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 INVESTING COMMENTARY
Advance Auto Parts, Inc.: Warming Up or Cooling Off?By Motley Fool StaffNovember 20, 2009 Together, we are all trying to build our fortune by finding well-run companies at bargain-basement prices. But it takes work -- scouring company earnings reports, scrutinizing key data, and assessing the competition. Because of that, we've created a screen based on the massive data aggregated from the more than 140,000 investors competing on our Motley Fool CAPSplatform. Each quarter, we check in on select companies after they file a 10-Q and track community sentiment -- so you can see how your company is doing. Here's the community sentiment on Advance Auto Parts, Inc. (NYSE: AAP) both this quarter and last (for comparison), as well as opinions on some related companies. Metric Advance Auto Parts, Inc. (NYSE: AAP) Genesco, Inc. (NYSE: GCO) New York & Company, Inc. (NYSE: NWY) Midas, Inc. (NYSE: MDS) This Quarter (11/19/2009): Price: $40.12 $28.26 $4.45 $7.45 % of Members Rating Outperform 87% 83% 88% 75% % of All-Star Members Rating Outperform 85% 81% 82% 85% CAPS Rating (out of 5) Last Quarter (8/21/2009): Price: $43.12 $20.40 $4.54 $9.59 % of Members Rating Outperform 86% 86% 88% 74% % of All-Star Members Rating Outperform 83% 88% 89% 80% CAPS Rating (out of 5)Source: Motley Fool CAPS. Dates given are the posting dates of Advance Auto Parts, Inc.'s most recent quarterly and/or annual reports to the SEC's website. Percentages are calculated from the number of members rating each company. A change in the community's approval (signified by four- and five-star ratings) or disapproval (one- and two-star ratings) could indicate that further research is in order. To help make your research easier … CAPS service-- a one-stop research shop -- and read what your fellow investors are saying about your stocks.This article was originally published as Advance Auto Parts, Inc.: Warming Up or Cooling Off?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. AK Steel Holding Corp: Warming Up or Cooling Off?By Motley Fool StaffNovember 20, 2009 Together, we are all trying to build our fortune by finding well-run companies at bargain-basement prices. But it takes work -- scouring company earnings reports, scrutinizing key data, and assessing the competition. Because of that, we've created a screen based on the massive data aggregated from the more than 140,000 investors competing on our Motley Fool CAPSplatform. Each quarter, we check in on select companies after they file a 10-Q and track community sentiment -- so you can see how your company is doing. Here's the community sentiment on AK Steel Holding Corp (NYSE: AKS) both this quarter and last (for comparison), as well as opinions on some related companies. Metric AK Steel Holding Corp (NYSE: AKS) Ternium S.A. (ADR) (NYSE: TX) Pan American Silver Corp. (USA) (Nasdaq: PAAS) Brush Engineered Material (NYSE: BW) This Quarter (11/19/2009): Price: $18.33 $31.49 $25.16 $17.92 % of Members Rating Outperform 91% 96% 95% 94% % of All-Star Members Rating Outperform 91% 98% 97% 96% CAPS Rating (out of 5) Last Quarter (8/21/2009): Price: $20.81 $25.01 $19.52 $23.33 % of Members Rating Outperform 91% 96% 96% 94% % of All-Star Members Rating Outperform 94% 99% 96% 96% CAPS Rating (out of 5)Source: Motley Fool CAPS. Dates given are the posting dates of AK Steel Holding Corp's most recent quarterly and/or annual reports to the SEC's website. Percentages are calculated from the number of members rating each company. A change in the community's approval (signified by four- and five-star ratings) or disapproval (one- and two-star ratings) could indicate that further research is in order. To help make your research easier … CAPS service-- a one-stop research shop -- and read what your fellow investors are saying about your stocks.This article was originally published as AK Steel Holding Corp: Warming Up or Cooling Off?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. BreitBurn Energy Partners L.P.: Warming Up or Cooling Off?By Motley Fool StaffNovember 20, 2009 Together, we are all trying to build our fortune by finding well-run companies at bargain-basement prices. But it takes work -- scouring company earnings reports, scrutinizing key data, and assessing the competition. Because of that, we've created a screen based on the massive data aggregated from the more than 140,000 investors competing on our Motley Fool CAPSplatform. Each quarter, we check in on select companies after they file a 10-Q and track community sentiment -- so you can see how your company is doing. Here's the community sentiment on BreitBurn Energy Partners L.P. (Nasdaq: BBEP) both this quarter and last (for comparison), as well as opinions on some related companies. Metric BreitBurn Energy Partners L.P. (Nasdaq: BBEP) Penn West Energy Trust (USA) (NYSE: PWE) Clean Energy Fuels Corp. (Nasdaq: CLNE) International Coal Group, Inc. (NYSE: ICO) This Quarter (11/19/2009): Price: $11.34 $17.87 $12.15 $4.42 % of Members Rating Outperform 97% 98% 97% 96% % of All-Star Members Rating Outperform 96% 99% 97% 96% CAPS Rating (out of 5) Last Quarter (8/21/2009): Price: $8.61 $12.90 $10.62 $3.47 % of Members Rating Outperform 97% 98% 97% 97% % of All-Star Members Rating Outperform 97% 99% 97% 97% CAPS Rating (out of 5)Source: Motley Fool CAPS. Dates given are the posting dates of BreitBurn Energy Partners L.P.'s most recent quarterly and/or annual reports to the SEC's website. Percentages are calculated from the number of members rating each company. A change in the community's approval (signified by four- and five-star ratings) or disapproval (one- and two-star ratings) could indicate that further research is in order. To help make your research easier … CAPS service-- a one-stop research shop -- and read what your fellow investors are saying about your stocks.This article was originally published as BreitBurn Energy Partners L.P.: Warming Up or Cooling Off?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Cyberonics, Inc.: Warming Up or Cooling Off?By Motley Fool StaffNovember 20, 2009 Together, we are all trying to build our fortune by finding well-run companies at bargain-basement prices. But it takes work -- scouring company earnings reports, scrutinizing key data, and assessing the competition. Because of that, we've created a screen based on the massive data aggregated from the more than 140,000 investors competing on our Motley Fool CAPSplatform. Each quarter, we check in on select companies after they file a 10-Q and track community sentiment -- so you can see how your company is doing. Here's the community sentiment on Cyberonics, Inc. (Nasdaq: CYBX) both this quarter and last (for comparison), as well as opinions on some related companies. Metric Cyberonics, Inc. (Nasdaq: CYBX) Immucor, Inc. (Nasdaq: BLUD) Stereotaxis, Inc. (Nasdaq: STXS) Vascular Solutions, Inc. (Nasdaq: VASC) This Quarter (11/19/2009): Price: $16.45 $18.80 $3.92 $7.99 % of Members Rating Outperform 71% 97% 87% 85% % of All-Star Members Rating Outperform 45% 98% 83% 75% CAPS Rating (out of 5) Last Quarter (8/21/2009): Price: $16.02 $18.46 $3.63 $8.38 % of Members Rating Outperform 69% 96% 86% 83% % of All-Star Members Rating Outperform 49% 98% 82% 85% CAPS Rating (out of 5)Source: Motley Fool CAPS. Dates given are the posting dates of Cyberonics, Inc.'s most recent quarterly and/or annual reports to the SEC's website. Percentages are calculated from the number of members rating each company. A change in the community's approval (signified by four- and five-star ratings) or disapproval (one- and two-star ratings) could indicate that further research is in order. To help make your research easier … CAPS service-- a one-stop research shop -- and read what your fellow investors are saying about your stocks.This article was originally published as Cyberonics, Inc.: Warming Up or Cooling Off?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. First Defiance Financial: Warming Up or Cooling Off?By Motley Fool StaffNovember 20, 2009 Together, we are all trying to build our fortune by finding well-run companies at bargain-basement prices. But it takes work -- scouring company earnings reports, scrutinizing key data, and assessing the competition. Because of that, we've created a screen based on the massive data aggregated from the more than 140,000 investors competing on our Motley Fool CAPSplatform. Each quarter, we check in on select companies after they file a 10-Q and track community sentiment -- so you can see how your company is doing. Here's the community sentiment on First Defiance Financial (Nasdaq: FDEF) both this quarter and last (for comparison), as well as opinions on some related companies. Metric First Defiance Financial (Nasdaq: FDEF) OceanFirst Financial Corp., Inc. (Nasdaq: OCFC) Abington Bancorp, Inc. (Nasdaq: ABBC) Washington Federal, Inc. (Nasdaq: WFSL) This Quarter (11/19/2009): Price: $12.32 $10.46 $6.86 $19.17 % of Members Rating Outperform 73% 63% 61% 54% % of All-Star Members Rating Outperform 54% 35% 10% 52% CAPS Rating (out of 5) Last Quarter (8/21/2009): Price: $17.73 $13.47 $8.37 $14.87 % of Members Rating Outperform 62% 56% 51% 56% % of All-Star Members Rating Outperform 43% 44% 23% 61% CAPS Rating (out of 5)Source: Motley Fool CAPS. Dates given are the posting dates of First Defiance Financial's most recent quarterly and/or annual reports to the SEC's website. Percentages are calculated from the number of members rating each company. A change in the community's approval (signified by four- and five-star ratings) or disapproval (one- and two-star ratings) could indicate that further research is in order. To help make your research easier …  CAPS service-- a one-stop research shop -- and read what your fellow investors are saying about your stocks.This article was originally published as First Defiance Financial: Warming Up or Cooling Off?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Flowers Foods, Inc.: Warming Up or Cooling Off?By Motley Fool StaffNovember 20, 2009 Together, we are all trying to build our fortune by finding well-run companies at bargain-basement prices. But it takes work -- scouring company earnings reports, scrutinizing key data, and assessing the competition. Because of that, we've created a screen based on the massive data aggregated from the more than 140,000 investors competing on our Motley Fool CAPSplatform. Each quarter, we check in on select companies after they file a 10-Q and track community sentiment -- so you can see how your company is doing. Here's the community sentiment on Flowers Foods, Inc. (NYSE: FLO) both this quarter and last (for comparison), as well as opinions on some related companies. Metric Flowers Foods, Inc. (NYSE: FLO) Kraft Foods, Inc. (NYSE: KFT) Lancaster Colony Corp. (Nasdaq: LANC) Lance, Inc. (Nasdaq: LNCE) This Quarter (11/19/2009): Price: $23.02 $26.97 $48.69 $24.07 % of Members Rating Outperform 97% 94% 88% 79% % of All-Star Members Rating Outperform 97% 94% 75% 70% CAPS Rating (out of 5) Last Quarter (8/21/2009): Price: $23.40 $28.50 $51.25 $24.73 % of Members Rating Outperform 97% 94% 83% 78% % of All-Star Members Rating Outperform 96% 96% 81% 83% CAPS Rating (out of 5)Source: Motley Fool CAPS. Dates given are the posting dates of Flowers Foods, Inc.'s most recent quarterly and/or annual reports to the SEC's website. Percentages are calculated from the number of members rating each company. A change in the community's approval (signified by four- and five-star ratings) or disapproval (one- and two-star ratings) could indicate that further research is in order. To help make your research easier … CAPS service-- a one-stop research shop -- and read what your fellow investors are saying about your stocks.This article was originally published as Flowers Foods, Inc.: Warming Up or Cooling Off?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Hot Topic, Inc.: Warming Up or Cooling Off?By Motley Fool StaffNovember 20, 2009 Together, we are all trying to build our fortune by finding well-run companies at bargain-basement prices. But it takes work -- scouring company earnings reports, scrutinizing key data, and assessing the competition. Because of that, we've created a screen based on the massive data aggregated from the more than 140,000 investors competing on our Motley Fool CAPSplatform. Each quarter, we check in on select companies after they file a 10-Q and track community sentiment -- so you can see how your company is doing. Here's the community sentiment on Hot Topic, Inc. (Nasdaq: HOTT) both this quarter and last (for comparison), as well as opinions on some related companies. Metric Hot Topic, Inc. (Nasdaq: HOTT) Stage Stores, Inc. (NYSE: SSI) Aeropostale, Inc. (NYSE: ARO) Tractor Supply Company (Nasdaq: TSCO) This Quarter (11/19/2009): Price: $5.80 $11.96 $31.86 $47.48 % of Members Rating Outperform 44% 56% 86% 88% % of All-Star Members Rating Outperform 31% 39% 81% 89% CAPS Rating (out of 5) Last Quarter (8/21/2009): Price: $7.44 $13.82 $39.55 $47.08 % of Members Rating Outperform 38% 55% 85% 89% % of All-Star Members Rating Outperform 27% 62% 84% 90% CAPS Rating (out of 5)Source: Motley Fool CAPS. Dates given are the posting dates of Hot Topic, Inc.'s most recent quarterly and/or annual reports to the SEC's website. Percentages are calculated from the number of members rating each company. A change in the community's approval (signified by four- and five-star ratings) or disapproval (one- and two-star ratings) could indicate that further research is in order. To help make your research easier … CAPS service-- a one-stop research shop -- and read what your fellow investors are saying about your stocks.This article was originally published as Hot Topic, Inc.: Warming Up or Cooling Off?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. NVIDIA Corp: Warming Up or Cooling Off?By Motley Fool StaffNovember 20, 2009 Together, we are all trying to build our fortune by finding well-run companies at bargain-basement prices. But it takes work -- scouring company earnings reports, scrutinizing key data, and assessing the competition. Because of that, we've created a screen based on the massive data aggregated from the more than 140,000 investors competing on our Motley Fool CAPSplatform. Each quarter, we check in on select companies after they file a 10-Q and track community sentiment -- so you can see how your company is doing. Here's the community sentiment on NVIDIA Corp (Nasdaq: NVDA) both this quarter and last (for comparison), as well as opinions on some related companies. Metric NVIDIA Corp (Nasdaq: NVDA) Teradyne, Inc. (NYSE: TER) Atmel Corp (Nasdaq: ATML) Intellon (Nasdaq: ITLN) This Quarter (11/19/2009): Price: $12.98 $8.85 $4.01 $7.30 % of Members Rating Outperform 96% 88% 87% 89% % of All-Star Members Rating Outperform 97% 92% 95% 81% CAPS Rating (out of 5) Last Quarter (8/21/2009): Price: $13.93 $8.18 $4.05 $4.96 % of Members Rating Outperform 96% 88% 86% 94% % of All-Star Members Rating Outperform 97% 98% 92% 100% CAPS Rating (out of 5)Source: Motley Fool CAPS. Dates given are the posting dates of NVIDIA Corp's most recent quarterly and/or annual reports to the SEC's website. Percentages are calculated from the number of members rating each company. A change in the community's approval (signified by four- and five-star ratings) or disapproval (one- and two-star ratings) could indicate that further research is in order. To help make your research easier … CAPS service-- a one-stop research shop -- and read what your fellow investors are saying about your stocks.This article was originally published as NVIDIA Corp: Warming Up or Cooling Off?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Transcend Services, Inc.: Warming Up or Cooling Off?By Motley Fool StaffNovember 20, 2009 Together, we are all trying to build our fortune by finding well-run companies at bargain-basement prices. But it takes work -- scouring company earnings reports, scrutinizing key data, and assessing the competition. Because of that, we've created a screen based on the massive data aggregated from the more than 140,000 investors competing on our Motley Fool CAPSplatform. Each quarter, we check in on select companies after they file a 10-Q and track community sentiment -- so you can see how your company is doing. Here's the community sentiment on Transcend Services, Inc. (Nasdaq: TRCR) both this quarter and last (for comparison), as well as opinions on some related companies. Metric Transcend Services, Inc. (Nasdaq: TRCR) SXC Health Solutions Corp. (USA) (Nasdaq: SXCI) Merge Healthcare (Nasdaq: MRGE) Computer Programs & Systems, Inc. (Nasdaq: CPSI) This Quarter (11/19/2009): Price: $19.16 $49.60 $3.14 $44.60 % of Members Rating Outperform 93% 93% 77% 92% % of All-Star Members Rating Outperform 84% 92% 67% 94% CAPS Rating (out of 5) Last Quarter (8/21/2009): Price: $17.57 $42.77 $3.77 $38.95 % of Members Rating Outperform 92% 95% 81% 92% % of All-Star Members Rating Outperform 88% 96% 81% 93% CAPS Rating (out of 5)Source: Motley Fool CAPS. Dates given are the posting dates of Transcend Services, Inc.'s most recent quarterly and/or annual reports to the SEC's website. Percentages are calculated from the number of members rating each company. A change in the community's approval (signified by four- and five-star ratings) or disapproval (one- and two-star ratings) could indicate that further research is in order. To help make your research easier … CAPS service-- a one-stop research shop -- and read what your fellow investors are saying about your stocks.This article was originally published as Transcend Services, Inc.: Warming Up or Cooling Off?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Do Blue-Chip Penny Stocks Exist?By Anand ChokkaveluNovember 20, 2009 Penny-stock loversare having a big laugh at the expense of blue-chip investors. A list of blue-chip stocks selling at penny-stock prices reads like a Who's Whoof government bailouts: Citigroup , AIG (before a 1-to-20 reverse split), Fannie Mae , and Freddie Mac . And I'm excluding the outright bankruptcies. It feels like a betrayal. Blue-chip stocks are supposed to be big and safe ... downright boring, even. Investors in blue chips expect steady growth and solid, inflation-beating returns. They don'texpect shares to become virtually worthless. Those are the risks that penny-stock buyers (hopefully) knowingly take. Penny stocks are the ones that promise binary outcomes: wild upsides or bust. Now we have a parade of blue chips that are no longer investments but speculations on dubious business models. Is Citigroup's loan portfolio really that bad? What will Fannie Mae look like in five years? Is it possible to extricate AIG's core insurance business from its credit-default-swap nightmare? Who the heck knows? Investments are calculated risks based on the study of a business. When you can't even pretend to quantify those risks, you have speculation -- precisely what you have in these fallen blue chips and in many penny stocks. Fortunately, we can combine the better qualities of classic blue chips and penny stocks to find some seriously intriguing investments -- we'll call them blue-chip penny stocks. Let's build one from the ground up.
Size matters
I set a floor of $200 million because microcap stocks aren't usually established enough to satisfy the "blue-chip" part of blue-chip penny stocks.
Beware the bogus
There are some legitimate companies that trade over the counter ( Nintendo comes to mind), but fishing the OTC waters is not the best way to find the future 10-baggersI've written about in the past. It's much more likely that these will become troubled stocks to sell.
Strength and performance
One additional caveat: Every company can promise a rosy future. For instance, analysts are already expecting 10% to 20% annual growth for the next five years out of Wells Fargo (NYSE: WFC), Goldman Sachs (NYSE: GS), and JPMorgan Chase (NYSE: JPM). It's up to us to figure out whether the rosy promises will wither over time.
They do exist!
