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3 Top-Tier Penny Stocks Actually Worth Owning

According to the SEC, a penny stock is one that trades below $5 per share. That definition offers a much broader array of companies than those stocks that the “pump-and-dump” crowd would like to see you get caught up in. There are actually some really solid businesses that sell for less than $5 a share; though, I will warn you, they are not without risk.

Pure play on pure water
Environmental services and frack water treatment company, Heckmann (NYSE: HEK ) trades at less than $4 a share. There’s a reason for that low share price – the company’s business model clouds the market’s perception of its future value. Until the company can clear that up, the shares likely will stay in penny stock territory.

The concerns with Heckmann are twofold. First, the market views its business as being tied to the growth of fracking for natural gas. What the market misses is that 70% of the company’s shale solutions revenue is tied to the development of oil and natural gas liquids. The market also sees the company’s financials being muddied by a steady stream of acquisitions. However, what it misses is that those acquisitions are what’s shifted the revenue mix into the major oil- and liquids-focused plays.

If you’re not opposed to waiting for Heckmann to clean up the market’s perceptions of its business, you’ll likely be very well rewarded.

Getting oily
You’ll see a recurring theme here, but the three names on my list are all energy companies moving from a focus on natural gas to one on oil and liquids. Among producers, SandRidge Energy (NYSE: SD ) , and its share price under $5, is a tempting value. The company is the king of the emerging Mississippi Lime formation and has a huge runway of growth ahead of it.

The problem here is that the company bit off more than it could chew to get to this point. It followed the model of Chesapeake Energy (NYSE: CHK ) much too closely and got itself caught in the gas bubble a few years back, and it has spent billions of dollars it didn’t have to transition into oil and liquids. It probably shouldn’t surprise you that current SandRidge CEO Tom Ward also co-founded Chesapeake.

The silver lining here is that the company’s financial situation is now much more manageable. Further, it’s seeing tremendous production growth out of the Mississippian. While it has a way to go to complete its turnaround, at less than $5 its shares are a very compelling value when you consider the potential of the company.

Hunting for value
Until recently, Magnum Hunter Resources (NYSE: MHR  ) boasted operations in three of the top oil and gas growth plays in the nation. While its recent sale of a bulk of its Eagle Ford acreage to Penn Virginia (NYSE: PVA  ) knocks it out of that play, the company still has large positions in both the Marcellus, Utica, and Bakken. These core operations should drive the company’s liquids-focused growth for years to come.

Like both Chesapeake and Heckmann, Magnum Hunter isn’t without its issues. The main reason behind the Eagle Ford acreage sale to Penn Virginia is to help repair its balance sheet. The company picked up almost $400 million in cash which will help reduce its debt. It also gives the company the flexibility it needs to invest in its liquids growth plans.

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Prokhorov’s Onexim Considers Buying Rusal Debt or Stake Sale

Billionaire Mikhail Prokhorov’s Onexim Group, a United Co. Rusal shareholder, is looking at buying debt issued by the world’s largest aluminum producer to boost its influence over management decisions.

Onexim, which holds 17 percent of Rusal, is “monitoring the opportunity” to buy debt alone or with partners, Onexim Chief Executive Officer Dmitry Razumov said. It may sell out if that plan doesn’t work, he said.

Prokhorov, flush with cash from selling out of Polyus Gold International Plc (PGIL) this year, and fellow minority shareholder billionaire Viktor Vekselberg have battled with Rusal CEO Oleg Deripaska for dividends and over his insistence on holding onto a 25 percent stake in OAO GMK Norilsk Nickel. The stake’s market value has fallen to about $6.8 billion, while the aluminum producer’s debt reached $10.8 billion at the end of last year.

“We, as a minority shareholder, have limited influence over the management and the main owner’s decisions,” Razumov said in an interview at the holding company’s Moscow headquarters on April 18. “We still think that Rusal should have sold the Norilsk Nickel stake when it had the opportunity, as now the company has huge debt amid low aluminum prices and high production cost.”

