Sell WFM Stock After Rotten Whole Foods Earnings

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Whole Foods (WFM) is taking a dive this morning after an ugly fiscal third quarter; shares of WFM stock are down about 7% today as a result.

But miserable Whole Foods earnings are only the beginning. The organic food grocer is down about 37% so far in 2014 with no bottom in sight, making it one of the worst-performing stocks in the S&P 500.

The slowing sales and increased competition at WFM stock are serious signs of concern that mean today’s pain is just part of a larger downtrend, and Whole Foods earnings will continue to suffer.

Here’s why you should sell Whole Foods stock now:

Whole Foods Earnings Details

Whole Foods earnings showed decent profits, with fiscal Q3 profits of 41 cents per share. That topped expectations … however, revenue fell short of forecasts by a hair at $3.38 billion vs. $3.39 billion in forecasts.

That doesn’t sound like a big miss on sales, and admittedly WFM beat on the top line. However, Whole Foods has been a dog this year, and investors really aren’t willing to give the company the benefit of the doubt.

The organic grocer’s decline started in earnest back in November, when Whole Foods lowered its sales and profit outlook for fiscal 2014. WFM stock had a forward price-to-earnings ratio of around 40 at the time, and the Whole Foods earnings multiple coupled with lowered expectations didn’t sit well with investors. After that, Whole Foods cut its outlook again in February, then again in May.

The fact that Whole Foods is having trouble even hitting that weaker guidance is not a good thing.

Sell WFM Stock

There are those who think that this could be a great buying opportunity after the flop, now that valuations are a bit more reasonable with the forward P/E on WFM back to around 21.

However, Whole Foods still is exorbitantly overpriced compared with other grocers. Kroger (KR) and SuperValu (SVU) both have a forward P/E of about 14.

Furthermore, competition in the organics space is fierce both from direct upscale competitors like privately held Trader Joe’s and recently public Sprouts Farmers Market (SFM) as well as conventional grocery stores like Walmart (WMT) that are pushing into organics with earnest.

The problem for Whole Foods is that the valuation still is stretched, expectations were unfairly high and competition is fierce.

Despite the fact that WFM stock is still up 200% in the past five years even after this recent flop, investors would be wise to move on to greener pastures as soon as possible.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor's Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. 

10 Insurance Stocks to Sell Now

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This week, the ratings of 10 insurance stocks on Portfolio Grader are down. Each of these rates a “D” (“sell”) or “F” overall (“strong sell”).

Axis Capital Holdings Limited’s (AXS) rating falls to a D (“sell”) this week, down from C (“hold”) the week prior. Axis Capital Holdings provides various insurance and reinsurance products to worldwide operations. To get an in-depth look at AXS, get Portfolio Grader’s complete analysis of AXS stock.

Meadowbrook Insurance Group, Inc. (MIG) earns an F (“strong sell”) this week, moving down from last week’s grade of D (“sell”). Meadowbrook Insurance Group provides alternative risk management programs and services. The stock gets F’s in Earnings Revisions, Cash Flow and Sales Growth. For more information, get Portfolio Grader’s complete analysis of MIG stock.

Crawford & Company Class B (CRD.B) earns a D this week, falling from last week’s grade of C. Crawford & Company is an independent provider of claims management solutions to insurance companies and self-insured entities. To get an in-depth look at CRD.B, get Portfolio Grader’s complete analysis of CRD.B stock.

State Auto Financial Corporation (STFC) gets weaker ratings this week as last week’s C drops to a D. State Auto Financial is a property and casualty insurance company engaged in writing personal and business lines of insurance. The stock also gets an F in Earnings Momentum. For more information, get Portfolio Grader’s complete analysis of STFC stock.

Erie Indemnity Company Class A (ERIE) earns an F this week, moving down from last week’s grade of D. Erie Indemnity is involved in the property/casualty insurance business. The stock also gets an F in Earnings Surprise. To get an in-depth look at ERIE, get Portfolio Grader’s complete analysis of ERIE stock.

Progressive Corporation (PGR) is having a tough week. The company’s rating falls from a D to an F. Progressive is an insurance holding company that offers primarily personal and commercial automobile insurance, in addition to other property-casualty insurance products. For more information, get Portfolio Grader’s complete analysis of PGR stock.

This week, Aspen Insurance Holdings Limited (AHL) drops from a C to a D rating. Aspen Insurance Holdings provides insurance and reinsurance solutions worldwide. To get an in-depth look at AHL, get Portfolio Grader’s complete analysis of AHL stock.

The rating of Validus Holdings, Ltd. (VR) declines this week from a C to a D. Validus Holdings provides reinsurance and insurance coverage in the property and marine markets. The stock also rates an F in Earnings Surprise. For more information, get Portfolio Grader’s complete analysis of VR stock.

This week, Cincinnati Financial Corporation (CINF) drops from a D to an F rating. Cincinnati Financial markets property casualty insurance through independent insurance agents. The stock gets F’s in Earnings Momentum and Earnings Revisions. To get an in-depth look at CINF, get Portfolio Grader’s complete analysis of CINF stock.

The rating of OneBeacon Insurance Group, Ltd. Class A (OB) declines this week from a C to a D. OneBeacon Insurance Group offers specialized insurance products and services. The stock also gets an F in Sales Growth. Shares of the stock are changing hands at twice the rate they were a week ago. For more information, get Portfolio Grader’s complete analysis of OB stock.

Louis Navellier’s proprietary Portfolio Grader stock ranking system assesses roughly 5,000 companies every week based on a number of fundamental and quantitative measures. Stocks are given a letter grade based on their results — with A being “strong buy,” and F being “strong sell.” Explore the tool here.

