Saving the bond insurers: 5 fixes for the crisis

Just about everyone seems to have an idea on how to fix the troubled bond insurers and stave off a crisis that threatens to send the financial services sector into disarray.

Divide and survive
The plan: When testifying before Congress last week, New York Gov. Eliot Sptizer and State Insurance Superintendent Eric Dinallo told lawmakers that the best solution would be to recapitalize the bond insurers. If that failed, they would break up these firms into a "good bank" that would manage their healthy municipal bond insurance business, and a "bad bank" to oversee the smaller structured finance arm. Each division would remain part of a holding company.

The prospects: Likely. Of all the different solutions being floated, this proposal has garnered the most interest. After the bond insurer FGIC was downgraded last week by Moody's, the company asked Dinallo's office for permission to break itself up. Its larger rivals Ambac and MBIA are also reportedly considering similar moves.

A break-up would prevent cities and towns - which buy insurance on bonds they sell to raise money for projects like roads, schools and bridges - from getting saddled with higher borrowing costs. But it is widely believed that, after a split, the structured finance arm would wither and die, meaning downgrades on the asset-backed securities issued by Wall Street and more writedowns.

Uncle Warren to the rescue
The plan: A little over a week ago, Warren Buffett proposed a bold solution for the bond insurance crisis by offering to take over $800 billion of the industry's municipal bond obligations.

Under his plan, companies like Ambac and MBIA would focus on their troubled structured finance arm, which are the source of the industry's woes.

The prospects: Slim to none. Even though the announcement of the plan garnered significant attention, it appears unlikely that any of the companies approached will accept the deal; one firm has already rejected the offer, according to Buffett. More importantly, the plan would impose a pretty stiff premium on the bond insurers, while they would lose control of their low-risk and profitable municipal bond business.

Can you spare $15 billion?
The plan: When New York Insurance Superintendent Eric Dinallo implored some of Wall Street's top firms to kick in about $15 billion to help bail out the capital-squeezed bond insurers late last month, their responses were only moderately better than a cold-shoulder.

While major financial firms have a vested interest in keeping the insurers afloat, they have their own capital problems after losing billions as a result of the credit crisis.

The prospects: Possible. While a bank bailout plan seems unlikely, it is not off the table. A coalition of banks including Citigroup, BNP Paribas, Wachovia and UBS are reportedly working on a bailout plan of Ambac, the nation's second-largest bond insurer. One considerable risk, however, is that there is no indication that a one-time capital infusion would save these troubled firms' credit ratings. Sean Egan of independent ratings shop Egan-Jones has publicly stated that the bond insurers require somewhere closer to $200 billion in capital.

Short-seller solution
The plan: Pershing Capital Management's Bill Ackman has been one of the leading critics of the bond insurance industry, but offered up his own remedy for the crisis Wednesday. Under his proposal, the company's structured finance division would take control of its municipal business, with the two remaining under the umbrella of the holding company.

The prospects: Very doubtful. While the plan would insulate the municipal business and provide support to the structured finance division, it is unlikely that the industry would want Ackman to decide its fate, given his long-standing role as critic and industry short-seller. He stands to benefit if companies like MBIA continue to see their stock tumble even further. Just hours after Ackman pitched his idea, MBIA publicly rejected his proposal.

Buyer beware
The plan: Like the bank bailout program, the notion of a private equity, or distressed investor rescue doesn't remain out of the realm of possibilities. MBIA, for example, has raised about $2.6 billion in capital this year, part of which came from private equity firm Warburg Pincus. And famed distressed investor and billionaire Wilbur Ross has repeatedly said he is looking to invest in one of the bond insurers.

The prospects: Possible. While selling a stake to an outside investor would be a quick fix for the bond insurers, it remains to be seen if they could raise enough capital to satisfy Moody's and Standard & Poor's requirements to sustain their `AAA' rating. What's more, it would not necessarily cure the systemic problems that plague the industry, an area that some, including MBIA's newly appointed CEO Joseph "Jay" Brown, are hoping to fix.

