Saturday, August 4, 2012

A Great Stock to Sell in 2012

Abercrombie & Fitch (NYSE: ANF  ) shares have fallen 17% in the last 12 months (and they've been nearly halved since their autumn peak of $78). Investors who are sticking by this stock should probably go ahead and sell; this retailer probably won't fare well in 2012.

The teen retailer made its share of blunders last year, including the smug announcement that Abercrombie was offering to pay Jersey Shore stars (specifically Mike "The Situation" Sorrentino) not to wear its brand. Although that particular "situation" could make a list of comedic corporate moments of 2011, that incident shouldn't have been amusing to shareholders.

It also wasn't particularly amusing when Abercrombie had to reverse its positive outlook on its European business about two short months after CEO Mike Jeffries had talked up "momentum" in that region.

Last year, many investors probably viewed Abercrombie as a great turnaround story (and this makes it one of my worst CAPScalls -- you can check my track record here), but bear in mind that Abercrombie's current financials represent just a shadow of former success.

The fiscal year ended February 2008 represented Abercrombie at its peak; it reported $3.7 billion in revenue, $5.45 per share in earnings, and its gross profit margin clocked in at 67.2%.

In the ensuing years, this retailer's been trying to return to former glory, and may fall short in 2012. Although analysts expect it to generate $4.2 billion in sales for the fiscal year ended January 2012, they also only expect earnings of $2.81 per share. In the last 12 months, Abercrombie's gross profit margin had continued its downward trajectory to 60.1%.

Abercrombie didn't report its December sales figures, but shareholders have reason to worry. By all accounts, the holiday shopping season this year was a highly promotional one, and that spells worries for a teen retailer like Abercrombie. Furthermore, some experts are predicting a major trough in consumer spending after the post-holiday sales this year, giving even more reason to worry about its 2012 performance.

In addition, Abercrombie's rivals are desperate, and that desperation will likely lead to their own race to the bottom when it comes to discounting. American Eagle Outfitters (NYSE: AEO  ) recently lowered its fourth-quarter earnings guidance due to its excessive promotions, and Aeropostale (NYSE: ARO  ) recently reported a nasty 10% sales decline during the holiday season.

For a more reliable retail stock idea, consider Buckle (NYSE: BKE  ) , which boasts years of positive sales growth (and comparable sales growth), steady gross margins, and consistently increasing annual earnings to speak for it. Buckle also pulled off a pretty incredible feat recently; its December comps increased by 8.9%. Or you can check out a retail stock idea you've probably never heard of: This free report, "The Motley Fool's Top Stock for 2012," is available absolutely free.

As for Abercrombie, though, there's plenty of ugliness left to come as this teen retailer dukes it out with its rivals. Investors should shed the shares before they get taken to the woodshed again.

Polarized Greece girds for crucial election


Greece will go to the polls Sunday for the second time in two months, and the outcome of the parliamentary vote could hold the key to the future of the euro zone. See full story.

Investors brace for dramatic new stage in Europe

Investors begin preparing for a dramatic new stage in the European debt crisis ahead of a weekend Greek vote that could help determine the future of the euro zone. See full story.

Crisis-hit Greece counts down to Sunday election

Greek voters will go to the polls on June 17 knowing that the outcome of Sunday�s parliamentary election could wreak havoc for the euro zone. See full story.

Next clash for health-care stocks already in sight

Cost-cutting efforts in medicine are locked into place, regardless of how the Supreme Court rules on the nation�s 2010 health-care overhaul, and that�s likely to put pressure on device makers, analysts say. See full story.

Next clash for health-care stocks already in sight

Cost-cutting efforts in medicine are locked into place, regardless of how the Supreme Court rules on the nation�s 2010 health-care overhaul, and that�s likely to put pressure on device makers, analysts say. See full story.


This story is what�s happening across the United States, as daily newspapers cut back to stay alive, writes media columnist Jon Friedman See full story.


When it comes to IRAs, timing is everything. Robert Powell looks at five rules that could derail your retirement-savings plans. See full story.

Metals & Markets Showing Further Divergence

The strong showing of the major U.S. stock indexes this week and over the past three months has seen a corresponding drop in the prices of major metals. And, in the short term, at least, experts say that major metals are not poised for a reversal.

Prices of the SPDR Gold Trust ETF (GLD), for instance, and the iShares Silver Trust (SLV) are down 2-4% this week, while the Dow Jones and S&P 500 indexes have risen at a 2-4% clip.

Over the past three months, these key metal-focused ETFs have been in positive territory, but have fallen sharply from their late February highs. Meanwhile, the major stock indexes have moved up over 10%, and the Nasdaq has improved roughly 20%.

Are metals expected to catch up? Based on trends in China tracked by Standard Chartered Bank, demand is looking soft, analysts said earlier this week. Plus, large money managers have cut their gold positions.

Gold prices have lost more than half of this year’s gains due to speculation that improving U.S. economic data will discourage the Federal Reserve from buying more debt.

Earlier this week, gold futures for April delivery fell 3% to $1,642.90 an ounce on the Comex in New York, which was the biggest drop for such a contract since Feb. 29. At one point this week, the price touched to $1,639.20, the lowest level since Jan. 17.

Silver futures for May delivery declined more than 4% to $32.181 an ounce earlier this week, which was the biggest decline since Feb. 29. The metal also touched $31.65, the lowest since Jan. 25.

Over the past six months, while the SPDR S&P 500 (SPY) has moved up about 15%, GLD had moved down 10% and SLV 20%.

In a one- and two-year context, though, gold and silver have outperformed the markets: GLD has improved 50% over the past two years, while SLV has jumped 100%.

Shadow Inventory Threatens All Major Metro Housing Markets

Investors are pouring into housing markets across the country. According to the November Report of Market Conditions by Inside Mortgage Finance, 20% of all home purchases nationwide are now made by investors. In some major markets, this percentage is much higher.

What attracts investors these days is very different from what drew them during the bubble years. They are not really enticed by appreciation potential and leverage. Investors are lured mainly by low prices and positive cash flows.

Many of them are also searching for an alternative to the ridiculously low rates they now receive from money market funds, U.S. Treasury securities or bank CDs. One knowledgeable Phoenix broker explained that his investor-clients are often 50 and older who have been pulled into residential investing because of the plunge in interest rates they've had to endure. Quite a few have liquid assets over $1 million and are looking for a better return.

Metros that experienced the greatest price bubbles and subsequent collapse have seen hordes of investors leap into their housing markets - especially Las Vegas, Phoenix, several Florida cities, and cities in the California Inland Empire. These investors are fairly confident that prices are nearing a bottom and that the risks of major declines are minimal.

Let's take a look at some of these markets to see whether investors are acting on sound information. The following table from CoreLogic data shows the ten weakest large counties in the U.S. in terms of distressed properties which have not yet been foreclosed and repossessed by lenders as of the end of September 2010.

Top Ten Larger Counties Distressed Mortgage Percentages - 3d Quarter 2010
COUNTY Active Loan Count 90+ Days Delinquent % Delinquent Defaults % Defaults Distressed Total
Miami-Dade 366,775 26,735 7.29% 64,708 17.64% 24.9%
Broward (Ft. Lauderdale) 328,721 21,939 6.67% 44,251 13.46% 20.1%
Orange (Orlando) 204,944 13,020 6.35% 24,839 12.12% 18.5%
Clark (Las Vegas) 360,192 32,932 9.14% 32,388 8.99% 18.1%
Riverside (CA) 368,432 32,622 8.85% 17,965 4.88% 13.7%
Prince George's (MD) 148,228 13,800 9.31% 6,367 4.30% 13.6%
San Bernardino (CA) 315,992 27,051 8.56% 14,980 4.74% 13.3%
San Joaquin (Stockton, CA) 105,519 8,887 8.42% 5,021 4.76% 13.2%
Kern (Bakersfield, CA) 114,247 8,031 7.03% 4,929 4.31% 11.3%
Maricopa (Phoenix) 715,944 43,164 6.03% 31,807 4.44% 10.5%

USD: Getting High with a Little Help from Its Friends


Bias to safety currencies in early Wednesday trading as stocks in Asia and Europe retreat, Greek debt uncertainty, early Monday on retreating stocks, risk appetite. Liquidity returns with open US markets. Here we focus on the EUR/USD, or FXE for ETF traders.

US Dollar Daily Outlook: Getting By With A Little Help From Its Friends

Higher vs. all major currencies except for the British pound on stronger economic data (TIC LT purchases) and the Republican win in Massachusetts. Ongoing euro weakness (discussed below) also helps a lot, as many dollar shorts appear to be getting stopped out and selling the EUR/USD pairs, further boosting the dollar.

Although it is widely known to forex traders that politics always trumps economics, it is rare that a Senate race would receive as much attention from the financial markets as yesterday’s election in Massachusetts. The reason why it is the primary event risk for the forex market this week is because if Democrats lose their 60th seat, it could delay or alter the passing of the over $1 Trillion health care bill and any other additional spending, which would reduce the US budget deficit and support the US dollar.

Not having to pay these outlays is perceived as dollar positive simply from the perspective of fiscal finances

Because the EUR/USD comprises about 30% of all forex trade, to know what’s going on with the dollar, one needs to be aware of what’s happening with the euro, and vice versa.

Euro Daily Outlook- Sliding on "Greeced" Rails

Down hard Tuesday vs. all majors as weak German PPI and ZEW data, PIIGS (Portugal, Italy, Ireland, Greece, Spain) debt concerns and a strong dollar combined to send the euro lower all day long, breaking strong support at 1.4270 after already falling through its 50 and 200 day SMA. With the 50 SMA looking to soon cross below the 200 SMA and form the "death cross" that suggests a longer term downtrend. Lots of EUR/USD short positions hitting stop losses also fed the trend.