HomeAway Continues Growth and Celebrates 1 Million Paid Listings

HomeAway (NASDAQ: AWAY  )  -- a leading online marketplace for vacation rentals worldwide -- reported second-quarter results after the market closed last Thursday churning in solid top-line, listings, and free cash flow growth. In addition, the company unveiled a new marketing strategy aimed to drive growth in the coming years. 

Highlights from a strong quarter
Total revenue for HomeAway increased 31.9% year-over-year to $114.3 million, of which listing revenue increased 28.7% to $114.3 million. Most notably, however, was the significant growth in HomeAway's "other revenue" segment, which grew 49.7% year-over-year to $19.7 million thanks to increased customer adoption of the company's owner, manager, and traveler product add-ons.

Average revenue per subscription listing was $473 in the quarter, a year-over-year increase of 13.7%, boosted in large part by the increased adoption of HomeAway's add-on products. Paid listings at the end of the second quarter totaled 1.04 million, up 34.2% year-over-year. Approximately 72% of these were subscription listings (paid in advance by property owners), with the remaining 28% made up of performance-based listings (where property owners only pay commissions on traveler bookings, fees, or traveler inquiries). 

HomeAway's performance held up closer to the bottom line as well, as  adjusted EBITDA increased 32.7% year-over-year to $33 million. Meanwhile, operating cash flow expanded 110.6% year-over-year to $45.9 million.

The renewal rate of HomeAway's subscription listings was 72.8% at the end of the second quarter, up slightly from the 72.4% renewal rate at the end of the second quarter in 2013 but still down from the 73.1% renewal rate at the end of the first quarter of 2014. "Renewal rates in the U.S. are steady," said co-founder and CEO Brian Sharples, "while Europe has seen some pressure in a few markets."

Finally, HomeAway's websites attracted 229.5 million visits during the quarter, an increase of 14.2% year-over-year. This was a strong quarter for HomeAway in terms of growth of revenue, revenue per subscription, and overall paid listings. 

An expanding marketing strategy 
On July 24, the same day second-quarter earnings were released, HomeAway announced the hiring of Mariano Dima as chief marketing officer -- a new executive position at HomeAway. Dima brings more than 20 years of experience with Visa Europe, PepsiCo Latin America, Levi Strauss & Co., and Vodafone. In the second quarter conference call, Sharples shared his vision for what Dima brings to the table for HomeAway: 

Mariano is a seasoned marketing leader who understands the value of developing a consistent and impactful global integrated marketing program to enhance traffic, brand awareness and conversion, including a combination of brand advertising, performance marketing, SEO [search engine optimization], PR and database marketing. He's also highly experienced globally and particularly in Europe, which is one of our most important and certainly one of our most competitive markets.

In 2013, Europe accounted for 36.5% of HomeAway's total sales. An across-the-board expansion of HomeAway's marketing efforts, guided by Dima, will be taking place over the next several years. The reasoning behind this, as shared by Sharples on the conference call, is that over the past several years HomeAway has particularly focused on investing in the development of its vacation rental formula and technology. "With much of that work behind us," said Sharples, "we're now planning to invest a good portion of that operating leverage in integrated marketing." 

Dima -- who officially comes on board as chief marketing officer in  September -- will help develop an integrated marketing strategy aimed to expand HomeAway's brand equity, improve customer conversion, and increase customer traffic in a profitable manner. Sharples believes that this marketing campaign can occur without denting HomeAway's margins in a significant way, although he did warn that the company may see some margin compression in the second part of 2014 and 2015.

The key question for investors is whether these ramped up marketing initiatives will lead to strong top-line and bottom-line growth. Remember that Sharples has been with HomeAway as co-founder and CEO since 2004. Carl Shepherd, HomeAway's second co-founder, also remains with the company as chief strategy & development officer. These two have been with HomeAway for the long haul since the company's inception, and I don't anticipate that changing anytime soon. There is a long-term vision and strategy at work here.

Foolish final thoughts 
HomeAway's mission, in the words of Sharples, is "to make booking a vacation rental as easy as booking a hotel." There is no question that the business itself continues to expand in the areas that count, including listings and revenue per subscription. HomeAway carries a total of $792.5 million in cash and short-term investments, well offsetting the $307.4 million of debt on the company's books, providing ample fuel for the company to continue its expansion strategy in the coming years.

HomeAway has built an effective platform, now with over 1 million total listings, that appears poised to expand even further thanks to a coordinated marketing effort set to take off in the remaining months of 2014. Investors will want to watch closely to be sure that these marketing efforts are indeed paying off with higher sales growth, listings, and revenue per subscription in the coming years.

Based on the stock's nearly 9% jump following earnings, the market certainly liked what it saw this quarter. While the stock looks somewhat pricey trading at a price/sales ratio around 8, should the company's marketing strategy succeed HomeAway will likely be able to deliver market-beating returns to investors over the next three to five years.

More from The Motley Fool: Warren Buffett Tells You How to Turn $40 into $10 Million

Capital Group Joins BlackRock in Filing for Non-Transparent ETF

Capital Group Cos., owners of the $1.17 trillion American Funds family, has joined money managers including BlackRock Inc. in seeking regulatory approval for a new type of exchange-traded fund.

Capital Group filed today with the U.S. Securities and Exchange Commission to open a non-transparent, actively managed ETF, a product that would clear the way for traditional stock-picking managers to offer their funds in an ETF package.

“We are filing so we can fully explore the possibility of offering a non-transparent ETF,” Chuck Freadhoff, a spokesman for the Los Angeles-based company, said today in an interview. “We’ve made no final decision and have no timeframe.”

Active ETFs combine the security selection of an actively managed fund with the intraday trading and some of the cost-saving characteristics of traditional ETFs. Companies have been discouraged from introducing such products by the SEC’s requirement for daily disclosure of fund holdings, which would make it easy for competitors to copy, and traders to anticipate, a manager’s portfolio changes.

