Saturday, May 4, 2013

An Interview With Fedele Bauccio: Raising the Bar in the Food Industry

In the following video, we hear from Fedele Bauccio, founder and CEO of Bon Appetit Management. His company has built its reputation on locally sourced, seasonal, healthy foods and is actively involved in sustainability issues affecting every aspect of the food industry.

Bauccio's company has revolutionized the food-service industry. He recalls that it all began with a passion for food that was born as he watched his mother grow her own food and prepare authentic Italian meals for the family.

A transcript follows the video.

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Isaac Pino: Well, Fedele, we are ecstatic to have you here today. I was going to give a brief introduction to the crowd to give them some perspective on your career, your experience, and your company today.

Fedele began his career in food service as a dishwasher in 1960 with Saga Corporation's education division, while a student at the University of Portland, and 27 years later he set out on his own to revolutionize the institutional food service industry.

Fedele founded Bon Appetit Management Company in 1987, and for the first time, real executive chefs were put in charge of the kitchens of colleges, universities, corporations, and cultural centers.

In 1999, Fedele and his team raised the bar for on-site food service by making a commitment to socially responsible food sourcing, starting with the launch of its "Farm to Fork" program. Since then, Bon Appetit has been addressing sustainability issues across the board, taking these challenges head-on and embracing small, owner-operated farms, sustainable seafood, turkey, and chicken raised without antibiotics, and a "low-carbon diet."

The first program to make the connection between food and climate change, Fedele's work and Bon Appetit have been honored by many organizations for tackling sustainability issues in the food industry, and today Fedele has flown over from the company headquarters in Palo Alto to Washington, D.C.

Thanks for being here, Fedele.

Fedele Bauccio: Good morning, everybody. I'm happy to be here.

Pino: We have a little bit of California weather today, just for you.

Bauccio: Yeah, it's not so bad. Yeah.

Pino: I wanted to get this started by reaching back into your background. You washed dishes, you worked in the food-service industry. It seems like you always had a knack for food, or perhaps a passion. Is that the case? Did you always have an interest in this line of work?

Bauccio: I did. I guess, being Italian, growing up with an Italian mother that loved cooking, and I was by her side a lot in the kitchen, I had this affection for food.

I was lucky, because she grew tomatoes and basil and all kinds of stuff in her backyard, so we were able to eat really well. When I got to college, Mom and Dad didn't have a lot of money, so they said, "You'd better get a job," so I started washing dishes.

About three months later, the chef in the kitchen at that time, or the cook, said, "Why don't you come in after class and start cutting vegetables for me, and get off the dish machine?" That was the start of it.

I started to put my hands in food while I was going to the university, and I felt that this was something I wanted to do. I wasn't quite sure what it was going to be, but I always had this passion and love for food.

How I Used Peter Lynch to Make Money, and How You Can, Too

Today, I'm able to pat myself on the back and say "job well done": I played the automotive industry and the market like a fiddle.

It all started years ago in the midst of the nastiest recession our nation has faced. Years ago, where my story begins, I read Peter Lynch's book One Up On Wall Street, from which I picked up some great -- yet simple -- investing knowledge. Here's the good news for investors: What I did is one of many strategies that can and will work again.

Rather than pull my money out at the wrong time, as so many people did, I invested in specific trend-bucking, low-beta stocks -- O'Reilly (NASDAQ: ORLY  ) , Advance Auto Parts (NYSE: AAP  ) , and AutoZone (NYSE: AZO  ) . I did so while following Lynch's advice to "invest in what you know." To allow me to tell my story, let me briefly explain what the beta number is and how it works. Then I'll tell you why I picked those stocks and explain how you can do it next time.

Beta number
In case someone out there can learn from me today, here's how a stock's beta number works. You can find the number listed on any ticker profile page.

If the number is less than 0, the stock generally moves in the opposite direction as the market index -- gold, for example. If the number is equal to 0, the stock movement is uncorrelated to the market. If the number is greater than 0, but less than 1, the stock's movement is generally the same direction as the market index but to a lesser degree. If the number is equal to 1, its movement is generally the same as the market and to the same degree. If the number is greater than 1, it moves in the same direction but to a higher degree.

While I never recommend trying to time the market -- ever -- you can help protect your portfolio by moving some assets into low-beta stocks during downturns. When things begin to improve, move some assets into higher-beta stocks. This is where my story begins.

The Great Recession
When the financial crisis occurred and the stock market began to tank as we entered into a severe recession, I searched for low-beta stocks that I knew and was confident in. I began my marketing career in the automotive industry and knew it thoroughly. I knew that during a recession, consumers put off large vehicle purchases and repairs -- opting to do the repairs themselves.

This consumer mind-set to save a buck on an oil change and other small repairs was a boon to automotive retailers such as O'Reilly, Advance Auto Parts, and AutoZone. Their beta numbers are low at 0.40, 0.49, 0.20, respectively, and I pulled the trigger to move some of my assets into those three stocks. During the recession and following months, store traffic increased and company profits surged -- which made these stocks rare winners at the time.

Source: Ycharts.

Switching back to high beta
If that one move was all I had done, it would have been a great move -- and those three are still doing well. Since I still follow and understand the automotive industry for a living, I saw the rebound potential that Ford (NYSE: F  ) represented last year. Ford has a much higher beta number at 1.56, and I finally had enough confidence in our economy's momentum to invest in high-beta stocks. During one of Ford's famous "summer swoons," I took advantage of what I thought was an undervalued stock and pushed some of my assets into it.

F Chart

F data by YCharts

It's been a great move so far, and I see tons of potential left in Ford and its rival General Motors (NYSE: GM  ) . Ford escaped a bailout because of excellent vision and management from industry-leading CEO Alan Mulally. Ford's crosstown rivals weren't so lucky and would suffer through bankruptcy and a government bailout. The lessons Detroit's Big Three would learn from their worst chapter in history would be vital to their becoming valid investments once again -- and they have.

Bottom line
As the economy improves, we're seeing U.S. vehicle sales increase to levels not seen since before the recession hit. Detroit's Big Three have emerged from the recession much leaner, efficient, and, most importantly -- profitable. Now both Ford and GM are producing valuable, fuel-efficient, quality vehicles that people actually want to buy. That was evident these past two weeks, as both companies posted beats on first-quarter earnings and are optimistic for the future.

Just recently I felt comfortable enough to put some of my hard-earned cash into GM, and I'm hoping my story continues to be my best investing decision. If you follow Lynch's simple advice and invest in what you know, that alone will make you a better investor. You can also protect your portfolio by having some low-beta stocks during uncertain times.

Did any of you have investment wins during the recession? I'm curious to hear about other stocks that may have done well. Let me know in the comments below.

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Fed Signals It Could Increase or Decrease Stimulus

WASHINGTON (AP) -- The Federal Reserve on Wednesday stood by its extraordinary efforts to stimulate the economy because unemployment remains high at 7.6 percent. The Fed said the economy and job market have been improving only moderately, held back by government spending cuts and tax increases.

