Saturday, October 20, 2012

Europe Stocks Stay Up Despite Rising Yields

European stock markets were under pressure and Spanish bond yields surged to a euro-era high Tuesday as enthusiasm waned over the proposed €100 billion ($125 billion) bailout for Spain's banks.

The U.K.'s FTSE 100 index ended up 0.8% at 5473.74, France's CAC-40 closed up 0.1% at 3046.91, Germany's DAX edged up 0.3% at 6161.24 and Spain's IBEX-35 closed up 0.1% at 6522.50. The benchmark Stoxx 600 index ticked up 0.6% to close at 243.44.

Meanwhile, the Italian FTSE MIB index closed down 0.7% at 12979.69, and Greece's ASE index fell 1.4% at 489.35.

Stock markets plunged briefly into negative territory in afternoon action as the yield on the 10-year Spanish government bond leapt toward the critical 7% level. A sovereign yield level of 7% is widely considered unsustainable and has prompted bailouts of euro-zone countries, beginning with Greece. Spain's 10-year bond yield hit 6.80% while Italy's 10-year bond yield surged as high as 6.26%, its highest level this year, according to Tradeweb.

"Investors remain sceptical, and with good reason, that a recapitalization of the [Spanish] banking sector will necessarily transfer the burden of a guarantee away from the Spanish government; the potential for further credit downgrades has arguably increased," warned Ian Williams, economist and strategist at Peel Hunt.

Italy, which is the euro zone's third largest economy, came under scrutiny as investors have grown concerned that it too may need help from its European partners. A key test for Italy lies ahead, with an auction of up to €4.5 billion of three- and seven-year bonds scheduled for Thursday.

Italian banks were the biggest underperformers in the euro zone: Intesa Sanpaolo slumped 3.7% while UniCredit fell 3.9%.

In the Markets
  • Markets Pulse | Market Data Center
  • MarketBeat: Oddly, Yields Are Rising in Germany, Too
  • TomTom's Deal With Apple Maps
  • U.S. Stocks Rise
  • Asian Markets Fall
  • Rupee Falls to Near Two-Week Low

Spanish bank stocks were not punished as much as their Italian counterparts: Banco Santander fell 0.4% and Banco Bilbao Vizcaya Argentaria fell 0.2%.

Fitch Ratings downgraded Banco Bilbao Vizcaya Argentaria and Banco Santander by two notches to triple-B plus late Monday. Fitch said the move was linked to its earlier downgrade of Spain's credit rating. Fitch cut another 18 Spanish banks' long-term credit ratings on Tuesday.

However, the selloff in Spanish banks eased after the International Swaps and Derivatives Association announced that the Spanish bank bailout proposal is not likely to trigger a credit event due to subordination.

Adding to the gloom in Europe was news the Mediterranean island of Cyprus could become the fifth euro-zone country to seek help from the region's bailout funds. According to several European officials, the size of any bailout would be unlikely to exceed €3 billion to €4 billion.

Among individual stocks, shares in Dutch navigation maker TomTom increased 16.2% after it said it will provide maps for Apple's newly announced mapping service.

Defensives, such as food and beverage stocks, provided support for the pan-European Stoxx 600 gauge. Nestle rose 1.3%. Drug manufacturers also lent support, with Roche up 1.6% and Novartis rising 1.1%.

Meanwhile, E.ON was the biggest gainer out of the euro zone's blue-chip stocks, closing up 2% after being upgraded to buy from neutral by UBS.

And London Stock Exchange Group increased 1.1% after announcing that former Nasdaq OMX executive David Warren will replace Doug Webb as chief financial officer.

—Barbara Kollmeyer and Sara Sjolin contributed to this article.

This Morning: Pondering Microsoft Surface, Cheers for Oracle

Here are some things going on this morning in your world of tech:

The Street is contemplating the meaning of the “Microsoft Surface,” the tablet computer that Microsoft (MSFT) unveiled yesterday afternoon in a last-minute press conference. The device runs versions of Microsft’s Windows 8 and uses processors from Intel (INTC) and Nvidia (NVDA) for two different models. Exact timing of the tablet computers were not disclosed.

Williams Financial’s Cody Acree remarks, “We believe Surface may have one of the best chances to compete with Apple, as Microsoft has taken a more different design approach, rather than simply emulating Apple, as most other hardware vendors have done.”

Nomura Equity Research’s Rick Sherlund observed Microsoft investors may be concerned about lower margins from Microsoft selling a hardware product, but he’s not concerned. “While being in the HW business will be dampening to overall margins, this will likely add to gross profit [...] Investors may not like a lower overall margin for Microsoft, although we are more focused on the overall profit contribution.”

Microsoft shares are up 92 cents, or 3%, at $30.75 this morning.

Apple (AAPL), presumed to be in the bullseye here, has been up and down this morning, currently up 21 cents at $585.99.

What about Microsoft’s partners, who are also for the moment on the short end of the stick with Microsoft’s tablet? Shares of Hewlett-Packard (HPQ) are actually up a penny a $21.06, though Dell (DELL) is down 13 cents at $12.29.

One partner who is definitely enjoying the ride today is�Nokia�(NOK), whose shares are up 3 cents, or 1%, at $2.53.

The Surface is definitely a positive for chip suppliers Intel and Nvidia, analysts say. Williams Financial’s Acree thinks it’s possible the Intel version will be priced too high to move units very quickly, and thus boost Intel shares. But he advises Nvidia stock is a buy at the current level. And Sherlund’s colleague at Nomura, Romit Shah, writes today that a Windows tablet with an embedded keyboard and running Office “are interesting features, in our opinion, that should drive incremental revenue for Nvidia.”

Nvidia shares are up 72 cents, or almost 6%, at $13.12. Intel shares are down 3 cents at $27.39.

Speaking of Apple, in case you missed it, The Wall Street Journal’s Jessica Vascellaro and Amir Efrati�this morning write about the latest “moves” of Apple and Google (GOOG) in the smartphone market, including Apple’s coming out with its own maps product, and Google’s buying Motorola Mobility. The conclusion: “Of the about 1.4 billion phones sold this year, only about 35% will be smartphones, a percentage projected to climb to 75% in the next five years, according to research and trading firm Wedge Partners. That potential bounty is intensifying the fight to sell more devices and accompanying services.”

Google stock is up $7.33, or 1.3%, at $578.18.

Shares of Oracle (ORCL) are higher by $1.05, almost 4%, at $28.17 after the company last night reported a better-than-expected profit per share for its fiscal Q4, and projected projft this quarter slightly ahead of expectations as well. The reaction across the board seems to be fairly favorable this morning. The stock got one upgrade, that I can see, from Underperform to Outperform, at CLSA Asia Pacific Markets.

The early release of the report last night seems to have been prompted by the departure of the company’s head of U.S. sales, Keith Block, but that loss seems not to have fazed the Street this morning.

This High-Risk Oil Stock Could Deliver HUGE Rewards

Oh Argentina. Why must you frustrate us so? You're blessed with so many resources and have so much charm. Yet you can't help but alienate everyone that you come into contact with.

  Over the last century, as nations such as Japan, South Korea, Brazil and China worked diligently to join the world's top-ranked economies, you squander away your largesse. Back in 1900, you had the fifth-largest economy in the world, and citizens from Spain, Italy, the U.K. and elsewhere couldn't wait to emigrate to your beautiful cities and fertile plains. You really should be at the top of your game right now.

Your vast storeholds of untapped natural gas could make you an energy giant along the lines of Russia or Norway. Instead, you fritter way such largesse with petty internal grievances. These days, you're no longer even in the top 20, according to the International Monetary Fund, having been surpassed by the likes of Taiwan, Poland and Indonesia.

You're in the headlines once again, doing your best to damage your economy even further. But this time, you won't succeed. Despite yourself, global institutions are likely to thwart you as you move to make yet another misstep.

I'm talking, of course, about the battle of wills being pursued by Argentina's government and energy giant YPF (NYSE: YPF), which is 57% owned by Spain's Repsol. In a bid to please the segment of consumers that voted in the current Kirchner government, Argentina has begun to do an impressive imitation of Venezuela, turning tax-paying energy companies into the enemy. These companies have seen limits imposed on what they can charge consumers while paying ever-higher taxes on any profits they make.

As a result, YPF and others have done whatever any profit-making enterprise does: allocate resources into other countries where financial returns are better. So even as Argentina sits on a huge amount of energy, underinvestment has led the country to be a net importer of fuel.

(Contrast that with neighboring Brazil, which has walked a much finer line between supporting oil giant Petrobras (NYSE: PBR) while also ensuring that its broader society reaps financial gains from a coming energy production boom.)

The battle between Ms. Kirchner's government and Spain's Repsol has now come to head. And looking at YPF's stock chart, it's easy to conclude which side is winning.

Concerns are growing that in a fit of pique, Ms. Kirchner will pull off a radical stunt such as kicking Repsol out and nationalizing YPF. It (probably) won't happen. For speculative investors, it pays to watch events unfold, as potentially outsized gains may be had if I'm right.