Onexim swapped a 25 percent stake in Norilsk for Rusal shares in 2008 and got about $5 billion in cash, setting off a more-than-four-year shareholder conflict at the nickel producer between billionaire Vladimir Potanin, now CEO of Norilsk, and Deripaska.
Debt Conditions

Rusal completed paying the debt it owed Onexim for the Norilsk stake in October 2011. The aluminum company declined to comment for this story.

By buying Rusal debt, Onexim could gain influence over the company’s ability to negotiate waivers from lenders on the terms of its borrowings, Barry Ehrlich, a Moscow-based analyst at Alfa Bank, said in a note.

“We find it difficult to imagine Onexim taking a large stake in low-yielding Rusal bank debt,” Ehrlich said. “However, the threat needs to be monitored. By threatening and then potentially moving ahead to acquire the bank debt, Onexim can strengthen its negotiating position by refusing to give Rusal a covenant extension at the end of 2013 when the current covenant holiday expires.”

Potanin and Deripaska signed an accord in December last year to end their feud and plan to sell a stake of about 6 percent in Norilsk to billionaire Roman Abramovich’s Millhouse as a part of an agreement reached after President Vladimir Putin urged them to settle the conflict.

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Europe’s Policies Are U.S. Energy’s Best Friend

Spanish authorities just announced that there will be a ban on production from hydraulic fracturing in one of the most promising shale gas regions in the country. Spain joins France and Bulgaria on the roster of countries who have banned the use of this new drilling technology used to access unconventional sources. While the entire European continent struggles with a new energy identity, it provides an immense opportunity for U.S. companies.

Fracking is a hot political topic. Germany is moving away from nuclear, and total European energy demand is expected to climb — which adds up to a region that will increase its energy imports by 75% by 2035, and America could be the one to fuel that need. In this video, Fool.com contributor Tyler Crowe discusses how several players in the American energy space could be able to take advantage of the European energy dilemma, and considers what it will take to make it happen.

The coal industry in the United States has been in a state of flux since the arrival of a cheaper alternative for energy production: natural gas. Exports are becoming a much bigger part of the domestic coal landscape, and Peabody Energy has deals in place to get its cheaper coal from the Powder River and Illinois basins to India, China, and the EU. For investors looking to capitalize on a rebound in the U.S. coal market, The Motley Fool has authored a special new premium report detailing exactly why Peabody Energy is perhaps most worthy of your consideration. Don’t miss out on this invaluable resource — simply click here now to claim your copy today.

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NextEra Concludes Nuclear Upgrade

NextEra Energy Inc.’s ( NEE – Analyst Report ) business wing Florida Power & Light (“FPL”) announced the conclusion of its large-scale modernization program at the Turkey Point Unit 4 and St. Lucie nuclear power facilities located in Miami-Dade County and St Lucie County, respectively.

It took the company five years to complete the plant upgrades. The last to complete the modernization work was Turkey Unit 4 and was linked to Florida’s power grid yesterday.

The generation capacity from the upgrade of these plants reached over 500 megawatts (“MW”), exceeding the prior projection of 399 MW made at the end of 2012. The “extended power uprates” as the upgrades are called involved installation of 38,000 (over seven miles) electric wiring conduit, roughly 16,000 linear feet of pipe which translates to about three miles and 288,500 feet (over 50 miles) of power cables.

In 2012, NextEra Energy completed the modernization of Turkey Unit 3, St Lucie 1 and 2. The company’s investments in nuclear energy are expected to result in major advantages in terms of fuel cost savings and low-emissions. Customers in Florida will thus enjoy lower electricity bills on the back of these considerable programs.

The savings from the first year of operation is estimated to be over $100 million from fossil fuels, which will definitely be passed on to customers in the guise of lower bills. As of now, the company’s power prices are 26% below the national average. Further, the program will help in reducing 33 million tons of greenhouse gas emissions.

Currently, the company charges $95 to an average residential customer consuming 1,000 Kilowatt-hours (kWh), which includes a nuclear cost recovery rate of $1.65 (5 cents per day). With the present nuclear upgrade coming into effect, NextEra plans to cut the nuclear cost recovery rates to about 50 cents equivalent to less than 2 cents per day in 2014.

In early Mar 2013, NextEra Energy disclosed its plans to invest $200 million for equipping its power infrastructure against severe storms as well as improve service reliability.