After a two-day policy meeting, the Fed maintained its plan to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent.

And it said that it will continue to buy $85 billion a month in Treasury bonds and mortgage-backed securities. The bond purchases are intended to keep long-term borrowing costs down and encourage more borrowing and spending.

In a statement, the Fed made clear that it could increase or decrease its bond purchases depending on the performance of the job market and inflation. And it was explicit for the first time that tax increases and federal budget cuts are "restraining economic growth."

The Fed action was support on an 11-1 vote. Esther George, president of the Kansas City regional Federal Reserve bank, dissented for the third straight meeting. The statement said that George remained concerned that the continued high level of policy accommodation increased the risks of future economic and financial imbalances.

Debate among Fed policymakers at the March meeting had prompted some economists to speculate that the Fed might scale back its bond purchases in the second half of 2013 if job growth accelerated.

But several reports in recent weeks have signaled the economy has weakened since the start of the year. Employers added only 88,000 jobs in March, far fewer than the 220,000 averaged in the previous four months. And the economy grew at an annual rate of 2.5 percent in the January-March quarter -- a decent growth rate but one that's expected to weaken in coming months because of federal spending cuts and higher Social Security taxes.

At the same time, consumer inflation as measured by the gauge the Fed most closely monitors remains well below its 2 percent target. That gauge rose just 1 percent in the 12 months that ended in March.

Many analysts now think the Fed will keep its easy-credit policies unchanged, possibly for the rest of the year.

The Fed has been joined by other major central banks in seeking to strengthen growth and reduce high unemployment.

The European Central Bank could cut its benchmark lending rate from a record low of 0.75 as soon as Thursday because the euro area's economy remains stagnant.

Unemployment for the eurozone is 12.1 percent. And the ECB predicts that the euro economy will shrink 0.5 percent in 2013.

Japan's central bank has acted to flood its financial system with more money to try to raise consumer prices, encourage borrowing and help pull the world's third-largest economy out of a prolonged slump. Economists say Japanese consumers will spend more if they know prices are going to rise.

The Bank of Japan has kept its benchmark rate between 0 and 0.1 percent to try to stimulate borrowing and spending.

The Fed's goal is to keep price changes from hurting the economy. This could occur if inflation raged out of control or if the opposite problem -- deflation -- emerged. Deflation is a prolonged drop in wages, prices and the value of assets like stocks and houses.

The United States last suffered serious deflation during the Great Depression of the 1930s but Fed policymakers worry more about the threat of deflation any time prices go lower than 2 percent.

Friday, May 3, 2013

Steady as She Goes on KLA-Tencor's Q4 Dividend

KLA-Tencor  (NASDAQ: KLAC  )  declared it will pay a quarterly cash dividend of $0.40 per share on June 3 to shareholders of record at the close of business on May 13. 

That rate is the same that the semiconductor specialist paid in the current fiscal year. It's raised its dividend each year  for the past three fiscal years. Prior to that, it had been a fairly consistent dividend of $0.15 per share, and over the last nine years, it has ranged from $0.09 to its current level of $0.40 per share. 

The new dividend annualizes to $1.60 per share, and yields 3.1% at the closing price of KLA-Tencor's stock on May 2.

KLAC Dividend Chart

KLAC Dividend data by YCharts

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Avenue Income Credit Declares 3 Months of Dividends

Maintaining its $0.12 per share monthly dividend payout, closed-end management investment company Avenue Income Credit Strategies Fund  (NYSE: ACP  )  said yesterday it will make the payout on May 31 to the holders of record at the close of business on May 15. The stock will trade ex-dividend May 13. 

Avenue Income has paid the $0.12 per share monthly dividend since December of 2011, when it was cut by $0.01. It also declared a $0.12 per share dividend for the months of June and July.

The fund's primary investment objective is to seek risk-adjusted returns with high current income and the potential for capital appreciation. It has invested in the public and private debt and equity securities of distressed companies across a variety of industries since 1995 and, as of March 31, it managed assets estimated to be approximately $11.5 billion.

The most recent dividend payment equates to a $1.44-per-share annual dividend, yielding 7.7% based on the closing price of Avenue Income Credit Strategies' stock on May 1.

ACP Dividend Chart

ACP Dividend data by YCharts

More Expert Advice from The Motley Fool
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Nokia Teams With UNESCO to Help Teachers in Nigeria

Drilling Down into Vanguard Natural Resources̢۪ Earnings

Oil and gas producer, Vanguard Natural Resources (NYSE: VNR  ) is out with its first-quarter earnings. The company, known for its monthly distribution to investors, is one of a growing number of oil and gas production companies structured as an MLP/LLC. This makes the high yielder a favorite of income-starved investors. Let's take a quick look to ensure that income won't be drying up anytime soon.

First quarter financial highlights
Vanguard's results were in line with management's expectations, with revenue of $96.7 million, which led to adjusted EBITDA of $72.4 million and distributable cash flow of $41.4 million. While adjusted EBITDA rose 36% year over year, distributable cash flow dipped by 7%. Distributable cash flow was affected by higher expenses, as well as commodity prices; however, the company still was able to deliver a distribution coverage ratio of one times, meaning that it is secure.

Oil and gas production skyrocketed in the quarter to 33,122 barrels of oil equivalent per day, which is up 144% over the 13,569 barrels of oil per day produced in the first quarter of last year. Natural gas production was the big driver in the quarter, as the company produced 68% more gas than last quarter. Oil production was up, as well, though it only increased by 4%, while NGL production was up by 23% over last quarter. The company's acquisitions over the past year have been a key driver in boosting its production. 

Vanguard's production mix for the quarter was 67% natural gas, 24% oil, and 9% NGLs; however, the revenue is made up of 55% oil, 35% natural gas, and 10% NGLs. That revenue mix was not only affected by a higher proportion of natural gas production, but challenges in the quarter due to oil and NGL price differentials, as well. Overall, there is nothing to be concerned about here as the company expects the pressure on oil prices to abate going forward. 

Looking ahead
Vanguard recently completed its $268.8 million acquisition of assets in the Permian Basin from Range Resources (NYSE: RRC  ) . These were liquids-weighted assets, with only 43% of the reserves weighted toward natural gas. It was a good deal for both sides, as Range is focusing its resources and personnel on the highest return projects in its portfolio, making these cash flow assets a much better strategic fit for Vanguard as they enable the company to grow its liquids production and related cash flow.

The Range assets contributed to Vanguard's ability to raise its monthly distribution from $0.2025 to $0.205. The company expects to continue to be active on the acquisition front, which could allow for additional steady distribution increases throughout the year. Also contributing to the increase was the company's decision to accelerate some of  its second-quarter drilling capital budget into the first quarter, which then brought that cash flow forward. Vanguard will likely increase its capital budget this year, which could yield additional distribution increases as that cash flow comes online.

