TheChek News Flow

The 3,100-square-foot store is the brand’s 10th dual-brand location combining the signature line and Kooples Sport, a concept that made its debut with the London store on Old Brompton Road last year.

Since launching The Kooples Sport line in 2012, the brand has opened 20 Sport-only stores in addition to its 115 The Kooples stores (for a total of 145 retail boutiques worldwide including the latest U.S. stores). The company has 350 points of sale worldwide, with direct operations in 13 countries and total distribution in 28 countries.

The Los Angeles store combines the signature all-black look of The Kooples stores with the all-white look of The Kooples Sport stores, with clean, luxe Italian marble walls floors and shelves and vintage furniture unique to each store.

Highly visible from the trafficked corner of Robertson Boulevard and Alden Drive, the clear glass facade and entryway show off the jumbo screens inside playing the black-and-white brand videos. Inside, a long, narrow layout with men’s on one side and women’s on the other gives way to an alcove dedicated to Kooples Sport and a seating area featuring a PK65 low table by Poul Kjaerholm, a pair of FK710 Skater chairs by Preben Fabricius and Jørgen Kastholm and a Jacques Charpentier leather sofa.

The meticulous details aren’t surprising to anyone familiar with the brand. Founded in 2008 in France by Elicha scions Laurent, Alexandre and Raphael (the family behind Comptoirs de Cotonniers) on the concept of blending French style with Savile Row tailoring (its suiting is made in partnership with Norton & Sons) for women and men, the business has seen rapid growth first in France, then Western Europe. Now it’s ready to tackle the U.S.

“It’s a strong concept and we know Americans like concepts. We can see from the data on the tax refunds [European valued-added tax rebates] that some of our first customers were Americans and we see couples often coming into stores to shop together,” said chief executive officer Nicolas Dreyfus.

He calls the U.S. strategy “step-by-step. “We wanted to open both coasts at the same time, with the latest collections.” The entire store is stocked with fall 2014 merchandise, comprising apparel, shoes, bags and watches, which are all produced in house in Europe. Retail prices range from $95 for a T-shirt to $900 for a men’s suit. The company delivers six collections per year, with about 1,000 stockkeeping units per season across both lines.

The New York flagship, on 14th Street in the Meatpacking District between the Apple Store and Hugo Boss, will mid-August and a second New York location on Mercer Street in SoHo (the former Phillip Lim space) will open in Oct. 1. A secondary California store on San Francisco’s Fillmore Street opened June 28. Other markets eyed are Miami and Chicago. The brand launched with 20 stores in France, followed by 40 in the U.K., it’s second largest market, then Western Europe. Currently, wholesale represents about 20 percent of the business, including accounts in Bloomingdale’s, Saks Fifth Avenue and Nordstrom, as well as Asia.

Dreyfus said he expects U.S. sales to total $100 million in the next three to four years, or about 25 percent of the company’s total business. Its fiscal year ending Aug. 31 is expected to tally global sales of $245 million, and earnings before interest, taxes, depreciation and amortization between $40 million and $42 million. Global overall growth for next year is expected to be 20 percent with the advent of the U.S. stores, or an estimated $300 million in sales.

Sabic's Second-Quarter Net Profit Rises 7%

Higher Sales Volumes and Prices Give State-Owned Saudi Basic Industries a Boost

The company better known as Sabic reported net profit for the three months ended June 30 of 6.46 billion Saudi riyals ($1.72 billion), up from SAR6.04 billion a year earlier, according to a statement published on the Saudi stock exchange website.

The quarterly result was broadly in line with analyst forecasts. Riyadh-based NCB Capital had expected Sabic to post a net profit of SAR6.36 billion, while Cairo-based EFG-Hermes analysts had penciled in a SAR6.7 billion result.

The petrochemical giant, which is 70% state-owned, attributed the increase in profits to higher production and sales volumes as well as higher sales prices.

Dean Foods Suffers as Consumers Sour on Cow Milk

Shoppers' zeal for healthier foods and beverages has turned the tables on a small soy-milk supplier and its former parent, America's largest milk processor.

A little over a year ago, Dean Foods Co. DF +0.63% , a nearly 90-year-old dairy giant, spun off its Silk plant-based milks and Horizon-brand organic milk into a separate company, The WhiteWave Foods Co. WWAV +0.60% In the past 12 months, WhiteWave shares have jumped 62% while Dean's are off 17%.

WhiteWave's profit and sales are climbing as U.S. consumers embrace plant-based milks. Dean has churned out losses on falling domestic demand and higher costs for raw milk. Today, WhiteWave's revenues are just a third of Dean's, but its market value is more than three times its former parent.

