1. Lockheed Martin (LMT) - nation’s largest defense contractor trading below $80 per share.

I also bought Allegheny Technologies (ATI) at $28.40. Allegheny was down 18% after reporting negative earnings for Q2 and forecasting no earnings growth for Q3. This stock could drop to $26 in the short term but I like the upside potential when metal prices rebound and the aerospace industry recovers.

I think that YUM! is attractive based on its long term growth prospects. YUM is the largest quick service restaurant chain in the U.S. owning KFC, Taco Bell, Pizza Hut, Long John Silver and Wing Express franchises. The story for YUM! is in its international growth where YUM! is growing in the high teens overseas especially China. For the 2nd quarter YUM! grew earnings per share (EPS) by 10%. This is in the midst of a recession that has caused same store sales to decline 1% domestically and 4% internationally. Despite decreased sales YUM! was able to improve profitability. Net income increased by 35% due to higher margins on sales.

Goldman Sachs (GS)

It was a great quarter for Goldman Sachs. The investment bank had huge gains from its trading operations and bond offering business. I know that everyone is saying buy Goldman right here and now but I wouldn’t buy the stock at its current levels. The stock is trading at $150 and I would like to know more about the investment bank’s business model will be going forward. Goldman appears to be taking great risks again. Will Goldman’s trading operations be as profitable quarter after quarter?

The interesting part is that these stocks have seen extreme run ups from their March lows. Wasn’t the time to upgrade Goldman Sachs to a buy when it was trading below $100? Or Bank of America when it was trading in the single digits? Analysts are often late to the party and miss big moves in individual stocks. They will rate a stock a “buy” after it has had a huge move to the upside. Or rate a stock a “sell” after the stock has dropped precipitously.

Minimum wage rate increases are going to hit certain sectors particularly hard. According to the Wall Street Journal, “The industries that rely most on minimum-wage workers include fast food restaurants, small-scale independent retail stores, day care establishments and hotels.” In the UK,”The sectors offering the highest number of minimum wage jobs were cleaning (26%), hairdressing (24%), hospitality (21%), textiles (9%), social care (8%) and retail (8%).” Those most affected by the increase are teens, young adults and less skilled employees.

A recession is defined as two or more quarters of negative growth in Gross Domestic Product (GDP). The current recession is far more severe then the past recessions of 1973, 1981, 1990 or 2000. Those were relatively short recessions with none lasting greater then 16 months. This economic downturn has lasted over 20 months which is far longer then any other economic crisis in US history since the Great Depression.

The stock is way down because of a recent profit warning due to heavy promotional advertising and lowered prices to stay competitive with competitors. The negative about the company is the huge $9 billion debt burden that Supervalu took on when the company purchased Albertson’s.

The people most effected by the financial crisis are senior citizens. Senior citizens rely upon a fixed income to manage their finances and pay their bills. Senior citizens are hurt the most by rising costs because there income doesn’t tend to rise with inflation as wages do. Rising medical costs and shrinking retirement plans are creating problems for seniors. The stock market crash of 2008 has forced many senior citizens to reduce their standard of living. Some have resorted to home-sharing by taking in roommates to split costs. Many seniors have been forced to come out of retirement and go back to work.

Noted analyst Dick Bove stated that Bank of America’s can earn $3 per share in a normalized earnings environment. I believe that Bove is correct with his assessment of the earnings power of Bank of America. Bank of America now owns the largest mortgage provider in Countrywide and one of the premier brokerage firms in Merrill Lynch. These brands should generate significant revenue when the economy rebounds. But I do think that Bove’s timing may be off. The key question is when will Bank of America operate in a normalized earnings environment?

Now that the residential side appears to be stabilizing, commercial real estate is showing weakness. Commercial and industrial lending has seen a precipitous decline as businesses are looking to get leaner and borrow less money.

I am still not seeing too many buying opportunites for stocks yet.

Stocks are nowhere near their highs of a year ago and are well off their lows from March of this year. While there are some examples of stocks that are trading too high and some are too low; Could it be that most stocks are not overvalued or undervalued but are at their appropriate valuations?

Endo currently trades at just over $17 per share. Based on the average earnings estimates of $2.64 for the current fiscal year the stock has a PE of 6.4. EPS has grown at an impressive rate of 18.63% over the last five years. EPS should grow at about 10% for the next 5 years. Endo has a ROE of 20.78% and a ROA of 14.20% over the past 5 years. Endo recently used its strong cash position to acquire Indevus Pharmaceuticals. Since the acquisition Endo has less cash and more debt but the company still has a solid balance sheet with almost $400 million in cash alone. This is a sizable amount for a company with a $2 billion market cap.

I bought a few more shares of the UltraShort S&P500 (SDS) at $58.30.

Waste Management (WMI) is the market leader in trash collection, disposal and recycling services in the US. The company operates in an industry with a high barrier to entry as the garbage industry is extremely capital intensive. Waste Management provides a service that has been needed in the past and will continue to be so for the foreseeable future.

According to the Center for Responsible Lending, there have been over 1 million foreclosures in the United States in 2009 alone. About 12% of all home loans are currently delinquent. Economists expect this number to double over the next 6 months. States such as Oregon have seen foreclosures rise approximately 90% this year. This is just the beginning. The government placed a moratorium on foreclosures last fall that stopped many of the banks from evicting homeowners until the end of March. Now that the moratorium has ended expect to see a major surge in foreclosures. Increasing job losses and decreasing home prices will lead to more foreclosures.

The days of growth appear over and I am looking for a drug company with a brighter future. One of the stocks that has piqued my interest is Celgene (CELG). Celgene is a biotechnology company that discovers and produces therapies to treat cancer and other diseases. Celgene has a solid balance sheet and a promising pipeline of cancer drugs such as Vidaza, Revlimid and Thalomid.