Finally, the company discussed on its conference call that it's exploring the opportunity to follow in the footsteps of LINN Energy to develop a similar structure to its LinnCo model. LinnCo has been highly successful in the marketplace, and Vanguard sees a similar structure as an option to fund future growth. This could have a significant future impact on how Vanguard operates going forward, so this is a key area for investors to watch.

Foolish bottom line
Overall, it was a solid quarter for Vanguard, and the company is set up to have a solid year. One last item of note: The company made mention on its conference call that it really needs investors to vote their 2013 proxy this year. They have an important item on the ballot that requires shareholder approval, so if you haven't voted yet, you really should take this opportunity to exercise your rights as an investor. Remember, you didn't simply buy a ticker symbol -- instead, you're a part owner of the future success of the company. 

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J.C. Penney Apologizes for 'Mistakes' in New Ad

JC PennyJ.C. Penney J.C. Penney's (JCP) quest to rebound from the disastrous reign of ousted CEO Ron Johnson continued today when it apologized to its disaffected customers in a new ad.

Titled "It's No Secret," the 30-second spot acknowledges the various changes the retailer has undergone in the last year and a half and admits that not every change went over well with the retailer's customer base.

"Some changes you liked, and some you didn't," says the ad's narrator, in what can charitably be described as a massive understatement. See for yourself:

The ad promises that the company will learn from its mistakes, the most high-profile of which was the "fair and square" pricing scheme, which did away with coupons and sales. Shortly before his ouster, Johnson himself acknowledged that the pricing strategy was a mistake, noting that "we learned [our customer] loves a sale."

The apparel strategy was likewise unpopular. Johnson brought in jeans "bars" and stylish boutiques from new brands like Joe Fresh, but in the process did away with "basic" apparel and favored brands like St. John's Bay. That alienated the retailer's older customers, and the company recently said it would start bringing back those departed brands in an attempt to lure back the faithful.

The ad went up on Twitter and Facebook on Wednesday morning, and attracted thousands of comments from J.C. Penney fans alternately praising the company for its honestly and angrily demanding changes.

"Bring back St Johns Bay get rid of all the sleezy stuff you changed to," reads one popular comment on the Facebook post. Another commenter demands that the retailer abandon its mobile checkout system, which is intended to make the checkout process more convenient but has attracted complaints from some shoppers and employees.

J.C. Penney had been on a bit of a roll since Johnson was replaced by former CEO Myron Ullman, but shares have been trending downward since Moody's cut its rating Tuesday and declared that a new loan it had secured from Goldman Sachs "will not solve JCP's longer term performance concerns."

UPDATE: About three minutes after tweeting out the link to this story, I got a reply from J.C. Penney's Twitter account:

@brownellorama We're listening, Matt. - Lee

- jcpenney (@jcpenney) May 1, 2013
I've noticed that other users tweeting at J.C. Penney are receiving similar responses; in cases where a user has made a specific suggestion, the person manning the account thanks the user for his or her feedback. The company's Facebook account is likewise taking an active role in the discussion and thanking commenters for their responses. And the company's social media team is rallying the discussion around the hashtag #jcplistens.

One of the big criticisms of Johnson was his penchant for charging ahead with big changes without first testing them with customers. While we doubt the new management is reading each and every comment, they clearly want to give the impression that they're more responsive to their customers than the old boss.

Thursday, May 2, 2013

Are the Suburbs Bad for Businesses?

In the following interview, we speak with Jeff Speck, author of Walkable City: How Downtown Can Save America, One Step at a Time. Speck is an architect and city planner in Washington, D.C., oversaw the Mayor's Institute on City Design, and served on the Sustainability Task Force of the Department of Homeland Security.

We look at the example of Grand Rapids, Mich., where several companies that were located in the suburbs and having trouble retaining employees were able to solve their problem through the creation of an urban innovation hub.

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Isaac Pino: Continuing on the groundwork that you just laid, your three main arguments are around health and wealth and sustainability. Here at The Motley Fool, we just care about wealth, really. We're a greedy bunch.

Jeff Speck: Sustainable wealth.

Isaac: No, I'm just kidding. We'll get to the other ones.

Sustainable, exactly, long term. Let's start with wealth and the importance of walkability in creating strong economies -- and strong companies, for that matter. One of the things that you point out is a company called Wolverine Worldwide  (NYSE: WWW  ) , I think based in Grand Rapids, Mich.?

Jeff Speck: Outside of Grand Rapids.

Isaac: Outside of Grand Rapids. They supply all kinds of brand-name shoes: Saucony to Sperry Top-Siders, Patagonia, all kinds of names. You made the point that walkability really affected exactly how they looked at their business and who they recruited and where they looked for talent. Can you explain a little bit more about that?

Jeff Speck: I was out at their headquarters, maybe three years ago. When you're a planner, you listen for stories like this. It's like a gold mine when you hear a story like this.

They were having no trouble attracting talent to come and move there -- this was in the suburbs outside of Grand Rapids -- but they were having trouble keeping the talent, because the perception among the spouses of the talent was that they couldn't break into the social scene in their hometowns.

The social scene, those who are a little more astute in terms of understanding why they make choices and what their environment offers them were saying, "Everything that I have to go to is by car, and therefore by invitation, and I'm not having those chance encounters, bump into a person in the street."

You form a lot of friendships, often, in cities. I know it happens to me, at my Blind Dog Coffee Shop, just around the bumping into people.

They weren't able to keep talent, and what the CEO did with, I think, five other companies in the Grand Rapids area that were actually stuck in the suburbs, was to create an urban innovation hub in the heart of Grand Rapids.

Now, Grand Rapids isn't New York City. It's not exactly Friends or Seinfeld, but it's a pretty neat little city, and you can have a really urban experience there, and even an urban life there. You can live in downtown Grand Rapids. It's also an Enterprise Zone, so you don't pay any state tax if you live in downtown Grand Rapids.

They managed to attract and retain talent, but also now all these different businesses are bouncing ideas off each other much more fully than they would have if they were each isolated in their office parks in the auto zone outside of the city.

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Today's 3 Best Stocks

Why OM Group Shares Popped

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 specialty chemical company OM Group (NYSE: OMG  ) climbed 14% today after its quarterly results easily topped Wall Street expectations.

So what: The stock has plunged since February on concerns over slumping demand, but today's first-quarter results -- EPS of $0.15 on revenue of $364.3 million versus the consensus of $0.04 and $287.5 million -- suggest that things are starting to turn. While specialty chemicals sales continued to decline, volume at its magnetic technologies and battery technologies division improved much more than expected, giving investors plenty of good vibes about its business mix going forward.

Now what: Management reaffirmed its full-year EBITDA guidance of between $120 million and $140 million. "[W]e have the financial capacity and discipline to continue to invest in our future while at the same time returning capital to shareholders," said Chairman and CEO Joe Scaminace. "We are well-positioned to execute our strategy and create long-term shareholder value." Of course, when you couple the stock's high beta with the fact that it's now up about 75% from its 52-week lows, expect the ride to be a particularly bumpy one.

