Del Frisco's Restaurant Group, Inc. (DFRG) owns and operates 35 upscale steakhouses under the brands Del Frisco Double Eagle, Sullivans and Del Frisco's Grille. We believe the company's operating culture is best in class, its restaurants are unique and have great brand awareness, and have strong economics. There are 10 Double Eagles in marquee locations that dominate their markets as high end business destinations. We think that, over time, this division will more than double as the company meticulously adds best in class large units in major cities.
The company began development of its Grille concept last year and has now built seven stores, all of which are successful and have exceeded expectations. These restaurants have a broader menu, are packed at both lunch and dinner, and are working in both urban and suburban locations. This will be the primary growth vehicle and we believe that there easily can be 50 of these in time. We think the company can grow earnings at between 20-25% per year for the foreseeable future. However it trades at only a high teens multiple because current sales are soft in the Sullivans' units which matters less to the overall business as the other concepts grow. We believe the multiple should expand along with the earnings growth.
From Ron Baron's Baron Funds third quarter 2013 report.
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Thursday, January 30, 2014
They won't make you more powerful than a locomotive. And you might not be able to leap tall buildings in a single bound in one of their products.
But one Michigan company is moving faster than a speeding bullet — by selling superhero capes.
Livonia-based Superfly Kids makes and sells capes — custom capes, to be exact — for kids and a few adults. And their sales have taken off like, well, Superman.
From 2010 to this year, the company, owned by Holly Bartman and Justin Draplin, has seen its revenues leap from about $260,000 to an estimated $2.4 million. They are expected to double next year.
It all began seven years ago when Bartman's son, Owen, who was turning 4, wanted a superhero party.
"But he didn't want to be Batman or Spider-Man. He wanted to be his own superhero," said Bartman, who taught special education before launching the business.
So, the mild-mannered mom made superhero capes — red ones, blue ones, black ones, all different colors — out of satiny material with lightening bolts and stars on them for the 15 or so kids invited to Owen's birthday party. The kids ran around the backyard, the flowing material trailing them as they went. Other parents and friends were impressed.
One friend told her the capes were so good she should sell them.
A few months later, she did just that.
Bartman, 40, said she initially had no business plan — or any plan at all, really.
Employee Julie Boase sews a custom cape at Super Fly Kids on Thursday, Sept.26, 2013, in Livonia, Mich.(Photo: Andre J. Jackson, Detroit Free Press)
Making capes was a hobby. She sold them online to make a little money. Orders would come in. She'd fill them. Then, even more orders would come. Aft! er a couple of years, the demand grew so big that she ran out of space in her house.
That's when she started renting space for about $160 a month in a Farmington office building, where she met Draplin, now 33.
Draplin, a fearless entrepreneur who thrives off creating businesses, had a marketing company in the same building. Every morning to get into his office, he had to step over material Bartman had rolled out in the hall to cut for her capes.
Curious, Draplin asked her what she was doing. She told him she was in the superhero business.
"At first, I thought there was no way she could make money selling capes," he said. "I couldn't wrap my brain around it."
But later, he did some calculations. He estimated there are about 30 million kids age 7 and younger in the U.S. If they all wanted capes, which Superfly sells at about $30 each, the market could be huge — $900 million.
So in 2009 Draplin went into business with Bartman.
Up, up and away
Bartman was more interested in designing and making the capes than selling them. She welcomed the partnership.
Draplin bought capes from Bartman and resold them through his own website.
After a few weeks, the two entrepreneurs decided to combine their businesses and the enterprise grew even faster. The duo have moved and expanded 10 times. They now work from a 7,600-square-foot factory in Livonia, and the company has 18 employees. They playfully answer the phone: "How can I save your day?"
Mike Siegrist prepares fabric to be made into customized capes at Super Fly Kids on Thursday, Sept.26, 2013, in Livonia, Mich.(Photo: Andre J. Jackson/ Detroit Free P Detroit Free Press)
Inc. Magazine ranked Superfly Kids the second fastest-gr! owing pri! vate company in Michigan, and 227th fastest in the U.S., by revenues in the past three years. The magazine ranked it behind Marketplace Homes, also in Livonia, and ahead of LinTech Global, a software consulting firm in Farmington Hills.
However, the owners acknowledge they made their first big mistake earlier this year when they overestimated how much they would sell in an online promotion. They were left with too much inventory. As a result, they expect their annual sales to be flat this year compared with 2012.
The owners also concluded that to continue growing, they need to open new channels — not just online — to sell to customers.
Despite the super growth curve, the decisions Bartman and Draplin make next likely will be the most challenging, and perhaps scariest, of their partnership.
"It's a critical point in the company, and they have to explore whether they want to bring it to the next level," said Julie Gustafson, executive director of the Macomb-Oakland University INCubator in Sterling Heights. "If they make the wrong decisions, there's a chance of failure."
'A lot of fun'
In many ways, Bartman and Draplin said, they are a good team.
Bartman said she tends to focus on the products and quality control — and takes a slow and steady approach. Draplin wants to grow the company as fast and as big as he can. He calls himself a spaghetti thrower, trying a lot of ideas to see which ones stick.
In addition to capes, the company sells superhero cuffs and masks, T-shirts, tutus, belts, crowns and stuffed toys. It has created its own comic book. (Characters in the book are named Owen, Lily and JJ.)
Superfly Kids even sells a line of adult-sized capes that can be customized with corporate logos. Their merchandise is made in the Livonia plant.
Draplin said he wants to broaden both their product lines and distribution to reach more retailers. He also has contemplated multilevel sales techniques similar to those of Amway and Mary Kay cosmetics.!
To! expand even quicker, they are considering whether to seek outside investors, which could require relinquishing control of the enterprise.
"I never thought I'd be doing this for a living," Draplin said. "This is a lot of fun."
Wednesday, January 29, 2014
DELAFIELD, Wis. (Stockpickr) -- At Stockpickr, we track daily portfolios of stocks that are the biggest percentage gainers and the biggest percentage losers.
>>5 Hated Earnings Stocks You Should Love
Stocks that are making large moves like these are favorites among short-term traders because they can jump into these names and try to capture some of that massive volatility. Stocks that are making big-percentage moves either up or down are usually in play because their sector is becoming attractive or they have a major fundamental catalyst such as a recent earnings release. Sometimes stocks making big moves have been hit with an analyst upgrade or an analyst downgrade.
Regardless of the reason behind it, when a stock makes a large-percentage move, it is often just the start of a new major trend -- a trend that can lead to huge profits. If you time your trade correctly, combining technical indicators with fundamental trends, discipline and sound money management, you will be well on your way to investment success.
>>5 Rocket Stocks for a Volatile Week
With that in mind, let's take a closer look at a several stocks under $10 that are making large moves to the upside.
pSivida (PSDV) develops products to deliver drugs and biologics primarily in the U.S. and the U.K. This stock closed up 8.3% to $4.96 in Tuesday's trading session.
Tuesday's Range: $4.52-$4.96
From a technical perspective, PSDV ripped sharply higher here right off some near-term support at $4.46 with decent upside volume. This move is quickly pushing shares of PSDV within range of triggering a major breakout trade. That trade will hit if PSDV manages to take out some near-term overhead resistance levels at $5.14 to $5.45 and then once it clears its 52-week high at $5.60 with high volume.
Traders should now look for long-biased trades in PSDV as long as it's trending above some near-term support at $4.46 or above $4 and then once it sustains a move or close above those breakout levels with volume that hits near or above 291,389 shares. If that breakout hits soon, then PSDV will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $6.50 to $7.
China Zenix Auto International
China Zenix Auto International (ZX), an investment holding company, engages in the research, development, production, and sale of commercial vehicle wheels to aftermarket and original equipment manufacturers. This stock closed up 8.6% to $3.01 in Tuesday's trading session.
Tuesday's Range: $2.78-$3.01
From a technical perspective, shares of ZX ripped sharply higher here right above its 50-day moving average of $2.66 and back above its 200-day moving average of $2.98 with decent upside volume. This stock has been uptrending strong for the last two months, with shares moving higher from its low of $2.11 to its recent high of $3.15. During that uptrend, shares of ZX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ZX within range of triggering a major breakout trade. That trade will hit if ZX manages to take out Tuesday's high of $3.01 to some more near-term overhead resistance at $3.15 with high volume.
