Top Stocks To Buy For 2012-1-23-3

Patterson-UTI Energy, Inc. NASDAQ:PTEN opened at $21.36 and with a gain of 4.92% closed at $22.39. Company’s fifty days average price is $20.91 whereas it has a market capitalization $3.45 billion.
The total of 5.21 million shares was transacted over last trading day.

Altera Corporation NASDAQ:ALTR opened at $36.84 and with a gain of 4.65% closed at $38.48. Company’s fifty days average price is $36.05 whereas it has a market capitalization $12.29 billion.
The total of 8.07 million shares was transacted over last trading day.

Spreadtrum Communications, Inc. NASDAQ:SPRD opened at $20.23 and with a gain of 4.11% closed at $21.01. Company’s fifty days average price is $17.65 whereas it has a market capitalization $1.00 billion.
The total of 1.52 million shares was transacted over last trading day.

Skyworks Solutions, Inc. NASDAQ:SWKS opened at $32.00 and with a gain of 4.00% closed at $32.75. Company’s fifty days average price is $27.83 whereas it has a market capitalization $6.00 billion.
The total of 6.85 million shares was transacted over last trading day.

Avago Technologies Limited NASDAQ:AVGO opened at $28.42 and with a gain of 3.43% closed at $29.22. Company’s fifty days average price is $27.18 whereas it has a market capitalization $7.06 billion.
The total of 3.73 million shares was transacted over last trading day.

Home-builder stocks host a hasty rally

SAN FRANCISCO (MarketWatch) � There was a burst of enthusiasm for home-builder stocks Wednesday, unleashed by a burst of optimism from within the hard-pressed industry itself.

The National Association of Home Builders/Wells Fargo housing market index surged 4 points to 22 this month. Read about the January home-builder index.

While still pathetically low, the index hasn�t been this high since 2007. It�s also its fourth straight monthly advance, which has folks wondering whether the sector is finally on the mend.

/quotes/zigman/232035/quotes/nls/len LEN 26.04, -0.25, -0.95% Lennar stock on a roll.

Given the industry�s near-death experience during the 2008 mortgage crisis, anything more than a faint pulse looks like major progress. So today�s report got lots of attention. Shares of industry stalwart Lennar Corp. LEN � shares rose 4% on the report. PulteGroup Inc. PHM � shares jumped nearly 6%.

These moves are not a one-time reflexive twitch. Since the start of the year, Lennar shares are up 17%. Pulte�s are up 26%.

There�s plenty of data stoking home-builder stocks. Consumer confidence is up. See story on consumer sentiment.

Banks are lending money again.

Interest rates remain near historic lows. See story on mortgage rates.

And after several years of taking in out-of-work kids and foreclosed-upon relatives, there�s a lot of pent up demand for new homes.

Even the weather seems to be cooperating, with one of the mildest winters in years allowing construction crews to work right through the holidays.

But before hopping on a runaway bandwagon, investors should temper their expectations. Jobs remains stubbornly absent from an improving economy. That keeps a tight ceiling on consumer confidence.

At the same time, a huge inventory of unsold homes continues to weigh on the market. Even with a thriving economy, it will likely take several more years to repopulate all the homes vacated by foreclosure.

Meanwhile, those looking to buy a new home are often hamstrung by the difference between what they think they should be paid for their old home and what buyers, with so many properties to choose from, think it�s worth.

For home-builders� stock to extend recent gains, they need to build a lot more homes. That�s not going to happen until the supply-demand and buyer-seller gaps narrow significantly.

As for the steep rebound in their stock, figure it includes a flock of value vultures who have positioned themselves for a bounce that may already have seen its best days.

� Jim Jelter

Pharmaceutical Packaging

Blister Packaging: One of the challenges of the pharmaceutical industry is packaging. Blister packaging and any other type of pharmaceutical packaging MUST protect the product from contamination and expiration. Blister packaging and other pharmaceutical packaging providers face this one problem the most–how to make packaging that will best preserve and protect the pharmaceutical product. The pharmacy must sell product that is healthy and does what the product promises. This is why blister packaging and all pharmaceutical packaging is so important.

Because of technology, there have been more life-saving medications and drugs made available. The fact that this pharmaceutical product is life-saving is very important to preserve the product in its packaging and to provide the customer with blister packaging or other types of packaging that look sanitary and reliable and professional. The blister packaging is what will provide the customer with the confidence in the product.

Many pharmaceutical product and medications are very sensitive to environmental changes such as humidity and temperature changes. Blister packaging such as blister packs, blister card, unit dose packaging, form fill seal, stock blister packaging, and clamshell packaging are all examples of what pharmaceutical packaging companies have come up with to protect the valuable pharmaceutical product.

Pharmaceutical product often needs to be sealed in air tight blister packaging to avoid contamination or leakage of the product.

Other concerns in making blister packaging or a pharmaceutical packaging is that the pharmaceutical product may be absorbed by the packaging rather than preserved for the use of the customer. Blister packaging clamshell with the cardboard backing, for example, would not be a good solution to pharmaceutical product packaging in this case. The clamshell blister packaging sealed with cardboard is used in many retail industries, but in the pharmaceutical industry the clamshell or blister packaging is often sealed with a form fill seal or cold form foil. In this case the blister packaging content doesn’t absorb the pharmaceutical product.

Another concern about blister packaging and other pharmaceutical packaging is that the pharmaceutical product may absorb some of the chemicals from the blister packaging. This would also contaminate the pharmaceutical product and make it useless.

Most blister packaging is made from a pvc plastic. The pvc plastic forms the blister packaging part whereas the form fill seal or cold form foil forms the back of the blister packaging. The pvc and aluminum make an inexpensive packaging solution that is safe for the pharmaceutical product, the pharmaceutical industry, and the pharmaceutical customer.

The chemical composition and the new technologies and chemicals used in the medical and pharmaceutical industry highly depend upon their blister packaging and other packaging companies. This is why blister packaging companies must keep up and are keeping up with the technology of medical advances so that the blister packaging of the pharmaceutical product along with medical tools and product are packaged accurately and safely with blister packaging techniques, blister packaging substance, and blister packaging expenses.

After reading this article you may not take for granted that little blister card of gum that you hold or the blister packaging that holds your pain-killer or daily pharmaceutical medication needs. Blister packaging must be right on with the pharmaceutical industry to provide effective product for your medical needs. The Packaging Industry

Other concerns in making blister packaging or a pharmaceutical packaging is that the pharmaceutical product may be absorbed by the packaging rather than preserved for the use of the customer. Blister packaging…. Learn more at Blister Packaging and packs

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T. Rowe Price Group Beats Estimates on Top and Bottom Lines

T. Rowe Price Group (Nasdaq: TROW  ) reported earnings on Jan. 27. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), T. Rowe Price Group beat slightly on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue grew, and GAAP earnings per share contracted.

Gross margins grew, operating margins dropped, and net margins dropped.

Revenue details
T. Rowe Price Group reported revenue of $671.6 million. The 12 analysts polled by S&P Capital IQ expected a top line of $664.6 million. Sales were 3.6% higher than the prior-year quarter's $647.5 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
Non-GAAP EPS came in at $0.73. The 21 earnings estimates compiled by S&P Capital IQ averaged $0.69 per share on the same basis. GAAP EPS of $0.71 for Q4 were 1% higher than the prior-year quarter's $0.72 per share.

Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 97%, 3,150 basis points better than the prior-year quarter. Operating margin was 43.7%, 260 basis points worse than the prior-year quarter. Net margin was 28.1%, 150 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $687.3 million. On the bottom line, the average EPS estimate is $0.73.

Next year's average estimate for revenue is $2.86 billion. The average EPS estimate is $3.13.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 372 members out of 396 rating the stock outperform, and 24 members rating it underperform. Among 119 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 112 give T. Rowe Price Group a green thumbs-up, and seven give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on T. Rowe Price Group is hold, with an average price target of $56.76.

Can your retirement portfolio provide you with enough income to last? You'll need more than T. Rowe Price Group. Learn about crafting a smarter retirement plan in "The Shocking Can't-Miss Truth About Your Retirement." Click here for instant access to this free report.

• Add T. Rowe Price Group to My Watchlist.

Greek debt talks in limbo

NEW YORK (CNNMoney) -- Greek debt talks are said to be progressing but officials have yet to announce a deal to scale back the nation's overwhelming debt load.

Negotiations between the government and experts representing the private banks and investors that hold Greek debt -- the Institute of International Finance -- have been ongoing since last Wednesday.

But the outcome still remains uncertain ahead of a key two-day meeting of eurozone finance officials that starts Monday.

The lead negotiators from the IIF, Charles Dallara and Jean Lemierre, left Athens Saturday to attend "long-standing personal appointments" in Paris, according to a statement.

In a statement, Dallara stressed that progress has been made over the last few days and that the "elements" of a deal "are coming into place."

"Now is the time to act decisively and seize the opportunity to finalize this historic deal and contribute to the economic stability of Greece, the euro area and the world economy," said Dallara.

The IIF also said Dallara and Lemierre are available to Greek officials by phone "should this be necessary."

The lure to leave the euro may prove irresistible

At issue is an agreement to reduce Greece's debt load by writing down the value of Greek bonds owned by the private sector by 50%.

In addition to the writedown, the deal is expected to include a debt exchange, in which investors would swap Greek bonds for new 30-year securities with an interest rate, or coupon, of about 4%.

The exchange could result in "real" losses of up to 70% for the private sector.

But it could also ease the burden on the Greek government as it struggles under a massive €350 billion pile of debt and a deepening recession.

The talks have been hindered by disagreements over the terms of the debt exchange and signs the participation rate may fall short of expectations.

The stipulation that investors voluntarily accept the writedowns has also been a stumbling block.