Actively-managed ETFs account for less than 1 percent of U.S. ETF assets and are dominated by products that invest in bonds. Transparency is less of an issue on the fixed-income side, where the opacity and negotiated nature of transactions in the over-the-counter bond market protect managers.

Capital Group also agreed to obtain the rights to use a formula for a nontransparent fund patented by Bedminster, New Jersey-based Precidian Investments. Precidian has previously filed for SEC approval of the product. Freadhoff said Capital Group had not made a final decision to use the Precidian patent.

Capital Group’s American Funds hold about $791 billion in actively-managed stock mutual funds, according to data compiled by Bloomberg.

T. Rowe Price Group Inc. in Baltimore and Boston’s Eaton Vance Corp. are also among fund firms seeking SEC approval for non-transparent active ETFs. None of the applications has been approved.

---

Check out ETF-Mutual Fund Hybrid: The Next Big Thing?  on ThinkAdvisor.

'Illegal to be homeless' in growing number of cities

More cities are instituting laws against things like sitting or sleeping in public, a new report finds. NEW YORK (CNNMoney) A growing number of cities across the country are making it "illegal to be homeless," according to a new report.

Despite a lack of affordable housing and emergency shelter, many of these communities are implementing laws that ban homeless residents from sitting or lying down in public, loitering, sleeping in vehicles, and begging for money or food.

"More cities are choosing to turn the necessary conduct of homeless people into criminal activity," said Maria Foscarinis, executive director of the National Law Center on Homelessness & Poverty (NLCHP).

The law center has tracked homelessness criminalization laws in 187 cities small and large since 2011.

During that time, city-wide bans on camping in public -- which can include sleeping outside on the streets or in a tent -- have increased 60%.

The number of cities with laws prohibiting or restricting people from sitting or lying down in public has jumped by 43%, and bans on sleeping in vehicles have surged 119%. Meanwhile, laws prohibiting people from begging in public and loitering have climbed more than 20%.

And these laws are popping up even when people have few other options for survival, the NLCHP argues.

In Santa Cruz, Calif., for example, sleeping in vehicles and camping, sitting or lying down in public, is criminalized -- even though a local survey found that 83% of homeless people don't have access to housing or shelter.

A spokesman for the city said that attorneys are required to dismiss any citations issued to homeless people who camp outside on nights that shelters in the area are full. Otherwise, the fine for violating the no-camping law is $20 or 8 hours of community service, and the offense is not punishable by jail time.

"The law does not criminalize homeless status, only conduct which is detrimental to community health and environment, i.e. lack of sanitation and degradation of City streets, open space and beaches," the Santa Cruz spokesman said in an email.

  Homeless valedictorian moves to college

Violations do result in arrest in many cities, how! ever. And the NLCHP points to a number of reports finding that the cost of enforcing these laws greatly exceeds the amount it would cost to provide people with options like affordable housing or shelter.

The Utah Housing and Community Development Division found that emergency room visits and jail stays end up costing nearly $17,000 per year for the average homeless person -- versus the $11,000 it would cost to provide that same person with an apartment and a social worker.

Other analysis from Creative Housing Solutions estimates that providing permanent housing and case managers to Central Florida's chronically homeless would save taxpayers $149 million over the next decade that they would otherwise spend on law enforcement and medical care.

"Criminalization laws are the least effective and most expensive way for cities to address homelessness in their communities," said Tristia Bauman, a senior attorney at NLCHP.

And such laws only perpetuate the cycle of homelessness because they don't get to the root of the problem, the group argues.

"Arrested homeless people return to their communities, still with nowhere to live," the report states. "Moreover, criminal convictions -- even for minor crimes -- can create barriers to obtaining critical public benefits, employment, or housing, thus making homelessness more difficult to escape."

Gold hovers after three days of losses

Bloomberg

LOS ANGELES (MarketWatch) — Gold prices inched fractionally lower on Wednesday, getting back on track after Janet Yellen's dovish testimony sapped any chance for gains.

At last check, gold for August delivery (GCQ4) (GCQ4) was basically flat at around $1,298 an ounce. September silver (SIU4)  gave up 8 cents to $20.81 an ounce.

A day earlier, gold prices reversed course and ended up losing ground for a third-straight session. This after the biggest drop of the year befell them to start the week.

Along with Janet Yellen, the mortgage purchase applications index and the producer price index hit early with the industrial production and capacity utilization numbers and the NAHB homebuilder survey at little bit later. The Federal Reserve Beige Book hits at 2:00 p.m. Eastern.

Walter de Wet, commodities strategist at Standard Bank, says gold seems a bit toppy, despite the fact that it has let off some steam in recent sessions.

"While some of the new speculative longs in the market may be justified based on (largely unpredictable) political tension in e.g. the Middle East and Eastern Europe, we believe that these longs won't stick because the fundamental drivers are lacking," he said.

Elsewhere in metals trading, October platinum (PLV4) rose $1.20 to $1,486.20 an ounce, while September palladium (PAU4)  tacked on 70 cents to $869.25 an ounce. High-grade copper for September delivery (HGU4)  continued to hold tight at $3.24 a pound.

Other must-read MarketWatch stories include:

Decoding Yellen: What 'sooner' rate hike means

Yahoo CEO has nothing to celebrate

5 Rocket Stocks to Buy for Summer Gains

BALTIMORE (Stockpickr) -- It's earnings season, and so far, the numbers are looking impressive. Out the gate, 70% of early reportingS&P 500 names have met or beat earnings expectations. But a whopping 78% of individual names in the big index are down over that same stretch, since earnings season started.

>>5 Toxic Stocks You Need to Sell in July

The clear takeaway is the earnings don't matter as much as most investors think -- at least not in their raw form.

