RealMoney Silver - 26 More Stock Tips From the U.S. Government

26 More Stock Tips From the U.S. Government
By Bill Trent
RealMoney.com Contributor
3/27/2008 11:30 AM EDT

According to the Census Bureau, new orders for manufactured durable goods in February decreased $3.6 billion, or 1.7%, to $210.6 billion, the second consecutive monthly decrease following a 4.7% January decrease. RealMoney contributor Tony Crescenzi says that this report is consistent with a recession, and the market seems to agree.

However, the news release could have said

New orders for manufactured durable goods in February increased $8.4 billion, or 4.3%, to $208.1 billion, compared to the year-ago period. This marks the third consecutive monthly increase, following year-over-year gains of 4.2% in both December and January.

Would the market have reacted more kindly to that rephrased release? It isn't an academic question, because either paragraph is technically correct.

The Census Bureau, as is its custom, reported the one-month change after making seasonal adjustments. My alternate version simply takes the one-year change in the data before the adjustments are made.

Looking at the unadjusted data on a year-over-year basis, I did all my fretting about a slowing economy last year. Order growth was slowing to negative, and inventories were rising at a faster rate than either.

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Source: U.S. Census Bureau

Now, with order growth outpacing inventory build, I think the data can provide a similar early read on the industries poised for a rebound.

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Source: U.S. Census Bureau

For example, consider primary metals. New orders rose 16.5%, and inventories are declining. Potential beneficiaries of this surge include

Alcoa (AA) ,
Freeport McMoRan (FCX) ,
Reliance Steel (RS) ,
Arcelor Mittal (MT) ,
Nucor (NUE) , and
US Steel (X)

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Source: U.S. Census Bureau

Also showing significant improvement was the computers and electronic products category, which in addition to computers includes storage devices, peripherals, telecom equipment and consumer electronics. Recall that some of these industries were also apparent beneficiaries of stronger pricing power, which makes sense if orders are stronger than inventories.

The potential winners here include

Dell (DELL) ,
Apple (AAPL) ,
Hewlett-Packard (HPQ) ,
Brocade (BRCD) ,
EMC (EMC) ,
Iomega (IOM) ,
Hutchinson (HTCH) ,
Quantum (QTM) ,
SanDisk (SNDK) ,
Seagate (STX) and
Western Digital (WDC) .

Click here for larger image.

Source: U.S. Census Bureau

Finally, consider the motor vehicles and parts industry. With orders down 4.5%, I'm not ready to argue that the sector is ready for a rebound. However, the fundamentals do seem to be improving. Inventories have been declining for the last eight months, which should ultimately help manufacturers return to profitability.

Given the debt loads and shaky financials for some of these guys, the high yield might be an attractive contrarian play amidst a credit crunch. Ford (F) and General Motors (GM) would fall into that category. Other, less severely levered options include

Oshkosh (OSK) ,
Honda Motor (HMC) ,
Toyota (TM) ,
Johnson Control (JCI) ,
Paccar (PCAR) ,
SPX (SPW) and
Tenneco (TEN) .

So there you have it. Twenty-six more stock tips from the U.S. government. As with any stock tip, this is only a starting place for further research, but it is a starting place that I have frequently found to be a useful one.