Oil prices start to cool

Crude futures head downwards after heating up on weak heating oil inventory report.


NEW YORK (CNNMoney.com) -- Oil prices fell Thursday, despite a government report showing supplies of fuel used to make heating oil declined much more than expected.

Early Thursday afternoon, U.S. light crude for April delivery fell $2.39 cents to $97.31 a barrel. Oil traded up as much as 10 cents to $99.80 a barrel after the report's release at 10:30 a.m. ET, but have since retreated.

Traders initially thought the decline in distillates was demand-related, as colder temperatures in the Northeast have increased demand for heating oil, according to Phil Flynn, senior market analyst at Alaron Trading in Chicago.

But now Flynn believes that traders realize the weak supply is refinery-related, suggesting an overall decline in demand.

"The market's coming back down to earth," said Flynn. "$100 a barrel isn't a price anymore, it's a destination. It gets to the level, then it backs off."

In its weekly inventory report, the Energy Information Administration said crude stocks rose by 4.2 million barrels last week. Analysts were looking for a rise of 2.9 million barrels, according to a Dow Jones poll.

But distillates, used to make heating oil and diesel fuel, fell by 4.5 million barrels while analysts were looking for a 1.5 million barrel decline.

Refinery usage was lower than the previous week, operating at 83.5% capacity last week. And gasoline demand continued to fall, averaging just 9 million barrels per day over the past month.

These numbers are only a little higher than the same period last year.

Gasoline supplies rose by 1.1 million barrels, just above forecasts for a 1 million barrel rise.

Panning for black gold, a global challenge
Oil prices have soared recently as whispers of supply cuts and lower interest rates sent oil above $100 Tuesday and Wednesday.

Demand for gasoline has continued to weaken, leading some traders to believe that the Organization of Petroleum Exporting Countries will decide to cut its output at a March 5 meeting.

Also, in Federal Reserve meeting minutes released Wednesday, the U.S. central bank issued a weaker economic forecast for 2008, predicting slower growth, higher unemployment and higher inflation for the rest of the year. Some economists believe that the report indicated another interest rate cut is on its way.

An interest rate cut usually sends the dollar lower - and oil prices higher - as investors sell dollar-denominated securities and buy commodities as a hedge.

Also, oil is priced in dollars worldwide, so a falling dollar provides less incentive for oil-exporting counties to increase output, or for foreign consumers to cut back on oil use.

"It's a double-edged sword," said Flynn, who noted that when the Fed says the economy is bad, oil prices should go lower. But the Fed's solution to the weak economy - interest rate cuts - sends oil higher.

"So bad news is bullish news for oil," added Flynn.

After oil prices topped $100 a barrel for the first time on January 3, they pulled back to the mid-$80 range amid fears of a recession in the United States, the world's largest economy; however, oil prices have risen again by nearly $14 a barrel in the past few weeks.

Oil prices have risen nearly five-fold since 2002. Most analysts blame rising demand and tight supply. That has also attracted floods of investment money, and exaggerated the effects of supply disruptions.

Oil breaks $100, hits new all-time high

Crude soars as investors weigh the possibility of OPEC production cuts; Texas refinery explosion may have also lifted prices.

NEW YORK (AP) -- Oil prices hit new record highs Tuesday as a Texas refinery fire and fears of an OPEC production cut pushed crude to settle at over $100 a barrel for the first time ever.

U.S. crude for March delivery jumped $4.51 to settle at $100.01 a barrel on the New York Mercantile Exchange, topping the previous settlement record of $99.62 set Jan. 2.

Oil also hit a new all-time trading high of $100.10 a barrel, besting the previous high of $100.9 set Jan. 3.

A weekend refinery explosion in Texas and the possibility that OPEC will cut production next month are driving prices higher, although analysts say there isn't a single factor to explain the move.

