Tuesday, December 31, 2013

After the Bell: Cooper, Ulta, Big Lots Plunge As Earnings Disappoint

The closing bell rang almost an hour ago. Still, a number of stocks kept moving in after-hours action.

Copper Cos (COO) shrank 6.5% to $125 after fiscal fourth-quarter earnings and the company's full-year 2014 financial forecasts fell below expectations. For the period ended Oct. 31, Cooper earned $57.4 million, or $1.15 a share, down from $71.9 million, or $1.46 a share, in the prior-year period. Excluding impacts from a divestiture, adjusted earnings were $1.48, up from $1.47. Revenue gained 3.9% to $411.9 million. Excluding currency impacts, the growth was 7%.  For the new fiscal year, Cooper said it expects per-share earnings of $6.70 to $7 and revenue of $1.675 billion to $1.735 billion Analysts polled by Thomson Reuters were expecting $7 a share in profit and $1.71 billion in revenue.

Ulta Salon Cosmetics & Fragrance (ULTA) shares plunged 15.7% to $99.50 after the beauty products retailer's quarterly results and outlook fell short of Wall Street expectations. The company reported third-quarter earnings of 70 cents a share on revenue of $618.9 million. Results included a severance charge of 2 cents a share. Analysts were expecting 74 cents a share on revenue of $622.1 million. For the current quarter, Ulta expects to earn between $1.07 a share to $1.10 a share on revenue of $853 million to $867 million. Analysts expect $1.24 a share on revenue of $893.6 million.

Big Lots (BIG) shares dropped 11.8% to $32.75 on moderate volume after the retailer reported a third-quarter loss of 17 cents a share on revenue of $1.15 billion. Results reflect the company's announcement they plan to close operations in Canada. Analysts forecast a loss of 8 cents a share on revenue of $1.16 billion.


Apple Inc. Pushes Back Against Carl Icahn (AAPL)

On Monday, Apple Inc. (AAPL) took a stand against hedge fund giant Carl Icahn’s request for the company to put to use its massive cash pile; particularly his request for a large share repurchase.

In a statement released by the firm, Apple asked that shareholders vote “AGAINST” Ichan’s proposal. The famed investor proposed for the company commit to repurchasing no less than $50 billion of shares during the fiscal year ending September 27, 2014. Apple commented that its board members are, ”thoughtfully considering options for returning additional cash to shareholders and are currently seeking input from shareholders as part of the Company’s regular review.”

Apple shares slipped 1.0% during Monday’s session. Year-to-date, the stock is up only 2.01%.

Monday, December 30, 2013

The Philippines economy faces uncertainty

A massive typhoon has battered the Philippines. That will set back what has been a promising economy for years and make the nation's troubling unemployment and poverty rates much worse than they have been. The world's 40th nation as ranked by gross domestic product (GDP) may barely be able to keep its status as a developing nation.

The Philippine GDP expansion has been impressive. Based on the most recent International Monetary Fund (IMF) assessment, GDP growth was 6.6% last year, a rate the agency ranks as better than most of the region. The IMF had forecast Philippine GDP expansion at 6% in 2013 and 5.5% in 2014. It is highly likely now that GDP will contract late this year and into next, and that contraction could be horrible.

The Philippines has struggled for years to improve a high unemployment rate, and more particularly an under-employment rate of 20%. In a country with 107 million residents, hundreds of thousands could be thrown out of work. At least short term, those numbers will soar, perhaps until workers are hired to repair the devastation. The national economy relies on several industries highly dependent on infrastructure that supports factory activity and transportation. These include petroleum and chemical refineries, as well as the assembly of wood products, clothing and electronics. Some 32% of workers are in agriculture, according to the CIA World Factbook, which will be devastated for years in areas most badly flooded.

One of the worst parts of the Philippine economy is its poverty rate, which the World Bank pegs at 27.9%. It is hard to imagine how that number will not get much worse, but it will. The number could rise by several percentage points as many people lose the ability to work entirely.

In its assessment of the Philippine economy earlier this year, the IMF reported:

The benefits of faster growth have yet to be disseminated to the broader population. Unemployment and poverty remain stubbornly elevated. The longstanding problems of poor infrastruc! ture, limited competition, and governance issues have created a climate that is not conducive to investing in productive sectors or generating well paying jobs, inducing large overseas employment and, in turn, remittance inflows and real appreciation.

The World Bank added in March:

The country has weathered the impact of the financial crisis and global slowdown quite well in the last four years, given its strong macroeconomic fundamentals — the result of past and on-going reforms in the financial and public sectors. The country's strong growth prospects, robust external accounts, and improving fiscal condition earned it its first ever investment grade credit rating in March 2013, followed by another upgrade in May 2013. With stronger economic reforms, the Philippines can see sustained growth of above 6 percent in the medium-term. Risks to growth will primarily come from a slower global recovery, domestic reform lags caused by increased resistance to reforms, and possible asset price bubbles in the real estate sector and the stock market.

The risk of the current devastation could not have been contemplated or imagined.

With GDP contraction, the chance of the spread of those benefits is gone, and with them any hope that problems that have plagued the economy for years will improve. Instead they will worsen for years.

24/7 Wall St. is a USA TODAY content partner offering financial news and commentary. Its content is produced independently of


Saturday, December 28, 2013

Best High Tech Stocks To Own For 2014

This year, investors had become accustomed to a "one-way" market; through May 17, the S&P 500 (SNPINDEX: ^GSPC  ) was up a very respectable 14% year to date, and the Dow Jones Industrial Average (DJINDICES: ^DJI  ) performed even better, with a gain of 14.5%. Since then, consistently rising stock prices have been replaced with a more volatile environment.� A greater frequency of losing days has emboldened market bears, who think the rally we've witnessed can only be followed by a nasty comeuppance. Are stocks overvalued and destined for a fall? In the following video, Motley Fool contributor Alex Dumortier explains why one bearish argument simply doesn't add up.

If you're an investor who prefers returns to rhetoric, you'll want to read The Motley Fool's new free report, "5 Dividend Myths ... Busted!" In it, you'll learn which stocks provide premium growth, and whether bigger dividends are better. Click here to keep reading.

Best High Tech Stocks To Own For 2014: Silgan Holdings Inc.(SLGN)

Silgan Holdings Inc. and its subsidiaries engage in the manufacture and sale of rigid packaging for consumer goods products worldwide. It offers steel and aluminum containers for human and pet food, and general line products; metal, composite, and plastic vacuum closures for food and beverage products, and plastic closures for the dairy and juice markets; and custom designed plastic containers, tubes, and closures for personal care, health care, pharmaceutical, household and industrial chemical, food, pet care, agricultural chemical, automotive, and marine chemical products. The company sells its products through direct sales force, as well as through a network of distributors. Silgan Holdings Inc. was founded in 1987 and is headquartered in Stamford, Connecticut.

Best High Tech Stocks To Own For 2014: Oxford Biomedica(OXB.L)

Oxford BioMedica plc, a biopharmaceutical company, engages in designing and developing gene-based medicines and therapeutic vaccines for the treatment of cancer, age-related or inherited neurodegenerative disorders, and ocular diseases in the United States and the United Kingdom. Its technology platform includes LentiVector, a gene delivery system that targets diseases of the central nervous system and the eye; 5T4, a tumour antigen targeted for anti-cancer therapy; Hi-8 PrimeBoost technology to stimulate potent and specific cellular immune responses against diseased cells; Gene-Directed Enzyme Prodrug Therapy, a therapeutic strategy for safety and effectiveness of prodrugs; and Anti-Angiogenisis technology, an anti-cancer therapeutic strategy to deliver the genes for endostatin and angiostatin using viral vectors. The company?s product pipeline comprises ProSavin, a therapeutic for the treatment of Parkinson?s disease that is in a Phase I/II dose escalating clinical tri al; RetinoStat, a treatment for neovascular ?wet? age-related macular degeneration and diabetic retinopathy; StarGen for the treatment of Stargardt disease; UshStat for the treatment of Usher syndrome 1B; EncorStat for the prevention of corneal graft rejection; TroVax, a therapeutic cancer vaccine; Hi-8 MEL, a therapeutic vaccine for metastatic melanoma; and MetXia, a gene-directed enzyme prodrug therapy for pancreatic cancer. Its products also consist of Anti-5T4, a pre-clinical stage antibody for treating cancer, as well as products under research comprising MoNuDin for the treatment of motor neuron disease, and EndoAngio-GT, an anti-angiogenic therapy for cancer. The company has partnerships and licensing agreements with Sanofi-Aventis, Sigma-Aldrich, Pfizer, Biogen Idec, Emergent BioSolutions, GlaxoSmithKline, Merck & Co, MolMed, VIRxSYS Corporation, Bavarian Nordic, and Emergent BioSolutions for its products and technologies. Oxford BioMedica plc is based in Oxford, t he United Kingdom.