But while the price direction from quarterly financial releases is far from obvious, earnings can certainly inject volatility into the marketplace. Last week was the fourth-biggest drop of 2014, and two of the other four took place during earnings season as well. Want to navigate the noise? Then focus on the "Rocket Stocks."

For the uninitiated, "Rocket Stocks" are our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts' expectations are increasing, institutional cash often follows. In the last 257 weeks, our weekly list of five plays has outperformed the S&P 500 by 79.51%.

>>5 Stocks Ready for Breakouts

Without further ado, here's a look at this week's Rocket Stocks.

PepsiCo

First up is PepsiCo (PEP), a snack food and beverage giant that provides some defensive posturing during what's likely another corrective week for the broad market.

>>3 Big Stocks Everyone Is Talking About

"Defense" isn't quite the right word, though. Pepsi hasn't just been "not losing" in 2014 00 it's been outperforming the S&P 500 year-to-date as well. Since the calendar flipped to January, PEP is up 8.3%, while the S&P has moved 6.45% higher over that same stretch.

PepsiCo is a whole lot more than the cola brand where it got its name. PepsiCo is also the biggest snack food company in the world, with a portfolio of snack food names that includes Lay's, Doritos and Quaker. The firm's revenue is split evenly between beverages and snack foods, and that big diversification gives PEP some equally big advantages. For instance, it's able to share resources between those units, running a leaner distribution network than if it were two separate companies.

Today, Pepsi has big exposure to the U.S. Around 50 cents of every sales dollar is generated here, so Pepsi has room to expand its reach overseas without worrying about saturation just yet. That means that despite a $136 billion market capitalization, there's a lot of clear runway available for PEP if the firm can push the throttles forward, particularly in emerging markets.

Keep an eye out for second-quarter earnings on July 23.

Kimberly-Clark

Kimberly-Clark (KMB) is another staid blue chip that's beating the S&P so far this year. Since the calendar flipped to January, KMB has rallied 8%. Tack dividend payouts onto the end of that, and the number ramps up to 9.45%. And this week, with rising analyst sentiment in shares of KMB, it's making our Rocket Stocks list.

>>5 Big Trades to Conquer a Correcting Market

Kimberly-Clark is a tissue, diaper and paper towel giant. It's the firm behind a plethora of household name brands, including Kleenex, Scott, Kotex and Huggies. While KMB's offerings are frankly pretty mundane, they boast customer stickiness (it takes a lot to drive parents to roll the dice on a new diaper brand), and that in turn provides hefty net profit margins that scrape up against 10%. Recently, the firm has been working to boost those margins more, exiting unattractive markets that don't contribute enough to the bottom line.

The firm's plan to spin off its health care division into Halyard Health later this year should help to unlock some shareholder value from a business too boring for even KMB to pursue. Meanwhile, there's a lot more to like about KMB's consumer business.

Western Digital

Next up on our Rocket Stocks list this week is hard drive maker Western Digital (WDC). With around 40% of the global market, WDC is the biggest hard drive maker in the world, a distinction that gives the firm some big tailwinds right now. As cloud computing continues to add demand for server storage around the world, hard drive makers are working overtime to fill those orders.

>>5 Stocks Insiders Love Right Now

Despite Western Digital's dominance in the hard drive space, there's a big target on its back right now. Up to this point, solid-state drives have been too costly to become economically feasible for many applications, but that's changing quickly -- WDC management understands that the firm will need to stay on top of the new trends in order to keep their throne. To do that, the firm has been making strategic investments (like the acquisition of STEC last summer) that should keep Western Digital's name inside enterprise server rooms in the decades ahead.

From a financial standpoint, Western Digital is in excellent shape. The firm carries $2.5 billion in net cash, enough to cover more than 10% of its market capitalization at current price levels. That big pile of dry powder should give WDC the resources to stay a step ahead of the demand curve for computer storage.

Illumina

Life science company Illumina (ILMN) has been on fire in 2014. Since the first trading session of the year, ILMN is up 60%, outperforming the rest of the market tenfold. And there's reason to look for more of the same at the San Diego-based firm for the rest of the year.

Illumina manufactures tools for genetic analysis, a space that's been growing quickly in the last few years. Best of all, most of Illumina's products are both high-end and consumable -- they're used to collect and analyze genetic material, and then they're discarded. The result is a business with hugely sticky recurring revenues and net profit margins in the double digits. The growing popularity of genetic therapies should ensure that ILMN's stair-step growth continues; while genome sequencing is still a relatively uncommon procedure, a fast-paced growth rate, coupled with Illumina's unique expertise, makes this name particularly exciting.

Don't mistake Illumina for a cheap stock -- it's not. Shares currently trade for a triple-digit earnings multiple, and the firm's balance sheet is effectively debt neutral. That said, the firm should see major margin expansion as genome sequencing is used more commonly. In 2014, ILMN's momentum wave looks worthy of riding into the second half of the year.

Keurig Green Mountain

Last up is Keurig Green Mountain (GMCR), the $20 billion Vermont-based company that transformed the single-serve coffee business. Now, with a big investment from Coca-Cola (KO), GMCR is ready to do the same thing for soda with its forthcoming Keurig Cold machine. Even without another blockbuster drink machine, there's good reason to pay attention to Keurig in 2014.

Keurig Green Mountain perfected the "razor blade model" of business. By selling the convenience of its proprietary brewers, GMCR is able to generate recurring revenues with big margins. And now, the firm's huge installed base is translating into significant cash generation. The firm's partnerships with other well0known brands (including rivals such as Starbucks (SBUX)) is a hat tip to the power of the K-cup today. While the expiring K-cup patent is a black cloud, new products like the Keurig Cold and K-cup 2.0 mitigate the risks.

