• 4-Star Stocks Poised to Pop: EMC
• If the Mafia Ran Berkshire and Amazon
• In Celebration of Life and MHirshey
• Is Cobalt Dead in the Deepwater?
• You'll Regret Missing This Stock
• Lloyds Turns the Corner
• The 7 Biggest, Baddest Dividend Stocks Out There
• 3 Reasons to Buy Western Digital Today
• This Week's 5 Smartest Stock Moves
• Today's Buy Opportunity: PetMed Express
• On the Path to a Blockbuster
• 4-Star Stocks Poised to Pop: The Phoenix Cos.
• 3 Reasons to Sell Western Digital Today
• A Game-Changer for GameStop?
• Why We're Buying PetMed Express

4-Star Stocks Poised to Pop: EMC

Based on the aggregated intelligence of 165,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, data storage specialist EMC (NYSE: EMC) has earned a respected four-star ranking.

With that in mind, let's take a closer look at EMC's business and see what CAPS investors are saying about the stock right now.

EMC facts

Headquarters (Founded)

Hopkinton, Mass. (1979)

Market Cap

$40.9 billion

Industry

Computer storage and peripherals

Trailing-12-Month Revenue

$15.5 billion

Management

CEO Joseph Tucci (since 2001)

CFO David Goulden (since 2006)

Return on Equity (Average, Past 3 Years)

10.7%

Cash/Debt

$6.8 billion / $3.16 billion

Competitors

IBM (NYSE: IBM)

Hewlett-Packard (NYSE: HPQ)

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 96% of the 3,183 members who have rated EMC believe the stock will outperform the S&P 500 going forward. These bulls include knnryeryeand All-Star lbcdpg, who is ranked in the top 15% of our community.

Just a few months ago, knnryerye highlighted EMC as a cloudy opportunity:

More and more companies are turning to virtual datacenter and "cloud computing" as budgets are shrunk, and yet demand is still high. Network storage is vital to this working and EMC is the leader. As companies change to virtual datacenters and virtual desktops EMC will continue to grow.

In fact, EMC doubledearnings in its most recent quarter, driven by 21% revenue growth in infrastructure revenue and a 48% surge in majority-owned VMware 's (NYSE: VMW) top-line. Although the company continues to face significant pressure from established storage specialists like Hewlett-Packard and IBM, it's that kind of performance which makes EMC a solid way to play the long-termcomeback of business spending. To be sure, EMC's stock price has outperformed those very same rivals by about 20 percentage points over the past year, but CAPS member lbcdpg explains why the shares stillrepresent a screaming value:

WAY undervalued. Using the $4 billion in net cash, and considering it owns 85% of [VMware] (that stake is currently is worth about $27 billion), that leaves EMC valued at around a 10 Billion market cap. They have over $14 Billion in revenues each year, and that figure is growing at a healthy rate. Throw in the growth of storage needs and cloud computing. This thing is C H E A P.

What do you think about EMC, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

This article was originally published as 4-Star Stocks Poised to Pop: EMCon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

If the Mafia Ran Berkshire and Amazon

I recently interviewed Kurt Luchs, a humor writer whose works have been published byThe Onion ,The New Yorker ,Slate and McSweeney's. He's the author of Leave The Gun, Take The Cannoli: A Wiseguy's Guide to the Workplace , a book that takes quotes from classic movies likeThe Godfather and TV shows likeThe Sopranos and translates them into business lessons. What follows is an edited transcript of the interview. In Part 1 , we discussed Apple and Microsoft. Part 2 begins with a discussion of the chairman and CEO of Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) .

Chris Hill: What about Warren Buffett? Is there a wiseguy equivalent to the wise old man from Omaha?

Kurt Luchs: You know, I hate to say it, but he reminds me a lot of Uncle Junior in The Sopranos. You look at him and you think, "Who is this guy? How did he ever get here? What did he do?" But obviously he must have done something right, so you don't want to diss the guy. You don't want to disrespect him or underestimate his accomplishments, but at the same time, he is such a goofball. You really can't put the two together.

Hill: All right, two more. Former businessman, now politician, Mayor Michael Bloomberg. Actually, I shouldn't say "former" businessman. He's still a businessman and his net worth speaks to that as much.

Luchs: Gee, I don't want to get accused of anything, but he has got that Moe Green feeling to me. He really does.

Hill: You can picture him just going into a room and just demanding of people, "Do you know who I am?"

Luchs: I can see him slapping around Fredo, yeah.

Hill: And finally, Amazon (Nasdaq: AMZN) CEO Jeff Bezos.

Luchs: This is totally unfair, but he is a Corleone, but not the right one. He is Fredo all the way.

Hill: Jeff Bezos is Fredo??

Luchs: Well, in his manner, you know? I think it is hard to take him seriously when he presents. It is a little bit like watching George W. Bush. Whatever is really going on under there, it presents a different face publicly. To me, he has got the image of a Fredo, even if I know he is actually much smarter than that.

This article was originally published as If the Mafia Ran Berkshire and Amazonon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

In Celebration of Life and MHirshey

Prepare for life as if you're going to live forever. Live each day as if it's your very last.
-- John Wooden

That's one of my favorite quotes, from a great man. It also happens to embody the spirit and passion for learning of MHirschey.

MHirschey was a highly respected contributor to The Motley Fool community who recently passed away from cancerat the young age of 59. As a business school professor at the University of Kansas, he was known for taking his students on annual trips to meet with Warren Buffett at Berkshire Hathaway . He spent better than 30 years studying both Berkshire Hathaway the organization and Buffett the leader. Clearly, his contributions went far beyond the virtual borders of Fool.com.