Simply put, it appears as if the Argentinean government is bluffing, and they've taken this bluff as far as they can. Fears that YPF will be nationalized dominate the Argentinean media, with more than a few columnists noting that Venezuela's move to kick out for-profit energy firms has been a disaster for that country. PDVSA, Venezuela's national oil firm, has been mismanaged and is said to be buckling under $35 billion in debt, according to Reuters. That debt load has kept PDVSA from maximizing capital spending to deliver peak oil output.

As Reuters noted in early March 2012, "Critics say the Chavez government has not invested enough in increasing output after it fired thousands of PDVSA managers following a 2002 strike at the company. The socialist leader has built up his support by spending oil revenue on social programs."

But Argentineans, which are far more likely to be in the middle class than most Venezuelans, have little appetite for a Robin Hood-style government. Indeed, Ms. Kirchner runs the risk of alienating her voter base by pushing YPF into state hands and leading to a deeper cycle of underinvestment and higher fuel imports.

Fly Pittsburgh to Philly for $698

NEW YORK (CNNMoney) -- Right now, $118 will buy you a roundtrip ticket on the 45-minute US Airways jaunt from Pittsburgh to Philadelphia.

Starting on Jan. 8, the price of that same ticket will skyrocket to $698, according to price data on the airline's website.

Why? Southwest Airlines (LUV, Fortune 500), the only other carrier that flies the route without connections, is dropping service -- leaving US Airways as the only nonstop option for fliers who need to span Pennsylvania in a hurry.

"This should be expected," said Michael Boyd, president of Boyd International Group, an airline consulting and research firm. "It's what happens when there is less competition."

US Airways (LCC, Fortune 500) declined to comment on the fare increase. "I can tell you in general terms that pricing decisions are made based on demand and what the market will bear," spokesperson Todd Lehmacher said.

A Southwest spokeswoman said the airline decided to cancel the flight because it wasn't selling enough tickets. "Pittsburgh to Philadelphia service is being discontinued because we are not seeing the passenger demand we used to," Brandy King said.

How Southwest won the fee wars

Boyd estimates that Southwest's Pittsburgh to Philadelphia flights are only about 52% full, while US Airways flights are at 75% of capacity.

"The price increase is just a reflection of [US Airways'] new hold on that market," Boyd says. "This is the nature of the airline business."

Fare hikes are not exclusive to US Airways, of course. According to U.S. Bureau of Transportation statistics, the average domestic air fare was $356 in the first quarter of 2011, an 8.4% rise from the $328 average in first quarter 2010.

Nor is Pennsylvania the only place where airlines are reevaluating their short-haul flights. For example, Southwest has also announced it will discontinue its direct flights in Washington between Spokane and Seattle in January 2012.

Boyd added: "Albany to Buffalo was a popular route in the early '80s with 35,000 or 40,000 flyers a year. Those numbers dwindled and there are no longer any non-stop options."

In Pennsylvania, the recent change leaves travelers without a lot of good options. They could seek out cheaper flights that connect through other airports, but this could extend travel times. Delta, for example, flies the route but with layovers in Detroit and make the trip a near six-hour trek.

Or there's always driving the 300-plus miles between Pittsburgh and Philadelphia.

Correction: An earlier version misquoted Boyd as saying the Albany to Buffalo route saw 35,000 to 40,000 flyers a day. It was actually 35,000 to 40,000 flyers a year.  

3 Energy Stocks Cashing In on Liquids

Kodiak Oil and Gas (NYSE: KOG  ) recently raised $650 million to continue to fund its oil and natural gas liquids development in North Dakota. These commodities are booming right now, and Kodiak isn't the only company trying to cash in. �

Forest Oil (NYSE: FST  ) -- The company made a significant effort to expand its presence in shale plays in the third quarter, adding 174,000 net acres in liquids-rich regions. Initial well results in one of those plays, the Eagle Ford Shale, surpassed expectations and bode well for the continued emphasis that Forest is putting on liquids. Overall, the bulk of the company's capital expenditures for the quarter went toward development of the Granite Wash play, also in Texas, and the Eagle Ford.

Forest's commitment to liquids production isn't a new idea. In 2008, liquids accounted for just over 10% of production and 28% of revenue. That ratio has shifted dramatically, so that the expected liquids numbers for 2011 stand at just below 25% of production and 54% of revenue. This is the sort of forward thinking that small oil and gas companies need to possess in order to survive the current environment of basement-level natural gas prices.

  • Add Forest Oil to My Watchlist.

Continental Resources (NYSE: CLR  ) -- The company is a big player in what is perhaps the best-known oil shale in the U.S. right now. I'm talking about North Dakota's Bakken field, of course. Continental boosted its production there 27% over the second quarter of this year.

Continental is focused on the Bakken for the immediate future. Though each well in the play costs an average of $8 million to get up and running, Continental's rate of return in the Bakken is an impressive 40% to 50%.

Going forward, the company is pioneering the development of the Three Forks formation there, which sits below the lower Bakken and is expected to incrementally increase the company's reserves.

  • Add Continental Resources to My Watchlist.

Carrizo Oil and Gas (Nasdaq: CRZO  ) -- The company operates in the well-known Eagle Ford and Marcellus Shale plays, but has recently started using horizontal drilling in the Wattenberg field in the Colorado's Niobrara play. Heavyweight Anadarko Petroleum (NYSE: APC  ) recently moved into the area and expects to pull between 500 million and 1.5 billion barrels of oil, NGLs, and natural gas from its wells there.

The company brought two new wells online in the Niobrara during the third quarter, with one more expected to come online in December. CEO Chip Johnson said the company's new wells continue to exceed expectations, a great sign for the future of liquids production at Carrizo.

  • Add Carrizo Oil and Gas to My Watchlist.

Foolish takeaway
Barring government intervention, oil and gas production will continue to boom domestically in the coming years. Utilize the Fool's free My Watchlist feature to stay up to date on all the exploration and production companies getting the most out of oil and NGLs.

Sears: A Big Holiday Meltdown Sends Shares Down Hard

Is there room for Sears (SHLD) in modern retailing? It’s a question that investors appear to be asking (and answering) today after Sears reported a big drop in same-store sales and warned that earnings would take a sharp dive in the current quarter. Shares are down 24% in midday trading. Its Sears Domestic and Kmart stores have seen same-store-sales fall 5.2% through Christmas. The company plans to close 100 to 120 stores.

The company’s release paints a dark picture of Sears’ prospects:

“Kmart’s quarter-to-date comparable store sales decline reflects decreases in the consumer electronics and apparel categories and lower layaway sales.� Sears Domestic’s quarter-to-date sales decline was primarily driven by the consumer electronics and home appliance categories, with more than half of the decline in Sears Domestic occurring in consumer electronics.� Sears apparel sales were flat and Lands’ End in Sears stores was up�mid-single digits. The combination of lower sales and continued margin pressure coupled with expense increases has led to a decline in our Adjusted EBITDA.� Accordingly, we expect that our fourth quarter consolidated Adjusted EBITDA will be less than half of last year’s amount.”

Of course, many investors expect Eddie Lampert, Sears controlling shareholder, to turn the company’s focus to real estate, renting and selling Sears spaces to other companies. Sears has made some moves to try to cash in on its real estate, but hasn’t fully embraced that plan. Could the current problems hasten that transition?

A Unique Way to Triple Your Money on Low Natural Gas Prices

A tremendous opportunity is opening up – right now – in a small niche of America's energy sector. It's a new development in a larger story we've been telling you in Growth Stock Wire for years now... The story is how, in just the past 10 years, America has gone from expecting to import natural gas to boasting the world's largest supplies. That's thanks to advances in drilling technology, which are allowing natural gas producers to find more and more of the stuff every day.  The U.S. is now "the Saudi Arabia of natural gas." That's remaking the country's energy industry. And as I'll show you today, it will lead to huge gains for companies that can take advantage of it. The glut of gas supplies has led to a historic collapse in prices. Over the past six months, natural gas is down 40%. And it's not likely to soar soon... Looking at the numbers, the U.S. consumed roughly 24 trillion cubic feet (tcf) of natural gas in 2010. Based on estimates provided by the Potential Gas Committee, a nonprofit organization, the U.S. has roughly 2,170 tcf of natural gas reserves. Dividing 2,170 by 24 means the U.S. is sitting on a 90-year supply. Cheap natural gas is terrible for major producers like Chesapeake Energy and Talisman Energy. These companies recently announced production cuts. Chesapeake shares lost more than one-third of their value in 2011. It's just too difficult to make a profit with natural gas prices hovering below $2.75 per tcf. But it's great news for companies like Westport Innovations (WPRT). Westport makes engines that run on natural gas. The company has partnerships with just about every large engine manufacturer in the world. At current prices, natural gas as a transportation fuel is now 50% cheaper than regular gasoline. This fundamental shift in prices is causing some of the largest trucking fleets in the U.S. to switch from using diesel engines to ones that run on natural gas. These companies include Wal-Mart, Ryder, Coca-Cola, and Waste Management. It's just a matter of time before every heavy-duty truck in the U.S. runs on natural gas. Think about it this way... The difference in price between natural gas as a transportation fuel and diesel is about $2 per gallon. That may not seem like a lot, until you see the cost savings for a company like Wal-Mart, which has nearly 7,000 trucks. Let's say the average heavy-duty truck covers 100,000 miles annually. At five miles per gallon, that equals 20,000 gallons per year in fuel. A $2 savings results in roughly $40,000 a year per truck. That would save Wal-Mart $280 million a year on fuel costs (7,000 trucks x $40,000 in fuel savings). Trucking companies may look to convert their current diesel-engines fleet to natural gas right away, like Ryder and Coke. Others may wait five to 10 years... or until their fleets need to be replaced. Either way, unless trucking companies want to lose money, they will make the switch to natural gas. So even though Westport is sitting at its 52-week high, and my Small Stock Specialist readers are sitting on 180%-plus gains, I believe the company has more upside. You see, Westport is still a relatively small company ($2 billion market cap). That's just 10% of the market cap of global engine-maker Cummins. And Westport is expected to grow revenue by more than 50% annually for at least the next three years. This forecast is super-conservative if natural gas engines make their way into cars. Five years ago, this forecast may have sounded far-fetched. Today, the economics suggest this could happen in three to five years. Westport has signed partnerships with seven of the top 10 automotive companies, including GM, Toyota, and Ford.