10 Best Blue Chip Stocks To Buy For 2014: Sig(SHI.L)

SIG plc supplies insulation, exteriors, interiors, and specialist construction products for the construction and related markets primarily in the United Kingdom, Ireland, and Mainland Europe. Its insulation products include thermal and acoustic insulation, fire protection, dry lining, refrigeration and cold storage, flooring, insulation installation, temperature insulation, air tightness testing, heating and ventilation, industrial lining, pipe and roofing insulation, waterproofing, air handling and air treatment, and air conditioning products. The company?s exterior products comprise flat roofing products, such as roofing membranes, liquid waterproofing, mastic asphalt, roof lights and domes, green roofs, and roof paving systems; slating and tiling products comprising concrete and clay tiles, slates, shingles, and metal roof tiles; sheeting and cladding products, including fiber cement and profiled metal sheeting, and insulated panels; rainwater goods; roofline products, such as soffits, fascias, and barge boards; ventilation and building plastics products; and photovoltaic solar kits/panels. Its interior products include suspended ceilings, partitioning, doors and door sets, category lighting, dry lining, fire protection, insulation, architectural glass, toughened and laminated glass, raised access floors, office/acoustic screens, noise control and fixing products, temporary protection products, floor coverings, and washroom systems. The company?s specialist construction products comprise mechanical engineering fixings and accessories; fastenings; groundwork products; fencing and scaffolding; masonry components; construction chemicals; safety helmets; protective clothing; safety glasses and boots; ear plugs; gloves; dust respirators; tools and concrete accessories; and steel support systems and site set-up equipment. The company was formerly known as Sheffield Insulations Limited. SIG plc was founded in 1957 and is headquartered in Sheffi eld, the United Kingdom.

Best High Tech Stocks To Own For 2014: Victoria(VCP.L)

Victoria PLC engages in the manufacture and sale of carpets, carpet yarns, and floor coverings for the residential and commercial markets in the United Kingdom, Ireland, Australia, and Canada. The company offers tufted and woven carpets, green carpets, and rugs. It also supplies woven wilton broadloom carpets and carpet tiles for the corporate, hospitality, and commercial sectors; and Axminster carpets, and wilton and tufted carpets for the residential and contract sectors. In addition, the company engages in the import and distribution of wool and floor coverings. It sells its products under Victoria Carpets, Navan Carpets, Munster Carpets, Colin Campbell, and Nature?s Carpet brand names. Victoria PLC was founded in 1895 and is headquartered in Kidderminster, the United Kingdom.

Best High Tech Stocks To Own For 2014: Atlas Air Worldwide Holdings(AAWW)

Atlas Air Worldwide Holdings, Inc. provides air cargo and outsourced aircraft operating solutions worldwide. The company operates through four segments: Aircraft, Crew, Maintenance, and Insurance (ACMI); Air Mobility Command (AMC) Charter; Commercial Charter; and Dry Leasing. The ACMI segment offers aircraft that is crewed, maintained, and insured by the company for lease. The AMC Charter segment provides full planeload charter flights to the U.S. military. The Commercial Charter segment provides planeload of capacity charter services to charter brokers, freight forwarders, direct shippers, and airlines. The Dry Leasing segment provides for the leasing of aircraft and/or engines to customers. The company operates a fleet of Boeing 747 freighters. Its customers include airlines, express delivery providers, freight forwarders, the U.S. military, and charter brokers. It operates in Asia, the Middle-East, Australia, Europe, South America, Africa, and North America. As of Decem ber 31, 2009, the company operated a fleet of 747-400 freighter aircraft. Atlas Air Worldwide Holdings was founded in 1992 and is based in Purchase, New York.

Advisors' Opinion:
  • [By Ben Levisohn]

    Atlas Air Worldwide (AAWW) has plunged 21% to $38.63 following its announcement that it would earn less this year than it had previously expected.

    Oshkosh has dropped 12% to $46.25 after it reported a profit of 49 cents a share, missing forecasts for 590 cents, as sales of military vehicles plunged.

Best High Tech Stocks To Own For 2014: Atlanta Gold Inc (ATG.V)

Atlanta Gold Inc. operates as a junior gold exploration and development company primarily in the United States and Canada. The company primarily holds interests in the Atlanta gold property, which comprises approximately 2,159 acres located in the east of Boise, in Elmore County, Idaho. The company was formerly known as Twin Mining Corporation and changed its name to Atlanta Gold Inc. in March 2007. Atlanta Gold Inc. was founded in 1985 and is headquartered in Toronto, Canada.

Best High Tech Stocks To Own For 2014: Epicore Bionetworks Inc. (EBN.V)

Epicore BioNetworks Inc. designs, develops, and manufactures biotechnology products and specialty animal feeds worldwide. The company offers a family of EPICIN branded biological aquaculture systems that create a cleaner and healthier growing environment in aquaculture hatcheries and grow-out ponds, as well as eliminates toxic ammonia and nitrates and improves animal health and disease resistance for the aquaculture industry. It also provides agriculture products, including EPIZYM-AW and EPIZYM-PIGS, which are animal manure bacterial inoculants to liquefy and deodorize animal waste; PHYTOZYM 2-2-2 liquid foliar spray and seed treatment, a stabilized biochemical concentrate; EPITHATCH biological thatch digester, a dry biological formulation that decomposes dead grass; and EPITHERM microbial ecosystem for composting organic waste. In addition, the company offers municipal products comprising LINEBAC, a microbial ecosystem to biodegrade contaminants in industrial and municipa l wastewater collection systems; LIPOSOLVE municipal emulsifier; DEOBAC Biological deodorizer and odor neutralizer, a liquid microbial ecosystem to biodegrade organic matter; and GREASE-X aqueous cleaner and degreaser that penetrates and softens various forms of grease, fats, and oil. Further, it provides wastewater treatment products, including EPIZYM-100 microbial ecosystem for the biodegradation of industrial and municipal wastewater; and EPIZYM-200 microbial inoculant for the biodegradation of crude oil and petroleum products. Additionally, Epicore BioNetworks Inc. offers biological cleaning products, such as drain and grease trap cleaners, hard surface cleaner, carpet and upholstery shampoo, and aqueous cleaner and degreaser; and bio remediation products. The company was formerly known as Epicore Networks Inc. and changed its name to Epicore BioNetworks Inc. in 2000. Epicore BioNetworks Inc. was incorporated in 1987 and is headquartered in Eastampton, New Jersey.

Best High Tech Stocks To Own For 2014: British Sky Broadcasting(BSY.L)

British Sky Broadcasting Group plc, through its subsidiaries, provides pay television services in the United Kingdom and the Republic of Ireland. It retails owned and third parties? channels; and the Sky Box Office service, which include a pay-per-view service offering movies, sporting events, and concerts to direct-to-home (DTH) customers. The company owns, operates, distributes, and retails 30 Sky Channels through its DTH service, and approximately 50 high definition TV (HD) channels; retails 147 Sky Distributed Channels to its DTH customers; and operates radio and free to air HD channels. As of September 30, 2011, it offered television services to 10,213,000 customers. It also provides broadband and telephony services. In addition, the company offers a range of channel packages that provide a selection of sports, news, music, and entertainment services to pubs and clubs, hotels, offices, retail outlets, and betting premises; and offers various advertising solutions, in cluding traditional ads, sponsorship, online, and video-on-demand, as well as text and interactive advertising to pubs, train stations, and on mobile. Further, it provides a range of betting and gaming services through the Internet, phone, and interactive TV, including Sky Bet, Sky Poker, Sky Vegas, and Sky Bingo; operates a portfolio of online sports media brands; and provides sponsorship and advertising for channels. Additionally, the company designs, develops, and manufactures set top boxes. British Sky Broadcasting Group plc was incorporated in 1988 and is headquartered in Isleworth, the United Kingdom.

Friday, December 27, 2013

At the Open: Stocks Shrug Off Shutdown; Acuity Gains 4% on Earnings

No government, no problem.

Getty Images

Stocks have edged higher this morning despite a government shutdown as moderate Republicans, ultra-conservative Republicans and Democrats try to work through their differences on a budget bill.

The S&P 500 has gained 0.5% to 1,690.23, while the Dow Jones Industrials have risen 0.3% to15,177.35 . The small-cap Russell 2000 has advanced 0.6% to 1,080.55.

So far, at least, investors appear to be reacting to the initial shutdown the way they have in the past–by ignoring it. JPMorgan’s Thomas Lee explains:

The median government shutdown (since 1976) is 4 days, with 17 such occurrences (this will be the 18th) since 1976 — the shortest was one day and the longest was 21 days.