Traders should now look for long-biased trades in ZX as long as it's trending above its 50-day at $2.66 or above $2.60 and then once it sustains a move or close above those breakout levels with volume that hits near or above 72,953 shares. If that breakout triggers soon, then ZX will set up to re-test or possibly take out its next major overhead resistance levels at $4 to its 52-week high at $4.27.
YuMe (YUME) provides digital video brand advertising solutions. This stock closed up 8% to $7.95 in Tuesday's trading session.
Tuesday's Range: $7.27-$8.09
From a technical perspective, YUME spiked sharply higher here right above some near-term support at $7.15 and back above its 50-day moving average of $7.89 with lighter-than-average volume. This stock recently put in a major bottoming chart pattern, since shares of YUME have found buying interest over the last two months each time it has pulled back to near $7 a share. Shares of YUME are now starting to spike higher off those support levels and the stock is quickly moving within range of triggering a big breakout trade. That trade will hit if YUME manages to take out Tuesday's high of $8.09 to some more near-term overhead resistance at $8.80 with high volume.
Traders should now look for long-biased trades in YUME as long as it's trending above Tuesday's low of $7.27 or above $7 and then once it sustains a move or close above those breakout levels with volume that hits near or above 177,215 shares. If that breakout hits soon, then YUME will set up to re-test or possibly take out its next major overhead resistance levels at $9.37 to $10.15.
To see more stocks that are making notable moves higher, check out the Stocks Under $10 Moving Higher portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.
Follow Stockpickr on Twitter and become a fan on Facebook.
At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets includingCNBC.com and Forbes.com.
You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.
Monday, January 27, 2014
If it looks like a bubble and acts like a bubble, it's a bubble.
Tesla Motors (TSLA) is the new bubble stock.
There is a lot of money to be made and lost in a bubble stock, but the trouble is bubble stocks are for trading not investing.
Once a bubble is underway almost anything can happen in the short term, but in the long term the outcome of a return to market normality is extremely likely. That doesn't mean you can't make a lot of money out of the madness, it's just a very dangerous game.
Risk equals reward and bubbles are immensely risky, which is why there is reward to be had. As such, bubble stocks draw investors to them like the clichéd moths to a flame.
Bubbles are lovely to behold. Look at this delightful chart:
Let's go closer. Fascinating. What's that burning smell? Wow it's me!
Of course the best thing to do is ignore these kinds of stocks but that sadly is not going to happen. The reason TSLA has gone to the moon–shares are up more than 500% over the last 12 months–is everyone wants in. Saying "avoid" is futile.
Saying Tesla's stock price is too high is not the same as saying Tesla is not a brilliant company. Tesla has done a great job. The stock isn't through the roof for nothing. You just have to see one of its cars on the road to want to own it. It is so "lick-able" it looks like an iPhone with wheels.
What did they do to the paint job to give it that opalescence? Or is that the new owners just polish it 24/7? Who knows, we shouldn't care. Perception can only be reality for so long.
We should stick to the land of comparative valuations and likely outcomes. So Tesla is a great company with a great product, but is it a good value investment? Let's keep that for later, but you can guess right off what my opinion is: no it isn't.
Is its stock going to rise? Why not? Once "superstar" status is achieved normal laws of the market no longer apply.
If Tesla wasn't a superstar stock it would be the easiest call in the world to short Tesla, but with the U.S. market's bi-polar tendencies, this is the first thing to avoid doing at this stage. There is always plenty of time to short Tesla and it will be a long time after it made perfect sense to do so. Superstar stocks can stay in orbit a lot longer than you'd ever guess.
So go long? Going long Tesla is purely a trading position, there is no long-term reason to cling onto this company at these heady valuations. Not unless TSLA invents anti-gravity paint.
I know no one wants to hear this but Tesla is worth twice Fiat, the owners of Ferrari. Tesla and Porsche are worth about the same. You could buy Peugeot Peugeot five times over. Should Tesla be worth half of GM? The market thinks so and the market is always correct. Right?
Special Offer: Get the names of five rock–solid companies with real, tangible growth drivers and big money making potential in the free report 5 Bargain Stocks To Buy Now.
So how to play the stock? Well first off, if you aren't in, leave this one alone unless you want to play a high risk gambling game with your money. Tesla is now pure speculation.
Stocks continue their slide today as the government shutdown continues and politicians appear set to drag the debt ceiling into the debate.Associated Press
The S&P 500 has dropped 0.7% to 1,682.30, while the Dow Jones Industrials have fallen 100 points, to 0.7% to 15,033.21.
Nomura’s Alastair Newton explains the risks:
Following the impasse over the continuing resolution, we now see a non-negligible possibility that Congress and the Administration will fail to reach agreement on the debt ceiling without there being a technical default first.
The main risk, as we see it, is that moderate Republicans will hold out beyond 17 October to try to head off possible de-selection by the Tea Party in upcoming primaries, even though related attempts to roll back "Obamacare" are doomed.
Nevertheless, even if the deadline (which may now be later than 17 October) for a deal passes, we see only a very low probability of a default on Treasuries.
However, coupled with the impact of the second round of the sequester, pending a resolution we do expect to see:
Even decent jobless claims data wasn’t enough to lift stocks this morning. Miller Tabak’s Andrew Wilkinson sums up the data and its implications:
The Labor Department issued another healthy and clean claimant count delivering the lowest four-week moving average reading since May 2007. The headline reading of 308,000 claims once again came in below a survey average of 315,000 while prior weekly data was revised up by only 2,000. We continue to wonder quite when the momentum will show up in stronger payrolls – something denied by ADP in its September report and something we are likely to be deprived of on Friday by the government shutdown…
The claims level implies that in a period of rising political uncertainty firms are holding onto workers at a time when the economy outside of Washington appears to be moving ahead with reasonable momentum. In the face of such uncertainty and with lack of clarity on the outlook for the economy such momentum is insufficient to prompt the Fed to commence the tapering process.
Will claims stay that way? Already, manufacturers have started to furlough workers–even if they didn’t show up in today’s numbers. The Wall Street Journal reports:
The partial shutdown of the federal government is leading to layoffs and production disruptions at defense contractors and some manufacturing companies.
United Technologies Corp. (UTX) said on Wednesday that it is preparing to furlough nearly 2,000 workers at its Sikorsky unit, which makes Black Hawk helicopters for the Defense Department, and may have to idle several thousand more workers at its Pratt & Whitney and UTC Aerospace units if the shutdown drags on for weeks.
United Tech has dropped 0.5% to 104.51, while Boeing (BA) has fallen 0.7% to $116.97, both helping to weight down the Dow.
Over at the S&P 500, HCP (HCP) has dropped 2.8% $40.62, making it the biggest loser in the benchmark, after the healthcare REIT fired its CEO. PVH (PVH), meanwhile, has gained 5.7% to $124.06, making it the S&P 500′s biggest winner at 9:48 a.m., after the company said it would sell its GH Bass division.
Texas Industries (TXI) has plunged 7.5% to $61.99 after the construction company said it earned 1 cent a share, below forecasts for 2 cents.
Sunday, January 26, 2014
The first things to look for in the non-commercials net change indicator are group themes. Are there similar movements in the COT data in several markets within a group? This week the answer would be no. Against the background of geopolitical concerns and a US holiday last Monday, movements in COT data have been mostly muted. Still, there was some movement again in soybeans, as well as meal and oil. And copper continues to coil but non-commercials backed off their threat to cross to the net long side of the market.
This RadarScreen capture shows the net change in the net non-commercial position, expressed as a percent of the total non-commercial open interest, in the Commitments of Traders (COT) data released Friday, September 6.
This indicator and more information about COT reports are available in the Analysis Concepts paper titled "Commitments of Traders: Breaking Down the Open Interest." As detailed in the paper, the intention is to follow the money flow of large speculators: money managers, hedge funds, etc.
You can read more of this blog here. Written by Stanley Dash, VP, Applied Technical Analysis, TradeStation. Follow TradeStation
Saturday, January 25, 2014
The stock market was pounded on Friday, making for a very bad week and a rough start for January. Still, not all is lost. A few stocks managed to avoid the carnage. Despite a drop of 318 points in the Dow Jones Industrial Average (-1.96% to 15,879.11) and despite a drop of 2.1% in the S&P 500 Index (-38.17 to 1,790.29), three of the thirty Dow stocks closed up on Friday.