MHirschey, you will be missed. I guess I just wanted to say thank you. Thank you for taking time out to educate, amuse, and enrich your fellow community members. Thank you for bringing a sense of individuality and unique thinking to investing problems. Thank you for demonstrating how civil and open debate can lead to better decisions.

In celebration of your contributions to our Foolish community I would like to highlight some of your most enjoyed posts. Cheers!

Donations to the Mark Hirschey Scholarship may be made through KU Endowment's website or by contacting Shari Mohr, KU Endowment, at 888-653-6111.

Buck Hartzell owns shares of Berkshire Hathaway and sends his condolences to the family, friends, and colleagues of MHirschey.

Berkshire Hathaway is aMotley Fool Inside Value and aMotley Fool Stock Advisor selection. Wal-Mart is anInside Value pick. The Fool owns shares of Berkshire Hathaway. The Motley Fool has a disclosure policy .

This article was originally published as In Celebration of Life and MHirsheyon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

Is Cobalt Dead in the Deepwater?

"The best thing that I can say about the second quarter is that it's over."
-- Joe Bryant, CEO of Cobalt International Energy (NYSE: CIE)

It's tough being Cobalt these days. Not only does the exploration and production outfit have a large focus on the deepwater Gulf of Mexico, but the relatively young Cobalt has no production. Drilling is this company's sole ticket to value creation.

Cobalt has spent years amassing a highly prospective portfolio of offshore leases both in the U.S. Gulf and in western Africa. This year was supposed to be the one in which Cobalt would make some high-impact discoveries, but it managed to drill only a few dustersbefore the Macondo disaster. (The company has participated in some discoveries by Anadarko Petroleum (NYSE: APC) , however). The six-month drilling moratorium put in place following the incident means that Cobalt won't be drilling another well until 2011, when the firm takes delivery of the Ensco (NYSE: ESV) 8503 and tackles its North Platte prospect.

Assuming that smaller, independent E&Ps like Cobalt and Newfield Exploration (NYSE: NFX) don't get forced out of the deepwater business by hasty legislation, it would seem that nothing has fundamentally changed the Cobalt story. The timing is thrown off, which definitely has an impact on the present value of the company, but shares are off roughly 40% since the April 20 explosion on Transocean 's (NYSE: RIG) Deepwater Horizon rig working at a BP well. Isn't that a wee bit excessive?

Consider that only a quarter of Cobalt's leases expire by 2015. The delay in Cobalt's drilling program is unfortunate, but not a deal-breaker -- especially since the firm has no debt and can afford to wait. You might even argue that the moratorium has improved Cobalt's odds of drilling successful wells. During the forced "time-out," the company is assessing and reworking all of its top prospects with the use of seismic reprocessing technology and other geological and geophysical tools. The exit of rigs from the Gulf is also pushing down global dayrates, which is positive for Cobalt's contracting requirements in Angola.

With around 9 billion barrels of unrisked potential resources, this firm still has a shot at making a big splash in 2011 and beyond. The best time to get positioned is before those drill bits start turning again.

This article was originally published as Is Cobalt Dead in the Deepwater?on Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

You'll Regret Missing This Stock

There are times in an investor's life when you just know. For me, this is the moment I decided Time Warner (NYSE: TWX) was worth a closer look:

Please enable JavaScript to view this video.

OK, this too:

To be fair, the friendly confines of Comic-Conaren't the best litmus test for the success of next year's debut of Green Lanternfilm, starring Ryan Reynolds as Hal Jordan, the appointed Green Lantern of space sector 2814.

(Interlude: Reynolds may also be the nicest guy in Hollywood. He symbolically raised his prop power ring to the young questioner from the video, and then signed memorabilia for him. A very classy move.)

Why should you care? Time Warner unit DC Comics is showing signs of becoming the sort of heavyweight Marvel was before Disney (NYSE: DIS) bid $4 billionto acquire the company.

What hides behind Green Lantern's light
But don't take my word for it. Look at the box office receipts for director Christopher Nolan's take on the Batman franchise. Batman Beginsand The Dark Knightcombined for more than $738 million at the domestic box office and $1.37 billion worldwide.

We won't know how big a box office draw Green Lanternwill be for another year. But I like the film's chances. Reynolds has charisma, and Green Lantern is a BIG character with a cosmic undertow. Viewers could be treated to an equal dose of superheroes and Star Wars. Geeky yet cool, you might say.

My lone worry is the film could get too busy. If you've ever read the comics, you know there's a lot more than one Green Lantern, and there's no such thing as a small story for this character. But I'm not sweating too much. DC Entertainment Chief Creative Officer Geoff Johns is to Green Lantern what Jon Favreau has been to Iron Man: a fan who has a big vision for the character's on-screen potential.

Smallville: getting bigger
Television producers made a surprisingly strong appearance at this year's Comic-Con. Comcast (NYSE: CMCSA) debuts The Cape, starring Daniel Lyons as a vigilante accused of a crime he didn't commit, and Disney's ABC network premieres No Ordinary Family, about a family of superheroes who struggle with (what else?) family life.

Both shows have a long way to go before they catch up to what may be the most popular superhero program since the Super Friends: Smallville. Earlier this year, the show, which chronicles Superman's beginnings, drew 2.8 million viewers for a two-hour special.