Using these criteria increases the chances that our small-cap investments will grow to become the next great blue chips. The analysts at our Motley Fool Hidden Gems newsletter service are putting the Fool's money where its mouth is. They are constructing a real-money portfolio by buying these blue-chip penny stocks -- although our team simply calls them "promising small-cap stocks." These three companies fit the above criteria and are current portfolio candidates: Under Armour Horsehead Holding Fossil (Nasdaq: FOSL)But none of these has become a purchase yet. Among the companies that have been deemed worthy of a real-money buy is a company the Hidden Gemsanalysts believe looks similar to McDonald's in its infancy. To view this company and the rest of the team's purchases, simply click herefor a free 30-day guest pass. There's no obligation to subscribe. Already a member ofHidden Gems ? Log in at the top of this page . This article was originally published June 4, 2009. It has been updated. Anand Chokkavelu is like Miley Cyrus -- he likes the best of both worlds. He owns shares of Philip Morris International and McDonald's. Under Armour is aMotley Fool Rule Breakers pick and Amazon.com is aStock Advisor recommendation. 3M is anInside Value selection and Philip Morris International is aGlobal Gains recommendation. Fossil, Under Armour, and Horsehead Holding areHidden Gems selections from before the service made selections with real money. The Fool owns shares of Under Armour and has a disclosure policy . This article was originally published as Do Blue-Chip Penny Stocks Exist?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Get Ready for a 25% DropBy Rex MooreNovember 20, 2009 My friend swears he's learned his lesson. Back in July 1995, this friend -- let's call him Charlie -- bought Microsoft at what turned out to be the highest price it would see that year. The stock was down 15% in no time, and Charlie was worried. He was smart enough to know the market is the best wealth-creating machine available to us regular folks, but stocks to him were sort of like husbands to Elizabeth Taylor. He liked them well enough, but he tended to give up when things got a little rocky. In a matter of weeks, his paper loss was approaching 25%, and he couldn't stand it anymore. He bailed out. Needless to say, the next few years were even rougher on Charlie as he watched Mr. Softy march steadily higher. It achieved 10-bagger status at the height of the bull market in 2000, but even today -- in another brutal market -- it's more than 250% higher than when he sold.
The ups come with downs
This table should really drive home the point for you. Look at these true all-star performers from the past decade -- a period in which the S&P 500 is down over 30%: Company 10-Year Gain Largest Drop Celgene (Nasdaq: CELG) 1,261% 79% Caterpillar (NYSE: CAT) 114% 73% Barrick Gold (NYSE: ABX) 154% 63% Valero (NYSE: VLO) 195% 82% Nvidia (Nasdaq: NVDA) 360% 88% Mosaic (NYSE: MOS) 229% 84% Realty Income (NYSE: O) 122% 50% Data from Capital IQ, a division of Standard & Poor's. The largest drop for some of these companies happened in the current bear market, but this is a lesson that practically all of the great performers from the past decades have dropped at least25% at one time or another. It would be very hard for you to find one that hasn't. The current market is a painful reminder of that. And hey, I'll be the first to admit that many stocks drop 25% and keep dropping. That can happen when a business that has no real competitive advantages to begin with gets the rug pulled out from under it. It happened to me several years ago, and like a shell-shocked boxer, I stillduck when I hear the name CMGI . (Shudder.)
Lesson learned
For the seven years since Stock Advisor was launched, Tom and David Gardner's recommendations have beaten the S&P 500 by an average of 50 percentage points. Interested in finding out which stocks to start with? Try a no-obligation 30-day free trial and you'll see Tom and David's five best buys for new money now. Here's more information. This article was originally published on Jan. 8, 2007. It has been updated. Rex Moore lathers and rinses, but never repeats. Of the companies mentioned in this article, he owns shares of Microsoft. NVIDIA is aMotley Fool Stock Advisor recommendation. Microsoft is anInside Value selection. The Motley Fool has a disclosure policy. This article was originally published as Get Ready for a 25% Dropon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. The Easiest Money You'll Ever MakeBy Paul ElliottNovember 20, 2009 Look, I know I was a little rough. And, yes, I bashed my friends in the mutual fund industry. Did I expect a few angry emails? Of course, but not this.
Feeling a little lost?
For my three stocks, I chose consumer electronics retailer Best Buy (NYSE: BBY) and old-school technology outfits Texas Instruments (NYSE: TXN) and Hewlett-Packard (NYSE: HPQ). But as you're about to see, any number of former highfliers could have done the trick. The idea was to show how a modest $10,000 investment could have ballooned to $422,563 in just 10 short years. But that wasn't the surprising part. For more details, check out " Don't Invest Another Penny." Just be sure to come back, because this is where it gets good. You see, there was a catch. Over the years, you'd have paid your mutual fund manager some $20,000 in fees, and surrendered nearly $58,000 in lost profits (money you could have earned on those fees, but didn't). Instead of $422,000, you'd be sitting on ... well, a lot less.
So you hate me, right?
In other words, I thought you'd say that my $78,000 blood money was a gross exaggeration. I thought wrong. Apparently, you're OK with me comparing the fund industry to an IRS on steroids. In fact, some of you think I'm understatingthe case -- trivializing the real cost to you as an investor, at least on a percentage basis. And guess what? You're right. John Bogle, the founder of Vanguard Funds, makes the case bluntly in his book, The Battle for the Soul of Capitalism. Bogle shows how you don't need blowout returns (like in my three-stock example) to make the case against mutual funds ... you need time. Here's why.
Beware the "tyranny of compounding"
For one thing, you won't be making 4,126% every 10 years, like in my bogus example. That's because for every stock rocket like Yahoo! (Nasdaq: YHOO) that your fund catches for a quick 10-bagger, it'll surf an E*TRADE (Nasdaq: ETFC) for a 90% plunge (yes, I knowit's coming back). But mostly, it'll bounce between IBM (NYSE: IBM) and Pfizer (NYSE: PFE), and other widely held stocks. And even when your fund manager does catch lightning in a bottle, he or she will buy and sell too often, and at the wrong times. That's why Vanguard's Bogle thinks you'll earn less than "average" -- 8.5% per year by his estimate. Plus, you won't invest for 10 years, but more likely 25, 30, or even 45 years or more. Brace yourself, because this thing really gets ugly.
That'll be 80% off the top, sir
For one thing, Bogle uses a more aggressive 2.5% for intermediation costs. That's because he goes beyond reported "management fees" and includes taxes, transactions, and timing costs. And given that Bogle founded Vanguard, the most trusted mutual fundcompany in the world, I'm inclined to believe him. More importantly, Bogle realizes that the more realistic your returns, the more deadly that 2.5% becomes, especially when compounded over the years. In other words, costs kill when your portfolio keeps doubling every six months.But when it doubles every 10 years or so, costs can really wipe you out.
What you can do about it
If you resent that, here's a solution a lot of folks are considering: Start managing your own investments. You don't have to jump in all at once, and you don't have to dump all your funds right away. But you can see how important it is that you give it some thought. Even so, you will need a few great stocks to get started -- and a little support. Here's an easy solution. Give Motley Fool Stock Advisor a look. Every month, you get the two top recommendations from Motley Fool co-founders David and Tom Gardner, and it's free for 30 days. (In the spirit of full disclosure, Stock Advisorhas returned 13.8% annually since inception, at time when the S&P 500 has been flat. I can hardly believe that number myself.) Of course, there's no pressure to join -- and if you do decide to stay on after your trial, it sure as heck won't cost you $100,000. These are interesting times for investors. If you never considered checking Stock Advisorout -- and wondered what all the fuss is about -- now may be the time to find out. To learn more about this special free trial, click here. This article was originally published Sept. 29, 2006. It has been updated. Paul Elliott owns shares of Pfizer, which is anInside Value recommendation. Best Buy is aStock Advisor andInside Value pick. Pfizer is anInside Value recommendation. The Fool owns shares of Best Buy. You can view the entireStock Advisor scorecard with your free trial . The Fool has a disclosure policy . This article was originally published as The Easiest Money You'll Ever Makeon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Thursday's Biggest Stock StarsBy Brian D. PacamparaNovember 20, 2009 Hey there, Fools. I've summoned our Motley Fool CAPScommunity once again to highlight a few of Thursday's biggest winners among the stocks with top ratingsof four or five stars: Company Yesterday's Gain Suntech Power (NYSE: STP) 5.96% Momenta Pharmaceuticals (Nasdaq: MNTA) 5.91% Agria 4.79% GameStop 1.70% Yamana Gold (NYSE: AUY) 1.29% There's a reason I selected those notable gainers, as opposed to other winners making noise on Thursday, like low-rated Sunrise Senior Living . Stocks go up all the time, but unless you were able to predict the pop, what does it matter? Our community of more than 140,000 CAPS Fools considers its high-star stocks the most likely to outperform the market.
Written in the (five) stars?
Shares of Suntech are up an amazing 200%since that call. In fact, yesterday's market-bucking pop came after the company raised its full-year outlook on significantly increasing demand.
The bullish lesson?
And now for the losers ...
Here are five of Thursday's biggest decliners with one- or two-star ratings: Company Yesterday's Loss Hot Topic (Nasdaq: HOTT) 13.04% Radian Group 7.04% MGM Mirage (NYSE: MGM) 5.15% Sears Holdings (Nasdaq: SHLD) 3.72% Las Vegas Sands 3.69% While yesterday's drop in highly rated Intel (Nasdaq: INTC) may have caught our community off guard, low-ranked stocks are fully expected to fall hard.
Did CAPS call the fall?
Consistent with that warning, shares of the specialty teen retailer are down 55% since that warning. In fact, yesterday's double-digit slide came after the company posted a third-quarter earnings drop of 21% and issued a weak holiday season outlook, to boot.
The bearish takeaway?
The final Foolish move
Over at Motley Fool CAPS, thousands of investors are Foolishly sharing insightful investment tips to help identify tomorrow's big movers. Over time, consistently reverse-engineering winning -- and losing -- stocks will help you become a more Foolish investor. Log into CAPS today and start participating. It's absolutely free -- and a lot of fun! This article was originally published as Thursday's Biggest Stock Starson Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 4-Star Stocks Poised to Pop: MerckBy Brian D. PacamparaNovember 20, 2009 Based on the aggregated intelligence of 140,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, drug behemoth Merck (NYSE: MRK) has earned a respected four-star ranking. With that in mind, let's take a closer look at Merck's business and see what CAPS investors are saying about the stock right now. Merck facts Headquarters (Founded) Whitehouse Station, N.J. (1891) Market Cap $107.9 billion Industry Pharmaceuticals Trailing-12-Month Revenue $23.37 billion Management Chairman/CEO Richard Clark (since 2005) CFO Peter Kellogg (since 2007) Return on Equity (Average, Past 3 Years) 29.1% Cash / Debt $22.26 billion / $9.07 billion Dividend Yield 4.3% Competitors Pfizer (NYSE: PFE) GlaxoSmithKline (NYSE: GSK) sanofi-aventis (NYSE: SNY) CAPS Members Bullish on MRK Also Bullish on General Electric (NYSE: GE) CAPS Members Bearish on MRK Also Bearish on Ford Motor (NYSE: F) Yahoo! (Nasdaq: YHOO) Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS. On CAPS, 92.8% of the 2,488 members who have rated Merck believe the stock will outperform the S&P 500 going forward. These bulls include All-Star Boredkid, who is ranked in the top 15% of our community, and jcn2u. Late last month, Boredkid assured Fools that Merck won't be expiring anytime soon: "Low P/E, high dividend yield. Expect patent-losses affect on bottom line to be offset by acquisitions and partnerships; also, expect Wall Street to be overly pessimistic about patent expirations." In a pitch from four days later, jcn2u applaudsthe recent megamerger: They bought [Schering-Plough] on the cheap. [Schering] has the pipeline and management that [Merck] needed. [Merck] has the deep pockets to carry through with the drugs in the pipeline, [Schering] did not. Now the question is: Does [Merck] have the fortitude to do what has to be done with their own management? We shall see. IF done correctly, [Merck] has the raw materials to become THE dominate drug company that they were many years ago. What do you think about Merck, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. The CAPS community is waiting to hear your opinions. CAPS is 100% free, so get started! Â This article was originally published as 4-Star Stocks Poised to Pop: Merckon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 1-Star Stocks Poised to Plunge: RadioShack?By Brian D. PacamparaNovember 20, 2009 Based on the aggregated intelligence of 140,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, electronics retailer RadioShack (NYSE: RSH) has received the dreaded one-star ranking. With that in mind, let's take a closer look at RadioShack's business and see what CAPS investors are saying about the stock right now. RadioShack facts Headquarters (Founded) Fort Worth, Texas (1899) Market Cap $2.35 billion Industry Specialty retail Trailing-12-Month Revenue $4.22 billion Management CEO Julian Day (since 2006) CFO James Gooch (since 2006) Compound Annual Revenue and Net Income Growth (Over Past 5 Years) (2.3%) and (10.4%), respectively 1-Year Return 128% Cash / Debt $856.7 million / $687.7 million Competitors Best Buy (Nasdaq: BBY) Wal-Mart Stores (NYSE: WMT) CAPS Members Bearish on RSH Also Bearish on Lennar (NYSE: LEN) Ford Motor (NYSE: F) CAPS Members Bullish on RSH Also Bullish on Apple (Nasdaq: AAPL) Microsoft (Nasdaq: MSFT) Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS. On CAPS, 55% of the 595 members who have rated RadioShack believe the stock will underperform the S&P 500 going forward. These bears include PatrickDickeyand mpapile. Earlier this year, PatrickDickey expressed concern over RadioShack's shocking prices: "As much as I like the products and services, and am a customer when I need electronic components, their prices are too high. ... Unless they can revamp their image with quality for price or lower price on the quality that you're receiving (which is on the upper-end), I don't see their stock outperforming the S&P." In a pitch from late last month, mpapile alsocriticizes the company for thinking too small: Radio Shack or "The Shack" has increased their profit the Circuit City way by forcing out higher paid employees in lieu of unknowledgeable lower priced employees. People who are not very good with electronics go to Radio Shack for help, and those that know a lot do not pay $50 for a cable that costs $3 on monoprice.com. So they are killing their core business. What do you think about RadioShack, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. The CAPS community is waiting to hear your opinions. CAPS is 100% free, so get started! This article was originally published as 1-Star Stocks Poised to Plunge: RadioShack?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 5-Star Stocks Poised to Pop: Brown-FormanBy Brian D. PacamparaNovember 20, 2009 Based on the aggregated intelligence of 140,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, alcoholic beverage producer Brown-Forman (NYSE: BF-B) has earned a coveted five-star ranking. With that in mind, let's take a closer look at Brown-Forman's business and see what CAPS investors are saying about the stock right now. Brown-Forman facts Headquarters (Founded) Louisville, Ky. (1870) Market Cap $7.5 billion Industry Distillers and vintners Trailing-12-Month Revenue $2.4 billion Management CEO Paul Varga (since 2005) CFO Donald Berg (since 2008) Major Brands Jack Daniel's, Southern Comfort, Finlandia, Fetzer Return on Equity (Average, Past 3 Years) 25.7% Cash/Debt $286.5 million / $915.3 million Dividend Yield 2.3% Competitors Diageo (NYSE: DEO) Constellation Brands (NYSE: STZ) Fortune Brands (NYSE: FO) CAPS Members Bullish on BF-B Also Bullish on Altria (NYSE: MO) Johnson & Johnson (NYSE: JNJ) CAPS Members Bearish on BF-B Also Bearish on Intel (Nasdaq: INTC) Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS. On CAPS, 97% of the 158 members who have rated Brown-Forman believe the stock will outperform the S&P 500 going forward. These bulls include mtinvestand All-Star mrindependent, who is ranked in the top 2% of our community. Just last month, mtinvest showed investors how to be in high spirits: "Jack Daniel's whiskey, Finlandia vodka, Southern Comfort liqueur. ROE has not been below 15% the last 10 years and it has averaged [well over] 20% during the same period." In a pitch from two days ago, mrindependent also advised Fools to drink in the dividend: As this rally matures, I think it is a good idea to add some stable stocks to my portfolio. Brown-Forman fits the bill nicely. I found this stock with a screen that looks for companies yielding over 2% and demonstrating year over year earnings growth, low payout ratios and good interest coverage ratios. ... As a purveyor of alcoholic beverages, Brown-Forman is a classic "stable stock". Like many other stable stocks, Brown-Forman was left behind by the recent rally. What do you think about Brown-Forman, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. The CAPS community is waiting to hear your opinions. CAPS is 100% free, so get started! This article was originally published as 5-Star Stocks Poised to Pop: Brown-Formanon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 5-Star Stocks Poised to Pop: NRG EnergyBy Brian D. PacamparaNovember 20, 2009 Based on the aggregated intelligence of 140,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, power plant operator NRG Energy (NYSE: NRG) has earned a coveted five-star ranking. With that in mind, let's take a closer look at NRG's business and see what CAPS investors are saying about the stock right now. NRG facts Headquarters (Founded) Princeton, N.J. (1989) Market Cap $6.0 billion Industry Independent power producers and energy traders Trailing-12-Month Revenue $8.47 billion Management CEO David Crane (since December 2003) COO John Ragan (since February 2009) Return on Equity (Average, Past 3 Years) 12.3% Other Highly Rated Utility Stocks Southern Co. (NYSE: SO) Duke Energy (NYSE: DUK) Dominion Resources (NYSE: D) CAPS Members Bullish on NRG Also Bullish on General Electric (NYSE: GE) Apple (Nasdaq: AAPL) CAPS Members Bearish on NRG Also Bearish on Micron Technology (NYSE: MU) Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS. On CAPS, 99% of the 593 members who have rated NRG believe the stock will outperform the S&P 500 going forward. These bulls include tombo615and All-Star mrindependent, who is ranked in the top 2% of our community. Just last month, tombo615 tapped the stock as an increasingly international power play: "their efforts toward promoting global energy efficiency aren't being unnoticed, especially by me. strong financial valuation plus their aggressive stance toward popping out strong from the recession make this a buy in my book." In a pitch from two days ago, mrindependent pushedFools to pounce on the company's recent profit miss: NRG Energy was punished based on a poor third quarter earnings report. This energy generation company is consistently profitable and seems to be well managed. Selling for less than book value and about 5 times earnings. Although this company has significant debt, the debt load is sustainable. Patient investors will be rewarded. What do you think about NRG, or any other stock for that matter? Make your voice heard on Motley Fool CAPS today. The CAPS community is waiting to hear your opinions. CAPS is 100% free, so get started! This article was originally published as 5-Star Stocks Poised to Pop: NRG Energyon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Gold's Bull Run Is Only BeginningBy Alex Dumortier, CFANovember 20, 2009 That's what hedge fund manager John Paulson told investors at a meeting this week. What's more, he's going to plow up to $250 million of his own wealth into a new, dedicated fund to ride this bull. A word on Paulson's credentials: He made a huge betagainst subprime mortgages, producing a 590% return for one of his funds in 2007 and netting himself a total of $3.7 billion. Should investors saddle up and ride alongside him this time?
Placing his bets
Furthermore, the fund will invest in gold-related shares and derivatives with the goal of outperforming gold prices. Here again, Paulson & Co. is already a large shareholder in miners AngloGold Ashanti (NYSE: AU), Gold Fields (NYSE: GFI), and Kinross Gold (NYSE: KGC).
A value, a hedge, or a speculation?
Perhaps, but he isn't going it alone. Paulson is hiring John Reade, the former metals strategist at Swiss bank UBS (NYSE: UBS) and a repeat winner of the London Bullion Market Association's forecasting prize.
