Saturday, September 29, 2012

Seagate FYQ3 EPS Crushes Estimates; Shares Rising

Disk drive maker Seagate Technology (STX) this afternoon reported fiscal Q3 revenue ahead of consensus and earnings per share that easily topped estimates, sending its shares higher in late trading.

Revenue in the three months ended in March rose 65%, year over year, to $4.45 billion, yielding EPS of $2.64 excluding some costs.

Analysts had been modeling $4.37 billion and $2.10 per share.

Seagate shares are up 14 cents, or half a percent, at $28.03 in late trading.

Seagate management will host a conference call with investors at 6 pm, Eastern time, and you can catch the webcast of it here.

House Passes Ryan FY2012 Budget Plan

The House of Representatives passed by a vote of 235-193 on Friday the FY2012 spending bill put forth by House Budget Committee Chairman Paul Ryan (left), R-Wis., which would cut $5.8 trillion in spending over 10 years. Four Republicans voted against the measure, while no Democrats voted for it.

The Senate, where the Democrats are the majority party, is currently in recess until May 2, and will not vote on the measure, said a spokesperson for Senate Majority Leader Harry Reid, D-Nev. Senate Budget Committee Chairman Kent Conrad, D-N.D., will put forth a FY2012 budget proposal “in the next month or so,” the spokesperson said.

Sen. Charles Schumer, D-N.Y., said in a statement following the House vote, “The Republicans have made a major mistake in turning a debate over the budget into a debate over whether to keep or eliminate Medicare. We have the high ground on this issue, and we welcome a budget debate on these terms. The House Republicans have let Tea Party zeal get the better of them, and this vote will reverberate for a long time.”

The vote on the FY2012 budget proposal introduced by Ryan comes just a day after the House passed by a vote of 260-167 the FY2011 spending bill that was agreed to late on April 8 and prevented a government shutdown. The Senate quickly followed, voting 81-19 for the deal. The compromise budget will cut $38 billion in spending through Sept. 30 when the fiscal year ends.

President Barack Obama on Wednesday laid out what he called “a more balanced approach” than House Republicans to reduce the nation’s burgeoning deficit by proposing a budget that would reduce the deficit by $4 trillion over 12 years.

Doubling Your Investments With Penny Stock Prophet

Penny Stock soothsayer is one of many stock programs on the market but one which only targets cheap stocks. That makes this program fascinating because cheap stocks offer up the best profit potential possibly in the market if you can identify a soon-to-be well performing stock from the rest. Whether you are a day trader whose sole focus is on inexpensive stocks or you are just looking to supplement your current income in some way, these are some things to understand about this program and whether it’s a good match for you.

This is a behaviour comparison program. What this implies is that this program reveals and makes its stock picks based primarily on similar stock behavior from history to the present. For example, if you have a stock which went on a profitable trend and you have a current stock which exhibits behaviour which is very similar to that stock of the past, this gives you a very accurate idea of how that current stock is going to act, just like that original stock.

Stock behaviour is the best tell which market analysts have at their disposal, which is why programs like Penny Stock prophet were modeled after the same practices utilized by market analysts twenty-four hours per day.

I discussed the profit potential which inexpensive stocks possess. For a better example of this volatility, I will reference my first pick which I received from this program when I was first trying it. When I first got this program, sometimes I’d get a pick each sunday. That first pick was valued at $.15 when the market opened on Monday morning. I scooped up one thousand shares were with us spending $150 with my online trading account and went off to start my own day of work.

I did not have the resources to think about checking back in on its performance till I was clocking out after the market had closed and I revealed that it had sure enough rocketed up to $.31.

Hey palswatch out this URL for a detailed survey on Penny stock prophet penny stock prophet I am confident you like it.Here is yet another link for you which is a study on penny stock prophet penny stock prophet review.

RPT-FOREX-Yen at post-intervention low, euro/dollar steady – Reuters

FXstreet.comRPT-FOREX-Yen at post-intervention low, euro/dollar steady
NEW YORK, March 29 (Reuters) – The yen slid to post-intervention lows on Tuesday and analysts anticipate more losses if the spread between US and Japanese yields continues to widen and if repatriation flows into Japan fail to emerge. …
WORLD FOREX: Yen May Keep Falling As Japanese Exporters InactiveWall Street Journal
Forex – GBP/USD down in U.S. tradeBenzinga
FOREX-Dollar gains vs yen as US yields continue riseForex Pros -YTWHW
all 114 news articles »

{forex} – Google News

2010: Gazing into the Crystal Ball

This year's prognostications come a bit later than usual - about two weeks - however, don't think for a second that the delay was used to "game the system" by allowing time to review what other seers think 2010 will bring.

After having read a few of these, it quickly became more confusing than when the process first began a couple weeks back and I now regret having opted to nurse a slight hangover and watch football on January 1st rather than knocking this out as has been the routine in recent years.

Even without a plethora of other opinions, seeing into 2010 has proven to be much more difficult than looking ahead into 2009 a year ago, simply because, after the events of late-2008, conditions couldn't get much worse - they had to get better.

This is clear to see in the Predictions for 2009 made 54 weeks ago and then discussed in last week's follow-up A Review of 2009 Predictions where a rebound from the dismal 2008 results occurred for the economy, financial markets, and my own forecasting performance.

As for the new year, some things seem certain, others not so much.

Off we go...

1. Maybe the Last Really Bad Year for Housing

It's hard to understand how anyone can really think that the nation's housing market managed to "stabilize" in 2009 when prices continued to decline on a year-over-year basis even after government support to this sector on a scale never before seen by Mankind.

Homebuyer tax credits, central bank purchases of mortgage-backed-securities, a sharp increase in FHA lending, and a host of other factors have merely "kicked the can down the road" and that road will be "uphill" in 2010. Mounting foreclosures, loan resets, and an increasing number of homeowners who simply "walk away" from underwater mortgages will cause a relapse in housing this year and month-to-month gains will turn back to losses.

As measured by the 20-city S&P Case-Shiller Home Price Index for October 2010 (to be released in late-December), home values will decline by another 8 percent. The U.S. government will extend the homebuyer tax credit again in the summer and late-2010 will be a good time to start looking to buy property in most parts of the country.

2. The Dollar Will Continue its Descent

The dollar fell modestly last year after a surprisingly strong 2008 and it will continue that slow, steady decline in 2010 after a surge of safe-haven buying in the spring after equity markets have another little hiccup, temporarily boosting the greenback's appeal.

The trade weighted dollar ended 2009 at about 78 but will end 2010 at 72 after briefly dipping into the 60s and scaring the bejeezus out of the entire world as the long-anticipated "global currency crisis" once again looks like it is at the world's doorstep.

The dollar weakness will be driven primarily by concerns about funding the U.S. budget deficit as traditional buyers become more scarce and the entire world begins to realize that the economic recovery in the U.S. will be very long and very slow.

3. Stocks Will End the Year Lower

Broad equity markets in the U.S. will advance early in the year and then, peering into the future of the domestic economy and not liking what they see, have a relapse right along with the housing market.

Retail investors will continue to pull money out of stocks, in the process muttering Will Rogers' famous words about the relative concern for the words "of" and "on" when they are placed between the words "return" and "principle". Whatever or whoever drove stocks higher in 2009 will have much less success doing so in 2010, however, it won't be a complete washout as the Dow will lose 10% and the Nasdaq 15%.

Stocks in China will get about half-way back to their 2007 highs before reversing and ending the year only modestly higher. Gold and silver mining stocks will fall in sympathy with other equity markets but will rebound faster and end higher than most other sectors.

4. Short-Term Interest Rates Will Stay at Zero ... Again

Like last year, short-term interest rates in the U.S. will end where they began - at zero - but the central bank will tack another $1 trillion onto its balance sheet.

Chairman Ben Bernanke will be re-confirmed for another four-year term as Fed chief but will receive the highest number of 'No' votes in history and many elected officials voting 'Yes' will regret their decision by summer as the economy sours and the mid-term election nears.

The Fed will stop buying mortgage backed securities in March and the housing market swoon will intensify. Bernanke and crew will then resume their purchases in May because no one else was willing to buy at anywhere near what the central bank was paying.

5. Energy Prices Will Go Up and Then Down

After rising to $95 a barrel during the spring, the price of crude oil will dip to as low as $45 and then end the year at $65 a barrel. Peak oil will have to wait until global growth begins to post much bigger numbers and that won't happen this year.

The price at the pump will rise from their current $2.70 a gallon to more than $3 a gallon early in the year and then retreat back to the low $2 range. Gasoline was one of best commodity investments last year, this year it will be one of the worst.

None of the green energy job initiatives will amount to anything and that's just sad.

6. Gold and Silver Will Soar ... Again

The end of 2010 will mark ten straight years that gold bullion has ended higher than it began and most Americans still won't own it, continuing to put their trust in the mainstream financial media that, for the most part, still doesn't understand it or recommend it.

The yellow metal will make new all-time highs at just over $1,400 an ounce in March and then begin its every-other-year 18 month consolidation, ending 2010 at $1,300 an ounce. Silver will rise to $24 an ounce in the spring and end the year at $21 an ounce.

An increasing number of retail investors will eschew the advice of Money Magazine and buy gold and silver anyway, but a good number of them will sell it over the summer when metal prices correct. They'll be back in 2011.

People will start talking about junior mining stocks at cocktail parties - just like internet stocks in 1997. (As noted the last couple years, I'm going to keep saying this until it's true).

7. The U.S. Economy will Barely Avoid a Double-Dip

Economic growth will stall by the second quarter as Congress finds it politically difficult to make additional stimulus funds available during an election year. Following an impressive growth rate during the fourth quarter of 2009, the first two quarters of the year will see rates of between zero and one percent with the economy posting a small negative number in the third quarter.