Smallville is heading into its 10th and final season, and stars an ensemble cast as the young members of DC's signature superhero team, the Justice League. If there's to be more superhero films starring more of DC Comics' lesser-known characters -- such as Green Arrow, Aquaman, or Hawkman -- Time Warner could pull talent and story ideas from this series.

Cycling a comic book superpower
Would Time Warner benefit from having more superhero films? Possibly, but I think that's the wrong question. Look at The Dark Knight. Despite a billion-dollar global box office collected over 33 weeks, Time Warner's Filmed Entertainment division saw revenue improve just 9% from 2007 to 2008.

Even so, as an investor, I'm more interested in the value chain developing around DC characters. Between HBO and Cartoon Network and its digital and interactive video game properties, Time Warner has all the tools to market its superheroes to the wider world, and make a lot of money doing it.

Consider the partnerships on display at Comic-Con. Mattel (NYSE: MAT) showed off collector's editions of action figures based on DC Comics characters and should have more in time for Green Lanternnext year. Sony (NYSE: SNE) , meanwhile, previewed the multiplayer game "DC Universe" through its Online Entertainment group.

Time Warner needs more deals like these, but it also needs a controlling partner. Someone who will defend the characters, ensuring they aren't extended to the wrong medium at the wrong time and in the wrong way. Enter Johns. He'll tackle that task when he isn't writing comics starring Green Lantern and The Flash.

Bottom line folly
For me, a business-focused investor with growth designs, I see a carefully crafted licensing and production powerhouse emerging inside Time Warner. A powerhouse called DC Comics.

And yet investors needn't pay up to get the added growth, which also comes free of the albatross that was AOL (NYSE: AOL) . Time Warner trades for less than 14 times anticipated earnings, a nice discount compared to what traders are paying for shares of Disney and News Corp. (Nasdaq: NWS) right now. Call it a heroic, if not super-powered, combination.

Do you think I'm wrong? Does Marvel still beat DC? Let the debate begin in the comments box below.

This article was originally published as You'll Regret Missing This Stockon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

Lloyds Turns the Corner

This article has been adapted from our sister site across the pond, Fool UK .

Better times for Lloyds Banking Group (NYSE: LYG) may lie around the corner. The reason? A long-awaited announcement from the international Basel Committee on Banking Supervision, which effectively loosened the strict capital and liquidity requirements it had initially said it would recommend that banks hold.

And this is good news for banks that formerly stood to have to bolster their balance sheets to the greatest extent -- for which, of course, read Lloyds, Royal Bank of Scotland (NYSE: RBS) , and (to a lesser extent) Barclays (NYSE: BCS) .

The price of Lloyds shares, for example, has risen 20% in just a week. Put another way, earlier this week, the shares closed above 72 pence, a price (adjusting for the effect of the rights issue) that they haven't seen since January 2009.

The rise in the price of Royal Bank of Scotland shares hasn't been as significant, but even so, 11% isn't to be sniffed at.

Talking tough
The Basel committee is part of the Swiss-based global finance institution the Bank for International Settlements, part of the world's financial infrastructure.

And in the wake of the onset of the credit crunch and collapse in banking confidence in mid-2007, the committee had been tasked with coming up with new, tougher stipulations on the minimum amounts of capital and liquidity that banks must hold.

And as recently as last December, explains Simon Hills, executive director for prudential capital and risk at the British Bankers' Association, some of those requirements gave cause for concern.

"We were broadly supportive but had several reservations in terms of the specifics," he says. The problem? Simply put, quibbles over what sort of assets counted as tier 1 capital -- and what didn't -- and concerns as to how liquidity was defined and measured.

Lloyds, for example, couldn't count as capital its unconsolidated investments in other financial institutions, such as Scottish Widows and Clerical Medical.

Swiss cheer
Monday's announcement eases such concerns, Hills says. The committee wasn't in complete agreement, he stresses: Germany still has reservations, and more work is required on timing and definitions.

But the shape of things is clear, he says, and it's good news for British banks. Lloyds, for instance, can now count as capital up to 10% of its holdings in other institutions.

That said, every British bank passed the -- somewhat maligned -- European stress tests, the results of which were released late on July 20. And every British bank has had to comply with the FSA's tougher stress test of just over a year ago, which was predicated on something of an economic "nuclear winter."

On the turn
Several analysts reckon that Lloyds stands to benefit most from the Basel committee's relaxed requirements, with both Deutsche Bank's Jason Napier and Evolution's Arturo de Frias Marques being quoted as citing the stock as a "buy."

In short, higher profits, lower levels of impairment, and a reduced need to bolster the balance sheet all beckon. Lloyds shares -- 69 pence at the time of writing -- could reach 95 pence, it's claimed.

Will they? Time will tell. But I've always regarded the HBOS acquisition as a significant opportunity, even though I do believe it could have been carried out better. It's why I bought into the rights issue and why I continue to hold.

At some point, of course, the government will sell its 43% stake in the business -- which is currently tantalizingly short of the 73 pence per share average price that it paid. That's something of an unknown, and will doubtless depress the price for a while. The forced asset sale, too, sees some of that expensively acquired value dissipated, at a still-unknown price.

But the fundamentals of the business continue to improve, and this week's Basel news is one more piece of a jigsaw puzzle that eventually builds up to quite a reasonable picture. 

Dividends should return early next year, albeit on a reduced scale. Lloyds shareholders have had a torrid three years, but the corner appears to be turned.