Biotech’s Top and Bottom 10 From 2010

At the start of the year, we provided a favorable outlook for the biotechnology industry in 2010 that was based on the same six drivers we proposed for 2009, which included the following:

  • Sector’s defensive characteristics and impact on future economic growth.
  • Highest number of annual new product approvals since 2004.
  • Record number of products in clinical trials and annual industry research and development investment.
  • Improving access to capital.
  • Brisk pace of industry consolidation and licensing transactions.
  • Many small- and mid-capitalization companies remain undervalued.

With 2010 officially on the books, it appears an appropriate time to review the sector’s performance along with some of the themes highlighted in our previous articles.

Big Versus Small

The twenty-member NYSE Arca Biotechnology Index (BTK) was up 38% in 2010, while the broader Nasdaq Biotechnology Index (NBI) advanced 15%. Performance of the NBI was in line with the Dow Jones Industrial Average (DIA), S&P 500 (SPY), and Nasdaq Composite, which were up 11%, 13%, and 17%, respectively.

Why the huge discrepancy in returns between the two major biotechnology indices? Unlike the equal-weighted BTK, the NBI is calculated under a modified capitalization-weighted methodology, taking into account the total market value of the companies it tracks and not just their share prices. Accordingly, companies with the largest market capitalizations, or the greatest values, will have the highest weighting in the index.

During 2010, most of the large capitalization biotechnology companies (greater than $10 billion) underperformed the median return of 11% for the 130 companies in the NBI. For example, Celgene Corporation (CELG) was up 6%, Cephalon, Inc. (CEPH) was down 1%, Amgen, Inc. (AMGN) was down 3%, Teva Pharmaceutical Industries (TEVA) was down 7%, and Gilead Sciences, Inc. (GILD) declined by 16%. Bucking the trend of underperformance among large capitalization biotechnology names were Shire plc (SHPGY), along with Genzyme Corporation (GENZ) and Biogen Idec, Inc. (BIIB), both of which were targeted by shareholder activist Carl Icahn.

Accordingly, the relative underperformance of large capitalization biotechnology companies in 2010 masked the fact that many smaller, innovative companies performed well, as evidenced by the fact that 30 of the 130 companies comprising the NBI produced greater than 50% returns during the period. This performance is consistent with our thesis that small- and mid-capitalization companies with positive clinical or regulatory catalysts would continue to outperform their larger industry peers in 2010. See Table 1 for a list of the top 10 gainers from the NBI in 2010.

Noticeably absent from the list of 2010 winners, however, were the staggering quadruple-digit returns witnessed in 2009 (Vanda Pharmaceuticals, Inc. (VNDA) +2,150% and Human Genome Sciences, Inc. (HGSI) +1,342%).

Table 1. Top 10 gainers from NBI in 2010

Company Name Symbol 12/31/09 Close 12/31/10 Close % Change
Akorn, Inc AKRX $1.79 $6.07 239%
Questcor Pharmaceuticals, Inc. QCOR $4.75 $14.73 210%
Neurocrine Biosciences, Inc. NBIX $2.72 $7.64 181%
InterMune, Inc. ITMN $13.04 $36.40 179%
Jazz Pharmaceuticals, Inc. JAZZ $7.88 $19.68 150%
Caliper Life Sciences, Inc CALP $2.54 $6.34 150%
SIGA Technologies, Inc. SIGA $5.80 $14.00 141%
Idenix Pharmaceuticals, Inc. IDIX $2.15 $5.04 134%
NPS Pharmaceuticals, Inc. NPSP $3.40 $7.90 132%
ARIAD Pharmaceuticals, Inc. ARIA $2.28 $5.10 124%

Last Year’s Laggards Become 2010 Winners

After declining 22% in 2009, shares of Akorn, Inc., a niche generic pharmaceutical company, staged an impressive comeback by becoming the largest percentage gainer within the NBI during 2010. In November 2010, the company announced that core business revenue is projected in the range of $79.0-80.0 million in 2010, a 76-79% increase over 2009, and up from the company’s prior guidance range of $71.0-75.0 million.

In another dramatic reversal of fortune, three of the top 10 gainers from the NBI in 2010 made the list of top 10 decliners in the prior year. Questcor Pharmaceuticals, Inc., Idenix Pharmaceuticals, Inc., and NPS Pharmaceuticals, Inc. rebounded sharply in 2010, each posting triple-digit returns due in part to the following:

  • Questcor’s performance was largely due to strong revenue growth from its H.P. Acthar® Gel (repository corticotropin injection), which is indicated for the treatment of acute exacerbations of multiple sclerosis in adults, as monotherapy for the treatment of infantile spasms in infants and children under two years of age, and for the treatment of several other diseases and disorders.
  • Despite news in September 2010 that the U.S. Food and Drug Administration (FDA) placed two of the company’s HCV drug candidates on clinical hold, Idenix Pharmaceuticals benefited from its drug candidate for the treatment of HIV/AIDS advancing into a Phase 2b trial by its corporate partner, ViiV Healthcare.
  • Interest in NPS Pharmaceuticals can be attributed to the fact that in early 2011 the company expects to report top-line results from a Phase 3 study of teduglutide, a proprietary analog of GLP-2, in patients with short bowel syndrome who are chronically dependent on parenteral nutrition.

Losers Brought to You by the Letter “A”

Affymax, Inc. (AFFY), AMAG Pharma (AMAG), Arena Pharma (ARNA), Alexza Pharma (ALXA), and Alnylam Pharma (ALNY) were among the top 10 decliners from the NBI in 2010 (see Table 2).

Affymax, Inc., which hopes that its investigational anemia drug peginesatide could ultimately compete with Amgen Inc.’s Aranesp® (darbepoetin alfa), posted the largest percentage decline within the NBI for 2010. Top-line results from the Phase 3 clinical program released in June 2010 showed that the frequency of death, stroke, myocardial infarction, congestive heart failure, unstable angina, and arrhythmia was higher in non-dialysis patients taking peginesatide than those taking Aranesp, which sent shares of Affymax plummeting. In November 2010, Affymax and partner Takeda (TKPHF.PK) confirmed their goal of submitting a new drug application (NDA) for peginesatide for the treatment of anemia in chronic renal failure patients on dialysis in the second quarter of 2011.

AMAG Pharmaceuticals, Inc. launched Feraheme® (ferumoxytol) to treat iron deficiency anemia in July 2009, but anemic sales earned the company a spot in the top 10 decliners of 2010. Net product revenues from Feraheme were $15.1 million in the third quarter of 2010, well below the $500 million to $1 billion in annual sales originally projected by Wall Street analysts.

Table 2. Top 10 decliners from NBI in 2010

Company Name Symbol 12/31/09 Close 12/31/10 Close % Change
Affymax, Inc. AFFY $24.74 $6.65 -73%
China Sky One Medical, Inc. CSKI $22.75 $6.97 -69%
Medivation, Inc. MDVN $37.65 $15.17 -60%
Biodel, Inc. BIOD $4.34 $1.83 -58%
XenoPort, Inc. XNPT $18.55 $8.52 -54%
AMAG Pharmaceuticals, Inc. AMAG $38.03 $18.10 -52%
Arena Pharmaceuticals, Inc. ARNA $3.55 $1.72 -52%
Alexza Pharmaceuticals, Inc. ALXA $2.40 $1.25 -48%
Alnylam Pharmaceuticals, Inc. ALNY $17.62 $9.86 -44%
Curis, Inc. CRIS $3.25 $1.98 -39%

2011 Outlook

Most of the drivers supporting our favorable outlook for the biotechnology industry remain intact for 2011, such as the record number of products in clinical trials and annual industry R&D investment, improving access to capital, brisk pace of industry consolidation and licensing transactions, and attractive valuations among many small- and mid-capitalization companies, which should continue to outperform their larger industry peers in 2011.

The key exception relates to the number of FDA drug approvals, which declined in 2010 and is more than 50% below the high of 56 new approvals in 1996 despite the fact that legislation passed in 2008 gave the FDA more money and resources. There is no discounting the negative impact of clinical and regulatory setbacks on the psyche of biotechnology investors, as evidenced by the greater than 10% decline in the NBI in late February 2009 following a spate of high profile disappointments.