Overall, markets have been down 0.2% from the start of a shutdown until the end, with the longer the shutdown, generally the worse that markets perform. Equities have fallen 0.2% during the shutdown period (median) but it seems that the longer the shutdown, the greater the decline…

This is intuitive as longer periods add uncertainty and put greater risk on economic outcomes… [For] shutdowns lasting 8 days or more, the range of returns during a shutdown is approximately flat to a -4.4% decline, and for those lasting less than a week, the range is +1.3% to -2.1%.

Mizuho’s Steven Ricchiuto says the impasse could extend to the debt ceiling drop-dead date. He writes:

The timing and composition of the eventual compromise are the big unknowns at this point. For the markets, the composition is less important than the timing. Our read of the current situation suggests a continuing resolution will be passed in time to keep the government from defaulting on its debt. The debt limit was originally expected to become binding in early November. Disappointing corporate and individual tax receipts, however, have narrowed this window to the middle of this month. This implies the shutdown could last as long as two weeks before a solution is found.

The U.S ISM manufacturing survey, meanwhile, was stronger than economists had expected. Miller Tabak’s Andrew Wilkinson explains:

Thursday, December 26, 2013

'Mad Money' Lightning Round: Take-Two Interactive Can Go Higher

Top 5 Tech Companies To Invest In Right Now

Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener.

NEW YORK (TheStreet) -- Here's what Jim Cramer had to say about some of the stocks callers offered up during the "Mad Money Lightning Round" Thursday evening:

Royal Caribbean Cruises (RCL): "They're taking a lot of share and I like them."

Take-Two Interactive (TTWO): "They're doing a great job and I think they can go much higher." KeyCorp (KEY): "It's up real big and it doesn't do well with this yield curve." Celldex Therapeutics (CLDX): "I say to hold onto this stock. I'm not a seller." ExOne (XONE): "That's a 3D play. I like this one for speculation only." To read a full recap of "Mad Money" on CNBC, click here. To sign up for Jim Cramer's free Booyah! newsletter with all of his latest articles and videos please click here. To watch replays of Cramer's video segments, visit the Mad Money page on CNBC. -- Written by Scott Rutt in Washington, D.C. To email Scott about this article, click here: Scott Rutt Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC

Wednesday, December 25, 2013

Workers Think They’re Maxing Out 401(k)s at $8,000

The IRS announced Thursday that the annual contribution limit for 401(k)s will remain unchanged at $17,500 for 2014, but it’s not likely to affect participants’ contributing behavior. The son-to-be-released Mercer Workplace Survey found that the average participant believes the deferral limit is $8,532, almost half the actual limit. That gives them the dangerous perception that they’re close to the maximum contribution when they’re actually far from it.

Mercer found that respondents expect to contribute just under $7,500 to their 401(k) plan in 2014.

“Plan sponsors need to do a better job of communicating the total opportunity employees have when contributing to their 401(k) plan,” Dave Tolve, U.S. leader of Mercer’s defined contribution administration business, told ThinkAdvisor on Monday. “When you start to dig into it further and start to think about the different demographics, it’s important for plan sponsors to communicate specific to their different employee demographics.”

Tolve blamed automatic features for at least some of the problem. “Automatic enrollment is pretty pervasive in 401(k) plans today. It’s great for getting employees to start contributing, but it often leads to inertia where many employees say, ‘This is great. I’m enrolled in my 401(k) and I don’t need to do any more.’”

Tolve referred to past Mercer research that shows people who contribute at the default level tend to contribute less than people who actively make a decision to contribute.

“Automatic enrollment has its place,” he said, “but it’s important to communicate to employees that there’s a lot more room to contribute beyond the default.”

Automatic escalation isn’t a perfect solution, either. “It’s a great feature, but it alone is not enough," he said. "A lot of plans will start someone at 3% and increase by 1% per year. That’s better than that employee not enrolling at all, but there’s an additional step that a lot of plan sponsors ignore, and that’s letting them know that there’s a much greater opportunity in 401(k) plans and they should be saving more.”

Top 10 Value Stocks To Invest In 2014

Another contributing factor is sponsors overemphasizing the company match as a target deferral rate rather than encouraging them to contribute as much as they can, regardless of the level their employer will match, Tolve said.

Tolve acknowledged that for some participants, saving the maximum allowable contribution just isn’t realistic. “Someone who makes $30,000 a year, it might not be feasible to contribute $17,500, but it would benefit higher-paid employees for plan sponsors to communicate to them the much greater opportunity to contribute to their plans.” There was little difference in expected contributions by age group. The 18 to 34 age group anticipate contributing $7,535; 35- to 49-year-olds said they would contribute $7,667, and 50- to 64-year-olds expect to contribute just $6,673.

“It’s surprising to see among older employees, especially among those over 50 who can add in the catch-up contributions as well,” Tolve said.

Another drawback to small contributions, Mercer noted, was that participants aren’t taking advantage of the tax efficiency 401(k) plans provide. More than a third of respondents said they would increase the contributions they made in the last year if they could, even though most respondents are saving in other plans as well as their 401(k).

“Our historical survey shows us that people who work with financial advisors have much higher levels of confidence in their ability to retire when they want to, their ability to maintain their lifestyle in retirement and their ability to leave money for their heirs,” Mercer said.


Check out 4 Things for Fiduciaries to Consider With IRA Rollovers on ThinkAdvisor.

Saturday, December 21, 2013

Coming Soon: BroadSoft Earnings

BroadSoft (Nasdaq: BSFT  ) is expected to report Q1 earnings on May 6. Here's what Wall Street wants to see:

The 10-second takeaway
Comparing the upcoming quarter to the prior-year quarter, average analyst estimates predict BroadSoft's revenues will grow 0.7% and EPS will shrink -62.1%.

The average estimate for revenue is $38.6 million. On the bottom line, the average EPS estimate is $0.11.

Revenue details
Last quarter, BroadSoft reported revenue of $45.8 million. GAAP reported sales were 13% higher than the prior-year quarter's $40.6 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
Last quarter, non-GAAP EPS came in at $0.47. GAAP EPS of $0.18 for Q4 were 5.3% lower than the prior-year quarter's $0.19 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Recent performance
For the preceding quarter, gross margin was 77.7%, 370 basis points worse than the prior-year quarter. Operating margin was 18.4%, 520 basis points worse than the prior-year quarter. Net margin was 10.7%, 280 basis points worse than the prior-year quarter.

Looking ahead

The full year's average estimate for revenue is $184.2 million. The average EPS estimate is $1.23.

Investor sentiment
The stock has a one-star rating (out of five) at Motley Fool CAPS, with 37 members out of 124 rating the stock outperform, and 87 members rating it underperform. Among 37 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), seven give BroadSoft a green thumbs-up, and 30 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on BroadSoft is outperform, with an average price target of $41.50.

Software and computerized services are being consumed in radically different ways, on new and increasingly mobile devices. Many old leaders will be left behind. Whether or not BroadSoft makes the coming cut, you should check out the company that Motley Fool analysts expect to lead the pack in "The Next Trillion-dollar Revolution." Click here for instant access to this free report.

Add BroadSoft to My Watchlist.

Friday, December 20, 2013

These Five Stocks Could Be Taper Losers

One answer: Companies with a lot of debt and little operational leverage, according to a new report from Credit Suisse.


Strategist Andrew Garthwaite and team explain why companies like Sprint (S),  American Water Works (AWK), Volcano (VOLC), Southern (SO) and Level 3 Communications (LVLT) could get hit by the taper:

Combining our view that bond yields are set to rise (making life more difficult for companies with high financial leverage), our caution on European credit and our expectation that economic momentum will accelerate lead us to the conclusion that sectors with both high financial leverage and low operational leverage – shown in the bottom right quadrant below – should be avoided.

Those sectors include telecoms, utilities, media, energy and tobacco companies, Garthwaite says. After screening for stocks with net debt to EBITDA greater than 2.5 times–a sign of financial leverage–free-cash-flow yields below 2%–a sign of little operational leverage–in defensive sectors and looking pricy, Credit Suisse came up with a list of 21 stocks that could be at risk, including the aforementioned Sprint,  American Water Works, Volcano, Southern and Level 3 Communications.

Sprint has gained 2.5% today to $9.17, American Water Works has dipped 0.1% to $42, Sothern is off 0.4% to $40.83, Volcano has fallen 1% to $21.32 and Level 3 Communications is up 4.6% to $32.01.


Wednesday, December 18, 2013

Pacific Rim Profits

Carl Delfeld, editor of Capital Gains, looks around the Pacific Rim for value-oriented investment opportunities. Here, he looks at a mining machinery outfit and a financial play on the expansion of the Panama Canal.

