Saturday, January 12, 2013

Top Stocks For 2012-1-8-13 Stock Report!

Monday August 17, 2009

UnitedHealthcare, a UnitedHealth Group (NYSE:UNH) company, announced it will launch the Connected Care program in Colorado, giving patients in certain rural locations expanded access to physicians and specialists using advanced telehealth technology. The Colorado program is among the first in UnitedHealthcare’s work with Cisco (NYSE: CSCO) and others to build a national telehealth network.

Harbin Electric, Inc. (Nasdaq: HRBN), a leading developer and manufacturer of a wide array of electric motors in the People’s Republic of China, today announced that it closed the sale of an additional 937,500 shares of common stock at the public offering price of $16.00 per share, pursuant to the over-allotment option exercised in full by the underwriter in connection with its public offering that closed on August 4, 2009.

Gaiam, Inc. (Nasdaq: GAIA), the leading distributor of lifestyle media and fitness accessories, today announced that it will produce Losing It and Keeping Fit, a fitness DVD featuring Valerie Bertinelli and her personal trainer, Christopher Lane. Complementing her successful weight loss with Jenny Craig, Valerie achieved her newly toned and fit body working out with Christopher in her living room, just like countless other women and men. She will share that experience and the exercise routine in her DVD.

The Brualdi Law Firm, P.C. announces that a lawsuit has been commenced in the United States District Court for the Southern District of Texas on behalf of purchasers of Repros Therapeutics Inc. (Nasdaq:RPRX) stock during the period between July 1, 2009 and August 3, 2009, inclusive (the “Class Period”) for violations of the federal securities laws.

CACI International Inc (NYSE: CACI) announced today that it has appointed Gordon R. England, United States Deputy Secretary of Defense under former President George W. Bush, to CACI’s Board of Directors. Mr. England brings outstanding leadership experience at the highest national and industry levels. His expertise and insight into the federal arena will provide strong support for CACI’s business delivering innovative solutions for national defense, intelligence, homeland security, and the improvement of government services.

Futurestep, a Korn/Ferry Company (NYSE: KFY) specializing in talent acquisition solutions, today announced that it has been chosen by premium global drinks company Foster’s Group Ltd. as the strategic talent partner in evolving Foster’s recruitment function. A press release covering this announcement was originally issued in the Asia-Pacific region by Futurestep’s Sydney, Australia office on August 12

Source: E-Gate System from

Some Potential Retail Buyout Targets

Private equity and consolidation interest in the retail space has been picking up over the last year, and low valuations and an improving economy are likely to lead to an intensification over the next few months. I read a very interesting article by Tara Lachapelle and Matthew Townsend on Bloomberg regarding one potential candidate, American Eagle Outfitters (AEO). I thought their analysis was excellent, but I would add the very large inside ownership as well as perhaps some focus by Jay Schottenstein after consolidating Retail Ventures (RVI) and DSW (DSW).

The authors use J. Crew Group (JCG) as a template of sorts. I had shared my perspective on bargains in the retail sectorin early November with my friends at TradeKing. I hope that someone else benefited from my work, as I didn't! As I disclosed in that article, our models had (and still have) exposure to Chico's (CHS) and Skechers (SKX). JCG received a buyout offer from private equity shortly after I had profiled it.

When I look at the space, I pay attention to near-term sales trends and to margins. I would rather bet on a stock that is growing rather than shrinking (in case that bid doesn't arrive!). I also like to find low PE ratios on low margins that could improve rather than on high margins that must be maintained. With that in mind, I wanted to run a screen of retailers and retail brands to see what might be among the most attractive. Here is what I did:

  • Russell 3000 member
  • Market Cap > $900mm
  • Net Debt to Capital < 10%
  • EPS Growth TTM > 0
  • PE F12M < 20
  • EV/EBITDA < 9

We narrowed the universe to 36 companies (click to enlarge image):

A few big picture observations:

  • Some of these are rumored to be "in play" (or have received offers) - 99 Cents (NDN), Steven Madden (SHOO), Big Lots (BIG), Children's Place (PLCE) all come to mind
  • Short-interest is very high among these names (they have blown it on NDN, apparently)
  • The group trades at its 5 year average margin, with a lot of variability - remember, these numbers include 2-3 tough years
  • The stocks, on average, are in line with the market over the past 2 1/2 months, perhaps trailing slightly (median return is 1%)
  • Most of these stocks have more cash than debt - I eliminated that column

I color-coded to help me focus on a few variables. Everything less than 7X trailing is green. I highlighted the stocks that trade at less than 2X tangible book value. I coded the stocks with EBITDA margins below 10% green and above 18% red. I also coded green the stocks trading at less than their 5-year average margin and as red those at a 50% or greater premium.

Working up from the bottom and adding any insight I can provide, I like Skechers (SKX), but it is working through a big inventory issue that seems more than priced in. It has very large inside ownership, but I don't put a high likelihood that they will be acquired by private equity.

RadioShack (RSH) has been in secular decline that may be bottoming. CEO Day leaves in May, with the CFO taking over. This one is so ugly that I am sure not too many people even want to look at it - a sure contrarian sign!

Aeropostale (ARO) is one that has higher margins than its peers. Still, it sure is cheap. Management just lowered the bar in time to award themselves annual equity grants.

Rival American Eagle (AEO) has been boosting margins but suffering negative same-store-sales growth. This is a good example of my lead comment regarding understanding margins and margin trends. While it's hard to expect it to get back to where it was in the go-go days, it seems like they could get in line with peers.

I follow Men's Wearhouse (MW) closely and believe that the company will restore its margins as it improves its tuxedo rental business that it bought a few years ago. It's a fantastic company in the way it treats its employees and customers.

I have been interested in the past in Buckle (BKE), which I have held in my models previously. This too is a great company, with massive inside ownership and almost flawless execution. The bull story is expansion in the Northeast, but bears can point to a couple of issues. First, the margins are sky-high. Second, they are very dependent upon denim. With all that said, I find the stock to be stupidly cheap.

Chico's (CHS) is in the midst of a turnaround engineered by a great CEO, Dave Dyer. We added this one to the TOP 20 Model Portfolioand the Conservative Growth/Balanced Model Portfolioin August and continue to hold a position. Dyer, just starting his third year, has brought in talent and is now opening stores at a heightened pace. He was running Lands End when it was sold to Sears (SHLD) and got Tommy Hilfiger sold to private equity. He has a good record of turnarounds. I characterize this one as just getting started really. I don't see them fitting with a strategic buyer, but there could be private equity interest (there have been rumors over the past year off and on).

Footlocker (FL) is another one I have followed closely. We have bought it a few times in the Conservative Growth/Balanced Model Portfolio but sold prematurely. This too is a management change story, with a former big-shot from JCP coming in. The stock really took off a year ago when he laid out his long-term vision.

My final company comment is regarding Jo Ann's (JAS). Don't spend too much time on it, as it will soon be acquired by private equity. An interesting sidebar is that the whole senior team all worked together previously (at Fred Meyer). When I evaluate management teams in conjunction with my work with Management CV, this is one attribute I like to see - a guy recreates a successful team. This is way off topic, but it's going on at Savient Pharma (SVNT).

This looks like a nice starting place to try to identify the next take-out target. JCG went to private equity at 21 PE this week. Their EBITDA margins were at an all-time high for the company of 18%. NDN ran up to 17 PE on the news Friday. While acquisition is nice, it's not necessary. A lot of these companies have solid long-term performance and a bright outlook with cheap valuations.

Disclosure: Model Portfolios at Invest By Model hold positions in CHS and SKX

Investors Still Searching for Post-Fed Direction; General Mills Rising

Markets continue to struggle for direction this week as they come off last week’s Fed-induced highs.

This morning, Japan’s central bank boosted its asset purchase program. On the other hand, U.S. housing starts rose less than expected. The net result? Stock futures were trading slightly higher early on Wednesday after a low-volume, trading day on Tuesday in which indexes ended just about where they started.

The Bank of Japan’s decision to buy more assets caused the Yen to fall and Japanese markets to rise. U.S. housing starts rose to 750,000 in August, about 25,000 starts below expectations. July numbers were also revised lower. John Tashjian of Centurion Real Estate Partners in New York called it “another step forward on a very long staircase,” arguing that banks continue to make it too difficult to obtain a mortgage.

Dow futures rose 21 points; S&P 500 futures rose 2.4 points.

General Mills (GIS) rose 0.7% after beating earnings expectations, as gross margins rose and the company continued a cost-cutting plan.

Cracker Barrel (CBRL) rose 6.9% on a strong earnings report.

Autozone (AZO) fell 1.9% after posting better than expected earnings but disappointing same-store sales.

Goldman Sachs (GS) fell 0.1% after announcing last night that CFO David Viniar would retire after January.

Obamacare Upheld: How It Will Affect Your Wallet and Your Life

On Thursday morning, when the Supreme Court ruled that the Patient Protection and Affordable Care Act -- aka "Obamacare" -- was constitutional, there was a brief pause as the country took a moment to imagine what this brave new world would look like. Had socialism won the day? Were death panels on the way? Would children be roused out of their beds for compulsory morning calisthenics?

Within moments, Twitter was hopping with messages from conservative dissenters such as Michelle Malkin, Ari Fleischer, the Heritage Foundation, and dozens of others, vowing to keep fighting health care reform all the way. But outside the beltway in the rest of the country, many Americans simply wondered how this ruling would affect their daily lives.