Please click here to read MD Becker Partners' legal disclaimer.

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

Anyone Feeling The Holiday Blues?

Is anyone feeling the stress, rush, lowdown, aren�t-we-supposed-to-be-happy-blues?

Family can be great. Or not.  This time of year is a mixed bag.

We�re preparing for a small Thanksgiving gathering at our house, with both our kids and some friends.  We�re rushing around, getting ready, buying food, wrapping up for the weekend with our work. This can be a really stressful time of year, but I wanted to take a minute to remember about gratitude.

We acknowledge the big things, like family and good fortune, and a chance to be together.

And for some of us, this time of year can be quite trying.  Maybe there is loss, or decline in health, or other sadness.

No matter how hard it may be with some things right now, there is always something to be grateful for in your life.

If you have a difficult aging parent, you can be grateful that you�re still standing to tell about it, and that the difficult person is not you.
You can be grateful that there is a place for you to be or to go on Thanksgiving, and it�s not a shelter.
You can be grateful that you are capable of fixing a meal or attending one, and that you can think and understand the meaning of this occasion. Some can�t.
You can be grateful for the capacity to see, smell and taste your food, or to feed yourself, as many can�t even do that much.

These are such basic things. We forget them. It�s so easy to get upset with all that might not go well or with whatever stresses you out.  We can overlook the smallest beauty in our lives.

When it�s time to reflect on Thanksgiving day, reflect on the basics, the little blessings of every day. It makes it all look so much better when we keep it in perspective. Offer a smile to the ones around you and give silent or verbal thanks for them.

If you�re with any older relative, appreciate the moment.  Our dear 89 year old friend, Albert is coming.  He�s a little frail now and we don�t know how many Thanksgivings he�s got left.  We�re just glad for this one.

Say thanks for being there to those who may share the time with you . It will do your heart good, and theirs too.

Wishing each of you a day of enjoyment and connection to someone you love.

Friday, October 19, 2012

Top Stocks For 2011-12-25-19 Stock Report!

Wednesday August 5, 2009

Seattle-based Nordstrom, Inc. (NYSE: JWN), a leading fashion specialty retailer, announced it will open a 45,000-square-foot Nordstrom Rack, a unit of the company’s off-price retail division, in Tampa, Fla. in fall 2010. The new store will be located in the Walter’s Crossing neighborhood at the intersection of Interstate Highway 275 and the Dale Mabry Highway next to Home Depot.

NASB Financial, Inc. (NASDAQ: NASB) announced today net income for the quarter ended June 30, 2009, of $4,242,000 or $0.54 per share. This compares to net income of $4,731,000 or $0.60 per share for the quarter ended March 31, 2009, and compares to net income of $3,610,000 or $0.46 per share for the quarter ended June 30, 2008.

South Jersey Gas announced today that Moody’s Investors Service has upgraded its senior secured rating to “A2″ from “A3″ and assigned an issuer rating of “Baa1″ which applies to its senior unsecured obligations as part of an industry-wide action. SJG, a subsidiary of South Jersey Industries (NYSE:SJI), is a regulated utility providing natural gas service to over 341,000 residential, commercial and industrial customers in the seven southernmost counties of New Jersey. Moody’s had raised SJG’s senior secured rating from “Baa1″ to “A3″ with a positive outlook at the beginning of February 2009.

Attorneys representing consumers and third-party payors today announced a proposed $41.5 million settlement with drug manufacturers Merck & Co. (NYSE: MRK) and Schering-Plough Corporation (NYSE: SGP) to settle allegations the companies suppressed critical information about the efficacy and safety of prescription drugs Vytorin and Zetia. Merck and Schering-Plough previously settled similar claims with 35 states and the District of Columbia for $5.4 million.

Hundreds of Navistar International Corporation (NYSE:NAV) employees today welcomed President Barack Obama to its Wakarusa, Ind., manufacturing facility to celebrate the award of a $39 million federal grant to develop and build all-electric delivery vehicles and bring jobs to the Elkhart County, Ind., communities.

Source: E-Gate System from

Dividend Stars Portfolio: January Update

equating to a current annual dividend yield of 4%. I initially had called for a $33 target on Mattel, but given the dividend hike and the relative weakness in shares of competitor Hasbro, I may be raising my target. Stay tuned.

See if (MAT) is traded within the Action Alerts PLUS portfolio by Cramer and Link

ProShares Ultrashort FTSE China 25 ETF(FXP), which was last month's best performer, turned out to be this month's worst performer (-6.42%, -0.5% Contribution to Overall Returns); even after exiting the position in early January. I noted last month that the volatility was a bit extreme, and decided to cut ties after the ETF fell through my entry point of $28 on January 9th. While the news in China in regards to housing continues to look bad (a recent report noted that Shanghai new home prices plummeted by 41 percent in the week ended January 29), the overall economy seems to be showing no imminent signs of any major slowdown. I still believe in the whole China Real Estate bubble story, but for now, it's time to move on.


-----------------------------Portfolio Returns (Jan 1st to Jan 31st):Microsoft (MSFT): +13.75%Mattel (MAT): +11.67%Deere (DE): +11.38% (Sold on 2/1/12)Intel (INTC): +8.95%Honeywell (HON): +6.79% (Sold on 2/1/12)McGraw Hill (MHP): +2.29%Target (TGT): -0.80%Norfolk Southern (NSC): -0.91%Pepsico (PEP): -1.02%Exxon Mobil (XOM): -1.2%Chubb (CB): -2.61% (Sold on 2/1/12)Proctor & Gamble (PG): -4.75%Novartis (NVS): -4.92%ProShares Ultra Short FTSE 25 (FXP): -6.42% (Sold on 1/9/12)

If you have any questions, comments or suggestions, feel free to message me on Twitter at @bostoncfa

>To order reprints of this article, click here: Reprints

AstraZeneca Pumping $100M More Into VC Unit

As the biotech venture world gets more corporate, AstraZeneca (NYSE: AZN  ) has re-upped its commitment to its MedImmune Ventures group with $100 million in additional funding. The new capital brings the VC unit's funds under management to $400 million and keeps AstraZeneca a strong player in the healthcare venture club, which has lost some of its long-standing members due to the challenges of backing drug developers.

MedImmune Ventures, which presumably became part of AZ in the drugmaker's buyout of U.S. biotech MedImmune, aims to keep making bets on biotech startups as well as medical and healthcare technology outfits, according to a release. The venture group emphasized its global hunt for good deals with the announcement that it co-led a second-round financing for Australian biotech NeuProtect with Starfish Ventures. It's also another example of a deal in which a corporate VC has joined a traditional venture firm to propel an early-stage drug developer.

"We look at core areas of interest to AstraZeneca, in terms of therapeutic areas, but we also look more broadly into what we call 'white spaces' that are areas that AstraZeneca may look at strategically in future, or may enter into for pharmaceutical development such as diagnostics, or to help their IT, " Atul Saran, senior vice president of corporate development and ventures at MedImmune, told Dow Jones Newswires.

Like its peers, MedImmune Ventures has been investing in developers with programs that could potentially help restock its corporate group's R&D pipeline. Returns are important too, of course. In 2009, MedImmune Ventures started to take the returns from its venture bets and pump them back into its funding pot, taking on an "evergreen" model. It's not clear how well this model is working out, as many young biotechs have struggled to achieve liquidity events through IPOs. For instance, Ambit Biosciences pulled its IPO plans this year and returned to its venture backers (including MedImmune Ventures) for another round of VC financing.

MedImmune Ventures-backed Rib-X Pharmaceuticals revealed IPO plans on Monday and will try to go public with a pipeline of new antibiotics and a partnership with French drugmaker Sanofi (NYSE: SNY  ) .

This article originally published here. Get your free daily biotech briefing here.

Related Articles:

  • Big Pharma embraces "open innovation" trend to fix a broken R&D model
  • VentiRx scores $25M in VC

Can Energy Transfer Partners Bounce Back in 2012?

With 2012 just beginning, now's a great time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.

Today, let's take a look at Energy Transfer Partners (NYSE: ETP  ) . As I discussed last month, Energy Transfer Partners has suffered somewhat from the glut of natural gas and competition among pipeline and storage peers. But with consolidation activity picking up in the industry, could the company actually be best positioned to take advantage of changing conditions in 2012? Below, I'll take a closer look at what people expect from Energy Transfer Partners and its rivals.

Forecasts on Energy Transfer Partners

Median Target Stock Price $49
2011 EPS Estimate�������������������������� $1.57
2012 EPS Estimate $2.45
Expected Annual Earnings Growth, Next 5 Years 19%
Forward P/E 19.2
CAPS Rating *****

Source: Yahoo! Finance.

Will Energy Transfer Partners rise in 2012?
Analysts are giving mixed messages about Energy Transfer Partners. On one hand, their target price of the stock is less than $2 above the current share price. However, they still expect huge earnings growth for the company in 2012. Motley Fool CAPS members weigh in on the optimistic side, giving the company their top rating of five out of five stars.