Two alternatives to gold
Current U.S. economic policy is creating tangible risks for investors. Tim Hanson urges you to read this because the dollar is doomed. What are your thoughts on the price of gold and the viability of the dollar? Let me know in the comments section below. This article was originally published as Gold's Bull Run Is Only Beginningon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Google Disappoints: No Chrome Just YetBy Tim BeyersNovember 20, 2009 You disappoint me, Google (Nasdaq: GOOG). Like so many others, I was hopingyou'd have a copy of the Chrome OSready for me to download and play with. But I guess that's the good news. Rushing the introduction of such an important OS would've been a bad idea, especially when Chrome proposes to be nothing like Mac OS X, Windows, or the various flavors of Linux from Ubuntu, Novell 's (Nasdaq: NOVL) SuSE, and Red Hat (NYSE: RHT). What will it be instead? Webby. Very, very webby. Here's how. First, Chrome will boot in seven seconds or less, making it reminiscent of the promises Palm (Nasdaq: PALM) once made with its failed Foleo device. Google thinks it can do better. I think so, too. Second, in Chrome, the browser isthe operating system. Sort of. Only those netbooks that feature a solid-state drivewill be allowed to boot the Chrome OS. "We want Google Chrome OS to be blazingly fast. From the time you press boot, you want it to be like a TV. In addition to making the boot time fast, we want the end-to-end experience to be fast," Computerworldreports Google vice president of product management, Sundar Pichai, as saying. Intel (Nasdaq: INTC) and SanDisk (Nasdaq: SNDK) are among those to build SSDs, which tend to be more expensive than their optical counterparts. For example, Apple offers a 128-gigabyte SSD with its high-rent MacBook Air. Asking cheapskate netbook makerssuch as Dell (Nasdaq: DELL) to adopt them for their Chrome OS systems is a gamble. Third, Chrome OS will introduce what it calls "application tabs." Choose a tab for where you wish to store and access your Web applications and that's where they'll stay. Think of them as a way to add a desktop feel to this browser-based environment. Fourth, and perhaps best of all, Chrome OS will remain an open-source project so that developers will have the better part of a year to create software that will take full advantage of the system's features and functions. My guess is the wait will be worth it. Don't let us down, Google. Get your clicks with related Foolishness: cloud computing is inevitable. Let's give cloud computing more of what it needs. This is what you risk if you ignore cloud computing.This article was originally published as Google Disappoints: No Chrome Just Yeton Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Las Vegas: Dead or Alive?By Robert SteyerNovember 20, 2009 Uncertain economy. Unfinished buildings. Unrealized expansionplans. Unyielding balance sheets. Unclear forecasts for tourism spending. For investors, are all of the above unmistakable signs that investing in Las Vegas is dead money? Or at least money that won't produce the lively returns of the not-so-long-ago days of cheap credit, booming tourism, full hotel rooms, and fearless expansion? Although some casino-industry executives see early signs of hope, or at least an easing rate of decline,investors have to wonder about the scope and speed of a comeback and how prominent a role Las Vegas will play in their investments. There are multiple gambling and investing opportunities in and around Las Vegas as well as the rest of Nevada, but we're focusing on the Strip, the biggest source of gambling revenue in the United States. If you're investing in luxury Strip casino owners such as Wynn Resorts (Nasdaq: WYNN) and Las Vegas Sands (NYSE: LVS), your key to a higher share price lies more in Macau than along Las Vegas Boulevard. The numbers say so -- both companiesget more revenue from Macau than from Las Vegas. And the proof is in the pudding: Wynn Resortsand Las Vegas Sandsare adding properties in Macau; they aren't expanding in Las Vegas. And just to top it all off, executives say so. Sheldon Adelson, chairman and CEO of Las Vegas Sands, recently told The Wall Street Journalthat he doesn't plan to build again in Las Vegas. He's already "fulfilled."
Some keep betting
Boyd Gaming has backed off at least temporarily, in saying it won't consider restarting construction on its Echelon project for three to five years. But Penn Nationalis ready to jump in, having made an offer for the unfinished, bankrupt Fontainebleau Las Vegas. The proposal requires bankruptcy court approval, and other companies may bid in an auction that could be held in mid-January. If the big boys aren't willing to play in the sandbox anymore, what makes Penn National think it can? And if you're a bond investor in the private Harrah's Entertainment or a stock and/or bond investor in MGM Mirage (NYSE: MGM), are you convinced that your company's heavy investment will recover? Each owns multiple properties on the Strip. They also have someof the ugliestbalance sheets in the industry.
The next big thing
If CityCenter, which has already cut the costs of its condominiums, can expand the size of the Las Vegas Strip market, the developers and even its competitors should benefit. But if people flock here at the expense of other casino operators, hoteliers, residential real estate companies, and retailers, then members of these groups will be hurt. Worse yet, if CityCenter fails to meet MGM Mirage's ambitious goals, the company will be in some serious trouble.
Leading indicators
US Airways Group (NYSE: LCC) recently said it would cut its daily flights at Las Vegas' McCarran International Airport to 36 from 64. The carrier is the second-largest at the airport, behind Southwest Airlines (NYSE: LUV). For the first nine months, McCarran's traffic had fallen by 10.2% from the year-ago period and US Airways was off 33.9%. US Airways, in essence, has said it's cutting flights from places that aren't as financially fruitful. I think that speaks for itself, but if you want further evidence of declining traffic, a recent report by airline consulting firm Boyd Group International said McCarran's traffic wouldn't return to 2008 levels until 2014.
Investigate the numbers
Although The Motley Fool has discussed this before,it bears repeating. Aside from gambling revenue, a crucial number on the Strip and at any other gambling resort is revenue per available room, or RevPAR. During the third quarter, MGM Mirage'sStrip hotels matched the year-ago quarter's occupancy rate of 95%, but RevPAR fell by 23%. For Las Vegas Sands, third-quarter RevPAR at the Palazzo fell by 29.8% as the occupancy rate fell by 6.6 percentage points. RevPAR at the Venetian Las Vegas fell by 20.4% as occupancy dropped by 3.3 percentage points. Hotel revenue, along with money spent on food and entertainment, plays a big role in a casino's health. For instance, Las Vegas Sands' Strip rooms account for about 43% of its total Vegas revenue, so if RevPAR is down across the boards, casinos are going to take a huge hit. As if we didn't have enough ways to illustrate the decline in Vegas traffic, a recent report illustrated that September was the 21st month in a row in which Vegas winnings declined in aggregate. Let's be clear. Las Vegas isn't dead, and it won't die, as a source of gambling and entertainment. There's optimism in the industry for a modest rebound next year. However, investors need to do a lot of extra math to decide whether their company's investment in Strip casinos will energize their stock or hold it back. This article was originally published as Las Vegas: Dead or Alive?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 7 Reasons to Worry About Next WeekBy Rick Aristotle MunarrizNovember 20, 2009 Thanksgiving is a week away, but some companies are more grateful than others. In fact, despite months of rallying equities and the occasional glimmer of positive economic news, there are several companies that haven't earned their stock gains. Looking over the handful of companies daring to report quarterly results in a holiday-shortened trading week, many of the widely followed stocks are projected to announce lower net income than they rang up a year ago. Let's go over a few of the companies that have a quarterly date with Mr. Market that investors may come to regret. Company Latest Quarter EPS (Est.) Year-Ago Quarter EPS Atwood Oceanic (NYSE: ATW) $0.69 $1.16 LDK Solar (NYSE: LDK) ($0.10) $0.77 China Finance Online (Nasdaq: JRJC) ($0.06) $0.21 Deere (NYSE: DE) $0.03 $0.81 Brocade (Nasdaq: BRCD) $0.13 $0.20 TiVo (Nasdaq: TIVO) ($0.06) $0.98 51job (Nasdaq: JOBS) $0.10 $0.15 Source: Yahoo! Finance.
Clearing the table
Atwood Oceanics is an offshore driller. Have you pumped gas lately? Oil prices have been creeping higher since hitting springtime lows, as worldwide demand and a general uptick in the global economy are making Jed Clampett smile. It's not going to help Atwood's fleet of drilling units, as analysts see earnings clocking in 41% lower than last year. LDK Solar has been a wild ride on the ups and downs of solar energy. Few will argue against the promising future of clean energy solutions, led by sun-powered initiatives. That's tomorrow, though. Wall Street is bracing itself for a small deficit this time around. China Finance Online and 51job are Chinese companies that should be doing well these days. China Finance Online runs a pair of popular stock research websites. 51job puts out a weekly listing of job openings in roughly two dozen regional editions. Chinese stocks have been performing well this year, and the economic boom in China is creating plenty of new job opportunities. Yet both companies are pegged to take backward steps next week. Deere is the agricultural equipment giant. With emerging markets bouncing back, the global demand for food should be an alley-oop pass to farming enablers like the company that John Deere started in 1837. It's not showing up in the numbers yet, though. Networking specialist Brocade is another company that the pros see going the wrong way on the income statement. Large U.S. companies may be scaling back on IT spending, but several countries are seeing their economies bounce back quicker than we are. Finally we have TiVo, slated to post its biggest loss in nearly two years. At a time when many consumer companies with their crosshairs on the couch potato are thriving, TiVo is having a hard time growing its subscriber base. Â
Why the long face, short seller?
There may still be more than a few favorable surprises in the mix. Really. Let's take a look at how Atwood Oceanics has performed relative to analyst targets over the past year. Month EPS Estimate Difference Sep. 2008 $1.13 $1.16 3% Dec. 2008 $1.15 $1.22 6% March 2009 $0.79 $0.88 11% Jun. 2009 $0.81 $1.05 30% Source: Yahoo! Finance. Take a look at the final column. Do you see the positive trend? Atwood Oceanics has beaten market expectations in each of the four previous quarters, and the gap between its reality and Wall Street's perception continues to widen. That's great momentum to carry into next week. The more I think about it, the less worried I become. This article was originally published as 7 Reasons to Worry About Next Weekon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. This Week's 5 Smartest Stock MovesBy Rick Aristotle MunarrizNovember 20, 2009 If you're feeling good about the market, you're not alone. Take my hand as we go over some of this week's more uplifting headlines.
1. Don't leave home without this
That's not going to happen. Better-suited challengers have fired blanks when PayPal was way smaller. No one is going to catch up to PayPal now. Where this deal really begins to make sense for American Express lies in the RevolutionCard. Tied to MoneyExchange accounts, the RevolutionCard can be swiped as a debit card. Revolution is now being accepted at a growing number of retailers, won over by the card's dirt-cheap transaction fees. American Express charges retailers substantially more in transaction and settlement charges, so now AmEx can make sure that RevolutionCard doesn't get in the way of its namesake plastic. American Express isn't out to kill PayPal. It's buying a live grenade that it can turn around and bury in its back yard.
2. Cover charges for coverage maps
Sure, a few of those features are iPhone-based, and if AT&T ever loses Apple (Nasdaq: AAPL) exclusivity, it would have to go back to the drawing board. However, it's clear that that Verizon Wireless' ad has had an effect on AT&T's psyche. It had to counter the coverage-map attack because silence would speak volumes -- assuming the silence wasn't the result of a dropped call caused by spotty coverage.
3. Don't believe the Skype
We can blast eBay for its inability to integrate Skype into its eBay.com, PayPal, or even Kijiji sites. It was just a bad fit from the beginning, but let's give eBay a pat on the back anyway. After all, the company was still able to grow Skype's reach over the past few years. It's also unloading a majority stake in Skype for a price that's probably more than most cynics figured it would be able to command after previous writedowns. Oh, and it's also still keeping a 30% chunk of the company, just in case its new buyers figure out better ways to monetize the wildly popular platform.
4. Way to go, IPO
The network-security specialist was originally expecting to price its offering between $9 and $11, before an uptick in demand caused underwriters to bump up the IPO price to $12.50 a stub. Clearly, even that wasn't enough. Not every debutante is as promising as tech hotshot Fortinet, but it's a good sign for underwriters when demand is outstripping supply.
5. Jam on, MySpace
The popular and interactive aural destination was running into some stiff legal obstacles, so cashing out to MySpace at a pittance is better than fading away like some forgotten B-side. I still like this move on MySpace's behalf. Even if all it ultimately acquires is a staff of music-savvy techies, MySpace is repositioning itself as an entertainment destination. It's not going to close the gap with Facebook as a social network, but it can play to its strengths as a hub for indie musical artists and profile-page design flexibility. What MySpace is paying is a great price for a handful of lottery tickets. These days, that's a major score for MySpace. This article was originally published as This Week's 5 Smartest Stock Moveson Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. This Week's 5 Dumbest Stock MovesBy Rick Aristotle MunarrizNovember 20, 2009 Stupidity gets us all from time to time. Even respectable companies can catch it. It's time againto take a look at five dumb financial events from this week that may make your head spin.
1. Bears should time their crossings a little
better
Perfect World (Nasdaq: PWRD) reported better-than-expectedresults on Monday. Revenue soared 55%. Non-GAAP earnings surged 45%. Obviously there's nothing dumb about the quarter that the Chinese online gaming speedster delivered. For that, we turn to Pali Research, which downgraded the stock exactly one week ago today. "In the short term, we do not expect any surprises," said Pali's note, arguing that Perfect World will earn less than even the consensus analyst estimate over the year ahead. I don't know why any analyst would want to make a gutsy call a single trading day before an earnings report. Perfect World had beaten analyst expectations in six of the previous eight quarters, so the batting average for a bearish swing has been freakishly low.
2. Xbox marks the spot
On the surface, this seems like a great way to move more Xbox 360 consoles. Access to sticky social sites will likely extend the average gaming experience. Let's dig deeper, though. Folks fiddling around with Facebook status updates or checking the latest Twitter feeds aren't going to be playing as many games as they used to. This may very well result in a slowdown of digital downloads purchased from the Xbox Live marketplace. As video game consoles do more and more computing chores, desktops and netbooks may become less crucial and that will also hurt Microsoft in moving copies of Windows and related software. I realize that this isn't a popular "dumb" call. Some will argue that folks spending more time on Xbox Live will move systems, provide Microsoft with the opportunity to generate juicier ad revenue, and increase usage of Xbox Live. I still see these evolutionary steps as detrimental to Microsoft in the long run.
3. Trading E*TRADE babies on the black
market
Let's think this through. Are speculators that dumb? Do they really believe that TD AMERITRADE would go public with its intentions of snapping up the rival discount broker, when the very notion would drive up the stock, making the buyout more expensive? I'm not naive. I think TD AMERITRADE will eventually make a play for E*TRADE. However, when it's actually serious about it, I trust TD AMERITRADE to tiptoe unnoticed into E*TRADE's boardroom. E*TRADE's uninspiring October -- on the heels of TD AMERITRADE's delivering superior results for the month -- could have been the ideal time to strike. However, I'll believe the chatter when TD AMERITRADE doesn't tip its hand.
4. Loyalty is a loaded word
The salt in the wounds here is that these three privately held companies can't do this alone. All they require is an email address to begin billing the duped, because they get the credit card information from merchant partners who collected it during the online checkout process. Of course, some people are fully aware of these programs, and have every interest in paying monthly fees in exchange for the loyalty program's discounts and services. However, there are too many complaints from those who feel that they have been tricked into the monthly billings. The clincher is that the feds have singled out 19 sites that have generated at least $10 million apiece in referral fees from marketing these programs to their customers. Most of the major online travel portals and movie ticketing sites are on the list. United Online (Nasdaq: UNTD) is on there twice -- since its Classmates.com and FTD.com sites each make the cut. Sold out by a loyalty program? You know it.
5. Use the salesforce, Luke
It's naturally a good reason to be concerned, as it's often an early indicator of future slowdowns. Unfortunately, the market seems to have ignored that salesforce also raised its near-term guidance. It's not all rosy, though. The stock trades at lofty multiples. Revenue growth has slowed -- or clocked in flat -- for several quarters in a row. However, when a company increases its future guidance, it deserves better than being dissed on a backward-looking indicator. Let's beat the dumb drum: dummies. The previous week's boneheads. Last year's silliest CEO quotes.This article was originally published as This Week's 5 Dumbest Stock Moveson Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 6 Companies With a Secret WeaponBy Selena MaranjianNovember 20, 2009 If you're like most investors, you're always looking for bargain stocks, and for companies with an edge over competitors. So maybe this will get you excited: In 2004, the research organization Catalyst studied more than 350 of the Fortune 500 companies and found that companies with one key edge sported returns on equity (ROE) 35% higher and total returns to shareholders 34% higher than those companies that didn't have it. That sounds exciting. And you're probably wondering what this secret weapon is. Well, it's the presence of women in upper management. And the companies with more seem to significantly outperform those with less. Therefore, you might be interested to learn some good news and some bad. First, the good: The ranks of women are increasing in executive suites across the country. According to a report by Catalyst last month, women now make up 3% of the Fortune 500 CEOs -- a paltry number, yes, but still a threefold increase in less than a decade. Here, for example, are the leaders of some of our biggest enterprises: Company CEO PepsiCo (NYSE: PEP) Indra Nooyi WellPoint (NYSE: WLP) Angela Braly Archer Daniels Midland (NYSE: ADM) Patricia Woertz Sunoco (NYSE: SUN) Lynn Elsenhans DuPont (NYSE: DD) Ellen Kullman Kraft Foods (NYSE: KFT) Irene Rosenfeld Of course, not every female CEO will knock our socks off -- Carly Fiorino's tenure at Hewlett-Packard (NYSE: HPQ), for example, was not universally loved. And some female CEOs may be bristling at being treated differently than their male counterparts. I say that because of the bad news I recently read: According to the good people at The Corporate Library, it seems that between 2007 and 2008, while men in top spots saw their total realized compensation drop 6.1%, women CEOs experienced an 18.5% cut. Ouch. There's more: Armed with this knowledge, you may now want to keep an eye on the percentage of women you notice at or near the helm of companies that interest you. A high percentage may bode well for your portfolio. And now that shareholders are getting more of a voice in executive compensation, you may want to look at your CEOs' pay packages closely, too. This article was originally published as 6 Companies With a Secret Weaponon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Can salesforce.com Talk Its Way to Bigger Profits?By Tim BeyersNovember 20, 2009 Give salesforce.com (NYSE: CRM) credit. No one names a conference better. At this year's Dreamforce confab, CEO Marc Benioff took the wrappers off a cloud-based collaboration system called Chatter. Not just a social network for salesforce.com users, Chatter proposes to blend feeds with document sharing and business intelligence. To Benioff, the combination seems like a no brainer. "Why do I know more about strangers on Facebook than my own employees?" he said in a press release.
Social hour for business software
These money movers sense a shift. They see the Social Web as a noisy network that sometimes obscures real intelligence. Benioff wants more of the intelligence and less of the noise. He also wants to enable relevant connections between people, in context. Chatter is designed to achieve that. Here's how. Profiles . Here's where Chatter most resembles Facebook or LinkedIn. The system's "profiles" ask users identifying information that, in the context of the whole, becomes searchable. That way, employees can more easily find and follow people who can help them create value or solve a problem. Updates . Chatterers can also be tweeters. Specifically, the software allows users import their Facebook data and useful Twitter searches, and includes a status update window of its own. Used well, Chatter could reduce the need for conference calls and lengthy email threads. Feeds . Here's where Chatter gets most interesting. Everything in the system has a feed for users to follow. So, for example, if a customer spreadsheet that exists in the network is germane to your work, you can follow it and get notified when someone updates it. In Chatter, even documents and data tweet.Interested yet? I'll admit to being fascinated by what Chatter could offer to salesforce.com customers, but I'd be remiss if I didn't concede something fundamental: collaboration tools aren't new.
Rewind to fast forward
salesforce.com is introducing Chatter into a market that has been talking about collaboration since the early days of tech. Why should anyone care, and why now? Interestingly, some of the smart guys over at ZDNet put a similar question to salesforce.com co-founder Parker Harris earlier this week. See the full videohere. My favorite quote of the interview: "This is about enabling relevant conversations in the enterprise."
