Wednesday, October 30, 2013

Does Intel Have Upside Potential?

With shares of Intel Corporation (NASDAQ:INTC) trading at around $24.07, is INTC an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

Intel was late to the smartphone and tablet party. This has left a lot of upside potential on the table. However, while the stock hasn't skyrocketed like many other stocks throughout the broader market over the past several years, it has more than held its own. This is in addition to an impressive 3.70 percent yield.

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The big question on everyone's mind is whether new CEO Brian Krzanich can improve the company's potential, which would then increase the stock's potential. He's a 3o-year Intel veteran, so he certainly knows the business well. He has a reputation for making fast decisions. Whether this will be a positive or a negative as CEO remains to be seen. In an email sent to employees, Krzanich stated:

"As your CEO, I am committed to making quick, informed decisions. I am committed to being bolder, moving faster, and accepting that this means changes will be made knowing that we will listen, learn and then make adjustments in order to keep pace with a rapidly changing industry."

One of his goals is to be more responsive to smartphone and tablet customers. He also created a New Devices Group in order to increase the odds of growing market share in future mobile technologies.

Intel is currently trading at 12 times earnings while the industry average is 62 times earnings. Margins are solid, and cash flow is good. It has also been rumored that Intel's Atom chip will be in the next generation of Samsung's Galaxy tablet. And analysts like (don't love) the stock: 17 Buy, 23 Hold, 7 Sell.

On the other hand, there were revenue and earnings setbacks in 2012 as well as in the last quarter on a year-over-year and sequential basis. Intel also lacks resiliency in bear markets.

Now let's get to some numbers. Below is a chart focusing on Intel's basic fundamentals.

Trailing P/E 12.03
Forward P/E 11.86
Profit Margin 19.45%
ROE 21.06%
Operating Cash Flow 20.20B
Dividend Yield 3.70%
Short Position 4.70%

Let's take a look at some more important numbers prior to forming an opinion on this stock.

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T = Technicals Are Strong

Intel has performed well year-to-date, but the market isn't reacting well to Bernake's recent hawkish comments, and Intel isn't a resilient stock.

1 Month Year-To-Date 1 Year 3 Year
INTC 4.91% 17.66% -5.01% 26.26%

At $24.07, Intel is trading above its averages.

50-Day SMA 23.10
200-Day SMA 21.51
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E = Equity to Debt Ratio In Normal

The debt-to-equity ratio for Intel is close to the industry average of 0.30.

Debt-To-Equity Cash Long-Term Debt
INTC 0.26 17.16B 13.35B

E = Earnings Have Been Inconsistent

Earnings and revenue has been inconsistent on an annual basis.

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 37,586 35,127 43,623 53,999 53,341
Diluted EPS ($) 0.92 0.77 2.05 2.39 2.13

When we look at the last quarter on a year-over-year basis, we see a decline in revenue and earnings. Revenue and earning have both declined on a sequential basis. It's difficulty to be optimistic when such conditions exist.

Quarter Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012 Mar. 31, 2013
Revenue ($) in millions 12,906 13,501 13,457 13,477 12,580
Diluted EPS ($) 0.53 0.54 0.58 0.48 0.40

Now let's take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?


Intel has performed well year-to-date, but has essentially gone nowhere for a decade. This hasn't been terrible for those looking for dividends.

Tuesday, October 29, 2013

NBA Tips Off As International Players, Revenues Jump

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NEW YORK (TheStreet) -- Maybe they should change the name to the International Basketball Association.

The National Basketball Association, which tips off its regular season on Thursday night, says a record 92 players from 39 countries and territories will take the court for the 2013-2014 campaign.

The NBA's popularity has grown across the globe as international markets account for 10% of overall league revenue.

Followers of the game invented by Canadian American James Naismith are aware over the past two decades of the surge of international players in the league. Among the most recognized international names are Dirk Nowitzki (Germany), Tony Parker (France), Pau Gasol (Spain) and Tim Duncan (U.S. Virgin Islands). Basketball has been the United States' most successful sports transplant since Michael Jordan, Larry Bird and Magic Johnson teamed with a roster of other superstars to form the 1992 Dream Team. "The summer of 1992 was unlike any in the history of Olympic basketball, becoming the biggest and brashest story of the Games, drawing a level of worldwide interest that ultimately contributed more to the growth of the global game than any other singular factor," reporter Chris Sheridan wrote for ESPN in 2010. The NBA has publicized its ambition to build its international market reach, specifically in China, where Commissioner David Stern has said it expects league revenue to increase at least 10% annually. Stern told Bloomberg in 2012 that he expected television and digital rights to games for last season to drive league revenue to $150 million in China. The season starts Tuesday at 7 p.m. EDT in Indianapolis between the Orlando Magic and Indiana Pacers. -- Written by Joe Deaux in New York. >Contact by Email. Follow @JoeDeaux

Monday, October 28, 2013

Analysts Team Issues Upside Targets on Twitter, Ahead of the IPO

Most Wall Street analysts wait for a company’s IPO to actually price and then start trading before they issue Buy, Sell, or Hold recommendations (or other recommendations). This is not the case for Twitter as Sterne Agee’s Arvind Bhatia and Brett Strauser initiated coverage of Twitter with upside price targets that would translate to a “Buy” rating if the IPO came out right in its expected price range.

The Sterne Agee team did not establish any formal rating or price target yet. It is the tone of this report that sounds so positive, and they have opined that shares would be attractive if the IPO prices in the $17 to $20 proposed range.

Twitter’s IPO is expected to hit in the first week of November. The team’s valuation work suggests a base case valuation of $25 to $32 per share in the next 12 months to 24 months. The upside case is a value of $33 to $48 per share, versus a downside case of $13 to $15 per share. Again, this is a call for the next 12 months to 24 months.

Twitter was shown to have some 232 million monthly active users, including 53 million in the U.S. Mobile accounts for 76% of the monthly active users, and over 70% of the advertising revenue was from mobile in the most recent quarter. The social network’s international user base represents 77% of the total but that same international group accounts for only 25% of the revenue.

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The Sterne Agee team called the valuation proposal, “Twitter's scale and deeply engaged user base create valuable opportunities for advertisers to leverage the platform. Advertisers can communicate directly with their followers for free, or they can purchase Twitter's advertising services to reach a broader audience. Twitter's platform partners include publishers, media, outlets, and developers, who have integrated with Twitter through an application programming interface, which allows them to seamlessly leverage Twitter as a complementary distribution channel for their content. Twitter plans to continue to integrate more content into their API to allow platform partners to distribute more forms of content.”

Another issue pointed out is that 11% of Twitter’s revenue came from Data Licensing. This is where it provides data partners with detailed historical and real-time analytics regarding total user interactions with the platform. Only five of the top data partners generated about 73% of the data licensing revenue in the first 9 months of 2013.

Twitter plans to issue 70 million shares, or up to 80.5 million shares if you include the overallotment shares for the underwriters. This would generate a capital raise of $1.2 billion to $1.6 billion before fees.

Sunday, October 27, 2013

Top 10 Low Price Stocks To Own For 2014

Last August, StreetAuthority analyst Nathan Slaughter made a bold prediction.

At the time, the price of natural gas had reached decade-low prices just a few months before, falling below $2 per thousand cubic feet (Mcf) in April of 2012.

Nathan predicted that natural gas was due for a rebound. He also spotted a huge disconnect between the rising price of natural gas and the share prices of the companies that produce it.

Since June 2012, the price of natural gas has doubled, reaching $4.40 in April before tapering off.

Now, if we were to take a look at the share price for the stock of a "pure play" natural gas company (as opposed to one that produces a combination of gas and oil), we might expect the share price to mirror the price of gas. After all, the spread between how much it costs for these companies to drill for gas and how much they are able to sell it for on the open market is how they make money.

Top 10 Low Price Stocks To Own For 2014: Dundee Mines Ltd (DUN.V)

Duncastle Gold Corp., engages in the acquisition, exploration, and development of natural resource properties in British Columbia, Canada. It primarily explores for gold, copper, molybdenum, tungsten, silver, lead, zinc, and base metals deposits. The company holds an option to acquire a 100% interest in the Porphyry Creek property consisting of 42 mineral claims located in the Omineca Mining District, British Columbia, Canada; and a 100% interest in the Yankee Dundee property consisting of 26 crown-granted mineral claims located in the Nelson Mining District, British Columbia, Canada. It also holds a 100% interest in the Drayton property consisting of 7 mining claims located in the Drayton Township in Ontario, Canada. The company was incorporated in 2006 and is headquartered in Vancouver, Canada.

Top 10 Low Price Stocks To Own For 2014: Claim Post Resources Inc (CPS.V)

Claim Post Resources Inc., a junior exploration company, engages in the acquisition, exploration, and development of mineral resource properties in Canada. The company primarily focuses on exploring and developing base metals and gold properties located in the Abitibi Greenstone Belt Region near Timmins in Ontario, Canada. It holds a 100% interest in the Kamiskotia property comprising 1,195 claim units located in the Godfrey, Turnbull, Jamieson, Robb, Cote, Massey, Mountjoy, and Bonar townships; and a 100% interest in the Dayton Porcupine claims consisting of 49 patented claims in Deloro and Ogden townships, as well as has an option to earn up to 100% interest in the Racetrack Project comprising 103 claim units and 12 patented claims located in Ogden township. Claim Post Resources Inc. was founded in 2005 and is headquartered in Toronto, Canada.