Interested in more info on OM Group? Add it to your watchlist.

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USA Today Founder Passes Away

One of the more durable hard-copy newspapers on the market has lost its founding father. USA Today's guiding light Allen "Al" Neuharth has passed away at his home in Florida at the age of 89. Formerly the chairman of Gannett (NYSE: GCI  ) , the company that launched and still operates the newspaper, Neuharth battled members of his own board to get his proposed national broadsheet launched in 1982.

Initially dismissed as "McPaper" for its heavy use of graphics and color and perceived light coverage of news and current affairs, USA Today is still a common and popular item on newsstands throughout the country. As of 2012, it had a total circulation of 1.7 million, putting it in an elite category with publications such as News Corp's The Wall Street Journal and The New York Times Company's (NYSE: NYT  ) eponymous gazette.

More Expert Advice from The Motley Fool
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Wednesday, May 1, 2013

Was Questcor's Q1 as Bad as It Looks?

Questcor Pharmaceuticals (NASDAQ: QCOR  ) reported first-quarter results after the market closed on Tuesday -- and they didn't look great. Shares fell 3% in after-hours trading, but were things really as bad for Questcor as they might seem? Let's take a look.

By the numbers
Non-GAAP earnings for the quarter were $0.76 per diluted share, up nearly 25% from $0.61 per share in the same period last year. That result fell far short, though, of the average analysts' estimate of $0.96 per share.

Questcor reported GAAP earnings of $0.65 per diluted share. This reflects a 12% increase over the $0.58 per share earnings from the first quarter of 2012.

First-quarter net sales totaled $135.1 million, up 41% year over year from $96 million reported in 2012. However, analysts expected sales of around $157 million -- 16% above what Questcor delivered.

The company held cash, cash equivalents, and short-term investments of $156.3 million as of April 19. That amount is up slightly from the $155.3 million on hand at the end of 2012.

Behind the numbers
It's not hard to find the reason behind Questcor's disappointing quarterly results. Shipments of its Acthar gel were clearly below expectations. The company's steady sales growth pattern for Acthar has now been broken.

Source: Company press release and 10-Q reports.

Some have predicted a bleak outlook for the company for quite a while now. Does this decline reflect gloomy days ahead for Questcor?

Let's look at the big elephant in the room: a 17% sequential drop in multiple sclerosis prescriptions for Acthar. This decrease follows an 8% sequential drop in the fourth quarter. Questcor says that insurance coverage for Acthar still appears favorable. Assuming this is the case, what's going on?

For one thing, the seasonality effect on multiple sclerosis flare-ups that I noted after last quarter's results were announced could still be a factor. Research supports the idea that there are fewer MS relapses in colder months.

Questcor also launched a new reimbursement support center during the first quarter. Since most new prescriptions for multiple sclerosis require assistance from the company to navigate the insurance reimbursement process, this transition likely affected figures to some extent.

The company noted that Acthar shipments in April set a record high of 2,550. Questcor CEO Don Bailey said in the earnings conference call that MS prescriptions in April appear to be especially strong.

Looking ahead
My view is that next quarter will be where the rubber meets the road for the supposition that the decline in Acthar prescriptions for multiple sclerosis is only temporary. If the strength that the company reported for April continues, second-quarter results should be solid.

Multiple sclerosis will increasingly take a less prominent role, though. New paid prescriptions for rheumatology indications shot up 58% sequentially with a beefed-up sales force. I expect continued strong growth in this area.

Questcor has a super-high short interest at just shy of 60%. A lot of people are betting this stock will fall. Maybe they're right, but that seems like a risky longer-term bet -- at least until second-quarter results come out.

If Acthar shipments return to the strong growth trajectory from past quarters, Questcor looks like one of the cheapest pharmaceutical plays in the market. I suspect this summer will tell whether the stock is cheap for a reason -- or just cheap for a season.

Questcor is one of the most debated names in all of biotech. Its premium priced drug Acthar has grown at a torrid pace -- and minted money in the process. However, recent events have created significant doubts about Questcor's future. Will insurance companies continue to cover the drug? Will a government investigation lead to huge fines? We highlight these high-profile issues inside our brand-new premium research report on Questcor. In it, you'll learn about the key opportunities and threats facing the company, as well as multiple reasons to buy and sell the stock. So make sure to claim a copy today by clicking here now.

NXP Semi Buys Code Red

NXP Semiconductors (NASDAQ: NXPI  ) has brought a new asset into its fold. The company announced it has acquired privately held Code Red Technologies. The latter, a provider of embedded software development tools, is seen as complementary to NXP Semi's existing business.

The terms of the deal were not made public.

NXP Semi said that Code Red's workforce will be consolidated across three locations; San Jose, Calif., Syracuse, N.Y., and Cambridge, U.K. At the moment, the latter has offices in Cambridge and San Francisco.

More Expert Advice from The Motley Fool
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Why Sourcefire Shares Caught Fire

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 Sourcefire (NASDAQ: FIRE  ) were on fire today, enjoying gains as great as 15%, after the company reported earnings.

So what: Revenue in the first quarter came in at $56.2 million, which resulted in non-GAAP earnings per share of $0.11. Those figures represent misses on both top and bottom lines, as analysts were expecting sales of $57.4 million and adjusted earnings of $0.12 per share.

Now what: Investors were braced for much worse following soft results from peers, so shares are rallying in relief that results weren't as bad as feared. Sourcefire fared well in its international and U.S. commercial businesses, which helped offset some weakness from federal government spending cuts. Guidance calls for second quarter revenue in the range of $60.5 million to $63.5 million.

Interested in more info on Sourcefire? Add it to your watchlist by clicking here.

It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

3 Stocks to Get on Your Watchlist

I follow quite a lot of companies, so the usefulness of a watchlist to me cannot be overstated. Without my watchlist, I'd be unable to keep up on my favorite sectors and see what's really moving the market. Even worse, I'd be lost when the time came to choose which stock I'm buying or shorting next.

Today is Watchlist Wednesday, so I'm discussing three companies that have crossed my radar in the past week -- and at what point I may consider taking action on these calls with my own money. Keep in mind that these aren't concrete buy or sell recommendations, nor do I guarantee I'll take action on the companies being discussed. What I can promise is that you can follow my real-life transactions through my profile and that I, like everyone else here at The Motley Fool, will continue to hold the integrity of our disclosure policy in the highest regard.

Elan (NYSE: ELN  )
Having a lot of cash in the biotech sector doesn't mean that a company's clinical trials will translate into success. Elan's claim to fame was the development of multiple sclerosis drug Tysabri, which it licensed out to Biogen Idec (NASDAQ: BIIB  ) . Sales of the drug hit $1.6 billion last year.

