This is very important, since declining inflation and strong economic performance will allow for capital inflows and currency appreciation.  Moody’s Corp. (NYSE: MCO) just recognized this strong progress by raising India’s local currency rating to Ba1 from Ba2.

Now, there are only a few ways in which foreign investors can actually participate in India’s equity markets – again, Jason explains several of those options in his article.  The reality is that there are just a handful of American Depositary Receipts (ADRs) for Indian companies that have any liquidity or are worthy investments.

However, one of those ADRs -Tata Motors – currently is offering investors a rare opportunity.
The leading automaker in India reported results in stellar fashion, and it’s set to keep cruising.

Tata Motors over the last five years has grown revenue at a rate of 25% a year on average.  And this year’s second quarter was particularly strong, as the company’s consolidated revenue grew 64%.  With this huge increase, Tata Motors turned the corner to solid profitability, posting second-quarter profit of $433 million, compared with a $69 million loss in the same period a year ago.

Tata’s operational and financial leverage have been the key to its strong execution.  Fixed costs and time to market are very high in this industry, so economies of scale are very high.  But if you hit it right with an attractive product mix that is priced adequately, the results are fantastic.

What is truly remarkable is that Tata Motors has managed to turn around the Jaguar Land Rover operation it bought from Ford in June of 2008.   The same Jaguar Land Rover operation that was never once profitable in the fifteen years it was under Ford’s management, now has produced three straight profitable quarters for Tata.

Tata has dramatically reduced the brands’ costs by combining two U.K. plants without cutting jobs. The company also plans to relocate production of the Land Rover Freelander to India.

Furthermore, Tata plans to boost sales by introducing its new Land Rover Defender globally and could soon introduce a station wagon and a new roadster under the Jaguar brand.

These new models should be well received in India – a country with the second-largest population in the world and an ambitious highway infrastructure plan that’s set to be completed by 2015.

Enter Tata’s Nano – the cheapest car in the world. Tata started production on the Nano in July 2009, after receiving 206,703 orders in just three months.  Demand has been so strong that the company just opened a plant in Gujarat, which is the first plant to be specifically dedicated to the Nano. The plant will have a capacity of 250,000 cars a year to start and 350,000 cars a year if necessary.  The Nano sells for some $2,500 in India and will be sold for some $7,000 in the United States later on.

In addition to the Nano, Tata has a strong hold on India’s commercial vehicle market. The company maintains a whopping 61% of the local commercial market. And it saw a 39% jump in volume in that segment in the second quarter.

Indeed, Tata Motors has turned the corner and has huge earnings growth momentum.  And that momentum will only grow stronger as India’s growth accelerates in the second half of 2010 and beyond.

Yet in spite of all of this, Tata Motors stock is still cheap.

In terms of valuation, it is trading at a ridiculously low forward price/earnings (P/E) of 8 and an even more ridiculous price/earnings/growth (PEG) ratio 0.34-times.

The stock is in a “boring” bullish trend, trading above its 20, 50, and 200 day exponential moving averages and it’s at the top of its Bollinger bands.  It has rallied more than 80% in a year.

This looks like a breakout right now, and clearly is a gift to investors interested in India. The only question is when and how to get in. I don’t like to chase stocks, but the potential is huge in this one.  So we are going to go in phases.

Recommendation: Buy an initial position in Tata Motors Ltd. (NYSE ADR: TTM), averaging in over the next couple of weeks, and save enough firepower to double up after any major pullback (**).

(**) – Special Note of Disclosure: Horacio Marquez holds no interest in Tata Motors Ltd.

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Clorox’s strong cashflow affords the company very comfortable debt coverage ratios. Its level of debt to earnings before income tax, depreciation and amortization (EBITDA) has declined in the last three years from 3.3-times to 2.2-times, improving its creditworthiness.  Clorox’s interest coverage ratio (EBITDA to interest expense) also has improved strongly, to 8.96-times from 6.27-times.  This trend has warranted an improvement in the firm’s credit rating outlook, which in the investment grade is BBB+ to stable.

There is no question that this is a sound strategy with interest rates so low.  A few years from now, as interest rates normalize and the cost of debt goes up, this strategy will be more costly.  But, by that time, the company’s effort to improve its earnings/debt ratio will have put it in a better position to face higher borrowing costs.

Of course, there’s more to Clorox’s recent success than shrewd borrowing.

In the past two years the company has set out to recover the slight profit margin erosion brought on by the economic disaster.  And in that time, Clorox has recovered much its lost market share through disciplined cost cutting, better pricing power and lower commodity prices.  You see, in this business, little differences add up. That means careful marketing, advertising, distribution and cost controls, as well as an optimal financing structure are of paramount importance.  And that’s precisely where Clorox has excelled.

For example, Clorox is already number two in U.S. market share, behind The Procter & Gamble Co. (NYSE: PG).  In fact, Clorox is ranked in the top two in almost every one of its key brands.  And those brands represent 88% of the company’s total portfolio.