Steve Halpern: We're here today with global investing expert, Carl Delfeld, founder of the Pacific Economic Club and editor of Capital Gains, a newsletter focused on global opportunities. How are you doing today, Carl?

Carl Delfeld: Hello Steven, great to be with you.

Steve Halpern: First, could you tell us a little about the Capital Gains newsletter?

Carl Delfeld: Sure, the Capital Gains newsletter is the member investment newsletter for the Pacific Economic Club, which is a group of over 3,000 different investment professionals, spread out all over the world.

A lot of them are in the Pacific Rim, and the goal, of course, is capital gains, so we're looking at the very best ideas at the extremes, either deep value, demonstrating a clear uptrend, or really fast growth, so we're trying to stay out of, what we call, the mushy middle.

Steve Halpern: Can you tell us a little more about the Pacific Economic Club itself?

Carl Delfeld: Sure, sure. Well, Pacific Economic Club grew over the years. I've been in the business all over the world, you know, from London to Tokyo to Southeast Asia and Manila, and over the years, I've collected, you know, a fair amount of good contacts, and so we started to just, kind of, share ideas and information, and that grew into the club.

In addition to the newsletter and investment ideas, we take tours, investment tours to different places. I have one planned for March, for Vietnam in March of next year, and we also have summits and meetings as well, but the newsletter—the Capital Gains newsletter's, sort of, the heart of the club.

Steve Halpern: Well, let's walk through a couple of stock ideas, so the people can understand what it is you recommend, and one of those ideas is Joy Global (JOY), a large-cap company in the mining machinery sector, and you note that the stock has been hurt by overall weakness in the sector, yet you consider the shares to be cheap. Could you expand on that view?

Carl Delfeld: Sure, sure. Joy Global is a company that, sort of, came out of the ashes of the old Allis Chalmers Company in Milwaukee, Wisconsin, which was a powerhouse in its day.

Joy Global is primarily in the mining machinery business, which, you know, is kind of, pretty much, at the bottom of its cycle, which got our attention. The stock is down 40% over the last two years. It's down 18% this year. You know, while the S&P is up 30% or so, so it's definitely trailing.

The valuation is quite attractive. It's trading right at eight times earnings, forward earnings. That's about half what Caterpillar (CAT) is trading at—and, you know, the earnings have not been that great.

But we really see the cycle beginning to turn, and the other thing I like about JOY is that they don't just make money from selling new mining machinery.

A lot of their business is reoccurring revenue from after-market services, maintenance, and so on, so that cushions the blow. Even in 2008 and 2009, they made money, which is pretty impressive. CAT, you know, lost quite a bit of money that year.

Page 1 | Page 2 | Next Page The expert featured in this column, Carlton Delfeld, may or may not own positions in any investment vehicle mentioned here. The views and opinions expressed are his or her own.

Tuesday, December 17, 2013

BITG Analyst: Time Warner Cable Should Hold Out for $160 Per Share (TWC)

Cable TV and Internet provider Time Warner Cable Inc (TWC) on Tuesday received some positive sentiment from an analyst at BITG Research.

The firm reiterated its “Buy” rating on TWC and lifted its price target from $80 to $160. Analyst Richard Greenfield feels the company shouldn’t be in a hurry to sell, given its internal performance is improving.

Greenfield commented, “While laying out all the potential acquisition scenarios spanning multiple companies and joint bids is far too complex, we believe the operational efficiencies and improved clustering of a TWC acquisition/breakup should warrant value of at least $160.” Both Charter Communications (CHTR) and Comcast (CMCA) are considered potential suitors for TWC, which is exploring a sale amid an expected upcoming era of consolidation for the cable television industry. Cable providers have been feeling the heat from Internet-based media services like Netflix, Hulu, and others, which offer consumers on-demand movies and TV shows for relatively low monthly fees.

Time Warner Cable shares were inactive in pre-market trading Tuesday. The stock has gained about 36% year-to-date.

Monday, December 16, 2013

PETA Aims to Free Willie

This oughta be interesting. 

With the successful IPO of SeaWorld Entertainment (NYSE: SEAS  ) , the company will now have to jump through hoops for the People for the Ethical Treatment of Animals, which took advantage of the public offering and bought a stake in the company. As PETA tells it, it did so for the express purpose of ending the "suffering endured by the orcas, dolphins, and other animals" at SeaWorld facilities.

By owning shares in the sea mammal entertainment provider, PETA can not only protest actions it thinks are cruel but it now has a voice at company shareholder meetings and can even submit resolutions for stockholders to vote on. Its first order of business, however, will be to free the orcas and dolphins "to coastal sanctuaries and, where possible, have them rehabilitated and released into the ocean."

SeaWorld, which is based in Orlando, Fla., went public at $27 a share and raised about $700 million. With the stock closing on Friday at $33.52, it has a market value north of $3 billion. The entertainment leader will still be majority-owned by private equity firm Blackstone  (NYSE: BX  ) , which retained 10 million shares.

Although it's probably best known for its public stunts such as throwing paint on furs and having supermodels and celebrities pose nude, it's not the first time PETA has bought shares in a company in an effort to have an impact on company policy. Previously it bought a stake in McDonald's and promptly introduced a resolution to require its suppliers to upgrade their outdated slaughter practices. It's purchased shares in Kraft Foods, to pressure the company to phase in the purchase of pig meat from suppliers that don't confine pregnant sows to gestation crates, and in Philip Morris International to prevent testing on animals by having them forced to inhale smoke for months at a time. PETA owns stock in more than 80 meat producers, clothing retailers, fast-food and grocery chains, and pharmaceutical companies.

Besides three SeaWorld parks, the company owns two Busch Gardens parks, several water parks, and Sesame Place, an amusement park based on the children's TV show Sesame Street.

It seems doubtful that SeaWorld will free Willie, Shamu, or any other orca it has in its shows, but it's likely we'll see PETA force the theme park operator to jump through a few hoops of its own.

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Sunday, December 15, 2013

Is Telefonica Ready To Bounce Back?

With shares of Telefonica (NYSE:TEF) trading around $16, is TEF an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Telefonica provides fixed and mobile communication services primarily in Europe and Latin America. The company offers mobile voice; value-added mobile data and Internet; wholesale, corporate, roaming, and fixed wireless; and trunking and paging services, as well as mobile payment solutions. Its fixed telecommunication services include PSTN lines; ISDN accesses; public telephone services; local, domestic, and international long distance and fixed-to-mobile communications services; video telephony; supplementary and business-oriented value-added services; intelligent network services; leasing and sale of handset equipment; and corporate communication and telephony information services.

Telefonica's third-quarter net profit fell 21 percent and revenue fell 1o percent, but Telefonica says it's beginning to turn around its operations in Spain. Europe's second-largest telecom company cited weaker Latin American currencies versus the euro as part of the problem, as sales in Latin America rose 11 percent in their own currencies but dropped 6.8 percent in euros. Telefonica executives were optimistic that the Spanish economy is beginning to bounce back, and revenue in the company's Spanish unit dropped less than it has in the two previous quarters, according to The Wall Street Journal.

T = Technicals on the Stock Chart are Strong

Telefonica stock has been surging higher after hitting lows last year. The stock is currently trading near highs for the year and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Telefonica is trading above its rising key averages which signal neutral to bullish price action in the near-term.


(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Telefonica options may help determine if investors are bullish, neutral, or bearish.

Top 10 Penny Companies To Invest In Right Now

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Telefonica Options




What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

December Options



January Options



As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Telefonica’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Telefonica look like and more importantly, how did the markets like these numbers?

2013 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)





Revenue Growth (Y-O-Y)





Earnings Reaction





Telefonica has seen  mixed earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have been optimistic about Telefonica’s recent earnings announcements.

* As of this writing

P = Excellent Relative Performance Versus Peers and Sector

How has Telefonica stock done relative to its peers, Telecom Italia (NYSE:TI), America Movil (NYSE:AMX), Vodafone (NASDAQ:VOD), and sector?


Telecom Italia

American Movil



Year-to-Date Return






Telefonica has been a relative performance leader, year-to-date.


Telefonica provides fixed and mobile communication services primarily in Europe and Latin America. The company reported earnings that fell; however, the company is beginning to see a turnaround. The stock has been surging higher after hitting lows last year and is currently trading near highs for the year. Over the last four quarters, earnings have been mixed while revenues have been decreasing, but investors remain optimistic about the company. Relative to its peers and sector, Telefonica has been a relative performance leader year-to-date. Look for Telefonica to OUTPERFORM.