The overriding theme in the economy during 2010 will be the continuing revival of a more frugal lifestyle following the credit and consumption binge of recent decades and the savings rate will continue to rise, from about 4% in 2009 to 7% by year-end, still well below the pre-Reagan administration average of about 10%.

8. Inflation will Surprise to the Upside

Consumer prices will rise much more than most economists expect early in the year driven higher by continuing unfavorable year-over-year energy price comparisons and the government's "official" annual inflation rate will reach a peak at over three percent as the grass starts turning green.

Then commodity prices will plunge and we'll start hearing about de-flation again.

9. Only a Few Jobs will be Created

Next month's benchmark revisions to the Labor Department nonfarm payrolls data will show an additional loss of 1.2 million jobs during the early-2008 to early-2009 period (greater than the currently estimated 840,000 loss) and there will be only modest net job growth in 2010 of about 500,000 jobs, all of it in health care.

The unemployment rate will reach a peak at 11% early in the year and remain above the 10% mark during all of 2010, save for a two-month dip in late-summer as millions of jobless become discouraged and stop looking for work.

10. The 2010 Elections will Be Shocking

As the economy turns from weak to bad again over the summer, there will be some surprising developments leading up to the fall elections as young and old alike express their displeasure with the status quo, namely, the cozy relationship between elected officials and the leaders of the FIRE (Finance, Insurance, and Real Estate) economy.

A record number of independents will run for and be elected to office and Washington will start to get the message, but Wall Street won't.

The Seven Habits of Spectacularly Unsuccessful Executives

Sydney Finkelstein, the Steven Roth Professor of Management at the Tuck School of Business at Dartmouth College, published �Why Smart Executives Fail� 8 years ago.

In it, he shared some of his research on what over 50 former high-flying companies � like Enron, Tyco, WorldCom, Rubbermaid, and Schwinn � did to become complete failures.  It turns out that the senior executives at the companies all had 7 Habits in common.  Finkelstein calls them the Seven Habits of Spectacularly Unsuccessful Executives.

These traits can be found in the leaders of current failures like Research In Motion (RIMM), but they should be early-warning signs (cautionary tales) to currently unbeatable firms like Apple (AAPL), Google (GOOG), and (AMZN).  Here are the habits, as Finkelstein described in a 2004 article:

Habit # 1:  They see themselves and their companies as dominating their environment

This first habit may be the most insidious, since it appears to be highly desirable.  Shouldn�t a company try to dominate its business environment, shape thefuture of its markets and set the pace within them?  Yes,but there�s a catch.  Unlike successful leaders, failed leaders who never question their dominance fail torealize they are at the mercy of changing circumstances.They vastly overestimate the extent to which they actually control events and vastly underestimate the role of chance and circumstance in their success.

CEOs who fall prey to this belief suffer from the illusion of personal pre-eminence: Like certain film directors, they see themselves as the auteurs of their companies.  As far as they�re concerned, everyone else in the company is there to execute their personal visionfor the company.  Samsung�s CEO Kun-Hee Lee was so successful with electronics that he thought he could repeat this success with automobiles.  He invested $5 billion in an already oversaturated auto market.  Why? There was no business case.  Lee simply loved cars and had dreamed of being in the auto business.

Habit #2:  They identify so completely with the company that there is no clear boundary between their personal interests and their corporation�s interests

Like the first habit, this one seems innocuous, perhaps even beneficial.  We want business leaders to be completely committed to their companies, with their interests tightly aligned with those of the company.  But digging deeper, you find that failed executives weren�t identifying too little with the company, but rather too much.  Instead of treating companies as enterprises that they needed to nurture, failed leaders treated them as extensions of themselves.  And with that, a �private empire� mentality took hold.

CEOs who possess this outlook often use their companies to carry out personal ambitions.  The most slippery slope of all for these executives is their tendency to use corporate funds for personal reasons.  CEOs who have a long or impressive track record may come to feel that they�ve made so much money for the company that the expenditures they make on themselves, even if extravagant, are trivial by comparison.  This twisted logic seems to have been one of the factors that shaped the behavior of Dennis Kozlowski of Tyco.  His pride in his company and his pride in his own extravagance seem to have reinforced each other.  This is why he could sound so sincere making speeches about ethics while using corporate funds for personal purposes. Being the CEO of a sizable corporation today is probably the closest thing to being king of your own country, and that�s a dangerous title to assume.

Habit #3:  They think they have all the answers

Here�s the image of executive competence that we�ve been taught to admire for decades: a dynamic leader making a dozen decisions a minute, dealing with many crises simultaneously, and taking only seconds to size up situations that have stumped everyone else for days. The problem with this picture is that it�s a fraud. Leaders who are invariably crisp and decisive tend to settle issues so quickly they have no opportunity to grasp the ramifications. Worse, because these leaders need to feel they have all the answers, they aren�t open to learning new ones.

CEO Wolfgang Schmitt of Rubbermaid was fond of demonstrating his ability to sort out difficult issues in a flash. A former colleague remembers that under Schmitt,� the   joke   went, �Wolf  knows everything about everything.�  In one discussion, where we were talking about a particularly complex acquisition we made in Europe, Wolf, without hearing different points of view, just said, �Well, this is what we are going to do.��  Leaders who need to have all the answers shut out other points of view. When your company or organization is run by someone like this, you�d better hope the answers he comes up with are going to be the right ones.  At Rubbermaid they weren�t.  The company went from being Fortune�s most admired company in America in1993 to being acquired by the conglomerate Newell a few years later.

Home Depot Accused of Using China Products in ‘Buy American’ Campaign

“Buy American.” That�s what American manufacturing workers want to protect American jobs and what the government thought it was doing when it took in shipments of The Home Depot Inc. (NYSE: HD) products. But the country�s largest home improvement chain made a big boo-boo. Its own photograph touting that America�s federal dollars get more bang for the buck at Home Depot tells a very different tale.

Home Depot is being investigated by the U.S. Department of Justice for violating the Buy American Act because it provided Chinese-made materials for public projects. The law requires all materials used in construction of public projects originate in the U.S. It has been revised several times to accommodate various trade agreements with designated countries such as Canada and Israel, but China-made materials are clearly out of the equation. That’s a big black eye for Home Depot if recent whistleblower claims are true.

First of all, it�s hard to believe that no one in the government�s receiving office noticed the “Made in China” labels on many of the products being shipped from Home Depot. As the story goes, Home Depot’s error was discovered while investigating evidence in a separate whistleblower lawsuit. ��It is even harder to believe that the federal government doesn�t expect many of the products it receives nowadays would not be made in America.

If the government thinks the law has value, then why are American companies allowed to get so many of their parts outside our borders – essentially playing middle man with a “made in the USA” label? And why is it okay for the government to buy some of our military equipment, which protects us at home and abroad, from foreign countries? Because our government knows that free trade benefits America as much as it does other countries, that’s why.

Some people may see prosecuting violators under the law as a way to send a message to China and other protectionist countries that their goods aren�t welcome if ours are not. But in this growing global economy, we may be hurting ourselves more at work and at the retail stores.

If we keep the law as is and selectively prosecute those who may unknowingly violate it, then how can we insist that China and other protectionist countries open their borders to American goods?

I�m not saying that I wouldn�t like to see more American dollars stay at home, but it appears that the law is being used more by whistleblowers looking for a big payout than by the government to change corporate behavior of achieve better trade agreements.

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

5 Small Stocks with Home-Run Potential

It's no secret that small-cap and micro-cap stocks really take it on the chin when investors grow skittish. A 5% or 10% drop in the broader market can lead to even deeper hits for these riskier stocks. The converse is also true: When the market is in rebound mode, these oversold stocks can post some of the most impressive rallies.

  At this point, investors in a buying mood are faced with two choices: They can either focus on lower-risk blue chips that appear inexpensively valued and possess respectable upside. Or they can focus on riskier, beaten-down stocks that could rise much more sharply in an improving economy.

I've spent a considerable amount of time the last few months focusing on blue-chip bargains. Here's a look at the other end of the spectrum -- five stocks under $5 that could rise sharply in the next few years, granted the global economy dodges a bullet with the current crises. 

1.Dryships (Nasdaq: DRYS)
Recent price: $2.80
The dry shipping industry, which carries dry-bulk goods on massive container ships, has been beset by weak demand and too much capacity. As a result, lease rates for these ships plunged, leading many industry players scramble for survival.

DryShips, which traded above $100 in 2008, is now worth less than $3 a share. Yet just-released quarterly results imply that a bottom has been reached. Better-than-expected lease rates led to $318 million in revenue, ahead of the $296 million consensus forecast. Better still, the company topped the consensus profit forecast for the first time in four quarters, earning two cents more than the $0.14 prediction. Profits would have been a lot more robust if not for some bad bets on currency swaps. This stock will never revisit its past heights, simply because its share count has risen nearly 1,000% in the past four years, but a return to $5 or even $7 isn't out of the question now that industry dynamics are reversing.

2. Leapfrog Enterprises (NYSE: LF)
Recent price: $4.81 
Back in January, I predicted  this maker of education-oriented toys was poised for a good year.

In subsequent months, the company failed to deliver on the promise I foresaw, so its share price moved in the opposite direction I had anticipated. Yet just-released quarterly results were nothing short of a blow out, and a fresh stock surge has moved it up more than 10% from where I originally recommended it. Further upside looks quite possible.