While double-digit earnings growth is achievable via growth in both its core U.S. operations and in its international units, do not expect miracles.  The likely range for outperformance or underperformance is relatively small at first sight.  Yet, the relatively low weight of international sales within the company and a proven capacity for successful and profitable innovation make its objectives achievable.  There is some room for upside surprises with both new products and developments in fast-growing emerging economies.

Clorox concentrates some 71% of its international presence in home cleaning and bleach and laundry products in Latin America.  And the fact that Asia today represents only 5% of sales is actually a plus, since it leaves lots of room for improvement in the long term. So, we have a superbly managed marketing company, with plenty of room to grow internationally.

This success is the result of a carefully managed process that prioritizes margin and market share expansion, allocating resources based on economic profit.  We expect continued margin improvement through the continuation of relentless cost savings initiatives, information technology investment, and innovation.  In addition, market share improvement will come from the launching of carefully targeted products – the emphasis being in value and superior customer perception.

Health and wellness are key themes that will drive future growth.  Clorox has very sophisticated market segmentation, product positioning and overall marketing strategy in these sectors.  It is bound to deliver results, based on their proven track record.

Earnings momentum is at its back due to a mix of carefully tested marketing and financial initiatives.  The stock is valued at 13-times earnings at a nice discount to the Standard & Poor’s 500 Index. Its Price/Earnings/Growth (PEG) ratio is high at 1.43, though not disqualifying.

We can overpay a little for growth that we are pretty certain lies ahead. And Clorox offers an attractive 3.4% dividend yield.  That dividend is easily sustainable at a dividend payout ratio of only 47%. In fact, it was just raised by 10% in May.

Technically, the stock is almost “boringly” bullish.  Its 200-day moving average shows a very steady upward slope. At just over $64 a share Clorox is sitting right near its 50-day moving average and in the middle of the Bollinger bands, in an oversold condition.  This bodes very well for an entry point.

However, the stock also is approaching the 2007 all-time high, so it should start showing some short-term resistance. So what is the investment proposition?

With this type of stability and high dividend yield, Clorox should be a core holding in any portfolio that is not purely speculative.  Rather than sitting in ten-year U.S. Treasury bonds, we can sit on Clorox stock, get paid much more and have the upside of a first-class equity that can actually adjust prices up if inflation becomes a problem.

If we see some resistance here, we could run a short-term covered-call strategy: Buy the stock and sell some out of the money calls on it.  The one-month calls we sell lower our entry point in the stock by the amount of premium we collect and would probably expire worthless.  The traditional risk-minimization strategy is to dollar-cost average into the stock over the next couple of months.

Recommendation: Dollar-cost average into The Clorox Co. (NYSE:CLX) on a weekly basis over the next two months (**).

(**) – Special Note of Disclosure: Horacio Marquez holds no interest in The Clorox Co.

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Steel production requires a hefty dose of power, itself. In fact, energy is such an integral element of economic development that energy consumption increases are almost perfectly correctly with economic growth. This correlation is so precise that multilateral organizations use it to track economic growth more precisely in countries where economic record -keeping is poor.With these factors we are seeing great visibility in terms of expensive capital -goods- expansion projects for mining – specifically coal mining – and at the same time we are seeing a powerful pick- up in coal demand .  Bulk freight rates for overseas shipments of coal are climbing once again, and coal-producing companies are reporting strong earnings and are increasing their earnings guidance for the year.

These are coincidences that one cannot afford to ignore.  This is a wake-up call to a profit opportunity in this asset sub-class.  As is our practice, we are going to play it strong and play it safe, and are going to go for the unchallenged global king of the coal industry: Peabody Energy Corp. (NYSE: BTU).

You see, the United States is the Saudi Arabia of coal, and Peabody Energy is the clearly dominant U.S. coal company.  Its superb positioning in the low-sulfur, very- low-extraction-cost Powder River Basin in the United States gives Peabody a scale, product quality and cost advantage that is simply impossible for its rivals to replicate.

But the story does not end there.

Peabody is geographically diversified, with a few mines left in the Appalachian region where it has been divesting, as well as some in the Illinois basin.  But, more importantly, the company enjoys a very profitable and fast-growing presence in Australia.

In 2008, profitability in Australia was spurred by a very unusual supply shortfall. That has changed. Even so, company profitability remains high – just not at the artificially assisted levels of 2008. But seaborne coal is experiencing a demand pickup, and will continue to do so, bringing Peabody a new source of p rofitability .

Australia’s continued economy strengthening is good for Peabody – especially in the near term. In the long term, however, the company’s commodity-supplying relationship with China and India will be an even bigger contributor to the company’s growth profile – especially because those two countries have such high – but sustainable – rates of growth.

