Halloween week turned out to be not so scary for the markets, as investors fed off some fat profits within the oil industry and some upbeat employment and retail sales data – the latter of which filtered through to one of our own Taipan plays and allowed readers to take some excellent profits. More on this in a moment.

Before I get started, I want to draw your attention to something I mentioned the other day, in case you missed it. And now that’s it’s the weekend and you might have a little more time, it’s definitely something worth it.

Many Taipan readers have already taken advantage of this opportunity and my thanks to you if you did – it’s a decision you won’t regret.

But if you didn’t, let me just say that the link below features a new report, highlighting a pretty darn explosive investment opportunity for you.

It centers on a company that recently got awarded an exclusive, lucrative patent from the U.S. Department of Commerce. As you know, owning a patent is a major accomplishment for a company. But in this case, it has single-handedly given this particular company a virtual monopoly in one of the most heavily-used and cash-rich industries there is for a period of 20 years – and left the so-called “big boys” in a big flap.

So what is it? Well, you’ll have to check out the link to find out more. But basically, my colleague William Colburn is responsible for unearthing this gem – one that could dump some extremely tidy gains in your pocket – just in time for Christmas.

William (or Brad, as we call him here at Taipan HQ) is an expert at digging up grossly undervalued and little-known companies like this one and both his Value Edge and Volume Spike Alert investment services are going gangbusters this year, as investors scramble for the most rewarding stocks in a volatile and unpredictable market.

So there you have it. A second chance to grab this opportunity while the going is good. Here’s the link you’ll need to check out the report:

http://www.agora-inc.com/reports/RTD/WRTDFA18/

OK, with that said, on we go. But please take a few minutes to check out the link once you’re done reading this message.

FAT SAUDIS & 50% PRICE HIKES

US$163 billion.

Say it out loud. Sounds like a lot, doesn’t it?

That’s the amount the Saudis will gobble up in oil revenues this year. It’s the most in two decades and comes courtesy of a US$51 per barrel average cost for Saudi oil this year – a whopping 45% higher than the US$35.17 mark set in 2004.

The Saudis, other Middle Eastern nations and Russia are among those sending more oil to places like China, where demand is still fierce and imports are rising.

Some reports say China has targeted 7.5% annual GDP growth through the year 2010 to help cope with its burgeoning population. That should come as good news for major oil exporters: higher population = higher energy demand = increased oil imports.

On a related note, the International Energy Agency (IEA) issued a sobering forecast, saying oil prices will balloon by 50% if the Saudis don’t invest in new production facilities –a project that would cost many billions of dollars.

I know what you’re thinking: If they scooped up US$163 billion this year alone, what’s the problem?

As always, politics. Quoted in the Financial Times, Fatih Birol, the IEA’s chief economist, says, “It’s not a problem of availability of reserves or capital. We need to be sure that the increase in production will be high enough and a sustained production capacity increase policy is in place. That will need sustained political will.”

Consider that Saudi Arabia plans to pump US$14 billion into a plan to raise production capacity from 11 million barrels per day (bpd) to 12.5 million by 2009, and you can see the significant cost of just a small increase in production.

As it stands now, the country will need to double its current oil output to meet the global demand forecast for 2030, which the IEA says will be double that of the present.

The Saudis aren’t alone in their hesitation to invest the needed resources. Other Middle Eastern oil-producing nations are reluctant to ramp up production too much and too fast for fear that the oil fields will run dry.

7 WEEKS TILL SANTA

It’s Christmas in seven weeks.

Yeah, I know what you’re thinking: “Crikey! I haven’t even thought about my gifts yet, never mind bought anything.”

Well, you got some time. But not as much as you think, for the last two months of the year always seem to whiz by like a flash and before you know it, it’s New Year’s. Retail heavyweight Wal-Mart has just launched its new ad campaign for the season – one that for the first time includes celebrities instead of its regular employees and shoppers. It’s also the first time they have officially started the season this early. Unofficially, most retailers started selling holiday merchandise two weeks ago.

Here’s what Taipan’s resident retail expert Tony Mullen has to say on the subject:

“The primary drive among retailers this year is to get consumers spending before they see their first winter heating bill – hardly surprising with natural gas expected to rise by around 60%. Expect big discounts straight out of the box and a push to get you to spend immediately. So do your shopping early and if you see what you want, buy it. Early discounts mean less inventory, so once it’s gone, it’s gone.

“The holidays won’t be as bleak as some think, but sales certainly won’t be a good as last year. In the world of retail, all that matters is this year over last year. And despite Wal-Mart’s early push, the company won’t enjoy a merry Christmas. It’s simply trying to prevent it from becoming a disaster. Not only do they have to worry about higher gas prices and the competition, they have a major PR battle on their hands. Anti-Wal-Mart groups are planning demonstrations the week of Thanksgiving.”

Rather than focus on the king, Tony’s strategy has recently focused on higher-end retailers. A good example of that is Nordstrom (JWN:NYSE) - his recommendation in the October Taipan issue.

On Wednesday this week, Tony advised Taipan readers to cash out of their positions on the January 2006 30 Calls (JWN AF) for 36% gains or higher.

At the time of the alert, the options were trading for US$6, compared with the official entry price of US$4.40 on October 5. Readers could have cashed out as high as US$6.90 for 57% gains.

And at Friday’s close, these options had climbed to US$7.80 – a massive 77% gain. So if you haven’t already done so, cash out now and give yourself some Christmas spending money.

Tony’s reasoning for the sell?

“From a current share price around US$36, I see the stock retracing back down to US$34.46 in the short term. But I also see this move being short-lived when the stock climbs back past US$39.74 in two to three weeks. When this happens, I might well issue another play and ride the end-of-year upside swing.”

So keep your eyes peeled for more!

As I said, the whole retail sector enjoyed some hearty gains this week, on the back of some stellar October sales figures. Abercrombie & Fitch, my own play from almost two years ago (November 24, 2003 for the December 2003 Taipan issue) is going gangbusters, despite a widely-publicized and silly protest against some racy new t-shirts from a bunch of high school girls and even a state Senator.

Don’t they realize that a protest like this merely creates more publicity for the company and its stock? Yeah, it’s negative, but that can often be positive – especially since the company just posted some astoundingly good October sales figures. Overall sales rocketed up 41%, while same-store sales zoomed up 31% - the latest in a string of very impressive monthly sales performances this year.

Having sold the first half of the position for 46% gains a year ago, the second half is still rocking along for 101% gains as the stock tacked on US$8.34 (17%) this week. Oh, and that’s not to mention the quick 77% gains Taipan readers took on Abercrombie September 60 Calls in three days back in mid-August.

For more gains like this, now go back and check out that link above!

Enjoy your weekend.

Martin Denholm

Executive Editor, Taipan

MMM

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