China Federation of Logistics and Purchasing reports October manufacturing (PMI – purchasing manager’s index) rose to 55.2, a full point increase over September 2009. Chinese manufacturing has risen for the eighth straight month, continuing signs that economic recovery in China is on stable ground.

Further, signs of a more robust expansion follow an already healthy economic recovery, with China reporting 8.9% GDP growth in the third quarter -- the highest rate for any major economy in the world. The China Gross Domestic Product is worth 4.326 Trillion dollars or 6.98% of the world economy, according to the World Bank.

Bullish Calls:

Staples (SPLS): "...is best of breed."

Hedge fund Atticus Capital ran by Timothy Barakett has filed a Form 4 with the SEC and has disclosed some small sales in their Legend International Holdings (LGDI.OB) position. Our apologies for not posting this sooner, as the filing was made on March 31st, 2009 due to sales made by Atticus on March 27th. They sold 50,000 shares at $0.6105 and another 65,700 shares at $0.6069. After the sales, their holding in LGDI sits at 30,654,300 shares remaining.

Atticus Capital, the hedge fund ran by Timothy Barakett saw their combined funds up 45% in 2005. In 2006, they gained over 30%. Yet, in a complete reversal of fortunes, Atticus survived a nightmarish year last year, having been down more than 30% at one point. With a fresh year in tow, they were eager to set out on the right foot for 2009. However, their pain somewhat continued. Their European fund was -0.8% for February and sits -10% for 2009 as of that time, as noted in our series of January & February hedge fund performance numbers (March numbers here).

Quote of the Day- "From the House's Mouth"

"Kids come out of school playing with Gameboys and iPods. Here's a hammer. 'What do I do with it?' That's my simplistic view of what's happening." - Korte Co. division manager Greg Korte, on rising construction costs and the reasons for a shrinking construction labor market in a high tech world. (Builder Online, July 10th)

CVRD (RIO), BHP (BHP), Freeport McMoran (FCX), Phelps Dodge (PD): Cramer urges investors who "have walked away from the table" because of subprime lending to take a look at RIO and BHP, because most of the demand for copper and nickel is coming from China, and the "America-centric" view will lose investors money. He comments BHP has "really found a floor here at $42" and is"very, very interesting." Cramer adds "with copper right here, the FCX/PD combination would go up." RIO will benefit from the very strong nickle demand in China.

Global SantaFe (GSF),Transocean (RIG) and Hercules (HERO): Although an analyst predicted an 80% jump for HERO, Cramer was positive yet lukewarm on the company. "The day rates for shallow are going to go down .... the day rates for deep are all going to go up." For this reason, Cramer said he likes RIG and GSF, both of which have "gigantic buybacks" and the "motivation to make a deal."

The tie-up, which was first announced in November 2006, will see FCX pay roughly US$26-billion in cash and stock to Phelps shareholders. It will also create the world’s largest publicly traded copper company.

The Materials sector was the growth leader during the fourth quarter and remains head and shoulders above the Industrial sector, which posted the next highest year over year growth. In Materials, as with many sectors, the current growth rate is expected to drop sharply in the first-quarter. For Materials, growth in the first-quarter is expected to be less than half what it was in the fourth, but that is still higher than any other sector. Large expected comparable decliners are Alcoa (AA), International Paper (IP), and Phelps Dodge (PD). Note that these companies all reported triple-digit growth last quarter and only IP is expected to achieve that same feat in the first.

Lagging firms during the fourth quarter were centered in the Utility and Telecom sectors. The median utility has posted flat fourth-quarter comps and is expected to recover slightly in the first-quarter, to a 5.5% growth rate. Telecom is the only sector in the red this quarter, with negative comps of over 10%. Energy, which was the leader in the first three quarters of 2006 is showing only slight year-over-year growth, but then again it has some very difficult post-hurricane comparables.

The Materials sector has the growth lead this quarter and is head and shoulders above Healthcare, the sector with the next highest year over year growth. In Materials, as with many sectors, the current growth rate is expected to drop sharply in the first-quarter. For Materials, growth in the first quarter is expected to be less than half what it was in the fourth, but that is still higher than any other sector. Large expected comparable decliners are Alcoa (AA), International Paper (IP), and Phelps Dodge (PD). Note that these companies all reported triple-digit growth last quarter and only IP is expected to achieve that same feat in the first.