The refinery in Big Spring, Texas is owned by Alon USA. It processes nearly 70,000 barrels of oil a day. Officials say it could be closed for as long as two months.

"The refinery fire in Texas is making people a little concerned," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Amherst, Mass.

March gasoline jumped 11.4 cents to $2.6078 a gallon, and March heating oil rose 10.41 cents to $2.751 a gallon.

The dollar fell Tuesday, giving investors another reason to buy oil. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

For the moment, investors appear to have put aside concerns about the economy that have sent oil prices down into the mid-$80 range twice since crude peaked above $100 last month. Traders are instead focused on the Organization of Petroleum Exporting Countries, which will meet early next month to map out production plans, and Venezuela, where President Hugo Chavez made conflicting statements this weekend about the country's legal dispute with Exxon Mobil Corp. (XOM, Fortune 500)

OPEC could move to cut production in the second quarter, typically a period of low demand, though many analysts feel that's unlikely. In Venezuela, Chavez said he was not serious about an earlier threat to cut oil sales to the United States, but also threatened to sue Exxon Mobil. The world's largest oil company is fighting Venezuela's nationalization of an oil project, and recently convinced several courts to freeze $12 billion in Venezuelan oil assets.

None of the news is enough to justify a nearly $3 a barrel jump in the price of crude, said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm. Echoing other analysts, Cordier argued that the oil market is in the process of "decoupling" from oil's supply and demand fundamentals. He said investors drawn by the falling dollar and momentum are pushing oil prices sharply higher despite reports last week from the Energy Department, OPEC and the International Energy Agency which all cut oil demand growth predictions for this year.

"Everyone concurs that we've got smaller demand coming in the U.S.," Cordier said.

Retail gas prices, meanwhile, jumped 1.8 cents to a national average price of $3.032 a gallon Tuesday, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, are following oil prices higher. The Energy Department expects gas prices to peak near $3.40 a gallon this spring.

Other energy futures also rose Tuesday. March natural gas jumped 30.1 cents to $8.961 per 1,000 cubic feet. Analysts said prices were supported by forecasts for cooler weather, but that futures were also following oil prices higher.

In London, Brent crude for April delivery rose $3.25 to $98.16 a barrel on the ICE Futures exchange.

My sister can’t manage her money

Finances can be a touchy subject among family members. If you try to offer help, proceed with caution, says Money Magazine’s Walter Updegrave.

Question: My 53-year-old unemployed sister has recently received a small amount of money, probably $5,000 to $10,000. She wants to know how to invest it, but she finds financial matters confusing. I’ve tried to help her before, but like many people who are waiting for the big lottery win, she seems to lack the discipline to manage money effectively. I want to help her, but I struggle advising her and other family members because of the huge gap between my financial status and theirs. Is there some wise advice I can give to someone in her circumstances? –Ken, Colorado

Answer: Your sister isn’t the only one who needs to reconsider how she’s dealing with her shaky financial situation. You do too.

I’m sure it’s frustrating that financial concepts that are so self-evident to you - spend less than you earn and then invest sensibly to build wealth for the future - don’t seem to take with her. But having grown up in a family that struggled financially, I can tell you that it’s no easy task to apply these ideas to the reality of your life when you’re having a hard time just scraping by day to day.

You’ve got to realize that helping your sister become more financially secure isn’t just a matter of imparting financial wisdom. If you want to help her change her behavior and improve her situation, you’re also going to have to be patient and sensitive to what she’s going through.

So with that in mind, what sorts of things should you be doing to help out your sibling financially?



Long-term investing
Let’s start with her windfall. If after talking to your sister you think there’s a realistic chance that she’ll be able to invest some of this money for the long-term, then you should help her get it into an investment that requires very little attention on her part, most likely an asset allocation or target-date retirement fund. This way she gets a fully diversified portfolio with no effort on her part. You can find asset allocation funds by typing asset allocation into the Quotes box at Morningstar.com. For a target-date retirement fund, check out our Money 70 list of recommended mutual funds.