The emerging markets were taking it on the chin and being set up for a really bad week ahead, and the currency woes may start biting into key US industrial exports. 24/7 Wall St. covered the four stocks which dominated the DJIA losses on Friday, but these are five key stocks that avoided the market carnage. Again three are DJIA stock and two of which are active S&P 500 names.
Microsoft Corporation (NASDAQ: MSFT) managed to turn in a gain of almost 2.1% to $36.80 on Friday. You can thank its earnings for this, as well as analysts taking their targets higher for the software and technology giant. The criticism remains over the post-Ballmer transition, so imagine how well it might have done (or will do ahead) if the CEO replacement is handled adequately and rapidly.
Procter & Gamble Company (NYSE: PG) managed to gain 1.2% to $79.18 after beating earnings expectations. This is also one of the top defensive stocks of the Dow, so investors who want stock market exposure without so much risk might be swinging money and parking it in consumer products too. P&G guided for earnings to rise 7% to 9% per share in 2014. Not bad, not bad at all.
Merck & Co. Inc. (NYSE: MRK) was a bit of a mystery rise, particularly when you consider that Pfizer Inc. (NYSE: PFE) fell by almost 3% on Friday. Perhaps it was just a bounce that was needed after several days of serious losses that robbed almost all of the big gain from the prior week. Merck shares closed up $0.38, or 0.74%, at $51.98 on Friday. Maybe being a defensive stock in the drug sector was another driving force, but the relative performance between it and Pfizer is not really a normal trading observation.
There were two other standout winners as well which are large and actively traded stocks day in and day out.
Juniper Networks, Inc. (NYSE: JNPR) managed to hit another annual high of $28.75, and closed on Friday up just over 6.5% at $27.72. That 38 million shares stands out heavily as well, considering that the average volume is almost 9 million share per day. Juniper also saw at least three key analyst upgrades as well. Having 59% quarterly profit growth is not the norm in this market, and Jana Capital is actively pressing the company to do better in managing costs and returning capital to holders. Juniper has about $4 billion in cash and liquidity (versus what is now a $14 billion market cap), yet it pays no dividend. Our quick calculation of a 25% payout of adjusted operating earnings ahead would yield a dividend of about 1.4% without Juniper eating into its huge treasure chest already on the books.
Discover Financial Services (NYSE: DFS) rose after beating fourth quarter estimates. The credit card issuer said that its loan balances were up 4%, while its sales volume rose by 3%. Shares were up as much as 5% at one point, but a 2% broad market correction managed to bring down those gains to “only” 2.8% to $53.88. This is still close to its high of $56.20 for the year and the stock’s high on Friday was $55.50. Being a financial stock and closing up on a day like Friday is impressive by almost all counts, even if the closing price was only 13-cents above the daily low. The more than 9 million shares which traded was about 3-times normal trading volume for Discover.
Friday was without a doubt a bad day for the stock market. Many have been calling for a real correction after 26% DJIA gains and 29% S&P 500 gains in 2013. Even in a sell-off, there is that saying “There’s always a bull market somewhere.” This is just proof again that some stocks can rise handily regardless of the market.
Below is a one-year performance chart of each of these five stocks from Yahoo! Finance. The gains may seem huge on Friday, but the gains versus the strong market over the last year may put this in even more perspective.
Source: Yahoo! Finance
Thursday, January 23, 2014
The simple statement by the Securities and Exchange Commission (SEC) that Philip A. Falcone of Harbinger Capital Partners has “agreed to be barred from the securities industry for at least five years” may list a time period, but effectively he is out of the business for life. In an industry that has had its share of phoenixes, Falcone has made too many mistakes to claw his way back. Breaking the law is perhaps the least among them.
The SEC took a long time to catch up to Falcone. Many of the misdeeds that triggered penalties against him occurred in 2006. Once the agency was able to get a negotiated settlement, it became clear how little leverage the hedge fund manager ever had:
"Falcone and Harbinger engaged in serious misconduct that harmed investors, and their admissions leave no doubt that they violated the federal securities laws," said Andrew Ceresney, Co-Director of the SEC's Division of Enforcement. "Falcone must now pay a heavy price for his misconduct by surrendering millions of dollars and being barred from the hedge fund industry."
After Falcone made investors huge sums by betting against mortgage-backed securities just as that market collapsed, he committed the worst sin a hedge fund manager can — he lost his investors almost all of their money, based on a single, wild gamble.
Falcone decided he was smarter than the executives at all the major wireless, cable and telecom companies combined. They had not made efficient use of spectrum to distribute broadband at the lowest prices possible. For a total of about $5 billion, the company he backed, LightSquared, bought satellite frequency and even launched a satellite of its own. All of this money was invested on the premise that he could set fees that would undercut the markets.
Falcone made two awful calculations. The first is that the U.S. government would approve the use of the spectrum he bought for his new broadband distribution scheme. The chance that would work ended quickly. The spectrum conflicted with that used for GPS devices. The government was not about to cripple the massive franchises that had grown from that technology.
His second mistake was one Falcone never got to make. He never had a practical plan to compete with entrenched broadband providers. Most of the leaders in the field have multibillion dollar annual budgets and tens of thousands of employees.
Falcone will be well shy of 60 when his ban expires five years from now. Wall Street may forgive him for breaking the law. Losing most of his investor’s money is another thing.
Tuesday, January 21, 2014
The developers of Call of Duty: Ghosts have drawn up a game-changing battle plan for the billion-dollar video game franchise.
Out Tuesday for PlayStation 3, Xbox 360, Wii U and PCs ($60, ages 17-up), the military fighting game has a globe-trotting storyline penned with the help of Oscar-winning screenwriter Stephen Gaghan (Traffic). The post-apocalyptic near-future tale – the U.S. has suffered a devastating attack – plays on family ties and introduces a loyal and lethal secret weapon: Riley, an attack-trained German Shepherd.
A new Call of Duty also means a new iteration of the crazily-popular online multiplayer game mode. This year's model has an improved character customization scheme with 20,000 combinations. For the first time, you can create a woman soldier – a nod to the growing female player base. In a new squads mode, you can match up against computer-controlled opponents to improve your online skills. And an entirely new mode, Extinction, lets four players work together to fight off an alien invasion.
STORY: More on multiplayer
Publisher Activision and main development studio Infinity Ward made the right move shaking things up a bit, says analyst P.J. McNealy of Digital World Research. "You always have to take risks to avoid franchise fatigue, and new stories are needed," he says.
Timed to the game's launch is a new mobile Call of Duty app for Android, iOS and Windows 8 devices that lets players customize characters and track progress in a Call of Duty Clan Wars metagame.
Call of Duty has been reliable for Activision. Each of the last four annual releases have surpassed $1 billion in sales with more than 20 million copies sold each.
Even though Ghosts may not be the top-selling game of 2013 – that honor will go to Grand Theft Auto V with 29 million copies shipped already – Ghosts will scare up huge numbers. "This franchise has been the biggest and best franchise in this console cycle," McNealy says. "The huge sell-in numbers for (GTA) bodes wel! l for (Ghosts) coming in north of 25 million units."
However, Wedbush Securities analyst Michael Pachter projects that retail sales will dip as much as 10%. And the arrival of new consoles later this month from Sony and Microsoft could, he says, "hurt sales initially, mostly because of the drain on wallet share." Ghosts is also available on the PlayStation 4, out Nov. 15, and the Xbox One (Nov. 22).
Many Best Buy stores will begin selling the game at 12:01 a.m. Tuesday and stores in West Los Angeles and Minneapolis will have Infinity Ward developers on hand for special events. Retailer GameStop expects 200 or more customers at most of its more than 4,000 stores for midnight sales events. Ghosts "is on track" to be the most-reserved game in 2013 for the retailer, says president Tony Bartel.
A screen shot from the video game 'Call of Duty: Ghosts,' out Nov. 5, showing the canine companion, Riley.(Photo: Activision/Infinity Ward)
Developer Infinity Ward dropped the Modern Warfare universe of its three previous games. The plot follows what's left of the special forces including the player's character, Logan, his brother and their father, a commander. "We added a very strong family element," says the game's executive producer Mark Rubin. "That experience of how that plays out for you as a player really adds a new story depth."