Back to the Future

In some ways, the future is already here. Many portions of the PPACA have already been quietly enacted. The government has streamlined the approval process for generic drugs and expanded Medicare's prescription benefit. It has levied a 10% tax on tanning booths, and passed several rules that will make it easier for people with "pre-existing conditions" to get the lifesaving treatments they need. For insurance companies, lifetime limits on coverage, price gouging, and a host of other cost-cutting measures are now illegal.

Slowly, almost imperceptibly, medication is getting cheaper, insurance coverage is getting easier to attain, and a healthy lifestyle is becoming more attainable.

Now, we can expect that over the next few months, more and more of the future will show up. Starting in August, new insurance policies will not be able to charge a copay for many forms of preventive care -- in other words, treatments like colonoscopies and mammograms will be free for patients who open new insurance policies. A few months later, people who make more than $200,000 per year will start having to pay an extra 0.9% tax which will help fund health care.

The Big Changes You'll Hardly Notice

These are little things, incremental changes that most people won't notice, except perhaps to occasionally wonder about when medications got cheaper or why achieving the Snooki look has gotten more expensive. But the big transition, the creeping socialism that Obamacare detractors are really worried about, will arrive in 2014. That's when everyone will either have to get insurance or pay a tax.

The funny thing is, creeping socialism probably won't feel much different than the current system. Imagine, if you will, an ordinary, middle class family. For mom and dad, who work full time, insurance will still be provided through work. They'll still go to the same doctor, pay the same copay, and head to the same hospital when things get dire. Their kids will still get the same care, too, although they'll be able to take advantage of their parents' health insurance until they're 26, if they need to.

As for grandpa and grandma, if they're over 65, they'll still be insured by Medicare, and their lives will largely go on as usual. If they're younger, and suddenly find themselves without insurance -- if, for example, grandpa is laid off from his job -- they will be able to get health insurance in spite of their pre-existing conditions. So grandpa may be stuck working part-time as a Walmart greeter, but he won't have to worry about paying for his insulin and blood pressure meds.

The Big Changes You Will

But what if grandpa's new job doesn't pay much and he can't afford insurance? Well, the new law may still cover him. One aspect of PPACA is that people who make up to 133% of the poverty line -- for a household of two adults and one child, this would be $23,344 -- would be eligible for Medicaid at no cost. Meanwhile, families that make up to 400% of the poverty line -- for a household of two adults and one child, this would be $70,208 -- would be eligible for some form of discounted insurance rate, scaled to their income.

So mom and dad, grandpa and grandma, and the kids are covered. What about Uncle Hank, the uninsured rebel with the ponytail and the motorcycle? Well, assuming he makes more than 400% of the poverty line, Hank's going to face a tough decision: He can either get insurance or pay a tax that will probably be slightly higher than the cost of insurance.

Hank might be able to get insurance through his work, but if he can't, the new law will give him another choice. It requires each state to create a health insurance exchange -- basically, an online marketplace where various insurance companies can directly compete with each other. Here are some proposals for Minnesota's health insurance exchange.

If Uncle Hank decides not to pay the health care tax, he would likely go to the exchange, pick a plan, set up a direct deposit program to take money from his paycheck -- much like the health insurance withholding that mom and dad pay -- and get an insurance card. And, later, if Hank gets into an accident on his bike, his insurance would cover his trip to the emergency room, as well as his ensuing operation and physical therapy.

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The Winners and the Losers

So who wins and who loses under the new insurance program? For insurance companies, it's going to be a mixed bag: On the plus side, they will get millions of new, relatively young customers like Uncle Hank who will be cheap to insure, and will add mightily to their coffers. On the opposite side, they'll also get millions of older, low-income customers -- like grandpa and grandma -- who will be expensive to insure, and will have pricey pre-existing conditions. Overall, the insurance companies will probably make a tidy profit.

For the poor, the chronically ill, and the unemployed, the new insurance program will also be a definite win. Millions of people will be able to afford basic health care, get diagnostic tests, and buy medications. Many will be covered by an expanded Medicaid program, and those who aren't will likely see a steep drop in the cost of insurance.

Gallery: 5 Signs You're Getting Robbed at the Hospital
For the average taxpayer, the new program will also be a win. Right now, a lot of the basic health care in America takes place in emergency rooms, where uninsured people end up when their colds turn into pneumonia, their untreated diabetes turns into a coma or an amputation, or their unmedicated high blood pressure leads to a heart attack. Many of these emergency rooms are already receiving taxpayer dollars. Preventing major, expensive health crises while they are small, inexpensive-to-treat problems saves everyone money.

In fact, the biggest losers of the new health care program will be folks like Uncle Hank, who previously didn't worry about health insurance, but will now have to pay for it. On the other hand, many will now have access to preventative care and basic medical care that were previously unavailable. Speaking as someone who once had to pay over $1,000 out-of-pocket for the treatment of a broken hand, I'd argue that mandatory health insurance might be an unwelcome prescription, but it is hardly unnecessary medicine.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at, or follow him on Twitter at @bruce1971.

Natural Gas: Price and Prejudice

Structural Break

Natural gas has historically hovered in a price range defined by oil prices. The reason historically comes from the fact that part of natural gas production is a byproduct of oil extraction (found in same wells). In addition, industry and power generation have long been able to switch back and forth between natural gas and residual fuel oil. The conventional and expected market price bracket of natural gas prices used to be thought as the following:

Upper band: The heat content (million BTU per barrel) of distillate fuel oil is 5.825. Hence, the upper limit for natural gas price should be a sixth of the current price of a barrel of oil.

Lower band: based on past observation, natural gas prices should mean revert around a ratio of 10:1.

There seems to have been a structural break here as the chart above shows. Since the outburst of the crisis, nat gas prices are pegged well below the lower band.

Power generators able to switch easily from nat gas to residual fuel have dwindled in numbers. This may explain the reason for a new equilibrium between oil and nat gas.

Finding the Missing Link

Even though the nat gas market is competitive and well integrated nationally it remains mostly local in comparison to oil prices. The recent widening of the WTI/Brent spread has highlighted the extent to which U.S. oil prices may depend on domestic supply conditions (overload at Cushing, OK). But oil prices remain strongly affected by international factors such as global demand, OPEC policy, and geopolitical risk.

Supply Side: The Shale “Revolution”

Reserves have also played an important role recently due to the shale gas “revolution." This new source of gas has benefited from extracting innovation (horizontal drilling/hydraulic fracturing) that lower production costs. It represents only 15% of U.S. supply (approx 9 bcf/d out of a total U.S. production of 58.5 bcf/d) but accounts for most of the marginal increase in dry gas production.

In addition, according to the Potential Gas Committee, the United States possesses a total resource base of 1,898 trillion cubic feet (Tcf) as of year-end 2010. This is the highest resource evaluation in the Committee’s 46-year history, exceeding the previous record-high assessment by 61 Tcf. Most of the increase arose from reevaluation of shale-gas plays in the Gulf Coast, Mid-Continent and Rocky Mountain area. According to EIA, U.S. total nat gas reserves are estimated at 2550 Tcf (more than one century of supply) from which Shale gases account for 830 Tcf (Marcellus, Haynesville, Barnett and Fayetteville basins account for 600 Tcf). The U.S. economy is becoming self sufficient in terms of nat gas supply. Yet, one should always keep in mind that potential/technically recoverable resources are not the equivalent of proved reserves.

This leaves the U.S. economy with a huge amount of supply for the foreseeable future and a genuine cap on prices if demand fails to catch up (primary energy substitution takes time as oil to coal substitution showed in the 19th and 20th century).

There might be some over optimism on the supply potential. Regulatory requirements could emerge shortly (burning natural gas is environmental friendly but the extraction of shale gas not really: land access may be constrained; water access/use and contamination is a key issue; health impacts are unknown). The rapid depletion of newly discovered fields could also be a cause for concern.

From Oil to Coal: Power Generation and Coal-to-Gas Switching

The demand potential for natural gas is high: Residential heating, car/truck conversion. Yet, without coal-to-gas switching, natural gas prices would be much lower today. The over supply of natural gas has enabled a sharp reduction of imports, but in the absence of LNG exports facilities, part of the excess supply has been dedicated to power generation ... at the expense of coal.

According to EIA data, from 2000 to 2009, the share from coal in power generation fell 7.2% from 51.7% to 44.5% while that of natural gas rose 7.5% from 15.8 to 23.3%.

Wells Fargo Embarks on an Acquisition Spree

Wells Fargo & Company (WFC) is on an acquisition spree. Its insurance unit, Wells Fargo Insurance Services, has acquired JFK Consulting Group LLC, an employee benefits brokerage and consulting firm located in Overland Park, Kansas. The acquisition closed on November 29, 2010. Terms of the transaction were not disclosed. The deal would help Wells Fargo Insurance to strengthen its presence in Kansas.

JFK Consulting Group provides employee benefit brokerage and consulting services to a large variety of customers, including small and mid-market fully-insured plans, large self-funded corporate plans, public sector employers, and association plans. The company serves customers primarily in Kansas and Missouri.

Last week, the company also announced the acquisition of Prestige Professional Plans. Based in Dayton, Ohio, the acquired entity is an employee benefits insurance brokerage firm. Wells Fargo closed the acquisition on December 1, 2010, but the requisites of the transaction were not disclosed.

Wells Fargo Insurance Services is the fifth largest insurance brokerage in the world and the largest bank-owned insurance brokerage in the U.S. with more than 200 offices in 37 states. The company has 9,200 insurance professionals who place more than $16 billion of risk premiums with experience in property, casualty, benefits, international, personal lines, and life products in it.

Fourth Quarter Earnings and Estimate Revision Trends

Wells Fargo is scheduled to release its fourth 2010 earnings on January 19, 2011. Besides Wells Fargo, the other biggies who are scheduled to report next week include Citigroup Inc. (C) (January 18), Goldman Sachs Group Inc. (GS) (January 19) and Bank of America Corp. (BAC) (January 21).