In early Wednesday trade it hit a twenty week low, and is struggling to hold onto $1.4200 in afternoon Asian trade as combined concerns about Greece, tightening by China and massive stop running is sent the euro plunging over 100 points in a matter of minutes. The ratings agencies’ warnings that Greece must reduce its budget or risk further downgrade continue to pressure the euro.

The euro was also hurt by a new round of risk aversion after the Shanghai index dropped nearly -3%, on reports that China’s banking regulator told several banks to stop lending for the rest of the month, fueling fears that Chinese monetary authorities are becoming serious about tightening credit creation as inflation pressures begin to build in the economy. The PBOC has made several tightening moves over the past month raising the rate on it weekly funding bills.

Economic news also hit the euro, as German PPI data turned negative in December declining -0.1% versus estimates of a 0.2% rise, showing that price pressure is nonexistent in the region and suggesting that the ECB has no motivation to tighten its monetary policy for the foreseeable future.

The pair appears to have stabilized around the 1.4200 level for the time being, but sentiment against the euro remains negative and if data does not offer support for the euro soon, sellers may aim for the psychologically important 1.4000 level in the near future. As we’ve noted earlier, today’s EZ PMI data becomes even more important within the context of the current price action. Recent comments by Germany’s economics minister, that even the German economy was not yet in self sustaining recovery (i.e. still needs stimulus), add to the dour mood surrounding the euro

Trade Idea For Eur/USD (Or FXE For ETF Traders)

Long: Wait until it breaks the 1.4600 resistance level or retests the 1.4428 (50%) Fibonacci retracement level, with stop loss just below the recently broken resistance turned support.

Short: At or near a break below the 76.4%% Fib level around 1.4165. Those willing to take a little more risk can try entering on a break below the psychologically important 1.4200 level, since the above Fib levels has not been significant support, and we don’t see the factors weighing on the euro (noted in the above Forex section) going away. Again, note the forming "death cross" forming as the falling 50 day SMA in red approaches the rising but flattening 200 day SMA in teal. When that happens, it suggests a longer term downtrend.

Watch the S&P for overall risk appetite, and the EUR/USD for a quick gauge of the USD to judge if oil is ready to stabilize.


Disclosure: Author has no positions

Tech stocks close day with mixed results

SAN FRANCISCO (MarketWatch) � Mild market reaction to Apple Inc.�s stock on the day the company released its latest version of the iPad colored trading action Friday on what ended up being a mixed day for tech stocks.

Click to Play Apple's new iPad goes on sale

Shoppers began purchasing the third-generation iPad on Friday, as the technology giant tries to widen its lead in the fast-growing market, Tomi Kilgore reports. (Photo: Getty Images)

Apple AAPL , which had flirted with reaching $600 a share on Thursday, fell early and ended the day with a gain of just a penny at share at $585.57 a share as consumers waited in lines to be among the first to buy the newest model of the iPad. Read more about the release of the new iPad.

With Apple in the spotlight, the Nasdaq Composite Index COMP �fell just 1 point to close at 3,055. The Philadelphia Semiconductor Index SOX �and the Morgan Stanley High Tech 35 Index MSH managed to edge into positive territory by the closing bell.

/quotes/zigman/68270/quotes/nls/aapl AAPL 615.70, +7.91, +1.30%

Gainers included cloud-based software firms Demandware Inc. DWRE , which rose $3.41 a share, or more than 14%, to close at $27, and chip maker M/A-Com Technology Solutions Holdings Inc. MTSI , up $1.20 a share, or almost 6%, to end the day at $21.75, a day after both stocks made their public-trading debuts.

Small advances also came from Dow components International Business Machines Corp. IBM and Cisco Systems Inc. CSCO �as well as Texas Instruments Inc. TXN �and online-travel site Inc. PCLN

Among leading tech stocks in red, decliners included Netflix Inc. NFLX , Oracle Corp. ORCL , Micron Technology Inc. MU �and Dell Inc. DELL . Read about whether Dell�s purchase of SonicWall is �material� in Rex On Techs.

Two Ways To Add Income to Your Portfolio as a Currency Investor

For the past 30 years, my grandfather has been living the retirement dream, thanks to a few strategic stock plays.

Here's the interesting part: My grandfather never knew a thing about stocks. He didn't know how to value them, or when to buy and sell.

But he did know the power of income.

You see, as a child of the Great Depression he saw stocks differently than we do today.
His generation didn't buy stocks for the possible capital appreciation.

Instead, they bought stocks based on the dividend yield - and the consistency of that dividend.

They had lived through uncertain times, so they only trusted investments that offered fairly certain income.

That's why now, as we find ourselves back in uncertain markets, you want to make sure your portfolio includes interest-bearing and dividend-yielding assets.

Passive dividend income arrives no matter what's happening in Greece, or how long U.S. Federal Reserve Chairman Ben Bernanke decides to hold rates at record lows. It comes as long as the company remains strong.

Which means my grandfather's strategy is worth copying.

How to Live Comfortably During Uncomfortable TimesMy grandfather started with certificate of deposits (CDs) in the late 1970s and early 1980s. These were the high-interest days, so these CDs paid 16% to18% interest. He got that nice, passive "certain" income for as long as that party lasted.

Then once interest rates dropped and all his CDs matured, he looked for the next round of certain income. He had just retired from the telecom industry and believed AT&T Inc. (NYSE: T) was a good long-term play.

Best of all, AT&T paid a 6% dividend yield. So he wisely invested his CD income into AT&T stock and then sat back and waited.

His dividend checks kept arriving through the dot- com and tech bust of the late 1990s and early 2000s. His checks have kept coming through the real estate bust and credit crunch through 2008 and 2009.

He never had to worry if stock prices were bobbing up and down.

In fact, in 2001 and 2002, he saw his AT&T stock gyrate all over the place. It dropped from more than $50 a share to $18 a share before it was all said and done. Over the years, he also watched his favorite stock double in price from $20 to $40.

Did he care? Not in the least. You see, he earned all his money back on AT&T stock many years ago just by patiently collecting dividend checks.

My grandfather has lived comfortably off this "certain" passive income for more than three decades.

Now, you can do the same.

Two Ways to Add Income To Your PortfolioAs a currency investor, there are several ways you can add income to your overall portfolio.

First of all, look for high-yielding foreign dividend stocks.

As a currency investor, you can invest in foreign stocks that offer higher dividends than their U.S. counterparts. Plus, you get the currency exposure, assuming the local currency rises against the dollar while you're holding shares of that foreign company.

Second, you can invest in foreign currency CDs. They don't pay the 16% to 18% that my grandfather received back in the "party days" for income - but the right currency CD can hand you a yield of more than 4%. Not bad.

These CDs also give you exposure outside the U.S. dollar.

Bottom line: There are several ways to earn income with foreign currencies. But whichever strategy you decide, I highly recommend you start thinking of investing in these terms.

[Bio Note: With the outlook for the dollar and the euro growing increasingly bleak, many readers have asked us about currency trading. So we decided to respond by bringing on a new currency expert - Sean Hyman. Hyman is a veteran currency trader with more than 20 years of experience. He also currently serves as Investment Director for World Currency Watch, editor of Currency Capitalist, and editor of Currency Cross Trader. Watch for his columns on currency trading in Money Morning.]

Uranium Energy: An Under The Radar Uranium Play With Tremendous Upside

Uranium stocks dropped significantly last year after the Fukushima nuclear power accident. As fears of the danger of nuclear power plants spread from the public to the investment community, uranium stocks sold off. Even now, about 15 months after the accident, there hasn't been much of an uptick in uranium stocks and that may present an opportunity for investors.

First, let's take closer look at the carnage. Cameco (CCJ), the largest pure play on uranium in the market with a market cap of close to $9 billion, is down about 50% off its 2011 highs reached just before the accident in Japan. Uranium Energy (UEC) was trading close to $7 a share in February of 2011. Now, it's trading at just under $3 a share, a fall of about 60%. Uranerz Energy (URZ) was trading close to $6 a share early last year and now trades at just over $1.50 a share, a fall of 70%.

The first half of the story is the drop in share prices. The second half of the story is the fundamentals. Despite the impact of Fukushima, the fundamentals of the uranium sector remain intact and appear poised for both near-term and long-term growth. There are currently 435 reactors operating, 62 reactors under construction, 156 reactors at the planning stage and 343 reactors under proposal. China, India, Russia and South Korea, the four major drivers of nuclear growth, have evaluated and renewed their commitment to nuclear power.

In China alone, government sources have announced plans to significantly increase Chinese nuclear capacity from 11GW today to possibly 86GW or more by 2020. With the emerging markets continuing to drive demand for nuclear power, the outlook for the uranium industry remains strong.

For 2011, global uranium consumption was approximately 175 million pounds while uranium production is estimated to reach only about 145 million pounds. To date, this shortfall has been made up from secondary sources of uranium such as government inventories, recycled materials, and down-blended weapons-grade material provided under the HEU Agreement between the U.S. and Russia, currently providing approximately 24 million pounds of supply annually and set to expire in 2013.

Despite this need for new production, current price levels in the range of $50 to $55 per pound are insufficient to incentivize the development of new conventional uranium projects. At current prices, for example, Kazakhstan, the source of nearly all production growth in the last decade, has indicated that no new uranium projects will be developed and, at the same time, is attempting to minimize further downward pressure on uranium prices by stabilizing its production levels. Over the course of the previous year, emerging supply constraints have also been exposed by operational challenges at existing mines and delays at development projects across the globe. Furthermore, secondary sources are expected to decrease over the long-term, especially with the expiry of the HEU agreement.