That's because Leapfrog's LeapPad, a sort of iPad for toddlers, is finally gaining serious traction (though device-specific sales weren't divulged). This fueled a 9% year-over-year gain in third quarter sales to $151 million, and earnings per share (EPS) of $0.35 were nearly 30% ahead of forecasts. Yet it's the all-important holiday season that could lead to a stock breakout. As analysts at Needham note, the $100 LeapPad's "camera and internal memory give it a strong advantage over competitors' products, as does its strong library of apps and the pedigree of the Leap Frog brand." They see shares trading up to $6.

3. Casual Male (Nasdaq: CMRG)
Recent price: $3.96
This menswear retailer, catering to the "big and tall" crowd, is a perennial member of my top low-priced stocks list. Management has done a great job of cutting costs and boosting margins, leading to a nice profit rebound. This comes at a time when consumer demand remains lousy, so any eventual rebound on consumer spending could really ignite this business model.

The numbers tell the story. Sales fell from $464 million in fiscal (January) 2008 to $394 million in fiscal 2011. Yet EPS rose from $0.09 to $0.32 during that time, thanks to tight cost controls. Results released in August portend even better days ahead. Sales rose 4% in the second quarter to $101 million compared with the same period in 2010, fueling a 17% jump in net income. EPS of $0.14 was the best quarterly showing in more than three years. Look for third-quarter results on Nov. 17 for signs that this turnaround story has real legs. I see shares trading up to $6.

4. Biolase Technology (Nasdaq: BLTI)    
Recent price: $3.03
I first profiled  this dental technology company in January, when shares traded at about $1.50. The stock quickly moved up to a 52-week high of about $6.85 soon thereafter. A 50% pullback from that peak leads me to again remind investors of the compelling value in this stock.

Under the tutelage of fresh management that came aboard in 2009, quarterly results keep getting stronger. Sales are expected to more than double this year to $54 million in comparison with last year, and rise another 30%-40% in 2012 as sales channels are tweaked.

This stock is no longer simply a story about dentistry. Look for Biolase to release new laser-based devices in the fields of ophthalmology, orthopedics and aesthetics in 2012. This means profit growth will be erratic during the next two years as Biolase invests in these new vertical niches. This also means that (projected) $75 million revenue base in 2012 could become a $150 million revenue base in a few years. I look for this stock to revisit the 52-week high of $6.85 during the next 12 months.

5. American Superconductor (Nasdaq: AMSC)
Recent price: $4.06
This maker of wind turbines deserves a mention, albeit short (I profiled this company in more detail here and here ). The abrupt end of a large and profitable relationship with Chinese wind-power provider Sinovel has led to a sharp drop in the company's results. But just-released quarterly results show a 30% sequential jump in bookings as the company lands new customers. A lawsuit that seeks $1 billion in damages from Sinovel could be a game changer for the company, which is valued at just $230 million. I dont' have a precise price target yet because there are too many variables right now -- where the stock goes depends on the outcome of the lawsuit with Sinovel, backlog growth and the move back to profitability. But it's definitely worth monitoring it to see if business rebounds.

Risks to Consider:  Small-cap stocks only rebound when investors grow confident that the bottom of an economic cycle is only a quarter or two away. Right now, it's too soon to tell what the U.S. economy will look like in 2012.

Friday, September 28, 2012

There Are No One-Size-Fits-All Investment Strategies

It may come as a surprise to some, but there is no magic formula for investing. There are many factors which weigh in to the equation. It also must be understood that not all investments are high risk. Some carry little to no risk at all. The fact that you are looking into investing is a good start. Regardless of where you are right now, you can make wise investment choices that can pay off in the future. Even investing a few dollars a week is better than not acting at all. Planning for the future should be foremost in your mind, regardless of your age.

Those investments that tend to pay off big, and quickly, are also usually the ones that carry the highest risk. Keeping money invested long term somewhere can pay well, but it usually has to be a very long term commitment. Risk is a major factor in how you invest. What kinds of risks are you willing to take to make money for the future? The risk and time considerations help determine which investments may be right for you. You must decide how much play to give the money you invest. Some people are willing to take a much bigger gamble than others.

Your current age should be a deciding factor in where and how much to invest. People in their 30’s are going to make very different choices than those who are in their 50’s and beyond. Younger people sometimes are willing to give the money a little play, since they have years ahead of them. Older people tend to think long term for their families, and usually put most of their money into low risk investments. The stock market is always a gamble, but it is one that people of all ages play.

Annuities, stocks, bonds, insurance; they are all ways of investing money. Real estate is another option. There are so many investments from which to choose, some rely on the help of a financial planner or investment broker. Of course, there are those who prefer to do their own research and choose their own investments. Whichever way you are comfortable is best for you. Although there are many horror stories about investments, there are just as many, albeit not as publicized, which have turned out successfully. The right investments for you are not necessarily going to be the right investments for someone else.

Chris Beanie, author of the popular investing and trading book: The Best Trading System

Silicon Image Rallies; Needham Ups To Buy; Sets $5.50 Target

Silicon Image (SIMG) shares are getting a boost this morning from Needham analyst Rajvindra Gill, who upgraded shares of the digital TV chip company’s stock to Buy from Hold, setting a price target of $5.50.

Gill thinks the company, which in particular is focused on HDMI interface technology,� will benefit from two long-term secular drivers:

  • HDMI upgrade cycle in the digital TV market drive by 3D TV adoption, higher panel refresh rates and connected digital TVs.
  • Penetration of mobile HDMI connectivity in the mobile handset market.

Gill upped his 2010 EPS view to 4 cents a share from break-even; for 2011, he goes to 24 cents, from 5 cents.

SIMG today is up 22 cents, or 6.3%, to $3.73.

Commodity Stocks: List of Top Hedge Fund Favorites

In the end of September, hedge funds had reduced their bets on higher commodity prices only days before raw materials rallied the most in 10 weeks -- they've since double-backed. Bloomberg reports hedge funds, in the week ended Dec. 27, have raised wagers on rising commodity prices the most in 16 months.

Net long positions increased by 18% to 536,907 contracts. The increase is the greatest since August 2010, according to data from the Commodity Futures Trading Commission.

James Paulsen, chief investment strategist at Wells Capital Management, tells Bloomberg the commodities have already formed a bottom because the U.S. has demonstrated sustained economic growth. "Data out of the U.S. flies in the face of recession. More and more people are saying: 'Maybe things are not that bad.'"

Still, the future of commodities and indeed most economic indicators are in limbo as long as Europe and the U.S. face the prospect of a recession. A downfall from either the EU or the U.S. would have a significantly negative impact on global markets.

Twelve of the 24 commodities on Standard & Poor's GSCI Total Return Index rose last week, reports Bloomberg. The gains were led by Wheat traded in Kansas City -- up 6.2%, followed by cotton at 5.2%. "Gold futures climbed 2.3 percent, heading for the biggest advance since Oct. 25."

Business section: Investing ideas
Big money managers are changing their outlook for commodities, so which stocks stand to benefit the most from this sentiment change?

As a start, it might be a good idea to look at the commodity stocks that they've been dumping. These stocks may have been dragged down by excessive pessimism, which may lead to a rebound if hedge fund managers turn bullish on their outlook.

All of these names have seen significant institutional selling -- are these trends about to reverse?

List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)

1. ConocoPhillips (NYSE: COP  ) : Operates as an integrated energy company worldwide. Market cap of $96.75B. Net institutional sales in the current quarter at -47.0M shares, which represents about 3.53% of the company's float of 1.33B shares.

2. Southern Copper (Nasdaq: SCCO  ) : Engages in mining, smelting, and refining mineral properties in Peru, Mexico, and Chile. Market cap of $25.38B. Net institutional sales in the current quarter at -12.4M shares, which represents about 7.72% of the company's float of 160.67M shares.

3. Ivanhoe Mines: Operates as an exploration and development company. Market cap of $13.10B. Net institutional sales in the current quarter at -7.8M shares, which represents about 3.35% of the company's float of 232.92M shares.

4. CF Industries Holdings (NYSE: CF  ) : CF Industries Holdings,, through its subsidiary, CF Industries,, manufactures and distributes nitrogen and phosphate fertilizer products, serving agricultural and industrial customers worldwide. Market cap of $9.48B. Net institutional sales in the current quarter at -4.4M shares, which represents about 6.67% of the company's float of 66.01M shares.

5. Cliffs Natural Resources (NYSE: CLF  ) : Produces iron ore pellets, lump and fines iron ore, and metallurgical coal products. Market cap of $8.92B. Net institutional sales in the current quarter at -5.9M shares, which represents about 4.15% of the company's float of 142.11M shares.

6. Eastman Chemical: Engages in the manufacture and sale of chemicals, plastics, and fibers in the United States and internationally. Market cap of $5.48B. Net institutional sales in the current quarter at -5.1M shares, which represents about 3.73% of the company's float of 136.90M shares.

7. SM Energy: Engages in the acquisition, exploration, exploitation, development, and production of natural gas and crude oil in North America. Market cap of $4.68B. Net institutional sales in the current quarter at -3.5M shares, which represents about 5.52% of the company's float of 63.43M shares.

8. Albemarle: Develops, manufactures, and markets engineered specialty chemicals in the United States and internationally. Market cap of $4.57B. Net institutional sales in the current quarter at -4.3M shares, which represents about 4.89% of the company's float of 87.92M shares.

9. Ultra Petroleum: Engages in the acquisition, exploration, development, production, and operation of oil and natural gas properties in the United States. Market cap of $4.53B. Net institutional sales in the current quarter at -9.3M shares, which represents about 6.23% of the company's float of 149.38M shares.