NextEra Energy’s diversified assets enable the company to maintain a stable revenue position. The housing construction market in Florida is expected to gain traction which will lead to increase in power demand. In this light the upgrade work on its nuclear assets seems timely. These upgrades are also anticipated to enhance operational quality which will lead to customer retention.

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How to play energy efficiency

Thematic investing isn’t the easiest way to make money: Not only do you have to get the theme right, but you have to select the right stocks for tapping into that theme.

Bank of America equity strategist Sarbjit Nahal has provided some assistance on the first part: Energy efficiency, he believes, is a “global thematic megatrend.”

As he argued in a research note, changes in global economic growth have only marginal impacts on long-term energy and climate-change trends, which implies that the trend toward efficiency is long-lasting.

Indeed, he states that coal use is set to rise by 21 per cent by 2035, oil demand will rise by 13 per cent and nuclear generation will grow by 58 per cent.

While that might suggest that energy production is a good investment, Mr. Nahal argues that there are investment opportunities in energy efficiency.

“In a fossil fuel and resource-constrained world, energy demand inevitably has to adjust to limited supplies,” he said.

“Barring an outright, long-term economic downturn, we believe that this process needs to occur through a combination of energy efficiency improvements and gradual substitution out of oil and fossil fuels. Both of these can help restrain our growing appetite for energy in the long-term – although we believe that energy efficiency offers the single, greatest prospects among currently available options for cheap and easy energy and cost savings.”

So-called “end use efficiency” – or energy savings from improved efficiency – could hold the greatest promise, given its track record. Mr. Nahal noted that without gains in efficiency over the past 40 years, global energy consumption today would be at least 63 per cent higher.

There are still more efficiencies to be found of course. The International Energy Agency believes that just one-third of the economic potential has been tapped so far.

That’s where the investing theme kicks in: While efficiency can mean nothing more than turning off the lights, the big investing opportunity is with companies that are developing and using technology to get more bang for the buck.

Mr. Nahal identified seven entry points for investors: automobiles, buildings, industrial and integrated plays, information technology, lighting and LEDs, smart grid and energy storage, and transport.

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Stocks advance at start of big earnings week

Investors remained cautious at the start of a big week for company earnings on Wall Street.

In negative territory until midday, the Dow Jones industrial average rose 19.66 points, or 0.14%, to 14,567.17. The Standard & Poor’s 500 index rose 7.25 points, or 0.47%, to 1.562.50. The Nasdaq composite index gained 27.49 points, or 0.86%, to 3,233.55.

About a third of the companies in the S&P 500, including Exxon Mobil and Apple, report earnings this week. Analysts currently expect earnings to rise by 2% in the first quarter, down from the 7.7% increase in the fourth quarter, according to S&P Capital IQ.

Investors have mixed views about a slew of tech earnings due out this week will beat estimates and counter the disappointing earnings report out last week from tech giant IBM.

INVESTORS: Unclear whether stock market can keep luring buyers

While the majority of companies that have reported earnings so far have beaten investors’ expectations, concerns remain about the outlook for revenues for the rest of the year. Caterpillar added to those worries Monday when it lowered its forecasts for full-year sales and profits because its mining business is slowing.

“Most of the companies seem to be coming in ahead of earnings expectations, but the thing that’s still problematic is the revenue line,” said Bill Stone, chief investment strategist at PNC Wealth Management. “To me it’s just symptomatic of the global economy continuing to sputter along.”

The yield on the 10-year U.S. Treasury note was at 1.7% Monday as many investors sold stocks and bought lower-risk government bonds. In bond trading, the price rises when demand is strong, pushing the yield lower.

In currency trading, the dollar was strengthening after the Group of 20 industrialized nations accepted Japan’s unprecedented efforts to stimulate its economy. It was 0.3% higher against the yen at 99.21 and the euro was slightly lower against the dollar at 1.3060.

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Technology Stocks Worth Consideration At Market Highs

The stock market as measured by the benchmark S&P 500 Index finally arrived at a new all-time high on the final day of the first quarter. While this represented a grand accomplishment for those that are bullish on stocks, many investors are understandably trepidatious about either taking the plunge or continuing further in this market after its recently strong run. This is particularly true given the notably shaky fundamental backdrop for the market. But for those risk sensitive investors still seeking opportunities in stocks, the technology sector may still offer some appeal.

