"The greatness of America lies not in being more enlightened
than any other nation, but rather in her ability to repair her
faults." - Alexis de Tocqueville
Old Alex, a noted French political thinker and writer, hit it
on the screws with his observations of the American spirit during
the early days of the Republic. Americans are good at recognizing
(eventually) what's broken, fixing it, and moving on. We're also
very good at figuring out how to profit from that change and
America has seen enormous change during the first decade of
the 21st century. From the bursting of the tech bubble to the
devastation of 9/11 to the financial crisis of 2008, the nation
has struggled to get its economy and status as a global leader
back on solid footing. But the seeds sown in that recovery
process are beginning to bear fruit. It can only be described as
an American Renaissance.
Old line companies thought to be dead or dying are
transforming themselves as leaders in new technology. All sorts
of businesses are rushing to build infrastructure to support and
transport America's new found energy resources. Large
manufacturers once caught up in the allure of offshoring are
repatriating operations stateside putting Americans back to work.
And rebuilding will be great for shareholders.
From Stamps To Software
I've profiled postage meter manufacturer
Pitney Bowes (NYSE:
a few times
. When I started following the company, the stock was barely
priced in double digits, had a price-to-earnings (P/E) ratio in
the single digits, and had a dividend yield that approached
In addition to the old-line postage business,
Pitney has been quietly growing its software business by
spending over a half-billion dollars since 2008 to
acquire five smaller software companies.
No one wanted to own it. Conventional wisdom said that postage
meters would go the way of the buggy whip with the proliferation
of email. The herd proclaimed Pitney Bowes as good as dead. But
they didn't drill down deep enough.
In addition to the old-line postage business, Pitney had been
quietly (and cheaply) growing its small software business. Since
2008, the company has acquired five smaller software companies,
spending over a half-billion dollars in the process. The software
products Pitney offers run the gamut of business services from
email management to e-commerce.
However -- and surprisingly for a 94-year-old company -- it's
Pitney Bowes' geolocation software business has me the most
excited. The company is in the middle of a multi-year commitment
to provide geolocation software that empowers its check-in
feature. Recently, Pitney signed a multi-year agreement with
to provide location intelligence solutions for Twitter's mobile
The company has also done a great job of managing itself
financially. The company has been aggressively buying back stock
and reducing debt. Pitney has extinguished nearly $600 million
worth of long-term debt over the past three years and bought back
nearly 5 million shares of its common stock, with approval for
nearly $50 million more. Pitney Bowes has also raised its
dividend for more than 30 years straight. PBI yields 3.4% at its
current price level.
Financial commentators (including yours truly) can't write enough
about the great energy boom through America's midsection. From
Texas to North Dakota, it seems like the entire region is awash
in oil and economic prosperity. Thanks to cheaper fracking
technology, extracting oil and gas from shale has become
amazingly efficient, so much so that many analysts predict that
the region will add nearly 3 million barrels per day to domestic
oil production. In essence, that makes the U.S. energy-secure, if
not very close to energy-independent.
The most successful companies involved with the boom are those
providing infrastructure and transportation to the oil and gas
industry, and one of the best ways for investors to cash in on
energy infrastructure is through owning energy MLP (master
limited partnership) units.
I'm a fan of using energy MLPs for income and infrastructure
exposure. These are companies that build and own oil and gas
pipelines, storage facilities and other energy
infrastructure-related operations. Because of their business
structure, the companies distribute most of the income to their
unit holders -- and the size of the distributions is often
The broader market often misprices MLP units based on the
price of the underlying commodity the company stores or
transports. MLP companies -- pipelines, for example -- get paid
based on how much volume their customers are running. Whether oil
is $100 a barrel or $50, a pipeline company gets paid like a
railroad: based on volume. Right now, as oil and gas prices are
at a seemingly weak juncture, the markets are discounting MLP
prices due to that weakness. One of the best values in the MLP
space currently is
Buckeye Partners (NYSE:
Buckeye owns and operates 6,100 miles of refined petroleum
products pipeline systems in the U.S. as well as 100 active
storage facilities that provide aggregate capacity of 64 million
barrels. The company is clearly focused on growing the business,
especially in the liquid petroleum products space, which provides
higher profit margins than the natural gas storage space, where
margins are relatively thin due to relatively low prices for
domestic natural gas.
BPL units yield almost 6.5% at current price levels, and the
distribution per unit is also expected to expand nearly 5% next
year, to $4.475.
If there was ever a poster child for the Great American Company,
General Electric (NYSE:
would be a top contender. Founded in 1892 by Thomas Edison (what
could be more American than that?), GE makes and does stuff that
touches our lives every day. Appliances, power generation,
finance, medical technology, railroad locomotives -- it would be
nearly impossible to go a single day without coming into contact
with something that GE was involved with at some level.
Five years ago, however, things looked bleak for the company.
The financial crisis of 2008 wreaked havoc on GE Capital, General
Electric's financial arm. The company, like many others, was
unable to sell commercial paper, which helped finance operations.
But like all great companies, GE adapted. The books at GE Capital
have been cleaned up, and risk is being managed more prudently.
This has set the stage for GE's success going forward, and
business is strong. (My colleague Karen Canella
recently outlined GE's bold push into the
Energy infrastructure is a major component of America's
resurgence, and GE has seized that opportunity big time. Although
the process appears extremely chaotic now, GE will also benefit
from health care reform. A longtime leader in medical equipment,
especially medical imaging technology, GE's products enhance
health care provider efficiency, which will remain crucial going
Shareholders will be rewarded, too: GE just increased its
quarterly dividend by 16%, and shares yield about 3.2% at current
Risks to Consider:
While all three companies are very different, they are all
susceptible to a weak economy. On an individual basis, GE is
probably most vulnerable to the dangers of higher interest rates
since its GE Capital division is responsible for nearly a third
of the company's revenue.
Action to Take -->
While very different, these three stocks fit into the American
renaissance theme by profiting from technology, energy or
infrastructure (or in GE's case, all three). The basket has a
blended dividend yield of 4.4%, and all three companies have
solid dividend growth histories. All three are suitable for
purchase at current levels.
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