We talked with Dr. A. Gary Shilling of A. Gary Shilling and Co. recently, and he gave us his overview of the current economic climate, and what government involvement in the economy portends for the future of economic recovery in the U.S.:

Dr. Shilling:  The government stimulus is being more than offset by private sector weakness and I happen to believe that after we get out of this recession, we’re going to see not only a slow recovery, but slower growth for probably the next decade, a very big contrast to what we have had in the 1980s and 1990s. Probably as a result, we’re going to have a heavier government involvement in the economy to combat what otherwise would be very high unemployment. It’s a political issue.

For the complete Investing Strategies report, including a full interview with Dr. Shilling, as well as interviews with a wide variety of portfolio managers of from a broad range of styles, click here.  

Obama administration hurting the economy ?

In a recent interview John Collopy of Briggs-Ficks Securities, LLC for our Industrial Equipment report Mr. Collopy when asked about how the new administration was impacting the sector he said “That’s a problem. I am very concerned about their overall economic policies. They have flooded the system with liquidity that I don’t know if much, any, some, or none of it is going to spill into the fundamentals of the economy at this point. I am afraid these policies might dampen multiples going forward because people are going to be leery of govern­ment interventions that could impact investor sentiment and I think that’s what one has to be very careful of.”

Problem , Concerned,  Afraid these are words that are never associated with recovery. Is the Obama administration off the mark or has Mr . Collopy missed the boat? Read the full Industrial Equipment Report and you let us know. follow and respond at twitter.com/wstranscript

As part of our June 29 Industrial Equipment Report we spoke with Karl S. Puehringer of Baldwin Technology Company, Inc. (BLD). The complete interview can be read at twitter.com/wstranscript

When asked about the companies sales mix Mr. Puehringer stated  “I’ll give you a quick overview of our current sales mix. More than 50% of our sales during our last fiscal quarter were re­curring revenues derived from consumables, service, parts and our U.S. food blends operation, and consequently, less than 50% of our revenue during Q3 FY09 came from equipment. By region, 26% of our revenues are in the Americas. Our largest region is Europe, which accounts for slightly less than half of our business, and the second largest region is Asia with Japan being the other most im­portant country for Baldwin. The geographic balance in sales is a major strength of Baldwin. “

The complete text of our interview is available through our Twitter portal at twitter.com/wstranscript. Make sure to check back with our Twitter for more exclusive content, commentary and issue updates

Wolseley WOS (LSE) the distributor of building materials announced its CEO since 2006, Chip Hornsby, would resign immediately. Hornsby was made CEO in 2006. Not long after his ascendance to the top, the company found itself facing the growing housing difficulties particularly its operations in the United States. At the point at which the housing market began to decline, Hornsby initiated a number of strategies to cut overall expenses particularly in the building supply area. Even with these policies in place, the firm saw its share price and profits continue to decline.

In Hornsby’s place the board has selected Ian Meakins. He was previously chief executive of currency exchange company Travelex. Prior to that he held executive positions with the pharmacist chain Alliance UniChem and drinks maker Diageo. Meakins is an accomplished executive it is difficult to determine if he is a good fit for Wolseley. One can expect some real changes in strategy after he takes over his post and gets situated. Stay tuned.

In this  week’s issue of TWST we spoke to Heather Douglas  and Andrew Mikitchook of Thomas Weisel Partners Canada Inc. about Investing in Gold. For Heather it’s Kinross Gold that stands above the rest;

Ms. Douglas: Among the seniors, we have been recommending Kinross Gold. They’ve delivered two key projects in the last year, Kupol and Paracatu. They are in the process of delivering growth and now they are re-establishing an interesting pipeline with Fruta del Norte in Ecuador and Lobo-Marte in Chile. Kinross has a very nice operating margin, so their cash costs are quite attractive, and their valuation in our view is attractive relative to their peers

To unearth the full story be sure to read the entire 99 page report on Gold and Precious Metals which includes 1 analyst, 2 money managers, and 21 sector firms.  Also remember to follow us at Twitter at twst.com/wstranscript for exclusive content

As part of our special focus on Gold and Precious Metals, we spoke with analysts Heather Douglas and Andrew Mikitchook of Thomas Weisel Partners about the space. Their outlook for this space, for the near term  at least, was actually quite positive:

 Ms. Douglas: Our 12-month expectations are positive for gold. We are aware that the early summer months are usually a more sideways period for the commodity, and we view pullbacks as opportunities to re-enter. We’ve identified some interesting developers who, even if the gold price doesn’t move, have the opportunity of showing price appreciation as they advance their projects, have exploration success, and bring projects into production. So that’s our June 2009 view.