One challenge the whole industry faces is that the natural gas market can't seem to catch a break. Both Range Resources (NYSE: RRC  ) and Ultra Petroleum (NYSE: UPL  ) have gotten off to a horrible start in 2012, as the gas-focused stocks have some of the heaviest exposure to natural gas prices, which have fallen to decade-lows to start off the year. Among pipeline companies, those pressures have led to consolidation in the industry, with combinations aiming to build extensive networks across the continent.

Price weakness doesn't directly translate to problems for Energy Transfer Partners, though. The company has an agreement with ExxonMobil (NYSE: XOM  ) subsidiary XTO Energy to provide processing and transportation for gas in the Barnett and Woodford shale areas. But as Energy Transfer Partners' recent dispute with Enterprise Products Partners (NYSE: EPD  ) over a proposed Cushing-Houston pipeline reveals, deals aren't a sure thing until they're done.

If natural gas will ever stabilize, then Energy Transfer Partners could profit in a big way from the increased demand. For now, though, the company may need to tread water in an ultra-competitive market in order to hold its own.

Energy Transfer Partners may shine in a good environment for gas, but we've got another stock we think is an even more exciting gas play. Join the thousands who've already found out its name and more about the company in the Motley Fool's special free report on natural gas, but don't wait -- get it today.

Click here to add Energy Transfer Partners to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

S&P Picks Lowest-Cost, Highest Return S&P 500 Index Funds

As a growing number of retail investors put their money into S&P 500 index funds, a Standard & Poor’s research group has examined 156 such funds and named the four lowest-cost performers in terms of expense ratios and total return.

S&P’s picks for the best four S&P 500 index funds, in alphabetical order, are the DWS Equity 500 Index Fund-S (BTIEX), the Schwab S&P 500 Index Fund (SWPPX), the T. Rowe Price Equity Index 500 Fund (PREIX) and the Vanguard 500 Index Investor (VFINX).

In making its top picks, S&P considered only retail share classes and excluded funds that are closed to new investors or that require a minimum initial investment of more than $5,000. The four funds each have S&P five-star rankings and three-star Morningstar rankings.

Cost was one of the major contributing factors S&P identified as driving performance disparity among the universe of index funds it reviewed, said Dylan Cathers, an S&P mutual fund analyst who performed some of the S&P 500 index fund research.

“The spread between the highest and the lowest of expense ratios was frankly more than I expected it to be,” Cathers said. While he acknowledged that there were different ways to invest in the S&P 500 index—for example, some funds included a mix of cash and derivatives while others were in top-earning holdings—“paying well over a 1.0% expense ratio is extremely high,” he said.

“It’s very important for investors to take a step back and see what they are actually being charged and the method they are using to select their funds,” Cathers said.

In its research, published as a “Trends & Ideas” comment in the Standard & Poor’s MarketScope Advisor on Jan. 31, S&P found a wide disparity in performance among the 156 funds totaling more than $300 billion in assets under management as of Jan. 27. Of the 144 funds in existence for five years, six had a total return of more than 2.4%, while 14 had a return of less than 1.2%.

The S&P 500 index saw a five-year annualized return, excluding dividends, of 0.25% between Jan. 27, 2006, and Jan. 27, 2011. The top fund during that period was S&P five-star ranked DFA US Large Company Portfolio (DFUSX) had a total return of 2.49%. In contrast, two-star ranked BB&T Equity Index Fund (BCEQX) had a five-year return of 0.96%, the lowest five-year annualized gain for that period.

The disparity in expense ratios was just as wide as the difference in returns. The average of the 20 mutual funds with the lowest expense ratios was 0.18%. Conversely, the average of the 20 funds with the highest expense ratios was 1.35%. The lowest expense ratios were populated by institutional funds. After removing institutional funds, there was little difference, with the 20 lowest-expense-ratio funds averaging 0.24%.

Highlights from the S&P report, “Why Aren’t All S&P 500 Index Funds Alike?”:

Schwab S&P 500 Index Fund

Over the trailing 10 years through January 27, Schwab S&P 500 Index Fund (SWPPX) outpaced its S&P 500 Index Objective peers on an annualized total return basis, returning 1.43% versus 0.98%. Its outperformance of its peers over the trailing one- and three-year periods helps it earn a positive score for performance analytics. The fund's risk considerations score adds to its overall five-star rank, as manager tenure, Sharpe ratio, and standard deviation are all favorable. The fund's net expense ratio, at 0.13%, is far below the peer average of 0.64%, it has no sales load, and the portfolio turnover of 3.0% is below the peer average's 11.0%.

Vanguard 500 Index Fund

The Vanguard 500 Index Fund (VFINX) is one of the largest S&P 500 index funds, and is also one of the least expensive. Its net expense ratio is 0.18%, and it has no sales load. Not surprisingly, it is one of the top performers within the S&P 500 Index Objective peer group, posting an annualized return of 2.31% over the trailing five years ended January 27, compared with 1.87% for its peers. As with the other funds in this review, its risk consideration score is positive.

DWS Equity 500 Index Fund

Over the trailing one-, three-, five, and 10-year periods ended January 27, BTIEX has outpaced its peers by an average of about 30 basis points, aiding its performance analytics score. Its risk consideration metrics are solid and generally in line with its S&P 500 Index Objective peers. What helps to set the fund apart is its net expense ratio of 0.21%, which is one third of the group's average. Also, it has no sales load.

T. Rowe Price Equity Index 500 Fund

Another top fund within the group is T. Rowe Price Equity Index 500 Fund (PREIX), which opened in 1990 and has outdistanced its peers by over 450 basis points since inception. Over shorter time intervals, the fund's has also beaten the average S&P 500 Index Objective fund, albeit by a slimmer margin. As with DWS Equity 500 Index Fund, PREIX's risk consideration scores are solid and in line with peers. Once again, we find that this strong performing fund has a net expense ratio that is a fraction (half in this case) of the peer average of 0.64%.

Read 'Old Normal' S&P 500 Rally Beating 'New Normal': Was Ken Fisher Right? at

This Just In: More Upgrades and Downgrades

At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." Today we'll show you whether those bigwigs actually know what they're talking about. To help, we've enlisted Motley Fool CAPS to track the long-term performance of Wall Street's best and worst.

And speaking of the best...
Historically speaking, Barclays Capital hasn't always been the best analyst out there in stock-land. Across the length and breadth of the markets, Barclays actually gets slightly more of its picks wrong than it does right. But there's one thing Barclays does really well, and that's picking gold-mining stocks (to sell).

Over the past few years, Barclays has panned everyone from Kinross Gold (NYSE: KGC  ) to Barrick (NYSE: ABX  ) to Newmont Mining (NYSE: NEM  ) -- and it's been right every time it told investors to sell these stocks.

Today, the analyst returned to the industry with a series of new recommendations, resuming coverage of Kinross and Barrick with "equal weight" (read: "hold") ratings and telling investors there's no "buy" in IAMGOLD (NYSE: IAG  ) , either. Two gold stocks the analyst does like, however, are Yamana Gold (NYSE: AUY  ) and the previously panned Newmont Mining.

Wonder why? So do I. Let's take a look.


Trailing P/E

Forward P/E

Projected Growth Rate





















Source: *Currently unprofitable.

Valuation matters
Right off the bat, what jumps out from these numbers is the high valuations of Barclays' favorite gold stocks when compared with the companies it favors less. Aside from unprofitable Kinross, Yamana and Newmont both carry P/E ratios much higher those of (unrecommended) rivals IAMGOLD and Barrick. On the other hand, they also sport two of the fastest growth rates in the industry -- growth rates that are expected to help drive the P/E ratios at both Yamana and Newmont down to more typical levels for the industry as early as next year -- and could help boost profits even further in the years to come.

Granted, if you look at these companies from a pure PEG perspective, none of the five sports a trailing P/E ratio low enough, or a growth rate high enough, to justify a purchase by PEG investors. But what if we look at things from the angle favored by many mining specialists? What if we focus not on what the companies are earning today, but on the proven and probable reserves of gold available to mine (and profit from) tomorrow?


Proven and Probable Recoverable Reserves (Trouy ounces)

Value of Reserves at $1,744 Per Ounce

Market Cap

Market Cap as a % of Reserves


17.4 million

$30.3 billion

$5.9 billion



139.9 million

$244 billion

$38.9 billion



63.9 million

$115.5 billion

$11.6 billion



313.4 million

$546.6 billion

$14.2 billion



98.8 million

$172.2 billion

$26.8 billion


Reserves data from S&P Capital IQ. Gold prices from

Now, it's important not to get too excited by numbers like these or think that gold is just lying around in streambeds for the taking these days; it costs money to find, mine, and refine. You can't just say that IAMGOLD, for example, is selling for 20% of what it's worth, and therefore it's a buy. Getting to that gold and getting it refined and in the market costs money. This is why even committed gold bugs need to keep an eye on P/E ratios to ensure the companies they're buying are able to make a profit off of all the gold they own.

Even so, viewed from the perspective of proven and probable reserves that are recoverable at an acceptable cost, it appears there's one clear winner in this slate of gold picks: Yamana Gold.

Foolish takeaway
Boasting the greatest gold reserves of the major miners named above, as well as the lowest market cap as a percentage of these reserves, Yamana looks like the obvious place for value investors to start digging around for value -- the best bet for finding a bargain in the industry.