Indeed, China, India and Brazil – three of the four so-called “BRIC” economies – are advancing at robust rates, despite some recent efforts from each country to prevent overheating economy and inflation. China and Brazil have achieved soft landings and inflation in each economy is under control.  India is pursuing a similar strategy.   With growth comes the afore-mentioned demand for energy. And that means coal. Expect Peabody Energy to continue its successful twin strategies of pursuing organic growth even as it looks for acquisitions to augment this growth.

Peabody hit the ball out of the park with its latest quarterly report. The company trounced Wall Street’s estimates and beat our own by a nickel a share. Even more important, however, was the fact that the company also boosted its guidance for the year. It may surprise us yet again, since the sweltering U.S. summer has bolstered electricity demand.

And many areas of manufacturing, like automotive, are also recovering well.  U.S. carmakers are back, which we’ve seen in their own numbers and the numbers released by AutoNation, Inc. (NYSE: AN).  It takes a lot of energy to produce, distribute and sell cars.In further evidence of the mining sector’s potential, our recent investment in Joy Global Inc. (NYSE: JOYG) is off to a great start.  We also saw its cross-town archrival Bucyrus International, Inc. (Nasdaq: BUCY) similarly beating earnings and raising guidance.  They are getting orders from abroad for yet another round of mining expansion.

Hence, our investment thesis is very strong both in the intermediate and in the long term.  What about the short term, for the traders?

Peabody Energy, like the entire commodity space, corrected abruptly since mid-April. I nvestors pulled back on the reins, waiting to see if Europe would resolve the Greek and Southern European country sovereign debt crises, and later expected some clarity on the shape of the European banking system.  Europe reacted strongly, passing comprehensive regulations  and posting aggressive- stress- test results.  The core of the European banking system is fine, and there are no systemic risks involved.

Hence, Peabody Energy’s stock printed a traditional double bottom and rallied once more.  It crossed the key exponential moving averages for the 200-day, 50-day and 20-day timelines.  This is very bullish.

What’s more, long term, the stock is showing the traditional cup-and-handle pattern that is usually a very strong predictor of abnormal gains ahead.Valuation-wise, the stock is trading at 22 times earnings, which seems high, but the Price/Earnings-to-Growth (PEG) ratio, which matches the P/E ratio with growth in earnings to see how much are we paying for growth, is very low.  And, with earnings very likely to keep surprising us to the upside, we need to hop on Peabody Energy now.

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United Technologies leads in most of the major segments in which it participates, and it is a very disciplined and well-managed company.  Its cost-containment efforts in the past are translating straight into profits as the business accelerates.  And this is what we just saw.  At the same time, it puts management in the comfortable position of being able to increase earnings expectations moving forward.  Other well-known global UTC brands include Sikorsky helicopters and Carrier air conditioners, refrigeration, and heating units.

We have already seen strength in industrial sales in many companies.  These include Caterpillar Inc. (NYSE: CAT), Deere & Co. (NYSE: DE), CNH Global NV (NYSE ADR: CNH), International Inc. (Nasdaq: BUCY) and Joy Global Inc. (Nasdaq: JOYG).  Bulk carrier rates, rates paid by bulk commodity shippers, also are going up.  This is especially true for coal, which is mainly used in power plants, and electricity has almost a perfect correlation with economic growth in the world.

So, while many are talking double-dip risks and about the many uncertainties facing the global economy, the companies selling heavy industrial machinery see strong growth ahead.  This is a very bullish indicator, because heavy equipment purchases demonstrate a buyer’s confidence in long-term business prospects.

Additionally, there are strong indications of a turnaround in civil aviation.  The airline industry is in the midst of a remarkable recovery that could last at least another year, maybe two.  There has been a sharp pick-up in orders globally, and business travelers are coming back. The industry, having undergone consolidation, has shown discipline by controlling capacity.  But the key is to keep improving efficiency by moving to newer, more fuel-efficient airplanes.

This trend clearly favors UTC’s Pratt & Whitney and Hamilton business units, which expect a pick-up in the second half of the year. The company already has shown strong order flow in Europe and China – two places analysts had expected slowdowns.

Meanwhile, the Federal Reserve issued a very cautious statement on the U.S. economy, emphasizing high unemployment, which suggests the central bank will take a cautious approach to withdrawing any stimulus measures. This is a bullish prognosis for most of UTC’s sales, which will benefit from low long-term interest rates.

Once more, the balance of aerospace and defense on one side and global infrastructure on the other, – combined with strong execution of cost controls and business development – has made United Technologies a winner.  UTC is the poster-child for balance and diversification.  And its after-market services, which account for some 40% of revenue, give it a great deal of stability.

The stock is trading at a forward price/earnings (P/E) ratio of just 13 times.  This is a nice discount from a standard valuation.  In addition, the stock sports a 2.6% dividend yield, which is approaching the neighborhood of the ten-year bond yield.  So investors get an income that’s comparable to “safe” bonds, while enjoying the upside of a truly great company.  They also have the opportunity to buy in at a discount valuation, at the beginning of yet another heavy machinery and infrastructure investment cycle.