Top 5 Safest Companies To Buy Right Now: Shengkai Innovations Inc.(VALV)

Shengkai Innovations, Inc., through its subsidiaries, engages in designing, manufacturing, and distributing ceramic valves and components for industrial use in the People?s Republic of China. It provides ceramic valves in various categories, including gate valves, ball valves, back valves, adjustable valves, cut-off valves, and special valves. The company also offers a series of services related to industrial ceramic valves comprising manufacture, installation, and maintenance of general industrial ceramic valves, as well as the design and manufacture of various non-standard ceramic valves. It sells its products to electric power, petrochemical, chemical, aluminum, and metallurgy industries through direct sales force and agents. The company also exports its products to Europe, North America, and the Asia-Pacific region. Shengkai Innovations, Inc. is based in Tianjin, the People's Republic of China.

Top 10 Low Price Stocks To Own For 2014: Vivo Participacoes S.A.(VIV)

Telecomunicacoes de Sao Paulo S.A.-TELESP provides fixed-line telecommunications services to residential and commercial customers in the state of Sao Paulo, Brazil. Its services include local voice services, such as activation, monthly subscription, measured service, and public telephones; intraregional, interregional, and international long-distance voice services; data services comprising broadband services; pay TV services through direct to home satellite technology and land based wireless technology multichannel multipoint distribution service; and network services, such as interconnection and rental of facilities, as well as other services consisting of extended maintenance, caller identification, voice mail, cell phone blockers, computer support, and antivirus for Internet service subscribers. The company also offers multimedia communication services, such as audio, data, voice and other sounds, images, and texts and other information. In addition, it provides interc onnection services to cellular service providers and other fixed telecommunications companies through the use of its network. Further, the company offers telecommunications solutions and IT support designed to address the needs and requirements of companies operating various types of industries, including retail, manufacturing, services, financial institutions, and government. Telecomunicacoes de Sao Paulo S.A.-TELESP provides its products and services through person-to-person sales, telesales, indirect channels, Internet, and door-to-door sales. As of December 31, 2010, its telephone network included 11.3 million fixed lines in service, including residential, commercial, and public telephone lines; 3.3 million broadband clients; and 0.5 million pay TV clients. The company was founded in 1998 and is headquartered in Sao Paulo, Brazil. Telecomunicacoes de Sao Paulo S.A.-TELESP is a subsidiary of Telefonica S.A.

Advisors' Opinion:
  • [By Sarah Jones]

    Vivendi SA (VIV) lost 1.7 percent to 15.72 euros in Paris after the owner of SFR, France�� second-biggest mobile-phone operator, reported a 21 percent drop in first-quarter Ebit to 1.18 billion euros. That missed analyst estimates.

  • [By Jonathan Morgan]

    Vivendi (VIV) SA climbed the most in two months as Qatar Telecom QSC said it raised $12 billion to finance its bid for the French media and telecommunications company�� stake in Maroc Telecom SA. Fiat SpA (F) advanced 4.4 percent after Italy�� industry minister offered support to keep its plants in the country. Club Mediterranee (CU) SA jumped the most on record after the French holiday-resort operator said it got a bid from two shareholders.

  • [By Sofia Horta e Costa]

    Vivendi (VIV) rose 2.7 percent to 17.15 euros. Music, pay-TV, European cinema and Internet in Brazil will make up a new media group based in France after the split with phone unit SFR, according to a statement yesterday.

Top 10 Low Price Stocks To Own For 2014: Washington H Soul Pattison & Co Ltd(SOL.AX)

Washington H. Soul Pattinson and Company Limited, together with its subsidiaries, primarily engages in the mining of coal; and provision of consulting services in Australia. The company involves in the exploration, development, production, processing, and transportation of coal. It has interests in the Colton project, an open cut coking coal resource located near Maryborough; and the Elimatta project, a thermal open cut coal deposit located in the northern Surat Basin in Australia. The company also engages in the production of copper sulphate and copper concentrates. In addition, it provides corporate advisory services relating to mergers, strategic advice, equity capital markets, private equity, restructuring, and debt advisory services. Further, the company invests in the field of building products, equity investments, telecommunications, agriculture, and pharmaceuticals. Washington H. Soul Pattinson and Company Limited was founded in 1872 and is based in Sydney, Austral ia.

Top 10 Low Price Stocks To Own For 2014: Australian Dollar(AU)

AngloGold Ashanti Limited primarily engages in the exploration and production of gold. It also produces silver, uranium oxide, and sulfuric acid. The company conducts gold-mining operations in South Africa; continental Africa, including Ghana, Guinea, Mali, Namibia, and Tanzania; Australia; and the Americas, which include Argentina, Brazil, and the United States. It also has mining or exploration operations in the Democratic Republic of the Congo, Guinea, and Colombia. As of December 31, 2010, the company had proved and probable gold reserves of 71.2 million ounces. The company has a strategic alliance with Thani Dubai Mining Limited to explore, develop, and operate mines across the Middle East and parts of North Africa. AngloGold Ashanti Limited, formerly known as Vaal Reefs Exploration and Mining Company Limited, was founded in 1944 and is headquartered in Johannesburg, South Africa.

Advisors' Opinion:
  • [By Rich Duprey]

    Considering the work stoppages and violent clashes that have become the norm at South African precious-metals mines, perhaps the miners were wondering exactly what they were getting for their money. An expose by South Africa's Daily Maverick has uncovered a system where miners such as AngloGold Ashanti (NYSE: AU  ) and BHP Billiton (NYSE: BHP  ) surreptitiously paid for the salaries of the heads of the local mining unions to keep the mine workers in line, and it's only because the miners sought to end the "uncomfortable arrangement" with the unions that the matter came to light.

  • [By Holly LaFon]

    The second largest market cap company, at $11.22 billion, is Anglogold Ashanti Ltd. (AU). Its afternoon stock price of $29.15 is within 5% of its three-year low, and has experienced a more significant drop than Newmont ��it is down 44.9% from its high price of $52.86 a share.

  • [By Profit Confidential]

    Graham Ehm, Executive Vice President of South African-based AngloGold Ashanti Limited (NYSE: AU), one of the biggest gold producers in the global economy, stated the company is looking to save $500 million over the next 18 months, as capital expenditures will only be going towards their highest-quality assets. (Source: Mining Weekly, August 5, 2013.)

  • [By Daniel Putnam]

    First, and most important, earnings estimates are stabilizing. In the past sixty days, 2013 estimates for the major gold miners have begun to tick up. In most cases, the increase is very modest. For instance, Goldcorp‘s (GG) EPS estimates have climbed from $0.91 to $0.95, while Barrick Gold‘s (ABX) have inched up from $2.57 to $2.64. Newmont Mining (NEM), Anglogold Ashanti (AU), and Gold Fields Ltd. (GFI) have shown similar gains. This positive rate of change marks a significant departure from the steady stream of bad news investors have had to endure in recent years.

Top 10 Low Price Stocks To Own For 2014: SL Green Realty Corporation(SLG)

SL Green Realty Corp. is a real estate investment trust (REIT). The firm engages in the property management, acquisitions, financing, development, construction, and leasing. It also provides tenant services to its clients. The firm invests in real estate markets of the United States. It primarily invests in commercial office and retail properties. SL Green Realty Corp. was founded in 1970 and is based in New York, New York.

Advisors' Opinion:
  • [By Marc Bastow]

    Property management and financing real estate investment trust SL Green Realty (SLG) raised its quarterly dividend 52% to 50 cents per share. SLG did not release a payment or ex-dividend date for the new dividend.
    SLG Dividend Yield:�2.04%

Top 10 Low Price Stocks To Own For 2014: Panax Geothermal Ltd (PAX.AX)

Panax Geothermal Ltd engages in the identification, exploration, and development of geothermal resources primarily in Australia, Indonesia, and India. Geothermal energy is the source of renewable energy that replaces base load power generated using fossil fuels. It operates in Penola Trough, Other Limestone Coast, Cooper Basin, Indonesia, and Other International segments. The company holds 100% interest in the Penola, Limestone Coast Geothermal project covering an area of approximately 3,000 square kilometers located in the Limestone Coast, South Australia; and the Hutton Geothermal project covering an area of 949 square kilometers located in the Cooper Basin, South Australia. It also holds a 49% interest in the Puga Geothermal project covering an area of approximately 100 square kilometers located in the Himalayan region, Upper Indus Valley, northern India. In addition, the company holds a 45% interest in the Sokoria Geothermal project for a 30 MW geothermal development o n Flores Island; a 35% interest in the Ngebel Geothermal project for a 165 MW geothermal development on East Java; a 51% interest in the Dairi Prima Geothermal project for a 25 MW geothermal development in Northern Sumatra; and a 95% interest in the Jambi Geothermal project for a 80 MW geothermal development in Central Sumatra, Indonesia. Panax Geothermal Ltd is based in Adelaide, Australia.