Personally, I still find the company's P/E ratio too high for comfort and its growth rate too slow to justify a buy. But Yamana's ample reserves of gold available for mining (and the fact that Yamana is pretty consistently free-cash-flow-positive in its operations, to boot) suggest to me that of the two picks Barclays made today, this one has the most promise.

But is it possible there's a gold miner out there with even more promise? Download The Motley Fool's special free report "The Tiny Gold Stock Digging Up Massive Profits." Our analysts have uncovered a little-known gold miner they believe is poised for greatness -- and an even better bargain than Yamana. Find out which company it is and why its future looks bright -- for free!

Top Stocks For 10/16/2012-16

Sirius XM Radio Inc. (NASDAQ:SIRI) increased 0.93% to close at $1.63. SIRI traded 48.02 million shares for the day and its earning per share remained $0.02. Sirius XM Radio Inc. provides satellite radio services in the United States and Canada. The company offers a programming lineup of approximately 135 channels of commercial-free music, sports, news, talk, entertainment, and traffic and weather. It also provides music channels that offer music genres, ranging from rock, pop and hip-hop to country, dance, jazz, Latin, and classical; channels of sports; talk and entertainment channels; comedy channels; national, international, and financial news channels.

Level 3 Communications, Inc. (NASDAQ:LVLT) increased 4.88% to close at $1.29. LVLT traded 20.21 million shares for the day and its 52 weeks range remained $0.83 - $1.77. Level 3 Communications, Inc. engages in the communications business in North America and Europe. It offers network and Internet services, including transport services, high speed Internet protocol services, dedicated Internet access, virtual private network services, and dark fiber services, as well as managed modem, an outsourced, turn-key infrastructure solution; and colocation services. The company also provides various media services, comprising Vyvx services that provide audio and video feeds over fiber or satellite.

Comcast Corporation (NASDAQ:CMCSA) increased 2.86% to close at $23.40. CMCSA traded 15.26 million shares for the day and its earning per share remained $1.26. Comcast Corporation, together with its subsidiaries, provides consumer entertainment, information, and communication products and services to the residential and commercial customers in the United States. The company operates in two segments, Cable and Programming. The Cable segment manages and operates cable systems, including video, high-speed Internet, and phone services, as well as regional sports and news networks. Its video services include analog, digital, on demand, and high-definition television and/or digital video recorders.

What Air Products and Chemicals Does With Its Cash

In the quest to find great investments, most investors focus on earnings to gauge a company's financial strength. This is a good start, but earnings can be misleading and incomplete. To get a clearer understanding of a company's ability to earn money and reward you, the shareholder, it's often better to focus on cash flow. In this series, we tear apart a company's cash flow statement to see how much money is truly being earned, and more importantly, what management is doing with that cash.

Step on up, Air Products and Chemicals (NYSE: APD  ) .

The first step in analyzing cash flow is to look at net income. Air Products and Chemicals' net income over the last five years has been impressive:






Normalized Net Income

$1.1 billion

$1.0 billion

$0.8 billion

$0.9 billion

$0.8 billion

Source: S&P Capital IQ. *12 months ended Sept. 30.

Next, we add back in a few non-cash expenses like the depreciation of assets, and adjust net income for changes in inventory, accounts receivable, and accounts payable -- changes in cash levels that reflect a company either paying its bills, or being paid by customers. This yields a figure called cash from operating activities -- the amount of cash a company generates from doing everyday business.

From there, we subtract capital expenditures, or the amount a company spends acquiring or fixing physical assets. This yields one version of a figure called free cash flow, or the true amount of cash a company has left over for its investors after doing business:






Free Cash Flow

$0.4 billion

$0.6 billion

$0.1 billion

$0.4 billion

$0.7 billion

Source: S&P Capital IQ. *12 months ended Sept. 30.

Now we know how much cash Air Products and Chemicals is really pulling in each year. Next question: What is it doing with that cash?

There are two ways a company can use free cash flow to directly reward shareholders: dividends and share repurchases. Cash not returned to shareholders can either be stashed in the bank, used to invest in other companies, or to pay off debt.

Here's how much Air Products and Chemicals has returned to shareholders in recent years:







$0.5 billion

$0.4 billion

$0.4 billion

$0.4 billion

$0.3 billion

Share Repurchases

$0.6 billion



$0.6 billion

$0.6 billion

Total Returned To Shareholders

$1.1 billion

$0.4 billion

$0.4 billion

$1.0 billion

$0.9 billion

Source: S&P Capital IQ. *12 months ended Sept. 30.

As you can see, the company has repurchased a decent amount of its own stock. That's caused shares outstanding to fall:






Shares Outstanding (millions) 213 213 210 211 216

Source: S&P Capital IQ. *12 months ended Sept. 30.

Now, companies tend to be fairly poor at repurchasing their own shares, buying feverishly when shares are expensive and backing away when they're cheap. Does Air Products and Chemicals fall into this trap? Let's take a look:

Source: S&P Capital IQ.

Management has been sporadic with buybacks, so this doesn't tell us much. Buybacks did dry up when shares were at their recessionary lows, but it's hard to tell if that's really indicative of management's long-term behavior. Given reasonable valuations in relation to earnings and cash flow, these buybacks have likely been a good deal for shareholders.

Finally, I like to look at how dividends have added to total shareholder returns:

Source: S&P Capital IQ.

Shares returned 35% over the last five years, which drops to 19% without dividends -- a nice boost to top off already decent performance.

To gauge how well a company is doing, keep an eye on the cash. How much a company earns is not as important as how much cash is actually coming in the door, and how much cash is coming in the door isn't as important as what management actually does with that cash. Remember, you, the shareholder, own the company. Are you happy with the way management has used Air Products and Chemicals' cash? Sound off in the comment section below.

  • Add Air Products and Chemicals to�My Watchlist.

Physical Gold and Silver Dividends Offer Investors the Best of Both Worlds

What if I told you there was a company that paid its shareholders in physical gold?

Would a "golden dividend" be enough to get you interested in gold stocks?

If not gold, what about silver?

Neither one of these options even existed when I first started talking about them just three months ago.

But thanks in part to billionaire resource investor Eric Sprott, today's investors can benefit from a dividend payable in physical gold or silver.

Sprott had sent a letter to silver producers, suggesting they reinvest some 25% of their earnings back into silver, rather than in cash at the bank.

That took my earlier discussion about gold and silver dividends to a totally new level: dividends in kind.

These aren't paper profits, but real, hold-in-your-hand gold and silver dividends.

For precious metals investors, these "hard asset" dividends make perfect sense.

Today, one innovative gold and silver producer offers investors the best of both worlds.

Finally: Physical Gold and Silver DividendsIn a bid to gain the "first mover" advantage, Gold Resource Corp. (NYSEAmex: GORO), a low-cost gold producer, is launching a gold and silver dividend program on April 10, 2012.

The company has already paid out $41 million in dividends to its shareholders over the past year and a half.

But now they are offering shareholders a unique option by partnering with Gold Bullion International (GBI). GBI is a New York-based precious metals provider to individual and institutional investors, with storage vaults in New York, Salt Lake City, London, Zurich, Singapore, and Australia.

Essentially, GORO shareholders can elect to convert their cash dividends into Gold Resource Corp. "Double Eagles" consisting of one ounce 0.999 fine gold and/or one ounce 0.999 fine silver rounds.

These "Double Eagles" will be drawn from GORO's physical treasury and placed into the shareholder's "individual bullion account" with GBI.

Jason Reid, President of Gold Resource Corp. said this new program is "a convenient and simple way of delivering precious metal dividends to shareholders [that] has been a long-term goal of the Company."

He went on to say: "With innovative assistance from Gold Bullion International, management of Gold Resource Corporation is pleased and excited to announce the launch of the Company's gold and silver dividend program, a dividend program unlike any other known program offered of its kind."

Other than the introduction of physically backed gold and silver ETFs, I can't think of another investment innovation in this sector that could have a major impact on how investors add precious metals into their portfolios.

So, What's An Eager Gold Investor To Do? Obviously, you don't have to get your physical silver and gold by investing in GORO.

Instead, you could just take your dividends from a gold and/or silver producer, then go out and buy precious metals yourself.

What GORO's new program does is make this whole process a lot simpler for those of its shareholders who prefer the real thing.

So of course that begs the question: Should you buy into Gold Resource Corporation?

Patient and early shareholders of GORO have been well rewarded with a tenfold gain since 2006.

But at today's share price of $23, GORO's trading at a P/E of 22.6 - a bit rich for my taste.

And despite the 2.5% dividend, which is generous by gold producer standards, you'd need to own $68,000 worth of GORO stock to receive one gold ounce annually at today's gold price.

That places Gold Resource out of reach for many.

A Golden AlternativeInvestors could look instead at the Market Vectors Gold Miners ETF (NYSEArca: GDX), which mimics the Gold Bugs Index (NYSE: HUI). It is trading at a P/E of 13, though offering a negligible yield of 0.27%.

This kind of valuation is near historical lows, making precious metals producers (as a group) a very compelling investment right now.

That's not to say they can't get cheaper.

But consider this: The very first time GDX traded at today's prices was back in October 2007.

At the time gold was trading under $800 and silver under $15.