More from Fool UK's Malcolm Wheatley:

This article was originally published as Lloyds Turns the Corneron Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

The 7 Biggest, Baddest Dividend Stocks Out There

Now more than ever, dividend stocks are a good play.

Why's that?

If you missed it, my colleague Morgan Housel explained earlier this monththat stocks yield more than bonds.

Specifically, the average dividend yield of the Dow 30 stocks slipped past the 10-year Treasury bond yield. Historically, bonds have yielded 3.8% more than stocks since stocks also provide the prospect of capital appreciation. But with investors turning to Treasuries out of fear and the Fed working actively to keep rates low, 10-year bond rates are yielding a paltry 2.9%.

For that reason alone, investors who want the promise of a steady stream of income may want to increase the dividend-paying portions of their stock portfolios.

But I'm just getting started
Don't be fooled into thinking dividend stocks are just for those nearing retirement, though. For fans of growth stocks, a study by Robert Arnott and Clifford Asness actually linkshigher dividend payouts to higher earnings growth.Further, Wharton professor Jeremy Siegel has studied the dividend situation and concludes: "Through the years, diversified portfolios of stocks that pay dividends have not only beaten those that don't, but have also handily outperformed the S&P 500."

That may surprise you.

The chance for big returns isn't what many investors expect from steady dividend payers.

Here's the thing. A company, unless suicidal, won't institute a dividend unless it plans on paying it for the long term. It's signaling to the market that its operations are steady and self-sufficient enough to start returning capital to its investors. The danger to a company that lowers or suspends its dividend is frequently a violent market reaction on the down side.

From a management standpoint, paying a dividend instills discipline. When government departments get their budgets each year, there's a use-it-or-lose-it mentality. The same is true for company departments -- there's always an extra project to justify. But by taking a portion of this capital away, managers are forced to allocate their capital to their highest-priority, highest-value projects.

Where are the biggest, baddest dividend payers?
For those looking for some of these dividend plays, Standard & Poor's helps us out. Each year, they construct a list called the Dividend Aristocrats. These are "large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years."

Yes, you read that right. 25 years.

Only a few dozen companies make the list. Here are the seven with the highest dividend yields.

Company

Industry

Market Cap

Payout Ratio

P/E (trailing)

Dividend Yield

CenturyLink (NYSE: CTL)

Telecom

$10.7 billion

85%

12.9

8.12%

Pitney Bowes (NYSE: PBI)

Mail processing equipment

$5.1 billion

75%

12.4

5.93%

Cincinnati Financial (Nasdaq: CINF)

Property casualty insurance

$4.5 billion

55%

9.8

5.64%

Integrys Energy Group (NYSE: TEG)

Utility

$3.8 billion

127%

24.2

5.54%

Eli Lilly (NYSE: LLY)

Pharmaceuticals

$41.1 billion

49%

8.9

5.43%

Consolidated Edison (NYSE: ED)

Utility

$13.3 billion

66%

14.4

5.05%

Leggett & Platt (NYSE: LEG)

Home furnishing components

$3.0 billion

83%

17.3

4.86%

Sources: Capital IQ (a division of Standard & Poor's) and Yahoo! Finance.

Does that list surprise you?

For one, you may be surprised that the dividend yields aren't in the double digits. Our dividend expert, Income Investor advisor James Early mentioned to me that he considers double-digit yields to be a warning sign for dividend unsustainability. So it makes sense that companies that have paid dividends for decades aren't quite at that level.

For another, you may not have heard of some of these companies. To be sure, familiar companies like McDonald's and ExxonMobil made the list, but their dividend yields of 3.1% and 2.9%, respectively, aren't among the top seven yielders.

It's impressive that these seven stocks top the heap, but that alone isn't a compelling reason to blindly jump into them.

Just because they've increased dividends over the past 25 years doesn't mean they can't lower or eliminate their dividends next month.

One factor to consider is their future growth prospects and any industry headwinds. CenturyLink and Pitney Bowes, for example, face tough prospects in telecom and mail services, respectively. CenturyLink has been forced to grow by acquisition; it bought Embarq last year and is in the process of merging with Qwest . Pitney Bowes is a dominant player but faces the threat of the Internet reducing mail volumes permanently.

I included their payout ratios -- the percentage of their earnings that they've paid out as dividends -- as a first step in due diligence. Ideally, you'd want to see a big dividend yield and a low payout ratio (less than 50% is preferred). At a payout ratio more than 100%, dividends are exceeding current earnings. That's the case for Integrys Energy.

Warnings out of the way, these seven companies are worth looking into to determine if their impressive dividend histories mean impressive dividend futures. Share your thoughts on them in the comments section below.

For more dividend talk, check out my response to those who think dividends are dumb by clicking here .

This article was originally published as The 7 Biggest, Baddest Dividend Stocks Out Thereon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

3 Reasons to Buy Western Digital Today

Historically, tumultuous times offer some of the best opportunities to buy stocks, and the market's recent mess surely qualifies. And though disk-drive maker Western Digital (NYSE: WDC) has already bounced back from recession lows, many investors expect even better times ahead.

In our Motley Fool CAPScommunity, 94% of the 1,220 investors rating the company are bullish, so there's no shortage of reasons why Western Digital 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 Western Digital yourself in CAPS.