The uranium story has even made mainstream media. According to a recent Barron's article, "uranium prices are poised to steadily increase over the next few years..." Further, an analyst noted in the article that "most analysts expect the price of uranium to rise from current levels of $50 to $65 (a pound) to $70 a pound over the next two years." This increase in the price of uranium should be a boost for uranium stocks. An analyst on Seeking Alpha is even more bullish, suggesting that uranium could reach $200 a pound.

With that said, one uranium stock that's loved by investors and analysts alike is Uranium Energy. Uranium Energy is a U.S.-based exploration and development company focused on uranium production in the U.S. The company is the newest uranium producer in North America, operating the first new uranium mine in the U.S. in over six years. In 2011, Uranium Energy completed its first full year of production with a cumulative total of 236,000 lbs. of uranium produced at average cost of $16 per pound, which the company then sold at the current spot price of $52 per pound. Uranium utilizes the In-Situ Recovery (ISR) production method, which is a more cost-effective and environmentally friendly way of mining uranium.

Well financed to execute on its key programs, the company controls 28 projects in the U.S. with total resources of more than 41.5M lbs. U3O8. Uranium Energy's fully licensed and permitted Hobson processing facility is central to all of its projects in South Texas, eliminating the need to construct a new processing plant on site at each project.

Additionally, Uranium Energy controls one of the largest databases of historic uranium exploration and development in the nation. Using this knowledge base, the company has acquired and is advancing exploration properties of merit throughout the southwestern U.S., a region known as being the most concentrated area for uranium mining in the United States.

The company's strategy of acquiring exploration databases and leveraging those databases to generate acquisition targets has proven to be effective thus far. With plans to continue aggressively pursuing this strategy, Uranium Energy is well positioned to capitalize on the world's overwhelming demand for more uranium, more energy, cheaper energy, and a cleaner environment.

Analysts have a consensus target on the stock of close to $4.50, upside of nearly 70% from today's share prices. A recent article by a UEC investor suggested buying the dip in the stock when it was over $3.30 a share, now it's sitting even lower at $2.70, an even better entry point.

The combination of the drop in UEC's share price and the projected supply/demand imbalance creates an unparalleled opportunity in UEC. Just returning to pre-Fukushima levels would give investors a return of 150%, a return that any investor would get excited about. Taking into consideration the projected price increase in uranium and that projected return increases even further.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

AAPL: Morgan Stanley Sees Revenue Upside On Capex Outlook

Morgan Stanley’s Katy Huberty today offers some thoughts on Apple’s (AAPL) revenue outlook based on its projected capital expenditures, as outline yesterday in a 10-K filing, for the fiscal year that began in October.

The remarks are akin to those of Barclays Capital’s Ben Reitzesyesterday morning.

Huberty notes that Apple’s projected spending, even excluding $1 billion in capital expenses that will go to the company’s headquarters construction, would be 53% growth in capital spending, year over year. That’s “well above” her estimate for 34% revenue growth for Apple this year.

Like Reitzes, Huberty concludes that means the consensus for 2012 revenue is probably too low: “Apple�s FY12 capital expenditure plans suggest a revenue run-rate closer to our bull case ($184 billion revenue and $50 EPS in CY12).” Consensus is $138.85 billion and $34.49 per share.

Huberty also notes that the 10-K lists Apple’s revenue from China, 12% of the total, and its hard assets in the country, which notes have tracked shipments there of iOS devices. She takes that as an indicator Apple “owns key production equipment at its outsourcing partners.”

Apple shares today are up $3.16, or 0.8%, at $400.57.

Friday, August 3, 2012

AAPL, NOK, QCOM Tops in Barclays Smartphone Outlook

Barclays Capital analyst Jeff Kvaal this afternoon offers up some thoughts on the smartphone market, and mobile, more generally, in advance of the Mobile World Congress trade fair commencing February 27th in Barcelona, Spain.

Kvaal cut his overall handset unit shipment forecast for last quarter and for this year and next year, based on his expectation that feature phones are in the process of a long-term decline at the hands of smartphones, and to account for lower sales of Nokia‘s (NOK) older phones based on “Symbian” and lower sales by Research in Motion (RIMM).

Kvaal’s overall handset forecast this quarter falls to 436 milion units from 443 million, while this year is cut to 1.7 billion units from 1.75 billion, and next year’s is cut to 1.84 billion from 1.88 billion. His smartphone estimate this quarter rises to 155 million units from 151 million, while his estimate for the year goes to 660 million from 669 million and his 2013 view goes to 862 million from 845 million.

The feature phone market peaked at 1.14 billion units shipped in 2010, dropping to 1.11 billion last year. He thinks it’ll drop another 6% in 2012.

As for smartphones, the middle of that product category in terms of price is rising: ‘While the overall unit volume of the market is close to expectations, the mix has shifted materially. Smartphones represented 35% of the market in 4Q11, up from 22% in 4Q10. This increase is primarily a function of growth in the mid tier smartphone market. Nokia shipped nearly 90 million Symbian phones in 2011 � few if any of which sell for more than $300. The year also saw the emergence of Huawei and ZTE as meaningful players in the smartphone market. This was aided partially, though not exclusively, by strength in the China smartphone market. The Chinese carriers are increasing the amount of handset subsidies they are offering to the benefit of Chinese brands and the detriment of Nokia, among others. Huawei and ZTE�s success, however, is broader than their domestic markets.

Wireless chip vendor Qualcomm (QCOM) is doing well because average selling prices are holding firm or even rising, he writes. Qualcomm could deliver EPS of $4.10 to $4.20 this calendar year. That would be well above the $2.79 cents the street is modeling for the four quarters of 2012.

Nokia, on which Kvaal has an Overweight rating and an $8 price target, is being valued based on further downside, with investors failing to value the recovery.� “We continue to see Nokia working through its difficult transition and expect estimates to bottom in early 2012 before improving later in the year.”

But the overall trend, as Kvaal outlines it, is Apple (AAPL)� and Samsung Electronics (SSNLF) gaining share and everyone else trying to cope with that:

The clear conclusion from 4Q results was that Apple and Samsung continue to extend their lead at the head of the smartphone charts. Even recently strong challengers such as HTC faded in 4Q, while Nokia, RIM, LG and Sony Ericsson are struggling to mount recoveries.� Huawei and ZTE grew rapidly last year, primarily in their home market but exports also grew strongly. We continue to expect that Apple and Samsung lead the way, particularly at the high-end, but can any challenger emerge? We think the combination of Nokia and Microsoft is beginning to gain momentum and expect Windows Phone volumes to build steadily through 2012, although we only forecast that Nokia garners 10% smartphone share, well below its prior peak. We look for updates from the myriad players in the Android camp at Mobile World Congress in two weeks, in particular around Ice Cream Sandwich/Android 4.0. Finally, we believe the delay until RIM launches BB10 leaves it with a sizable hole in its portfolio.

Vegas Is the Anti-Resolution Capital

Have you given up on your New Year's resolutions yet? If not, TravelsinTaste will help you get to it with this antiresolution roundup -- so you can forget the stress and guilt of getting back to the gym or sticking to a diet.

This year, resolve to indulge yourself in some of the most sublime offerings instead. And where best to find them but Las Vegas?

Get alerts before Link and Cramer make every trade

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SHO Shaun Hergatt: The Financial District Finally Gets Fine Dining Right
New York's Best Seafood, Courtesy of New York's Best Chef: James Beard Award Winner Eric Ripert
TasteAs the only restaurant in Vegas to ever hold three Michelin stars, Joel Robuchon at MGM Grand offers the ultimate splurge in fine French cuisine with its 16-course Degustation Menu. Robuchon (sometimes called the Chef of the Century) has a menu that evolves with the seasons. For $425 per person, there are countless delicacies, such as Le Foie Gras, a carpaccio of foie gras and potatoes covered with white-truffle shavings and served with more than a dozen types of breads pulled from the oven minutes before service begins; an eclectic cheese cart with 15 to 20 varieties, available nightly; and a Mignardises Trolley filled with more than 30 handmade delights -- all at unlimited quantities with your meal.In the land of $100 margaritas and $1,000 shots of whiskey, there should be no surprise there's also an extravagant and unrivaled burger-eating experience. Renowned Chef Hubert Keller of Fleur at Mandalay Bay serves up the FleurBurger 5000, a gastronomic jackpot. The foie gras- and black truffle-topped Kobe burger is accompanied by a bottle of Chateau Petrus 1995 poured in Ichendorf Brunello stemware imported from Italy. After the meal, the team will ship the glasses to your home at no additional charge. All this decadence for $5,000!Chef Masa Takayama of barMASA at Aria Resort & Casino offers a dish that epitomizes his style to the most indulgent degree: the Masa Toro with caviar. Delicate, fatty toro is topped with a mountain of Osetra caviar and served with crispy, buttery brioche. Just three simple ingredients create an epicurean experience that's out of this world, available for $240.RelaxWho said caviar was only for eating? Resolve to indulge and enjoy renewed skin with a facial cocktail of crushed pearls, marine caviar and hydrating botanical elements. With the Caviar Fusion Facial from Spa Bellagio, guests can face the rest of the year with a rejuvenated look and feel.IndulgeWith more master sommeliers under one roof than any other location on Earth and a diverse array of unparalleled wine programming, of course the AAA Five Diamond Bellagio carries some of the most exquisite (and expensive!) wines and liquors in the world. At the Maccioni family's Le Cirque, guests can accompany their fine French cuisine with a high-end cognac -- Hardy Perfection, which is more than 140 years old and $975 per shot -- as well as a multitude of rare, expensive wines from the coveted Burgundy and Bordeaux regions, priced all the way up to $25,000 per bottle. In addition, Chef Andre Rochat leaves no stone unturned when it comes to fulfilling his lifelong hobby of researching, finding and acquiring some of the rarest cognac collections in the world. Andre's at the Monte Carlo and Alize have Jacques Hardy Cognac, Private Reserve, Vintage 1777, at $35,000 per bottle -- and there are just four bottles in the world. Andre's cognac collection actually contains the largest selection of Hardy Cognac outside the family's collection.Thrill seekFor thrill-seekers looking for the experience of a lifetime, the Shark Reef Aquarium at Mandalay Bay provides a true adrenaline rush. Daredevils can dive into the 1.3 million-gallon, 22-foot-deep Shipwreck Exhibit, which houses rays, sawfish, green sea turtles and seven different species of sharks including whitetip reef and zebra Sharks. All divers have to present a valid certification card from a recognized dive instruction agency and sign a liability waiver. Also, while sharks, whether in the wild or in the aquarium, are not aggressive toward divers, and all are fed regularly, divers are required to wear gear that allows them to experience the dive with no concern about their safety.Happy Anti-Resolution!RELATED STORIES: >>Food in 2012: Healthy Eating -- With Beef>>White Truffle Has Chefs Salivating>>Where to Consume the Super Bowl With a SteakFollow TheStreet on Twitter and become a fan on Facebook.