Saturday, December 14, 2013

Spending Spree: Retail Sales Zoom Up 0.7% in November

november retail salesJ Pat Carter/AP WASHINGTON -- U.S. retail sales rose solidly in November, adding to signs of a strengthening economy that could draw the Federal Reserve closer to reducing the pace of monetary stimulus. The upbeat economic picture was clouded somewhat by another report Thursday showing the biggest jump in a year in first-time applications for unemployment benefits last week. The Commerce Department said retail sales increased 0.7 percent last month as Americans bought automobiles and a range of other goods. November's retail sales increase was the largest in five months and followed a 0.6 percent rise in October. Economists polled by Reuters had forecast retail sales, which account for about 30 percent of consumer spending, advancing 0.6 percent after a previously reported 0.4 percent gain in October. "It should provide more confidence to the Fed that the economic recovery has emerged from the political-induced uncertainties of recent months essentially unscathed and reinforce the expectation for the recent improved performance in the data to be sustained," said Millan Mulraine, senior economist at TD Securities (TD) in New York. So-called core sales, which strip out automobiles, food services, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, rose 0.5 percent after gaining 0.7 percent in October. That suggested consumer spending would likely step up from a two-year low touched in the third quarter. Spending is being supported by solid employment gains and steady income increases, which could help limit the drag on fourth-quarter GDP growth from an expected attempt by business to reduce inventories after building them up in the July-September quarter. But businesses are showing no signs of pulling back just yet. In a second report, the Commerce Department said business inventories increased 0.7 percent in October, the largest gain since January, after rising 0.6 percent in September. Lower gasoline prices are also helping, though they are a drag on retail sales figures, which aren't adjusted for inflation. U.S. stock index futures reversed losses on the retail sales data, while Treasury debt prices extended losses. The dollar rose against the euro and the yen. But the firming growth tone was tempered somewhat by a separate report from the Labor Department showing initial claims for state unemployment benefits surged 68,000 to a seasonally adjusted 368,000 last week. That was the largest weekly increase since November 2012 and surpassed economist expectations for a rise to only 320,000. However, the four-week moving average for new claims, which irons out week-to-week volatility, rose only 6,000, suggesting that a recent strengthening of the jobs market remains intact. "I would be heavily dismissive of the latest number. It was heavily distorted by the holiday. You had a low-ball number last week and a high one this week. You have to take the two weeks together," said Jacob Oubina, senior economist at RBC Securities in New York. Seasonal Variations A Labor Department analyst said seasonal volatility, including a late Thanksgiving, made it difficult adjusting the data for seasonal variations. Nonfarm payrolls increased solidly in October and November. The unemployment rate hit a five-year low of 7 percent in November. The steady stream of fairly upbeat data should give the Fed cover to start cutting back its monthly $85 billion bond buying program soon, and could fuel some speculation a move could come as early as the central bank's meeting next week. Most economists, however, expect the Fed to hold off until January or March. Another report from the Labor Department showed import prices fell for a second straight month in November. The general lack of inflation pressures is a wild card in the Fed's decisions on its monetary stimulus. Retail sales last month were buoyed by a 1.8 percent jump in receipts at auto and parts dealers. That helped to offset a 1.1 percent drop in sales at gasoline stations.Receipts at building materials and garden equipment stores rebounded 1.8 percent after falling 1.5 percent in October. There were also gains in receipts at furniture, electronics and sporting goods shops, among others. Sales at electronics and appliance stores rose 1.1 percent, while furniture store sales rose 1.2 percent. However, receipts at clothing stores fell 0.2 percent after rising 2.6 percent in October. Percentage of U.S. population who visited in March: 14.2%  Revenue: $73.3 billion  1-year stock price change: 27.56%  Store category: Discount & variety stores

Friday, December 13, 2013

Top 5 Penny Companies For 2014

Photo credit: SandRidge Energy

When I started writing this article SandRidge Energy's (NYSE: SD  ) stock had closed just one penny below $6 per share. It's a level the stock hasn't seen since February. The stock has climbed nearly 30% off 2013 lows seen this past April. While in obvious hindsight those lows were the best price to buy, will we look back at today and think that just under $6 was also a good price?

I ask this question because a few weeks ago I had my written puts on SandRidge expire with only income as a consolation. It was part of a trade that saw me buying shares for half of my intended allocation and writing puts in hopes of buying the rest of my desired allocation even cheaper. I can't complain about that trade as those puts earned 11.4% on the capital at risk in less than four months. Further, the shares I bought are up more than 18% since I bought them. I certainly have reason to celebrate.

Top 5 Penny Companies For 2014: Chimera Investment Corporation (CIM)

Chimera Investment Corporation operates as a real estate investment trust (REIT) in the United States. The company, through its subsidiaries, invests in residential mortgage-backed securities (RMBS), residential mortgage loans, commercial mortgage loans, real estate-related securities, and other asset classes. Its targeted asset classes include agency or non-agency RMBS; prime, jumbo prime, and Alt-A mortgage loans; first or second lien loans secured by multifamily properties, mixed residential or other commercial properties, retail properties, office properties, or industrial properties; and asset-based securities (ABS), including commercial mortgage-backed securities, debt and equity tranches of collateralized debt obligations, and consumer and non-consumer ABS. The company has elected to be treated as a REIT for federal income tax purposes and would not be subject to income tax, if it distributes at least 90% of its REIT taxable income to its share holders. Chimera Inve stment Corporation was founded in 2007 and is based in New York, New York.

Advisors' Opinion:
  • [By John Maxfield]

    Well, it just so turns out that there is. And Annaly Capital Management (NYSE: NLY  ) , the parent company in our nonhypothetical tale, has figured out how -- for the record, the publicly traded subsidiary is Chimera Investment Management (NYSE: CIM  ) .

  • [By Selena Maranjian]

    Appaloosa Management reduced its stake in companies such as Chimera Investment (NYSE: CIM  ) and Valero Energy (NYSE: VLO  ) . Mortgage REIT Chimera Investment recently yielded 10.9%, but it may become less attractive if Congress cancels favorable tax treatment for REITs. Chimera has taken on more risk than many of its brethren, and has had some trouble filing reports on time. Some still like its prospects, though, while others question its hefty management fees.

Top 5 Penny Companies For 2014: Brocade Communications Systems Inc.(BRCD)

Brocade Communications Systems, Inc. supplies networking equipment comprising end-to-end Internet protocol based Ethernet and storage area networking solutions. Its Data Storage segment provides infrastructure products and solutions, including directors, switches, routers, fabric-based software applications, distance/extension products, management applications, and utilities to centralize data management; and host bus adapters, converged network adapters, mezzanine cards, and switch modules for bladed servers. The company?s Ethernet Products segment offers Open Systems Interconnection Reference Model (OSI) Layer 2-3 switches and routers, which enable the use of bandwidth-intensive network business applications and digital entertainment on local area networks and wide area networks; and OSI Layer 4?7 switches that allow enterprises and service providers to build network infrastructures to direct the flow of traffic, and file area network products and associated management s olutions. The company?s Global Services segment provides break/fix maintenance, extended warranty, installation, consulting, network management, and related software maintenance and support services; consulting and support services that assist customers in designing, implementing, deploying, and managing networking solutions; and post-contract customer support and extended warranties. It serves various businesses and organizations, which include global enterprises and service providers, such as telecommunication firms, cable operators, and mobile carriers. The company has a strategic partnership with LG-Ericsson. It offers its products and services to end-user customers directly, and through various distribution partners comprising original equipment manufacturers, distributors, systems integrators, and value-added resellers in the United States, western Europe, Japan, and the greater Asia Pacific region. The company was founded in 1995 and is headquartered in San Jose, Cali fornia.

Advisors' Opinion:
  • [By Muhammad Bazil]

    There is a looming monumental change in the information technology sector that will obviously benefit some existing producers of technology networking equipment but unfortunately, some will be drowned in the ensuing storm. The size of the networking equipment industry where Cisco Systems (CSCO) currently plays a prominent role is massive: The industry is worth about $50 billion in annual spending. Cisco is a tech manufacturing company that manufactures and markets Internet protocol-based switches and routers commonly used by networking companies and professionals for data and voice transmission across networks. Other major players in this industry include F5 Networks (FFIV), Juniper Networks (JNPR) and Brocade (BRCD).

  • [By Lauren Pollock]

    Brocade Communications Systems Inc.(BRCD) raised its stock buyback program to $1 billion from $308 million, as the company cited confidence in generating greater cash flow as well as its long-term business prospects. Shares rose 3.8% premarket to $8.49.

  • [By Rick Munarriz]

    Brocade (NASDAQ: BRCD  ) steps up on Thursday. The provider of fabric-based data center networking solutions is one of the few companies expected to post flat financial results next week. Analysts see Brocade clocking in with a profit of $0.15 a share, flat with last year's showing.

  • [By Lauren Pollock]

    Brocade Communications Systems Inc.'s(BRCD) fiscal fourth-quarter earnings rose 19% as stronger margins and decreased costs offset lower revenue for the maker of data and storage-network products. Adjusted profit for the period exceeded the company’s expectations, sending shares up 5.3% to $8.52 premarket.