Currently, Zacks Consensus Estimates for Wells Fargo are 61 cents for the fourth quarter and $2.22 for full-year 2010. Over the last 7 days, 3 of the 25 analysts covering the stock have increased their estimates for the fourth quarter and full-year 2010, while none of them made any downward revision.

We believe with its diverse geographic and business mix, Wells Fargo is well positioned compared to its peers. The Wachovia acquisition and the demise of some smaller players helped it garner a larger share in the mortgage markets. Yet, the recent financial regulations are expected to have a negative impact on both top- and bottom-line results of the company.

We maintain our long-term Neutral recommendation on Wells Fargo. Also, the company currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Materials ETF Moves Ahead of Europe’s ‘Stress Tests’

Materials ETFs are leading the way early in what are otherwise choppy, flat markets. Traders appear to be wary of making any big moves ahead of the eagerly-awaited results of the European bank “stress tests,” which are due out today.

A look at the top ETF winners and losers on our Dashboard shows that the top materials ETF right now is the First Trust Materials AlphaDEX Fund (FXZ), up 1.2%. The move could be attributed in part to strong second-quarter earnings from steel maker and top holding Reliance Steel & Aluminum, which said sales rose 30%.

click to enlarge

The cost to insure European debt dropped sharply as traders predict that the results of the European bank stress tests will show that, by and large, all is well. The tests were on 91 of Europe’s largest banks. Europe ETFs, on the other hand, are trading mostly flat while they await the reports. The top fund so far, according to the ETF Analyzer, is the iShares S&P Europe 350 (IEV), which is flat.

Leading wireless carrier Verizon (VZ) said it lost $198 million in the second quarter because of worker buyouts, resulting in worse-than-expected earnings. Thanks to some popular smartphones, such as the Droid, Verizon has more than held its own against AT&T (T). iShares Dow Jones U.S. Telecommunications (IYZ) is up 1%; VZ is 10.3% of its total portfolio.

Disclosure: None

Today in Commodities: A Push Higher

News of further bailouts in Europe goosed the markets today. Crude advanced to a three week high today trading toward our target of $103-$105/barrel in the July contract. Aggressive traders can buy dips in crude as well as the distillates. Natural gas appreciated an additional 3% today as prices are approaching levels not seen since early May. We feel the easy money has been made on longs and have advised clients to lighten up on longs or at a minimum to tighten their stops. A correction of 4-6% we will likely re-establish longs for those clients that have already exited their longs.

The indices are back over their 20-day MAs and likely headed for a re-test of their highs in late April. The dollar index is lower by nearly 0.50% today, trading to a three week low. We look for continued weakness and traders can stay the course buying dips in the European crosses; the euro, swissie and pound. A new currency recommendation today is buying the loonie. After the near 4% correction in the last few months we feel we could see a retracement higher, and our target is 1.04/1.0450.

Livestock traders can work their way back into longs in lean hogs and live cattle. We would remain long as long as the recent lows hold. Our favored play would be live cattle, either June or December contracts. We advised clients who were previously long metals to move to the sidelines in both gold and silver today. Both cocoa and sugar were higher today but remain long as we are looking for more appreciation. In cocoa our target is 3150/3200 in the July contract and as for sugar we expect 24.50/25.00. Lifting a ban on exports in Russia contributed to falling wheat prices today, losing nearly 5%. Weakness spilled over to corn and soybeans as well with corn down 1.45% and soybeans 0.25%. Aggressive traders could be short corn looking for an additional 20-30 cents. More conservative traders should be looking for long entries in new crop on that break. Exit your short futures trades in the debt complex and look for a correction to cut losses in your September put options.

Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

Appeals Court Rejects Gay Marriage Ban789 comments

SAN FRANCISCO—A federal appeals court on Tuesday struck down California's voter-mandated ban on gay marriages, but stopped short of finding that other states or the federal government were required to recognize same-sex marriage.

The decision sets the stage for the U.S. Supreme Court to weigh in on gay marriage as soon as next year, and could add fuel to the issue in the presidential campaign.

In a 2-1 vote, a panel of the Ninth U.S. Circuit Court of Appeals said California's 2008 law, popularly known as Proposition 8, violated the 14th Amendment's equal-protection clause by stigmatizing a minority group without legitimate reason.

American Capital Agency Is Ready to Grow

In an update a few weeks ago, we discussed getting back into American Capital Agency (NASDAQ:AGNC) after the company declared its dividend and priced any secondary stock offering that usually occurs right after it posts earnings.

Well, all three of those events are now in the books, and shares of this popular mortgage REIT have pulled back 5.4% from its recent high.

AGNC primarily deals in fixed-rate government-backed residential mortgages backed by Fannie Mae and Freddie Mac. In the most recent Q4 results, American Capital Agency recorded an annualized economic return of 33% for the quarter. As of Dec. 31, 2011, the company’s investment portfolio was composed of $54.7 billion worth of agency securities at fair value, including $51.5 billion of fixed-rate securities, $2.8 billion of adjustable-rate securities and $0.4 billion of CMOs.

For the fourth quarter of 2011, AGNC reported earnings of $208.7 million, or 99 cents per share, compared with $138.1 million, or $2.50 in the year-earlier quarter. The decrease in quarterly earnings per share is primarily due to a higher number of weighted average shares in fourth-quarter 2011 compared with the prior-year quarter. Including one-time items, comprehensive income for the reported quarter was $476.8 million, or $2.27 per share, compared with $68.2 million, or $1.23 in the year-ago quarter.

During the reported quarter, the annualized weighted average yield on the company’s investment portfolio was 3.06%, and its annualized average cost of funds was 1.16%, resulting in a net interest rate spread of 1.90%. The company decreased its first-quarter 2012 dividend to $1.25 per share to reflect the narrowing of the spread along with the rise in leverage of the portfolio.

Even after a dividend reduction last month to compensate for the narrowing of the spread between borrowing short and investing long, shares of AGNC held their ground because, quite simply, the newly adjusted dividend yield was still huge by comparison with other REITs in the sector.

The company is using about nine times leverage to produce that 17% yield, and it’s employing a sophisticated interest rate hedging strategy to manage downside risk. Last week, AGNC priced 62 million shares in a secondary offering for proceeds of $1.8 billion for acquiring additional securities and is the latest offering by AGNC since it raised about $1 billion in late October 2011. The size of the offering was originally 54 million shares, but institutional demand allowed for the 10-million-share-over-allotment to kick in.

I was hoping to see the stock come in further after trading ex-dividend March 5 and pricing such a huge stock offering, but demand for the yield in this market is strong — and so is the stock’s price action. At its current price, we’re paying about 1.09 times book, which is a bit of a premium, but I don’t see that coming down, thanks to the attractiveness of the yield.

If AGNC management can pay out this kind of income in what I believe is the toughest of all environments for such entities, then as interest eventually ticks higher as the economy improves, the prospect for future dividend increases will grow, too. AGNC now ranks as one of the largest REITS, trading at a price-earnings multiple of under six. The company also continues to hold about $10 of cash per share.

The one overriding risk for AGNC is further tightening of the spread. The way to keep the dividend at current levels is to grow the portfolio to generate more income. Thus, raising $1.8 billion in new capital is a great vote of confidence in executing this very strategy.

Friday, January 11, 2013

Korn/Ferry Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of recruiting specialist Korn/Ferry (NYSE: KFY  ) were getting fired by investors today, falling by as much as 12% in intraday trading after announcing fiscal second-quarter earnings.

So what: During the quarter, Korn/Ferry's revenue rose 8.7% from last year and operating income, on an adjusted basis, climbed 16%. However, the company's adjusted earnings per share fell 3% to $0.32, missing the $0.34 target that Wall Street analysts had set.

On the bright side, revenue for the quarter was above expectations and the adjusted operating margin rose to 12.7% from 11.8% last year. On the executive recruitment side of the business, engagements billed and new engagements were up 14% and 3%, respectively.

Now what: In its reaction to earnings announcements, the market often focuses itself on simply whether a company hurdled or missed Wall Street's earnings expectation. For Kern/Ferry, the quarter was certainly a disappointment in that frame, but in a yet-tough economy, the quarter doesn't look overly poor. However, the company added further to investors' pessimism by projecting earnings for the next quarter between $0.25 to $0.33, below the analyst-expected $0.35.

The economy is clearly taking the wind out of Korn/Ferry's sails right now, but Foolish investors will be best served by looking at the big picture rather than simply being quick on the trigger in today's sell-off.

Want to keep up to date on Korn/Ferry? Add it to your watchlist.

Should You Buy This Unknown Inflation Fighter?

In a recession, the last thing you usually need to worry about is inflation. But ever since the U.S. economy survived the worst of the market meltdown in late 2008 and early 2009, rising prices have threatened the recovery -- and raised the specter of inflation.

Remembering inflation
High inflation is something that many investors can't really remember. But 30 years ago, inflation was front and center in the economic debate. Then-unheard-of energy costs served as a tax on discretionary spending, crippling business activity and leading to conditions that could have caused a downward spiral for the entire U.S. economy. Inflation reached double-digit percentage rates, and the same Treasury bonds that now pay next to nothing fetched interest rates that would make your mouth water -- rates that only Annaly Capital (NYSE: NLY  ) , American Capital Agency (Nasdaq: AGNC  ) , and other mortgage REITs can match. It's somewhat ironic that today's extremely low rates are what make mortgage REITs' high yields possible.