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YM Biosciences: The Next Way To Get Long Myelofibrosis

YM Biosciences Inc. (YMI) has stated that it is currently in discussions with the FDA to agree on a protocol for the Phase III clinical trial design for its lead product candidate CYT387, for the treatment of myelofibrosis (MF). YMI expects to start Phase III in the second half of 2012. Given the Company's current valuation (157MM shares outstanding, ~$135MM cash, Market Cap = ~$271MM, EV = ~$136MM), investors seem to be searching for clarity on how YMI intends to bring a drug into a market currently exclusively owned by Incyte Pharmaceuticals' (INCY) Jakafi. While this uncertainty as it relates to valuation may be explainable, many investors may be overlooking YMI's potential. We note that YMI is a well-capitalized company with a drug that:

1) has the potential to produce superior clinical outcomes compared to Jakafi,

2) may have an easier path to regulatory approval,

3) is un-partnered in a pharmaceutical landscape, which has produced collaboration deals as high as $1.3 billion for similar drugs, and

4) may have broad potential beyond the initial indication of Myelofibrosis

Myelofibrosis (MF) is a disease of the bone marrow resulting in the replacement of bone marrow with nonfunctional fibrous tissue. During this disease, progressive reduction in bone marrow stem cells interferes with the production of white blood cells, red blood cells and platelets. Patients with MF suffer from anemia, clotting issues and increased risk of infection as well as constitutional symptoms of fatigue, shortness of breath, joint pain, and night sweats. Often, as serum levels of red blood cells fall, the body compensates by inducing the spleen and liver to produce red blood cells, causing both organs to swell.

The International Working Group Myelofibrosis Research and Treatment (IWG-MRT) response criteria measures the severity and treatment response by the following criteria:

1) amelioration of anemia (preferably transfusion-independence),

2) reduction in spleen size,

3) platelet count, and

4) neutrophil count.

Treatment of MF depends on the severity of symptoms. While the few younger patients may be cured with an allogenic stem cell transplant (Allo-SCT), the majority of patients can only be treated symptomatically. Treatments include blood transfusions for anemia, radiation and chemotherapy, recombinant erythropoietin (EPO) or androgens, and in more severe cases - splenectomy (removal of the spleen).

In November 2011, the FDA approved the use of Incyte Pharmaceuticals' Jakafi (ruxolitinib), the first of a class of drugs called JAK2 inhibitors, for the treatment of MF. JAK2, or "Janus Kinase 2", is a signaling protein and is a key component for the stimulus of red blood cells, white blood cells, and platelet production. About 50% to 60% of people with MF have the mutation "JAK2V617F"; the mutant form of JAK2, which can no longer be regulated properly. Despite FDA approval, Jakafi clinical trials have only demonstrated a reduction in spleen size and the lessening of some constitutional symptoms. Noticeably absent is the ability of Jakafi to treat the IWG-MRT's first criterion, transfusion independence or even anemia amelioration. Indeed, Jakafi's label clearly states that treatment with the drug can cause hematologic adverse reactions including thrombocytopenia, neutropenia, and, importantly, drug-induced anemia, the latter of which may result in a greater need for transfusions above and beyond that related to the disease itself.

YMI is currently in discussions with the FDA for the Phase III trial design of its own JAK1/JAK2 inhibitor, CYT387. Preliminary findings from its Phase I/II trial of CYT387 were released at the end of last year at the American Society of Hematology's (ASH) 2011 Conference. Similar to Jakafi, CYT387 demonstrated a reduction in spleen volume (49% of patients had spleen size reductions of greater than 50%) and improvement of constitutional symptoms. More significantly, and something that Incyte's Jakafi has not yet proven, 54% of patients treated with CYT387 were transfusion-independent after 12 weeks.

Of course it is in the early days of the Jakafi launch. On April 26th 2012 INCY reported greater than anticipated 1Q Jakafi sales of $19.3MM, following which several analysts upgraded their first year US revenue projections to >$100M. Early indications are that myelofibrosis likely represents a billion dollar plus global market opportunity.

So where does YMI stand now? At its current price of $1.65 (as of April 24, 2012), and with 164MM fully diluted shares outstanding, YMI has a fully diluted market capitalization of ~$271MM and an enterprise value (EV) of ~$136MM. The company recently completed a highly oversubscribed, tightly-priced secondary offering in late February, and has ~$135MM in cash with no debt. A brief timeline of the CYT387 development milestones and news flow is as follows:

  • 2H12 - Initiate pivotal Phase III studies
  • 4Q12 - Presentation of Phase II BID dosing study data
  • 4Q12 - Presentation of final 9-month Phase I/II data
  • 4Q12 - Presentation of long-term data from the Phase I/II Extension study

YMI has already initiated discussions with the FDA and is optimistic about starting the trial by 2H12. As such, the drug might be approved by mid-2015. Interestingly, Jakafi's approval has provided YMI with an advantage - a clearly defined framework for the approval of CYT387. Jakafi was approved by a special protocol assessment (SPA) with the primary endpoint of a >35% reduction in spleen volume after six months, and a secondary endpoint of reduction in constitutional symptoms as evaluated by patient reported outcomes (PRO). With these criteria in mind, YMI also has the potential to incorporate transfusion independence as an additional study endpoint, and a valuable differentiating factor once on the market.

Absent from the timeline are two interesting potential events: first, YMI has yet to partner CYT387's commercial rights, and second, CYT387's untapped potential to treat a number of other indications. By way of comparison, in November 2009, when Jakafi was at approximately the same development stage that CYT387 currently is in, Incyte signed a licensing agreement with Novartis (NVS). In exchange for the ex-U.S. rights to JAKAFI (and another Phase I compound), Incyte received an initial payment of $210 million, potential milestone payments of $1.1 billion, and possible double-digit royalties on ex-U.S. sales.

Around the same time, Incyte signed a licensing agreement with Eli Lilly (LLY) for another of its JAK inhibitor compounds before it had completed its Phase II trial for the treatment of rheumatoid arthritis. In exchange for worldwide rights to the compound, Incyte received an initial payment of $90 million, potential milestone payments of $665 million, and possible double-digit royalties. We think YMI is looking for a partner who is equally committed to multiple indications and a broad development and commercialization strategy.

As JAK1/JAK2 mutations have been implicated in other disorders, including epithelial cell cancers and many inflammatory diseases, CYT387 could easily be partnered for the treatment of prostate, breast, head and neck, lung, ovarian, renal cell, glioma, pancreatic and liver cancers. If CYT387's anemia benefits are borne out in larger studies, it is a prime candidate to treat hematological cancers in combination with chemotherapy, such as multiple myeloma, as well as various lymphomas and leukemias such as MDS.

Interestingly, CYT387 has an excellent pedigree, having originated in the laboratories of Australian biotech firm Cytopia, a company founded by the discoverer of the JAK kinases, Dr. Andrew Wilks, and subsequently acquired by YMI in 2010. Cytopia pioneered the development of JAK inhibitors, having solved the crystal structures of both JAK1 and JAK2, and building the first rational drug development effort in the field. Indeed, YMI currently holds many of the foundational patents in the JAK space, and has a library of small molecule JAK kinase inhibitors in its portfolio derived from Cytopia's discovery efforts. As such, a second YM JAK inhibitor similar to CYT387 could also emerge in the future for inflammation, including RA.

The clinical data to date suggest that CYT387 may be superior to the only FDA-approved treatment (Jakafi). YMI is therefore well positioned and may have a relatively easy path to approval for CYT387. Importantly, YMI has a timeline with several value inflection points and has completed a recent secondary offering giving the company a very strong balance sheet. YMI has the flexibility to retain exclusive rights to CYT387 or can partner CYT387 in one or several indications.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Public and Private Real Estate: Pieces of the Same Puzzle

Real estate is the type of investment you never forget. You may be stuck with a speculative property in foreclosure, or you may have struck gold at the corner of Mink Mile and Bourse Boulevard. Perhaps you’ve discovered, in the real estate jungle, a resilient money tree. For good or ill, real estate investments stick with you.

More often than not, it’s because they are private transactions that are hard to get out of (in alpha-speak, they are called illiquid). If they are public investments, the net operating income can be addictive (in alpha-speak, cash flowing).