10. Alpha Natural Resources (NYSE: ANR  ) : Engages in the production, processing, and sale of coal in the United States. Market cap of $4.49B. Net institutional sales in the current quarter at -14.2M shares, which represents about 6.37% of the company's float of 222.91M shares.

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

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List compiled by Eben Esterhuizen, CFA. Kapitall's Eben Esterhuizen and Rebecca Lipman do not own any of the shares mentioned above. Institutional data sourced from Fidelity

It has become a popular sport among investors these days to bash Apple Inc. stock and forecast what some denizens of the message boards are calling "the inevitable fall."

Indeed, it's not hard to find investors in many of the online communities making the case for getting out of the technology giant, expecting a correction or something much worse, usually with creatively dull lines about how apples always fall off the tree or get picked and eaten.

You'll also hear arguments about how Apple (AAPL) is much more of a trader's stock than something held by individual investors, how at 17% of the Nasdaq Composite's value it basically is a proxy for the entire tech market, or even how -- with its giant market-cap -- Apple dictates the entire stock market's direction.

Facts vs. feelings

That market noise prompted Mark from Richmond, Va., to write, wondering if he should get out. "I love Apple as a company and a stock, but I have a good profit in the stock and people keep talking about a correction or worse. Apple has gone so far up, and that means it has so far to fall, so while I think the stock might turn back for a little while, I was thinking I might sell and buy it back in the future."

Selling Apple right now -- whether it is unloading shares or betting against the company through short sales or options -- would be the Stupid Investment of the Week. Stupid Investment of the Week highlights the conditions and characteristics that lead investors to make less-than-ideal decisions about securities.

This is the first time in the history of this column -- nearly 10 years -- that a stock has been featured as a bad sell, rather than a poor purchase.

Accordingly, this column should not be construed as an automatic buy signal. It's entirely possible that Apple's naysayers will be right and the stock will take a significant step back; that would dismay anyone buying in at current prices, but the average investor who has shares now and who takes a long-term view is likely to feel better for having weathered the bumps.

"Feeling" is important with Apple shares in large part because of the price. At roughly $580 a share -- and already up 40% so far this year -- the stock "feels" prohibitively expensive, and like it must be due for a fall. With an annualized average gain of 66% over the last three years, there's a lot of "nothing goes up forever" talk around Apple, and reminders of how the last time the stock suffered a bad year, 2008, it shed 57% of its value.

But price is a relative concept, and as hard as it may be to believe, Apple at $580 a share is still a bit of a bargain.

"A big problem with Apple is that there is a lot of anchoring -- people getting stuck on certain price levels and digging in," said Charles Rotblut, editor of AAII Journal. "It was $300 or $400 and they say 'I don't want to pay $600 for a stock, it's come up so much that it's overpriced. It's easy to miss that a stock at $20 can be a whole lot more expensive than a stock at $600. It's all about where is it trading relative to earnings."

In Apple's case, the current price/earnings ratio is roughly 14, and the company is trading at under 12 times forward earnings. Investment researcher Morningstar Inc., for example, has a fair-value estimate of $670 on the stock, some 15% above current levels; its analysts believe an appropriate selling point would be closer to $900 per share.

Nervous Apple investors can also find calm in the company's cash stash of more than $110 billion, or roughly $120 a share. While Apple currently pays no dividend, that will change going forward, giving nervous investors some downside protection.

Bytes and bites

That's not to say that the naysayers haven't got their points to make. With nearly 75% of Apple's revenue coming from the iPhone and iPad, if either of these product segments ever has a disappointment, it will cut into the stock's fair-value estimate.

Apple's sales are heavily concentrated in the U.S. and its high-end products are economically sensitive. It is unclear whether Apple will be as widely accepted in international markets, and particularly the emerging markets, where the boom in personal communications devices will drive the global business in the future; if Apple can't capture the growth in those markets, future revenue growth will slow considerably.

Further, there is a long list of once-great consumer companies that have stalled and fizzled just when it seemed their run would last forever. Many of those stocks, however, traded in the "nosebleed area" at that point, while Apple is not, said Brent Wilsey of Wilsey Asset Management in San Diego.

"Investors want to pay a low price for future growth, and Apple is the best deal in town," Wilsey said. "I know some worry that the market cap of Apple is approaching $600 billion, which they see as the top because, in the past, companies like GE and Microsoft hit those levels only to fall. Investors fail to realize that at those high-market caps, those companies also had very high valuations, P/E's of 40 to 50 times [earnings]."

Rotblut also noted that the average investor who lets the high current share price drive them out of the stock now will never find a price point where they are comfortable getting back in.

"The average investor has a tough time buying a stock that is at $100 a share, let alone $300 or $600 a share," Rotblut said. "If you are an Apple investor and you believe in the long-term prospects of the company, you can't let the noise -- or even a correction -- get you to sell the stock, because you are never going to find a point where you are comfortable getting back in. If you own the stock now, you may have to ride out some disappointment, but it's hard to think you won't be happy owning it three or five years from now."

Google News Experiments With Use Of – Imagine That! – Editors

Google (GOOG) News has begun testing a new feature called Editor’s Picks, according to a Niemen Journalism Lab post. A small percentage of Google News users will now find a content box with links chosen by actual human beings at partner news organizations.

“At Google, we run anywhere from 50 to 200 experiments at any given time on our websites all over the world,” the company said in a statement. “Right now, we are running a very small experiment in Google News called Editors� Picks. For this limited test, we�re allowing a small set of publishers to promote their original news articles through the Editors� Picks section.”

Partners in the test include The Washington Post, Reuters, Newsday and Slate, among others.

Are IPOs a Thing of The Past?

There�s definitely a lot of IPO buzz this week, especially with Groupon getting readyfor its offering. Based on its latest filing, the company could be worth more than $11 billion.

But Zynga also expects to hit the market within a month or so. And of course, investors are eagerly awaiting the Facebook IPO.

So, things are looking much better, right? Maybe not, according to a recent study titled �Where Have All the IPOs Gone?� from University of Florida professor Jay Ritter.

Based on his research, the average number of IPOs during 2001-2009 came to 103. However, during the 20 years prior to that, there were 311 IPOs.

In fact, Ritter believes the lower volume will continue for some time, which is certainly bad news for investment banks like Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS).

Why is Ritter taking such a dim view on things? First of all, the Sarbanes-Oxley law imposes severe regulations on public companies. At the same time, the structure of Wall Street has been transformed. For example, the size of many funds has increased over the years, and if a money manager has billions to invest, it�s tough to get much impact when buying shares in small companies.

But Ritter has another interesting reason: It has gotten tougher for smaller companies to compete. He points out that giants like Apple (Nasdaq:AAPL) have tremendous scale to design and roll out products across the world. How can a small operator do something like that?

Thus, it should be no surprise that Ritter�s research shows that the biggest decline for IPOs is for those companies with less than $50 million in annual revenue. For companies of that size, the average number of IPO deals went from 165 a year during 1980 to 2000 to just 30 a year from 2000 to 2009.

This trend is actually good for investors. For the most part, the IPO market is a much better filter for quality companies. Consider that this year we�ve seen top firms like HomeAway (Nasdaq:AWAY) and LinkedIn (NYSE:LNKD) go public. They have dominant positions in their markets as well as proven business models.

And more importantly, there have not been the kind of wacky IPOs of the 1990s � a la � that have made any traction. In light of the huge losses during that era, it is probably a good thing the markets are much more restrained nowadays.

Tom Taulli runs the InvestorPlace blog �IPO Playbook,� a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of �All About Short Selling� and �All About Commodities.� Follow him on Twitter @ttaulli. As of this writing, he did not own a positioning any of the stocks named here.



A No-Good, Really Bad, Awful Year for This Pharmaceutical Company

With the year quickly coming to an end, it's always a good idea to check in on how some of our most watched stocks are doing. By continually completing our due diligence, we're able to get a sense for where a business is coming from, and where it's going.

Today, we'll be examining K-V Pharmaceutical (NYSE: KV-A  ) , which provides medical solutions, primarily for women.

We'll go over the specifics of the company below, but first, here are the vital statistics:

Stats on K-V

Year-to-Date Stock Return (47.8%)
Market Cap $79 million
1-Year Revenue Growth (82.1%)
1-Year EPS Growth NM
Short Ratio 23.6%
CAPS Rating (out of 5) ***

Source: Yahoo! Finance, Google Finance, NM = not meaningful, as the company was not profitable one year ago.

Lack of leadership
The year ended with CEO Greg Divis ranked No. 2 on our Worst CEOs list. How did he get there?

Well, it all started in February, when the company got approval for the use of Makena -- it's new drug developed with Hologic (Nasdaq: HOLX  ) that prevents pre-term births. The possibilities seemed endless for the company, and the stock absolutely took off, gaining over 700% in just over one month!

K-V Pharmaceutical Stock Chart by YCharts

And then, with the good will of the medical and investment community pushing it forward, Divis decided to make one of the worst PR decisions in recent history: pricing Makena at an eye-popping $1,500 dollars per dose, when it was previously compounded by doctors for as little as $15.

Not content to have raised the ire of the public, the company tried to argue that it had exclusive rights to the pre-term birth treatment. The FDA promptly announced that it'd be allowing doctors to use the previous combination of drugs that ran for $15 in order to avoid the heavy costs associated with Makena.

The threat of congressional intervention even surfaced. In May, AVANIR (Nasdaq: AVNR  ) was forced to justify the price of its Neudexta to elected officials. Many thought at the time that Dendreon's (Nasdaq: DNDN  ) Provenge, Bristol-Myers Squibb's (NYSE: BMY  ) Yervoy, and K-V would be the next targets.