A non-voluntary writedown could trigger credit default swaps, a form of insurance that investors use as protection against a default.

Eurozone officials have insisted that the agreement be voluntary, arguing that credit default swaps could spread chaos in the financial system. But investors who have purchased credit protection might have an interest in holding out for a default.

The private sector owns over €200 billion worth of Greek debt, so the 50% writedown would translate to €100 billion.

That would help shrink Greek government debt to 120% of gross domestic product by 2020, according to eurozone officials. Currently, Greece's debts are equal to about 160% of GDP.

Both sides are under pressure to reach agreement before Monday's meeting of euro area finance ministers, known as the Eurogroup.

The restructuring of Greece's private sector debt is a key condition for the nation to receive additional bailout funds from the European Union and International Monetary Fund.

Greece is facing a €14.5 billion bond payment in March that it may not make without another injection of emergency financing.

Europe: Still a huge pain in the neck for investors

Officials from the EU, IMF and European Central Bank arrived in Athens last week to begin reviewing the government's finances.

The troika, as three institutions are known, is beginning the process of negotiating a second bailout for Greece, valued at €130 billion.

Greece has struggled in the past to implement the austerity measures and structural reforms that are a condition of its existing bailout loans.

Prime Minister Lucas Papademos, a former ECB vice president, was appointed last year to impose more budget cuts and revive Greece's moribund economy.

The big concern is that Greece could default in a disorderly way, a development that could force the nation out of the euro currency union.

That would likely cause the Greek banking system to collapse and plunge the nation's economy deeper into recession. It could also drive up borrowing costs for other vulnerable euro area economies, such as Italy and Spain.

The spread of a debt contagion in the eurozone is seen by most economists as the single biggest threat facing the global economy. 

Nokia Reportedly Cuts Phone Prices; Symbian Upgrade Delayed

Nokia (NOK) has cut prices for mobile phones across its product portfolio by up to 10%, according to Reuters. The wire service notes that the company has also delayed the launch of a revamped version of its Symbian operating system software to the second half of the year from the second quarter, citing “two sources with direct knowledge of the delay.

Earlier today, Nokia reported March quarter results that disappointed the Street, among other things reducing its margin guidance for the June quarter; that news triggered an ugly sell-off in NOK shares.

In the regular session, NOK was down $1.96, or 13.1%, to $12.99.

Amazon Q4 Ahoy! ‘Fire,’ Margins in Focus Tonight

Analysts are sharpening up their models in advance of Amazon.com‘s (AMZN) Q4 report tonight.

Shares of Amazon are down 27 cents at $191.88.

The consensus for tonight is for $18.26 billion in revenue and 17 cents EPS. The outlook for the current quarter is for $13.4 billion and 32 cents.

The range of Q4 estimates especially wide this time around, with the high estimate on the Street being 43 cents, and the lowest estimate being a loss per share of 26 cents. That’s a reflection of the fact that the forecast offered back in October by Amazon management was “wide enough to drive a truck through,” as one analyst put it, with the company projecting $16.45 billion to $18.65 billion in revenue.

Street is of course looking for any color on the company’s first quarter of sales of the “Kindle Fire” tablet computer. (Though knowing Amazon’s history of not giving out such, it’s unlikely they’ll get much.) Also, there’s some hope expressed by many, though not all, that this might be the quarter the deterioration in margins. And, hey, who knows, maybe even some small hint of that smartphone that Citigroup was expecting may come out by the end of this year.

Jeetil Patel, Deutsche Bank: Reiterates a Buy rating and a $246 price target. He’s looking for $17.98 billion in revenue and 42 cents in per-share profit. Profit growth is “pressured” by investments, but will resume in the latter half of this year, he thinks. “We expect 4Q unit growth of 43% YoY, which has potential upside, while Kindle Fire unit sales could help the top-line. Given the robust growth, we would not be surprised to see the company continue to build out additional fulfillment centers (FCs) to support growth, especially to move toward same-day delivery in states like CA, NY.”

Scott Tilghman, Caris & Co.: Reiterates an “Above Average” rating and a $250 price target. He’s modeling $18.1 billion in revenue and 40 cents EPS. Tilghman thinks there will be some relief from worries about spending — at some point.� “Ultimately we believe Amazon needs to signal an easing of investment costs, somewhat regardless of 4Q results, in order for shares to move higher [...] Overall, we expect operating margins to fall to 1.2%-the lowest level in a decade. However, we expect 1Q guidance to highlight early easing in the significant Y/Y margin declines experienced during 2011. Specifically, we expect marketing costs to ease and a slowdown in fulfillment additions and thus lower incremental costs, but margins still down Y/Y.”

Doug Anmuth, JP Morgan: Reiterates an Overweight rating and a $235 price target. He’s modeling $18.3 billion in revenue, based on sales of 5 million Kindle Fire units. He’s betting the outlook for this quarter shows a turnaround in margins. “We believe 4Q11 could be the low point for margins as: 1) Kindle Fire device losses moderate as fewer devices are sold in 1Q12; 2) Amazon Prime Video and Kindle Lending library�s costs should grow more slowly as a run-rate for these investments has been established in 4Q; 3) greater Prime adoption and Kindle-Fire related ebook and physical sales should create positive leverage in 2012�we conservatively estimate $1B in Fire-related retail sales this year.”

Colin Gillis, BGC Partners: Reiterates a Sell rating. He’s modeling $17.9 billion last quarter and just 5 cents EPS. The company continues to see profit hurt by its ongoing investments, especially selling the Kindle “for no profit.” “The company is facing more difficult growth comparisons in 2012 given the positive trends for e-commerce in 2011. Given its high price-earnings multiple, which at 183x our 2011 estimate is over five times that of any other company in our coverage (which has a median multiple of 15x 2011 earnings), if investors stop awarding Amazon a premium, the company could face lengthy downward or sideways share price action. Amazon is neither the fastest growing, or most profitable, company in our coverage.”

7 personal finance lessons to learn from Katrina Kaif

Sanjay Matai

Inspirations come in all shapes and sizes. You would surely agree that Katrina Kaif as an inspiration is not only shapely but also quite beautiful.

Katrina was a total novice when she entered the Hindi film industry. She had no knowledge of films. Worse - she couldn't even speak the Hindi language properly. Yet within a short span of 5-7 years she has become one of the most successful actresses in the Hindi film industry.

Many amongst you too would have no knowledge of the personal finance industry. Worse - you wouldn't even understand the financial language. But if you are willing to work hard like Katrina, there is no reason why you too can't become a successful manager of your money.

Lesson 1: Background and past do not matter; what matters is what you do with your present.

Her first movie was called Boom, which ironically went totally bust (even though it also starred the legendary superstar Mr. Amitabh Bachchan). But she didn't let the super-flop discourage her. Instead of feeling sad or sorry about it, she turned the failure into a lesson. You too will experience many failures when you start investing. But don't let them deter you. No one can be 100% successful. All you have to aim for is to have more wins than losses.

Lesson 2: Don't be discouraged by failures, instead learn from them.

To guide her during the initial years, she found herself a mentor. He acted as her friend, philosopher and guide - educating her about the nuances of the films and film industry. More importantly, she was a willing student who worked very hard to absorb all the lessons. You too should find yourself a financial advisor who will pass on all the knowledge to you. More importantly, you should be a willing student. After all, you have to score your own goals. A coach cannot do it for you.

Lesson 3: Find yourself a mentor and be willing to learn.

The first few years of her career she worked with established and successful stars only. You too should begin your investments with large and established companies/mutual funds. There is no point in taking risks until you understand the game.

Lesson 4: To start with, invest only in top-rated and successful companies/mutual funds.

She found a certain comfort level with Akshay Kumar and gave many hits working with him. She didn't try to experiment too much or work with many stars. Identify a few investment options that you easily understand and are comfortable with. Don't buy too many different financial products in the initial years of your investment.

Lesson 5: Stick with a few simple investment products in the early years.

It was only when she started understanding the Hindi film industry and achieved reasonable success that she moved to younger upcoming stars such as Ranbir Kapoor, Imran Khan and Ali Zafar. She also took to doing items songs. Had she done item songs in early part of her career she would have remained an item-girl only. Only when you get a hang of the personal finance industry and have made some successful investments, should you consider investing in different products and upcoming companies. If you start with Futures/Options you will never become a successful investor.

Lesson 6: Move to riskier and specialized products only after you become a reasonably successful investor.

It would be wrong to attribute Katrina's success to only her face and contacts. Starlets with prettier faces and better connections didn't shine long enough. You won't even remember their names. Ultimately, it is her attitude and dedication towards her work that has given Katrina all the success, fame and money. Likewise, the likelihood of you too becoming a multi-millionaire would be determined by just how good you are at managing the resources you have.

Lesson 7: Only "attitude" matters; rest is just a matter of details.

Professions may differ, but the underlying rules to success remain the same. Pick up any person you admire - Sachin Tendulkar, A.R. Rahman, Narayana Murthy, Kiran Bedi, Sonia Gandhi, etc. - and make him/her your inspiration. Success is waiting for you. Are you ready to grab it?

Sanjay Matai is a personal finance advisor ( http://www.wealtharchitects.in/ ) and author. ' Millionaires don't eat cakes...they make them ' is his latest publication.

  

Microsoft: FYQ2 Aside, It’s All About Windows 8

Shares of Microsoft (MSFT) are up $1.54, or 5.5%, at $29.66 after the company last night met fiscal Q2 revenue expectations and beat by a couple of pennies on the bottom line.

The most mysterious element of the report was the 6% drop in Windows division sales. Microsoft had warned of weakness in PCs last week, and last night it said the collapse of netbooks was a particular difficulty. But as Microsoft’s IR director told me after the release, netbooks alone don’t explain the drop in Windows revenue. In fact, it wasn’t completely clear what drove it, he said.