Tweeting for cash
In the meantime, while Chatter isn't as unique an idea as the boisterous Benioff might have us believe, it's still a threat that Oracle (Nasdaq: ORCL) and NetSuite (NYSE: N) should take seriously. SAP (NYSE: SAP) may have less to worry about, if only because it's a salesforce.com partner and featured in the Chatter demonstration video. Either way, salesforce.com is using the social tools of the day to add more value to its customers, and that's ultimately good for investors. But that's also just my take. Now it's your turn. Does Chatter make you more or less inclined to buy shares of salesforce.com? Please take a moment to vote in the poll below. You can also sound off by leaving a comment. We'd love to hear from you. This article was originally published as Can salesforce.com Talk Its Way to Bigger Profits?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. How Free Services Make Google RichBy Anders BylundNovember 20, 2009 Obviously, the big news from Google (Nasdaq: GOOG) yesterday was the official announcement of the Chrome OS operating system, which should raise a few red flags for Microsoft (Nasdaq: MSFT). But while that event is hogging the spotlight, Google also introduced another example of how one Google project leads to another -- and eventually to more online traffic and ad revenue.
The back story
I've heard that some people might watch YouTube videos at work (but of course I wouldn't have any firsthand experience of that). The Apple (Nasdaq: AAPL) iPhone can't play YouTube's videos directly because they are presented in the Flash format from Adobe Systems (Nasdaq: ADBE), which the iPhone can't handle -- but there's an app for getting around that problem. I'd imagine that a student or two in a packed college auditorium could sneak in a few YouTube videos in the course of a long, boring lecture on economics or calculus. In short, some people like to watch videos with the sound turned off. Other times, text just helps you understand better what people are saying. I'll fully admit to watching TV on a daily basis with the captions turned on, especially when faced with odd accents or the kind of dialogue where every word counts. And here's the kicker: When you convert spoken-word material into text, suddenly you can make it searchable, quotable, and translatable. And that makes better citizens in Google-land.
The news
The auto-captioning service will start small, with a handful of partners who specialize in lectures and instruction videos, including Yale, UCLA, PBS, and official channels of content produced by Google or YouTube staff. I expect to see a wide rollout in coming months when a few bugs and quirks have been worked out of the system. The idea is to eventually have captions on every video that needs them, and these auto-captioning tools simplify the process. As a corollary, the act of processing and then error-checking this first batch of videos should improve the quality of the transcription algorithms, which will make GOOG-411 and the voice mail features more useful as well.
The reasons why
So Google hands out 411 information for free, which must be a huge thorn in the sides of AT&T (NYSE: T) and Verizon (NYSE: VZ), among others. Does Google make money from that service? No. But the information gathered there improves several other services. Some of them domake money -- and I believe that YouTube is one of them by now -- so anything that draws people further into the Google experience is good for Google's top and bottom lines. A happy Google user surfs the Web more. Increased surfing means more ad clicks. And that's the real payoff. Google is the biggest Rule BreakerI've seen -- in more than just market cap. This article was originally published as How Free Services Make Google Richon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Boeing Wins!By Rich Smith (TMF Ditty)November 20, 2009 Beleaguered Boeing (NYSE: BA) backers got a rare bit of good news this week. (And every little bit helps, right?) Over in the nation's capital, the U.S. Court of Appeals for the Federal Circuit has just overturned a lower court's ruling that stripped Boeing of its contract to service KC-135 refueling tankers. As The Wall Street Journaldescribed the story, Boeing won the contract to service the planes back in September 2007. Alabama Aircraft Industries -- don't laugh: They were big enough to go toe-to-toe with L-3 (NYSE: LLL), Alliant Techsystems (NYSE: ATK), and Orbital Sciences (NYSE: ORB) for a NASA contractlast year -- proceeded to file suit, challenging the award's validity. And AAI was so convincing that the federal judge apparently agreed to rewrite the rules of the Air Force's request for proposals, resulting in an "impermissible substitution of the court's judgment for the [Air Force's]."
It's ... something ... all over again
For one thing, it wasn't Boeing that started this fight. Boeingwon the KC-135 contract fair and square; it was AAIthat raised a ruckus and rang up the lawyers. For another thing, Boeing filed its appeal of the lower court's verdict months before the Pentagon began pressing contractors to limit their award challenges to only extreme cases. This being the case, the precedent Boeing set when it agreed not to fight Northrop's KC-10 win has not been unsettled by this latest legal news.
At least, not yet
And not to sound like a war-profiteer here but ... yeah, the Pentagon's inability to get a final award out the door on so many contracts doeshurt investors. It's hard for our companies to profit from a contract when they can't even begin work till the lawyers are done wrangling. So forgive me for gloating a bit here but ... yes, I am glad to see AAI get its comeuppancein court. Related Foolishness: lawyers in briefs? And when did the tide begin to turn? Should we heed the Pentagon's plea for More Guns, Fewer Lawyers?This article was originally published as Boeing Wins!on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Today's 5-Star MoversBy Motley Fool StaffNovember 20, 2009 As fundamentals-focused long-term investors, Fools never base an investment decision on the daily gyrations of the market. But the market's daily price movements can be useful when looking for new stock ideas for further research, or to keep tabs on watch-list stocks. Below you'll find today's biggest movers among our five-star stocks -- the highest rating awarded by our CAPS community of more than 140,000 investors. Have a look, and then visit us on CAPSto dig in further on each of them. Up Today Sector Sector Past 30 Days Fools Saying Outperform Research
Internet Initiative Japan, Inc.
(ADR)
7.10% Internet Software and Services 0.80% 245 of 254
China Agritech Inc.
6.67% Chemicals (3.48%) 96 of 98
Mahindra Satyam
6.01% IT Services (3.53%) 1293 of 1340 Other Five-Star Internet Software and Services eBay Gmarket, Ltd. (OTC: EBGMY) no change Digital River, Inc. (Nasdaq: DRIV) down 0.57% Other Five-Star Chemicals Yara International (OTC: YARIY) up 2.95% LSB Industries, Inc. (NYSE: LXU) up 0.94% Other Five-Star IT Services Yucheng Technologies Limited (Nasdaq: YTEC) up 0.37% Integral Systems, Inc. (Nasdaq: ISYS) up 0.35%Come join us on CAPS to learn more about these and countless other interesting stock ideas. Click herefor a free sign-up. This article was originally published as Today's 5-Star Moverson Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 7 Stocks That Give You Real ValueBy Dan CaplingerNovember 20, 2009 If you like to buy stocks at bargain prices, you've had no shortage of prospects to look at lately. But now that the rallyhas pushed share prices back up to somewhat pricier levels, you can't afford to get stuck with stocks that turn out to be value traps.
A tricky time
In addition, even when the economy isn't in recession, earnings-based valuation methodsstill have their problems. Because earnings figures are determined by accounting rules, they can mean different things depending on the accounting conventions that a particular business chooses to use. Some industries will often use accounting methods that differ greatly from other industries, making it difficult if not impossible to compare one company's P/E ratio with a company in another industry.
Keeping it real
So out of curiosity, I looked for stocks that were still trading at attractive multiples not just to their earnings but also to their free cash flow over the past 12 months. Below are some of the stocks that came up: Stock P/E Ratio P/FCF Ratio Kimberly Clark (NYSE: KMB) 14.8 11.5 Heinz (NYSE: HNZ) 14.7 12.6 AT&T (NYSE: T) 13.0 8.0 Wellpoint (NYSE: WLP) 11.0 7.7 Travelers (NYSE: TRV) 9.8 7.6 L-3 Communications (NYSE: LLL) 9.7 8.0 Tesoro (NYSE: TSO) 5.1 7.8 Source: Capital IQ, a division of Standard and Poor's. Ratios based on trailing 12 month figures for earnings and free cash flow.
Just the beginning
In particular, when you look at trailing figures like the chart above does, you implicitly assume that the future will be at least as bright as the past. Because the economy has been in recession throughout the past 12 months, it's fairly reasonable to assume that if the economy recovers in the near future, most companies will enjoy a rebound both in earnings and free cash flow. Yet for at least some of the stocks in the table above, there are legitimate fears that the future may not look much better than the present. For instance, as a seller of health-care plans, Wellpoint faces a great deal of uncertainty concerning the federal government's health-care reform bill. Although the current plan seems to make many allowances for private insurers -- which would seem to be good news for Wellpoint and its industry peers -- details in any final plan could threaten profits. Similarly, future cuts in defense spending could endanger profitability at L-3. The recession has put refiners like Tesoro at the mercy of bank creditorswho might force asset sales that could damage their core business. You'd want to have a firm grip on exactly how bad things could get for these companies before you conclude that they're good bargains.
The power of information
This article was originally published as 7 Stocks That Give You Real Valueon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. This Just In: Upgrades and DowngradesBy Rich Smith (TMF Ditty)November 20, 2009 At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing. But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.
And speaking of the best ...
All of this adds up, in Broadpoint's mind, to a valuation
picture where the "risk/reward is now compelling"
– and an upgrade from "neutral" to "buy."
But
noneof this explains why investors should be feeling
so sour on AMD. So what gives?
 Stock Broadpoint Says: CAPS says: Broadpoint's Picks Beating (Lagging) S&P By: NVIDIA (Nasdaq: NVDA) Outperform **** 97 points [four picks] MEMC Electronic (NYSE: WFR) Outperform ***** (55 points) Sigma Designs (Nasdaq: SIGM) Outperform ***** (7 points) [two picks] RF Micro Devices (Nasdaq: RFMD) Outperform **** (11 points) Applied Materials (Nasdaq: AMAT) Outperform **** (16 points) So you can see why investors might be just a wee bit
skeptical about Broadpoint's bullish prognosis on AMD.
According to the analyst, AMD's improved balance sheet and
newly signed peace treaty with Intel means will we should not
see: "a price war with Intel, but a feature/performance
battle at already established market price points."
I also can't help but notice that AMD hasn't fared awfully well in its past contests with Intel. Over the past five years, AMD has averaged $850 million in negative free cash flowper year. Over the past 12 months, the company burned through $1.3 billion in cash. And while Broadpoint tells us AMD's debt situation is looking up, my reading of the SEC filings shows the company actually has not $3.7 billion, but $5.3 billion in debt (versus $2.5 billion cash and equivalents, and Intel's $1.2 billion on the way). Seems to me, that leaves AMD still $1.6 billion in the hole, versus a cash-rich Intel.
Foolish takeaway
But they're great reasons to sell. This article was originally published as This Just In: Upgrades and Downgradeson Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Now Is the Time to Buy RiskBy Tim HansonNovember 20, 2009 You may have heard that now is the time to buy risk. In
fact,
BlackRock chief investment officer Bob Doll
told CNBC viewers in October that "risk assets will continue
to outperform safe assets."
In fact, Dr. Reddy's is one of the companies we're slated
to meet with during our upcoming
Motley Fool Global Gainsresearch trip to India. And
while it's quite a bit smaller and pricier than the classic
blue chip, we like its opportunity to bring needed generic
and other pharmaceuticals to the world's emerging markets.
This article was originally published as Now Is the Time to Buy Riskon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Chavez Wants to Redo the 'RithmeticBy Kris EddyNovember 20, 2009 When looking at a foreign country's gross domestic product, it's worth asking how the figure is calculated, since not everyone plays by American rules. Consider oil-rich Venezuela. Its central bank reported Tuesday that the country's economy shrank 4.5% in the third quarter, according to a blog by Daniel Molinskiin The Wall Street Journal. It continues: " 'We simply can't permit that they continue calculating GDP with the old capitalist method,' President [Hugo] Chavez said in a televised speech before members of his socialist party. 'It's harmful.' ... " ... [Chavez] said the weak economic growth numbers are mostly the result of 'capitalist calculations' that don't give proper credit to economic activity in a socialist setting." Chavez also acknowledged oil's role. If you're thinking of investing in Venezuela or already own shares in energy companies that do business there -- like Total (NYSE: TOT), Chevron (NYSE: CVX), Statoil (NYSE: STO), or BP (NYSE: BP) -- you have to ask yourself what the president's comments mean. Scroll down and sound off in the comments box about whether there's likely to be a refiguring of GDP that takes better account of socialist programs, and what that might mean for the economy and foreign companies. This article was originally published as Chavez Wants to Redo the 'Rithmeticon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. This Moneymaker Is Dumping Its DeadweightBy Chris JonesNovember 20, 2009 Global Payments (NYSE: GPN) shareholders can breathe a sigh of relief. The credit card transaction processor has finally found a buyer for its money transfer business. The sale, long in the making, essentially amounts to the removal of a growth-sucking leechfrom the rest of the company. Pending regulatory approval and license transfers, Global will sell the money transfer unit to a private equity firm for a price between $85 million and $110 million, with the precise amount to be pinned down at closing based on its operating performance. As a result, management expects fiscal-year earnings per share from continuing operations without money transfer to come in between $2.31 and $2.42. That range is lower by about 5% than originally anticipated. Although the company's stock has fallen since the announcement, I think the long-run benefits will more than make up for the short-term pain.
Concentrated focus
Additionally, the private equity buyers will now assume the burden of fending off competition from niche monster Western Union (NYSE: WU), which was arguably an unwinnable fight from Global's standpoint. Western Union attracts a globally diversified revenue stream, which totaled more than $5 billion in the past 12 months. It has boatloads of cash on its balance sheet that it can spend toward cementing its place at the head of the class in money transfer. In comparison, Global's presence in the industry was more of a sideshow than anything else, as it did little more than distract the company from its breadwinning card transaction processing activities.
That's the way you do it
When you pay with plastic, whoever you're buying from pays a number of fees. Merchant acquirers pocket a portion of the fee, with the remainder getting split between the card companies, like Visa (NYSE: V) and MasterCard (NYSE: MA), and the banks that issue the cards, like JP Morgan Chase (NYSE: JPM) and Citigroup (NYSE: C). Visa and MasterCard both farm out merchant acquisitions to third parties like Global, but they have an interest in setting up merchant terminals in untapped markets. That essentially lets acquirers like Global step in after much of the grunt work has already been done. With its deadweight money transfer business out of the way, Global can solely focus on its most profitable core business. Who has the best deal in the credit card business: merchant acquirers, card networks, or bank issuers? Let me know what you think in the comments section below. This article was originally published as This Moneymaker Is Dumping Its Deadweighton Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 5-Star Stocks Worth a LookBy Morgan HouselNovember 20, 2009 Despite the fierce rally, high-quality companies at great prices can still be found. Watch a few minutes of CNBC. Read a few blogs. Talk to a few opinionated people. There's no doubt about it: Fear still isn't hard to find. And that's great news for those on the hunt for great investments.  Using our Motley Fool CAPS ranking system's screening tool, I scanned for a few five-star-ratedcompanies -- the highest our CAPS community offers -- that might aid your bargain-hunting ambitions. Have a look: Company Recent Price TTM Return on Equity Forward P/E Ratio Abbott Laboratories (NYSE: ABT) $52.96 27.5% 12.8 3M (NYSE: MMM) $77.25 22.8% 15.8 Diageo (NYSE: DEO) $68.27 48.2% 12.9 UnitedHealth (NYSE: UNH) $28.63 16.9% 9.3 Western Union (NYSE: WU) $19.28 728.5% 13.7 Data from Motley Fool CAPS and Yahoo! Finance, as of Nov. 19, 2009. None of these are necessarily recommendations -- just good starting points for you to dig a little deeper. You can rerun an updateof this screen yourself, if you like.
A closer look at Diageo
1. International exposure
Segment Percentage of Revenue North America 31.4% Europe 34.8% Other International 22.8% Asia Pacific 10.3% Source: Capital IQ, a division of Standard & Poor's. Why is this important? Two reasons. One, it gives exposure to areas of the world that are still growing at a good clip, like China. Two, it gives a solid weak-dollar hedge by providing sales in a broad range of international currencies. As CAPS member 3dollarhedgefundwrites: "[W]hat makes the company so attractive to us at this price is the ability to use US dollars at their current purchasing power to buy future earnings in a variety of world currencies, which increasingly will derive from consumers in emerging markets."
