Dreams of return on equity can turn into nightmares when excessive capital expenditures or new technologies expand production capacity and compete away potential profits. Unfortunately, myriad new technologies and expanding capacity are cause for energy investors to lose sleep.

Malinvestment and Overcapacity

Remember the cries of “peak oil” from energy bulls? Speculation in the 2008 commodity bubble provided substantial funding for new drilling projects and investment in new energy technologies. This funding catalyzed the rise of natural gas fracturing, the long-term of threat of renewables, and unexpected new challengers.

Seaborne liquefied natural gas plants are emerging as a new threat to energy sector profitability. The largest LNG producers in the world, led by Royal Dutch Shell (RDS.A), have figured out how to move their processing plants to floating barges so they can tap into remote underwater fields. Shell has plans to build a floating LNG plant in South Korea by year end 2012. This will be the world’s biggest floating LNG plant, and will weigh six times more than the largest aircraft carrier. About 5,000 workers are expected to build this vessel, and it is expected to cost about $13 billion.

This will be a huge transition for Shell from a land-based infrastructure initiated roughly 50 years ago, when Shell provided the technology for the first commercial LNG plant. These plants may offer a cost savings in addition to geographical flexibility since a land-based facility costs about $20 billion to build. To continue reading, click here.

With interest rates remaining at historical lows, REIT investors have been nicely rewarded with growing share prices and healthy dividend yields. In some instances, especially in light of the recovering real estate market, REIT shares have risen year to date by as much as 20% or more.

While both the current and expected performance of most REITs has been positive, there is one REIT in particular that I feel could be a real winner in terms of longer-term income and growth due to its diversified portfolio and income-generating strategies. In this article, I will discuss why Two Harbors Investment (TWO) is a great fit for REIT buyers.

Although Two Harbors recently cut its dividend, the company still offers a nice yield of over 12%. Over the past 12 months, Two Harbor’s sales growth has increased by more than 400%, with income growth in excess of 250%. The company feels that this is due in large part to its diversified asset portfolio that consists of both agency and non-agency mortgage-backed securities, as well as the firm’s purchase of foreclosed single-family properties from big banks that are subsequently rented out for income generation.

Upon purchase of these homes, Two Harbors rolls the properties into an entity named Silver Bay Realty Trust. This trust has recently registered for its own IPO. Although Silver Bay is a new offering, it has an advantage when seeking financing from lenders in that it is owned by Two Harbors.

Two Harbors has a P/E ratio of 9, which is actually below that of the real estate industry overall of closer to 10, and substantially lower than the P/E ratio of 17.7 for the S&P 500 index. To continue reading, click here.

Telecommunications is becoming increasingly important in a world without boundaries and the relentless advance of technology. Previously stand-alone electronic devices now work together smoothly, allowing us to use mobile phones to produce photographs and videos, watch TV via the Internet, and use TV sets to browse the Internet. Telecommunications also tie together offerings from various industries such as movies and music from the entertainment industry and payment processing and fund transfers from the financial services industry. As a result, the market for telecommunications is growing rapidly and the Telecommunications Industry Association (TIA) estimates that telecommunications spending was $3.34 trillion in 2011 and is expected to reach $4.4 trillion by 2015. This has resulted in a major battle between wired and wireless technologies, and TIA is of the opinion that future growth will be driven by wireless, even though there is plenty of potential for wired technology in sectors such as cloud computing.

Windstream (WIN) is a wireline telephone and DSL Internet service provider. Windstream provides consumers in predominantly rural areas with phone, Internet broadband and digital TV services as well as a range of IP-based voice and data services. It also provides businesses and government agencies with advanced phone services. The company has been aggressive when it comes to making acquisitions and, following the acquisition of CT Communications in 2007 and Lexcom and D&E Communications in 2009, the pace of inorganic growth has accelerated. In 2010, it acquired KDL, Norlight, Hosted Solutions, Iowa Telecommunications Services, and NuVox and PAETEC in 2011.To continue reading, click here.

Ford (F)seems to be having a very good year despite a low stock price. Not only was its F-Series pickup truck the best-selling vehicle in America for the third decade in a row, sales for the F-Series increased by 14% in the last year.

