Best Stocks Broker For 2013, Top Stocks Broker In 2013: June 2014

Saturday, June 28, 2014

Is Easier Credit Juicing Auto Sales?

Sales are booming for Ford Motor (F), General Motors (GM) and other automakers–or are they? Morgan Stanley’s Adam Jonas and team aren’t so sure, as they see a disconnect between the monthly data and what they’re hearing from dealers and auto manufacturers.

Getty Images

The reason: Easier access to auto loans, which are creating the illusion of higher sales. Jonas offers a hypothetical dialogue to show how auto sales could be inflated by easy credit:

Customer: So I want to buy this SUV. Dealer: Got plenty in stock and can get you out
the door in a base version for $521/mo ($30k
loan, 60 mth term, 1.7% APR). Whatcha say? Customer: Darn… my budget is $500/mth and
I really can't go any higher than that. Dealer: Hmmm… lemme talk with the folks in
finance and see what we can come up with.
(Dealer steps away, comes back 5 minutes later and
hands the Customer a sheet of paper) Dealer: Good news, we got your payment
down to $409/mo ($30k loan, 84 mth term,
4.0% APR). We gotta deal? Customer (looking down at term sheet, a
broad smile forms from ear to ear): Not only
do we have a deal, but now I can get 4WD and
the tech package! How'd you do that? Dealer: They're running a special on 7 year
loans at a modestly higher rate. Everything
else is the same. (Satisfied customer drives away in an SUV with an
ATP nearly 20% higher than the base price).

Jonas doesn’t worry about the use of credit, per se, but how that looks to investors in stocks like General Motors and Ford. “In our view, easier credit is a natural sign of a recovering car market and we think it has a lot of room to run,” he says. “What is less clear is how the stock market will interpret the optics of accelerating pricing into a higher seasonally adjusted annual rate and what multiple it will pay for the associated earnings.”

Shares of General Motors have dropped 0.3% to $36.79 at 2:20 p.m., while Ford Motor has risen 0.2% to $17.24.

Tuesday, June 24, 2014

The Largest Satellite TV Operator in the U.S. Is Expanding Its Current Portfolio of Services

DirecTV (DTV) is engaged in providing digital television entertainment in the U.S. and Latin America. As of Dec. 31, 2012, the company operated two direct-to-home business units: DirecTV U.S. and DirecTV Latin America, which are differentiated by their geographic locations and are engaged in acquiring, promoting, selling and distributing digital entertainment programming primarily via satellite to residential and commercial subscribers.

In this article, let's take a look at this company and try to explain to investors the reasons this is an apparently appealing investment.

Geographic Strategies

For the U.S. market, the company adopted the following strategies. First, the firm focuses on better negotiation with the content providers as well as introducing online video streaming services. Moreover, it continues to extend the brand leadership as the premium pay-TV provider in the marketplace even in a weak environment.

For the Latin American markets, we can highlight a new set of strategies. These include a gradual penetration in the pay-TV market, which is still low in Latin America. Secondly, it plans to continue to be the most cost-effective provider to both high-end and low-end customers and finally it focuses on driving customers to download and stream OnDemand video.

New Technology

The 4K ultraHD technology offers content with horizontal resolution on the order of 4,000 pixels, and the company is trying hard to be the first to offer it.

DirecTV has also planned to launch two more satellites in the next years. For example, the TV operator will launch a new satellite (called Intelsat DLA-2, also known as Intelsat 31) for its Panamericana division (Latin America, except Mexico and Brazil).

Share Repurchases

DirecTV authorized a $3.5 billion stock buyback program, with Chief Executive Mike White saying the satellite-television provider's current stock price is "far below our intrinsic value."

Analyst Recommendation

The firm is currently Zacks Rank # 2 – Buy, and it also has a longer-term recommendation of "Neutral." A Buy rating indicates that the stock, over the next one to three months, will perform at an annualized rate of 19.04%, outperforming the S&P 500. For investors looking for a better Zacks Rank, there is no better option.

Relative Valuation

In terms of valuation, the stock sells at a trailing P/E of 14.9x, trading at a discount compared to an average of 16.7x for the industry. To use another metric, its price-to-sales ratio of 1.3x is below the industry average of 1.43x.

Earnings per share (EPS) decreased slightly in the most recent quarter compared to the same quarter a year ago (from $1.55 to $1.53). But both the top and the bottom line surpassed the respective Zacks Consensus Estimate. In the next graph we can see that it has demonstrated an interesting positive trend in the last eight years and we include the stock price because EPS often lead the stock price movement. The last year, the stock´s share price has jumped by 30.45%, exceeding the S&P 500 performance.

Finally, we can consider the return on assets (ROA), which is an indicator of how profitable a company is relative to its total assets. This ratio gives an idea of how efficient management is at using its assets to generate earnings. The higher it is, the better, because the company is earning more money on less investment. So let´s compare the current ratio with the peer group in the next table:

Ticker	Company Name	ROA (%)
DTV	DIRECT TV	13.05
CHTR	Charter Communications Inc	-0.98
DGI	Digital Globe Inc	-2.13
SATS	EchoStar Corp	0.04
GILT	Gilat Satellite Networks, Ltd.	-5.59
I	Intelsat SA	-1.54

The company has a current ratio of 13.05% which is higher than the one registered by Charter Communications Inc. (CHTR), Digital Globe Inc. (DGI), EchoStar Corp (SATS), Gilat Satellite Networks Ltd. (GILT) and Intelsat SA (I).

Final Comment

As outlined in this article, we see with good eyes the potential of the new business strategies, the new technology improvement and the positive signal given via the share repurchases. Additionally, it has initiated a massive marketing drive to attract customers to its exclusive programming, offering the best plans.

I would recommend investors to consider adding the stock for their long-term portfolios. Hedge fund gurus have also been active in the company in fourth quarter 2013. Gurus like Wallace Weitz (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Jean-Marie Eveillard (Trades, Portfolio), John Rogers (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and David Dreman (Trades, Portfolio) have also invested in it.

Disclosure: James Miller holds no position in any stocks mentioned.

Also check out: David Dreman Undervalued Stocks David Dreman Top Growth Companies David Dreman High Yield stocks, and Stocks that David Dreman keeps buying Jean-Marie Eveillard Undervalued Stocks Jean-Marie Eveillard Top Growth Companies Jean-Marie Eveillard High Yield stocks, and Stocks that Jean-Marie Eveillard keeps buying

Currently 5.00/512345

Rating: 5.0/5 (1 vote)

Voters:

Subscribe via Email RSS Feeds

Subscribe RSS Comments Please leave your comment:
More GuruFocus Links

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool

Disney: Anything But Frozen?

Morgan Stanley’s Benjamin Swinburne and team lowered their 3rd quarter earnings estimate on Walt Disney (DIS)–despite the big boost provided by Frozen’s continued success:

Yoshikazu Tsuno/Agence France-Presse/Getty Images

While F3Q14 faces tough theatrical comps vs. last year (Iron Man 3, Monsters University), robust box to date aided by Captain America and Maleficent should help minimize downside. Frozen will likely be a source of continued upside to Home Video, as well as a key driver of sustained Consumer Products strength. At CP, we forecast double-digit growth to continue for both licensing and retail revs in F3Q, particularly as supply constraints further ease on Frozen merchandise…

On a consolidated basis, we raise our Studio, CP and Interactive estimates, partly offset by a reduction in ESPN and ABC ad sales. However, lower deferred revenue recognition at ESPN results in our F3Q14 EPS estimate of $1.13 ($1.16 prior). We bump up our PT to $85 (mid-CY15), or 17x forward EPS.

Shares of Walt Disney have gained 0.4% to $83.09 at 2:12 p.m. today.