Top 10 Energy Companies To Watch In Right Now: China Sky One Medical Inc.(CSKI)

China Sky One Medical, Inc., through its subsidiaries, engages in the development, manufacture, marketing, and sale of over-the-counter, branded nutritional supplements, and over-the-counter plant and herb-based pharmaceutical and medicinal products primarily in the People?s Republic of China. The company?s product line includes ointments, sprays, medicated skin patches, injections, capsules, suppositories, tablets, and granules. It offers compound camphor cream that is used for the treatment of various pathogens on the skin surface, such as mycete, trichopytic, staphylococcal bacteria aureus, bacillus coli, and candida albicans; Hemorrhoids ointment, which is made in soft ointment form and is effective in sterilizing and relieving hemorrhoid symptoms, including itching, distending pain, burning, and bleeding; Sumei slim patch, a natural treatment for weight loss; and pain relief patch used for various ailments, including fever, headache, heart dysentery, diarrhea, and sti ffness and pain caused by hypertension. China Sky One also provides anti-hypertension patch that stimulates blood capillaries, improves circulation, and reduces blood pressure; QiXue asthma patch, which is designed for the treatment of chronic inflammation of the airways and lungs; Stomatitis spray used for the treatment of dental ulcers, pharyngitis, and faucitis; Naphazoline Hydrochloride eye drops for the temporary relief of eye redness associated with minor irritations; cardiac arrest early examination kit used for early stage diagnosis of myocardial infarction; and Naftopidil dispersible tablet designed to treat benign enlargement of the prostate among middle age males, as well as various wash fluids, tablets, liniments, syrups, capsules, granules, injections, aerosols, and oral liquids. The company sells its products through Chinese domestic pharmaceutical chains. China Sky One Medical, Inc. is headquartered in Harbin, the People?s Republic of China.

Top 5 Penny Companies For 2014: (POSC)

Positron Corporation operates as a molecular imaging company providing nuclear medicine technologies and services that are used in the field of nuclear cardiology. The company, through its proprietary PET imaging systems and radiopharmaceutical solutions, enables healthcare providers to accurately diagnose disease, and improve patient outcomes while practicing cost effective medicine. Its proprietary product lines and services include the Attrius, a dedicated PET imaging system; PosiStar, a clinical, technical, and service customer care plan; and PosiRx, a system that automates the elution, preparation, and dispensing processes for radiopharmaceutical agents used in molecular imaging. The company was founded in 1983 and is headquartered in Fishers, Indiana.

Top 5 Penny Companies For 2014: Dehaier Medical Systems Limited(DHRM)

Dehaier Medical Systems Limited, through its subsidiaries, designs, develops, and markets respiratory and oxygen homecare products, and other medical devices in the People?s Republic of China. The company also distributes products designed and manufactured by other companies. It offers various medical devices, including C-arm X-ray systems, anesthesia machines, patient monitors, and general hospital products; and respiratory and oxygen homecare products, such as oxygen concentrators, CPAP devices, portable sleep diagnostics, and Rhinitis hyperthermia devices; and air compressors and ventilator trolleys. The company sells its products primarily to distributors, as well as to hospitals, clinics, and government health bureaus directly. Dehaier Medical has a tripartite strategic cooperation agreement with Taiyo Nippon Sanso Shenwei (Shanghai) Medical Gas Co. Ltd. and Beijing Orient Medical Gas Co. Ltd. to develop and distribute oxygen therapy services for the home use market i n Beijing. The company was formerly known as De-Haier Medical Systems Limited and changed its name to Dehaier Medical Systems Limited in June 2005. Dehaier Medical Systems Limited was incorporated in 2003 and is based in Beijing, the People?s Republic of China.

Thursday, December 12, 2013

Coach Inc. (COH) - Why You Might Want to Take a Second Look - What’s in the Bag?

Founded in 1941 and based in New York, Coach, Inc. (COH) is a luxury designer and marketer of fine accessories and gifts for women and men. The company owns and operates full-priced retail and outlet store locations in the United States, and internationally. It utilizes distributors to help expand their brand presence around the globe and runs e-commerce websites in over 24 countries. However, and in spite of all these efforts, Coach's shares have lagged the broader market over the past year. Coach disappointed on the sales front that fell 1.1 percent, after increasing 6 percent during 4Q fiscal 2013, as a consequence to its idleness in the North American market. Furthermore, the company's shares remained flat in relation to the prior-year quarter, at 77 cents each. In addition, several analysts have qualified the stock as a "sell" case. Some people say it's time to do that, but is it really? Let's take a closer look before rushing a decision.

Why so flat?

Being a luxury fashion purveyor, the company has been challenged by new and fierce competitors –such as Michael Kors (KORS) and Kate Spade. Although it is a well established brand, its tenure as a market leader is not immune to new entrants. As a consequence, Coach's North American business (which consists of 68 percent of net sales) suffered a slight decrease. Recession, also, has not been a friend to sales as its customers tend to be more "aspirational", and are, hence, more sensitive to macroeconomic factors.

It has also been pointed out that, as Coach has embarked itself upon a transformation into a global lifestyle brand, it may be damaging its core business. As it broadens its product offerings, Coach may dilute its core handbags and accessories brand. Customers are very brad-loyal in the handbag and accessories category and thus, while expanding, Coach is running the risk that changes in tastes and preferences will eventually lead to consumers turning elsewhere. Also, although other brands –mainly Eur! opean- have been successful offering a broader line of products, Coach's brand is unfortunately not in the same league as century-old luxury icons.

What's really in the bag?

Coach may be non-European, but it is a century-old (almost a century, actually), strong, recognizable brand. Over the years, the company has survived changes in management, recessions, and competitive threats and the brand has evolved through numerous faces of growth –and it may be having a new one in the form of a new CEO and its expansion into a global lifestyle brand. Furthermore, the word "Coach" itself conjures images of luxury bags. This has given the company the ability to price at levels above lesser brands, but where consumers still see value.

And don't forget about Coach's strong international position, which accounts for 32 percent of its sales, and where its success has only just begun. There, their sales grew by 9.9 percent this year -15.8% when not taking in consideration the devaluation of the Yen. Besides its presence in China and Japan- where the company proved it can compete effectively with European leather goods makers and gain share- Coach has just decided to take its first steps into Europe.

On top of all, and more importantly, Coach has very strong numbers along a low business valuation compared to other luxury goods companies, which makes it a great buying opportunity. In fact, Coach ranks as one of the best cash-generating consumer companies: over the past ten years, sales-per-share growth has averaged about 20 percent per year.

When The Timings Looks Right…

Despite this year's setback on sales, Coach's sales, earnings, cash from ops, free cash flow and net worth have all been growing firmly. It seems that the problems plaguing this company are only temporary in nature, and should not deceive a good investor's eye.

Truth is, due to these issues, shares are now priced at an attractive valuation (see table below) for a potentially lucrative long-! term inve! stment. In fact, several investment gurus seem to have recognized this potential over the past few months: prominent investors, from Jim Simmons to Joel Greenblatt and Steve Mandel upped their positions in the company over the past quarter.

Company (Ticker) Coach (COH) Ind. Avg. Michael Kors (KORS)
P/E 15.5 21.6 32.8
Operating Margin 29.9 19.9 29.8
Net Margin 20.4 13.0 19.2
ROA TTM 31.1 16.4 35.5
ROE TTM 47.2 27.3 46.4
Source: Morningstar

Disclosure: Victor Selva holds no position in any stocks mentioned

Currently 4.33/512345

Rating: 4.3/5 (3 votes)