However, earlier this year, Biogen purchased the remaining rights to Tysabri (they had been split 50-50) for $3.25 billion in cash, further cementing Biogen as the name to be reckoned with in MS therapies. The purchase doesn't negate the fact that Elan can still earn 12% to 18% royalties from Tysabri depending on its annual sales, but it leaves Elan's product pipeline completely empty.

The concern I have with Elan is twofold. First, the company used $1 billion of its $3.25 billion to buy back its own shares. That's fine if the company is healthfully profitable and looking to boost shareholder value, but to me it seems a waste of $1 billion to repurchase shares when it has no FDA-approved products on the market (again, not counting its Tysabri royalties).

Second, it has one (yes, one) experimental compound currently under investigation. That drug, ELND005, is being targeted at Alzheimer's disease and bipolar disorder. May I remind everyone that bapineuzumab, which was being developed by Pfizer and Johnson & Johnson, and which Elan had a financial interest in, failed in multiple late-stage studies. So Elan essentially has only one drug in development to treat a disease area that few have had any success in. While I wish Elan luck, I'd be looking for a short-selling opportunity on any major rally.

Juniper Networks (NYSE: JNPR  )
Juniper Networks is always a company I have on my Watchlist, as it's a particularly predictable networking play. Just like any tech company, it suffers from the ebb and flow of the replacement cycle as new technologies and software emerge. It also has suffered under the weight of weaker government spending, which has reduced the networking infrastructure needs of some of its primary customers.

However, just as Juniper has struggled over the past year, the signs that its business may be about to turn are making themselves apparent. Specifically, I'm talking about the boost we're beginning to see in the bottom lines of fiber-optic companies. Fiber-optic component suppliers like JDS Uniphase (NASDAQ: JDSU  ) are seeing a ramp up in orders from Chinese and domestic service providers, which usually signals that the next technological infrastructure build-out is upon us. We've been given confirmation of this strength in JDS' second-quarter results, which delivered a 5% revenue jump, at the high-end of the company's previous forecast, as all three business segments improved. 

Simply put, when fiber-optic companies begin seeing orders, that's when Juniper becomes a strong buy. As a provider of networking infrastructure, it's the next logical step up the ladder. In addition, with nearly $1.7 billion in net cash, Juniper is incredibly well funded, yet is small enough with a market value of just over $8 billion to be a takeover target if it drops much further.

Millennial Media (NYSE: MM  )
To say that my timing in selecting Millennial Media as a "stock near a 52-week low that you can buy right now" stunk would be an understatement. Shortly after my selection, the provider of mobile advertising sank like a rock -- a continuation move from fourth-quarter results in February that weren't well received by investors. But sometimes you have to be able to see the good in the bad, and there's a lot of potential growth in mobile advertising.

I believe the biggest problem with mobile advertising, just as we saw last year with nearly all forms of social media, is that there's no set formula for success. If investors don't understand it, and there isn't a set formula for success like Google has with online-based advertising, then investors and analysts are less likely to understand its potential. Yes, that does mean even I could be misconstruing Millennial Media's potential, but I feel fairly confident that without a true leader in mobile advertising, it can garner significant market share.

Millennial Media is working with $1.73 in cash per share and no debt, so, if anything, it's an attractive takeover candidate for a larger company. As long as Millennial remains profitable and cash flow positive, I think you go along with the growing hiccups and consider it an intriguing long-term buy.

Foolish roundup
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below, and consider following my cue by using these links to add these companies to your free, personalized Watchlist to keep up on the latest news with each company:

Add Elan to My Watchlist. Add Juniper Networks to My Watchlist. Add Millennial Media to My Watchlist.

Will Google dominate the mobile ad space too?
As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other Web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.

Frontier 100: High risk, high potential

Paul GoodwinEmerging markets feature imperfect protection for private property, government interference in markets and the affairs of companies, low liquidity, low transparency and volatile economies. Frontier markets aren't even up to the emerging stage; they're pre-emerging.

The vehicle we favor for getting exposure to these high risk markets is the iShares MSCI Frontier 100 Index Fund (FM), which was created in September 2012.

The ETF tracks the performance of the MSCI Frontier 100 Index, which is a subset of MSCI's broader Frontier Index. The Frontier 100 includes the 100 largest and most liquid companies in the parent index.

In practice, the Frontier 100 has a 28% allocation to Kuwait, 17% to Qatar, 13% to Nigeria, 12% to United Arab Emirates, 4.6% to Pakistan and the rest to various other countries.

Financial issues represent the largest exposure with 54%, while telecomm services makes up 14%, industrials 12%, energy 8.5%, consumer staples 7% and materials 3%, with utilities and health care accounting for the rest.

The fund is reviewed twice a year to bring its number of securities back to 100 (should any components drop out) and to ensure that no country represents more than 50% of the portfolio.

The current top 10 constituents are National Bank of Kuwait, Mobile Telecom (also Kuwait), Emaar Properties (UAE), Kuwait Finance House, Nigerian Breweries, Qatar Industries, KazMunaiGas Exploration (Kazakhstan), Qatar National Bank, Al Rayan Bank (Qatar) and Qatar Telecom.

Collectively these companies represent about 41% of the portfolio. The individual companies in the Frontier 100 have great stories. We did not know, for instance, that Guinness sells more beer in Nigeria than it does in Ireland!

Right now, however, what's more important is that the MSCI Frontier Markets Fund has a P/E ratio of under 12 and an expense ratio of 0.79%. The fund achieved a return of 8.01% in the first quarter of the year.

The big story is that the potential returns from frontier markets are sizable. These markets are coming off a very low base, and once their economic development begins, progress can be meteoric.

We've seen it before with the emerging markets, and the frontier markets are traveling a familiar road.  We'll put a buy rating on iShares MSCI Frontier Markets Fund.

Tuesday, April 30, 2013

Microsoft Finally Gets It

Microsoft (NASDAQ: MSFT  ) has done more harm than good in revitalizing PC sales. In fact, Windows 8 sales are off to a worse start than the nightmare known as Windows Vista. Between the lack of affordable touch-enabled devices and the radical change in the user interface, there are plenty of reasons behind the poor reception. However, there's one major reason that remains largely unaddressed: marketing.

Whenever a company introduces a product that's a strong divergence from its past, it's really important that the marketing message explains the differences and why users would want to embrace it. Microsoft's advertising message with Windows 8 hasn't exactly been clear with consumers ... until now:

The sooner potential users can understand the value that Windows 8 adds to the computing experience, the better chances PC sales can find some footing. In a 30-second ad, Microsoft successfully conveyed what makes Windows 8 different from previous versions and why that's a good thing for users. It also showed the versatility of a Windows 8 hybrid laptop that doubles as a tablet in a pinch.

It's complicated
As Microsoft CFO Peter Klein put it, transitioning to Windows 8 has been "complicated." For the first time ever, touch and mobility are now the central focus of the PC experience, which has naturally been met with resistance among millions of Windows users. Before Microsoft can really get the Windows 8 ball rolling, it must win over the hearts of those unwilling to change. In this context, it becomes clear how important clear-cut marketing is to Microsoft's ambitions. This ad is living proof that Microsoft is making progress toward that goal.