Make no mistake, some company is bound to make money off of sick or dying babies, but the 10,000% jack-up in price paints capitalism in just about the worst way possible. That's a stain that'll be tough for K-V to ever remove.

Just look at how the rest of the year has gone since the announcement.

K-V Pharmaceutical Stock Chart by YCharts

Clearly, looking toward 2012, there are better options out there for you than K-V Pharma. I suggest you take a look at our special free report, The Motley Fool's Top Stock for 2012.

Inside, you'll learn about a company that has all the greatness of Costco, but is laying down roots in the fast-growing economies of Central and South America. Get your report today, absolutely free!

Boston Scientific at a Crossroads: The Case For Bowing Out (Part 2 of 2)

In Part 1, I discussed some of the unfortunate events that led to Boston Scientific (BSX) falling from its once-lofty position alongside Medtronic (MDT), Johnson & Johnson (JNJ) and other major med-tech players. Through a mix of mismanagement, excessive appetite, and competitors' successes, Boston Scientific has found itself languishing for years.

Now, though, the company appears to be serious about change. Company-wide restructurings are underway, the company sold its once-promising neurovascular business to Stryker (SYK), and both management and investors await what they hope will be successful new product launches in the coming years. While all of this is taking place, though, there is a steady drumbeat in the rumor mill that Boston Scientific will not be independent for long.

In this section I mean to examine what the buyout environment for Boston Scientific could be like and who could be interested in this company.

Who Might Step Up?

Rumors about Boston Scientific selling out are widespread, and have been for quite a while. Clearly there is still some value in the company's portfolio of assets and if current management cannot harvest that, somebody else will.

Johnson & Johnson is the most commonly named candidate to acquire Boston Scientific. Clearly the deal would make a certain amount of sense – JNJ wanted to get into cardiac rhythm management (CRM) years ago (but wisely refused to outbid Boston Scientific for Guidant). The acquisition of Boston Scientific would not only serve that goal, but would re-energize JNJ's faltering stent business and boost the company's efforts in areas like endoscopy and urology, while adding businesses like neuromodulation and cardiac surgery.

Would JNJ do this deal? The company was apparently willing to pay $11 billion or so for Smith & Nephew (SNN) and Johnson & Johnson could certainly afford more for BSX. But does JNJ want another “problem child” when it already has so many challenges of its own? At a minimum, it would be a bold move, but it could really add some life to JNJ.

Who's Next?

Here is the problem with the “Boston Scientific is going to get bought” idea – after Johnson & Johnson, there really is no obvious candidate. Medtronic may want to increase its presence in the drug-coated stent market (the Endeavor is basically an also-ran) and may value some of the other parts of BSX's business, but there would be massive antitrust issues from the CRM overlap. And while Medtronic may be strategically comfortable with the idea of jettisoning the BSX CRM business to a third party, these kind of three-part deals are tricky and relatively uncommon.

The only other really credible candidates would be Abbott (ABT) or Covidien (COV). A deal with Abbott would offer much the same problem as a Medtronic merger, only with the stent business as the antitrust concern. In fact, Abbott got a huge boost into the drug-coated stent business years ago when BSX had to allay antitrust concerns over its purchase of Guidant and sold assets and IP to Abbott. That said, Abbott has been a savvy and opportunistic acquirer over the years and it would be a high-potential move for a company that has some growth concerns of its own to address over the next few years.

As for Covidien, it is a long-shot but a credible one. Covidien has already shown that it is willing to take on the challenges of acquiring companies that have stumbled but still own promising technology. That said, Covidien may find it needs more time to digest what it has already acquired before taking on such a large task. Still, Covidien says it wants to move into higher-margin and higher-value products, and this is one major way to do it.

If Covidien is a long-shot, there are a few other possible wild card bidders. Roche (RHHBY.PK) would seem to have enough challenges getting its diagnostics and life sciences businesses back in order, to say nothing of reassuring investors in the wake of the Avastin setbacks. Philips (PHG) and Siemens (SI) seem content to stay focused largely on the “big iron” markets of healthcare.

Danaher (NYSE: DHR) and 3M (NYSE: MMM) could be the other relevant dark horses. Both have larger healthcare businesses than investors commonly realize and the means to do a deal. In that regard, though, 3M is probably the better bet. Danaher is only about three times the size of Boston Scientific (in market cap terms, in revenue terms Danaher is only twice as big). Not only does Danaher have the not-inconsiderable task of integrating and rehabilitating Beckman Coulter (BEC), a deal for Boston Scientific would be incredibly destabilizing to Danaher in terms of its business and market mix.

For 3M, though, the company would have to face the possibility of analysts and investors going berserk. 3M sells products like stethoscopes, orthodontic supplies, and surgical masks and there would likely be skepticism in abundance about 3M's ability to handle high-ASP, R&D-intense product lines.

Private Concerns

If Boston Scientific were to get a buyout offer, private equity might actually be the likeliest bidder. It is easy to get excited about the margin potential of products like the Promus Element as well as corporate efficiency drives that could reap literally hundreds of millions of dollars in savings. That is music to the ears of private equity investors.

It is hard to see what else a private equity buyer could do for Boston Scientific, though. Management seems to be aware of the levers it can pull to improve the business, so it really comes down to time and market sentiment. If BSX management cannot deliver encouraging early returns on its restructuring and/or the Street fails to show sufficient appreciation, a well-heeled private equity group may just make a move.

What Would A Deal Take??

On its own, if things go right, Boston Scientific could be worth twice as much (or more) in five years' time from a combination of revenue growth, margin improvement, and multiple expansion. It seems extremely unlikely, though that a strategic bidder would offer something close to that sort of largesse – a 40% premium (similar to what Beckman received) might be the most that Boston Scientific and its shareholders could realistically expect.

What Should Boston Scientific Do?

Whether or not Boston Scientific should take a bid is of course dependent on a bid being made. If the rumors ultimately prove to be true, investors will have a tough decision – take what is likely to be a 30-50% premium to the current price, but a guaranteed premium, or hope that the company can at long last deliver on its promise. That's no easy question and the “right” answer has a lot to do with each investor's goals and expectations. On balance, though, it may be hard to turn down a premium bid; particularly when the company in question has so much work to do to rebuild shareholder value.

Disclosure: I am long RHHBY.PK, MMM.

Netflix: From A Bear To A Bull

I can’t resist a half-off sale, and I have learned that being greedy does not work on Wall Street. That is why I covered my short and went long. It is funny how just a month ago, everybody could not get enough Netflix (NFLX) at $300, but won’t touch it with a 10-foot pole now that it’s half that price. I loved the company at that point, but hated the stock. Now that love for the company’s fundamentals has turned to indifference, but my loathing for the stock price has reversed, to infatuation.

10 Things I Think About the Wikipedia Blackout

The House and the Senate are working up anti-piracy bills, respectively code-named SOPA and PIPA. If passed in their original forms, these measures would fundamentally change the structure of the Internet, making online publishers utterly responsible for anything their users might say or do. In a fully SOPA-fied future, posting a link to copyright-infringing material in the comments to this story could lead to The Fool going offline for weeks while the courts figure out what happened.

This frame, used with permission from XKCD, illustrates the futility of regulating the Web. He'll be up all night.

That's how the Wikimedia Foundation sees it, anyhow. To protest the twin bills, the foundation has taken the English version of Wikipedia offline on Wednesday, showing lawmakers exactly what they're asking for. Rather than crowdsourced overviews of white blood cells and the economy of Nepal, now you get a black page with a handy form to find your local Congress members and file a complaint.

With mild apologies to David Letterman, here are the top 10 things I think about the Wikipedia blackout:

  • Way to fight fire with fire, Jimmy Wales! If this works, will you follow up with blackouts in protest of copyright and taxes?
  • Why not just learn Spanish or Mandarin in case the English Wikipedia goes dark again? Rosetta Stone must love that idea as anything that raises interest in language learning surely must be good for the company.
  • Speaking of languages, "sopa" is the Swedish word for "sweep" or "trash," while "pipa" means "pipe." Do the lawmakers know Scandinavian languages, and what were they smoking?
  • SOPA creates community. How else could you get Wikimedia, Google, Facebook, Yahoo!, and Twitter all working toward a common goal? All of them have threatened to go dark in protest, though Wikimedia was the most committed to the cause. Google just slapped a big, black bar over its logo today, offering a less intrusive protest link. Yahoo! did nothing.
  • Oh, but then again, Wikimedia is a nonprofit organization, while the others are all trying to run a business. Would it be too much to ask Google and Yahoo! to sacrifice at least a couple of hours of search-service profits, like in the middle of the night? There's a principle at stake here, folks!
  • And speaking of principles, Wales follows up his controversial fund-raising campaign by� keeping the money and not doing business for a while. Really?
  • Peaceful resistance worked for Mahatma Gandhi. But he was just fighting the British army, not the all-powerful MPAA and RIAA media empires.
  • On the upside, Wikipedia going black means we don't have to fear that terrifying Chuck Norris-like gaze at the top of every page for 24 hours. You win some, you win some.
  • The campaign seems to have missed its target a bit. Judging by the trending topics on Twitter, people just remembered that research can be done without Wikipedia. Google's action seems to resonate, however: Two phrases from its anti-SOPA pages are in the top 10 Twitter trends today.
  • It looks like drastic action is less helpful than a measured response that keeps the lights on. Shutting down your main service just makes people angry. Who knew?
  • Will the Internet explode in a white-hot fireball without Wikipedia? Should the foundation have hit the brakes given that officials want to take the sting out of SOPA and PIPA? Has anybody learned anything important today? Add a basket of important Internet companies to your watchlist and check back again on Thursday -- if you still can.

