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Sunday, September 29, 2013
Japan and China: Time to Celebrate?
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The Japanese have been celebrating after winning their bid to host the 2020 Summer Olympics; from our perch, the party is just getting started in Japanese stocks, too. And less heralded, but no less exciting, has been the recent showing by neighboring China, observes Stephen Leeb of The Complete Investor.
The Olympics aren't the only reason for Japan to cheer: So-called Abenomics, named after Prime Minister Shinzo Abe, continues to pay off.
Japan's combination of aggressive monetary easing, fiscal stimulus, and economic reform has translated into faster economic growth after decades of stagnation and many false starts.
The country just revised its second-quarter inflation-adjusted real GDP growth upwards to 0.9%, which equates to an annualized 3.8% rate.
Japan also revised its first-quarter GDP upwards, to 4.1% annualized, up from the previous 3.8%.
Japan is still struggling to boost inflation, but is headed in the right direction. Although the country's GDP deflator was a negative 0.5% year-over-year, after 12 consecutive months of deflation, Japan recorded back-to-back June and July increases in its monthly consumer price index.
With its money supply growing at its fastest pace in 14 years and its currency near a four-year low, Japan's inflation rate should continue to rise, breaking the grip deflation has held on the country for more than two decades.
Despite the 30% plus gains they've enjoyed this year, the stocks that comprise the iShares MSCI Japan ETF (EWJ) still trade at 14 times depressed earnings.
Meanwhile, China's GDP growth fell to just 7.5%, but based on recent data, China looks unlikely to decelerate further. Indeed, it now appears that growth in China could again tick up to 8% by year's end.
Unlike the leaders in Japan, China's chiefs are eager to keep a lid on inflation. They set a full-year target of 3.5% growth in the nation's consumer price index (CPI) and are meeting that goal.
The country's CPI last month edged down to 2.6%, and essentially all of that increase came from rising food costs, which represent more than a third of China's price basket. Producer prices, meanwhile, which typically lead consumer-level prices, measure growth of a tame 1.6%.
While many emerging economies are struggling these days, China continues to run a current account surplus. It also has the benefit of a strong currency.
The yuan trades close to a record high against the dollar. The strong currency will help to keep Chinese prices in check if, as expected, materials prices continue to climb.
Healthy economic data, coupled with low inflation, make Chinese stocks attractive as well. Our first choice here is the China Fund (CHN). It holds a diverse portfolio of stocks primarily focused on the Chinese domestic market.
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Saturday, September 28, 2013
Get on the Renovation Cycle
As part of the housing boom, there are several related industries that are booming as old homes are being fixed up and Elliott Gue has a stock you should examine now.
SPEAKER: My guest today is Elliot Gue. Hi Elliot, and thanks for being here.
ELLIOT: Thanks for having me.
SPEAKER: You know the housing market has just been incredible,
ELLIOT: Right.
SPEAKER: All over the country, even in the little town that I live in in Tennessee,
ELLIOT: Right.
SPEAKER: We’ve seen major improvements, and the renovation cycle, which you’ve written about recently seems to really be on the upswing too because people are buying older homes.
ELLIOT: Sure.
SPEAKER: And they’re having to do replacements.
ELLIOT: Absolutely.
SPEAKER: So, in some of the big box retailers like Lowe’s and Home Depot have done very, very well, but you’re in some other types of companies too.
ELLIOT: Yeah, absolutely, I mean the renovation cycle, I think has had a long tail on it. I think there’s a lot of pent up demand there. Obviously people don’t want to make major renovations on their home if they think that underwater on their mortgage.
SPEAKER: Right.
ELLIOT: I mean, you also had household formation in the US, the number of new households created go way down over the last few years during the housing crisis.
SPEAKER: Sure.
ELLIOT: A lot of kids stayed at home with their parents,
SPEAKER: Oh heck.
ELLIOT: A lot people stayed renting with a roommate rather than getting their own home.
SPEAKER: Um hmm.
ELLIOT: Obviously I think that you know both the child and parent would be happy to change that.
SPEAKER: Right.
ELLIOT: And you’re starting to see that. You’re starting to see household formation rise again.
SPEAKER: Um hmm.
ELLIOT: I think that’s driving a demand for renovation as well.
SPEAKER: Um hmm.
ELLIOT: So all that pent-up demand is helping companies like Home Depot and Lowe’s. Another company I’ve been looking at a lot and just recently recommended is Whirlpool.
SPEAKER: Um hmm.
ELLIOT: They make home appliances.
SPEAKER: Right.
ELLIOT: They’re behind other brand names as well, Maytag, Amana, Jenn-Air. They make everything from dishwashers and stoves to air conditioners, all sorts of major home appliances. In fact they own the largest share of the US market, about 40 to 45% of the US market is Whirlpool brands.
SPEAKER: Um hmm.
ELLIOT: Obviously they were hurt during the housing crisis, but now they’re really seeing a lot of growth and demand for these appliances as people renovate old homes, replace the appliances, and as people just look to upgrade their kitchen.
SPEAKER: Sure.
ELLIOT: In fact, recently they reported earnings, and they raised their demand estimates for demand growth in the US from 2 to 3% this year all the way up 5 to 8%.
SPEAKER: Wow.
ELLIOT: So a big jump in demand.
SPEAKER: Um hmm.
ELLIOT: The US accounts for about 55 or 60% of their business. The other major place is Brazil. Brazil actually recently instituted a government program to help drive demand for renovations.
SPEAKER: Hmm.
ELLIOT: So that’s helping them out as well. In addition to that, one of their major competitors down there went bankrupt.
SPEAKER: Oh yeah.
ELLIOT: So they’re actually taking a lot of market share from them.
SPEAKER: Um hmm.
ELLIOT: Both of their main markets are doing very well right now, and I think that’s likely to continue. I think that’s just a solid company to buy now.
SPEAKER: Yeah. And do they pay a dividend also.
ELLIOT: Very small dividend right now.
SPEAKER: Um hmm.
ELLIOT: It’s about one and a half to 2% range. They will probably continue to boost that over time, and they have been buying back stock. They bought about, they’ve bought back quite a bit of stock in the most recent quarter. They’ve indicated that they’ll probably continue that program going forward.
SPEAKER: Um hmm. Super. Well thank you so much, Elliot.
ELLIOT: Thanks for having me.
SPEAKER: And thanks for joining us at the moneyshow.com video network.
Thursday, September 26, 2013
Ranks (and dollars) of ultra high net worth grow
The number of ultrahigh-net-worth people reached an all-time high this year, largely due to growth in North America and Europe, according to the World Ultra Wealth Report 2013, assembled by Wealth-X and UBS AG.
The moniker applies to both the number of people qualifying as UHNW as well as stratum's total combined wealth. The population is up 6.3% to 199,235 this year, from 187,380 in 2012, while the group's total combined wealth has climbed 7.7% to $27.8 trillion, from $25.8 trillion.
“Market conditions are very healthy for UNHW clients,” said Craig Brothers, managing director of fixed income at Bel Air Investment Advisors LLC, a Los Angeles firm that specializes in the ultrawealthy. “Clients had a bomb shelter mentality for a few years after the crisis, but that's receded the further we've gotten away.”
The report defines UHNW individuals as those with total net assets of at least $30 million.
The pace of growth among the ultrawealthy doesn't surprise Mr. Brothers, even as the U.S. economic recovery remains anemic and Europe has only begun to escape the grips of recession. One reason is that they have access to the best investment vehicles.
“The wealthier clients get to see products that are more cutting-edge,” he said. “Advisers bring them the best of what's out there.”
For example, ultrawealthy investors can invest in hedge funds, which require large upfront contributions.
“Hedge funds haven't been performing particularly well, but some of them have done really well,” Mr. Brothers said. “You have to know the good managers, the ones who really know what they're doing.”
The number of UHNW individuals living in emerging markets such as China and Brazil dropped, however, as did this group's total wealth. But while Asia as a whole delivered modest growth among the ultrawealthy (3.8% more individuals qualified, with 5.4% more total wealth), the number of Latin Americans qualifying as UHNW fell, as did their total wealth.
But the sudden slowdown in emerging markets, according to the report, shouldn't betray the continent's prospects for continued growth.