The figures seem to indicate that Ford has a moat around it in the pickup truck business. Its closest competitor in pickups is General Motors (GM), which sold 194,058 of its Silverado pickups in the last year. Yet Ford was able to sell 310,141 F-Series in the same period. Sales figures for Chrysler’s Dodge Ram pickup were less than half of those for Ford. Only 138,351 Rams were sold in the last year.

The sales figures for the F-Series were not the only good news for Ford in June. Its Claycomo plant in Kansas City was the top producing U.S. auto factory in 2011. The Kansas City Business Journal reported that Claycomo produced 460,338 vehicles in 2011, the highest output of any U.S. auto factory.

Those figures and the F-Series sales prove that Ford is an extremely productive company that knows how to market. So it would seem to be a growth stock, right? It has high production and cash flow from sales. Pickup truck sales in particular would seem to be a cash cow for Ford.

Why is Ford’s Share Price so Low?

Ford seems to own the pickup truck business, but its stock price was still under $10 a share on July 9, 2012. To continue reading, click here.

One great way to make money in equities is to find a growth company in a growth business, but do so before the company actually grows so the stock is dirt cheap. As for the business, it makes no sense to invest in a new and better sewing machine manufacturer, for instance, as sewing is not a growth industry. One industry that fits the bill for a true growth industry is mixed martial arts. As established sports leagues and events as popular as the National Football League and NASCAR have experienced actual drops in attendance these past few years, mixed martial arts bills itself, quite correctly, as the fastest growing sport in the world. That makes the arena of providing product and services to the mixed martial arts industry an attractive proposition to any company.

One company that is in a position to take advantage of both the growth of mixed martial arts and the fact that its primary target audience is persons under 35 years of age is Respect Your Universe (RYUN). It is a young company, with limited sales to date and no profits. It describes itself on its website as “a premium training apparel and equipment company rooted in and inspired by mixed martial arts.” Yet, when looking at any sort of developmental company, one must first look at the managers. When it comes to Respect Your Universe, I like what I see. Its Chief Executive Officer and Director, Christoper Martens, is formerly an executive at Nike (NKE), specifically serving as its General Manager and Merchandise Director. He served also as Global Director of Apparel for the Beijing Olympic Games in 2008. Prior to Nike, he served eleven years in the apparel division at Eastern Mountain Sports.

John Wood is President of Respect Your Universe, and also a board member. Prior to coming to his current position, he was Director of Customer Development at two major Las Vegas nightclubs, putting him in contact with many of the promoters and participants in Ultimate Fighting Championship events. He is also a martial arts expert on his own accord. His contacts make him the “point” man for Respect Your Universe’s efforts to become the “inside” apparel maker for the mixed martial arts community.

Steven Eklund is the Chief Financial Officer. He has decades of experience in finance with large consumer operations like Nike, General Mills (GIS), and Eddie Bauer. He is 64 years old, substantially older than the other officers, and will add a nice bit of seasoning to the management team.

The other director, Erick Siffert, is Chief Operations Manager. He too has decades of experience in operations, much of that for Nike. All told, this is an idea combination of experience, contacts, and energy for any developing company to be lucky to have. This team gives me great confidence that Respect Your Universe will have every chance to succeed.

Respect Your Universe purports to base its products on foundation beliefs in respect, strength, honor and sustainability. Its products all have special markings, taken from ancient Swahili iconography to designate it is a moisture wicking fabric “Air Weave”, a weather resistant fabric “Wind Weave”, thermal control fabric (Fire Weave), and environmentally friendly fabric (“Terra Weave”).

Respect Your Universe sells a wide variety of performance athletic and leisure wear for indoor and outdoor, competition and training. All its products either incorporate recycled materials, or organic fabrics. Offerings are for men and women, everything from performance shorts to hoodies and duffel bags. The bulk of its sales have been through its web site, but inroads have been made with national retailers also such as Von Maur department stores and Eastbay. Earlier this month, Respect Your Universe reached an agreement to open its first, and flagship, retail store in Las Vegas. It will be placed in an upscale mall, across from a Burberry (BURBY) store.