But given your sister’s precarious financial situation, I think there’s a good chance she won’t be able to take the long-term approach with this money. I suspect she’ll have to draw on it fairly regularly for any number of reasons. If that’s the case, then she probably should have all or nearly all of it in an investment that offers security of principal and relatively easy access.

Liquid cash
Normally, I’d say a money-market fund would fit the bill, but you don’t want to make it too easy for her to get at this money. So you might recommend that your sister put a portion of her windfall in a money-market fund and spread the rest among CDs with maturities ranging from six months to two years. This way she can get to the CD money if she really needs it, but the prospect of being docked for an early-withdrawal penalty may make her less apt to raid the CDs for anything less than a true emergency. And if it turns out your sister does need some of her CD funds, then at least dividing the money among several CDs instead of putting it all in one would save her from having to pay the prepayment penalty on her entire stash.

Without being too pushy, you should try to help your sister set up these accounts. Otherwise, it might not get done. Earning a high return isn’t your top priority here; making sure the money makes it into the accounts is. But you and your sister can assure that she at least gets a competitive return on this money if the two of you sit down together and check out CD rates here and money-market fund yields here.



Planning for the future
After your sister finds work again, try to encourage her to begin saving on her own so she’ll have something to support her in retirement besides Social Security. If her next job has a 401(k) plan - and you can suggest that she look for one that does - try to persuade her to contribute at least enough to get any matching funds her employer may offer. If she doesn’t have access to a 401(k), then recommend that she contribute to an IRA.

Depending on how much she earns and how much she contributes to a 401(k) and/or IRA, she may be able to qualify for a Retirement Savings Contribution tax credit, which would lower her tax bill and make it more palatable for her to save. (For details on this credit, which maxes out at $1,000 for individuals and $2,000 for married couples, click here.)

Again, I think the chances of her pulling this off will increase dramatically if you actually guide her through the process of opening the accounts and help her choose the investments. But you also have to consider the possibility that you simply may not be the right person to help your sister. She may feel uncomfortable or embarrassed at being in the position of having to take financial advice from a sibling.

If that’s the case, you may be better off buying her some time with a financial planner who can go over her finances with her and get her started on a savings and investment plan. While most planners prefer long-term relationships, there are some who will work on an hourly or project basis, which would probably be more appropriate in your sister’s case. You can contact planners willing to work on that basis by clicking here.

There’s no guarantee that any of these suggestions - or for that matter, any other strategies - will work. But I don’t think it’s a waste of time to try. If you succeed, your sister will be better off financially. If you don’t manage to help her improve her financial situation, I think you’ll both still feel better than if you hadn’t tried at all.

Loan crisis goes to college

Paying for college could get even tougher this year as smaller lenders tighten standards and raise rates. But big banks are holding the line.


NEW YORK (CNNMoney.com) -- The credit crunch is hitting the college classroom.

When parents and students try to line up college funding this spring, they will likely be in for a nasty shock. They may still get a loan, but it will come at a price. Borrowers will have a more limited choice of lenders and find discounts for on-time payments or direct debit scarce. On top of that, they'll see higher rates and fees.

The credit crisis, which started last year with mortgages and has bled into many other areas, is now affecting student loans. Many lenders, particularly smaller companies not affiliated with banks, are finding their main source of funding for private student loans cut off as investors balk at buying securities backed by these loans. This will force some to boost interest rates on private loans by up to 1 percentage point, raise minimum credit scores to 650 and require parents to co-sign the loans, experts said.

"If lenders are not able to securitize, they are not getting the capital to make new loans," said Mark Kantrowitz, who runs FinAid.org, a college funding Website based in Cranberry Township, Pa. "It's an issue of liquidity and cost of capital."

On top of this, legislative changes enacted by Congress last year have sent some lenders fleeing from the federal student loan program. Lawmakers reduced the subsidy lenders receive for making government-backed loans.