By contrast, the inflation we've seen lately is only a shadow of those dark days of the late 1970s and early 1980s. Even with prices on food and energy at relatively high levels -- high enough to give companies like McDonald's (NYSE: MCD  ) some grief -- consumer price index figures have only risen by around 3.5% over the past year. But after seeing essentially no change in the CPI for a number of years, the return of positive price increases -- though beneficial to seniors whose Social Security benefits are indexed to the CPI -- has some wondering if the worst is yet to come.

Fighting the inflation battle
One well-known investor who's doing something about inflation is Bill Gates. The Microsoft co-founder recently reported a couple of interesting investments among his holdings -- investments that try to track inflation.

The particular investments that Gates chose are closed-end funds: Western Asset/Claymore Inflation-Linked Securities (NYSE: WIA  ) and Western Asset/Claymore Inflation-Linked Opportunities & Income (NYSE: WIW  ) . The two funds own substantial stakes in inflation-indexed income securities whose prices rise and fall in part with changes in inflation levels.

U.S. investors are familiar with what's known as TIPS -- Treasury inflation-protected securities. These bonds adjust their principal value automatically with changes in the CPI. Moreover, you can get access to TIPS through the iShares Barclays TIPS Bond ETF (AMEX: TIP  ) as well as some similar funds.

But how the funds that Gates chose differ from TIPS is that they invest not only in U.S. bonds but also similar inflation-indexed investments around the world. By owning foreign inflation-adjusted bonds of the type that the SPDR DB Int'l Gov't Inflation-Protected Bond ETF (AMEX: WIP  ) gives you, you get exposure to changes in price levels that reflect a variety of foreign currencies as well as differing levels of overall economic activity. The net result is more diversified protection against inflation.

In addition, closed ends have something that regular ETFs lack: the chance to buy at a discount. Currently, the discounts on the two inflation-fighting closed ends he owned are upward of 10%. Discounts not only let you buy shares on the cheap but also boost the effective yield on any interest distributions you receive -- a double benefit for savvy buyers.

Is it too late?
Surprisingly, the discounts on these two closed-end funds remain unusually wide -- even after news of Gates' purchases became commonly known. If you're looking for a cheaper way to give yourself some direct protection against price increases, then take a closer look at the Western Asset closed ends and see if they deserve a portion of the money you have allocated to fixed-income in your portfolio.

Closed-end funds and ETFs aren't just good for fighting inflation; they can help you make money, too. The Motley Fool's free special report on ETFs has three ETF names you should know; just click on the link to read it with no obligation to do anything more.

Daily ETF Roundup: IWO Pops, VXX Drops On Loose Fed Policy

Domestic equity markets got off to an explosive start as Fed Chairman Ben Bernanke expressed his concerns regarding the ongoing recovery and reaffirmed his support of accommodative policies as deemed�necessary. Stocks rallied higher as investors were relieved to see that the central bank is committed to promoting the recovery even if it entails another round of�quantitative�easing [see also How To Play A Treasury Bubble With ETFs].�

On the home front, the Nasdaq led the way higher, gaining 1.78% on the day, while the Dow Jones Industrial Average lagged behind, inching higher by 1.23%. Gold soared on the day as inflation worries resurfaced after the Fed dropped subtle hints of potentially more stimulus to come; futures prices for the precious metal gained over 1.5% on the day, settling near $1,690 an ounce. Worse-than-expected housing market data was brushed off to the side; pending home sales for February came in at negative 0.5% versus the previous reading of 2% [see ETF Insider: Do Fundamentals Justify The Wall Street Rally?].

The iShares Russell 2000 Growth ETF (IWO) was one of the best performers, gaining 2.18% on the day, bolstered by broad-based optimism on Wall Street. Investors increased their risk appetite, and small caps as represented by IWO led the way, after Ben Bernanke made it clear that the Fed was committed to sticking with a loose monetary policy given the fragile recovery. After today’s rally, IWO has gained nearly 16% from a year-to-date perspective [see How To Hedge For A Market Correction With ETFs].�

The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) was one of the worst performers, shedding a dismal 9.42% on the day. Uncertainty seemingly evaporated from the markets as Chairman Bernanke bolstered investors’ confidence by reassuring Wall Street that more stimulus would be provided if deemed necessary. VXX dropped as growth expectations improved and the Volatility Index closed below the 15 mark [see also ETF Laggards�Struggling�In 2012].�

[For more ETF analysis, make sure to sign up for our�free ETF newsletter�or try a�free seven day trial to ETFdb Pro]

Amazon: Acacia Suit Means ‘Fire’ Will Be Big, Says Nomura

Following reports yesterday that (AMZN) is being sued by an outfit called Smartphone Technologies LLC, Nomura Equity Research’s Richard Windsor this morning writes that the suit is proof that Amazon’s “Kindle Fire” tablet computer will be “a very relevant entrant to the tablet market.”

Jeff Roberts of PaidContent yesterday reported that Smartphone, which is owned by Acacia Research, which pursues many patent suits, has accused Amazon of infringing Smartphone’s technology in the Fire. Nomura’s Windsor notes that as the Fire is not due out till the November 15th, the only possible thing Acacia/Smartphone could be going after this quickly is the “Android” operating system software running the device, provided by Google (GOOG), of course.

Windsor opines this is like scraping the bottom of the barrel for patent winnings: “The game [of intellectual property] is largely over in Android, but that is not going to stop those seeking to make an easy return from having a go” at suing, he writes.

Windsor expects Google will step in to help defend Amazon if need be. Be that as it may, Windsor thinks the main point of Acacia’s suing is that it indicates Acacia believes the volume shipments for the Fire will be big.

Windsor concludes, “Success of the Amazon Kindle Fire is likely to place pricing pressure on the other vendors to reduce their prices and their margin aspirations, in our view,” which is a “small negative for Samsung [Electronics (SSNLF) and HTC (2498TW), but more relevant for Motorola [Mobility] (MMI).”

The Impact Of Slowing Global Growth On U.S. Profits, Payrolls And Stocks

In this article, we provide some healthy reminders about the impact of slowing global growth on U.S. profits, payrolls and stock market dynamics. As we illustrate on the following pages, slowing global growth, weighed down by a flat-lining European economy, points to a continued deceleration in S&P 500 earnings growth. In turn, weakening corporate profit trends portend slower payroll growth ahead, which is an environment typically characterized by falling share prices.

Figure 1: Slowing global growth points to decelerating S&P 500 earnings growth

Click to enlarge.

According to the Organisation for Economic Co-operation and Development (OECD), its system of composite leading indicators (CLIs) was developed in the 1970s to give early signals of turning points in economic activity. In figure 1, we showcase the OECD's broadest CLI alongside S&P 500 earnings per share since 1990. The 12-month rate of change on the "OECD + Major Six Non-Member Economies" (NMEs) CLI leads the year-over-year change on S&P 500 trailing 12-month operating EPS by six months. The correlation coefficient is an impressive 0.78, meaning the two series have strong co-movement. The bottom line is slowing global growth points to a continued deceleration in S&P 500 earnings growth.

A few points of detail: The "OECD + Major Six NMEs" CLI covers 39 countries, including Australia, Austria, Belgium, Brazil, Canada, Chile, China, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Russian Federation, Slovak Republic, Slovenia, Spain, South Africa, Sweden, Switzerland, Turkey, United Kingdom and United States. As of 2011, the top-five heaviest weights are the U.S. (23.27%), China (17.48%), India (6.91%), Japan (6.79%) and Germany (4.77%). Using the U.S. CLI as a guide, its component series include: Dwellings started, net new orders for durable goods, share prices: NYSE composite, the Thomson Reuters/University of Michigan Consumer Sentiment Index, weekly hours of work: manufacturing, the ISM Manufacturing Index and interest rate spreads.

Figure 2: 25% of S&P 500 sales came from abroad in 2010

The strong link between global growth and U.S. corporate profitability should come as no surprise. Standard & Poor's informs us that, based on a full sample (100%), 24.58% ($2,288,479 million) of S&P 500 companies' global sales (~$8,720,000 million) came from outside of the U.S. in 2010. Based on a truncated sample (15%-85%) of the 255 (51%) S&P 500 companies that fully reported their foreign sales in 2010, 46.29% of global sales came from abroad. Importantly, Europe and Asia represented 29.12% and 13.11% of foreign sales, respectively. The recent weakness of the Markit Flash Manufacturing PMIs for the Eurozone, China, Japan and the U.S. bodes ill for future S&P 500 earnings growth.

Figure 3: Weakening corporate profit trends portend slower payroll growth ahead

In turn, weakening corporate profit trends portend slower payroll growth ahead. In figure 3, we present S&P 500 trailing 12-month operating EPS growth versus total nonfarm payroll growth. Intuitively, there's a close connection between profits and hiring: Accelerating earnings growth leads to a pickup in hiring, just as decelerating earnings growth is followed by less job creation, hiring freezes and layoffs. From our lens, the current divergence between profits and payrolls is unsustainable against a weak global macro backdrop.

Figure 4: An environment of slowing global growth, U.S. profits and payrolls is typically characterized by falling share prices …

What does all of this mean for investors? In short, an environment of slowing global growth, U.S. profits and payrolls is typically characterized by falling share prices. Indeed, figure 4 shows total nonfarm payrolls (year-over-year % change) alongside the S&P 500 (year-over-year % change) since 1990. As you can see, equity returns actually lead payroll growth at major turning points. Clearly, it pays to play defense over offense when global growth, profits and payrolls are slowing.