Top 10 Low Price Stocks To Own For 2014: Corcept Therapeutics Incorporated(CORT)

Corcept Therapeutics Incorporated, a development stage pharmaceutical company, engages in the discovery and development of drugs for the treatment of severe metabolic and psychiatric disorders. The company focuses on the development of drugs for disorders that are associated with steroid hormone called cortisol. Corcept Therapeutics Incorporated has completed its Phase III study of CORLUX for the treatment of Cushing's Syndrome, as well as has an ongoing Phase III study of CORLUX for the treatment of the psychotic features of psychotic depression; and a Phase II program for CORT 108297 and an IND-enabling program for CORT 113083. It has a patent license from Stanford University for the use of GR-II antagonists, as well as agreements with ICON Clinical Research, LP; and MedAvante, Inc. The company was founded in 1998 and is based in Menlo Park, California.

Top 10 Low Price Stocks To Own For 2014: ProAssurance Corporation(PRA)

ProAssurance Corporation, through its subsidiaries, provides medical and other professional liability insurance products to health care service, legal service, and other professional service providers in the United States. It primarily offers its products to physicians, dentists, chiropractors, optometrists, and allied health professionals. The company markets its products through an internal sales force, as well as independent agents. ProAssurance Corporation was founded in 1976 and is based in Birmingham, Alabama.

Advisors' Opinion:
  • [By Rich Duprey]

    Specialty insurance company�ProAssurance� (NYSE: PRA  ) �announced yesterday�its second-quarter dividend of $0.25 per share, the same rate it's paid since it initiated a payout in 2011.

Saturday, October 26, 2013

Suncor Energy Offers Stable Growth And Attractive Dividends For Long-Term Investors


It's hard to have the best of both worlds, but Suncor Energy (SU) offers an attractive 2.1% dividend and a 7% production growth for its investors. The stock is trading at 11.4X 2014 earnings and 4.9X EV/EBTIDA, which is low compared to other large oil and gas producers. The author sees a 13.5% upside for the stock in the next 12 month.

About The Company:

Suncor Energy is the largest energy company in Canada based on market capitalization. Suncor is an integrated oil company with both upstream and downstream operations.

Suncor's upstream operations center around its oil sands operation in the Wood Buffalo region of Alberta. The oil sands division consists of oil sands mining and in-situ operations which extract and upgrade raw bitumen. Suncor also holds stakes in oil sands Joint Ventures projects such as Syncrude Canada (12% working interest), Fort Hills Mining (40.8% working interest), and Joslyn Mining (36.75% working interest). Furthermore, Suncor has an attractive upstream E&P business in Eastern Canada and U.K. Suncor's E&P business is attractive because it has low sustaining capital expenditures and high free cash flow. Suncor uses those free cash to fund its oil sands business.

Suncor's downstream business includes 4 refineries located in Sarnia (Ontario,Canada), Edmonton (Alberta, Canada), Montreal (Quebec, Canada) and Commerce City (Colorado, U.S.) with total refining capacity of 460 Mbbls/d. Suncor's goal is to utilize low cost feedstock from its own oil sands operation and capture the pricing differential between heavy crude (Western Canadian Select) and WTI. In the past year, Suncor was able to generate significant cash flows through its lucrative refining operations and its price realized on its upstream production was 93% of Brent pricing due to its refining business. The integrated business model, having both upstream and downstream operations, is powerful.

Graph 1: Suncor's Production History in Last 8 Quarters (in

(click to enl! arge)

Source: Company Filings. The production was low last quarter because of various maintenance including a major turnaround at its U1 upgrader. Q3 production approach the 600 Mbbls/d level.

Investment Thesis:

The investment thesis in Suncor is simple: It provides both an attractive dividend and compelling growth potential. It's hard to find a oil and gas stock that has a 2.1% yield while providing a stable 7% production growth. Also, it has a solid balance sheet and dedicated management team.

Suncor's Dividend Growth Potential:

Suncor has grown its dividend by a compounded rate of 21.4% in the last 5 years. Also, it spent over 2 billions in buybacks in the last two years. The company still has a $1.8 billion share buyback program that could purchase up to 49 million shares (around 3.2% of shares outstanding). Suncor raised its quarterly dividend by 54% from $0.13 per quarter to $0.20 in April. The dividend could be raised by 5-10% ($0.01-0.02 per quarter) again in April,2014 when the company re-visits its payout policy. With annual cash flow from operations at $10 billion and capital expenditures at $7 billion, there is about $3 billion of free cash flow, which only $1.2 billion per year is committed to the current dividend. Thus, investors should expect further dividend growth in the years ahead.

Graph 2: Dividend History of Suncor Since 2009

(click to enlarge)

Source: Company IR Website. Dividends did not change materially from 2010-2012 because the company focused on reducing debt levels after its Petro-Canada acquisition, which reduced free cash flow available. With debt at a manageable level and cash flows growing, future dividend hikes are on the horizon.

Suncor's Growth Plan:

In ! addition ! to its dividend, Suncor also has an attractive growth profile. First of all, Suncor has various debottlenecking projects that increase production in its oil sands business as announced in its Q2 report. Oil sands production grew from 350 Mbbls/d in January to 433 Mbbls/d in August and it is expected to grow in the future. Various projects in its oil sands and E&P businesses will provide the stable 7% production growth. Secondly, Suncor has a lot of flexibility given it has 6.9 billion barrels in proven reserves and another 23.5 billion barrels in contingency resources. At the current production rate, Suncor can maintain production for over 34 years and over 100 years if the contingency resources are included. Therefore, Suncor can ignore short term fluctuation in energy prices and solely focus on developing its resources optimally. Finally, Suncor can fund its growth entirely out of its own cash flow and does not need additional outside capital, which lowers Suncor's cost of capital.


The intrinsic value of the shares, calculated by the author, is $42.75 or 5.5X 2014's consensus EBITDA estimate of $13 billion. The peer average is around 5.5X so the author believes this multiple is justified. The calculated intrinsic value of $42.75 implies a further 13.5% appreciation from the current share. For U.S. investors, the price target is in Canadian Dollars because the reporting currency of Suncor is in Canadian Dollars. $42.75 translates to a price target of $41.10 for SU's NYSE listed shares using today's USDCAD rate of 1.04.

Suncor's trading multiples have been depressed in recent years because of poor capital allocation and operational issues such as low utilization of its facilities. Nonetheless, when Steve Williams was promoted to CEO in May 2012, he made concrete plans to improve capital allocation and increase reliability at existing facilities. Not only has operational and financial results improved considerably since May 2012, but also Suncor attracted Warren Buffett's! attentio! n. Berkshire Hathaway (BRK.A) bought 17.8 million shares of Suncor in Q2 and the author expects Buffett to continue to build his stake further similar to how Berkshire built its stake in DirectTV (DTV) and General Motors (GM). For Suncor investors, keep an eye out for Berkshire's 13F that is scheduled to release in mid-November.

Table 1: SU Quick Facts

Dividend Yield


P/CF (Fiscal 2014E)


P/E (Fiscal 2014E)


Return on Capital Employed (Average Last 4 Quarters)


Production (FY 2012 in bbls/d)


Future Production Growth (2013-2020)


2P Reserves (in MMbbls)


Source: Company Q2 Report and Investor Presentation


Suncor offers both growth and income to investors, a rare combination. Suncor watchers should keep an eye out when it reports Q3 earnings on October 30 at 10:00pm EDT. The author expects financial and operational results will improve in the next 4 quarters and the stock will rise towards the author's $42.75 price target.

Source: Suncor Energy Offers Stable Growth And Attractive Dividends For Long-Term Investors

Disclosure: I am long SU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: This article is for informational purposes only and does not constitute an offer to buy or sell any securities discussed in the article. The stock mentioned in this article does not represent financial advice. The target price presented in this article are based on current information and are subject to change without further notice. Investors are recommended to conduct further due diligence before committing capital to any investment.

Friday, October 25, 2013

Former Obama Adviser Says President Will Nix Keystone XL Pipeline

Carol Browner, who served as the U.S. Environmental Protection Agency (EPA) administrator under President Clinton and as director of the White House Energy and Climate Change Policy under President Obama, told a Washington audience on Thursday that Obama will reject the 1,700-mile long Keystone XL pipeline being proposed for construction by Transcanada Corp. (NYSE: TRP).

Browner said:

At the end of the day, he is going to say no. There will be some more twists and turns before we get there.

Former U.S. Vice-President, Al Gore, called the pipeline an "atrocity" at the same meeting at which Browner made her remarks.

Obama has said that he would only approve the Keystone XL "if this project does not significantly exacerbate the problem of carbon pollution." A U.S. State Department study in March found that the pipeline would not cause major changes in the amount of carbon emitted as a result of the development of Canada's oil sands.

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That is the point on which the U.S. government and environmental critics of the pipeline part company. The critics argue that if the pipeline is not built then development of the oil sands will not proceed at its planned pace. Keystone XL would have capacity to move more than 700,000 barrels of bitumen a day from Alberta to the U.S. Gulf Coast.

Increased rail transportation may play a bigger role in shutting down the pipeline than any environmental argument. Transport by rail to both the East and West Coasts of the U.S. has lifted the price of oil sands crude and it is far cheaper to build more rail terminals in more locations than it is to run pipelines. Pipeline transportation still costs less than half as much as rail transport, but the advantage of shipping crude by rail is that railroads go everywhere.