Technically, investors would be buying right on top of the 200-day exponential moving average, as the stock prepares to rally.  That will lead to both short-term and long-term gains.

Recommendation: For both short-term and long term-holders, buy United Technologies Corp. (NYSE:UTX) at market today.

(**) – Special Note of Disclosure: Horacio Marquez holds no interest in United Technologies Corp. (NYSE:UTX).

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Siemens is a conservatively run firm.  It has very low levels of debt, which is rated in the middle of the investment grade scale (A).  And despite the weakness in Europe, it has managed to increase its bottom line by 50% from last year’s levels.

More importantly, it is one of the strongest players in the world in the next wave of electricity technology: smart grids.  Demand for electricity is growing immensely, especially in emerging markets, since it has almost a perfect correlation with economic growth, and Siemens is in prime position to profit.

Siemens is a very diversified conglomerate, with different lines of businesses.  Their main activities comprise industry automation, building and drive technologies, and energy and health care, mainly. It also owns lighting company Osram.

While most businesses are sensitive to the business cycle, Siemens’ diversification protects it from severe downturns.  What we have seen so far is that short-cycle businesses, especially energy, are showing a strong recovery.

This is especially true in green technologies.  That’s good for Siemens, which leads in offshore wind generation, and enjoys the second spot in onshore wind generation technologies in the United States.  It recently developed the most efficient gas generation turbine in the world, which is already producing strong orders in Europe and should be followed by orders from the United States.

Similarly, Siemens is experiencing success with Velaro high-speed train orders in Germany, Spain, China, and Russia.

In fact, Siemens just inked multi-billion dollar deals to produce wind turbines and trains for Russia.  The size of the recent deal was undisclosed, but a few figures were known.  The company will supply Russia wind turbines capable of generating 250-500 megawatts of energy, and it expects to get up to 5,000 megawatts by 2020. Siemens also will launch two research facilities locally over the next five years.

The deal is so big that Russia even agreed to make visa requirements more flexible for Germans.  This is a very strong long-term growth deal for Siemens and the company has gained a very strong foothold in one of the major BRIC economies.

But Russia is just the beginning of the story. Siemens will benefit from the cheaper euro, as it exports to Asia and Australia, which have been the company’s main growth drivers.

Additionally, Siemens is implementing a long-term restructuring plan to drive up efficiency.
The company has increased the overall efficiency of its management and global suppliers and has disposed of unprofitable operations. That’s why expenses related to selling, general and administration functions have decreased by 16% since 2007 and revenue has increased.

The success Siemens has had in high technology export-oriented industries allowed the company to increase its guidance for this year by 20% – to $9.7 billion (7.5 billion euros) from a range of $7.8 billion – $8.4 billion (6 billion euros – 6.5 billion euros).

The recent business with Russia and the weakness of the euro – which effectively subsidizes German exports and reduces the employment cost of Siemens’ European workforce – should allow the company to keep increasing profit margins and revenue estimates for the future.  Siemens reports on July 29.

The stock is in a traditional, very bullish long-term (five year) “cup and handle” pattern, where the handle, looked at in detail from the second half of last year until today, shows a very well established range between $87 and $102 per share.  Right now, it is barely above the middle of that range, bumping up against some short-term resistance at $97.

Short term, I believe that the stock will have to trade up.  Its Price/Earnings/Growth (PEG) ratio is ridiculously low, meaning that we are paying very little for the earnings growth that Siemens is showing.  I expect Siemens to keep raising earnings estimates as it gains traction globally, cuts costs and benefits from the weak euro.

Recommendation: Buy Siemens AG (NYSE ADR: SI) (**). Short-term players should buy into any weakness before the company’s July 29 earnings announcement.  And long-term players might even see their shares double over the next two years if they buy now and hold.

(**) – Special Note of Disclosure: Horacio Marquez holds no interest in Siemens AG.

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That means we could soon see a strong short-term bullish market trend.

Meanwhile, the International Monetary Fund’s (IMF) recent World Economic Report Update showed global growth estimates for the next year and a half that were much stronger than expected.

China will still be growing above 9% in the second half.  And the “downside” scenario in Brazil is about 5% gross domestic product (GDP) growth in 2011 – down from about 7% currently.  India will accelerate in the second half to almost 9% GDP growth and barely decelerate next year, and Russia will decelerate some from its 4% GDP growth.

Increased global growth means strength for commodities – which in turn leads to higher stock prices in that sector.  I especially like the mining sector, which is benefiting strongly from this secular growth trend.  In general, the “picks and shovels” play on an industry is likely to deliver much greater returns than the direct commodity play, sometimes with a lot less risk, although this is not the case always.