TWST: It sounds more positive than anything else.

Ms. Douglas: Still positive. For the generalists, I do recommend exposure to gold first and then extra work to look at the companies, to be familiar with the specific risks with each of the companies.

TWST: When you say gold first, how do you recommend they play it?

Ms. Douglas: It depends on the investor. The GLD ETF is obviously one way, but there are other ways for them to get only the gold exposure diversification they are seeking without the additional operating and country development risks associated with each of the companies.

For the complete Gold and Precious Metals issue, including a full interview with both Ms. Doulgas as well Mr. Mikitchook in addition to interviews CEOs of topic companies in the space, click here. 

Steve Ladurantaye wrote a piece for Canada’s Globe and Mail about the increasing activism associated with Mutual Funds with respect to corporate management.  According to Ladurantaye’s piece,

Mutual funds are becoming increasingly aggressive in voting against company management and using annual general meetings to push socially responsible agendas.

“You are seeing a less friendly attitude toward director nominees, for one thing,” said Laura O’Neill, director of law and policy for the Shareholder Association for Research and Education. “It’s a relatively positive sign that shows some movement toward a more critical approach to management.”

Don’t expect mutual funds to pressure management across the board but we can expect to see increased pressures on management by mutual funds when they determine specific corporate policies are not in their interest.

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Susanne Craig and Joann S. Lublin wrote a story that appeared in today’s Wall Street Journal that examined the dearth of financial CEOs available to come in and run many of our troubled financial companies.  According to the story,

The strain of the credit crisis, curbs on executive compensation and the specter of government scrutiny are making it harder for financial firms to lure chief executives, according to directors, executives and search firms.

“There aren’t any highly attractive CEO prospects in the financial-services industry,” said Peter D. Crist, head of Crist|Kolder Associates, an executive-search firm in Hinsdale, Ill. “The best players won’t risk their careers going to a troubled enterprise.”

… One problem is that the financial industry’s crisis has shown that some firms simply might be too much for anyone to conquer. Eventually, boards will find new CEOs who are confident enough to give it a try no matter how big the risks. For now, the pickings are slim, said recruiters involved in continuing searches.

I am not quite as sanquine about the prospects for finding new CEOs to run the troubled financial firms as are those referred to in the story e.g., executive search firms, directors and executives.  I agree that finding the right candidates will be challenging but that is always the case.  There are good candidates out there and many are up to the challenge, even if compensation does not meet their initial expectations.  Decide for yourself, check out the story.

Speaking this week with Paul Taylor of the BMO Harris Investment Management in Toronto, we asked him to give us some of the companies he’s looking at in the Canadian market:

1. SNC-Lavalin (SNC:TSX) - “SNC-Lavalin is an engineering and construction firm. If you want to build a road, a new hospital, if you want to build a plant surface facility at a base metals operation [in Canada], you approach SNC-Lavalin for project management to take your project from greenfield to a completed facility. There was a very, very healthy backlog for all of the infrastructure firms including SNC-Lavalin going into 2008, while from the private sector there have been some projects that have been canceled. South of the border the public sector and the Obama Administration have earmarked fiscal stimulus plans for infrastructure. Similarly the Harper Administration here north of the border has a significant spend on infrastructure projects and firms like SNC will be beneficiaries.”

2. Research in Motion (RIMM)- “We did add to our Research in Motion position in February and we believe that is an example of world-leading innovation in a very significant market segment. We believe the transition from old phones to smart phones is a process that is inevitable, and it will continue to emerge at least over thenext three to five years. Research in Motion, which booked their one millionth subscriber four years ago, is a firm that we believe has the potential to grow to 50 million or 100 million subscribers in the not too distant future, and we believe from a valuation perspective that this is a stock with tremendous growth potential, trading at very reasonable valuation multiples.”
3. Suncor (SU) & Petro-Canada (PCZ)- “We’ve owned the majors [in oil sands], we’ve owned Suncor and we’ve owned Petro-Canada. Of course, Suncor is in the process of taking out Petro-Canada to get the scale that is required to fund the capital expenditures that are needed to be able to extract oil from the sand. The idea of having a firm of the scale of the combined Suncor/Petro-Canada is compelling when oil goes from $147 to $40 and then back to $60. So we have some core exposure to the oil sands.”

For the complete Investing Strategies report, including a full interview with Mr. Taylor, as well as other portfolio managers in a wide variety of investment styles and focuses, click here.