Saturday, November 10, 2012

FLIR Systems: Interim Results May Create Buying Opportunity

On July 14, FLIR Systems, Inc. (FLIR) announced preliminary revenue and EPS results for the second quarter that will miss analysts expections. We recommended in our June 27 report that investors wait for a buying opportunity for FLIR. The fallout from this announcement, and formal release expected on July 22, may create a buying opportunity soon. We are looking for a buy-in price close to $23.

The company blames the missed revenue on continued weak demand in the government systems division. As we said in the earlier report, we are looking to see that FLIR's management can deal with the additional complexity in its business resulting from recent acquisitions. In the short run, this announcement confirms some of our fears; however, we would consider buying in if the price was low enough.

FLIR announced that it expects to post revenues of approximately $390 million and earnings per share of approximately $0.18 for the three months ended June 30. Results for the company's commercial systems division remained strong, while continued weak demand in the government systems division negatively impacted results for the quarter.

Management is evaluating its previously announced guidance for the full year 2011 and will provide updated guidance on its second quarter earnings call on July 22 at approximately 7:30 a.m.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in FLIR over the next 72 hours.

The Most Promising Dividends in Industrial Machinery

Dividend payers deserve a berth in any long-term stock portfolio. But seemingly attractive dividend yields are not always as fetching as they may appear. Let's see which companies in the industrial machinery industry offer the most promising dividends.

Yields and growth rates and payout ratios, oh my!
Before we get to those companies, though, you should understand just why you'd want to own dividend payers. These stocks can contribute a huge chunk of growth to your portfolio in good times, and bolster it during market downturns.

As my colleague Matt Koppenheffer has noted: "Between 2000 and 2009, the average dividend-adjusted return on stocks with market caps above $5 billion and a trailing yield of 2.5% or better was a whopping 114%. Compare that to a 19% drop for the S&P 500."

When hunting for promising dividend payers, unsophisticated investors will often just look for the highest yields they can find. While these stocks will indeed pay out the most, the yield figures apply only for the current year. Extremely steep dividend yields can be precarious, and even solid ones are vulnerable to dividend cuts.

When evaluating a company's attractiveness in terms of its dividend, it's important to examine at least three factors:

  • The current yield
  • The dividend growth
  • The payout ratio
  • If a company has a middling dividend yield but a history of increasing its payment substantially from year to year, it deserves extra consideration. A $3 dividend can become $7.80 in 10 years, if it grows at 10% annually. (It will top $20 after 20 years.) Thus, a 3% yield today may be more attractive than a 4% one, if the 3% company is rapidly increasing that dividend.

    Next, consider the company's payout ratio, which reflects what percentage of income the company is spending on its dividend. In general, the lower the number, the better. A low payout ratio means there's plenty of room for generous dividend increases. It also means that much of the company's income remains in its hands, giving it a lot of flexibility. That money can fund the business's expansion, pay off debt, buy back shares, or even buy other companies. A steep payout ratio reflects little flexibility for the company, less room for dividend growth, and a stronger chance that if the company falls on hard times, it will have to reduce its dividend.

    Peering into industrial machinery
    Below, I've compiled some of the major dividend-paying players in the industrial machinery industry (and a few smaller outfits), ranked according to their dividend yields:

    Company Recent Yield 5-Year Avg. Annual Div. Growth Rate Payout Ratio Add to Watchlist�
    Eaton (NYSE: ETN  ) 3.3% 10.4% 35% Add
    Illinois Tool Works (NYSE: ITW  ) 3.2% 14.3% 34% Add
    Graco 2.4% 7.3% 37% Add
    Dover 2.3% 10.3% 27% Add
    Parker Hannifin (NYSE: PH  ) 2.0% 14.2% 20% Add
    IDEX 1.9% 9.6% 28% Add
    Tennant 1.8% 6.8% 34% Add
    Ingersoll-Rand 1.6% (15.1%) 42% Add
    Sun Hydraulics (Nasdaq: SNHY  ) 1.6% 30.7% 46% Add
    Flowserve (NYSE: FLS  ) 1.3% 20.9%* 17% Add
    Graham Group (AMEX: GHM  ) 0.4% 17.5% 7% Add
    Gardner Denver 0.3% New dividend 4% Add

    Data: Motley Fool CAPS. *Denotes the past four years.

    Often, if you focus on dividend yield alone, you end up with a very slow-growing dividend or a payout rate that's worrisomely high. That's not a danger among these companies, though.

    Instead, let's focus on the dividend growth rate first, where Sun Hydraulics, Flowserve, and Graham Group lead the way. Their growth rates are so steep, though, that they may be hard to maintain for long, though their reasonable payout rates make that not an immediate concern. Note, though, that their current yields are on the low side, meaning that it may take a while for them to grow competitive.

    You may notice, too, that some notable players in the industry, such as Stratasys (Nasdaq: SSYS  ) , with its three-dimensional printers, aren't on the list. That's because smaller, fast-growing companies often prefer to plow any excess cash into further growth, rather than pay it out to shareholders.

    Just right
    As I see it, among the companies above, Eaton and Illinois Tool Works offer the best combination of dividend traits, sporting some solid income now and a good chance of strong dividend growth in the future. Sun Hydraulics and Flowserve are well worth considering, as well, due to their rapid dividend growth.

    Of course, as with all stocks, you'll want to look into more than just a company's dividend situation before making a purchase decision. Still, these stocks' compelling dividends make them great places to start your search, particularly if you're excited by the prospects for this industry. (Remember, too, that you may find even more attractive dividends elsewhere, such as in electric utilities or tobacco.)

    Do your portfolio a favor. Don't ignore the growth you can gain from powerful dividend payers.

    Looking for some All-Star dividend-paying stocks? Look no further.

    Greek Austerity Deal, Good Jobs News Sends Futures Higher

    Stock futures had been trading in negative territory early this morning, but two key pieces of news that came in around 8:30 a.m. reversed the momentum. The government announced that jobless claims fell by 15,000 last week to 358,000, another strong reading. And Greek leaders came to a deal on austerity measures, at least in principal, that could keep the country from defaulting on loans that come due next month.

    Dow futures rose 11 points to 12,854; S&P 500 futures rose 1.7 points to 1,348.7.

    Pepsico (PEP) fell 2.6% after releasing disappointing earnings projections. Groupon (GRPN) fell 11% after posting an unexpected loss. Diamond Foods (DMND) plunged 40% after the company’s audit revealed problems, and the board removed the CEO and CFO. Visa (V) rose 3.9% after beating earnings expectations.

    Three Common Misconceptions About Working With An Investment Advisor

    Investing can be a complex affair, especially if you are not an expert in the field. However with hundreds of thousands of people making their first investments each year, it is no longer a field reserved for the seasoned professionals. However investments are a very risky business and could potentially be even riskier without a full understanding of the process and its implications. This is why many people choose to consult the expert knowledge of an independent investment advisor or broker in the initial stages.

    In this article, we will explore three common myths regarding the service provided by investment advisors, offering you accurate and balanced information on the matter.

    1. The advisor takes control of money and all decisions

    A good independent investment advisor will seek to gain a good understanding of your financial situation and also your financial goals. They are likely to consider the four Ws in order to do this: why you are looking to invest, what you are hoping to do with the money, where you are looking to invest (if you have any idea) and also when you would like/hope to use the money.

    By gathering these facts and gaining a full picture, they will be able to advise and make recommendations accordingly. An independent investment advisor is not there to take control of your money but rather to use their expertise to offer guidance to help you invest in a way which best suits your circumstances and aspirations. They will also discuss the risk factor and they are likely to try and ascertain your tolerance for risk and expected rate of return in order to be able to make relevant recommendations.

    The money will remain yours and any decisions will also be your own however if you are unfamiliar with investing then seeking assistance from an independent investment advisor could help to offer guidance on a number of factors. They can advise you on what to invest in, whether to buy stocks or funds, investing for income or retirement, potential rates of return and also taxable costs of your investments.

    2. Only beginners need investment advice

    In actual fact, many people with existing investments turn to independent investment advisors when they are considering how to move forward. With bigger investments come greater risks therefore people often want to be as well-advised as possible.

    Also investors who have been lucky enough to make profits on their first investments often find themselves wanting to grow it further and therefore look to invest in different ways which an investment advisor could offer guidance on.

    An investment advisor is likely to analyse your existing investments and discuss your future investment aspirations in order to help make a plan for going forward.

    3. If I use an investment advisor, I counteract some of the risk of investing

    Sadly this is not true. Even the most seasoned experts in the field could not deny that investing carries great amount of risks and often people who have made the greatest profits have taken serious risks along the way. An independent investment advisor could help on finding the right investment suited to your attitude to risk, but they cannot the risk of any particular investment away.

    Investments can be a good way of growing your money but profit is not guaranteed and is often based on things that are out of your control such as stock market movements. Therefore you should always bear in mind that you could lose all the money that you invest and be left to deal with the consequences.

    John T Hughes writes for Share Dealing Account, a leading online source of information on share dealing accounts in the UK.

    Dollar up as Greece deal delayed further

    NEW YORK (MarketWatch) � The euro fell for a third day against the U.S. dollar on Monday as Greece struggled against the clock to cut a deal with its international creditors for a second bailout seen as essential to averting a messy default.

    The dollar index DXY , which measures the greenback�s performance against a basket of six currencies, rose to 79.064, off its high of 79.516, from 78.969 in late North American trading on Friday.

    The euro EURUSD �fell to $1.3124, from $1.3147 Friday.

    /quotes/zigman/1652083 DXY 82.62, +0.03, +0.03%

    The leaders of Greece�s main political parties have yet to reach an agreement on further austerity measures demanded by international creditors, while European leaders have upped pressure on Athens to come to an agreement. The additional austerity measures are a pre-condition for Greece to receive its second bailout from the so-called troika � European Union, International Monetary Fund and European Central Bank. Without a deal, Greece is seen as certain to default in mid-March, when a debt repayment comes due. Read more Greek debt talks.

    The euro pared its losses late morning after a Greek government minister said the country agreed to lay off 15,000 public-sector workers this year, according to Dow Jones Newswires. However, Greek Prime Minister Lucas Papademos and leading lawmakers postponed a meeting another day until Tuesday.

    �Any signs that Papademos� government will fulfill any of Troika�s conditions to receive funds by March to avoid a disorderly default will pressurize the weaker euro shorts in an illiquid market,� said Dean Popplewell, chief currency strategist at Oanda Corp.

