Tuesday, April 29, 2014

Prestige Brands Acquires Care Pharma - Analyst Blog

Best Construction Material Companies To Own In Right Now

Prestige Brands Holdings, Inc. (PBH) recently announced that it has acquired Australia-based Care Pharmaceuticals Pty Ltd. Effective from Jul 1, 2013, this privately held marketer and distributor of over-the-counter (OTC) healthcare products became a part of Prestige Brands. Financial details of the deal were not provided. Prestige Brands saw its share price moving up by 10.9% on the news.

This acquisition will strengthen Prestige Brands' portfolio with Care Pharma's principal brand Fess and other brands including Painstop, Rectogesic and Fab. Prestige Brands funded this acquisition through an existing credit facility and cash on hand.

We note that Prestige Brands is heavily into acquisitions. The company acquired 17 brands in 2012 and 6 brands in 2011 in the OTC Healthcare category, supplementing its existing OTC Healthcare brands.

On Jan 31, 2012, the company acquired 15 OTC healthcare brands, including related contracts, trademarks and inventory from GlaxoSmithKline plc (GSK) and its affiliates. The other two brands, namely, Debrox and Gly-Oxide, were acquired on Mar 30, 2012.

On Nov 1, 2010, the company acquired Blacksmith Brands Holdings, Inc., which owned five brands, namely, Efferdent, Effergrip, PediaCare, Luden's and NasalCrom. On Jan 6, 2011, the company acquired some assets comprising the brand Dramamine in the US.

Prestige Brands carries a Zacks Rank #2 (Buy). The latest acquisition is a great strategic fit for the company. The two companies have similar business models and a common culture focusing on building brands, innovation and new products. It will also help Prestige Brands in expanding its business in the Asia Pacific region.

Right now, companies like Santarus, Inc. (SNTS) and Jazz Pharmaceuticals (JAZZ) look well positioned with a Zacks Rank #1 (Strong Buy).

Monday, April 28, 2014

Is This a New Frontier?

With shares of Frontier Communications Corporation (NYSE:FTR) trading at around $4.29, is FTR 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

Frontier Communications has been losing customers. In Q1 of 2011, Frontier had 3,338,306 residential customers. In Q1 of 2013, it had 2,859,229 residential customers. In Q1 of 2011, it had 333,396 business customers. In Q1 of 2013, it had 281,052 business customers.

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In addition to the loss of customers, there are other negatives as well:

Increased competition High expenses (mostly due to promotions) Access line losses Atrocious stock performance over the past two years (in a bull market) 23.40 percent short position on the stock (a lot of non-believers) Poor debt management Decline in revenue in 2012 Decline in earnings four consecutive years Verizon assets Poor company culture

It's amazing how often company culture matches the success (or lack of success) of a company. In other words, company culture is important. According to Glassdoor.com, Frontier Communications has a 2.3 of 5 rating, which is subpar. Only 28 percent of employees would recommend the company to a friend, and only 25 percent of employees approve of CEO Maggie Wilderotter.

There are a few positives for Frontier Communications, which include an increase in ARPC and the divestments of non-core assets. It should also be noted that there is a 9.40 percent yield on the stock. This makes the stock appealing to investors; they're certainly not interested because of growth potential.

Jeffries recently cut its price target to $5 from $6, but rated it a Buy.

The chart below compares fundamentals for Frontier Communications, AT&T (NYSE:T), and CenturyLink (NYSE:CTL).

Trailing P/E 28.60 28.79 26.78
Forward P/E 19.50 13.79 13.62
Profit Margin 3.19% 5.81% 4.79%
ROE 4.10% 7.92% 4.43%
Operating Cash Flow 1.53B 39.53B 5.88B
Dividend Yield 9.40% 4.80% 5.70%
Short Position 23.40% 1.30% 7.30%

Let's take a look at some more important numbers prior to forming an opinion on this stock.

T = Technicals Are Mixed

Frontier Communications has been a dog over the past two years, but the past year has been good.

At $4.29, Frontier is trading above its 50-day SMA and below its 200-day SMA.

1 Month Year-To-Date 1 Year 3 Year
FTR 1.42% 2.50% 35.78% -27.41%
T -3.52% 13.21% 16.37% 70.86%
CTL 1.37% -2.07% 2.37% 37.21%
50-Day SMA 4.07
200-Day SMA 4.31
E = Equity to Debt Ratio Is Weak

The debt-to-equity ratio for Frontier Communications is weaker than the industry average of 0.80. This isn’t much of an issue now, but when interest rates increase (eventually), it will become a factor. It’s possible for Frontier Communications to improve its debt management by that time, but not likely.

Debt-To-Equity Cash Long-Term Debt
FTR 2.07 875.91M 8.43B
T 0.85 3.88B 74.92B
CTL 1.10 476.00M 20.79B
E = Earnings Have Weakened

Earnings have consistently weakened on an annual basis. Revenue had been improving, but there was a setback in 2012.

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When we look at the last quarter on a year-over-year basis, revenue declined and earnings improved. Revenue also declined on a sequential basis. Clearly,it is becoming a concern.

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in billions 2.24 2.12 3.80 5.24 5.01
Diluted EPS ($) 0.57 0.38 0.23 0.15 0.13
Quarter Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012 Mar. 31, 2013
Revenue ($) in billions 1.27 1.26 1.25 1.23 1.21
Diluted EPS ($) 0.03 0.02 0.07 0.0250 0.05

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 Do Not Support the Industry

The industry is seeing decreased demand and increased competition. This is not a recipe for success.

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Frontier Communications is losing customers, and it’s in a weakening industry. The high yield is the most appealing attribute for the stock, but debt management is a concern and the dividend might be cut in the future. The stock has performed well over the past year, but almost any stock has the potential to perform well in a dartboard market. Therefore, there is near-term upside potential. However, if and when the market begins to act normally, this isn’t a good place to be. There are too many risks.

Sunday, April 27, 2014

Buy Skechers For The Long Run

U.S. retail sales inched up 0.2% in December. This increase followed a 0.4% jump in Nov., resulting in retailers' merriment. Although this was driven by the highly promotional environment and deep discounts, this shows that consumers are willing to open their wallets. In fact, there are some standout companies that have performed much better than expected, making the most of increased consumer spending.

Footwear retailer Skechers (SKX) recently reported a blockbuster quarter. Results far surpassed the Street's expectations, pushing the stock price north.

Great performance indeed

High demand for products drove revenue up to $450.7 million, an increase of 14% over last year's quarter. Demand for winter wear, such as boots, surged mainly due to a colder holiday season. On the other hand, warm weather in the West led to higher sports footwear sales.

All of Skechers' segments did well, which led to staggering growth in the top line. Both its wholesale and retail businesses grew substantially as the shoe retailer launched new products. Revenue from the retail segment increased 18.6% over last year; the company opened 20 new stores. However, store additions were not the only reason for the performance. Same-store sales grew 12.8%, which boosted total revenue.

Additionally, the footwear retailer's e-commerce operations grew by 9% due to stronger marketing efforts. The company's earnings more than tripled to $0.28 per share from $0.08 per share a year-ago. Skechers' efficient inventory management and cost-savings efforts paid off, resulting in a margin expansion of 190 basis points.

Strong recovery from the past

Although the shoe retailer's performance has been remarkable, this isn't the case when we look at its stock price. Over the last five years, Skechers did not perform as well as peer Crocs, as evidenced by returns. However, it did manage to outperform Nike during the same period.

Crocs' stock price grew 1,180% over the last five years, much higher than Skechers (522.6%) and Nike (297.9%). This is mainly because Crocs' stylish and colorful footwear attracted customer in hordes. Moreover, its products were comfortable, which lured people to its stores.

Skechers, on the other hand, lacked innovation, which is why it lost customers' interest, especially in the domestic market. Also, its inability to manage rising input costs added to Skechers' woes. However, with increased efforts to grow its geographical presence and new product developments, Skechers outpaced its peers.

Skechers' stock price has appreciated by 61.7% over the last year, whereas Crocs shares have fallen 3.2%. Crocs' performance has been deteriorating since it is unable to attract many customers. In fact, in Crocs recently reported fourth-quarter, revenue increased by only 1.6% since demand for its colorful clogs declined. Same-store sales fell 4%, forcing the retailer to move into more fashionable footwear.

Nike remains in the second position with returns of 43.9%. Nonetheless, Nike's efforts have been quite fruitful; the company experienced a revenue increase of 8% to $6.4 billion. The company's products resonate with customers because of Nike's focus on comfort and innovation.

Nike's products such as Nike+ FuelBand and Flyknit technology have not only attracted more customers but also led to expanding margins. Moreover, the company has been marketing its products well by promoting them at various sports events such as the Olympics and the World Cup.