Many heavy equipment companies have been revealing very robust order flow for the second half.  These include Deere & Co. (NYSE: DE), CNH Global NV (NYSE ADR: CNH) and Caterpillar Inc. (NYSE: CAT).  The latter sees so much strength in mining that it will be increasing its efforts in the sector.

We are going to play this strong short-term rebound and long-term mining bonanza with Joy Global, Inc. (Nasdaq: JOYG).

Joy Global is highly levered to commodity prices and fears about the end of the cyclical uptrend in commodities will subside in the days and weeks ahead.  Global growth will demand an expansion of global mining operations.  And the excellent and comprehensive aftermarket support Joy Global offers its customers – which accounts for some 55% of sales – will keep differentiating the firm.

Joy Global Inc. is slightly larger than its close competitor and Milwaukee neighbor Bucyrus International Inc. (Nasdaq: BUCY).  And it does not have to digest recent acquisitions. But both names tend to trade together, closely following the developments in the commodities markets.

For example: Bucyrus hit a bump at the end of June, when the Export-Import Bank of the United States (Ex-Im) – a specialty bank that supports the export sector by guaranteeing the risk of the buyer – denied the company financing for a $310 million shipment of coal mining equipment that was destined for a power facility in India.

The bank was following new U.S. policies designed to promote a cleaner environment, and both Bucyrus and Joy Global traded down as a result. However, the Obama administration last week announced a renewed focus on expanding exports. That should be a viable strategy since emerging markets will continue to grow strongly.

In addition, the bar set in the Bucyrus case seems way above the bar set in countries that have much tighter environmental standards than the United States.  And there are strong indications that the Eximbank will re-examine the loan and revert to the standard international practice – thus restoring competitiveness to U.S. mining equipment manufacturers.

So, in anticipation of the possible Eximbank announcement, the strong global case for commodities, the reversal of global growth fears as European bank stress tests are revealed, and the strong visibility of heavy machinery orders we are going to buy the stock now.

Financially, Joy Global has been beating earnings estimates consistently, and in the last two quarters in particular. And with operating margins north of 20% and a return on equity approximating 70%, it sports a very high profitability when compared to the industry.

The stock pays a decent and very safe 1.4% dividend yield and at 12-times earnings, it is fairly cheap.  Wall Street has not yet caught on to this company, but some analysts are beginning to recognize its potential and are upgrading the stock.

Joy Global is at the bottom end of a well-established trading range, between 45 and 65.  It is sitting right at its 200-day exponential moving average in an oversold condition and starting to turn to the upside.  It has bounced to the upside very nicely in the past every time it has reached this moving average.

Please recognize the volatility of this stock, expect a bumpy ride and dimension your position and entry strategy appropriately.

Recommendation:  Buy Joy Global Inc. (Nasdaq: JOYG) at market (**).

(**) – Special Note of Disclosure: Horacio Marquez holds no interest in Joy Global Inc.

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But to be on the safe side, lets review the investment proposition then and see if anything has changed.

The bottom line is that Campbell Soup enjoys a huge and very stable cashflow. This monster cashflow is the product of the company’s unquestioned dominance of the U.S. soup market, and increasingly, its emerging market profits. The company’s nearest U.S. competitor sells one-seventh of what Campbell sells. This profitability generates operating margins of some 25% — twice that of other consumer staple companies. And the high certainty regarding Campbell’s cashflow lets it carry a high level of leverage that brings their return on equity to an astounding 72%!

The end result of Campbell Soup’s soup market dominance and profitable execution is a 3.1% dividend yield. And that dividend is very safe, since it represents less than half the company’s profits. It also compares very favorably with the less than 3% yield that you’d get on 10-year U.S. Treasuries. And while Campbell Soup can lift its prices in accordance with inflation, investors lose money on U.S. Treasuries if inflation increases and yields move up.

Campbell Soup also offers a huge upside based on its strong emerging market growth.

Additionally, the demand for soup could actually grow faster in an economic downturn, because consumers switch to cheaper foodstuffs to save money. That means we are covered on the economic downside, guarded against inflation and getting higher yield than we would sitting on 10-year Treasuries. And that’s in addition to the huge upside presented by growth in emerging markets – specifically Russia and China, which respectively are the largest and second-largest soup markets in the world.

Russia’s market is basically wide open for Campbell Soup’s products, because most of that country’s citizens make their own soups from raw meats and vegetables. But ready-made soups are cheaper and more convenient, which means the product is destined to find a mass following.

Meanwhile, Campbell keeps executing well in cost controls, and its marketing programs – with superior market segmentation and product positioning – have allowed for growth with fewer promotions. This has resulted in expanded margins, which together with the emerging market expansion keeps leading to continued positive earnings surprises.

So if you don’t consider consumer staples growth candidates, think again.

Remember, Warren Buffet has made a fortune on another “boring” consumer staple company that seemed to be maxed out in the United States: The Coca-Cola Co. (NYSE: KO). While the entire analyst community was asleep at the wheel, Warren saw the compelling long-term value of replicating the company’s success in hundreds of countries around the world. So he took a long-term position in the stock.

