The Motley Fool's Weekly Editors' Picks
Fools were out and about this past week in an investing world jam-packed with actions and ideas. Here are three articles you might find useful as you decide how to invest your money.
The Unexpected Consequences of the 2012 Drought
Drought conditions aren't going to wallop farmers and grocery shoppers to the extent you might think, Fool analyst Brian Stoffel wrote. "If you're looking for who loses from rising corn prices, there are two places to look: livestock producers and corn processors," he wrote.
Concerns that margins for high-fructose corn syrup would be pinched caused Morgan Stanley to downgrade Archer Daniels Midland (NYS: ADM) , Brian wrote. ADM has more than 265 processing plants where it converts corn and other crops. It processes 2.6 million bushels of corn per day, according to the company's website, producing more than 24 different food and feed ingredients and industrial products from corn, including sweeteners, starches, fuel ethanol, and animal feed.
Heckmann (NYS: HEK) also stands to lose from the dry weather, Brian wrote. The company handles the water needs of energy companies using "fracking" techniques to extract oil and natural gas from the ground. Fracking uses loads of water, Brian noted, and some states have suspended fracking in deference to the drought. "[I]f fewer companies are paying Heckmann to use its water system, the company will be collecting far fewer fees," he wrote.
Read the article for more insight on what the drought might mean for investors.
1 Huge Warning Sign You Need to Notice Now
Fool analyst Alex Planes took a step back to look at the trend in companies that are failing to report the numbers Wall Street had expected. Thus far, 2012's second quarter looks almost exactly like 2008's, Alex reported, with about 30% of companies missing earnings expectations and roughly 58% beating. That's an unusually high amount of misses.
Chipotle (NYS: CMG) was one popular stock that disappointed investors with its second-quarter results, Alex wrote. Chipotle reported its earnings on July 19; shares dropped from just over $400 on July 19 to just under $300 on July 25. Long-term Chipotle investors shouldn't panic, though, noted Fool analyst Alyce Lomax, who owns shares of the company in the real-money portfolio she manages for Fool.com.
Alex noted that over at Netflix (NAS: NFLX) , which beat revenue and EPS estimates, it's poor guidance and weak sales that are scaring investors away. Said Fool analyst Matt Koppenheffer: "Unlike most companies, beating quarterly Wall Street estimates just isn't enough for Netflix. ... The reason for the rush to the doors was the company's admission that meeting its user sign-up goals for the year will be 'challenging.'"
Alex wraps up by saying that "[t]his spate of earnings whiffs may be the tip of the iceberg, as it was in 2008, or it could simply herald short-term weakness that'll soon be behind us." He continues: "Don't jump into any new investment without carefully considering both the stock-specific headwinds and the global trends that could act on it in long-range ways." He recommends taking an interest in dividend stalwarts.
Read the article for more of Alex's insight.
Why This Energy Stock Could Triple in 3 YearsIf the energy sector piques your interest, you might want to check out SandRidge Energy (NYS: SD) , which Fool analyst Arjun Sreekumar highlights for its smart management and undervalued stock price. The six-year-old company presciently swung from natural gas to oil and is focused on the Mississippian Lime.
"SandRidge was one of the first movers into the Mississippian and one of the first companies to grasp the true scope of the play," Arjun wrote. "As a result, it was able to scoop up a massive acreage position at a very appealing price." Arjun thinks SandRidge will be able to close the gap between capital expenditures and cash flow and "hopefully achieve its plan of tripling EBITDA and doubling oil production by the end of 2014."
The article The Motley Fool's Weekly Editors' Picks originally appeared on Fool.com.Fool online editor Kris Eddy owns no shares of any stocks mentioned in this article. The Motley Fool owns shares of Heckmann, Netflix, and Chipotle.Motley Fool newsletter serviceshave recommended buying shares of Chipotle and Netflix. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. The Motley Fool has adisclosure policy.
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