Thursday, October 24, 2013

Best Companies To Watch In Right Now

From The Kiplinger Letter, Sept. 13, 2013

If your computers use Microsoft�� Windows XP operating system, take note:

As of April 8, 2014, Microsoft will no longer provide technical support for it, despite the popularity of the venerable software. So users will no longer receive fixes for glitches or updates to ward off the latest security threats, as they have for years. Most businesses will upgrade to Windows 7, one of three operating systems currently sold by Microsoft. But before upgrading, make sure your current computers are powerful enough to run the newer software. Many users will need new machines for Windows 7 or the more advanced Windows 8, meant for devices with touch screens.

Watch for more and more touch screens to pop up in business applications, as folks used to smart phones and tablets in their personal lives increasingly prefer to tap and swipe rather than click and type. Tablets and other touch screen devices let office workers instantly share files, work together online and do other group tasks in ways that PCs can��, making the offices more collaborative...and more productive.

Best Companies To Watch In Right Now: Market Vectors ETF Trust Market Vectors India Small Cap Index ETF (SCIF)


Advisors' Opinion:
  • [By Jon C. Ogg]

    Market Vectors India Small-Cap ETF (NYSEMKT: SCIF) is down almost 3% at $22.38, and the new low was put in today, with its 52-week range now being $22.25 to $46.60. This one is now down over half from its high and without any extreme leverage other than holding smaller stocks.

  • [By Jon C. Ogg]

    The small-cap ETF for India is the Market Vectors India Small-Cap ETF (NYSEMKT: SCIF), and its gain is only 0.5% to $24.48, against a 52-week range of $22.25 to $46.60. The recovery here is only almost 9% when it is still trading at about half the price of its 52-week high.

  • [By Jon C. Ogg]

    Market Vectors India Small-Cap ETF (NYSEMKT: SCIF) is down 3.5% and hit a new 52-week low of $23.71 and its 52-week high was $46.60. This is now effectively down by 50%, and that is without any extreme leverage.

  • [By Ankush Shaw]

    Therefore the�Market Vectors India Small Cap ETF� (NYSEMKT: SCIF  ) , with an asset base of $90.39 million, could be a good option for investor. The ETF has a large allocation toward banks and the financial sector (20%), which is an added advantage, as the Indian financial sector would be the biggest beneficiary of the latest policies.

Best Companies To Watch In Right Now: Overland Storage Inc.(OVRL)

Overland Storage, Inc. provides data management and data protection solutions for primary or nearline storage, disk backup and recovery, and data management and protection worldwide. It offers Snap Server, a line of network attached storage and storage area network solutions designed for primary and secondary data accessibility and protection; and are available with backup, replication, and mirroring software in fixed capacity or highly scalable configurations. The company also provides NEO SERIES and REO SERIES of virtual tape libraries, tape backup, and archive systems designed to meet the need for data storage for long-term archiving and compliance requirements. In addition, it offers data management software, including GuardianOS, a storage-optimized platform operating system; Snap Enterprise Data Replicator, which provides multi-directional, WAN-optimized replication for Snap Server systems; and Protection OS software that offers virtualization, data protection, data management, and connectivity features for REO virtual tape library systems. It serves various industries, such as financial services, video surveillance, healthcare, retail, manufacturing, telecommunications, broadcasting, and research and development. The company markets its products through original equipment manufacturers, direct market resellers, distributors, and value-added resellers to small and medium enterprises, corporate departments, small and medium businesses multinational corporations, governmental organizations, and educational institutions. The company was formerly known as Overland Data, Inc. and changed its name to Overland Storage, Inc. in 2002. Overland Storage Inc. was founded in 1980 and is headquartered in San Diego, California.

Top Casino Companies To Invest In 2014: CorVel Corp.(CRVL)

CorVel Corporation provides medical cost containment and managed care services to manage the medical costs of worker?s compensation and auto claims in the United States. It offers network solutions, including bill review, PPO management, professional review, reimbursement, pharmacy, directed care, and clearinghouse services, as well as medicare solutions. The company also provides patient management services comprising claims management, case management, nurse triage, utilization management, vocational rehabilitation, life care planning, disability management, liability claims management, and auto claims management. It provides its services to insurance companies, third-party administrators, employers, and government agencies. The company was founded in 1987 and is based in Irvine, California.

Best Companies To Watch In Right Now: Intel Corporation(INTC)

Intel Corporation engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. It offers microprocessor products used in notebooks, netbooks, desktops, servers, workstations, storage products, embedded applications, communications products, consumer electronics devices, and handhelds. The company also provides system on chip products that integrate its core processing functionalities with other system components, such as graphics, audio, and video, onto a single chip. In addition, it offers chipset products that send data between the microprocessor and input, display, and storage devices, including keyboard, mouse, monitor, hard drive, and CD, DVD, or Blu-ray drives; motherboards designed for desktop, server, and workstation platforms, and that has connectors for attaching devices to the bus; and wired and wireless connectivity products consisting of network adapters and embedded wireless cards used to translate and transmit data across networks. Further, the company provides NAND flash memory products primarily used in portable memory storage devices, digital camera memory cards, and solid-state drives; software products comprising operating systems, middleware, and tools used to develop, run, and manage various enterprise, consumer, embedded, and handheld devices; and software development tools that enable the creation of applications. Additionally, it develops computing platforms, which are integrated hardware and software computing technologies designed to offer an optimized solution. The company sells its products principally to original equipment manufacturers, original design manufacturers, PC components and other products users, and other manufacturers of industrial and communications equipment. It has a strategic alliance with Scientific Conservation Inc. Intel Corporation was founded in 1968 and is based in Santa Clara, California.

Advisors' Opinion:
  • [By Kofi Bofah]

    In his May 14, 2013 interview with Fortune Magazine, ARM (ARMH) CEO Simon Segars mocked the personal computer market as a place "where two people have controlled it and the person that makes PCs runs on 2% profit margin and can't afford to innovate anything other than which shade of grey the plastic is." At the time, Segars' ridicule of the personal computer industry came against a Company Overview backdrop of claims that ARM architecture has been installed within more than 95% of the world's mobile phones. Over the past 24 months, of course, Microsoft (MSFT) and Intel (INTC) have expressed their financial and ideological commitment to building out mobile businesses. The moves out of Segars' "two people," however, have increasingly reeked of desperation. For once, Microsoft and Intel are finding themselves largely shut out and unable to bully their way into a lucrative market.

  • [By Selena Maranjian]

    Intel (NASDAQ: INTC  )

    To earn their high scores, the companies above engaged in a variety of good practices such as paying employees for some of their volunteering time, loaning talent, and permitting the use of facilities. Each company's total annual giving was also considered.

    Digging deeper
    So what, exactly, are these companies doing right? Here are a few examples of their philanthropic practices:

  • [By Alex Dumortier, CFA]

    The article cites several specific examples in which the tax credit made a dramatic impact on companies' effective tax rate, including Intel (NASDAQ: INTC  ) and Google. In the case of Intel, the chip maker's tax rate fell to 16.3% in the first quarter from 28.2% in the prior year period. The company itself said the extension of the research tax credit was responsible for the "substantial majority" of the decline.

  • [By Andrew Tonner]

    In case you hadn't noticed, the PC market is in absolute shambles these days. With�Microsoft's (NASDAQ: MSFT  ) Windows 8 having failed to drive the refresh cycle many had hoped, we're now seeing names like Microsoft and�Intel (NASDAQ: INTC  ) shift their strategy. In the coming months, investors and consumers will see a new spate of devices enter the market that will take aim at the tablet market. And while these are two of the most formidable names in all of technology, the challenge they both face is maybe equally immense as both�Apple (NASDAQ: AAPL  ) and�Google (NASDAQ: GOOG  ) continue to click on all cylinders in the mobile space as well. This tension should be one of the defining storylines in big tech today.

Best Companies To Watch In Right Now: PACCAR Inc.(PCAR)

PACCAR Inc, together with its subsidiaries, designs, manufactures, and distributes light-, medium-, and heavy-duty trucks and related aftermarket parts worldwide. The company offers its trucks for use in the over-the-road and off-highway hauling of freight, petroleum, wood products, construction, and other materials to independent dealers under the Kenworth, Peterbilt, and DAF nameplates. It also provides finance and leasing products and services, such as inventory financing for independent dealers; and retail loan and lease financing for new and used trucks, as well as other transportation equipment; and full service leasing under the PacLease trade name. In addition, it manufactures and sells industrial winches under the Braden, Carco, and Gearmatic nameplates. PACCAR Inc was founded in 1905 and is headquartered in Bellevue, Washington.

Advisors' Opinion:
  • [By Dan Caplinger]

    Navistar hasn't been entirely locked out of the trucking market, though. The company won several contracts from the Defense Department in support of its military vehicles, including its MaxxPro mine-resistant, ambush-protected armored vehicle. On the commercial front, Navistar won part of an order in May from trucking company Con-Way (NYSE: CNW  ) , which purchased 200 ProStar vehicles from the company. Still, the fact that rival Paccar (NASDAQ: PCAR  ) got an even bigger portion of the Con-Way order is just one more sign of the ongoing struggles Navistar faces.