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

Thursday, January 10, 2013

AAPL: Susquehanna Sees iPhone Upside, ‘iPad 3′ Underway

Susquehanna Financial Group’s Jeffrey Fidacaro today joined the chorus of analysts trying to predict what the introduction of Apple’s (AAPL) iPhone 4S may mean for the company’s results last quarter and this quarter, which Apple is expected to announce on October 18th.

“Preliminary iPhone orders for fiscal Q1 2012 [are] showing strong sequential improvement,” writes Fidicaro.

Fidicaro is modeling iPhone units to rise slightly to 21.5 million in Apple’s fiscal Q4 ended last month, and he thinks record pre-orders of 1 million units in the first 24 hours of availability for the iPhone 4S point to 27.1 million units in Q4. Fidicaro thinks total “builds” of the iPhone, across all models, separate from the actual shipments, may be in a range of 32 million to 36 million this quarter.

For the iPad, Fidicaro thinks Apple shipped 11.5 million units last quarter, and will probably reach 13 million this quarter.

Fidicaro also makes reference to a note from his semiconductor colleague, Christopher Caso, also published today, addressing the iPad.

Caso takes on the multiple reports of cuts in iPad production that came from competing analysts two weeks ago. He thinks they’re wrong. Apple “pulled in” some iPad production into Q3 in order to get ready for the holidays, and also to clear the decks for what he thinks is the imminent arrival of an “iPad 3″:

We believe AAPL pulled production forward to ensure sufficient availability of iPad during the holidays, and such a move is consistent with a production decline in advance of the new model launch (we believe iPad 3 starts production in 4Q, as noted below). Thus, we believe that recent competitor reports, which only noted the 4Q production volumes two weeks ago, were misinformed. iPad 3 appears on the forecast for 4Q production start. Our checks indicate that iPad 3 has now shown up on AAPL’s production forecast for a late-4Q production start. We believe 0.6 mln-1 mln units are forecasted for 4Q production.

Fidicaro maintains a “Positive” rating on Apple shares and a $535 price target.

Apple shares today closed up $6.24, or 1.6%, at $408.43.

Modern Dividend Theory Explained

According to Investopedia, Modern Portfolio Theory (MPT) is defined as follows:

A theory on how risk-averse investors can construct portfolios to optimize or maximize expected [total] return based on a given level of market risk, emphasizing that risk is an inherent part of higher reward.

I've been thinking that it's time we developed a parallel Modern Income Theory. Part of that would be a Modern Dividend Theory (MDT). I am going to restrict myself to the latter, because it is my area of expertise.

I am going to try to start off developing this theory by comparing MPT concepts to analogous MDT concepts. The MDT concepts are hyptheses, but then again so are most MPT concepts.

As you read through the following, you will notice significant contrasts, starting right off with the underlying goals themselves. I think this is why MPT proponents have difficulty even talking to MDT proponents, because the goals and tenets are so different.

In the chart below, "return" on the MPT side means total return unless otherwise noted. "Return" on the MDT side means dividend return unless otherwise noted. Also, I use "dividend" broadly to refer to common dividends, preferred dividends, and distributions by such entities as MLPs and REITs.


Modern Portfolio Theory

Modern Dividend Theory

Primary goal

Maximize expected total return with least acceptable risk. Little to no emphasis placed on income.

Maximize dividend income with least risk. Some emphasis also placed on total return. Some investors' primary goal is total return using income-investing techniques.

Significant metrics

Total returns; CAGR (compound annual growth rate); risk (standard deviation from expected mean); total wealth.

Dividend income; DGR (compound annual growth rate in dividends); total income.

Significance of income



Risk measured by

Volatility or standard deviation from the mean in total return.

Unexpected reductions in dividend stream.

Can there be negative return?

Yes. Actual value of portfolio may go up or down.

Not in dividend stream. There is no such thing as a negative dividend. However, value of underlying portfolio can go up or down.



Low risk is associated with low potential total returns; high risk is associated with high potential returns. Higher returns can only be achieved by assuming higher risk (i.e., higher volatility).

High and growing dividend streams can be achieved with relatively low risk. There is no consistent relationship between risk levels of total returns and risk levels of dividends. Indeed, dividends can rise while total returns are falling.


By investing in more than one stock, investor can reap benefits of diversification-chief among them, a reduction in the riskiness of the portfolio.

Same. (Note that the "riskiness" referred to here is risk to the dividend stream, while in MPT it refers to risk in total returns.)


The difference between different assets' levels of risk determines overall portfolio risk. Investing in uncorrelated asset classes in varying proportions determines both risk and potential total returns.

Results are achieved with single asset class-dividend and distribution stocks. Some investors would classify distribution instruments such as REITs and MLPs as different asset classes.

Steadiness of returns

Total returns move up and down as asset prices move up and down in the markets.

Dividend stream moves generally upward as companies increase dividends. Dividends are not market-dependent.

Optimal number of asset classes

Varies depending on pundit. Most common recognized classes are stocks (of various flavors) and bonds (of various flavors). Some other asset classes-such as real estate and "alternative" investments-are often considered to be legitimate (i.e. non-correlated) asset classes.

Uses single asset class, namely dividend and distribution stocks of various flavors: Common stocks; preferred stocks; REITs; MLPs; BDCs. Asset classes without significant distributions are not involved in the strategy.

Proportions in which to hold asset classes

Varies by pundit.


Common word to describe portfolio construction

"Exposure," meaning to expose yourself to various risky assets. Exposure to risk also exposes investor to potential rewards.

"Opportunity," meaning to avail yourself of opportunities to create positive dividend streams.

Passive or active?

Passive. Investor selects target proportions for various asset classes, then rebalances periodically to restore proportions to original targets. Individual stocks are not purchased, rather ETFs, which are then held with only activity being rebalancing. (ETFs themselves, of course, hold and trade individual stocks and bonds.)

Active. Investor selects stocks initially, then monitors them for continued satisfactory performance. Investor may rebalance if (say) sector proportions get out of whack. Investor may sell or replace stocks under defined circumstances to maintain or increase dividend stream.

Buy individual stocks?



Selected sources:

  • Investopedia, definition of "modern portfolio theory."
  • Modern Portfolio Theory: Why It's Still Hip, Investopedia, written by Ben McClure (January 7, 2010)
  • Disclaimer: This article is only meant to scratch the surface between investing for total returns compared to investing for income. My main goal here is to propose that just as total-return seekers have theoretical support in MPT, income-seekers have theoretical support in MDT, which at some point could be expanded out to MIT, meaning "modern income theory.

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

    Continue to Part 2 >>

    Is Central European Distribution Going to Burn You?

    There's no foolproof way to know the future for Central European Distribution (Nasdaq: CEDC  ) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result.

    A cloudy crystal ball
    In this series, we use accounts receivable and days sales outstanding to judge a company's current health and future prospects. It's an important step in separating the pretenders from the market's best stocks. Alone, AR -- the amount of money owed the company -- and DSO -- the number of days' worth of sales owed to the company -- don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

    Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can also suggest a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

    Why might an upstanding firm like Central European Distribution do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.

    Is Central European Distribution sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

    Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

    The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I've plotted both above.

    Watching the trends
    When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. Central European Distribution's latest average DSO stands at 126.7 days, and the end-of-quarter figure is 153.2 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let's get back to our original question: Based on DSO and sales, does Central European Distribution look like it might miss its numbers in the next quarter or two?

    The numbers don't paint a clear picture. For the last fully reported fiscal quarter, Central European Distribution's year-over-year revenue grew 22.6%, and its AR dropped 2.5%. That looks OK, but end-of-quarter DSO decreased 20.5% from the prior-year quarter. It was up 25.0% versus the prior quarter. That demands a good explanation. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.

    What now?
    I use this kind of analysis to figure out which investments I need to watch more closely as I hunt the market's best returns. However, some investors actively seek out companies on the wrong side of AR trends in order to sell them short, profiting when they eventually fall. Which way would you play this one? Let us know in the comments below, or keep up with the stocks mentioned in this article by tracking them in our free watchlist service, My Watchlist.

    • Add Central European Distribution to My Watchlist.

    Make Your Money Know With Forex Trading Software IvyBot

    There is no question that the Forex Trading market is a very lucrative market. Despite the global financial slowdown, it is still able to trade 3 Trillion dollars per day, every day. So it is no wonder that an increasing number of individuals are considering to enter this money-spinning field.

    The IvyBot is better than others as it trades four currency pairs as compared to other trading software that trades only one pair. It is automatic so you can trade with it and not lose any of your trade and can have your free time to enjoy. You do not need to sit in front of the computer for it to work.

    The Forex IvyBot comes with several notable features. It is the only one of its kind to offer a package that contains not just a single robot, but 4 independent robots. These 4 robots can work with 4 different currency pairs such as the USD/JPY, USD/EURO, USD/CHF and EURO/Yen. Each of the said 4 robots come with a specific algorithm based solely on a specific currency pair. With 4 Forex robots at your disposal, you are able to work on different markets without fear of missing a certain currency pair that might look quite profitable.

    There are many advantages in trading the in foreign currency market. IvyBot trades four pairs of currency using four separate robots, one for each currency pair. It is much better than other automatic systems that only trade one currency pair.

    Moreover, installing IvyBot is simple. Included in the package are video tutorials on how to install and operate the system as well as other additional indicators and scripts. Beginners and veteran Forex traders will appreciate IvyBot’s automation and customization features. IvyBot is currently sold at $149.95.

    Guaranteed 95.82% Accuracy, Best Forex Robot,. Forex MegaDroid Indisputably Proves A Robot Can Trade With 95.82% Accuracy In EVERY SINGLE Market Condition And At Least Quadruple Every Single Dollar You Deposit. 38 years of combined forex trading, experience delivers Megadroid RCTPA Technology.