1. Overrated pressures
Some CAPS members are brushing aside the worries of oversupply and pricing pressure in the hard-disk industry, putting faith instead in the trend of solid demand. Western Digital shipped nearly 10 million more units in its fiscal fourth quarter compared with the prior year while posting big increases in earnings and revenue, and it sees demand remaining strong over the long term. Computer-memory maker Micron (Nasdaq: MU) recently said it’s having trouble filling demand in all of its segments, and with Intel (Nasdaq: INTC) and Dell (Nasdaq: DELL) seeing a wave of users upgrading their computers, Western Digital is in a sweet spot these days.  

2. Valuation
While shares of solid-state drive maker STEC (Nasdaq: STEC) are selling for a price-to-earnings multiple around 12, and storage specialist EMC (NYSE: EMC) commands a pricey multiple around 28, some CAPS members just can’t pass up the single digit earnings multiplesof Western Digital or peer Seagate Technology (Nasdaq: STX) .    

3. War chest
Western Digital has been cranking out free cash flow in recent quarters, which has continued to add cash to its balance sheet. With about $2.7 billion in cash, equaling close to $12 per share, investors like the options Western Digital provides, such as the possibility of more acquisitions and heavy investments in new technologies needed to compete in the future.

To see details of what CAPS members are saying nowabout Western Digital, just click on over to Motley Fool CAPSand have a look -- or add your own thoughts directly to this story in the comments box below.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 57 points on average, take a free 30-day trial.

This article was originally published as 3 Reasons to Buy Western Digital Todayon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

This Week's 5 Smartest Stock Moves

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. Thinking outside of the box
Small-box video game retailer GameStop (NYSE: GME) is starting to hedge its bets. The chain is buying Kongregate, an online distributor of social games.

One can argue that GameStop is morbidly placing a small bet on the digital delivery platform that threatens to make physical distribution obsolete, but it's fairer to call this savvy insurance.

I'm not the only one who has turned bearish on GameStop in recent years. Industry sales have been sluggishfor more than a year. Rivals are finally set on squeezing GameStop's trade-in cash cow, where its thickest margins hang out.

GameStop has always been in a precarious position. Digital delivery of software may actually help publishers and the console makers, as they are able to cash in on games without the overhead of pressing, packaging, physical shipping, and inventory logistics. However, that inevitable future leaves GameStop out in the cold. As hard drives get chunkier and connection speeds get faster, GameStop stores may be left with little more than low-margin hardware to move.

Buying Kongregate doesn't necessarily rescue GameStop. It's a small distributor of casual third-party diversions. However, it's a good baby step in the right direction.

2. Made in the E*TRADE shade
E*TRADE (Nasdaq: ETFC) turned heads last week when it posted its first quarterly profitin three years.

The heads keep on turning.

Credit ratings giant Moody's raised its outlook on the discount broker -- from negative to stable -- this week. E*TRADE's improving financials and lower exposure to problematic loans triggered the upgrade.

3. Droids bash bushels
If you figured that Apple 's (Nasdaq: AAPL) apologetic Antennagate admission and offer to arm iPhone 4 owners with free bumper cases was enough to silence the brand-tarnishing ordeal, you've underestimated the attack skills of its hungry competition.

Motorola 's (NYSE: MOT) been taking out full-page ads to promote its Droid X this week, with a "No Jacket Required" zinger. The ads claim that Motorola's dual antenna design "allows you to hold the phone any way you like to make crystal clear calls without a bulky phone jacket."

Motorola then goes on to claim that this is the attention to obvious details that comes with making wireless handsets for three decades, a jab at Apple's inexperience in this field despite its indisputable success.

Apple may have brought this on by dodging some of the responsibility by saying that antenna reception woes are common among its peers, but you can't blame Motorola for striking while media attention is still hot.

The cherry on top? Motorola went on to post healthier-than-expected profit growth and projected a return to revenue growth during the current quarter.

4. Gunning for multiple expansion in China
Sohu.com (Nasdaq: SOHU) posted better-than-expected quarterly resultson Monday, but the real gem in the Chinese new-media company's report is that its online advertising business is finally growing faster than its Web-based gaming division.

Sohu's brand advertising revenue climbed 22% during the period, compared to a mere 17% advance at its majority-owned Changyou.com (Nasdaq: CYOU) stake. This normally wouldn't matter, but investors have been shy about bidding up China's leading players in Web-based multiplayer fantasy games. Whether they fear that the government will crack down harder on content or the time-sucking nature of the addictive games on its youth, investors are willing to pay healthier premiums for companies that rely on Web-based advertising over those cranking out popular Internet games.

Sohu currently trades at 14 times this year's projected profitability and 11 times next year's projected earnings. That's in line with what its online gaming peers are fetching, but far lower than what the online advertising leaders are commanding.

Online gaming contributes 53% of Sohu's total revenue, whereas brand advertising is just a 36% slice of the top-line pie. In other words, Internet ads still have a way to go to justify the meatier multiple. It's just comforting to see it moving in the direction of justifying multiple expansion.

5. The feature presentation
Shares of IMAX (Nasdaq: IMAX) popped higher yesterday, after the premium theatrical experience provider posted better-than-expected quarterly results. Revenue climbed 38%, as reported profits quadrupled on a per-share basis.

It's been a good week for IMAX, as it kicked off the week announcing an international expansion deal with a Russian exhibitor and solid box office receipts. Aftershock-- the first mainstream Chinese film to be digitally remastered for IMAX -- is a hit in its cinematic debut in the world's most populous nation and Inceptioncame through with yet another market-thumping weekend through its IMAX screenings.