About the only other tidbit that could be gleaned yesterday was when CFO Peter Klein was asked by an analyst on last night’s conference call what had led to a slowing of the rate of growth in business PC revenue for Windows. Klein remarked that “a small amount due to macro,” meaning macroeconomic concerns.

However, most analysts seem to be able to get past that fact today. The real issue is whether to hold onto the stock in anticipation of the arrival of Windows 8, later this year, or bail until Windows 8 comes:

Kevin Buttigieg, Collins Stewart: Reiterates a Buy rating and a $33 price target, writing that Microsoft has “cleared the confusion,” putting to rest “fears of wider issues” for the company than just PCs. Buttigieg thinks the focus will now be on forthcoming products (Windows 8, for example) and that the stock’s multiple can expand. The drop in Windows division revenue of 6% was worse than the 4% he had been modeling, but he notes that it was made up for by the Business Division and the Entertainment & Devices group (Xbox). Buttigieg cut his revenue estimate for this year to $73.61 billion, from a prior $74.33 billion, but keeps his EPS estimate at $2.65.

Walter Pritchard, Citigroup: Reiterats a Buy rating and a $35 price target, writing that the company’s strength in its enterprise business, with the company’s “contracted backlog” higher than is the norm for the season. In short, the “diversity” of Microsoft’s business model is playing to Microsoft’s advantage amidst the uncertain PC market. Pritchard cut his estimates for this year to reflect an even more pessimistic view of the personal computer landscape. He now models Microsoft making $74 billion in revenue and $2.69 per share in profit versus his prior estimate for $74.85 billion and $2.78 per share.

Brendan Barnicle, Pacific Crest: Reiterates a Sector Perform rating on Microsoft (MSFT), writing that he is “waiting for Windows 8 and Windows recovery,” with PC headwinds likely to keep that business from recovering until the March quarter. “Microsoft�s Windows revenue declined by 6% in fiscal Q2 (Dec), which was much slower than IDC�s estimate of a Q4 PC decline of 0.2% and Gartner�s estimate of a Q4 PC decline of 1.5%. Windows revenue even grew slower than Microsoft�s own estimate of a Q4 PC decline of 3%.”

Heather Bellini, Goldman Sachs: Reiterates a Neutral rating on the stock, while cutting her estimates for this quarter to $16.8 billion in revenue and 55 cents EPS from a prior $17.4 billion and 59 cents. She also cut her the full year estimate to $74 billion and $2.68 per share from a prior $74.3 billion and $2.70. “We see December quarter results as helping to support the stock near term, with the continued big question mark relating to the company�s consumer price and quality competitiveness in new form factors at the launch of Windows 8. As such, we continue to see the stock relatively ??????range bound near term.”

Score One For Patent Trolls: Acacia Research Soars On Big Q1

One of today’s biggest movers is Acacia Research (ACTG), an unusual company that makes money by partnering with investors and patent owners, then licensing the patents to corporate users, which is a nice way to say that they are “patent trolls,” who invent little but litigate much.

Acacia posted Q1 revenue of $39.77 million, up from $16.96 million a year ago, and well ahead of the Street at $17 million; the company earned 55 cents a share, which was pretty impressive considering the Street was looking for two cents.

The company said Q1 revenues reflect license fees from 40 new licensing agreements covering 29 of its technology licensing programs, including initial fees from 13 new licensing programs, up from 4 in the comparable year ago quarter.

Acacia’s patents cover a wide range of technologies – lighting, mapping, storage systems, credit-card fraud protection and many, many others. Acacia is apparently good at squeezing out value from patents – and at least in the current quarter, its holders are reaping big returns as a result.

ACTG is up$2.92, or 25.3%, to $14.47.

How Fast Is the Cash at Flow International?

It takes money to make money. Most investors know that, but with business media so focused on the "how much," very few investors bother to ask, "How fast?"

When judging a company's prospects, how quickly it turns cash outflows into cash inflows can be just as important as how much profit it's booking in the accounting fantasy world we call "earnings." This is one of the first metrics I check when I'm hunting for the market's best stocks. Today, we'll see how it applies to Flow International (Nasdaq: FLOW  ) .

Let's break this down
In this series, we measure how swiftly a company turns cash into goods or services and back into cash. We'll use a quick, relatively foolproof tool known as the cash conversion cycle, or CCC for short.

Why does the CCC matter? The less time it takes a firm to convert outgoing cash into incoming cash, the more powerful and flexible its profit engine is. The less money tied up in inventory and accounts receivable, the more available to grow the company, pay investors, or both.

To calculate the cash conversion cycle, add days inventory outstanding to days sales outstanding, then subtract days payable outstanding. Like golf, the lower your score here, the better. The CCC figure for Flow International for the trailing 12 months is 99.6.

For younger, fast-growth companies, the CCC can give you valuable insight into the sustainability of that growth. A company that's taking longer to make cash may need to tap financing to keep its momentum. For older, mature companies, the CCC can tell you how well the company is managed. Firms that begin to lose control of the CCC may be losing their clout with their suppliers (who might be demanding stricter payment terms) and customers (who might be demanding more generous terms). This can sometimes be an important signal of future distress -- one most investors are likely to miss.

In this series, I'm most interested in comparing a company's CCC to its prior performance. Here's where I believe all investors need to become trend-watchers. Sure, there may be legitimate reasons for an increase in the CCC, but all things being equal, I want to see this number stay steady or move downward over time.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of the seasonality in some businesses, the CCC for the TTM period may not be strictly comparable to the fiscal-year periods shown in the chart. Even the steadiest-looking businesses on an annual basis will experience some quarterly fluctuations in the CCC. To get an understanding of the usual ebb and flow at Flow International, consult the quarterly-period chart below.

Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

On a 12-month basis, the trend at Flow International looks less than great. At 99.6 days, it is 14.1 days worse than the five-year average of 85.5 days. The biggest contributor to that degradation was DSO, which worsened 7.2 days when compared to the five-year average.

Considering the numbers on a quarterly basis, the CCC trend at Flow International looks good. At 98.3 days, it is little changed from the average of the past eight quarters. With quarterly CCC doing better than average and the latest 12-month CCC coming in worse, Flow International gets a mixed review in this cash-conversion checkup.

Though the CCC can take a little work to calculate, it's definitely worth watching every quarter. You'll be better informed about potential problems, and you'll improve your odds of finding the underappreciated home run stocks that provide the market's best returns.

• Add Flow International to My Watchlist.

U.S. stocks mostly down; S&P streak holds

MARKETWATCH FRONT PAGE

A late-session surge in financials keeps the S&P 500 in the green for a fourth consecutive week. See full story.

10 income-paying stocks that beat the crowd

Stock investors no longer have doubts about dividends, and that�s reason for some doubt, as many of these income-producing stocks have been discovered. Better to look for dividends among cash-rich companies that slip under yield-hunters� radar. See full story.

Tech spending may not be as bad as feared

Earnings in the sector are lifting hopes that IT spending may not be as dismal this year as many analysts expected back in December. Quarterly reports from IBM, EMC and VMware offer a more upbeat view. See full story.

Oil ends lower, gasoline at best since August

Oil futures end a seesawing session modestly lower. Gasoline futures settle at their highest since August on a planned refinery shutdown and higher Brent prices. See full story.

White House expands foreclosure prevention program

The Treasury Department expands a troubled program seeking to help troubled borrowers on the verge of foreclosure, expanding incentive payments to investors so they participate in the program. See full story.

MARKETWATCH COMMENTARY

Instead of acknowledging that banks have become a part of government, we keep pretending they are private institutions, writes David Weidner. See full story.

MARKETWATCH PERSONAL FINANCE

What�s the State of Retirement in the U.S.? It�s plagued with problems involving Social Security, contribution rates and more that need fixing now. See full story.

CVS Offers Free Flu Shot with $30 Puchase

Just in time to send the kiddies off to school, CVS (NYSE: CVS) is offering a free flu shot � providing you spend a little cash while you�re there, of course.

Available at every CVS pharmacy and MinuteClinic stores, the flu shots will be provided at no charge to consumers who buy $30 worth of products from Procter & Gamble (NYSE: PG) such as Bounty paper towels, Pampers diapers and Tide laundry detergent. The promotion seems to be perfect for the back-to-school season, when parents already have a big hassle with buying clothes, shoes and other school supplies.

The stores will offer walk-in appointments or an online �My Flu Shot Scheduler� to an appointment in advance for even more ease for customers. The online site shows store locations along with available appointment times.

Earlier this month � and likely the reason for the whole idea � Walgreens (NYSE: WAG) began offering flu shot coupons at its stores. The retailer is offering the gift cards for $29.99 at all of its 7,500 drugstores as well as on its website, Walgreens.com.� In 2009, the Illinois-based company provided more than 7 million flu vaccinations.

The largest in the Drug Stores industry (based on market cap), CVS is clearly intended to hold off Walgreen�s attempts at cornering the flu shot market. Both stores are hoping for an added bottom-line boost, as stock prices for the pharmacies are having serious issues, although CVS shares have dramatically outperformed WAG stock in 2010. (Just happy to be included near the Big 2, Rite Aide (NYSE: RAD) has been in a steady downward spiral since mid 2007). Walgreen�s stock is down some -21.5% since January, and CVS stock is down -15.80% year-to-date against the Dow�s -3.7% and S&P�s -5.75%. Both stores suffer from poor front-of-store sales � the non-prescription purchases, that is.

With 100 million to 150 million vaccines shot in the arms of Americans every year, this new push could be one way to help profits. This year, the flu shot vaccination will cover three strains of influenza, including the 2009 H1N1 strain, approved by the U.S. Food and Drug Administration.