    Apple Wins Import Ban on Select HTC Smartphones

    By Darrell Etherington, GigaOM

    Apple on Mondaywon a formal import ban against some HTC Android handsets in theU.S. from the International Trade Commission. The ITC decisionrelates to HTC devices that links data in documents like email toother applications, for example, a phone number that when tappedmakes a call using the phone’s dialer.The ban narrowly applies only to devices that implement thisfeature as described by a “data tapping patent” held byApple, according to FOSSPatents’ Florian Mueller. Should HTC be able to workaround or disable this feature in its Android devices, it’llbe able to once again ship and sell those handsets in the likewise made changes to certain features of the GalaxyTab 10.1N in Germany in order to sidestep a ruling against itstablet in that country, so it’s very possible HTC will find aworkaround before the import ban is scheduled to take effect onApril 19, 2012. But such a workaround could chip away atAndroid’s usability and create a more frustrating experiencefor users.Still, it’s a victory for Apple, and ammunition thecompany can add to itsaarmoryain its ongoing war againstGoogle’s mobile operating system and the devices that run it.As Mueller points out, should Apple be able to achieve the samekind of success with other system-level Android elements, it couldbegin to make a serious dent in Android’s ability to win overusers.Related research and analysis from GigaOM Pro:
    Subscriber content. Signup for a free trial.
    • The future of mobile: a segment analysis by GigaOMaPro
    • Mobile Q2: Smartphone growth surges; iPad’s ruleacontinues
    • A Global Mobile Handset Platform Forecast, 2011 –a2015 >To order reprints of this article, click here: Reprints

    Wednesday, January 9, 2013

    Performance Trends May Indicate Risk-Adjusted Equity Fund Flows: KBW Report

    Can the comparison of three-year risk-adjusted equity fund returns year over year predict fund flow trends? Such is the hope of Keefe, Bruyette & Woods (KBW), in its latest quarterly equity fund performance report titled "Equity Performance Bubbles: A Look at Risk-Adjusted Returns," released Tuesday.

    The report, which compares the above-mentioned returns as of August 31 with those calculated one year ago, evaluates the risk and return and how they relate to fund inflows or outflows. Results indicate strong returns for a number of funds, including T. Rowe Price, Eaton Vance, and Waddell & Reed; Calamos shows the most improvement, while many of Alliance Bernstein's funds' relative positioning continues weak.

    Using the Simfund database of Strategic Insight, scattergraph diagrams were calculated for "a wide variety of asset managers," according to the report. Those diagrams plot "the three-year risk-return profile of individual equity funds managed by a particular asset manager relative to other funds in the same Morningstar category."

    While "attractive risk-adjusted returns do not guarantee that a fund will generate positive flows," the report goes on to say that "the funds in our sample universe that fell into the upper-left quadrant (lower risk, higher return) have tended to generate net inflows." The report also tracks how risk-adjusted returns evolve over time, with an eye toward understanding future flow trends. Observations revealed that, "over the course of a year, there was noticeable change in the relative positioning of many of the equity funds measured in our analysis."

    Read more about mutual fund flows at

    Silver Offers a Golden Opportunity

    The fundamentals for silver and gold are very strong, and with all the massive bailouts, which are increasing debt levels, they are just getting stronger. Until a significant portion of these debts is repaid or defaulted on, it would be foolish to talk about a top in precious metals.

    The repayment of debt (or default on debt – which is more likely) will result in significantly reduced economic activity. Significantly reduced economic activity will have a negative effect on the stock market, which in this case, will likely result in a huge crash. It is these conditions (a deflating debt bubble) that will drive gold and silver prices significantly higher.

    Why? Because this will not just be a normal type of reduced economic activity, but one in which the monetary system as a whole is questioned or collapses (due to the excessive debt levels).

    In a crisis like this, it will be all about preserving value, which will make gold and silver the most wanted goods. The excessive debt levels we have currently, mostly represent artificial value, or value that will never be realised. We now have a great opportunity to convert that soon to be destroyed value into real value, by buying gold and silver, with fiat currency.

    In my opinion, silver bullion presents the better opportunity, when compared to gold. Silver bullion is still trading much lower than its 1980 high, and also at relatively historic lows against gold.

    Silver Flag

    Here, is a follow-up on my previous article about the similar flag formations on the silver chart. Below is a graphic which compares the current pattern on silver (from about the beginning of 2011 to present) to a 2007 pattern:

    On both charts, I have suggested how the flag patterns might be similar, by marking similar points, from 1 to 6 (and alternatively from a to f). Based on this comparison, it appears that the silver price might now have found that point 6 or h, and is about to increase significantly.  

    *Post courtesy of Hubert Moolman, a gold and silver analyst, specializing in fractal analysis as well as the fundamentals of gold silver. He offers a newsletter service, which provides research to investors from various countries, including: USA, UK, Europe, India and Australia. His work is regularly published on the established precious metals sites. 

    You can read more at and reach him at


    Why These 3 Dow Stocks Surged This Week

    The Dow Jones Industrial Average (INDEX: ^DJI  ) rose once again this week, up 0.3%. But some stocks surged more than others. These were the three biggest losers:


    Weekly Price Change

    Procter & Gamble (NYSE: PG  ) 2.8%
    Alcoa (NYSE: AA  ) 2.8%
    Chevron (NYSE: CVX  ) 2.3%

    Procter & Gamble was up big on an announcement that it will lay off 5,700 non-manufacturing employees by the end of fiscal 2016, up from the 1,600 in cuts the company had already announced for this year. Cutting 10% of its non-manufacturing workforce will help P&G save $800 million as part of a new plan to save $10 billion over the next five years.

    Alcoa rose on an announcement that it will enter a joint venture with China Power Investment to make high-end fabricated aluminum products for various industries in China. Terms weren't announced, but it could be a big deal based on the sheer variety of products they'll be making, from aerospace to transportation to packaging. Separately, the aluminum giant offered to double the salaries of 600 workers at an Australian plant that could close down if they move to a new smelter in Saudi Arabia.

    Chevron announced that it's started to look for gas in China's shale. It's also beginning phase two of a gas processing plant in Sichuan and delaying a Nigerian gas processing plant. The oil giant did start pumping oil out of the Usan field, a joint project with ExxonMobil, Total (NYSE: TOT  ) , Esso, and Nexen that's half a mile deep and 60 miles off the Nigerian shore. Total is operating the project, which is expected to produce up to 180,000 barrels of oil per day gross.

    Procter & Gamble, Alcoa, and Chevron all beat the market this week, but it's important to remember that what happens to the market on a day-to-day or even week-to-week basis doesn't matter nearly as much as how our stocks perform over the long run. If you're interested in one stock that our chief investment officer�picked to crush the market, check out our brand-new report, "The Motley Fool's Top Stock for 2012." It highlights a company that is revolutionizing commerce in Latin America. For a limited time, you can get instant access to the name of this company�for free.�

    The 18 Most Successful New ETFs Of 2011

    Growth and evolution have been recurring themes in the exchange-traded universe in 2011, as investors are now faced with a diverse product lineup of over 1,400 ETPs. More than 300 of those are new additions in 2011, a year that broke the previous record for extent of product development. And while many of the new ETFs that launched in 2011 are on the small side, some of these funds have come flying out of the gates to attract significant cash inflows.

    Through December 13, 18 ETFs that debuted in 2011 had accumulated at least $100 million in assets, an impressive total that illustrates the tremendous growth potential remaining in a market some believed was approaching its saturation point:

    1. iShares High Dividend Equity Fund (HDV): This ETF provides investors with exposure to 75 U.S. companies that have provided relatively high dividend yields on a consistent basis. Top holdings include AT&T, Pfizer, Johnson & Johnson, Procter & Gamble, and Intel [see Special Report: Dividend ETFs In Focus].

    2. PowerShares S&P 500 Low Volatility Portfolio (SPLV): This fund consists of 100 stocks from the S&P 500 Index that have the lowest realized volatility over the past 12 months [see Low Volatility ETFs Attracting Big Inflows].

    3. Vanguard Total International Stock ETF (VXUS): This ETF tracks the MSCI All Country ex-USA Investable Market Index, which is made up of a whopping 6,700 stocks issued by companies located outside of the United States.

    4. WisdomTree Asia Local Debt Fund (ALD): This fund gives investors exposure to local-debt denominated in the currencies of Asia Pacific (ex-Japan) countries. ALD is comprised of holdings from South Korea, Malaysia, Indonesia, Philippines, Thailand, India, China, Hong Kong, Singapore, Taiwan, Australia and New Zealand.

    5. WisdomTree Managed Futures Strategy Fund (WDTI): This is an actively managed ETF which employs a quantitative, rules-based strategy designed to provide returns that correspond to the performance of the Diversified Trends Indicator (DTI). The DTI is a long/short managed futures strategy that incorporates a diversified group of 24 liquid components of exchange-traded commodity and financial futures contracts.

    6. PowerShares Senior Loan Portfolio (BKLN): This High Yield Bond ETF is linked to an index that is designed to track the market-weighted performance of the largest institutional leveraged loans based on market weightings, spreads and interest payments.

    7. Schwab U.S. REIT ETF (SCHH): This ultra-cheap offering from Real Estate ETFdb Category is comprised of 80 U.S. companies whose charters are the equity ownership and operation of commercial real estate and which operate under the REIT Act of 1960.

    8. Precidian MAXIS Nikkei 225 Index ETF (NKY): Precidian, a newcomer to the industry, broke ground when it launched NKY as this was the first Japanese Equities ETF linked to the popular Nikkei 225 Index.