    Traders remain very short, meaning heavily positioned for the shared currency to fall further, currency strategists at Morgan Stanley said, meaning However, long positions in the U.S. dollar declined for the fourth week, while the longest positions are in the Japanese yen USDJPY �and Swedish krona USDSEK .

    Even �if a deal is reached, we think it will likely be the high point in terms of good news in the euro-zone debt crisis,� said Brian Dolan, chief currency strategist at �Markets are likely to conclude that even with a deal, Greek debt levels are still unsustainable in the long run.�

    Also, an agreement over the bailout is separate from the still-unsettled negotiations Greece is having with its private bondholders to take big losses on current holdings in exchange for longer-dated bonds.

    Still, the euro has been �relatively well behaved� for two reasons, said Greg Anderson and Valentin Marinov, currency strategists at Citigroup.

    �Investors still expect that an agreement will be reached on both the second bailout and [private-sector deal] before the March redemptions,� they wrote in a note. �This outcome seems consistent with recent evidence which suggests that after protracted (and painful) negotiations, a resolution was always reached.�

    Also, �investors think that Greece is too small to matter for the health of the euro zone even in the case of an outright default. A credit event will restore market confidence in the credit-default-swap contracts and provide an incentive for (foreign) investors to return en masse to the peripheral debt markets,� they said. �The latter should be euro positive.�

    The dollar index�s gains on Monday erased its decline on Friday which followed stronger-than-expected data on U.S. nonfarm payrolls for January. See story on dollar, U.S. payrolls.

    Click to Play Should we be worried?

    A look at the world economy juxtaposed against the idea of whether the U.S. can be optimistic about 2012.

    �The fact that encouraging data releases will not alter the Federal Reserve�s dovish stance implies U.S. bond yields will remain compressed, giving no support for the U.S. dollar from higher U.S. yields for some time yet,� said strategists at Credit Agricole.

    Still, a �disorderly default� by Greece could work to the benefit of the greenback, they said.

    Traders remain very short the euro, currency strategists at Morgan Stanley said, meaning traders expect the shared currency to fall further. However, long positions in the U.S. dollar declined for the fourth week, while the longest positions are in the Japanese yen USDJPY �and Swedish krona USDSEK .

    Japan, U.K., Australia

    The dollar was little changed against the Japanese yen as traders consider whether Tokyo will intervene in currency markets.

    The dollar bought �76.58, versus �76.62 late Friday.

    The odds of intervention on behalf of the Japanese currency have �increased significantly as U.S. dollar/yen brushes the psychologically important 76.00 yen level. However, the feeling on the ground is that U.S. dollar/yen will need to broach 75.00 before intervention is actually seen,� the Credit Agricole strategists said.

    The British pound GBPUSD �turned up slightly to buy $1.5830, from $1.5817 on Friday. The Australian dollar AUDUSD changed hands at $1.0731, down from $1.0777.

    The Bank of England and the Reserve Bank of Australia are both meeting this week and expected to further ease monetary policy. Read blog about central bank meetings.

    Friday, November 9, 2012

    Stocks Extend Rally as Data Shows Improvement

    Stocks accelerated gains in the final stretch of trading on Wednesday and closed near session highs as the latest economic data eased some concerns about the U.S. economy.

    The Dow Jones Industrial Average closed near its 10,951 peak of the day, gaining 131 points, or 1.2%, to 10,940. The S&P 500 added 20 points, or 1.8%, at 1144 and the Nasdaq rose 56 points, or 2.3%, to 2461.

    Find out what stocks Link and Cramer are trading before they trade them

    Stocks across the basic materials and tech sectors showed the strongest gains of Wednesday's session. Within the Dow, Cisco Systems (CSCO), Hewlett-Packard (HPQ) and Intel (INTC) were the high fliers alongside Walt Disney(DIS), Chevron(CVX) and Alcoa(AA). Twenty-four of the Dow's 30 components moved higher. Market breadth was decidedly positive. Of the 5.2 billion shares that traded on the New York Stock Exchange, 71% gained ground while only 27% declined. On the Nasdaq, 2.5 billion stocks changed hands.Earlier, Automatic Data Processing(ADP) said U.S. companies added 91,000 jobs in September, rising from the revised 89,000 in August and beating the 75,000 economists surveyed by Thomson Reuters had estimated. An estimate of planned job cuts in September offered reasons to be cautious even though ADP numbers pointed to slight improvements in the jobs market. Consulting firm Challenger, Gray & Christmas said companies announced 115,730 layoffs in September after planning 51,114 job cuts in August. The number of announced layoffs jumped to the highest level since April 2009, when 132,590 cuts were announced. The government will release its employment report for September on Friday.The Institute for Supply Management also released its non-manufacturing index, which measures the service industry. The gauge fell to 53 in September, as economists predicted, from 53.3. While the index fell, readings above 50 indicate the industry grew. Despite upward momentum seen Wednesday, investors were wary that the market could reverse anytime. "Volatility is so high that a rally can turn on a dime," says Jeffrey Friedman, senior market strategist at MF Global. "Without more encouraging news from Europe, it's hard to feed the bull," he added.Friedman explained that yesterday's late day surge spooked investors who were shorting the market. The "double dip pro camp" continues to run for cover today, he added.Recent developments in Europe tempered the sentiment on Wednesday. Late Tuesday, ratings agency Moody's cut Italy's debt rating three notches to A2, saying the country faces challenges in reducing its debt amid sluggish economic growth even though the risk of an Italian default remains "remote." Investors continued to monitor talks of a concerted bank recapitalization to reduce uncertainty in the European debt crisis.On Wednesday, London's FTSE closed up 3.1% while Germany's DAX gained 4.5%. Asian markets closed lower with Japan's Nikkei Average off 0.86%. The Belgian-French lender Dexia has become the first European bank to require a government intervention because of the European debt crisis. The bank will likely be broken up, with its troubled assets pooled separately, allowing it to sell its healthy operations. The lender, which was also rescued by France and Belgium in 2008, said Tuesday that it would take "all necessary measures" to guarantee its loans.

    1 2 Next › Last »

    Dexia's troubles are the latest sign that the debt crisis has spread to the core of the eurozone financial system.

    In corporate news, New York Attorney General Eric Schneiderman and the city of New York are suing Bank of New York Mellon(BK) for nearly $2 billion, for allegedly defrauding clients in foreign currency exchange transactions. Bank of New York Mellon's stock lost 2.9% to $18.28.

    Shares of Monsanto(MON) rose 5.2% to $66.25 after the fertilizer company forecast earnings growth in the mid-teens for its next fiscal year and reported a fiscal-fourth-quarter loss of 22 cents a share, less than 27-cent loss analysts had expected.Costco(COST), the warehouse retailer, said net income in the fourth quarter rose about 10.6% as sales jumped 17%. Net income in the fourth quarter was $478 million, or $1.08 a share, compared with $432 million, or 97 cents, a year earlier. Analysts surveyed by Thomson Reuters expected Costco to earn $1.10 a share. The stock was off by 1.7% at $80.25.Shares of Walt Disney(DIS) were rose 5.5% to $31.51 after Citigroup upgraded its rating on the stock to "buy" from "hold." Citigroup said the media company's shares have retreated from recent highs, creating a buying opportunity. Acme Packet(APKT), a provider of network services, gave a disappointing fiscal-third-quarter forecast. The company expects earnings of 20 cents to 22 cents a share, excluding certain items, for the fiscal third quarter on revenue of $70 million, less than the estimates of analysts polled by Thomson Reuters for a profit of 30 cents on revenue of $82.8 million. Shares fell 5.5% to $40.46.The benchmark 10-year Treasury was down 20/32, pushing the yield to 1.893%. The dollar index, which measures the dollar against six currencies, was off by 0.147%.Gold for December delivery added $25.60, or 1.6%, to settle at $1641.60 an ounce.The November crude oil contract gained $4.01, or 5.3%, to close at $79.68 a barrel..

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    These Dividends Are All Fun and Games

    The following video is part of our "Motley Fool Conversations" series, in which consumer-goods editor/analyst Austin Smith and editor and analyst Isaac Pino discuss topics around the investing world.

    In today's edition, Austin discusses two dividend-paying companies investors can smile about. Hasbro and Mattel are the makers of many timeless brands, including Nerf, Barbie, and Uno. Their products span generations as staples in childhood, and Austin doesn't see that changing any time soon. While that's good news for kids, it's great news for investors. These dividend-paying companies are sure to please shareholders and kids alike, because the only thing better than unwrapping a new Hot Wheels track is getting paid to do it.

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    Despite these companies' track record, some investors are wary of their ability to continue innovating to meet kids' rapidly changing tastes for toys. If you agree and you're in the mood for equally proven dividends from some stable consumer-goods companies, you should take a look at our special free report: "Secure Your Future With 11 Rock-Solid Dividend Stocks." You can access your complimentary copy today at no cost! Just click here to discover the winners we've picked. The report is 100% free.

    Private Equity In Bank Stocks: 13 Shine Out Of 25 Chosen

    SNL Financial compiled a list of 25 major-exchange-traded U.S. bank and thrift stocks in which a private equity firm owns at least 10% of the common stock outstanding, according to FactSet Research Systems Inc. (here)

    Of the 25 stocks, 13 have returned positively since the investment while 12 have lost value. For comparison, the SNL Bank and Thrift Index has lost 5.71% during the period since the earliest PE investment on SNL's list - Dec. 17, 2008 - through June 8.

    Note Sageview Capital LP EverBank which bought out Tygris Leasing and is now active in equipment leasing and finance. There are others.

    (Click to enlarge)

    SNL Financial notes San Jose, Calif.,-based Bridge Capital Holdings' (BBNK) ($1.16 billion) common stock performed the best among the PE-owned institutions identified by SNL. A commercial lender started in 2001 to focus on the technology industry, Bridge Capital's stock has returned more than 245% since CCFW Inc., which does business as Carpenter & Co., completed a $30.0 million private placement with the bank in the fourth quarter of 2008. CCFW owned 32.2% of the bank's common stock, as of April 2, according to FactSet.

    "On the other hand, if investors had followed Anchorage Capital Group LLC, Capgen Capital Group LP and The Carlyle Group LLC and bought the common stock of Norfolk, Va.-based Hampton Roads Bankshares Inc. (HMPR) ($2.13 billion), their losses would have been in the high double digits, " the report notes. "The common stock has lost 90.0% since Anchorage participated in a private placement on Dec. 28, 2010, and has lost 94.7% since Capgen and The Carlyle Group invested on Sept. 30, 2010."