Way to go

Therefore, it is clear that Skechers has recovered over the years and seems to be a strong player. It also has some good reasons to be hopeful. For example, it plans to open a number of new stores in the future in order to grow its top line. For 2014, the footwear company expects to add 60 to 70 new stores, which will enhance its presence.

Skechers also plans to expand its footprint internationally, where demand for its products has been attractive. Lastly, it plans to continue to innovate and launch new products, which will provide more reasons for customers to enter its stores.


After having a difficult time, Skechers seems to be making a great comeback. Its diversified product portfolio, which includes items catering to needs ranging from winter wear to sportswear, has been luring customers in. Moreover, the marketing tools it has chosen to use have been helpful. Its ability to outpace other players and its plans for a bright future make me believe in this company. Investors should not ignore this growing retailer.

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Saturday, April 26, 2014

Do You Trust the Earnings at Harbinger Group?

Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.

Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Harbinger Group (NYSE: HRG  ) , whose recent revenue and earnings are plotted below.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.

Over the past 12 months, Harbinger Group generated $365.0 million cash while it booked net income of $78.9 million. That means it turned 7.5% of its revenue into FCF. That sounds OK.

All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.

So how does the cash flow at Harbinger Group look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

With 30.0% of operating cash flow coming from questionable sources, Harbinger Group investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 86.9% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 14.1% of cash from operations.

A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.

Selling to fickle consumers is a tough business for Harbinger Group or anyone else in the space. But some companies are better equipped to face the future than others. In a new report, we'll give you the rundown on three companies that are setting themselves up to dominate retail. Click here for instant access to this free report.

We can help you keep tabs on your companies with My Watchlist, our free, personalized stock tracking service.

Add Harbinger Group to My Watchlist.

Thursday, April 24, 2014

Amazon Q1 income up 32% on brisk sales

Amazon.com, the giant online retailer that is rapidly expanding into digital media and hardware, said Thursday its first-quarter net income rose 32% from a year ago to $108 million as it registered higher sales in all major product lines.

Its diluted earnings of 23 cents per share matched estimates of analysts polled by Bloomberg.

Net sales increased 23% to $19.7 billion from the same quarter a year ago.

The results were announced after markets closed. Amazon shares inched up 0.52% in after-hours trading, to $338.89.

Amazon still generates a vast majority of its revenue by selling electronic goods and other items — sales of those rose 27% to $13 billion. Sales of media items, including digital files, are growing at a rapid clip, up 8% to $5.5 billion, amid heavy competition from Apple, Google and other giants.

Amazon's profit margins have usually been thin, given its heritage as an online retailer. And that isn't likely to change because it continues to invest heavily in other areas that normally would be found in Silicon Valley, including Internet hosting services, cloud computing, tablets and even video game development. Total expenses rose 23% to $19.6 billion, including nearly $2 billion on technology and content.

As usual, the Seattle-based company did not release detailed figures about sales of its Kindle line of tablets and e-readers, as well its Prime Instant Video service, the $99 annual membership that includes two-day delivery and some free streaming of TV and movies.

The company expects second-quarter net sales to be between $18.1 billion and $19.8 billion, or to grow between 15% and 26%, compared with second quarter 2013.

Amazon also expects an operating loss next quarter of $55 million to $455 million, compared with income of $79 million last year.

"I'm somewhat surprised the stock is trading up," said Michael Pachter of Wedbush Securities. "Revenue guidance is great ... but they expect an operating loss in (second quarter)."

T! he first quarter was an eventful one for the online retailer-turned Net content provider. Before it announced its earnings, Amazon said Prime subscribers could use a new grocery-delivery service called Prime Pantry to get a 45-pound box of groceries shipped for a flat rate of $5.99.

On Wednesday, the company struck an agreement with HBO to stream the cable network's popular, previously aired shows for Prime subscribers. As part of that deal, HBO Go will come to Amazon's new $99 Fire TV set-top box it brought to market earlier this month. Fire TV delivers streaming video from Amazon and other sources, including Netflix and Hulu.

And last month, Amazon told its 25 million Prime members that it was raising the annual fee from $79 to $99; that took effect April 17. "2014 is off to a kinetic start," said Amazon CEO and founder Jeff Bezos in a statement accompanying earnings.

Wednesday, April 23, 2014

Facebook Earnings Live Blog Recap


Updated from 4:13 p.m. to include comments from the earnings call throughout.

NEW YORK (TheStreet) -- Facebook (FB) reported on Wednesday first-quarter earnings and revenue that topped expectations as advertising revenues grew more than expected.
Revenue for the first quarter of 2014 totaled $2.5 billion, an increase of 72%, compared with $1.46 billion in the first quarter of 2013. First-quarter revenue of $2.36 billion was expected, according to Thomson ONE Analytics.

Revenue from advertising was $2.27 billion, an 82% increase from the same quarter last year. Mobile ad revenue represented about 59% of advertising revenue in the first quarter, up from about 30% of ad revenue the same time last year. Analysts on average were expecting total ad revenue of $2.14 billion, a 71% increase year-over-year.

CFO David Ebersman said during the company's earnings call mobile ad revenue was up 7% sequentially despite the seasonal benefits of the fourth quarter.

"Mobile continues to be a big opportunity," chief operating officer Sheryl Sandberg underscored during the call. "Our goal is to make our ads as interesting and valuable as the organic content that you find on Facebook."

The company added that its shift to news feed ads have allowed for higher pricing because of higher engagement and click-through rates.

Facebook provided user-engagement numbers as of March. Daily active users (DAUs) were 802 million on average for March 2014, an increase of 21% year-over-year. Mobile DAUs were 609 million on average for March, an increase of 43% year-over-year. Monthly active users (MAUs) were 1.28 billion as of March 31, 2014, an increase of 15% year-over-year. Mobile MAUs were 1.01 billion as of March 31, an increase of 34% year-over-year. "We tracked how many people use Facebook, not just every day, but what percent of people use it six out seven days a week ... this last quarter, that number surpassed 50%," said CEO Mark Zuckerberg.

Excluding share-based compensation and related payroll tax expenses and income tax adjustments, non-GAAP net income was $885 million, up 184%. Non-GAAP diluted EPS was 34 cents, up 183%. The Wall Street earnings estimate was 24 cents. Facebook also announced that Ebersman has informed the company of his intention to step down as chief financial officer. On June 1, 2014, he will be succeeded as CFO by David Wehner, currently Facebook's vice president of corporate finance and business planning. --Written by James Rogers, Andrea Tse and Antoine Gara in New York

Stock quotes in this article: FB 

Tuesday, April 22, 2014

Will the real Stanley Bing please stand up?

This isn't just a book review. It's investigative journalism. It's an exposé of one of the most prolific authors of modern times, drawn from years of research and undercover work.

It's a sordid, but true, story that will use the release of his latest book, The Curriculum: Everything You Need to Know to Be a Master of Business Arts, to rip the cover off of one of the literary world's greatest mysteries.

This is about Stanley Bing, one of the foremost experts on business practices. Author of 14 books, columnist for Fortune magazine (for those under 65, a magazine is a printed pamphlet that aggregates content for people unable to turn on a tablet or smartphone.) Bing has long been a top dog in a world of true blowhards: people who give business advice.

Some charge outrageous fees as "consultants" and deliver their advice with PowerPoint presentations to clients who pay dearly for the private advice so they can make dumb decisions.

But Bing is an expert who brings his message directly to the public through books, writings and blog posts. He eschews personal contact that might expose a bit too much about himself for comfort. What, you ask, does Bing have to hide?

First, the book world's worst kept secret: It is now "common knowledge," which means it has been reported in social media, that Bing's real identity is that of CBS executive Gil Schwartz, a close consigliere to the most powerful man in media, CBS boss Leslie Moonves. Most people in the know believe Schwartz invented the "Bing" persona to protect himself in the event that anything he wrote upset someone important (anyone close enough to Moonves to call him "Les").

Second, this book, like the previous 13 by Bing, leaves the reader convulsing with laughter. But we can't figure out if we are laughing with or at the author. It's so funny, the reader never knows if it was meant to be funny or a serious search for the great clichés of the business world. Like the work of any consultant, the result! s are so obvious, the reader doesn't know whether to laugh or cry about how much the consultant's report cost.

Is this Stanley Bing or Gil Schwartz?(Photo: Cliff Lipson, Harper Collins)

In researching this story, a search for the identity of the elusive, brilliant Stanley Bing, I went undercover as an executive at CBS myself from 2005 to 2007, when I befriended Messrs. Schwartz and Moonves. During that stint, I ascertained several significant facts about Schwartz that question his true false identity.