    9. Schwab U.S. Aggregate Bond ETF (SCHZ): This ETF is linked to the same index as AGG and BND, the Barclays Capital U.S. Aggregate Bond Index, which measures the performance of the U.S. investment grade bond market. However, SCHZ boasts the lowest expense ratio in the Total Bond Market ETFdb Category, making it an irresistible choice for cost-conscious investors.

    10. FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR): This ETF provides exposure to a global basket of companies that have significant business operations in the ownership, management and/or production of natural resources in energy, agriculture, precious or industrial metals, timber and water resources sectors.

    11. Active Bear ETF (HDGE): This is an actively managed ETF which seeks capital appreciation through short sales of U.S. stocks by employing a bottom-up, fundamental, research-driven security selection process. In addition to utilizing accounting metrics to analyze the income statement, cash flow statement, and balance sheet, HDGE’s fund managers also rely on qualitative factors to evaluate potential short-sale candidates.

    12. FlexShares iBoxx 3-Year Target Duration TIPS Index Fund (TDTT): This new offering from FlexShares offers exposure to U.S. inflation protected bonds knows as TIPs, with a targeted average duration of approximately three years.

    13. FlexShares iBoxx 5-Year Target Duration TIPS Index Fund (TDTF): This ETF is a close cousin of TDTT, although it’s underlying portfolio of inflation protected bonds have a targeted average duration of approximately five years .

    14. PIMCO 0-5 Year High Yield Corporate Bond Index Fund (HYS): Issued by industry juggernaut PIMCO, this high yield bond ETF is comprised of publicly issued U.S. dollar-denominated corporate debt notes that are rated below investment grade and have remaining maturities of less than 5 years [see High Yield ETFdb Portfolio].

    15. SPDR SPDR S&P Emerging Markets Dividend ETF (EDIV): This ETF was able to capitalize on increasing demand for current income-generating securities as it provides investors with exposure to 100 dividend paying securities of publicly-traded companies in emerging markets.

    16. PowerShares KBW Regional Banking Portfolio (KBWR): This ETF is linked to the KBW Regional Banking Index, which is an equal-weighted index, comprised of 50 holdings, that seeks to reflect the performance of publicly traded companies in the U.S. that do business as regional banks or thrifts.

    17. Schwab U.S. Mid-Cap ETF (SCHM): Available for commission free trading on Charles Schwab accounts, SCHM tracks approximately 500 mid cap equities selected from the Dow Jones U.S. Mid-Cap Total Stock Market Index.

    18. Schwab U.S. Dividend Equity ETF (SCHD): This ETF tracks an index that is designed to measure the performance of 100 high dividend yielding stocks issued by U.S. companies that have a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios.

    Disclosure: No positions at time of writing.

    Original post

    Disclaimer: ETF Database is not an investment advisor, and any content published by ETF Database does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. From time to time, issuers of exchange-traded products mentioned herein may place paid advertisements with ETF Database. All content on ETF Database is produced independently of any advertising relationships.

    REITs Outperform S&P 500 in First Quarter

    U.S. REITs continued to outperform the broader equity market in the first quarter of 2011. The total return of the FTSE NAREIT All Equity REITs Index was up 7.50% in the quarter, and the FTSE NAREIT All REITs Index was up 6.80% compared to 5.92% for the S&P 500.

    REITs delivered their first-quarter gains in spite of slightly negative returns in March. The FTSE NAREIT All Equity REITs Index was down 1.28% in the month, and the FTSE NAREIT All REITs Index was down 1.38%, while the S&P 500 was up 0.04%.

    On a 12-month basis ended March 31, 2010, the total return of the FTSE NAREIT All Equity REITs Index was up 25.02% and the FTSE NAREIT All REITs Index was up 24.34%, significantly outpacing the S&P 500’s 15.65% gain in the period.

    The U.S. REIT industry’s gains in the first quarter came on top of near 28% gains in both 2010 and 2009, years in which the S&P 500 gained approximately 15% and 26% respectively. At the end of this year’s first quarter, equity REITs were up 205% from their market cycle trough in March 2009, but still remained 18% below their peak in February 2007.

    The equity market capitalization of the U.S. REIT industry stood at $429 billion at the end of the 2011 first quarter, up 10.28 percent from $389 billion at year-end 2010.

    Income-seeking investorsalso continued to benefit from REIT dividend yields. The yield of the FTSE NAREIT All REITs Index at the end of the first quarter was 4.20%, while the FTSE NAREIT All Equity REITs Index’s yield was 3.46%. By comparison, the dividend yield of the S&P 500 was 1.91%.

    The public equity and debt marketscontinued to provide REITs with a significant amount of fresh capital in the first quarter of 2011. REITs raised a combined $23.3 billion in 59 equity and debt offerings in the period. The amount raised put the industry on track to surpass the $47.5 billion in public equity and debt it raised in 2010, the second largest annual amount raised in the industry’s history after the $49 billion raised in the record year of 2006.

     “Today, REITs are both financially and strategically well-positioned to continue their track record of building long-term value for their investors,” said NAREIT president and CEO Steven A. Wechsler, in a statement. Wechsler noted that REIT returns have outpaced those of the S&P 500 for the past 1-, 3-, 10-, 15-, 20-, 25-, 30-, and 35-year periods, and that REITs delivered double-digit returns in seven of those eight periods.

    Tuesday FX Brief: Out to Lunch

    After 21-months of trying to figure out how to mend the broken China in the store, EU officials in concluding a meeting on Monday posted a sign in the front window announcing they were “Out to Lunch.” The current crisis of confidence feels somewhat different from past crises during which speculators ganged up to prize tiny fissures wide open before forcing an inevitable crack in the system. It has been said that Italian government debt is tightly concentrated in the hands of a finite number of investors, notably domestic. The reality is that those bond holders may well be a tight crowd, but they too are in panic mode as they lighten the yoke under which they are increasingly struggling to carry their burden.

    Euro – The euro has bounced from its lowest point in four months against both dollar and yen at the start of another harrowing day for trading. We’ve noted previously that all avenues seem blocked to official efforts to find a new way to resolve the crisis. Plans previously rejected by Germany to use the bailout fund to retire Greek debt at a discount have resurfaced. At the same time some have proposed that Greece should temporarily enter default in a move that would bridge one episode of the crisis to a way forward despite staunch ECB opposition to any initiative that might appear in the lexicon of default. Unsettling already nervous investors on Tuesday was the short note that accompanied the conclusion to Monday’s meeting, which said that the EU would be back with a new strategy “shortly” and without setting a timeframe. The euro reached $1.3837 making for a 7.5-cent shift demise since Independence Day. Proving that trading is ever-reliant on scouring the headlines, the unit rebounded after a successful auction of Greek bonds. However, one well-received auction isn’t going to find any applause in Rome.

    U.S. Dollar – Again you have to look back to March to see the last time the dollar index traded as high as Tuesday’s 76.72 lifted as investors chose the dollar over the euro. Against other risk safe havens the dollar is weaker and trades lower against both the Japanese yen and the Swiss franc, although the greenback recently popped its head back above water having trawled close to a two-week low against the European alternative. An IBD measure of small business confidence for Jun dipped marginally, but has cursory impact on the dollar economy. The May trade balance widened to $50.2 billion.

    Canadian dollar – The Canadian unit lost almost one full cent versus the greenback as risk aversion forced dealers out of positions around the world. Later the loonie found its feet and actually made a gain against the dollar. The Canadian recently traded at $1.0312 U.S. cents following a merchandise trade report for international trade showing a second monthly deficit of C$900 million.

    Aussie dollar – The Aussie unit buckled overnight as spillover from the European crisis delivered a second session of equity market selling as investors shunned risk. To start the week the Reuters/Jeffries CRB commodity index declined by 0.9%, while on Tuesday the MSCI Asia Pacific stock index slid by 1.9%. Investors lost appetite for the Aussie sending it plunging close to its weakest point in two weeks. Having reached bottom at $1.0527 U.S. cents the Aussie has stabilized and recently traded at $1.0617 cents. A decline to a six-month low in the National Australia Bank reading of business confidence also weighed on the unit. Investors are still banking on the Reserve Bank of Australia to ease monetary policy within the next year, which represents a massive shift in sentiment over the past several weeks and has the capacity to detract from the local dollar’s appeal.

    British pound – Good news for the Bank of England was bad news for the British pound on Tuesday after the consumer price index moved into long-awaited retreat, while store sales remained stuck in reverse. The June CPI dipped by 0.1% leaving prices 4.2% higher than one year ago, which is down from a 4.5% at the time of the May reading. And while inflation remains more than twice the Bank’s target rate today’s revelation was unexpected and indicates the unpredictable nature of the series at a time when much of the threat was related to raging commodity price gains. The central bank has stood its ground in face of heated public pressure to raise interest rates at a time when the fiscal ligature has sent a clear signal of impending slowdown. The pound lost further support from any argument that the Bank would shift in to tightening gear anytime soon and slid to $1.5801 cents.

    Japanese yen – The selloff around the world for stocks as investors turned defensive saw heavy demand for the Japanese yen, which powered to ¥79.38 and breaching ¥79.50 for the first time since the Bank of Japan spearheaded coordinated intervention to restrain the yen after the March earthquake. The central bank today left its benchmark short-term interest rate unchanged at 0.1%.

    Genworth Attracts $100 Million in Assets to Its Alternative Investing Platform

    When Genworth announced its acquisition of alternatives investment provider Altegris Investments last October, Gurinder Ahluwalia said the move was made in response to the expressed wish of its RIA and broker-dealer advisor clients for access to alternatives. The move has appeared to pay off.