Both metals are at double those levels right now. Yet the gold and silver producers are still trading at October 2007 prices.

This can't last.

Investor sentiment toward gold is at exceptionally low levels versus the average of the past four years.

But real interest rates (interest you can earn safely minus inflation) are near -3%. That has historically kept gold in a bull market.

On a seasonal basis, we're also likely at the "trough," where gold stocks tend to bottom out before heading higher.

How much higher?

Well, if we look at the data from the past decade since gold started its secular bull run, the HUI has averaged 15% gains from mid-March until the end of May.

And gold stocks are at an extreme "undervalued' level right now: another great contrarian signal.

The past several times we've had this kind of setup, gold stocks have absolutely soared, with the HUI Index shooting up over 100% in the ensuing twelve months.

The current price range for GDX - $45 to $50 - has previously acted as both resistance and support.

In my view, the inflection point is close at hand. The odds are in favor of gold stock investors.

My advice: Seriously consider going long gold stocks, which you can easily do by adding GDX.

With such great odds, you could well double your money by this time next year.

In the meantime, keep your eye out for companies that follow GORO's lead and begin to offer dividends payable in gold and silver.

Even though this development has drawn little fanfare in the press, I believe it's a watershed moment in precious metals investing.

[Editor's Note: Gold and silver aren't the only way to profit in today's commodities bull market.

According to Peter, soon virtually every substance vital to modern life will become enormously expensive and profitable for investors who know how to play it.

As he explains in his latest report, "today's scarcity and soaring costs could spur the biggest investment gains in history."

To read Peter's latest free report click here.]

CEO Gaffe of the Week: Diamond Foods

Last month, I introduced a new weekly series, the "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the Worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!

This week I want to highlight the now former CEO of Diamond Foods (Nasdaq: DMND  ) : Michael Mendes.

The dunce cap
Seriously, where to begin?

Diamond Foods, one of the largest manufacturers of snack foods and the name behind Emerald Nuts and Pop Secret, announced yesterday that it was placing CEO Michael Mendes and CFO Steven Neil on administrative leave. The reason for their departure was an internal accounting probe which discovered that Diamond had made improper payments to walnut growers over the past few quarters, and that these payments would necessitate a restatement of its 2010 and 2011 results. In short, Diamond was knowingly making late payments to its walnut growers to artificially inflate its profits.

Those three sentences more or less sum up the chaos at the top of Diamond -- but there's more to this story than meets the eye.

Diamond Foods also agreed last April to purchase the Pringles brand from Procter & Gamble (NYSE: PG  ) for $1.5 billion in an all-stock deal. If successful, this deal would make Diamond the No. 2 snack food company in the United States, behind only Frito-Lay, the snack food division of PepsiCo (NYSE: PEP  ) that owns the Fritos, Cheetos, Doritos, and Ruffles brands, to name a few.

That deal is looking significantly less likely as of now because of the "material adverse change" clause that's built into its buyout agreement. Procter can choose to walk because the earnings restatements may result in up to a 50% reduction in Diamond's 2010 and 2011 total EPS -- a fact that I feel would entice any court to side with P&G.

In addition, P&G isn't likely to accept the deal on the grounds that Diamond is backing the purchase with its stock, and the last time I checked, its share price was approaching losses of more than 75% since September.

To the corner, Mr. Mendes
But wait -- there's more!

The Justice Department in January launched a criminal probe into alleged impropriety related to those payments made to walnut growers. Although the Securities and Exchange Commission hasn't launched a formal investigation into Diamond's practices, I'd consider it just a matter of time before that happens. Let's not forget that you can almost assuredly expect a littering of shareholder lawsuits to hit over the next few weeks following the admission that a restatement of earnings is needed by the company.

Right now, Diamond looks like a shell of its former self (oh, I made a funny), but its near-term outlook is no laughing matter for shareholders. P&G will more than likely look elsewhere for a buyer of its Pringles brand, and I happen to think (on a purely speculative basis, mind you) that Kraft (NYSE: KFT  ) would make a perfect pairing with its Ritz and Oreo brand names.

If we were in a nine-inning baseball game, this debacle hasn't even hit the halfway point yet. Mendes has assaulted Diamond Foods shareholders' wallets and completely destroyed his company's image -- all in a years' work.

Do you have a CEO you'd like to nominate for this dubious weekly gaffe honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may wind up seeing your nominee in the spotlight.

And if you'd like a surefire way to avoid investing in companies with questionable leadership practices, I invite you to download a copy of our latest special report, "11 Rock-Solid Dividend Stocks." This report contains a wide-array of companies and sectors that are likely to keep your best interests in mind regardless of whether the market is up or down. Best of all, it's completely free for a limited time, so don't miss out!

Raymond James Execs Boast ‘Huge Strides’ in Technology

Bella Loykhter Allaire, head of technology for Raymond James, speaks at firm's Women's Symposium on Oct. 12.

When it comes to technology platforms and operations, Raymond James (RJF) executives say the firm is at or ahead of larger rivals.

“We have made huge strides,” said Raymond James CEO Paul Reilly in an interview with AdvisorOne, after speaking Friday at the Women’s Symposium conference hosted by the firm in St. Pete’s Beach, Fla.

“We now benchmark ourselves against the wirehouses and firms like Schwab, we think it’s going well,” Reilly said. “Our financial advisors are happy.”

Raymond James executives are also proud that the firm is “one of, if not, the first firm to support iPads for advisors,” Reilly shared. “The platforms will change, and we have to be there to deliver.”

As they change, the firm is making needed investments, according to Bella Loykhter Allaire, executive vice president of technology and operations.

“What’s going on is lots of plumbing investment, and that I could not have accomplished in any other firm,” said Loykhter Allaire, addressing the Women’s Symposium audience on Friday. 

“We are fortunate that [Reilly] gets it,” the executive said in an upbeat talk. “He has said that he would say ‘no’ one day, but that hasn’t happened.

As a result, Raymond James is able to move ahead with platform improvements that will let advisors more easily handle everything from prospecting for new clients to making new investments in foreign currencies and other products.

“We need to see this as a process. It’s all tied together,” said Loykhter Allaire. “Many firms do this in parts … but we want to solve this from beginning to end.”

Advisors should see major changes associated with this wealth management platform effort happening in 2013, she added. “We are not as integrated as I would like, but we are getting there,” Loykhter Allaire said. “You will see new additions every three months.”

Morgan Keegan Benefits

While Reilly has praised fixed-income and other abilities that Morgan Keegan is bringing to Raymond James, the technology executive said that the company’s platform has benefited from the acquired firm’s performance-reporting system.

“There are areas, like this, where they were better,”  Loykhter Allaire said. “So, we took their system and put it on top. You will start seeing some of the results by year end.”

The full conversion of Morgan Keegan advisors to the Raymond James platform will take place in February, the tech executive says. “As much work as this has added to my plate, I am very happy that we took the approach we did and that it benefits the Raymond James platform.”

Thursday, October 18, 2012

Leap Wireless: Watch Out Below

Update: Leap Wireless crushed after Metro PCS (PCS) Q2 2011 Results are Released

Not only do the results bode ill for the earnings prospects of LEAP but the release removes MetroPCS from the pool of potential acquirers. Clearly, any prospect of LEAP being acquired for a meaningful premium is over.

See the full Metro PCS earnings call transcript

Technically there is no support. Based on the volume traded there is still significant short interest in the stock. When the stock was last down near this level at the end of Aug. 2010, the short interest was 9.2 million shares. Look for momentum shorts to pile on and discouraged longs to liquidate. While the wireless spectrum licenses are valuable assets, don't look to book value to provide any meaningful support.

Continued losses will diminish shareholder value. Shareholders are confronted with the classic agency problem. Management will continue to operate the company at a loss, protecting their jobs while diminishing shareholder value. At the current rate of loss, book value will nearly halve in a year. Unless earnings reverse their recent trend and with merger prospects dead, I think that the strategic alternatives for the company are limited.

I think that it is highly unlikely that LEAP will be able to improve margins. The biggest competitive threat is Sprint's (S) continued move toward low-end pricing tiers. I predict that LEAP's share price will be significantly lower in a year. For investors who are uncomfortable shorting stocks, an interesting way to position for a decline is to buy the LEAP Jan 2013 10 Puts Bid $2.61 x Ask $2.81.

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

Buffett, Berkshire face test of investor patience

Reuters Questions about Warren Buffett�s health and succession will likely dominate Berkshire Hathaway�s annual shareholder meeting this weekend.

SAN FRANCISCO (MarketWatch) � In a first for Berkshire Hathaway Inc.�s annual shareholder meeting, Warren Buffett will field questions from a trio of analysts who follow its stock.

Click to Play What investors expect from Berkshire meeting

Will Warren Buffett discuss his health and a possible successor at this weekend's Berkshire Hathaway's shareholders meeting? Rick Brooks discuss these and other investor questions on the News Hub. Photo: AP.

Though each of the three panelists in Omaha, Neb., this weekend is bullish on the shares � another analyst with a �hold� rating says he wasn�t tapped for the panel � they are not expected to shy away from controversial topics.