Granted, it's going to take more than a single 30-second ad to change the negative perceptions surrounding Windows 8. But little by little, Mr. Softy may be able to improve its marketing effectiveness.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

Spansion Beats Expectations But Takes A Step Back Anyway

Spansion (NYSE: CODE  ) reported earnings on April 30. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended March 31 (Q1), Spansion missed estimates on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue dropped. Non-GAAP earnings per share dropped significantly. GAAP loss per share increased.

Margins dropped across the board.

Revenue details
Spansion reported revenue of $189.6 million. The five analysts polled by S&P Capital IQ expected revenue of $195.1 million on the same basis. GAAP reported sales were 13% lower than the prior-year quarter's $218.8 million.

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

EPS details
EPS came in at $0.03. The six earnings estimates compiled by S&P Capital IQ anticipated $0.02 per share. Non-GAAP EPS of $0.03 for Q1 were 57% lower than the prior-year quarter's $0.07 per share. GAAP EPS were -$0.25 for Q1 against -$0.22 per share for the prior-year quarter.

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

Margin details
For the quarter, gross margin was 24.2%, 290 basis points worse than the prior-year quarter. Operating margin was -2.9%, 310 basis points worse than the prior-year quarter. Net margin was -7.6%, 160 basis points worse than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $224.0 million. On the bottom line, the average EPS estimate is $0.26.

Next year's average estimate for revenue is $943.2 million. The average EPS estimate is $1.13.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 23 members out of 25 rating the stock outperform, and two members rating it underperform. Among seven CAPS All-Star picks (recommendations by the highest-ranked CAPS members), seven give Spansion a green thumbs-up, and give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Spansion is outperform, with an average price target of $14.80.

Is Spansion the best semiconductor stock for you? You may be missing something obvious. Check out the semiconductor company that Motley Fool analysts expect to lead "The Next Trillion-dollar Revolution." Click here for instant access to this free report.

Add Spansion to My Watchlist.

Apple's Brilliant iPad Surrender

Apple Just Dropped a Clue on Jony Ive's iOS Overhaul

Whenever Apple (NASDAQ: AAPL  ) sends out media invites to its official events -- such as for its iPhone 5 event -- it likes to drop subtle hints as to what it has up its iSleeve. Consumers are currently in one of Apple's longest dry spells, with no notable events or product introductions.

Business Insider notes just how long it's been since any official event, particularly since this year has had no iPad event in the spring like in previous years. Apple has now set the official dates for its Worldwide Developers Conference, or WWDC, which will take place from June 10 to June 14.

WWDC is frequently a staging ground for product introductions or unveilings, both hardware and software. Last year's WWDC opening keynote introduced the Retina MacBook Pro and previews of iOS 6 and OS X Mountain Lion. Prior years frequently saw new iPhones unveiled.

Hardware aside, the guaranteed software news will headline the event. This version of iOS is arguably one of Apple's most important in years, as it will mark a dramatic shift for the platform that drives more than 70% of sales. iOS 7 will be the first version under design chief Jony Ive's influence, following Scott Forstall's ouster in October, and it's set for an aesthetic overhaul.

WWDC 2013. Source: Apple.

The teaser is striking on a number of levels and much more interesting than in previous years. Even the font that Apple's using here is a departure from its normal corporate typeface, and looks clean and modern (MMXIII is the roman numeral for 2013).

There's been talk that Ive is pursuing a "flat design" that's more minimalist, which would better match Apple's hardware designs. Ive is also said to be ditching skeuomorphism. Farewell, faux leather.

Interface design is an area where even I believe iOS has fallen behind Android, and is exactly a department where Ive can flex his British muscles. Even Yahoo! is demonstrating a shockingly attractive design philosophy under Marissa Mayer.

WWDC is now less than 2 months away, and a revamped iOS interface could prove to be an underappreciated catalyst that most investors aren't considering.

There is a debate raging as to whether Apple remains a buy. Eric Bleeker, The Motley Fool's senior technology analyst and managing bureau chief, is prepared to fill you in on both reasons to buy and sell Apple and the opportunities left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Monday, April 29, 2013

3 Reasons to Buy LinkedIn Stock Today

KMG Buying OM Group's Ultra Pure Chemicals

KMG Chemicals (NYSE: KMG  ) is buying OM Group's (NYSE: OMG  ) Ultra Pure Chemicals subsidiaries in the U.S., U.K., Singapore, and perhaps in France as well.

On Monday, OM announced the signing of definitive agreements to sell the first three subsidiaries to KMG, and said it has also offered to sell KMG the French subsidiary. Combined, the four subsidiaries would sell for $60 million cash in a deal set to close before the end of June.

OM CEO Joe Scaminace described the sales as "another step to optimize our portfolio and sharpen our strategic focus." If the sales go through, they will also be an example of some pretty sharp dealmaking on OM's part.

With $94 million in 2012 sales of "ultra pure chemical solutions" used in semiconductor and microelectronics manufacture, OM is unloading its subsidiaries for a price of about 0.64 times annual sales. OM's overall corporate P/S ratio, in contrast, is only 0.47 times sales, so the divestitures are bringing a higher valuation than the company as a whole commands.

From its perspective, KMG is also getting a deal, buying subsidiaries at a valuation below its own 0.83 P/S ratio.

Shares of KMG are nonetheless down a fraction of a percent, closing at $18.48 Monday. OM Group shares, in contrast, gained 2% to close at $24.52.

More Expert Advice from The Motley Fool
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8 Gut-Wrenching Months for Apple: The Ups

Apple (NASDAQ: AAPL  ) shares have taken a beating lately, but the news hasn't been all bad. Here's a look at the four brightest moments of this sustained bear attack.

AAPL data by YCharts

Apple shares jumped 4% on Oct. 22, helpfully marked "1" in the preceding chart. This was a drastic swing back from several days of bearish action, and perhaps a few short-sellers were taking profits. It was also the day before a long-awaited Apple event, where the iPad Mini was to be unveiled. Investors boiled over with enthusiasm for the as-yet unseen product.

Three weeks later, Apple saw its largest positive move of the entire post-peak period. The company had no particular news to share, but investors focused on optimistic news around federal budget talks. Anything that conserves the American consumer's disposable income would be good news for Apple, and the stock price had been driven down to a bargain-basement 25% discount from summer highs anyway. That was good enough for a massive 7.2% price jump, one beautiful Monday in November.

The stock closed out 2012 with a bang, jumping 4.4% on the year's final trading day. Barron's had just published an article on Apple's rock-bottom valuation, and multiple outlets speculated that much of the autumnal Apple sales must have been tax-gain moves ahead of the dreaded fiscal cliff. Sell in December to avoid higher tax rates in January -- it's a reverse version of the well-known January Effect.