With installations, new screen signings, and IMAX theatrical release announcements ahead of last year's pace, the multiplex sweetener continues to flex its scalable business model.

With numbers like these, shareholders may find that even the popcorn tastes better.

Let me know in the comments box below what you think of this week's smart moves.

This article was originally published as This Week's 5 Smartest Stock Moveson Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

Today's Buy Opportunity: PetMed Express

Welcome to "11 O'Clock Stock." Check back to Fool.com at 11 a.m. ET, and we'll be finding a new great stock every weekday for 50 days. Better yet, we’re so confident in the picks that we’re investing $50,000 of the Fool’s own money in them! To hear more about the series,  click here to see a video from Motley Fool co-founder Tom Gardner. Can't make it at 11 a.m. ET? Come back to  Fool.com, and we'll have the article in our Top Stories section 24 hours a day.

We all know that man's best friend is a canine -- but could Fido be man's best financial advisor, too? Well, probably not, but your furry pal can lead you to superior investment ideas. So sit ... stay ... and read on to find out why Fido and I think PetMed Express (Nasdaq: PETS) is better than a bowl full of Milk-Bones and Snausages.

Fast facts on PetMed Express:

Market Capitalization

$363.3 million

Industry

Your furry little friend -- pets

Revenue (TTM)

$235.5 million

Earnings (TTM)

$25.2 million

Source: Capital IQ (a division of Standard & Poor's). TTM is trailing 12 months.

We love our pets
The numbers are big:

To put that in perspective, Americans will spend as much on pets in 2010 as the Dominican Republic will produce as a country. If Fidoland were a country, it would have the 74th largest gross domestic product, ahead of countries like Costa Rica and Jamaica (combined). With all silly comparisons aside, the point is that the pet market is bigger than Clifford and a potential gold mine for investors.

PetMed Express fills the prescription
Of the $47.7 billion spent on pets last year, $3.7 billion went toward medication. Ten years ago, this market was a near monopoly controlled by veterinarians. The model was simple: When you took Fido for a checkup, your vet would write a prescription and fill it right there. As a pet owner, you were a price taker because you didn't have any other way to fill the prescription.

Enter PetMed Express. The company operates an online and mail order pet pharmacy. Through its website, catalog, and unforgettable phone number (1-800-PetMeds), PetMed Express sells prescription and nonprescription pet medications, generally at prices well below what your vet charges. Typical of an online retailer, the benefit offered to customers is cost savings and the convenience of anytime ordering and home delivery. But PetMed Express goes even further -- it reminds you when Fido is running out of medicine and will call the vet for you to refill the prescription.

Pet owners have embraced and come to love the service PetMed Express offers. Sales, profits, free cash flow, and customer growth have been impressive over the years. Importantly, the company appears to be keeping existing customers happy (reorders make up 75% of sales) while focusing on attracting new customers and growing the business.

FY 2005

FY 2010

5-Year CAGR

Sales

$108.4

$238.3

17.1%

Net Income

$8.0

$26.0

26.6%

Free cash flow

($2.4)

$23.8

NM

New Customers

510,000

815,000

9.8%

Source: Capital IQ and company filings. Numbers in millions, except for customers.

Way back in 1996 PetMed began its quest to bust the vet monopoly. It took awhile to gain some traction, but the company now has 6% market share and getting larger. It dominates the mail order business -- all of its competitors only control 5% of the market. That's right, PETS is larger than all of its mail order competitors combined.

Beware the dog catcher
Let's not confuse a Chihuahua for a mastiff, though; vets still control 72% of the pet medication market. And since PetMed Express has generated a return on equity above 30% for each of the past nine years we shouldn't be surprised if competitors come around and start sniffing under its tail. Major sellers of nonprescription meds and other pet supplies, such as PetSmart (Nasdaq: PETM) , Wal-Mart (NYSE: WMT) , and Amazon.com (Nasdaq: AMZN) , are already competing with PetMed Express. However, PETS has the advantage of being a licensed pharmacy in all 50 states, which allows it to deal in prescription medications, where these others can't. The extra regulation that comes with being a pharmacy, combined with the 1-800-PetMeds brand and high customer satisfaction has built the company a competitive advantage. It is why PetMed is so much larger than its nearest direct competitor, Drs. Foster & Smith, and why I think it will be able to defend its niche against the big dogs.

Many investors disagree with this assessment; Shares of PetMed Express are heavily shorted. Even so, the company has the ability and wherewithal to back up its bark. With no debt, a long-tenured management team and a rabid customer base, The Motley Fool is ready to lift its leg and mark its territory by placing real cash behind PetMed Express. Check back to see how PETS and the other stocks in our "11 O'Clock Stock" campaign are faring.

Previous recommendations

This article was originally published as Today's Buy Opportunity: PetMed Expresson Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

On the Path to a Blockbuster

Prolia might be able to save Amgen (Nasdaq: AMGN) . But not yet. More in a moment.

In the company's just-reported quarter, product sales were essentially flat year over year with a couple of notable disappointments. Sales of anemia drug Aranesp fell 13% as label changes continue to have an effect on year-over-year comparisons. U.S. sales of anti-inflammatory Enbrel fell 3%, which doesn't sound so bad until you notice that Abbott Labs ' (NYSE: ABT) Humira increased more than 9.6% and Johnson & Johnson 's (NYSE: JNJ) Remicade increased 1.6% in the second quarter. Outside the U.S. and Canada, where Pfizer (NYSE: PFE) sells Enbrel, sales were up a more respectable 9%, but that's still nothing compared to Humira's 32.7% increase in international sales.