"The report forecasts that Asia will generate more UHNW individuals and wealth than the U.S. and Europe in the next five years,” Joseph Poon, UBS Wealth Management's head of ultrahigh net worth, Southeast Asia, said in a statement. “This closely mirrors our own observations of the trajectory of wealth creation in Asia.”
In
Wednesday, September 25, 2013
How income inequality hurts America
NEW YORK (CNNMoney) It's not just income inequality. It's lifespan inequality. And education inequality. And declining economic growth. It's a well-established fact that the rich are getting richer, while the poor and middle class are falling behind.
"The 400 richest people in the United States have more wealth than the bottom 150 million put together," said Berkeley Professor and former Labor Secretary Robert Reich on a recent CNNMoney panel on inequality.
Meanwhile, the median wage earner in America took home 9% less last year than in 1999.
But the rising income gap is manifesting itself in American society in other ways too.
Social scientists have long said income inequality is bad for society. Yet popular measures of social stability -- crime rates, voter non-participation -- have been going down over the last couple of decades.
So how does inequality hurt?
Lifespans: Paychecks aren't the only things that are increasingly unequal. Rich people are actually living longer than poor people.
In the early 1980s, wealthy Americans lived 2.8 years longer than the poor, according to the Department of Health and Human Services. The wealthy and poor were defined as the top and bottom 10% on a number of different economic measures.
But by the late 1990s the rich were living 4.5 years longer, and the gap has only widened since then, HHS said.
The increasing disparity is a result of a variety of reasons including "material and social living conditions" as well as access to medical care, according to HHS.
Education: For Americans born in the early 1960s, 5% of poor people went to college and 35% of rich folks did, according to the Russell Sage Foundation. They defined rich and poor as top and bottom 25% for income.
Only o! ne generation later -- Americans born around 1980 -- the number of rich people going to college jumped by 20 percentage points. For poor people, it rose only 3 percentage points.
That further perpetuates the cycle of income inequality, as an increasing number of middle-class jobs favor the more educated.
While researchers stress that it's difficult to concretely link any of these measures with rising income inequality, the correlation is compelling.
"When income inequality goes up, you see more inequality in these other things," said Lane Kenworthy, a professor of sociology and political science at the University of Arizona.
Economic growth: Some economists have long argued that a widening income gap suppresses economic growth and job creation, and may be one reason this economic recovery doesn't feel like a recovery at all.
The theory is based on research showing middle-class people tend to spend more of their income than rich people. As their incomes and feelings of relative wealth decline, so does overall economic growth.
Since the recession ended, growth has averaged just 2.2%. That compares to the 3.3% historical average since the Great Depression.
"Our middle class is too weak to support the consumer spending that has historically driven our economic growth," Nobel Prize-winning Economist and Columbia Professor Joseph Stiglitz wrote in an editorial earlier this year.
"With inequality at its highest level since before the Depression, a robust recovery will be difficult in the short term, and the American dream — a good life in exchange for hard work — is slowly dying."
Who's to blame for income inequality? What to do about it: Research shows Americans want the country to be more equ! al -- two! thirds say inequality is a problem according to Leslie McCall, a sociology and political science professor at Northwestern University.
The trouble is, Americans don't really know what to do about it. Strengthening unions, taxing the rich, raising the minimum wage and better job training are a few ideas.
But many view inequality as an unavoidable symptom of the free market -- a market that has, on a global scale, lifted hundreds of millions of people out of poverty and provided the wherewithal to boost living standards around the world.
"It's not clear that raising taxes will produce what people want -- which is better jobs and more pay," said McCall. 
Monday, September 23, 2013
Apple Inc. (AAPL): Top Reasons Why New iPhones Would Be Successful
Apple, Inc. (NASDAQ;AAPL) began sales of its latest iPhones on Sept.20, hoping that the strong demand for the new devices would help it to consolidate its position in the smartphone market.
The long queue at the US stores, after sales kicked off in Australia, Japan, China and Europe, blew-away the notion that Apple has been losing on the innovative front and pricing strategy, especially with its low cost iPhone 5C.
Apple priced the 16GB iPhone 5S at $199 with a two-year contract, or $649 without while the 5C costs $99 and $549, respectively. Virtually, the price difference between iPhone 5S and 5C is only $100, and that was the main worry for the Wall Street.
But, both the devices as well as the operating system iOS7 are getting positive reviews from all quarters. Walter Mossberg of The Wall Street Journal recommends iPhone 5s "for anyone looking for a premium, advanced smartphone." He calls the phone's Touch ID fingerprint sensor "a potentially game-changing hardware feature" and iOS 7 "a radically new operating system."
On iOS7, David Pogue of The New York Times, says, "The structure, layout and features represent some of Apple's best work." In his iPhone review, he calls iPhone 5c "a terrific phone," noting, "The price is right. It will sell like hot cakes."
Going by the review, Apple should taste success with its new products. The revamped operating system, fingerprint sensor and the 62-bit architecture, multiple colors should set the phones apart from the rest.
iOS 7 has a completely redesigned user interface and hundreds of new features, including Control Center, Notification Center, improved multitasking, AirDrop, enhanced Siri, and more. So far iOS7 downloads have been extremely strong, which is a leading indicator to suggest that iPhone 5C and 5S will also be extremely strong.
Meanwhile, iPhone 5C caters to younger audiences - bright colors, plastic and new age specific apps on AppStore will make this offering a success with kids 6 months and older to! young youths 25 years or less. This demographic has been under penetrated - iPhone 5C expands the market for iPhone and Apple.
"Another catalyst for 5C is that schools are starting to use iPads in the classrooms. Kids currently are given feature phone, iPhone 5C is probably going to put an end to feature phones for some kids," Global Equities Research analyst Trip Chowdhry wrote in a note to clients.
In iPhone 5S, the real innovation is 64bit OS. Apple has managed to do it without changing the form factor. The 64 bit system significantly enhances sound, video and image centric applications, such as gaming and mapping Apps. This assumes significance as games account for more than 50 percent of purchases on Apple App Store.
"Apple has at least 12 - 18 months lead over Android Ecosystem. To be successful, you need to have 64 bit CPU, 64 Bit OS, 64 bit compilers and 64 bit development tools...there is a lot of catching up to do for the Android Ecosystem," Chowdhry added.
Instead of just reducing the price on the iPhone 5 by $100 as it has done in previous launches, it introduced colors with the polycarbonate casing. The "old" iPhone 5 now looks like new technology for more price-conscious consumers while Apple enjoys a higher margin.
The 64-bit architecture, Touch ID fingerprint authentication, and improved camera show that innovation is not dead, and these features could be precursors to future products and services like Apple TV.
The potential of iOS 7 may be underappreciated. In terms of user experience, iOS 7 compared to iOS 6 is a bigger change than the 5S versus 5. Assuming iOS 7 is well received, it could attract Android users to the Apple ecosystem, another example of the benefit of vertical integration.
"As far as developed markets go, the announcement looks like a winner. Recall that last quarter, the US, UK, and Japan posted solid iPhone growth, suggesting there still are new users (and market share) to be gained," UBS analyst Steven Milunovich said in! a client! note.
In Japan, Apple has signed NTT DoCoMo, which should result in at least 5 million in iPhone unit sales in fiscal 2014, and China Mobile appears to be on the way. As a result, earnings estimates were flat to up following the introduction.
On the iPhone 5C, the clear message appears to be that Apple is about making the best products, will not compromise user experience and is worth the price. That doesn't mean its pricing strategy is like Ferrari's, The iPad mini is reasonably priced, and the iPod line had low entry-level prices, but it seems that the technology does not yet allow Apple to build $300-$400 phones that it is proud of.
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Apple's brand value is huge and worth protecting. The brand is not so much based on a high price as it is user friendliness, which sometimes results in a premium price for a better experience. Its adds emphasize experience and feeling over specs.
"It could be that Apple is willing to stake out the high end and wait for the emerging global middle market to be able to afford its phones. While the 5C is too expensive for most developing markets, there still is an aspiration to own Apple products," Milunovich noted.
As one Chinese consumer put it to the LA Times, "The most important thing is the brand. The phones could be even more expensive and people would buy them."
Moreover, Apple has a remarkable recorded in creating and dominating new markets. The company might have enough confidence in coming offerings that it does not feel the need to chase lower-margin phone sales. Apple is bent is to innovate, not protect its low-end flank.