While the interest rates on federal loans are set annually by the government, many lenders will stop waiving origination fees and cut out the discounts offered borrowers after they start repaying the loan, boosting the overall cost.

Private loan problems

With little or no profit to be made in the federal loan arena, some smaller lenders are exiting the business, while others are shifting their focus to the more lucrative private loan industry. Others, however, are curtailing even their private loan originations.

San Diego-based College Loan Corp., the eighth largest federal loan originator in 2006, recently announced it would stop making these loans as of March 1, though it will continue originating private loans. Lincoln, Neb.-based Nelnet Inc. (NNI) last month issued a statement saying it would "be more selective" in the loans it originates as it lays off 300 people, or 10 percent of its workforce. And on Tuesday, the Michigan Higher Education Student Loan Authority said it would stop making private loans, known as MI-LOAN.

"It's an area of concern, both in terms of the number of players and the cost of loans that students have to pay," said Tom Joyce, a spokesman for Reston, Va.-based Sallie Mae, the nation's largest lender formally known as SLM Corp (SLM, Fortune 500).

As college costs skyrocket, a growing number of parents and students rely on private loans to cover the gap between tuition and federal loans, which are limited to between $3,500 and $5,500 a year. Private loans made up 24% of education borrowing in 2006-07, up from 6% a decade earlier, according to the College Board, a New York City-based nonprofit higher education access group.

These loans, however, are much more expensive than their government-backed peers and will become even more so. For 2008-09, students will pay a fixed 6.0% on a subsidized federal loan, while the rates on private loans are as high as 13%, depending on the borrower's credit profile, and are inching upward, according to Kantrowitz. Rates on private loans change quarterly or annually, and two-thirds of borrowers pay the highest rate, he said.

"Most students will be able to get them, but they will have to be careful," said Sandy Baum, senior policy analyst at the College Board. "There will be an even greater risk of high interest rates and unfavorable terms."

Higher margins, more interest

While costlier for borrowers, the higher margins on private loans are attracting more lenders with the wherewithal to make these loans.

Private loans, for instance, made up 31% of Sallie Mae's $25.5 billion in originations in 2007, up from 20% five years earlier. The company, which suffered recently after a buyout by J.C. Flowers failed, is close to securing $35 billion in financing to carry it through the next school year. It plans to focus on the higher-margin private loan market.

JPMorgan Chase (JPM, Fortune 500) said the recent wave of failed auctions for investments backed by student loans won't affect its operations. The bank keeps its loans on its books so it is not affected by the securitization freeze. Like other big banks, Chase is not planning to raise its rates.

Chase is actually expanding its student loan operations because it has low defaults and puts the bank in touch with young people to whom they can pitch other products. In the fall it hired 140 people from struggling Nelnet and continues to add to the staff.

Blue chips that can ride out a recession

Solid stocks have been dragged down along with troubled shares. Learn to spot the bargains.

(Money Magazine) -- Really bad stock markets knock down shares of all kinds. That's essentially what has been happening since the start of 2008, as subprime fallout led to recession anxiety. But not every market sector faces the same problems and uncertainties.

Even if we are in a downturn, many companies will come through with their long-term prospects untarnished. Scoop up such stocks while their prices are depressed, and you have a real chance to boost your returns.

The way I see it, the stock market now is actually three markets. First, there are companies that depend on borrowing and lending, including home builders and makers of big-ticket consumer items that typically require financing, as well as bank stocks. Their shares all posted double-digit losses last year.

Yes, the stocks are starting to look like bargains, and the Fed's aggressive interest-rate cutting should eventually spark a recovery. But I'd be worried about buying in too early: The final chapter of the subprime story isn't written yet.

At the other extreme, inflation-sensitive sectors, such as energy and other commodities, have boomed for several years running. But they've had sizable losses so far in 2008, they're still relatively expensive, and they could stay down for a while if demand for raw materials falls in a slowing economy.