    Senate OKs $1T Budget Bill, Payroll Tax Cut


    WASHINGTON (AP) � The Senate voted Saturday to temporarily avert a Jan. 1 payroll tax increase and benefit cutoff for the long-time unemployed, forcing a reluctant President Barack Obama to make an election-year choice between unions and environmentalists over whether to build an oil pipeline through the heart of the country.

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    The action set up a Monday vote in the House, where many GOP lawmakers told their leaders they are ready to reject the measure. With the still-reeling economy serving as a backdrop, the Senate's 89-10 vote belied a tortuous battle between Democrats and Republicans that produced the compromise two-month extension of the expiring tax breaks and jobless benefits and forestalled cuts in doctors' Medicare reimbursements. Senate passage capped a year of divided government marked by raucous partisan fights that tumbled to the brink of a first-ever U.S. default and three federal shutdowns, only to see eleventh-hour deals emerge. It also put the two sides on track to revisit the payroll tax cut early next year as the fights for control of the White House and Congress heat up. However, House GOP leaders held a conference call Saturday with rank-and-file lawmakers in which participants said strong anger was expressed about the Senate bill, including its lack of House-approved cuts in last year's health care overhaul law and its failure to erase the reductions in doctors' payments for more than two months. "You can't have an economic recovery with this," said Rep. Jack Kingston, R-Ga., said of the bill "If the Senate is incapable of doing that, we don't have to accept it." A House GOP aide said afterward, "Members are overwhelmingly disappointed in the Senate's decision to just 'kick the can down the road' for two months.' By 67-32, senators gave final congressional approval to a separate $1 trillion bill financing the Pentagon and scores of other federal agencies through next September. That measure avoided a shuttering of government offices that otherwise would have occurred this weekend when temporary financing expired.

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    The tax legislation delivers tax cuts and jobless benefits that some Republicans opposed. It also represents a rebuff of Obama's original demands for a yearlong payroll tax reduction for 160 million workers that was to be even deeper than this year's cut, extended to employers and paid for by boosting taxes on the highest-earning Americans.

    The measure's $33 billion price tag will be paid for instead by raising fees that government-backed Fannie Mae and Freddie Mac will charge to back new mortgages or refinancings, beginning next year. When fully phased in, those increases could cost a person with a $200,000 mortgage about $17 a month.

    Despite the changes, Obama praised the Senate for passing the bill and prodded the Republican-run House to give it final approval in a vote, which has been expected early next week. He exhorted lawmakers to extend the tax cuts and jobless aid for the entire year, saying it would be "inexcusable" not to. "It should be a formality, and hopefully it's done with as little drama as possible when they get back in January" from their holiday recess, he said. The Senate adjourned for the year after its votes Saturday. While Obama and Democrats used the fight to portray themselves as defenders of beleaguered middle- and lower-income people, Republicans used it to cast themselves as champions of job creation. Headlining that was a provision they inserted forcing Obama to make a decision within two months on whether to allow construction of the proposed 1,700-mile Keystone XL pipeline, which is to deliver up to 700,000 barrels of oil daily from tar sands in Alberta, Canada, to refineries in Texas. The language requires him to issue the needed permit unless he declares the pipeline would not serve the national interest. Unions have clamored for the thousands of jobs the project could create. Environmentalists have decried the huge amounts of energy it would take to extract the oil. Obama originally announced he was delaying a decision until 2013, which would have allowed him to avoid choosing between two Democratic constituencies before Election Day next November.

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    When the House inserted the language into its version of the payroll tax bill this month, Obama said he would "reject" the legislation if it retained the Keystone provision. He abandoned that stance this past week as GOP leaders said they would insist on keeping the Keystone language and the final deal jelled.

    "The only thing standing between thousands of American workers and the good jobs this project will provide is a presidential decision," said Senate Minority Leader Mitch McConnell, R-Ky.

    An administration official said Friday that Obama would almost surely refuse to grant the permit, a stance echoed Saturday by congressional Democrats. "We feel we're giving them the sleeves off a vest," said Sen. Charles Schumer, D-N.Y. Democrats said when Congress revisits the issue of renewing the tax cuts and jobless benefits early next year, they would win the political battle because they would be viewed as protecting peoples' household budgets. Republicans, though, said they would once again focus the fight on jobs, with some predicting they would try adding provisions to repeal pollution curbs and other government regulations that they say make it harder for companies to hire people. "There are lots of issues Republicans are interested in as job creators that will still be alive in March," said Sen. Roy Blunt, R-Mo. The tax bill would renew this year's 4.2 percent payroll tax through February, preventing the rate from bouncing back to its normal 6.2 percent on New Year's Day. Obama pushed that cut through Congress a year ago as a way to help spark the economy by leaving more money in people's pockets. A $50,000-a-year wage earner would save about $170 during next year's first two months under the bill the Senate approved Saturday. Obama had proposed reducing the payroll tax employees pay to 3.1 percent next year. The levy is the chief source of revenue for Social Security.

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    For two more months, the tax measure would also continue current jobless benefits that provide a maximum 99 weeks of coverage for people who have been out of work the longest. Without any extension, the White House said, 2.5 million people would have lost coverage by the end of February.

    The bill also prevents a 27 percent cut in Medicare reimbursements for doctors that might have induced some to stop treating the program's elderly beneficiaries.

    The spending legislation carries out budget cuts across government that Republicans won earlier this year and includes GOP provisions blocking energy efficiency and coal dust requirements. Democrats fought off Republican language that would have blocked limits on greenhouse gases and hazardous emissions from utility plants and other sources. ___ Associated Press writer Andrew Taylor contributed to this report.

    >To order reprints of this article, click here: Reprints « First ‹ Previous 1 2 3 4

    Three Dividend Stocks to Capitalize on BP’s Weakness

    The woes of BP’s oil spill are making national headlines these days. After several unsuccessful attempts at capping the oil spill, British Petroleum(BP) is still unable to stop the oil from flowing into the water. With liabilities expected to reach several billion dollars, investors have been selling off BP’s stock, which has caused it to decline over 30% from its highs in April. Many investors are now wondering whether now is the time to capitalize on the weakness in BP’s stock price and purchase the stock at a discount.

    On the positive side, the company earned $16.5 billion in 2009, or $5.28/share. It earned $1.92/share in the first quarter of 2010, which was more than enough to cover its quarterly dividend of $0.84/share. With a dividend yield of 9% and a Price/Earnings ratio of 6, the company definitely looks attractive. The main issue here is the total liabilities that the company would have to incur in order to clean up the mess from the oil spill. If hurricane season is especially intense this year, the environment of the whole Gulf of Mexico region could be severely affected. This could make it very expensive to clean up the oil spill mess. With all the uncertainty around, analysts are forecasting either the implosion of the company or a takeover of BP. Given the company’s strong cash flow generation however, BP should be able to shoulder the costs financially. The main problem is the damage to its reputation.

    At the same time other quality oil companies have gone down in tandem with BP, falling oil prices and falling equity indices worldwide. If investors are not willing to take the company specific risk of BP, they could look elsewhere to purchase quality oil companies at a discount. Three dividend growth oil stocks which look attractively priced at the moment include Chevron (CVX), Exxon Mobil (XOM) and Royal Dutch Shell (RDS.B).

    Exxon Mobil Corporation is a manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a range of specialty products. It also has interests in electric power generation facilities. This dividend aristocrat has raised dividends for 28 consecutive years. The stock yields 2.90% and trades at a P/E of 14. (analysis)

    Chevron Corporation manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to United States and international subsidiaries that engage in fully integrated petroleum operations, chemicals operations, mining operations, power generation and energy services. This dividend achiever has managed to boost distributions for 23 consecutive years. The stock trades at a P/E of 11 and yields 3.90%.(analysis)

    Royal Dutch Shell is engaged worldwide in the aspects of the oil and gas industry and also has interests in chemicals and other energy-related businesses. The Company operates in three segments: Upstream, Downstream and Corporate. This dividend stock has raised distributions since 1993. The stock yields 6.40% and trades at a P/E of 11. (analysis)

    For enterprising investors looking for a bargain, BP stock might look like the ultimate value play. That being said, investors should do well over time with a lower amount of risk by allocating their capital to other oil companies. My personal favorite is Chevron, with its adequately covered dividend payment, above average yield and low price/earnings ratio of 11. I also like the dividend growth prospects of Chevron as well, which makes it my top oil pick.

    Full Disclosure: Long BP, CVX, RDS.B and XOM

    Expect Apple to Lead Tablet Race Too

    The race to be king in the tablet PC market is heating up. Hewlett Packard (HPQ), Dell (DELL), Lenovo (LNVGY.PK), Sony (SNE) and Samsung (SSNLF.PK) have all displayed their tablet PC offerings at the 2010 Consumer Electronics show. Microsoft (MSFT) is expected to release a courier tablet PC within the next few months. All of these companies are competing to be the first to market in the sizzling hot tablet PC market. The game changer however is expected to be Apple’s (AAPL) “iSlate” tablet PC expected to launch in the next few weeks.

    The tablet PC market is important because it is seen as the next major growth market in computer hardware. Tablet PCs are smaller, more portable devices than netbooks. Netbooks are still relatively new devices and are expected to surpass 14 billion in sales next year. The tablet market is expected to take in over 5 billion dollars in revenue in its first year. That’s impressive. Tablet sales could increase profits significantly for many tech firms. Now you can see why tech firms are scrambling to be the first to market with their tablets.

    The reason that I think that Apple’s iSlate will fare the best is because of Apple’s recent history with its product offerings. From the iPod to the iPhone to the iMac, Apple has wowed consumers with its innovation in product development. Apple products always seem to possess unique features that differentiate their products from competitors. Consumers have ponied up the cash for Apple’s niche products even during the recession of the past few years. I don’t expect this year to be any different.