  • [By Neha Chamaria]

    Investors who follow the industrial sector closely should be ready for a busy week ahead, as some of the top names turn up with their quarterly earnings reports. One company to pay attention to is PACCAR (NASDAQ: PCAR  ) .

  • [By Daniel Ferry]

    Another important development last week was the announcement that Trillium CNG, a division of Integrys Energy Group (NYSE: TEG  ) , would build 101 new compressed natural gas (CNG) refueling stations across the country by 2016. This would expand the existing infrastructure of publicly available CNG refueling stations by nearly 20%. This is good news for Westport because many of Westport's products run on CNG, including its bi-fuel WiNG system for light-duty Ford pickup trucks, as well as the medium-duty ISL G and heavy-duty ISX12 G engines it produces through Cummins Westport Incorporated, its manufacturing joint-venture with independent engine maker Cummins (NYSE: CMI  ) . Users of the ISL G and ISX12 G engines include long-haul truck manufacturers like PACCAR (NASDAQ: PCAR  ) , Volvo, and Daimler. Freight trucking is a critical growth industry for natural gas engines, because the long miles and heavy loads that freight trucks endure relative to passenger vehicles make them especially sensitive to fuel costs.

Wednesday, October 23, 2013

Friday's "Catastrophic Surge" in Mortgage Rates

If you're thinking about buying a home, then you're probably not going to like what I'm about to say. On Friday, while you were busy nursing yourself back to life following the previous night's celebrations, mortgage rates exploded.

The daily recap from a widely followed mortgage industry publication characterized it as a "catastrophic surge," saying: "today's rise in mortgage rates is among the largest ever, and certainly the largest in the past 10 years. Today alone, rates rose more than most entire weeks."

According to its estimates, the rate on a conventional 30-year fixed rate mortgage "moved forcefully into 4.75% territory, with some lenders at 4.875%."

But wait a second. Didn't Freddie Mac just announce on Wednesday that rates had fallen? What could have happened in the meantime to cause them to take flight?

The answer is this: Friday's better-than-expected jobs report for June. As my colleague Morgan Housel noted, "Bad news for the end-of-the-world crowd: June's jobs report was released Friday, and it was pretty good. 195,000 new jobs were created last month, according to the Bureau of Labor Statistics. That was the third-best June jobs report in the last 15 years."

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The connection between mortgage rates and job creation is the Federal Reserve. That is, as the labor market picks up, the central bank will begin to reduce its support for the economy. And because its support for the economy consists, in large part, of bond purchases, its retreat will result in higher interest rates.

As Mortgage News Daily put it (emphasis added):

Today's catastrophic surge higher was a direct effect of a stronger-than-expected Employment Situation Report, which not only showed June job creation to be better than expected, but revised the last two months into stronger territory as well. The more profound indirect consideration is the report's role as the key barometer for Fed policy. This is the reason the rise in rates of the last two months has been as sharp as it is.

All things considered, in turn, if you're a prospective homeowner, it might behoove you to act on your inclination to buy a house sooner rather than later, as there's reason to believe that this trend could very well continue.

And if you're an investor, it'd behoove you to follow these rates as well. This is particularly true for the nation's largest mortgage originators, among them Wells Fargo (NYSE: WFC  ) , JPMorgan Chase (NYSE: JPM  ) , Bank of America (NYSE: BAC  ) , and US Bancorp (NYSE: USB  ) .

As I've discussed previously, all four of these banks benefit from noninterest income related to mortgage underwriting activity, which could be throttled because of the higher rates. But at the same time, these lenders will reap gains from the higher interest income on their securities portfolios. How these factors, as well as others, balance themselves out, in turn, will largely dictate both the price of bank stocks and the ability of lenders to increase their dividends over the foreseeable future.

Many investors are terrified about investing in big banking stocks after the crash, but the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

Tuesday, October 22, 2013

Jobs Growth Slowed in Sept.; Unemployment Rate Drops to 7.2%

After the government shutdown held up its planned release more than two weeks ago, the Department of Labor released its September employment situation report (link opens in PDF) today, and numbers are mixed.

After increasing a revised 193,000 for August, total nonfarm payroll employment eased down to just 148,000 new jobs this past month, well below analyst estimates of 185,000. And while the unemployment rate did manage to slip down 0.1 percentage points to 7.2%, the dip was largely due to declining labor force numbers, rather than more Americans employed.

In the private sector, the biggest employment improvements came from construction (up 20,000), wholesale trade (up 16,000), and transportation and warehousing (up 23,000).

Government work, as well as mining and logging, manufacturing, and information industries, showed little overall employment changes for September. In the only industry decline, food services and drinking places took a slight 7,000-employee hit.

For those with jobs, September's hourly earnings did manage to edge up 0.1%, although analysts had expected another 0.2% rise from August. In September, average hourly earnings for all employees on private nonfarm payrolls rose by $0.03 to $24.09. Over the year, average hourly earnings have risen by $0.49, or 2.1%.

Average U.S. job growth has fallen sharply in the past three months after a promising start this year. The economy added an average of 143,000 jobs a month from July through September. That was down from the 182,000 average gain during from April through June and well below the 207,000-a-month pace from January through March.

link-- Material from The Associated Press was used in this report.


Monday, October 21, 2013

Going for Gold: HSBC Upgrades Miners on Potential Precious Metal Rebound

If you’re bullish on gold, you better be bullish on gold miners–and HSBC is feeling pretty good about both.


In a note released yesterday, HSBC upgraded a number of gold stocks as the bank expects the price of gold to rebound. Analyst Patrick Chidley and team explain:

Despite the rush to the door by speculators on the COMEX and in the [SPDR Gold Trust ETF (GLD)], we continue to believe the fundamentals are supportive of higher prices. China continues to report gold imports at very high levels (over 130 tonnes in the month of August from Hong Kong alone). Based on our belief that the pressure on gold price is temporary, due to continued strength in Chinese demand, continued strong Indian demand (despite recently ramped up government tariffs on gold imports), growing demand in other emerging markets countries, continued central bank purchases, a strong physical supply response coupled with a lack of new projects coming into production in the next few years, we believe the gold price will rebound in the next few months.

Hence, given the rebasing of gold equity prices to reflect the current gold price below USD1,300/oz, and HSBC's view that gold can climb back above USD1,400/oz within a few months, we are upgrading a group of stocks and hold a generally bullish view on the gold sector, looking forward, while recognizing the current situation is tough unless gold rebounds.

As a result, Chidley and team upgraded Agnico Eagle Mines (AEM) and Yamana Gold (AUY) to Neutral from Underweight, and raised Barrick Gold (ABX), Goldcorp (GG) and Iamgold (IAG) to Overweight from Neutral. Gold Fields (GFI) was downgraded “due to increased risk and also reduced expectations for the South Deep operation,” Chidley says.

Agnico has gained 0.9% to $25.20 today at 3:23 p.m., Yamana has risen 2.8% to $9.63, Barrick has advanced 1.7% to $18.83, Goldcorp has jumped 2.3% to $24.90, and Iamgold is up 3.6% at $4.93. Gold Fields has ticked up 0.2% to $4.49.

Sunday, October 20, 2013

Trading in your iPad? Do it now

5 Best Performing Stocks To Invest In 2014

ipad trade in

A new iPad is probably coming soon, and companies that buy used electronic devices say they're experiencing a surge of customers trading in their old tablets.

NEW YORK (CNNMoney) With a new iPad likely around the corner, iPad trade-ins are on the rise -- and selling prices are falling fast.

Companies like Gazelle and NextWorth, which buy used electronic devices, say they're experiencing a surge of customers trading in their old iPads. The spike began Tuesday, when Apple (AAPL, Fortune 500) announced it has an upcoming event Oct. 22. Apple is widely expected to be giving its tablet its first big redesign in more than a year and a half.

At Gazelle, iPad trade-ins have soared to their highest level this year. IPads now make up 20% of items traded in on Gazelle's website, up from 11% a week ago.

"Previous generations all look the same," said Anthony Scarsella, Gazelle's chief gadget officer. The new iPad could have more processing power, a better camera and even use Apple's latest Touch ID fingerprint sensor.

Related story: Macs down, PCs up

Meanwhile, NextWorth saw its weekly iPad trade-ins more than triple this week.

But consumers looking for a good deal had better act fast, lest they be affected by the basic forces of economics. The surge in supply of trade-in iPads means trade-in prices are dropping.

Data provided by NextWorth show that iPad prices drop after Apple unveils a new tablet - and even more when a new iPad hits store shelves. Last year, trade-in values for the iPad dropped 4% when Apple unveiled its latest-generation iPad in October. The trade-in price fell by another 10% when the tablet hit store shelves in November.

Apple stores to get a shot of high-style   Apple stores to get a shot of high-style

If you're trading in: Let's say you've got a mid-range iPad 2 (black, 32 GB with WiFi) in good condition -- but not flawless. Last year, that could have fetched $300. How about now?

