Table of Contents

1.  Market Update
2.  Infrastructure Plays
3.  Brunswick (BC)
4.  Additional Investing Ideas
5.  Investor Trivia -- Utility Outperformer
6.  Featured Topic -- A Second Chance To Capture Oil Profits
7.  Free Investing Resources

Today's Top Stock Picks

The Firms Poised To Cash In On The New U.S. Infrastructure Revolution
President-Elect Obama intends to use infrastructure spending as a way to get Americans back to work. But more importantly, investors can get their money back to work by tapping into this soon-to-be booming sector.  
Read More. . .

Taking a Cue For +250% Gains
This oversold stock has the potential to nearly triple your money. Fine billiards equipment maker Brunswick (BC) has been around for more than 100 years and it knows what it takes to perform in any economy.
Read More. . .

Market Update

The market got off to a promising start this past week, but stocks ran out of steam and finished the week almost unchanged -- but in this market, flat doesn't seem too bad.

Over the prior weekend, President-elect Obama's shed some light on a massive stimulus package that has become the subject of much speculation recently. While the finer details are still being hammered out, the centerpiece of the proposal will likely focus on heavy investments to modernize the nation's aging infrastructure. The scope of this public-works undertaking could be unlike anything we've seen in decades, covering everything from road and bridge work to broadband internet expansion.

The goal is to put workers back on the payrolls and lift the economy out of the depths of recession -- and the dollar amounts being thrown around (in the neighborhood of $1 trillion) should certainly be enough to get the ball rolling. There is generally a lag time before this type of stimulus has a visible impact, but the initiatives have already brought some optimism back to Wall Street.

The news triggered a broad 300-point rally on Monday and sent shares of infrastructure-related companies sharply higher -- equipment maker Caterpillar (NYSE: CAT) bounced more than +10% and construction material supplier Cemex (NYSE: CX) climbed almost +30%. The optimism was felt as far away as Brazil, whose commodity-rich companies could see a boon from increased construction activity.

At that point, the major averages actually perked up into positive territory for the month.

Unfortunately, a rash of troubling announcements during the week reminded traders that companies are still hurting. We saw profit warnings from several companies (FedEx and Texas Instruments), deep job cuts at others (Dow Chemical and Bank of America), and outright bankruptcy filings from KB toys and publisher Tribune Co.

Meanwhile, investors are still grappling with concerns on multiple fronts, not the least of which is continued uncertainty over the fate of the Big 3 automakers. If you need an indication that fear hasn't subsided just yet, consider that yields on 3-month Treasury bills did the unthinkable and dipped into negative territory -- meaning investors are so nervous they are literally willing to pay the government to hold their cash.

Once again though, the market has shown a willingness to shrug off disappointing news, and we may be relying on that resilience again next week -- with housing starts, manufacturing numbers and other closely-watched economic data on the docket.

In light of the pending stimulus effort, Managing Editor of the Smart Profits Report, Martin Denholm, shares his insight on the next U.S. infrastructure revolution. He profiles his favorite picks, from infrastructure funds down to raw materials suppliers, which stand to profit from the anticipated wave of stimulus spending.

And with this year's market downturn, value investors have an almost embarrassing number of oversold stocks to pick from. Billiards equipment maker Brunswick (NYSE: BC, $3.37) is certainly among them. In business since 1845, the company is taking all the right steps to insure it's around for the another century. Below, I discuss why I think investors could reap +250% gains on its continued performance.    

Good Investing!

-- Nathan Slaughter
Co-Editor
TopStockAnalysts Digest

Pack your bags, folks -- "There's no more Wall Street."

That's the damning verdict from Alan Greenberg, former CEO of Bear Stearns. Speaking on Bloomberg's "Money and Politics" show, Greenberg declared that the existing Wall Street investment banking model is dead.

I'm not sure about death, but the broader U.S. economy is like a 2:00 AM drunk, continuing to stumble towards the end of a mind-altering 2008, with little long-term relief in sight. Will it ever find its way home again?

One of President-elect Barack Obama's most ambitious and large-scale plans quite literally seeks to dig America out of this mess -- and here's how you can profit, too. But you'd better act fast -- some of Wall Street's big boys are already placing their bets...

The Eisenhower Model: Part II

In five weeks, Barack Obama will take the oath as 44th president of the United States.

Since his election victory, the more he's said about "getting to work immediately" and having "no time to waste," the more I think the inauguration ceremony will be a time-consuming inconvenience, distracting him from fixing America's problems!

One key area in which he's pledged to spend his way out of the mire is by tackling the country's aging and rapidly deteriorating infrastructure. He plans to make the largest investment to repair and upgrade the country's public works systems since Dwight Eisenhower spearheaded the nationwide interstate highway system in the 1950s.