    Piper Jaffray analyst Gene Munster estimates that Apple could add over 1.2 billion dollars in revenue in year 1. That’s a 3% increase in revenue from tablet PC sales alone.

    While the tablet market is large enough for many players to get a piece of the pie, expect Apple to outperform competitors as they have done in the past. I wouldn’t chase Apple’s stock at its current price of $210 per share but I would be a buyer on a pullback to $185.

    Thursday, September 27, 2012

    Why Is Buffett Buying Shares of Iron Mountain, Fiserv?

    Warren Buffett used to say that he never invested in technology companies because he doesn’t understand them. That doesn’t mean that his holding company, Berskhire Hathaway (BRK.A), doesn’t invest in information technology companies. Recently, Buffett’s company has had an appetite for information services companies. These investments were probably made by Charlie Munger or Lou Simpson.

    He now owns 8 million shares of Iron Mountain Inc. (IRM) which provides information management services to IT companies. The company offers document management, data protection, destruction services, and records management services. Iron Mountain is one of the companies on the cutting edge of cloud computing. Buffett also owns 4.4 million shares of Fiserv (FISV). Fiserv offers information management services and electronic payment processing solutions to its clients.

    So, why is Buffett buying shares of both of these companies?

    It’s simple really. Both companies are classic Buffett investments. Fiserv and Iron Mountain both generate large amounts of free cash flow. Fiserv generates $970 million dollars in free cash flow and Iron Mountain has $630 million dollars in free cash. Both companies have similar balance sheets with $300 million in cash and $3 billion dollars in long term debt.

    Both companies had straight years of sequential revenue growth until last year. The economic crash of 2009 hit the service revenues for both companies as clients ratcheted down capital spending. Iron Mountain had nine straight years of revenue growth before last year. Fiserv had a streak of consecutive earnings growth until the company had its first revenue drop in 2009.

    Fiserv trades at 12.5 times earnings which is right in line with the historical growth rate. Iron Mountain trades at 17.5 times earnings which is slightly higher than the 13.6% historical growth rate. Neither company could be classified as a steal or as expensive. Both companies appear reasonably valued. They trade at PEG ratios close to 1.

    E-commerce is the present and future of business. The market is still in its infancy and has great growth potential. E-commerce sales are currently 7% of all United States retail sales and are expected to hit $170 billion dollars this year. Berkshire Hathaway’s investments in both firms are clearly designed to benefit from this emerging trend.

    17 Cheap Dividend Aristocrats On Sale

    As part of my dividend retirement plan, I add new money to my portfolio every single month. I have found that purchasing dividend stocks with growing dividends, reinvesting these distributions selectively and adding new capital consistently is the key recipe for success that will help me reach the dividend crossover point.

    I determine which stocks to purchase based on portfolio weights and valuation. I typically use the dividend aristocrats index as a starting point in my research, since it includes quality names that have boosted distributions for over 25 years in a row.

    Using the dividend aristocrats index, and my entry criteria, I came up with the following screen:

    1) Price/Earnings Ratio of less than 20

    2) Dividend yield exceeding 2.50%

    3) Dividend Payout Ratio of less that 60%

    The following companies are just ideas for further research. Before committing money to new ideas, I typically do an analysis of the company, where I look for the following pieces of information:

    1) Ten year trends for earnings, dividends, returns on equity, dividend payout ratios and stock prices
    2) Qualitative information such as competitive advantages, strong brands and understanding the business

    In addition, I also attempt to gauge whether the companies will be able to generate future growth. Identifying drivers for future growth often requires a fair degree of guesstimation. After all, without earnings growth, future dividend growth will be hard to come up.

    Many of the companies listed above will grow thanks to the rise of the middle class in emerging markets such as Brazil, Russia, China and India. Others will grow by becoming more efficient in their operations, gaining market share or innovating their way to increased profits. While not terribly exciting, reading annual reports, analyst reports and familiarizing yourself with each company could literally pay dividends in the long run.

    Full Disclosure: Long AFL, APD, CL, CLX, EMR, ITW, KO, MCD, MDT, MMM, PEP, SYY, WAG, WMT

    GNC Is a Healthy Stock Buy

    Last May, GNC Holdings (NYSE:GNC) launched its initial public offering. Although this IPO didn�t generate quite as much buzz as last year�s big internet IPOs like Groupon (NASDAQ:GRPN) or Pandora Media (NYSE:P), this stock was one of last year�s biggest success storeis�appreciating almost 140% in the past 12 months.

    But recently the stock consolidated after the FDA moved to block the marketing of an ingredient used in several of the company�s nutrition supplements. Let�s review this company and see if it still has upside potential after this development.

    Company Overview

    GNC, which stands for General Nutrition Centers, is the third-largest drug store chain in the industry. The company specializes in weight loss, bodybuilding and nutritional supplements but also stocks vitamins and natural remedies for a variety of ailments. Based in Pittsburgh, Pennsylvania, the company has over 7,300 locations worldwide and brought in over $1.8 billion in sales in 2011.

    Earnings Buzz

    GNC Holdings announced its first-quarter operating results at the end of April. Compared with the same quarter last year, net income surged 545% to $63.9 million. Adjusted earnings weighed in at 60 cents per share, which topped the 52 cents consensus estimate by 15%.

    Over the same period, consolidated sales jumped 23% to $624.3 million; analysts forecast $587 million in sales, so the company posted a 6% sales surprise. The company has also upwardly revised its 2012 earnings guidance to $2.05 per share and its sales guidance to $2.37 billion. This tops the Street view of $2.31 billion in annual sales.

    FDA Warning

    After the stunning first-quarter earnings announcement, shares of GNC climbed to a new high, but a few days later the stock consolidated after the FDA warned GNC and nine other companies about the use of an ingredient called DMAA.

    In a nutshell, the FDA asserts that DMAA cannot be the primary ingredient in nutritional supplements because it hasn�t been properly tested and it may lead to heart and nervous system problems. Although shares of GNC dipped slightly on this news, analysts say that this should not set the company back because GNC only derives about 2% of its total sales from DMAA products.

    So, while GNC would do well to comply with all FDA regulations, this shouldn�t impact the company�s top or bottom lines too much.

    Current Ratings

    Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. Because GNC Holdings Inc. has now been publicly traded for a little over a year, this stock was added to my Portfolio Grader system in March.

    Since then, the stock has maintained its A-rating, thanks to solid fundamentals and stellar buying pressure. The company is especially strong in terms of earnings growth, earnings momentum, analyst earnings revisions as well as return on equity.

    GNC is also doing well in terms of sales growth, operating margin growth, and its track record of beating analyst earnings estimates. The only real area of improvement is cash flow, so this stock receives a B-rating for its overall Fundamental Grade.

    That, paired with an A for its Quantitative Grade, makes this an A-rated stock.

    Bottom Line: GNC is an all-around solid company; this is an A-rated buy.

    Recommendation: A-rated Buy

    Sound Off: What do you think about GNC? Are you a buyer at current prices? Let me know what you think by posting on our wall on Facebook

    Fabulous Fourth Quarter Boosts Best Buy

    Best Buy (BBY) is the undisputed market leader in consumer electronics retail, and they reported fiscal fourth quarter results above estimates for the period that includes the end of the holiday shopping season. The results were better than analysts’ expectations on both sales and profits. Net income rose to $779 million or $1.82 per share ahead of analysts’ estimates by 4 cents and up substantially from last year’s $570 million or $1.35 per share. Sales in the quarter were better across the board rising 12% overall, and 7% in comparable store figures. International growth was a highlight of the quarter as sales rose 15% (5% on a constant currency basis) with China being particularly impressive with a 34% increase, and international same store sales jumped 5.5%. The top-line figure was $16.6 billion, which is $500 million stronger than consensus Wall Street estimates, largely because of the strong performance overseas.

    While international sales a key driver of Best Buy’s growth, they also increased market share in the United States as it continues to reel-in shoppers that might have otherwise gone to now bankrupt Circuit City. Shoppers spent more on average, but margins were squeezed a little bit from sales of lower margin products such as notebook computers and pricing pressure on flat screen TV’s. In the quarter, gross margins slipped about 60 basis points to 24% even as selling, general and administrative expenses dropped 70 basis points. However, the overall performance of the company has propelled the stock to a more than 8% gain in morning trading, despite the slip in margin.

    Further helping the stock is managements better than expected outlook for fiscal 2011. They have come out with earnings guidance of $3.45 to $3.60 on sales of $53 billion, and same store sales gains of 1% to 3%. This topped Wall Street’s view of $3.37 in earnings on sales of $52.2 billion. The company has reinstated the $2.5 billion share repurchase plan that it had suspended when the market environment was less hospitable.

    Based on the recent performance of Best Buy and their optimistic outlook for the year ahead, we think the stock remains cheap even after the rally today and we are reiterating our Undervalued stance. In my opinion, this company’s market leading position in consumer electronics and its international growth should warrant a premium over its historical valuation in the market; however, the opposite is actually true as it trades at a discount to historical valuation ranges. For example, over the last ten years BBY has traded for price-to-cash earnings of 9.2x to 18.7x, but the current valuation is only 8.5x. Similarly, on a price-to-sales basis BBY has normally traded for .43x to .83x, but based on sales figures from the year that just ended, the current metric is only .37x. So, we believe the market will return to more historically normal valuations for Best Buy given its strong execution and projected growth in the coming year, which makes our expected price range of $46 to $60 per share.