Where’s the alpha opportunity? There are three ways to get exposure: publicly traded real estate companies, the growing universe of Real Estate Investment Trusts, and finally private real estate. Are they related? At first sight, they seem to follow their own rhythms. REITs are closely linked to the performance of public equities, particularly high-yield equities. Private real estate seems akin to private equity, however.

In a recent paper, “Private and Public Real Estate — What’s the Link?,” Raghu Suryanarayanan and Dan Stefek at MSCI Barra suggest that different types of real estate investment are more closely correlated than the metrics have previously disclosed, at least in the U.S. and U.K.

It’s an important issue because money, particularly pension fund money, is beginning to flow into real estate again. And REITs, according to Bloomberg, are vying for a bigger piece of the pie.

The National Association of REITs is trying to entice institutional investors, who typically put only 10% of their real estate allocation into publicly traded stocks, as a complement to direct commercial real estate investing. According to NAREIT:

REITs are the spark plug to boost portfolio performance and a powerful diversifier to reduce volatility. [T]he REIT return cycle leads the private real estate return cycle going into both downturns and recoveries. In the last real estate market cycle, REIT returns peaked approximately one year ahead of those of private real estate funds.

That touches on the timing case for real estate.

Apart from that, REITs have a lower beta to the unlevered private real estate market as the chart below shows (click to enlarge images):

Blending private and public investments does diversify, but not in expected ways. It actually increases the volatility of a core real estate portfolio – unless value-added and opportunistic plays are stripped out – but at the same time increases the Sharpe ratio, as seen below.

NAREIT’s data is presented as smoothed on the private side. So, beware, that data may be misleading.

Private real estate holdings may actually be more volatile than current wisdom would have it. Suryanarayanan and Stefek noted that private real estate values are appraised quarterly in the U.K., and annually in the U.S. What looks good on paper may not provide an accurate measure of what is happening while the data is being committed to paper.

“Appraisal-based indices suffer from two well-known problems,” they noted. “They lag the market and understate volatility. These problems stem, in part, from the tendency of appraisers to smooth their valuations. Appraisers anchor their valuation of a property on its past appraisal and adjust it based on recent transactions of comparable properties. The ability to quickly incorporate new market information greatly depends on the availability of timely and comparable property sales.”

Appraisal is not an exact science, as property taxpayers who routinely appeal their “market value” assessments well know. Applied to capital properties, the inexactitude can overstate the investment case since appraisals are not quite the same as daily price discovery for publicly traded companies and typically lag behind them.

“As a result, property index returns do not accurately capture true private real estate returns,” write Suryanarayanan and Stefek . “Instead, given the nature of the property appraisal process, a quarterly index return reflects a fraction of the true return over the quarter as well as portions of the true returns for previous quarters.”

How to remedy this?:

We assume that true private real estate returns may be related to both current and past public real estate returns. We expect there to be a contemporaneous relationship between the two types of investments since both are exposed to the broad underlying U.K. real estate market.

Smoothed appraisals obscure this relationship. With returns left unsmoothed, the correlation between public and private real estate hovers between 40% and 45%.

That’s the U.K. deconstruction with quarterly appraisals included. The task is a little more difficult when applied to U.S. private real estate returns since appraisals are annual. But there is a stronger relationship between public and private real estate than what is normally reported.

A final task for the MSCI Barra researchers is to decompose liquidity. Privately held real estate seems to be less volatile because the holding periods are longer than for publicly traded equities. But by their analysis:

Real estate volatility is greater than one might think, especially at longer horizons. Second, private and public real estate investments behave more similarly at longer horizons. This further suggests that private real estate may also be considerably more correlated with traditional equities at longer horizons than is commonly assumed.

In real estate, there is correlation, correlation, correlation. So it’s really about diversification, diversification, diversification – and time, time, time until when correlations converge on 1. Then it’s through for this old house.

ETF Insider: Cautiously Bullish At Home

Mixed economic releases coupled with concerning nonfarm payrolls data�left many�scrambling�to take profits, sending major indexes into red�territory�for the week. With earnings season in the books, investors will once again focus their attention on fundamental data releases along with headlines from the Euro zone. The week ahead looks to be clouded with uncertainty as�parliamentary�elections across the debt burdened currency bloc may very well spark volatile trading on Wall Street�[see also�5�Simple ETF�Trading�Tips].

Weekly Outlook

Below, we highlight ETFs that may see an increase in trading activity as relevant market data is released and evaluated by investors:

  • Vanguard Small Cap ETF (VB): The small market-cap segment of the U.S. equity market will come into focus on Tuesday as investors digest the latest NFIB small business index data; VB could experience volatile trading if the figure misses the expected reading of 92.5.
  • iShares MSCI Australia Index Fund (EWA): Australian equities have come under pressure over the past few trading sessions following the recent rate cut by the Reserve Bank of Australia.�Tumultuous�trading may continue overseas following the latest employment data on Wednesday, with analysts�expecting�the unemployment rate to tick higher to 5.3% from the previous reading of 5.2%.
  • VelocityShares Daily Inverse VIX Short-Term ETN (XIV): Volatility levels could spike in either direction at home on Wednesday following the latest weekly jobless claims data. Analysts are expecting for 370,000 to have filed for unemployment benefits versus the previous reading of 365,00.
  • SPDR S&P China ETF (GXC): Investors will turn their attention overseas on Thursday evening as China releases inflation and new yuan loans data. GXC may gap in either direction on Friday morning depending on how markets’ react; analysts are expecting for CPI to come in at 3.4% along with 780 billion in loans.
  • CurrencyShares Euro Currency Trust (FXE): The euro will likely have a busy trading week as�parliamentary�elections overseas are sure to spawn more than a few dramatic headlines. FXE could accelerate downwards if heavy selling volume breaks support at the $129 level.

The Volatility Index (VIX) is back near the 20 mark, suggesting that uncertainty levels are elevated and will likely come down gradually; not surprisingly, Euro zone drama has resurfaced again as the currency bloc will have to digest results from a number of key�parliamentary�elections. We anticipate for Greek debt drama to steal the limelight (at least once this week) and put a strain on domestic equity indexes; we see support for the S&P 500 Index at 1,360, followed by the 1,340 level. In terms of upside, positive economic data releases will be necessary to bolster the Index back towards the 1,400 mark.

Below, we have highlighted three technical trading ideas for the upcoming week. Note that most of these recommendations require active management as they are only relevant for a very short period of time. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

Actionable ETF Idea #1: Long RSP�
Pro Membership Required to Continue Reading To continue reading this article, you must be an ETFdb Pro member. Please login or begin your 7-day free trial to continue reading. There are several benefits to becoming an ETFdb Pro member today:

  • Access to 45+ All-ETF model portfolios. Whether you're a long-term, buy-and-hold investor or a more active trader looking to establish a tactical position, our collection of ETFdb Portfolios has something for everyone.
  • Get objective, in-depth, custom research on every ETF. Our ETFdb Realtime Ratings show you exactly where each fund stacks up next to the competition.
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Melco Crown Entertainment Beats Estimates on Top and Bottom Lines

Melco Crown Entertainment (Nasdaq: MPEL  ) reported earnings yesterday. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Melco Crown Entertainment beat expectations on revenues and beat expectations on earnings per share.

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

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

Revenue details
Melco Crown Entertainment recorded revenue of $1.01 billion. The five analysts polled by S&P Capital IQ anticipated a top line of $977.4 million. GAAP sales were 30% higher than the prior-year quarter's $773.7 million.

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

EPS details
EPS came in at $0.20. The five earnings estimates compiled by S&P Capital IQ forecast $0.17 per share. GAAP EPS of $0.20 for Q4 were much higher than the prior-year quarter's $0.03 per share.

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

Margin details
For the quarter, gross margin was 28.6%, 17,190 basis points worse than the prior-year quarter. Operating margin was 13.3%, 720 basis points better than the prior-year quarter. Net margin was 10.7%, 860 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $986.5 million. On the bottom line, the average EPS estimate is $0.13.

Next year's average estimate for revenue is $4.03 billion. The average EPS estimate is $0.54.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 1,295 members out of 1,348 rating the stock outperform, and 53 members rating it underperform. Among 356 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 341 give Melco Crown Entertainment a green thumbs-up, and 15 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Melco Crown Entertainment is outperform, with an average price target of $15.89.

  • Add Melco Crown Entertainment to My Watchlist.

Play the Coming Pullback in the Market, Metals With FCX Puts

Freeport-McMoRan Copper & Gold (NYSE:FCX) � which engages in the exploration, mining, and production of mineral resources — has been on a tear lately, moving up nearly 25% this year.

FCX closely tracks copper, which has been on a similar tear.

The company primarily explores for copper, gold, molybdenum, silver and cobalt. It holds interests in various properties in North and South America, Indonesia and the Democratic Republic of the Congo.

FCX had disappointing earnings in its report, which initially was met with selling, but this has since been overshadowed by the Fed�s reiteration of its free-money policy.

The overall market has shown resiliency, to say the least. The S&P 500 has not had a down day of more than half a percent so far this year, and has yet to experience a pullback of even 1%.

For FCX, this is the best start to the trading year since 1987. (Yikes!) FCX has recently shown a little weakness, stalling out at the $46 level.

Given the magnitude of the recent move and my expectation of a market pullback sometime in the next few months, I look for FCX to close around the $44 level by March options expiration.

Based on FCX�s current market price of $45.75 and using a target price of $44, a target date of March 16, 2012, and $1,000 of investment capital, you can capture some nice gains by buying the March 55 Put, selling a March call spread, buying a March put spread or using another options strategy that best fits your trading style and goals.