Getting drinkers back in the barn won't be easy. "It is going to be tough to buck the trend of declining consumption of [cow] milk in the U.S.," says Ryan Oksenhendler, an analyst with Arlon Group LLC, a New York-based fund manager that owns WhiteWave shares. He says shoppers quitting cow milk and embracing soy, almond and coconut milks are feeding WhiteWave's gains.

Dean executives aim to reverse its profit decline by cutting costs and expanding sales of flavored milks and higher-protein drinks, two niche products that are outperforming conventional, white milk. Dean shut eight of its roughly 80 plants last year and plans to close three more this year in an effort to navigate what its executives call the toughest industry conditions in memory.

View Graphics

Eau Claire Leader-Telegram/Associated Press

"It's uncharted waters," Dean Chief Executive Gregg Tanner told analysts in May. Mr. Tanner declined to be interviewed for this article.

Dallas-based Dean won cheers from Wall Street in 2012 when it staged an initial public offering for WhiteWave to draw more value from investors for the fast-growing unit. Gregg Engles, who ran Dean for 18 years and built it through acquisitions, left to run the offshoot. Dean also sold its Morningstar Foods division, which made creamers, iced coffee and cottage cheese, to Canada's Saputo Inc. SAP.T -0.05% in January 2013 for $1.45 billion, before completing the WhiteWave spinoff that May.

The revamp was designed to make Dean a smaller company with a tighter focus, lower debt, and the dominant supplier in the $20 billion-a-year U.S. fluid-milk industry. It succeeded on those points, cutting Dean's total debt to $963 million as of March 31, from $1.8 billion a year earlier, and enabled Dean to return cash to shareholders, said Amit Sharma, an analyst with BMO Capital Markets. Dean today controls 36% of the U.S. fluid-milk business and hopes to boost its share further by being the lowest-cost producer, able to operate more efficiently than smaller competitors.

But it turned out to be a bad time to double down on dairy. Prices for raw milk in the past year have spiked, thanks to constrained supplies and surging demand overseas. That has crimped profits for Dean, which can't easily pass on the cost without risking lower sales.

In May, the price of milk used in beverage products reached a record $24.47 a 100 pounds, more than a third higher than a year earlier, according to the U.S. Agriculture Department. The agency, which sets minimum dairy pricing, pegged the price at $23.02 a 100 pounds for July.

Demand for milk powder, cheese and other dairy products in China and other Asian markets has soared. U.S. dairy exports for the first five months of this year jumped 29% in value over a year earlier, according to data from the U.S. Dairy Export Council. But Dean's sales are almost entirely in the U.S.

Global milk production fell in recent years after a 2009 drop in prices that forced out some smaller U.S. dairy farms and on droughts in the U.S. in 2012 and in New Zealand and Australia last year. European and U.S. output is expected to increase this year, easing costs for Dean.

But milk processors also face a longer-term challenge: U.S. milk consumption per person has dwindled for decades as consumers switched to flavored waters, juices, sodas and alternative dairy drinks.

Last year, U.S. retail sales volumes for skim and low-fat cow's milk, the biggest conventional-milk drinks, declined 4%, while dollar sales slumped 2.4%, says IRI, a Chicago-based market-research firm. The 2013 volume decline was worse than in each of the previous three years.

WhiteWave and other plant-based dairy suppliers including Blue Diamond Growers continue to nip at Dean's heels. WhiteWave's net income rose more than one-third over a year earlier to $32 million in its first quarter. Almond-milk sales have been especially hot.

The faster-growing products also yield higher margins. The Broomfield, Colo., company's gross profit margin reached 36% last year, compared with 21% at Dean.

Halsey Associates Inc., a New Haven, Conn.-based firm that owns about 355,000 WhiteWave shares, scooped up the stock shortly after WhiteWave was spun out. "We would not have looked at it as part of Dean Foods, just because the commoditized dairy business dominated the company's financial condition," said James Zoldy, the firm's chairman.

Dairy companies hope to rejuvenate milk sales by capitalizing on rising U.S. consumer demand for protein-rich foods. The national Milk Processor Education Program, which promotes milk products for Dean and others, dropped "Got Milk?" as its main advertising campaign earlier this year in favor of "Milk Life," emphasizing 8 ounces of milk has 8 grams of protein. The campaign will be backed by $50 million in advertising and social-media spending this year.

Dean this year intends to expand nationwide its TruMoo Protein Plus drink, a version of its TruMoo flavored milk with 25 grams of protein per 14 ounces. TruMoo, launched in 2011, has been a success for Dean, growing to $650 million in annual retail and school sales last year.

TruMoo accounts for less than 8% of Dean's $9 billion in annual sales, making it critical to improve results elsewhere.

"You are talking about a large conventional milk business that is in decline," said Deutsche Bank DBK.XE +0.36% analyst Eric Katzman. "It is hard to quickly offset that."