So how much further can we expect the stock market (SPY) to rise anyway? With the Fed pumping billions of dollars of liquidity daily into the financial system, there is no telling how high the stock market could rise. At its current rate, we could see the S&P 500 cross 2000 by the end of year. Why not? Capital markets are so completely disconnected from reality already, so what is to stop it from tacking on another 440 S&P points before the end of the year? Never mind that the already sluggish rate of economic growth in the U.S. is slowing and many other parts of the world are already mired in recession. Never mind that we are but only one day and one boneheaded policy mistake away from the outbreak of the next financial crisis. Never mind that corporate earnings growth on the S&P 500 has been downwardly revised by -6% over the last year at the same time the Index itself has increased by +11% in price.

Never mind that corporate profit margins have compressed by 150 basis points in recent quarters at the same time the Index itself has risen by over +15%. Never mind that the stock market is already trading at a premium to its historical valuation. Heck, even if the S&P 500 Index hit 2000 on April Fool’s Day, it would only be trading with a P/E ratio of 20.65, which of course would still probably be deemed as “significantly undervalued” as one former central bank chairman recently put it.

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U.S. Stocks Advance, Led by Tech Shares, After FOMC Minutes

–Stocks rise after early FOMC minutes release

–Technology shares lead S&P 500 gains, adding 1.3%

–Tech-heavy Nasdaq Composite outperforms, adding 1.1%

By Alexandra Scaggs

Stocks rose, led by a broad rally in technology shares, after the Federal Reserve’s meeting minutes were released early but offered few other surprises for investors.

The Dow Jones Industrial Average advanced 85 points, or 0.6%, to 14758. On Tuesday, the Dow rose 60 points, or 0.4%, to close at an all-time high of 14673.46.

The S&P 500 tacked on 11 points, or 0.7%, to 1579, above its previous intraday high of 1576.09. Technology stocks notched the biggest gains, adding 1.3%. The tech-heavy Nasdaq Composite Index gained 36 points, or 1.1%, to 3274.

On Tuesday, the S&P 500 posted a second-straight gain, snapping its record 13-session streak of alternating between daily advances and losses.

The Federal Open Market Committee’s March meeting minutes were released at 9 a.m. EDT, rather than the scheduled 2 p.m. because they were inadvertently sent a day early to Congress and some trade groups, the Fed said. The minutes showed that committee members are continuing to debate the timeline for ending the central bank’s stimulus efforts.

“These minutes didn’t change the general story,” said David Kelly, chief global strategist with J.P. Morgan Funds. The release “just reinforces the idea that investors need to gradually move their money toward riskier assets.”

Demand fell for the safe-haven 10-year U.S. Treasury bond, pushing its yield up to 1.786%.

Keith Bliss, senior vice president with New York brokerage Cuttone & Co., said that the early release of the minutes likely helped traders and portfolio managers position for the day.

“I’m glad they came out at 9:00,” he said. “What we’ve seen the past few [releases] is that around 11:00 or 12:00, trading usually comes to a screeching halt, because people are waiting for the minutes. Now that the minutes are out … we can get on with the day.”

Stocks also got a boost from strong economic data abroad. Chinese imports surged 14.1% from a year ago, well above expectations of a 6.1% increase, a sign that demand from the world’s second-largest economy remained strong.

European markets were broadly higher. The Stoxx Europe 600 climbed 1.5%, as better-than-expected industrial production out of France and a well-received auction of short-term Italian debt helped provide a lift.

February industrial output rose by more than expected in France, and January’s decline was smaller than previously reported. France’s CAC 40 index climbed 1.6%.

Italy sold EUR11 billion ($14.4 billion) of three- and 12-month bills, with funding costs declining. The FTSE MIB index ran up 3.3%.

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Market Watch: Dramatic Shift to Bearish Sentiment

Not a bull in sight as the markets struggle to keep the rally alive. With all the sentiment exiting the bullish stance, will the market fool all the Zentrader contributors? To keep some continuity, back on April 1st, Poly and Chris were calling for an 8-10% correction from those levels. Another sentiment change to note is that I have been bullish since January 4th and have now switched to a bearish stance.