For the full details on this trade, visit, create a free Instant Login and try the TradeBuilder feature, where you�ll see several ways to trade this name. Best of all, you can see a potential profit-and-loss outline for each strategy.

Create your free login, and get access to the details about these FCX option trading strategies by visiting the TradeBuilder here.

Thursday, August 2, 2012

How Reliable Is the January Effect?

January came in with whimper with all major indices falling across the board. The DJI did the best falling -3.5% whilst the Shanghai Composite fell -8.8%. If you want to take the glass is half full view, 2010 was the best January for the S&P500 in the last 3 years. January 2008 saw a -6.1% slide in the S&P500 whilst in 2009 the S&P500 fell -8.6% as shown below.

Of course this time of year brings out the old adage, as goes January so goes the year, meaning that if the stock market is down in January it will be down for the year and vice versa. But just how accurate is the so-called January effect? After all, January 2008 was down and so was the year, however if you invested on that basis in 2009 you would have missed a year of stellar returns in the stock market.

Taking a look at the S&P500 over the last 60 years, the January effect seems to have some predictive value although that comes with some caveats. As shown in the table below, over the last 60 years the S&P500 has finished higher in January 37 times and subsequently the S&P500 finished the year higher 34 times. Or said another way 92% of the time January has finished higher the year has also finished higher. However when the S&P500 has finished down in January the year has only finished down 57% of the time or 13 times out of 23 in the last 60 years.

The results are not unexpected since as we know over the last 60 years, the S&P500 has risen on an annual basis


of the time or 44 times out of 60. So of course the January effect has better predictive ability when the S&P500 finishes higher. However since January 2010 was a down year you might as well flip a coin as rely on the January effect for guidance on how the year will end.

How Super PACs Are Choosing Your Next President

It's no secret that the rich use their money to influence the ballot, but in this year's election cycle they have created a new, more insidious way to do it.

They are called super PACs and they are choosing your next President.

Super PACs (political action committees) have drawn attention in recent months because of their outsized influence on the Iowa caucuses and the New Hampshire primary.

Case in point: One super PAC that supports former Massachusetts governor Mitt Romney called Restore Our Future spent more than $3 million in Iowa attacking former Speaker of the House Newt Gingrich with great effect.

The month-long blitz of negative ads played a major role in knocking Gingrich from first to fourth in the polls. As late as Nov. 30, Gingrich lead in Iowa with 31% to Romney's 17% according to a New York Times/CBS poll.

However, when the caucuses were held on Jan. 3, Gingrich limped to the finish line with just 13% of the vote while Romney took 25%.

But the Romney campaign is not the only one benefiting from super PACs. Every major presidential candidate has a super PAC working on their behalf

These organizations can raise and spend unlimited amounts of money, with the only restriction being that the super PAC cannot "coordinate" with the candidate.

In a super PAC, individual donations of $500,000 to a $1 million or more are not uncommon.

"The sky's the limit,"Columbia Law Schoolcampaign-finance expert Richard Briffault told USA Today. "We are back to the pre-Watergate era of unlimited amounts of money."

Although the law does require disclosure of the donors and how much they give, the use of tax-exempt entities has created loopholes that donors can hide behind.

After a brief period when the Internet made it possible for less well-heeled candidates to mount successful grassroots fundraising campaigns by tapping large numbers of small donors, the super PACs have dramatically increased the ability of the wealthy to sway elections.

"It's just proven to be a vehicle for getting around contribution limits," Michael Malbin, a scholar at the Campaign Finance Institute, told The Washington Post. "It's made for people who've already maxed out."

Created by a 2010 Supreme Court decision, Citizens United vs. Federal Election Commission, super PACs provide what may be the most devious way yet around 40-year-old campaign finance laws designed to prevent unlimited fundraising.

In fact, the country is worse off because of the ill-conceived precaution that the candidates cannot coordinate with the super PACs.

Attacks Without AccountabilityFor one thing, the new rule does away with candidate accountability.

So no matter how vicious or untrue a super PAC's attacks on an opponent, candidates can legitimately claim "it's not my fault."

Romney did precisely that in the middle of a debate when Gingrich confronted him about Restore Our Future's barrage of attacks.

"As you know, under the law, I can't direct their ads. If there's anything in there that's wrong I hope they take it out," Romney said.

In fact, the rules governing super PACS are so laughable that comedian Stephen Colbert created one as a joke.

But in fact, former staffers and aides operate these super PACs on behalf of the candidates, making obvious coordination with the candidate unnecessary.

Getting caught is not even a concern. Given how easily the rule can be circumvented, it's nearly impossible to police.

And the folks who run the super PACs certainly aren't shy at all about what they're up to.

"We're Newt's super PAC. We take out marching orders through the media for Newt Gingrich," Rick Tyler, a former Gingrich spokesman and advisor to Gingrich super PAC Winning Our Future told Politico. "I do what Newt tells me through the media. And it's all within the confines of the law."

Super PACs Aren't Going AwayThe disconnect in name only also means that candidates can publicly criticize the idea of super PACs even while reaping their benefits.

"Campaign finance law has made a mockery of our political campaign season," Romney told MSNBC morning host Joe Scarborough in December. "We really ought to let campaigns raise the money they need and just get rid of these super PACs."

Don't hold your breath.

The number of registered PACs has exploded from 80 in 2010, when they collectively spent $90 million, to more than 250 today.

And even though the Republican groups are getting most of the attention now, expect to hear more from Democrat-oriented super PACs shortly. There's already at least one super PAC backing U.S. President Barack Obama called Priorities USA Action.

"I have no faith that Democrats want campaign finance reform any more than Republicans. They talk of it, but they don't want it," Christopher Shays, a GOP Senate candidate in Connecticut who as a congressman helped pass the 2002 campaign finance law known as McCain-Feingold, told Politico.

News and Related Story Links:
  • Money Morning: How Bain Capital Could Sink Mitt Romney
  • Money Morning:
    Wealthy Congressmen Don't Feel Your Pain
  • Money Morning: 
    An Investor's Guide to the 2012 Iowa Caucuses
  • Money Morning:
    The Debt Ceiling Debate: Will the Democrats' Gambit Lead to a Victory in the 2012 Election?
  • The Washington Post: Stephen Colbert gives super PAC to Jon Stewart, mulls presidential run in South Carolina
  • The Atlantic: Super PACs: The WMDs of Campaign Finance
  • The New York Times:
    PACs’ Aid Allows Romney’s Rivals to Extend Race
  • Associated Press:
    Big change in '12: Big GOP money from 'super PACs'
  • The Wall Street Journal:
    The Super PAC Boomerang

Can "Santorumnomics" Clinch Another Second Place Finish in the New Hampshire Primary?

The battle for second place is heating up ahead of the New Hampshire primary tomorrow (Tuesday), testing whether Rick Santorum and his "Santorumnomics" ideas supporting tax cuts and credits can win over voters.

The former Pennsylvania senator snagged second place in the Iowa caucuses with 24.5% of the vote. Mitt Romney is expected to again capture first after winning Iowa by a narrow 0.1% margin.

Another second-place finish for Santorum in the New Hampshire primary is far from a sure thing, with various polls showing fellow presidential hopefuls Ron Paul, Newt Gingrich and Jon Huntsman Jr. gaining support for the runner-up spot.

Santorum's better-than-expected performance in Iowa's election kickoff last week has led many voters to become more familiar with his economic policy - "Santorumnomics," as Bloomberg's editors referred to it - ahead of the New Hampshire primary. Instead of heading straight to South Carolina, where there are more of Santorum's target demographic of social and religious conservatives, since Iowa Santorum has been campaigning hard in New Hampshire.

Tomorrow will determine if those efforts worked, or if Santorum's Iowa finish was just a lucky start.

Santorum: "Defender of the Taxpayer"Santorum is pushing a typical Republican low-tax economic agenda. Santorum's 12-item tax plan - his solution to reviving the U.S. economy as "Defender of the Taxpayer" - includes 10 tax cuts and two tax credits/deductions.

He proposes cutting top corporate tax rates to 17.5% from 35%, cutting rates for the richest individuals to 28% from 35%, and creating a special zero tax rate for manufacturers to spur job creation.

His pro-family platform also includes a tax deduction for families with children.

The former Pennsylvania senator wants to limit government spending to18% of gross domestic product (GDP). He said his "Santorumnomics" plan would cut spending by $5 trillion over five years.

The major problem, though, is where the missing revenue will come from - widening the budget deficit isn't an option.

"Santorum's numbers don't add up," said Money Morning Global Investing Strategist Martin Hutchinson. "In Congress he was always a big spender, "compassionate conservative.' He's not really interested in economics. He got very lucky in Iowa, but Iowa always elevates socially conservative, economically illiterate candidates (such as Mike Huckabee in 2008) thus making it impossible for the economic conservatives to stop the establishment squish."

While unrealistic, Santorum's tax-cut plans do benefit some key Republican constituencies: corporations and wealthy taxpayers.

"This should play well in future (Republican) primaries," Howard Gleckman of the Tax Policy Center told Reuters. "If he somehow gets the nomination, he'll still have to explain the huge hole he'd blow in the budget."

Romney: No. 1 Ahead of New Hampshire PrimaryAs of Monday afternoon, it looked likely that former Massachusetts governor Romney would retain his lead in the New Hampshire primary.

A Suffolk University/7News tracking poll of likely voters showed Romney with 33% of the vote, although his lead slipped for the fifth day in a row. Second-place Paul was still 13 points behind.

The shift in polls could be traced to questions surrounding Romney's position at private equity firm Bain Capital, which could prove an ongoing threat to him keeping the lead.