And players will also get a canine's eye view of the action when they deploy Riley in the game. Two Navy Seals-trained German Shepherds were used in motion capture sessions to create the in-game dog's natural moves. It worked so well that Riley evolved "from an auxiliary role to more of a teammate," says animator Zach Volker.
In the making of the video game 'Call of Duty: Ghosts,' two trained German Shepherds were used in motion capture sessions so that animators had realistic movements to assign to the in-game dog, Riley.(Photo: Activision/Infinity Ward)
Sunday, January 19, 2014
BALTIMORE (Stockpickr) -- Put down the 10-K filings and the stock screeners. It's time to take a break from the traditional methods of generating investment ideas. Instead, let the crowd do it for you.
>>5 Rocket Stocks to Buy This Week
From hedge funds to individual investors, scores of market participants are turning to social media to figure out which stocks are worth watching. It's a concept that's known as "crowdsourcing," and it uses the masses to identify emerging trends in the market.
Crowdsourcing has long been a popular tool for the advertising industry, but it also makes a lot of sense as an investment tool. After all, the market is completely driven by the supply and demand, so it can be valuable to see what names are trending among the crowd.
While some fund managers are already trying to leverage social media resources like Twitter to find algorithmic trading opportunities, for most investors, crowdsourcing works best as a starting point for investors who want a starting point in their analysis. Today, we'll leverage the power of the crowd to take a look at some of the most active stocks on the market today.
>>5 Stocks Ready to Break Out
These "most active" names are the most heavily-traded names on the market -- and often, uber-active names have some sort of a technical or fundamental catalyst driving investors' attention on shares. That's especially true now that earnings season is officially underway. And when there's a big catalyst, there's often a trading opportunity.
Without further ado, here's a look at today's stocks.
Nearest Resistance: $22
>>5 Stocks Triggering Breakouts on Big Volume
Pandora Media (P) was one of the highest-volume stocks on the NYSE on Friday, down double-digits on the firm's earnings results. While the firm's 4-cent earnings per share for the quarter came in at double analysts' estimates, guidance wasn't what market participants were hoping for, and they're selling.
Despite the setback last week, a glimpse at Pandora's chart shows that all isn't exactly lost. This stock is still in a well-defined uptrend that's got a reasonably good proxy for support just below the 50-day moving average. If you're looking to build a position in Pandora, I'd suggest waiting for the next white-bar day and buying.
Nearest Resistance: $12.50
>>5 Big Trades You Can't Miss
Aeropostale (ARO) is a post-earnings trainwreck after it announced second quarter numbers after the bell yesterday. The stock got flooded with negative comments from analysts after releasing its numbers, with some suggesting that financial distress could be a real concern if ARO stays unprofitable as long as they expect. Morgan Stanley puts the firm's bear case price target at $2, which is nearly an 80% drop even from here.
As bad as the fundamentals look for ARO, the technicals look even worse. Shares broke support a week ago, and have been in free-fall ever since. Friday's selloff only accelerates the drop. This is the definition of a "falling knife". Don't try to catch the bottom in ARO.
Nearest Resistance: $15
>>5 Stocks Warren Buffett Is Buying in 2013
A bounce in a basket of beaten-down emerging markets late last week helped to spur huge trading volume in Brazilian oil firm Petrobras (PBR). PBR has had a rough year in 2013, dropping 23% on weakness in the global economy coupled with a strong dollar. But shares bottomed in July and have spent the last few weeks consolidating in a rectangle with resistance at $15. While shares flirted with a $15 breakout on Friday, it wasn't confirmed. If we see PBR hold above that level, consider it a buy.
If you decide to buy PBR on a $15 move, you'd better be nimble. While this stock sports an upside target around $19, it's still a bullish setup within the context of a long-term bearish trend. I wouldn't want to be caught long for too long in PBR this summer.
To see these stocks in action, check out the at Most-Active Stocks portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
Follow Stockpickr on Twitter and become a fan on Facebook.
At the time of publication, author had no positions in stocks mentioned.
Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor toTheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.
Follow Jonas on Twitter @JonasElmerraji
Friday, January 17, 2014
Check out Jim Cramer's latest trading recommendations on "Action Alerts Plus".
(Updates from 10:45 a.m. ET with closing information.)
NEW YORK (TheStreet) -- Here's what Jim Cramer had to say on CNBC's "Squawk on the Street" Friday.
Stifel Nicolaus upgraded Pioneer Natural Resources (PXD) to buy from hold. "This stock has just been a horrendous performer," Cramer said. He thinks it still has access to a lot of oil in the Permian basin. PXD was 82 cents lower at $174.70.
Wednesday, January 15, 2014
DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.
>>5 Hated Earnings Stocks You Should Love
Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."
Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.
>>5 Rocket Stocks to Stomp the S&P in 2014
With that in mind, let's take a look at several stocks rising on unusual volume recently.
Dana Holding (DAN) engages in the design, manufacture and supply of driveline products, technologies and service parts for vehicle manufacturers worldwide. This stock is trading up 5.8% at $19.94 in Tuesday's trading session.
Tuesday's Volume: 5.91 million
>>5 Stocks Poised for Breakouts
From a technical perspective, DAN is ripping higher here back above both its 50-day moving average at $19.32 and its 200-day moving average at $19.82 with heavy upside volume. This move is quickly pushing shares of DAN within range of triggering a major breakout trade. That trade will hit if DAN manages to take out some near-term overhead resistance levels at $20.35 to $20.50 and then once it clears its gap-down day high from last October at $21 with high volume.
Traders should now look for long-biased trades in DAN as long as it's trending above Tuesday's low of $19.15 or above some more near-term support at $18.78 and then once it sustains a move or close above those breakout levels with volume that's near or above 2.78 million shares. If that breakout triggers soon, then DAN will set up to re-fill some of its previous gap-down-day zone that started near $23.
Nxstage Medical (NXTM), a medical device company, develops, manufactures, and markets products for the treatment of kidney failure, fluid overload, and related blood treatments and procedures. This stock is trading up 8.4% at $12.26 in Tuesday's trading session.
Tuesday's Volume: 1.02 million
>>5 Stocks Insiders Love Right Now
From a technical perspective, NXTM is soaring higher here with above-average volume. This stock has been uptrending strong over the last month and change, with shares moving higher from its low of $8.77 to its intraday high of $12.40. During that uptrend, shares of NXTM have been making mostly higher lows and higher highs, which is bullish technical price action.
Traders should now look for long-biased trades in NXTM as long as it's trending above Tuesday's low of $11.55 and then once it sustains a move or close above its 200-day moving average of $12.30 with volume that's near or above 543,708 shares. If we get that move soon, then NXTM will set up to re-test or possibly take out its next major overhead resistance levels at $13.50 to $14. Any high-volume move above those levels will then give NXTM a chance to tag its 52-week high at $14.64 to $16.
SodaStream International (SODA) engages in the development, manufacture, and sale of home beverage carbonation systems that enable consumers to transform ordinary tap water instantly into carbonated soft drinks and sparkling water. This stock is trading up 2.5% at $37.89 in Tuesday's trading session.
Tuesday's Volume: 3.36 million
From a technical perspective, SODA is trending higher here with heavy upside volume. This stock recently gapped down sharply from over $50 to under $37 with monster downside volume. That gap lower pushed shares of SODA into oversold territory, since its current relative strength index reading is 23.32. Oversold can always get more oversold, but it's also an area where a stock can experience a powerful rebound higher from.
Traders should now look for long-biased trades in SODA as long as it's trending above Tuesday's low of $36.38 and then once it sustains a move or close above Tuesday's high of $38.14 with volume that's near or above 1.07 million shares. If we get that move soon, then SODA will set up to rebound sharply higher off oversold conditions and potentially tag $42.50 to $45.
To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.
Follow Stockpickr on Twitter and become a fan on Facebook.
At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets includingCNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.
Monday, January 13, 2014
China�� stocks rose the most in a week, led by financial companies, after valuations on the benchmark index dropped to a four-month low.