It’ll be interesting to see what happens now that the majority are lining up with some cautionary/bearish stance. This is what I had hoped to achieve with this sentiment pool to see if we can garner some sort of information when this sort of alignment happens.

Financial Tap – Certainly bearish now looking for weakness over next 8 weeks. But we’re due for a Daily Cycle Low next week, and that should spawn a 3-7 day rally before continuing lower. – Bearish

Liz DeMera –  Short term low later this week with upside bias into end of month. Intermediate term very bearish next four to eight weeks. Waiting for longer term indicators to reach extreme conditions as they begun to deteriorate significantly. – Bearish

All About Trends – Neutral opportunistic long and short with a bias to the upside over the next week or two to test resistance on the S&P 500 (SPX) then bearish. – Neutral

Jeff Pierce – With all of my markets I cover on a sell signal I’m moving to the bearish camp after being stubbornly bullish since January 4th. You have to listen to what the market is telling us and I see waning momentum signals all over the place. – Bearish

Karen Starich – We have a lunar eclipse in Scorpio that will make a hard aspect to the Federal Reserve Uranus on April 25th.  Uranus rules sudden political changes and in light of the the recent setback to the President’s gun bill we could see a reactionary move in the near term that causes some angst among investors. We could see a sudden pullback that is a buying opportunity as the bullish rally could resume in May. - Neutral

Christopher Ebert – Long straddle option trading became ridiculously profitable early in March, and is just now beginning to pull back to normal levels. Usually the market corrects about 10% within a month, but it could also correct by moving sideways for the next month or so. – Neutral Bearish.

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Go Green with These 3 Clean Energy

While many investors might want to support ‘green’ companies, these firms haven’t exactly made a great case to be in portfolios over the past few years. Companies in this segment have seen big subsidies and more interest from the every-day consumer, but have still failed to attract enough demand to remain profitable or see their stock prices soar.

However, while this has largely been the story of clean energy over the past few years, the outlook might finally be shifting for this space. Many companies have actually seen pretty solid performances to start 2013, finally beating out more traditional energy firms in YTD terms.

This represents a huge reversal, as many clean energy firms have lost double digits—if not 40% or more—in the trailing three year period. This suggests that, given the insatiable energy demand across the globe, we might finally be seeing a place for clean energy in the market (see 3 Sector ETFs Surviving This Slump).

So, it could finally be time to take a closer look at some of the names in the clean energy universe. Many of the weakest firms have died off, and new technological processes and decent demand are helping to boost prospects for the remaining players in the market.

Still, clean energy investing is quite risky, and especially so from an individual security perspective. For this reason, a clean energy ETF approach could be the way to go, as this still allows for a bet on clean energy but with hopefully a more diversified and lower risk technique.

If investors like this idea, it should be noted that there are a plethora of ETFs tracking this segment currently on the market, each with their own pros and cons. For this article, we have selected 3 of the best performing clean energy ETFs that focus on the broad space, as any of these could be big beneficiaries from a continued positive trend in this intriguing corner of the stock market:

iShares S&P Global Clean Energy Index Fund ( ICLN )

This ETF tracks the S&P Global Clean Energy Index, a broad benchmark of companies engaged in some aspect of the clean energy business. The product charges 48 basis points a year in fees, while its volume is a little light along with a moderate asset level of just $30 million (read 3 Biggest Mistakes of ETF Investing).

The portfolio doesn’t have much of a focus in the clean energy segment, as it includes biofuels, ethanol, geothermal energy, and the more well-known hydro, solar and wind. Still, the portfolio is pretty small holding just over 30 stocks in its basket.

In terms of sector classification, ‘utilities’ take the biggest chunk, followed by broad alternative energy, and semiconductors. Unsurprisingly, large caps make up less than half of the portfolio, giving a heavy focus on mid and small cap stocks instead.

As alluded to earlier, the performance for this ETF has been terrible over the long haul, as the fund has lost more than 50% of its value in the last 36 months. However, it has seen a huge reversal as of late, gaining 5.7% in the past three months, beating out ( SPY – ETF report ) in the process.

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