    Note that in this analysis, SNL has not calculated the PE firms' return on their investments. The return of the banks' common stock may have little correlation with the PE firms' ROI, since PE firms often buy ownership at a discount to open market prices or they buy preferred shares, convertible shares, warrants, rights or other types of securities. Rather, SNL is calculating the performance of the common stock on the open market while the PE firms owned parts of the companies.

    Waterbury, Conn.,-based Webster Financial Corp. (WBS) ($19.13 billion) has also returned highly to common shareholders since Warburg Pincus LLC purchased $115 million worth of common stock, non-voting perpetual preferred stock and warrants in 2009. The stock has returned 90% since the transaction. Warburg Pincus has a stake of 16.1% in the bank, according to FactSet.

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

    Intel: Buy the Resilience, Says Bulls; New Normal, Say Bears

    Shares of Intel (INTC) are up 62 cents, or 2.4%, at $26 following last night’s in-line Q2 revenue report and cut in the company’s year outlook.

    Revenue in the quarter fell below the mid-point of the range that Intel originally offered in April as a result of weakness in the NAND flash memory chip market. However, the reduced outlook for this year, with sales growth of perhaps 3% to 5%, was a result of macroeconomic worries that are hitting PC growth in mature markets, CEO Paul Otellini said.

    The company’s server chip business saw revenue rise by 15%, helped by the “Romley” processor introduction in the Spring. That was a clear positive that was widely cited in notes this morning.

    Although Otellini remarked that Intel had taken share from competitor�Advanced Micro Devices�(AMD), AMD’s stock is doing alright today, rising 7 cents, or 1.4%, to $4.94. Moreover, PC-related stocks are faring well, including�Hewlett-Packard�(HPQ), up 43 cents, or 2.3%, at $19.30, Dell (DELL), up 11 cents, or almost 1%, at $12.23, and�Microsoft�(MSFT), up 52 cents, or 1.7%, at $30.17.

    While Intel’s chart is clearly positive, there is a great divide this morning among analysts over whether the diminished outlook makes it better or worse to buy the shares now:


    Joanne Feeney, Longbow Research: Reiterates a Buy rating and a $34 price target. “We expect Intel to continue to see a mix shift towards low-end desktop and notebook markets, but we see strength in the company’s server products offsetting the impact on margins. As Romley and Ivy Bridge continue to ramp, we expect to see gross margins expand on lower unit costs, and expect TAM expansion to help fuel growth in 2013.”

    Jonathan Pitzer, Credit Suisse: Reiterates an Outperform rating and a $35 price target, writing that, “Macro risks still persist, but no more so for INTC than the rest of Semis/the stock market. Sub-seasonal guide for C3Q, only seasonal for C4Q – despite lean inventory and Win8 – might actually mean INTC stock is less exposed, especially relative to continued negative investor sentiment. We disagree with but at least understand the structural bear call on INTC. The tactical call of disappointing revenue coupled with uncontrollable spending driving major EPS revisions is losing steam.”

    Ross Seymore, Deutsche Bank: Reiterates a Buy rating and a $33 price target. “Intel delivered solid 2Q results and gained considerable mkt share vs. competition. Importantly, the co guided cautiously for 3Q/2H, acknowledging softer macro while also illustrating the resilience of its business model by generating solid profitability and FCF. We continue to believe INTC can outgrow its competition in MPUs, deliver strong growth in DCG and in its non- core areas (Mobility, NAND, Embedded etc.).”

    Uche Orji, UBS: Reiterates a Buy rating and a $34 price target. “While it lowered full year sales growth guidance to +3-5% from high-single-digit resulting from the challenging macro, gross margin stays resilient due to higher ASPs softening the impact of top line weakness. We believe: 1) expectations have been reasonably reset, 2) Data Center growth has more runway than we feared, 3) the new product transition to ultrabooks is positive for ASPs/gross margin, 4) low channel inventory sets up for potential restocking in 2H if ultrabooks are well received or the macro improves.”


    Patrick Wang, Evercore Partners: Reiterates an Equal Weight rating and a $26 price target. “It’s not safe to get in the water yet as there’s a chance Intel’s lowered expectations may still prove optimistic and we head towards a supply / demand imbalance later this year. Absent an improving macro, it’s hard to be constructive in a sea of negative data points. That said, we liked (a) robust DCG growth, (b) prudent op-ex controls, (c) unchanged 2012 GM guidance, and (d) capitulation to a more realistic FY growth target of +4% YoY vs. prior +8% YoY.”

    Mike Burton, Northland Capital Markets: Reiterates a Market Perform rating and a $27 price target. “INTC is forecasting revenues to go up a less-than-seasonal 2-10%, or 6% sequentially, which is exactly in line with our expectation (but off a slightly smaller Q2), compared to the Street Consensus estimate for an 8% rise, and normal seasonality of up 9-10%. [�] While INTC did guide below seasonal (and the Street) for Q3, we expect the stock to perform well given there was no �cliff� in revenues for Q3.”

    Cody Acree, Williams Financial Group: Reiterates a Hold rating. “While we believe we will likely see stronger seasonal PC activity in Q4, we are hesitant to expect a return to normal levels, particularly when considering that macro activity is likely not significantly different in the second half than the muted growth we have seen through the first few months. We expect mature market softness to persist, a strong dollar to continue to drive higher system build costs and emerging markets will likely grow nicely, albeit at a slower pace than seen over the past few quarters.”

    Ultra Petroleum Will Burn Brighter in 2012

    With 2012 just beginning, now's a smart 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 Ultra Petroleum (NYSE: UPL  ) . As I discussed last month, Ultra Petroleum had a horrific 2011, as natural gas prices remained weak due to huge supply overruns from new shale plays. But eventually, with high oil prices, equilibrium has to reassert itself. Will 2012 be the year for higher gas prices? Below, I'll take a closer look at what people expect from Ultra Petroleum and its rivals.

    Forecasts on Ultra Petroleum

    Median Target Stock Price $46.50
    2011 EPS Estimate�������������������������� $2.58
    2012 EPS Estimate $2.47
    Expected Annual Earnings Growth, Next 5 Years 19%
    Forward P/E 12
    CAPS Rating (out of 5) *****

    Sources: Yahoo! Finance, Motley Fool CAPS.

    Will Ultra Petroleum win in 2012?
    The picture for Ultra Petroleum looks mixed. Over the long run, investors and analysts alike see big things for the natural gas giant. But at least for 2012, a small earnings decline could dampen excitement about the stock -- even though the current price target rests more than 50% above current levels.

    The disconnect stems from Ultra's dominant position in natural gas. With higher costs, SandRidge Energy (NYSE: SD  ) and Chesapeake Energy (NYSE: CHK  ) have moved strongly toward oil and liquids production, where higher prices are available. So far, that hasn't created a vacuum in the natural gas market, but eventually, lower interest in production should help boost prices -- supporting Ultra's low-cost model. The company's activity in the Marcellus shale, where it's working with EOG Resources (NYSE: EOG  ) and EXCO Resources, follows in the footsteps of other economically attractive production opportunities for Ultra.

    The other end of the equation comes from demand. Clean Energy Fuels (Nasdaq: CLNE  ) is trying to tap into the nascent market for liquefied natural gas with a network of fueling stations. If LNG can become a viable fuel source for transportation, demand will blossom -- and prices will inevitably rise, helping Ultra.

    Concerns about fracking and shale gas generally could be potential speed bumps down the road. But at least for now, Ultra is the low-cost provider in an increasingly important industry -- one that has huge potential in 2012 and beyond.

    Ultra Petroleum could win big from a natural gas boom, but we have another stock we think is even more exciting. 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 Ultra Petroleum to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

    Thursday, November 8, 2012

    Profit From This Coming Dividend Cut

    The following video is part of a special series in which Motley Fool analyst Andrew Tonner and "Options Whiz"�Alex Pape discuss how to make 2012 the year YOU master the market.

    In this edition, Andrew and Alex analyze Alaska Communications Systems Group. Obviously, investing in the stock market carries risk. In this article, part of The Motley Fool's Options Education Month series, Motley Fool Options analyst Alex Pape sits down with fellow Fool Andrew Tonner to talk about one specific strategy designed to profit from a holding he believes may decline.

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    For more details on how to trade Alaska Communications Systems Group using similar options strategies with as much potential or more, just click here.

    You'll be directed to the Motley Fool Options Whiz -- our interactive "Options U" designed to teach you to trade options sensibly, with a minimum of risk, and all the resources of The Motley Fool behind you -- all 100% FREE!

    The Fallout From Crisis in Iran

    The U.S. is currently trying to increase international sanctions on Iran over the country's nuclear program, something that has caused Iran to threaten to close the Strait of Hormuz, the Gulf's oil gateway to the world. This may not have gotten a lot of front-page news in the last week, but it's something everyone should be worried about.

    If analysts are correct, the conflict will pass without a conflict because the effect on Iran would be far greater than on the U.S. or its allies. But the impact of sanctions is already being felt, and it may not be affecting the world in the way you would think.

    Oil trades higher on fear
    There's no surprise that oil has traded higher recently on fears that Iran will retaliate. But the move has been subtle and hardly the kind of spike you might expect if threats were actually going to occur. That's partly because traders don't think the threats are going to lead to action and partly because this kind of geopolitical risk is already baked into the price of oil.

    Oil is $100 per barrel for a lot of reasons: traders driving up the price, OPEC keeping production down, and production costs increasing. But more people are starting to realize that there's constantly a price premium because much of the world's oil comes from the most volatile countries. Iran, Nigeria, Iraq, and Syria are just a few of the countries that could explode at any moment disrupting supply. Disruptions would have a ripple effect for many companies.

    Troubled waters ahead
    If production is interrupted and Iran does block the Strait of Hormuz, the effect on oil tankers could be catastrophic. The biggest shipper Frontline (NYSE: FRO  ) had to restructure its business recently since it was in so much trouble and business partner Ship Finance International (NYSE: SFL  ) has had a rough year as well. Ship owners have been hit by increased tanker supply and low rates and a cutback in shipping out of the Middle East could lead to more losses.

    China's pickle
    China has said it won't join sanctions against Iran, but there are a number of reasons it's in the country's best interest to stay on the sideline. Iran is one of China's biggest oil suppliers, and an extended disruption would be disastrous for the manufacturing powerhouse.