Poly Real Estate Group Co. and Haitong Securities Co. advanced at least 1.4 percent, driving financial stocks to the biggest gain in two weeks. Drugmaker Yunnan Baiyao Group Co. and Goertek Inc., a supplier to Apple Inc., surged to record highs. BYD Co., the automaker partially owned by Warren Buffett�� Berkshire Hathaway Inc., jumped 6.5 percent after the Shanghai Securities News reported the government may issue subsidies for renewable-energy cars.
The Shanghai Composite Index (SHCOMP) rose 1.4 percent to 2,205.50 at the close, rebounding from the lowest level since Dec. 24. The benchmark index slipped 0.2 percent yesterday after a private report showed decelerating manufacturing growth. Data today showed service industries expanded at a slower pace.
��his is a technical rebound after investors digested bad manufacturing data yesterday,��said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu.
5 Best Stocks To Buy Right Now: Croda Intl(CRDA.L)
Croda International Plc, a marketing and technology company, produces and sells specialty chemicals. The company offers personal care products, including biochemical actives for sebum regulation, wrinkle reduction, skin firming, and protection from free radicals; traditional and microwave plant extracts for use in personal care and industrial applications; and natural oils for personal care applications. It also provides excipients, solubilisers, plant and marine oils, proteins, and biopolymers for the nutritional, pharmaceutical, dermatological, and animal health care markets; and formulation aids and adjuvants under Atlox, Atplus, and Crovol brand names for various applications, including emulsifiable concentrates, microemulsions and O/W emulsions, seed treaters, soluble liquids, suspension concentrates, suspo emulsions, water dispersible granulates, and wettable powders. In addition, the company offers specialty products for formulators in the automotive and industrial lubricant markets; oleochemicals and specialty surfactants for resin manufacturers, formulators, and additive producers; emulsification and demulsification solutions for oilfield, mining, and water treatment markets; polymer additives for use in applications, such as polyolefins, PVC, styrenics, polyamides, and biopolymers; and natural specialty ingredients for home care and tissue, car care, and industrial and institutional applications. Further, it provides ingredients, additives, and processing aids for various consumer applications, including construction chemicals, emulsion technology, technical and industrial fiber chemicals, advanced materials, ceramic ink-jet ink additives, bitumen additives, leather auxiliaries, paper chemicals, candles and waxes, and rubber compounders. The company has operations in Europe, North America, Latin America, and Asia. Croda International Plc was founded in 1925 and is headquartered in Goole, the United Kingdom.
5 Best Stocks To Buy Right Now: Apollo Global Management LLC(APO)
Apollo Global Management, LLC is a publicly owned investment manager. The firm primarily provides its services to pension and endowment funds, institutional investors, individual investors, pooled investment vehicles, and corporations. It manages client focused portfolios, hedge funds, real estate funds, and private equity funds for its clients. The firm invests in the fixed income and alternative investment markets across the globe. Its alternative investments include investment in private equity and real estate markets. The firm's private equity investments include traditional buyouts, distressed buyouts and debt investments, corporate partner buyouts, distressed asset, turnaround, corporate restructuring, special situation, acquisition, and industry consolidation transactions. Its fixed income investments include distressed debt, senior bank loans, and value oriented fixed income securities. The firm seeks to invest in chemicals; commodities; consumer and retail; oil an d gas, metals, mining, agriculture, commodities, distribution and transportation; financial and business services; manufacturing and industrial; media distribution, cable, entertainment, and leisure; energy, packaging and materials; and satellite and wireless. It seeks to invest in companies based in across North America with a focus on United States, and Europe. The firm employs a combination of contrarian, value, and distressed strategies to make its investments. It conducts an in-house research to create its investment portfolio. The firm seeks to acquire minority positions in its portfolio companies. Apollo Global Management, LLC was founded in 1990 and is headquartered in New York, New York with nine additional offices in North America, Europe, and Asia.Advisors' Opinion:
Top Insurance Stocks To Buy Right Now: Diploma(DPLM.L)
Diploma PLC supplies specialized technical products and services in Europe, North America, and internationally. The company?s Life Sciences segment supplies consumables, instrumentation, and related services to the healthcare and environmental industries. This segment offers consumables and instruments used in the diagnostic testing of blood, tissue, and other samples in hospital pathology laboratories; specialty electrosurgery and endoscopy equipment, and consumables for use in the operating rooms and endoscopy suites; analyzers for detecting and measuring specific elements in liquids, solids, and gases, as well as containment enclosures for potent powder handling; and equipment and services for the monitoring and control of environmental emissions. The company?s Seals segment supplies hydraulic seals, gaskets, cylinders, components, and kits for heavy mobile machinery and industrial equipment. This segment provides a next day delivery service for seals, seal kits, and cylinders used in heavy mobile machinery applications; gasket and seal kits for heavy duty diesel engines, transmissions, and hydraulic cylinders used in off road and marine applications; hydraulic kits to install attachments on excavators; O-rings, moulded and machined parts, PTFE products, and shaft seals; and precision seals for hearing aids and heavy duty seals for wind power mills. The company?s Controls segment supplies specialized wiring, connectors, fasteners, and control devices for technically demanding applications. This segment offers wiring, interconnect, electro-mechanical, and fastener products for use in a range of technically demanding applications in various industries, including defense and aerospace, motorsport, energy, medical, and general industrial; flexible braided products and multi-core cables; and control devices used in the sensing, measurement, and control of temperature and pressure. Diploma PLC was incorporated in 1931 and is based in London, the United Kingdom.
5 Best Stocks To Buy Right Now: Imperial Tobacco (ITYBY.PK)Imperial Tobacco Group PLC (Imperial Tobacco), incorporated on August 6, 1996, is a tobacco company. Through the Company�� total tobacco portfolio it provides consumers a range of brands and products, including cigarettes, fine cut tobacco, cigars and snus. Its total tobacco portfolio includes fine cut tobacco, cigars, rolling papers and tubes. Its non-European Union (EU) markets consist of Eastern Europe, Africa and the Middle East and Asia and markets of the United States and Australasia. Its international cigarette brands include Davidoff, Gauloises Blondes and West. It offers services across the whole logistics value chain to its customers, including order reception, storage and stock management, order preparation, transport and distribution, invoicing and collection and customer services. Its business has two aspects: tobacco logistics and non-tobacco logistics. Imperial Tobacco comprises two distinct businesses: Tobacco and Logistics. The Tobacco business comprises the manufacture, marketing and sale of tobacco and tobacco-related products, including sales to (but not by) the Logistics business. The Logistics business comprises the distribution of tobacco products for tobacco product manufacturers, including Imperial Tobacco, as well as a range of non-tobacco products and services. The Logistics business is run on an operationally neutral basis.
5 Best Stocks To Buy Right Now: EMCOR Group Inc. (EME)
EMCOR Group, Inc. provides electrical and mechanical construction, and facilities services primarily to commercial, industrial, utility, and institutional customers in the United States, the United Kingdom, and internationally. The company offers various electrical and mechanical systems, including electric power transmission and distribution systems, such as power cables, conduits, distribution panels, transformers, generators, uninterruptible power supply systems, and related switch gear and controls; premises electrical and lighting systems, including fixtures and controls; low-voltage systems comprising fire alarms, and security and process control systems; voice and data communications systems, including fiber-optic and low-voltage cabling systems; and roadway and transit lighting and fiber-optic lines. It also provides heating, ventilation, air conditioning, refrigeration, and clean-room process ventilation systems; fire protection systems; plumbing, processing, and piping systems; controls and filtration systems; water and wastewater treatment systems; central plant heating and cooling systems; cranes and rigging; millwrighting; and steel fabrication, erection, and welding systems. In addition, the company offers facilities services comprising industrial maintenance and services; outage services to utilities and industrial plants; commercial and government site-based operations and maintenance; military base operations support; mobile mechanical maintenance and services; floor care and janitorial; landscaping, lot sweeping, and snow removal; facilities and vendor management; call center; building systems installation and support; and technical consulting and diagnostic services. Further, it provides small modification and retrofit projects; retrofit projects; and program development, management, and maintenance services for energy systems. EMCOR Group, Inc. was founded in 1966 and is headquartered in Norwalk, Connecticut.Advisors' Opinion:
Sunday, January 12, 2014
With shares of US Airways (NYSE:LCC) trading around $23, is LCC 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
US Airways operates and owns passenger and freight airline carriers. Consumers and companies across the nation are now looking to travel at an increasing rate. Since air travel is quicker and less expensive, it is becoming a common transportation method for many. As costs decrease and flights become more efficient, look for business and retail customers to fly more than ever.