I do not know of any company as uncompromising to quality and environmentalism as Respect Your Universe purports to be. Its biggest downside is it has no real track record. It has a market capitalization of a little less than $40 million, and trailing 12 month revenue of $67,000 through March 31, 2012. At that time it held a little more than $2 million cash on hand, $0.5 million in inventory, $0.8 million in deposits, and $1.7 million in prepaid expenses. The company recorded a loss in the second quarter of the year of $1.94 million, and since the inception of the company in 2008 has recorded a cumulative loss of a little over $10 million. It carries virtually no long term debt.

This company bears all the hallmarks of a young company in its development stage. It will begin to receive real revenue in the current quarter through its new retail marketing partners and its web site, which only because operational in February of this year.

Perhaps the “grown up” company that most resembles what Respect Your Universe might someday be is Lululemon Athletica (LULU). This high cap ($8.8 billion market capitalization) company has achieved terrific growth without taking on long-term debt. Its operating margin of 28% is more than double Nike’s and Under Armour’s (UA). Its return on equity of 35% is outstanding in any sort of business. And best of all, it is selling at a lower 5 year PEG than Nike, Under Armour or Adidas (ADDYY). Lululemon has obtained this enviable record and position by securing a market, in its case the yoga market, and from that position it is chewing on the virtual heels of Nike and Under Armour in running and other athletic apparel. That, in my opinion, is the way for Respect Your Universe to sustain years of growth. Secure the mixed martial arts market, and then slowly make inroads in other athletic or fashion areas. Time will tell.

Transparency/Disclosure: I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research. I am a consultant to a third-party and have received one hundred fifty dollars for independent research. Always discuss investments with a licensed professional advisor before making any financial decisions. Statements made herein are often “forward-looking statements” as stipulated under Section 27A of the Securities Act of 1933, Section 21E of the Securities Act of 1934, and the Private Securities Litigation Reform Act of 1995. While I have researched this company thoroughly, my due diligence is not a substitute for your own.

Cress Oil, a subsidiary of The X-Change Corporation (XCHC), may have bought into a potential oil field in Montana that is part of the Bakken shale formation. Cress just made a deal to buy the mineral rights on 15,000 acres in northeastern Montana from Diverse Energy Investments LLC.

The exciting thing about this deal is that the acreage that Cress has purchased is part of the Bakken shale formation. The U.S. Geological Survey estimates that the Bakken formation and its surrounding areas could contain up to 3.65 billion barrels of oil, 1.85 trillion cubic feet of natural gas, and 148 million barrels of natural gas liquids.

Cress is planning to launch an aggressive drilling program on both the acreage it just bought and additional mineral leases it owns in central and northeastern Montana right away. The company will close on the mineral leases on Aug. 10, so it could be drilling on some of that land by this fall. The leases just purchased are located in Daniels and Roosevelt counties, which are next to the North Dakota state line.

Cress also has the money to start its drilling and fracking operations in Montana. The company recently completed a deal to get $2.8 million in equity funding from La Jolla Capital Investors. That money should cover the costs of the operations and help it get the oil and gas wells into operation.

As stated earlier, Cress is a wholly-owned subsidiary of a shell company called The X-Change Corporation (XCHC), so this deal might make The X-Change Corporation a really good penny stock play in the oil sector. X-Change shares did go up in value by 1¢, or 9.09%, on the news of this deal. If this deal works out and the company starts producing oil and gas, X-Change shares should keep going up for quite some time.

Cress Oil Makes X-Change Look Good

Cress Oil’s work in Montana indicates that X-Change has some major growth potential; it has been able to successfully purchase mineral rights in one of the world’s fastest growing oil fields. The company has demonstrated its ability to get equity financing and move quickly and aggressively to take advantage of new opportunities.

In addition to Montana, Cress Oil is looking into opportunities overseas. The most exciting of these are in Iraq, which is aggressively expanding its oil production and allowing foreign companies access to “super-giant” oil fields. A super giant oil field contains more than 5 billion barrels of oil. Iraq is selling off the right to drill and pump in five super giant oil fields, Majnoon, Rumalia, Zubair, West Qurna 1, and West Qurna 2.