Amgen was able to eke out a 1% increase in adjusted income thanks to cost-cutting measures. Adjusted earnings per share were up 7% thanks to share repurchases. I guess that's not too shabby -- investors' share of the profits is what counts after all -- but it's not as if Amgen is firing on all cylinders.

Amgen's newest offering, osteoporosis treatment Prolia, should be the missing piece of the turnaround puzzle, but it's going to take time. The drug was approvedat the beginning of June, which resulted in an almost-not-worth-reporting $3 million in sales for the quarter. With plenty of other branded drugs and generics of previous top sellers like Merck 's (NYSE: MRK) Fosamax, it's going to be an uphill battle to break into the crowded osteoporosis space.

The easier pathway to blockbuster status will come in the cancer arena where the active ingredient in Prolia is under Food and Drug Administration review as a treatment to prevent bone breaks in patients with tumors that have metastasized to the bone. The drug has already beaten Novartis ' (NYSE: NVS) Zometa in a couple of head-to-head trials, so making inroads into that space will be easier.

Prolia will reach the magical $1 billion blockbuster status eventually, but investors are going to have to be patient. Turnaroundstake time.

This article was originally published as On the Path to a Blockbusteron Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

4-Star Stocks Poised to Pop: The Phoenix Cos.

Based on the aggregated intelligence of 165,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, insurance provider The Phoenix Cos. (NYSE: PNX) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Phoenix's business and see what CAPS investors are saying about the stock right now.

Phoenix facts

Headquarters (Founded)

Hartford, Conn. (1851)

Market Cap

$283 million

Industry

Life insurance

Trailing-12-Month Revenue

$2 billion

Management

CEO James Wehr (since 2004)

CFO Peter Hofmann (since 2007)

Trailing-12-Month Return on Equity

(10.5%)

Cash/Debt

$132.4 million / $427.7 million

Competitors

MetLife (NYSE: MET)

Prudential (NYSE: PRU)

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 92% of the 253 members who have rated Phoenix believe the stock will outperform the S&P 500 going forward. These bulls include All-Stars tuckerboreoand mrindependent, both of whom are ranked in the top 5% of our community.

Earlier this year, tuckerboreo highlighted the stock's price level as an enticing entry point:

I see [Phoenix] as undervalued at $2.30/share. Insurance companies have been hit hard during this financial crisis and they are no exception. As markets settle down, [Phoenix] will stabilize and return nicely to profitability in 2010. With a book value of over $10/share, [Phoenix] should rise from the ashes again as it always does.

In 2010, Phoenix's stock has been cut by 15%, while its bigger life insurance brothers MetLife and Prudential have risen10% during the same period. Of course, Phoenix's relatively weak balance sheet, which Moody's recently warned "exacerbates the company's limited financial flexibility," probably has a lot do with that wide performance discrepancy. Still, when you consider Phoenix's unbelievably low price ratios, it's easy to see why Fools continue to see at least somevalue in the stock.

CAPS All-Star mrindependent explains:

Ok I admit it, The Phoenix Companies, Inc. appears to have a crappy business model that earns remarkably low returns on equity. But is this life insurance and annuities company really worth just 0.2 times book value and 4.6 times expected earnings? Qualifies for my "Out of Favor" stocks screen. I feel comfortable "betting" on this company as part of a hugely diversified portfolio, but would not recommend that anyone take a position larger than 2% of total longs.

What do you think about Phoenix, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

This article was originally published as 4-Star Stocks Poised to Pop: The Phoenix Cos.on Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

3 Reasons to Sell Western Digital Today

Acting on panic never helps investors, but it's still a good idea to question why you're really buyingindividual investments.

Consider digital storage firm Western Digital (NYSE: WDC) . Though demand for memory storage continues to be strong, you'll find a few of the 1,220 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, so I'm highlighting three of the main bearish arguments on Western Digital today. Be sure to read the bullish sideas well, and then weigh in with your own comments below or rate Western Digital in CAPS.

1. Not meeting expectations
Unlike the expectations-beating quarterly earningsand guidance that competing memory and storage maker SMART Modular Technologies (Nasdaq: SMOD) recently turned in, Western Digital disappointed Wall Street in its fiscal fourth-quarter results and first-quarter guidance. Several analysts slashed their price targets on the stock, and investors have sold off shares, with concerns lingering about earnings growth. 

2. Margin attack
Despite strong full-year outlooksfrom Intel (Nasdaq: INTC) and PC maker Hewlett-Packard (NYSE: HPQ) , some investors are keeping a distance from hard-drive makers over concerns of oversupply and pricing pressures. Compared with flash-memory maker Sandisk (Nasdaq: SNDK) , which reported stable pricing and higher margins in its most recent quarter, Western Digital warned of falling first-quarter margins, echoing a similar forecast from competitor Seagate (Nasdaq: STX) .       

3. Heated competition
With Seagate holding a strong lead in the enterprise space, counting giants like IBM (NYSE: IBM) as major customers, some CAPS members are skeptical that Western Digital can maintain a leading position over the long haul. And while Western Digital outsells major rival Seagate in terms of volume, technologies like flash memory and solid-state drives are gaining ground in mobile and other consumer device markets, a trend that could make it tougher for Western Digital to keep up with peers.

To see details of what CAPS members are saying nowabout Western Digital, just click on over to Motley Fool CAPSand have a look -- or add your own thoughts directly to this story in the comments box below.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 57 points on average, take a free 30-day trial.