In short, this means utility industries like electric and water will receive huge cash infusions. Roads and bridges will be repaired and rebuilt. Schools will be modernized, part of which will include improving Internet access to a nation that ranks 15th in the world in broadband adoption. Energy efficiency, particularly in government buildings, will be increased. The healthcare industry will make greater use of technology to streamline and computerize medical records to cut costs.

That's the plan anyway. And Obama says it will create 2.5 million jobs by 2011. But we want profits. Read on to find out how you can grab some...

It's The Economy, Stupid... Six Weeks Away From $500 Billion Rescue Plan

Obama's economic brain trust is currently "busy working, crunching the numbers... to determine what the size and scope of the economic recovery plan needs to be. But it's going to be substantial."

Kinda vague right now, I know. But early estimates put the economic recovery bill at $500 billion. In terms of infrastructure upgrades, 5,000 road and bridge projects could get underway immediately after Obama puts his autograph on the bill.

Here are some investments that could revel in the building boom...

Brick By Brick... Bridge By Bridge

When the U.S. infrastructure sets to have a sweaty wad of cash lobbed in its direction, construction firms are lining up to grab a share of the spoils, as the need for equipment and raw materials rises.

Appropriately, we start in Obama's home state of Illinois, which is also home to the world's largest manufacturer of construction and mining equipment, engines, and industrial turbines. Founded in 1986 and based in Peoria, Caterpillar (NYSE: CAT) has shot up from about $37 to over $42 in the month of December, as it feeds off the infrastructure buzz.

One of Caterpillar's fellow Illinois-based construction equipment manufacturers, Deere & Company (NYSE: DE), could also be set to extend a share price boost that has seen the price surge from the upper $20s on November 20th to over almost $37 today.

If you want a more diversified way to play the industrial and construction sector, take a look at the ETF, the Industrial Select Sector SPDR (NYSE: XLI).

On the engineering front, head west and look no further than California's Jacobs Engineering Group (NYSE: JEC), which is the largest publicly traded engineering firm in the U.S. The infrastructure love is spreading across the sector and the stock is performing well on the back of the company recently securing two more contracts.

1. A five-year, $17.5 million contract from the Peninsula Corridor Joint Powers Board (JPB) that will see Jacobs serve SamTrans and the San Mateo County Transportation Authority (SMCTA) agencies to work on three programs. This includes project management, scheduling, budget management, and more.

2. A contract from Pima County, Arizona to provide project management and construction inspection services for the Ina Road water reclamation project. Construction costs here will total about $200 million.

Jacobs pulls in a whopping $11 billion annually and employs more than 57,000 workers -- a number that could grow under Obama's bold plan.

And speaking of water, if you're looking to cash in on this critical industry amid a surging global population, increasing pollution, and a depleting, finite amount of water resources, check out leading firm Watts Water Technologies Inc. (NYSE: WTS) or the sector ETF, PowerShares Water Resources (NYSE: PHO), which tracks the price and yield performance of the Palisades Water index.

Be sure to also pay a visit to our own free Smart Profits Report research section, where you can read much more about the water problems facing the world -- and the vast profit potential that the industry holds. We've got two in-depth (pun intended) water reports up there.

Get Raw

On the raw materials side, several firms spring to mind as potential winners of the Obama Infrastructure Initiative (I just made that term up). And as Jim Cramer might say, they're "best of breed" in their industries.

Cement: South of the border, in Garza Garcia, Mexico, to be exact, you can find Cemex (NYSE: CX), a world leader in producing, distributing, and selling cement. And when it comes to infrastructure rebuilding and repairs, you don't get many more commodities more important than this one. Its market cap of almost $8 billion is evidence of this.

Steel: Talk about a liftoff. U.S. Steel Corp. (NYSE: X) shares have surged from the mid $20s on November 20th to a current price around $39, having enjoyed its biggest daily jump in almost 20 years on Monday.

Copper: Its 52-week high on May 21, 2008 was $127.24. Its price now sits around $20. Quite a slump for what is the largest publicly traded copper producer, Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX). You can blame the prolonged commodities sector slump for that, in addition to the stock market's woes. But in an Obama-fueled infrastructure rebuilding rampage, I'm betting on a resurgence here.

Aluminum: Go large. The leader here is Alcoa Inc. (NYSE: AA). Like FCX, Alcoa has endured a rocky year. Having traded at a 52-week high of $44.77 in May, the stock market's tank job has whipped this stock into submission. Shares are currently trading around $10 and with a 0.34 PEG ratio (price/earnings-to-growth), the market thinks it's ridiculously undervalued.