The bears may argue that Apple would be disrupted by low-priced Asian rivals, resulting in slowing revenue growth and margin pressure. However, Apple's history of success and its familiarity with disruptive innovation theory suggest it may not be so simple.
Friday, September 20, 2013
Spain’s Public Debt Soars to New Highs Smothering Any Optimism
A small ripple of optimism over the gradually improving state of the Spanish economy that filtered through the markets a few weeks ago is now once again shaky on the latest figures from the beleaguered country, which show its public debt burden has soared well beyond governmental forecasts.
The Bank of Spain recently announced that the nation’s public debt had reached 92% of GDP for the end of June, a noticeable increase over the 90% tallied up in March, and numerous parties, the International Monetary Fund (IMF) included, believe that Spain’s public debt-to-GDP is likely to rise even further, most likely topping out well above the 100% mark.
That’s bad news for a country where economic recovery is still but a whisper and where a host of problems, not least severe unemployment, continue to make everyday life extremely tough for scores of people. But nevertheless, Spain’s public debt load is still lower than that of other Southern European countries that continue to suffer the pains of the Eurozone crisis, said Brian May, European economist at Capital Economics in London.
“One hundred percent is not a nice number, but given that Italy’s public debt has been over 100% for a number of years now, and Greece, too, is well above that level, Spain’s numbers aren’t too worrying by comparison,” May said.
Being able to manage that debt burden, though, even if it climbs to a higher level will depend on Spain’s resolve and ability to address the deep-rooted structural issues that continue to hold back economic growth.
In all fairness, the country has been tackling some of those deeper economic issues and because of that, there are definitely signs that the Spanish recession is easing, May said.
The European Central Bank’s (ECB) Outright Monetary Transactions (OMT) program has also brought Spanish government bond yields to more manageable levels and the worst of the fiscal squeeze appears to have passed, May said. The labor market downturn has also eased and Spanish exports, he said, are expanding as the country’s business base improves, thereby lending support to both the economy and the banking sector. And finally, encouraging labor market data suggests also that there have been improvements in that area.
Spanish banks have also succeeded in reducing their ECB borrowings. In August, borrowings totaled around E250 billion, a net decrease from the E400 billion borrowed a year ago.
But even though Spain may be in a better position than its other European periphery counterparts, and economists are more optimistic about Spain than they are about the rest, the country still faces some very serious challenges as the worst of the crisis continues to bore its way through the economy, May said.
The high levels of household debt in Spain are a real concern and combined with household savings rates that are now at extremely low levels as a result of the recession will mean that household spending, which is already low, will fall even further.
Credit is also still very tight in Spain, which means that businesses are going to have to deleverage further and that will make them reluctant to invest, according to May. “Although Spanish banks may have better access now to wholesale markets for their funding needs, and are borrowing there rather than using ECB money, it could be that the gradual improvements we have seen in the indebtedness of the banks are actually due to the banks not using the emergency money that they could have used. So rather than extending credit, they may simply be giving unused money back to the ECB,” he said.
Overall, Spain’s debt dynamics are in a healthier position than Greece’s, and whereas Greece will need help for years and years to come, Spain could potentially work its way out of the mess if interest rates don’t rise and the Spanish economy continues to stage a decent, albeit slow, recovery going forward.
But even though Spain may be able to solve its problems without financial assistance from outside, such a high level of public debt is not a good thing, and May still has a more pessimistic view on the Spanish situation, believing that there’s a real risk of deflation, which will make it harder for both the public and private sectors to reduce their onerous debt burdens.
Although a continued rise in public debt isn’t going to set off another Eurozone panic, or prompt the Spanish government to default on its debt, Spain, the country may well end up having to seek financial assistance from the Eurozone to, May said, “to ensure that its public debt return to a stable footing.”
Thursday, September 19, 2013
5 Best Financial Stocks To Watch Right Now
In this segment of The Motley Fool's everything-financials show,�Where the Money Is, banking analysts Matt Koppenheffer and David Hanson highlight the key factors in the second-quarter earnings reports from�Wells Fargo�and�JPMorgan Chase.
Matt highlights the importance of the unrealized losses experienced at these banks during the second quarter.
Will more banks impress?
Many investors are terrified about investing in big banking stocks after the crash, but the sector has one notable standout. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's�new report. It's free, so click here to access it now.
5 Best Financial Stocks To Watch Right Now: Cazador Acquisition Corporation Ltd.(CAZA)
Cazador Acquisition Corporation Ltd., a development stage company, intends to effect a merger, share capital exchange, asset acquisition, share purchase, reorganization, or similar business combination with one or more operating businesses or assets. It would focus on a business combination in developing countries in central and eastern Europe, Latin America, and Asia. The company was founded in April 2010 and is based in Grand Cayman, Cayman Islands. Cazador Acquisition Corporation Ltd. is a subsidiary of Cazador Sub Holdings Ltd.
5 Best Financial Stocks To Watch Right Now: Allied World Assurance Company Holdings AG (AWH)
Allied World Assurance Company Holdings, AG operates as a specialty insurance and reinsurance company in Bermuda, Hong Kong, Ireland, Singapore, Switzerland, the United Kingdom, and the United States. It offers casualty insurance products that provide coverage for specialty type risks, such as professional liability, environmental liability, product liability, inland marine liability, healthcare liability risks, and commercial general liability products, as well as professional liability products, including policies covering directors and officers, employment practices, and fiduciary liability insurance. The company also provides a mix of errors and omissions liability coverages for various service providers comprising law firms, technology companies, insurance companies, insurance agents and brokers, and municipalities; primary and excess liability, and other casualty coverages to the healthcare industry, including hospitals and hospital systems, managed care organization s, and medical facilities, such as home care providers, specialized surgery and rehabilitation centers, and outpatient clinics; and general casualty products for a range of industries consisting of construction, real estate, public entities, retailers, manufacturing, transportation, and finance and insurance services, as well as workers compensation insurance products. In addition, it offers property insurance products covering physical property and business interruption for commercial property risks; and general property products covering risks for retail chains, real estate, manufacturers, hotels and casinos, and municipalities. Further, the company provides the reinsurance of property, general casualty, professional liability, specialty lines, property catastrophe, accident and health, and marine and aviation coverages. Allied World Assurance Company Holdings, AG was founded in 2001 and is headquartered in Baar, Switzerland.
Best Penny Companies To Watch In Right Now: Meadowbrook Insurance Group Inc. (MIG)
Meadowbrook Insurance Group, Inc., through its subsidiaries, operates as a specialty commercial insurance underwriter and insurance administration services company in the United States. The company markets and underwrites specialty property and casualty insurance programs and products, including workers� compensation, general liability, commercial property, environmental, garage, commercial multi-peril, commercial auto, surety, and marine insurance on an admitted and non-admitted basis through a network of independent retail agents, wholesalers, program administrators, and general agents. It also offers program and product design, underwriting risk selection and policy issuance, claims administration and handling, loss prevention and control, risk-bearing entities administration, and retail property and casualty insurance agency services, as well as produces commercial, personal lines, life, and accident and health insurance with unaffiliated insurance carriers for its fe e-for-service and agency clients. The company was founded in 1955 and is headquartered in Southfield, Michigan.
5 Best Financial Stocks To Watch Right Now: Cdn Western Bank Com Npv (CWB.TO)
Canadian Western Bank provides various banking and financial products and services for business and individual customers primarily in western Canada. It operates in the financial services areas of banking, trust, insurance, and wealth management, as well as focuses on commercial banking, real estate financing, equipment financing, and energy lending. The company also offers various personal financial products and services, including personal loans and mortgages, deposit accounts, investment products, and other banking services; registered savings products; commercial equipment leasing for small- and mid-sized transactions; and trustee and custody services to independent financial advisors, corporations, brokerage firms, and individuals, as well as underwrites and administers residential mortgages sourced through a network of mortgage brokers. It also provides stock transfer and corporate trust services; personal auto and home insurance to customers in British Columbia and Alberta; and wealth management services for individuals, corporations, and institutional clients, as well as third-party mutual funds. The company serves its customers through a network of 41 banking branches. Canadian Western Bank was founded in 1982 and is headquartered in Edmonton, Canada.