Frankly, I never understood why Moonves kept Schwartz around, except for the fact that Moonves often needed someone to show up in his office with a "crisis" as an excuse to get rid of some star begging for a spot in a new show.

And I never saw Schwartz do any actual work. He was always at his desk on the phone or reading a newspaper or magazine. Every once in a while, he had a guitar and would practice on it for a country music performance at a CBS meeting. But I never saw him write a word. This raised my suspicions, since he published three books during my time there. If Gil Schwartz is Stanley Bing, he has written more books than he has read.

I don't know if that is a criticism or the sign of a true guru.

Let's take a look at some of Bing's advice from his latest book. He offers a "Core Curriculum" with chapters that include "Not Appearing Stupid" and "Fabricating a Business Personality." He makes a dramatic observation: "The appearance of intelligence is an asset, and the inverse, not so much."

There are detailed chapters on grooming ("We are not a dignified species. Those who do achieve dignity are in danger of looking equally ridiculous if they overgroom,"); image implications of personal h! ardware (! "Functionality is not the primary issue in the selection of hardware for those wishing to construct their helpful persona. If it were, the BlackBerry with the physical keyboard would still be around. Get something new. People will love you.") and Approach to Aggression ("A certain amount of anger is expected from the senior ranks. Those who do not display sufficient rage when thwarted or frustrated are secretly judged lacking in some key component of classic executive chops. At just six displays per quarter, this particular executive is deemed something of a 'sissy'").

Armed with an overwhelming number of graphics, charts and tables, the book may contain every management and business cliche ever cited. It's a magnificent piece of work. I should know. I spent two years of my life getting an MBA in Bing's world.

Only one question remains: Who really wrote this epic?

The conclusion of my years of research and investigation is clear:

Sir, I served with Stanley Bing, I knew Stanley Bing, and Gil Schwartz, you're no Stanley Bing!

Larry Kramer is President and Publisher of USA TODAY. He researched this article while working undercover at CBS with Gil Schwartz.

Monday, April 21, 2014

Six Flags and Cedar Fair Are Ready to Ride

I'm a kid at heart, so last week I took my family to Southern California to chase some coasters. After kicking the tires of the news Cars Land attraction at Disney's California Adventure, we ventured an hour north to Magic Mountain.

Our timing couldn't have been better. Despite the ridiculous heat wave, Six Flags (NYSE: SIX  ) had just opened a new coaster -- Full Throttle -- at Magic Mountain just a few days earlier.

Magic Mountain now has a record 18 roller coasters, two more than Cedar Fair's (NYSE: FUN  ) Cedar Point park in Ohio. The two seemed to be jockeying back and forth for the crown a few years ago, but Cedar Fair eventually figured that this wasn't an arms race worth battling.

Full Throttle is a pretty intense ride. Billed as the tallest and fastest looping coaster in the world, it clocks in at a scintillatingly brief 54 seconds, but that's because it uses three launches throughout the ride to get you through the 160-foot loop, sending you backwards out of a tunnel, and back to the station over the loop.

It was still a work in progress when we rode on Thursday and Friday of last week. The subdued tunnel soundtrack that was used when the ride opened earlier in the week was replaced by Ozzy Osbourne's "Crazy Train" by the time we got there. There was netting aboard the boarding platform on Thursday that housed an awning by Friday.

Six Flags knows that timing is everything in the amusement park industry. Magic Mountain is one of the few parks in the chain that is open year-round, but Cedar Fair and Six Flags live and die by the summer. With the economy showing signs of life and gas prices staying low, it's the perfect climate for regional amusement parks that largely attract locals.

The third quarter that began this week for both companies is huge. Both companies are expected to earn more during these next three months than they will for the entire year. In other words, both chains lose money during the balance of the year.

There's certainly plenty of room for upside here. Analysts see revenue at both operators growing a mere 5% this year. Given the high fixed costs of running an amusement park, even the slightest tick to the upside in revenue could result in a material windfall on the bottom line. That's big because Six Flags and Cedar Fair are compelling investments for income investors, yielding 5.1% and 6%, respectively. Material improvement in profitability should translate into even more generous payouts if the positive industry fundamentals play out this season.

Best Trucking Stocks To Buy Right Now

Just like Magic Mountain's new coaster, Six Flags and Cedar Fair are hoping for more forward launches in the coming months.

3 more coasters to ride
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Sunday, April 20, 2014

Fed's PR Tour Continues, Easing Fears on Wall Street

Top Consumer Service Stocks To Watch Right Now

European markets slid in late trading today as investors eyed U.S. data, the end of the second quarter, and more comments from the Federal Reserve. Fed officials have been on damage control all week after the market reacted sharply to Chairman Ben Bernanke's comments about potentially slowing an $85 billion bond-buying program later this year. Long-term interest rates shot higher and the Fed has been sending its team out on a speaking tour to calm down markets and assure investors that they won't allow rates to rise high enough to slow the economy.  

Today, three more Fed officials are due to speak, and the market appears to be receiving the calming words well. Dow Jones Industrial Average (DJINDICES: ^DJI  ) futures are up 0.2% at 7 a.m. EDT and the S&P 500 (SNPINDEX: ^GSPC  ) has also gained 0.2%.

The reason the Fed is on a PR campaign is the impact that higher interest rates could have on the economy. Last week I highlighted that a 1% rise in mortgage rates can lead to a 12% rise in monthly payment, something that directly impacts consumers. So, everyone from big business to the individual consumer has an incentive to keep rates low for now, which has been the Fed's goal all week.

On a company level, it looks like BlackBerry (NASDAQ: BBRY  ) will be a big mover today, with shares already down 18% in premarket trading. The company reported an $84 million loss, or $0.16 per share, which was better than the $518 million loss a year ago but not exactly a sign the company is on its way to profitability. BlackBerry made a big bet on its new Z10 and Q10 in an effort to catch up in the smartphone market, but it doesn't appear to be paying off. BlackBerry has been relegated to has-been status and I doubt it will ever get its old cachet back.  

It's incredible to think just how much of our digital and technological lives are almost entirely shaped 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.

Saturday, April 19, 2014

The Men Who Run Babcock International

LONDON -- Management can make all the difference to a company's success and thus its share price.

The best companies are those run by talented and experienced leaders with strong vested interests in the success of the business, held in check by a board with sound financial and business acumen. Some of the worst investments to hold are those run by executives collecting fat rewards as the underlying business goes to pot.

In this series, I'm assessing the boardrooms of companies within the FTSE 100. I hope to separate the management teams that are worth following from those that are not. Today, I am looking at Babcock  (LSE: BAB  ) , the outsourcing and engineering company that earns over half its sales from the Ministry of Defense.

Here are the key directors:



Mike Turner

(non-exec) Chairman

Peter Rogers

Chief Executive

Bill Tame

Finance Director

Kevin Thomas

CEO, Support Services Division

Archie Bethel

CEO, Marine and Technology Division

John Davies

CEO, Defense and Security Division

Mike Turner became chairman in 2008, shortly after stepping down as CEO of BAE Systems, a role he held from 2002. His executive career was spent exclusively with BAE, having joined predecessor company Hawker Sidley's apprenticeship scheme in 1966. He had previously been a non-executive of Babcock from 1996 until 2005, a period in which the business transformed itself from a manufacturing company to a service provider.

Peter Rogers joined Babcock as chief operating officer in 2002 and became CEO in 2003. A chartered accountant, he spent his early career with Ford Motor Company and then Courtaulds, where he was a main board director. Whilst Babcock had largely moved out of manufacturing before Rogers took the helm, he has grown the company significantly, both organically and through acquisitions, including the purchase of VT Group.

During Rogers' tenure Babcock's market cap has risen from 150 million pounds to 4 billion pounds, with revenues up from 400 million pounds to 3 billion pounds. The shares have increased nearly 10 times.

Accountant, surveyor, engineer, lawyer
Finance director Bill Thame joined in 2002 as well. A chartered accountant, Tame worked for Courtaulds for 15 years in various finance roles before serving as finance director of Scapa group from 1999 to 2001.

A chartered surveyor, Kevin Thomas also joined Babcock in 2002, after 12 years in facilities management including Serco and local government. A chartered mechanical engineer, Archie Bethel joined in 2004. He had previously worked in engineering roles in the Scottish oil industry and also as CEO of the Lanarkshire Development Agency. Both Thomas and Bethel stepped up to the main board of Babcock in 2010.

John Davies joined Babcock as CEO of the defense and security division in 2010 when it acquired VT Group, stepping up to the main board this year. Qualified as a lawyer, Davies has worked exclusively in the defense industry, with BAE Systems and subsequently Bombardier Defense, which was acquired by VT Group in 2000.