That’s exactly what we’re aiming to do with Campbell Soup.

While analysts look at the U.S. market’s minor developments, not understanding the growth dynamics of exotic countries that they have seldom analyzed and never visited, we will take advantage by remaining constructive on Campbell Soup – even as it approaches most analysts’ price targets of around $35 to $37 a share.

The stock is still trading at a discount to the Standard & Poor’s 500 Index when the reliability of its earnings should command a premium. Also, on a technical basis, the stock is on a bullish trend and at the bottom of the Bollinger bands. Like the market, it is oversold right now, and sitting on strong support.

This is a short-term entry opportunity for any short-term traders. Finally, we reiterate the highly defensive nature of Campbell Soup’s stock and its strong and reliable dividend yield, which compares favorably with 10-year Treasuries. On the basis of continued growth and expanding margins, I am moving my target up to the pre-crash, 2008 high of $40 a share

Recommendation: Buy Campbell Soup Co. (NYSE: CPB) at market (**).

(**) – Special Note of Disclosure: Horacio Marquez holds no interest Campbell Soup Co.

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That’s why the Chinese government last week finally made its currency policy more flexible.  The orderly appreciation that China will allow its currency will help control domestic inflation and further stimulate local demand.  Chinese consumers will demand more imports from the West and therefore help rebalance growth in the world.  It bodes well for other emerging markets and commodities-exporting nations, as well.

Meanwhile, Congress on Friday agreed to a historic overhaul of U.S. financial regulations.  While limiting many risky activities, banks and other financial institutions avoided the comprehensive bans that many had feared.

Finally, Europe is dealing with its sovereign debt crisis, which has important implications for the continent’s banking industry.

The G20 will move forward with global rules on banking, under its Basel III initiative.  The tougher capitalization and liquidity requirements being discussed pose a risk to the global recovery, because they could force banks to restrain credit or dispose of assets in order to comply.  Therefore, the extent and timing of such reforms are critical to the future course of the global economy.

With so much uncertainty surrounding the changing regulatory environment and its possible effect on banks and economies, we are going to take pause and focus on stability and a high-yielding dividend.

That brings us to Enbridge Energy Partners, L.P. (NYSE: EEP).

Why Enbridge?

Enbridge delivers very stable earnings time after time and it’s a company that doesn’t mind giving profits back to the shareholder.  EEP is a master limited partnership (MLP) that owns crude oil and natural gas pipelines – including oil pipelines that bring Canadian crude down to the United States and gas pipelines woven throughout East and North Texas – as well as natural gas storage and processing facilities.

Do not get hung up on the MLP structure – it is something that we can take full advantage off.

For example, MLPs are contractually obligated to pay a quarterly required distribution (QRD). And with the company’s superlative revenue and profit stability, the degree of certainty concerning that payment is very high.  Also, MLPs are able to distribute these earnings without paying Federal or State taxes!

And the investor, who is really a partner, is able to reduce their own tax liabilities by discounting their proportion of the MLP’s depreciation.

All of this sounds too good to be true, but it is right there for us to take full advantage of.  The reason for such beneficial tax treatment is to facilitate this critical aspect of U.S. energy policy.

Enbridge’s business may be boring, but there are extra efficiencies to be gained by managing a boring business.  And Enbridge has a habit of exploiting those efficiencies in recent quarters to beat analysts’ estimates.  That could mean a 1% surprise increase in its planned distributions, like the one announced recently.

Now, ahead of the company’s earnings report – after the market closes on July 23rd – investors can get safely into this stock that has recently traded down, increasing its dividend yield to a whopping 7.6%.  And remember that you will be able to reduce the tax impact to you even more (please consult your tax advisor), by using the depreciation allocation of the partnership in your own tax return.

That’s the game with Enbridge. Hold the stock long term, enjoy your 7.6% dividend, and disregard occasional volatility in the stock price.

Once we have a clearer picture of the global economy in terms of global financial regulation and policy adjustments, we can become more aggressive in taking advantage of the favored trends.

Recommendation:  Buy Enbridge Energy, L.P. (NYSE: EEP) at market (**).

(**) – Special Note of Disclosure: Horacio Marquez holds no interest in Enbridge Energy, L.P.

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Those attributes translate into higher profitability and cash generation, and in turn, allow for a light debt burden, high liquidity and a bulletproof balance sheet.

Cummins’ superior quality and cost advantage are what’s made it the leading designer and manufacturer of diesel engines in the United States.  It’s also quickly become the largest producer of natural gas and hybrid bus engines in the country.  And both segments are due for very strong increases in sales.

Cummins was the first to comply with a very tough new environmental standard in 2007, and in 2008, it pushed Caterpillar Inc. (NYSE: CAT) out of the on-highway heavy engines business. Daimler AG (OTC: DDAIF) also ceased sourcing engines internally and switched to Cummins.