2. Cheers!
3. Cash flow flows
4. Incredible brands
5. Our CAPS universe loves it
You take it from here
For related Foolishness: Everything Buffett Needs to Know, He Learned Right Here Bargain Stocks Are Everywhere Was This Small Cap Crashproof or Just a Lucky Survivor?This article was originally published as 5-Star Stocks Worth a Lookon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. An Open Letter to the Federal ReserveBy Matt Koppenheffer and Morgan HouselNovember 20, 2009 Dear Ben Bernanke and distinguished members of the Federal Reserve: We are writing today to formally solicit your help in obtaining approvals to start a new bank holding company, Money Unlimited. We of course understand that the approval process for a new bank is typically done through the FDIC, but as the Federal Reserve plays a crucial role in our business plan, we hope that you can expedite the process. First, let us assure you that we will start from day one as a very well capitalized institution, with no need to raise outside capital. While actual cash is on the lower end of the spectrum, we both own stock portfolios that we plan to use as collateral for our banking operations. Our current holdings include Berkshire Hathaway (NYSE: BRK-B), Johnson & Johnson (NYSE: JNJ), Procter & Gamble (NYSE: PG), and Coca-Cola (NYSE: KO). For the purposes of this application, we are choosing to mark these assets to model rather than to market. Our basic assumptions include 7% U.S. GDP growth, 12% global GDP growth, a 4% U.S. unemployment rate, rising corporate profitability, U.S. debt repudiation, and the end of cloudy days. Â Â In addition, Matt owns a home in Las Vegas. Though this asset is currently considered "under water" based on market valuations, a house down the street just sold for slightly more than Zillow.com said it was worth. We extrapolated that gain into infinity and determined the housing bust is simply a figment of the media's imagination. Now the good news: Without getting into the complexities, our models show our combined net worths at just over $1 billion, all of which we'll use as capital for Money Unlimited. We hired a 22-year-old right out of college who's pretty darn good with Excel. He assures us it's a conservative figure. While neither of us has any "formal" banking experience, our time-tested business model more than compensates for this apparent shortfall. As with Goldman Sachs (NYSE: GS), which was recently made a bank holding company, we have no plans to engage in actual banking operations such as deposit-taking and lending. That stuff just sounds hard. Regulators are always all, "You need to lend money to people who can pay you back." We'd rather just avoid that whole sticky situation altogether. Instead, we're going to leverage our borrowings from the Federal Reserve to create a massive, money-spewing trading operation. It's quite simple, really. We're going to borrow money from the Federal Reserve at 0%, then lend it back out to the U.S. Treasury at 3%. The Treasury can then use that money for fantastic programs like Cash for Clunkers. If we leverage our $1 billion asset base 20-to-1, we'll pull in $600 million in year one without breaking a sweat. Because we want to do what's right for the economy, we plan to keep operating expenses to a bare minimum and limit our bonuses to $20 million each for the first five years. By plowing the remaining money back into the bank -- and, of course, leveraging it at 20-times -- we'll be able to grow like a weed. Assuming you folks at the Federal Reserve continue to do your part by lending money at 0%, we expect to clear $120 billion in assets in five years flat. And don't worry about us. We understand that hard work and tangible economic contributionsneed to be rewarded, so in the sixth year of operation we both plan to take $500 million bonuses and use company money to buy ourselves private jets. Money Unlimited will offer other significant benefits to the economy as well. We'll compete against banking organizations such as Goldman Sachs, JPMorgan Chase (NYSE: JPM), and Citigroup (NYSE: C), who are no doubt engaging in similar practices. ( Have you seen their earnings?) Plus, we'll allow other banks to buy credit defaults swapsagainst us. As any financial professional worth his salt can tell you, this "increases liquidity" and helps small businesses. We can't tell you exactly how that works, but salesmen who wear shiny cuff links and talk really fast tell us it's true. But helping the economy isn't all we're about. As Goldman Sachs' CEO Lloyd Blankfein recently put it, this is "God's work," and we certainly don't disagree with that. Before long, the founders of Money Unlimited expect our trading operations will become so large that we will be considered "too big to fail."While some may consider this a concern, we disagree. There should be more competition among "too big to fail" institutions so that the risk of a Chernobyl-type catastrophe in our financial system is spread more broadly. Thank you for your time and we look forward to your help obtaining a speedy approval for Money Unlimited. Sincerely,
This article was originally published as An Open Letter to the Federal Reserveon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Delve Into Dell's MiseryBy Anders BylundNovember 20, 2009 It looks like Dell (Nasdaq: DELL) is falling behind the competition. The third quarter should have been a solid success but came in closer to a limp squib. Chief rival Hewlett-Packard (Nasdaq: HPQ) reports earnings next week, and we don't have any fresh third-party market reports from the likes of iSuppli, or Gartner (NYSE: IT). But I think it's fair to use leading chip supplier Intel (Nasdaq: INTC) as a proxy for the computer market, and Dell is lagging far behind Intel's latest reported results. While Intel reported a 17% jump in sales from one quarter to the next, Dell had to settle for a far less impressive 1% sequential sales boost. At $12.9 billion, Dell's revenue shrank 15% from the year-ago period. The story gets even more sordid on the bottom line, where Intel's earnings moved from red ink to black in the quarter-over-quarter comparison and stayed nearly flat year over year. Dell made money, but at $0.17 per share, it was less than half of the profits seen last year and even a drop from last quarter's $0.24 per share. And if you don't trust Intel as a proxy, IBM (NYSE: IBM) told much the same story. Dell's management pointed out that corporate IT spending is thawing after a deep freeze, which should be good for Dell because the company makes 80% of its sales to commercial enterprises. Business is improving from month to month, and Dell hopes to keep that trend going as businesses start to refresh their technology budgets and adopt the new Microsoft (Nasdaq: MSFT) Windows 7 platform. But none of that can explain why Dell is doing so much worse than Intel, and by extension, compared with the larger computer sector. The only explanation that seems to make any sense is if Dell is losing market share to rivals like HP and Lenovo , not to mention IBM in the oh-so-important enterprise market. So I will expect independent reports and earnings from the other guys to bear that story out over the next few weeks. Dell's stock is down 10% today. Some might call it a buy-in opportunity, but I think the company deserved this slap to the face. The comments box below can't wait to hear what you think. This article was originally published as Delve Into Dell's Miseryon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Warren Buffett Is a Growth InvestorBy Matt KoppenhefferNovember 20, 2009 Berkshire Hathaway 's Warren Buffett is a value investor, right? Everyone knows that! Well don't tell that to Gerald Martin and John Puthenpurackal of American University and UNLV. In 2008, the two completed what they call "the first rigorous examination of Berkshire Hathaway's investment performance" -- a paper that analyzed Buffett's superior investment performance and looked at his investing style. Besides concluding that Buffett's superior investment returnssince 1976 were more than just luck -- as if we didn't know that already! -- Martin and Puthenpurackal concluded that Warren Buffett is ... wait for it ... a large-cap growthinvestor. The definition of growth that the researchers used was one that separates value and growth stocks based on the inverse of book valuemultiples and classifies value stocks as those with the highest book-to-market ratio and pegs those with the lowest as growth stocks. According to the paper, growth stocks accounted for more than 40% of Berkshire's investments, while true value picks made up less than 20% of Buffett's buys. But let's not get too crazy here. After all, Buffett is still very much a value investor by his own definition -- that is, he only buys stocks that offer a discount to the company's intrinsic value. But what this study does suggest is that if we're looking for Buffett-esque stocks, our best bet is to look for high-quality companiesrather than rummage through the bargain bin. To track down some stocks that might fit the bill, I've enlisted the help of The Motley Fool's CAPS communityand its stock screener. I focused my search on stocks that are returning 10% or more on their equity, are trading abovebook value, and have been highly rated by the CAPS community members. (You can run the same screen by clicking here.) Company Return on Equity (TTM) Book Value Multiple
CAPS Rating
Halliburton (NYSE: HAL) 18.9% 3.3 **** Southern Co. (NYSE: SO) 10.5% 1.7 **** Royal Bank of Canada (NYSE: RY) 11.2% 2.7 **** Precision Castparts (NYSE: PCP) 17.3% 2.7 ***** Nike (NYSE: NKE) 16.4% 3.4 **** Source: CAPS as of Nov. 19. TTM = trailing 12 months. While these aren't meant to be formal recommendations, they're a great place to kick off some more research. In fact, why don't we start by taking a closer look at Royal Bank of Canada.
What would Warren do?
Despite the fact that Buffett made a significant investment in investment banking powerhouse Goldman Sachs (NYSE: GS) last year, he'd probably agree when I say that the best banksare typically the most boring. While slinging MBSes, CDOs, CDSes, and any number of other acronyms can add some gusto to the bottom line, we've also seen how they can topple even seemingly powerful financial companies. Royal Bank of Canada is far from perfect; it does significant business in risky areas like credit default swaps, and it has a notably high assets-to-equity ratio of 19-to-1. However, the majority of its income comes from good old-fashioned banking and tried-and-true financial services such as wealth management and insurance. In fact, management specifically targets its capital markets and investment banking business to account for only 25% of the bank's total business. Â Better still, the company derives most of its income from its home base of Canada, which has looked more like Switzerland lately when compared to the U.S. banking nightmare. Heck, if we consider the mess at UBS , Canada may look more like Switzerland than Switzerland -- except maybe for the tax-evading secrecy part.
CAPS or bust
I have been a Royal Bank of Canada customer since about 1991. I have recently closed all of my other bank accounts because RBC has proven to be the most reliable, fair, and consistent financial institution I have ever worked with. Plus, they are one of the few that was managed sensibly BEFORE the mortgage meltdown and was not damaged by irrational behavior. But here's the real question: What do you think of RBC's prospects? Let the CAPS community know by clicking overand sharing your opinion with the 140,000 investors already participating. Although RBC offers a pretty tasty 3.4% yield, fellow Fool and dividend-lover Adam Wiederman has dug up the best yields for the next 10 years. This article was originally published as Warren Buffett Is a Growth Investoron Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 3 Stocks Hitting High NotesBy Motley Fool StaffNovember 20, 2009 When a stock hits a fresh high, it can mean that it’s on its way to greatness-- or that it has run its course. Even with the risk of the latter, searching for these outperformers can reveal companies that are doing something right, much to their investors' delight.
Let’s dig deeper
Here are three such stocks: Today’s Intraday Price Industry CAPS Rating (out of 5) Fools Saying Outperform DIRECTV Group, Inc. (Nasdaq: DTV) $31.88 Media
561 of 613 The Coca-Cola Company (NYSE: KO) $57.56 Beverages
4743 of 4992 ION Geophysical Corporation (NYSE: IO) $5.85 Energy Equipment and Services
728 of 754 Source: Motley Fool CAPS, as of November 20, 2009 Top-rated media companies: Marvel Entertainment, Inc. (NYSE: MVL): Stock price is 118% higher than last year. Focus Media Holding Limited (ADR) (Nasdaq: FMCN): Stock price is 103% higher than last year.Top-rated beverage companies: Companhia de Bebidas das Americas (ADR) (NYSE: ABV): Stock price is 151% higher than last year. Coca-Cola HBC S.A. (ADR) (NYSE: CCH): Stock price is 93% higher than last year.Join us on CAPSto learn more about these and countless other interesting stock ideas. This article was originally published as 3 Stocks Hitting High Noteson Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 4-Star Stocks on the UpswingBy Motley Fool StaffNovember 20, 2009 Sadly, there's no such thing as an ultimate buy signalwhen it comes to investing in stocks. Identifying companies with the wind at their backs takes time, patience, and a good dose of due diligence. There is, however, an easy way to increase your odds of finding the stocks that will beat the market. At Motley Fool CAPS, the Fool's investing community of more than 140,000 members, we've found that our "five-star portfolio" is up 15.31% between January 2007 and April 2009, compared to a loss of 40.6% for the S&P 500. To fully capture the upside potential of those highly rated stocks, it makes sense to identify them just as soon as they are upgradedto four- and five-star status. Fortunately, our CAPS screenernow makes it possible to do this. Below, for example, is a list of companies that have been upgraded to four-star status from three stars just yesterday. These stock ideas are only a starting point, of course. Be sure to join us on CAPSto dig in even further. Company All-Stars Saying Outperform Patterson-UTI Energy, Inc. (Nasdaq: PTEN) 830 of 876 Republic Services, Inc. (NYSE: RSG) 289 of 306 Copa Holdings, S.A. (NYSE: CPA) 132 of 152 Stratasys, Inc. (Nasdaq: SSYS) 258 of 277 Alleghany Corp (NYSE: Y) 264 of 283 Genomic Health, Inc. (Nasdaq: GHDX) 147 of 158 Data from Motley Fool CAPS, November 20, 2009 Come join us on CAPS, absolutely free, to learn more about these and countless other interesting stock ideas. This article was originally published as 4-Star Stocks on the Upswingon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 5-Star Stocks on the UpswingBy Motley Fool StaffNovember 20, 2009 Sadly, there's no such thing as an ultimate buy signalwhen it comes to investing in stocks. Identifying companies with the wind at their back takes time, patience, and a good dose of due diligence. There is, however, an easy way to increase your odds of finding the stocks that will beat the market. At Motley Fool CAPS, the Fool's investing community of more than 140,000 members, we've found that our "five-star portfolio" is up 15.31% between January 2007 and April 2009, compared to a loss of 40.6% for the S&P 500. In order to fully capture the upside potential of those five-star stocks, it makes sense to identify them just as soon as they achieve five-star status. Fortunately, our CAPS screenernow makes it possible to do this. Below, for example, is a list of companies that have been upgraded to five-star status from four stars just yesterday. These stock ideas are only a starting point, of course. Be sure to join us on CAPSto dig in even further. Company All-Stars Saying Outperform Lindsay Corp (NYSE: LNN) 291 of 319 Meridian Bioscience, Inc. (Nasdaq: VIVO) 456 of 468 FactSet Research Systems, Inc. (NYSE: FDS) 350 of 361 Compass Minerals International, Inc. (NYSE: CMP) 634 of 653 Vodafone Group Plc (ADR) (NYSE: VOD) 606 of 652 POWERSHS DB MULTI SECT COMM (NYSE: DBE) 105 of 109 Data from Motley Fool CAPS, November 20, 2009 Come join us on CAPS, absolutely free, to learn more about these and countless other interesting stock ideas. This article was originally published as 5-Star Stocks on the Upswingon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 3 Reasons to Buy Las Vegas Sands TodayBy Dave MockNovember 20, 2009 Historically, tumultuous times offer some of the best opportunities to buy stocks, and the market's recent mess surely qualifies. Many investors are keeping their distance from casino and gaming stocks these days, but a good deal still think there's value in casino operator Las Vegas Sands (NYSE: LVS). In our Motley Fool CAPScommunity, nearly 81% of the 1,662 investors rating the company remain bullish, so there's no shortage of reasons Las Vegas Sands will thrive, three of which I've highlighted below. But here at The Motley Fool, we're all for looking at both the good and bad sides of an investment. Once you're done with this article, you can read the case against the stock, weigh in with your own comments below, or rate Las Vegas Sands yourself in CAPS.
1. Macau
2. The house always wins
3. Skin in the game
To see details of what CAPS members are saying nowabout Las Vegas Sands, just head on over to Motley Fool CAPSand have a look -- or add your own thoughts in the comments box below. This article was originally published as 3 Reasons to Buy Las Vegas Sands Todayon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. It's Time to Invest in IndiaBy Jennifer SchonbergerNovember 20, 2009 If you think the U.S. market has had a torrid run this year, take a look at India. That country’s equity market has doubled since March, with ADRs like Dr. Reddy's Laboratories (NYSE: RDY) and Tata Motors (NYSE: TTM) more than doubling and tripling, respectively. Some might think India’s market is overheated given this remarkable run, but in reality its stocks are actually quite fairly valued. On a price-to-earnings basis, the Indian market is trading in line with its long-term average, according to several experts I spoke with. But as Warren Buffett would say, put next year away. If you're going to invest in India, you should be investing for the long-term story: the growth of an emerging market into a developed one. Investing in India for the long haul -- the next 10 years or more -- is increasingly attractive now, considering the country's domestically driven economy, focus on the software industry, democratic government, and years of growth on the horizon. Pinakin Patel, client portfolio manager for Far East equities at J.P. Morgan Asset Management, a unit of JPMorgan Chase (NYSE: JPM), is very bullish on India. "I think it's very difficult to see a pullback within India," Patel said in a recent interview. "We have come a long way this year, but the long-term story remains attractive." Patel expects India’s GDP to grow 6.5% to 7% in its next fiscal year (which ends in March). This is on par with the historical average GDP growth of 7%. Patel projects India's long-term sustainable growth rate to be 7%. He says India still has another 20 to 40 years before becoming a mature economy. What's more, Patel says he thinks India will move along the growth curve at a faster pace than has historically been seen in underdeveloped countries, thanks to its positive demographics, a positive urbanization story, the strong position of the consumer, the corporate climate, and the government.
Generating growth internally
Additionally, the Indian economy's focus on the software services industry (as opposed to the hardware industry) has served the country well, enabling India to weather the downturn better than other economies that focus on hardware. "If you look at the development of India, which was very dominant in software, and compare that with the likes of Taiwan, which was clearly very dominant in the hardware side, it's the likes of Taiwan that have suffered more in this downturn," Patel said.
New government benign for business
Indian corporations are now in a position to project their investment plans forward, because they know there is a stable political policy in place, one that won’t change with a new regime. As a result, Patel says we should expect to see greater investment by corporations within themselves, as well as the Indian economy. "The government is in a better position to bring about further investment in infrastructure because they have a mandate to push India forward from a growth perspective," Patel said. "Given that the newly elected government will remain in power for another five years without any question marks over to their ability to rule, [this] makes it very positive for corporations, as well as foreign direct investment."
Where to invest
Patel is also positive on IT, but remains focused on investing in quality companies with good earnings growth. The fund manager also favors selective consumer discretionary stocks, including Indian auto stocks, agriculture-related stocks, and manufacturers. In contrast, he is substantially underweight in the telecom sector because of a price war that recently erupted between the major mobile providers in the local market, squeezing margins. Patel's favorite companies that trade on U.S. exchanges include Infosys Technologies (Nasdaq: INFY), HDFC Bank (NYSE: HDB), and ICICI Bank (NYSE: IBN). Indian companies are expected to notch a robust 20% in average earnings growth in 2010, Patel says. Contrast that with the U.S. -- Standard & Poor's forecasts that the average domestic company in the S&P 500 will grow earnings at a rate of 13.9% in 2009 (the closest equivalent to India's fiscal 2010).
Challenges
The client portfolio manager says India's fiscal deficit poses a large constraint as well. Patel points to the fact that India has been effectively subsidizing oil at high rates, and that tax collections remain low relative to other countries. He also says geopolitics cannot be ruled out with China and Pakistan bordering India. "Given what's happening in Pakistan right now, and given that both Pakistan and India are nuclear powers ... I think it's important to be aware of that risk," Patel said. When it comes to emerging economies like India, it’s important for investors to balance the unique risks against the very real potential for high long-term growth -- and invest accordingly. Interested in investment opportunities in India? Our Global Gains research team is traveling there at the end of the month to meet with the country's top companies and investors. You can get all of their special dispatches from the field delivered right to your inbox free of charge -- just click hereto sign up. Fool contributor Jennifer Schonberger does not own shares of any of the companies mentioned in this article. HDFC Bank is a former Global Gains recommendation. The Motley Fool has a disclosure policy. This article was originally published as It's Time to Invest in Indiaon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Wall Street's 10 Favorite Stocks Right NowBy Ilan MoscovitzNovember 20, 2009 On the heels of some seriously ugly macroeconomic news and last year's market plunge, investors withdrew more than $41 billion from their mutual funds in just the first three months of this year ... before turning around and dumping $33 billion back in. Things are scary out there, and investors are (understandably) freaking out about what they should be doing right now.
All that pressure got you down ...
Despite my long-standing misgivings about the worthiness of Wall Street's advice -- especially now, after a year of watching its business sense nearly destroy our entire economy -- I wanted to find Wall Street's 10 favorite stocks. So I built a screen using Capital IQ, a great institutional software package. I sought out the stocks with the most analyst "net buy" recommendations, with net buys defined as buys minus sells. Here they are: Company Analyst Net Buy Recommendations % Owned by Institutions* Market Cap Activision Blizzard (Nasdaq: ATVI) 17 37% $15 billion Gilead Sciences 15 87% $42 billion Qualcomm (Nasdaq: QCOM) 13 77% $76 billion St. Jude 13 79% $12 billion Wal-Mart 12 33% $209 billion Advance Auto Parts 11 95% $4 billion eBay (Nasdaq: EBAY) 10 68% $30 billion SunPower (Nasdaq: SPWRA) 10 83% $2 billion Pharmasset 10 56% $0.6 billion United Therapeutics 10 97% $2 billion Source: Capital IQ, a division of Standard & Poor's. Includes domestic stocks trading on major exchanges. *Approximate. Institutional ownership may exceed 100% because of short sales or a lag time in the reporting of institutional holdings. So what general themes can we gather from this list? susceptibility to deadly value traps, chronically unhinged earnings estimates, and proclivity to overvalue stocks, I was pleasantly surprised to see so many strong names on the list. eBay, Activision Blizzard, and Wal-Mart have competitive advantages from their network effects, brand, and scale, respectively. Activision, Gilead Sciences, and Qualcomm enjoy strong support from our 140,000-member CAPS investment community. Seven of Wall Street's 10 favorite stocks hail from the IT and health-care industries. Hewlett-Packard (NYSE: HPQ), Google , and Genzyme (Nasdaq: GENZ) also ranked very highly. We could read this as an informed endorsement that these industries will lead the recovery. Analysts could also be betting that these businesses will benefit from stimulus spending on broadband access and the prospect of wider health insurance availability. Or it could just mean that even during recessions, Wall Street can't help getting wrapped up in its enthusiasm for exciting growth industries. Almost by definition, most of Wall Street's favorite stocks are widely followed, widely owned, large, prominent companies. Twenty-nine analysts cover these stocks on average; nearly all have heavy institutional ownership, and most are large caps valued at more than $10 billion.While many of them could turn out to be great investments, do any of Wall Street's 10 favorite stocks have what it takes to be among the market's 10 best-performingstocks?
Let's find out
For each of the past four years, Tim Hanson, former microcap analyst at Motley Fool Hidden Gems , has published his findings on the market's best-performing stocks. Here is his most recent data: Company Return, 1999-2008 Jan. 1, 1999 Market Cap Hansen Natural 4,801% $53 million Celgene 4,167% $252 million Quality Systems 4,002% $26 million Clean Harbors 3,953% $16 million Green Mountain Coffee Roasters 3,786% $19 million Deckers Outdoor 3,374% $19 million Almost Family 3,122% $9 million XTO Energy 2,992% $343 million Southwestern Energy (NYSE: SWN) 2,911% $187 million FTI Consulting 2,907% $16 million Source: Capital IQ. What characteristics do the market's top 10 stockshave in common? They certainly don't belong to a common industry -- Hansen Natural makes natural fruit juices and energy drinks, Deckers sells Ugg boots and other footwear, Almost Family does home nursing, and Southwestern Energy searches for natural gas. These are about as varied and as seemingly random a collection of companies as you could hope to find. But the 10 best-performing stocks did share three special things in common before they made their incredible runs. They were: 1. Ignored. 2. Obscure. 3. Small. While many of the stocks on Wall Street's top 10 list may be excellent choices, they don't appear to share the three qualities that seem so crucial to stellar performance. Stocks possessing these traits not only have more opportunities for growth, but they also attract less coverage from Wall Street -- meaning they're more likely to be mispriced. Ironically, these very qualities make it nearly impossible for any of the best-performing stocks to rank among Wall Street's favorites! And as I've shown in a previous column, those attributes are especially attractive today, when select stocks are cheap. According to data I compiled from Ibbotson Associates, a leading authority on investing research, small stocks outperformed large stocks over the past 13 recessions by an average of four percentage points annually!