The companies said in May they would form a joint venture, controlled by D.E Master Blenders' private parent JAB Holding Co., which would be the world's No. 2 player behind Nestle.

The companies have hired Lazard to advise on strategic options for the two French brands, according to three sources familiar with the matter. The options could include, but are not limited to, a sale, they said.

It was not immediately clear how big the brands are or why they may be sold. L'Or, which makes capsules compatible with Nestle's Nespresso system, is currently owned by D.E Master Blenders. Grand Mere, first introduced in 1950, is owned by Mondelez. It is known for its smiling grandmother icon.

JAB, the investment arm of Germany's billionaire Reimann family, and Mondelez declined to comment. Lazard could not immediately be reached. The sources declined to be identified as the matter is private.

The combined company, to be called Jacobs Douwe Egberts, will be the largest pure-play coffee company but will still be much smaller than Nestle's business.

Based in the Netherlands, it will have annual revenue of more than $7 billion and brands including Carte Noir, Gevalia, Pilao and Senseo.

The deal, which would give Mondelez $5 billion in cash and a 49 percent stake in the business, is expected to close in 2015.

The global coffee business has undergone a spate of deals lately, fuelled in part by the rise of single-serve capsules and consumers' growing taste for higher quality drinks.

JAB, co-run by former Reckitt Benckiser Chief Executive Bart Becht, former Mars finance chief Olivier Goudet and former Anheuser-Busch InBev Chairman Peter Harf, has bought three coffee companies since 2012.

In other industry deals this year, Coca-Cola took a stake in Keurig Green Mountain and Italian coffee company Massimo Zanetti Beverages plans to list a 30 percent stake on the market this year.

Surging global demand for chocolate should keep the rally going, even if the cocoa crop hits a record. And an El Niño could boost prices even more.

Investors and candy companies are betting that you, and pretty much everyone else, will be eating more chocolate.

Production in the world's top cocoa-growing region of West Africa is booming, but consumption in both developed and emerging markets is rising faster, fueling a rally that has recently sent cocoa futures near three-year highs.

The prices for cocoa, the key ingredient in chocolate, are up 14% this year, and with demand already expected to outstrip supply during the season that begins on Oct. 1, investors are worried that the weather phenomenon known as El Niño, which can boost temperatures and upend precipitation patterns around the world, could exacerbate the shortfall and shoot prices even higher.

"Everyone is worried there's not going to be enough cocoa going forward," says Edward George, a commodities analyst at Ecobank in London. "It's paradoxical, given the uniform positive outlook for production." In fact, Ivory Coast, the world's No. 1 cocoa producer, will likely reap a record crop during the season that begins on Oct. 1, the country's Agriculture Ministry said in June. That would mark a second year of record yields. But not even back-to-back bumper crops can keep up with the world's swelling cocoa craving.

Global chocolate sales by volume are forecast to hit a record 7.5 million tons in 2014—up 7.6% over the past five years, according to market-research firm Euromonitor International.

In the past 10 weeks, hedge funds and other investors have boosted their net-bullish bets on cocoa futures by 39%, according to the U.S. Commodity Futures Trading Commission.

GROWING CONSUMPTION IS EXPECTED to be fueled by rising demand in developing countries, driven by the burgeoning middle class in countries such as India and China. Asian cocoa grindings—the tonnage of beans ground into cocoa products—rose 5.2% in the second quarter of 2014 from the total a year earlier, the Cocoa Association of Asia said Friday. Grindings are viewed as a bellwether for chocolate demand. Agribusiness giant Cargill sees global demand outpacing production by 100,000 to 200,000 tons in the coming 2014-15 season.

The development of an El Niño could exacerbate the expected supply issues. Temperatures in the Pacific are rising, prompting U.S. government forecasters to predict a near 80% chance of El Niño occurring by the end of the year. The weather phenomenon typically reduces global cocoa output by 2.4% in a year in which it happens, according to the International Cocoa Organization.

To be sure, some investors think the risk of El Niño is priced into the rally.

"We think the market's not fully reflecting the fact that supplies may come in stronger than expected" if there isn't a full-blown El Niño, says Andy Rosenberger, senior portfolio manager at Brinker Capital in Berwyn, Pa., which manages about $16 billion in assets.

But if there is, all bets could be off.

Fain Shaffer, president of Infinity Trading, an Indianapolis-based brokerage, sees futures hitting $3,250 a ton in the near term, citing both growing demand and the risk of El Niño. Cocoa closed Friday at $3,082 a ton.

"Bottom line, this is a strong bull market," he says.

Events in Ukraine and Gaza show that volatility can increase on bad news much faster than it can decline on good developments.

The "Fed Put" may be destined to become the "Yellen call."

Unfortunately for investors, the call is on the CBOE Volatility Index (VIX), not the stock market. And VIX calls increase in value when the stock market declines.