The company already is consistently beating sales and earnings estimates, and it’s showing no signs of slowing down. Cummins’ first-quarter net income more than doubled Wall Street estimates, rising to $149 million, or 75 cents a share, from $7 million, or 4 cents, in the year-earlier quarter. And we can expect a similar outperformance as we approach its second-quarter earnings report, to be released on July 27.

This is not only because the company boasts disciplined and consistent management, but also because U.S. and global trends are providing a unique profit opportunity.

While Asia and Latin America – most notably Brazil – are now being forced to curtail economic growth to keep from spurring inflation, the U.S. recovery continues to gain momentum.  And, very importantly, infrastructure spending remains a strong pillar of global growth.

As a result, there currently is very high demand for new trucks all over the globe. That’s why Cummins’ international sales have grown to 60% of total sales from 40% just a couple of years ago.  Who says that America cannot compete in manufacturing around the world?

In the United States, the trucking industry has been caught with an antiquated fleet that is in desperate need of replacement.  The average age of the U.S. truck fleet is the oldest it has been in decades, and old trucks mean higher maintenance costs.  As the U.S. recovery gathers steam, trucking companies are increasingly taking advantage of low interest rates to replace their trucks and reduce operating expenses.  And the federal government has ambitious plans to increase mileage standards for big rigs, which will help accelerate the replacement of old trucks.

In addition, higher gasoline prices have accelerated the migration to diesel engines. Cities, states and federal governments are moving towards more efficient vehicles and thus increasing their purchases of natural gas and hybrid engines.  The United States is riddled with large pockets of natural gas and prices are very low right now, which makes shifting to natural gas-powered bus fleets a no-brainer.

Cummins is perfectly positioned to take advantage of this with new, undisclosed designs aimed at reducing pollution and boosting mileage. It might not be as sexy as Apple Inc.’s (NYSE: AAPL) iPhone, but it’s much more difficult to leapfrog Cummins’ products and the profits it’s generating will soon be just as good.

This trend is increasingly dominant in Europe and Asia as well, as countries around the world tighten emissions and mileage standards further.

Cummins should continue to grow strongly in its power-generation business, because its products enjoy advantages in standby, mobile and distributed power generation. The inadequacies of the electricity-distribution grids in many emerging markets will provide fuel for strong future growth in this category.

So, continued emerging market growth, an ingrained recovery in the United States, and tighter mileage and pollution standards will continue to power unusually strong profits for Cummins over the immediate-long-term future.

Cummins stock is still discounting strong growth, but it’s trading at all time highs and testing a strong resistance.  And if the company’s second-quarter earnings blow through analysts’ estimates the way first quarter earnings did, its stock could go substantially higher. So we need to enter the stock in a staggered fashion.

We need to buy some now and buy some more after the earnings report, whichever way it goes.  A solid strategy is to use dollar-cost averaging, which means buying the same dollar amount of the stock in periodic purchases over time.  This way, when the stock rallies we get fewer shares, and when the stock is cheap we get more.

Recommendation: Dollar-cost average into Cummins Inc. (NYSE: CMI) starting today and complete your investment over a period of two months (**).  Hold for superlative profits in the medium and long term.

(**) – Special Note of Disclosure: Horacio Marquez holds no interest in Cummins Inc.

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• Robert Doll, chief investment officer at investment giant BlackRock Inc. (NYSE: BLK), wrote a well-argued bullish position for U.S. stocks in The Wall Street Journal.
• U.S. Federal Reserve Chairman Ben S. Bernanke attempted to reassure investors that there would be no double-dip recession.
• And China posted red-hot economic numbers.

These developments – and others – are bullish for stocks. If we include the fact that the market has been way oversold, the market seems to be telling us that it is time to look for bargains.

That’s why it’s time to play copper, which carries the “metal-of-the-economists” moniker for a very good reason – copper prices are a very good barometer of global economic activity.  Since the metal is used widely in construction, automotive, electronics and a myriad of industries, copper has served as a fairly reliable barometer.

Until now.

I make that statement with a bit of caution, since there has been a very pronounced sell-off in copper prices in the market since the April peak.  This was coincident with the European debt crisis.  But the sell-off has been dramatic.

Now, however, it appears that the expectations of a global crash are decidedly diminished. Central bankers and governments around the globe have taken dramatic measures and continue to work feverishly in order to ensure that global growth remains on track.  Sure, there are differences, but the general objective is the same for everybody: maximize growth.  The constraints in emerging markets are inflationary pressures, and in European countries there are fiscal and debt level issues.  So let’s quickly review.

The U.S. economy is strengthening further.  We learned last week from Bernanke that the impact from the European debt situation will be muted and that the Fed remains vigilant to counter its effects in the U.S. economy.  As a result, the U.S. economy will be consolidating its gains in growth and unemployment will be hard to cut from here, but we will not go into recession again.