"I think Romney's big political weakness is coming out, which is his Bain Capital work," said Hutchinson. "Basically Romney got the Bain Capital job because he was "teacher's pet" in Bain, and Bain Capital was bound to do well because it had all the very smart people finding deals and having ideas about how to run companies. Initially, it focused on venture capital, which genuinely creates jobs, like its work at Staples Inc. (Nasdaq: SPLS), but later it moved to leveraged buyouts, which generally don't create jobs, and can hollow out the company, making it vulnerable to failure."

Hutchinson said it's a point that the opposing party will run with.

"It's too easy for the Democrats to demonize, especially as President Obama is clearly running on a class warfare platform," said Hutchinson.

There's still more than five months of primaries until they wrap up in Utah June 26, meaning no candidate can feel too comfortable despite a strong start out of the gate.

"This time the process is more drawn out and Romney is vulnerable, so Iowa and New Hampshire may not be the end of the story," said Hutchinson. "Being ancient, I remember "76, when [Ronald] Reagan's first primary victory was North Carolina, the seventh contest, yet he very nearly beat [Gerald] Ford, the incumbent president."

After the New Hampshire primary Tuesday, the candidates will battle in South Carolina, where voters head to the polls on Jan. 21.

News and Related Story Links:

  • USA Today:
    Poll: N.H. fight brews for who finishes behind Romney
  • Bloomberg News: Santorumnomics, a Guide to Republican Hopeful's Policies
  • Reuters: Santorum tax plan cuts rates, keeps goodies

Wednesday, August 1, 2012

Top Stocks For 2012-2-5-3

SGDH, SGD Holdings Ltd, SGDH.PK

DrStockPick News Report!




Dr Stock Pick HOT News & Alerts!

SGD Holdings, Ltd. Subsidiary, Ecopaper, Inc. Sells 50%

of a Container of Bulk Banana Paper


Thursday September 10, 2009

SGD Holdings, Ltd. Subsidiary, Ecopaper, Inc. Sells 50% of a Container of Bulk Banana Paper

VENTURA, Calif., (CRWENEWSWIRE) — SGD Holdings, Ltd. (Pink Sheets:SGDH) announced that its wholly-owned subsidiary, Ecopaper, Inc., pre-sold one half container shipment of bulk banana paper to a wholesale client for $28,000. The balance of the container will go into its retail internet inventory to be sold through

“Increasing consumer demand for our environmentally sustainable tree-free paper products has significantly increased our bulk paper and retail internet sales. Our Central American facility specializes in providing products from the agricultural waste of banana plantations. Increased demand will lower our shipping costs and has improved our overall profit margins,” stated Harry Johansing, CEO of SGD Holdings, Ltd.

About Ecopaper, Inc.

Ecopaper, Inc. is the first company in the history of the paper industry to create and market treeless paper of a superior quality. Every page of Ecopaper is smooth, acid-free, durable, chemical-free, and made in Costa Rica. Ecopaper, Inc. has developed an innovative and economically feasible option for the removal of 230,000 tons of agro-industrial waste that are dumped yearly in Costa Rica alone. The company’s challenge is to invent new processes and create paper from exotic tropical fibers from waste materials in new textures and tones for consumers. The results of processing these exotic tropical fibers are items that both appeal to the consumer and to positively impact the environment.

About SGD Holdings, Ltd.

SGD Holdings, Ltd. is a holding company which owns and operates through its wholly-owned subsidiary, Ecopaper, Inc. ( Its goal is to acquire new technologies which can positively impact the environment either through internal development or by acquisition.

Safe Harbor Act Disclaimer

Forward-looking statements in this release are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks, and uncertainties and actual results could differ from those discussed. This material is information only and is not an offer or solicitation to buy or sell the securities.


SGD Holdings, Ltd.
Richard L. Severson
(866) 843-1137

Source: SGD Holdings, Ltd.

Am I a Goldman Sachs client or a muppet?


Greg Smith, an executive at Goldman Sachs, resigned in dramatic fashion: a blistering op-ed in the New York Times. But how many of his grievances are true? See full story.

Citi among banks that fail Fed stress test

Ally Financial, Citigroup, MetLife and SunTrust Banks don�t have enough capital under a stress test conducted on 19 big banks, the Federal Reserve says. See full story.

Italian auction, Fed send Europe stocks higher

European stock markets rise Wednesday, with banking in the lead after a favorable bank stress test from the Federal Reserve and upbeat comments about the recovery, while borrowing costs fell at an Italian auction. See full story.

U.S. stocks extend gains on stress tests

U.S. stocks trade slightly higher Wednesday, in the wake of largely positive results from stress tests for the nation�s biggest banks. See full story.

March Madness brings business back home

For a mid-major school, there can be big financial rewards for making it to the Big Dance. See full story.


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


Higher fees are sneaking into the overall cost of most mortgages. But given ultralow interest rates these days, it�s likely few borrowers will notice. See full story.

Top Stocks For 5/21/2012-8

MERRIMACK, N.H.–(CRWENewswire)– GT Solar International, Inc. (NASDAQ:SOLR), a global provider of polysilicon production technology, and sapphire and silicon crystalline growth systems and materials for the solar, LED and other specialty markets, today announced that it has received an order for its advanced sapphire crystallization furnaces totaling $460.4 million from a new market entrant. The order is GT�s largest single order to date, and represents a significant milestone for the company as a leader in the fast-growing LED industry. The order will be included in GT�s backlog for its current Q1 FY12, which ends on July 2, 2011.

�Our customer is a well established, diversified manufacturing company located in China who is new to the LED industry. We are pleased that they have selected our advanced sapphire growth technology for their new sapphire production facility,� said Tom Gutierrez, GT Solar�s president and CEO. �The market acceptance of our sapphire growth technology has been remarkable and it speaks to the confidence our customers have shown in our ability to help them build successful businesses that leverage our crystalline growth expertise and our global equipment installation and support resources.�

According to Strategies Unlimited, an industry analyst firm that tracks the LED industry, revenue for high brightness LED applications will be approximately $19 billion by 2015, with general lighting applications accounting for about 25 percent of this total. High brightness LEDs are primarily manufactured on sapphire wafers. This growth is driving the expansion of manufacturing capacity to meet the increased demand for high quality sapphire material.

About GT Solar International, Inc.

GT Solar International, Inc. is a global provider of polysilicon production technology, and sapphire and silicon crystalline growth systems and materials for the solar, LED and other specialty markets. The company’s products and services allow its customers to optimize their manufacturing environments and lower their cost of ownership. GT Solar will be changing its name to GT Advanced Technologies as it establishes a new global brand. The new name reflects the broader range of markets and technologies the company now addresses since its acquisition of Crystal Systems in July of 2010. The transition to GT Advanced Technologies is expected to be completed in August 2011. For additional information about GT Solar, please visit

Forward-Looking Statements

Some of the statements in this press release are forward-looking in nature, including statements regarding expected revenue from customer contracts and the expected performance of the sapphire furnaces. These statements are based on management�s current expectations or beliefs. These forward-looking statements are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside the Company�s control, which could cause actual events to differ materially from those expressed or implied by the statements. Factors that may cause actual events to differ materially from those expressed or implied by our forward-looking statements include the possibility that the Company is unable to recognize revenue on customer contracts, that technological changes could render existing products or technologies obsolete, the Company may be unable to protect its intellectual property rights, competition from other manufacturers may increase, exchange rate fluctuations and conditions in the credit markets and economy may reduce demand for the Company�s products and various other risks as outlined in GT Solar International, Inc.�s filings with the Securities and Exchange Commission, including the statements under the heading �Risk Factors� in the Company�s annual report on Form 10-K for fiscal 2011 filed on May 26, 2011, and the quarterly report on Form 10-Q for the third quarter of fiscal 2011 filed on February 10, 2011. GT Solar International, Inc. is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.


GT Solar
Jeff Nestel-Patt, 603-204-2883


Ryan Blair, 603-681-3869

Source: GT Solar International, Inc.


The Dumbest Investment I Ever Made

This article could be differently titled because the investment itself was a good one. The problem was it could’ve been a personally historic one, and the lesson is one I’ll remember for a very long time.

New York City was a great place to have a job in late 2000. I was writing on a television show and going out every single night. One day while walking home along a different subway route, I found myself standing in front of a men�s clothing store called Jos. A. Bank Clothiers (NASDAQ:JOSB). I wasn’t much of a suit guy, but this was New York and I needed a wardrobe upgrade. And since Peter Lynch’s book had said to keep an eye out for investing opportunities just like this, I investigated the company.

At the time, the company had around 90 stores and modest expansion plans. Earnings were increasing 68% year-over-year, and they were generating about $10 million in free cash flow. This was a fine achievement for a little company whose enterprise value was a tiny $36 million. Despite the expansion, the company also was buying back shares. It seemed to me that management really was taking an unnecessary risk to buy back stock when it should be expanding, but my gut told me that was because management believed the buyback was a better ROI than expansion. Management was either really smart or really dumb. But their suits looked great on me, the service was excellent, and I believed I had an undervalued diamond in the rough. I purchased the suits — and the stock.

If you’re looking at JOSB’s chart, you must be jealous knowing that I bought in at a split-adjusted $1.28 and am enjoying a 46-bagger.

Don’t be jealous. I sold the stock. At a split-adjusted $6.

So cry me a river on my near-five-bagger, but a 46-bagger would’ve been oh-so-sweet. It would’ve been that rare time you hear about the guy who put $10,000 into Microsoft in 1976 and became a zillionaire.