Home Sales See Biggest Monthly Gain in Nearly 3 Years

Wilfredo Lee/APA prospective homebuyer checks out a house in Miami Shores, Fla. WASHINGTON -- Sales of previously owned U.S. homes posted the best monthly gain in nearly three years in May, providing hope that housing is beginning to regain momentum lost over the past year. The National Association of Realtors reported Monday that sales of existing homes increased 4.9 percent last month to a seasonally adjusted annual rate of 4.89 million homes. The monthly gain was the fastest since August 2011, but even with the increase, sales are still 5 percent below the pace in May 2013. "Sales appear to be moving up again, although the increase to date -- over two months -- reverses just a fraction of earlier weakening," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, said in a research note. Sales had been dampened by last year's rise in mortgage rates from historic lows and various other factors including tight supplies and tougher lending standards. The median price of a home sold in May was $213,400, up 5.1 percent from a year ago. By region of the country, sales were up the most in May in the Midwest, an 8.7 percent gain which likely reflected further catch-up from the severe winter. Sales rose 5.7 percent in the South and 3.3 percent in the Northeast but showed only a slight 0.9 percent increase in the West. The number of first-time buyers remained stuck near record lows at just 27 percent of sales in May, down from 29 percent in April. Analysts expressed concerns about the scarcity of first-time buyers, who historically have made up around 40 percent of the market. "The existing home sales market can only retain its strength for so long if move-up buyers cannot find a first-time buyer to purchase their starter homes," said Stephanie Karol, an economist at Global Insight. The level of distressed sales -- either foreclosures or short-sales in which the homeowner has to sell for less than the value of the mortgage -- declined to 11 percent of all sales in May, an improvement from 18 percent of all sales a year ago. After hitting a recent peak of 5.38 million sales at an annual rate last July, sales started sliding. Potential buyers have been grappling with a limited supply of houses, more expensive homes and lending standards which have been tightened in response to the housing boom of the past decade which resulted in millions of houses going into foreclosure. Five years into the recovery from a deep recession that was triggered in part by the collapse in housing, housing sales have yet to return to their historic averages. Demand remains strong for the most expensive homes but has faltered for starter homes and those priced for middle class buyers. The pace of home sales is below the 5.1 million homes sold in 2013 and off the pace of 5.5 million annual sales that would be consistent with a healthy housing market. Lawrence Yun, chief economist for the Realtors, said because of the weaker start to sales this year, he expects that sales for the entire year will be down 3.1 percent this year to 4.9 million, compared with 5.1 million sales of existing homes in 2013, which had been a 9.2 percent rise from 2012. Yun said he was predicting a stronger second half for sales this year but he said that would not be enough to compensate for the weakness at the start of this year, a slowdown that reflected in part a harsh winter. Sales of existing homes began to slow in the second half of 2013 as mortgage rates crept up from historic lows, but home prices continued to rise due to a lack of available homes for sale. Average rates for 30-year fixed-rate mortgages declined to 4.17 percent last week, down from 4.20 percent the previous week. Mortgage rates are about a quarter of a percentage point higher than they were at the same time last year. Yun forecast that mortgage rates will be rising at the end of this year as the Federal Reserve moves closer to starting to boost interest rates. He forecast rates would average 4.9 percent in the last three months of this year and 5 percent in the first quarter of 2015. The total inventory of homes for sale at the end of May climbed 2.2 percent to 2.28 million homes, which represents a 5.6-month supply at the May sales pace. Inventory is 6 percent higher than a year ago, which analysts said should help to slow price gains and boost sales by giving would-be buyers more homes to choose from.

Monday, June 23, 2014

Coal Sector Shooting Higher

Related WLT Stocks To Watch For June 19, 2014 Mid-Day Market Update: US Stocks Surge; PVH Shares Slip On Downbeat Results

Coal stocks are moving higher Monday on what appears to be little fundamental data.

Most coal stocks have a high short interest, leaving open the possibility that much of the move may be shorts covering their positions after initial momentum on the open.

Interestingly, European coal fell to a four-year low Monday after Credit Suisse cut its target on the commodity by 6.3 percent. The note stated that US shipments of coal may fall below 40 million tons for 2014 versus 51 million tons the year before.

Related: ParkerVision Shares Down +60%

Price updates on the sector are given below:

Walter Energy (NYSE: WLT) +6.36 percent

Arch Coal (NYSE: ACI) +2.05 percent

Alpha Natural Resources (NYSE: ANR) +3.73 percent

Peabody Energy (NYSE: BTU) +0.41 percent

Anglo American (OTC: AAUKY) +1.14 percent

Posted-In: coal Credit SuisseCommodities Markets Trading Ideas

Most Popular Micron Technology Earnings Preview: Can Momentum Continue? Earnings Expectations For The Week Of June 23: Nike, Walgreen And More Stocks To Watch For June 23, 2014 Morgan Stanley Reiterates On General Electric Following Alstom Board Recommendation #PreMarket Primer: Monday, June 23: BNP Expected To Pay $9 Billion For Sanctions Violations Barron's Recap: 50 Best Annuities Related Articles (ACI + AAUKY) Coal Sector Shooting Higher Arch Coal Held in Balance - Analyst Blog Cloud Peak to Drill Exploratory Holes in PRB - Analyst Blog Coal: A 'Million Dollar Mile' Getting Longer In the U.S. Balanced View on Peabody Energy - Analyst Blog UPDATE: Morgan Stanley Upgrades Peabody Energy Around the Web, We're Loving...

Saturday, June 21, 2014

Prepare to be patient if you aim to serve wealthy business owners

Practice management, ultrahigh-net-worth investors, business owners

The nation's business owners are an affluent bunch and they require a broad swath of services from a financial adviser — but the potential pay-off to advisers may be many years down the road.

About one-third of the nation's wealthy investors, those who have $1.5 million or more to invest, are business owners, and that proportion jumps dramatically as wealth level rises, a new study finds.

About 74% of the super-affluent, those with $5 million to $20 million to invest, are business owners, and a whopping 89% with $25 million or more to invest own businesses, according to a report by CEG Worldwide and Wealth Engine.

“There's a disproportionate amount of wealth with private business owners versus the rest of the country,” said James Dean of WealthEngine.

However, many business owners' wealth initially is tied up in those companies, so there may not be many assets for an adviser to manage at the onset of a relationship. The payoff typically comes when the owner sells or takes the business public.

Advisers who target business owners help these clients protect their assets with insurance and buy-sell agreements, make sure they are mitigating taxes, structure retirement vehicles, and create plans for extracting business value to benefit their heirs, said John Bowen, chief executive of CEG Worldwide, a consulting and coaching firm for advisors.

The financial planning advisers do for these clients' businesses has to incorporate the personal financial goals of the entrepreneur, too.

“In an ideal world, these clients want the independence of having enough capital outside their business so they have some flexibility,” Mr. Bowen said.

Lou Stanasolovich, founder of Legend Financial Advisors, which has been serving business owners for 18 years, estimates that 70% to 80% of a business owner's assets are tied up in their business for its first 10 years.

“There's no money in the beginning; they're just fighting to survive,” Mr. Stanasolovich said. “They don't even retain us until there's some money available,” and even then some don't think they can afford a financial adviser's services, he said.

Legend advisers have learned to charge business clients hourly fees for business financial planning “so that they can cut us off when they want.”

The firm's advisers have had to develop a lot of expertise to provide a variety of services to business clients.

Helping clients put together a team of lawyers, accountants, insurers and bankers with the expertise needed for their business, as opposed to using professionals whom they may have outgrown, is on! e of their most important goals, Mr. Stanasolovich said.

Advisers also help clients set up defined-benefit plans, self-directed retirement plans, and less frequently, a Simplified Employee Pension plan, which he said aren't as good from an asset protection standpoint.

Business financial planning also involves reviewing balance sheets and income statements and asking questions about ways to tighten up expenses, or suggesting other ways to add value for the owner, he said.

Of course, business owners know they need to do a lot of these things. They often don't follow through, though, because entrepreneurs typically have more to do than time to do it. Advisers help push these decisions to the forefront, he said.