5 Best Financial Stocks To Watch Right Now: Assured Guaranty Ltd(AGO)
Assured Guaranty Ltd., through its subsidiaries, provides credit protection products to public finance, infrastructure, and structured finance markets in the United States and internationally. The company offers insurance, reinsurance, and credit derivative products that protect holders of debt instruments and other monetary obligations from defaults in scheduled payments, including scheduled interest and principal payments. It provides policies issued directly to the holders of insured obligations at time of issuance and those issued in the secondary market; and assumed reinsurance contracts written to third parties. The company insures various types of securities, including taxable and tax-exempt obligations issued by the United States or municipal governmental authorities, utility districts, or facilities; notes or bonds issued to finance international infrastructure projects; and asset-backed securities issued by special purpose entities. Assured Guaranty Ltd. markets its credit protection products directly to issuers and underwriters of public finance, infrastructure, and structured finance securities, as well as to investors in such debt obligations. The company was founded in 2003 and is based in Hamilton, Bermuda.
Sunday, September 15, 2013
3 Stocks Rising on Big Volume
DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.
Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."
Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.
With that in mind, let's take a look at several stocks rising on unusual volume today.
Dex Media
Dex Media (DXM) is a provider of marketing solutions that include Web sites, print, mobile, search engine and social media solutions for local businesses, through its Dex One and SuperMedia Marketing Consultants. This stock closed up 5.6% at $10.25 in Thursday's trading session.
Thursday's Volume: 471,000
Three-Month Average Volume: 280,277
Volume % Change: 105%
From a technical perspective, DXM spiked sharply higher here right above some near-term support at $9 with above-average volume. This stock has been downtrending badly for the last four months, with shares plunging lower from its low of $23.86 to its recent low of $8.85. During that move, shares of DXM have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of DXM have started to see its downside volatility stop as the stock has rebound off oversold levels. This stock got so oversold that its relative strength index reading recently dipped below 20. Shares of DXM are now starting to move within range of triggering a big breakout trade. That trade will hit if DXM manages to take out its 200-day moving average at $11.61 with high volume.
Traders should now look for long-biased trades in DXM as long as it's trending above some key near-term support levels at $9 or $8.85 and then once it sustains a move or close above Thursday's high at $10.51 and its 200-day at $11.61 with volume that's near or above 280,277 shares. If that breakout hits soon, then DXM will set up to re-test or possibly take out its 50-day moving average of $13.72.
Employers Holdings
Employers Holdings (EIG) is a provider of worker's compensation insurance focused on select small businesses engaged in low to medium hazard industries. This stock closed up 2.9% at $28.48 in Thursday's trading session.
Thursday's Volume: 252,000
Three-Month Average Volume: 119,789
Volume % Change: 75%
From a technical perspective, EIG jumped notably higher here right above its 50-day moving average of $26.48 with above-average volume. This stock has been uptrending strong for the last five months, with shares soaring higher from its low of $21.03 to its recent high of $29.12. During that move, shares of EIG have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of EIG within range of triggering a near-term breakout trade. That trade will hit if EIG manages to take out its 52-week high at $29.18 with high volume.
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Traders should now look for long-biased trades in EIG as long as it's trending above Thursday's low of $27.65 or above its 50-day at $26.48 and then once it sustains a move or close above its 52-week high at $29.18 with volume that's near or above 119,789 shares. If that breakout hits soon, then EIG will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $33 to $35.
Belden
Belden (BDC) designs, manufactures and markets cable, connectivity and networking products in markets including industrial, enterprise, broadcast and consumer electronics. This stock closed up 1.4% at $59.39 in Thursday's trading session.
Thursday's Volume: 400,000
Three-Month Average Volume: 215,781
Volume % Change: 69%
From a technical perspective, BDC rose modestly higher here right above some near-term support at $57 with above-average volume. This stock recently formed a triple bottom chart pattern at $55.72, $55.64 and $56.07. After finding buying interest at those levels over the last month, shares of BDC have spiked higher and moved within range of triggering a major breakout trade. That trade will hit if BDC manages to take out its 52-week high at $59.95 with high volume.
Traders should now look for long-biased trades in BDC as long as it's trending above support at $57 or above its 50-day at $56.39 and then once it sustains a move or close above its 52-week high at $59.95 with volume that's near or above 215,781 shares. If that breakout hits soon, then BDC will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout $63 to $65.
To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.
Tuesday, September 10, 2013
Is Home Depot a Buy At All-Time Highs?
With shares of Home Depot (NYSE:HD) trading around $79, is HD an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Home Depot is a home improvement retailer that operates Home Depot stores, which are full-service, warehouse-style stores. The company sells an assortment of building materials, home improvement, lawn and garden products, and provides a number of services. Home Depot stores serve three primary customer groups: do-it-yourself customers, do-it-for-me customers, and professional customers. Construction and improvement of new and existing homes and businesses is on the rise as consumers and business owners are investing where they operate. Look for the home and business improvement trend to continue, and for Home Depot to be a leading provider of the products and services consumers and professionals demand.
NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!T = Technicals on the Stock Chart are Strong
Home Depot stock has been on an explosive run that has just about quadrupled its stock price over the last few years. The stock is now trading at all-time high prices and does not yet show any signs tired trend. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Home Depot is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Home Depot options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Home Depot Options | 20.74% | 70% | 71% |
What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| June Options | Flat | Average |
| July Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Home Depot’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Home Depot look like, and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 22.06% | 35.80% | 5% | 17.44% |
| Revenue Growth (Y-O-Y) | 7.4% | 13.94% | 4.64% | 1.67% |
| Earnings Reaction | 2.54% | 5.69% | 3.62% | 3.57% |
Home Depot has seen increasing earnings and revenue figures over the last four quarters. From these figures, the markets have been very pleased with Home Depot’s recent earnings announcements.
NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!P = Excellent Relative Performance Versus Peers and Sector
How has Home Depot stock done relative to its peers, Lowe’s (NYSE:LOW), Orchard Supply Hardware (NASDAQ:OSH), Lumber Liquidators (NYSE:LL), and sector?
| Home Depot | Lowe’s | Orchard Supply Hardware | Lumber Liquidators | Sector | |
| Year-to-Date Return | 28.49% | 20.66% | -75.17% | 56.73% | 20.43% |
Home Depot has been a relative performance leader, year-to-date.
Conclusion
Home Depot is a home improvement retailer that is a leading provider of the products and services consumers and professionals are demanding. The stock has been on an explosive run over the last few years that has taken it to all-time high prices. Over the last four quarters, earnings and revenue numbers have increased which has led to a strong bid by investors. Relative to its strong peers and sector, Home Depot has been a year-to-date performance leader. Look for Home Depot to continue to OUTPERFORM.
Monday, September 9, 2013
World Economic Forum: Chad Listed as Least Competitive Nation
The World Economic Forum just issued the current Global Competitiveness Report (2013-2014). The study is one of the most dense and complex assessments of national economies. It also pretends to rate nations on which very little data is available. That may be why Chad ends up at the bottom of the list of 148 countries, along with several other nations for which no solid data has been available recently, and in some cases has not been for years.
The Global Competitiveness Report continues to use its “12 Pillars of Competitiveness” for rating all nations. The authors write:
We define competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be reached by an economy. The productivity level also determines the rates of return obtained by investments in an economy, which in turn are the fundamental drivers of its growth rates. In other words, a more competitive economy is one that is likely to grow faster over time.
The names and the descriptions of the Pillars are so hard to understand that a reading of the methodology of the Global Competitiveness Report will exhaust most readers before they can get to the important parts of the report. They are, in order: Institutions, Infrastructure, Macroeconomic Environment, Health and Primary Education, Higher Education and Training, Goods Market Efficiency, Labor Market Efficiency, Financial Market Development, Technical Readiness, Market Size, Business Sophistication, and Innovation.
Countries with homogenous populations and governments that directly support both business and the economic welfare do well in the Global Competitiveness Report, as they do in much of the research from other agencies like the International Monetary Fund and World Bank. Switzerland tops the list, followed by Singapore. All of the Scandinavian nations, which are rich and benevolent, are very near the top — Finland, Netherlands, Norway, Denmark and Sweden. The countries that have been at the top of the of the economic and financial leadership in the developed world are all there too — Germany, the United States, Japan and the United Kingdom. Each of the nations at or near the top of the list has a sophisticated ability to gather huge sums of data on its economic activity and details about its population. In other words, these countries are easy to rate because they have tools and budgets to collect the necessary data for evaluation in this study.