CNNMoney looked at the prevailing prices online Wednesday:

Amazon: If you're willing to wait around for a buyer, you post your iPad for sale on Amazon and easily sell it for $350. Amazon also has a trade-in program, offering $189. Apple: Probably the worst deal out there, because of how restrictive it is. The Apple Reuse and Recycling Program offers $136 -- but only in the form of an Apple Store gift card. Gazelle: $190. It's also more forgiving on nicks and scratches. NextWorth: $180. It's also accommodating on the tablet's condition. Best Buy: This one's a bit tricky, because "good" is the best listed condition. But if it's "fair," you only get $130. GameStop: After an in-store inspection, you can choose between $161 in cash or a $202 in store credit. RadioShack: $150 if you include the power adapter. $269. You'll get your money faster if you send it in your own box instead of waiting for the company to ship a box to you. eBay: You're the seller so it's totally up to you. But it can easily go for $265 -- whenever a buyer eventually finds you. To top of page

Saturday, October 19, 2013

Shutdown threatens to overshadow earnings

NEW YORK (MarketWatch) — Wall Street weathered the first four days of the government shutdown little worse for wear, but Washington's budget impasse might be harder to shake off this week, even as investors look ahead to the launch of earnings season.

The S&P 500 (SPX)  rebounded Friday, cutting its weekly loss to less than 0.1%. The Dow Jones Industrial Average (DJIA)  ended with a 1.2% weekly decline. Both indexes experienced some bouts of heavy selling as the shutdown took hold, but managed to rebound.

FactSet Enlarge Image

Investors are well aware that past shutdowns have tended to inspire pullbacks that ended up being buying opportunities, said Carmine Grigoli, chief investment strategist at Mizuho Securities. In fact, a shutdown that extends beyond 10 days could trigger a pullback of around 5% or so. History indicates the drop would mark a good time to buy, he said.

"That message has been clearly sent" to investors and portfolio managers, Grigoli said in an interview. "That's why we've seen one-day downdrafts" followed by renewed buying interest. See: Shutdown jolts market's fear gauges: 6 charts.

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Meanwhile, if the shutdown drags on, it will threaten to steal the thunder from the start of earnings season, which begins in earnest on Friday with results from Dow Jones component J.P. Morgan Chase & Co. (JPM)  and Wells Fargo & Co. (WFC)  .

Analysts have slashed their earnings forecasts for J.P. Morgan, Citigroup (C)  , Morgan Stanley (MS)  , and Goldman Sachs Group Inc. (GS)  over the past month, largely on expectations the banks' post-crisis earnings boom is coming to an end as a sluggish recovery lumbers along.

Click to Play The Next 24: Economic held back by shutdown

J.P. Morgan kicks off earnings season - and thank goodness for that, because there may be a very empty economic calendar to trade off. And Alcoa, Yum Brands, Wells Fargo are set to report next week. Laura Mandaro has the Next 24.

More broadly, analysts expect S&P 500 earnings to grow 3% year-on-year in the third quarter, with the financial sector leading the way and energy firms lagging other sectors, according to FactSet.. That's a step down from the beginning of the third quarter, when forecasters penciled in growth of 6.5%.

On the top line, analysts are looking for revenue growth of 2.6% for the third quarter. That's also down from expectations on June 30, when analysts were looking for revenues to expand by 3%.

Moreover, FactSet noted that 90 companies in the S&P 500 had issued negative earnings guidance, which the data company said would be the highest figure since it started tracking guidance data in 2006. At the same time, 19 companies have offered positive guidance, which would be the lowest number since FactSet started collecting the data. See: Ahead of earnings season, negative news dominates.

Newscast: Budget impasse upside- no taper?

The benchmarks are edging slightly higher, as Alisa Parenti reports.

Analysts at Pavilion Global Markets in Montreal said they expect corporate results to show that past earnings growth was very slow, and they noted that profit is on track for a 10th consecutive quarter of growth less than 10%. Meanwhile, the growth outlook for the fourth-quarter remains "extremely lofty" at 24.8%, they said, which means investors should prepare for a heavy round of fourth-quarter profit warnings.

"Profit warnings and policy uncertainty are poised to maintain pressure on equities over the next month," they said.

But Barry Knapp, head of U.S. equity strategy at Barclays, offered a more upbeat outlook. He argued that earnings growth likely hit its low point in the third quarter of last year at roughly 0% year-on-year.

That will make for easier year-on-year comparisons as third-quarter 2013 earnings roll in, Knapp said in a note. Knapp said he expects the practice of "beat and lower," in which companies top forecasts while lowering their forecasts, to continue.

Friday, October 18, 2013

Best Clean Energy Stocks To Watch For 2014

Droughts made headlines throughout 2012�due to their harmful affects on our nation's food supply, but privation wasn't the only drag on our fresh water sources. A recent study shows that oil and natural gas fracking has placed great stress on available fresh water�in areas around the country by taking up measurable amounts of the resource. In some instances in Texas, fracking staked its claim to 20% of total water usage in the regions surrounding production areas.�

Reading that astonishing fact clears up any doubt as to why Texas now mandates the recycling of water used in the fracking process. If we plan on becoming more energy independent through increased production of domestic oil and natural gas, then something will most likely be done at the federal level as well. Which companies stand to benefit? Check out Motley Fool analyst Taylor Muckerman's video below.

Despite this, natural gas still has a great chance at revolutionizing the clean energy movement. This trend toward alternative energy is gaining momentum. One potential opportunity in this field is Clean Energy Fuels, which focuses its natural gas efforts primarily on trucking and fleets. It's poised to make a big impact on an essential industry. Learn everything you need to know about Clean Energy Fuels in The Motley Fool's premium research report on the company. Just click here now to claim your copy today.

Best Clean Energy Stocks To Watch For 2014: Engro Corporation Limited (S44.SI)

EnGro Corporation Limited engages in the manufacture and sale of cement and building materials, and specialty polymers primarily in Singapore, Malaysia, and the People�s Republic of China. The company offers ground granulated blast furnace slag under the VCEM brand; ordinary Portland cement; Portland blast furnace cement; high slag blast furnace cement; ready-mixed concrete; dry mix; and construction chemicals. It also provides thermosetting synthetic resin and plastic materials used in various markets and application, including automotives, electrical and electronics, construction and civil engineering, household, and consumer and packaging; and carbon consultancy services. In addition, the company is involved in the provision and supply of workers; and in trading equity securities, and holding investments in venture capital funds and equity securities of various industries, such as information technology, wireless communications, software, semiconductors, medical device s and equipment, pharmaceutical drug development, nanotechnology, and specialty chemicals and materials industries. The company was formerly known as SsangYong Cement (Singapore) Limited and changed its name to EnGro Corporation Limited in February 2005. EnGro Corporation Limited was founded in 1973 and is headquartered in Singapore.

Best Clean Energy Stocks To Watch For 2014: Mittel(MTTI.MI)

Mittel S.p.A, together with its subsidiaries, provides various financial services in Italy and internationally. It operates in five segments: Operating Finance, Real Estate, Private Equity, Corporate Finance, and Investment Management Advisory. The Operating Finance segment, through Mittel Generale Investimenti S.p.A., provides corporate lending and proprietary trading services. The Real Estate segment, through Mittel Investimenti Immobiliari S.p.A., manages property investments. The Private Equity segment invests in Italian companies through the means of stake acquisitions or closed investment funds. The Investment Management Advisory segment, through ECPI S.r.l., offers various consultancy services, including the production, maintenance, and release of financial indexes, primarily portfolio rating and screening, risk scores, and financial researching. The Corporate Finance segment, through Mittel Corporate Finance S.p.A., offers investment advisory services. The company, formerly known as Mittel ?Societa Industriale Meditarrea S.p.A., was founded in 1895 and is headquartered in Milan, Italy.

Best Financial Stocks To Buy For 2014: Syntel Inc.(SYNT)

Syntel, Inc. provides information technology (IT) and knowledge process outsourcing (KPO) services worldwide. It operates in four segments: Applications Outsourcing, KPO, e-Business, and TeamSourcing. The Applications Outsourcing segment provides software applications development, maintenance, testing, migration, and infrastructure services. The KPO segment offers a host of outsourced solutions for knowledge and business processes. It focuses on middle and back-office business processes of the transaction cycle in the capital markets, banking, healthcare, and insurance industries. The e-Business segment provides technology services in the areas of architecting, implementing, and maintaining Web solutions, data warehousing/business intelligence, enterprise application integration, business process management, and enterprise resource planning solutions. The TeamSourcing segment offers professional IT consulting services directly to customers on a staff augmentation basis. It s services include systems specification, design, development, implementation, and maintenance of complex IT applications involving computer hardware, software, data, and networking technologies and practices. Syntel, Inc. provides services to a range of companies primarily in the financial services, healthcare and life sciences, insurance, manufacturing, automotive, retail, logistics, and telecom industries. The company was founded in 1980 and is headquartered in Troy, Michigan.

Advisors' Opinion:
  • [By Brian Pacampara]

    Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, IT services specialist Syntel (NASDAQ: SYNT  ) has earned a coveted five-star ranking.

Best Clean Energy Stocks To Watch For 2014: Rex Energy Corporation(REXX)

Rex Energy Corporation operates as an independent oil and gas company in the Appalachian Basin and the Illinois Basin. It focuses on the Marcellus Shale drilling projects, and Utica Shale and Upper Devonian Shale exploration activities in the Appalachian Basin. The company also holds interests in the Lawrence Field ASP Flood project, which is an oil recovery project located in Lawrence County, Illinois. As of December 31, 2011, it operated approximately 2,117 wells, including approximately 517 disposal and injection wells. The company had estimated proved reserves of 366.2 billions of cubic feet equivalent. Rex Energy Corporation was founded in 2007 and is headquartered in State College, Pennsylvania.