    China is also setting up to benefit from sanctions against Iranian oil in an unintended consequence for the United States. Rhodium Group analysts think China will be able to negotiate a 10% to 15% discount for Iranian oil as sanctions tighten. Since the country is Iran's biggest oil buyer, it certainly has an upper hand if its other customers join an embargo.

    Sending Europe over the brink
    With parts of Europe on the brink of economic disaster, a disruption of oil supplies could send them over the edge. So it shouldn't be a surprise that Europe delayed sanctions for six months to allow Greece, Italy, and Spain to secure new supplies. By then it's likely some sort of resolution (or conflict) will have been reached.

    Europe is much more reliant on the Middle East for oil than the U.S., which has been cutting back on the oil for years, so the impact on Europe would be much higher than domestically.

    Domestic supplies become a hot-button again
    The U.S. is still dependent on others for oil, but most people don't realize that U.S. dependence on foreign oil, the Middle East in particular, has fallen dramatically since 2005. Net imports have fallen from 60.3% of product supplied in 2005 to 45.4% in the first 11 months of 2011. Imports from OPEC have fallen from 30.5% of product supplied in 2008 to less than 25% last year.

    With worldwide oil supply relatively constrained, that will put more pressure on domestic oil companies and offshore drillers outside of the Middle East. Statoil (NYSE: STO  ) , Whiting Petroleum, Continental Resources (NYSE: CLR  ) , and Kodiak Oil & Gas (NYSE: KOG  ) have more than a million combined acres in the Bakken shale play, the fastest-growing oil production play in the U.S. and higher potential prices could mean even more drilling.

    Growing production in the Gulf of Mexico, off the Atlantic, and even in Alaska could be keys for U.S. oil production as well if the Iranian fallout spreads. The Obama administration is opening new locations in the Gulf and Alaska for future sales, but rising oil prices or production disruptions in the Middle East could put pressure on the government to speed up the process.

    No matter how you look at it, increasing domestic oil production both on and offshore will be critical if this dance with Iran goes on much longer.

    An interconnected world
    If Iran continues to threaten to close the Strait of Hormuz, we need to be prepared for the realities the energy industry will have to deal with. For investors that means taking another look at domestic producers like Kodiak Oil & Gas, Continental Resources, and Whiting Petroleum, which have onshore assets or Statoil, which has onshore assets and attractive new offshore assets in Africa.

    What seems certain for the time being is oil will stay close to $100. Our Rising Star analysts have identified three companies that will benefit from $100 oil and are revealing them in a free report. Click here to access the report before it's gone.

    Make Yahoo Sticky

    If my company were producing $353,000 in revenue for each employee, I'd hire more.

    I'm not Yahoo (YHOO).

    CEO Scott Thompson looks at that figure only in comparison with Google (GOOG) and Facebook (FB), so he's cutting 14% of all employees in the first of what AllThingsD Kara Swisher breathlessly hopes will be "the first move of a larger purge to come." (It's easy to be perky about layoffs until one happens to you.)

    You'd think from all this that if Thompson had no employees, he'd have infinite revenue.

    The last time I wrote about Yahoo, in February, I suggested that what they most need is a growth strategy, something that connects the company more closely to Softbank (SFTBY.PK) of Japan and Alibaba (ALBCF.PK) of China, which it bought into a decade ago, when they were cheap.

    They still need a growth strategy.

    What Thompson has done, with these latest layoffs, is make it impossible to find such a growth strategy. If you didn't believe me in December believe me now - sell this dog.

    Layoffs on this scale do beg the question asked by one analyst - "why any employee that is any good would stay at this point." After all, Thompson doesn't value employees. He only values strategy, as in the Boston Consulting Group, which is apparently managing the latest strategic turn. (Or as Will Ferrell once called it, "strate-gery.")

    Consultants are great, and they're useful. But they are good for implementing visions, not creating them. If you don't have a vision a consultant can't help you. They are good at arranging things so your ideas work, not at coming up with the raw material of business growth. If they were good at that they'd be running their own companies, not yours.

    So Scott Thompson hires consultants, fires a bunch of people who were making money for his company, sinks the morale of all the rest, and expects us to buy his stock? Who does he think he is, Mitt Romney?

    (Sorry, couldn't resist that one. But now that I've got your attention ...)

    Yahoo actually has some good assets. It has some decent radio assets, some good newsmen work there, and one thing it has never done with those assets is build anything like a community with them.

    Compare the interactivity of this page with this one.

    Note the difference. Note that Yahoo invites you to read while its rival invites you to stay and have your own say, then read what others have to say. Which page will someone spend more time on, see more ads on?

    So I will close by offering Mr. Thompson something I've been saying for 15 years now, practically since the Web was spun. That IN in the word Internet? It stands for interactive. Either make Yahoo sticky or sell it to someone who will.

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

    Chinese Silver Zodiac Coins – A Fun Chinese Silver Coin

    The Chinese Silver Zodiac Coins that are now seen frequently in online merchant sites are galvanized by the ancient Chinese zodiac, which contains the twelve animals that make up the 12-year cycle. And thanks to the beauty and elegance of these coins, other nations like Australia, Liberia, and Somalia have issued commemorative coins that featured both the Chinese animal zodiac signs and the respective royalties of the partnering countries.

    If you try a search for these coins online, you will find that almost all of the silver and gold Chinese zodiac coins produced have the faces or emblems of Australia, Somalia, and even the Isle of Man on the opposite side. If these are the categories of coins you would want to collect for yourself then this article will give you some of the basic info you’ll need in attempting to find these coins.

    China as we all know is an example of the oldest civilizations existing and has influenced most parts of Asia with its culture and history like no other. It is also known to be one of the best places to look for ancient and rare coins as it’s been manufacturing its own currency since 1889.

    Collectors are continually on the look-out for both rare Chinese currencies and brilliant uncirculated coins like the Chinese Silver Zodiac Coins that have either been made regionally or through coinage with other states abroad. If you’re on the lookout for any of these silver zodiac provoked coins, here’s what you can do:

    Take the time to flick through the World Wide Web since this is the most convenient source of information with regards to these Chinese silver zodiac coins. You will be amazed at how many coin sellers are available to transact with you.

    Research on what factors are needed to identify authentic Chinese Silver Zodiac Coins to not pay for fakes, especially when bought online.

    Find great deals and selection on the beautiful Chinese Silver Zodiac Coins at: ==>

    Timely Ten: Best blue chip dividend buys

    Our primary purpose is to assist investors in growing their capital and income base from which to derive cash for their current and future needs.

    To that end we believe that high-quality stocks purchased at historically low-price-to-high-yield offers the best potential for downside protection and upside appreciation.

    Our current Timely Ten list is our reasoned expectation based on our methodology and experience for what we believe will perform best over the next five years.

    Do we believe that all 10 will go up simultaneously or immediately? Of course not.

    Our four-plus decades of research and experience, however, leads us to believe that these stocks, purchased at historically ndervalued levels, are well positioned for both growth of capital and income.
    Whether you are looking to build a portfolio from scratch, are partially invested and looking to add new positions, or fully invested and in need of some affirmation and hand holding, The Timely Ten represents our top ten current recommendations.

    The Timely Ten consists of undervalued stocks that generally have a S&P Dividend & Earnings Quality rating of A- or better, and have a history of exemplary long-term dividend growth.

    These stocks also have a P/E ratio of 15 or less, a payout ratio of 50% or less (75% for Utilities), debt of 50% or less (75% for Utilities), and technical characteristics on the daily and weekly charts that suggests the potential for imminent capital appreciation.

    Our latest Timely Ten selections are:

    Union Pacific (UNP) - yielding 2.2%
    Johnson & Johnson (JNJ) - yielding 3.5%
    Coca-Cola (KO) - yielding 2.8%
    United Technologies (UTX) - yielding - 2.5%
    Eaton (ETN) - yielding 3.2%
    CVS Caremark (CVS) - yielding 1.5%
    Abbott Labs (ABT) - yielding 3.5%
    Northrop Grumman (NOC) - yielding 2.4%
    Archer Daniels Midland (ADM) - yielding 32.4%
    Becton, Dickinson (BDX) - yielding 2.5%

    Paycheck Fairness Act

    Daily Market Commentary for June 4, 2012

    The Paycheck Fairness Act - which seeks to shrink the pay gap between men and women - got a boost from President Obama on Monday when he urged Congress to pass the bill on a conference call with supporters. (read more at Millennium-Traders.Com)

    U.S. factories orders for goods produced decreased 0.6% in April, the Commerce Department reported Monday. Factory orders were revised lower by 2.1% in March, down from a prior estimate of a 1.5% decline. Orders for durable goods which is for products meant to last at least three years, remained flat during April and orders for nondurable goods moved lower by 1.1%.

    According to a monthly labor-market report released Monday by the Conference Board, a gauge of employment trends rose in May, signaling that jobs growth may not slow further in coming months. The private research group reported its employment-trends index, which is designed to forecast turning points in employment, increased 0.29 % in May from the prior month. "Employers have been very cautious in hiring in the past two months, but at the moment, economic activity in the U.S. is just strong enough to require a modestly growing workforce," said Gad Levanon, macroeconomic research director at the Conference Board. Versus previous year, the index is 7.6% higher. The employment-trends index is made up of eight labor-market indicators, five of which made positive contributions in May, led by the percentage of firms with positions they are not able to fill right now.

    The trustee leading the bankruptcy case for MF Global Holdings Ltd. (MFGLQ), James Giddens, is accusing the firm and its top management of a 'breach of fiduciary duty and negligence'. Giddens describes a brokerage with a 'lack of sufficient monitoring and systems' As refreshing and honest as Giddens�s claims are, the threat of a lawsuit won�t assuage investors burned by what seems to have been clear wrongdoing at the firm. To date, regulators, including the Commodities Futures Trading Commission and the Securities and Exchange Commission, continue to move slowly against MF Global and Corzine. The CFTC sued the clearing arm of MF Global in March. The SEC and CFTC have hinted that more 'enforcement' actions may be coming. Key point could be MF Global�s statement that it had strong liquidity just before it went bankrupt as it had $1.3 billion in book value but a $41 billion balance sheet. Like so many MF Global claims, that liquidity assertion looks patently false in the aftermath. Unless Corzine and his team are held accountable, no firm need view itself as required to make truthful claims.