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Granted, it is not surprising that Chad is at the bottom of the list, or at least near the bottom. However, there is so little solid data on this country, its finances and economy, that Chad, along with several other small, underdeveloped countries, should be exempt from this report since the reader is assured that the results are based on extensive research and analysis. Accurate and extensive information on some of the countries that are just ahead of Chad in this report’s list — Macedonia, Georgia, Ecuador and Vietnam — is also unavailable.
The Central Intelligence Agency is as good as any other organization at collecting facts on other countries. The CIA has an army of people who perform the work that allows them to issue The CIA World Factbook. The spying division of the American government reports:
The World Factbook provides information on the history, people, government, economy, geography, communications, transportation, military, and transnational issues for 267 world entities.
As far as Chad is concerned, the CIA can only estimate gross domestic product (GDP) for the past three years, and reports that it reached about $21 billion in 2012. The same is true of GDP growth rate and gross national savings. As a matter of fact, the CIA can only make a reasoned guess at which sectors make up the national economy. Just above 47% is agriculture, maybe.
The persistent idea that nations for which a great deal of current economic, financial and demographic information exists can be measured against those for which nearly no data is collected or available continues to be a waste of effort. Comparing the competitiveness ranking of Slovenia to Canada does not inform the audience of the Global Competitiveness Report in any meaningful way.
Sunday, September 8, 2013
10 Best High Tech Stocks To Own For 2014
Capitulating bears and overseas buyers are drowning out every other concern for American stocks, pushing the Standard & Poor�� 500 Index (SPX) to successive records even after the biggest drop in Treasury yields since June.
The Standard & Poor�� 500 Index closed at all-time highs twice last week and hasn�� traded more than 1.8 percent away from its record in the 23 days since March 11, according to data compiled by Bloomberg. The 2.1 percent advance over that period came as rates on 10-year government bonds tumbled 0.36 percentage point to as low as 1.7 percent. Plunges of that size coincided with losses of 4.6 percent for equities since 2010.
Bulls say U.S. shares are becoming less vulnerable to global shocks and will keep rallying as skepticism eases among professional investors. Gains such as the 1.2 percent advance on April 10 have been accompanied by even bigger jumps in companies with the most short interest. Bears say indiscriminate buying shows the rally is in its last stages and stocks will fall as earnings drop and Federal Reserve stimulus ends.
10 Best High Tech Stocks To Own For 2014: Boom Logistics Ltd(BOL.AX)
Boom Logistics Limited provides crane logistics and lifting solutions to resource, energy, utilities, and infrastructure sectors in Australia. The company provides managed lifting solutions, contractual maintenance programs, crane integration for high rise construction, engineering services and maintenance, and equipment hire services. It also involves in the sale of cranes and crane parts; and the provision of repairs and maintenance services. The company offers a range of cranes, lifting equipment, and heavy haulage vehicles, as well as access and ancillary equipment. Its solutions include mobile, project, crawler, and tower cranes; heavy haulage vehicles, such as prime movers and low loaders; low profile prime movers; overhead jacking systems; and travel towers, under-bridge units, trailer lifts, spider lifts, boom lifts, knuckle boom lifts, scissor lifts, one man lifts, material lifts, material handlers, generators, and compressors. Boom Logistics Limited operates in a range of industry sectors, primarily industrial maintenance, commercial construction, resources and petro chemical industry, civil works, and heavy lifting sectors. It offers approximately 530 cranes and 2,500 items of access equipment. The company, formerly known as Australian Crane Company, was incorporated in 2000 and is based in Southbank, Australia.
10 Best High Tech Stocks To Own For 2014: Halfords Group Ord 1p(HFD.L)
Halfords Group plc engages in retailing automotive, leisure, and cycling products. It offers car maintenance products, including car parts, servicing consumables, workshop tools, and body repair equipment; and car enhancement comprising in-car entertainment systems, cleaning products, accessories, interior and exterior car styling products, navigation systems, and alloy wheels. The company also sells new cycles; cycle accessories, such as lights, locks, and cycle safety helmets; car travel equipment, which include roof boxes and cycle carriers; travel accessories that comprise batteries, safety equipment, and child car seats; and outdoor leisure equipment. It sells its products through operating 473 stores in the United Kingdom and the Republic of Ireland, as well as through its halfords.com and halfords.ie Web sites; and provides car servicing and repairs through its 240 car servicing centers in the United Kingdom. The company was founded in 1892 and is headquartered in R edditch, the United Kingdom.
Top 10 Casino Companies For 2014: American Public Education Inc.(APEI)
American Public Education, Inc., together with its subsidiary, American Public University System, Inc., provides online postsecondary education focusing on the needs of the military and public service communities. The company operates through two universities, American Military University (AMU) and American Public University (APU) serving approximately 110,000 students in the United States and internationally. The universities share a common faculty and curriculum, which includes 87 degree programs and 69 certificate programs in disciplines related to national security, military studies, intelligence, homeland security, criminal justice, technology, business administration, education, nursing, and liberal arts. The company was founded in 1991 and is headquartered in Charles Town, West Virginia.
10 Best High Tech Stocks To Own For 2014: American Campus Communities Inc (ACC)
American Campus Communities, Inc., incorporated on March 9, 2004, is a self-managed and self-administered real estate investment trust (REIT). The Company specializes in the acquisition, design, financing, development, construction management, leasing and management of student housing properties. Through the Company�� interest in American Campus Communities Operating Partnership LP (the Operating Partnership), the Company owns, manages and develops student housing properties in the United States. It operates in four segments: Wholly-Owned Properties, On-Campus Participating Properties, Development Services and Property Management Services. As of December 31, 2011, the Company�� property portfolio contained 116 properties with approximately 71,800 beds in approximately 22,900 apartment units. Of the 116 properties, 11 were under development as of December 31, 2011. In July 2012, the Company acquired University Commons, a 480-bed off-campus community serving students attending the University of Minnesota. In September 2012, it acquired Campus Acquisitions��15 student housing properties with 6,579 beds. On November 30, 2012, the Company acquired student housing properties with 12,049 beds, including 366 beds at an additional phase from affiliates of Kayne Anderson Capital Advisors, L.P.
In December 2011, the Company acquired a 79.5% interest in a partnership that owns a 258-unit, 901-bed property (The Varsity) located near the campus of the University of Maryland in College Park, and a 367-unit, 1,026-bed wholly owned property (26 West) located near the campus of The University of Texas in Austin. In November 2011, the Company acquired a 370-unit, 684-bed wholly owned property (Studio Green) located near the campus of Florida State University in Tallahassee. In September 2011, the Company acquired a 216-unit, 792-bed wholly owned property (Eagles Trail) located near the campus of the University of Southern Mississippi in Hattiesburg. In July 2011, the Company acquired a retail shopping! center located near the campus of the University of Central Florida in Orlando. In April and May 2011, the Company sold four owned off-campus properties (Campus Club - Statesboro, River Club Apartments, River Walk Townhomes and Villas on Apache).
Through the Company�� taxable REIT subsidiaries (TRS), it also provides construction management and development services, primarily for student housing properties owned by colleges and universities, charitable foundations, and others. As of December 31, 2011, the Company provided third-party management and leasing services for 31 properties (nine of which the Company served as the third-party developer and construction manager) that represented approximately 24,200 beds in approximately 9,600 units, and one joint venture property in which the Company owns a noncontrolling interest with approximately 600 beds in approximately 200 units. As of December 31, 2011, the Company�� total owned, joint venture and third-party managed portfolio included 148 properties with approximately 96,600 beds in approximately 32,700 units.
The Company�� wholly-owned properties segment include American Campus Equity (ACE). Its On-Campus Participating Properties segment includes four on-campus properties owned by one of its TRSs that are operated under long-term ground/facility leases with two university systems. The Company�� third-party services consist of development services and management services and are typically provided to university and college clients. Many of its third-party management services are provided to clients for whom it also provides development services. The Company�� Development Services segment consists of development and construction management services that it provides through one of its TRSs for third-party owners. These services range from short-term consulting projects to long-term development and construction projects.