Small is good
Our team at Hidden Gems looks exclusively for promising stocks that are too small to find their way onto Wall Street's radar. They may not be the most recommended stocks, but that's exactly the point. If you're looking for some more ideas, click hereto read all about our favorite small-cap bargains, free for the next 30 days. Already a member ofHidden Gems ? Log in at the top of this page . This article was first published April 3, 2009. It has been updated. Ilan Moscovitz owns shares of Hansen Natural and Google. Quality Systems, Activision Blizzard, and eBay areStock Advisor recommendations. Hansen Natural, Green Mountain Coffee Roasters, and Google areRule Breakers picks.Motley Fool Options recommends a bull call spread on eBay. The Fool owns shares of XTO Energy and has a disclosure policy . This article was originally published as Wall Street's 10 Favorite Stocks Right Nowon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. These Tech Stocks Will Make Me RichBy Tim BeyersNovember 20, 2009 Welcome to week 67 of my stock-picking throwdownwith Mr. Market. Let's get right to the numbers: Company Starting Price* Recent Price Total Return Akamai (Nasdaq: AKAM) $22.23 $24.25 9.1% Harris & Harris $6.22 $4.50 (27.7%) IBM $125.82** $127.54 1.4% Oracle $22.58** $22.39 (0.8%) Taiwan Semiconductor $9.81** $10.42 6.2% AVERAGE RETURN -- -- (2.36%) S&P 500 SPDR $123.09** $109.82 (10.78%) DIFFERENCE -- -- 8.42
Source: Yahoo! Finance.
That's two weeks in a row, Mr. Market. My tech portfolio took advantage of a shaky S&P to gain 76 basis pointsin this three-year contest. ( Go hereto see how it all began.) If Mr. Market can't decide which way is up in the coming weeks, it may be due to the uncertainty that follows having a handful of megabanks hold the most valuable cardsin the deck we call the U.S. economy. Combined, Bank of America , JPMorgan Chase (NYSE: JPM), and Citigroup hold some $6 trillion in assets. Don't think that's a problem? That the banks have smartened up and will no longer act cavalierly about the possibility of reckless behavior ushering in financial armageddon? Yeah, take a closer look at the fantasy world Goldman Sachs (NYSE: GS) lives in.
The week in tech
Consider Google (Nasdaq: GOOG). Yesterday, the search king demonstrated its widely anticipated Chrome OSto a gaggle of reporters gathered at its Silicon Valley headquarters. Not surprisingly, we're seeing mixed reactions. Skepticscorrectly argue that (a) Chrome OS isn't built on anything that's fundamentally new, and (b) it doesn't resemble any operating system in use today. At best, they call it a souped-up browser. They very well could be right. Chrome OS is still a year away from launch. Developers could use that time to create a mind-blowing environment, but we're not there yet. Not even close. What's more, Chrome OS is a tribute to tech irony. The underlying code may be open-source, but Google will enact strict controls over what sorts of hardware will be allowed to run the OS. Among the requirements: premium solid-state drives. Wave goodbye to cheap Chrome netbooks, kids. No way is Hewlett-Packard (NYSE: HPQ) going to sell a solid-state system for under $500. Microsoft (Nasdaq: MSFT) and Nokia (NYSE: NOK) must be thrilled. So that's the bad news. Here's the good: More software is moving into the cloud, and what Google has shown of Chrome OS looks nice. Rudimentary, yes, but also nice. Mix in a dollop of security and a few dashes of extensible code from third-party developers, and Chrome OS could lead a new market for functional Web appliances. Either way, I think my Foolish colleague Anders Bylund has it right. He says the surge in interest in Chrome suggests that more users are trusting in the Web, and that's really all that matters for Google. Yet Anders and I could be wrong. One of the great truths about tech is that overnight successes take years to develop and even longer to create value. Patience and diversification are the keys to tech investing gains. Look at David Gardner. He produced a decade of 20% returnsin the real-money Rule Breaker portfolio by betting on a broad portfolio of innovators, and holding for the long term. Tom Gardner's " simpleton portfolio" was also a 10-year winner. I believe that, with my tech portfolio, I will achieve similar success.
Checkup time!
There's your check-up. See you back here next week for more tech stock talk. Get your clicks with more techie Foolishness : this storage stockfly so high? One telco says it's time to go all-in on WiMAX. A tussle in telco? Nah, it's more like a catfight.This article was originally published as These Tech Stocks Will Make Me Richon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Drug Companies Targeted, AgainBy Kris EddyNovember 20, 2009 Price gouging is unacceptable; anticipatoryprice gouging is "especially offensive." So say four House Democrats seeking a review of drug company pricing practices. A Democratic senator wants to know if drug companies are trying to make up for concessions they've promised for health-care reform. The New York Timesreportsthe drug companies' side: Drug companies do not deny having raised wholesale prices at the highest rate in years. But they say it has nothing to do with the impending health care legislation. They say the price increases are necessary to maintain profits for research and employment in the face of a difficult business environment, which includes a slowdown in sales of many brand-name products, expiring patents and increasing competition from generic drugs. What do you think? Should drug companies such as GlaxoSmithKline (NYSE: GSK), Eli Lilly (NYSE: LLY), Johnson & Johnson (NYSE: JNJ), or ViroPharma (Nasdaq: VPHM) be worried about this side street in the road to health-care reform? Sound off in the comments box below. This article was originally published as Drug Companies Targeted, Againon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 5 Stocks That Laugh at Wall StreetBy Rich DupreyNovember 20, 2009 In these heady economic times, Mr. Market seems to enjoy dogpiling on any stock that dares to fall short of analysts' estimates. To defy that trend, we're here to celebrate stocks that didn't merely meet Wall Street's predictions, but laughed in analysts' facesby leaving their miserly forecasts in the dust. The companies below have all soundly trounced earnings estimates by 20% or more in the last quarter: Company
CAPS Rating
EPS Surprise Est. EPS
Growth
Est. 5-Year Growth Abercrombie & Fitch (NYSE: ANF) ** 50% (6%) 11% Capital One Financial (NYSE: COF) * 571% 111% 11% Conseco (NYSE: CNO) ** 32% (15%) 6% NVIDIA (Nasdaq: NVDA) **** 90% 194% 13% SanDisk (Nasdaq: SNDK) **** 188% 140% 16% Source: Yahoo! Finance.  Nonetheless, beating estimates isn't enough to make a stock a winner. Analysts are notoriously lousy at forecastingresults, and one-time items can sometimes push earnings over the top. Wall Street professionals typically don't include such extraordinary events in their forecasts. Rather than focusing only on the past, we'll check whether analysts have a bead on future performance. With help from Motley Fool CAPS, we'll see which of the companies listed above will have the last laugh.
The joke's on them
It also looks like an opportune time to raise cash in the public markets. Conseco's stock has appreciatedmore than 1,800% since it hit bottom in March, so it is planning to sell $230 million in stock, which will be used to repay some of its $1.3 billion in debt. All of these financial maneuvers should put it on firmer footing, though the CAPS community remains concerned about its positioning. Some 83% of the 248 members rating Conseco have said they believe it will outperform the broader market, but in the past three months the insurer's stock rating has dropped from four stars to two, indicating an undercurrent of doubt. In September, CAPS member thinshaw71suggested that the worst was over, but that a lot still depended on the outcome of health-care reform. Wall Street, though, remains bullish, with all six analysts who cover the company expecting it to outperform. Ensure your opinion is heard; head over to Conseco's CAPS pageand let us know whether Paulson's correctly calling another U-turn.
Chuckles the Clown
NVIDIA used the growing interest in GPU and graphics chips, primarily from increased demand in China, to power its way to higher revenue, while implementing cost-cutting initiatives to boost earnings. There's so much demand these days that the chip maker is experiencing supply constraints, but it was still able to forecast fourth-quarter results that far exceeded Wall Street's expectations. CAPS member miatamisssees NVIDIA's shift in focus to smartphone technologyas a key to offsetting any gaps that may be found elsewhere. Indeed, the chip maker said that it saw its mobile solutions gaining momentum along with its new server chips.
Yucking it up
This article was originally published as 5 Stocks That Laugh at Wall Streeton Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 3 Reasons to Sell Las Vegas Sands TodayBy Dave MockNovember 20, 2009 The turmoil in the markets makes it too easy to justify selling any stock these days. Yet while panic never helpsinvestors, it's still a good idea to play devil's advocate with investments. Consider casino operator Las Vegas Sands (NYSE: LVS). Though the gambling sector is showing signs of life, you'll find a few of the 1,663 Motley Fool CAPSmembers weighing in on the company offer reasons to be bearish. Here at The Motley Fool, we like to consider both the good and bad sides of an investment, so in this article, I've highlighted three of the main bearish argumentson Las Vegas Sands today. Be sure to read the bullish side as well, and then weigh in with your own comments below or rate Las Vegas Sands in CAPS.                                           Â
1. Gambling is out
2. Recovery is slow
3. There's a debt overhang
To see details of what CAPS members are saying nowabout Las Vegas Sands, just head on over to Motley Fool CAPSand have a look -- or add your own thoughts directly to this story in the comments box below. This article was originally published as 3 Reasons to Sell Las Vegas Sands Todayon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. More Stuffing for Earnings SeasonBy Rick Aristotle MunarrizNovember 20, 2009 The earnings reports keep on coming! I just reviewed seven companiesthat analysts see posting lower quarterly results next week than they did a year earlier. The economy may be bouncing back, but some companies are still not ready to do a turnaround dance. Well, unfortunately, there are a lot more than seven companies pegged to post year-over-year declines on the bottom line. Let's go over a few more. Company Latest Quarter's EPS (Estimated) Year-Ago Quarter's EPS Analog Devices (NYSE: ADI) $0.26 $0.49 BJ Services (NYSE: BJS) $0.02 $0.57 Frontline (NYSE: FRO) ($0.12) $1.77 H.J. Heinz (NYSE: HNZ) $0.69 $0.87 American Eagle (NYSE: AEO) $0.21 $0.30 WSP Holdings (NYSE: WH) $0.19 $0.29 The9 (Nasdaq: NCTY) ($0.46) $0.61 Source: Yahoo! Finance. These are companies in vastly different industries, from ketchup to mall haunt, from high-tech to oilfield services. A healthy cross-section of sectors is still smarting these days. Some of these stocks are even fallen growth darlings. The9 was growing quickly in China's booming online-gaming industry until it lost a major licensed franchise to a larger rival. BJ Services and Frontline were doing great when oil-price speculation was a gusher, but things have settled down considerably over the past year. It's not too late for any of these seven companies to get their mojo back. Turnarounds happen all the time. However, if analysts know their stuff, none of these seven companies will be posting higher earnings next week than they did a year ago. Thankfully, analysts have been known to underestimate companies quite a bit. This article was originally published as More Stuffing for Earnings Seasonon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. All That Glitters Isn't GoldBy Stephen Mauzy, CFANovember 20, 2009 Talk about having your ducks aligned, the wind at your back, an engine firing on all cylinders, and every other cliche that implies the market gods are smiling favorable upon you. I'm talking about gold, of course. The metal has been on a tear for the past six years, tripling in price to trade above $1,150/ounce within the past week -- a record high (at least in nominal dollars). It's a secular run in full force, having begun long before the collapse in housing prices and the even more dramatic collapse in financial stocks.
Bulls abound
It's easy to understand why so many of us have been bitten by the gold bug when the pro-gold argument is spread out before us: commodityprices. Short-term interest rates close to zero (and negative in real terms). Massive government fiscal deficits. (e.g., during the fiscal year that ended Sept. 30, the Treasury reported a record deficit of $1.4 trillion). Anxiety over inflation. A depressed dollar vis-a-vis the euro. Rapid money supply growth (e.g., from September 2008 to September 2009, the Federal Reserve pumped an unprecedented $2 trillion into the financial system by buying Treasury bonds and other assets from banks.). Reports of dwindling gold supplies.
Getting in the game
Indirect ownership -- gold stocks -- is another option more investors have warmed to, but it's not a gold overlay. Gold mining is a business incurring its own mark ups, influenced by many factors, including the grade of the deposit, the depth of the deposit, proximity to refining capacity, energy and labors the cost, and all the capital costs associated with any mining operation. The miners, therefore, don't track gold directly. That said, gold producers are price takers (gold production only adds 1% to 2% a year) so gold prices hold sway over gold-mining fortunes. And with gold currently exceeding $1,150 per ounce, these fortunes have been well driven this year. In fact, when compared to the SPDR Gold Trust EFT (NYSE: GLD), as an example of a direct gold investment proxy, the gold miners have been driven exceedingly well, out pacing the actual metal in many instances this year.   Firm  Gain (YTD) Market Cap (Billions) Goldcorp. (NYSE: GG) 41%  $32.5 Barrick Gold (NYSE: ABX) 23% $43.6 AngloGold Ashanti (NYSE: AU) 62% $15.9 IAMGOLD Corp (NYSE: IAG) 211%  $7.0 Compania de Minas Buenaventura SA (NYSE: BVN) 100% $10.2 SPDR Gold Trust ETF 31% N/A Source: Capital IQ and Yahoo! Finance.
Caveat emptor
, especially now
I also see parallels in the gold market and the Internet market of a decade ago and the housing market of a few years ago -- based on the extensive marketing of these investments to retail investors. Those of us a little longer in the tooth remember the pitches promoting the merits of online trading and Internet investing. Newer investors might remember the residential real estate pitches: Flip those putatively safe investments for instant profits! Remember how those bullish runs ended? I see a similar push in gold. AM radio, the business section of your local newspaper, and cable business outlets offer a superfluity of gold commercials directed at the retail investor, which I interpret as more people aligning on the same side of the gold market. When investors and speculators align, ducks tend to run askew, headwinds form, engines start misfiring, and metaphors start falling apart. These above-average performing gold miners are more likely to turn into below-average performers when the eventual fallout comes. This article was originally published as All That Glitters Isn't Goldon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Why These Big Winners Are Really LosersBy Dan CaplingerNovember 20, 2009 Eight months into the stock market's recovery, many stocks have posted some truly phenomenal gains. But for long-term investors, even those huge gains won't be enough to make up for the losses they suffered on the way down. Smart investors should take that into consideration before they throw caution to the wind in hopes of profiting from the next bull market.
Getting back to bullish
The funny thing, though, is that if you were a long-term investor in most of those speculative stocks, you would've been better off leaving them alone in the first place. Staying on the sidelines and earning next to nothing in a bank account would still have left you ahead -- even after you add in the multibagger gains some of these stocks have seen since March.
The secret of gains and losses
The problem, though, is that even incredibly strong returns can't necessarily overcome the big losses you'll suffer if you invest in the wrong stocks during bear markets. As an example, just take a look at some of these well-known stocks and how they've done both recently and over the past couple of years. Stock Return Nov. 20, 2007 to March 3, 2009 Return March 3, 2009 to Nov. 19, 2009 Total Return Since Nov. 20, 2007 Las Vegas Sands (NYSE: LVS) (98.8%) 1,094% (85.1% AIG (NYSE: AIG) (99.3%) 409% (96.7%) International Paper (NYSE: IP) (85.8%) 470% (19.1%) Crocs (Nasdaq: CROX) (97.1%) 389% (85.7%) Sirius XM Radio (Nasdaq: SIRI) (95.7%) 320% (81.9%) Lululemon Athletica (Nasdaq: LULU) (87.3%) 500% (24%) Office Depot (NYSE: ODP) (96.6%) 1,008% (62.6%) Source: Yahoo! Finance. As you can see, these stocks have knocked investors' socks offduring the rally. But they fell so much in the lead-up to the financial crisis that even with those phenomenal gains, they're still trading well below their 2007 levels. And although the overall market has obviously also lost ground in the past two years, all but one those seven stocks lag the total return of the S&P 500 index as well.
Learn your lesson
How do you do that? Here are a few ideas: Diversify. While stocks, real estate, and commodities were tanking last year, many bonds soared. Those who mixed their stocks with bond exposuregreatly reduced their losses. Set stop losses. Sometimes, you simply make a mistake in choosing a particular stock. If you decide in advance that there's a maximum amount you're willing to lose, you can prevent yourself from getting into such a big hole that you'll never recover. The downside to this, though, is that depending on where you set your stop loss, you'll also sometimes sell just before a stock hits bottom. Know your risk tolerance. If you can't handle a big loss, avoid speculative stocks in favor of well-established companies. You may not have the same potential for gains, but the losses you avoid should make up for the less impressive gains.During an advance like the current rally, it's easy to lose sight of how damaging big bear markets can be. But by being ever vigilant to prevent crippling losses, you'll ensure better long-term resultsfor your portfolio. Jim Cramer's still talking, but are you listening? Nick Kapur explains why you shouldn't be. This article was originally published as Why These Big Winners Are Really Loserson Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Is Google Just Inviting Trouble?By Rich DupreyNovember 20, 2009 Didn't Microsoft (Nasdaq: MSFT) get in trouble for this? Google (Nasdaq: GOOG) unveiled a new Chrome operating systemdesigned to be used with netbooks specifically made for the browser. One neat feature about the OS is that you turn on the PC and -- whoosh!-- you're immediately surfing the Internet. Pretty cool.
Nothing but 'Net
That means Chrome functions more like a Web browsersimilar to Internet Explorer or Apple 's (Nasdaq: AAPL) Safari than an operating system. It also increases the likelihood of corralling people toward its search capabilities -- Google is already the default search engine in Chrome browsers -- and that's where it enters territory that got Microsoft into trouble.
Is it evil or innovative?
And similar to Microsoft's "bundling" practices, Google is giving away the OS for free, just as Verizon (NYSE: VZ), Motorola (NYSE: MOT), Samsung , and others benefitted from Google giving away its smartphone OS Android. Even though Mr. Softy charges less for netbook versions of Windows, margins on netbooks are already razor thin. Free software is an enticement to manufacturers to juice profits by integrating Chrome into their products. This is innovative, not anticompetitive, but it seems more insidious than how Microsoft's symbiotic system worked.
Times change, people change
No flight plan
Along with its offline limitations, a Chrome OS may not be the game-changer Google hopes for, even if it doesn't invite closer regulatory scrutiny. This article was originally published as Is Google Just Inviting Trouble?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. The One Retailer Stock to BuyBy Rich DupreyNovember 20, 2009 You, my friend, are no better than a monkey. Since the low point in early March, the market has risen some 60%, lifting the tide of all boats. While low-quality stocksfueled the early stages of the rally, just about any monkey could have hit a winner on the dartboard since then. So don't pat yourself too heartily on the back for the gains that your portfolio's realized. The tide came in, and everyone's boat is floating.
A slippery banana peel
Clothing retailers might not have been the top performing industry over the past year (that would be precious metals), but they haven't been a slouch either. The Dow Jones U.S. Apparel Retailers Index is up more than 115%, making it one of the market's top 10 performers. But that's a curious position for them to be in considering industry numbers don't really support their valuations, even if you argue that they were extremely undervalued beforehand. Some of the top leaders have been Guess? (NYSE: GES), Pacific Sunwear , and Urban Outfitters (Nasdaq: URBN), with some of the worst merely doubling in value, but the teen clothing segment still doesn't look all that healthy.