    On Tuesday, the G-7 finance ministers and central bank governors will hold a conference call on the European debt crisis, per a spokeswoman for Canadian Finance Minister Jim Flaherty on Monday. "I've been having discussions and I will have more discussions tomorrow morning and subsequently with my G-7 colleagues," Flaherty told reporters. "Those discussions also take place with some of the non-European members of the G20 ... who are concerned around the world outside of the euro zone with the potential consequences of a crisis in the euro zone, particularly a banking crisis," he added. A spokeswoman for the U.S. Treasury Department declined comment on the statement from Flaherty's office.

    Immunogen Inc. (IMGN:NASDAQ said its investigational treatment for non-Hodgkin's lymphoma and other B-cell malignancies showed improved safety and performance under a modified dosing schedule. At the annual meeting of the American Society of Clinical Oncology, the company reported the data from an extension of a Phase I study. The data established the dosing schedule for clinical trials with partner Sanofi-Aventis SA (SNY:NYSE). As part of a broader collaboration, the compound--SAR3419--was developed by Immunogen and licensed to Sanofi. Immunogen technology is designed to deliver a cancer-fighting drug directly to the cancer cell, providing a stronger punch while limiting side-effects often associated with chemotherapy. The company reported that patients that were administered the treatment weekly for four weeks and then every two weeks for another four doses showed more improvement than patients dosed weekly. "We believe the findings reported today support that SAR3419 has the potential to become an important new therapy for key B-cell malignancies," said ImmunoGen President and Chief Executive Daniel Junius said. "These findings also add to the growing body of clinical data supporting that the utility of our TAP technology--and the depth of our product opportunities--extend well beyond any one compound to multiple types of cancers, antibodies, and product designs."

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    Thanks for reading

    This Stock Turns Bad Money into Good

    Warren Buffett -- and Benjamin Graham before him -- made their fortunes off of one simple strategy: buying assets at cheap, undervalued prices and then helping those assets realize their value. It's a tried and true strategy that's spawned generations of value investors.

    For an investor, it makes a lot of sense if you can find a company that takes a similar approach. I've found a company that does just that, but with one slight difference. Instead of buying companies or physical assets, it treats debt as an asset -- and tries to buy it for as cheap as possible. If the company can collect just about anything off of the debt, it's usually for a huge profit.


    But instead of investing in Uncle Sam's debt or Corporate America's debt, this company relies on the individual. Let me explain.

    Any business that allows its customers to pay after they receive goods or services is going to have some percentage of deadbeats. Credit card companies deal with this all the time. So do other types of lenders. And as the economy struggles, so does the average consumer. That means bad debt, which always exists, is all the more prevalent.

    When the internal collections department of a company finally gives up on pursuing its late payers, or just don't want to deal with the hassle of collections, that debt gets sold off for pennies on the dollar.

    There are several players in this space that are effective at collecting on these debts, but my favorite is Portfolio Recovery Associates, Inc. (Nasdaq: PRAA).

    The company has a very wide reach. It acquires receivables of the well-known credit card companies -- Visa (NYSE: V), MasterCard (NYSE: MC) and Discover (NYSE: DFS), as well as private label credit cards, installment loans and lines of credit, bankrupt accounts and will pursue legal judgments and trade payables from various debt owners. The company also provides a range of fee-based services, including locating collateral for creditors, performing audits and debt recovery services for various government entities. There really isn't a sector the company doesn't service.

    Portfolio Recovery Associates may have anywhere between $40 million and $75 million worth of receivables at any time, of which 60% are currently from the big three credit card issuers, 23% from consumer finance entities, 14% from private label credit cards and 2% from automobile contracts.

    The key to all this, however, is how cheaply Portfolio Recovery acquires the debt. Since the company began in 1996, it has purchased debt for an average of three cents on the dollar. Three cents. This shouldn't come as much of a surprise considering the delinquent accounts are usually no younger than four months old and can be as old as nine months. After that much time, the internal collections department of any debtor pretty much assumes the debt is uncollectible as far as their efforts are concerned. But for Portfolio Recovery, to get it for three cents is a gift.

    Part of the company's advantage is that it specializes in collections. Talk to a collections agent and you'll learn a variety of legal tricks and methods of persuasion that the initial debtor simply lacks. They'll try to get debtors into a payment plan, for example, in which the customer makes five payments of 20% of their balance each.

    And here's the beautiful part about it: all it takes is one payment, and in most cases Portfolio Recovery has already made a huge profit based on the purchase price. Beyond this, Portfolio Recovery has an army of lawyers who can initiate legal proceedings and commence with garnishment for debtors who "have the ability but not the willingness to resolve their account."

    Portfolio Recovery is quite astute at getting those accounts paid. Last year the company booked $281 million of revenue, with a cost of revenue of $14.7 million. That means the company has astonishing gross margins of 95%. After backing out all expenses, net margins are 16%, generating a $44 million profit. In other words, the company's bottom line profit is triple that of what it paid for the debt.

    Portfolio Recovery has generated some $80 million of free cash flow each of the past three years. This allows the company to buy that bad debt without incurring debt itself, which would shrink margins.

    Wednesday, November 7, 2012

    Could India Go the Way of Greece and Italy?

    Could India, which has the world's second-fastest-growing economy, follow the lead of Greece and Italy?

    Long-term yields on India's debt are about 9%, much higher than Italy's when the European nation started to quake, an ordeal that ended with the resignation of Prime Minister Silvio Berlusconi two days ago. India's high yields are less concerning because the country's economy is growing quickly. Still, there are signs of slowing growth and a weakening banking system.

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

    India's economy, like China's, is struggling to maintain rapid growth against a backdrop of high inflation, rising interest rates and monetary tightening. The country's trade deficit is widening, inflation is very high, and the savings rate has been de-regulated even as rates are already rising. This year, India's central bank expects GDP to grow by 7.6%, less than an earlier estimate of 8%.The country's trade deficit widened to its highest level in 17 years in October. Some analysts think the deficit could get even bigger as higher oil costs drive up the value of imports. The deficit has weighed on the value of the rupee and, in turn, pushed up inflation. In fact, the inflation rate has stayed above 9% since the start of last December. In an effort to cap rising prices, the central bank of India raised interest rates for the 13th time in October, making borrowing more difficult. In a surprise move last week, Moody's downgraded the outlook on India's banking system to "negative" from "stable." The ratings agency, trying to anticipate deterioration in the banking system, cited asset quality as the cause for the downgrade. A majority of the banks are owned by the government, and it is assumed that state-owned lenders account for about three-quarters of the market in terms of assets. Government ownership means they won't let the system fail, but it could also mean large capital infusions by the government if things go awry.State Bank of India, one of the country's largest banks, reported that defaults on loans may increase and set aside funds to cover those potential defaults. Prior to the announcement, in October, Moody's downgraded the company's credit rating to D+.

    Part of the problem in the banking system is the steep increase in borrowing costs. The central bank has raised interest rates by 375 basis points since March 2010, driving up deposit rates and hurting profits. Furthermore, savings rates have been deregulated, forcing banks to compete for customers. Coupled with higher borrowing costs, profits are shrinking.

    Corporate earnings in India have begun to slow. U.S. technology bellwether Cisco(CSCO) for the first time mentioned India as a concern on its quarterly conference call last week. CEO John Chambers said "Europe and India obviously are two geographies we're watching, and India, it's partially currency and macro but it's a large part, the government gears are just grinding to a halt."

    Tom Linebarger, president and COO of industrial-goods company Cummins(CMI), said in a recent earnings call that "government actions to reduce inflation in India and China have resulted in softer near-term demand."There are a number of signs that point to a slowing economy in India, making it a country to keep our eyes on. Reducing exposure to investments in India now would be wise. Remember what happened when Moody's placed Italy's rating on review?

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

    4 Stocks To Avoid Like The Plague And 1 Shining Star To Buy Now


    I usually write about stocks I would buy. This time I'm going to focus on stocks of companies I believe are broken. These companies have unsustainable business models and in some cases outrageously priced stocks. These stocks should be avoided like the plague. I am always searching for diamonds in the rough and love a great comeback story. Nevertheless, these four bottom dwellers will most likely never comeback.

    I have included one company with all the right stuff, a true triple threat. The company has strong fundamentals, is technically sound and has product and service catalysts on the horizon.

    In the following sections we will perform a review of the fundamental and technical state of each company. Additionally, we will discern if any upside potential exists based on sector, industry or company specific catalyst. The following table depicts summary statistics and Wednesday's performance for the stocks.

    (click to enlarge)

    Apple Inc. (AAPL)

    (click to enlarge)

    Apple closed Wednesday at $606.26, flat for the day. The company is trading 5% below its 52 week high and has 20% potential upside based on the analysts' consensus mean target price of $726.89 for the company.

    Apple is undervalued based on fundamentals. Apple is trading for 12.71 times free cash flow. Apple's quarter over quarter EPS and sales growth rates are 92.28% and 58.86% respectively. Apple's net profit margin is 27.13%. Apple's ROE is 47.10% and the company has no debt.

    Technically, the company is in a well-defined uptrend since the start of the year. The stock is currently resting on the bottom of the trend channel, which is an ideal time to buy a stock.

    In a research note sent to investors on Tuesday, Morgan Stanley called the upcoming launch of Apple's much-rumored next-generation iPhone "one of the most significant product cycles in two years," and expects the device to lead a strong fourth quarter performance.

    Apple is fundamentally and technically a buy at this level. Couple this information with the opportunity for growth in China and upcoming product launches and you have a recipe for profits.

    Facebook, Inc. (FB)

    (click to enlarge)

    I see three major headwinds for Facebook. First, 1.7 billion shares are due to hit the market as staggered lock ups expire. A majority of the locked up shares will hit the market prior to the end of 2012. Second, I question the number of current and future users of the site willing to be leveraged. There may be a mass exodus if privacy settings are changed once more or intrusive advertising methods are implemented. Finally, I submit the bulk of the prime advertising demographic accesses Facebook via their smartphone. This is the proverbial Achilles heel for Facebook. The company is currently unable to display advertising on smartphones.

    According to a recent report by The American Customer Satisfaction Index [ACSI] Facebook recently came in last place for customer satisfaction among e-businesses with a score of 61 out of 100, an 8 percent drop from the company's score last year of 66. In fact, the company scored so poorly that it set a new record the lowest score in the social media category. As a user of Facebook I can understand why. It has become too cumbersome. I dropped the alerts service because they started alerting me every time one of my friends had a drink.

