a huge increase over the previous year, which took 10 months to reach 209 tonnes. Another 12% of demand is
attributed to medical and industrial uses for gold, where it is used in the manufacturing of medical devices like stents and
precision electronics like GPS units. Gold prices can be affected by the basic theory of supply and demand: as demand for
consumer goods such as jewellery and electronics increase, the cost of gold can rise.
Wealth Protection
During times of economic uncertainty, as seen during the recession of the late 2000s, more people turn to investing in gold
because of its enduring value. Gold is often considered a "safe haven" for investors during uncertain times. When the expected
or actual returns on bonds, equities and real estate fall, the interest in gold investing increases, driving up its price. Gold can be
used as a hedge against currency devaluation, inflation or deflation. In addition, gold is viewed as providing protection from
political instability, as evidenced by the recent unrest in the Middle East and North Africa (MENA), which may be partly
responsible for gold's recent rally to new highs.
Gold Production
Major players in worldwide gold mining include China, South Africa, the United States, Australia, the Russian Federation and
Peru. The world's gold production affects the price of gold, another example of supply and demand. Gold mine production
increased by about three percent in 2010 to about 2,652 tonnes, according to GFMS as several new large-scale mines began
operations. Despite this small increase, however, gold mine production has been in a decline since the early 2000s. One factor
is that all the "easy gold" has already been mined; miners now have to dig deeper to access quality gold reserves. The fact that
gold is more challenging to access raises additional problems: the miners are exposed to additional hazards, and the
environmental impact is heightened. In short, it costs more to get less gold. These add to the costs of gold mine production,
resulting in rising gold prices.

The Bottom Line


We have long been, and will likely continue to be, enamoured by gold. The recent recession has stirred a modern day gold rush.
Discovery Channel's Gold Rush: Alaska, a reality show about a team of inexperienced miners hoping to strike it rich in Alaska's
backcountry, brought in more than 4 million Friday-night viewers. The Gold Prospectors Association of America, a group that
caters to recreational miners, saw membership nearly double in 2008 as the gold bug spreads. The demand for gold, the
amount of gold in the central banks' reserves, the value of the U.S. dollar and the desire to hold gold as a hedge against inflation
and currency devaluation, all help drive the price of gold, one of the world's precious metals.

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The
Japan, Uranium & Cameco (CCJ) TRADINGMASTER

Uranium and nuclear power stocks are the most directly impacted by events in Japan. In our view, this isn’t the time to sell
uranium stocks, including Cameco Corp. (CCJ).
Investors looking for a roadmap of what’s likely to transpire over the next few weeks should recall the Macondo Oil spill in the
Gulf of Mexico in late April 2010.

In the immediate aftermath of the spill any stock leveraged to the Macondo well, or even vaguely tied to deepwater drilling, got
slammed as investors panicked and sold indiscriminately.

Over time, cooler heads began to prevail. Investors came to realize that the industry wasn’t going away and that the world still
needed deepwater oil production.
Months later, evidence mounted suggesting the environmental impact was far lower than the early fear-mongering doomsayers
had projected.

Deepwater drilling activity in the US will take time to recover in the wake of the moratorium, but the height of the panic proved
an epic buying opportunity for energy stocks, especially those leveraged to offshore spending.

The bad news: As was the case after the Gulf spill, the panic will take time to recede, these stocks will be volatile for some time
to come, and we can’t rule out more near-term downside.

The good news: The doomsayers are blowing the environmental risks way out of proportion with reality, the long-term growth
story is intact, and this will ultimately prove an outstanding buying opportunity.

Cameco Corp is the 800-pound gorilla of the uranium market. It aims to double its annual uranium output from slightly less
than 22 million pounds to about 40 million pounds by 2018.

The company is on track to meet that goal as it expands production at existing mines and brings new mines into production.

The stock is a bit of a defensive play on rising uranium prices; about 40 percent of its output is locked in under long-term, fixed
price deals.

Yes, the hit to Cameco from the situation in Japan will be painful, and you can expect more volatility over the next few weeks.
But leaning against a media-fuelled panic situation is the best move. Buy Cameco Corp up to 42.