Ready for a dressing down
Below are some top teen retailers showing their valuations compared to how well they're moving their clothes off the racks. Retailer P/E EV/FCF MRQ Comps LTM Inventory Turns Abercrombie & Fitch (NYSE: ANF) 164.3 16.2* -22.0% 2.5 American Eagle Outfitters (NYSE: AEO) 24.1 16.6 -10.0% 5.3 bebe NA NA -25.7% 8.1 Buckle (NYSE: BKE) 11.4 16.2 8.6% 4.1 Gap (NYSE: GPS) 16.6 11.1 -8.0% 5.5 Guess? 16.5 21.0 -12.5% 4.5 J. Crew (NYSE: JCG) 57.8 17.2 -5.1% 4.6 Limited Brands 58.5 8.8 -9.0% 4.6 Pacific Sunwear NA 40.8 -24.0% 3.5 Urban Outfitters 30.1 33.2* -2.0% 4.7 Source: Capital IQ, a division of Standard & Poor's. *Free cash flow til the July/August quarter.
The kids are not all right
But valuation concerns take out a number of these retailers from consideration as their run ups have put them into dangerously overbought territory. So which one should you fill up your shopping cart with?
How about the proven winner?
The market is undervaluing its stock, and even based on cash flows, it is not all that expensive, particularly in light of analysts' expectations for it to grow profit at 11% per annum.
What's it mean to you?
With the market at some heady levels, you're better off buckling your belt and going with top-notch retailers like Buckle. It could save you from any monkey business that is yet to come this holiday season. This article was originally published as The One Retailer Stock to Buyon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. A 1-in-100 InvestorBy Rich DupreyNovember 20, 2009 The first 100 days in office sets the tone for any new president. Similarly, Motley Fool CAPSkeeps an eye on how well investors do in their first 100 days. Some of our best members -- we call them All-Stars -- have achieved scores of 100 on stock selections in their first 100 days on CAPS. In this column, we're looking at members who made some of their best selections early on and then seeing which stocks they think will be best next. One of our highest-rated members is becon800, who sports a 99.69 member rating. Since joining CAPS in July 2008, this member has made 814 picks, with 214 active picks now. With 72% accuracy, becon800 has attracted 40 "groupies," CAPS members who've listed this investor as one of their favorites. Here are a few of this member's most recent selections and how they were rated. Stock Call Price* Current Score Apollo Group (Nasdaq: APOL) ** Outperform $56.28 0.71 Baker Hughes ***** Outperform $43.26 (3.51) Express Scripts *** Outperform $85.70 (0.64) Intuitive Surgical (Nasdaq: ISRG) **** Outperform $279.80 0.89 MedcoHealth Solutions (NYSE: MHS) **** Outperform $61.69 0.74 Patriot Coal (NYSE: PCX) **** Outperform $14.39 (3.64) priceline.com (Nasdaq: PCLN) * Outperform $208.45 0.91 QLogic *** Outperform $19.45 (1.48) Raytheon (NYSE: RTN) **** Outperform $50.27 0.42 Symantec ** Outperform $17.76 1.91 Source: Motley Fool CAPS; *price when call was made. Current score is how many points by which a member is beating (lagging) the S&P 500 index from the time of the call. Let's take a look at what other CAPS members are saying about a few of these stocks and whether they agree with this member's assessment.
Degree of risk
Don't have any reservations about heading over to priceline.com's CAPS pageto tell us what you think about the company.
All aboard
The fate of Burlington Northern and coal are inextricably bound together. The railroad shipped 604,000 carloads of coal in the third quarter, representing about a quarter of all its revenues. While the slowdown reduced the volume shipped compared with last year, Burlington Northern's 2008 coal operations amounted to 10% of the country's electrical needs. Even in the face of possible cap-and-trade regulations that might hurt the economy, Buffett's bid seems mighty bullish. Last month, CAPS member lonewulf47638found Patriot Coal's valuation to be attractive, considering the country's need for coal. very low P/E and most energy is from coal. Sales growth and earnings are up.
Mapping out an opportunity
CAPS member Schumpeter80writes that the outcome of the debate might not hurt Intuitive Surgical. Great company, great product. The only looming issue is how they will be [affected] by health care reform. And it is not [necessarily] negative given the potential [efficiencies] produced by their product in the medical marketplace.
A 1-in-100 opportunity
As hockey great Wayne Gretzky once noted, "You miss 100% of the shots you never take." At Motley Fool CAPS, every investor's opinion counts. It's free to sign up, so why not use this opportunity to take your best shot? This article was originally published as A 1-in-100 Investoron Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. eBay Is $2 Billion Richer!By Anders BylundNovember 20, 2009 If you’ve been scratching your head and wondering why eBay (Nasdaq: EBAY) wanted any part of an Internet telephony service, you are not alone. But you can stop scratching now. eBay just completed the spinout of voice and chat service Skype, receiving $2.05 billion in cash and IOU notes from a consortium of private investment firms. Since eBay is keeping a 30% stake in the operation and selling the other 70%, the full value of Skype works out to $2.75 billion. That's a lower valuation than the $3.1 billion eBay paid to take Skype outof the private sector in the first place. Hardly the outcome any investor would like to see after four years of capital commitment, but it could also have been a lot worse. After all, many an investment has fared much less pleasantly across the backbreaking 2008 speed bump. I believe that eBay could have gotten a better deal with just a little patience. Internet telephone services are coming into their own right about now. Look at Vonage Holdings (NYSE: VG) invading your cell phoneand turning a profit. Google (Nasdaq: GOOG) is doing its part by pushing Google Voiceinto every nook and cranny available -- and the application is so compelling that some staunch Apple (Nasdaq: AAPL) iPhone fanatics are ditching their beloved handsetsjust to get a better Google Voice experience. Most of the time, you have to pull the iPhone from the Apple faithful's cold, dead fingers, so this is impressive. But no matter -- the deed is done, and Skype has largely passed out of eBay's control. When Skype returns to the open market in its own IPO, which is a common exit strategyfor privateinvestor takeovers, I hope to see a market full of skepticism and ridiculously low share prices. That will be a happy day for my portfolio. Until then, I'm not quite sure what eBay will use the Skype cash for, unless the company is planning a merger or takeover on a large scale. Mercadolibre (Nasdaq: MELI), perhaps? InterActiveCorp (Nasdaq: IACI)? But apart from the Gmarket splurge and the Skype experiment, eBay is not known for buying its way into growth. With about $5 billion of cash equivalents in the bank and hardly any debt, eBay sure could have kept sitting on its hands a while longer. It's not like the debtors are knocking on the door with angry demands of repayment. A little patience could have paid off handsomely in the long run, but it's too late to go back now. How can eBay use two fresh billions, other than collecting dust and interest in a Swiss bank account? If you have any ideas, please share them in the comments below. This article was originally published as eBay Is $2 Billion Richer!on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Who's Paying for Health-Care Reform?By Brian Orelli, Ph.D.November 20, 2009 Health-care reform isn't going to be cheap. Ensuring coverage of 94% of eligible Americans will cost a trillion dollars over the next decade -- give or take a few billion, depending on which chamber is the source of the bill. So who is going to pay for the added coverage? The short answer is: We all are. Taxpayers, investors, and consumers -- you're probably all three -- are going to foot the bill one way or another. More specifically, the nonpartisan Joint Committee on Taxation came out with an analysis of the Senate's version of the health-care reform bill this week. It has some interesting breakdowns of where the money to pay for the added costs will come from.
Cadillac coverage gets more expensive
I have a hard time seeing health insurance companies like UnitedHealth Group (NYSE: UNH), Humana (NYSE: HUM), Aetna (NYSE: AET), and CIGNA (NYSE: CI) just eating that whopping added tax. Instead, they're likely to increase the cost of the plans to cover most or all of it. Ironically, the real beneficiaries of the tax could be companies like Ford (NYSE: F) or Goodyear Tire & Rubber (NYSE: GT), those with workforces that are dominated by unions. Those workers are typically the ones with the Cadillac plans, and the increased cost might push companies to finally end the madness and scale back insurance coverage. Depending on the companies' contracts with the unions, the cost decreases might not come right away, but it seems likely that the unions will have to give up some of their sweet insurance packages the next time negotiations roll around.
The rest of us aren't off the hook, either
Beauty queens and CEOs
CEOs and other high-wage earners will be paying a hefty share of the health-care burden. A new payroll tax on wages in excess of $200,000 has a catchy name: "hospital insurance tax." Depending on whether you're a supporter of trickle-down economics or of progressive tax systems, you'll either love or hate the new payroll tax. It's a bigger debate than is possible here, but in any case, the tax is in the bill -- for now.
Far from done
Even then, the House and Senate bills differ substantiallyin some areas, and we'll need to see even more compromise to work out a final bill. Is the increased coverage worth the added costs? This article was originally published as Who's Paying for Health-Care Reform?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Taking Fido on Your Trip? There's a Drug for That.By Brian OrelliNovember 20, 2009 Pfizer (NYSE: PFE) is going to the dogs. Really. The company put out a press release yesterday encouraging dog owners to take their pets with them when they travel for the holidays. It even launched a Twitter feed to share tips on traveling with your pooch. Think there's an ulterior motive here? Pfizer hasn't started selling those "dog on board" caution signs, but it does sell Cerenia, a motion sickness drug for dogs. That's 7.2 million potential customers ... if Pfizer can convince their owners to take the drug with them. But what if Pfizer is really trying to boost the economy? I mean, if the ad campaign works, imagine all the ancillary benefits. Airlines like US Airways (NYSE: LCC) and AMR 's (NYSE: AMR) American Airlines would rake in the dough with their surcharges for pets. Wonder if Pfizer has a drug to keep dogs from going stir-crazy inside their carriers while their owners are munching on peanuts? For those driving, more stops at rest areas to let the dog do its business should help with vending-machine sales. And some people likely would stay at hotels like Marriott 's (NYSE: MAR) Residence Inn or Starwood Hotels & Resorts ' (NYSE: HOT) Sheraton, leading to increased earnings from pet surcharges -- as long as the dog doesn't eat the profit by shredding the pillows in the middle of the night. PetSmart (Nasdaq: PETM), Petco , Tractor Supply (Nasdaq: TSCO), and the like also would benefit from the purchase of extra snacks for the trip. And don't forget the dog gate for Grandma's house; we wouldn't want Buster snatching the turkey off the table. Ironically, one of the reasons Pfizer gives for taking your dog with you is that having unconditional love from a pet can help with the added stress this year because of "tough economic times." With all the added costs, maybe it would be less stressful to just leave the dog at home. Like rooting for the underdog? Morgan Housel has three stocks he thinks are true bargains. This article was originally published as Taking Fido on Your Trip? There's a Drug for That.on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Buy This Stock Before Your Neighbor DoesBy Jordan DiPietroNovember 20, 2009 "The overwhelming majority of people are comfortable with consensus, but successful investors tend to have a contrarian bent."-- Seth Klarman, founder of the Baupost Investing Group I learned early on that I come from contrarian stock. At 10 years old, I asked my dad why he didn't buy a nice new car like the other dads in the neighborhood -- after all, he worked hard days and weekends and could have afforded it. He looked at me and said, "Son, cars are depreciating assets." Despite examples to the contrary, however, we as humans are hardwired not only to care what other people think, but to follow the herd in almost every scenario.
Especially your neighbors
He wanted to find out what would persuade people to conserve energy, so he put leaflets in people's doorways with different messages. One control group received no leaflets; one group received leaflets with facts about how energy conservation helps the environment; another group received information on how much money they could save; and one group received leaflets that said, "The majority of your neighbors are conserving energy." Later, they checked the gas meters to see who had, in fact, changed their energy consumption. I'm sure you see where I'm going with this -- the most effective leaflet was the one telling people that their neighbors were conserving energy. As Cialdini says, people will almost always do things they know or believe other people are doing them. Think about how many times you've stopped and looked up at the sky just because other people were doing it. That's why bubbles are so devastating -- we tend to get caught up in the excitement, buying shares of Oracle (Nasdaq: ORCL) and Adobe (Nasdaq: ADBE) for more than $40 per share right before they plunged over 80%. We couldn't help it -- everyone else was doing it.
Far from the madding crowd
Following stocks that everyone else is following hardly gives you much of an advantage -- you're forced to compete against not only thousands of other investors, but hundreds of scrupulous Wall Street analysts. On the other hand, tracking stocks that are typically ignored -- i.e., small-cap stocks -- allows you to find mispricing situations, and once you can identify a great company that's undervalued -- well, you've just hit a gold mine . For example, I bet most of your neighbors haven't heard of Atheros Communications (Nasdaq: ATHR). This small-cap company plays in the wireless communications segment and provides low-cost, single-chip solutions for various products. Because of its nimbleness and adaptability to the market, Atheros caught the eye (and the recommendation) of our Motley Fool Hidden Gems analysts. Over the last half decade, it's earned over 20% annualized gains, and in the past year alone, it's experienced a whopping 127% return. It currently has zero debt, and over the last five years it's generated consistent free cash flows and increased revenues by over 20%. You simply can't find that type of growth from companies your neighbors have already heard of -- blue-chip stocks like General Electric (NYSE: GE) or Wells Fargo (NYSE: WFC). Those companies are just too big to grow that fast again.
Keep it in the family
For example, here are some lesser-known small caps that have the qualities needed to see some enormous gains: Â Market Cap P/E Ratio 5-Year Annualized Revenue Growth (TTM) Return on Equity (TTM) The Pantry $335 million 4.8 21% 17.1% Sun Health care Group (Nasdaq: SUNH) $374 million 3.4 19% 32.6% M&F Worldwide (NYSE: MFW) $606 million 4.7 81% 29.8% *Data taken from Capital IQ. TTM = trailing 12 months. I'll be honest -- not all small-cap stocks are going to be a perfect fit. But if you have the guts to pick the less popular stocks, your portfolio will surely reap some tremendous benefits. Those are the kinds of stocks we buy for our Hidden Gems real-money portfolio -- and our picks are beating the market. If you're interested in seeing the stocks our analysts are recommending, just click here for a free, 30-day trial. There's no obligation to subscribe. Already aHidden Gems member? Log in at the top of this page . This article was originally published on October 16, 2009. It has been updated. Fool contributor Jordan DiPietro owns shares of General Electric. Adobe Systems is aMotley Fool Stock Advisor pick. The Fool owns shares of Atheros Communications and Oracle. Atheros Communications is aMotley Fool Hidden Gems pick. The Fool has a disclosure policy . This article was originally published as Buy This Stock Before Your Neighbor Doeson Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Who Killed Terrestrial Radio?By Rick Aristotle MunarrizNovember 20, 2009 My car was in the shop for a few days. The dealer took three stabs at it over the past month before realizing that a defective gas tank needed to be replaced. The end result is that I spent five days with a loaner. Did I mention that the rental car didn't have satellite radio? I'll admit that I'm spoiled. I've had a Sirius portable unit since 2004 and have had XM in my GM car since 2006. It's been awhile since I actively sought out AM/FM radio, and even then it's usually for the sake of local sports radio, since that's about the only thing I can't truly duplicate through Sirius or XM. In short, I had forgotten how forgettable terrestrial radio has become. Between the sheer volume of ads -- which I realize pay the bills -- and the razor-thin music rotations, I was never happier than when I picked up the phone to hear "your car is ready" at the other end of the line. Trying to take the pulse of old-school radio is a challenge. Clear Channel went private. The remaining publicly traded operators -- Citadel , Cumulus , Beasley , and the like -- are either penny stocks or command minuscule market caps. Many of the stocks have hitched a ride on the market rally, but the gains don't feel particularly earned. Entercom (NYSE: ETM) has seen its shares grow nearly tenfold from its 52-week low, even though its latest quarterly report shows a 14% dip in revenue, with adjusted profitability falling twice as quickly. Some may argue that the industry's wounds are self-inflicted, but I suspect foul play. I think several other factors have contributed to the demise of the traditional radio industry. I have a few suspects in mind. Let's see how they line up.
Blame it on Sirius XM
Terrestrial radio was so threatened by satellite radio that it lobbied extensively -- through its National Association of Broadcasters arm -- to nix the merger between Sirius and XM. It ultimately failed, but it threw enough wrenches in the system to delay the pairing for a year and a half. One can argue that satellite radio has its fingerprints all over the cadaver, but it's not a slam-dunk case. Only 47% of the buyers of new cars that come with factory-installed satellite receivers continue to pay for Sirius or XM after their trial subscriptions run out. However, no one said satellite radio's appeal has to be universal to deal a blow to old-school broadcasters. In the end, we're talking about 18.5 million people who are unlikely to bother with terrestrial radio for as long as they're active satellite subscribers.
Taking a bite out of Apple's crime
Apple moved 10.2 million iPods in its latest quarter. It also cleared nearly 7.4 million iPhones, which come complete with iPod functionality. In other words, Apple moved nearly as many iPod-capable devices in three months -- 17.6 million -- as the entire population of satellite radio subscribers. If we tack on the portable-media players that rivals Microsoft (Nasdaq: MSFT) and SanDisk (Nasdaq: SNDK) sell, we're probably looking at numbers that well exceed the satellite-radio crowd. It's no surprise to find more and more cars with audio input jacks. There may not be a financial incentive to add the jacks -- as there is for automakers that deliver paying subscribers -- but consumers are demanding it. With a choice of digital music purchases, ripped CDs, podcasts, and audiobook services, an iPod owner never has to run out of fresh content.
Blame it on the smartphone, wise guy
It's no surprise to find that the top music application on Apple's App Store is for Pandora Radio. Pandora's ability to serve up music streams tailored to the individual user make it unique in a way that terrestrial -- and even satellite, to some extent -- can't duplicate.