“We lose money on most of our business owner clients,” Mr. Stanasolovich said. “The key is to keep them long-term so you're there when they sell off their businesses.”

The Contrarian Play: Emerging Markets Energy Sector

Emerging markets natural resource companies can be dirty companies, but they’re dirt cheap.

So says Research Affiliates’ Ryan Larson, essentially anyway, in the fundamental indexing firm’s June newsletter.

The Newport Beach, Calif., firm regularly emphasizes the return advantage of contrarian investment plays that involve selling popular high-performing stocks and buying unloved, poor performers.

The firm’s chief investment officer, Chris Brightman, made that point explicitly with reference to emerging markets natural resource companies in a debate with dumb beta proponent Rick Ferri.

The pain of contrarian investment decisions, Brightman said Thursday, would be “like buying [Russian oil producer] Lukoil today. Does that feel like a comfortable trade? No. It means selling Internet stocks in the late ’90s, buying emerging-market resource stocks today.”

That pain, and potential gain, is described in greater detail in Larson’s analysis.

“Not since the Asian Contagion and Russian ruble crises of 1997–1998 have emerging market stocks underperformed U.S. stocks by as much as they have over the past three years,” writes Larson, noting a nearly 60% return premium for U.S. stocks versus their emerging-market counterparts.

“Through March 31, 2014, the three-year cumulative return of emerging market stocks as measured by the MSCI Emerging Markets Index is –8.35%, while that of U.S. stocks as measured by the S&P 500 Index is 50.73%,” he details.

Larson argues that two factors driving stock market returns over the long-term—mean reversion and valuations—both favor investing in emerging-markets, particularly its most battered natural resources sector.

As to mean reversion, net earnings in the U.S. are 50% above their historic average while they are 10% below trend in emerging markets. And, Larson adds, today’s globalized economy tends to homogenize profit margins from region to region, so one should not discount emerging-market earnings because they are not advanced economies.

As to valuations, using Shiller CAPE, the U.S. stock market trades at a multiple of 25 compared to a multiple of just 14, nearly half, in emerging markets.

The view is starker still on a price-to-book basis: “fundamentally weighted emerging markets portfolios trade near book value, levels touched in the depths of the Global Financial Crisis in February 2009.” Larson hastens to point out how well (fundamentally weighted) emerging markets performed in the immediate aftermath of the crisis, rising almost 150% from February 28, 2009 through end-year 2010.

“What is more likely to have a positive surprise: a market with high valuations, above trend profits, and high expectations, or a market with dirt cheap valuations, below average profits that can revert to the mean, and overwhelmingly negative sentiment?” Larson writes.

But the Research Affiliates analyst does not rest his case merely with the attractiveness of emerging markets.

Like Brightman, he drills down a little further to show divergences within emerging markets where consumer stocks and high tech are actually trading at high multiples, whereas natural resource stocks are experiencing death throes.

“Led by high-flying Internet companies, tech stocks are the top performing sector in the emerging markets, up nearly 40% over the past three years,” he writes, pointing out that a company like South Africa’s Naspers sports a nosebleed P/E ratio of 90.

In contrast, emerging market energy stocks have fallen 33% over the past three years, even as they have risen 18% in the U.S., a variance of over 50%. On a price-to-book level, emerging-market energy stocks are 60% less valued.

This gap suggests to Larson that it is reasonable to anticipate emerging-market outperformance at some point.

And yet investors are highly reluctant to invest in places that are “full of problems.”

It is precisely such emotions, though, that push prices down.

Citing a Credit Suisse study that looked at returns in the period 1976 through 2013 based on dividend yields and currency, the analysis found an annualized return advantage of about 20% in buying high yield and weak currency, two measures of investors’ skittishness.

“The reason high yields and weak currencies are profitable is that they are a by-product of fear and pessimism, emotional responses that lead to low prices and create opportunities to earn a higher risk premium,” Larson writes.

Like his colleague Brightman, Larson concludes that the discomfort one feels is a validating signal of a contrarian strategy like fundamentally weighted indexing that explicitly rebalances into low P/E and low P/B stocks.

-- Check out Brightman, Ferri Slug It Out Over Smart Beta

Friday, June 20, 2014

Starbucks prices are going up

A tall latte will cost between 15 and 20 cents more after Tuesday. NEW YORK (CNNMoney) Your Starbucks latte could cost you more starting Tuesday, when the company raises the price of some of its drinks.

On average a drink will cost between 5 and 20 cents more, depending on what you order and where you're making the purchase.

The price of a tall or venti sized latte will go up by between 15 and 20 cents, for example. But the price of a grande (medium in plain-speak) sized latte won't change at all. The cost of a tall brewed coffee and any sized frappuccino won't change either.

The company estimates that the orders of fewer than 20% of its customers will be affected. The price is only changing in U.S. stores, but it will change more in some markets than others.

Starbucks is also raising the price of its packaged coffee sold in grocery stores by about 8%, beginning July 21. While retailers ultimately set the price, customers can expect to pay about $1 more per 12 oz. bag.

The change will actually bring the price back up to what it cost in April 2013, when the company cut the cost, spokesman Zack Hutson said.

He would not specify why the price hike is going into effect, but said the company considers factors like "competitive dynamics" and its overall cost structure.

Starbucks CEO: $15 min. wage may kill jobs

Hutson said the price hike is not a knee-jerk reaction to the recent rise in coffee prices, which have skyrocketed due to a severe drought in Brazil. Starbucks buys its coffee beans ahead of time and already has enough f! or the rest of the fiscal year, and some of the next, he said.

The price hike at Starbucks (SBUX) comes about two months after J.M. Smucker (SJM) raised the price of its coffee products, including those for Folgers and Dunkin' Donuts, by 9%.

RadioShack Under $1: The Clock Is Ticking

RadioShack Corp (RSH). just tumbled below the stock market’s version of the Mendoza Line.

Shares dropped under $1 Friday morning for the first time ever, as the beleaguered electronics retailer continues to struggle and bankruptcy rumors swirl. Early this month the company reported ugly quarterly numbers that sparked some dire outlooks from Wall Street analysts, including one who slashed his price target to $0 and said the shares were worthless.

More In RadioShack RadioShack's NYSE Listing: The Watch Is On Analyst Slashes RadioShack Price Target to $0 Analysts on RadioShack: Time Is Running Out RadioShack Store Closings: A Complicated Undertaking Super Bowl Advertising Apparently Works: RadioShack Shares Jump

Investors appear to be most concerned about RadioShack’s cash position. As of May 3, the company had $61 million in the bank, down from $180 million at the end of 2013. The company said earlier this month that it had enough cash to last at least 12 months, but that’s contingent on an immediate improvement in sales and margins, no easy feat.

RadioShack has “too many unprofitable stores, and no way to close the majority of them without filing for bankruptcy,” David Strasser, an analyst at Janney Capital Markets, recently said. That constraint is likely to keep shares near the floor unless the chain convinces its lenders to allow more store closures — without having Chapter 11 force their hand. RadioShack has credit agreements that prevent it from closing more than 200 stores this year without approval from some of its major creditors.

A RadioShack spokeswoman declined to comment.

RadioShack shares recently fell 12% to 91 cents. The stock’s slide has picked up steam in recent weeks, falling 40% since the company’s earnings report on June 10. Shares are down more than 70% over the past 12 months.

–Drew FitzGerald contributed to this report.

Rio Tinto Speculation Boosts Turquoise Hill Prospects

Mining giant Rio Tinto PLC (NYSE: RIO) already owns 50.8% of Turquoise Hill Resources Ltd. (NYSE: TRQ), and speculation that Rio Tinto will buy the other 49.2% has boosted Turquoise Hill’s share price by nearly 13% in the week ending Thursday. Most of the gain came in the last two days, although shares were giving some of that gain back Friday probably because Rio Tinto has not announced an offer yet.