My mistake was not letting the story play out. The company had a great story, but a couple of years later, I panicked when I saw that sales were up 9% but inventories were up 30%. That suggested to me that the company was not managing inventory well and that consumers had, for whatever reason, found a new suit outlet. Having been burned in the past by retail clothiers, and knowing retail investors can be finicky, I figured now was the time to get out. My lapse in knowledge was that inventories were growing because the company was about to open a lot more stores and they needed that inventory to stock them!


Since then, of course, the company now has 515 stores, generates tens of millions annually in free cash flow, and while its days of 30% growth are over, it’s still growing at a 12% clip. The lesson is that as an investor in any company, you must keep your eye on all aspects of the story. One slip-up could cost you — big time.

Lawrence Meyers no longer owns shares of Jos. A Bank.

Financial Services Industry ‘Safer, Sounder’: Hamilton Financial Index

Hamilton Place Strategies on Tuesday released its new Hamilton Financial Index, which shows that “great progress” has been made in strengthening the financial services sector since the financial crisis in 2008.

The new index measures the safety and soundness of the financial services industry and merges both systemic risk and capital levels by using two commonly accepted metrics: the St. Louis Federal Reserve Financial Stress Index, which measures 18 stress indicators, and Tier I Common Capital Ratio, which measures a financial institution’s ability to absorb unexpected loss.

“The Hamilton Financial Index reinforces what a large stream of data continues to show: the financial services industry is more safe and sound than at any time during or before the financial crisis,” said Matt McDonald, partner at Hamilton Place Strategies, in a statement. “Whether we look at capital levels, liquidity, asset quality, or exposure to risk, the accepted benchmarks for the financial industry have been improving dramatically across the board.”

Key findings of the index include:

  • The new Hamilton Financial Index, which measures the safety and soundness of the financial services industry, has risen since the crisis. It is now 15% above normal levels of safety and soundness.
  • U.S. commercial banks’ Tier 1 Common Capital levels are at an all-time high and the ratio of loans to deposits has declined 20% since 2007, pointing to a strong foundation for higher levels of lending.
  • Insurance firms’ capital and surplus are also at all-time highs despite an increase in unexpected expenses from natural disasters in 2011.
  • Insurance companies had record payouts to the many individuals who suffered from natural disasters in 2011.
  • While business loans have lagged due to a slow recovery, consumer loans increased dramatically during the recession, helping individuals weather the crisis.
  • The private sector continued to reduce outstanding debt in 2011, declining 17% from the highs.
  • The total U.S. retirement market is valued at $17 trillion, an increase of 21% since 2008.
  • Lastly, our regulatory spotlight found that in the first four months of the Durbin amendment’s (to the Dodd-Frank Act) implementation, consumers have seen no decline in merchant prices and reduced account benefits from their debit cards. Foreseeable but unintended consequences of this regulation, which expands Federal Reserve powers for setting interchange fees related to debit card transaction processing, have resulted in a clear loss of value for consumers.

The Partnership for a Secure Financial Future, comprised of the Consumer Bankers Association, Mortgage Bankers Association, Financial Services Institute, and The Financial Services Roundtable, held a roundtable discussion on Tuesday to reveal the results of the index.

Dale Brown, president and CEO of FSI, said that “while it is a common misconception that financial services firms are only on Wall Street, we must not forget many in the industry thrive on Main Street, and are critical to the financial futures of Main Street Americans. This report demonstrates the importance of the industry for hard-working Americans as well as the industry becoming safer and stronger.”

Independent financial services firms and their affiliated financial advisors, he said, “are local business leaders in small communities across America. And the men and women they serve are not just their clients but their family and friends. We must keep this in mind as we discuss the future of the industry and its continued growth and strength.”

Tuesday, July 31, 2012

Lululemon: Hold Off For A Better Buy Opportunity In 2012

By Peter Konefal

Lululemon Athletica (LULU), a growth stock darling in Canada’s apparel industry, has potent brand power, sells out of its product before it hits the shelves and is in the early stages of its international and online sales development. Lululemon’s traditional focus has been its yoga-apparel and running markets, with significant sales to a broader market of buyers who are attracted to the casual wear products. Its strategy has been highly successful in diversifying beyond a yoga niche market, and capturing the hearts of a relatively broad, mostly female buyer for luxury sports and casual wear. The brand has benefitted significantly from its early mover advantage in what was once a very nascent market, broadening the appeal of yoga culture into the up-market athletic buyers of east and west coast North America and Australia. Under the leadership of Christine Day, formerly the president of Starbucks Asia Pacific’s region, the company is well positioned to continue to capitalize on its strong culturally distinct brand and premium quality reputation among its customer groups.

Its current financial situation is strong and its stock has reflected its consistently aggressive growth trend over recent years. This success has attracted short-sellers in droves. From a combination of both retained earnings and leftover shareholder injections, the company has a sizeable war chest of $276 million in the bank with which to fund future growth. Lululemon is in the midst of completing the remaining buy-backs of its franchise locations and with no immediate dividend pressures to worry about, can concentrate on remaining a growth story for years to come. Many investors may look at the company's 38% drop in share value since its exuberant July peak of $64.49 a share, and ask, what’s not to like?

Ultimately, all the above is true and compelling, and yet, value investors should be conscious of signs that earnings growth may be slowing, and to consider the fundamentals in order to avoid over-paying for a much-hyped stock.

Lululemon earned $230 million during the quarter ended Oct 30, 2011, and is on pace for revenue of $950.70 million assuming it can maintain its Q4 2010 comparable sales growth of 28% (the target is $337 million for Q4). This would be a significant achievement; particularly in light of recent difficulties the company has had maintaining adequate stock levels. Jefferies and Company analyst Taposh Bari has used these continuing difficulties as a reason to “wait and see” on Lululemon until into 2012. Not all of Lulu’s slowing growth can be attributed to stock-outs, and evidence is emerging of Lululemon reaching an inevitable saturation point in the growth that can be achieved with organic same-store sales growth: compared with Q3 2010’s comparable sales growth of 29%, last week’s announcement of 16% for Q4 2011 was a disappointment for investors.

Evidence is emerging as well, that the stock is more than well priced at present. An investor who purchased the shares at the beginning of 2011 would have experienced a rocky, but mostly upwards ride, gaining 34.05% year to date. On a five year, annualized basis, investors were rewarded with an average annual return of 45.4% - quite strong considering we are talking about a Canadian company outside of technology, mining or resources, and an industry with relatively few barriers to entry (proponents will argue the brand and early mover advantage on the yoga culture front create barriers).

On a broad basis, assuming the investor has no specific interest in growth stocks in the apparel sector, and notwithstanding the recent discount the stock has experienced in recent weeks, Lululemon’s P/E at 40 remains costly relative to global growth stock or apparel substitutes. If investors are willing to assign significant P/E premiums to the growth potential for a company, why is a giant such as Apple’s (AAPL) P/E a relatively modest 14.21 despite more than doubling its sales in the past two years? Under Armour (AU) is perhaps one of the most similar to Lululemon from a P/E perspective, at 47.45, and showing no signs of coming down to earth any time soon. In the apparel industry, more mature firms such as Nike (NKE) , Ralph Lauren (RL) and the Gap (GPS), to provide counterpoints, also possess more modest valuations, in the 10-20 range. Granted these are not growing at Lululemon’s rate, but they provide less risk, and are more justified from a fundamental perspective. With a beta of 2.48, Lululemon’s stock has fluctuated from a high P/E of 44 (currently it is at 39.7) to 15 this year, and experienced a range in values of 38 to 5 in 2010. Assuming the stock continues its volatility, at least in the near term, it is likely there will be attractive entry points for savvy buyers in the future. Most analyst coverage hovers in the “hold” range, noting that the company only looks weak when compared against its own prior growth (it still far outperforms most similarly sized peers), and allowing for fickle sell-offs for negative future news on comp sales growth or inventory issues.

Currently, the outlook for the Lululemon is more subdued than it has been from a fundamental economic perspective. Jason Asaeda of Standard & Poors has issued a neutral outlook on global demand in the apparel, accessories and luxury goods sub-industry segment, noting, however that the resiliency of core affluent shoppers will continue to bolster luxury brands. Overall apparel sales grew 1.9% in 2010, versus a 5.1% decrease in 2009. Growth in 2011 was modest overall at 0.7%, and the outlook remains neutral. These trends, while important, are not expected to effect Lululemon significantly, as its customers are already less price-sensitive than mass channel customers, however the indication of slower growth, even in the luxury segment reinforces the trend seen in lower Q3 year-over-year comp sales growth: growth will come, but it will increasingly be slower, and more dependent on new store openings. Lulelemon’s senior management continue to note the lack of price resistance amongst their “guests” and if anything, are likely to develop more expensive apparel in the future.

Ultimately, Lululemon currently, as I’ve said, is overvalued – even despite factoring in its growth. Using a price-to-sales ratio, a measure of the cost investors pay for one dollar of sales, Lululemon at $5.70 is above its peers such as Under Armour ($3), Nike ($2.03) and PVH ($0.83). Factoring in growth prospects, using a price/earnings to annual EPS growth ratio, or PEG ratio, we can see why the street is still calling for a $54-$65 price target in 2012. Compared with its peers, Lululemon’s PEG ratio is 0.56 relative to 1.12 for Under Armour and Nike. Nonetheless, these measures are backward looking, and should be modestly discounted based on decreased comp performance, a still volatile economy and somewhat dampened luxury goods demand. Our recommendation remains hold or sell in favour of more attractive opportunities, and we maintain a price target of $52.

Shares of Lululemon opened at 45.30 on Thursday. Lululemon has a 52-week low of $30.91 and a 52-week high of $64.49. The stock’s 50-day moving average is $51.64 and its 200-day moving average is $53.06.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.