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The
TRADINGMASTER
Japan's impact on US nuclear utility stocks

There’s still a lot we don’t know about Japan's nuclear crisis. We’ve seen a massive sell-off of in all things nuclear. In our view,
this drop will be reversed as the situation calms down.

Here, we review the impact of these on-going developments on the major utilities in the US that are involved in operator and
building nuclear facilities -- including some that remain compelling investment ideas.

For one thing, the countries driving the global nuclear building boom -- namely China and Russia -- are unlikely to panic and
abandon construction programs that are well underway, and both are using far different designs than the Japanese plants.

Although the disaster may drive some modifications, China in particular is anxious to both meet surging power demand and
limit its future dependence on imported coal, which has already made electricity prices extremely volatile.

Neither is the US likely to do anything drastic, despite the swell of hysteria in some quarters. Nuclear now contributes some 22
percent of US electricity production and is arguably the cheapest and most reliable baseload power.

It’s simply impossible to take that much power off the market all at once, particularly with demand climbing again.
Finally, the two companies in the US now building nukes -- SCANA Corp. (SCG) and Southern Company (SO) -- operate in
states that support them and, again, they’re using far more advanced designs than the Japanese reactors.
There are, however, a couple of situations to watch. One is in California, where the two major nuclear power plants--Diablo
Canyon and San Onofre--have long been criticized for their vulnerability to earthquakes.

San Onofre is jointly owned by Edison International (EIX) and Sempra Energy (SRE) and is actually being deemphasized
by both companies.

Diablo Canyon, in contrast, remains very important for PG&E Corp. (PCG). Shutting it, though unlikely immediately, would
be a blow to the company, which we have rated a 'sell' for several months due to gas safety and regulatory issues.

Back east, Entergy Corp. (ETR) is battling with the state of Vermont over relicensing the Vermont Yankee plant.

The Nuclear Regulatory Commission has now said it will grant a 20-year license extension for the facility but the state--now run
by an anti-nuclear governor and legislature--is likely to fight it tooth and nail, which will force a shutdown in 2012.

A final shutdown wouldn’t be a financial burden to Entergy, as it’s now only breaking even on the facility.

The Japanese crisis, however, could well make things more difficult to keep running the company’s Indian Point plant, which
would have a financial impact were it to be shut.

The good news is these risks are now well baked into Entergy’s share price. In fact, the company was upgraded by a major
brokerage on the last two days’ drop in its share price.

The Mid-South utilities operation is thriving and more than covers the dividend (nearly 5 percent) on its own by a wide margin.

S&P last week actually raised the credit rating of the Entergy New Orleans unit, a clear sign that division has now fully
recovered from Hurricane Katrina.

In our view, it’s an equally compelling reason for Entergy shareholders to weather this storm and stick with this great company.
We continue to rate Entergy Corp a buy up to 80.

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The
The Most Profitable Investing Trends Right Now TRADINGMASTER

The stock market has been very volatile the last few years. While volatility brings risk, but it also brings opportunities for large
gains if you are able to spot the right trends early. Here are some of the most profitable investing trends right now.

1. Cloud Computing
A big trend in computing is offloading your local computing and data storage needs into the cloud. Ultimately, the cloud
computing movement sees individual computers becoming primarily web terminals used to connect to powerful servers hosting
our personal and business data, as well as web-based applications.

There are very few good pure-play companies in cloud computing. Amongst publicly-traded names, one of the leaders in cloud
computing is Amazon (AMZN) with its EC2 virtual computing environments. Google (GOOG) is also a major player in the field
with its web-based Google Docs service, as well as its Google Apps for Business line. Microsoft (MSFT) is also in the game with
its Business Productivity Suite and its Office 365 offering.

2. Tablet PCs
Almost every major computer maker is debuting new tablet computers this year. The tablet segment is expected to grow quickly
over the next few years, with one research firm projecting a growth from approximately 4 million units sold in 2010 to 57
million units being sold in 2015. A clear leader in the field is Apple (AAPL), with over 75% of the worldwide market share. In
addition, Apple's Ipad 2 is expected to start shipping soon.