There are five non-execs, giving the chairman the balance of power. They include Sir David Omand, former Director of GCHQ and U.K. Government Security and Intelligence Coordinator.

Forty percent of shareholders objected to a new share bonus scheme in 2012, but generally Babcock's remuneration policies are uncontroversial.

I analyze management teams from five different angles to help work out a verdict. Here's my assessment:

1. Reputation. Management CVs and track record.

Good, exceptionally qualified execs.

Score 3/5

2. Performance. Success at the company.


Score 5/5

3. Board Composition. Skills, experience, balance

Slightly executive dominated.

Score 4/5

4. Remuneration. Fairness of pay, link to performance.

Generally uncontroversial.

Score 3/5

5. Directors' Holdings, compared to their pay.

CEO 8 million pounds' worth, FD 4 million pounds, Bethel & Thomas 1 million pounds.

Score 5/5

Overall, Babcock scores 20 out of 25, a good result. Babcock's executives are especially well qualified for the markets it serves, while a former CEO of BAE and Director of GCHQ add weight to the board.

I've collated all my FTSE 100 boardroom verdicts on this summary page.

Buffett's favorite FTSE share
Legendary investor Warren Buffett has always looked for impressive management teams when picking stocks. His recent acquisition, Heinz, has long had a reputation for strong management. Indeed Buffett praised its "excellent management" alongside its high-quality products and continuous innovation.

So it's important to tell you about the FTSE 100 company in which the billionaire stock picker has a substantial stake. A special free report from The Motley Fool -- "The One U.K. Share Warren Buffett Loves" -- explains Buffett's purchase and investing logic in full.

Buffett, don't forget, rarely invests outside his native United States, which makes this British blue chip -- and its management -- all the more attractive. So why not download the report today? It's totally free and comes with no further obligation.


Friday, April 18, 2014

Asian stocks higher, U.S. markets closed for Good…

BEIJING (AP) — Asian stocks were mostly higher in trading muted by Good Friday observance.

Markets in Europe, the U.S. and many countries in Asia were closed for the holiday. Oil trading also was suspended.

WEEK AHEAD: Filled with economic reports

Among the markets that traded, Tokyo's Nikkei 225 gained 0.7 percent to 14,516.27 while China's Shanghai Composite Index shed 0.1 percent to 2,097.75 after data earlier this week showed economic growth slowed to its lowest level since 2012.

Seoul's Kospi added 0.6 percent to 2,004.28 and Taiwan's Taiex rose 0.3 percent to 8,966.66. Benchmarks in Malaysia and Thailand were slightly higher.

On Thursday, global stocks were subdued after Google and IBM reported weak results, even though General Electric was optimistic and Goldman Sachs and Morgan Stanley beat expectations.

Top 10 Medical Companies To Buy Right Now

THURSDAY: S&P 500 closes higher for 4th day; Dow drops

TECH FIVE: Google, IBM sink off earnings

On Wall Street, the Standard & Poor's 500 rose two points, or 0.1 percent, to close at 1,864.85. The Dow Jones industrial average, however, fell 16 points, or 0.1 percent, to close at 16,408.54, hurt by the big drop in IBM.

The euro inched down to $1.3820 from $1.3816 late Thursday. The dollar was little changed at 102.42 yen from 102.43 yen.

Thursday, April 17, 2014

3 Stocks Under $10 to Trade for Breakouts

DELAFIELD, Wis. (Stockpickr) -- At Stockpickr, we track daily portfolios of stocks that are the biggest percentage gainers and the biggest percentage losers.

>>5 Stocks Set to Soar on Bullish Earnings

Stocks that are making large moves like these are favorites among short-term traders because they can jump into these names and try to capture some of that massive volatility. Stocks that are making big-percentage moves either up or down are usually in play because their sector is becoming attractive or they have a major fundamental catalyst such as a recent earnings release. Sometimes stocks making big moves have been hit with an analyst upgrade or an analyst downgrade.

Regardless of the reason behind it, when a stock makes a large-percentage move, it is often just the start of a new major trend -- a trend that can lead to huge profits. If you time your trade correctly, combining technical indicators with fundamental trends, discipline and sound money management, you will be well on your way to investment success.

>>5 Rocket Stocks for a Tumbling Market

With that in mind, let's take a closer look at a several stocks under $10 that are making large moves to the upside.

Elbit Imaging

Elbit Imaging (EMITF), together with its subsidiaries, engages in commercial and entertainment centers, hotels, medical industries, residential projects and fashion apparel businesses. This stock closed up 3.1% to 23 cents per share in Tuesday's trading session.

Tuesday's Range: $0.22-$0.23

52-Week Range: $0.16-$2.47

Tuesday's Volume: 658,000

Three-Month Average Volume: 1 million

From a technical perspective, EMITF jumped higher here with lighter-than-average volume. This spike higher on Tuesday is starting to push shares of EMITF within range of triggering a big breakout trade. That trade will hit if EMITF manages to take out some near-term overhead resistance at 24 cents per share with high volume.

Traders should now look for long-biased trades in EMITF as long as it's trending above some key near-term support at 20 cents per share and then once it sustains a move or close above 23 cents per share with volume that hits near or above 1 million shares. If that breakout materializes soon, then EMITF will set up to re-test or possibly take out its next major overhead resistance levels at 28 cents per share to its 50-day moving average of 33 cents per share.

Walter Energy

Walter Energy (WLT) produces and exports metallurgical coal for the steel industry. This stock closed up 4.8% to $8.18 in Tuesday's trading session.

Tuesday's Range: $7.66-$8.25

52-Week Range: $7.07-$21.48

Tuesday's Volume: 8.51 million

Three-Month Average Volume: 6.83 million

From a technical perspective, WLT spiked sharply higher here right above its recent low of $7.20 with strong upside volume. This stock recently formed a double bottom chart pattern at $7.07 to $7.20. Since forming that bottom, shares of WLT have started to spike higher and the stock is now quickly moving within range of triggering a near-term breakout trade. That trade will hit if WLT manages to take out Tuesday's high of $8.25 to some more near-term overhead resistance at $8.65 with high volume.

Traders should now look for long-biased trades in WLT as long as it's trending above those double bottom support levels at $7.20 to $7.07 and then once it sustains a move or close above those breakout levels with volume that hits near or above 6.83 million shares. If that breakout hits soon, then WLT will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $9.33 to $9.40. Any high-volume move above those levels will then give WLT a chance to tag $10 to $11.

Midstates Petroleum

Midstates Petroleum (MPO) is engaged in the exploration, development and production of oil, natural gas liquids and natural gas in the U.S. This stock closed up 6.5% to $5.38 Tuesday's trading session.

Tuesday's Range: $5.07-$5.40

52-Week Range: $4.13-$7.04

Tuesday's Volume: 834,000

Three-Month Average Volume: 776,427

From a technical perspective, MPO ripped higher here right above its 50-day moving average of $4.86 with above-average volume. This move is quickly pushing shares of MPO within range of triggering a near-term breakout trade. That trade will hit if MPO manages to take out its 200-day moving average of $5.44 to more near-term overhead resistance at $5.53 with high volume.

Traders should now look for long-biased trades in MPO as long as it's trending above Tuesday's low of $5.03 or above its 50-day at $4.86 and then once it sustains a move or close above those breakout levels with volume that hits near or above 776,427 shares. If that breakout triggers soon, then MPO will set up to re-test or possibly take out its next major overhead resistance levels at $5.98 to $6.41.

To see more stocks that are making notable moves higher, check out the Stocks Under $10 Moving Higher portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.


>>3 Big Stocks on Traders' Radars

>>5 Stocks to Sell Before It's Too Late

>>Want to Buy Apple? Think Again

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com.

You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

Tuesday, April 15, 2014

Almost All S&P 500 Gains Happen on a Tuesday: StockTwits

5 Best Logistics Stocks To Own Right Now

NEW YORK (TheStreet) --Market strategist Ryan Detrick recently shared a remarkable chart.

It shows how important each Tuesday has been to the stock market so far this year. The S&P 500  is down nearly 1% year-to-date, but it would be down much more if it weren't for what has occurred on each Tuesday.

There have been 15 Tuesdays since 2014 started and the S&P 500 has only closed down on two of them. It currently has an average return of roughly 0.55%. Every other day of the week has an average return that is much worse, and negative. Monday, for example, is the worst at -0.25%. Friday is the next worst at -0.22%.