The Company�� pre-development services typically include feasibility studies for thir! d-party o! wners and design services. Feasibility studies include an initial feasibility analysis, review of conceptual design, and assistance with master planning. Construction management services consist of hiring of project professionals and a general contractor, coordinating and supervising the construction, equipping and furnishing process on behalf of the project owner, including site visits, hiring of a general contractor and project professionals, and coordination and administration of all activities necessary for project completion. The Company�� Property Management Services segment, conducted by its TRSs, includes revenues generated from third-party management contracts in which it is responsible for marketing, leasing administration, facilities maintenance, business administration, accounts payable, accounts receivable, financial reporting, capital projects and residence life student development.
10 Best High Tech Stocks To Own For 2014: Resources Connection Inc.(RECN)
Resources Connection, Inc. provides professional services in the areas of finance, accounting, risk management and internal audit, corporate advisory, strategic communications and restructuring, information management, human capital, supply chain management, actuarial, and legal and regulatory services to support client-led projects and initiatives. It offers finance and accounting services, including financial analyses, budgeting and forecasting, audit preparation, public-entity reporting, tax-related projects, merger and acquisition due diligence, initial public offering assistance, and assistance in the preparation or restatement of financial statements; information management services, such as financial system/enterprise resource planning implementation, and post implementation optimization services; and corporate advisory, strategic communications, and restructuring services. The company also provides risk management and internal audit services comprising compliance r eviews, internal audit co-sourcing, and assistance services; supply chain management services, including strategic sourcing efforts, contract negotiations, and purchasing strategy services; and actuarial support services for pension and life insurance companies. In addition, it offers human capital services, such as change management, and compensation program design and implementation services; and legal and regulatory services comprising providing attorneys, paralegals, and contract managers to assist clients, such as law firms with project-based or peak period needs. Further, the company provides policyIQ, a Web-based content management product for documenting, managing, and communicating various types of business information, including policies and procedures, Sarbanes documentation, training documentation, and other business content. It operates in North America, Europe, and the Asia Pacific. The company was founded in 1996 and is headquartered in Irvine, California.
10 Best High Tech Stocks To Own For 2014: Bentley International Ltd(BEL.AX)
Bentley International Limited, an investment company, invests primarily in equity securities listed on the world's major stock markets. It also invests in fixed interest securities and money market instruments denominated in various currencies. Constellation Capital Management Limited serves as the investment manager of the company. Bentley International was incorporated in 1986. It was formerly known as BT Global Asset Management Limited and changed its name to Bentley Equities Limited in 2003, and then to Bentley International Limited in March 2004. Bentley International is based in Double Bay, Australia.
10 Best High Tech Stocks To Own For 2014: Sempra Energy(SRE)
Sempra Energy, together with its subsidiaries, develops new energy infrastructure, operates utilities, and provides energy-related products and services worldwide. It operates in six segments: SDG&E, SoCalGas, Sempra Generation, Sempra Pipelines & Storage, Sempra LNG (liquefied natural gas), and Sempra Commodities. The SDG&E segment has electric and natural gas franchises that locate, operate, and maintain facilities for the transmission and distribution of electricity and natural gas to residential, commercial, industrial, street and highway lighting, and direct access customers. The SoCalGas segment has natural gas franchises that locate, operate, and maintain facilities for the transmission and distribution of natural gas to electric generation, wholesale, large commercial, industrial, and enhanced oil recovery customers. The Sempra Generation segment involves in the generation and wholesale distribution of electricity through a fleet of natural gas-fired power generati on facilities in Arizona, Nevada, and Indiana, as well as Mexico with a total capacity of 2,513 megawatts. The Sempra Pipelines & Storage segment operates 1,883 miles of distribution pipelines, 224 miles of transmission pipelines, and 3 compressor stations in Mexico; operates Mobile Gas, a natural gas distribution utility located in Mobile and Baldwin counties in Alabama; and operates natural gas storage facilities in Washington County of Alabama and Simpson County of Mississippi. The Sempra LNG segment involves in the receipt, storage, and vaporization of LNG, as well as the purchase and sale of natural gas. It operates Energia Costa Azul LNG receipt terminal in Baja California, Mexico, as well as Cameron LNG receipt terminal in Hackberry, Louisiana. The Sempra Commodities segment engages in the commodities-marketing business. Sempra Energy has operations in the United States, Canada, Mexico, Argentina, Chile, and Peru. The company was founded in 1998 and is headquartered i n San Diego, California.
10 Best High Tech Stocks To Own For 2014: Washington Banking Company(WBCO)
Washington Banking Company operates as the bank holding company for Whidbey Island Bank that provides community commercial banking services in northwestern Washington. Its deposit products include interest-bearing demand and money market accounts, saving deposits, time deposits, NOW accounts, and noninterest-bearing demand deposits. The company?s portfolio of loans comprises secured and unsecured commercial loans for working capital and expansion; real estate mortgage loans, including one-to-four family residential and commercial real estate loans; and real estate construction loans, such as commercial real estate, one-to-four family residential construction, and speculative construction loans. Its consumer loan portfolio include automobile loans, boat and recreational vehicle financing, home equity and home improvement loans, and other secured and unsecured personal loans, as well as SBA guaranteed loans for small and medium sized businesses. In addition, the company pro vides non-deposit managed investment products and services, and sweep investment options. As of December 31, 2010, it operated 30 branches in 6 counties located in northwestern Washington. The company was founded in 1996 and is based in Oak Harbor, Washington.
10 Best High Tech Stocks To Own For 2014: Syndicated Metals Ltd(SMD.AX)
Syndicated Metals Ltd engages in the exploration of mineral resources in Australia. It primarily explores for base metals, including copper, gold, molybdenum, rhenium, uranium, zinc, and phosphate. The company owns interest in the Mount Remarkable Project, including the Barbara copper deposit comprises contiguous tenements covering around 1100 square kilometers located in the Mount Isa Region in northwest Queensland. It also holds interests in the Kalman South Project located in northwest Queensland; and the Exmouth Project comprising three granted exploration licenses covering a total area of 480 square kilometres and an exploration license application of 180 square kilometers located in Perth. The company was incorporated in 2005 and is based in Subiaco, Australia.
10 Best High Tech Stocks To Own For 2014: Ikonics Corporation(IKNX)
IKONICS Corporation, together with its subsidiaries, engages in the development, manufacture, and sale of light-sensitive liquid coatings and films for screen printing and abrasive etching primarily in North America, Europe, Latin America, and Asia. The company also markets inkjet receptive films and substrates, ancillary chemicals, screen printing films, and emulsions to distributors; offers photo resistant films, art supplies, glasses, and metal medium and related abrasive etching equipment to end user customers; and resells equipment and other consumables. In addition, it provides digitally generated acid resist transfer films, etched electronic wafers and industrial ceramics, and sound absorbing technology for the aerospace industry; and develops and sells proprietary inkjet technology. IKONICS Corporation serves the screen printing, awards and recognition, signage, electronics, aerospace, and industrial ceramics and industrial digital inkjet markets, as well as other industrial markets. The company sells its screen print photochemical products and adhesives under the image mate brand name. It markets its products through domestic and international distributors, magazine advertising, trade shows, and the Internet, as well as through direct sales to customers. The company was formerly known as The Chromaline Corporation and changed its name to IKONICS Corporation in December 2002. IKONICS Corporation was founded in 1952 and is headquartered in Duluth, Minnesota.
Friday, September 6, 2013
Is Walgreen Still a Winner?
With shares of Walgreen Co. (NYSE:WAG) trading at around $49.51, is WAG an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock's Movement
Walgreen was rated on OUTPERFORM here on March 12. It has had a good run since that time, but have circumstances changed? There will be a lot of information below, but perhaps the most important fact is that 75 percent of the U.S. population lives within 3 miles of a Walgreens. One of the biggest selling points that most people already know about is the rise in generics, which means improved margins. Getting back on board with Express Scripts Holding Company (NASDAQ:ESRX) was also a big move. In addition to that, Walgreen inked a 10-year deal with AmerisourceBergen Corporation (NYSE:ABC). This will increase Walgreen's potential in brand and generic drugs on a global scale. Let's take a look at some other positives for Walgreen, as well as some negatives.