The shots do not, however, include anything to prevent you from avoiding the store altogether until you either get sick again or need a passport photo.� So the drug store chains better hope they have another trick in the works to prop up sales down the road.

As of this writing, Burke Speaker did not own a position in any of the stocks named here.

Daily Trader�s Alert: Red-Hot Trades Sent Right to Your Inbox! Complete with chart and trading target, this daily stock or ETF pick is e-mailed to you each trading day before the market open. InvestorPlace�s Chief Technical Analyst Sam Collins also gives you his take on what�s slated to impact your portfolio during the trading day. Click here to subscribe to Daily Trader�s Alert — it�s FREE!

MGM Is Ready to Pop

With increased foot traffic in Las Vegas and growing consumer confidence throughout the country, MGM Resorts (NYSE: MGM  ) is set up to be the casino industry's biggest winner.

MGM's stock has been crushed over the past few years, as many of the casino operators were. The chart below shows the industry falling from the highs of late 2007. Note that MGM has been the slowest to show any signs of recovery.

MGM Resorts International Stock Chart by YCharts

While Wynn Resorts (Nasdaq: WYNN  ) stock has performed the best thus far, Las Vegas Sands (NYSE: LVS  ) and Penn National Gaming (Nasdaq: PENN  ) have both shown signs of recovery since hitting the bottom during 2009. Wynn and Las Vegas Sands have bounced back faster because of strong revenue growth coming from new markets in Asia, a market MGM was late to enter. While competitors were moving across the Pacific, MGM was still heavily focused on its operations in Las Vegas.

Three years ago, no one felt the city in the desert had a chance, and in most aspects it didn't: consumer confidence was low, spenders became savers, and unemployment nationwide was increasing. Now, the situation in Las Vegas is slowly getting better. November marked the 21st straight month the number of visitors to the city increased, and house gaming wins were up 5.2% for the first 11 months of 2011. If all these trends continue, MGM Resorts will benefit hugely from a Las Vegas revival.

Not just casino operators
Over the past few years, Las Vegas has seen gaming revenue trend downward. Currently, gaming revenue in Nevada is at an all-time low, accounting for only 46.2% of the total. So finding more money from other aspects of the business is the key to survival. Companies like Wynn, Sands and Boyd Gaming (NYSE: BYD  ) rely on gambling for approximately 75% of revenue. MGM, on the other hand, is more reliant on food, beverage, entertainment, and room revenue -- only 51% comes from the casino.

Rooms and rates
For hotel operators, one of the best ways to increase a balance sheet is by raising room rates. When room rates increase, costs stay flat, allowing the new revenue to move down to the bottom line. Since MGM owns and operates 30% of all the rooms on the strip, and the overall room rate in 2011 has increased 10.8% over the prior year, the company could see a large boost in profits.

Higher demand and lower supply allows the city to charge elevated room rates. In 2011, 84.8% of Las Vegas' 150,000 plus rooms were occupied again over the prior year, and the city realized a visitor volume increase of 4.4% from 2010. With higher room occupancy and more traffic, there will likely be a decrease in the number of hot room deals Las Vegas used to offer in the past to help fill vacant rooms. That will further allow the average room rate to continue rising.

Online poker
On Dec. 22, the Nevada gaming commission posted rules and governing guidelines for the state pertaining to online poker. It spells out how the application process for service providers will be handled, how much each operator can profit from the games being played, and what information players signing up will need to provide. The writing is on the wall: This will happen. The only question is when.

MGM is already positioned to benefit from this new revolution with its joint venture with Boyd Gaming and Bwin.Party. Wynn has also teamed up with an online poker company, but Las Vegas Sands is still standing outside the party all alone. Based on Fool writer Travis Hoium's estimates, MGM Resorts could see an increase of $75 million in EBITDA if online poker becomes legal. (Boyd would see much less because its stake is only 10%.)

Foolish take
MGM still has a long way to shore up a balance sheet that is weighed down with $13.5 billion in debt. But with online gaming on the horizon and increased travel to Sin City, I feel MGM Resorts is positioned to realize better returns than its competitors in 2012. That's why I have made a positive CAPScall for MGM Resorts. As much as I like MGM Resorts' future potential, I like another company even more: Find out what myself and thousands of others already know in this free report on the "next rule-breaking multibagger." Hurry, it won't last forever! Click here.

The Serial Backdoor Roth, A Tax-Free Retirement Kitty

If your income is too high, you can�t contribute directly to a Roth individual retirement account, but you can get one in a backdoor way. Step 1: Open a traditional IRA (in your case, it�s nondeductible). Step 2: Convert it to a Roth IRA. Is it worth it? �It�s a no-brainer if you have the cash to do it,� says Kevin Huston, an enrolled agent in Asheville, N.C. who has clients both young and old doing it to shore up their retirement savings. �It especially makes sense for people who are younger because they have all these years of tax-free growth,� he says.

Basically, you get an extra $5,000 (or $6,000 if you�re 50 or older) each year that grows in the Roth IRA income-tax free. That�s $10,000 (or $12,000) a year for a married couple. Repeat each year, and you can amass a nice retirement kitty. The audience for backdoor Roths is a niche, appealing to those earning too much to contribute to Roths directly but not so much that the extra tax savings doesn�t seem worth the effort. Vanguard says that �backdoor Roth� contributions represented about 2 percent of traditional IRA contributions in 2011. (Income restrictions on conversions were lifted starting Jan. 1, 2010, so anyone�regardless of income�can convert a traditional IRA to a Roth.)

Why go through the hoops of getting money into a Roth IRA? They are an amazing deal, especially for folks looking long-term and expecting higher tax rates in the future. With a Roth IRA you don�t ever have to take money out, and when you do start taking money out, it�s all income-tax-free, including the earnings. By contrast, with a traditional IRA, earnings grow tax-deferred, you have to start taking required mandatory distributions the year after you turn 70.5, and distributions count as income. A Roth can help keep your tax bite down in retirement. (Ideally you want a mix of taxable, tax-deferred and tax-free accounts to draw from in retirement.)

A Roth IRA also has other benefits. Medicare premiums are based on income, so by keeping your income down, you�ll pay a lower premium. And if you leave a Roth account to a child, he or she will have to take money out each year, but there will be no income tax hit. (Inheriting a $100,000 Roth IRA is a whole lot better than inheriting a $100,000 traditional IRA; the higher your beneficiary�s tax bracket, the bigger the savings).

Here�s how the strategy is helping a couple in their 40s build their nest egg. The wife�s in marketing with a pharmaceutical company, and the husband is a stay-at-home dad. First, she�s maxing out on her company pre-tax 401(k) plan contributions�putting away the full $17,000 for 2012�her employer doesn�t offer a Roth 401(k) option. The couple told their tax advisor Huston they want to save more, but they can�t contribute to Roth IRAs directly because her income is nearly $200,000 a year. (Once your modified adjusted gross income is $183,000 for a couple filing jointly or $125,000 for singles, no Roth IRA contributions are allowed).

But they can each contribute to a traditional IRA. They don�t get a deduction because of the wife�s high income, so it�s called a nondeductible IRA. She puts away $5,000, and he puts away $5,000 (his IRA is based on her earning and called a nondeductible spousal IRA; otherwise you have to have earned income to contribute to an IRA). Then they convert the IRAs into Roth IRAs. That sounds complicated but you can do it online, and it�s almost as easy as transferring money from checking to savings. You pay income tax the next April only on any earnings accrued between the time you contributed to the nondeductible IRA and converted to a Roth.

There�s one big caveat to the backdoor Roth: the pro rata rule. When you calculate the taxes due on a conversion, you have to take into account all your IRA assets, not just the new $5,000 nondeductible IRA. For example, if you have a traditional IRA with $95,000 of money from a 401(k) rollover (the $95,000 contributions were made on a pre-tax basis), and you make a $5,000 nondeductible contribution to a new IRA, the conversion would be 95% taxable.

So when might it make sense to skip this whole exercise? Ronald Finkelstein, a CPA and lawyer with Marcum in Melville, N.Y., said he personally makes nondeductible IRA contributions each year and has considered doing a Roth conversion but passed because he has accumulated a large sum in a traditional IRA he opened 30 years ago when he had a newspaper route. Plus, he may retire to Florida, so paying the New York state tax bite wouldn�t make sense. �You have to do the calculations,� he warns.

But sometimes it can still make sense for folks, even older folks, with big traditional IRAs, to do the backdoor Roth. Another Huston client, a 68-year-old builder, does them as part of a holistic plan to get more of his net worth into tax-free accounts so he and his wife (and grandchildren) will have the accounts to tap as part of a tax diversification strategy. He just did a $6,000 backdoor Roth for the third year in a row. At the end of each calendar year, Huston and he look at his income and decide how much to convert from his traditional IRA too (one year it was $50,000; one year $25,000), keeping in mind what would push him into a higher tax bracket.

There�s still time to make an IRA contribution for calendar year 2011 through April 17, 2012. You can double up and make your 2012 contribution too. How long should you wait to convert? �It�s a grey area,� says Robert Keebler, a CPA in Green Bay, Wisc. He suggests a waiting period of six months, although other advisors say to convert the next day to limit the tax bite on the conversion.

For a run-around the dreaded pro rata rule, see The Backdoor Roth IRA, Advanced Version.

 

 

Refashioning Gap: CEO Sees Future in Outlets, Online

Gap might be undergoing an extreme makeover, but the chain is no longer the key growth engine of Gap Inc., (GPS) Glenn Murphy, chairman and chief executive officer of the retailer, told a packed room of investors at the Piper Jaffray Consumer Conference in New York Wednesday.

The apparel giant is shifting its emphasis away from its embattled namesake brand -- as well as its other specialty divisions, like Banana Republic -- to stoke its major growth initiatives.

These include expanding its outlet store business and growing its newer divisions, such as the Piperlime e-commerce site and yoga and athletic apparel chain Athleta.