Another perspective is that Google's Android-based systems may be where the real growth is. In the fourth quarter of 2010,
Android-based systems went from 2.3% market share to nearly 21.6%. Unfortunately there is not a good pure-play on Android
tablets, since major computer makers sell a wide variety of systems. Investors may want to look into the profit-boosting
potential of Dell's (DELL) new tablet or HP's (HPQ) TouchSmart series of tablets. Another idea would be to look into Intel
(INTC) which makes the processors powering most non-Apple tablets.

3. Solar/Alternative Energy
Alternative sources of energy are gaining in popularity, but as an investor, you have to be careful where you put your money.
For example, the Market Vectors Global Alternative Energy ETF (GEX) has delivered a negative-50% return since its inception
in 2007. The alternative energy sector includes a lot of yet-unproven technologies and small early-stage firms, which presents a
high risk for investors. You may want to be more selective and pick out some of the better individual firms. First Solar, Inc.
(FSLR) is one of the biggest names, with a $13 billion market cap; it is up nearly 5000% since 2007.

4. Streaming Movies
Watching streaming movies and television shows on demand is quickly catching on as a preferred method of media delivery.
The old style physical rental chains, like Blockbuster, are fast disappearing from the competitive landscape.

The leader in streaming movies is Netflix (NFLX), which is up approximately 700% over the past five years. New investors may
wish to exercise caution, however, since Netflix is currently trading at relatively high valuation levels, and several major
companies seem to be eyeing an entrance into the market. The most interesting new entrant to the space is Amazon. Amazon
launched its new streaming video service on February 22, 2011 which makes approximately 5,000 titles available on demand
for free to Amazon Prime members.

5. Lithium
Commodities as an asset class have seen a tremendous run-up in price over the last several years. One of the more compelling
long-term commodity stories is lithium, where increased demand is expected for the metal for use in batteries. Lithium
batteries are used in electric cars, so if plug-in electric vehicles catch on, that may be a very large new source of demand.

If you are looking for a broad exposure to lithium, you may be interested in the Global X Lithium ETF (LIT) which is up 30%
since its inception in 2010. One of the major individual names in lithium is the Chemical and Mining Company of Chile (SQM)
which is up about 350% over the last five years.

The Bottom Line


These investing trends have been very profitable for investors who got in early. If you are considering investing now, conduct
careful research to make sure you aren't buying in at overvalued levels. Another approach would be to analyze these trends,
identify common themes, and try to spot a new trend in the early stages.

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Top Commodity Producers with the Highest The
TRADINGMASTER
Upside Potential

The best performing stocks in the market are usually the highest growing stocks or the stocks with the highest expected growth
rates. This doesn’t mean that one should be invested in growth stocks and stay away from the value stocks at all times.
Historically value stocks managed to beat the growth stocks hand over fist. The reason is simple. Value stocks are beaten down
stocks with very low or negative growth expectations. Not surprisingly it is easier for these stocks to beat the expectations on the
average. On the other hand, everybody is extremely bullish about growth stocks and expect them to have higher growth rates in
the future. Their stock prices also reflect this fact. Not surprisingly, it is more difficult for these stocks to beat these challenging
expectations.

We ranked the commodity producers based on their expected 5-year growth rates. Contrarian investors should look into the
stocks that are at the top of the table.