Finding the best deals
That still leaves a big swath of stocks whose share prices are down but which are unlikely to suffer lasting damage from the subprime flu or any mild cold the economy catches. The industrial, technology and consumer sectors all fall into this category.

In particular, companies that derive a large percentage of their earnings from outside the U.S. have the best chance of riding out a bad domestic economy. For example, two of the stocks I recommended in last month's column - Hewlett-Packard (HPQ, Fortune 500) and 3M (MMM, Fortune 500) - get at least 60% of their sales abroad.

Spotting true bargains during this downturn is no layup, though. Price/earnings ratios based on anticipated results may be misleading, for instance, because growth may not come through as expected this year. So make sure that a stock also looks cheap compared with its peers based on P/Es using 2007 earnings.

Another smart way to compare stocks is by ratios of price to cash flow (the cash per share a company actually generates each year). The reason: Cash figures tend to be less volatile than earnings.

Three stocks to watch
In doing a little bargain hunting among stocks in the Sivy 70, I found three that have solid prospects, trade at P/Es below 15 based on 2007 earnings and are priced at less than 10 times cash flow. Those multiples count as cheap by anyone's calculations.

DuPont (DD, Fortune 500) announced 27% earnings per share growth (excluding one-time items) in the fourth quarter and recently raised its earnings targets for 2008. How does a company in a cyclical industry such as chemicals buck a U.S. recession? Almost two-thirds of sales come from overseas, where they are growing up to 20% a year in countries such as Brazil, China and India.

The hottest part of DuPont's business has been agricultural products, boosted by rising food prices and demand for ethanol. That division, which accounts for almost a quarter of sales, is growing twice as fast as the rest of the company. As an added bonus, DuPont shares yield a very healthy 3.8%, making them a great choice for retirees.

Fortune Brands (FO, Fortune 500) is a conglomerate with top-name consumer brands, including Jim Beam bourbon and Titleist golf balls. The company also has a home and hardware division, which consists of product lines like Moen faucets. Those businesses have been suffering because of the bad housing market. As a result, the stock has fallen close to a 52-week low of $66, down from a high of $90. That looks like too much punishment for limited housing exposure. Besides, Fortune is restructuring to trim costs, downsizing its home and hardware division and selling its wine business. As a result, the company took a large write-down in the fourth quarter.

But long-term growth has averaged 9% annually and is projected to continue at that rate over the next five years. Add in the stock's solid 2.6% yield, and you have double-digit return potential.

IBM (IBM, Fortune 500) reported terrific fourth-quarter results. Earnings per share were up more than 20% on a 10% rise in sales. A third of the increase in per-share profits was the result of 2007 stock buybacks totaling almost $19 billion. The rest of the profit gain was mostly from IBM's extensive business outside the U.S., which now accounts for almost two-thirds of total sales.

The company is enjoying especially strong growth in Asia and some developing markets. Bookings for service contracts in 2008 are also several billion dollars above expectations, and IBM has raised earnings projections for 2008. As Big Blue goes global, seems like it would deserve a market-beating multiple.

Stocks we love

Forget flowers and chocolates. Our Valentines should make you money. Check out our picks for this year's most lovable stocks.
By Ben Rooney, CNNMoney.com staff writer