Advisors' Opinion:
  • [By Matt DiLallo]

    The company has also shifted some of its attention to next-door neighbor Ohio's Utica Shale. It's not the only Marcellus driller to look to the higher profit potential in the liquids-rich Utica. Smaller drillers like Rex Energy (NASDAQ: REXX  ) are also looking west to the Utica in an effort to grow liquids production. The company reported positive results at three recently drilled wells at its Warrior South project. While all this attention is great for the Utica, Pennsylvania would rather have drillers investing that drilling capital within its borders to add more jobs and tax revenue. �

Best Clean Energy Stocks To Watch For 2014: Arcan Resources Ltd (ARN.V)

Arcan Resources Ltd. engages in the exploration, development, and production of petroleum and natural gas in western Canada. It primarily holds interests in Swan Hills property located in north central Alberta; Hamburg property located in northwest Alberta; and McLeod property located in west central Alberta. The company was incorporated in 2003 and is headquartered in Calgary, Canada.

Best Clean Energy Stocks To Watch For 2014: American Capital Agency Corp (AGNC)

American Capital Agency Corp. (AGNC) is a real estate investment trust (REIT). The Company earns income primarily from investing on a leveraged basis in agency mortgage-backed securities. These investments consist of residential mortgage pass-through securities and collateralized mortgage obligations (CMOs) for which the principal and interest payments are guaranteed by government-sponsored entities, such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), or by a United States Government agency, such as the Government National Mortgage Association (Ginnie Mae) (collectively, GSEs). It may also invest in agency debenture securities issued by Freddie Mac, Fannie Mae or the Federal Home Loan Bank (FHLB). The Company is managed by American Capital AGNC Management, LLC, which is an affiliate of American Capital, Ltd.

AGNC funds its investments primarily through short-term borrowings structured as repurchase agreements. The agency mortgage-backed securities in which the Company invests consist of agency residential pass-through certificates and CMOs. Agency residential pass-through certificates are securities representing interests in pools of mortgage loans secured by residential real property. Agency CMOs are securities that are structured instruments representing interests in agency residential pass-through certificates. Agency CMOs consist of multiple classes of securities.

Advisors' Opinion:
  • [By Markos Kaminis]

    As investors in Annaly Capital shares already know, quickly rising interest rates are a very bad thing for mortgage REITS like Annaly and peers like American Capital Agency (AGNC) and Two Harbors Investment (TWO). Interest rate concern is the key reason the share prices of names in this group have declined so deeply this year already, though the catalyst was intensifying expectations for Fed tapering of asset purchases up until now.

  • [By Dan Caplinger]

    American Capital Agency (NASDAQ: AGNC  ) will release its quarterly report on Monday, and the real estate investment trust faces the toughest environment it has seen in years. With big share-price declines, the pressure will be on to see if American Capital Agency earnings can sustain the company's generous dividend payouts -- or whether it will have to make further cuts in its dividend that could send the stock falling further.

  • [By Dan Caplinger]

    CYS isn't the best-known mortgage REIT in the industry, but it presents an interesting bargain right now. With shares of CYS trading well below its net asset value of $13.31, the REIT has a margin of safety that you won't find with bigger rivals. Both Annaly Capital (NYSE: NLY  ) and American Capital Agency (NASDAQ: AGNC  ) trade at or above book value, compared to about a 7% discount at current prices for CYS.

  • [By Jay Jenkins]

    For these mREITS, the market has ignored the rebounding real estate market, the explicit backing of�Fannie Mae� (NASDAQOTCBB: FNMA  ) and�Freddie Mac� (NASDAQOTCBB: FMCC  ) by the U.S. government, strong performances from mortgage originators this year, and the impressive dividends offered by leading companies like�American Capital Agency (NASDAQ: AGNC  ) , CYS Investments (NYSE: CYS  ) , and Hatteras Financial (NYSE: HTSI  ) .�

Thursday, October 17, 2013

Volatility And The Last Debt Ceiling Crisis: A Lesson From History

In August of 2011, the United States went through a similar take-it-to-the-brink brush with meeting its debt ceiling. Volatility in markets surged at that time, and the VIX more than tripled. While it is trite to say that history never repeats exactly, it remains a useful warning. Past is also often prologue, and so I think it is instructive to look at what happened in the late summer of 2011 as the US approached the debt ceiling then and glean from that what may be in store this time.

The debt ceiling is the total amount the US can borrow and is currently set at $16.7 trillion. Like most modern nations, the US uses deficit spending, or borrowing money to finance expenditures that exceed revenues. Neither side of the congressional aisle has a difficulty with deficit spending per se; the issue has become the perception that it has gone too far. Legislated ceilings on the amount the US can borrow have been put in place to attempt to force fiscal discipline. The problem has become similar to the parent who lacks the resolve to properly discipline their unruly child: threats are issued of consequences for repeat offenses, but are not followed through on. Since 1960, congress has raised the debt ceiling an astonishing 78 times. That averages out to about 1.5 increases per year. Debt ceilings have been raised under both Republicans and Democrats: (source:

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A failure to raise the debt ceiling has the potential to cause the US to default on its debts, which could have disastrous effects on the economy.

Performance of the VIX

The VIX is the best known measure of volatility. The CBOE Volatility Index, VIX

is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment an! d market volatility. (source:

The VIX measures investor expectations of volatility in the coming thirty days. This is accomplished by aggregating data on various options premiums. It is often referred to as the "fear gauge" as options premiums tend to rise during market declines as hedging activity increases to protect portfolios. VIX has undergone various changes in its computation methodology over the years, but differences in composition are subtle, and so comparisons with other years, while not perfect, for the most part remain valid. So far, year to date 2013 has seen an average VIX of 14.17, a maximum value of 20.49 and a minimum value of 11.3. The reading at time of writing is 19.48, above average as one would expect given the looming debt ceiling crisis. During 2011 the average VIX level was 24.2 with a minimum of 14.62 and a maximum of 48. (source: all figures from

VIX During The Last Debt Crisis

The VIX made a massive spike during 2011.

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During the month of July, 2011, as talks were heating up between Democrats and Republicans, the VIX rose from a level of 15 to 25, a 67% increase over the course of one month. But the real move, the move from 25 to 48, a move of 92% was accomplished in just four trading days from August 3 to August 8. The astonishing thing is that move happened after the August 1 announcement that the impasse had been solved and the debt ceiling would increase $2.1 - $2.4 trillion, allowing the government to continue to operate into 2013. It would appear the market feared more the government continuing its spending than it feared the government shutting down. This fear was punctuated by S&P downgrading the US debt upon the ceiling being increased.

To give some historical perspective to those 2011 VIX levels, since the beginning of 2007 the average VIX level has been 23.62, the minimum has ! been 9.89! and the maximum 80.86.

Investing in the VIX

One cannot purchase the VIX directly, but one can purchase a reasonable facsimile in the form of IPath S&P 500 Short Term Futures ETN (VXX) which seeks to replicate, net of expenses, the S&P 500 VIX Short-Term Futures Total Return Index. The VXX buys

exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects the implied volatility of the S&P 500 Index at various points along the volatility forward curve. The index futures roll continuously throughout each month from the first month VIX futures contract into the second month VIX futures contract"(source: yahoo finance profile description of VXX)

The typical situation for VIX futures is that second month prices are higher than first month prices, a condition known as contango. This contango causes inherent price decay or negative roll yield as the premium for future months erodes while the future approaches the current date. This condition works against holders of the VXX, and it is for this reason that it is recommended as a short term investment only. Hold periods of a day to a few weeks are commonly recommended.

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But for rare periods, contango reduces and can turn into its opposite, backwardation, the condition where front month futures are priced higher than subsequent futures. Under backwardation, the roll yield becomes positive, price decay turns into price accretion. The normal situation is one of contango and backwardation exists for usually a day or two only.

Backwardation in 2011 and Now

In a highly unusual situation, the VIX was in a state of backwardation for 76 continuous days from August 1 2011 through November 15, 2011. The average amount of backwardation during that time was 7.67% and the maximum backwardation was 27.12%. This became a significant tail wind ! for VXX i! nvestors reducing or eliminating the cost of holding VXX over longer periods.

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VIX has recently gone back into backwardation. No one can say for sure how long it will stay backwardated, but for now this backwardation assists VXX investors and shows investor perception is heightened about volatility in the short term.


Estimates currently point to October 17 as the day when the US government will run out of money and no longer be able to pay its bills and risk defaulting on its debts. Politicians and lawmakers from both parties have demonstrated their willingness in the past to take issues right to the brink. It appears likely that the brink will be approached again this time. With 10 days remaining, it also seems likely that investors will continue to want to hedge portfolios until a solution is in hand. This suggests that options premiums will continue to rise, which will put upward pressure on the VIX. This, coupled with the VIX term structure being in backwardation, makes for a strong case for short term investment in VXX. Further, the fact that VIX remains well below the extreme levels reached in past crises implies significant upside for investors willing to tolerate high levels of volatility.