Email FeedsSubscribe via Email RSS FeedsSubscribe 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
183,785 Users
Have Received Their FREE 12-Page Warren Buffett Portfolio Report Get Yours FREE Here 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
COH STOCK PRICE CHART 55.94 (1y: -1%) $(function() { var seriesOptions = [], yAxisOptions = [], name = 'COH', display = ''; Highcharts.setOptions({ global: { useUTC: true } }); var d = new Date(); $current_day = d.getDay(); if ($current_day == 5 || $current_day == 0 || $current_day == 6){ day = 4; } else{ day = 7; } seriesOptions[0] = { id : name, animation:false, color: '#4572A7', lineWidth: 1, name : name.toUpperCase() + ' stock price', threshold : null, data : [[1355205600000,56.43],[1355292000000,56.43],[1355378400000,56.64],[1355464800000,57.05],[1355724000000,57.89],[1355810400000,58.92],[1355896800000,59.16],[1355983200000,58.42],[1356069600000,57.57],[1356328800000,57.52],[1356501600000,54.13],[1356588000000,54.86],[1356674400000,54.3],[1356933600000,55.51],[1357106400000,55.13],[1357192800000,54.95],[1357279200000,55.51],[1357538400000,55.63],[1357624800000,57.33],[1357711200000,57.96],[1357797600000,57.49],[1357884000000,58.89],[1358143200000,61.01],[1358229600000,61.41],[1358316000000,61],[1358402400000,61.57],[1358488800000,61.8],[1358834400000,60.68],[1358920800000,50.75],[1359007200000,50.9],[1359093600000,51.21],[1359352800000,51.52],[1359439200000,52.22],[1359525600000,51.55],[1359612000000,51],[1359698400000,49.87],[1359957600000,48.67],[1360044000000,48.81],[1360130400000,49.1],[1360216800000,48.61],[1360303200000,48.93],[1360562400000,48.93],[1360648800000,49.01],[1360735200000,48.77],[1360821600000,48.2],[1360908000000,48.4],[1361253600000,49.02],[1361340000000,48.13],[1361426400000,47.62],[1361512800000,46.79],[1361772000000,46.77],[1361858400000,46.5],[1361944800000,47.82],[1362031200000,48.33],[1362117600000,48.22],[1362376800000,49.28],[1362463200000,50.1],[1362549600000,49.93],[1362636000000,48.54],[1362722400000,48.93],[1362978000000,49.5],[1363064400000,48.81],[1363150800000,49.67],[1363237200000,49.99],[1363323600000,50.41],[1363582800000,49.27],[1363669200000,48.47],[1363755600000,49.29],[1363842000000,49.81],[1363928400000,50.27],[1364187600000,49.72],[1364274000000,49.5],[1364360400000,49.61],[1364446800000,49.99],[1364792400000,49.99],[1364878800000,50.39],[1364965200000,50.55],[1365051600000,50.33],[1365138000000,50.1],[1365397200000,50],[1365483600000,49.93],[1365570000000,51.21],[1365656400000,52.33],[1365742800000,52.37],[1366002000000,51.44],[1366088400000,51.71],[1366174800000,50.85],[1366261200000,51.38],[1366347600000,51.2],[1366606800000,50.59],[1366693200000,55.55],[1366779600000,56.28],[1366866000000,57.53],[13669524! 00000,57.42],[1367211600000,58.27],[1367298000000,58.86],[1367384400000,58.24],[1367470800000,58.18],[1367557200000,58.25],[1367816400000,57.33],[1367902800000,58.28],[1367989200000,58.74],[1368075600000,58.53],[1368162000000,59.5],[13684

Wednesday, December 11, 2013

Warrants Warrant More Respect in the Resource Sector: Dudley Baker

The Gold Report: Before we get into how to invest in warrants, please tell our readers what a warrant is.

Dudley Baker: Very simply, a warrant is a security that gives the holder the right, but not the obligation, to purchase the underlying common shares at a specific price and includes a specific expiration date.

TGR: How does that differ from a futures contract?

DB: A futures contract refers to the purchase of an actual commodity: gold, silver, soybeans, pork bellies, etc. Warrants also differ from call options. Those are derivative contracts written on a stock, stock index or futures contract.

"Virtually every company in the resource sector has a warrant in its capital structure."

The official definition of warrants states that they are securities, the distinction being here that a warrant is actually issued by the company.

TGR: Why do most investors overlook warrants?

DB: That has been a mystery for decades. Since the early 1980s, when the Chicago Board Options Exchange (CBOE) came into play, investors' interest turned toward stock options—calls and puts. These days, it's all about trading, and for brokers, it's all about commission. Warrants were left out of the investment arena. They're still great opportunities. My mission is to educate and explain the value of stock warrants.

TGR: What are the differences between trading warrants and private placement warrants

DB: Virtually every company in the resource sector has a warrant in its capital structure. Very few of those warrants actually trade; most are private placement warrants.

Private placement warrants serve as an equity kicker. I'll use Rick Rule as an example. He would never do a transaction unless a long-term warrant was part of the equity package because he wants more bang for his buck. Unfortunately, many individual investors don't have the opportunity to participate in private placements.

However, investors should know that there are roughly 200 trading warrants out there right now in the U.S. and Canada, not just in the resource sector, but across the board.

TGR: We're in a depressed market for mining equities. Does market performance have an effect on the warrant market?

DB: Yes, if stocks are down, warrants will be down. That said, it's all about the underlying company. For the warrant to do well, the company has to perform. We're always looking for the upside leverage.

"Now is when investors want to start looking for long-term warrants on companies they like."

We're looking for a 2:1 leverage. If an investor wants the common shares in a company to rise 100%, we want the warrant to perform 200%. That gives us a reason to buy the warrant in lieu of the common shares. It's all about gaining more leverage with long-term warrants.

For the last couple of years, the market has not been kind to resource investors, whether it's common shares or warrants. We see this whole sector coming back big time. Now is when investors want to start looking for long-term warrants on companies they like.

TGR: Why do mining companies, especially gold and silver equities, deal in warrants more than other sectors?

DB: The resource sector is highly capital intensive and high risk. Let's face it, the companies need more incentive to get someone like Rick Rule and Sprott Global involved in a potential financing. They have to offer a long-term warrant as an equity kicker.

TGR: The warrant offsets risk.

DB: Exactly. In the resource sector, money goes into the ground and everybody hopes for the best. The people providing the financing, however, need more opportunity for the upside potential to outweigh the downside. The financiers know that many companies will not perform, so they require these equity kickers.

TGR: What's the typical path to making money by investing in a warrant?

DB: The most straightforward, logical way is to pick the right company and buy its warrants. If the company doesn't perform, the warrant can't perform either.

On top of that, we need a good market environment or the expectation of a good market environment, which I think we have right now. I think most would agree that the next few years probably will be in favor of resource investors.

TGR: Are there other ways to make money with warrants?

DB: Yes, one is a dollar allocation. Take an investor who comes to us with a question as to how to invest $10,000 in a gold stock. The company also offers a long-term warrant. He could split the investment between the stock and the warrant. Depending on the leverage situation, that split could be 50/50, 80/20, or another combination, according to the investor's risk/reward ratio.

"The liquidity of warrants varies on a daily basis."

There also are hedging opportunities in warrants. Instead of just buying the warrant, investors can buy the warrants and short the common shares. They could buy the warrants and sell puts against that position. They could actually short the warrants and buy call options. So they're just trying to establish hedge positions here.

This works better in the U.S. markets. That is because American investors can't exercise a warrant issued in Canada; U.S. investors can only trade Canadian warrants. A Canadian investor could probably short the shares.

I'd almost say, especially in the U.S., any time you are doing a hedge and you're buying the common shares as your core position, basically you just substitute the company's long-term warrant for the common shares, and you can accomplish that same hedge position with a lot less cash on the line, which means your net return will be substantially higher.

TGR: What are four things should investors be aware of before entering the world of warrants?

DB: First, warrants can expire. Once they've expired, they are worthless. I would recommend choosing only long-term warrants, which to me means a minimum of two or three years. This gives you more time for the markets to turn around and to capture the maximum gains.

Second, stick with companies that you like. Before buying common shares, ask whether the company has any long-term trading warrants, You may have to look into those yourself; not all newsletter writers are up on the opportunities warrants offer.

Third, before you buy a warrant, find out what the current leverage is. Is the warrant overpriced, fairly priced or undervalued? You don't want to pay more than you have to.

Fourth is liquidity. The liquidity of warrants varies on a daily basis.

TGR: When you talked with The Gold Report in 2008, there was no exchange where warrants were traded. Are there some new resources that make warrants trading more transparent and, perhaps, simpler? Your website, CommonStockWarrants.com, is one resource. Are there others?

DB: The lack of information about warrants was one reason I started my service, and there has been progress. Today, warrants are traded like stocks on the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSX.V) in Canada. Warrants for U.S. companies can trade on the New York Stock Exchange (NSYE) or on NASDAQ. Exchanges issue warrants a symbol, just like common shares.

TGR: They just have a longer ticker.

DB: It's usually five letters or it will have a .WT, or in the U.S., it might have a -WS.

TGR: When an outstanding warrant is worth less than the current stock trading price, it can create an overhang on a stock. How do you play that situation?

DB: There is a perception, and probably rightly so, that outstanding warrants have a dilution effect on the common shares. Some people see that as a negative. We look at the upside leverage opportunity that warrants offer an investor. We know there will be slight dilution to the company's shares if and when those warrants are exercised. We also know that means new cash coming into the company's kitty. It's a tradeoff.

TGR: But if a company is trading for $2/share and its warrant is trading at $1, why not buy the warrant instead of the shares?