While Keurig is another example of a momentum name with a rich valuation, the 34x earnings multiple on shares today isn't exactly a pie-in-the-sky price tag. GMCR has attainable growth priced into shares. So, with rising analyst sentiment in Keurig Green Mountain this week, we're betting on upside to continue in this Rocket Stock.

To see all of this week's Rocket Stocks in action, check out the Rocket Stocks portfolio at Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

RELATED LINKS:

>>5 Stocks Breaking Out on Big Volume

>>5 Stocks Hedge Funds Love This Summer

>>5 Stocks Under $10 Set to Soar

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in the names mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to

TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

3 Huge Stocks on Traders' Radars

BALTIMORE (Stockpickr) -- Put down the 10-K filings and the stock screeners. It's time to take a break from the traditional methods of generating investment ideas. Instead, let the crowd do it for you.

>>5 Hated Earnings Stocks You Should Love

From hedge funds to individual investors, scores of market participants are turning to social media to figure out which stocks are worth watching. It's a concept that's known as "crowdsourcing," and it uses the masses to identify emerging trends in the market.

Crowdsourcing has long been a popular tool for the advertising industry, but it also makes a lot of sense as an investment tool. After all, the market is completely driven by the supply and demand, so it can be valuable to see what names are trending among the crowd.

While some fund managers are already trying to leverage social media resources like Twitter to find algorithmic trading opportunities, for most investors, crowdsourcing works best as a starting point for investors who want a starting point in their analysis. Today, we'll leverage the power of the crowd to take a look at some of the most active stocks on the market today.

>>5 Rocket Stocks to Buy for Summer Gains

These "most active" names are the most heavily traded names on the market -- and often, uber-active names have some sort of a technical or fundamental catalyst driving investors' attention on shares. And when there's a big catalyst, there's often a trading opportunity.

Without further ado, here's a look at today's stocks.

Apple

Nearest Resistance: N/A

Nearest Support: $95

Catalyst: Analyst Upgrade

>>5 Stocks Ready for Breakouts

Tech giant Apple (AAPL) is perennially on the list of highest-volume stocks on the Nasdaq -- but today, shares are seeing conviction buying at the hands of a notable analyst upgrade. Barclays boosted its rating on Apple to overweight, citing strong product checks that could drive better-than-expected earnings numbers when Apple reports next week. With the upgrade, Barclays upped its price target from $95 to $110.

Technically speaking, AAPL continues to look stellar. Shares broke out above prior resistance at $95 pressing shares up against new highs in this afternoon's session. New highs are significant from an investor psychology standpoint because they mean that everyone who has bought shares in the last year is sitting on gains. As a result, the "back to even" mentality is less of a concern than it would be for a name with a higher proportion of shareholders sitting on losses. If you decide to buy here, keep a tight stop in place.

I also featured Apple in "5 Stocks Hedge Funds Love This Summer." For another take on the stock, check out "Apple's Almost Back: A Chart You Should See."

Citigroup

Nearest Resistance: $49

Nearest Support: $46

Catalyst: Earnings, Mortgage Accord

>>5 Stocks insiders Love Right Now

Big bank Citigroup (C) is up nearly 3.7% this afternoon, boosted by a positive second-quarter earnings release and a settled mortgage bond accord with the DoJ. Excluding one-time items (such as the $7 billion settlement with the Feds), Citi's earnings came in at $1.24 per share, besting the $1.05 per share estimate that was Wall Street's best guess. In addition, the big settlement is a sigh of relief for investors. Not only is it materially less than the $10 billion that the government wanted, but it's also Citi's get-out-of-court-free card.

But that doesn't mean you should buy shares of Citigroup right now. While today's share jump is welcome for shareholders, this stock continues to look technically bearish. Shares of Citi are bouncing their way lower in a descending triangle pattern this month. A breakdown below $46 support is the big sell signal to watch for.

I also featured Citigroup recently in "5 Stocks Hedge Funds Love This Summer."

GT Advanced Technologies

Nearest Resistance: $20

Nearest Support: $13

Catalyst: Plant Production Issues

>>5 Stocks Under $10 Set to Soar

Last up is GT Advanced Technologies (GTAT), a name that's down 5% on big volume this afternoon, following an analyst note from CLSA that indicated that production issues were causing limited supply of sapphire glass at the firm's plants, a problem that is likely to materially impact guidance. This is just the latest in a string of negative analyst comments about GTAT, and that's being reflected in this stock's price chart at the moment.

GTAT looks "toppy" right now, thanks to a classic "double top" pattern that's been forming in shares for the last several months. A violation of support at $13 is the big sell signal that points to lower ground in GTAT this summer.

To see these stocks in action, check out the at Most-Active Stocks portfolio on Stockpickr.



-- Written by Jonas Elmerraji in Baltimore.

RELATED LINKS:

>>4 Stocks Spiking on Unusual Volume

>>3 Stocks Under $10 Making Big Moves Higher

>>5 Big Trades to Conquer a Correcting Market

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author was long AAPL.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to

TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

Higher Mortgage Rates Aren't Keeping Buyers at Bay

Getty Images | @diana_olick Rates aren't the driving factor for home sales. At least that's what the correlation between rate moves and mortgage applications to purchase a home suggests. After several week-to-week declines in mortgage application, the numbers increased by 4 percent last week, according to the Mortgage Bankers Association. So did mortgage rates. The MBA's seasonally adjusted index of mortgage application activity, which includes refinancing and home purchase demand, rose 1.9 percent in the week ended July 4. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.32 percent from 4.28 percent the previous week. The rise in rates did, however, affect applications to refinance, which rose just 0.4 percent from the previous week. Both refinance and purchase applications are down from a year ago, 46 percent and 10 percent respectively. The MBA adjusted this week's results to account for the Fourth of July holiday. "Rates have adhered to this range for two months," noted analysts at Mortgage News Daily. "The visits to the lowest levels have been progressively [more frequent]. This could indicate that the longer-term momentum is pointing very slightly higher, and we'd need to see a move below late-June lows to rule that out." The housing market continues to sputter into recovery, largely on the back of higher net-worth and cash buyers. The latter made up more than one-third of all May home sales. First-time buyers are still largely left out, hampered by tighter mortgage underwriting and high levels of student debt. "Most of the consumer debt being taken on continues to be student loans which rose another $4.4 billion month over month, not seasonally adjusted, to $780.1 billion, a new record high," said Peter Boockvar of the Lindsey Group. While some expect mortgage rates to rise dramatically by year-end, recent comments from Federal Reserve Chair Janet Yellen have other analysts changing their tune. "Our rates strategists have revised down their year-end forecast of 10-year Treasury yields from 3.25 percent to 3 percent," Goldman Sachs (GS) analysts wrote in a note to investors. "We revise our mortgage rate forecast accordingly. We now expect mortgage rate to rise to 4.5 percent by year-end."

Sex Valley: Tech's booming prostitution trade

  Valley sex worker: Techies great clients NEW YORK (CNNMoney) Business is booming for sex workers in Silicon Valley, but it's becoming increasingly risky.

Startups are transforming into multi-billion companies. And the staffs are overwhelmingly male. Sex workers tell CNNMoney they have a growing clientele who have plenty of excess cash.

Two recent events have raised concerns.

The arrest this week of an alleged prostitute, Alix Tichelman, in connection with the death of Google executive Forrest Timothy Hayes has prostitutes worried about the impact on business.

"I do worry that people are going to think that this is something that's normal and happens, but it really doesn't," said "Maxine Holloway" a high-end prostitute working in Silicon Valley. (To protect their privacy, CNNMoney agreed to use pseudonyms or the professional names of the sex workers we spoke with for this story.)

Other sex workers CNNMoney spoke to expressed worry as well -- though none said they had experienced cancellations.

A second issue affecting business was the shut down of a prominent website for both solicitation and screening of prostitutes and their clients.

Late last month, the FBI raided and shut down MyRedbook, a website that allowed escorts to advertise their services and negotiate with clients.

Women in the industry relied heavily on MyRedbook to do background checks on their clients. Sex workers would post about instances of violence or circumstances in which they felt unsafe.

  Why sex workers are celebrating Obamacare

Without MyRedbook, prostitutes are having a difficult time vetting their clients.

"It's like sex workers lost their Yelp," said Bay Area sex worker and activist "Siouxsie Q."

Male clients also used the site to review and discuss their experiences.

That's why call girls say that the further underground sex work goes, the more dangerous it is for everyone involved.

Hayes did not solicit Tichelman on MyRedbook; according to detectives, they met on SeekingArrangement.com, where users sign up to be "Sugar Bab! ies" or "Sugar Daddies" in search of "mutually beneficial" relationships.

The FBI indicted the founders of MyRedbook on charges of using the Internet to facilitate prostitution and on multiple charges of money laundering.

Bay Area sex workers say high-powered tech executives likely joked about MyRedbook, which had kind a 1990's-era website look to it.

"I'm sure that they had all kinds of technological critiques of the actual website -- but they were definitely using it," Holloway said.

Another prostitute, who asked that her name not be used, says she has a roster of regular clients from major tech companies. She is a high-end prostitute and estimates that she's made nearly $1 million over the 10 years that she's been working in the area.

She says that her clients are increasingly worried about their own security, which is one of the reasons they been coming back to her so consistently -- they know what they're getting.

Amazon to FAA: Let us fly our drones

Amazon is asking the FAA for permission to test drone delivery outdoors in Seattle. NEW YORK (CNNMoney) Getting all your deliveries by drone is getting one step closer to reality.

Amazon (AMZN, Tech30) has asked the Federal Aviation Administration for permission to conduct outdoor tests near its Seattle headquarters.

Amazon, in a letter to the FAA, said that it has already conducted indoor tests.

It says its drones will "travel over 50 miles per hour, and will carry 5-pound payloads." That would cover 86% of products sold on Amazon, the company said.

Now Amazon is ready to move the project outside.

It said the drones will weigh up to 55 pounds.

  Making Amazon drone delivery a reality

For the tests, the drones would stay within sight and Amazon said it can force landings with a remote-controlled kill switch. If the communication link with the drone is broken, it would automatically return to a predetermined location on Amazon property.

Amazon said that it is only asking to do what private citizens are already doing all the time.

"Current FAA rules allow hobbyists and manufacturers of model aircraft wide latitude in flying their sUAS [small unmanned aircraft system] outdoors," read the letter. "Because Amazon is a commercial enterprise we have been limited to conducting R&D flights indoors or in other countries."

Amazon said it would rather keep its R&D jobs in U.S. then export them outside the influence of the FAA.

The retailer did not return calls from CNNMoney. But to the FAA, the company painted an enticing picture of the future.

"Amazon Prime Air, a new delivery system that will get packages to customers in 30 minutes or less using aerial vehicles, is one invention we are incredibly passionate about," said the retailer. "One day, seeing Amazon Prime Air will be as normal as seeing mail trucks on the road today, resulting in enormous benefits for consumers across the nation."

Stocks: One Step Forward, Two Steps Back

What goes down must go up? It sure seems that way.

REUTERS

After two days of losses, the S&P 500 has gained 0.5% to 1,972.83 today, while the Dow Jones Industrial Average rose 0.5% to 16,985.61 and the Nasdaq Composite jumped 0.6% to 4,419.03. The small-company Russell 2000, however, ticked up just 0.1% to 1,172.97.