Rio Tinto’s largest project, the Oyu Tolgoi copper and gold mine in Mongolia, has been delayed by negotiations between the government and the company that are getting approximately nowhere. Turquoise Hill owns leases adjacent to the copper and gold property and leases on a nearby coal mine through its SouthGobi Resources subsidiary. Turquoise Hill, formerly known as Ivanhoe Mines, essentially discovered the resource after acquiring the exploration rights from BHP Billiton PLC (NYSE: BHP) in 2000. Rio Tinto bought in in 2006.

Oyu Tolgoi produced 76,700 metric tons of copper in 2013 and 157,000 ounces of gold. Copper production is expected to double in 2014, and gold production could rise by between four and five times to as much as 750,000 ounces. The resource is estimated to have a life of at least 40 years, with 10-year average annual production of 332,000 metric tons of copper, 495,000 ounces of gold and 2.3 million ounces of silver.

Turquoise Hill shares were down about 1.7% in early afternoon trading on Friday, at $4.08 in a 52-week range of $2.26 to $4.62. The high was posted in May 2013, following first deliveries from Oyu Tolgoi.

Time To Write Covered Call Options On BHP Billiton?

Related BHP Events Scheduled for Week of Jun. 16th to Jun. 20th Top 4 NYSE Stocks In The Industrial Metals & Minerals Industry With The Highest Revenue

Blue chip stocks in the natural resources sector, like BP (NYSE: BP) and Rio Tinto (NYSE: RIO), are ideal for writing covered call options.

That's when the owner of the stock sells options, but not the obligation, to buy it at a higher price in the future. In the natural resources sector, BHP Billiton (NYSE: BHP) is a solid choice for writing covered call options for a variety of factors.

There are many ways to profit from writing covered call options, but there are three primary methods:

The first is through the actual sale of the option. That is cash in the bank (or an addition to the left side of the brokerage account).

Related: Small Cap Food Stocks May Benefit From The 'Food Frenzy'

Next is from the collection of dividends during the period of the option. As BHP Billiton has a dividend yield of more than 3.5 percent, that is a nice check to get in the mail every three months (or added to the left side of the brokerage account).

The last is from the higher price of the stock if the option is exercised.

Options expert Dr. Joseph Louro, head of Investview (OTC: INVU), an investor education and financial technology entity, says that more than 70 percent of options are never exercised. And that makes selling covered call options on a company like BHP Billiton even more rewarding and even less risky.

BHP Billiton is up more than 10 percent for the last year of market action. However, it has been basically flat for 2014. BHP Billiton is also down for the last week and month of market action. Those are very appealing conditions for selling covered call options.

Posted-In: covered call covered call options Joseph Louro metals and mining mining natural resourcesEducation Long Ideas Dividends Options Markets Trading Ideas General Best of Benzinga

Most Popular UPDATE: Morgan Stanley Initiates Coverage On BlackBerry Fuel Cell Stocks Rally Amid Bullish Analyst Comments Breakdown Of Amazon Phone Opportunity By SunTrust Advances In HIV, Hep C Treatments Could Spark Renewed Interest In Biotech Stocks Wells Fargo Sees 90% Probability Of Merger Between Reynolds, Lorillard 5 Stocks Expected To Grow In The Natural Foods Industry Related Articles (BHP + BP) Time To Write Covered Call Options On BHP Billiton? Stock Market News for June 19, 2014 - Market News Market Wrap For June 17: Markets Higher Ahead Of Fed Decision Events Scheduled for Week of Jun. 16th to Jun. 20th Top 4 NYSE Stocks In The Industrial Metals & Minerals Industry With The Highest Revenue ExxonMobil's CLOV Projects Begins Per Schedule, Shares Rise - Analyst Blog Around the Web, We're Loving... Abercrombie Stems Bleeding Sales in Key Brand A Pristine Trading Plan for Intra-Day Trading Gold Falls to 16-Week Low on Firm Equities Create an Account With Options House and Get 150 Free Trades! We're Now Hiring Real-Time Journalists for our Newsdesk!

Thursday, June 19, 2014

Stock markets bust past big round numbers

Major indexes broke through round-number barriers Tuesday as the rally on Wall Street takes stocks to levels some thought they wouldn't see in a long while.

The Wilshire 5000 index, the broadest measure of the entire stock market, jumped 322.29 points to close at 20,133.02. It's the first major U.S. stock index to close above 20,000. And the much-watched measure of shares of small companies, the Russell 2000, jumped 32 points to close at a new high of 1208.38, breaking the 1200 barrier for the first time.

JOB GROWTH: Investors eye Friday report

The rally was a recovery from Monday's slide and came after Russian President Vladimir Putin made statements indicating he isn't planning to immediately escalate military efforts in Crimea. And with that major scare out of the way for now, big round numbers of psychological import are starting to dominate chatter from Wall Street to the water cooler. The Standard & Poor's 500, at Tuesday's close of 1873.91, is knocking on the door of 1900. And talk that Nasdaq 5000 is actually looking possible is surfacing for the first time in 15 years.

RUSSIA: Markets punish Putin over Ukraine

"People are getting more excited about (stocks) crossing over these levels," says Craig Johnson of Piper Jaffray. "And there's growing remorse among those who are not participating." The market's surge above major levels is important because it's:

• A confirmation of the market's upward thrust. Traders are now increasingly eyeing the Standard & Poor's 500's move toward 1900 as the next major test this year, says Todd Salamone of Schaeffer's Investment Research. The key number earlier in the year was 1850, which was just beyond the 1848 level that would put the S&P 500 back in the black for the year following the early year drubbing, he says. Bulls are watching closely to see if the Dow can do the same, which would be 16,577, which remains 1% away, he says. The Nasdaq was the first major index to get back to break even this year.

•! A notice to doubters. While investors are pleased some indexes are busting to new highs, skeptics are looking for more signs of the market's upward trajectory, says Charles Carlson of Horizon Investment Services. Specifically, the Dow Jones industrial average and the Dow Jones transportation averages busting into new high ground would be a confirmation of what's going on with the other market measures, he says. "We need to reconfirm that S&P 500 high," he says.

• A repair of the market's lingering bear market damage. Nasdaq's peak of nearly 5049 notched on March 10, 2000, at the height of the dot-com boom stands as a living memory of the market's brutal destruction. The slow march back toward that level is a reminder of how much damage the bull market has undone, but still needs to repair. "The Nasdaq is still way closer to 4000 than 5000," Salamone says. The Nasdaq on Tuesday closed up 75 points to 4351.97 — still 13.0% below 5000.

"There are lots of round numbers on the way," Salamone says. "We are very encouraged."

Gold surges above $1,300 to two-month high

NEW YORK (MarketWatch) — Gold prices pushed above $1,300 on Thursday, propelled by continued tension in Iraq and signals from Federal Reserve Chairwoman Janet Yellen that short-term rates can be held steady for a while longer.

AFP/Getty Images

Gold for August delivery (GCQ4) jumped $41.40, or 3.3%, to settle at $1,314.10 an ounce on the Comex division of the New York Mercantile Exchange. That's the highest level since April 14, tracking the most-active contracts, according to FactSet data.

July silver (SIN4) added 87 cents, or 4.4%, to end at $20.65 an ounce.

President Barack Obama said Thursday the government would send 300 military advisers to Iraq amid escalated violence. The U.S. has indicated that it wants a government in Iraq that can work with the country's Sunni population, perhaps one without current Prime Minister Nouri al-Maliki, according to The Wall Street Journal.

Iraq has been "a background factor that's helping to elevate gold," said Brien Lundin, editor of Gold Newsletter. "I think the generally dovish interpretation of the Fed policy statement yesterday has also helped gold," he said, adding that the two factors pushed gold futures toward technical levels that further accelerated gains.