The simple fact is that, for some reason we do not have an answer to, Tuesday has been the biggest day to buy. It's kept the market even somewhat buoyant since the start of the year. If we removed all of the gains that have occurred on Tuesday, the S&P 500 would be down a huge 8%: As discussed w @srussolillo, $SPX w/o Tuesday -8.3% YTD. Here's the chart. cc: @carlquintanilla http://stks.co/i0V8u - Ryan Detrick (@RyanDetrick) Apr. 15 at 10:39 AM SEE ALSO: Ryan Detrick breaks down every day of the week in this table. You can follow the author of this article on StockTwits and Twitter This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Stock quotes in this article: ^GSPC 

Monday, April 14, 2014

U.S. Gas Prices Expected To Be Slightly Lower This Summer

A combination of increased supply and relatively static demand should reportedly help keep gas prices stable , as the nation enters into the prime, summer driving months.

According to the Department of Energy's forecast, regular gasoline retail prices are expected to average around $3.57 a gallon during the upcoming summer season – or about one cent less than they were last summer.

The price for Brent crude oil – which typically accounts for about two-thirds of the retail price of gasoline – is expected to average $105 per barrel this summer driving season (April through September), which is about $2 below its level last summer," said Monday's entry in a DOE blog.

But those lower crude prices are expected to be "almost fully offset" by higher wholesale margins, compared to last summer.

Related: Consumers Are Less Confident In Automotive Industry, But Is That Affecting Sales?

Gas prices, according to the Department, are expected to peak in May – with an average of $3.66 per gallon – and then decline steadily to around $3.46 in September. And, on average, the highest gas prices this summer will probably be found on the U.S. West Coast – with prices along the Gulf Coast as much as 48 cents per gallon lower.

Gas consumption this summer is expected to be close to last summer's level of nearly nine million barrels per day, despite a 0.7 percent expected rise in highway travel. But improvements in vehicular fuel efficiency, according to the DOE, is taking care of that discrepancy.

Global economics and geopolitics are also in play with this summer's forecast. The ongoing oil and gas boom in the U.S. and Canada are certainly benefiting American consumers. Meanwhile, unrest in parts of the Middle East, including Libya and Sudan, have disrupted some oil production, which The New York Times says has prompted OPEC to increase its overall oil production.

At the same time, as Europe struggles to recover from its debt crisis and the Chinese economy slows down, international oil demand has remained stable.

Of course, the ongoing Ukraine/Russia crisis still remains as this summer's wild card, when it comes to any possible fluctuations in overall gas prices.

Posted-In: gas gas consumption gas prices Gasoline summer driving season tourism travel Ukraine crisisNews Commodities Travel Events Global Economics Markets Personal Finance General Best of Benzinga

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

  Most Popular Earnings Expectations For The Week Of April 14: Coca-Cola, Goldman Sachs, Google And More Weekly Highlights: iPhone 6 Hype, iPad Air 2 Concepts, Twitch Popularity Skyrockets And More Barron's Recap: The Tech Bust GM Confirms Howell, Bingol Leaving Co., John Quattrone Named as Senior VP, Global Human Resources UPDATE: Endurance Specialty Offeres to Buy Aspen Insurance for $47.50/Share in Cash, Stock GrowLife's Commitment and Dedication to the Market: An Open Letter to Shareholders Related Articles () Updated Research Report on Monster Beverage - Analyst Blog Will The Bull Market Survive? - Video Blog Bio-Rad Buys GnuBio - Analyst Blog Updated Research Report on Altera Corp. - Analyst Blog Huntsman to Divest European Assets to Wilmar - Analyst Blog Wal-Mart's Massmart CEO Resigns - Analyst Blog Around the Web, We're Loving...

Saturday, April 12, 2014

Why I Would Buy PPG Industries

PPG Industries Inc. (PPG) is a global supplier of paints, coatings, optical products, specialty materials, glass and fiber glass.

In this article, I'll take a look at this company and try to explain to investors the reasons this is an apparently appealing investment.

Diversified Business

PPG Industries derived nearly a third of its revenues from emerging markets. In 2012, Sales in Latin America, Asia Pacific, Eastern Europe, the Middle East and Africa accounted for 27% of the total. Growth in these fast growing regions minimizes the risks associated with a specific geographical region, lowering the impact of economic headwinds faced by in a particular region or market.

Strategic Acquisitions

In January 2013, PPG has completed the sale of its $2.5 billion commodity chemicals business to Georgia Gulf. The agreement resulted in the formation of a new company that was renamed Axiall Corp. On April 2013, PPG finalized the acquisition of the North American architectural coatings business of Akzo Nobel N.V., Amsterdam, for $1.05 billion. This was the second-largest acquisition in the company's history with expected synergies at around $200 million within the first three years. The deal will extend PPG's architectural coatings business in the United States, Canada and the Caribbean. Product offerings are now available in more than 15,000 outlets across North America. Moreover, PPG Industries has acquired specific assets of privately-held specialty coatings company Deft Incorporated. The acquisition enhances the coatings capabilities of PPG's aerospace business.

Dividend & Share Repurchases

Looking at the financials, the company has a strong balance sheet: good cash that allows the company to hike its dividend payout to $0.61 per share ($2.44 per share annualized), reflecting a dividend yield of 1.28%. Furthermore, last year the company repurchased up to $1 billion of the company's common stock.

Analyst Recommendation

The firm is currently Zacks Rank # 3–Hold, and it also has a longer-term recommendation of "Neutral". A Hold rating indicates that the stock, over the next 1 to 3 months, will perform at an annualized rate of 10.56%, very similar to the S&P 500. For investors looking for a Zacks Rank # 1–Strong Buy, Methanex Corporation (MEOH) could be the option.

Relative Valuation, Earnings and ROE

In terms of valuation, the stock sells at a trailing P/E of 8.8x, trading at a discount compared to the industry mean. Earnings per share (EPS) has increased by 44.71% in the most recent quarter compared to the same quarter a year ago, $1.78 per share for the fourth quarter. In the next graph we include the stock price because EPS often lead the stock price movement. As we can appreciate in the chart, the price performance as well as EPS had an upward trend over the last five years.


Finally, I always like to see one of the most important financial ratios applying to stockholders, the best measure of performance for a firm's management: the return on equity. The ratio has increased from the same quarter one year prior. This is a clear sign of strenght within the company.

Let´s compare the current ratio with the peer group in the next table:


Company Name

ROE (%)


PPG Industries Inc.



Methanex Corporation



Air Liquide SA



Akzo Nobel NV



Cabot Corporation



Celanese Corporation



Huntsman Corporation



Kronos Worldwide, Inc



Olin Corporation


The company has an extremely good ratio of 65.51% which is higher than the ones registered by all others comps.

Final Comment

The company aims to achieve more consistent earnings growth by improving its mix of businesses through expanding its international markets and strategic acquisitions. Additionally, the company has a rich history of raising dividends, 42 years of dividend increase. For these reasons, I feel bullish on PPG Industries.

I would recommend investors to consider adding the stock for their long-term portfolios. Hedge fund gurus have also been active in the company in the fourth quarter of 2013. Gurus like Mario Gabelli (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) have taken long positions on it.

Disclosure: Victor Selva holds no position in any stocks mentioned.

Also check out: Mario Gabelli Undervalued Stocks Mario Gabelli Top Growth Companies Mario Gabelli High Yield stocks, and Stocks that Mario Gabelli keeps buying Paul Tudor Jones Undervalued Stocks Paul Tudor Jones Top Growth Companies Paul Tudor Jones High Yield stocks, and Stocks that Paul Tudor Jones keeps buying
Currently 5.00/512345

Top Oil Service Companies To Own In Right Now

Rating: 5.0/5 (1 vote)

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Friday, April 11, 2014

Double Your Money With These 5 Shareholder Yield Standouts

BALTIMORE (Stockpickr) -- We've all heard the old story of equity market returns: averaged across the long run, the stock market pays out a solid 10% return each year. But that's chump change.

By focusing on just three simple metrics this year, you could nearly double those average gains. Best of all, you could do it at the exact same time that momentum names are losing steam this month.

So what the secret sauce I'm talking about? It's shareholder yield.

Shareholder yield focuses on measuring the three ways that a company can return cash to its shareholders. Yes, that includes obvious moves like dividends -- but it also includes share buybacks and paying down debt.

>>5 Big Trades to Survive a Roller Coaster Market

Translation: shareholder yield is made up of anything that directly returns cash or equity to your portfolio.

Any of those three corporate actions can unlock significant value for shareholders, and the data backs it up. According to research by James O'Shaughnessy, over a 40-year period, large-cap stocks with the highest shareholder yield delivered average gains of 18.05%. That's almost double the returns that investing in the vanilla big index would have earned you.