"We're mitigating our dependence on the specialty business in North America [Gap and Banana Republic] ... to mitigate risk," Murphy said.

To that end, the chain will shrink its Gap chain down from about 900 stores today to an estimated 700 stores by 2013 as part of an ongoing contraction of the 41-year-old brand that almost single-handedly redefined casual dressing in America.

Everyone's Going to the Outlets

By contrast, Murphy envisions the addition of about 50 to 60 Gap outlet stores in the U.S, bringing the total to around 250, and also foresees its Banana Republic outlet business expanding by about 40 new stores to around 150. Gap Inc.'s outlets have been a bright spot for the company in in recent years -- consistent with a pattern across the retail industry in this recessionary climate. The outlet business has generated "the highest return on sales," Murphy said. "It's where customers are gravitating."

These are not your mother's outlets, selling castoff blouses and pants from the parent chain. Gap's plan is to increasingly stock its outlet stores with on-trend merchandise, Murphy said. "I don't want them bringing stripes in the stores if stripes are last year's idea," he said.

Growing the outlet business abroad is another focus. The retailer opened an outlet store in Milan, Italy, this month, and recently expanded into Canada and Japan. China, too, represents a "huge potential" market for the format, he said. It's all part of Murphy's plan to build a "global runway" with the expansion of not only outlet stores, but also flagship stores overseas.

The retailer is not new to foreign soil: In fact, its international business has recently been outshining the North American stores. Stateside, Murphy is also bullish on the growth of Piperlime, Gap's online business, which will add men's product this fall, and Athleta, where the "real estate opportunities are exploding," he said.

Getting Back on the Forefront of Fashion

But that doesn't mean the company is abandoning its U.S. Gap stores, which have been struggling with poor sales, hurt by fashions that have left shoppers cold.

In a bid to reverse the downward trend, Murphy spearheaded a management shakeup and restructuring this year that included the high-profile ouster of chief designer Patrick Robinson; the introduction of new leadership, with Art Peck replacing Marka Hansen as president of Gap North America; and the formation of the Gap Global Creative Center in New York. The division will chose about 75% of the merchandise content for the Gap, Banana Republic and Old Navy divisions, among others.

What's more, the merchants who have been behind the company's international business, competing adeptly against popular global clothing retailers such as Uniqlo, Inditex Group from Spain (which operates Zara in the U.S.) and H&M, "will have a much bigger influence over design and product" for its North American retail brands, Murphy said.

Come fall, when more trend-right product hits the stores, Murphy hopes the Gap stores will "delight" consumers once again, he told DailyFinance. While Murphy said little about what the new Gap merchandise will look like, he was frank about what has gone wrong at the chain.

For one, Gap missed out on opportunities last year to build on its highly successful 1969 jean collection with items like "hot, complementary tops," he said. Although the Gap chain has been the company's Achilles heel, the other divisions have also stumbled.

Old Navy has faltered because it tried to be too much like fast-fashion retailers such as H&M. Meanwhile, Banana Republic got too casual: More work-appropriate clothes will begin to show up in its stores in July, he said.

The overall apparel business has been pummeled by the worst inflationary pressures and raw material cost increases -- specifically, cotton -- in 30 years, Murphy said. Could Gap Inc. have prepared better by ratcheting up product orders before cost increases kicked in? Yes, Murphy conceded.

To mitigate ongoing commodity price hikes, the retailer is now working more directly with fabric mills, and is using fewer vendors, as well as choosing ones more willing to keep costs down, Murphy said. "For spring, we've completely changed our strategy," he said.


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Top Stocks For 2012-1-19-2

Aehr Test Systems (Nasdaq:AEHR) announced that it will report financial results for the first quarter of fiscal 2011 ended August 31, 2011 after the market closes on Thursday, September 29, 2011.

Aehr Test Systems develops, manufactures, and sells systems, which are designed to reduce the cost of testing flash, dynamic random access memory, and other memory devices, as well as to perform reliability screening, or burn-in of complex logic and memory devices.

Crown Equity Holdings, Inc. (CRWE)

Crown Equity Holdings Inc’s selection of Core Link reflects recent diversification beyond CRWE’s original charter as a provider of services and knowledge to small business owners taking their own companies public. In addition to these services, Crown Equity Holdings Inc has transitioned into a multifaceted media organization that publishes clients’ news online; sells advertising adjacent with its digital network targeted at a high-income audience; designs, hosts and maintains websites; produces marketing videos from concept to final product; crafts press releases and articles for maximum SEO; develops email campaigns; and forges branding campaigns to bolster client company images.

VoIP stands for Voice over Internet Protocol. In simple words, this means that when you make a call to someone by a VoIP (Voice over Internet Protocol) phone, your voice is carried over internet, instead of the regular cable lines. When the other person replies to you, his/her voice reaches you by internet in the same way. In this way Voice over Internet Protocol is a telephone connection that uses internet instead of the regular telephone network.

When you call someone by a Voice over Internet Protocol telephone, your voice (analog) signals are converted into digital signals which travel over the internet. These digital signals are converted back into voice (analog) signals at the other end and heard as normal voice by the person you call.

Crown Equity Holdings Inc. (CRWE) is pleased to announce that it has entered into a joint venture to deploy VoIP (Voice over Internet Protocol) technology delivering voice, video and data services to residential and commercial customers. The joint venture company is Crown Tele Services Inc. which was a wholly-owned subsidiary of Crown Equity Holdings Inc. Crown Equity Holdings Inc. will own fifty percent (50%) interest in the joint venture.

Commenting on the joint venture, Kenneth Bosket, President of Crown Equity Holdings Inc., said: “We are excited to deliver VoIP communications solutions specifically designed to meet the business and residential market needs in this fast-growing global market.”

Crown Equity Holdings, Inc. together with its digital network, currently provides electronic media services specializing in online publishing, which brings together targeted audiences and advertisers. Crown Equity Holdings Inc. offers internet media-driven advertising services, which covers and connects a range of marketing specialties, as well as search engine optimization for clients interested in online media awareness.

For more information, visit http://www.crownequityholdings.com

Tegal Corp. (Nasdaq:TGAL) announced that Sequel Power, its portfolio company dedicated to the development and operation of large scale photovoltaic (PV)-based solar utility projects, has established a strategic alliance with Table Rock Capital (TRC), an independent private equity fund manager focusing on investments in infrastructure assets located in the U.S. and other OECD countries.

Tegal Corporation focuses on the development and application of technologies in the field of green energy.

RF Monolithics Inc. (Nasdaq:RFMI) announced a substantial price reduction for their industry leading, ultra low-power Wi-Fi module. The pre-certified module comes with full-function, ready to use firmware has a new MSRP of $39 for single piece quantity. Volume discounts are also available.

RF Monolithics, Inc. designs, develops, manufactures, and markets wireless solutions and wireless components for various applications in the industrial, medical, automotive, consumer, and telecommunications markets in the United States and internationally.

Stat of the Week: Consumer Credit Up 9.9%

Last Monday, the Federal Reserve announced that November consumer credit surged 9.9%, the fastest monthly increase in 10 years — since the post-9/11 recovery month of November 2001. Credit-card debt rose 8.5%, the biggest monthly jump since 2008, while nonrevolving debt (such as auto loans) rose 10.7%.

This surge in consumer credit should contribute to a rise in fourth-quarter GDP growth since consumer spending represents about 70% of GDP growth. Some economists have now revised their fourth-quarter GDP estimate to an annual pace of 3.4% in the wake of the Fed�s report. In addition, vehicle sales rose 1.5% in December and 8.8% in 2011, while overall retail sales increased by a very healthy 6.5% in 2011.

The sentiment indexes are also turning up. On Tuesday, the National Federation of Independent Business reported that small-business optimism rose to 93.8 in December, up from 92.0 in November. That index has now risen 5.7 points in the last four months. Another good sign is that the Fed�s latest Beige Book survey reported that economic conditions improved in all 12 Fed districts during the last six weeks of 2011. And then, on Friday, the University of Michigan/Reuters� January preliminary consumer sentiment index rose to 74, up from 69.9 in December — a point higher than economists� consensus estimate of 73.

One negative indicator came out on Thursday when the Labor Department announced that new weekly jobless claims rose by 24,000, to 399,000. Ouch! Not only did retailers reduce their temporary help but transportation companies also made job cuts. New jobless claims had been trending lower since mid-September, but now the latest four-week average of new jobless claims has risen by 7,750, to 381,750.

At first glance, it looks as if the recent influx of new jobs could have been a seasonal phenomenon, so we could see the unemployment rate rise this month and next. But perhaps not. Home Depot (NYSE:HD) announced on Thursday that it plans to hire 70,000 temporary workers for its U.S. stores this quarter because it anticipates a healthy spring-cleaning season — and spring is Home Depot�s busiest time of the year.

When I put all of these indicators together, I see rising consumer spending as a rational response to the near-zero yields now available in bank savings accounts. As consumer confidence rises, consumers will decide to spend more now since they aren’t getting significant returns on their bank savings.

By the same token, investors are switching to high-yield stocks rather than accepting low cash yields, especially since the average stock in the S&P continues to return more that 10-year Treasury bonds.

Stock Market Outlook: Is All the Good News Cooked In?

The economy is improving, but stock investors already know this, says Paul R. La Monica at CNN Money. The U.S. is seeing a "BBQ recovery" that is slowly but surely cooking along -- the only problem, he says, is the market already reflects this and may soon be ripe for a pullback.

La Monica cites several sources of positivity -- a huge drop in jobless claims, non-threatening inflation levels, absence of bad news in Europe, and better-than-expected earnings from Bank of America and Morgan Stanley. But the overall market has been essentially flat on these news stories.