    Original post

    Find out about Pipe Marking

    Are you aware that there's a range of pipe markers accessible to fit your many application needs? Self-Adhesive Markers are vinyl pipe markers that are so easy to put in, just peel the back again layer off and stick right onto the pipe. These markers are ideal for indoor or outside pipes which have been clean and dry. Snap-Around Markers preserve you time on installation seeing that you do not actually have to completely clean the pipes before you “snap” them on. These pipe markers are good for grimy, oily, greasy and rough-surfaced pipes, indoors or out. High performance Markers are markers that can be in particular built to withstand the cruel outside environments. These pipe markers resist graze, chemical substances, enormous humidity and outside weather conditions and thus are glorious for dirty, oily, greasy and rough-surfaced pipes such as stainless-steel.

    1 imperative portion of the ANSI Common A13.1-2007 for pipe markers recommends a predetermined shade scheme. This secondary bit of pipe identification has for a while been specifically revised from the newest 2007 revision on the typical. This portion on the classic has altered seriously. What’s more, the language of intrinsically dangerous or non-hazardous is eliminated thru the standards. The mix of Yellow/Black is now allotted with combustible liquids, and Green/White shall now identify drinkable, cooling, boiler feed with other waters. These 2 adjustments suggest that legends these as scorching h2o, cold drinking water and steam will now all use the shade code of Green/White.

    Other crucial coloration enhancements are comprised of the addition of Brown/White for flamable liquids and Orange/Black for deadly or corrosive fluids. To represent fire slaking fluids, the color code of Red/White shall be used and for Compressed Air, the colour code of Blue/White will probably be compliant using this conventional. The truth that the standard has identified specific shades for inflammable liquids, combustible fluids and poisonous or corrosive fluids implies it’s critical to consult Material Security Info Sheets (MSDS) ahead of picking a shade. Even more, when the pipe content material includes many perils (combustible and deadly) it'll need to be determined which poses the greater risk and marked accordingly. To illustrate, if chilled or heating methodologies incorporate poisonous treatment possibilities the coloration combination needs to be Orange/Black.

    The 2007 standard also identifies for the 1st time 4 increased utilized determined shade mixes and in particular identifies every one of the specific qualifications colors to get employed. The exact colors are safety shades contained while in the ANSI Z535.1-2007 traditional. At long last, to solidify your compliance when pipe marking a facility, the normal gives you pipe marker visibility suggestions. The standard suggests that the pipes shall be marked opposite to all valves and flanges at the same time at both equally sides with the floor or wall penetrations. What’s more, pipes shall be marked adjacent to changes in directions and each single 25 to 50 intervals on straight runs.

    Obtaining pipe marking compliance is straightforward. If you're prepared to begin your up coming project or upgrade your older and worn markers, see Seton for your preferences. Our staff of experienced pipe marking pros are standing by to help you and have the many specs and substances you are going to need to get the profession finished appropriate; nicely while also remaining compliant.

    Are you looking high and low for a pipe markingor more on 5 s marks? Visit Charcy Denifson’s website on the double for more stories now.

    5 Steps to Keep Estate Plans Up to Date

    Family life usually starts out happy, but much can change.

    The tumult of the current tax season is winding down, but advisors can provide a valuable additional service to their wealthy clients by encouraging them to closely review their estate plans to ensure these are up to date.

    Estate plans are valid at the time they are signed, but sometimes years or decades pass before they come into play and circumstances change: assets grow or retract, designated trustees die, family members have falling-outs.

    Keeping estate plans current is essential to protecting clients’ families and their assets, Blooma Stark, an attorney with Aronberg Goldgehn Davis & Garmisa, said in a telephone interview with AdvisorOne.

    Stark noted that accountants are often the advisor clients see most often—at least once a year—and so are well positioned to recommend an estate plan review. In contrast, clients may see their attorneys only at wide intervals. She said she had just spoken with a client who had prepared an estate plan 20 years ago, and only recently realized she needed to update the plan.

    Stark listed five estate plan areas to which advisors can direct clients’ attention for review. Doing this now “can save a lot of time and aggravation down the road,” she said.

    1. Review Documents

    It’s essential that a client’s estate plan documents align with his or her current situation. Often a review will show one or more of these need to be updated, Stark said. Especially important are the will, power of attorney, living will and trust.


    2. Determine Familial Situation

    Clients should assess whether their relationships with people they’ve named as guardians, executors, trustees or agents under a power of attorney are in good standing. If not, they will need to appoint others to fill those roles.


    3. Assess Sub-Trusts

    Children grow up, and often their adult circumstances are different from those envisaged at the time the client formulated the estate plan. They may now have children of their own, requiring the arrangements of trusts to be changed. For example, Stark said, clients may decide that their children are sufficiently wealthy not to need to be direct beneficiaries and so execute a generation-skipping trust to ensure their grandchildren will be well provided for.


    4. Update Schedule of Assets

    A critical issue clients often overlook or are unaware of is that an asset such as a second home does not automatically become part of their trust; the asset must be transferred to the trust during their lifetime. Failure to do this will likely result in probate costs that can escalate. (Photo: AP)


    5. Evaluate Changes in Estate Tax Law

    Depending on the net worth of the client’s estate, changes in the law may make it advisable to change estate plan documents. This year is a prime example, when so much is up in the air about the so-called Bush tax cuts. In 2013, for example, the estate tax exemption of $5 million could drop to $1 million, or some figure in between; nobody knows. Stark, like so many others who advise wealthy clients, said she has given up trying to crystal-ball what will happen next year. She is advising her high-net-worth clients to make gifts this year to take advantage of the current exemption.

    Naked Puts Bring Reward and Risk

    This article originally appeared on Traders Reserve.

    If you�ve ever bought a put option, you know how to make money from falling stocks.

    But some of the most-successful traders use puts to profit when a stock is standing still � or even going up.

    In fact, instead of using cash (or margin) for every trade, they get paid to make bullish bets with puts.

    Call buying isn�t always the best option play for stocks with upside potential. One big reason why is that option buyers lose money four out of five times. Here�s how you can increase your chances of being that one out of five who win consistently.


    A Better Way to Boost Your Income

    Buying puts can get expensive in a bear market or bear rally. The benefit, however, is twofold: It gives you a way to safely play down-trending stocks, and rough markets can cause premiums to surge.

    Yet, you shouldn�t reserve puts for an escape plan when the market goes haywire. Quite the contrary — they can reward you, sometimes even handsomely, during volatile conditions and even those long, boring stretches that happen altogether too frequently.

    So, why not buy a call if you think a stock is ultimately going up? Because selling the put means instant gratification in the form of income in your pocket the moment you initiate the trade � money that is yours to keep.


    Buy Into Selling Puts

    A short put — also known as a naked put, or a put-write — is actually a bullish tool. The advantage to selling puts over buying calls is evident in the math: The odds of winning are significantly increased.

    Recent studies show that 80% of long options expire worthless while sellers reap all the benefits of those losing trades. Would you rather take the four-out-of-five shot of making the wrong trade, or join the one out of five who get it right almost every time?

    Many professional traders use the short put strategy to buy stocks at prices they want. Nobody wants to pay Google or Apple prices to own shares, but when the stocks pull back — and stocks always pull back — the market helps you to get in at a better price.

    But what if you don�t want to buy the stock? Don�t sell puts on stocks you wouldn�t want in your portfolio. You will get taken out of the trade if the stock rises beyond your option�s strike price, and those are the kind of stocks you probably want to own!

    This is always the risk with short puts, but it�s hard to call it a �downside� when you end up owning a good stock at a great price. Besides, even if you are assigned to take possession of the shares, you can always sell them on the open market. In fact, you can often get out for a better price and, thus, a profit � and repeat the strategy, if you choose.

    Better yet, if the stock goes up and your put gets assigned (i.e., you take delivery of the shares), just sell a covered call against the shares and you�ve found another way to profit in one easy step!

    That�s how you �save� a short put position that didn�t go the way you expected. But the odds are on your side that the puts will expire without value for the buyer and you will be out of the trade on expiration day with no further obligation than to enjoy the money you made.


    Become a Put Selling Pro

    The reason we want to sell the puts is for the premium collection, not to mention that we don�t have to own the underlying stock for the strategy to work. This is a great alternative to a strategy like covered calls, where you lay out a lot of capital upfront and the premium from the short calls pay you to wait for price movement.


    How to Trade the Short Put

    A) Before getting started you will want to check with your broker whether you can sell naked puts through your account. Because of the risks involved with naked selling many brokers limit these trades to certain customers and certain types of accounts.

    1. Locate companies with good products/services, strong earnings, strong technicals and are otherwise fundamentally sound.

    2.�Look at the stock�s option chain and locate the strike price closest to where the stock is trading.

    3.�Tell your broker that you want to �sell to open� the at-the-money put options. (Pick an expiration date close to the date when you�re initiating the position, such as one to two weeks or months out.)

    4.�Keep repeating the strategy for as long as it is working.

    5. If the position is working, the put will expire worthless and you are out of the trade. If the position turns against you (i.e., the stock drops by more than the premium you collected), you can buy back your puts at any time before assignment.

    One thing option sellers should always keep in mind is that, while your trade is still active, you have absolutely no obligation to remain in it. Most equities have American-style exercise, which means they can be closed or exercised at any time during the life of the trade. (Compare that to European-style exercise, which can only take place on designated days.)

    In other words, closing your non-working position before it can be assigned is entirely within your power. If the stock moves quickly, however, you may not get that chance. But if your outlook on the stock changes mid-trade, buy back your options (oftentimes this can be done for cheaper than what you collected at the outset) and move on to the next opportunity.


    For more trades, ideas and strategies, visit Traders Reserve.