The big news of the day: The minutes from the last Federal Reserve meeting. After initial dip, buyers stepped in and pushed stocks up towards a new high of the day. Citigroup’s Steven Englander explains why:

The Fed Minutes did not deliver anything new. In practice this is dovish as almost all market participants who expected a shift  from the Statement/Press conference were on the hawkish side. No one expected a more dovish message so the hawks are caught offside. However we are talking smalls here.

Of course, today was also the first trading day of earnings season, following Alcoa’s (AA) beat after the yesterday’s close. Mizuho’s Carmine Grigoli and Ujjal Basu Roy think earnings growth will accelerate during the second half of the year:

We are confident that earnings growth will accelerate over the balance of the year. Macroeconomic data suggest to us that analysts may be underestimating the level of prospective improvement in the second quarter. Our outlook calls for the S&P 500 to post a year-over-year gain of 7% in net income in the second quarter followed by 8% – 12% gains in the second half.

Goldman Sachs’ Amanda Sneider  and team explain which kinds of companies are most likely to beat earnings forecasts:

Companies where analysts revise down quarterly earnings estimates during the quarter are less likely to beat expectations than stocks with positive revisions or no change to estimates. Likewise, stocks with negative revisions are more likely to miss. Companies with negative revisions are rewarded more for beating expectations and penalized less for missing.

Companies that have had earnings revisions rise during the second quarter and are likely to beat earnings include Wyndham Worldwide (WYN), CBRE Group (CBG), Consol Energy (CNX), McKesson (MCK) and Boston Properties (BXP), Sneider says.

The Value Case For Forest Oil - Aquitania Capital (From ValueX Vail 2014)

<p style=" margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; -x-system-font: none; display: block;"> The Value Case For Forest Oil (FST) - Aquitania Capital

About the author:Canadian Valuehttp://valueinvestorcanada.blogspot.com/

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Constellation Brands, Inc. (STZ) Q1 Earnings Preview: Drink Up

Constellation Brands, Inc. (NYSE:STZ) will report financial results for its fiscal first quarter ended May 31, 2014, on Wed., July 2, 2014, before the open of the U.S. markets.  A conference call to discuss the financial results and outlook will be hosted by President and Chief Executive Officer Rob Sands and Executive Vice President and Chief Financial Officer Bob Ryder at 10:30 a.m. eastern time, July 2, 2014.

Wall Street anticipates that the alcohol-beverage company will earn $0.93 per share for the quarter, which is a lot more than last year's profit of $0.38 per share. iStock expects STZ to top Wall Street's consensus number, the iEstimate is $0.94.

[Related -Bond Yields Rise On Stronger Economic Data]

Sales, like earnings, are expected to explode higher, increasing 111.8% year-over-year (YoY). Constellation Brands' consensus revenue estimate for Q1 is $1.43 billion; a lot more than last year's $673.4 million.

Constellation Brands, Inc., together with its subsidiaries, produces, imports, and markets beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy.

The company sells wine across various categories, including table wine, sparkling wine, and dessert wine. Its wine brands include Arbor Mist, Black Box, Blackstone, Clos du Bois, Estancia, Franciscan Estate, Inniskillin, Kim Crawford, Mark West, Mount Veeder, Nobilo, Ravenswood, Rex Goliath, Robert Mondavi, Ruffino, Simi, Toasted Head, and Wild Horse; and Spirits Brands comprise Black Velvet Canadian Whisky and Svedka Vodka.

[Related -Stock Upgrades And Downgrades: AMD, CHK, CSC, DDD, PANW, SPWR, STZ]

Mexican beer is the reason for STZ's revenue explosion. A little more than a year ago, the company acquired full ownership of Grupo Modelo's U.S. beer business from Anheuser Busch Inbev SA (ADR) (NYSE:BUD).

The brands include Modelo, Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico. The Mexican beers essentially doubled STZ's sales.

With or without south of the border beer, Constellation Brands has a strong history of delivering bullish earnings surprises. The spirits company topped the street's view 14 of the last 16 quarters by an average of 16.91%, ranging from 2.56% to 81.58% more than expected. For the remaining two, earnings missed by -7.32% once and hit the Wall Street's consensus once.

The stellar track record translated into shares heading higher in the days surrounding nine of the last 16 quarters. On average, buyers bid STZ higher by 7.8% in the days surrounding the nine bullish quarterly checkups.

Once, the stock traded flat with six red reactions. Constellation Brands typically dipped -5.68% when EPS-driven price sensitivity was negative.

Overall: The iEstimate and Constellation Brands, Inc. (NYSE:STZ) suggest a small bullish surprise. The last four July announcements, while split between two green and red reactions, favored bulls with moves of 5.7% and 27.3%. Meanwhile, the two selloffs were limited at -2.2% and -2.5%. 

GM's 'culture' blamed for current crisis

  GM's original whistleblower speaks out NEW YORK (CNNMoney) A corporate culture that stopped acknowledging problems is why General Motors is in its current predicament, according to a former quality manager for the automaker.

In an exclusive interview that aired Saturday on CNN's "Smerconish," former GM manager Bill McAleer told host Michael Smerconish that employees who work at GM were "faced with a culture where you get fired if you do talk about quality and safety issues, and you get fired if you don't talk about them."

GM (GM) is dealing with a backlash for delaying the recall of 2.6 million vehicles for an ignition switch defect that's been tied to at least 13 deaths. Some GM employees knew the part was causing trouble more than a decade before the recall was issued in February.

McAleer, who started on the assembly line in 1968, says he was in charge of the Global Delivery Survey from 1988 to 1998 that GM used to help assess the quality of its cars before they were delivered to dealers.

He says he found a "wide variety" of what he called "catastrophic defects" beginning in 1995, when GM added a routine obstacle course drive to its quality checklist. Problems ranged from gasoline leaks to steering linkage issues that pointed to overall quality defects.