Yellen on Wednesday refused to shed light on when the central bank could hike interest rates, emphasizing that there's no "mechanical formula" for future increases. She also said that recent inflation data were "noisy," dismissing some speculation that the Fed could tighten policy based on data showing higher inflation. A continuation of low interest rates in the U.S. would benefit gold, as they make alternative assets such as gold more attractive.

Still, the market is beginning to appreciate that "retail price inflation will become an issue in the U.S. economy," said Lundin.

The dollar (DXY) fell against major rivals Thursday, making dollar-denominated commodities less expensive for foreign investors.

Weekly jobless claims declined by 6,000 to 312,000 last week, roughly in line with expectations, according to data released Thursday.

"Geopolitical flash points will continue to be very closely monitored for new developments," said Kitco's Jim Wyckoff. "Both situations are likely to worsen before they become better. The gold market, crude oil, U.S. Treasuries and the U.S. dollar should all at least see limited selling interest as these two developments play out."

Elsewhere in metals trading, July platinum (PLN4) added $7.70, or 0.5%, to end at $1,450.80 an ounce, while September palladium (PAU4) rose $5.95 or 0.7%, to settle at $822.65 an ounce. High-grade copper for July delivery (HGN4) ended roughly flat at $3.06 a pound.

More must-read MarketWatch stories include:

Prosecutors subpoena congress in insider trading probe

Food-stamp use is falling from its peak

Wednesday, June 18, 2014

Beware state premium taxes on annuities

annuities, taxes, state taxes, tax planning

(iStock)

Don't be alarmed, but did you know that a handful of states slap premium taxes on carriers for annuities — and that some of that expense is being passed onto clients?

The practice has been ongoing for years, but it's largely been taking place under clients' noses. It's modeled into the quote investors receive.

It's not all that different from the tax nearly all states currently levy on life insurance premiums — and that's been going on since the 1800s, according to Leonard Wright, a certified public accountant and personal finance specialist.

There are currently eight jurisdictions that apply state premium taxes to clients' deposits into annuity contracts: California, Florida, Maine, Nevada, Puerto Rico, South Dakota, West Virginia and Wyoming. The tax applies based on the residence of the buyer.

“Life insurers aren't taxed on net income but on the gross premiums in each state,” said Jim Hall, regional vice president at the American Council of Life Insurers, an industry advocacy group. “The annuity tax works like a premium tax on the gross amount received.”

(Don't miss: New annuities offer exposure to equities and downside protection)

Naturally, life insurance and annuities are priced with the expectation that the state in which the client resides will take its slice of the premium dollars. This way, the company pays the tax and the expense is subsequently deducted from the client.

Rates for non-qualified annuities, according to the ACLI, include: California: 2.35%; Florida: 1%; Maine: 2%; Nevada 3.5%; Puerto Rico: 1%; South Dakota: 1.25%; West Virginia 1% and Wyoming: 1%.

For qualified annuities, California taxes insurers at a 0.5% rate. In Florida, Puerto Rico and West Virginia, they are taxed at 1%. The remaining jurisdictions — Maine, Nevada, South Dakota and Wyoming — do not tax qualified annuities.

In Florida, insurers are exempt from the annuity premium tax if they can show that they've passed the savings onto the policyholders in that state.

The extent to which an insurer passes the expense tied to the premium tax to the client varies from one insurer to another. Some companies pass on the full tax amount to the client.

“It's a matter of competition,” Mr. Hall said. “Some companies may incorporate it more. Others, less so.”

The timing of when the insurer passes on the expense can also vary. Insurance law statutes in California, Nevada and West Virginia permit the carrier to remit the tax to the state either when the client makes the deposit or when the! contract is annuitized. In the remaining states, however, the carrier pays the tax on the front end, according to Mr. Hall.

When a company decides to assess the tax expense on the customer is generally up to the carrier, however. “A company may be required to pay the tax on the front end, but they might assess it [to the customer] after annuitization,” Mr. Hall said.

But there are real planning implications for annuity purchasers in the eight jurisdictions. Mr. Wright specializes in the tax as it applies to contracts for residents in California and Nevada. What advisers need to bear in mind is whether the annuity is being held in a qualified account or in a non-qualified account.

The tax impact can be huge. In California, an annuity in a qualified account will be taxed at a rate of 0.50%. But if it's in a non-qualified account, the levy climbs to 2.35%.

“It forces you into a decision: Where should the annuity be held in the first place?” asked Mr. Wright. “Is it in a qualified plan where your distributions are considered ordinary income?”

Another factor to weigh, particularly with clients who may retire outside of states that tack on high levies: Should you hold off on the annuity purchase until you've relocated, since the annuity premium tax is based on residency? “If you want to move to Texas from Nevada, you'll pay less in taxes if you wait a year,” said Mr. Wright.

Regardless of how a client decides to proceed, it's important that advisers ensure that the annuity decision is the right call for the investor in the first place. The application of the annuity premium tax is just one consideration.

“If it is the right decision, don't let the tax tail wag the dog,” Mr. Wright added.

Twitter Inc. (TWTR): 3T Analysis - #TimeToBuy?

Twitter Inc. (NYSE:TWTR) got cracked following earnings that disappointed Wall Street last quarter, but the earnings driven freefall was just a continuation of the stock slide after posting an all-time high of $74.73 in December 2013.

For the last month or so, the price has flattened out while trading between $30 and $34ish; a mini-consolidation phase, but there's been something different of late. As you can see on the chart below, bargain buyers have started to accumulate TWTR as illustrated by the large green bars.

The recent spate of buying pushed the stock out of the consolidation phase and turned the 12-day average's trend higher, putting it on a path to bypass the 26-day mark. We've seen this look thousands of times, and it usually leads the stock to its 50-day benchmark.

[Related -Twitter Inc (TWTR) Q1 Earnings Preview: It's As Easy As 1-2-3 Metrics]

The 50-day is a tough barrier to break, but $40 appears to be a more natural point of resistance. The odds favor Twitter printing $40 sooner than later, in our opinion. From there, $45 would be the completion of a triangle pattern. Forty-five bucks is a high probability if investors bid TWTR past $41, again, just our opinion.

On chart two, you can see the 140-character social site's trading range has narrowed considerably since the start of June. From our experience, stocks tend to make substantial moves following a tight trading range. The spoils will belong to whichever side of the channel breaks first.

[Related -Tech Stocks Pull Back: What to do? Nothing.]

As it is today, Twitter closed near the high achieved on TWTR's earnings-driven gap down day – May 6, 2014. The day before, the stock closed at $38.75 and then $31.85 on the 6th with a high of $36.10.

If/when Twitter closes above $36.10, then it should begin the process of closing the gap-down, which would place stock in the neighborhood of the 50-day average; confirming our analysis up-top.

Momentum, as defined by Rate-of-Change is building for Twitter; however, the five-day and 15-day ROC readings are bumping into resistance. But that's OK because the trends for all three levels on the chart below are trending in the right direction for bulls.

Longer-term, the 25-day ROC shows TWTR's upswing should have some staying power. A rough day or two should be greeted by more green bars as bulls buy the dips.

Overall: Twitter Inc.'s (NYSE:TWTR) charts suggest shares could touch $40 – maybe more – in the not too distant future. Of course, TWTR will need some help from the overall market. If the indexes go into correction mode, then it would make the task more difficult, but still more likely than not, in our opinion.

5 Stocks With Poor Earnings Growth â€” BBRY TCI ZQK RBCN MGPI

Popular Posts: 10 Best “Strong Buy” Stocks — GMK GAME DAL and moreBiggest Movers in Energy Stocks Now – CHK KOG CLD PXDHottest Technology Stocks Now – SYNA INFY GTAT GME Recent Posts: Hottest Financial Stocks Now – AGO SCHW HRG ISBC Hottest Healthcare Stocks Now – EW HZNP PBYI SLXP Hottest Technology Stocks Now – ATHN MDSO FDS SUNE View All Posts 5 Stocks With Poor Earnings Growth — BBRY TCI ZQK RBCN MGPI

This week, these five stocks have the worst ratings in Earnings Growth, one of the eight Fundamental Categories on Portfolio Grader.