US Airways and AMR Corp.'s (AARMQ.PK) American Airlines will reportedly have to make antitrust concessions at more than just Ronald Reagan International Airport outside of Washington, D.C., if the airlines want the U.S. Department of Justice to drop a suit blocking their proposed merger. A source familiar with the talks recently told Reuters that US Airways and American will have to give up takeoff and landing slots at airports across the country for the Justice Department to approve. The DoJ has said the merger will cut down too much on competition, while US Airways and American counter that the merger would make them more competitive against other large airlines.T = Technicals on the Stock Chart Are Strong
US Airways stock has been surging higher in the past several years. The stock is currently trading near highs for the year and looks ready 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, US Airways is trading above its rising key averages, which signal neutral to bullish price action in the near-term.
Taking a look at the implied volatility (red) and implied volatility skew levels of US Airways options may help determine if investors are bullish, neutral, or bearish.
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.
As of Monday, there is 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 US Airways’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for US Airways look like and more importantly, how did the markets like these numbers?
US Airways has seen decreasing earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been upbeat about US Airways’s recent earnings announcements.P = Average Relative Performance Versus Peers and Sector
How has US Airways stock done relative to its peers – Southwest Airlines (NYSE:LUV), Delta Air Lines (NYSE:DAL), and United Continental (NYSE:UAL) — and sector?
US Airways has been an average relative performer, year-to-date.Conclusion
US Airways is an airline that operates passenger and freight planes. The company, AMR Corp., and the Department of Justice are currently attempting to reach a settlement regarding the US Airways and American Airlines merger. The stock has exploded higher in 2013 and is currently trading near its yearly highs. Over the last four quarters, earnings have been decreasing while revenues have been rising, which has produced optimistic investors. Relative to its peers and sector, US Airways has been an average year-to-date performer. Look for US Airways to OUTPERFORM.
Saturday, January 11, 2014
One trend you should be aware of as an investor is that of the "connected car". Your vehicle can connect with the outside world through a dedicated modem, such as General Motors' (NYSE: GM ) 17-year-old OnStar service, or -- increasingly these days -- through your smartphone.
At the recent Connected Car Conference in New York City, Roger Lanctot of Strategy Analytics spoke about the role of smartphones and modems in the vehicle: Besides entertainment, they can help sell cars, route motorists, and facilitate commerce through various payment options for tolls, parking, etc. If done properly, a connected car even can save lives and make driving safer.
Our roving reporter Rex Moore attended the conference, and was able to speak to Roger about the role of the smartphone in the car. In today's video, the question of why the smartphone is forcing a move away from an OnStar-like subscription model is explored.
Who's really smart?
Friday, January 10, 2014
WILMINGTON, Del. — The judge in the Fisker Automotive bankruptcy case has ruled that assets of the failed electric car maker will go to public auction.
Bankruptcy Judge Kevin Gross heard testimony Friday to decide whether to accept Hybrid Technologies LLC's offer to buy Fisker's assets at less than a penny on the dollar.
STORY: Fisker heads back to bankruptcy court
Another bidder for the bankrupt electric car maker, Wanxiang America Inc., had dangled hope earlier this week that an old General Motors facility near Newport, Del., might someday see the production of new vehicles if Wanxiang were allowed to take over the company's assets.
"It just isn't realistic for us to take on" the Delaware plant for manufacturing," lawyers for Hybrid Technologies said in court Friday.
Hybrid suggested selling the Delaware plant to maximize money that could be returned to Fisker's creditors, which include the state of Delaware.
Fisker Automotive, the California-based plug-in hybrid manufacturer, received state and federal incentives with the intention of reopening the old GM plant, but instead declared bankruptcy in November. That month, Hybrid bought Fisker's $168 million federal Department of Energy loan for about $25 million. Hybrid wants to apply credit on that loan toward its purchase of Fisker's assets in bankruptcy.
Wanxiang, China's largest auto parts manufacturer, had asked Gross to open up the asset sale process to an auction, arguing it can deliver more value to creditors.
Thursday, January 9, 2014
The Motley Fool is on the road in Seattle! Recently we visited Coinstar -- now officially renamed Outerwall (NASDAQ: OUTR ) -- to speak with CFO-turned-CEO Scott Di Valerio about the 22-year-old company's well-known coin-cashing machines, as well as its more recent acquisition of Redbox, and future initiatives to expand into other aspects of the automated retail market.
In this interview, Scott chats with The Fool about the economics of coin and video kiosks, Coinstar's share repurchase program, and its exciting initiatives in a number of new automated retail spaces as well as related online services. From coffee and breakfast to cosmetics and photo shoots, Coinstar is looking to move into much more than coins and video.
A full transcript follows the video.
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.
Austin Smith: Scott, thanks so much for joining us today.
Scott Di Valerio: Thanks, I appreciate you being here.
Austin: Thanks for having us.
Newly in the CEO role, came up from the CFO ranks -- I'm wondering if you could maybe talk a little bit about that transition and what it's like now that you're steering the ship?
Di Valerio: Yeah. It's been a lot of fun. I've been on the team for three-and-a-half years, so really working hard to set the strategy with our executive team and coming in as the CEO, working with that team to continue to push forward.
The good thing is we have a good, strong strategy that's leveraging our leadership in automated retail. We're focusing across six sectors that we set up. That gives us about a $16 billion revenue sweet spot for us in the automated retail space, in an $85 billion market.
We're really setting course with our team to be able to get after that part of the business.
Austin: When you say $85 billion, is that what you see as the addressable market for automated retail?
Di Valerio: For automated retail, yes. Then when we narrow it down to the six sectors that we're looking at and the sweet spots that we think we can get after, it's around $16 billion. With some adjacencies around it, it'll go out to around $20 billion, so we've got a nice, big market for us to get after, and being a leader will allow us to get after it pretty quickly.
Austin: Nice to have those good runways.
Di Valerio: That's right.
Austin: You said you were looking at all these markets. If you look five years out in all of your adjacent markets, where do you see automated retail five years from today, both from your perspective, and from an industry perspective?
Di Valerio: I think automated retail really plays into the trends that we're seeing here -- urbanization, the 24/7 gratification that people want -- as well as people getting very comfortable with technology, and technology getting very good so that we can deliver products and services in a kiosk format or automated retail format.
I think people are getting much more used to getting products and services from an automated retail format. I see it expanding out.
One of the things we do at Coinstar, and have done, is we develop a relationship with our customers through the automated retail solution or the kisosk.
We do that through our email capture, and being able to have communication back and forth with them through having a good customer experience, to where people go to stores -- certain stores and certain kiosks -- because they've developed a relationship with Redbox or with Coinstar. We're going to look to continue to do that with some of our other products as well, as we bring it in the marketplace.
As we look out, we see it continuing to expand. We see it as being a way to sit in between that brick-and-mortar and the Web fulfillment. There's lots of opportunities for us in areas that we haven't even addressed yet.
Austin: You said you're neatly positioned between bricks-and-mortar and that Web experience. Those seem to be industries that have a lot of "once great" success stories here. There's a lot of once-great retailers out there; companies like Sears or J.C. Penney. There's also a lot of once-great tech companies out there: Apple famously down, Microsoft's not done a lot the past few years.
Given that you guys are at the intersection of that, what are you doing, as an executive and as a company, to continue the creative machine, to make sure that you guys stay relevant and avoid the pitfalls that are inherent in both of those industries?
Di Valerio: One of the things we always do is we start with the customer. We do a lot of work trying to understand what customer trends are, and what our customers want, and what new customers that would be coming to us would want.
We start there, and then start building backwards, about how do we develop a solution? If you look at our core businesses, the coin business, we're rolling out our PayPal solution, where you're able to load up your PayPal account with coins or cash, or withdraw from your PayPal account as well at our Coinstar machines.