Company Symbol Market Forward Expected 5-Year


Cap PE Growth Rate
Sterlite Industries India Limited SLT 47.26B 7.64 (17.8)
Sociedad Quimica y Minera SQM 13.80B 26.34 0.1
Newmont Mining Corporation NEM 24.92B 11.09 0.7
Sasol Limited SSL 34.51B 10.16 1.7
Weyerhaeuser Company WY 13.08B 23.84 1.8
Barrick Gold Corporation (USA) ABX 48.21B 12.5 2.0
International Paper Company IP 11.58B 8.01 2.1
Freeport-McMoRan FCX 49.40B 7.88 2.3
International Flavors & Fragrances IFF 4.65B 14.18 2.8
Teck Resources Limited TCK 31.64B 8.15 3.8
The Dow Chemical Company DOW 41.89B 10.9 5.2
Mechel OAO MTL 12.29B 8.51 6.4
Yamana Gold Inc. (USA) AUY 8.89B 12.4 6.5
EI du Pont de Nemours DD 48.25B 12.78 7.0
Celanese Corporation CE 6.18B 8.75 7.3
Albemarle Corporation ALB 4.97B 12.36 7.4
Sigma-Aldrich Corporation SIAL 7.48B 16 7.7
Kinross Gold Corporation (USA) KGC 16.33B 18.34 7.9
FMC Corporation FMC 5.45B 11.71 8.3
MeadWestvaco Corp. MWV 4.70B 13.35 8.4
Ball Corporation BLL 6.01B 11.18 8.4
Air Products & Chemicals, Inc. APD 18.32B 13.75 8.8
Rio Tinto plc RIO 126.71B 6.52 9.3
Vale VALE 165.12B 6.67 9.4
CF Industries Holdings, Inc. CF 9.30B 10.35 9.6
Precision Castparts Corp. PCP 20.19B 16.88 9.7
Parker-Hannifin Corporation PH 14.24B 12.41 10.3
Alumina Limited AWC 5.30B 11.25 10.3
Eastman Chemical Company EMN 6.72B 10.64 10.3
Praxair, Inc. PX 29.08B 16.06 10.4
Ashland Inc. ASH 4.57B 11.93 10.7
PPG Industries, Inc. PPG 14.12B 13.31 10.8
Nucor Corporation NUE 14.32B 12.23 10.8
The Mosaic Company MOS 34.46B 14.42 10.8
The Timken Company TKR 4.76B 11.01 11.1
Companhia Siderurgica Nacional SID 23.81B 6.33 11.3
Airgas, Inc. ARG 5.18B 16.65 11.6
Potash Corp./Saskatchewan (USA) POT 142.00B 14.6 12.2
Eldorado Gold Corporation (USA) EGO 8.53B 16.13 12.2
Monsanto Company MON 36.07B 19.96 12.6
Alcoa Inc. AA 16.94B 11.19 13.2
Ternium SA TX 6.92B 8.52 13.3
POSCO PKX 33.52B 8.49 14.2
BHP Billiton plc BBL 203.47B 9.67 14.4
Compania de Minas Buenaventura BVN 10.72B 11.67 16.0
Harmony Gold Mining Co. HMY 5.12B 11.92 16.8
Lubrizol Corporation LZ 8.60B 10.79 17.4
Gerdau SA GGB 18.56B 6.19 17.7
ArcelorMittal MT 52.67B 8.4 17.9
Agrium Inc. (USA) AGU 14.11B 11.29 17.9
United States Steel Corporation X 7.90B 8.97 19.1
Southern Copper Corp SCCO 34.59B 10.28 27.8
Allegheny Technologies Inc ATI 6.19B 15.01 34.9
Agnico-Eagle Mines Limited (USA) AEM 10.97B 20.35 35.1
Goldcorp Inc. (USA) GG 37.07B 18.4 37.6
IAMGOLD Corporation (USA) IAG 7.53B 16.29 67.9
AngloGold Ashanti Limited AU 16.86B 11.67 72.9

Prominent hedge funds are extremely bullish about gold and gold producers. John Paulson, who made $5 Billion in 2010 from
his hedge fund, prefers Kinross Gold Corp (KGC), Anglogold Ashanti (AU), Novagold Resources Inc (NG), Randgold Resources
(GOLD), and Barrick Gold Corp. (ABX). Jim Simons’ Renaissance, Ray Dalio’s Bridgewater, and Brevan Howard are among the
hedge funds with Newmont Mining positions.

Most hedge funds are already invested in Potash (POT) or CF Industries (CF) to take advantage of soaring food prices. John
Burbank's Passport Capital, David Einhorn's Greenlight, Daniel Loeb’s Third Point, Tom Steyer’s Farallon Capital, Andreas
Halvorsen’s Viking Global, Jim Simons’ Renaissance, Richard Perry’s Perry Capital and Mohnish Pabrai bet on Potash. CF
Industries is one of the 10 stocks hedge funds own the most of.