BlackBerry Limited () engages in the design, manufacture and marketing of wireless solutions worldwide. BBRY gets F’s in Earnings Momentum, Analyst Earnings Revisions, Equity, Cash Flow and Sales Growth as well. .

Transcontinental Realty Investors, Inc. () is a real estate company that owns a variety of properties located across the United States. TCI gets F’s in Earnings Momentum, Equity and Cash Flow as well. .

Quiksilver, Inc. () is an outdoor sports lifestyle company that designs, produces and distributes a diversified mix of branded apparel, footwear, accessories, snowboards and related products. ZQK also gets F’s in Earnings Momentum, Analyst Earnings Revisions, Equity and Sales Growth. .

Rubicon Technology, Inc. () is an electronic materials provider that develops, manufactures and sells monocrystalline sapphire and other innovative crystalline products for LEDs, RFICs, blue laser diodes, optoelectronics and other optical applications. RBCN gets F’s in Earnings Momentum, Analyst Earnings Revisions, Equity and Sales Growth as well. .

MGP Ingredients, Inc. () produces and markets ingredients and distillery products. MGPI also gets an F in Equity. .

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.

Tuesday, June 17, 2014

3 Tech Stocks in Breakout Territory With Big Volume

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

>>5 Hated Earnings Stocks You Should Love

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

>>5 Rocket Stocks to Buy for a Correction Week

With that in mind, let's take a look at several stocks rising on unusual volume recently.

Veeva Systems

Veeva Systems (VEEV) provides industry-specific cloud-based software solutions for the life sciences industry in North America, Europe, the Asia Pacific and Latin America. This stock closed up 11.3% at $23.72 in Monday's trading session.

Monday's Volume: 2.72 million

Three-Month Average Volume: 1.36 million

Volume % Change: 95%

From a technical perspective, VEEV exploded higher here right off its 50-day moving average of $20.77 with above-average volume. This sharp spike higher on Monday also pushed shares of VEEV into breakout territory, since the stock took out some near-term overhead resistance levels at $23.25 to $23.59. Shares of VEEV are now starting to trend within range of triggering another big breakout trade. That trade will hit if VEEV manages to take out Monday's intraday high of $23.88 to more past overhead resistance at $24.25 with high volume.

Traders should now look for long-biased trades in VEEV as long as it's trending above $22 or above its 50-day at $20.77 and then once it sustains a move or close above those breakout levels with volume that's near or above 1.36 million shares. If that breakout gets started soon, then VEEV will set up to re-test or possibly take out its next major overhead resistance levels at $29 to $32

Dealertrack Technologies

Dealertrack Technologies (TRAK) provides Web-based software solutions and services to the automotive retail industry in the U.S. and Canada This stock closed up 3.7% at $42.58 in Monday's trading session.

Monday's Volume: 832,000

Three-Month Average Volume: 560,483

Volume % Change: 65%

From a technical perspective, TRAK spiked notably higher here right above some near-term support at $39.82 with above-average volume. This stock has been trending sideways and consolidating for the last month, with shares moving between $38.12 on the downside and $42.55 on the upside. This spike higher on Monday is starting to push shares of TRAK into breakout territory, since the stock flirted with the upper-end of its recent range. Shares of TRAK tagged an intraday high of $42.61, before closing just below that level and right near its 50-day moving average at $42.71. Market players should now look for a continuation move higher in the short-term if TRAK manages to take out Monday's high of $42.61 with strong upside volume flows.

Traders should now look for long-biased trades in TRAK as long as it's trending above Monday's low of $40.70 or above more near-term support at $39.82 and then once it sustains a move or close above Monday's high of $42.61 with volume that's near or above 560,483 shares. If that move starts soon, then TRAK will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $44.52 to $44.58. Any high-volume move above those levels will then give TRAK a chance to re-test or possibly take out its next major overhead resistance levels at $48 to $50.

Nimble Storage

Nimble Storage (NMBL) provides flash-optimized hybrid storage platform. This stock closed up 4% at $27.56 in Monday's trading session.

Monday's Volume: 1.65 million

Three-Month Average Volume: 709,728

Volume % Change: 182%

From a technical perspective, NMBL bounced sharply higher here right off its 50-day moving average of $27.10 with above-average volume. This stock has been uptrending a bit for the last few weeks, with shares moving higher from its low of $22.40 to its intraday high of $28.47. During that move, shares of NMBL have been consistently making higher lows and higher highs, which is bullish technical price action. Shares of NMBL are now starting to trend within range of triggering a near-term breakout trade. That trade will hit if NMBL manages to take Monday's intraday high of $28.47 to some more near-term overhead resistance at $30.13 with high volume.

Traders should now look for long-biased trades in NMBL as long as it's trending above some near-term support at $25 and then once it sustains a move or close above those breakout levels with volume that hits near or above 709,728 shares. If that breakout triggers soon, then NMBL will set up to re-test or possibly take out its next major overhead resistance levels at $37 to $41.

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

What Facebook knows about love, in numbers

NEW YORK (AP) — With 1.23 billion users in all the flavors and up-and-down stages of romantic relationships, Facebook knows a thing or two about love.

For example, two people who are about to enter a relationship interact more and more on Facebook in the weeks leading up to making their coupled status official — up until 12 days before the start of the relationship, when they share an average of 1.67 posts per day.

Then, their Facebook interactions start to decline — presumably because they are spending more time together offline. But while they interact less, couples are more likely to express positive emotions toward their each other once they are in a relationship, researchers on Facebook's data science team found.

Touching on everything from religion to age differences, Facebook has been disclosing such light-hearted findings in a series of blog posts this week, with one coming up later Friday and another, on breakups, Saturday. Friday, of course, is Valentine's Day.

Facebook data scientist Mike Develin, whose background is in mathematics, notes that the relationship stuff is sort a side project for his team, the findings geared more toward academic papers than Facebook's day-to-day business. His "day job" is Facebook's search function — how people use it, what they are searching for that isn't available and how to make it more useful.

But the patterns Facebook's researchers can detect help illustrate just how useful the site's vast trove of data can be in mapping human interactions and proving or disproving assumptions about relationships. Can horoscopes predict lasting love? Forget about it.

"We have such a wide-ranging set of data, including on places there may not be data on otherwise," Develin said, adding that because Facebook knows a lot about people's authentic identity, there are "almost no boundaries" to the kinds of questions the researchers can explore — about the structure of society, culture and how people interact.

Someday, researcher! s studying Facebook data may be able to predict whether a couple will break up, learn whether people are happy together or see what makes relationships last. Of course, the data has its limits — not everyone is on Facebook and not every Facebook user shares everything on the site.

Still, people share quite a bit. When looking at breakups through the lens of changed relationship statuses (see: "Joe Doe is single"), the researchers found couples who split up and got back together — and dutifully documented it on Facebook — 10 or 15 times a year. The maximum, Develin, recalls, was a couple who went in and out of a relationship 27 times in one year. While one may assume that a couple wouldn't want to broadcast so much relationship drama to the world, people actually "very faithfully update Facebook at each twist and turn," he says.

Facebook's researchers use aggregated, anonymized data from hundreds of millions of users on the site. This means that while they see information such as age, location, gender, a person's relationship status, for example, such data is not tied back to a specific person.

It was in a study of 18 million anonymized Facebook posts exchanged by 462,000 Facebook couples that researchers delved into how "sweet" couples are to one another on the social networking site.

"For each timeline interaction, we counted the proportion of words expressing positive emotions (like 'love,' 'nice,' 'happy," etc.) minus the proportion of words expressing negative ones (like 'hate,' 'hurt,' 'bad,' etc.)," writes Facebook data scientist Carlos Diuk in Friday's blog post. The data is plotted on a graph, which shows a visible, general increase in the proportion of warm fuzzy feelings right at the start of a relationship.