The potential recasting of the famous Fed Put—named in years past for former Federal Reserve chiefs Alan Greenspan and Ben Bernanke, whose policies seemed designed to support the stock market—follows recent statements from Janet Yellen, the central bank's current chair, that investors are too complacent about risk. This suggests that the days of historically low options volatility, a byproduct of a market grinding higher, are poised to end as the Fed prepares to wrap up its bond-buying program.

"Does 'Don't fight the Fed' mean 'Buy the VIX?'" Steve Sosnick, the equity risk manager for Interactive Broker's Timber Hill market-making firm, asks in a recent note to investors. Indeed, the VIX was mentioned in the minutes of the Federal Reserve's June meeting. The reference was pedestrian but notable because it seemingly marks the first time the VIX has appeared in the minutes. The fear gauge's ups and downs aren't the natural purview of central bankers.

In a section discussing lackluster results for first-quarter corporate earnings, the minutes noted that the "VIX, an index of option-implied volatility for one-month returns on the Standard & Poor's 500 index, continued to decline and ended the period near its historical lows."

This was quite clear to investors, but the Fed's mystery and power subject ordinary pronouncements to intense discussion. "Are they stating the obvious or are they saying something else?" one of Wall Street's top trading strategists wonders.

To be sure, Thursday's events in Ukraine and Middle East were a wake-up call for many investors who were well, complacent, about the stock market's historic highs. The downing of the Malaysian airliner, and the Israeli offensive in Gaza, pushed the VIX up some 32%, its largest one-day move since April 15. The S&P 500 fell 1.18%, its first daily move of more than 1% in 62 trading days.

Earlier in the week, the VIX was around 10, and seemingly blind to the world's woes. But the alarming international news scared some investors, convincing them to pay top-dollar for VIX calls. With the VIX around 13, investors aggressively bought August 13, 14, 15, 16, 17, 18, 19 and 25 calls. Some investors even bought October 18 calls, telegraphing to the market that they are worried stock prices may decline in one of the stock market's most historically temperamental months.

The sudden interest in VIX calls is a big shift from recent trading patterns. Before Thursday, stock portfolio hedging was slow and steady but not enough to move the VIX, which seemed destined to fall into the single digits as the market kept edging higher. Both indexes rebounded on Friday, but the VIX did not erase all of its gain.

THE ONLY PEOPLE WHO really paid attention to the hedging were derivatives analysts, who noted that the index market (not including VIX options) was "skewed" to the put side. This means that, reflecting fear of a market decline, the implied volatility of bearish puts was higher than the implied volatility of bullish calls. But, at the same time, volatility in options on single stocks was relatively muted, and still is, indicating optimism that they will outpace benchmark indexes. This leads contrarians to view the index hedging as a bullish sign.

The impact of last week's events might prove fleeting, or not. But the VIX's violent reaction is a reminder that volatility tends to increase much faster than it declines. The stock market's advance may grind onward, but portfolio protection might not be as attractively priced tomorrow as it is today.

A disappointing German economic report added to a string of troubling reports. Here are two European equities to look at in this scenario.

The Portuguese banking drama has given investors a sharp reminder of how fragile the European recovery is, bringing defensive plays to the fore again only months after fund managers had started looking for growth stocks.

On the plus side, it was swiftly understood that a lot has changed since 2008. The financial problems faced by Banco Espírito Santo's (ticker: BES.Portugal) parent were judged to be neither systemic nor likely to cause contagion—the two worrying watchwords that were bandied about during the euro-zone crisis.

All things considered, European equity markets held up pretty well on the day that Banco Espírito Santo's shares were suspended from trading. Those not invested in Southern Europe generally or in banks specifically were little troubled by the episode. The Stoxx Europe 600 and Stoxx Europe 50 closed roughly 1% lower.

It's easy to blame choppy markets on the plight of Banco Espírito Santo, or that of Austria's Erste Group Bank (EBS.Austria), which a week earlier also shook markets when it said it expected to post a full-year net loss of up to 1.6 billion euros ($2.16 billion) because of charges at its Romanian and Hungarian units.

In fact, the biggest worry for investors is much larger: Europe's faltering recovery. Last week, Germany surprised forecasters when it posted sharply lower industrial production for May, falling a seasonally adjusted 1.8%, well below expectations that it would remain roughly unchanged.

THE DECLINE WAS THE latest in a string of troubling data. The German economy is Europe's largest and accounts for nearly a third of euro-zone gross domestic product. If Germany starts to falter, the currency bloc's slender 0.8% annualized GDP growth of the first quarter could quickly evaporate. Meanwhile, the European Central Bank is pulling out all possible stops to boost inflation. If the ECB fails, the European recovery will look even more elusive.