Jim Rogers is insanely bullish about these stocks, saying that commodities will increase no matter what happens in the global
economy. The question is whether one should invest in commodity producers with low expected growth or high expected
growth.

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The
Tip of the Week TRADINGMASTER

The Essentials of Corporate Cash Flow


If a company reports earnings of $1 billion, does this mean it has this amount of cash in the bank? Not necessarily. Financial
statements are based on accrual accounting, which takes into account non-cash items. It does this in an effort to best reflect the
financial health of a company. However, accrual accounting may create accounting noise, which sometimes needs to be tuned
out so that it's clear how much actual cash a company is generating. The statement of cash flow provides this information, and
here we look at what cash flow is and how to read the cash flow statement.
What Is Cash Flow?
Business is all about trade, the exchange of value between two or more parties, and cash is the asset needed for participation in
the economic system. For this reason - while some industries are more cash intensive than others - no business can survive in
the long run without generating positive cash flow per share for its shareholders. To have a positive cash flow, the company's
long-term cash inflows need to exceed its long-term cash outflows.

An outflow of cash occurs when a company transfers funds to another party (either physically or electronically). Such a transfer
could be made to pay for employees, suppliers and creditors, or to purchase long-term assets and investments, or even pay for
legal expenses and lawsuit settlements. It is important to note that legal transfers of value through debt - a purchase made on
credit - is not recorded as a cash outflow until the money actually leaves the company's hands.

A cash inflow is of course the exact opposite; it is any transfer of money that comes into the company's possession. Typically,
the majority of a company's cash inflows are from customers, lenders (such as banks or bondholders) and investors who
purchase company equity from the company. Occasionally cash flows come from sources like legal settlements or the sale of
company real estate or equipment.

Cash Flow vs Income


It is important to note the distinction between being profitable and having positive cash flow transactions: just because a
company is bringing in cash does not mean it is making a profit (and vice versa).

For example, say a manufacturing company is experiencing low product demand and therefore decides to sell off half its factory
equipment at liquidation prices. It will receive cash from the buyer for the used equipment, but the manufacturing company is
definitely losing money on the sale: it would prefer to use the equipment to manufacture products and earn an operating profit.
But since it cannot, the next best option is to sell off the equipment at prices much lower than the company paid for it. In the
year that it sold the equipment, the company would end up with a strong positive cash flow, but its current and future earnings
potential would be fairly bleak. Because cash flow can be positive while profitability is negative, investors should analyze
income statements as well as cash flow statements, not just one or the other.

What Is the Cash Flow Statement?


There are three important parts of a company's financial statements: the balance sheet, the income statement and the cash flow
statement. The balance sheet gives a one-time snapshot of a company's assets and liabilities. And the income statement
indicates the business's profitability during a certain period.

The cash flow statement differs from these other financial statements because it acts as a kind of corporate checkbook that
reconciles the other two statements. Simply put, the cash flow statement records the company's cash transactions (the inflows
and outflows) during the given period. It shows whether all those lovely revenues booked on the income statement have actually
been collected. At the same time, however, remember that the cash flow does not necessarily show all the company's expenses:
not all expenses the company accrues have to be paid right away. So even though the company may have incurred liabilities it
must eventually pay, expenses are not recorded as a cash outflow until they are paid.

The following is a list of the various areas of the cash flow statement and what they mean:

• Cash flow from operating activities - This section measures the cash used or provided by a
company's normal operations. It shows the company's ability to generate consistently positive
cash flow from operations. Think of "normal operations" as the core business of the company.
For example, Microsoft's normal operating activity is selling software.
• Cash flows from investing activities - This area lists all the cash used or provided by the
purchase and sale of income-producing assets. If Microsoft, again our example, bought or
sold companies for a profit or loss, the resulting figures would be included in this section of
the cash flow statement.
• Cash flows from financing activities - This section measures the flow of cash between a firm
and its owners and creditors. Negative numbers can mean the company is servicing debt but
can also mean the company is making dividend payments and stock repurchases, which
investors might be glad to see.