Monday, June 16, 2014

Mid-Day Market Update: US Stocks Turn Red; Fusion-IO Shares Jump On SanDisk Buyout

Related CWCO Mid-Afternoon Market Update: US Stocks Reverse Earlier Loses; Fusion-io Shares Jump On SanDisk Buyout Top 4 NASDAQ Stocks In The Water Utilities Industry With The Lowest PEG Ratio

Midway through trading Monday, the Dow traded down 0.30 percent to 16,725.65 while the NASDAQ tumbled 0.30 percent to 4,297.53. The S&P also fell, dropping 0.24 percent to 1,931.60.

Leading and Lagging Sectors

Utilities shares gained around 0.83 percent in today’s trading. Meanwhile, top gainers in the sector included Consolidated Water Co (NASDAQ: CWCO), up 4.3 percent, CenterPoint Energy (NYSE: CNP), up 2.1 percent.

In trading on Monday, telecommunications services shares were relative laggards, down on the day by about 0.48 percent. Top losers in the sector included Telecom Argentina SA (NYSE: TEO), down 6.1 percent, and NQ Mobile (NYSE: NQ), off 6.8 percent.

Top Headline

Medtronic (NYSE: MDT) announced its plans to buy Covidien plc (NYSE: COV) for $42.9 billion in cash and stock.

Medtronic will offer $93.22 per share for Covidien, representing a 29% premium over Covidien's closing price on Friday.

Equities Trading UP

Bluebird Bio (NASDAQ: BLUE) shares shot up 33.61 percent to $34.86 following the presentation of positive data on LentiGlobin BB305 at the European Hematology Association (EHA).

Shares of Covidien plc (NYSE: COV) got a boost, shooting up 20.90 percent to $87.07 after Medtronic (NYSE: MDT) announced its plans to buy Covidien for $42.9 billion in cash and stock.

Fusion-io (NYSE: FIO) shares were also up, gaining 23.11 percent to $11.43 after SanDisk (NASDAQ: SNDK) announced its plans to buy Fusion-io for $11.25 per share in cash.

TW Telecom (NASDAQ: TWTC) jumped 7.04% to $38.90 after the company agreed to be acquired by Level 3 Communications (NYSE: LVLT) in a stock-and-cash transaction valued at $40.86 per share.

Equities Trading DOWN

Shares of Karyopharm Therapeutics (NASDAQ: KPTI) were 9.45 percent to $42.67 after the company announced that the FDA has found the effectiveness and safety for KPT-335.

Yahoo! (NASDAQ: YHOO) shares tumbled 4.95 percent to $35.11. Alibaba reported revenue for the year ending March 31 of $8.47 billion and reported Yahoo stake in Alibaba of 22.5% versus 22.6% as of December 31, 2013.

DreamWorks Animation SKG (NASDAQ: DWA) was down, falling 12.43 percent to $23.95 after the company announced the launch on YouTube.

Commodities

In commodity news, oil traded up 0.07 percent to $106.99, while gold traded up 0.51 percent to $1,280.60.

Silver traded up 0.15 percent Monday to $19.69, while copper rose 0.46 percent to $3.04.

Eurozone

European shares were lower today.

The eurozone’s STOXX 600 tumbled 0.37 percent, the Spanish Ibex Index dropped 0.84 percent, while Italy’s FTSE MIB Index fell 0.77 percent.

Meanwhile, the German DAX dropped 0.20 percent and the French CAC 40 fell 0.58 percent while UK shares dropped 0.25 percent.

Economics

The Empire State manufacturing index rose to 19.28 in June, versus a prior reading of 19.01. However, economists were expecting a reading of 15.00.

Industrial production rose 0.6% in May, after dropping 0.3% in April. However, economists were projecting a 0.5% growth in May.

The NAHB housing market index surged to 49.00 in June, versus a prior reading of 45.00. However, economists were expecting a reading of 47.00.

Posted-In: Earnings News Guidance Eurozone Futures Commodities FDA M&A Economics Markets

Most Popular Why Tesla Is Up Over 8% Tesla Stock Gains On Patent Sharing News - Analyst Blog UPDATE: Summit Research Initiates Coverage On FireEye UPDATE: Bank Of America Upgrades AK Steel Holding On More Compelling Risk/Reward Benzinga's Top #PreMarket Gainers Google Glass Rapidly Gaining Traction With Physicians Related Articles (CNP + BLUE) Mid-Afternoon Market Update: US Stocks Reverse Earlier Loses; Fusion-io Shares Jump On SanDisk Buyout Mid-Day Market Movers For Monday, June 16, 2014 Mid-Day Market Update: US Stocks Turn Red; Fusion-IO Shares Jump On SanDisk Buyout Benzinga's Volume Movers Mid-Morning Market Update: Markets Mostly Higher; Medtronic To Acquire Covidien For $42.9B Stocks Hitting 52-Week Highs

A Look at InterContinentalâ€™s Post-Crisis Growth Strategy

Recessions are difficult for any consumer-related industry to overcome, but the travel and hotel segment is always particularly affected by budget cuts. Nevertheless, with a 20% boost of the domestic revenue per available room, the lodging industry is well on the recovery road, with several large companies leading the way. Investment guru Pioneer Investments (Trades, Portfolio) recently bought almost 80,000 shares of InterContinental Hotels Group PLC (IHG), the world's largest hotel owner, franchiser and manager, with over 4,500 hotels in 100 countries. But let's see what really makes this company a solid long-term investment.

A Majority Franchised System

This company is known for its famous midscale brands Holiday Inn and Holiday Inn Express, as well as the upscale hotels InterContinental and Crowne Plaza. The interesting factor, however, is the high rate of franchised and managed hotels among these brands, compared to industry rivals Hyatt Hotels Corporation (H) or Starwood Hotels & Resorts Worldwide Inc. (HOT). With more than 99% franchised or managed hotels in the InterContinental system, this company profits from excessive operating margins of 33.2% (the industry average is 8.70%) and minimal capital expenditures.

Additionally, the typical 10 to 30-year contracts for hotel franchises create high switching costs for property owners, while simultaneously generating high returns on invested capital. Since 2010, for example, InterContinental has averaged a 29% return on capital, and currently reports a 57.8% return, all due to the firm's asset-light strategy of selling owned hotels and converting them to management or franchising contracts. The latest transaction of the InterContinental New York Barclay, for example, sold at $300 million, was a well strung deal for the company, which will maintain a 20% ownership in the property, as well as manage the hotel for the next 30 years. This transaction is bound to boost free cash flow, as well as revenue growth, which has been somewhat stagnant throughout fiscal 2013 (4.0%).

International Advantage

One of InterContinental's key growth segments is its international business. Since 1984, this company has been taking advantage of the underpenetrated Chinese market, and today this hotel operator holds the best infrastructure to grow and expand its brand presence in the country. With an estimated 50,000 rooms in its new Chinese hotel pipeline, representing 90% of the firm's total existing rooms in Asia, the company will enjoy a solid 15% annual unit growth in China over the next several years. Also, the current 10% revenue income generated by this nation will reach 25% by 2021 making InterContinental the best represented U.S. lodging company in Asia.

Fiscal 2014 is looking promising for this hotel operator, with a forecasted increase of room numbers by 3.1% annually until 2022, in addition to boosts in revenue per room over several continents. America is expected to deliver 5.3% annual growth, Europe 4.4% and China 8.4%, as the economy in these regions recover and travel spending continues to surge. Although this lodging firm remains vulnerable to the risks of a recession, which led to revenue declines of 14% from 2007 to 2009, I believe the almost integrally franchised business model will be able to sustain profits in the long term. Furthermore, with the stock currently trading at a 35% price discount relative to the industry average of 22.60x, and the 2.04% dividend yield should be appealing to investors.