China and the rest of Asia remain very strong.  China’s numbers reveal that it is still in risk of overheating its economy, despite the measures it has taken to avoid this.  Very strong trade surpluses, despite the recent financial turmoil and European distress, strongly point to the fact that China needs to do a lot more to “flexibilize” its currency and let it appreciate.  A more-flexible approach would be beneficial, since it would achieve a more balanced growth, relying less on exports and increasingly in the purchasing power of its own consumers.  As an example, the trade deficit excluding oil for the U.S. economy narrowed with every country except for China.

Now, should China gradually make the currency changes that I expect – as Brazil and Mexico have done for a long time – the Asian giant would benefit from an immediate easing of its internal inflationary pressures, while at the same time increasing the purchasing power of China’s consumers.

This, in turn, would help support the global economy, balancing China’s growth, and stoking its demand. The global commodity and exporting sectors would benefit from that heightened demand.

India’s economy is set to accelerate into the second half of the year and beyond, and is stimulating lending.  And Brazil’s economy has been – and will continue to be – able to post accelerated rates of growth this year. It will grow at a 7.5% pace this year, with the rate moderating to 5% next year.

We’ll also have an extended period of 0% interest rates in the U.S. economy stretching into at least the first quarter of 2011, with Europe likely to remain extremely lax in monetary policy to compensate for the renewed fiscal discipline. Japan is also likely to keep an easy monetary policy.

This environment is the ideal scenario for commodities.

Yet, we saw the sell-off over exaggerated fears about a global double-dip.

Since markets exaggerate to the downside and to the upside before reaching an inflection point, they create great opportunities at the extremes.  And when markets sell-off to the downside, they tend to do so much more aggressively and over a shorter period of time.

In addition, the fact that the Bush administration tax cuts expire at the end of this year is forcing many investors and speculators to take profits now, leading them to establish a new, higher cost basis.  This could have been a strong factor helping the recent sell-off be more pronounced than it should have been, were it based solely on fundamentals.  But this just creates new entry opportunities that we must seize.

That brings us to the publicly traded king of copper: Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX).

Copper prices sold off 25%, from $3.65 on April 12 to a recent low of $2.73.  And this occurred in an environment where gold, which acts as a safe haven from both inflation and financial meltdowns, was rallying.  In this environment, it is no surprise that Freeport’s stock sold off 33% from almost $88 to $57.  It closed Friday at $64.93.

Indeed, a chart of copper and the chart for FCX reveal the expected almost identical movements for both.

The sell-off in Freeport’s stock occurred independently of the fact that the company’s reported earnings-per-share (EPS) of $2.00 in its April release was ahead of expectations, and the fact that the firm recently doubled its dividend from 60 cents to $1.20 per share.  FCX actually has accumulated a huge amount of cash already ($2.7 billion) and is generating some $1 billion per quarter.  So some market players have been speculating about the possibility of the company paying a special dividend.  We are not going to count on this, however, and will just go on the company’s prospects from here – as well as the current $1.20 dividend, which gives us a 2% dividend yield.

By accounting for roughly 12% of the total output of copper in the world, Freeport is the largest publicly traded copper producer on the planet.  The industry has seen a tripling of copper prices in the last few years and this strong pricing is likely to keep increasing.

Cheaper copper – accessible in open-pit mines – will run out in the next decade. At the same time, however, the demand keeps increasing with the “wealth effect” that is creating hundreds of millions of new members of the global middle-class/consumer-class in China and in other emerging markets around the world. We’re also seeing huge urbanization trends occurring in those countries.  As we discussed, global growth should actually accelerate into 2011.

Freeport, by virtue of the high quality of its properties, its expertise and its economies of scale, shines bright.  It continues to enjoy a very high profitability from its Grasberg property in Indonesia, which, given its very-high-quality ore, is one of the most competitive mines in the world.

The company does have some political risk in the Democratic Republic of Congo, which has recently raised taxes even without going through Congress.  This follows a joint study between the Organization of Economic Co-operation and Development (OECD) and the African Development Bank, which concluded that many African states should do the same in order to ensure that they get an adequate return from their mineral wealth. Tax increases are not expected to be a significant dent in Freeport’s profitability.

FCX’s stock was strongly oversold and has rebounded decidedly on good global macro news, and an apparent abatement of near-term European-debt-default fears.  I see a continuation of all the trends that I’ve described, which I believe grants us a very attractive entry opportunity into FCX.  The stock is trading at a Price/Earnings (P/E) ratio of less than 9.0, while the Standard & Poor’s 500 Index is trading at 15 times earnings.

This is a gift.  I foresee in coming months a strong rebound in copper prices and a possible 50% upside for Freeport – sending it to new highs.

Recommendation: Buy Freeport McMoran Copper & Gold Inc. (NYSE: FCX) at market (**).

(**) – Special Note of Disclosure: Horacio Marquez holds no interest in Freeport McMoran.

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