What that does is open up Internet merchandising, or merchandisers, to maybe the under-banked and non-banked customers there, by being able to fill out your PayPal. Again, some adjacencies and extensions onto our business, that's physical, moving into the Web world.
If you think about our Redbox business, we have our tickets business that we're testing out, we have Reserve Online, so we're always stepping out past what we're doing from the physical presence as well.
We have a team that's really focused around new business ventures. We have Rubi -- which you guys have tasted -- the Rubi machine, our coffee business.
Austin: The reviews were good.
Di Valerio: That's right, good. Yeah, we have Crisp Market, which is prepared food in the breakfast and lunch daypart, and we have Star Studio, which is in the mall channel, which is a whole new take on photo booth, so green screens and music and fun, really geared toward the teenager that goes to the mall -- particularly the teen girls that go to the mall -- and making it a fun experience for them.
We continue to stretch out around those kinds of businesses in order to be able to bring new customers to the Coinstar brand, but also to bring new products to our customers and continue to extend out that relationship that we have with them.
Austin: It sounds like a lot of new products. I believe Rubi is, what, a partnership with Starbucks as well, right? Seattle's Best is a Starbucks label?
Di Valerio: Seattle's Best is a Starbucks label. We have an agreement with Seattle's Best in certain channels, to provide beans as well as to brand the machines. We certainly are a very good partner with them, but Rubi is 100% owned by Coinstar; we've generated business. It's a partnership that we have with them in bean supply, as well as obviously brand across key channels.
Austin: OK, so it looks like we have Rubi, some sort of food-based vending machines, and some photo-based vending machines. If you were to pick a "favorite child," so to speak, which one do you think has the most growth? Which one are you the most excited about, going out a few years?
Di Valerio: Certainly our Rubi machines. The other businesses are relatively early-stage businesses.
It's always hard to say, "OK, which one's going to hit?" Again, Crisp Market is performing well in the couple of stores that they're in today, the couple offices that they're in today. Star Studio is in around 60-70 mall locations and doing quite well, so we think that could be a nice business there.
We also have a business we call Sample It, which is beauty samples, today. Think about paying a dollar at a CVS or a Walgreen's [ (NYSE: WAG ) ] for a couple samples of a cosmetic and a coupon. Not only do you, for a dollar, get to try out whether the product is going to work for you, but then you get a coupon to be able to purchase it.
The machines we have in market there are performing well, and the coupon redemption is quite high, which the brands love, as well as the retailers. In fact, Walgreen's just opened a brand-new banner store in downtown Boston and the sample machine was built into the store there, and again was a key focal point as they opened up the store.
Austin: Sample It! -- it seems like you've got some friendships with Walgreen's. I know you have a lot of kiosks with them. What other brands are people sampling? Is it Avon, is it... ?
Di Valerio: Yeah. Right now it's geared on beauty. We think it can extend to personal care and then on past that as well.
If you go into a Sample It! there will be a fragrance product from Halle Berry with the Halle Berry brand, Beyonce has branded products in there. It's across a number of the different traditional cosmetic brands. There's face products, there are fragrances, there are lotions, those kinds of things.
It's, again, starting there. Small samples you can test out, eye care products, see if it works for you and then be able to go back and buy the regular size.
Austin: Great. I want to talk about the specter in the room of Redbox; obviously your cash-cow business, you've had a lot of success with it, but a lot of the naysayers would say, "You guys are already at 50% market share, and the DVD rental industry is an eroding space."
I'm wondering, what is it about Redbox, and Coinstar in general, that is going to... what would you say to the naysayers who are looking at this industry and saying, "Well, it's eroding. How are you guys going to maintain relevance?"
Di Valerio: Certainly. One of the key things with the Redbox business is we continue to grow our market share and continue to increase overall rents by focusing on the customer and bringing a great new release product to the customer.
There's not a company that can deliver a new release product at the price point we do, and I think our customers are rewarding us for that. The first quarter of 2013, we have 40 million unique credit card transactions, which was up a million from the fourth quarter of 2012 and up over 6% from the year before, so we're growing our customer base.
We rented nearly 200 million discs in the first quarter, so we're continuing to grow out that business; that was an increase. What we're seeing, the NPD data shows that there's a slowing -- the decline in the physical rental market -- as the market has absorbed the demise of the brick-and-mortar stores, where lots of rentals were going, the national chains, and have converted to Redbox, for the most part.
You're seeing revenues come down in the rental market, but those revenues are coming down in large part because of the price point differential from, when you went to brick-and-mortar, you paid a higher price point than the $1.20 or $1.50 that you do at Redbox.
Austin: OK. I'm wondering if you could discuss the economics of your different kiosks, maybe useful life, the revenue generation that you see out of them, if you could, maybe across your big ones -- Coinstar, Redbox, Rubi.
Di Valerio: You bet. The Redbox kiosk is a kiosk that costs us about $15,000 to manufacture and put into the market. It pays back for itself in about 18 to 24 months. It begins positive cash flow in about eight to 12 months, so it's a very nice machine.
They start off, from a ramp perspective, $35,000 in year one in revenue, $50[,000] in year two and $55[,000] in year three, so it's a nice ramp-up business that returns on itself quite nicely, and continues to go out from that perspective.
The useful life of the machines, we have Redbox machines that have been in market since the start. We certainly bring machines in and refurbish them and do those types of things over time, but they're very stable, very long-lasting machines, and have been built quite well from that perspective.
Uptimes are extremely high on both the coin and the Redbox machines. In fact, on the Redbox machines about 85%-90% of any issues we have with the machines are resolved remotely, from our network operating center. There's very few break-fix services that go out on the machines.
The same is true with the Coinstar machine. Again, very high uptime on those. All the machines are connected wirelessly, so we communicate with the machines routinely during the day. We can fix issues on the machines routinely.
Again, it's a quite nice business. The coin machines are in the $11[,000]-$12,000-kiosk range.
Austin: That's cost to build?
Di Valerio: Cost to build. They pay back in a little bit longer time than the Redbox machine because it's got fewer transactions going through, but again we've had coin machines in the marketplace... 22 years that we've been in the business, we've had machines that are in the marketplace 15 years. They're very solid.
We're always having to replace monitors and upgrades, and do those kinds of things on a refurb basis, but they're very strong, long-lasting machines with high uptime.
Austin: Great. You guys, it seems, have retail relationships with everybody. You've got Safeway, Wal-Mart, CVS, Walgreen's I think we talked about earlier. I'm sure they're all great partners, but what's your favorite retail partner and why?
Is there one that just provides really great entry points for you, that you really enjoy working with, or do you see a lot of use from your machines at certain locations?
Di Valerio: It really depends on the business. For the coin business, what we've found is grocery and mass merch is the best way to go. It has enough traffic and has a high enough traffic pace to where people come into the stores and utilize machines and those kinds of things. The drug and convenience channel really don't work for the coin business.
We look at it from that perspective. A new, emerging market for us -- channel for us, I should say -- for the coin business is the financial institution business. We just put 350 kiosks in, in TD Bank Canada, and are processing points for TD Bank, and we're looking to expand.
We have a few machines in the U.S. today in the banking or financial institution channel and we're looking to expand that out as we go out.
It really depends on business from a channel perspective. When we look at Redbox, for example, we're in the grocery channel, we're in the mass merch channel, we're in convenience, and we're in drug, but we have the machines located at different places.
For convenience and drug, we're primarily outdoors. What that allows us to do is be open for 24 hours a day, it allows customers to see the machine, and it gets the right amount of traffic, both for us and as well for our retailers. And, again, it utilizes space that's very underutilized and turns it into very profitable space as well.
We really do focus based on the channel. If I look at some of our new businesses like Rubi, the grocery channel will be a very good channel for us. The mass merch channel will be a very good channel for us as well. I think we really do try to take a look at it based on the channels, as opposed to an individual retailer that's out there.
Austin: It's the right channel, the right placement, and the right machine is really what dictates it.
Di Valerio: Exactly.
Austin: Who would be the best retail partner that you don't already have? Who do you really want to become a partner with, that you haven't already tied the knot?
Di Valerio: We're very fortunate in the Redbox business, for example, that we have the top 10 national grocery chains under our banners. We have Wal-Mart, which is the largest mass merch center, as well as CVS and Walgreen's in the drug channel, and 7-Eleven and Circle K in convenience, so we have very, very strong channel space there.