Source: Volatility And The Last Debt Ceiling Crisis: A Lesson From History

Disclosure: I am long VXX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Wednesday, October 16, 2013

Digging Into Citigroup's Earnings

Before the market opened yesterday, Citigroup (NYSE: C  ) added its name to the list of banks that performed abominably last quarter.

Following the lead of both JPMorgan Chase (NYSE: JPM  ) and Wells Fargo (NYSE: WFC  ) , the nation's third-largest bank by assets said its earnings before taxes plunged by $2.1 billion, or 32%, in the three months ended September 30.

Tracking down Citigroup's problems
Even a cursory glance at Citigroup's income statement reveals a number of troubling headwinds. The first is that its net interest income fell by $171 million. This is the amount of money a bank earns on its asset portfolio after the cost of funds (that is, deposits and loans) is deducted.

While we've known for some time banks would struggle to keep this figure steady in the face of still-historically low interest rates, Citigroup's performance was significantly worse than the other two megabanks to have reported thus far. Wells Fargo's net interest income was effectively flat for the quarter while JPMorgan's was up by $71 million thanks to a lower cost of funds.

It should be noted, moreover, that a decline in net interest income affects Citigroup to a much greater extent than its too-big-to-fail brethren. Whereas Wells Fargo and JPMorgan both look to noninterest income for roughly half of their total revenue, Citigroup's net interest income accounts for roughly two-thirds of its top line.

Digging a bit deeper, Citigroup also experienced declines in almost every category of noninterest income. Far and away the worst was its trading revenue, which dropped by 58% compared to the second quarter.

That trading revenues plummeted at the New York-based bank, and particularly in its fixed-income division, doesn't necessarily come as a surprise. Aside from its massive $9.2 billion charge-off related to litigation reserves, this was JPMorgan's Achilles' heel last quarter.

The impetus for the drop in trading income was twofold. First, trading volumes dropped after the Federal Reserve announced last month that it wasn't ready to taper its bond-buying stimulus program. This assured investors that it was safe to hold bonds for a least another month. And second, fears late in the quarter about an impending government shutdown made investors reluctant to trade, choosing instead to wait until the political storm blows over.

These issues are what CEO Michael Corbat was referring to when he said in the bank's earnings release that, "We performed relatively well in this challenging, uneven macro environment. While many of the factors which influence our revenues are not within our full control, we certainly can control our costs, and I am pleased with our expense discipline and improved efficiency year-to-date."

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The silver lining in Citigroup's results
As Corbat noted, despite an otherwise abysmal performance, all was not lost at Citigroup. More specifically, it notched improvements in both its expenses and credit costs.

Compared to the second quarter, Citigroup's operating expenses fell by an impressive $485 million, with roughly half of that amount stemming from lower compensation costs. And its total provisions for credit losses dropped by 3% on a sequential basis and by 25% compared to the same quarter last year.

In addition, the bank continued to wind down its legacy asset division, which holds noncore assets and those that were impaired during the financial crisis. The division, known as Citi Holdings, now makes up only 6% of Citigroup's consolidated balance sheet and accounts for an increasingly smaller drag on the bank's bottom line.

And finally, Citigroup's capital base remained on an upward trajectory. At the end of the third quarter, its Basel III Tier 1 common capital ratio stood at 10.4% -- well above both JPMorgan and Wells Fargo – though this goes to show that capital is only a necessary, and not a sufficient, piece of the profitability puzzle for banks.

The Foolish bottom line
Citigroup has long been considered the basket case of Wall Street thanks to its legal antics (namely, its role in overturning Glass-Steagall) and geographically diverse assortment of businesses. This is why I've never been a fan of the bank. And, suffice it to say, last quarter didn't persuade me to change my opinion.

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Tuesday, October 15, 2013

Why Diebold Might Be Poised to Keep Dropping

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Diebold (NYSE: DBD  ) slipped 2% today after Compass Point downgraded the self-service delivery and security systems specialist from neutral to sell.

So what: Along with the downgrade, analyst Douglas Greiner lowered his price target to $23 (from $25), representing about 25% worth of downside to yesterday's close. While value investors might be attracted to the stock's recent pullback, Greiner believes that several significant headwinds will continue to work against Diebold over the next few quarters.

Now what: Compass expects Diebold to post EPS of $1.30 in 2013, down substantially from prior-year levels above $2.00. "One of the main problems has been lost market share in the regional business where the profitability is approximately twice as attractive as national business," noted Compass. "We expect this trend to somewhat mean revert but not fully recover. ... We expect the core business to continue to face pressure in terms of both top line growth and gross margin." With the stock flirting with its 52-week lows and currently boasting a near-4% dividend yield, however, those short-term concerns might be providing patient Fools with a juicy long-term income opportunity. 

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Monday, October 14, 2013

Hankook Tire plant to bring 1,800 jobs to Tenn.

CLARKSVILLE, TENN. — State officials confirmed Monday that South Korean Hankook Tire Co. will indeed build its first U.S. manufacturing facility in Clarksville, creating nearly 2,000 direct jobs.

The announcement by Tennessee Gov. Bill Haslam and other officials put to rest growing speculation that Hankook was coming to town. The company is expected to break ground on the new plant by the end of 2014 and begin tire production by 2016.

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Hankook will invest over $800 million for the new state-of-the-art plant, its first in the United States. The new plant will provide additional capacity for Hankook's growing business in the U.S. market and create approximately 1,800 full-time jobs for the region.

"This new facility will help Hankook Tire accomplish our plan to establish a production base in all major markets," said Mr. Seung Hwa Suh, Vice Chairman and CEO of Hankook Tire. "We will be able to provide our customers, consumers and car makers with high quality tires and industry leading service to meet the demands of the American market."

According to Haslam, state and local officials first started talking with the company about 18 months ago. The governor thanked the company, and the state and local partnership for making it happen.

Tennessee Department of Economic and Community Development Commissioner Bill Haggerty said that Hankook's choice of Clarksvile site for its first North American facility is going to be a shot heard around the world

"These 1,800 jobs will make a real difference for Tennessee, and for this area," Haggerty said.

Clarksville Mayor Kim Millan said, "With vision and insight, Hankook Tire is committed to being a leading local company." She also said that in Clarksville-Montgomery County, Hankook Tire would find the most dedicated, talented workforce anywhere.

McMillan credited Industrial Board Executive Director Mike Evans and his team at the EDC for their roles in the Hankook anno! uncement.

Once production begins, Hankook will become the city's largest private employer.

The Clarksville location is ideal for Hankook, offering an extensive transportation network including rail, plane and interstate highway networks as well as regional access to the Mississippi River inland waterway.

This announcement puts Hankook Tire one step closer to its vision of being a leading global tire company providing customers with top-tier products and service.

Nissan, General Motors and Volkswagen have assembly plants in Tennessee, and more than 900 further automotive sector companies are active in the state.

Clarksville is also home to a steel cord plant for Japanese tire maker Bridgestone, which has its Americas headquarters in Nashville.

Not all the news has been good for the tire industry in Tennessee in recent years. Goodyear in 2011 shut its plant about 100 miles to the west in Union City, causing 1,800 workers to lose their jobs.

Contributing: The Associated Press

Sunday, October 13, 2013

SolarCity Stock Explosion Looks Like a Bridge Too Far

SolarCity Corp. (NASDAQ: SCTY) saw its shares surge on Friday after the company offered guidance for 2013 and 2014. The move was so big that it was fighting for the pole position of the market’s top performers. It is also a move that may simply be too exaggerated.

What is odd is that the company merely confirmed guidance for fiscal 2013, even if 2014 was very impressive for an outlook. SolarCity deployed 78 MW during the third quarter.

Cumulative energy contracts reached 72,506, and cumulative customers rose to 82,235. Its estimated nominal contracted payments remaining were $1.737 billion as of September 30, 2013.

SolarCity said, “The Company continues to expect to achieve 278 MW deployed for its current fiscal year 2013. For its fiscal year 2014, the Company expects to deploy between 475 MW and 525 MW.” The translation is growth of 70% to 89% in 2014.

What you have to ask yourself is whether or not a move of almost 22% to $46.71 is too much when the 52-week range is $9.20 to $52.77. Then keep in mind that the consensus analyst estimates for earnings per share are -$1.71 per share in 2013 and -$1.67 per share in 2014. How much of an increase does it take to actually become profitable?

Also, does it matter if Elon Musk is buying more shares in the upped stock offering? Shares were at $38.33 on Thursday before the news, and the consensus analyst price target was actually under that price at $37 on last look.

One more thing boosting this move is that the latest short interest just hit an all-time high. The mid-September short interest was more than 6.84 million shares, and that was up from the prior high of over 5.56 million jus two weeks earlier.

Trading volume was already more than 11 million shares shortly after the 12:00 PM mark when normal trading volume is closer to 2.6 million shares for a full trading day. This move is not just unusual. It is exaggerated by outside factors.

Trying to use logic for valuation and price moves is often painful during major bull markets. Then throw in the Elon Musk hype and you add the Tesla Motors Inc. (NASDAQ: TSLA) mystique. This stock for SolarCity could keep going higher, but whether or not it should is a different matter entirely.