With low interest rates and record levels of cash sitting on corporate balance sheets, management teams are looking for the most effective ways to return value to shareholders. It's not one size fits all, either -- the best mix varies from company to company. But by looking at the trifecta of dividends, buybacks, and debt extinguishment, you can be sure that you won't miss out on any of the proceeds.

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With that in mind, here's a look at five names that have provided superior shareholder yield in the last year.

Illinois Tool Works

First up on our list of shareholder yield standouts is Illinois Tool Works (ITW), the $35 billion industrial conglomerate. Calling ITW diversified is an understatement – the firm has more than 100 individual business units in 58 countries. And even that's a huge decrease from the firm's former scope. While ITW only pays a perfunctory 2% dividend yield, its payout looks a whole lot more impressive on a shareholder yield basis: the firm has returned 12.24% to investors in the last 12 months.

ITW's products run the gamut from the seat heater in your car, to the plastic beverage rings on a six-pack of sodas, to the commercial oven at your favorite restaurant and everything in between. Those businesses have actually been on the decrease in recent years, as ITW looks to simplify its structure from 800 individual subsidiaries to "just" 100. That change will allow ITW to focus on the businesses where it enjoys the biggest returns.

Historically, one of ITW's biggest advantages has been the fact that its management is decentralized – while restructuring will move more processes to the home office, it won't change the fact that each unit is managed autonomously. Most of ITW's shareholder yield in the last year came from big share buybacks and debt extinguishments. Look for cost savings from the firm's long-term plan to materially boost profitability in the next three years.


Shares of CenturyLink (CTL) have been showing strength in a tough market this year: the $20 billion integrated communications stock has managed to push almost 6% higher since the calendar flipped to January, dramatically outpacing the barely 1% gain in the S&P 500 over the same stretch. And with a 10.6% shareholder yield in the past year, CTL is well positioned to keep driving gains to investors.

CenturyLink is the third-largest local phone company in the U.S., providing landline service to 13 million lines and internet access to another 6 million customers in 37 states. It's a mistake to think of CTL as a firm with a bunch of legacy assets: the firm lays claim to a 240,000 mile fiber optic network and 55 global datacenters, two businesses that should provide considerable growth in the years ahead, especially if CenturyLink can successfully leverage its huge customer rolodex from the fixed-line business.

While shares got cheaper after a recent dividend cut, the reality is the management was moving cash from one form of shareholder yield to another (share buybacks). That fact gave CTL an even more bargain-basement valuation, and it's why the firm has managed to perform in the face of weakening market internals in 2014. To be clear, CTL doesn't own the most outstanding network in the country, but it does own the cheapest one at a time when discount valuations are few and far between in this market.

Phillips 66

The last year has been a good time to be an owner of Phillips 66 (PSX); shares of the $45 billion midstream energy stock have climbed more than 27% since last April. And while the firm's approximately 2% dividend yield is shy of what other midstream companies are paying out, PSX makes up the difference with its complete shareholder yield picture: last year, that payout tipped the scales at 7.69%.

Phillips 66 got its start when ConocoPhillips (COP) split off its downstream assets in an effort to concentrate its juicy exploration and production margins. Even though PSX is thought to be the "boring" side of the business, the firm's performance has been anything but. Phillips 66 is a refiner and gas station chain, and it also owns a lucrative chemical business and more than 62,000 miles of pipeline. The firm has been de-emphasizing its super-low margin refining operations, a strategy that should help to convert a bigger piece of every dollar it generates into profits.

At the moment, PSX looks cheap right now. The firm trades for just 13 times earnings, and it sports a balance sheet with a $10 billion net cash and investment position. That's a bargain stock. Combined with its hefty shareholder yield, PSX could be an important gain-generator for investors in 2014.


Satellite TV carrier DirecTV (DTV) is another shareholder yield standout to watch in 2014. The firm is the biggest satellite TV name in the U.S., with 20 million customers from coast to coast. It's also a huge player in Latin America, through ownership stakes in Sky Brazil, Sky Mexico and PanAmericana that tack another 17 million names onto its customer lists.

DirecTV's U.S. business is a cash cow. In general, the firm's U.S. subscribers are more apt to buy bigger packages, paying around 18% more than the average cable customer. Likewise, the firm's satellite network is instantly scalable to any household in the country without the huge installation costs of similarly high-end options like fiber optic to the home. With Latin America's huge growth rates and the big bucks streaming in from U.S. subscribers, DTV's business provides a very attractive one-two punch.

As the internet becomes more important to households than TV service (or rather, as it becomes a replacement for the latter), DTV's lack of a physical infrastructure could become a detractor for the U.S. market. Luckily, the firm's huge scale gives it the ability to pen important deals with content providers like the NFL, a move that should keep buyers renewing. More important, those risks are already priced into shares today.

That means investors are getting a lot of bang for their buck right now; in the last year, DirecTV has paid out a 7.28% shareholder yield.


Last up is home improvement retailer Lowe's (LOW). Lowe's has been another strong performer in the last year, racking up gains of more than 26% since last April. But add the firm's 6.4% shareholder yield to that number, and the shadow outperformance becomes even more impressive.

Lowe's has some big tailwinds pushing at its back. As the world's second-biggest home improvement retail store chain, Lowe's operates more than 1,800 stores across all of North America. While top rival Home Depot (HD) is larger, many investors have already forgotten just how much better positioned LOW was heading into the real estate crash of 2008. Now, with increasing home prices and consumer spending upticking, LOW is well positioned for the extended recovery as well.

Efforts to court commercial contracting customers and installation sales will directly benefit from increase home improvement spending in 2014, particularly as do-it-yourselfers look for help with larger projects than they can handle alone. LOW's biggest contributors to its hefty shareholder yield payout came from stock buybacks and dividend payouts last year; as long as interest rates remain at record levels, expect those two sources to get the majority of LOW's free cash. Investors should continue to benefit in a big way from that spending in 2014.

To see these names in action, check out the Shareholder Yield Stocks portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.


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Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to

TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

Tuesday's Top Upgrades (and Downgrades)

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, in honor of the season, our headlines are all vacation, all the time, as we check out a pair of price-target hikes for travel websites Travelzoo (NASDAQ: TZOO  ) and priceline.com (NASDAQ: PCLN  ) . But first, let's examine why one analyst thinks...

Carnival Cruise Lines is a shipwreck
Carnival Cruise Lines (NYSE: CCL  ) updated investors on its prospects -- or lack thereof -- yesterday, warning that revenues are likely to slip 2% to 3% in fiscal 2013, with earnings ranging from $1.45 to $1.65 per share. That's down from previous promises of only flat revenues, and earnings as high as $2.10.

The news shook Wall Street pretty badly, with William Blair, UBS, and HSBC pulling their buy ratings on the stock, and downgrading to various flavors of "hold." UBS, in particular, while admitting that it's closing the barn door after the earnings warning has already run down the country road, is quoted by StreetInsider.com today as worrying that "the worst is not behind Carnival just yet. We had maintained BUY after previous incidents with belief that perception issues would start to resolve going forward, but lower guidance tonight means bookings have gotten worse, not better, in the last few weeks."

That's bad news for Carnival -- bad news that investors can ill afford to ignore. Priced at 17.5 times earnings today, the stock may not look unfairly priced based on Carnival's 2.9% dividend yield and 14% projected growth rate. However, now that analysts are saying the growth rate is in question -- and Carnival is confirming it -- there's a real risk that this apparently fairly priced stock will begin to look overvalued once earnings growth projections adjust.

Add in the fact that, with just $770 million in trailing free cash flow showing up on its cash flow statement, Carnival apparently produces only one dollar of real cash profit for every $2 it claims to be "earning" under GAAP, and the stock could deserve even worse ratings than the "hold"s that Wall Street analysts are handing out today.

Tune into the morning Travelzoo
Better news greeted investors in travel deals website Travelzoo this morning. While maintaining a hold rating on the stock, analysts at Ascendiant Capital Markets upped their price target by 23%, to $32 per share -- comfortably higher than the $29 and change the stock costs right now. But is Ascendiant right?

Actually, yes. And in fact, I think the analyst might even still be a bit too conservative here. On one hand, sure, Travelzoo at 23 times earnings looks a bit pricey for the 20% annualized earnings growth it's expected to produce over the next five years. On the other hand(s), though, Travelzoo generates about 50% more free cash flow than it gets to report as net earnings on its income statement, resulting in a price-to-free cash flow ratio of just 15. Factor in the $65 million in cash on Travelzoo's books, and the valuation drops even further -- to an enterprise value-to-free cash flow ratio of only 12.5.

On a 20% grower, that's a bargain price. Result: I think Travelzoo will hit Ascendiant's $32 price target... and keep right on running higher.