McAleer said that while the company seemed responsive to fixing problems in the mid '90's, that changed.

  Lawmakers grill GM's Barra in D.C.

"In 1997 something happened internally in GM where no problem could be admitted. Whether it was safety or any kind of problem. We couldn't have a problem," he said.

"That's what happened with the ignition switch," he added. "People knew there was a problem, but problems were not acceptable. They just ignored it."

McAleer eventually was laid off from GM in 2004. He tried to sue the company under a whistleblower law but said he was unsuccessful.

McAleer said he sent a letter to the GM board of directors to tell them about the overall quality problems and the lack of action by management, but he thinks that the letter might have been intentionally misdirected once it got there.

GM issued a statement saying,"If McAleer's concerns were submitted by an employee today, they would be thoroughly investigated within the safety organization! , however that is not to imply that in this particular case, his issues weren't."

The company also said that while McAleer lost his case against GM, it will still look at his allegations to see what "we can learn."

The No. 1 Tip to Accelerate Your Financial Independence Day

We all share the dream of financial independence. By reaching the point at which our assets generate enough to cover our expenses for the remainder of our lives, we gain the freedom to focus all of our time on the things that really matter.

In honor of our nation's Independence Day this Fourth of July, the slideshow below shares the No. 1 tip to help you more quickly reach your own Financial Independence Day. Along with that tip, it also includes a brief discussion of how to think about money in terms of time, as well as priorities to make it easier to make the tough decisions that will help you attain financial independence sooner.

How to get even more income during retirement
Social Security plays a key role in your financial security by reducing the amount you need to save on your own to cover your retirement expenses. Still, it's not the only tool to boost your retirement income and help you reach your financial independence day sooner. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

Betting On Big Drop, Shorts Borrow All the GoPro Stock They Can

For GoPro Inc.(GPRO), now comes the hard part.

Bearish investors are out in full force betting against the video-camera maker’s stock price after it more than doubled throughout its first four days on the public markets. Whether GoPro can convince the skeptics of its future prospects will go a long way in determining the stock’s next move.

More In GoPro GoPro's Wall Street Honeymoon Just Keeps On Going Podcast: Dissecting GoPro's Strong Debut GoPro's Wall Street Honeymoon Continues Is GoPro a Gadget Maker? A Lifestyle Brand? Or a Social-Media Firm? Investors Stoked for GoPro

The cost of borrowing GoPro shares, a proxy for short-selling activity, has “immediately become one of the highest in our system,” says Karl Loomes, market analyst at Astec Analytics, a unit of financial technology firm SunGard. In addition the utilization level–the percentage of shares available to loan that are actually being borrowed–is near 100%, Mr. Loomes says. It’s rare for a stock to have such a high utilization level.

“Both these figures suggest borrowers are snapping up all the available GoPro shares they can, and are willing to pay a high price to do so,” Mr. Loomes says. Astec didn’t immediately provide the exact number of shares available to loan.

Short sellers borrow shares to sell them in hopes of buying them back cheaper at a later date, aiming to profit from a price decline.

GoPro shares recently fell as much as 15%, on track for the first decline since the company went public last week. The stock jumped 31% in its debut on Thursday and then gained 14%, 13% and 20% in each of its next three days, respectively. It traded as high as $49.90 on Tuesday, more than double its $24 IPO price, and recently traded at $44.70.

GoPro makes a wearable high-definition video recorder that is best known for appealing to the extreme-sports crowd. People who ski, surf, scuba dive, bike and climb use GoPro cameras as a way to record and share their exploits. But the company has also broadened its appeal and is now the top-selling camcorder in the world by volume, according to market researcher IDC. It generated about $1 billion in revenue last year and about $60 million in profit.

As we’ve noted, it’s unclear whether investors should value the firm as purely a gadget maker, or a lifestyle brand, or a social-media firm, or some combination of all three.

No matter what kind of company it is, it looks like GoPro’s Wall Street honeymoon is coming to an end. And until GoPro can back up its high stock price with strong quarterly results, short sellers aren’t likely to relent in their pursuit against the stock.

“Although sharp and strong moves are common in the first days of securities lending activity of a newly listed company, and often unrelated to short selling activity, these numbers are dramatic even by those standards,” Mr. Loomes said.

Telecom is Having a Bad Day…Or Is It?

As I write, telecom is the worst performing sector in an S&P 500 has been running in place. That seemed odd to me considering that utilities, another defensive, big-dividend-paying sector, is the best performer in the S&P. It turns out, however, that telecoms aren’t doing as badly as the might seem.

Getty Images

Consider: The S&P 500 telecom sector has dropped 0.3% at 12:53 p.m., even as the S&P 500 has gained 0.1% and the S&P 500 utilities sector has advanced 0.1%. But telecom is a weird grouping. For starters, there are just five telecom stocks in the S&P 500: Verizon (VZ), AT&T (T), CenturyLink (CTL), Frontier Communications (FTR) and Windstream Holdings (WIN).

And of those, just two matter: Verizon and AT&T. That’s because those two have market caps of $202.5 billion and $184 billion, respectively, while CenturyLink, Frontier Communications and Windstream Holdings have market caps of $20.7 billion, $5.8 billion and $6 billion–or 8% of the index market cap.

That matters on a day like today where the telecom sector looks like it’s having a bad day, but in reality, it’s doing quite well. In fact, four of the five stocks in the sector are up on the day. Windstream has gained 0.9% to $9.95, Frontier Communications has advanced 1.2% to $5.80 and CenturyLink has risen 1.2% to $36.20. But Verizon has dropped 0.9% to $48.89 and AT&T has ticked up just 0.1% to $35.45. The end result: An index that is among the worst performers on the day–despite big gains in three components.