Even a modest investment in Iraq could give Cress Oil the access to a huge amount of oil. Iraq has proven oil reserves of 143 billion barrels and gas reserves of 122.5 trillion cubic feet. It has been willing to let foreign firms buy into this potential bonanza in order to repair the damage done to the oil fields by decades of dictatorship and war.

Major oil companies working in Iraq include BP (BP), which is active in the Rumalia Oil Field, EniSpA (E), which is working Zubair, Occidental Petroleum (OXY), also in Zubair, and Exxon Mobile (XOM) and Royal Dutch Shell (RDS), which are developing the West Qurna 1 field. Russia’s Staoil ASA (STO) is developing West Qurna 2.

It should be noted here that there is no indication that Cress Oil has completed any oil deals in Iraq, nor are any details of any deals the company is working on listed on its website. Iraq appears on a list of countries that Cress would like to drill in at some point in the future. Other nations the company is interested in include Egypt, Turkey, and Vietnam.

Any successful oil deal in Iraq would greatly boost X-Change’s stock value because it would demonstrate that is capable of making major deals in one of the world’s top oil producers. It would also demonstrate that it is capable of making a serious deal with a foreign government.

A successful deal in Iraq could propel X-Change out of the penny stock category. Success in Iraq could give X-Change the cash it needs to make investments in the other foreign markets it is targeting. Such success could also give X-Change the ability to develop its other foreign properties. Successful expansion overseas would help Cress Oil become a major player.

Major Investors, Including Warren Buffett, are Active in the Bakken

X-Change would be a great low cost way to get involved in the Bakken formation. Two of the biggest value investors in North America, Warren Buffett and Bill Ackman, are already profiting from the Bakken formation.

Bill Ackman of Pershing Square Capital is the biggest investor in the Canadian Pacific Railway (CP). The Canadian Pacific has seen its profits increase because its tracks run right through the Bakken area. The tracks are used to haul sand, which is used in fracking the process needed to get oil and gas from the Bakken rock. On June 22, the CPsigned a deal with U.S. Silica Holdings (SLCA) to be the exclusive shipper of sand for hydraulic fracking from Silica’s Sparta mine in Wisconsin to the Bakken.

The Burlington Northern Santa Fe, or BNSF railroad, owned by Warren Buffett’s Berkshire Hathaway (BRK.A), is also in a position to profit from the Bakken because two of its main lines run through the region. In addition to hauling in sand and other materials, railroads haul much of the oil out of the region.

Buffett and Ackman have reputations as being shrewd value investors. They are investing in the Bakken because it has the potential to generate cash. Cress Oil is investing there for the same reason because the Bakken has long-term value. One of its biggest attributes is low cost transportation that is provided by two major railroads. That can enable companies like Cress to keep the costs down on drilling operations and maximize profits.

The presence of two major railroads in the region will benefit Cress Oil because it will be able to start shipping out oil and liquid natural gas products as soon as the wells start producing. It will not have to wait for the construction of pipelines, a process that can be delayed by permitting. Many producers in the Bakken are using railroads to ship out oil while they wait for pipelines to get built.

Cress Oil Posed for Growth

Cress Oil looks like it is poised for growth; the company has demonstrated that it is capable of buying potentially profitable oil leases in a proven field. It has also demonstrated that it can secure the funding necessary to finance the new activities.

If it can duplicate its success in the Bakken and other oil regions, Cress should be able to deliver long-term growth for shareholders. The company could increase its share value further by demonstrating that it is capable of difficult extraction operations, such as hydraulic fracking. Extraction in many overseas oil fields, including Russia’s Bazhenov, will require fracking.

This could give Cress the capability to take advantage of opportunities in many countries beyond those, and it has indicated it will also expand, so X-Change could be that oil growth stock you’ve been looking for.

Transparency/Disclaimer: We were paid $150 by a third-party shareholder to write this article. While we vetted each company, researched it thoroughly and done our own due diligence, it is no substitute for your own diligence. Consult a professional investment advisor before you invest.