Best Building Product Stocks To Own Right Now

By Claudio Grass

It has been almost eight years since former U.S. President George W. Bush warned the world that "without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold." The government's response to the crisis was a $700 billion rescue package that would prevent U.S. banks from collapsing and encourage them to resume lending, which was soon to be followed by a series of Quantitative Easing (QE) packages injecting money into the economy. The rationale of government intervention was to boost spending, restore confidence in the market and revamp economic growth to everyone's benefit - but did it succeed in doing so?

QE: Faith-Based Monetary Policy

With QE still ongoing (albeit tapered), it is no longer part of a "rescue" package - it has now become the new normal - despite a complete lack of positive results. Since end-2007, the Federal Reserve's balance sheet expanded from about $890 billion to more than $4.5 trillion! And yet, U.S. growth rates have remained in the vicinity of 2 percent since 2010 (see chart below). Europe is no different. The European Central Bank (ECB), which first embarked on QE in March 2015, raised the monthly amount for asset purchases from EUR60 billion to EUR80 billion, and expanded the range of assets to include corporate bonds - but despite that, the growth outlook remains dim with 1.4 percent in 2016, and 1.7 percent in 2017 (source: Bloomberg). So why are governments still clinging to an approach that simply doesn't deliver?

Best Building Product Stocks To Own Right Now: Deutsche Bank AG(DB)

Advisors' Opinion:

• [By Reuters]

  Justin Sullivan/Getty Images RICHMOND, Calif. -- Richmond, Calif.'s leaders approved Wednesday morning a plan for the city to become the first in the nation to acquire mortgages with negative equity in a bid to keep local residents in their homes. The power of 'eminent domain' allows governments to seize private property for a public purpose. Critics say the plan threatens the market for private-label mortgage-backed securities. Richmond's city council voted 4 to 3 for Mayor Gayle McLaughlin's proposal for city staff to work more closely with Mortgage Resolution Partners to put the plan crafted by the investor group for the city to work. Richmond can now invoke eminent domain if trusts for more than 620 delinquent and performing "underwater" mortgages reject offers made by the city to buy the loans at deep discount pegged to their properties' current appraised prices to refinance them and reduce their principal. A mortgage is under water when its unpaid balance is greater than its property's market value. Mortgage Resolution Partners has failed to get similar plans approved by local governments elsewhere -- most recently in North Las Vegas, Nev., and earlier this year in San Bernardino County in Southern California -- as the mortgage industry and local real estate businesses rallied against them. But in Richmond, Mortgage Resolution Partners found an ally in a Wall Street-bashing Green Party mayor of one of the San Francisco region's poorest cities who sees working with the investor group to acquire mortgages as a public purpose if it makes the loans more affordable, averts foreclosures and alleviates blight. Richmond's residents have been "badly harmed by this housing crisis," McLaughlin said, defending the plan and partnership with Mortgage Resolution Partners during an often contentious city council meeting that began Tuesday evening and ended early Wednesday morning. "Too many have already lost their homes." City council members opposed to the pl

• [By Diane Alter]

  Before we get into why we remain bearish on Deutsche Bank AG (NYSE: DB), here's what has been driving shares so much higher this week…

  Why the Deutsche Stock Price Has Rebounded

  The Deutsche Bank stock price had been falling after U.S. regulators said they are seeking $14 billion in fines from the company for selling fraudulent mortgages that lead to the U.S. housing bubble.

• [By Paul Ausick]

  Deutsche Bank AG (NYSE: DB) lost about about 4.2% Tuesday to post a new 52-week low of $12.43 after closing Monday at $12.97. The 52-week high is $30.82. Volume of around 8.8 million was up about 61% from the daily average of around 5.4 million. FDIC vice-chairman Thomas Hoenig said Tuesday that the bank’s low capital status makes it the top risk among the big banks.

• [By Lisa Levin]

  Deutsche Bank AG (USA) (NYSE: DB) was down, falling around 10 percent to $13.35 after the German-based bank was slapped with a $14 billion penalty from the U.S. Justice Department. The Wall Street Journal, citing "people familiar with the matter," reported that the $14 billion fee would settle a series of high-profile mortgage-securities probes during the financial crisis. Deutsche Bank was quoted by the Wall Street Journal as saying in a statement that it has "no intent" of paying a fee that is "anywhere near the number cited."

• [By David Zeiler]

  But perhaps the most galling is the $328.2 billion in benefits given to Deutsche Bank AG (NYSE: DB). Yes, the same European bank that's teetering on the edge of collapse right now, the same bank from which the United States is seeking a $14 billion fine for selling risky mortgage-backed securities prior to the financial crisis.

Best Building Product Stocks To Own Right Now: Actinium Pharmaceuticals, Inc.(ATNM)

Advisors' Opinion:

• [By Lisa Levin]

  Shares of Actinium Pharmaceuticals Inc (NYSE: ATNM) were down 24 percent to $1.29. Actinium priced 8 million shares at $1.25 per share.