A new price target for Priceline
Finally, similarly, but from a different analyst this time, we're seeing shares of Priceline get a price-target bump -- this time courtesy of analysts at Cantor Fitzgerald. According to the analyst, this stock is going to $900 within a year, and since Priceline only costs about $837 today, Cantor thinks you should buy it.

But here's where I break with the Street. While I like Priceline a lot, I don't believe the stock offers investors a compelling bargain at today's prices. Here's why:

Priced at 29 times earnings, and with 20% growth projected, the stock looks expensive on its face. Factor in all the caveats and quibbles we used to prove Travelzoo is actually a bargain, though, and... Priceline still looks expensive. Value it on free cash flow, and the P/FCF ratio drops to 25. Give it credit for its cash reserves, and the valuation drops again -- to an EV/FCF of 22.

Both of those numbers, unfortunately, are still higher than the 20% growth estimates for Priceline. Meaning: If the company exceeds estimates for its performance by a significant margin, it could indeed be worth buying -- but only if it exceeds these estimates, and only if the difference between promise and performance is significant. Merely living up to expectations won't cut it, and any failure to grow as expected could bring a world of hurt to Priceline shareholders.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends priceline.com. The Motley Fool owns shares of priceline.com.

Thursday, April 10, 2014

Top 5 Medical Companies To Watch For 2015

With shares of Johnson & Johnson (NYSE:JNJ) trading around $85, is JNJ an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let�� analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Johnson & Johnson�engages in the research and development, manufacture, and sale of various products in the health care field worldwide.�The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. The company�offers a range of products used in the general care, women�s health fields, as well as nutritional and anti-infective, contraceptive, gastrointestinal, oncology, pain management, and vaccines. It also�offers products to treat cardiovascular disease, orthopaedic and neurological products, blood glucose monitoring and insulin delivery products, and general surgery products. Through its wide variety of healthcare products, Johnson & Johnson is able to support consumers and medical businesses around the world who continue to demand for improved products. As consumers become increasingly health aware, Johnson & Johnson stands to see profits well into the future.

Top 5 Medical Companies To Watch For 2015: Epizyme Inc (EPZM)

Epizyme, Inc., incorporated on November 1, 2007, is a clinical stage biopharmaceutical company that discovers, develops and plans to commercialize personalized therapeutics for patients with genetically defined cancers. The Company systematically identify the genetic alterations that create cancer causing genes, called oncogenes, select patients in whom the identified genetic alteration is found and then design small molecule therapeutics to inhibit the oncogene. The clinical development plan for each of its product candidates is directed towards patients with a particular genetically defined cancer.The Company is conducting a Phase I clinical trial of its advanced product candidate, EPZ-5676, an inhibitor targeting the DOT1L HMT, for the treatment of mixed lineage leukemia (MLL-r). The Company has identified its two lead product candidates using its product platform.

EPZ-5676-DOT1L Inhibitor

EPZ-5676 is an intravenously administered small molecule inhibitor of DOT1L. The Company is developing EPZ-5676 for the treatment of MLL-r, an aggressive subtype of the two most common forms of acute leukemia, ALL and AML. Patients with MLL-r are routinely diagnosed with existing technologies that are commonly used in clinical setting. The Company�� Phase 1 clinical trial of EPZ-5676 is an open label, multicenter trial that has two phases.

EPZ-6438-EZH2 Inhibitor

The Company is developing EPZ-6438 as an orally available small molecule inhibitor of EZH2 for the treatment of non-Hodgkin lymphoma patients who have an oncogenic point mutation in EZH2. EZH2 is an HMT that can become oncogenic and cause non-Hodgkin lymphoma and a range of other solid tumors. Two types of non-Hodgkin lymphoma, diffuse large B-cell lymphoma of germinal-center origin, or DLBCL, and follicular lymphoma, or FL, are particularly associated with an EZH2 point mutation. There are no therapies approved specifically for the treatment of cancer associated with an EZH2 point mutation.

Advisors' Opinion:
  • [By Dan Caplinger]

    Outside the Dow, there were a few winners. Guess? (NYSE: GES  ) climbed 8% after a better-than-expected earnings performance, despite the fact that profits fell from year-ago levels. The retailer repeated what we've heard from its peers about bad weather conditions having a negative impact on the company, and its European operations also struggled. Meanwhile, biotech IPO Epizyme (NASDAQ: EPZM  ) soared more than 50% after coming public at $15 this morning. The company has a promising technology in treating cancer caused by carcinogenic genes, and it has collaborations with several major drug companies that should help it push some of its potential treatments through the pipeline.

  • [By Lisa Levin]

    Epizyme (NASDAQ: EPZM) shares rose 66.84% to $34.20. The volume of Epizyme shares traded was 1683% higher than normal. Epizyme reported two major milestone achievements. It announced the achievement of a proof of concept milestone in the EPZ-5676 DOT1L inhibitor clinical program.

  • [By John Udovich]

    It�� a new year and the first one and a half trading weeks of 2014 has not disappointed biotech investors as the sector and mid cap or small cap biotech or�pharma stocks like Intercept Pharmaceuticals Inc (NASDAQ: ICPT), Epizyme Inc (NASDAQ: EPZM), Tonix Pharmaceuticals Holding Corp (NASDAQ: TNXP) and TNI BioTech Inc (OTCQB: TNIB) either surging or producing some news plus there have been IPO filings for future listings for�Flexion Therapeutics (NASDAQ: FLXN), Aldexa Therapeutics (NASDAQ: ALDX), Retrophin (NASDAQ:�RTRX) and Dicerna Pharmaceuticals (NASDAQ: DRNA). Consider the following news so far this year:

  • [By Jake L'Ecuyer]

    Epizyme (NASDAQ: EPZM) shot up 54.63 percent to $31.70 after the company reported two major milestone achievements. It announced the achievement of a proof of concept milestone in the EPZ-5676 DOT1L inhibitor clinical program.

Top 5 Medical Companies To Watch For 2015: MedeFile International Inc (MDFI)

Medefile International, Inc.(Medefile), incorporated on July 16, 1997, through its MedeFile, Inc. subsidiary, has developed a patient-centric, Internet-enabled Personal Health Record (iPHR) system for gathering, digitizing, maintaining, accessing and sharing an individual's actual medical records. MedeFile's products and services are designed to provide healthcare providers with the ability to reference their patient's actual past medical records.

MedeFile iPHR

MedeFile is a Business-to-Business and a Business-to-Consumer subscription service. MedeFile is designed to create a cradle to grave longitudinal record for each of its members by retrieving and consolidating copies of their medical records. When the records are received, the MedeFile system consolidates them into a single medically correct format. The records are then stored in Medefile's MedeVault, a secure repository that can be accessed by MedeFile members 24 hours a day, 7 days a week.

MedeFile's Emergency Medical Information (EMI) Card

Upon becoming a MedeFile member, each individual will receive a Membership / Emergency Medical Information (EMI) Card. It contains instructions on how to contact MedeFile in order to retrieve the member's medical records.

The Digital Health Profile (DHP)

A part of a member's MedeFile is their Digital Health Profile (DHP). This form is completed by the patient in order to provide a summary of the patient's healthcare history which assists healthcare providers in understanding the patient's course of medical treatment.


The MedeDrive is an external universal serial bus (USB) drive, which stores all of a patient's Emergency Medical Information and their MedeFile which can be viewed on a personal computer. MedeDrive self loads its own viewer, so no special program or software is required.


The MedeVault is designed to serve as an electronic data and document repo! sitory that incorporates state-of-the-art security features in order to prevent unauthorized access to a patient's records. Access to the MedeVault is provided through an encrypted connection to a Web service run by MedeFile. This connection is provided by Secure Sockets Layer (SSL) technology.


MedeMinder is MedeFile's reminder service. The member tells the Company when and where to call, and the Company automatically contacts the member day or night with an appropriate reminder, spoken by real people.


During the year ended December 31, 2011, the Company introduced MedePro. MedePro is a medical record retrieval and document management solution created specifically by MedeFile for legal and insurance professionals.


SecurMed is designed to serve as an authentication process. SecurMed protects against any information being viewed by unauthorized persons.

The Company competes with GE Healthcare, Bio-Imaging Technologies, and Cyber Records.