European stock indexes started to slip from the beginning of July even before the region's most recent banking worries. They actually finished last week with a slight bounce. Still, since the start of the month, the Stoxx Europe 600 is down 1.5% and the Stoxx Europe 50 has slipped 1.2%.

The current economic backdrop is in stark contrast to the beginning of this year, when some of Europe's previously most-troubled countries, such as Spain and Ireland, seemed clearly to be on the mend. Fund managers didn't expect GDP to go gangbusters anytime soon, but they were at least confident enough in the economic turnaround to come out of the shadows and start buying neglected cyclical stocks—ones that would give them the best possible exposure to the upswing.

Romain Boscher, global head of equities at Paris-based asset manager Amundi, says, "Some of us, if not most of us, were expecting a bullish European equities market this year. We were expecting a growth to earnings-per-share recovery story and finally have experienced a fixed-income style rally where utilities and real estate lead the way instead of cyclical value stocks."

AMONG DEFENSIVE PLAYS, Jefferies International real estate analyst Thomas Leppert last week reiterated a Buy rating on Land Securities Group (LAND.UK), a FTSE 100 company and Britain's biggest commercial real estate business. He has a 12.16 British pounds ($20.81) price target on the stock, representing a healthy upside of over 18%.

His comments follow the company's latest trading update, in which Leppert says one negative aspect was a slight uptick in retail vacancies to 2.4% from 2.2% in March. "Otherwise, it's a steady delivery of the [company's] 2010 development program with the retail portfolio transformed by the acquisition of 30% of Bluewater, which may look expensive in the short term but needs to be put in the context of the group's financing structure, with the interim dividend confirmed at 7.9 pence," he says.

Land Securities announced in late June that it was buying a stake in the Bluewater shopping center in Kent, England, along with asset-management rights, for £696 million. Land Securities shares closed at £10.37 on Friday.

Italy's largest utility, Enel (ENEL.Italy), is also favored by some analysts, despite recent pressure on earnings from weak energy demand and the strong euro. Barclays Capital analyst Monica Girardi recommends the stock at Overweight with a €4.60 price target. She says the potential upside could be €5.25 if restructuring translates into improved return on equity and return on capital employed.

Barclays said in May that the company appeared to have pulled through several difficult years and was on track to hit its targets. It said the stock provided investors with an opportunity to capture value among European utilities.

Enel is selling its power-generation assets in Slovakia along with Romanian distribution and sales activities. The move is part of a plan to sell €6 billion worth of assets and reduce debt. Its shares closed at €4.16 on Friday.

--> Halliburton's technology should boost revenue from its mature-field business, expand margins, and help its stock rise 20% in the next year, powered by 20% earnings gains.

The oilfield-services titan seems to have left a controversial past behind. The stock could lift by 20%.

Halliburton is a company people love to hate. But it has finally put the sources of much of the disapprobation behind it, by settling criminal charges last year for its role in the Deepwater Horizon spill and reserving more than $1 billion against claims; spinning off its KBR engineering and construction unit, which had been accused of everything from overcharging in Iraq to bribery in Nigeria; and settling a major asbestos litigation case 10 years ago. Now, investors can judge Halliburton on its merits.

Of course, the "new" Halliburton (ticker: HAL), led by David Lesar, 61, who succeeded Dick Cheney as CEO in 2000, has plunged into hydraulic fracturing, or fracking, which comes with its own perils, if considerable upside.

It's boom time in oilfield services: a Halliburton fracking project at an Anadarko Petroleum site in Colorado. Photo: RJ Sangosti/Getty Images

Big investments in technology have enabled Halliburton, the world's second-largest oilfield-services company (behind Schlumberger ), to squeeze more production from mature wells, which account for more than 70% of global oil-and-gas production. The company now spends about 11% of its revenue, or $3.2 billion last year, on R&D and capital expenditures. It has developed cutting-edge tools, such as technology that lets customers drill offshore from their offices using a joystick. More importantly, it has boosted production and efficiency at onshore shale plays in the U.S., where in many instances fracking extracts only 10% of the oil from the rock.

These are boom times in oilfield services. The industry is operating at a 25-year-high in international drilling, and near record highs in U.S. drilling. Though oil prices have recently slipped, they have risen this year well above expectations, increasing yearly growth in global capital expenditures by exploration and production companies to 6% to 8% from an anticipated 5% to 6%, says James Wicklund, who covers the industry at Credit Suisse Group. Halliburton is Wicklund's top pick.

Halliburton leads in pressure pumping for fracking domestically, says Mark Luschini, chief investment strategist of Janney Montgomery Scott, which has a position in the stock. The other main growth area, aside from mature wells, is in difficult-to-negotiate deepwater fields, where Halliburton's $1 billion investment in infrastructure has allowed it to expand into 30 countries, giving it a foothold in all the world's deepwater markets. The company aims to grow at least 25% faster than the deepwater industry over the next three years.

