Keeping Y-T-D Tabs On The DOW 30

Check out the below 2008 Year To Date (YTD) Performance Chart of the 30 companies comprising the U.S.'s Dow Jones Industrial Average (Market Index) :

* Year To Date 2008 (through 7/24/08), the Dow is down 14% or 1,900 points...Year over year (Jul 25, 2007 - Jul 24, 2008), the Dow is down 17% or 2,400 points

* Only 5 out of the 30 DOW companies (less than 17% of the index) are 'net gainers' on the year - Dupont (DD), IBM, Walmart (WMT), McDonald's (MCD) and Johnson & Johnson (JNJ)

* Only 2 of these 5 'gainers' have convincing gains - Walmart (+22%) and IBM (+20%)

* In terms of DOGS of the DOW, 3 companies have lost over 40% of their marketcap during 2008 - AIG (-48%), Merk (-45%) and General Motors (-41%)

* Interesting to note the right-most performance column (performance since 7/15/08)...Bank of America (BAC) is up 80% in less than 10 days ! Don't get too excited though..their still down almost 20% on the year.

http://seekingalpha.com/article/86776-dow-30-performance-since-7-15

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FYI, Track the value and performance of the U.S.'s Dow Jones Industrial Average using stock ticker .DJI

Data Courtesy: SeekingAlpha.com
Full Disclosure: I own shares of IBM.

Will Vale Bid On Freeport ?

According to Bloomberg, Brazilian mining giant Vale (RIO) is planning to raise $15 Billion via an equity secondary offering. While Vale hasn't detailed exactly how they are planning to use this massive amount of capital, there's a decent bit of speculation out there that believes VALE would use this money along with their balance sheet cash (fyi, as of their March '08 qtr RIO had about $2.3 Billion in cash) + possible debt financing to ACQUIRE any one of the possible 3 companies :

http://www.bloomberg.com/apps/news?pid=20601087&sid=a3kZLKF7MRkE&refer=home

1.) Anglo American (AAUK) - $85 Billion marketcap

2.) Freeport McMoran Copper & Gold (FCX) - $46 Billion mcap

3.) Alcoa (AA) - $35 Billion mcap

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* The share sale (secondary) would be the biggest ever for Rio de Janeiro-based Vale, with proceeds equal to about 9% of the company's marketcap of about $170 billion.

* Brazil's O Estado de S. Paulo newspaper, citing people connected to Vale, said the company is mulling a bid for Anglo American Plc, Alocoa Inc. or Freeport-McMoRan Copper & Gold.

* "It would make sense for Vale to make a new acquisition,'' said Daniel Gorayeb, mining and metals analyst with Sao Paulo- based broker Spinelli SA. "Vale has spare cash following the iron-ore price increase and needs further scale in a very competitive market.''

* Freeport, based in Arizona, is the world's 2nd largest COPPER producer + world's largest Molybdenum maker. Alcoa, based in New York, is the world's 3rd largest ALUMINUM producer. London based Anglo American produces platinum and other industrial metals.

* Chief Executive Officer Roger Agnelli said last year Vale would invest a record $59 billion to expand production capacity and add projects into 2012. In April, Agnelli said the company will seek new acquisition targets, which wasn't included in the investment plan.

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Anecdotally, consider me a BELIEVER of this story as it supports my Long Term investing THESIS in FCX. To clarify, I believe FCX is TOO attractive of a commodity player to NOT eventually receive a takeover bid at a sizable premium...just a matter of time before it happens. Please refer to my 3/26/08 post titled 'Fearless FCX + The Inevitable' for some more background on why I believe FCX will eventually get a bid.

On a side note + even if FCX does indeed receive a bid, I'm not exactly sure on whether or not the U.S. Justice Department would allow a $40-60 Billion OVERSEAS takeover. However, since I'm a seller on NEWS of the BID and NOT on the actual CLOSING of the deal, this Justice Dept tidbit doesn't really matter to me + my FCX investing thesis !

Data Courtesy: Bloomberg
Full Disclosure: I own shares of FCX.

FEARLESS FCX + The INEVITABLE

In light of Brazilian mining behemoth Vale (RIO...$170 Billion marketcap) ending its TAKEOVER talks with London-traded European mining company Xstrata (Xstrata's current marketcap is $35 Billion), who could be next on their list to ACQUIRE ?

http://www.bloomberg.com/apps/news?pid=20601081&sid=ahBpW.PXmMvw&refer=australia

I can't tell you for certain but I believe American made Freeport-McMoran Copper & Gold (FCX) is a very attractive takeover target. Sure it's a commodity stock and because of that its volatile movements can be difficult to STOMACH...BUT...as I mentioned in a previous post, this industry is rapidly + UNDOUBTEDLY undergoing 'consolidation' (acquisitions done in order to reduce/shrink the size of global players/sellers).

Couple of major reasons WHY global commodity players are consolidating:

1.) EXTERNAL GROWTH IS CHEAPER --> Because of current industry dynamics, it is actually cheaper for a lot of the MAJOR public commodity players (BHP Billiton, Vale, Rio Tinto, etc.) to outright buy smaller companies on 'wall street' vs. growing their businesses on 'main street' (i.e: taking the time to discover sites, gain regulatory approval, set up shop, explore, mine, etc.). In other words, 'external' growth is currently more attractive + cost efficient to these guys versus growing their businesses internally. Makes you think that a lot of the commodity stocks on wall street (many of which are selling at P/E's of 10-15) are INHERENTLY CHEAP, huh?? !

2.) GLOBAL SUPPLIER PRICE LEVERAGE --> Industry consolidation also offers the major players the opportunity to organize and incrementally gain global COMMODITY PRICING LEVERAGE against the HUGE + growing emerging market demand-side counter-parties (aka the usual suspects like India, China, Russia, etc.). As the demand base becomes larger these commodity companies are feeling the pressure to organize + consolidate in order to maintain pricing power.

The 'supplier/demander' war on commodities is very much REAL, ongoing and pretty darn interesting. For example, in an effort to block BHP from merging with RTP, CHINESE aluminum company, Chinalco, just recently teamed up with American aluminum company, Alcoa (AA), to acquire a 9% stake in BHP's potential takeover target Rio Tinto (RTP)! Why is that interesting? In MY opinion, China (the demand side) is clearly reacting to and feeling threatened by BHP's unsolicited RECORD $147 BILLION takeover bid for Rio Tinto. China is (and SHOULD be) concerned about doing its very best to STOP such a blockbuster merger from happening because it could very likely result in higher priced commodity imports for the country.

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Some FCX Stats:
*Marketcap: $37 Billion
*P/E: 12
*FORWARD 08 P/E: 14
*Dividend yield: 2%

*World's largest publicly traded copper company.
*2007 revs rose 190% yoy to $17 Billion (Phelps Dodge acquisition).
*2007 profits rose 93% yoy to $2.7 Billion.
*2007 Free Cash Flow rose 225% yoy to $6.2 Billion.

Full Disclosure: I own shares of FCX.