Advisors' Opinion:
  • [By Peter Graham]

    Small cap healthcare and lifestyle stocks Axxess Pharma Inc (OTCMKTS: AXXE), Medefile International Inc (OTCMKTS: MDFI) and Intelligent Living Inc (OTCMKTS: ILIV) have all been getting some extra attention lately thanks in part to a few disclosed paid promotions or investor relations type of activities. But just how healthy are these small cap stocks for investors and traders alike? Here is a quick reality check:

Top 5 Regional Bank Stocks To Watch Right Now: CEL-SCI Corp (CVM)

CEL-SCI Corporation (CEL-SCI), incorporated on March 22, 1983, is engaged in the business of Multikine cancer therapy; New cold fill manufacturing service to the pharmaceutical industry, and ligand epitope antigen presentation System (LEAPS) technology, with two products, hemagglutinin type 1 and neuraminidase type 1 (H1N1) swine flu treatment for H1N1 hospitalized patients and CEL-2000, a rheumatoid arthritis treatment vaccine.


CEL-SCI's Multikine, is being developed for the treatment of cancer. It is a cancer immunotherapy drugs called Combination Immunotherapy because it combines active and passive immunity in one product. It is the only cancer immunotherapy that both kills cancer cells and activates the general immune system to destroy the cancer. Multikine target the tumor micro-metastases for treatment failure. Multikine is also applicable in many other solid tumors.

New Manufacturing Facility

CEL-SCI's facility manufactures Multikine for CEL-SCI's Phase III clinical trial. CEL-SCI offers the use of the facility as a service to pharmaceutical companies and others, particularly those that need to fill and finish their drugs in a cold environment. Fill and finish is the process of filling injectable drugs in a sterile manner.


CEL-SCI's patented T-cell Modulation Process uses heteroconjugates to direct the body to choose a specific immune response. The heteroconjugate technology, referred to as LEAPS, is intended to stimulate the human immune system to fight bacterial, viral and parasitic infections, as well as autoimmune, allergies, transplantation rejection and cancer. Administered like vaccines, LEAPS combines T-cell binding ligands with small, disease associated and peptide antigens.

Using the LEAPS technology, CEL-SCI has created a peptide treatment for H1N1 (swine flu) hospitalized patients. This LEAPS flu treatment is designed to focus on the conserved, non-changing epitopes of the di! fferent strains of Type A Influenza viruses, including swine, avian or bird, and Spanish Influenza. CEL-SCI's LEAPS flu treatment contains epitopes.

Advisors' Opinion:
  • [By Bryan Murphy]

    It may not have blazed a trail into the young, immunology segment of the biotech industry the way Dendreon Corporation (NASDAQ:DNDN) did back in 2010 with the debut of Provenge. It may not have the same immunology pipeline (and company size) that ImmunoGen, Inc. (NASDAQ:IMGN) boasts. One thing is pretty certain about cancer-immunotherapy developer CEL-SCI Corporation (NYSEMKT:CVM) right now, however - its stock may be poised to dole out a much bigger foreseeable-future reward than DNDN or IMGN are.

  • [By Bryan Murphy]

    Names like Amgen, Inc. (NASDAQ:AMGN) and CEL-SCI Corporation (NYSEMKT:CVM) may have pioneered and even mainstreamed the idea of cancer immunology, but the nature of the branch of biotechnology means any company could send CEL-SCI or Amgen back-pedaling. See, it's not about size or deep pockets in the world of biotech anymore. It's about know-how and an idea, which can just as easily be discovered and developed by a small company as they can be a large company. That's why AMGN and CVM at least need to keep a close eye on budding immunology competitor TNI Biotech Inc. (OTCMKTS:TNIB).

Top 5 Medical Companies To Watch For 2015: DiaMedica Inc (DMA)

DiaMedica Inc. (DiaMedica) is a development-stage company. The Company is a biopharmaceutical company engaged in the discovery and development of drugs for the treatment of diabetes and related diseases. DiaMedica's compound, DM-199, is a recombinant human protein for the treatment of both Type I and Type II diabetes and their complications. DiaMedica is starting a Phase I/II clinical trial for DM-199. DM-199 is a recombinant human protein, which improves glucose control, protects beta cells through the expansion of a population of antigen-specific immunosuppressive cells (Tregs), and proliferates insulin producing beta cells through the activation of certain growth factors. The Company�� DM-204 is a G-protein-coupled receptor agonist (GPCR) monoclonal antibody to treat Type II diabetes and some of the associated complication's. activating a receptor resulted in insulin sensitivity, insulin secretion and vasodilation. Advisors' Opinion:
  • [By Richard Rhodes]

    Given this economic backdrop, and developing pressure on corporate revenues, margins, and earnings, we feel that risk is being misplaced at current levels.

    The 14-day and 40-day models are now overbought. Now, the 14-day and 40-day are peaking, which would certainly indicate a correction stands as the highest probability.

    The % of stocks above their 10-day moving average (dma) is at the 70%-level; still a major divergence with prices.

    The % of stocks above their 200-dma stands at 77%. The 87% level marked previous highs. The 50-dma/150-dma cross breakdown now confirms a larger correction. Bottoms form between 30%-40%.

    Overall, the risk-reward remains skewed to the downside, regardless of whether prices remain above trendline resistance, as our model group suggests a correction to the 110-day moving average, currently at S&P 1711.

    A clear breakdown at that level would accelerate the decline towards the wide 200-dma and 380-dma range, between 1657-1571.

Top 5 Medical Companies To Watch For 2015: Redhill Biopharma Ltd (RDHL)

Redhill Biopharma Ltd. is an Israel-based biopharmaceutical company. The Company is focused on the development and acquisition of therapeutic candidates. The Company�� pipeline consists of six late clinical development therapeutic candidates, two of which have completed bioequivalence clinical trials subject to review and approval by the United States Food and Drug Administration and, in some cases, regulatory authorities in other countries. The Company�� six clinical stage therapeutic candidates include RHB-101, RHB-102, RHB-103, RHB-104, RHB-105 and RHB-106.


RHB-101 is a treatment of hypertension, heart failure and left ventricular dysfunction (following myocardial infraction) by means of controlled release of an active ingredient known as carvedilol, which is designed to be administered to patients on a once-daily basis. RHB-101 is based on a patented technology for the controlled release of drugs administered orally.


RHB-102 is a once-daily controlled release oral formulation of ondansetron. RHB-102 utilizes a technology called CDT that uses salts to provide a controlled release of ondansetron.


RHB-103 is an oral thin film formulation of rizatriptan intended for the treatment of acute migraine headaches. Migraine is a neurovascular disorder (related to nerves and blood vessels) characterized by recurrent headaches in one side or both sides of the head.

The product is based on a technology called VersaFilm.


RHB-104 is an antibiotic combination therapy for the treatment of Crohn's disease (with a PIII clinical study underway), as well as Multiple Sclerosis (with an ongoing PIIa clinical study) and Rheumatoid Arthritis. RHB-104 is a combination of clarithromycin, clofazimine and rifabutin, three generic antibiotic ingredients, in a single capsule.


RHB-105, an antibiotics and proton pump inhibitor drug targeting Helico! bacter Pylori infection. RHB-105 is a combination of three approved drug products omeprazole, which is a proton pump inhibitor (the natural body pump that produces the gastric acids used for digesting the food in the stomach), and amoxicillin and rifabutin which are antibiotics. Chronic infection with Helicobacter pylori irritates the mucosal lining of the stomach and small intestine.


RHB-106, is a tablet for the preparation and cleansing of the gastrointestinal tract prior to the performance of abdominal procedures. Its abdominal procedures include diagnostic tests, such as colonoscopy, barium enema or virtual colonoscopy, as well as surgical interventions, such as laparotomy.

The company competes with GlaxoSmithKline, Sanofi-Aventis Groupe, Hoffman-La Roche Ltd, Merck and Co., Inc, Ferring Pharmaceuticals and Salix Pharmaceuticals Inc.

Advisors' Opinion:
  • [By Monica Gerson]

    Breaking news

    Vitran Corporation (NASDAQ: VTNC) announced today that it has entered into a definitive arrangement agreement with TransForce pursuant to which TransForce has agreed to acquire all of the outstanding common shares of Vitran not already owned by TransForce for US$6.50 in cash per share, in accordance with TransForce's prior proposal. To read the full news, click here. ReneSola (NYSE: SOL) today announced it signed a Memorandum of Intent (MOI) to sell three utility-scale projects in Western China, with a total capacity of 60MW, to Jiangsu Akcome Solar Science & Technology Co on December 30, 2013. To read the full news, click here. Cooper Tire & Rubber Company (NYSE: CTB) today announced it has terminated the merger agreement with Apollo Tyres (NSE:ApolloTYRE). To read the full news, click here. RedHill Biopharma (NASDAQ: RDHL) today announced that it has entered into a definitive agreement with leading healthcare investor OrbiMed Israel Partners Limited Partnership, an affiliate of OrbiMed Advisors LLC, for the sale of RedHill's American Depository Shares and warrants in a private placement transactionor a total sum of $6.0 million. To read the full news, click here.

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