Walt Disney Co. (DIS) reported another in a string of great quarters, with earnings per share coming in at 44 cents vs. the consensus estimate at 38 cents. DIS has beaten analyst consensus by 15% or more repeatedly in the past year, as it performing well in all segments.

Under the new leadership of Robert Iger, this stock has definitely impressed me. Not only did each operating unit post income growth of 10% or more, but the company repurchased shares at a steady clip. Most impressive was DIS' media networks unit, which posted earnings up 21% to $1.18 billion. And the parks business was also up 19%, studio entertainment was up 60% and consumer products was up 20%.

Just this fiscal year, DIS repurchased 96 million shares, which is a lot. And the DIS board has boosted its authorization to purchase another $400 million worth of shares, which amounts to 18% of all shares outstanding.

This was a great quarter for DIS, and I couldn't find one thing to complain about in the entire Magical Kingdom.

A political firestorm continues to flare in Washington D.C. over the fate of the country's efforts in Iraq. Yet there is one issue that partisans on both sides of the aisle are willing to join hands over. And no, I'm not talking about Congressional pay raises.

I'm referring to the Mine Resistant Ambush Protected vehicle program, or MRAP, which received an additional $4.1 billion from the House Armed Services committee earlier this month. These heavily-armored vehicles, specially designed with V-shaped underbellies, are able to deflect the improvised explosive devices that have been responsible for so much bloodshed in Iraq and Afghanistan. The cash infusion brings the MRAP piggybank to $8.4 billion, which will buy roughly 8,000 of these vehicles for the U.S. Army and Marine Corps.

The funds will be doled out to contractors between now and the end of June, but there is already talk of extending the program. On May 11, officials at the Pentagon met privately to discuss it. That followed an announcement from the U.S. Army that it wants more MRAPs, in excess of its current allotment of 2,500 vehicles. This is all good news for Oshkosh Truck Corp. (OSK), a heavy equipment maker with a strong defense division.

Consider the facts: ExxonMobil (XOM) has 22.8 billion barrels of oil equivalent (a common industry measure) in reserves, of which slightly more than half is crude oil and oil sands. It has an additional 51.2 billion barrels of oil equivalent in additional resource potential that it cannot yet count as reserves, and it has the largest oil refining system in the world, capable of pumping out 6.4 million barrels of gasoline and fuel oil and the like per day. It is also one of the world's largest chemical makers.

Due to more than a half a billion dollars worth of investment in technology and systems design over the past several years, Exxon has been able to turn all that production into more profits than any company has been able to achieve in the history of the planet. It was rewarded with a 39% total return last year, and is up another 11% this year. But in my view, there is still much more to come, as the company still earns only a price/earnings multiple of 12X, vs. the S&P 500 multiple of 15X.

In other words, the most profitable company on the planet, which has $5.33 per share in cash and is growing in excess of 10% a year, is getting a commoner's valuation. If investors were merely to decide to give XOM the average valuation of the market, and it earns just the consensus of $6.75 per share next year (which I think is way too low), it would be trading at $101, or 20% higher than the current price.

An article published in the New England Journal of Medicine a few days ago showed that Avandia, a popular diabetes drug manufactured by GlaxoSmithkline (GSK), significantly increased the risk of heart attacks in patients who used it.

On some cosmic level it's unfortunate that it works out this way, but that bad news was a positive for Merck (MRK) because MRK sells the market's leading competitor to Avandia, called Januvia. Drug industry analysts immediately noted that a significant amount of the $3 billion spent on Avandia worldwide this year will likely shift to the Januvia franchise.

It's hard to know if this is a done deal because it's possible that Glaxo will strike a deal that would allow the company to make a label change with U.S. drug regulators, averting total disaster for its drug. The Food and Drug Administration is usually wary of making quick changes, so in the interim you can expect a lot of doctors to simply switch to Januvia now and await changes later.

Under one reasonable scenario, analysts expect Januvia to get 60% of Avandia sales over the next three years, resulting in as much as $1.6 billion in upside to current MRK estimates. That's a huge windfall. Even if Januvia only gets 30% of lost Avandia sales, the upside could be as much as $830 million through 2010.

So, what is the difference between the S&P 500 at around 1,520 now than in those "bubble" years of March 2000?

The key difference between today and March 2000 is the nature and valuation of the sectors leading the charge in each case. Seven years ago, the sector leading the charge was technology and, in particular, the Internet industry, which was really in its infancy. These leading sectors had valuations at that time that were wildly out of control. Tech sported a 12-month forward price/earnings multiple of 48X back then, which was nuts.

Leaders today are so much different. No single industry has dominated the recent move back to the highs, but financials and energy are at the front of the line. Valuations for both groups are entirely reasonable, and probably even low, at just 12X. The forward PE for the entire S&P 500 today is a mere 15.4X, which is close to the index's long-time median.

Based on this valuation data, and reasonable projections of growth, it's quite clear that the market is anything but frothy now, or overbought. The financials, energy producers and electric utilities should be able to maintain their leadership role and will probably be helped by health care. To keep the momentum moving in the right direction, all we really need to see is U.S. core inflation right around current levels, or edging lower, as recent reports have shown it to be doing.