"It's true that investors may be getting ahead of themselves a little bit. A pullback in stocks wouldn't surprise me, especially if Europe's debt problems take a sudden turn for the worse again," he said.

Business section: Investing ideas
Keeping this possibility in mind, we ran a screen on stocks that may be exposed to a possible pullback if La Monica is indeed correct.

We ran a screen on large-cap stocks that have rallied over 50% over the last quarter for those with bearish sentiment from short-sellers. We screened for stocks with significant increases in shares shorted month over month.

Do you think these stocks are the "burgers to flip"?

List sorted by increase in shares shorted as a percent of share float. (Click here to access free, interactive tools to analyze these ideas.)

1. United Rentals: Operates as an equipment rental company in the United States and Canada. Market cap of $2.18B. The stock has increased 71.79% over the last quarter. Shares shorted have increased from 12.03M to 16.49M month-over-month, a change representing 7.68% of the company's 58.06M share float.

2. Spectrum Pharmaceuticals (Nasdaq: SPPI  ) : A commercial-stage biotechnology company, primarily focuses on oncology and hematology. Market cap of $889.28M. The stock has increased 84.62% over the last quarter. Shares shorted have increased from 7.06M to 8.67M month-over-month, a change representing 3.26% of the company's 49.38M share float.

3. RAM Energy Resources: Engages in the acquisition, development, exploitation, exploration, and production of oil and natural gas properties primarily in Texas, Louisiana, Oklahoma, New Mexico, and West Virginia. Market cap of $312.09M. The stock has increased 395.00% over the last quarter. Shares shorted have increased from 293.90K to 1.89M month-over-month, a change representing 2.87% of the company's 55.57M share float.

4. RSC Holdings (NYSE: RRR  ) : Engages in the rental of construction and industrial equipment primarily in the United States and Canada. Market cap of $2.09B. The stock has increased 121.99% over the last quarter. Shares shorted have increased from 4.55M to 6.16M month-over-month, a change representing 2.60% of the company's 61.86M share float.

5. OCZ Technology Group (NYSE: OCZ  ) : Designs, develops, manufactures, and distributes computer components for computing devices and systems worldwide. Market cap of $397.96M. The stock has increased 55.04% over the last quarter. Shares shorted have increased from 21.48M to 22.40M month-over-month, a change representing 2.03% of the company's 45.28M share float.

6. Cedar Realty Trust: Engages in the ownership, operation, development and redevelopment of supermarket-anchored community shopping centers and drug store-anchored convenience centers in the United States. Market cap of $326.45M. The stock has increased 71.43% over the last quarter. Shares shorted have increased from 2.33M to 3.29M month-over-month, a change representing 1.77% of the company's 54.26M share float.

7. KB Home (NYSE: KBH  ) : Operates as a homebuilding and financial services company in the United States. Market cap of $853.20M. The stock has increased 55.54% over the last quarter. Shares shorted have increased from 25.60M to 26.65M month-over-month, a change representing 1.60% of the company's 65.47M share float.

8. Molina Healthcare: Provides Medicaid-related solutions to meet the health care needs of low-income families and individuals, as well as assists state agencies in their administration of the Medicaid program. Market cap of $1.28B. The stock has increased 83.99% over the last quarter. Shares shorted have increased from 2.40M to 2.68M month-over-month, a change representing 1.12% of the company's 24.92M share float.

9. Dendreon (Nasdaq: DNDN  ) : Engages in the discovery, development, and commercialization of therapeutics to enhance cancer treatment options for patients. Market cap of $2.09B. The stock has increased 50.48% over the last quarter. Shares shorted have increased from 31.34M to 32.90M month-over-month, a change representing 1.07% of the company's 145.73M share float.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.

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Kapitall's Alexander Crawford does not own any of the shares mentioned above. Short data sourced from Yahoo! Finance.

Google Increases Sales but Misses Estimates on Earnings

Google (Nasdaq: GOOG  ) reported earnings on Jan. 19. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Google missed on revenue and missed on earnings per share.

Compared to the prior-year quarter, revenue expanded significantly, and earnings per share improved.

Margins dropped across the board.

Revenue details
Google booked revenue of $10.6 billion. The 25 analysts polled by S&P Capital IQ looked for a top line of $10.9 billion. Sales were 25% higher than the prior-year quarter's $8.4 billion.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions.

EPS details
Non-GAAP EPS came in at $9.50. The 33 earnings estimates compiled by S&P Capital IQ predicted $10.48 per share on the same basis. GAAP EPS of $8.22 for Q4 were 5.3% higher than the prior-year quarter's $7.81 per share.

Source: S&P Capital IQ. Quarterly periods. Figures may be non-GAAP to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 65.0%, 10 basis points worse than the prior-year quarter. Operating margin was 33.1%, 220 basis points worse than the prior-year quarter. Net margin was 25.6%, 450 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $10.7 billion. On the bottom line, the average EPS estimate is $10.11.

Next year's average estimate for revenue is $46.0 billion. The average EPS estimate is $43.85.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 14,847 members out of 17,316 rating the stock outperform, and 2,471 members rating it underperform. Among 3,563 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 3,215 give Google a green thumbs-up, and 348 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Google is outperform, with an average price target of $731.19.

New technology paradigms and mobile devices are driving the next wave of Internet services. Many older companies won't survive the change, while fortunes will be made by the first movers in the field. Where does Google fit in? What's the fortune-making change? Check out our latest free report: "The Two Words Bill Gates Doesn't Want You to Hear..." Click here for instant access to this free report.

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Microsoft: FYQ2 Aside, It’s All About Windows 8

Shares of Microsoft (MSFT) are up $1.54, or 5.5%, at $29.66 after the company last night met fiscal Q2 revenue expectations and beat by a couple of pennies on the bottom line.

The most mysterious element of the report was the 6% drop in Windows division sales. Microsoft had warned of weakness in PCs last week, and last night it said the collapse of netbooks was a particular difficulty. But as Microsoft’s IR director told me after the release, netbooks alone don’t explain the drop in Windows revenue. In fact, it wasn’t completely clear what drove it, he said.

About the only other tidbit that could be gleaned yesterday was when CFO Peter Klein was asked by an analyst on last night’s conference call what had led to a slowing of the rate of growth in business PC revenue for Windows. Klein remarked that “a small amount due to macro,” meaning macroeconomic concerns.

However, most analysts seem to be able to get past that fact today. The real issue is whether to hold onto the stock in anticipation of the arrival of Windows 8, later this year, or bail until Windows 8 comes:

Kevin Buttigieg, Collins Stewart: Reiterates a Buy rating and a $33 price target, writing that Microsoft has “cleared the confusion,” putting to rest “fears of wider issues” for the company than just PCs. Buttigieg thinks the focus will now be on forthcoming products (Windows 8, for example) and that the stock’s multiple can expand. The drop in Windows division revenue of 6% was worse than the 4% he had been modeling, but he notes that it was made up for by the Business Division and the Entertainment & Devices group (Xbox). Buttigieg cut his revenue estimate for this year to $73.61 billion, from a prior $74.33 billion, but keeps his EPS estimate at $2.65.

Walter Pritchard, Citigroup: Reiterats a Buy rating and a $35 price target, writing that the company’s strength in its enterprise business, with the company’s “contracted backlog” higher than is the norm for the season. In short, the “diversity” of Microsoft’s business model is playing to Microsoft’s advantage amidst the uncertain PC market. Pritchard cut his estimates for this year to reflect an even more pessimistic view of the personal computer landscape. He now models Microsoft making $74 billion in revenue and $2.69 per share in profit versus his prior estimate for $74.85 billion and $2.78 per share.

Brendan Barnicle, Pacific Crest: Reiterates a Sector Perform rating on Microsoft (MSFT), writing that he is “waiting for Windows 8 and Windows recovery,” with PC headwinds likely to keep that business from recovering until the March quarter. “Microsoft�s Windows revenue declined by 6% in fiscal Q2 (Dec), which was much slower than IDC�s estimate of a Q4 PC decline of 0.2% and Gartner�s estimate of a Q4 PC decline of 1.5%. Windows revenue even grew slower than Microsoft�s own estimate of a Q4 PC decline of 3%.”

Heather Bellini, Goldman Sachs: Reiterates a Neutral rating on the stock, while cutting her estimates for this quarter to $16.8 billion in revenue and 55 cents EPS from a prior $17.4 billion and 59 cents. She also cut her the full year estimate to $74 billion and $2.68 per share from a prior $74.3 billion and $2.70. “We see December quarter results as helping to support the stock near term, with the continued big question mark relating to the company�s consumer price and quality competitiveness in new form factors at the launch of Windows 8. As such, we continue to see the stock relatively ??????range bound near term.”

Google Conf Call: Ad Format Changes Hit Cost-Per-Click

Following disappointing Q4 results this evening, Google‘s (GOOG) CEO Larry Page talked with analysts on the company’s conference call, saying that he was “very happy with our results,” as the company “blew past the $10 billion [revenue] mark for the first time. Pretty exciting.”

Regarding the company’s advertising business, where the “cost-per-click” unexpectedly declined last quarter, the company attributed some of that to changes in advertising format:

When we make ad quality or format changes, CPC and paid clicks may be impacted differently. For example, when we introduced site links, we saw an increase in clicks. But the additional clicks were on lower CPC ads, which reduced the average CPC. Many of the ad quality changes in Q3 increased paid clicks at lower CPCs, and they were revenue-positive with good user and good advertiser metrics. These ad quality changes from Q3 had a cumulative effect on Q4 metrics.

When UBS Securities’s Brian Pitzer pressed management on the decline in cost-per-click, management reiterated that “multiple factors” were responsible, but the main ones being foreign exchange and changes in “ad quality or format changes.”