  Shineco Inc (NASDAQ: TYHT) was down, falling around 32 percent to $19.50. On Wednesday, Shineco priced IPO at $4.50 per share.

Best Building Product Stocks To Own Right Now: Whiting Petroleum Corporation(WLL)

Advisors' Opinion:

• [By Ben Levisohn]

  Shares of energy stocks, including ExxonMobil (XOM), Chevron (CVX), Whiting Petroleum (WLL), and Devon Energy (DVN), are surging on reports that OPEC has agreed to to limit the amount of oil its members produce. Bloomberg’s Nayla Razzouk,�Grant Smith, and Angelina Rascouet�report:

• [By Lisa Levin]

  Energy shares surged around 1.85 percent in trading on Monday. Top gainers in the sector included Legacy Reserves LP (NASDAQ: LGCY), Whiting Petroleum Corp (NYSE: WLL), and Atwood Oceanics, Inc. (NYSE: ATW).

• [By Ben Levisohn]

  The $50/Bbl Question Is Answered �� In our June 2nd note entitled, ��Rethinking Risk/Reward on High Beta E&Ps,�� we highlighted that $50/Bbl is a critical level as it is around which many E&Ps have indicated they would begin either utilizing drilled-but-uncompleted (DUC) wells and/or increasing activity. Thus, with the NYMEX strip exceeding ~$50/Bbl in H2��16 and 2017, the question becomes, ��What will E&Ps do next?�� In our note we distinguished which oilier SMID Caps could organically accelerate at current NYMEX strip prices without further leveraging the balance sheet and which would still require higher oil prices. We ranked WPX third, behind�Oasis Petroleum (OAS) and Whiting Petroleum (WLL) in terms of its ability to accelerate through the drill-bit while keeping the balance sheet intact. For WPX we concluded that without increasing activity beyond our base case assumptions or higher oil prices, leverage would increase by 0.8x in 2017. However with accelerated activity and corresponding higher outspend (via more Williston DUCs and an addt��l Permian rig), we forecast WPX could further grow production next year and keep leverage flattish at ~3.5x Net Debt/EBITDAX. We think today��s announcements confirm our thesis, as WPX increased 2016 Williston activity and issued equity to facilitate this addt��l spend plus potential activity acceleration in 2017/2018 without adding more debt.

• [By Ben Levisohn]

  Credit Suisse analysts�Mark Lear and team explain why they upgraded�Whiting Petroleum (WLL) to Outperform from Neutral:

  Bloomberg News

  We upgrade�Whiting Petroleum to Outperform and raise our target price to $14 per share (from $13/sh) given Whiting Petroleum��s significant beta to a higher mark to market 2Q16 WTI price. Our target price is further aided by a recent debt exchange whereby the company was able to remove $1.065bn of debt principal through the use of mandatory convertibles. Our $14/sh target price…is based on an assumption of max dilution, with actual shares issued on the convertible debt depending on how Whiting Petroleum��s stock trades over the next few weeks. This exchange came on the heels of a smaller 1Q16 announcement which removes ~$477mm of debt from the balance sheet.

  In the most recent exchange, the minimum mandatory conversion price has a lower bound at $8.75 per share, which when coupled with macro fears appears to have unjustly hurt and kept the stock range-bound since the announcement, as�Whiting Petroleum is down ~34% over the past month relative to the XOP up ~2%. However, an extensive inventory in the core of the Williston coupled with improving type curves from larger completions which are increasing validated in state production data provide compelling near term catalysts as we expect drilling activity to accelerate in 2017 at the latest. Meanwhile, asset sales remain another key catalyst with remaining assets on the block including North Ward Estes and the monetization of Whiting Petroleum��s Williston Basin gas plants.

  Lear also sees strong “upside potential” for�Concho Resources (CXO), Pioneer Natural Resources (PXD) and Newfield Exploration (NFX) as well performance improves in the Permian/STACK, and also writes positively on Devon Energy (DVN).

  Not that the upgrade is doing much good today. Shares of�Whiting Petroleum have dropped 1.4% to $8.68 at 1:59 a.m. today, wh

Best Building Product Stocks To Own Right Now: Zillow Group, Inc.(Z)

Advisors' Opinion:

• [By Nelson Hem]

  Also in this week's Barron's:

  A special report on strategic beta ETFs How to take advantage of underpriced stocks Who is in denial about the death of the personal computer market Finding the best value mutual funds Finding value in big stocks and emerging markets How mining companies are striving for sustainability Why Zillow Group, Inc.-Class C (NASDAQ: Z) could fall 25 percent Six unconventional yield plays for an uncertain market Why Alibaba Group Holding Ltd (NYSE: BABA) investors may lose in hot IPO

  Disclosure: At the time of this writing, the author had no position in the mentioned equities.