Commodity Stocks Are Market Leaders Again

While everyone is focusing on Apple and Citi, commodity stocks are again the market leaders.

New highs for all the big names:

Mosaic ,

Agrium ,

Deere ,

Archer Daniels Midland ,

CF Industries and

Potash , to name only a few.

What's going on?

Grains continue to explode: corn up another 1.6 percent today. Cotton, wheat, sugar, hogs, rice all higher — and things like rice actually outperforming stock markets (up 3.5 percent year to date). There's the weak dollar trade and Australian damage to wheat.

Bottom line: ags are going wild on emerging inflationary pressure globally. "Those stocks are direct beneficiaries of inflation, one trader told me. "Supplies are very tight...currency devaluation putting pressure on all kinds of input costs and whammo — you have a commodity inflation problem."

This is a problem all over the world, as I noted last week. UK inflation was very hot today.


Two big December Chinese IPOs saw the expiration of their quiet period today, and analysts are hardly screaming "buy!"

In fact, no one is screaming buy. On either one of them. The three or four analysts initiating coverage are mostly with a Neutral rating. Not a single one is a buy.

Youku : of the three initiations of coverage I have seen this morning, Piper Jaffray has perhaps the most interesting comment on Youku — the problem is valuation. In initiating with a Neutral position, they had this to say:

"Theme Exciting, But Valuation Fair, Market Early. Despite our optimism around the online video category and the growth prospects in China, we believe investors have fairly valued shares at roughly 22x 2012E revenue compared to Youku's peer group at 6x. We also note that the online video market is early in China, and we expect Youku to aggressively invest in content to stay ahead of competitors, which could hold down margins over the next 2-3 years. The bottom line is that we would view shares as more attractive at the $30-$35 level."

Piper says essentially the same thing for Dangdang , which it also initiates with a Neutral rating: "We believe investors at current levels are investing for the 5+ year opportunity and our revenue growth expectations for FY11/12 would need to be adjusted to 60%-plus from 52/51% currently in order to move shares higher."

That's a big adjustment!

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