But Halliburton shares haven't caught up to these developments, not surprising, given the company's troubled past. At a recent $70.35, the stock trades at 13.6 times next year's estimated earnings of $5.18 per share, well below its five-year average price/earnings multiple of 15.5. Halliburton's enterprise value to earnings before interest, taxes, and depreciation, runs at a 30% discount to Schlumberger (SLB), notes Wicklund. Halliburton leads in well completions in North America, while Schlumberger is No. 1 in exploration.

Lee Levy, founder and general partner of Canid Asset Management, a San Francisco value hedge fund that owns Halliburton shares, thinks the stock can gain 20% in the next 12 months, if, as expected, revenue from mature fields boosts margins and the shares get an above-average multiple. Although Halliburton is up 39% already this year and recently hit a historic high, Levy says "on a valuation basis, it's still really attractive."

WITH THE NEW TECHNOLOGIES, and as a one-stop shop for oilfield and logistics services—including ownership and leasing of some 6,000 rail cars to haul sand for fracking directly to wells—Halliburton has improved production rates some 20% to 30%, says William A. Herbert, managing director and co-head of securities at Simmons & Co. International. This has allowed Halliburton to charge more. "There's a big upside to growth that's being measured in decades, not quarters," he says. He sees the stock rising 20% over the next year, on 20% earnings growth.

Halliburton's technology outlay "is going to increase its margins, and make it more attractive than Schlumberger," predicts Levy. As margins recover, "Halliburton and Baker Hughes [BHI] have the most upside because they have the most exposure to the fastest-growing market—onshore U.S. well completions," adds Wicklund. He expects margins to grow four or five percentage points in the next three years, from 20%. At the same time, operating earnings should rise 25% this year, to an estimated $3.99 a share, on revenue growth approaching double digits, to $32 billion

This kind of expansion has been helping Halliburton return cash to shareholders. The company looks poised to continue that trend, with cash flow from operations in the first quarter more than doubling that of the 2013 quarter, to $954 million. In 2013, Halliburton raised its dividend twice, to an annual rate of 60 cents, a 67% increase from 2012. It also bought back $4.4 billion, or 10%, of its shares. It has said it hopes to increase the percentage of cash available for shareholders by 2016 to 35% of operating cash flow, nearly double its historic average and higher than its peers.

And Halliburton still has plenty of room to boost efficiency. Among its advances are what it terms the "Frac of the Future," a technology introduced early last year that saves millions of gallons of diesel fuel annually by using natural gas to power drilling equipment, and reduces onsite capital costs 20% and labor costs 30%; the Q10 pump, which provides greater horsepower and reliability than other pumps; and the Cypher service, a system that delivers real-time information on seismic and well data to help target fracking areas. In June, Halliburton said that Cypher had helped increase production 35%, on average, in several North American shale projects. The company also has apparatus that, without any moving parts, can separate oil, gas, and water. And it's working on a way to recycle water used in fracking, with the goal of reducing freshwater usage 25% this year.

IN MATURE FIELDS, these technologies give Halliburton an edge over smaller operators. The company sells its technology "to people who don't have it and will pay up for it," says Wicklund. It will be renegotiating 60% of its pressure-pumping contracts in North America over the rest of the year, and could see modest price increases, which should help it hit its three-year target of tripling its mature-fields business to $9 billion from $3 billion in 2013. Over the past two years, it has more than doubled the size of its mature-field business. It also is aiming for deepwater-play revenue growth 25% above the industry average.

Started in 1919 and named for its founder, who invented a way to fortify oil wells with cement, Halliburton gets 52% of its revenue from North America, with the rest coming from fast-growing international markets, such as the Middle East. Revenue from Saudi Arabia alone rose almost 50% in the first quarter from the level a year earlier. In 2007, the Houston company established a second headquarters in Dubai. Although it has had challenges in Brazil and Mexico— Latin American operating profit fell 8% in the first quarter—Halliburton recently announced a fracking joint venture in China.

Halliburton wouldn't comment for this article, citing coming earnings. Lesar has spent much of his tenure fighting fires, some of which—though not all—were set in the Cheney years. But those problems now appear to be in the past, though Deepwater Horizon claims are still being filed. The newly tech-savvy Halliburton could be a real gusher for investors—if it can stay out of trouble.

Investors have shunned cyclical stocks in favor of utilities and Internet stocks. Time to bet on global growth.

Never before has contrarian investing been so, well, contrarian.

For months, strategists and economists have been in near-agreement on the rosy outlook for the global economy. For the first time in five years, the U.S., Japan, and Europe are all poised for economic growth. And yet the majority of mutual fund managers have taken contrarian tacks, pouring money into companies that aren't dependent on economic growth, and instead focusing on biotechnology, social media, and electric utilities, none of which are likely to benefit further as the economy improves.

