We believe the primary reason for this increment is the company’s blockbuster fourth-quarter results and growing visibility of its future business prospects. As a leading government electronics supplier, Harris benefits from the increase in US defense expenditures. It has a sustainable and diversified product pipeline with a potential market size of $15 billion. Its total order backlog at the end of fiscal 2009 was more than $6.1 billion. In the previous quarter, all the three business segments of the company received healthy order bookings. Harris reported that it had $1.29 billion new orders during the fourth quarter, an improvement of 22% over the previous quarter.

We believe that in the near term, Harris will benefit from higher defense expenditure by the US government and new expansion drives in the Asian, European and African markets. The company has established a solid international dealer network to pursue multiyear contracts throughout these regions and estimates that international markets represent around $4 billion pipeline opportunity. It recently won large-scale multiyear standardization contracts in Mexico, Australia, Algeria, U.K., Pakistan, Sweden and Iraq.

Harris also won five domestic contracts for its Public Safety and Professional Communications services. We believe the newly acquired M/A-COM will generate significant synergies for the company’s existing land mobile radio business. Integration of high-end solutions of M/A-COM will enable Harris to gain a strong foothold in the $9 billion global Public Safety and Professional Communications market.

Due to a lack of infrastructural facility, nearly 800 MMcf of natural gas is burned off every day from the Basra oil field in Iraq. The Government wants to utilize this gas for domestic electricity production and export the balance, if any.

In September 2008, Shell and Iraq’s South Gas Company had signed an agreement to produce gas from key oil fields in southern Basra province. For this, they will form a joint venture with Shell holding 49% interest and South Gas Company owning the rest. Both companies are expecting the final deal to be signed within a year.

Royal Dutch Shell – the second-largest natural gas producer in the world – was awarded the deal from amongst many other international players. In terms of assets, Shell owns a strong and diversified portfolio of global energy businesses offering attractive long-term growth opportunities.

However, Shell does not compare favorably with its super-major peers, Exxon (XOM) and Chevron (CVX), in terms of reserve lives, upstream growth, costs and financial returns.

While Shell has decided to invest liberally in several integrated projects by divesting non-core assets, it remains to be seen how this can become fruitful for the company. Until then, we prefer to stay on the sidelines and maintain our Hold recommendation.

Weatherford Weathers Downturn on International Strength

Weatherford International (WFT), which recently moved its corporation to Switzerland from Bermuda, is a leading manufacturer and provider of equipment and services used in drilling, completion and production of oil and natural gas wells. The company carries out its operations along four geographical segments: North America, Latin America, Europe/West Africa/CIS and Middle East/North Africa/Asia.

Weatherford's large North American presence has become a liability in the current environment of tentative natural gas prices. But the company has a growing international footprint, particularly in the Eastern Hemisphere. International markets accounted for a little over 50% of total revenue earned last year, a ratio that is expected to materially increase this year due to the current slowdown in North American activity levels.

The slowdown in international activity levels is expected to be much less pronounced (an approximately 10% drop is expected from the 2008 levels), which works to Weatherford's advantage given its heavy international expansion efforts over the last few years. In fact, the company expects that all of its growth in 2009 will come from the international markets with a combined double-digit growth rate. In particular, Weatherford remains well positioned in Mexico and Iraq, both of which are expected to be major oilfield service growth markets in the coming years.

Additionally, we believe that the company's North American presence -- which may be a drag over the next few quarters due to the region's weak fundamentals -- should nevertheless provide plenty of exposure to the region's eventual recovery. Therefore, in spite of the stock's impressive run up in the last three months (the stock price has soared almost 80% to the current level of $19.56), we believe that this oilfield service name still offers upside from current levels.

As such, our Buy recommendation remains unchanged with a 12-month target price of $30.

In May, one of the broadest commodities indexes—the S&P GSCI—produced its biggest one-month gain since Iraq invaded Kuwait in September 1990.

The S&P GSCI increased 19.67% in the month. That compared to a gain of 22.94% in September 1990, according to Standard & Poor's, which released the results on Tuesday. (See table below.)

"Solid commodity gains in May were attributed to most commodities accelerating the recovery process from the sharp declines experienced during the second half of 2008 and first quarter of 2009," said Michael McGlone, S&P's director of commodity indexing in a statement.

Year-to-date through May, the S&P GSCI had registered a total return of 5.95%, led by strength in the energy and agriculture sectors.

Sparked by price increases in unleaded gas and crude oil, the S&P GSCI Energy Index increased 25.44% on the month for a year-to-date gain through May of 4.38%. The S&P GSCI Agriculture Index was the second-best-sector performer last month, increasing 12.37% for a year-to-date gain of 8.18% heading into June.

Metals also performed well in May. The S&P GSCI Precious Metals Index gained 11.41%, putting it up 12.71% for the year. The S&P GSCI Industrial Metals Index increased a more modest 5.82% on the month. But it has been the strongest year-to-date sector performer with a gain of 22.23% (led by a 55.72% increase in copper) through May.

--- This article was submitted by IndexUniverse's Murray Coleman.

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Here are highlights from Friday's Analyst Blog:

Defense Budget Spelled Out

Thursday, Congress received a Defense expenditure request of $663.8 billion for fiscal year 2010 in two parts: a baseline budget of $533.8 billion, which is 4.0% higher (2.1% in constant dollars) than the 2009 baseline budget of $513.3 billion, plus a $130 billion kicker to cover ongoing military operations (Afghanistan, Iraq and, perhaps, other interesting places).

This proposed budget would terminate both Lockheed Martin's (LMT) F-22 fighter at 187 shipsets as well as Boeing's (BA) C-17 transport at 205 shipsets. On the other hand, the next chapter of the "Northrop Grumman (NOC)/EADS versus Boeing for the tanker" saga is written in ink for all to see.

Cosan Demonstrates Strength

This week, Cosan Ltd. (CZZ) shares have performed remarkably, with an appreciation over 20% until yesterday. The company's new finance director, Mr. Marcelo Martins, has been stating that the immediate priority of Cosan is to generate cash-flow and reduce net debt through the selling of non-priority assets, like participations in smaller companies. This sounds like music to investors...

Additionally, the new director said that some partnerships in special projects are a priority to raise new capital to allow investments without increasing net debt. It is interesting to remember that few weeks ago the market got excited about the possibility of a partnership with Petrobras (PBR).

We understand this news is positive for Cosan, as the company now seems to be willing to focus on cash-flow generation and debt reduction. We still believe that some kind of agreement to allow the company to access the U.S. ethanol market in the short-to-medium term will be reached, and that Cosan will be able to develop new projects with the focus on partnerships. We are keeping our positive outlook on Cosan.

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Force Protection manufactures blast-protected vehicles specifically for use in war zones such as Iraq and Afghanistan.

At the time of its addition, Force Protection was trading at 11.4x forward earnings. The company has announced several new million dollar contracts this month which has buoyed the stock.