Lagging firms this quarter are centered in the Utility and Telecom sectors. The median utility has posted flat fourth-quarter comps and is expected to recover slightly in the first quarter, to a 4% growth rate. Telecom is the only sector in the red this quarter, with negative comps of just over 3%. Energy, which was the leader in the first three quarters of 2006 is showing only barely positive year over year growth, but then again it has some very difficult comparisons it is working against.

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That was it. No reaction from the trading pits. No economist droning on and on. Why not show the traders jumping up and down? Why no droning? Simple – the story wasn’t U.S. Stock Market positive. Even worse it was U.S. Dollar bearish. They should have had a webcam on me to capture my big smile. I was smiling, because I knew this report would create a positive back drop for gold to follow-through on last week’s move through $670/oz.

Entergy (ETR) - Electric utility company based in New Orleans. Up about 40% over the last year and is now trading at a somewhat aggressive 21x LTM EPS. If you believe forward estimates though, which have EPS growing 20% year over year, forward P/E is a more palatable 17x. Pays a 2.3% dividend.

It should be noted that 7 of the 14 are retail/consumer related. Anyone else see another pattern?

Bullish calls:

TRANSCRIPT SPONSOR

Phelps Dodge (PD)
Q4 2006 Earnings Call
January 29, 2007 9:30 am ET

Phelps Dodge Corp. reported profits rose nearly 1,100% from the previous year period bolstered by the rising price of Copper and a one-time fee from its failed takeover of fellow miner Inco. By the numbers, Phelps Dodge had profits of $1.32 billion, good for EPS of $6.50, versus earnings of $121.3 (EPS of $0.60) during the prior-year period. Revenue rose 43% to $3.2 billion. Consensus Bloomberg estimates called for EPS of $4.36. Phelps Dodge, the world's third largest copper miner, is poised to be acquired by Freeport-McMoRan Copper & Gold Inc. though it's not clear exactly when that deal will close.

SAC said:

We’ve wondered about the price rallies of various metals we’ve been following, hoping to understand some of the emotions behind the excitement. Being skeptical, some of this begins to sound like mob hysteria. On the sunny side of the fence, one could call this exuberance. Cui bono is our question. Who benefits?

For the utilities hoping to obtain nuclear fuel for their reactors, a rising uranium price and lessened available SWU capacity to meet their needs exacerbate the worry about whether or not the nuclear renaissance can be realistically sustained. For molybdenum, soaring stainless steel and super alloy demand helps keep the silvery metal well above the actual production costs to mine it. Plans for building more pipelines with stronger anti-corrosive properties adds a sexy energy twist, spicing up what Raymond James mining analyst Bart Jaworski calls a boring story.

Freeport-McMoRan reports Q4 net income of $426 million, or $1.99/share, an 8% y-o-y decline, which missed the average Street estimate of $2.12/share. Revenue grew 10% to $1.64b, but missed the consensus estimate of $1.72b. Three issues negatively impacted earnings: adjustments to metal sales from prior quarters, higher Q4 y-o-y copper and gold prices but 36% and 15% respectively off calendar intra-year highs and lower production at its Grasberg mine in Indonesia (copper -8.1% and gold -54%). Net income for the year totaled $1.4b, or $6.63/share on revenue of $5.79b, compared to $935m, or $4.67/share on revenue of $4.18b in '05. Freeport expects to sell 1.1 billion pounds of copper and 1.8m ounces of gold in '07 -- versus 1.2b and 1.7m, respectively in '06 -- of which Q1 sales are expected to be the highest. Shares of Freeport lost nearly 3% yesterday to close at $53.40. Its $25.9 billion stock and cash deal to acquire Phelps Dodge announced last Nov. is set to close this March.

Caterpillar (CAT), Phelps Dodge (PD), Guess (GES), Costco (COST), Home Depot (HD), Lowes (LOW), WalMart (WMT), Alcoa (AA), Altria (MO), AIG (AIG), Honeywell (HON), IBM (IBM), Johnson & Johnson (JNJ), Pfizer (PFE), McDonald's (MCD), Microsoft (MSFT), Hewlett Packard (HPQ)

Bullish calls: