Saturday, November 17, 2012

Has Visa Become the Perfect Stock?

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Visa (NYSE: V  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Visa.


What We Want to See


Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 26.3% Pass
1-Year Revenue Growth > 12% 14.0% Pass
Margins Gross Margin > 35% 84.0% Pass
Net Margin > 15% 39.7% Pass
Balance Sheet Debt to Equity < 50% 0.1% Pass
Current Ratio > 1.3 2.69 Pass
Opportunities Return on Equity > 15% 14.0% Fail
Valuation Normalized P/E < 20 16.93 Pass
Dividends Current Yield > 2% 0.7% Fail
5-Year Dividend Growth > 10% 12.6% Pass
Total Score 8 out of 10

Source: Capital IQ, a division of Standard & Poor's. Total score = number of passes.

When we looked at Visa last year, it only managed to rack up six points, so we've seen a big improvement from the company's 2010 showing. A cheaper valuation and a continuing rise in the company's dividend have helped the credit card giant get closer to perfection.

Visa is the undisputed leader in the credit card business. With more cards than MasterCard (NYSE: MA  ) , American Express (NYSE: AXP  ) , and Discover Financial (NYSE: DFS  ) combined, Visa covers the globe and dealt with more than $3.3 trillion in payments during 2010.

But Visa continues to face threats from several directions. Caps on debit-card fees could threaten their growth, especially as banks like Bank of America (NYSE: BAC  ) have already instituted separate monthly charges for those who use their debit cards.

The bigger concern is the growing battle to create an electronic wallet. Google (Nasdaq: GOOG  ) initially partnered with MasterCard on its pay-by-smartphone service but ended up working with all the major card networks. But with rival networks as well as eBay's (Nasdaq: EBAY  ) PayPal all fighting for supremacy in the area, Visa will have to act strongly to defend its turf.

For now, though, Visa has everything it needs to succeed. With strong sales growth, a clean balance sheet, and improving returns on equity, all investors would need is a higher dividend to judge Visa a perfect stock.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.

Finding the perfect stock is only one piece of a successful investment strategy. Get the big picture by taking a look at our 13 Steps to Investing Foolishly.

Quibids and Bidz Penny Auction Reviews

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Robert Shiller on Why So Many Experts Missed the Crash

In hindsight, the housing bubble and ensuing crash seem so obvious. Who could have missed it?

At the time, nearly everyone.

Despite the incredible leverage built up in financial institutions and blatant overbuilding in the housing market, the bubble and crash of 2008 surprised the majority of expert forecasters.

In an exclusive interview last month, I asked Yale economist Robert Shiller -- one of the few who warned of the housing bubble well before it burst -- where the economy is heading over the next 10 years. His response was essentially: No one knows. That moved into a conversation about why we're so bad at predicting what the economy and investments might do in the future. Here's what he had to say:

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What do you think? Share your thoughts in the comment section below.

Lufkin Industries Outruns Estimates Again

Lufkin Industries (Nasdaq: LUFK  ) reported earnings on Feb. 9. Here are the numbers you need to know.

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

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

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

Revenue details
Lufkin Industries reported revenue of $279.3 million. The two analysts polled by S&P Capital IQ hoped for sales of $255.1 million. GAAP sales were 44% higher than the prior-year quarter's $193.5 million.

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

EPS details
Non-GAAP EPS came in at $0.80. The five earnings estimates compiled by S&P Capital IQ forecast $0.78 per share on the same basis. GAAP EPS of $0.67 for Q4 were 40% higher than the prior-year quarter's $0.48 per share.

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

Margin details
For the quarter, gross margin was 24.9%, 50 basis points worse than the prior-year quarter. Operating margin was 14.1%, 300 basis points better than the prior-year quarter. Net margin was 7.4%, 10 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $285.2 million. On the bottom line, the average EPS estimate is $0.92.

Next year's average estimate for revenue is $1.24 billion. The average EPS estimate is $4.31.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 608 members rating the stock outperform and 24 members rating it underperform. Among 232 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 229 give Lufkin Industries a green thumbs-up, and three give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Lufkin Industries is outperform, with an average price target of $79.

Over the decades, small-cap stocks, like Lufkin Industries have provided market-beating returns, provided they're value priced and have solid businesses. Read about a pair of companies with a lock on their markets in "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke." Click here for instant access to this free report.

  • Add Lufkin Industries to My Watchlist.

BMC Software: New University, Defense Deals

BMC Software Inc. (BMC) is winning new customers at regular intervals. The company's superior product quality, innovative service offerings and aggressive marketing strategy are helping to win these major deals. The ongoing revival in IT spending across the globe is also a benefit.

Latest among these is a deal win from Australia's Monash University. This university has selected BMC Software's Business Service Management (BSM) platform to support its information and communication technology (ICT) services. This new platform developed jointly by Monash and BMC will manage IT services for more than 50,000 students across six Victorian campuses. Although a major deal, the company did not disclose the monetary value.

In addition, various government agencies are increasingly feeling the need for professional management of their IT infrastructure. As a result, many U.S. defense organizations have selected BMC Software Inc. for their IT service management and software, including the Air Force Services Agency, Defense Logistics Agency, Marine Corps Systems Command, U.S. Air Force, U.S. Air Force Pentagon Communications Agency, U.S. Army, U.S. Coast Guard, U.S. Department of Defense, U.S. Department of the Navy and others.

Apart from providing normal IT solutions and services, U.S. Government agencies have also chosen BMC Software for different IT initiatives, such as cloud computing, service desk consolidation and the management of hybrid IT environments.

We view these wins as significant, not only because government contracts are usually lucrative, but also because they usually span over a number of years and lend stability to the top line numbers. Moreover, new wins increase penetration at government agencies and indicate market share gains.

The company reported encouraging second quarter 2010 results, with earnings per share of 76 cents exceeding the Zacks Consensus Estimate of 60 cents per share. Revenue of $508.0 million was up 4.0% from the year-ago period. For fiscal year 2010, the company expects non-GAAP earnings per share of $2.64 to $2.72, but expects total bookings and revenue to increase in the low single digits, compared to the year-ago period.

For fiscal year 2010, the Zacks Consensus Estimate is $2.37. This is much below the company's guidance range of $2.64 to $2.72 per share, leaving some room for further upside. Analysts covering the stock have not changed their estimate in the last 30 days.

The company has witnessed an average earnings surprise of 16.25% in the last four quarters and we expect this trend to continue, as the company is venturing into new businesses and expanding its existing line of business.

6 Overbought Stocks and Funds With Significant Short Interest

The following is a a list of overbought stocks, as defined by the RSI(14) indicator, that have a short float in excess of 15%. These stocks may have reached new highs, but will the inevitable short buybacks provide some support in the event of a pullback?

More detailed analysis follows below.

1. Athenahealth, Inc. (ATHN): Business Services Industry. Market Cap of $1.06B. Forward P/E at 37.06, and PEG ratio at 4.07. Short float at 34.57%, which implies a short ratio of 12.93 days. RSI(14) at 72.75. The stock has lost -16.47% over the last year.

2. OpenTable, Inc. (OPEN): Business Services Industry. Market Cap of $1.20B. PEG ratio at 2.84. Short float at 20.44%, which implies a short ratio of 15.04 days. RSI(14) at 72.36. The stock has gained 76.24% over the last year.

3. Superior Well Services Inc. (SWSI): Oil & Gas Equipment & Services Industry. Market Cap of $681.21M. Forward P/E at 21.26. Short float at 22.75%, which implies a short ratio of 3.43 days. RSI(14) at 71.95. The stock has gained 200.82% over the last year.

4. CMS Energy Corp. (CMS): Diversified Utilities Industry. Market Cap of $4.01B. Forward P/E at 12, and PEG ratio at 2.08. Short float at 18.26%, which implies a short ratio of 12.11 days. RSI(14) at 71.71. The stock has gained 36.79% over the last year.

5. iShares Barclays 20+ Year Treas Bond (TLT): ETF. Market Cap of $3.24B. Short float at 43.37%, which implies a short ratio of 1.73 days. RSI(14) at 71.19. The stock has gained 16.51% over the last year.

6. Netflix, Inc. (NFLX): Music & Video Stores Industry. Market Cap of $7.18B. Forward P/E at 35.92, and PEG ratio at 2.3. Short float at 16.63%, which implies a short ratio of 2.08 days. RSI(14) at 70.9. The stock has gained 208.43% over the last year.

Disclosure: No position

3 REITs Offering Outstanding Dividends

The real estate investment trust, or REIT, sector has recovered nicely following the financial crisis. In fact, the disaster helped separate the wheat from the chaff. Overleveraged companies got their heads handed to them and were among the first to cut dividends. Other REITs that managed their debt and liquidity well not only survived, but thrived.�Here are three such REITs that I’ve followed for a long time that I think make an excellent addition to any regular or retirement account.

Winthrop Realty Trust

Winthrop Realty Trust (NYSE:FUR) is rather modest by REIT standards. It owns 16 triple-net-leased properties; two office buildings located in Amherst, N.Y.; an office building located in Indianapolis; a nine-story office building in Houston; and an 80% interest in 128,000 square feet of retail and office space and 208 parking spaces located in Chicago.

Winthrop also has chosen to diversify its portfolio by owning loan receivables and preferred equity investments, as well as trading other real estate securities. For example, this past quarter, Winthrop originated a $20 million mortgage loan to a Manhattan hotel, sold off a $14 senior position in another loan, and held onto a junior position in the same loan that pays 13.4% interest. In effect, you’re buying a catch-all real-estate play that owns property and makes loans to collect interest.�Winthrop Realty raised capital with a stock offering this past year that diluted its shares considerably, but despite that, the company still raised its net income by 60%. And FUR pays a great 7.1% yield.

Newcastle Investment Corp.

If you are in the mood for a dicier play, have a look at Newcastle Investment Corp.�(NYSE:NCT). The company invests in a portfolio of real estate securities, including commercial mortgage-backed securities, senior unsecured debt issued by property REITs, real estate-related asset-backed securities, and agency residential mortgage-backed securities.�Newcastle also owns interest in loans and pools of loans, including real estate related loans, commercial mortgage loans, residential mortgage loans and manufactured housing loans. Lastly, NCT also owns interests in operating real estate.

In this case, you are relying entirely on the expertise of management to pick and choose the right investments. Newcastle got hammered along with others of its ilk in 2008 but has rebounded quite nicely and is generating good cash flow. NCT cut its dividend in 2009 but reinstated it in 2010, and it currently yields 13.2%. But be forewarned — this play is more geared toward aggressive investors. If too many of these investments don’t work out, NCT stock could be in real trouble.

Ashford Hospitality Trust

Ashford Hospitality Trust (NYSE:AHT) is a hotel REIT that not only outperformed all of its peers post-crisis, but managed its liquidity and debt better than any of them when times were tough. Many other hotel REITs not only eliminated their common dividends, but their preferred ones as well. Ashford only eliminated its common dividend.

Ashford’s management has 20 years of experience in hotel management and deal-making, and it has boosted the company’s income during the crisis by using complex hedges and derivatives that substantially assisted with cash flow. These guys are savvy dealmakers and own a solid portfolio of more than 100 hotels, broadly diversified in brand and geography. The stock pays a 4.4% yield, and I also like the Preferred D and E shares, which pay 9% and 9.6%, respectively.

As always, read over the financial statements and make sure each REIT’s debt ratio is within limits you are comfortable with.

As of this writing, Lawrence Meyers was long AHT.

Rough Seas Ahead For Shipping

I apologize for the use of puns in the following article, it's simply too easy. As investors, we're constantly out looking for the best deals on the market. It's common nature for people to seek the greatest value in their purchases whether it's a can of soup, a new car, or a little piece of a company. Many of these people are looking towards the shipping industry as one which has been knocked down and is looking to come rising back up.

Unfortunately for these investors, they could be riding the bull straight off the cliff in this circumstance as many of the shipping companies are walking the fine line towards bankruptcy. These investors look towards the sun rising on commodities as the catalyst for correcting the diminishing shipping industry. They'll soon learn that even a growing demand for commodities will not be enough to right this ship. The demise of shipping companies worldwide is two-fold, and about to experience the second beat down in recent years.

A Brief History

The shipping industry experienced years of prosperity throughout the beginning of the century with commodities in high demand and globalization further increasing the exchange of goods across borders. Clear skies were surely ahead causing the shipping companies of the world to exponentially grow their fleets. Little did they know they were sailing straight into the "perfect storm." Unfortunately ships cannot be built overnight; they take years to construct, which causes the directors of shipping companies to predict future demand and correspondingly order more ships to be built. During the boom they simply could not fill orders fast enough as they were constantly working at full capacity. Then the crash came… In the second half of 2008, the prices of most commodities fell dramatically on expectations of diminished demand in a world recession.

2012 Outlook

Some shipping companies narrowly escaped the crash in commodities and have struggled to stay afloat during the global recession. Even as the price of commodities shows signs of rebounding, thus driving up the demand in the industry, they are about to experience further turmoil: The supply is too high. The boom in the price of commodities prior to the financial crisis led to a large increase in orders for the construction of new vessels. Those vessels are now coming onto the market, leading to a massive over-supply of ships. Consequently freight rates have crashed from $15,000 per day about 2 months ago, to less than half that today: $6,000. If you find yourself near a port in Singapore, Malaysia, South Korea, Hong Kong, China etc. you'll see first hand how these coast lines are becoming the largest parking lots on the planet. Miles of empty cargo ships sit idle with no plans of future use. These parking lots however are more damaging than leaving your car in a dark alley of Detroit. Boats that sit idle deteriorate very quickly. They must constantly be maintained and moving in order to be kept seaworthy.

This second wave of pain on the shipping industry is going to be far more destructive than what we've witnessed over recent years. Their income statements are about to produce another year of losses due to the decrease in freight rates. Furthermore, their balance sheets are going to be equally as devastated due to the decreased value of their vessels from over-supply.

Will This Lead to Investment Opportunities in Consolidation?

According to many reputable SA authors; Yes. According to this inexperienced, punk kid with too much time on his hands; NO. If you're the CEO of a large shipping company are you actively looking for a cheap buyout of your smaller, cash strapped competitors? No. These larger companies may be better prepared to endure more times of hardship, but they certainly will not be looking to add to their fleet through acquisition. This is not the tech world where a takeover leads to new subscribers and endless amounts of patents. This is the shipping world. A takeover will lead to more useless ships, smelly sailors, and increased docking costs. Take Overseas Shipping Group (OSG) for example. They currently are in one of the best positions to make it through the upcoming hardships. Market cap of $411.65M, yield of 6.62% and a strong cash position to back it up. They're certainly not going to be looking to diminish their cash position by acquiring a large fleet through a takeover. At a Price-to-Book ratio of 0.25 they certainly look like a cheap buy, but if you believe anything I've outlined thus far, this is no industry to go long in. Don't let this attractive looking stock be the Italian rock that sinks your portfolio.

Abandon Ship!

Expect the shipping industry to take another shot across the bow in 2012. If you do your due diligence you'll be able to find many possible short candidates.

Eagle Bulk Shipping Inc. (EGLE) for example, has an EPS of -0.16 accompanied by a Debt-Equity ratio of 168.53. From September 2010 to September 2011 their cash position went from $129M to $27M. Needless to say, this company cannot remain liquid if they go through another difficult year. If you're looking to short, allow this stock to continue rising as it has recently. Make sure to thank the bulls when you do enter the position.

If you're sitting here today having watched your stocks in DryShips Inc. (DRYS) increase over 16% yesterday and laughing at this article which is predicting we've hit a false bottom, I say kudos and congrats. Further, I caution you to recognize the sheer lack of reasoning for this rally, and reevaluate the horizon for this company.

Apologies for painting a bleaker picture for the optimists out there, but these ships certainly were not paid for with cash. The European banks, clinging to their life rafts as they weather the current financial crisis, hold majority of the debt used to finance these shiny new boats. But I digress...

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

Conflict of Interest: Fed Gave Their Own Banks $4 Trillion!

A report recently conducted by the Government Accountability Office (GAO) and officially released by Senator Bernie Sanders (I-Vermont) has a lot of Americans angry about the problematic functioning of the Fed. Despite the fiscal struggles plaguing America, the Fed has been handing out trillions of dollars companies with CEOs also working for the Fed.

The cases involve some serious conflicts of interest and strong bias to say the least.

Shortly after the 2008 financial meltdown, the Fed allocated more than $4 trillion in near zero-interest loans to banks and businesses whose executives also served as directors for the national bank. The report reveals that at least 18 Fed regional bank directors, both current and former, “had a direct stake in the trillion-dollar bailout given to teetering institutions.”

Senator Sanders had a provision in the Dodd-Frank Wall Street Reform Act which required the GAO to investigate the Fed for any possible conflicts of interest regarding bailout money. Three days ago, Sanders exposed the names of those who received special treatment when it came to Fed hand-outs...

Sanders seeks to end this irresponsible behavior once and for all. Regarding the report findings, he said:

"This report reveals the inherent conflicts of interest that exist at the Federal Reserve.  At a time when small businesses could not get affordable loans to create jobs, the Fed was providing trillions in secret loans to some of the largest banks and corporations in America that were well represented on the boards of the Federal Reserve Banks.  These conflicts must end.” 

In May, Sanders initiated legislation that would deny the banking industry and business executives the ability to hold directors positions within the Fed's 12 regional banks.

In attempt to get his proposal approved, Sanders shed light on this perfect example of a major conflict of interest. Jamie Dimon, CEO of JPMorgan Chase and a director of the Federal Reserve Bank of New York since 2007. He played a significant role in the Fed's leadership team when it voted on a $391 billion emergency fund for JPMorgan Chase in order to help it manage the mayhem on Wall Street.

But the Dimon example stands far from alone...

The CEO of General Electric, Jeffrey Immelt, participated in a similar situation. Immelt was part of the New York Federal Reserve when it began the Commercial Paper Funding Facility – that funding facility conveniently lent $16 billion to General Electric.

To repeat the same full-length story with slightly altered dollar-amounts each time becomes tedious, but let it be known that the examples don't end there. Current and former CEOs of SunTrustBanks, Citigroup, Popular Inc., Webster Bank, Wilmington Trust, PNC, Texas Capital Bank, CitiBank, Marshall & Ilsley, Old National Bancorp., KeyCorp, State Street Corporation, Lehman Brothers, and a Goldman Sach board of directors member all engaged in behavior mimicking that of the examples listed above.

-SunTrustBanks received $7.5 billion

-Citigroup received $2.5 trillion

-Popular Inc. received $1.2 billion

-Webster Bank received $550 million

-Wilmington Trust received $3.2 billion

-PNC received $6.5 billion

-Texas Capital Bank received $2.3 billion

-CitiBank received $21 billion

-Marshall & Ilsley received $21 billion

-Old National Bancorp. received $550 million

-KeyCorp received $40 billion

-State Street Corporation received $42 billion

-Lehman Brothers received $183 billion 

It's nice to know someone is taking action to crack down on sleazy Fed behavior, especially during these turbulent economic times where small businesses are dying because they can't afford loans and the employment rate is plummeting in consequence.

Bailout money shouldn't be based on bias, especially when it's taxpayer money paying for those big banks' failures.


Friday, November 16, 2012

European Central Bank Research Shows that Government Spending Undermines Economic Performance

Europe is in the midst of a fiscal crisis caused by too much government spending, yet many of the continent�s politicians want the European Central Bank to purchase the dodgy debt of reckless welfare states such as Spain, Italy, Greece, and Portugal in order to prop up these big government policies.

So it�s especially noteworthy that economists at the European Central Bank have just produced a studyshowing that government spending is unambiguously harmful to economic performance. Here is a brief description of the key findings.

�we analyse a wide set of 108 countries composed of both developed and emerging and developing countries, using a long time span running from 1970-2008, and employing different proxies for government size� Our results show a significant negative effect of the size of government on growth. �Interestingly, government consumption is consistently detrimental to output growth irrespective of the country sample considered (OECD, emerging and developing countries).

There are two very interesting takeaways from this new research. First, the evidence shows that the problem is government spending, and that problem exists regardless of whether the budget is financed by taxes or borrowing. Unfortunately, too many supposedly conservative policy makers fail to grasp this key distinction and mistakenly focus on the symptom (deficits) rather than the underlying disease (big government).

The second key takeaway is that Europe�s corrupt political elite is engaging in a classic case of Mitchell�s Law, which is when one bad government policy is used to justify another bad government policy. In this case, they undermined prosperity by recklessly increasing the burden of government spending, and they�re now using the resulting fiscal crisis as an excuse to promote inflationary monetary policy by the European Central Bank.

The ECB study, by contrast, shows that the only good answer is to reduce the burden of the public sector. Moreover, the research also has a discussion of the growth-maximizing size of government.

� economic progress is limited when government is zero percent of the economy (absence of rule of law, property rights, etc.), but also when it is closer to 100 percent (the law of diminishing returns operates in addition to, e.g., increased taxation required to finance the government�s growing burden � which has adverse effects on human economic behaviour, namely on consumption decisions).

This may sound familiar, because it�s a description of the Rahn Curve, which is sort of the spending version of the Laffer Curve. This video explains.

The key lesson in the video is that government is far too big in the United States and other industrialized nations, which is precisely what the scholars found in the European Central Bank study.

Another interesting finding in the study is that the quality and structure of government matters.

Growth in government size has negative effects on economic growth, but the negative effects are three times as great in non-democratic systems as in democratic systems. �the negative effect of government size on GDP per capita is stronger at lower levels of institutional quality, and ii) the positive effect of institutional quality on GDP per capita is stronger at smaller levels of government size.

The simple way of thinking about these results is that government spending doesn�t do as much damage in a nation such as Sweden as it does in a failed state such as Mexico.

Last but not least, the ECB study analyzes various budget process reforms. There�s a bit of jargon in this excerpt, but it basically shows that spending limits (presumably policies similar to Senator Corker�s CAP Act or Congressman Brady�s MAP Act) are far better than balanced budget rules.

�we use three indices constructed by the European Commission (overall rule index, expenditure rule index, and budget balance and debt rule index). �The former incorporates each index individually whereas the latter includes interacted terms between fiscal rules and government size proxies. Particularly under the total government expenditure and government spending specifications�we find statistically significant positive coefficients on the overall rule index and the expenditure rule index, meaning that having these fiscal numerical rules improves GDP growth for these set of EU countries.

This research is important because it shows that rules focusing on deficits and debt (such as requirements to balance the budget) are not as effective because politicians can use them as an excuse to raise taxes.

At the risk of citing myself again, the number one message from this new ECB research is that lawmakers � at the very least � need to follow Mitchell�s Golden Rule and make sure government spending grows slower than the private sector. Fortunately, that can happen, as shown in this video.

But my Golden Rule is just a minimum requirement. If politicians really want to do the right thing, they should copy the Baltic nationsand implement genuine spending cuts rather than just reductions in the rate of growth in the burden of government.

VIX - Options Volatility Sonar: Friday Recap

VIX - Market Sentiment

Friday saw a yawner of a pre-market with the S&P futures only moving 5 points top to bottom. Digestion for this market is probably pretty good here as we continue to build floor after floor of support for the S&P. Core CPI numbers were released and were lower than expected but just like other days it appears investors just do not care at this point. The accelerated uptrend remains intact and we are not even threatening the 10-day moving average currently sitting at 1373.

The spot CBOE Volatility Index (VIX) continued to melt away. An initial pop in VIX futures made volatility ETFs (VXX) and 2x volatility (TVIX) jump and follow the same trend lower as the markets were flat. The March VIX puts were active today especially in the front month. Buyers of the VIX March 15 puts came in heavy today with more than 25K contracts trading and 70K contracts on the 17 line suggest traders expect to see front month futures collapse between now and next Wednesday settlement. This would be very bad for VXX in the short term if this did come to fruition as more than likely the back month futures will not collapse as much similar to how they performed today. VIX futures are listed below.


March VIX futures 17.13

April VIX futures 21.63

May VIX futures 23.60


March VIX futures 16.50

April VIX futures 21.33

May VIX futures 23.55

Options Paper

Apple (AAPL) straddle and strangle sellers yesterday made some serious bank after March volatility plummeted today. The 585 straddle yesterday traded north of 10.00 and into the noon hour saw this come in more than 70% down to 2.60 bid. The volatility in this name has been crazy doubling in the last two days just to have March volatility collapse hard allowing those sellers to make some serious bank. Today AAPL options came back down to earth only trading 800K moving into the 2:00 timeframe. Calls did outnumber puts today and unlike yesterday net premium is signaling calls once again being bought today as well as puts but almost 3x upside call inflows in terms of cash. As noted in yesterday's sonar the 675's were bid at 1.05 and even today continue to be bid at .38 as people continue to believe AAPL will continue the march higher.

Today touched a new all time high of 600.00 and today the net premium is decidedly bearish showing inflows into puts and outflows into calls. A large hedge fund is betting on even more upside after putting on a very large April 610 - 660 1x2 call spread. The majority of this went off at 9:55 today buying the 610s for 26.60 and selling 2x of the 660 calls for 12.50 for a net debit of 2.10. This trade would pay off greatly if AAPL were to run and rest at the 660 level prior to April expiration. Just the single print of this trade cost the trader 508K and could make 11.6 million in profit. Even with AAPL at these elevated levels and volatility screaming through the roof it appears some traders are looking for even more upside. AAPL already passed its daily option volume prior to the 11:00 mark and today is again well on the way to 1.25 M contracts again. As noted in yesterday's sonar report today AAPL again was trading at the time of this writing more than 10% of all contracts with calls outnumbering puts 1.7:1.

Iron Mountain (IRM) has been on the sonar a few times of late and today the bulls are at it again. A large 10K October risk reversal went off today selling the 25 strike puts for 1.25 and buying the 32.50 strike calls for 1.27. This only cost the trader .02 and will profit greatly with a move higher between now and October. This does lock up some serious cash so for those of you who don't like eating that much margin you could buy the October 20 put and save more than 2K in margin and buying power to keep your leverage high but cut your risk. Option volume is more than 6 times average in both strikes so this appears bulls continue to pile into this name. Options volume as one would expect in a thinly traded name like this was more than 22x average daily volume so if you enter a trade like this be careful because options are not very liquid with large spreads.

Popular ETFs and equity names with bullish/bearish paper in terms of call/put ratios:

Calls outnumbering puts:

Flextronics (FLEX) 99:1

Savient (SVNT) 95:1

Vanguard Emergin ETF (VWO) 72:1

Aeropostale (ARO) 47:1

Globe Specialty (GSM) 46:1

Liz Claiborne (LIZ) 45:1

Commercial Metals (CMC) 44:1

Gap Inc (GPS) 36:1

Puts outnumbering calls:

Micron Tech (MU) 14:1 (Large number of puts sold so this would be bullish)

Deutsche Bank (DB) 8:1 (I've been wrong on this for 7 points now hopefully the 42.5 put buyer is right)

Fossil (FOSL) 5:1

Shutterfly (SFLY) 6:1

Crown Castle (CCI) 5:1

Yen ETF (FXY) 4:1

Volatility Explosion

Keryx (KERX) is a name which I highlighted a few weeks back after some bulls stepped in with heavy call buying pressure. I've been down to flat in this trade ever since but today options lit up again sending IV again sky high touching the 52 week high of 221 before pulling back slightly. Today calls and puts were both heavily bought with calls outnumbering puts 2:1. Options volume was also 2x average daily volume in this name as people seek both long and short protection from an upcoming announcement. More than likely this stock will either scream to the upside or drop into oblivion with the April straddle now priced at 2.75 ask. This is more than a 50% implied move between now and April expiration so strap on your seat belts.

Volatility Implosion

Perfect World (PWRD) saw IV collapse today after positive results has the stock moving higher in a big way. We have mentioned call activity on the sonar in the past and today those April 15 call buyers got paid. The stock jumped more than 29% as shorts ran for cover. The call buyers playing almost a triple are now bailing and rolling to some higher strikes but it appears some bears are also stepping in here buying 63% of the puts on the ask. The total option volume today was more than 14x average daily volume with calls outnumbering puts 2:1. It is important to note the largest trades were inflows of cash into puts. Keep your eyes on open interest for a potential move on this moving forward.

Speculative Play Friday

So with the last two plays one worked and one didn't making us now 9 for 12. Of course in my defense the Yahoo (YHOO) short I mentioned is still in a bearish pattern and the June puts could still very well work. My short on gold (GLD) has worked very well and I have taken profits and left this trade. This week's trade is one where I have many emotions wrapped up in and thus is either a home run or death.

Research In Motion (RIMM) is a common buyout rumor candidate which could be overall very positive for the stock. I, however, feel this stock has much more than a broken chart - it's a broken company. RIMM has fallen hard from the ranks of stardom with the rising of the AAPL iPhone and Google (GOOG) droid. The company had major outages last year, and when you combine this with subpar outdated equipment and gear I feel they will continue to head lower.

I am a user of both Blackberry and iPhone and personally I have never heard someone say "I can't wait for the new Blackberry." The RIMM playbook is a joke and this company receives major inflows from Europe and other foreign markets which have not been great either. Thus I am looking to make a bearish bet on RIMM. I like buying the April 15 put and selling weekly OTM puts and calls against it to reduce cost. I believe the earnings and more importantly guidance will be soft from RIMM which will more than likely put downward pressure on the stock.

As always happy trading and stay hedged.

Remember equity insurance always looks expensive until you need it.


I am long APC, TBT, FAZ, X, KERX,

I am short: PBI, DB, AAPL, LYV, YHOO.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. I do not recommend that anyone act upon any investment information without first consulting an investment professional as to the suitability of such investments for his or her specific situation.

5 Potential Peter Lynch Stocks

With the simple phrase "buy what you know," Peter Lynch made investing far more accessible to a wide range of potential investors.

Last week, I took a look at the home runs that my wife hit in her Motley Fool CAPS account by following that advice to a T. However, I also noted that simply sticking to that phrase and not doing any additional work can get you into trouble, so I suggested a few additional points to consider before diving in:

  • Make sure it's a company you think offers something better and not just something you are familiar with.
  • Look for signs that it's a well-managed company.
  • Buy only if you can get a fair price.
  • With those points in mind, I decided to take stroll around my house to see if there are any companies that I give my hard-earned dollars to that are worthy of an investment.

    Five that I know
    For each company, I've listed the product or service that I own or use, given a thumbs up or down on whether it's a product that is a must have for me, provided a gauge of management based on the company's return on capital, and made a call on whether the stock currently sells at a fair price.

    Company Product / Service Must Have? Well Managed? (Return on Capital*) Fair Price?
    Intel (Nasdaq: INTC  ) Intel-based computers Yes Yes (15.3%) Yes Wide range of retail purchases Yes Yes (16.8%) No
    Nike (NYSE: NKE  ) Running shoes No Yes (17.6%) No
    Tesco Fresh & Easy grocery stores Yes No (8.2%) Yes
    Dell (Nasdaq: DELL  ) Laptop Yes Yes (29.7%) Yes

    Source: S&P Capital IQ.
    *Average five-year, trailing 12-months return on capital.

    Intel has done a tremendous job at branding, considering the company makes computer components that most consumers normally wouldn't give a second thought to. There's certainly competitive advantage in the quality of processors that Intel produces, but there's a heck of a lot to be said for the power that the "Intel Inside" sticker has to convey quality. Archrival AMD (NYSE: AMD  ) keeps fighting back, but it seems like Intel has an almost insurmountable lead.

    As far as the criteria I'm looking at, it only gets better from there. On the basis of the company's return on capital, management has done a stellar job making the most of the brand advantage and the cash that it earns. And as far as a fair price goes, investors are currently paying 10.6 times Intel's trailing earnings and less than 10 times its expected forward earnings. Need I say more?
    For me, Amazon is the first stop for just about anything I want to buy. Everything else is just a second option if Amazon doesn't carry what I'm looking for. The company's scale, along with programs like Amazon Prime that lock in customers, give it a tremendous advantage over both other Internet retailers and the bricks-and-mortar folk.

    I'm a big fan of Jeff Bezos and think he's a very sharp operator. And from the numbers, it certainly seems like the company is run wisely. If there's a fly in the Amazon ointment for me, it's that I just can't wrap my head around the stock's valuation. My fellow Fools at Motley Fool Stock Advisor newsletter service are still hot on the stock, but I can't help but wait for a price that makes more sense to me.

    Is the "no" surprising when it comes to Nike's "must have" status for me? It should be, and it reveals why subjective estimations of a company's edge can sometimes be misleading. Though I do own Nike running gear, the swoosh doesn't compel me to buy Nike's products, and I prefer other brands in a lot of cases. However, Nike's brand is one of the most powerful in the world, and it'd be silly for me to not recognize that.

    On the topic of management effectiveness, the numbers resoundingly show that Nike's got some savvy folks at the top that know how to make the most of the company's brand power and resources. However, like Amazon, I'm not crazy about the price tag on Nike's stock. The valuation isn't as head-scratching for me as Amazon's, but it's higher than I'd be willing to pay.

    I've never been one to get on board for the prices at Whole Foods Market (NYSE: WFM  ) , but I've always been a big fan of its cheaper, privately held counterpart Trader Joe's. However, when Tesco started opening its small-format Fresh & Easy stores near me, I was hooked. And talking to many of my fellow Las Vegans reveals that I'm far from the only one that feels that way. But, of course, while Fresh & Easy has been growing well for Tesco, it's an exceedingly small part of the group's total revenue and was still not profitable in 2010.

    Looking at the bigger picture, it would seem that Tesco has some room for improvement when it comes to the returns it earns. Returns on capital are generally lower for grocers, but the U.S.'s Kroger (NYSE: KR  ) and Costco (Nasdaq: COST  ) are both fairly consistent about delivering double-digit returns.

    The valuation on Tesco seems pretty reasonable to me, but the package may be a more interesting if returns start climbing.

    Put simply, I only buy Dell computers. Why? Because the process is simple, the price is right, and I've been consistently happy with the product that I've received. Of course, as I mentioned with Nike, the subjective view of one consumer is often of very little use. However, my view on Dell as a customer does highlight some potential competitive advantages such as scale, which gives it purchasing power and helps keep prices down; brand, which brings many customers knocking in the first place; and the streamlined PC-build process, which allows customers to customize their PC and receive it in a very timely matter.

    Further bolstering the case for Dell is the company's high returns on capital and low, low valuation. It probably also bears mentioning that Dell has just $7.7 billion in debt and $15.1 billion in cash and 15% of the company is still in the hands of founder and CEO Michael Dell.

    If there was a shocker of the group for me, it was Dell -- it's a stock and company that I'd long ago written off but now think could be well worth a closer look.

    Zeroing in
    I hope one or more of these stocks has caught your eye. If so, your best bet is to add the stock to your watchlist as you dig in further to figure out whether it's really worthy of a spot in your portfolio.

    • Add Intel to your watchlist.
    • Add to your watchlist.
    • Add Nike to your watchlist.
    • Add Tesco to your watchlist.
    • Add Dell to your watchlist.

    Watchdog Targets Mortgage Servicers

    The Consumer Financial Protection Bureau has begun examinations of mortgage servicers as part of its larger initiative to regulate the mortgage industry.

    The examinations will focus initially on loans in default where consumers are struggling to make payments, but will widen into an investigation of the entire loan-modification application process, officials said.

    Get alerts before Link and Cramer make every trade

    Each CFPB examination will look into whether the servicer is providing information about alternatives to foreclosure that is clear, whether loans sent to foreclosure are properly reviewed and actually in default and whether the fees charged to delinquent borrowers are not duplicative or otherwise illegal.The CFPB says it is looking into mortgage servicers, who are responsible for collecting payments from the mortgage borrower on behalf of the owner of that loan, since in the vast majority of cases consumers do not choose their mortgage servicer and mortgage servicing rights can be, and frequently are, bought and sold among servicers.A senior official for the CFPB said last week that a significant number of examinations are under way. The bureau has released an 800-page volume explaining how the examinations will be conducted, and is seeking feedback from industry officials and consumer advocates. "Bank regulators didn't do a good job in the past," says Ira Rheingold, the executive director of the National Association of Consumer Advocates. "We need someone with fresh eyes and a consumer protection perspective to look into the industry."

    1 2 Next › Last »

    Rheingold also says that while policy changes won't happen overnight, new regulations aren't as far away as the public might think, even without a confirmed CFPB director.

    "The bureau can still make rules if it is getting authorities transferred from other agencies," Rheingold says. However, these examination procedures are being unveiled at a time other pressures may force changes in the mortgage industry, he adds.

    The Office of the Comptroller of Currency recently unveiled a new complaint review process for homeowners believing they were the victims of an improper foreclosure. There is also the ongoing probe by state attorneys general into the mortgage industry over the foreclosure document mess (aka "robo-signing") that has yet to be settled. Rheingold says that while it is too soon to predict what rules specifically might go into effect, he hopes new regulations will be put in place that prevent servicers from pushing families into foreclosure and charging inordinate fees once a loan enters in default. The examinations are the latest step in the CFPB's focus on the mortgage industry. Earlier this year, the CFPB unveiled two sample documents that could replace existing federally required mortgage disclosure forms."Mortgage servicing has a huge impact on consumers and is a priority for the CFPB," Raj Date, special adviser to the secretary of the Treasury on the CFPB, says in a written statement. "The mortgage servicing market has been bogged down by widespread reports of pervasive and profound consumer protection problems. We are going to take a close and measured look at whether servicers are following the law."Follow on Twitter and become a fan on Facebook.

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

    4 Triple A Rated Dividend Payers

    U.S. financial markets are off to a rousing start in 2012 with the Dow up 5.5%, the S&P 500 up 7.1% and the Nasdaq notching a YTD gain 11.5% (as of Feb 3, 2012). What's behind these gains? Investors are starting to believe that a recovery is underway in the domestic economy, forward looking statements from big cyclical companies like Caterpillar (CAT) suggest that the emerging economies are back in growth mode and lately, the blowout quarter from Apple (AAPL) and prospects for the Facebook IPO have ignited the tech sector powering the Nasdaq average higher.

    Perhaps you're not quite convinced that it's OK to hoist the all clear flag. Maybe you think that before the history is written for 2012 we will suffer a setback thanks to the Euro crisis. Yes, the ECB has stepped in to address liquidity concerns for the European banks but you're not ready to concede that the crisis has been averted and that it won't affect the US economy.

    But you're a dividend investor and want to be invested. However, you also want a measure of downside protection. I would suggest that you could do no better than to look to the only AAA rated companies in the US: Automatic Data Processing (ADP), Exxon Mobil (XOM), Johnson & Johnson (JNJ) and Microsoft (MSFT). Yes, the AAA rating relates to the debt of these companies reflecting the sterling nature of their balance sheets, but it is a noteworthy factor when looking for rock solid businesses.





    Automatic Data Processing




    Exxon Mobil




    Johnson & Johnson













    ADP provides payroll processing, human resources and retirement plan services for businesses around the world. As the employment picture improves in the US, ADP will benefit. And when interest rates begin to return to growth levels, the company will see increased earnings from their substantial float. Check this Seeking Alpha article for a more detailed look at ADP.

    Market Cap: $27.9B

    Forward P/E: 18.7

    5 year dividend growth rate: 13.4%

    2012 YTD: 2.78%

    Exxon Mobil

    This integrated oil and gas behemoth has exploration, production and refining operations around the world. The company earns consistently high returns on equity and on invested capital. The stock price is barely above flat line so far this year but it saw a very respectable 18.45% return for 2011. Check out this analysis of Exxon's 4th quarter 2011 earnings report.

    Market Cap: $413.8B

    Forward P/E: 10.4

    5 year dividend growth rate: 5.84%

    2012 YTD: 0.2%

    Johnson & Johnson

    J&J is the world's most diverse health care company. You can think of it as a health care mutual fund representing pharmaceuticals, medical devices and diagnostics, and consumer products. Even though the bottom line has lagged recently due to litigation and product recall related charges, the company has a diverse revenue stream, a strong pipeline of drugs in late stage development and a 49 year history of dividend increases. This article on Seeking Alpha provides an earnings recap for the 4th quarter.

    Market Cap: $179.4B

    Forward P/E: 12.0

    5 year dividend growth rate: 6.50%

    2012 YTD: 0.1%


    The stock of the PC software giant has turned in one of the best performances among the DOW components with a 16.49% gain thus far in 2012. With a 5 year average growth in earnings per share of 17.5%, investors are starting to believe the MSFT will continue to deliver and perhaps accelerate with Windows 8 giving them a better presence on mobile devices. And with a payout ratio under 30% we can expect to see continued growth in the dividend. For a more detailed look at valuation refer to the article on Seeking Alpha.

    Market Cap: $256.2B

    Forward P/E: 10.2

    5 year dividend growth rate: 13.25%

    2012 YTD: 16.49%

    Please do your own research prior to making any investment decision. This article is not a recommendation to buy or sell any security and is the opinion of the author.

    Disclosure: I am long JNJ.

    My Thoughts on Filling Those Fed Seats

    So it looks like President Obama is going to start filling the vacancies left on the Federal Reserve Board. There are three vacancies including the vice chairmanship. Reuters lists several possible candidates. Their list is fine for speculative purposes, but I would like to put my two cents in as well.

    There are two people that I think should (and could) be chosen to sit on the Board of Governors. Also, I would choose one of the two to serve as vice chairman. They are:

    • Edward Nelson — Ed Nelson is currently the Assistant Vice President of the St. Louis Federal Reserve and is, in my opinion, one of the best and most active monetary economists in the field. Nelson’s research displays not only rich, modern insights, but also an appreciation of previous work in monetary economics that seems to have fallen out of the consciousness of most of monetary theory. He recognizes that monetary aggregates are useful for policy. In addition, he has written on nominal income targeting (something I like) and has done extensive research on the Great Inflation.
    • Michael Woodford — This pick will likely surprise those who know me well because I absolutely deplore the cashless approach to monetary policy analysis that Woodford pioneered. However, Woodford is the premier monetary theorist of the day, an independent thinker, and, most importantly, he has a forward-looking viewpoint of monetary policy (something that would please Scott Sumner).

    SEC Chair Speaks to SIFMA

    This news originally appeared on WealthManagerWeb on 10/27/09

    Securities and Exchange Commission Chairman Mary L. Schapiro spoke of the need to "restore investor confidence by focusing on the needs of investors," as the Securuties Industry and Financial Markets Association (SIFMA), opened its annual meeting on Oct. 27 in New York.

    In her speech, Schapiro outlined the progress that the Commission has made so far in the past nine months of her tenure, as it continues to "refocus...on core investor protections." This includes analyzing "the risks and trends of new products pitched to investors." Schapiro highlighted a new area of the SEC, a department of "Risk Strategy and Financial Innovation."

    In addition to initiatives in corporate and market-structure transparency, scrutiny of "complex fee arrangements" and "emerging risks," the Chairman made it clear that overly-complex, high fee products, especially those aimed at the retirement-bound investor, will not be tolerated. In particular, target date funds and life settlements are under the SEC's magnifying glass.

    In addition, Schapiro says she supports the recommendation in the Obama admistration's Investor Protection Act (IPA) for a "fiduciary standard for all financial services professionals who provide investment advice about securities," adding that, "a high standard should apply. Investors simply want their advisors to put [investor's] interests before their own." The Chairman went on to tell the SIFMA audience that the fiduciary standard that becomes law should be a strong one, and not be "a watered down...commercial standard."

    The SEC has fairly wide lattitude in the IPA, as drafted, to ensure that the fiduciary standard of conduct that is ultimately put in place for all providers of advice is an authentic fiduciary duty, which has been in place for decades for investment advisors and their clients and is based on centuries of law.

    The fiduciary standard includes the core principles of putting investor's interests first, prudence, making robust, meaningful disclosures of all material conflicts and management of all conflicts in the client's favor.

    The IPA bill is in mark-up this week in the House Financial Services Committee.

    Comments? E-mail Wealth Manager Editor in Chief Kate McBride at McBride is a member of The Committee for the Fiduciary Standard.

    Africa Index ETF Presents Unique Opportunity

    The Africa Index ETF that Market Vectors sponsors (AFK), has been a shining example of how diversifying assets outside of domestic US markets can be quite profitable. Unfortunately, Africa is usually at that center of negative press generated by biased western media. But, sticking to true capitalist form, you cannot refute the percentage gains this ETF has produced in the 2009 year. AFK produced 35% in 2009 vs. a mere 26% for SPY.

    Beta Analysis

    Beta measures a stock’s volatility (price fluctuations), in relationship to the overall market. Typically, if a security has a Beta of 1, its price movements will tend to mirror the price movement in the overall equities market. If the Beta is greater then 1, it usually means that security is experiencing greater price movements then the overall market. Conversely, a security with Beta less then 1 tends to experience lower price movements then the over market.

    Beta is used as a key tool when examining Risk/Reward scenarios with securities. For example, if the overall market returned 26% with a Beta of .99 and another security with a Beta of 1.04, we would expect that security to have a gain of 27.3% or greater.

    In the case of SPY and AFK, SPY actually does have a Beta of .99 and AFK actually does have a Beta of 1.04, but the difference is that AFK returned 35%, 7.7% above the expected Beta adjusted rate of return of 27.3%. That is very impressive for the Market Vectors ETF, because it produced returns that would be equivalent to a security with a Beta of 1.35, which would be, expected to have higher price movement.

    This ETF has been steadily gaining ground in this game of asset gathering. For the 2009 year AFK accumulated a little shy of $32mm in new assets, which is 700% asset grow YoY. This is clearly not a new Pimco ETF offering that have gained lots of traction, but it is far from a MacroShares Metro Housing Up (UMM) /Metro Housing Down (DMM) ETFs, which were recently shut down..

    As the world recovers from the deep wounds left by the credit crisis, this ETF presents a unique opportunity for investors seeking international investment exposure. This makes room for more so-called exotic investments, such as AFK.

    Africa is the Last Frontier:The Chinese have recognized this, as evidenced by their significant investment into harvesting one of Africa’s greatest assets, its natural resources. The question is will China be the only one to capitalize from it.

    Disclosure: No Positions

    Thursday, November 15, 2012

    Marriott In-Line as Corporate, Leisure Demand Rebound

    Marriott International Inc. (MAR) has reported third quarter 2010 earnings of 22 cents per share, in line with the Zacks Consensus Estimate. Earnings were at the higher end of the company’s guidance of 18 cents to 22 cents, and recorded a substantial increase of 47% year over year.

    The results were driven by further strengthening of corporate and leisure demand, resulting in a higher average daily room-rate. Total revenue summed up to $2.6 billion, up 40% year over year and also surpassed the Zacks Consensus Estimate of $2.5 million.

    Inside the Headline Numbers
    Base management and franchise fees increased 9% year over year to $253 million, backed by higher revenue per available room (RevPAR) and fees from new hotels. Incentive management fees spiked 24% from the year-ago quarter at $21 million. Owned, leased, corporate housing and other revenues fell 3% to $220 million, while adjusted Timeshare sales and services revenues rose 10% to $275 million.

    The RevPAR for worldwide comparable company-operated properties grew 8.2% (up 7.5% on a constant-dollar basis).

    International company-operated RevPAR upped 12.0% year over year (up 8.5% on a constant-dollar basis) with a 1.6% hike in average daily rate (down 1.6% using constant dollars). RevPAR was strongest in the Asia-Pacific region with a rise of 20.0%.

    In North America, comparable company-operated RevPAR rose 7.2%, with average daily rate up 1.7%. RevPAR for comparable company-operated North American full-service and luxury hotels escalated 7.3%, driven by a 2.6% rise in average daily rate.

    Worldwide comparable company-operated house profit margins were up 90 basis points (bps), driven by higher occupancy, slight rate increases and strong productivity.

    General Administrative and other expense expanded 4% to $149 million and interest expense leaped 52% year over year to $41 million.

    Update on Hotel Rooms
    In the third quarter, Marriott opened 5,000 rooms including nearly 2,000 rooms in international markets. At quarter-end, Marriott’s pipeline of hotels under construction internationally, pending conversion or approved for development, added up to about 575 properties with approximately 95,000 rooms.

    The company expects to open about 30,000 rooms in 2010 and 25,000 to 30,000 rooms in 2011.

    At the end of third quarter 2010, total debt was $2,726 million and cash balances summed up to $223 million, compared with $2,298 million in debt and $115 million of cash at year-end 2009, respectively.

    Marriott did not repurchase any shares in the reported quarter. The company also has no plans to repurchase shares in fiscal 2010. As of September 10, 2010, the remaining share repurchase authorization totaled 21.3 million.

    For the fourth quarter, Marriott expects earnings of 33 cents to 36 cents on total fee revenue projection of $370 million to $380 million. Comparable system-wide RevPAR on a constant dollar basis is expected to increase 6% to 8% in North America and 7% to 9% outside North America.

    For full-year 2010, Marriott expects its earnings guidance in the range of $1.09 to $1.12 per share on total fee revenue projection of $1.17 billion to $1.18 billion.

    The company expects 2011 to be more promising than 2010, as strong demand and pricing continue. Comparable system-wide RevPAR on a constant dollar basis is expected to grow in the range of 6% to 8% in North America, outside North America and on a worldwide basis. Total fee revenue is expected to be in the range of $1,290 million to $1,330 million.

    Top Stocks For 2011-12-8-16

    Microchip Technology Inc. (Nasdaq:MCHP) announced a new family of stand-alone Real-Time Clock/Calendar (RTCC) devices. The MCP795WXX/BXX RTCC devices have a 10 MHz SPI interface, non-volatile memory and an effective combination of features at a price lower than most competitors’ devices, including those with fewer features.

    Microchip Technology Incorporated engages in the design, development, manufacture, and market of semiconductor products for embedded control applications.

    Crown Equity Holdings, Inc. (CRWE)

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

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

    Crown Equity Holdings Inc., together with its digital network of Websites, offers media advertising, branding and marketing services as a worldwide online multi-media publisher. The company focuses on the distribution of information for the purpose of bringing together a targeted audience and the advertisers that want to reach them. Its advertising services cover and connect a range of marketing specialties, as well as providing search engine optimization for clients interested in online media awareness.

    Every business tries to cut costs and increase profitability. And with the ever-increasing pace of technological development, there are many new possibilities open for the forward-thinking businessman. Among these possibilities are business VoIP solutions. VoIP is the abbreviated version of “Voice Over Internet Protocol.” And as you can tell by the name, VoIP is a telephone technology that utilizes the Internet instead of the traditional telephone cables to connect callers to each other. For this reason, you can make telephone calls at a much reduced rate, especially on long distance phone calls - less than half the cost of a regular long distance phone call.

    For more information please visit official website of CRWE:

    Itron, Inc. (Nasdaq:ITRI) announced it has been recognized with the prestigious 2011 North America Frost & Sullivan Award for Product Quality Leadership. Frost & Sullivan Excellence in Best Practices Awards recognize companies for demonstrating outstanding achievement and superior performance in areas such as leadership, technological innovation, customer service and strategic product development.

    Itron, Inc. provides products and services for the energy and water markets worldwide. It produces standard electricity, natural gas, and water meters for residential, commercial, industrial, and transmission and distribution customers.

    Investors Title Co. (Nasdaq:ITIC) announced its results for the third quarter ended September 30, 2011. Net income increased 68.4% to $2,440,465, or $1.14 per diluted share, compared with $1,449,101, or $0.63 per diluted share, for the prior year period.

    Investors Title Company, through its subsidiaries, provides title insurance, as well as tax-deferred real property exchange services in the United States.

    Apple: Dave’s Top 10 Q’s To Ask Before Waiting In iPad Line

    Here it is, from last night’s Late Show: David Letterman‘s list of the top 10 questions to ask before getting in line to buy an Apple (AAPL) iPad:

    • 10. “What the hell is it?”
    • 9. “Will this make Steve Jobs notice me?”
    • 8. “Really, what the hell is it?”
    • 7. “Is it kosher for Passover?”
    • 6. “Should I wear my Spock ears?”
    • 5. “Wasn’t I saving this money for a hot tub time machine?”
    • 4. “What? Ricky Martin’s gay?”
    • 3. “Is it a bad sign no one can explain what the hell it is?”
    • 2. “Will there be hot tattooed women in the line?” (Jesse James only)
    • 1. “Can’t Apple invent something that will wait in line for me?”

    With A New CEO And Revamped Board, Is YRC Worldwide Back On Track For A Turnaround?

    James Welch

    Can James Welch, the new CEO of one time transportation giant YRC Worldwide, succeed in  retooling and rehabilitating the company that was close to bankruptcy last year? The quick answer is yes, based on his less-than-a-year performance as helmsman of the ailing YRC.

    With his extensive experience in the trucking industry, some investors believe that if there�s anybody who could pull the behemoth out of its dark hole, it would be Welch, a 33-year veteran in the transportation industry, including 29 years at YRC.

    His years at YRC culminated in his being promoted to president and chief executive of YRC�s Yellow Transportation subsidiary in 2000. The unit posted record operating profits from 2004 to 2006.

    Welch, however, quit in 2007 when he started to question the new direction that parent YRC was taking. �I disagreed with the new acquisitive strategy of the company, and I felt the acquisitions it was pursuing were ill-timed and were bad moves,� says Welch. The acquisitions, he noted, boosted the company�s debt level to $1.3 billion. So at age 52, Welch quit YRC and retired.

    That lasted until July 22, 2011, when he accepted a newly reconstituted YRC board�s offer for him to come back and become the new CEO of the restructured company, replacing Bill Zollars, who was largely responsible for the company�s steady decline and ill-fated moves to expand the company through aggressive acquisitions.

    Welch quickly proceeded to streamline the company, including reducing to three the number of senior executives in the YRC headquarters, and the sale of unprofitable assets, including its facilities and operations in China. U.S. companies don�t usually run away from China, but Welch says its business in that country had been a disaster, although it was just a relatively  modest operation. �We lost money in China, which really didn�t complement our global operations,� says Welch.

    As part of a financial restructuring at YRC, Welch got an infusion of $100 million in new capital by issuing new convertible notes, and exchanged part of YRC�s outstanding loans and other obligations for new securities, including equity.

    Analysts saw the financial changes an important fresh sign of improvement. �YRC�s balance-sheet restructuring in 2011 improved the company�s liquidity,� says Thomas R. Wadewitz, transportation analyst at J.P. Morgan.

    Unless a sharp economic downturn occurs, he says YRC �will likely remain a significant player in the less-than-truckload market for some time.� He believes YRC�s freight business has �achieved solid improvement in service since mid-2011, moving from an on-time delivery ratio of 87.3% to a mid-90% ratio today.�

    YRC�s results in the fourth quarter of 2011 showed year-over-year improvement, notes Wadewitz, with an adjusted operating ratio in its Freight national segment of 102.5% and an adjusted operating ratio in its regional segment of 98.1.

    Although he does not see YRC making a profit this year or in 2013, Wadewitz, who rates the stock as neutral, says an alternative way to value the stock is on the basis enterprise value/EBITDA. The stock plunged 98% in the past 12 months, trading at $6.32 a share on Apr. 13, 2012.

    State Street Releases Dividend ETF Guide

    Despite (or possibly because of) the buzz that’s building over a possible dividend bubble, State Street SPDR ETFs released its “ETF Product Comparison Guide: An In-Depth Look at Dividend ETFs” on Thursday.

    The guide compares dividend ETFs from large, established companies including SPDR ETFs, iShares, PowerShares, Vanguard and WisdomTree.

    “In today’s historically low-yield environment, dividend funds may provide higher yields than traditional income sources,” according to the company. “In addition, their combination of upside potential and a degree of downside protection may be a welcome option for investors wary of market volatility.”

    The guide, updated for 2012, explains why “index construction” is a key factor in evaluating competing dividend funds and provides the information needed to compare domestic, international and emerging-market dividend ETFs.

    “With retiring baby boomers looking for income streams and the Fed intending to hold rates low into 2014, the search for yield has become a key theme for many clients,” State Street said in its announcement. “A global ‘flight to quality,’ driven largely by European sovereign debt woes, has continued to drive up Treasury prices, putting additional downward pressure on yields. The result is that Treasuries and other traditional sources of income are sometimes yielding close to or less than the rate of inflation. In this historically low-yield environment, dividend funds may provide significantly more attractive rates of income.”

    Putting numbers to the dividend argument, State Street noted that from 1926 through March 31, 2012, dividends contributed more than one-third of the total return of the S&P 500 Index, with the balance coming from capital appreciation.

    “Domestically as well as internationally, dividend-based investment strategies have historically participated in the majority of market upswings, while offering a degree of downside protection in turbulent times. Even when stock prices are declining, dividends may provide a stable source of income. These qualities make dividend funds particularly attractive in the current environment, with yields at historically low levels and uncertainty surrounding the direction of the global economy.”

    Competing dividend ETFs each approach the market in a somewhat different way, the company concluded, due largely to differences in index construction. It says the guide will help investors find the best dividend ETFs for their portfolios.

    VelocityShares Launches 8 Leveraged ETNs

    VelocityShares has significantly increased its leveraged ETP lineup, recently announcing eight new products that offer amplified exposure to various natural resources. The new ETNs will offer 3x and -3x exposure to natural gas, crude oil, and Brent crude, as well as 2x and -2x products targeting indexes comprised of copper futures. The new ETNs will join a VelocityShares lineup that already includes products offering leveraged exposure to gold (UGLD, DGLD), silver (USLV, DSLV), platinum (LPLT, IPLT), and palladium (LPAL, IPAL).

    Each of the products will be lined to indexes comprised of futures contracts on the underlying commodities, and each will be structured �as exchange-traded notes issued by Credit Suisse. That means that investors will be exposed to the credit risk of the issuing institution, but will avoid the tracking error that can become significant in futures-based products that utilize leverage.�

    DOIL3x Inverse Brent Crude ETN linked to the S&P GSCI Brent Crude Index Excess Return�
    UOIL3x Long Brent Crude ETN linked to the S&P GSCI Brent Crude Index Excess Return
    UWTI3x Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return
    DWTI3x Inverse Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return
    DGAZ3x Inverse Natural Gas ETN linked to the S&P GSCI Natural Gas Index Excess Return
    UGAZ3x Long Natural Gas ETN linked to the S&P GSCI Natural Gas Index Excess Return
    SCPR2x Inverse Copper ETN linked to the S&P GSCI Copper Index Excess Return
    LCPR2x� Long Copper ETN linked to the S&P GSCI Copper Index Excess Return
    First To Market ETPs

    DOIL and UOIL are the first products to offer leveraged exposure to Brent Crude oil. United States Commodity Funds was previously the only issuer to cover this corner of the commodity market; the United States Brent Oil Fund (BNO) is a futures-based product that invests in short-term contracts linked to Brent. In recent years, Brent crude has become an increasingly important benchmark in global oil markets, and occasionally traded at a significant premium to West Texas Intermediate (WTI). That disconnect exists because of a glut of oil in the U.S., compared to ongoing supply issues in Europe and stronger demand from emerging markets.�

    The new leveraged products could potentially be used in strategies to bet on changes in the premium of Brent relative to WTI, allowing investors to construct positions that could reflect expectations for changes in the relative prices of the two energy commodities. That premium has varied significantly in recent months, creating opportunities to generate short-term profits. �This launch further demonstrates our dedication to developing sophisticated exchange traded products for institutional investors.� said Nick Cherney, Co-founder and Chief Investment Officer of VelocityShares.

    SCPR and LCPR are also the first leveraged ETPs to target copper, joining three existing products (JJC, CPER, CUPM) that offer exposure to the metal. Copper prices have jumped by more than 10% so far in 2012 on a surge in demand and general appetite for risky assets.�

    In addition to the commodity ETNs highlighted above, the VelocityShares product lineup consists of a number of products linked to indexes consisting of VIX futures contracts.�

    [For updates on all new ETPs, sign up for the free ETFdb newsletter]

    Harbinger Capital Unloads More NY Times Shares

    Philip Falcone's hedge fund Harbinger Capital Partners just recently filed an amended 13D and a Form 4 with the SEC in reference to shares of The New York Times (NYT). As per the Form 4, we learn that Harbinger sold 1,500,000 shares of NYT on March 26th at a price of $11.20. After the sales, Harbinger is left with 16,886,799 shares remaining. As per the amended 13D, we now see that this totals a 11.68% ownership stake in the company.

    This is obviously a decrease from the last time when we looked at the NYT stake in Harbinger's portfolio. These recent sales come after Falcone's hedge fund reduced its NYT stake back in December and in November as well. So, the selling continues at a very controlled pace and we'll keep our eyes peeled for any future hints of just position size adjusting or a turn in sentiment.

    Yet again, Harbinger has sold shares at a loss. The hedge fund initially acquired its stake between $15-20 per share almost two years ago when it invested over $500 million. While no one can deny the NYT is a tremendous brand and there is an asset there, we've wondered whether or not newspapers are a dying industry. They certainly have some business model problems to address in the near future. While Harbinger has sold shares numerous times, it appears as though it is still confident in the name as Harbinger still owns a large stake.

    Harbinger of course is a multi-billion hedge fund focused on both distressed debt and equity plays. It often takes large, concentrated positions in companies and this NYT stake is the perfect example. Other recent news out of the hedge fund includes word that Harbinger plans to build a 4G wireless network. Additionally, last week we found out the hedge fund had boosted its stake in Sable Mining.

    Taken from Google Finance:

    The New York Times is "a diversified media company that includes newspapers, Internet businesses, investments in paper mills and other investments. The Company is organized in two segments: News Media Group and the About Group." For other investments Falcone's hedge fund has made, you can view the rest of Harbinger's portfolio here.

    Original article

    OshKosh, InterDigital Soar in Midday Trading

    Here’s what’s hot in the market today: A big day for computer technology stocks as Blackboard Inc. jumps following an acquisition bid from Providence Equity Partners, DemandTec plummets after catastrophic Q1 earnings, and InterDigital gains interest following a Nortal asset fire sale. First Republic Bank dipped after pricing a secondary offering and Oshkosh Corporation got a big boost after Carl Icahn picked up a nearly 10% stake in the company.

    Blackboard Inc. (NASDAQ: BBBB), the educational software company, was up nearly 2% on almost 27 million shares after Providence Equity Partners announced it would acquire Blackboard for almost $2 billion at $45 per share. Blackboard was trading near $44 per share by midday.

    First Republic Bank (NYSE: FRC) fell more than 3% to just above $31 on almost 12 times normal trading. The commercial bank announced the pricing on a secondary offering of 13 million common shares at $31.75.

    DemandTec (NASDAQ: DMAN), a software company specializing in retail services, fell almost 21% to about $7.25 after reporting earnings for its fiscal first quarter that ended May 31st. A Raymond James analyst lowered his target price on DemandTec from $14.50 to $11, calling the Thursday earnings conference call “the worst conference call I have ever listened to as a publishing analyst.” Revenues came in at $22.5 million while GAAP gross profits were $13.5 million.

    Oshkosh Corporation (NYSE:OSK) was up more than 12% to top $32.40 on more than 4 million shares. Noted investor Carl Icahn and his partners acquired a nearly 10% stake in the truck and range vehicle manufacturer on Thursday after the markets closed.

    InterDigital (NASDAQ:IDCC), a holding company in the computer technology sector, was up almost 14% to $46.58 following the sale of competitor Nortel’s intellectual property assets to Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL). The sale implies that InterDigital is currently undervalued considering its breadth of IP assets.

    As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at�@ajohnagnello and�become a fan of�InvestorPlace on Facebook.

    Deer Consumer Products: An Overseas Trend Best Not Ignored

    China's economy is still on a roll. Maybe not at the breakneck speed of the past decade, but the economy is still growing at a comfortable 9-plus percent.

    The China Academy of Social Sciences most recent GDP forecast calls for 2010 economic expansion to finish 2010 at a 9.9 percent rate, with similar growth in 2011. The government think-tank predicts greater stability in China and little change in the government’s macroeconomic policies. The World Bank has projected China’s economy will grow 9.5% this year and slow to 8.5% next year.

    Some foreign observers estimate that more than half China’s population falls under the definition of "middle-class", and have concluded that in the next decade China’s middle class population will grow to 700 million. However, the Chinese government has placed the middle class number at about 20 percent of the 1.3 billion people. Either scenario leaves more room to grow in the years ahead.

    Many U.S. investors are leery of investing in this growth, often because many of the opportunities are so new. But many companies are capitalizing on the homeland’s rising middle class and expansion into the global economic recovery.

    Consider small cap manufacturer Deer Consumer Products (Nasdaq: DEER). Since the company began in 2006, it has grown rapidly and its stock has risen 78 percent since it first became available in a July 2009 IPO.

    Not to be confused with American tractor maker John Deere & Co. (NYSE: DE), which is making inroads in developing nations (including China) with its tractors and other equipment, this Deer is also a fleet-footed global competitor more comparable to companies like Whirlpool (NYSE: WHR), National Presto (NYSE: NPK), and Jarden (NYSE: JAH).

    You've probably seen Deer's products on U.S. retailers' shelves - maybe you even own some. The company makes kitchen appliances such as blenders and juicers. It makes appliances that sell under the Black & Decker brand of Stanley Black & Decker (NYSE: SWK) as well as Betty Crocker products, under a licensing arrangement controlled by General Mills (NYSE: GIS). Deer also makes electric appliances sold by various retailers under their own private labels.

    But most important for Deer is the potential in its homeland country of China. The company introduced the Deer brand in 2008 for the China market because, according to its 2009 annual report, "...urbanization, rising family incomes and increased living standards have spurred demand for small appliances in China."

    ***Deer says that in 2009 it sold 7 million products to customers on five continents. All told, Deer's products include blenders, juicers, soy milk makers, pressure cookers, and dehumidifiers, among others, which it says meets the safety requirements in all markets where they are sold, including North America and Australia.

    For the third quarter, Deer reported that its profit more than doubled to $9.3 million, from $4.1 million a year ago. Revenue climbed to $55.3 million from $26.5 million, and the company credited growth in the high-margin Chinese domestic markets. Earnings per share were $0.28, up from the year-ago $0.18 and topping analyst expectations of $0.21.

    Deer also raised its full-year estimates, to $0.88 per share on revenue of $172 million, up from $0.76 and $160 million, respectively. In 2011, Deer places its net income and revenue growth at 30 percent over the 2010 estimates. The company also boasts a strong balance sheet, with $75 million in cash and no long-term debt or credit lines.

    ***According to an analyst survey by Thomson Reuters, the median 12-month price target on shares of Deer is $17. That price target implies shares are fairly valued at 14.9 times 2011 EPS estimates, which seems pretty reasonable for a fast growing company.

    But Deer's stock is down 20 percent from the 52-week high of $13.80 posted in January. Given the impressive growth, investors are presented with an excellent buying opportunity.

    Deer appears determined to build its reputation with consumers both at home and overseas. Currently I think the stock is oversold at around $11.00.

    Miners Will Shine Again, Says Fund Manager

    While the prices of many metals have fallen sharply since the Spring, Malcolm Gissen, portfolio manager for the Encompass Fund(ENCPX), expects a bounce in shares of Avalon Rare Metals(AVL) because of rising demand for the rare earth metals they specialize in.

    "The demand for rare earth elements is spiking and prices have gone up eight to ten times in the last year," Gissen said. "So this is a company that will be vertically integrated that will do the mining as well as the producing."

    See if (AVL) is in our portfolio

    The $21 million fund, which garners 3 stars from Morningstar (MORN), has returned 31% over the past year, better than 99% of its peers in the world stock category. Over the past three years, the fund has returned an average of 27% annually, once again outpacing 99% of its Morningstar rivals. And despite the Japanese nuclear meltdown and fears about what that means for uranium prices, Gissen is not ready to give up on the metal, holding Texas-based Uranium Energy Corp.(UEC). "We think that this company is going to be at the forefront of Uranium production and the demand for uranium production is increasing considerably faster than supply. There are a lot of uranium projects and nuclear power plants being constructed around the world despite what many people in the United States might believe," Gissen said. The Encompass Fund also holds a position in Endeavour Silver(EXK) despite volatility in the silver market. "The company is in production and expanding through some smart acquisitions," said Gissen, adding that he sees the demand for silver outstripping supply.

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