    The lock up expiration will be the catalyst to drive the stock lower in the near future. With 2 billion shares outstanding and 1.7 billion on the way the dilution will weigh heavily on the stock. Think about it, the number of shares outstanding will practically double. I am seriously considering shorting the stock.

    Groupon, Inc. (GRPN)

    (click to enlarge)

    Groupon closed Wednesday at $7.07, down almost 2% for the day. The company is trading 77% below its 52 week high and has 145% potential upside based on the analysts' consensus mean target price of $17.33 for the company.

    The company is not currently profitable. Sure Groupon has massive upside potential based on analysts' estimates, but in this case I must disagree. I signed up for the service but quickly found it useless and unsubscribed from the service. A local clone of the product called Clickedin serves my purposes much better. I just don't buy in to the company being able to monetize a coupon service.

    Technically, the stock is the definitive falling knife. The chart looks terrible. It looks like it's on the fast track to zero. I would not touch this stock with a ten foot pole.

    Nokia Corporation (NOK)

    (click to enlarge)

    Nokia is trading well below its consensus estimates and its 52 week high. The company is trading 75% below its 52 week high and has 75% potential upside based on the analysts' consensus mean target price of $3.02 for the company. Nokia was trading Wednesday for $1.73, up over 2% for the day.

    Fundamentally, Nokia looks like a dead man walking. The stock has negative quarter over quarter EPS and Sales growth of 370% and 30% respectively. The company is unprofitable and burning through cash. The company paid a dividend with a yield of 14.60, but I am close to being certain you will never clip that coupon.

    Microsoft (MSFT) has decided to practically give the Nokia Lumia 900 phone away in an attempt to gain market share. The company dropped the price to a mere $50. The stock is in a downward spiral with no end in sight. If you are buying into this stock on the hopes of a takeover, you may find no place to hang your hat. The stock price is so low at his point the potential buyers would most likely rather pick up the pieces in a bankruptcy auction. Dump this one now.

    Zynga, Inc. (ZNGA)

    (click to enlarge)

    Zynga is trading well below its consensus estimates and its 52 week high. The company is trading 71% below its 52 week high and has 148% potential upside based on the analysts' consensus mean target price of $11.42 for the company. Zynga was trading Wednesday for $4.61, up almost 1% for the day.

    Fundamentally, Zynga has few positives. Year over year revenue is down. The company is losing money hand over fist. Zynga's net profit margin is -41.57. That means they almost 1 out of every 2 dollars are lost. Not the kind of burn rate I want to be involved with.

    Zynga has a hard row to hoe ahead of it. The company needs to bolster its product line and diversify from Facebook which seems like an insurmountable task. Facebook is fading and will soon be swirling around the bottom of the drain and Zynga will be dragged down with it. Stay away from this catastrophe in the making.


    Don't be fooled into thinking you are getting these stocks at a bargain basement price simply because they are down significantly. It makes no difference where a stock has been, it only matters where it's going. As far as I can see the deck is stacked against them. Four of the five stocks are a "No Touch" in my book. If you currently own these stocks cut your losses and move on. Consider buying Apple which is firing on all cylinders.

    Use this information as a starting point for your own due diligence and research methods before determining whether or not to buy or sell a security. If you choose to start a position in any stock, I suggest layering in 10% at a time on a weekly basis to reduce risk and setting a 5% trailing stop loss order to minimize losses further if you wish.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AAPL over the next 72 hours.

    Exports: Risk Of Recession Rising

    Maybe I’m a little jumpy, having just created a series of videos about business planning with a risk of recession.

    Today’s foreign trade data worry me. If the United States economy is going to turn down, then foreign trade is the most likely source of the slump. Consumers are fairly stable now, spending in pace with their income gains. Housing and non-residential construction are weak, but don’t have much room to worsen. Government spending is not going to suddenly crash. The two major risk areas are exports and business capital spending.

    The latest decline in exports may just be a blip. It’s not unusual to have a sawtooth pattern, with the little dips being meaningless in the long run. That could be the case here. However, we know that Europe is slowing down and quite possibly in recession now. China’s economy is growing less rapidly due to its inflation-fighting efforts. (For more details, see myChina economic forecast article.)

    It’s too soon to hunker down, but not too soon for some planning. You can start by watching my videos:

    Business Planning With Risk of Recession: The Stance

    Business Planning With Risk of Recession: Strategic Initiatives

    3 High-Risk, High-Reward Stocks You Need to Know About

    After being in the investment business for longer than I care to admit, surviving two nasty bear markets, experiencing the advent of the Internet, seeing more corporate scandals than I care to remember, and more, I've decided there are only two basic kinds investment mistakes -- taking on too much risk, and not taking on enough risk. 

    The latter may be more prevalent than you'd believe. 

    Granted, you start a portfolio with conservative holdings. If you've got that piece of your allocation in place, though, and now have some extra cash to take on more risk in search of bigger rewards, here are three aggressive stocks that could offer outsized gains.

    1. Franklin Electric Co. (Nasdaq: FELE) Investors who have never heard of Franklin Electric might assume it's a utility company. Franklin actually makes electrical equipment -- groundwater and fuel pumping systems to be exact. It's far from being a riveting business, but what it lacks in pizzazz it makes up for in reliable growth.

    Why now: There are a couple of different good reasons to own Franklin Electric right now, not the least of which are growing sales and profits. You just have to take a big step back and look at the bigger picture to see the growth potential for this stock. 

    Last year's top line of $821 million and bottom line of $63.1 million are both record-breakers for the company. Earnings are projected to swell by 14% this year after last year's 61% improvement. Boring or not, that's impressive growth many corporations envy. 

    Investors can still count on earnings volatility going forward, but the results are impressive for those who can commit for a year or more. 

    The other reason investors may want to consider stepping into Franklin Electric Co. now is a little less sophisticated: Shares are in a long-term uptrend and the well-paced rally shows no signs of stopping. 

    2. Darden Restaurants Inc. (NYSE: DRI)

    You may know this company better as Red Lobster or The Olive Garden -- a couple of cliche casual-dining chains that are occasionally the butt of restaurant jokes. Those taking jabs at the company, however, may also want to realize the company is laughing, too -- all the way to the bank.

    Why now: When the recession hit in 2008, fine and casual dining were among the industries hit the hardest. Several moderately-priced eateries like Friendly's Ice Cream, Bennigan's, and Tony Roma's have all faced financial difficulties since then, up to and including bankruptcy, as was the case with Friendly's. 

    While Darden Restaurants was lumped into the left-for-dead group at the time, the company has defied the skeptics by continuing its march into record earnings levels. In fact, had it not been for the mere 1.3% dip in fiscal 2010's (mostly calendar 2009) revenue, Darden would have posted higher sales in seven of the past eight years. Profits have grown in six of the past eight years, and not once during that time has the company booked an annual operating loss. That's not bad.

    Granted, the past is no guarantee of future results. But after a long-term track record of sales and earnings growth -- and during a time when many of its competitors were hitting a wall -- it's quite clear Darden has found a winning formula. 

    3. Southern Copper Corp. (NYSE: SCCO) Very few metal miners are pure plays. Southern Copper is no exception. But, as far as industrial metals are concerned, it's one of the biggest and "most pure" copper plays investors can own.

    Why now: It's a bit of a misnomer that copper miners want to see sky-high prices. It's nice for a while, but it can invite unwanted competition into the marketplace, and excessively high prices eventually lead to a supply glut and a subsequent meltdown of the entire copper market. 

    Conversely, dirt-cheap copper leaves little room for margins, and that's assuming anybody actually wants to buy the stuff. Sometimes there's no price low enough to sell any meaningful amounts of it. 

    Said another way, there's a "sweet spot" for copper prices, where established miners can sell enough to be profitable, storage facilities aren't getting backed up with oversupply and buyers are willing to pull the trigger. 

    Right now, we're in just such a sweet spot. The London Metal Exchange's warehouse-stored copper supply reading hit a multi-year low in May, though it's not at rock-bottom lows from 2007. This means the supply isn't drained, yet it isn't piling up on itself. Simultaneously, copper is currently priced at $3.50 per pound -- the average price for the past five years or so -- and is holding steady. It's a stability (read, predictability) the copper market hasn't seen in years and one that could last for years.

    Add in the fact that Southern Copper has already managed to crank up the top and bottom since 2009 (growing the bottom line from 2009's $929 million to last year's record $2.3 billion) even before the copper market's new stability materialized, and what you have is a proverbial perfect storm. 

    Risks to Consider: The biggest worry here isn't corporate performance, but in the way investors perceive these companies. As long as the economy remains stable, these three stocks should remain in favor. If the economy significantly sours, however, then these picks could fall out of favor rather quickly.

    Tips>> Were all these stocks in the same industry, or even the same sector, choosing just one would be preferable.

    Why Phase 3 Trials Fail: What Investors Need to Know

    As readers of Seeking Alpha and investors in biotech know, investing in development stage biotechnology / biopharmaceutical companies is fraught with risk. Early-stage companies burn cash funding R&D and clinical trials, with no guarantee of approval (or even revenues in the future given successful approval!). As clinical trials progress, they become more expensive due to increases in both duration and patient size. Click here for a background on clinical trials.

    Sometimes this development risk is mitigated by licensing deals with big pharma in which clinical trial costs are shared and upfront / milestone payments are made in exchange for future revenues. However, when these products do not live up to expectations it negatively impacts share prices, sometimes dramatically (19/20 small molecule candidates that commence clinical trials will fail; 4/5 biologics will fail as well). Let us look at some studies of clinical trials and delve into the numbers more globally.

    According to a McKinsey study analyzing phase 3 trial failures reported from 1990-2002, the results had numerous implications for pharma. Focusing on small-molecules (656 Phase 3 compounds), 58% were successful. This of course implies a 42% failure rate; a staggering sum given that both safety and efficacy should have already been demonstrated. The analysts were able to evaluate in depth 73 of the 212 failures. Shockingly, the results indicated that a full 50% of these compounds failed for a lack of efficacy compared to placebo! Another 30% were for safety concerns and the final 20% could not be proven safer or more effective than the drugs already on the market. Phase 2 is designed to establish efficacy in patients, and clearly there are shortcomings at this stage. The efficacy failures could be attributed to two main causes: mechanistic novelty and endpoint definition. Qualitative endpoints failed more often than defined endpoints. Interestingly, according to the study:

    “An even more significant predictor of failure was novel mechanism. Even after the patient evaluation process in Phase 2, drugs that used novel mechanisms of action failure more than twice as often in Phase 3 as those that used known mechanisms. And if drugs had both novel mechanisms and less objective endpoints, they failed 70% of the time.”

    According to another recent article, oncology candidates are particularly risky, with only 8% of candidates achieving approval that completed phase 1. Along the same lines as the McKinsey study, the author cites the Investigational Drug Steering Committee (IDSC). In general, the IDSC:

    “encourage[s] the use of progression-free survival as the primary endpoint, randomization, inclusion of biomarkers, and incorporation of newer designs,” while acknowledging that “objective response as an endpoint and single-arm designs remain relevant in certain situations.” “There is a lack of predictability in the way Phase II trials are conducted in cancer because few are done in a comparative fashion.”

    Similarly, the experts interviewed for the article point out that the key rests in powerful, well-designed phase 2 studies. A great piece (from the author’s Alma Mater) addresses the lack of efficacy in Phase 2, and suggests a remedy.

    While companies will never be able to eliminate all of the risk in large-scale clinical trials (e.g. some long-term side effects are not foreseeable), hopefully the field as a whole can become more efficient, helping patients and investors alike. While the above data is not perfect or exhaustive and definitely not indicative of future success / failure, it is a good place to begin for any investor interested in development stage firms. In particular, all sources consulted agreed on one thing: phase 2 results are paramount. The implication appears to be that management cannot always be trusted to make the correct decision (possibly because of loss of objectivity about compounds, pressure to deliver on announcements, pipeline incentives, etc.).

    Below, I’ve compiled a list of companies that are currently in phase 3 trials, with a brief description. While by no means passing judgment or assigning odds of success, I am simply trying to give investors a more complete picture. For the rewards of successfully owning stocks in the right companies, look no further than Amgen (AMGN), Genentech, Genzyme (GENZ), etc.

    5 Companies Currently in Phase III Trials

    Medivation (MDVN): enrollment was completed in a CONCERT study, a 12-month, Phase 3 clinical trial in patients with mild-to-moderate Alzheimer's disease (AD) evaluating the potential efficacy of dimebon (latrepirdine*) when added to ongoing treatment with donepezil. Medivation is conducting this study under its collaboration agreement with Pfizer Inc. (PFE). Data expected in the first half of 2012.

    Raptor Pharmaceutical Corp. (RPTP): announced it has reopened enrollment in its Phase 3 clinical trial of its proprietary delayed-release oral formulation of cysteamine bitartrate (DR Cysteamine) in patients with nephropathic cystinosis. The pivotal Phase 3 clinical trial is designed as a study of the safety, tolerability, pharmacokinetics and pharmacodynamics of DR Cysteamine compared with immediate-release cysteamine bitartrate. Data expected sometime in Q2 2011.

    Amarin Corp. (AMRN): reported the completion of patient randomization for its ANCHOR trial, a pivotal Phase 3 trial of AMR101. The ANCHOR trial is a multi-center, placebo-controlled, randomized, double-blind, 12-week pivotal study to evaluate the efficacy and safety of 2 grams and 4 grams of AMR101 (ethyl-EPA) in patients with high triglyceride levels from 200 mg/dL to less than 500 mg/dL who are also on statin therapy. Patients in this trial are characterized as having high triglyceride levels with mixed dyslipidemia (two or more lipid disorders) and are at significant risk of cardiovascular disease. No omega-3 based therapy is approved by the FDA for treating this patient population. This is being conducted under a Special Protocol Assessment (SPA) agreement with the FDA. Data expected sometime in Q2 2011.

    Omeros Corp. (OMER): expected to announce data from our Phase 3 program evaluating OMS103HP in ACL reconstruction in the first quarter of 2011. OMS103HP is added to standard arthroscopic irrigation solutions and perfused through the joint during surgery. Each active ingredient in OMS103HP was selected for its anti-inflammatory action, and each agent interacts with discrete molecular targets involved in the acute inflammatory response.

    Oncolytics Biotech, Inch (ONCY): announced in October 2009 that it had reached an agreement with the FDA under the Special Protocol Assessment (SPA) process for the design of a Phase 3 trial (randomized, two-arm, double-blind, multicentre, two-stage, adaptive Phase 3 trial) examining REOLYSIN in combination with paclitaxel and carboplatin in patients with platinum-refractory head and neck cancers. The primary endpoint for the trial is overall survival (OS); secondary endpoints include progression free survival (PFS), objective response rate (complete response (CR) + partial response (PR)) and duration of response, and safety and tolerability of REOLYSIN when administered in combination with paclitaxel and carboplatin.

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

    Tuesday, November 6, 2012

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    Top Stocks For 2011-12-8-12

    MELVILLE, NY–(CRWENEWSWIRE -11/15/11) - FONAR Corporation (NASDAQ:FONR), The Inventor of MR Scanning�, reported today its first quarter of fiscal 2012. The Company reports net income has risen 360% to $1.8 million for the first fiscal 2012 quarter ended September 30, 2011 from $363 thousand one year earlier for the fiscal quarter ended September 30, 2010. The Company has net income for the past six quarters and income from operations for the past seven quarters.

    Statement of Operations Items

    Total revenues increased 11% to $9.6 million for the quarter ended September 30, 2011, from $8.7 million for the corresponding quarter which ended one year earlier on September 30, 2010.

    The basic earnings per common share increased 257% to $0.25 per share during the first fiscal quarter of fiscal 2012 as compared to $0.07 per common share for the first fiscal 2011 quarter ended September 30, 2010. In addition, the diluted earnings per common share increased 243% to $0.24 per share during the first fiscal quarter of fiscal 2012 as compared to $0.07 per common share for the first fiscal 2011 quarter ended September 30, 2010.

    For the quarter ended September 30, 2011, income from operations was $1.8 million. This is compared to the same period ended September 30, 2010, when the income from operations was $435 thousand.

    Total operating costs and expenses decreased 5% to $7.8 million for the quarter ended September 30, 2011 from $8.3 million for the quarter ended September 30, 2010.

    Revenues from product sales were $1.8 million for the fiscal quarter ended September 30, 2011 as compared to $2.7 million for the corresponding quarter ended September 30, 2010. Revenues from service and repair fees were $2.9 million for the fiscal quarter ended September 30, 2011 as compared to $2.7 million for the fiscal quarter ended September 30, 2010.

    Revenues from the management and other fees segment (management of the ten FONAR UPRIGHT(R) Multi-Position� MRI diagnostic imaging centers segment) increased to $4.9 million for the fiscal quarter ended September 30, 2011, from $3.3 million for the fiscal quarter ended September 30, 2010.

    Balance Sheet Items

    As of September 30, 2011 total current assets were $24.5 million, total assets were $33.1 million, total current liabilities were $23.1 million, and total long-term liabilities were $2.5 million.

    As of September 30, 2011, total cash and cash equivalents and marketable securities were $9.5 million as compared to $9.3 million as of June 30, 2011. In addition, this compares to $1.3 million for the fiscal quarter one year earlier ended September 30, 2010.

    As of September 30, 2011, the total stockholder’s equity improved to $7.5 million, as compared to a total stockholder’s equity of $5.9 million as of June 30, 2011.

    Significant Quarter Highlight:

    Breakthrough in the Diagnoses of Multiple Sclerosis

    On September 20, 2011, a paper, titled “The Possible Role of Cranio-Cervical Trauma and Abnormal CSF Hydrodynamics in the Genesis of Multiple Sclerosis,” was published in the journal Physiological Chemistry and Physics and Medical NMR (Sept. 20, 2011, 41: 1-17). It was co-authored by FONAR MRI researchers Raymond V. Damadian, M.D., president and founder of FONAR and FONAR scientist David Chu, PhD.

    The journal article reported a diagnostic breakthrough in multiple sclerosis (MS) based on observations made possible by the company’s unique FONAR UPRIGHT(R) Multi-Position� MRI. The findings reveal that the cause of multiple sclerosis may be biomechanical and related to earlier trauma to the neck, which can result in the obstruction of the flow of cerebrospinal fluid (CSF), which is produced and stored in the central anatomic structures of the brain known as the ventricles. Since the ventricles produce a large volume of CSF each day (500 cc), an obstruction can result in a build up of pressure within the ventricles, resulting in leakage of the CSF into the surrounding brain tissue. This leakage could be responsible for generating the brain lesions of multiple sclerosis. The complete study in which the diagnostic breakthrough was reported can be viewed at

    Dr. Damadian said, “We used the UPRIGHT(R) Multi-Position� MRI to view the flow of cerebrospinal fluid in and out of the brain with the patients scanned UPRIGHT(R) and scanned lying down. The UPRIGHT(R) MRI also revealed that these obstructions were the result of structural deformities of the cervical spine, induced by trauma earlier in life. The findings are based on viewing the real-time flow of cerebrospinal fluid in a series of eight randomly chosen patients with multiple sclerosis. These invaluable dual observations have only been possible since the invention by FONAR of an MRI capable of imaging the patient UPRIGHT(R).”

    The “Major Diagnostic Breakthrough in Multiple Sclerosis Achieved With Advanced UPRIGHT(R) MRI” was announced by Dr. Damadian on October 4, 2011, at a Radiology Department Grand Rounds at the University of California San Diego Medical Center.

    William G. Bradley, Jr., M.D., Ph.D., F.A.C.R., Chairman of the Department of Radiology, and a Professor of Radiology at UCSD School of Medicine introduced Dr. Damadian to his colleagues at grand rounds. Dr. Bradley said, “Dr. Damadian has shown that 8 patients with MS had degenerative changes in their cervical spines which impinged on the spinal canal and limited the pulsatile, to-and-fro flow of cervical CSF over the cardiac cycle, as demonstrated on UPRIGHT(R) MRI. His hypothesis that increased resistance to outflow of CSF is linked to the etiology of MS has some similarities to Dr. P. Zamboni’s hypothesis that MS is due to the impeded outflow of venous blood from the brain due to dural sinus stenoses. In both theories, increased resistance to outflow of either CSF or venous blood would be expected to modify the intracranial pressure wave over the cardiac cycle. While both theories need to be further tested with larger controlled studies, it is intriguing that they seem to invoke similar pathologic changes. Whether these changes are etiologic in all cases of MS remains to be tested.”

    Dr. Damadian stated, “These new observations have uncovered biomechanical barriers that appear to give rise to multiple sclerosis, and, even more excitingly, these barriers may be therapeutically addressable. One of the eight patients in the study, a 41-year-old female patient with MS was treated when her symptoms subsided upon treatment.”