While Buffett still has legions of true believers, many investors are concerned about the chairman and chief executive�s health and succession plans; Berkshire�s BRK.A BRK.B �underperforming stock price; and the status of this traditional holding company at a time investors are captivated by Apple Inc., Facebook Inc. and other digital darlings in the market.

�Now that Mr. Buffett has revealed health problems, I think investors will first want to be reassured that he still has the stamina to run the company, is still on top of his game, still is enthused about Berkshire and feels well enough to run the company another several years,� said Tim Vick, senior portfolio manager at Sanibel Captiva Trust Co.

�Longtime investors have taken for granted that Buffett would always be there for them, and that has made his presence and his health a more important matter to shareholders than the company�s near-term financial performance,� he added.

/quotes/zigman/219651/quotes/nls/brk.a BRK.A 123,898, -912.43, -0.73% /quotes/zigman/583979/quotes/nls/brk.b BRK.B 82.54, -0.68, -0.82% /quotes/zigman/3870025 SPX 1,354.68, -12.90, -0.94% Berkshire Hathaway stock has trailed the S&P 500 over the past three years.

Buffett revealed last month that he has been diagnosed with early-stage prostate cancer and will undergo radiation treatment for two months starting in mid-July.

�The good news is that I�ve been told by my doctors that my condition is not remotely life-threatening or even debilitating in any meaningful way,� he said at the time.

Investing icon

Shareholders will expect Buffett to act quickly this weekend to reinforce that upbeat message about his health and to address succession plans, so these sensitive matters won�t distract from the agenda.

�He will try to address his health problems early in the meeting as best he can, then move on,� Vick said. �That has been the pattern at annual meetings in the past. He doesn�t dodge these issues, but always confronts them honestly and in ways that satisfy shareholders.�

The thousands of Berkshire shareholders gathering in Omaha this weekend have come to expect no less from Buffett. From humble beginnings in the mid-1960s, Buffett built Berkshire into a multibillion-dollar holding company with interests in diverse industries � including insurance, banking, railroads, media, jewelry, fast food and furniture. It is the world�s eighth-largest public company based on a combination of sales, profits, assets and market value, according to Forbes.

Key investments in the Berkshire stable include Coca-Cola Co. KO , International Business Machines Corp. IBM , American Express Co. AXP �and Wells Fargo & Co. WFC �Such positions give Berkshire itself, with a current market value of around $200 billion, certain qualities of a large-cap value mutual fund.

Indeed, Buffett, dubbed the �Oracle of Omaha,� has become synonymous with investing acumen and shrewd deal-making.

�Over the last 45 years, the annualized return on book value [for Berkshire] has been 20% relative to say, a 9% return for the S&P 500 [Index]. So, definitely he�s kind of the special sauce that makes Berkshire a wide-moat firm,� wrote Gregg Warren, a senior equity analyst at Morningstar, in a research report.

While Buffett�s value-focused investment style isn�t always in favor when it comes to Berkshire�s stock performance, Buffett is held in such high esteem that his investment in a company carries significant clout.

Bristol-Myers Squibb: Steady prescription

While they don�t always deliver eye-popping growth, stocks that offer a steady stream of growing income are must-haves for the conservative investor.

With that in mind, we recommend Bristol-Myers Squibb (BMY) as a dependable income play that warrants a place in our income model portfolio.

Because patent protection lasts 20 years from the date of application, pharmaceutical companies able to successfully develop and market major drugs enjoy lucrative and unchallenged sales for a number of years.

But new products must continually be developed to offset the sales declines that accompany patent loss. They are key to keeping a company�s cash-generating engines churning relatively uninterrupted. Bristol-Myers Squibb (BMY), the $48 billion giant, fits this bill nicely.

We sold Bristol-Myers in early 2010 due to uncertainty over whether the company could compensate for the May 2012 expiration of its U.S. patent on the hugely successful Plavix (the #2 selling drug in the country).

The stroke and heart attack prevention drug, jointly marketed with Sanofi-Aventis, is both the top seller and current growth driver for the company, with $6.7 billion in 2010 net sales.
In addition, its fifth-best selling drug Avapro/Avalide, with $1.2 billion in 2010 net sales will similarly lose U.S. patent protection in March 2012.

However, in recent months, Bristol-Myers has shown amazing progress in re-energizing its pipeline.

One of its most promising new products is Yervoy, a treatment for late stage melanoma that has exhibited very good efficacy during trials.

Yervoy stimulates the immune system to recognize and attack cancer cells, and is being further tested for use against other cancers such as lung and prostate cancer.

If the drug�s use can be expanded to treat more common cancers, Yervoy has the potential to be a multi-billion product in the league of Plavix.

The drug was launched in the U.S. in April, and is delivering on its promise; second-quarter sales were $95 million, fantastic for a newly-launched drug. Approval to market in the E.U. was granted in July.

During the second quarter, Bristol-Myers booked a 14% year-on-year improvement in net sales, grew EPS by 4% and revised its 2011 earnings guidance upwards to $2.20-$2.30 per share despite headwinds from U.S. health care reform and E.U. austerity measures.

Sales for new products were strong across the board and the company received a string of new approvals.

Plus, encouraging results from a number of late-stage clinical studies make the company�s pipeline arguably one of the best in the industry.

Reflecting the loss of Plavix exclusivity, the company expects 2013 adjusted EPS to be around $1.95, after which new products are expected to restart earnings growth.

The company generates more than $1 billion in free cash flow annually and had $5 billion in cash at the end of June.

The stock is trading at just 13 times projected 2013 EPS, a reasonable valuation given BMY�s consistent track record, strong pipeline and generous 4.7 percent yield.

With a dividend payout ratio of just 63%, the dividend is safe. Bristol-Myers joins the Income Portfolio this month.

Apple’s Buying Event of the Decade: Don’t Miss Out!

Christmas and Chanukah came early this year. The Street completely misread Apple�s (NASDAQ:AAPL) most recent earnings announcement, the stock took a bit of a hit, and now we have the buying opportunity of the year � maybe even the decade.

What Apple announced, everyone focused on the word �missed.� They missed revenue estimates. They missed profit estimates. But the message from the company that some people missed was, �The whole world was waiting for the new phone. They did not buy as many of the old phones. But now, we are sold out of the new phone and, by the way, we have a free phone for low-end users.�

In other words, everyone�s used to (only) hearing how much Apple �beat� expectations. And true to form, they did plenty of that — the company beat on iPad sales, Mac sales and margin expectations. The physics majors and engineers turned analysts who need to justify their spreadsheets looked at the numbers and sold or said not to buy. And to that, I say, �Thank you for that early holiday gift!�

So, is it time to sell or time to buy instead? The iPhone worrywarts need to consider this: A recent survey by ChangeWave Research/451 Group showed enormous pent-up demand for the 4S, and the newest smartphone�s sales were more than double that of the iPhone 4 during its own launch period.

Plus, the company just opened up pre-orders for the phone in 22 additional countries. There�s no doubt that this stock will recover lost ground, and quickly.

Of course, that is a response to a short-term worry. What about the longer term?

Apple is the world�s dominant brand in consumer electronics. So, it has tremendous market share and, therefore, the stock has no room to run, right? Wrong. Here�s why:

  • The world market for cell phones of all kinds in 2012 is estimated to be 1.7 billion units. Apple�s share estimate? 110 million units, a 6.5% share.
  • The world market for tablets in 2012 is estimated to be 72 million (JPMorgan (NYSE:JPM) estimates), with Apple selling 45 million to 50 million — a 62% to 69% share. Well, actually, I look at this market as tablets plus their �displacement equivalents� — netbooks and very low-end laptops increasingly displaced by tablets — and I find that market to be roughly 200 million units. So, Apple has only a 25% share.
  • The world market for computers in 2012 is estimated to be about 440 million units (Gartner Group). Apple sold 4 million Macs in Q3; let�s say they sell 25 million in 2012 — that is a 5.7% share.

Apple is the world�s best consumer brand. Its electronic products have the highest level of consumer satisfaction. It�s the largest market cap company in the United States. And it has 6.5%, 25% and 5.7% share in its target markets, not to mention margins that are almost double that of their primary competitors.

In other words, if you�re still wondering whether it�s a buy right now, there�s the bullish case in a nutshell.

If you don�t own AAPL already, I recommend that you buy it. (Disclosure: I own it.)

Another way to trade it is to buy call options. The January 2012 and the January 2013 calls look good right here. If you buy the out-of-the-money calls — that is, with strike prices above the market price — you get more leverage as it moves up.

I also write calls (�Sell to Open�) against my long stock all the time. Before the earnings announcement I sold calls, and bought them back when the stock moved down. Doing this month after month (and week after week with AAPL�s weekly options) helped me to average down the net cost of my shares roughly $6 a share.

The great thing about selling calls against your long stock (i.e., the covered-call strategy) is the income you can bring in on a regular schedule. The covered call isn�t a �one and done� strategy � you can keep doing it again and again. That money not only helps bring down your cost average for the shares, but it also ensures that your bottom line keeps growing with every trade.

From time to time, however, I�ll take some of that cash income out of the markets — I believe it�s important to enjoy your returns along the way. Next time I take out some cash, it will probably be to buy a new iPad for my wife for Christmas. Unless they are sold out, of course!