Positives:
Margin expansion Traction in Balance Rewards loyalty program Future share repurchase program likely 2.20 percent yield (higher than peers) Analysts like the stock: 15 Buy, 6 Hold, 2 Sell Large insider purchase on April 18 at $48.62 (insider purchases are rare these days)Negatives:
Wal-Mart Stores Inc. (NYSE:WMT) is a growing threat CVS Caremark Corporation (NYSE:CVS) is an ever-present nuisance for Walgreen Still fighting to win back previous customers EPS decline in 2012 Revenue decline in 2012Now let's take a look at some comparative numbers. The chart below compares fundamentals for Walgreen, CVS, and Rite Aid Corporation (NYSE:RAD). Walgreen has a market cap of $46.59 billion, CVS has a market cap of $71.48 billion, and Rite-Aid has a market cap of $2.38 billion.
| WAG | CVS | RAD | |
| Trailing P/E | 21.86 | 19.19 | 21.96 |
| Forward P/E | 13.33 | 13.16 | 16.47 |
| Profit Margin | 2.91% | 3.15% | 0.47% |
| ROE | 12.19% | 10.25% | N/A |
| Operating Cash Flow | $4.41 Billion | $6.67 Billion | $819.59 Million |
| Dividend Yield | 2.20% | 1.60% | N/A |
| Short Position | 1.40% | 0.90% | 5.00% |
Let's take a look at some more important numbers prior to forming an opinion on this stock.
E = Equity to Debt Ratio Is Strong
The debt-to-equity ratio for Walgreen is stronger than the industry average of 0.40.
| Debt-To-Equity | Cash | Long-Term Debt | |
| WAG | 0.34 | $2.44 Billion | $6.36 Billion |
| CVS | 0.26 | $1.38 Billion | $9.83 Billion |
| RAD | N/A | $129.45 Million | $6.05 Billion |
T = Technicals Are Strong
Walgreen has performed well over a three-year time frame. Rite Aid has been the top performer in this group, but that's not likely to last. Over the long haul, Walgreen and CVS are highly likely to outperform Rite Aid.
| 1 Month | Year-To-Date | 1 Year | 3 Year | |
| WAG | 3.82% | 34.63% | 42.90% | 48.28% |
| CVS | 6.28% | 21.40% | 31.68% | 63.00% |
| RAD | 40.00% | 95.59% | 79.73% | 79.73% |
At $49.51, Walgreen is trading above all its averages.
| 50-Day SMA | 45.15 |
| 100-Day SMA | 41.83 |
| 200-Day SMA | 38.34 |
E = Earnings Have Been Steady
Earnings suffered a setback in 2012, but looking at the past five years, there is consistency. Revenue had been improving on an annual basis until a slight setback in 2012.
| 2008 | 2009 | 2010 | 2011 | 2012 | |
| Revenue ($)in billions | 59.03 | 63.64 | 67.42 | 72.18 | 71.63 |
| Diluted EPS ($) | 2.17 | 2.02 | 2.12 | 2.94 | 2.42 |
When we look at the previous quarter on a year-over-year basis, we see flat revenue and a slight increase in earnings. However, on a sequential basis, there were impressive improvements in both revenue and earnings.
| 2/2012 | 5/2012 | 8/2012 | 11/2012 | 2/2013 | |
| Revenue ($)in billions | 18.65 | 17.75 | 17.07 | 17.32 | 18.65 |
| Diluted EPS ($) | 0.78 | 0.62 | 0.39 | 0.43 | 0.79 |
Now let's take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
T = Trends Support the Industry
For many people, medicine is a necessity, not a luxury. People are also living longer, and with baby boomers retiring in droves, the industry is likely to have a bright future. Technological advances will also lead to new diagnostic products, which might be sold at drug stores. Of course, there's also the increased popularity of generics, which means higher margins for drug stores. The only big negative is if the stock market crashes. If that happens, then there will be pain, but Walgreen and CVS should hold up better than most companies throughout the broader market. It could also be looked at as an opportunity to buy more stock. Furthermore, there will be dividend payments along the way. All of this doesn't pertain to Rite Aid, which is a much riskier investment.
Conclusion
Walgreen's long-term planning is excellent. The big concern is the stock market being overheated, not the company itself. However, the market could be propped up for another two years. Nobody knows how that will play out. The good news is that Walgreen will be around for a long time, and that being the case, any downward moves in the stock price should present an opportunity. Buying in increments is always recommended in order to reduce downside risk.
Thursday, September 5, 2013
Acquisitions Boost TripAdvisor
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Back in 2000, it was a small, independent company featuring user-generated travel tips; it is now the largest travel site in the world, measured by both content, and visitors. I'm one of them, and I use it frequently, reports Timothy Lutts, editor of Cabot Stock of the Month.
In 2004, TripAdvisor (TRIP) was purchased by conglomerate Interactive Corp (IACI), which spun off its travel businesses under the name of Expedia in 2005. In December 2011, TripAdvisor was spun off from Expedia in an IPO.
But all the while, TripAdvisor was growing, by acquiring smaller competitors and amassing more and more user-generated content (for free!).
TripAdvisor offers localized versions of its site in 30 countries. More than a billion travelers visited TripAdvisor's Web site during the first half of the year!
And today, in addition to its namesake Web site, the company also runs Airfarewatchdog, BookingBuddy, Cruise Critic, Family Vacation Critic, FlipKey, Holiday Lettings, Holiday Watchdog, Independent Traveler, OneTime, SeatGuru, SmarterTravel, Tingo, SniqueAway, Travel Library, TravelPod, VirtualTourist, and Kuxun.cn.
Revenue from click-based advertising accounts for 74% of TripAdvisor's revenue, while revenue from display-based advertising accounts for 13%. The remaining 13% comes from subscriptions, transactions, and other sources.
North America accounts for 54% of revenues, Europe, Middle East, and Africa region for 30%, Asia-Pacific for 12% and Latin America for the rest.
In the second quarter, TripAdvisor stopped offering pop-up ads and rolled out a new hotel metasearch display that's less intrusive and more effective. In addition, the company repurchased 675,000 common shares of its stock for $42.4 million—an excellent sign that management believes the stock is a good value.
Plus, the company is in the midst of four more acquisitions: Jetsetter, CruiseWise, Niumba, and GateGuru. In sum, the company is growing, thriving, well-managed, and set to get a lot bigger, for two simple reasons:
One, the world is its marketplace and there's enormous potential for growth, as people adopt middle-class lifestyles that include travel, particularly in China.
Second, the network effect will continue. More than a decade ago, when I looked at TripAdvisor, there wasn't much there. Today, it's an easily navigated, comprehensive resource. And no competitors are close.
The company's revenues and earnings are both growing rapidly, while after-tax profit margins are plump; the fact that the majority of the company's content is free is not to be underestimated.
Looking forward, analysts estimate that 2014 earnings will grow 30%. My guess is the company will do better, in part, because there will almost certainly be more acquisitions.
Technically, the stock showed upward progress since the December 2011 IPO, interrupted by a big correction from July through October of 2012. But the stock has been beating the market since then, as more and more institutional investors come to recognize the company's great growth prospects.
Most recently, we saw the stock hit a high of $82, and then fall heavily after the CEO told analysts that business this summer had been bumpier than expected, and that traffic was below the company's target.
That selling brought the stock down from the stratosphere, and led to the building of a two-week base in the $70 area, which is where it sits today, 14% off its high. Meanwhile, the stock's 50-day moving average is nearing $68, and thus is very likely to provide support in this area. I recommend buying now.
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Tuesday, September 3, 2013
The Best Way To Profit From The Commodity Bust
What happens to a forest after a forest fire?
More often than not, it grows back even healthier than before. Trees damaged in a fire typically die within two years, and dead vegetation falls to the ground. The remaining snags provide a habitat for wildlife and eventually fall to the forest floor, becoming a long-term source of nutrients. It's a process of creative destruction.
Financial markets can behave the same way. They can crash and burn, clearing out irrational excess in order to build a foundation of sustainable growth. Two prime examples: the tech bubble of the late 1990s and the so-called commodities supercycle.
"Technology is here to stay."
This is one of the most ridiculous statements I've heard uttered by investors as they bid up the likes of Pets.com and CMGI to ridiculous, stratospheric prices. Along the way, the stocks of many great long-term companies were lifted as well. One of my favorite "Forever Stocks," chip-making giant Intel (Nasdaq: INTC), has been punished for over a decade, thanks to guilt by association.