So when everyone appears to be a contrarian, what's a stockpicker to do? Perversely: Follow the consensus view. While strategists have been recommending economically sensitive stocks on expectations of better global economic growth, fund managers quite literally haven't bought the argument, eschewing cyclical stocks, which rise and fall with economic cycles. Indeed, cyclicals make up the smallest portion of actively managed fund portfolios since the financial crisis, according to Bank of America Merrill Lynch U.S. equity strategist Savita Subramanian. She recommends that investors seek out some of the less-popular areas of the market, most notably the global companies that are tied to economic growth, including technology, energy, industrials, and financials. "There's not going to be a better opportunity to buy these cheaper cyclical names than now," she says.

Enlarge Image

Illo: Scott Pollack for Barron's

Going against the crowd can be lonely, but that's how you want to be positioned when the market turns -- and it's turning right now. The most crowded stocks in the Standard & Poor's 500 underperformed the most underowned stocks by four percentage points in the second quarter. Granted, the global recovery is uneven, and some caution is warranted, especially as many of these cyclical stocks have started to rise. But it doesn't take much to sustain modest growth in the early stages after a downturn, says Strategas chief economist Don Rissmiller. That's especially true for Europe, which is at an even earlier stage of recovery than the U.S.

What's more, he thinks China will dodge another hard landing, and its moves to keep its economy chugging along should help emerging markets shore up their own growth. Japan's new sales tax is creating some messy economic data, he says, but its recent monetary and fiscal reforms should underpin growth.

Within the U.S., cyclical stocks offer better dividend growth and cheaper valuations than utility stocks, where investors have fled for yield. And the unpopularity of cyclicals also could mean less selling pressure if the market pulls back, says Subramanian.

As a result, you should look for companies and sectors that have been largely ignored. Today, that means technology, energy, industrials, and financial services. Barron's identified six relatively cheap stocks that should benefit from the global recovery.

Technology

While Internet stocks have captured the market's attention, up 97% over the past three years, other technology stocks have largely been overlooked. The group's price/earnings and price/cash-flow ratios are at the lowest level in 25 years, relative to the S&P 500, notes Leuthold Chief Investment Officer Doug Ramsey.

One reason for the discount is that companies are still tightfisted with their information-technology budgets, especially on big projects. That has hurt companies like Teradata (TDC), a leader in helping businesses make sense of the digital data gathered from the Internet, mobile devices, and elsewhere, with large-scale data analysis.

Teradata's shares have slipped 8% this year on concerns about competition and a slowdown in revenue. Sales are expected to rise 3% this year, to $2.8 billion, a big drop from its midteens rate of 2010 through 2012.

Potential competition from start-ups with cheaper products has weighed on the stock, but first-quarter results suggest it isn't having the impact some had feared. Teradata also saw a record number of new customer sign-ups in the first quarter, and strong growth from its smaller customers. Teradata also stands to benefit from increased sales in Europe, as customers there are in the early stages of adopting data-analytics software.

Enlarge Image

First Eagle Global co-manager Abhay Deshpande says Teradata is well positioned to benefit as companies collect even more data and try to capitalize on it over the longer term. He thinks the company should be able to generate stable 5% to 7% growth and rich free cash flow -- $527 million over the past 12 months. "Teradata's stable long-term growth and cash flow are more valuable than those of temporarily higher-growth companies that the market has been flocking to lately," he says, adding that the stock, now $42, is worth at least $50.

Energy

Energy stocks have been out of favor for nearly four years, but lately they've begun to attract attention, rising 12% so far this year. Chesapeake Energy (CHK) is up less than half that. Almost 1½ years after co-founder and CEO Aubrey McClendon was forced out over questions about his mingling personal expenses with those of the company, Chesapeake is still struggling to regain confidence with investors.

The firm's aggressive spending also raised concerns. Its willingness to take risks and invest big helped Chesapeake become one of the most active gas drillers and a poster child for the domestic oil boom, but it also dented its cash flow and left a wave of concerns about its corporate governance. New management is focusing on spending in areas that produce returns, rather than just acquiring more acreage, which should be good for future production growth. Already, the company has doubled its 2015 production forecast from earlier in the year, and is now expecting 7% to 10% production growth.

Earnings are expected to rise 24% this year, to $1.4 billion, or $2.05 a share. Some of Chesapeake's investments are also beginning to pay off. And the recent spinoff of its services business removed $1 billion of debt, improving its balance sheet.

Those moves should help Chesapeake stock, which trades at an enterprise value to Ebitda ratio of 5.5 -- well below the industry's historical average of seven. (Ebitda stands for earnings before interest, taxes, depreciation, and amortization.)