The final bounce in our rundown came on another slow news day. Apple was gearing up for the next week's earnings report, and investors were hoping for fantastic holiday sales numbers. Fellow Fool Evan Niu, for one, chose this day to predict an earnings blowout. This story stock reacts to speculation like your molar nerves react to chewing on aluminum foil: There's another 4.2% jump, dated Jan. 16.

In short, Apple's swoon was balanced by deep-discount bargain hunting and some product-focused speculation. I think it's fair to say that none of these arguments had any staying power, as the facts kept shooting down optimistic rumors and the price kept sliding lower.

Have we seen the peak of Apple's share prices and market power? Maybe so.

There is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

What's Next for Social Security?

social security card and banknotes. Alamy Over the last several years, the news about Social Security's long-term health has gotten progressively worse. With nearly every passing year, the Social Security Administration's annual Trustees' Report has pulled forward the date when the Social Security Trust Funds are expected to run out of cash.

About a year has passed since the last report, which pegged the date at 2033, and the next is due soon. Still, a collapse date 20 years from now wouldn't seem so bad if it weren't for the fact that the trend suggests it probably won't stay that far away, as the chart below illustrates:

Trustee Report Year Estimated "Run Dry" Date
2012 2033
2011 2036
2010 2037
2009 2037
2008 2041

On top of that worrisome pattern, data published earlier this year by the Congressional Budget Office indicate that the Social Security Trust Funds' problems continue to get worse. A combination of higher disability claims, low interest rates, and stubbornly high unemployment have conspired to draw closer the date when the program's reserves will be exhausted.

Based on that, chances are strong that this year's Trustees' Report will pull the funds' expiration date even sooner.

Regardless of exactly when the projected date for the Trust Funds to run dry is, if nothing changes, those reserves are going to run out -- at which time, benefits will be cut.

What Happens to You When It Runs Out of Reserves?

The Social Security Trustees indicate that when the reserves are gone, incoming taxes will only be able to cover about 75 percent of the program's current promised benefits. Nobody is quite sure yet how that 75 percent will be distributed across beneficiaries, but chances are good that your benefits, along with everyone else's, will be affected by that shortfall.

The average monthly Social Security check to a retiree currently sits at $1,265.82. While everyone's situation varies, a 25 percent cut in those benefits translates to a substantial loss in income.

The table below shows just how big a kick in the pocketbook those cuts will be to typical beneficiaries:

Family Status Average Annual Benefit Benefit at 75% Annual Cut
Two retired workers $30,379.68 $22,784.76 $7,594.92
One retired worker, one spouse $22,743.00 $17,057.25 $5,685.75
One retired worker only $15,189.84 $11,392.38 $3,797.46

If you're a fairly young retiree now of around age 65, in 20 years, when the Trust Funds are currently projected to empty, you'll be 85. Will you be willing -- or even able -- to find a job to cover that shortfall?
And if you're in your mid-40s or younger now, all signs point to you never getting your anticipated full retirement benefit as long as Social Security remains on its current path.

What's Being Done to Stop the Slide?

As the years tick closer to the date the Trust Funds empty, it gets far tougher financially to shore up the system to prevent that collapse. Rght now, the only proposal getting serious consideration is President Obama's budget proposal to tie the increases in Social Security payments to the "Chained CPI," which would slow the rate that benefits grow in response to inflation.

By reducing the inflation-adjusted growth in the average Social Security check by an estimated $30 a month by 2023, the Chained CPI modification would reduce the program's net outflow of cash. But that would only cover about a quarter of the program's long-term shortfall. It's a little bit of pain over a long period of time that postpones, but doesn't stop, the Trust Funds' collapse and the eventual substantial cut in overall benefits as a result.

If it comes to pass, the Chained CPI change is expected to cut the growth in payments by somewhere in the neighborhood of around 0.1 percentage points to 0.3 percentage points per year. The table below shows what that would mean to a recipient getting today's average Social Security retiree payment, assuming 3 percent inflation calculated under the current method and a few different Chained CPI levels:

Year 3% Inflation 2.9% Chained CPI 2.8% Chained CPI 2.7% Chained CPI
2013 $1,265.82 $1,265.82 $1,265.82 $1,265.82
2014 $1,303.79 $1,302.53 $1,301.26 $1,300.00
2024 $1,752.19 $1,733.57 $1,715.13 $1,696.86
2034 $2,354.80 $2,307.25 $2,260.62 $2,214.89
2044 $3,164.65 $3,070.78 $2,979.60 $2,891.05

One thing is becoming crystal clear -- you can expect to be on the hook to cover more of your retirement income needs on your own. That's true regardless of whether we'll face the reduction from the Chained CPI, the reduction from the emptying of the Social Security Trust Funds, or some combination of both.

For ideas on how to start covering for the shortfall: What Will You Do When Social Security's Trust Fund Runs Dry? The First Million Is the Hardest ... but Not as Hard as You Think Prepare for a Scary Income Gap in Retirement

Sunday, April 28, 2013

What to Expect from Arcos Dorados Holdings

I'm Sorry I Ever Doubted You, Lumber Liquidators

Back in February, I wondered what happened to shares of Lumber Liquidators  (NYSE: LL  )  after the company posted strong fourth-quarter and full-year 2012 earnings.

After all, shares of the hardwood flooring specialist fell 7% the following day, even after the company grew revenue 21%, posted 11.4% same-store sales, and increased fourth-quarter net income by a whopping 63% year-over-year.

As a result, I concluded the valuation was a tad rich for anyone hoping to open a new position, especially considering the stock had more than tripled over the prior year and traded hands around 35 times trailing earnings at the time, or significantly above its average trailing price-to-earnings ratio since going public in 2008.

A big slice of humble pie
Naturally, take a look at how shares of Lumber Liquidators have performed relative to the S&P 500 since then:

LL Total Return Price Chart

LL Total Return Price data by YCharts

To my credit, I did suggest current shareholders should remember there's "much to be said for letting your winners run," and also noted Lumber Liquidators "has plenty of room for sustainable growth" over at least the next five years. What's more, the S&P 500's 6.4% return over the past two months certainly wasn't bad.

But seriously, Lumber Liquidators? Did you really need to jump another 44%?

The numbers
I suppose it did. In fact, the last 12% jump came on Wednesday alone after the company absolutely destroyed analysts' first-quarter earnings estimates. When all was said and done, first-quarter revenue grew 22.5% to $230.4 million, helped by impressive 15.2% comparable-store sales growth.

Better yet, net income rose an incredible 92.5% from the year-ago period to $0.57 per diluted share, topping expectations that called for earnings of just $0.42 per share on $215.5 million in revenue.

Better better yet, Lumber Liquidators management also increased guidance for the remainder of the year and now expects net sales in the range of $913 million to $942 million, up from the previous guidance of $885 million to $920 million. Earnings per diluted share should also be higher at somewhere between $2.10 and $2.35, or up from the previous range of $1.90 to $2.15.