But what happened after the crash is that investors are able to buy shares of a great company that consistently makes money and rewards its shareholders with a rising dividend. Best of all, the shares can be purchased at a 36% discount to the price-to-earnings (P/E) ratio of the S&P 500 index.
After The Fire
The overhyped commodities supercycle has experienced a similar rise and fall. The rise was twofold. First, as emerging markets became more developed economically and their citizens became more affluent, they ate more. Food producers needed to produce more and in the meantime, commodity prices on the in demand agricultural products went up. This nearly decade-long chart tells the story.
The second cause of rising commodity prices was fueled by the decade-long bear market in equities. Investors needed to go somewhere. The commodity train was leaving the station, and they hopped on. Then the train wrecked, as it always does during any type of investment mania or bubble, and like the tech bubble, many high-quality companies were swept up by the rising tide and mercilessly pummeled.
I've found two ideas that spell profit for investors. Best of all, these companies manufacture an essential component to agricultural production: fertilizer. You really can't farm without it. It doesn't matter whether commodity prices are in the clouds or the toilet. People have to eat, farms have to grow food, and fertilizer is needed, regardless.
The 900-Pound Gorilla
Potash Corp. of Saskatchewan (NYSE: POT) is the world's biggest diversified fertilizer company and one of the world's largest producers of potash. Estimates peg the company's contribution right at 20% of global capacity of potash production.
During the decade long commodities supercycle party, Potash Saskatchewan definitely made hay while the sun was shining. From 2004 to 2012, earnings per share grew at a compound annual rate of 30% while the dividend grew 24%.
Based on how well the company took advantage of the macro trend, it's no wonder investors bid the share price up to lofty heights. But that was then.
With the realization that rapid growth in emerging markets would eventually slow, the financial markets took their toll. The stock is 60% off of its pre-financial crisis highs and over 30% off of its 52-week high. But there's another issue compounding the problem.
Recently, the largest Russian potash producer, OAO Uralkali, said it would begin selling its own potash rather than using a marketing group model as it had in the past. The company also said that it would focus on volume over price. This announcement has caused massive confusion in the potash market and pummeled the stock prices of potash producers. So, if prices are going down and competition is heating up, should you own shares of Potash Saskatchewan? Yes.
Aside from the two major influences on the potash industry, Potash Saskatchewan is an incredibly well-run company. Shares trade at around $29.50 with a forward P/E ratio of 11.9 and an attractive dividend yield of 4.7%. The financials are impressive, too. The long-term debt-to-capitalization ratio sits at an extremely comfortable 25%, and return on equity (ROE) is a strong 23%.
The company still sees growth despite the tough environment projecting global potash shipments to rise 7.8% to 55 million tons from last year. It's obvious that Potash Saskatchewan prepared for the famine during the feast.
Diamond In A Garbage Can?
While Potash is a prime example of a large market leader trading at a deep discount in a tough environment, Intrepid Potash (NYSE: IPI) is a smaller player hurt by macro factors and limited options. But that's not always a bad thing for smart investors.
It's obvious that Intrepid caught just the tail end of the commodities supercycle.
Formed in 2000, the company was put together as roll-up to consolidate smaller potash producers in the U.S. Over the past eight years, its output has supplied 1.6% of annual global potassium consumption -- not too impressive compared with Potash Saskatchewan 's 9.3% global share. However, Intrepid supplies 9.3% of annual U.S. consumption -- not bad for a 13-year-old company with just under $1 billion in market capitalization.
Whereas Potash Saskatchewan is a whale with a diversified business, Intrepid is a smaller catch that offers value and opportunity. While a young company, Intrepid has no long-term debt. Shares trade at around $12.30, and there's no dividend. Not too exciting. But the stock also trades right at its tangible book value (the value of all of the company's physical assets). In 2012, earnings per share were $1.16 while projections for this year call for 56 cents a share. That's a significant slowdown but still earnings-positive.
Intrepid looks like a classic takeover candidate, with halfway decent financials and worthwhile market share in its particular sector. Disruption in a sector usually results in at least some consolidation. Being a smaller player, Intrepid would be a target. A bigger operator could gain significant U.S. market share for just a modest premium, 20% to 30%. But what seems like a modest premium could be highly lucrative to investors at the stock's current level.
Risks to consider: As discussed earlier, the resulting bear market in stocks after a sector bubble bursts could last awhile and usually, they last longer than an average investor thinks it will. Stock selection and mental preparedness is essential. Potash Saskatchewan is the Coca-Cola (NYSE: KO) of the fertilizer business. Its substantial dividend yield, strong market position and reasonable valuation provide the necessary ballast. Intrepid Potash's upside as a consolidation candidate offsets the risk somewhat, but you shouldn't own a stock based on takeover speculation without an exit strategy should the acquisition fail to materialize.
Action to Take --> The potash industry may be in disarray due to pricing pressure, so this might be the best time to buy the stocks of those companies. Potash Saskatchewan 's position as the market leader and strong operating history make it a natural choice. With market stabilization and consistent execution, shares of Potash Saskatchewan should have a 12-month price target of $38. That would mean that the P/E would only have to rise to 15 or so. Factoring in the 4.75% dividend yield, the result would be a total return of 36%. As an ideal acquisition target, shares of Intrepid Potash offer value at their tangible book value: considering a 25% premium, a reasonable takeout price of $15.
P.S. -- Stocks like Potash Saskatchewan are similar to a special group of securities we call "Forever Stocks." These are stocks solid enough stocks to buy, forget about and hold -- "Forever." To learn more about these stocks -- including some of their names and ticker symbols -- click here.
Sunday, September 1, 2013
SEC Lifts Ban on Hedge Fund Advertising
The Securities and Exchange Commission on Wednesday lifted the ban on advertising by hedge funds and private equity firms. The rule, approved by a 4-1 vote, was a congressionally mandated rule required by the Jumpstart Our Business Startups (JOBS) Act.
SEC Chairwoman Mary Jo White said in her Wednesday remarks that under the rule, “only ‘accredited investors’ would be permitted to actually invest in these offerings.” Accredited investors are defined as those who have a net worth of at least $1 million, excluding the value of their home, or earn at least $200,000 annually.
SEC Commissioner Luis Aguilar cast the dissenting vote on the measure, arguing that the commission was moving ahead “recklessly.”
The JOBS Act passed by Congress in April 2012 required a “significant change in this marketplace in an effort to facilitate both capital formation and the accompanying creation of new jobs,” White said. “Specifically, Congress mandated that the commission eliminate the ban on general solicitation in Rule 506 securities offerings. Once the ban is lifted, issuers will be able to use a number of previously unavailable solicitation and advertising methods when seeking potential investors.”
White noted, however, the numerous concerns that have been raised stating that lifting the ban would “result in more fraudulent conduct.”
Both the North American Securities Administrators Association and the Investment Company Institute were quick to express their disappointment with the Wednesday vote.
Therefore, he said, NASAA "strongly urges the SEC to move as expeditiously as possible to adopt the proposed amendments to Regulation D and Form D."
ICI President and CEO Paul Schott Stevens said that the SEC's final rule fails to include investor protection measures recommended by ICI, consumer groups and many others. "Instead, the SEC put forward a proposal to consider whether investor protections should be added at a later date," he said.
But White said that while protestors have urged the commission to defer lifting the general solicitation ban “while we pursue and adopt related discretionary rulemaking designed to provide more investor protections in this new market,” White argued that “given the explicit language of the JOBS Act as well as the statutory deadline that passed last July, the commission should act without any further delay.”
She added that the SEC should, however, “take steps to pursue additional investor safeguards if and where such measures become necessary once the ban on general solicitation is lifted.”
To that end, the commission also adopted by a 3-2 vote a plan that will allow that agency to collect additional data on how the new rule affects the private offering market and the offering practices that develop under the new rule. The proposal, the SEC said, “would address certain concerns raised by investors in connection with this new rule.”
Said White: “I believe the commission should closely monitor and collect data on this new market to see how it in fact operates, observe the practices issuers and market participants are using, and assess whether and to what extent the changes in the private offering market has led to additional fraud.”
The SEC also approved a rule mandated by Section 926 of the Dodd-Frank Act, which would bar “felons and other bad actors” from participating in a private-placement offering.
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Check out NASAA Sounds Alarm on Private Placement Offerings.