When you look at a cash flow statement, the first thing you should look at is the bottom line item that says something like "net
increase/decrease in cash and cash equivalents", since this line reports the overall change in the company's cash and its
equivalents (the assets that can be immediately converted into cash) over the last period. If you check under current assets on
the balance sheet, you will find cash and cash equivalents (CCE or CC&E). If you take the difference between the current CCE
and last year's or last quarter's, you'll get this same number found at the bottom of the statement of cash flows.

In the sample Microsoft annual cash flow statement (from June 2004) shown below, we can see that the company ended up
with about $9.5 billion more cash at the end of its 2003/04 fiscal year than it had at the beginning of that fiscal year (see "Net
Change in Cash and Equivalents"). Digging a little deeper, we see that the company had a negative cash outflow of $2.7 billion
from investment activities during the year (see "Net Cash from Investing Activities"); this is likely from the purchase of long-
term investments, which have the potential to generate a profit in the future. Generally, a negative cash flow from investing
activities are difficult to judge as either good or bad - these cash outflows are investments in future operations of the company
(or another company); the outcome plays out over the long term.
The "Net Cash from Operating Activities" reveals that Microsoft generated $14.6 billion in positive cash flow from its usual
business operations - a good sign. Notice the company has had similar levels of positive operating cash flow for several years. If
this number were to increase or decrease significantly in the upcoming year, it would be a signal of some underlying change in
the company's ability to generate cash.

Digging Deeper into Cash Flow


All companies provide cash flow statements as part of their financial statements, but cash flow (net change in cash and
equivalents) can also be calculated as net income plus depreciation and other non-cash items.

Generally, a company's principal industry of operation determine what is considered proper cash flow levels; comparing a
company's cash flow against its industry peers is a good way to gauge the health of its cash flow situation. A company not
generating the same amount of cash as competitors is bound to lose out when times get rough.

Even a company that is shown to be profitable according to accounting standards can go under if there isn't enough cash on
hand to pay bills. Comparing amount of cash generated to outstanding debt, known as the operating cash flow ratio, illustrates
the company's ability to service its loans and interest payments. If a slight drop in a company's quarterly cash flow would
jeopardize its loan payments, that company carries more risk than a company with stronger cash flow levels.

Unlike reported earnings, cash flow allows little room for manipulation. Every company filing reports with the Securities and
Exchange Commission (SEC) is required to include a cash flow statement with its quarterly and annual reports. This statement
tells the whole story of cash flow: either the company has cash or it doesn't.

What Cash Flow Doesn't Tell Us


Cash is one of the major lubricants of business activity, but there are certain things that cash flow doesn't shed light on. For
example, as we explained above, it doesn't tell us the profit earned or lost during a particular period: profitability is composed
also of things that are not cash based. This is true even for numbers on the cash flow statement like "cash increase from sales
minus expenses", which may sound like they are indication of profit but are not.
As it doesn't tell the whole profitability story, cash flow doesn't do a very good job of indicating the overall financial well-being
of the company. Sure, the statement of cash flow indicates what the company is doing with its cash and where cash is being
generated, but these do not reflect the company's entire financial condition. The cash flow statement does not account for
liabilities and assets, which are recorded on the balance sheet. Furthermore accounts receivable and accounts payable, each of
which can be very large for a company, are also not reflected in the cash flow statement.

In other words, the cash flow statement is a compressed version of the company's checkbook that includes a few other items
that affect cash, like the financing section, which shows how much the company spent or collected from the repurchase or sale
of stock, the amount of issuance or retirement of debt and the amount the company paid out in dividends.

The Bottom Line


Like so much in the world of finance, the cash flow statement is not straightforward. You must understand the extent to which a
company relies on the capital markets and the extent to which it relies on the cash it has itself generated. No matter how
profitable a company may be, if it doesn't have the cash to pay its bills, it will be in serious trouble.

At the same time, while investing in a company that shows positive cash flow is desirable, there are also opportunities in
companies that aren't yet cash-flow positive. The cash flow statement is simply a piece of the puzzle. So, analyzing it together
with the other statements can give you a more overall look at a company' financial health. Remain diligent in your analysis of a
company's cash flow statement and you will be well on your way to removing the risk of one of your stocks falling victim to a
cash flow crunch.

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