The bottom line here is that companies like these could all stand to profit from a huge ramp up in infrastructure spending. What's more, they're all solid, well-established, industry-leading firms in strong cash positions, doing business in areas where there are clear, critical needs. If you're looking for outperformers, infrastructure stocks are set up well for 2009.

Best regards,

Martin Denholm

P.S. And for specific investment recommendations -- using professional investment strategies that Wall Street's elite use every day to generate wealth -- don't forget to check out the work of my colleagues, Karim Rahemtulla, Marc Lichtenfeld, Jim Stanton, and Lee Lowell in the Xcelerated Profits Report newsletter. These guys are pros themselves, so they know exactly how to do it. Head this way for more details.
 

Brunswick (NYSE: BC, $3.37) originated in 1845 as a maker of fine billiards equipment. Over a century-and-a-half later, the company's pool tables are still highly regarded, and its family bowling centers can be found in over 100 locations throughout North America and Europe. Meanwhile, it has also picked up several new product lines along the way.

First, the firm's Mercury plant in Wisconsin is the world's leading manufacturer of marine outboard and inboard engines. And its fitness division is a top supplier of treadmills, free weights and other exercise equipment to commercial customers such as health clubs and professional sports teams. But boats are what really put the wind behind Brunswick's sails.

Brunswick is one of the world's largest boat manufacturers, with a portfolio encompassing more than 40 different brands, including Triton, Lowe, and Bayliner. The company sells everything from 10-foot aluminum fishing boats to sleek 100-foot pleasure yachts with granite wet bars and plasma TVs.

As you might expect given tighter access to credit and slack demand for big-ticket goods, Brunswick is facing some stiff headwinds. In fact, the company just reported a -22% drop in third quarter sales, led by a steep -36% decline in the boat segment.

Meanwhile, operating earnings (excluding one-time charges) added up to a loss of -$0.33 per share, versus a gain of $0.19 per share this time last year. And with demand down -40% at the retail level, inventory is piling up, and things don't look to get significantly better in the immediate future.

Fortunately, that's exactly why I'm interested. When demand falls off, the best way to protect earnings is to tighten the belt and reduce fixed costs. And the company has already announced plans to shutter 12 plants, which will help shave $300 million in annual expenses by the end of next year. To put that figure in context, profits totaled $111 million for all of fiscal 2007.

On the latest conference call, CEO Dusty McCoy pointed out that these cost reductions will position Brunswick to remain free cash flow positive at sales levels as low as $4.5 billion -- $1 billion or so below what the company took in last year.

Of course, there are still risks involved. Like many other companies, Brunswick's debt has just been downgraded -- which will raise borrowing costs on $250 million worth of recently issued notes. Furthermore, the balance sheet has been marred by recent asset write-downs.

But the good news is that both of these concerns are already out in the open -- rather than lurking as potential hazards. Plus, the -85% plunge in the stock means that investors are already expecting the worst. With the bar set this low, any earnings surprises are more likely to be to the upside rather than the downside -- particularly as we begin to overlap weak periods that will make for favorable year-over-year comparisons.

After this sell-off, the entire company can now be had for around $290 million -- about one-twentieth of last year's $5.6 billion in revenues. It's not often you run across a market-share leader in four different industries trading at just 0.05 times sales and 2.4 times trailing cash flows. The last time you could pick up the shares this cheap, it was 1983 and the Dow Jones had closed above the 1,100 mark for the first time.

There's no doubt that Brunswick is facing a difficult operating environment. But don't make the mistake of assuming that today's conditions will extend in a straight line forever. It may not be next month, or even next year, but at some point the economy will recuperate and consumers will again have a hearty appetite for bass boats, ski boats, party barges and other recreational water toys.

In the meantime, this is a resilient company that weathered the Great Depression, and I think it will emerge from this downturn leaner and in a better competitive position than ever.

The market's decision to pummel BC has been right in direction, but wrong in magnitude. Yes, cash flows are likely to remain weak for the time being. However, a company's value isn't tied to what happens over the next few quarters, but what it can generate for shareholders years into the future.

I still see a company with dominant brands, entrenched customer relationships, and good growth prospects overseas. The firm has posted 10 consecutive years of healthy profits, and deep cutbacks could lead to record earnings once business picks back up.

Even at just 50% of its former production capacity, Brunswick is still sharply undervalued at this level. Given deteriorating conditions and potential loan covenant breaches, the stock is better suited to aggressive investors.

But even if the shares retrace just half of their losses and climb back to $12 , investors could nearly triple their money.