With the coin business, we have nine of the 10 grocery chains under the coin banner, and Wal-Mart as well in the mass merch, so we have very strong relationships, as you've mentioned, across there. Certainly there are a couple on the coin side.
There's one grocery chain that we don't have, which we would love to bring up underneath the banner, which is Publix. Certainly, we always are looking and talking to Target as another large mass merch, to see if there are some opportunities with them for some of our businesses on a general basis.
Austin: OK. I wanted to talk a little bit about the progress of Redbox Instant and your partnership with Verizon [ (NYSE: VZ ) ]. I'm wondering if you could maybe just elaborate on that, any progress you guys have going there, or what you're seeing as the early results?
Di Valerio: You bet. Yeah, we're very pleased with our partnership with Verizon, to bring Redbox Instant to the marketplace. We signed that deal in February of 2012, and about 15 months later were able to launch a product through kind of a beta, general availability. We're pleased with it so far.
One of the things we've been really doing is trying to understand from the customer, is there enough content between the around 5,000 titles that you have on the streaming side, as well as getting great new release content from the kiosk?
The surveys from our customers are saying yes, there's enough content, and they're finding great new-release content because you get four nights at the kiosk each month on the subscription, as well as the streaming, as we think about the business; that's both from customers who have stayed on and are paid subscribers, as well as ones who churned out of the business, so we're always trying to find the best mix there.
One of the great things about the Redbox Instant business is you basically have the full old brick-and-mortar store available to you.
If you think about it, when you used to go to a brick-and-mortar store you'd walk around the outside walls because that's where the new-release content was. We've taken that new-release content, and that's Redbox. Basically we've taken those outside walls and put them into 12 square feet. With Redbox Instant, we now have the center of the store available to our customers.
We think it's a great opportunity for our customers, it's a great value for our customers today at $8 for four standard-def rentals a month, plus unlimited streaming, or $9 for Blu-ray, for four nights at the kiosk.
We're really pleased; we think it's a great value for our customers, and as we roll into the third quarter, Redbox Instant will do a lot more work around promoting the service as we've brought on more CE device manufacturers so that people are going to get that 10-foot experience for being able to get it up on the TV in a much broader way.
Austin: Now, obviously there's a lot of incumbents in the streaming space. We can't talk about this without saying Netflix [ (NASDAQ: NFLX ) ] and Amazon [ (NASDAQ: AMZN ) ] Prime. Are they your biggest competitors here, or am I misreading it? Do you think about it differently?
Di Valerio: Yeah, I think our competitor is people's time, is what we look at. What are people going to choose to do for their entertainment value? Certainly those folks are in that space across there, plus a whole host of other people as well.
We think we are very well positioned because, for customers who love movies, you've got a service where you get new-release content. We're the only service that can bring new-release content, and the physical aspect of it, as well as the streaming in there.
What you're really doing is getting real new-release content when you want it, how you want it, and then be able to get your stream from around that.
Again, we're doing the business in a different way than some of the competitors on the streaming side. We are paying for content on a per-subscriber basis, which means each subscriber we bring on for Redbox Instant is gross margin positive.
It's different than... A lot of our competitors are buying content up front and having to build up the subscriber base in order to be able to cover off the costs, so they run negative a much longer time period than we will, from a profitability standpoint.
Because of the way that we're structured and running the business, we can be the No. 3 or No. 4 streaming business, and still be very, very successful, both for us and for Verizon.
Austin: It's because of that margin dynamic.
Di Valerio: The margin dynamic, and the fact that we're combining new-release content at the kiosk, on a physical basis, along with the stream, which is something that people are finding very compelling.
Austin: Now, the new-release issue has definitely been a user negative, leveled against Netflix and Verizon. What is it about you guys that allows you to bring new releases to users? I think a lot of people aren't really familiar with the dynamic of why some of the streaming people have to wait and why you're able to get the new-release content out there earlier, in front of users.
Di Valerio: There's a couple of ways to get new-release content from the studios. One is physical, which certainly we do here at the kiosk, and are really focused on that as a company. The other way is through what they call paid video on demand -- not the subscription video on demand -- so to pay $5-$6 to view a movie at home on your TV.
Really, we provide that same content at $1.20 for standard def and $1.50 for Blu-ray. People are continuing to buy Blu-ray players at very high rates. People love to get that physical disc and put it in, because there isn't a better way, from a Blu-ray perspective, to get really high-definition-quality picture and sound. The way you get it is through the disc. You can't get that through a stream.
We feel very good about that. We obviously are focused on it, and we think that combination, as you look at Redbox Instant, combined with Redbox on the physical side, is a winning combination.
Austin: Good combo there for users.
What's next in the pipeline for Coinstar? You guys obviously are rolling out a lot of new devices, looking at new automated kiosks. What else is there for users, that they should be looking forward to over the next few years?
Di Valerio: We're going to continue to look and bring great automated retail solutions. Certainly, with our coin line of business we are rolling out the PayPal, so that's a great opportunity for people to lever their PayPal accounts and do some things they want to do there.
We also have a business in the coin business called Gift Card Exchange, where you can exchange your gift cards that you've been getting for years, at stores that you might not go to, or stores that you have a little bit of money left on those cards, and get those turned in for cash.
We think that's going to be a very interesting business for us. We're starting to roll that business out. There's around 50 kiosks in the market today and we'll expand that out over the next year to capture that, and also be looking to do that with both your physical gift card, but also your digital gift cards, to be able to be the place where you're turning in your gift cards and then we're remonetizing those out.
As I look at Redbox, for example, we're obviously beginning to roll out Redbox Instant in a broader fashion, along with Verizon. We're testing tickets out, and we're putting in some very good CRM and loyalty programs that will roll out in the third and fourth quarters that will continue to extend out that Redbox brand and value: simplicity, convenience, and entertainment.
We are the No. 1 place for people to watch new-release content. We want to be the No. 1 place that people come to for overall entertainment.
If I look at the business broader, we think there are some great opportunities to bring new products into the marketplace, but also to extend them out, both from a physical perspective as well as from an online perspective, and keep marrying those two things up as we go forward.
Austin: Great. You guys have dramatically reduced shares outstanding in just a few quarters. I think it was about 3 million shares. I'm wondering, now that you're CEO, if you could discuss the logic and strategy behind that share repurchase program and whether or not you guys are interested in continuing it?
Di Valerio: You bet. We do capital allocation on a holistic basis. You first take a look and say, "OK, I need to invest in my core businesses to continue to grow them, both from new innovations into the core businesses, as well as the existing. I need to invest in new businesses" -- like we've been talking about -- "to bring new concepts into the marketplace, and then also in infrastructure in the corporation."
You calculate out what those returns are, and also returning money to the shareholders through share buyback. We'll continue to do that. We balance those out to make sure that we're doing it in a smart way, but a way that really does drive the highest return.
Four years ago, our return on invested capital, for example, was in the low single digits. Last year we finished out at 18.3%.
Di Valerio: It's a nice focus for us to continue to do that, and as we try to grow out this business -- and we've talked about doubling the size of the company over the next five years -- we're going to do that while getting our return on invested capital up to 20%, which isn't necessarily the easiest thing to do, but that's how we stay in this very structured and balanced approach to getting returns for our shareholders.
Austin: Got to aim high.
Di Valerio: That's right.
Austin: What do you think is the single biggest thing that retail investors may be missing, or should know, about Coinstar today?
Di Valerio: It's a business that really focuses on its customer, and it's a business that is very operationally sound, and a business that continues to be inventive, innovative, and to bring new products to the market that customers want, and do it in a way that's efficient and effective, that's driving top-line and bottom-line growth.
If you look at our business, we've grown double-digits over the last four or five years, both top line and bottom line, and we've driven great free cash flow: well over $250 million of free cash flow last year, we'll generate between $185 [million] and $205 million of free cash flow this year.
It's a business that's very strong, very growth-oriented, but we're growing profitability at the same time we're growing revenue and free cash flows, which is, again, a business that is very good to run. It's a business that should be very good to invest in, and one that's probably a little bit misunderstood, given the fact that we have a lot of great businesses and we're in a business that we think is going to continue to grow, and grow quite rapidly.