I say the Internet killed the radio star
As dirt-cheap -- or even free -- connectivity becomes ubiquitous and coverage gaps shrink, it will be hard for a handful of local radio stations to compete against the countless number of Web-based stations running on hobbyist shoestring budgets. Obviously, some terrestrial stations will stick around as global streamers. The more popular content creators will simply go it alone and connect directly with fans. However, terrestrial radio as we know it is fading with every passing day. The last lunge of the dagger will come from cyberspace. This article was originally published as Who Killed Terrestrial Radio?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Will the Sun Set in Oracle's Backyard?By Anders BylundNovember 20, 2009 You can say a lot of things about Larry Ellison, but never call him a quitter. The planned merger of his Oracle (Nasdaq: ORCL) with Sun Microsystems (Nasdaq: JAVA) has been in regulatory limbofor months, leading some observers to speculate that Oracle might give up on the buyout altogether. But the deal is not quite dead yet. Oracle just received an extension on a deadline to tell European Commission investigators more about the deal, perhaps buying Oracle enough time to finally push Sun through the cobwebs of bureaucracy. It's not the first time Oracle has gotten hung up on the way to a multibillion-dollar deal. The $10.3 billion PeopleSoft buyout took more than a year of courting, back-and-forth, and legal disputes. The BEA Systems deal, only slightly smaller at $8.5 billion, met with fewer regulatory challenges but featured plenty of price haggling, and it took just as long to complete as the PeopleSoft buyout. The $7.4 billion Sun agreement is a strange beast that could turn Oracle into a Mini-Meversion of IBM (NYSE: IBM). Oracle's traditional strength is in enterprise software such as large-scale databases, where the main competition comes from the likes of IBM, SAP (NYSE: SAP), and Microsoft (Nasdaq: MSFT). Sun will add some fresh blood to that sector, but it also makes Oracle into a major server vendor. That's another IBM stronghold, but also the domain of hardware specialists like Hewlett-Packard (NYSE: HPQ) and EMC (NYSE: EMC) in storage. The Sun deal puts Oracle's finger into many new pies and places the company in direct competition with many of its biggest partners and customers. I still don't think it's a very good idea to do this, but Ellison seems determined to make it happen. And judging by his track record of making difficult buyouts a reality, I suppose this one also will come through in the end. This article was originally published as Will the Sun Set in Oracle's Backyard?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. This Week in SolarBy Toby ShuteNovember 20, 2009 On Monday, Suntech Power (NYSE: STP) kicked things off by announcing it had chosen a site near Phoenix for its first American manufacturing plant. The company's U.S. head of business development pointed to the weight of solar panels as a justification for moving production closer to the American end market. It's a good thing I wasn't drinking milk when I read that. I hate it when milk spurts out my nose and all over my computer screen. That is the biggest whopper I've read in the business press in quite some time. The real answer is in the label to be slapped on these panels: "Made in America." Speaking of Arizona, ex- First Solar (Nasdaq: FSLR) COO Chip Hambro has joined the board of Google (Nasdaq: GOOG)-backed eSolar. That is a major addition for the fledgling concentrated solar power company, which struck a promising partnershipwith NRG Energy earlier this year. Hambro's former employer took a step forward with its planned 2-gigawatt Chinese plant this week, signing a framework agreement with the Ordos City mayor. Never heard of Ordos? Check YouTube for an eye-opening video on "China's empty city." This is indeed a strange piece of the Middle Kingdom. SunPower (Nasdaq: SPWRA) easily had the worst week in the solar world, disclosing accounting irregularities that really socked its stock price. The most distorted figure appears to be the second quarter's operating expenses, understated by some $14 million. The company reported $9.9 million in operating income that quarter. If you ascribe to the cockroach theory of accounting shenanigans, in which one visible cockroach is evidence of many more, then SunPower is a company to avoid. Many analysts have advised clients to do just that. Remember LDK Solar 's (NYSE: LDK) little flapwith Q-Cells ? The company has taken care of any possible liquidity scare by selling 15% of its polysilicon plant to a local financial institution. It's a convenient bailout for LDK, but I do wonder how that $219 million investment will work out for the bank. In other China news, the Golden Sun program extended subsidies to 294 different projects totaling 642 megawatts of capacity. That exceeds the previously announced upper bound for the program by 28%, and the target is expected to expand to 1.5 gigawatts by 2015. Suntech claimed 20% of the 91 megawatts' worth of rooftop projects covered under the program. Of course, this was a big week for Chinese solar earnings reports as well. Canadian Solar had a peppy report, and China Sunergy and Solarfun Power (Nasdaq: SOLF) also fared well, but Trina Solar (NYSE: TSL) trumped them all. This article was originally published as This Week in Solaron Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 5 Signs of a Strong Dividend StockBy Todd WenningNovember 20, 2009 Coming off the worst year in more than half a centuryfor dividends, investors need to rethink their strategies for income generation. Gone are the days when you could buy a dividend-paying stock simply because it's a blue chip, and forget about it until retirement. The quick annihilation of dividends at once-reliable companies like Wachovia quickly dispelled that illusion. For that matter, you'd also be wise to disregard mechanical strategies like dividend-weighted exchange-traded fundsthat might only work under "normal" market conditions. Instead, it's time to get back to basics.
The keys to success
1. An above-average dividend yield: If you're specifically setting out to find an income-generating stock, make it worth your while. There's no reason to settle for a below-average yield, so use the S&P 500 as a benchmark and screen for stocks with yields above the index's average (currently around 1.8%). 2. Sufficient free cash flow cover: Earnings are an accountant's opinion, but cash is a fact. It's important that the company generates enough free cash flow (cash from operations minus capital expenditures) to cover its dividend payouts. If the dividend payouts significantly outweigh the free cash flow, the sustainability of the dividend is in question. A reasonable free cash flow payout ratio (dividends paid / free cash flow) should be below 80%. 3. A history of dividend hikes: While a good track record in itself is no guarantee of future payouts, I do like to see a dividend-paying company with a history of rewarding shareholders by increasing its payout in line with earnings growth. Stanley Works (NYSE: SWK) has boosted its payout for 42 consecutive years, and Emerson Electric (NYSE: EMR) has done the same for 53 years. 4. A solid balance sheet: As we've been reminded over the past 18 months, creditors have a greater claim to a company's earnings and assets than common shareholders. If a company can't repay its creditors, it won't be able to pay you dividends. Look for stocks with interest coverage ratios (EBIT / interest expense) of more than 3.0, but preferably higher. A company with an interest coverage ratio below 1.5 is in danger of being unable to repay its creditors. 5. Undervalued versus the market: You want to buy dividend-paying stocks when they're trading at value prices. Outside of doing a formal discounted cash flow valuation, a good rule of thumb is to look for companies trading at price-to-earnings multiples below the current S&P 500 average (today, it's about 16 times next year's earnings). There are no hidden tricks or magic formulas here, just reasonable and traditional criteria to help us find strong dividend stocks.
Gimme shelter
Here are five of the results: Company Yield FCF Payout Ratio 3-Year Dividend Growth Rate Interest Coverage Ratio Forward Price-to-Earnings Ratio
Molson Coors
2.1% 26% 11% 4.8 11.7
Waste Management
3.5% 53% 10% 4.6 15.9
Eli Lilly
5.5% 54% 7% 22.3 8.2
Reynolds American
7.1% 77% 9% 10.1 10.7
Harris Corp.
2% 16% 33% 13.9 11.1 Data courtesy of Capital IQ, a division of Standard & Poor's, as of Nov. 19. While no simple screen ensures a good investment, these are five quality names to research further. Each of them has a strong track record of dividend payouts, plenty of free cash flow to continue paying (and even raising) its dividend, and strong competitive advantages within its industry. Another thing worth noting is that these five are all U.S.-based companies. But it would be unwise to limit your search to domestic stocks -- look globallyfor dividend ideas. A number of the companies I found in the screen were based outside the U.S., including TELUS , a Canadian telecommunications company that yields 5.7%.
Keep the faith
They: With interest rates so low, stock prices still well below last year's highs, and dividend yields higher than they have been in years, now is a great time to double down on dividends. Using the five criteria outlined above, you'll more easily locate the dividend stocks that can improve your portfolio's income-generating capabilities. If you're looking for more dividend stock ideas, our Motley Fool Income Investor service can help. Advisor James Early and the Income Investorteam recommend both stocks with high yields and those focused more on dividend growth. At present, on average their picks yield 4.3% and have outperformed the S&P by more than seven percentage points since the service's inception in 2003. A 30-day trial of Income Investoris free. If you'd like to learn more about the service, just click here. Already a member ofIncome Investor ? Log in at the top of this page . This article was originally published on July 9, 2009. It has been updated. Fool analyst Todd Wenning lives a life of ease and has all he needs -- sky of blue, sea of green, and a yellow submarine. He does not own shares of any company mentioned. Waste Management is both anIncome Investor andInside Value selection. The Fool has a disclosure policy . This article was originally published as 5 Signs of a Strong Dividend Stockon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Fertilizer Firms One Step Closer to the AltarBy Toby ShuteNovember 20, 2009 Earlier this month, we saw a big development in the ongoing takeover saga that DealBookhas dubbed the "Forever War." CF Industries (NYSE: CF), which finds itself in the sights of Agrium (NYSE: AGU), sweetened its bid for Terra Industries (NYSE: TRA) by including a significant cash component. I deemed this to be a realistic bid, and then Terra's Board made me look out of touch by rejecting it two days later. Well, shareholders have now voted in favor of three CF nominees at Terra's annual meeting. Who's out of touch now? This voting follows a final volley of shareholder letters and press releases that pelted my inbox over the past week or two. Terra trumped up the three proxy advisory firms backing its own slate of Director nominees, while trashing a fourth. The firm accused the supposedly "flawed and contradictory" report by RiskMetrics Group of employing "tortured arguments, flawed analysis and contradictory reasoning." Harsh! Interestingly enough, RiskMetrics has also recommended that CF shareholder tender to Agrium's bid. Bankers and lawyers must love this firm! Meanwhile, CF mostly just rehashed some familiar points in favor of the combination of the two firms: Terra shareholders are a pragmatic bunch. By this point, it's become quite clear that CF isn't backing down. Voting some CF nominees onto Terra's Board is a prelude to negotiations. It doesn't seal the current offer in place, but rather opens the door to a final bid somewhere down the road. I view this as the most likely outcome. Agrium came close to winning this three-way tug-of-war, with 62% of CF shareholders tendering to its offer this week, but the Terra results really throw a wrench in that firm's plans. This article was originally published as Fertilizer Firms One Step Closer to the Altaron Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 5 Deathbed Stocks?By Rich DupreyNovember 20, 2009 We've all heard of the "death rattle," the last gasp from a lost soul's lungs. Sometimes, we seem to hear it from the companies in which we invest. Revenues dry up. Margins contract. Profits evaporate. All these signs suggest that their condition is worsening -- a financial death rattle, if you will.
Stocks in sick bay
For help, we'll turn to the clever coroners at our 140,000-strong Motley Fool CAPScommunity, where members give the thumbs-up or thumbs-down to some 5,300 stocks. We've unearthed a handful of stocks that look like they might be headed six feet under based on their one-star ratings, but we'll head over to CAPS to measure the opinions there. Then we'll palpate the stocks' pulses with some quick tests for liquidity -- who knows, maybe we'll still find some signs of life! The current ratio and quick ratio(also called the "acid test" ratio) give us an idea of a company's ability to pay its bills, and the Altman Z-Score suggests companies in danger of bankruptcy. Companies scoring 3.00 and above are considered safe, between 2.70 and 2.99 are "yellow flags," between 1.80 and 2.70 have a good chance of going bankrupt within two years, and those with scores below 1.80 mean the cryptkeeper is waiting. Here’s today's list. The question is: With our primary screen being those stocks that CAPS investors have given one-star status to ... are these companies only mostlydead, or have they already given up the ghost? Stock CAPS Rating Current Ratio Acid-Test Ratio Altman Z-Score Recent Price Affiliated Computer Services (NYSE: ACS) * 1.7 1.5 2.64 $55.09 Isle of Capri Casinos (Nasdaq: ISLE) * 1.1 0.8 0.93 $8.30 Nanometrics (Nasdaq: NANO) * 3.1 1.6 1.57 $11.20 Pulte Homes (NYSE: PHM) * 3.0 0.6 1.25 $9.82 US Airways (NYSE: LCC) * 0.8 0.6 0.78 $3.12 Sources: Motley Fool CAPS; Capital IQ, a division of Standard & Poor's. We obviously don't know whether these companies are headed six feet under, so don't short them based on their appearance here. Moreover, some companies -- like software makers and financials -- don’t neatly fit into the Altman Z-Score scale. Let's use the CAPS community as our guide to determine whether these stocks are destined to seriously underperform the market.
Whistling past the graveyard
Nanometrics' stock soared in recent weeksas after it posted a third-quarter profit and confounded analyst expectations. The supplier of advanced process control metrology systems said sales surged 12% and expenses plunged from the previous period as it received multisystem orders from customers. As it exciting as the jump might have been, even management says not to expect a repeat in the near future. Top-rated CAPS All-Star UltraLongthought Nanometrics' performance was good, but also noted management's caveats on future growth: Underperform recommendation from what I would refer to as a rampant overvaluation at these levels. Nanometrics has never shown any real consistency in turning a profit and they even STATED in their quarterly report that their revenue growth would begin slowing. If you didn't notice, 15% revenue growth isn't exactly blowing the door off the barn. Despite a relatively low 19M in debt, thats quite a hefty load for a company like this and could pose a credit risk going forward. Although like Vanamonde said, this could have long-term potential, this is a venemous snake waiting to suck your money in the short-term. Nanometrics competes against the likes of KLA-Tencor (Nasdaq: KLAC) and Rudolph Technologies (Nasdaq: RTEC), both of which were also able to handily beat analyst forecasts as the semiconductor industry rolled higher. Nanometrics will need to perform at this level consistently if it wants to warrant investor confidence.
Rattling the cage
This article was originally published as 5 Deathbed Stocks?on Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. This Baby Is a Nice AdditionBy Brian OrelliNovember 20, 2009 The marriage between Merck (NYSE: MRK) and Schering-Plough is already starting to produce offspring. The only question is whether the fertility treatment for its pipeline was worth it. Today, the drugmaker received a positive opinion from the EU's Committee for Medicinal Products for Human Use (CHMP) for its fertility treatment Elonva. The drug worksjust as well at helping women get pregnant as its currently available treatment, Follistim, and requires fewer injections. The way the EU system works, a positive opinion from CHMP is essentially an approval, although Merck will need to wait for the European Commission to sign off before it can start marketing the drug. Elonva probably isn't going to be a blockbuster, but the decrease in the number of needle sticks may help persuade more women to look for some added help at getting pregnant. Besides, if a drug company can string togetherenough drugs with sales of a couple hundred million each, their combined revenue is as good as a blockbuster anyway. One of the driving forces for Merck's acquisition of Schering-Plough was its substantial pipeline compared to Merck's barren one. This is the first in a series of new drugs that Merck can expect to work their way through the pipeline. While a nice addition to the family, Elonva isn't really a validation of the large acquisitions that Merck and Pfizer (NYSE: PFE) made. Schering got its hands on the drug -- and many others -- through its smaller purchase of Dutch Akzo Nobel's Organon BioSciences subsidiary. Smaller purchases often provide more bang for their buck. Are you listening AstraZeneca (NYSE: AZN) and Eli Lilly (NYSE: LLY)? Just say noto large acquisitions. Grow your family the old-fashioned way: a couple of drugs at a time. This article was originally published as This Baby Is a Nice Additionon Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Bottling Up Beer InvestorsBy Robert SteyerNovember 20, 2009 For investors itching to invest in multinational brewers, here's a word of advice: You won't have much -- if any -- influence on corporate policy. Many of the world's largest brewers have complex ownership structures that look they were designed by the Dutch artist M.C. Escher, a master of enigmatic images that challenge the eye and the mind. These giants are characterized by significant stock ownership by multiple descendants of corporate founders and builders; assorted holding companies and trusts; and/or multiple sets of stock that keep average investors on the sidelines. Unless they can influence the ruling families, individual investors and even institutions will have little impact on companies such as Anheuser-Busch InBev (NYSE: BUD), Molson Coors , FEMSA (NYSE: FMX) and AmBev (NYSE: ABV).
Mexican standoff
Does the world's biggest brewer want to spend more money for the rest of the Mexican company? Will it keep the status quo? Would it risk selling Grupo Modeloor allowing the Mexican company to buy back its shares? Whatever the decision, the average shareholder will have little influence. Founding families that created InBevin 2004 via a merger of Belgian and Brazilian brewers -- and who bought Anheuser-Busch last year -- own a majority of Anheuser-Busch InBev shares. They also own enough stock to choose eight members of the company's 13-member board.
Beer and other beverages
FEMSA also owns just over half of the shares in Coca-Cola FEMSA (NYSE: KOF), the second-largest Coca-Cola bottlerin the world, while Coca-Cola (NYSE: KO) owns about one-third of the shares. FEMSA also runs a fast-growing chain of convenience stores in Mexico called Oxxo. Does FEMSA sell the beer division, or create a joint venture? Does it sell the whole company? What role does Coca-Cola play in the discussions? Whatever the FEMSA board decides, the result will likely be a fait accompli. FEMSA has three sets of stock, but only Class B shares have full voting rights. A voting trust representing estates, trusts, and many members of families that played a role in the creation of FEMSA holds 75% of Class B shares. The voting trust's holdings represent about 39% of all common shares. The next-biggest shareholder is William H. Gates III -- yes, the chairman of Microsoft (Nasdaq: MSFT) – with 6.5% of common shares. Morningstar , always a stickler on corporate governance, says FEMSA's structure is "unwieldy." Morningstar cites a large board filled with descendants of several founding families, adding that corporate rules provide "little power" for shareholders to remove directors.
O Canada, O Colorado
Some analysts speculate that the joint venture is a precursor to an SABMiller takeover. Do you like that idea? Unfortunately, you have no say with Molson Coors, whose corporate structure is branded by Morningstar as "overly complex." Created by a merger in 2005, the company has two headquarters and two sets of U.S. stock. The shares trade on two stock exchanges -- New York and Toronto. The Coors and Molson family shareholders choose most board members and they hold most of the voting power.
Corporate complexity elsewhere
At the Washington Post , the publishing giant has two sets of stock. It is a "controlled company" for New York Stock Exchange reporting purposes, because members of the Graham family vote for 70% of the board members. Ironically, the former Anheuser-Busch was a takeover target partly because it was a strong practitioner of corporate democracy. It dropped its poison-pill takeover defense, and it was moving from the staggered election of board members to voting for all directors yearly. Although August A. Busch IV was in charge before the takeover,family members owned relatively little stock.
Foolish takeaway
This article was originally published as Bottling Up Beer Investorson Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. 5 Dynamic Dividend StocksBy Matt KoppenhefferNovember 20, 2009 The New York Yankees of the '50s and the Chicago Bulls and Dallas Cowboys of the '90s have one crucial element in common: consistent excellence in their organizations and performance. That's a rare accomplishment, but if you think it could never occur in your portfolio, think again. Carefully chosen dividend-paying stocks could be your key to superstar returns.
Build the next investing dynasty
Total (NYSE: TOT), for example, has beaten the S&P 500's return by 44 percentage points since December 2003, and is currently rewarding investors with a 5.1% yield. Or consider Unilever (NYSE: UL), which has topped the S&P by 55 percentage points since February 2005, atop a current 2.4% yield. While these stocks happen to be Income Investorrecommendations, you don't need to be a subscriber to get these great gains.
Identify new talent
Company Yield
CAPS Rating
ExxonMobil (NYSE: XOM) 2.3% **** Paychex (Nasdaq: PAYX) 4.0% **** Hasbro (NYSE: HAS) 2.7% ***** American Eagle Outfitters (NYSE: AEO) 2.7% **** Exelon (NYSE: EXC) 4.5% ***** Source: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and CAPS as of Nov. 19. Any of these quality companies would add some dividend pizzazz to your portfolio, but let's take a closer look at how Exelonstacks up.
Does my dividend have a glass jaw?
With that in mind, there are three places that I immediately tune into when kicking the tires of a dividend payer -- dividend history, financial statements, and business stability. When it comes to electric utilities, we can typically expect to find similarities such as a high debt load, heavy capital spending, a relatively stable business, and a good history of dividend payments. With Exelon, we find all of the above. Digging into Exelon's financials, we see that although the company does have nearly $13 billion in debt and a debt-to-equity ratio of just more than 100%, it has its interest payments well covered. It's also notable that the company typically produces enough cash to pay for both its capital expenditures and dividends from operating cash flow. We could gripe a bit about Exelon's dividend history, since it's had dividend cuts in its distant past, and, as recently as 2006, years where it didn't raise its dividend payout. However, if the company continues to grow its payout at its averagerate, investors should be well rewarded at today's price.
What the bulls say
All-Star Trimalerushas been bullish on Exelon since April, writing: Exelon cutting greenhouse gas emissions puts this company in a good position for when a carbon cap & trade system is implemented in the US. Stands to benefit from growth of the energy sector ... Long-term value pick.
Get into the action
Dividend stocks could help you transform your portfolio from the flash-in-the-pan Florida Marlins into the dependable New York Yankees. And if you hate the Yankees, it's probably because they're so darn good, so darn often. Not satisfied with these yields? Fellow Fool Adam Wiederman serves up what he thinks are the best yields for the next 10 years. This article was originally published as 5 Dynamic Dividend Stockson Fool.com Copyright © 2009 The Motley Fool, LLC. All rights reserved. Published on November 20, 2009 More Motley Fool ...  © 2009 UCLICK, L.L.C. |