Foolish final thoughts
In an ironic twist, just last week my wife and I were having trouble deciding on a new hardwood floor. Long story short, we were utterly disappointed with the mediocre hardwood selections and less-than-knowledgeable customer service offered by both our local Home Depot and Lowe's stores. Even worse, I questioned the sanity of the other specialized flooring businesses in my city, given the sky-high prices they were demanding for their wares. 

Of course, while I don't expect the more diversified behemoths in Home Depot or Lowe's to go anywhere anytime soon -- especially considering the ongoing rebound in the housing market -- I still found myself lamenting the fact that our nearest Lumber Liquidators stands more than three hours away.

In the end, Lumber Liquidators' price advantage and simple, superior business model are the very reasons its shares should continue outperforming the broader market for the foreseeable future.

As for my botched "underperform" CAPScall, Lumber Liquidators did me a favor by reminding me of something Warren Buffett wrote in a 2008 editorial for The New York Times: "So if you wait for the robins, spring will be over."

More expert advice from The Motley Fool
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2 Billion Reasons Why Android Will Forever Dominate

From now until the end of the year, 250 million more Google (NASDAQ: GOOG  ) Android devices will come online, bringing Android's total army to 1 billion strong. According to Google Chairman Eric Schmidt, low-cost devices will help drive Android's total reach to 2 billion active devices in the coming years. In other words, most people's first encounter with a smartphone will be an Android device.

This is both a blessing and a curse for Google, which founded Android on a platform of openness. In one respect, it has allowed Google to command elements of the mobile experience, which should translate into more lucrative search queries for Google. But on the other hand, Android's openness puts Google at risk of other businesses putting their best interests ahead of Google's.

I can say for certain that Android's approach has created developer attraction that differs in scale than what Apple (NASDAQ: AAPL  ) can offer. By and large, Apple developers make money off of how many people download their application. Google, on the other hand, gives developers an opportunity to modify and own more of the mobile experience on a much higher level, which is a far more powerful preposition.

Although Apple may command about 73% of industry's operating profits, Android's openness invites the possibility of more innovation to the smartphone experience since than what Apple could ever offer. To really do Android some justice, it should never be compared to Apple on a sheer monetary basis. There are far more business opportunities to consider for an Android developer, which are inherently more difficult to measure.

Facebook (NASDAQ: FB  ) Home is a testament not only to Facebook's interest in owning more of the mobile experience, but also confirmation that Android is a more innovative smartphone platform than Apple iOS. Eric Schmidt was recently quoted that he thinks what Facebook and Amazon has done to the Android experience as "fantastic," because it shows how open Android really is. The fact that Google allows major competitive threats to piggyback off of Android's 70.1% market share is nothing short of amazing.

Android's openness may in fact undermine Google's built-in moneymakers, but it's never going to stop a user from opening up a browser and going to

As one of the most dominant Internet companies ever, Google has made a habit of driving strong returns for its shareholders. However, like many other web companies, it's also struggling to adapt to an increasingly mobile world. Despite gaining an enviable lead with its Android operating system, the market isn't sold. That's why it's more important than ever to understand each piece of Google's sprawling empire. In The Motley Fool's new premium research report on Google, we break down the risks and potential rewards for Google investors. Simply click here now to unlock your copy of this invaluable resource.

Microsoft's Brilliant Pizza Play

The following video is from Wednesday's Motley Fool Money roundtable discussion with host Chris Hill and analysts Ron Gross, Charly Travers, and James Early.

Microsoft (NASDAQ: MSFT  ) and Pizza Hut have teamed up to launch a new "Create Your Pizza" app that allows gamers to order a pizza directly from their Xbox consoles. What does the move mean for Microsoft? What does the move mean for Pizza Hut? In this installment of Motley Fool Money, our analysts talk about the unusual partnership.

The relevant video segment can be found between 14:42 and 15:58.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

For the full video of today's Motley Fool Money, click here.

3 Simple Investment Strategies That Deliver Long-Term Riches

In trying to make their money work harder for them, investors often fall for questionable investment strategies that promise to help you get rich quick but usually deliver huge losses. But the smartest ways to reach your money goals don't require you to deal with arcane, hard-to-understand financial products. By following these three simple investment strategies, you can get the long-term results you want without the risk you'll find with more aggressive and dubious alternatives.

1. Dollar-cost averaging.
Few investors have huge pots of money to invest all at once, but most people are able to set aside at least a modest amount of money every month. Dollar-cost averaging involves taking that money and investing it in a mix of low-cost index mutual funds or ETFs. The exact mix depends on your tolerance for risk, your time horizon, and the amount you have to save, but by putting aside the same amount month in and month out, you'll build a habit of saving and investing.

The benefit of dollar-cost averaging is that when shares are cheaper, you'll buy more of them with the same fixed amount. Meanwhile, when prices rise, you end up with fewer shares, and so on average you'll buy more when an investment is cheap than when it's expensive. Buying low is a key tenet of investing, and dollar-cost averaging lets you take full advantage of it.

2. Using tax-favored accounts.
The biggest challenge in investing is making sure that you keep as much of your earnings as you can. Unfortunately, taxes can sap a huge portion of your investing profits, making it essential for your investment strategy to include ways of keeping the tax man at bay.

IRAs and employer-sponsored retirement plans like 401(k)s are a great tool for savers to use in implementing a smart strategy for investing. By putting stocks and other growth assets in an IRA or 401(k), you can shelter their income from tax as long as the money stays within the account. Some retirement accounts force you to pay tax on the amount you withdraw, but Roth IRAs actually let you take that income tax-free. Using tax-favored accounts to hold your investments isn't complicated, but it'll save you plenty at tax time.

3. Choosing dividend stocks for growth and income.
Investors struggle with finding the right balance between investments that will grow and investments that will provide solid income. But dividend stocks offer the best of both worlds, paying reliable dividend income but also retaining the growth potential of some of the most successful companies in the world.

Investing in dividend stocks is easy. Exchange-traded funds Vanguard Dividend Appreciation (NYSEMKT: VIG  ) , iShares Dow Jones Select Dividend (NYSEMKT: DVY  ) , and SPDR S&P Dividend (NYSEMKT: SDY  ) give you low-cost access to dozens or even hundreds of dividend-paying stocks, all within a single investment vehicle. If you prefer, you can also buy individual stocks, either through a broker or through direct investment plans. Blue-chip companies General Electric (NYSE: GE  ) and Procter & Gamble (NYSE: PG  ) are just two of the hundreds of stocks that offer shares through direct plans and allow you to reinvest dividends automatically in additional shares at no fee.

It's not hard
If these investment strategies seem simple, it's because they are simple. Whoever said that investing has to be complicated was dead wrong. These suggestions won't work as quickly as high-risk alternatives, but they will work in the long run, and the results you'll get will be worth the wait.

GE pays a solid dividend yield, having recovered from the recent financial crisis. Learn more about whether General Electric is the right dividend stock for you in our premium report on the conglomerate, in which our industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE today. To get started, click here now.