The company’s revenue from display advertising, which is not its traditional strength, is now at a “run rate” of $5 billion annually, Page said. The company is seeing “tremendous mobile users,” said Google’s chief business officer, Nikesh Arora, in answer to an analyst question about how great a shift was going on from traditional desktop search to searching on mobile phones and tablets.

Users of Google’s social network, Google+, more than doubled from last quarter, said Page, to 90 million users. Google’s phone and tablet operating system, Android, is seeing 700,000 activations per day, said Page, and now is running on 250 million devices. During the holiday weekend last month, 3.7 million devices were activated.

Google shares are down $57.18, or almost 9%, at $582.39.

Two Delta Executives Sell Shares

Delta (DAL) was in the news today over whispers about the firm’s intention to buy US Airways (LCC) or AMR (AMR), the parent company of American Airlines.

Two Delta executives, meanwhile, have been selling some of the shares they hold in the company. CFO Hank Halter sold 20,000 shares for about $207,500, and Executive VP Glen Hauenstein sold 50,900 shares for $529,400. The two executives recently had a large chunk of restricted stock vest, so the sales aren’t necessarily a huge surprise, or a glaring red flag, notes InsiderScore.com.

“The timing, however, is a little curious,” says an InsiderScore.com analysis. “Each executive had shares withheld to cover taxes when the restricted stock vested, so these weren’t tax sales. We understand the want and/or need to turn some stock-based compensation into cash, but with the potential for another round [of] big-time consolidation in the industry the major story amongst airlines right now, we’re a little surprised to see top executives taking money off the table.”

Top Stocks For 2012-1-21-11

AAR WINS AIRLIFT SUPPORT CONTRACT FROM MILITARY SEALIFT COMMAND
AAR to provide helicopter airlift support for U.S. Navy ships

AR (NYSE: AIR) announced that it has been awarded a contract from Military Sealift Command (MSC), to provide airlift support for U.S. Navy ships. The contract has a one-year initial base period, three one-year options and an additional 11-month option with an estimated total value of approximately $77 million.

The vertical replenishment (VERTREP) contract calls for the renewal of 4 helicopters, personnel, and operational and technical support services that the Company currently provides in the Western Pacific and Indian Oceans and the Arabian Gulf. AAR was selected from four competitive bids submitted.

�This award reflects the Military Sealift Command�s continuing confidence in AAR�s transportation and logistics capabilities and we are extremely proud to support the U.S. Navy�s operations at sea,� said David P. Storch, Chairman and Chief Executive Officer, AAR CORP.

AAR�s Airlift Group provides expeditionary airlift services in austere environments and performs specialized aircraft modifications in support of national defense, security and humanitarian relief operations. Under current contracts, the Company provides airlift for the Department of Defense in three regions around the world, using both fixed-wing aircraft and rotary-wing aircraft to transport personnel, supplies and mail over land and at sea.

AAR is a leading provider of value-added products and services to the worldwide aerospace and government and defense industries. With facilities and sales locations around the world, AAR uses its close-to-the-customer business model to serve aviation and government/defense customers through four operating segments: Aviation Supply Chain; Maintenance, Repair and Overhaul; Structures and Systems; and Government and Defense Services.

More information can be found at www.aarcorp.com.

World Energy Solutions, Inc. (Nasdaq:XWES), a leading energy management services firm, announced it has purchased the energy procurement business of Co-eXprise, Inc., a privately-held enterprise software firm. The acquisition extends World Energy’s leadership in online energy procurement, adding valuable new government, institutional, and commercial & industrial clients to its large and growing customer base. World Energy expects the transaction to be immediately accretive.

World Energy Solutions, Inc., an energy management services company, develops and builds solutions to assist businesses, institutions, and governments in managing their energy as a strategic asset.

Enzo Biochem Inc. (ENZ)

Enzo Biochem, Inc., is a growth-oriented integrated life sciences and biotechnology company focused on harnessing biological process to develop research tools, diagnostics and therapeutics, and serves as a provider of test services, including exotic tests, to the medical community. Since ENZ was founded in 1976, their strategic focus has been on the development of enabling technologies in the life sciences field.

Biotechnology is a branch of science where living things are used for the creation of products or to perform some tasks for human beings. Plants, animals and even micro-organisms like bacteria are used to produce some benefit to mankind. In the medicine and agricultural industries, biotechnology helps in producing foods, tests for diseases and to remove waste. Biotechnology can also be used to solve problems and to help in research.

Biotechnology involves the manipulation of plants and animals to produce species that are more environments friendly and productive. Development of varieties of wheat that are disease resistant by cross breeding different types of wheat is an example of green biotechnology.

Enzo Biochem Inc. recently announced that it has added four highly experienced executives at its Enzo Life Sciences subsidiary to focus on rapidly evolving new pharmaceutical and clinical applications.

The officers, all filling newly created positions, are Bruce Taillon, PhD, as head of global technology business development, John D’Errico, PhD, to lead the commercial merchandising operations, Kara Cannon, as head of global marketing and Paul Munger, PhD, to lead Global Manufacturing.

Over the past two years, Enzo has been engaged in enhancing the Life Sciences subsidiary’s operating performance through added capabilities, greater integration and a more focused product mix. These efforts are all aimed at significantly expanding Enzo’s presence and marketing beyond the traditional academic and research laboratory core to greater penetrate the pharmaceutical and clinical customer base with new and cutting edge platform technologies.

For more information about Enzo Biochem Inc. visit its website: http://www.enzo.com

Savient Pharmaceuticals, Inc. (Nasdaq:SVNT) announced that John H. Johnson, Chief Executive Officer and President of Savient will present at the Sixth Annual JMP Securities Healthcare Conference on Wednesday, September 28, 2011 at 9:30 a.m. Eastern Time. The conference will be held at the St. Regis hotel in New York City. A live webcast of the presentation can be accessed through the investor relations section of the Company’s website at www.savient.com. Following the live presentation, a replay of the webcast will be available on the Company’s website for 30 days.

Savient Pharmaceuticals, Inc., a specialty biopharmaceutical company, focuses on developing KRYSTEXXA, a biologic PEGylated uricase in the United States.

Cleantech Transit, Inc. (CLNO)

Cleantech Transit Inc. was founded to capitalize on technology advances and manufacturing opportunities in the growing clean energy public transportation sector. The Company has expanded its focus to invest directly in specific green projects. Recognizing the many economic and operational advances of converting wood waste into renewable sources of energy, Cleantech has selected to invest in Phoenix Energy (www.phoenixenergy.net). This project could benefit the Company’s manufacturing clients worldwide.

Cleantech Transit, Inc. (CLNO) is pleased to announce it has met its funding requirement to secure the Company’s ability to earn in 25% of the 500KW Merced Project.

The Company is in the final stages of closing its initial interest in the Merced Project and is currently working on completing the necessary documentation and expects closing the transaction soon. As previously announced Cleantech has the option to earn up to 40% of the Merced Project and the Company plans to continue to work towards increasing its interest in the Merced Project as they move ahead.

For thousands of years, ever since we used wood for fuel, we have relied on biomass or bioenergy to provide heat and energy. Today we use many other sources of biomass in the form of plants, landfill fumes, agriculture and forest residues, and organic wastes from industries and cities. Biomass can come from a large variety of sources. Often, agricultural and forest industry by-products can be used, which include paper mill residue and lumber mill scrap. Municipal wastes and surplus crops can also be utilized. Dedicated energy crops, such as fast growing trees and grasses can be used as sustainable long-term sources of biomass.

For more information about Cleantech Transit, Inc. visit its website www.cleantechtransitinc.com

Cheap Finance Stock Review; 5 Reasons you should Consider Citi

1. Citigroup Inc. (NYSE: C) today announced it was named as an official sponsor of the 2012 U.S. Olympic and Paralympic Teams and the U.S. Olympic Committee by the U.S. Olympic Committee (USOC) and NBC Olympics. The company is the official bank sponsor of the USOC through 2012. This agreement includes television and digital advertising, events and promotional opportunities.

2. The company�s mutual fund transfer agent services within the Global Transaction Services business achieved a 5-Star performance ratings from the National Quality Review (NQR) for 2010. NQR analyzed two areas of the compnay�s fund services� customer experience including, transaction processing and telephone service, each achieving the independent assessment firm�s 5-Star rating.

3. Recently, Citi was named as the �Best Investment Bank� and �Best Debt Bank� for the Latin American region by the Global Finance Magazine.� In addition, it was named as the �Best Investment Bank� in Argentina and Mexico. The company�s work was also appreciated with the award of �Equity Deal of the Year� for its Petrobras� $70 billion stock sale, in which Citi acted as a Global Bookrunner.

4. Citi was recently awarded top position in Affordable Housing Finance�s fourth annual ranking of affordable housing lenders. Its community capital�s volume for 2010 was $2.94 billion, making it highest in the history of the rankings and had nearly 75% more volume than the second place lender.

5. The company also expanded its OpenWealth platform including a complete package of trust accounting, operations outsourcing, and custody services for wealth managers. OpenWealth solution provides a complete package of modular services ranging from modern technology, extensive flexibility and the experience of providing client focused solutions. The new offering includes trust accounting on a highly scalable, customizable web-based platform with real-time processing and reporting that supports all phases of the account administration lifecycle.

Its Global Transaction Services business was recently appointed by IMI for its sponsored Level 1 American Depositary Receipt program.

The company stock has traded in the range of $3.53 and $5.15 during the past 52 weeks. The company�s market cap is $129.74 billion.

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C

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Why Greece Has The Upper Hand

Stephen Fidler makes a good point: the difference between a “voluntary” exchange and a “coercive” exchange, when Greece finally puts an offer to its creditors, is largely semantic. Or, to put it another way, the only real difference is that in a voluntary exchange, you have the IIF’s Charles Dallara saying nice things about the Greeks, while in a coercive exchange, you have the IIF’s Charles Dallara saying nasty things about the Greeks. But the fact is that precious few bondholders who are going to change their vote based on what Charles Dallara thinks.

