RealMoney Silver - Fifteen More Stock Tips from the U.S. Government

Fifteen More Stock Tips from the U.S. Government
By Bill Trent
RealMoney.com Contributor
5/20/2008 2:15 PM EDT

According to a release from the Bureau of Labor Statistics, core producer prices increased by 0.4% in April and 3% over the last 12 months. The monthly gain was twice the rate that had been forecast, and the 12-month change was the largest gain since December 1991.

I'll leave reading the economic tea leaves to those who are better at it. For a stock picker like me, government economic reports can do more than just indicate the state of the economy. Instead, I like to examine the industry-level data to see if there are specific industries to consider more closely as investment opportunities. As usual, this month's PPI report did not disappoint.

Food Packagers

To begin with, it is probably not surprising that with food prices driving inflation, those companies related to food are able to pass on some of their own costs. Fruit and vegetable canners were showing strong pricing power late last year, but appeared to be losing ground early this year. It now looks like the upward trend is back on track.

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Source: Bureau of Labor Statistics

Possible plays on this industry include packaging companies (can makers), such as:

Ball Corp. (BLL)

Crown Holdings (CCK)

Silgan (SLGN)

Or you can go to the food processors, such as:

Campbell Soup (CPB) Del Monte (DLM) Hain Celestial (HAIN) H.J. Heinz (HNZ)

I have written about Campbell being potentially attractive, at least relative to luxury foods. Del Monte's price/book ratio of 1.3 times looks like it could expand, while the high ROE at Crown Holdings suggests the potential for earnings to grow faster than analysts are expecting. Finally, estimates are on the rise at Silgan, supporting the thesis that they are able to pass on price increases.

Railroads

The railroads are also big beneficiaries of inflation. Higher food and energy prices tend to mean more coal and grain for them to haul, while high fuel costs make them relatively more attractive than trucks for other merchandise. The big plays here are:

Burlington Northern (BNI)

CSX Corp. (CSX)

Norfolk Southern (NSC)

Union Pacific (UNP)

As well as railcar maker GATX (GMT) .

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Source: Bureau of Labor Statistics

Warren Buffet's Berkshire Hathaway (BRK) owns a big stake in Burlington Northern and smaller positions in both Norfolk Southern and Union Pacific. Perhaps wanting to fill the void, other activist investors have taken on CSX. Estimates have been rising at GATX as well, so no reason to leave them out.

Computers

Last but not least, it is good to see that pricing pressures may have finally bottomed for computer manufacturers. That offers some positive news for Dell (DELL) , Apple (AAPL) and Hewlett Packard (HPQ) .

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Source: Bureau of Labor Statistics

Depending on one's style, Apple has the price momentum, Dell has the high ROE and Hewlett Packard has rising earnings estimates -- so there is something for every taste.

So, complain about rising prices, or try to profit from them? The choice seems clear to me. Thanks to these 15 stock tips courtesy of Uncle Sam, I have plenty of ideas to choose from.