2010 – In Like A Lamb, Out Like A Lion?

Glorious spring is still two long months away, but March’s adage “in like a lamb, out like a lion” (or the reverse) might just be a predictor for 2010 if recent surveys are to be believed.

According to a new survey, financial executives are bullish about the coming economic recovery and expect their companies to perform well through the rest of this year.

The survey of more than 200 senior decision-makers found that 60.4% of executives expect the economy to return to normal growth in 2010, with the second half of the year likely to be better than the first.

Still, a full 25% of the respondents remain cautious, expecting recovery in 2011, while 7.4% saw 2012 as the year that growth returns.

Executives expect federal stimulus and low interest rates to drive the economy and they also see consumer demand strengthening in both the U.S. and Canada.
While cost reduction remains an important factor to half the companies surveyed, only 13% expect to slash their operations in 2010. A full 30% said that they may increase staffing levels.

A survey of oil and gas companies found many of their top industry executives are bullish in their outlook for 2010, according to Grant Thornton's eighth annual Survey of Upstream U.S. Energy Companies.

The survey of more than 100 senior executives of independent oil and gas companies, found that half expect their companies to add jobs this year and 67% anticipate increases in domestic capital expenditures in 2010, up from 32% in 2009.

The prevailing opinion seems to be that the big downsizing has already occurred. With the focus on revenue growth and the fundamental feeling that consumers will drive the expansion, many of the executives feel rather safe about increasing their capacity again.

For penny stock investors, this could mean being trepid about companies that are still in a reactive mode and instead, looking for those companies that are being proactive. If the penny stock company you’re looking at isn’t fundamentally prepared to sprint when the economy does…you may want to find out why.

Hopefully, the penny stock you’re considering didn’t take a wait-and-see approach while the rest of the market fine tuned (or overhauled) their operations. The last thing you want is to hang your hopes on a penny stock that took a 2-year sabbatical while the recession circumnavigated the globe.

Speaking of circumnavigating…Gail Bebee, author of No Hype: Straight Goods on Investing Your Money, when asked to select one stock that will soar higher than all others this year, went against the large cap grain and chose a penny stock as her top pick.

She chose Star Bulk Carriers, Corp. (SBLK – Nasdaq). Her rationale? Star Bulk Carriers Corp. is, she says, an unloved bulk shipping stock. “There is an upturn in global production happening and this should set the stage for an economic recovery in 2010. Dry bulk shipping is a beaten-up sector, which is fair proxy for a recovery.”

The stock, she says, has a low debt load for the sector and at $2.85 per share, trades well below its $8.29 book value. Further, unlike many penny stocks, SBLK pays a dividend.

In November, the company reported solid third quarter results. Speaking on the results, company President and CEO, Akis Tsirigakis, noted, "We are pleased to report strong operational results for the third quarter of 2009, exceeding expectations. Excluding non-cash items, Net Income for the quarter was $12.4 million or $0.20 per share and adjusted EBITDA was $28.3 million."

"Our cost control campaign has generated tangible results, General and Administrative expenses decreased by 37%, while vessel operating expenses decreased by $1.9 million or 20%, compared with the third quarter of last year. During the quarter we further enhanced our company's financial and operational stability."

"With a young and modern fleet, low debt level, experienced management, efficient in-house technical and commercial fleet management, strong charter coverage and high liquidity, our company is well positioned for continued growth creating value for its shareholders."

Clearly SBLK is not an example of a penny stock that took the last two years off. With strong fundamentals and a solid outlook, SBLK could be a penny stock that exits 2010 like a lion.