Most of the bondholders are European banks, and as Fidler says, European banks are subject to “moral suasion” — having their arms twisted by their national governments — which is much more likely to affect their final decision than the official judgment of Dallara. Meanwhile, an increasing proportion of the bondholder base is made up of hedge funds, who certainly don’t care what Dallara thinks.

Landon Thomas reports that the two sides are getting closer to agreement; the sticking point seems to be the coupon on the new bonds, and the likely outcome, on that front, is likely to be just below 4%. No word on the governing law of the new bonds, though I suspect that Greece will go along with doing the market-friendly thing of issuing its new debt in London.

The reason why none of the negotiations really matter very much is, as Fidler says, that “if they don’t agree, the holdouts will have the ‘voluntary’ deal forced down their throats”. Greece is going to bolt collective action clauses onto its outstanding bonds — and use those clauses in what’s known as a “cram down”: the minority has to do whatever the majority wants.

Now with most collective action clauses, this would be non-trivial. Often these clauses require a large supermajority of bondholders to agree before the CAC is triggered — 85%, say. And they’re generally done on a bond-by-bond basis, making it much easier for a hedge fund to build up a blocking stake in one bond.

But Greece is in the very nice position of being able to craft its CACs now, rather than at the time the bonds were issued. As a result, it can set the CAC threshold very low, if it wants, and it can also draft them so that the percentage which matters is the percentage of all bonds tendered into the exchange, rather than the percentage of any individual bond.

All it needs to do then is have a quiet word with the technocrats at the EU, who have a very good idea how much moral suasion they can wield. Greece has a pretty good idea what the minimum take-up of any exchange offer is likely to be. And it just needs to set its CAC level at or just below that minimum take-up level.

Of course, the lower the CAC level, the more coercive the Greece exchange will be considered. If the CACs are set at 85%, the deal will be “voluntary”; if they’re set at 51%, it will be highly coercive. But either way, the deal will get done. And Greece has absolutely nothing to worry about with respect to hedge funds threatening to sue the country in the European Court of Human Rights. Good luck with that one, guys, you’re going to need it.

The only real risk for Greece, as I see it, is that its offer is so bad that less than 51% of bondholders tender into the exchange: you can’t set a CAC below 50%. But I doubt we’ll see that. Banks hate holding defaulted debt. Greece is going to offer them a choice, between holding defaulted debt and holding new instruments which are paying in a timely fashion. When push comes to shove, the banks are going to take the new instruments. Whether Charles Dallara likes it or not.

Treasury Borrowing Advisory Committee Report: Here Comes the Death Spiral

The Treasury Borrowing Advisory Committee reportis out and it's nasty.

The key is here:

[Click all to enlarge]

The OMB, by the way, projected $5 trillion in surpluses in 2000. That is, a net debt of near zero over 10 years. Do you think that's a bit optimistic compared to reality?

Instead we doubled the debt. Which, incidentally, was a doubling from 1990 too. And, I might add, that was roughly a doubling from 1980.

Welcome to compound function hell.

How many times do you really think you can do this? Again? Really? Oh, incidentally, the World Economic Forum said that on a global level we have to do it again -- to the tune of $100 trillion in new debt within the next nine years.

Let's look at the systemic level:

Uh huh. We're going double it again? We did it three times. We hit the wall in 2007, which is why the recession happened. What makes you think we can keep borrowing and spending and not run right into that wall again?

The really awful news is in here. Interest payments rise, according to OMB projections, from about $180 billion to over $800 billion in 2020.

No way.

The budget is about $3.7 trillion. Of that we take in about $2 trillion in taxes. The rest is being borrowed at present. There's no way we can possibly put more than 20% of federal revenue toward interest, and this presumes a 3% interest rate on that debt, which is insanely optimistic after we manage to pile on another double. If we get a Greece-style response and rates shoot upward ... well, you can forget about it.

We won't get there, folks. It's not possible. The market won't allow it and The Fed can't control it.

Worse is this picture:

That graph probably ought to be titled "How do you avoid a treason charge?"

No, not today. We're not at war. But in the future we're damn-near certain to wind up in one with this chart, and the bad news is that it will come about as a consequence of that foreign ownership and their reaction when the reality strikes that we cannot pay.

You want to see real idiocy? Here it is:

Note carefully the "insurers/pension" category. Do that and the 8% return they're counting on turns into 3% (or the Treasury detonates, since that's the OMB baseline expectation). But if they only get 3% or 4%, then every pension fund in the United States detonates instead.

There's plenty of arm-waving in the presentation that is all an attempt to claim that "we can make this work."

No, we can't. The budget deficit has to be brought negative, and this means a cut in federal spending by 50% ... which, incidentally, only takes spending back to 2000 levels.

We don't have a choice, folks; we have to do it now.

We must get rid of fully half of all federal spending and we must run a primary budget surplus including all off-balance sheet items such as Social Security and Medicare.

I know nobody wants to hear it, but that doesn't matter. It has to happen. If it doesn't, and there's no evidence that it will, then at some time well before the 2020 line is reached the market will come to the conclusion that we will not fix the problems.

On the day that happens, yields will ratchet and the spiral -- the last one -- will begin.

Qualcomm: A Compelling Risk / Reward Story

Qualcomm (QCOM) is a play on the smartphone space through its large intellectual property holdings related to 3G technology (there are six interfaces for this, of which three are based on Qualcomm’s CDMA technology and one on Qualcomm dominated OFDMA technology). Up to now, many GSM-based operators were using a bridging technology 2.5G (like GPRS), but the proliferation of smartphones and the explosion of data services means that the push to WCDMA (including HSDPA, HSUPA) will materialize, proving a big boost for Qualcomm.

Royalties make up 2/3 of the company's profits, while manufacturing chips makes up 1/3 of profits (with ratios switched for revenues). Having settled over the past 2 years all outstanding license agreements with the big guys for a 15-year period, Qualcomm has only one license renewal coming up in the next 7 years. This has obviously de-risked the business substantially. With +10% growth expected for the next 3 years with EBITDA growth of over 15% in the same period, the company is poised to reverse the flattish performance of the last year. Generating $1-1.2bn per quarter in the next couple years (which is $4bn of cash on top of the company's $19bn cash pile), the valuation seems out of whack with such an appealing profile for a large cap play. The company currently has a market cap of $67bn while the EV is $48bn. Ex-cash, you are getting the company at around 12x free cash flow multiple (or 14x P/E), on top of a modest 1.8% dividend yield.

The chart looks a bit eery as the stock hovers around the major support level at $37. With the potential to get back up to the $47 area (gap fill), however, risk/reward seems compelling at this level with a tight stop. (Click to enlarge)

Is Thermo Fisher Hiding Weakness?

Thermo Fisher Scientific (NYSE: TMO  ) carries $20 billion of goodwill and other intangibles on its balance sheet. Sometimes goodwill, especially when it's excessive, can foreshadow problems down the road. Could this be this be the case with Thermo Fisher Scientific?

Before we answer that, let's look at what could go wrong.

AOL blows up
In early 2002, AOL Time Warner was trading for $66.27 per share. It had $209 billion of assets on its balance sheet, and $128 billion of that was in the form of goodwill and other intangible assets. Goodwill is simply the difference between the price paid for a company during an acquisition and the net assets of the acquired company. The $128 billion of goodwill in this case was created when AOL and Time Warner merged in 2000.

The problem with inflating your net assets with goodwill is that it can -- being intangible, after all -- go away if the acquisition or merger doesn't create the amount of value that was expected. That's what happened in AOL Time Warner's case. It had to write off most of the goodwill over the next few months, and one year later that line item had shrunk to $37 billion. Investors punished the stock along the way, sending it down to $27.04 -- or nearly a 60% loss.

In his fine book It's Earnings That Count, Hewitt Heiserman explains the AOL situation and how two simple metrics can help minimize your risk of owning a company that may blow up like this. Let's see how Thermo Fisher Scientific holds up using his two metrics.

Intangible assets ratio
This ratio shows us the percentage of total assets made up by goodwill and other intangibles. Heiserman says he views anything over 20% as worrisome, "because management might be overpaying for the acquisition or acquisitions that gave rise to the goodwill."

Thermo Fisher Scientific has an intangible assets ratio of 74%. This is well above Heiserman's threshold, and you should keep a close eye on just how the company is fueling its growth. It's also useful to compare it to tangible book value.

Tangible book value
Tangible book value, which is simply what remains after subtracting goodwill and other intangibles from shareholders' equity (also known as book value, see box). If this is not a positive value, Heiserman advises you to run away because such companies may "lack the balance sheet muscle to protect themselves in a recession or from better-financed competitors."

Thermo Fisher Scientific's tangible book value is -$5 billion, which obviously raises a yellow flag.

I asked Heiserman about the tendency for some large-cap blue chips to have a high intangible assets ratio and negative tangible book value. He says this can be OK, provided the company has (1) modest or no net debt, (2) persistent and rising levels of free cash flow, and (3) stock buybacks at a discount to intrinsic value.

Because of this -- and research I've done indicating negative book value may not be detrimental to large caps -- I give this company the benefit of the doubt in this area, but I'm still wary of the 74% intangible assets ratio.

Foolish bottom line
If you own Thermo Fisher Scientific, or any other company that fails one of these checks, make sure you understand the business model and management's objectives. You can never base an entire investment thesis on one or two metrics, but there is a yellow flag here. I'll help you keep a close eye on these ratios over the next few quarters by updating them soon after each earnings report.

Keep up with Thermo Fisher Scientific, including news and analysis as it's published, by adding the company to your free, personalized watchlist.