How we chose the stocks
In honor of Valentine's Day, we carefully selected five stocks that will make your portfolio swoon. We screened thousands of stocks to come up with the most appealing combination of earnings and sales growth, reasonable valuations and some of the sexiest balance sheets around.
But we know how easy it is to get your heart broken in a market as volatile as this. So we picked stocks that we think you'll want to commit to for the long term.
If you want some financial love this Valentine's Day, look no further.
Garmin
(GRMN) P/E: 18.4, EPS Gr: 19% Just as you can count on Garmin's global positioning systems to prevent you from getting lost, you can probably depend on Garmin's strong market position to keep you from a loss in your portfolio.
Yes, the stock has slipped recently due to competition from rival GPS makers and fears that an economic slowdown will crimp sales. These are valid concerns but one analyst thinks the sell-off is overdone.
"While we can't ignore the possibility that a U.S. economic slowdown could affect Garmin, we believe any impact is likely to be more modest than the current share price suggests," wrote Needham analyst Richard Valera in a research note.
Also, Garmin announced late last month it will enter the smartphone market with its nüvifone. The device will feature GPS, of course, as well as mobile Web-browsing capabilities.
Though some questions remain about which carrier will support the gadget and how much it will cost, the nüvifone has strong potential, according to Deutsche Bank analyst Jonathan Goldberg. "All in all, we believe Garmin has released an intriguing teaser," he said.
Laboratory Corp of America
(LH) P/E: 16.5, EPS Gr: 15% LabCorp's allure is undeniable to investors looking for strong growth.
The nation's second-largest independent clinical laboratory company captured our hearts when it announced recently that it expects 2008 net income to be in the range of $4.74 to $4.90 per share. Wall Street analysts were expecting 2008 earnings of $4.15 per share.
Among LabCorp's many charms: the company reported healthy cash flow in its last quarter, is expected to complete three acquisitions by the end of the first quarter and is likely to continue its aggressive share repurchase activity.
"Investors should take solace that the slowing economy has not significantly affected clinical laboratory operations and that [LabCorp.'s] focused strategy is poised to yield strong returns in 2008," wrote Bank of America analyst Robert Willoughby in a recent research note.
Nike
(NKE) P/E: 17, EPS Gr: 14% We've had a long-term love affair with Nike. The athletic apparel maker made our list of "Stocks we love" in 2005, back when the company's international exposure first stole our hearts.
Since then, Nike has continued to see strong growth overseas, particularly in China, but domestic sales have held up surprisingly well despite economic instability. In its most recent earnings report, the company said U.S. revenues increased 7%.
"Nike is best positioned to weather the storm given its premier brands, global reach and consistently solid execution," JP Morgan analyst Robert Samuels wrote in a recent research note.
What's more, Nike stands to benefit from a number of large sporting events this year. Both the Beijing Olympics and the European Soccer Championships will provide huge sales opportunities for new products that Nike has in store.
Precision Castparts Corp
(PCP) P/E: 16, EPS Gr: 20% Precision Castparts may not be the sexiest stock on our list but the company's financials are are certainly eye-catching.
The maker of aerospace and automotive components said profit jumped 55% in its fiscal third quarter, which ended in January. The company cited strong sales across all major segments. And like the other companies on our list, Precision Castparts is well positioned to withstand an economic slowdown.
Demand for aerospace components remains robust despite the gloomy economic climate, according to JP Morgan analyst Joseph Nadol.
What's more, the stock trades at a discount to its industry counterparts. Nadol thinks it deserves to trade at a higher valuation than its peers.
"We believe Precision Counterpart's much higher than average growth rate, driven by smart acquisitions, efficient operations, and increasing market share justify a premium to the group," Nadol wrote in a recent research report.
Tata Motors
(TTM) P/E: 15.8, EPS Gr: 20% Tata Motors, India's largest automobile company, is our long-distance lover.
The stock is listed on the New York Stock Exchange as an American Depository Receipt (ADR), which means investors in the U.S. can buy Tata shares without having to open an Indian investment account or worry about exchange rates.
Tata made headlines recently when it unveiled the world's cheapest car, the Nano, which sells for as low as $2,500. With the Nano, Tata could tap into the rapidly growing market of middle-class buyers in emerging economies like India and China.
Also, Tata has a number of promising acquisitions and partnerships in the works. Tata is in talks with Ford to buy the American carmaker's Jaguar and Land Rover brands. And the company's manufacturing subsidiary recently signed a deal to produce parts for Boeing's 787 Dreamliner.