    FONAR reported on the case study on November 2, 2011. The FONAR UPRIGHT(R) MRI found cervical malrotations at the cranio-cervical junction, which resulted in alterations of CSF flow dynamics and gave rise to CSF fluid leakages into surrounding brain tissue. The CSF leakages visualized were directly connected to MS lesions visualized on the UPRIGHT(R) MRI. Following an Atlas Orthogonal (AO) Correction by Dr. Scott Rosa, the patient experienced a significant reduction in symptoms which correlate directly to 28.6% reduction of her CSF pressure on post MRI evaluation. The patient is currently being maintained free of MS symptoms (vertigo and vomiting on recumbency) by weekly treatments with the AO instrument.

    Other Quarter Highlights

    As of September 30, 2011, FONAR had installed 152 FONAR UPRIGHT(R) Multi-Position� MRIs. The 152nd was installed at the Diagnostic Radiology Center of the Treasure Coast in Port St. Lucie, Florida.

    A new California customer purchased the FONAR UPRIGHT(R) Multi-Position� MRI saying it was because of their dedication to being a ‘center of excellence for the spine.’ One of the physicians, Hoorman M. Melamed, MD, FAOOS, a board certified orthopaedic spine surgeon, and a principal at the Bakersfield UPRIGHT(R) MRI Center, said, “Selection of the FONAR UPRIGHT(R) Multi-Position� MRI for our group was a very careful and deliberate decision. We recognize that the UPRIGHT(R) MRI offers capabilities beyond that of a recumbent-only MRI. The UPRIGHT(R) MRI allows for scanning patients weight-bearing and in the dynamic positions of flexion and extension. This allows us to see and evaluate the patient’s spine pathology under load and thus enabling us to avoid underestimating a patient’s pathology and therefore obtaining a better diagnosis.”

    Another new customer for the FONAR UPRIGHT(R) Multi-Position� MRI was a physician practice of radiologists and neurosurgeons located in the Northeast section of the U.S. It will be part of a newly-constructed 75,000 sq. ft. state-of-the-art neuroscience spine institute where it will be the hallmark of their goal of becoming a center of excellence in spine care.

    Management Commentary

    Dr. Damadian said, “Over the last six quarters we have a net profit of $4.9 million. This is due to changes that we have had to make including a focus on the management of our ten UPRIGHT(R) MRI imaging centers and some difficult cost reductions. While sales are not as robust as in prior years, we believe sales of the UPRIGHT(R) Multi-Position� MRI will increase as the U.S. economy continues its recovery. This is because the UPRIGHT(R) MRI has huge value in medicine when it comes to diagnosing the spine. As time goes on, more and more physicians and patients recognize this. The discovery that an interrupted CSF flow causes MS is a valuable discovery and one that will immensely help those poor souls afflicted with the symptoms of MS as well as FONAR tremendously.”

    About FONAR

    FONAR, Melville, NY, The Inventor of MR Scanning�, was incorporated in 1978, and is the first, oldest and most experienced MRI company in the industry. FONAR introduced the world’s first commercial MRI in 1980, and went public in 1981. Since its inception, nearly 300 recumbent-OPEN MRIs and 150 UPRIGHT(R) Multi-Position� MRI scanners have been installed worldwide. FONAR’s stellar product is the UPRIGHT(R) MRI (also known as the Stand-Up(R) MRI), the only whole-body MRI that performs Position� imaging (pMRI�) and scans patients in numerous weight-bearing positions, i.e. standing, sitting, in flexion and extension, as well as the conventional lie-down position. The FONAR UPRIGHT(R) MRI often sees the patient’s problem that other scanners cannot because they are lie-down only. The patient-friendly UPRIGHT(R) MRI has a near-zero claustrophobic rejection rate by patients. As a FONAR customer states, “If the patient is claustrophobic in this scanner, they’ll be claustrophobic in my parking lot.” Approximately 85% of patients are scanned sitting while they watch a 42″ flat screen TV. FONAR is headquartered on Long Island, New York.

    UPRIGHT(R) and STAND-UP(R) are registered trademarks and The Inventor of MR Scanning�, Full Range of Motion�, Multi-Position�, Upright Radiology�, The Proof is in the Picture�, True Flow�, pMRI�, Spondylography�, Dynamic�, Spondylometry�, CSP�, and Landscape�, are trademarks of FONAR Corporation.

    This release may include forward-looking statements from the company that may or may not materialize. Additional information on factors that could potentially affect the company’s financial results may be found in the company’s filings with the Securities and Exchange Commission.

    Source: FONAR Corporation


    Daniel Culver
    Director of Communications
    FONAR Corporation
    Tel: 631-694-2929
    Fax: 631-390-1709
    Email Contact

    FONAR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (000's OMITTED)ASSETS September 30, June 30, 2011 2011 (UNAUDITED) ------------- -------------Current Assets: Cash and cash equivalents $ 9,512 $ 9,251 Marketable securities 28 33 Accounts receivable - net 4,701 5,264 Accounts receivable - related party 90 - Management and other fees receivable - net 3,496 3,309 Management and other fees receivable - related medical practices - net 1,714 1,669 Costs and estimated earnings in excess of billings on uncompleted contracts 557 169 Inventories 3,817 2,400 Current portion of notes receivable - net 114 114 Prepaid expenses and other current assets 425 352 ------------- ------------- Total Current Assets 24,454 22,561 ------------- -------------Property and equipment - net 3,499 3,769Notes receivable 344 359Other intangible assets - net 4,219 4,318Other assets 587 574 ------------- ------------- Total Assets $ 33,103 $ 31,581 ============= ============= FONAR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (000's OMITTED) September 30, June 30,LIABILITIES AND STOCKHOLDERS' EQUITY 2011 2011 (UNAUDITED) ------------- -------------Current Liabilities: Current portion of long-term debt and capital leases $ 1,818 $ 2,026 Accounts payable 2,074 2,187 Other current liabilities 9,264 8,236 Unearned revenue on service contracts 5,379 5,762 Unearned revenue on service contracts - related party 82 - Customer advances 3,638 4,846 Billings in excess of costs and estimated earnings on uncompleted contracts 817 4 Income tax payable 75 75 ------------- ------------- Total Current Liabilities 23,147 23,136Long-Term Liabilities: Accounts payable 148 102 Due to related medical practices 230 228 Long-term debt and capital leases, less current portion 1,628 1,746 Other liabilities 498 502 ------------- ------------- Total Long-Term Liabilities 2,504 2,578 ------------- ------------- Total Liabilities 25,651 25,714 ------------- ------------- FONAR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (000's OMITTED, except share data) September 30, June 30,LIABILITIES AND STOCKHOLDERS' EQUITY 2011 2011 (continued) (UNAUDITED) ------------- -------------STOCKHOLDERS' EQUITY:Class A non-voting preferred stock $.0001 par value; 453,000 shares authorized at September 30, 2011 and June 30, 2011, 313,451 issued and outstanding at September 30, 2011 and June 30, 2011 - -Preferred stock $.001 par value; 567,000 shares authorized at September 30, 2011 and June 30, 2011, issued and outstanding - none - -Common Stock $.0001 par value; 8,500,000 shares authorized at September 30, 2011 and June 30, 2011, 5,689,171 and 5,636,571 issued at September 30, 2011 and June 30, 2011, respectively; 5,677,528 and 5,624,928 outstanding at September 30, 2011 and June 30, 2011, respectively 1 1Class B Common Stock (10 votes per share) $.0001 par value; 227,000 shares authorized at September 30, 2011 and June 30, 2011; 158 issued and outstanding at September 30, 2011 and June 30, 2011 - -Class C Common Stock (25 votes per share) $.0001 par value; 567,000 shares authorized at September 30, 2011 and June 30, 2011, 382,513 issued and outstandingat September 30, 2011 and June 30, 2011 - -Paid-in capital in excess of par value 173,580 173,476Accumulated other comprehensive loss (22) (16)Accumulated deficit (172,597) (174,110)Notes receivable from employee stockholders (113) (115)Treasury stock, at cost - 11,643 shares of common stock at September 30, 2011 and June 30, 2011 (675) (675)Non controlling interests 7,278 7,306 ------------- ------------- Total Stockholders' Equity 7,452 5,867 ------------- ------------- Total Liabilities and Stockholders' Equity $ 33,103 $ 31,581 ============= ============= FONAR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (000's OMITTED, except per share data) FOR THE THREE MONTHS ENDED SEPTEMBER 30, ------------------------ 2011 2010 ----------- ----------- Product sales - net $ 1,776 $ 2,660 Service and repair fees - net 2,905 2,689 Service and repair fees - related parties - net 27 55 Management and other fees - net 3,329 2,088 Management and other fees - related medical practices - net 1,571 1,193 ----------- ----------- Total Revenues - Net 9,608 8,685 ----------- -----------COSTS AND EXPENSES Costs related to product sales 1,475 2,506 Costs related to service and repair fees 813 665 Costs related to service and repair fees - related parties 8 14 Costs related to management and other fees 2,185 1,313 Costs related to management and other fees - related medical practices 819 739 Research and development 329 454 Selling, general and administrative 2,043 2,383 Provision for bad debts 175 176 ----------- ----------- Total Costs and Expenses 7,847 8,250 ----------- -----------Income From Operations 1,761 435Interest Expense (107) (94)Interest Expense - Related Parties - (4)Investment Income 62 38Interest Income - Related Party - 1Other Income 56 9 ----------- -----------Net Income 1,772 385Net Income - Non Controlling Interests (259) - ----------- -----------Net Income - Controlling Interests $ 1,513 $ 385 =========== ===========Net Income Available to Common Stockholders $ 1,409 $ 363 =========== ===========Net Income Available to Class A Non-Voting Preferred Stockholders $ 78 $ 22 =========== ===========Net Income Available to Class C Common Stockholders $ 27 $ 7 =========== ===========Basic Net Income Per Common Share Available to Common Stockholders $ 0.25 $ 0.07 =========== ===========Diluted Net Income Per Common Share Available to Common Stockholders $ 0.24 $ 0.07 =========== ===========Basic and Diluted Income Per Share - Common C $ 0.07 $ 0.02 =========== ===========Weighted Average Basic Shares Outstanding 5,668,762 5,012,245 =========== ===========Weighted Average Diluted Shares Outstanding 5,796,266 5,139,749 =========== ===========