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The Trend is your Friend

The trend is your friend and so far the trend has been down. There hasn't been much to cheer about these days. As long as there is a freeze in the credit markets the equity markets will continue to suffer. Borrowing money is how American businesses grow. No money, no growth. I think the Feds have done a good job in providing liquidity to the markets. Banks and other financial institutions are now in a better position to re-lend that money to their clients at better rates. However, what if banks continue to cautiously lend and continue to tighten credit standards so that not even their best borrowers can qualify? What would be the long-term effects of such stringent lending policies? Which industries would be the most affected and how can an investor profit from such a scenario as this continues to play out in the credit markets over the next 6 to 12 months? These are issues that I will try to consider as I make my stock or bond recommendations over the next 6 to 12 months.

The stock of the month is Mirant Corporation and although this is a pretty tough market, I believe that energy trading stocks may still be undervalued and I particularly like Mirant (NYSE: MIR: $36.96).

Name of Company: Mirant Corporation
Stock Symbol: MIR
Sector: Utilities
Sub-Sector: Electric Utilities
Closing Price as of 02/20/2007: $36.96
Days since stock recommendation posted: 1
Simple Return in last 30 days: N/A
Compounded Annual Return: N/A

Company's description: Mirant Corporation was originally incorporated in Delaware on April 20, 1993. The Company manages its business through three principal operating segments: United States, Philippines and Caribbean. The Company's United States segment consists of the ownership, long-term lease and operation of power generation facilities and energy trading and marketing operations. The Philippine segment includes ownership, long-term lease or similar interests in power generating facilities. The Caribbean segment includes power generation businesses in Curacao and Trinidad and Tobago, and integrated utilities in the Bahamas and Jamaica. In the Company's United States segment, its core business is the production and sale of electrical energy, electrical capacity and ancillary. Its customers in the United States are ISOs, utilities, municipal systems, aggregators, electric cooperative utilities, producers, generators, marketers and large industrial customers. Read more on Mirant's profile at MarketWatch.com or Reuters.com. The stock has performed relatively well over the last 12 months and is trading at a very low PE (price to earnings) ratio of 7.53-cheap; the stock is also trading at thirty percent (30%) above it book value of $25.6- cheap, per share. In addition, the company has reduced millions of dollars of debts off of its balance sheets through the sale of assets at premium prices in 2007.On November of 2007 the company and its subsidiaries was removed from Fitch ratings negative watch and assigned a stable outlook which has positively affected its debt ratings in the credit markets. I believe that Mirant can and will continue to profit in the oil and gas markets, and you could see continued price appreciation in the stock over the next 6 to 12 months baring any negative legal or operational events going against the company.

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