Consider The Hershey Company (NYSE/HSY), which is a business that pretty much everyone recognizes. The chocolate maker’s latest earnings report saw revenues of $1.4 billion, up 6.7% from revenues of $1.3 billion in the same quarter last year. Net income for the second quarter of 2012 were just under $136 million, or $0.59 per diluted share, compared with $130 million, or $0.56 per diluted share, in the second quarter of 2011.

Hershey said that its been able to increase its prices without affecting demand; the company expects volumes to increase in the bottom half of the year, and management increased the company’s earnings outlook for all of 2012 from the previous $3.11 to $3.17 per share to a range between $3.17 and $3.23 per share. In my opinion, for such a mature business and brand, this is a great earnings report. On the stock market, the position is trading just below its all-time high, with a current dividend yield of 2.2%.

Then there’s PepsiCo, Inc. (NYSE/PEP), which is a benchmark stock I always follow. (See “My Favorite Benchmark Stocks That Lead the Stock Market.”) The company just reported a great second-quarter earnings report that beat consensus. The company is still going through a global restructuring, and it did have some one-time charges in its earnings report. PepsiCo’s net income was $1.5 billion, or $0.94 per share, in the latest quarter, down from net income of $1.9 billion, or $1.17 per share. Excluding one-time items, PepsiCo earned $1.12 per share, beating Wall Street consensus of $1.09 per share.

As we know, PepsiCo is a very mature business, but on the stock market, it’s a genuine leader. The stock was strong before the company’s latest earnings report; after the earnings report was released, the position broke through to a new 52-week high of just over $70.00 a share. All this, and a dividend yield of just over three percent.

Just like the economy, things are choppy in industry, and not all companies are able to produce good earnings reports that beat consensus. Today’s stock market leaders, however, will be best positioned to weather the next recession, and ... Read More

The superlative growth of China over the last decade has largely been fueled by export demand for cheaper Chinese-made goods. The country built thousands of plants and added significant capacity to handle the significant influx of foreign business. While this strategy works when global economies are strong, the problem arises when export demand declines as we are seeing now in China.

The current structure of the country’s growth is largely dependent on foreign demand for goods, but China realizes that it also needs to drive domestic consumption higher to help minimize the negative impact of any global slowing when moving forward, and to create a more balanced economy that is powered by both export demand and domestic consumption.

The International Monetary Fund came out earlier this week and suggested China’s economy is facing “significant downside risks,” advising the country to try to increase domestic consumption instead of just pumping money into the economy. If you go to China, you’ll notice tens of thousands of empty apartments that were built by the government with no tenants. You also see this with excess manufacturing capacity. China has spent hundreds of billions on infrastructure, but consumer spending is key.

China has made it clear that it wants to stimulate domestic consumption, which currently stands at around a third of its gross domestic product (GDP) compared to around 70% in the U.S.

With over 1.3 billion people and a middle-class of around 300-400 million (depending on who you talk to), the strategy to boost domestic consumption makes a whole lot of sense.

In its 12th Five-Year Plan for 2011-2015, China indicated it wants to make the country less dependent on export demand and investment-led growth, and to try to promote equal income distribution that would allow its lower-income citizens greater access to money. This, in turn, would pump up domestic consumption, at least in theory.

The reality is that China’s exports are declining as the global economies continue to face growth issues. (Read “Global Economies Backtracking.”) There is also a decline in domestic consumption, which is a key area the Chinese want to address and improve.

China has made clear its intentions to pump up its economy with stimulus and make consumers want to spend. Interest rates have been lowered, and with inflation well below the top target, there is more room for rates to fall.

The hope is to make it so attractive the Chinese consumer will want to borrow and spend.... Read More

These Three Factors Determine Oil Prices

1. Supply and demand;
2. The spread between benchmark crude grades; and
3. Geopolitical tensions and events. Here, we are considering matters we've discussed here a number of times.