"In this market, it's almost impossible to find anything cheaper," says Charlie Bobrinskoy, director of research at Ariel Investments and manager of the firm's Focus fund. "Chesapeake's name has been tainted, but it still has spectacular horizontal-drilling and fracking technology." He thinks the stock is worth in the mid- to high-$30 range, or at least 30% higher than its current $27.

Industrials

The U.S. manufacturing renaissance has helped industrial stocks fare a bit better than energy. The biggest opportunities, then, are in more global-oriented companies that have been out of favor amid concerns over China's economic slowdown.

Take Caterpillar (CAT), whose stock was essentially stuck in the mud for two years amid the downturn in mining and slowing growth in China.

But as expectations for a stronger global economy emerged, Caterpillar's stock rose 20% this year. At 17.6 times this year's estimated earnings of $6.18 a share, it's now a bit pricier than the broad market. But industrials tend to trade at high P/Es toward the bottom of an economic cycle, and by historical standards, this is a relatively low multiple. In the trough of the downturns in 2003 and 2009, its shares traded at a P/E of 25 or higher. The stock, now $109, could rise another 15%, to $125, if the cyclical recovery is on.

There is more than hope at work. The pace of decline in Caterpillar's mining business has slowed, and construction and highway activity have picked up. The company also has cleared the excess inventory of mining equipment it was stuck with when orders dried up. "If you get just a little bit of a recovery in emerging markets and mining spending over the next two years, it will show up in earnings quickly," says Laton Spahr, manager of the $2.4 billion Oppenheimer Value fund. "They fixed their house."

At 13 times forward earnings, industrial toolmaker Kennametal (KMT) is a cheaper way to play similar trends; the tools it sells are used by Caterpillar as well as by auto makers and in engineering projects. Its cutting tools employ a specialized technology that allows metals to withstand corrosive and high-temperature conditions.

That edge hasn't protected it from slowing demand, particularly in coal production in Appalachia and China. Analysts expect earnings for the year that ended in June to slip 3%, to $197 million, on sales of $2.9 billion. But Kennametal has seen a pickup in orders in its industrial business over the past few quarters, with growth especially strong in Asia and Europe, and a stabilization in its infrastructure business that includes energy, road construction, and mining.

Since Kennametal doesn't sell big-ticket equipment, it sees a pickup in spending more quickly than those that do. The steps it took during the downturn, including cost-cutting and acquisitions, should boost profitability once spending returns. More credit from the market would help it trade in line with peers at 17 times forward earnings, boosting shares to the mid-$50s from $45.

Financials

Financial firms are still one of the cheapest parts of the market, plagued as they are by regulatory concerns and low interest rates. Capital One Financial (COF) has transformed itself with acquisitions, like ING's online-banking business, which gave it low-cost deposits that should power profits over time, and its purchase of HSBC's U.S. lending business. The latter deal gave the company entrée to the lucrative private-label credit-card business, but also created its own share of headaches. Not long after the deal, Capital One decided to unload a chunk of what it had just bought -- saying that it wasn't a good fit -- a move that hurt earnings and raised concerns about the transaction and its growth prospects.

Now the fourth-largest U.S. credit-card firm, Capital One has worked through most of the kinks. The missing ingredient: Customers are still reluctant to rack up additional credit-card debt. But its second-quarter results, out last week, showed glimpses of loan growth.

For 2014, analysts expect net income at Capital One to rise 3%, to $4.3 billion, or $7.55 a share, as revenue slips 2%, to $21.9 billion. Based on cost-cutting and other moves, Wasatch Advisors founder Sam Stewart thinks the stock should fetch a valuation closer to that of average regional banks, which trade at 13.5 times forward earnings compared with Capital One's 11 times. That translates to 20% upside, or a price of $99 from its current $82.

While Capital One waits on its missing ingredient to make a full transition, T. Rowe Price Group (TROW) has been hit because of a coming transition. This underowned stock fell 5% in the month after the asset manager said its chairman, veteran investor (and Barron's Roundtable member) Brian Rogers, would relinquish his money-management duties on the $31 billion T. Rowe Price Equity Income fund next year. Analysts think the selloff is overdone, especially since the firm has long been known for having a team orientation and a deep bench of managers.

The company benefits as the economy improves and people invest more. T. Rowe is one of the major 401(k) players, which helps drive inflows to its funds. And with a firm foothold in the target-date fund business, retirement assets will continue to grow.

Analysts expect earnings to increase 19%, to $1.2 billion, as revenue rises 15%, to $4 billion. Yet, at 16.6 times forward earnings, the stock is trading 15% below its 19.8 average over the past decade, giving investors an opportunity to buy a high-quality stock just as some strategists expect these types of stocks to outperform. The shares, now $80, could rise 15%, to $92.