    In a media roundtable in New York on Tuesday, Ahluwalia (left), CEO of Genworth Financial Wealth Management (GWFM), mentioned that since the platform’s launch in February it had attracted $100 million in assets.

    There are 12 allocation strategies on the platform, said Michael Abelson, GWFM’s senior VP of Investment and product management, and the success of the platform reflected the fact, he said, “that alternatives are becoming a more important part of advisors’ practices.”

    Jon Sundt, president and CEO of Altegris, predicted that “three to five years from now, alternatives will be seen as ‘regular’—just as they are considered ‘regular’ in institutions and among the high net worth.”

    The fourth member of the roundtable, Anne Lester of J.P. Morgan Asset Management’s Global Multi-Asset Group (GMAG), pointed out that for advisors building portfolios, “it’s always about asking the right question of why you’re diversifying,” and then “sizing those exposures” that provide diversification.

    While many observers worried that Modern Portfolio Theory’s diversification mantra failed during the 2008-2009 economic and markets crisis, Sundt (left) pointed out that certain alternative strategies—namely managed futures, global macro, and long/short equity—“all made money during the crisis." Sundt argued that “it wasn’t the case that Modern Portfolio Theory didn’t work” during the crisis, but that investors hadn’t achieved true diversification.

    Looking just at the performance of managed futures, which Sundt says displays near zero correlation with the equity markets, Sundt said that during the “lost decade” of equity returns, an investment in managed futures would have performed quite well on an absolute basis, not just beaten the equities market's return.

    At Altegris, Sundt said, the company’s “80-strong” analysts looked for the best alternatives managers, who needed to exhibit long/short investing acumen, have a flexible investing mandate and be in liquid investments. Altegris is working on bringing some alternatives managers into '40 Act mutual funds, which he said have become

    more appealing to those alternatives managers while the increased visibility of those mutual funds’ holdings would be more appealing to advisors.

    Answering a question about the flexible investing mandate of Altegris-approved managers in a conversation after the roundtable, Sundt explained that those managers are “flexible within their style,” so advisors choosing those managers could find comfort that they will stay within their announced strategies. Moreover, Sundt said that  “We recommend that you have a diversified alternatives” strategy” as well in your clients’ portfolios.

    Still Deleveraging, and More Volatility Ahead

    In addition to expounding on the place of alternatives in a portfolio, Lester and Sundt commented on where the markets and the economy stand in the recovery. “We’re several years into a multi-year deleveraging process,” Lester said, “that has been painful and will continue to be.” She expects the deleveraging to last for another three to five years, resulting in “shorter, sharper market cycles.” While consumers are far “healthier” than they were and are “far into the deleveraging process,” and while “we see a V-shaped recovery in corporate profits,” she lamented the fact that “government deleveraging hasn’t started yet.”  

    She also worries that “we’re nearing the end of the recovery, despite plenty of “dry corporate powder” and signs of a pickup in M&A activity, and even the market’s quick recovery from the Japanese disaster, all of of which she sees as positives for the market.

    Sundt argued that Ben Bernanke's “Jackson Hole Hail Mary,” also known as QE2, is an “experiment we borrowed from the Japanese.” Corporate profits, he said, are “surging but also mean reverting.” Risk remains in the market, he expects inflation to come back into the market, and while there’s a “tail wind for equities” he also expects plenty of volatility as well in the next six to 12 months.

    Speaking further of consumers’ attitudes, and whether they will continue to save at the higher rates that have been in evidence since the crisis, Lester admitted she couldn’t predict whether that would be a permanent or temporary behavior pattern. She did tell a story that provided evidence that many investors remain gun-shy when it comes to investing and a recovery. “I was speaking at an end client conference in California last week,” she recalled, and asked the mostly older wealthy attendees whether they felt the recession was over. “Not one hand was raised,” she said.

    Tuesday, January 8, 2013

    Greece weighs on Brazil stocks, Petrobras tanks

    SAN FRANCISCO (MarketWatch) � Brazil�s benchmark index closed down more than 2% on Friday after euro-zone officials demanded additional austerity measures from Greece and delayed approval of bailout funds. Market sentiment was also burdened by big losses in Petroleo Brasileiro SA shares after the company reported a sharp drop in profit.

    Click to Play U.S. stocks drop on concerns over Greece

    Stocks fall as concerns over whether Greece will be able to receive bailout funds prompted a pullback. Photo: AP

    The Ibovespa index BR:BVSP �fell 1,532.63 points, or 2.3%, to finish at 63,997.86. For the week, the index shed 1.9%.

    Greece remained an albatross for stocks after euro-zone finance ministers made it clear that they will not disburse 130 billion euro ($172 billion) in financial assistance unless Greece demonstrates its commitment to pushing ahead with additional spending cuts. Read details on Greece�s latest problems

    In Sao Paolo, Petrobras PBR �BR:PETR4 �sank 7.8% after reporting a sharp drop in quarterly earnings. The oil giant said late Thursday its fourth-quarter net profit fell to 5.05 billion Brazilian reals ($2.93 billion) from BRL10.6 billion a year ago. It also said several high-level executives were replaced following the appointment of a new chief executive. Read more on Petrobras� quarterly results

    Usinas Siderurgicas de Minas Gerais BR:USIM3 �and Gerdau SA BR:GGBR4 �were also big decliners.

    At the other end, gains by Centrais Electricas Brasileiras BR:ELET6 and Companhia Energetica de Sao Paulo BR:CESP6 �helped to slow the index�s decline.

    Other Latin American equity markets were mostly weak with Mexico�s IPC MX:IPC �down 93.06 points to 38,149.22 while Argentina�s Merval AR:MERV �was off by 27.11 points to 2,721.89.

    Chile�s IPSA CL:IPSA bucked the trend to rise 6.79 points to 4,410.74.

    Top Stocks For 2012-1-18-14


    Solutions Include Speech Recognition Technology, Analytics, Reporting Services for HIM and Radiology

    FRANKLIN, Tenn., Sept. 20, 2011 (CRWENEWSWIRE) — MedQuist Holdings Inc. (Nasdaq:MEDH), a leading provider of integrated clinical documentation solutions for the U.S. healthcare system, announced that Los Angeles County Department of Health Services has chosen the company to provide clinical speech technology and documentation services across its health system and SpeechQ front-end speech recognition technology for its radiology practices.

    By standardizing on MedQuist services and technology to capture the detailed story for its patient population, Los Angeles County Department of Health Services will have actionable, meaningful clinical documentation, experience cost reductions and realize clinical documentation improvement, which will help them with their move from ICD-9 to ICD-10. Front-end speech recognition capabilities for radiology will provide technology enhancements with accuracy gains in speech understanding, in addition to cost savings afforded by a standardized solution for radiology transcription technology and services.

    “The MedQuist solution greatly enhances the efficiency of our clinical operations by harnessing the latest in technology,” said LAC+USC Medical Center Diagnostic Services Administrator Daniel Amaya. “We look forward to our continued partnership and to meeting our performance and cost objectives.”

    Los Angeles County Department of Health Services facilities included in this relationship are:

    Harbor UCLA Medical Center
    High Desert Health System
    LAC+USC Health Care Network
    Martin Luther King, Jr. Multi-Service Ambulatory Care Center
    Olive View-UCLA Medical Center
    Rancho Los Amigos National Rehabilitation Center

    Clinical documentation services are performed utilizing the company’s DocQment Enterprise Platform (EP) through digital voice capture, automated speech recognition and transcription and editing tools. DocQment EP(TM) facilitates workflow efficiencies and high-quality clinical information captured from the physician narrative. DocQlytics, an intuitive reporting dashboard streamlines and accelerates performance reporting on clinical documentation and provides continuous process improvement analytics. SpeechQ for Radiology offers real-time interactive speech for dictation, review and electronic signature of reports, interfaces with radiology information systems (RIS) or picture archiving and communication systems (PACS) systems.

    “The Los Angeles County Department of Health Services provides valuable healthcare services to the communities in which it operates, and our partnership will help them achieve even greater success for their patients,” said Vern Davenport, Chairman and CEO of MedQuist Holdings. “Deep value will be derived from the rich content delivered through the clinical documentation process we deliver. By capturing such detailed clinical information in the care cycle, greater collaboration in the healthcare continuum will be achieved among stakeholders and deeper insight into each patient’s complete story will enhance delivery of care.”

    About Los Angeles County Department of Health Services

    The Department of Health Services (DHS) provides acute and rehabilitative patient care, trains physicians and other health care clinicians, and conducts patient care-related research. DHS operates four hospitals, including some of the nation’s premiere academic medical centers through its affiliations with the University of Southern California and the University of California, Los Angeles. In addition, DHS operates two multiservice ambulatory care centers, six comprehensive health centers, and multiple primary care health centers throughout Los Angeles County, many in partnership with private, community-based providers.

    About MedQuist

    MedQuist is a leading provider of clinical narrative capture services, delivering Speech Understanding technology from MModal and clinical documentation workflow. MedQuist’s enterprise solutions — including mobile voice capture devices, speech recognition, Web-based workflow platforms and global network of medical editors — help healthcare facilities facilitate adoption of electronic health records (EHR), improve patient care, increase physician satisfaction and lower operational costs. For more information, please visit

    The MedQuist Holdings Inc. logo is available at

    “Safe Harbor” Statement under the U.S. Private Securities Litigation Reform Act of 1995: Statements in this press release regarding MedQuist’s business that are not historical facts are “forward-looking statements” that involve risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or forecasted in forward-looking statements. As a result, forward-looking statements speak only as of the date they were made, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

    Source: MedQuist Holdings Inc.


    Thomas Mitchell
    Director of Marketing