Disclosure: Patricio Kehoe holds no position in any stocks mentioned.

About the author:Patricio KehoeA fundamental analyst at Lone Tree Analytics

Currently 5.00/512345

Rating: 5.0/5 (2 votes)

Subscribe via Email RSS Feeds

Subscribe RSS Comments Please leave your comment:
More GuruFocus Links

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool

Resurgence of Infrastructure Enthusiasm Justified

Yesterday, this company reported record fourth quarter revenue that was well above Wall Street projections, writes MoneyShow's Jim Jubak, who feels the company's recent pop indicates that industry enthusiasm has returned.

Xylem (BATS:XYL) moved up yesterday, after the company reported record revenue for the fourth quarter of $1.03 billion, almost 5% higher than Wall Street projections. Revenue climbed 7% year over year and earnings per share hit 56 cents a share, well above the 52 cents a share projected by the Wall Street consensus. The company also announced an increase in its quarterly dividend to 12.8 cents from a current 11.6 cents. Xylem also raised its guidance for fiscal 2014, to earnings of $1.85 to $2.00 a share, versus the Wall Street consensus of $1.91. The company said revenue for fiscal 2014 would be $4 billion against the $3.94 billion Wall Street consensus.

I think it tells you something about how few companies have put this kind of complete package—earnings and revenue beats, a dividend increase, and positive guidance for 2014—together that the market moved Xylem's shares up 10.6% by the New York close.

A 10.6% pop on a 4 cents a share beat seems, well, very enthusiastic.

But it might actually be justified, because Xylem is seeing an improvement in its European markets. The big reason not to buy the stock in 2012 and 2013 was the slow growth in government spending in the EuroZone on water infrastructure. Strange how a little debt crisis can cut into spending, even spending on water.

Yesterday, however, the company told Wall Street that it was encouraged by signs of stabilization in some of its key end markets such as industrial and public utilities, as well as relative strength in Europe. We believe, Xylem continued, that the improvement it saw in the last half of 2013 will carry over into 2014.

Some concrete contract wins in January backed up that talk. For example, Xylem announced a deal to supply its supply of technology to disinfect wastewater, to a plant in the Vigo region of Spain that will be the largest ultraviolet treatment plant in the country, when it is finished.

Xylem is a member of my Jubak's Picks portfolio. The shares are up 50.6% since I added them to the portfolio on September 4, 2012. As of February 4, I'm raising the target price to $45 a share by November 2014, from the current $43.

Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own shares of Xylem as of the end of December. For a full list of the stocks in the fund, see the fund's portfolio here.

Amazon.com, Inc. (AMZN) Q4 Earnings Preview: Will Amazon's EPS Top Street?

Amazon.com, Inc. (NASDAQ: AMZN) will release its fourth quarter financial results on Jan.30. The company will hold a conference call to discuss the operating performance at 2:00 p.m. PT/5:00 p.m. ET on the same day.

Wall Street expects Amazon to report earnings of 66 cents a share, according to analysts polled by Thomson Reuters. The consensus estimate implies more than three fold increase from the 21 cents earned last year.

Amazon's results have managed to top Street view only once in the past four quarters while missing them by a wide margin on two occasions and meeting it in the third quarter. The consensus estimate dropped 3 cents in the last three months while two analysts have raised their profit view for the quarter in the past 30 days.

[Related -Updating Amazon AMZN Gap into Fibonacci Support]

Quarterly revenue is expected to rise 22.60 percent to $26.07 billion from $21.27 billion in the same quarter last year. Amazon sees fourth quarter net sales between $23.5 billion and $26.5 billion, or to grow between 10 and 25 percent from the fourth quarter 2012. The market look at the contributions of North America and International markets.

For the full year, Amazon is expected to earn 73 cents a share on revenue of $74.94 billion. Last year, the online, retail giant reported a loss of 9 cents a share and generated revenue of $61.09 billion.

Amazon's fourth quarter results could be boosted heavily by a strong sales during the holiday season, driven by Kindle shipments and video game sales. This year, there is a difference in Kindle shipping timing, with both the new 7" and 8.9" versions pushed into the fourth quarter this year. This effectively shifts the recognition of new Kindle Fire HDX sales fully into the fourth quarter.

[Related -Level Watching and Swing Trade Planning for Amazon (AMZN)]

UBS analyst Eric Sheridan notes that the updated version of the Kindle Paperwhite eReader sales will benefit from last year's stock-out issues that delayed a portion of shipments into the first quarter 2013.

In addition, high levels of Amazon promotional support and encouraging data points as supportive of strong Kindle Fire HDX sales in the fourth quarter.

As expected, video game console and game sales also appeared to be winners over the holiday shopping season, and were specifically called out as Black Friday top sellers at Walmart (by the company) and Target (by InfoScout).

Sheridan believes that video game related sales make up anywhere from 10 to 15 percent of Amazon's Media segment and this segment represents about one third of total company sales.

The quarter also saw an uptick in Amazon prime membership. Amazon reported the addition of greater than one million new Prime members during the third week of December alone, noting that total Prime member is now in the "tens of millions". For context, Amazon had approximately 234 million active customers as of the end of the third quarter 2013.

Amazon Prime membership sign up were coming in at such a rapid pace that the company actually had to limit customer sign-ups during peak periods.

Sheridan said a likely contributor to the increase in new members was Amazon's recent (October 2013) free shipping threshold change – increasing the minimum qualifying order value from $25 to $35.

Amazon noted that on Cyber Monday, the peak day for the 2013 holiday season, the company received more than 36.8 million customer orders. This represents a 39 percent increase over last year's peak day (26.5 million units on Cyber Monday, 2012).

Meanwhile, increased fee revenues from 3P sellers should be supportive of gross margin expansion. Investors would be looking for paid unit growth trends, which is a key metric given Amazon's increasing 3P mix and its impact on both reported revenue growth and gross profit margins.

Sheridan noted that the fourth quarter 2013 may have seen a greater mix of 3P units given outside sellers could promote on holiday pages for the first time this year. To that point, the company noted that Cyber Monday 3P units were up 50 percent in 2013. This implies an increase of close to 300bps in 3P mix on Cyber Monday.

The Street will expect updates on international Kindle e-book developments, macro recovery in key European markets and traction in its Amazon Web Services business. They may also focus on any comments over recent rumors of additional hardware launches, such as Kindle smartphone and video game consoles.

Amazon is giving a stiff competition to Netflix, Inc. (NASDAQ:NFLX) on the content front. Prime Instant Video selection increased from 33,000 to more than 40,000 movies and TV episodes in 2013. Amazon Instant Video now includes more than 150,000 movies and TV episodes.

A few additional items that may be brought up on the call or mentioned in some form include early progress related to the company's global expansion of the Kindle Appstore; early traction with 3P sellers in India; update around China strategy (Kindle, partnerships); and the potential pace of Amazon Fresh market expansion, including the recently announced Pantry initiative.

Amazon is sacrificing near-term profitability to drive long-term growth as it is investing heavily in Kindle tablets, TV content, Video library and AWS. These heavy investments are weighing on gross margins resulting in losses. Amazon expects third-quarter operating results between a loss of $500 million and a profit of $500 million, compared to $405 million a year-ago.

For the third quarter, the Seattle, Washington-based company reported a net loss of $41 million, or 9 cents a share, compared with a net loss of $274 million, or 60 cents a share, in the third quarter 2012. Net sales increased 24 percent to $17.09 billion in the third quarter.

Amazon has traded in a mixed manner following its last two fourth quarter earnings announcements, increasing 5 percent and decreasing 8 percent, respectively. That said, over a five year span, the average price change post fourth quarter results is a 1.4 percent gain.

Shares of AMZN have gained 19 percent since the last quarterly report and have climbed 52 percent in the last year. They have traded between $245.75 and $408.06 during the past 52-weeks.