DB: The warrants will always be selling for less than the common shares but an investor must still ask several questions: do you like the company, what is the time remaining until expiration, and what are the current leverage calculations as to whether the warrant is fairly priced. Additionally, a warrant will almost always trade at a minimum of its intrinsic value. If the common shares are selling at $12/share and the exercise price on the warrant is $10, we know that warrant has to be selling in the marketplace for a minimum of $2.

TGR: What's the best way to play a long warrant?

DB: Time permitting, you want to hold a warrant as long as you would hold the common shares. Remember, you're basically playing the common stock even though you own the warrants.

If you own a warrant and, after 6 to 12 months, decide that the common shares have peaked and are overbought, you sell the warrant at the same time that you would sell the shares. You make the same decision, as though you owned the common shares.

People often ask if you have to hold the warrant until the expiration date. The answer is no. Warrants are totally liquid. You can buy today, sell tomorrow. You're not locked in.

TGR: What are some warrants in the gold and silver space that you'd like to share with us today?

DB: There are several. We have Sandstorm Gold Ltd. (SSL:TSX; SAND:NYSE.MKT), which has a similar streaming model to Silver Wheaton Corp. (SLW:TSX; SLW:NYSE) and the same management team. Sandstorm Gold has three warrants trading right now. I always look for the warrant with the longest life. The Sandstorm Gold Warrant B goes out to September 2017, giving investors almost four years of remaining life.

New Gold Inc. (NGD:TSX; NGD:NYSE.MKT) is another great company. Its Warrant A expires in June 2017, more than three-and-a-half years of remaining life. We expect to see a rip-roaring bull market within that time period, so that's really cool.

The third name I'd share with you is Alamos Gold Inc. (AGI:TSX). It issued a five-year warrant just a few months ago that will expire in August 2018.

For any of those three, of course, you want to determine the leverage calculation. Is it overvalued, undervalued?

TGR: You would buy those warrants and sell them when you believe they are appropriately valued.

DB: Exactly. I would be utilizing all the tools that an investor would: looking at long-term charts, following analysts or newsletter writers.

If, as I expect, we get a nice bull market in the resource sector, it would not be uncommon to see common share prices double, triple or quadruple. The warrants should do twice as well. It's just a matter of staying on board as long as possible to capture these gains, but knowing that you can pull the plug and can exit at any moment.

It's like any investment, if you double your money, you may want to take some money off the table and minimize your risk. But we'd like to capture as much of this upcoming bull market as possible.

TGR: If investors want to find the current value of one the Sandstorm Gold warrants that are trading, where would they go?

DB: That's the dilemma for most investors. There are 200 warrants trading on the markets now in total, not just in the resource sector. It's tooting my own horn, but CommonStockWarrants.com is virtually the only place to find all the detail needed to make informed investment decisions.

Barring that, investors willing to invest the time can follow company news. Fortunately, resource companies tend to be more transparent with information about their warrants.

You can read in the news about U.S. companies outside the resource sector—biotech and financial service firms—making offerings with common shares and warrants. However, 9 times out of 10, those warrants will not trade. You have to dig that information out of the original prospectuses, where there's a phrase that reads, "There is currently no market for the warrant and we do not anticipate a market to be established."

TGR: What other warrant ideas are out there?

DB: There are a couple of interesting companies in the energy space. Kinder Morgan Inc. (KMI:NYSE) has a long-term warrant that goes out to May 2017. A Fieldpoint Petroleum (FPP:NYSE.MKT) warrant goes out to March 2018.

In the biotech space, I would name MannKind Corp. (MNKD:NASDAQ). Its warrant expires in February 2016. Not long ago, another newsletter crowed about gains on its recommendation of Mannkind's common shares. If he had bought the warrant at the same time as the common shares, he would have more than doubled the money for his investors. Instead of making 200%, it would have made a 400–500% return.

Another is Bioamber Inc. (BIOA:NYSE), which has a warrant that expires in May 2017. This is a sustainable chemicals company. Its proprietary technology platform combines industrial biotechnology and chemical catalysts to convert renewable feedstock into chemicals for use in a wide variety of everyday products.

Northwest Biotherapeutics Inc. (NWBO:OTC) is another biotech name with trading warrants.

TGR: Dudley, we've just scratched the surface of warrants. What would be one final thought for our readers?

DB: Brian, I would say warrants are a simple investment vehicle that has been overlooked for decades, whether for trading or for hedging. For good or ill, warrants are a niche market. My passion is getting more people to understand the opportunities of long-term warrants.

TGR: Thanks for your time and your insights.

Dudley Baker worked for the IRS for 29 years, which gave him an extensive 'numbers' background. He has 35 years of accumulated knowledge and experience in trading stocks, options, leaps, futures, options on futures and warrants. In March 2005 he founded and launched a new market data service, Precious Metals Warrants, which provided detail on mining and energy warrants trading on the U.S. and Canadian exchanges. The service was expanded in May 2013 to include all stock warrants trading in the U.S. and Canada and for all industries and sectors and the name changed to Common Stock Warrants. Baker can be reached at Dudley@CommonStockWarrants.com or through the website www.CommonStockWarrants.com.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.

1) Brian Sylvester conducted this interview for The Gold Report and provides services to The Gold Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Dudley Baker: I or my family own shares of the following companies mentioned in this interview: Sandstorm Gold Warrant B (SSL.wt.B) and New Gold Warrant A (NGD.wt.A). I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts' statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.


The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Commodities Markets Trading Ideas

Originally posted here...

  Most Popular Slideshow: Apple's 2014 Rumored Lineup Barron's Recap: Top 10 Stocks for 2014 UPDATE: Sysco and US Foods Agree to Merge in $8.2B Agreement Earnings Expectations For The Week Of December 9 SYSCO, US Foods Agree to Merge, Enterprise Value of Deal is ~$8.2B Five Star Stock Watch: eBay, Inc. Related Articles () Investors Barely React To Vail Resorts' Q1 Miss Market Wrap For December 9: Investors Digest Further Clues Hinting at An Upcoming Taper Bank of the Ozarks to Acquire Bancshares of Houston, Texas for Approximately $23M ValueClick to Sell Owned & Operated Websites Segment to IAC Pinnacle Foods Announces 17M Share Secondary Offering Synthetic Biologics, Intrexon Initiate Development of Novel Biologics for a Subset of Patients Suffering from IBS Around the Web, We're Loving... Lightspeed Trading Presents: Thunder and Tubleweeds: Trading Techniques for the New Market Enviroment Pope Francis Rips 'Trickle-Down' Economics Come See How the Pro's Trade in this Exclusive Webinar Wynn, MGM, Other Casino Giants Vying For U.S. Turf What Should You Know About AMZN? View the discussion thread. adsonar_placementId=158747

Tuesday, December 10, 2013

At the Close: Stocks Edge Higher, Look Ahead to 2014

Like the little engine that could, stocks are chug, chug, chugging higher, even if they have to work hard for their gains.


The S&P 500 gained 0.2% to 1,808.37 today, while the Dow Jones Industrial Average finished little changed (some 0.03% higher, if you must know) at 16,025.53.

The S&P 500 got a lift from Sysco (SYY), which gained 10% to $37.62 after purchasing a competitor,  Davita HealthCare Partners (DVA), which rose 6.7% to $62.17, and Cabot Oil & Gas (COG), which reported stronger than expected production in the Marcellus region. Big losers include Newfield Exploration (NFX), which dropped 8% to $24.33 after offering disappointing production guidance, and Edwards Lifesciences (EW), which fell 5.4% to $62.73 after releasing disappointing earnings guidance.

Still, investors appear to be looking past December and into 2014. Strategists, in particular, are predicting a solid, though muted year-to-come. Just eyeballing the reports that have been rolling in, the consensus appears to be for the S&P 500 to close somewhere between 1,900 and 2,000 by the end of 2014, good for a 5.1% to 11% gain. That’s right in line with the 5.5% gain in the S&P 500 in the 23 years following 20%+ gains since 1927, according to this Wall Street Journal story, but the average misses the point: the S&P 500 has dropped eight times after a 20% gain, but has gained 20% or more six times. So maybe those predicting a lukewarm 2014 will be right, but the odds suggest it could be another year of extremes–good or bad.

Top Penny Companies To Invest In 2014

Barclays’ Barry Knapp recommends investors shift into safer sectors. In a note released on Friday, he writes:

While the fundamental improvement seems to point to a favorable environment for equities in 1H14, given the persistent drop in the equity risk premium in cyclical stocks and unfavorable mix of S&P 500 mid-cycle valuation and earnings growth, even if our earnings forecast does prove correct, the risk of a period of digestion of this year's gains are fairly high…

We upgrade Staples to Overweight to reduce portfolio beta and downgrade Utilities to Underweight to decrease interest rate sensitivity; reducing total portfolio cyclical exposure.

Knapp, by the way, is one of those predicting a 1,900 S&P 500 at the end of 2014.