This article was originally published as 3 Reasons to Sell Western Digital Todayon Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

A Game-Changer for GameStop?

Video game retailer GameStop (NYSE: GME) is fighting a war on several different fronts. Best Buy (NYSE: BBY) will soon be offering used video games, while Electronic Arts (Nasdaq: ERTS) , Take-Two Interactive (Nasdaq: TTWO) and other developers are expanding their digital delivery capabilities.

In response, GameStop just announced that it's buying Flash-game site Kongregate ,which has 10 million monthly unique users, 30,000 games, and more than 1,000 new games every month. So what does the future hold for GameStop? I recently asked Motley Fool Associate Advisor Charly Travers.

Mac Greer : Charly, can GameStop continue to be a dominant player on the video game market?

Charley Travers : Sure, Mac. I think for the next five years, the answer is absolutely yes. This is the No. 1 retailer for video games right now, and they do about $9 billion in revenue with 6,000 stores. I'm not too worried about certain of the threats that you mentioned. Best Buy has tried to do used games going back to 2005, several attempts, and they have failed. Wal-Mart made a foray, and they backed off. Then you've got some more Internet-related sites, where people buy used stuff all the time ... and none of that has dented GameStop's core business, where they make about half of their profits. Now, the bigger problem for GameStop is digital delivery. That's because a retail store is essentially just a distribution point for somebody to pick up a product, and if you're getting your games in a digital format instead of through a physical DVD, that cuts out the need for a retailer.

Greer : And let's talk a little more about that digital delivery. GameStop developed a free game for Facebook users. The game, Gangsta Zombies, allows players to take on the role of an undead gangster. We have seen the incredible success of social games like Mafia Warson Facebook. Is Facebook the future for GameStop?

Travers :   Well, I love Zombiesand I love Gangstas, but I have got to say, if free games are your future, you're in trouble ... Social gaming is still in its infancy as an industry. This didn't even really exist two or three years ago, and now it's becoming big business. What the opportunities here for GameStop are largely an unknown at this point --- especially the economics of this, if they can make a profit. But it is good to see that they're taking a few steps to disrupt their own business model a little bit.

Greer : And what is the biggest competitive threat to GameStop, if you had to pick one name?

Travers : I would say any of the online gaming distributors or gaming networks. [One] of those would be Steam, which is for PC games. It's operated by a company called Valve, which created the well-known Half-Lifefranchise. They have more than 20 million users. I've used Steam myself many times. I can't remember the last time I have actually bought a game at a store, and I'm a pretty hardcore gamer.

Newer to the game, and very interesting in its own right, is a cloud computing platform called OnLive, which was at the recent E3 conference in California this summer. How big is OnLive going to get?  I have no idea, but what On Live does is it really eliminates the need for you to have both a console and a copy of the game itself, because you're playing your game straight out of the cloud. So all the new games like Assassin's Creed II, for example, are available on the cloud.

Greer : And what's the biggest question you have about GameStop as you look at the company going forward?

Travers : They are piloting a program with Microsoft (Nasdaq: MSFT) for downloadable content. Games aren't necessarily just a one-off sale anymore; they tend to come with these mini little expansion packs that you pay 10 bucks for or five bucks for, and you can now buy certain downloadable content through GameStop. So if they can continue to participate in the digital world with the publishers in that manner, that would help a lot.

Another big question is, what do they do with their cash flow? This is a very profitable business, and do they divert that into what I think is a dying bricks and mortar model, or do they plow that into what could give them a better future in the digital world? That is a big question for them.

Greer : And does GameStop survive as a stand-alone company, or ultimately do you think it gets acquired?

Travers :   If they do survive, I think it would be as a stand-alone company; I can't think of anybody off the top of my head who would want to acquire them. The digital companies, I can't imagine would have any interest in running a 6,000-store retail location. If there would be one, possibly it would be Best Buy, which has kind of stepped back a little bit from selling games in its own stores, but Best Buy has its own growth problems. They did an acquisition in Europe of Car Phone Warehouse, and maybe if their growth doesn't look so hot, they could be tempted to pick up a company like GameStop.

Greer : OK, Charly, and if you could only buy one stock over the next three years: GameStop, Electronic Arts, Take-Two Interactive, or Best Buy?

Travers : I thought pretty hard about this one, and I think I would go with Take-Two Interactive, just because that stock has been beaten down so badly, and they do have some good brands in their own right with the Grand Theft Autofranchise. The 2K games are pretty solid competitors to Electronic Arts' offerings. It hasn't been the best-managed company, but with the stock where it's at, I think it beats these other ones over the next three years.

This article was originally published as A Game-Changer for GameStop?on Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

Why We're Buying PetMed Express

The video below is part of The Motley Fool's "11 O'Clock Stock" series. We're recommending a new stock every weekday at 11 a.m. ET on  Fool.com over the next 50 weekdays. Better yet, we're investing $50,000 of our own money into the picks! To see a video of co-founder Tom Gardner explaining the series,  click here. To see our original recommendation of PetMed Express (NYSE: PETS) ,  click here.

Want a great way to profit from America's obsession with our four-legged friends? Motley Fool Pro analyst Bryan Hinmon says investors should be looking to PetMed Express. To see why, click on the video or read the summary below.

Please enable JavaScript to view this video.

PetMed operates in the $45 billion pets market, but its core business is the $3.7 billion pet medication industry. PetMed has managed to dominate the veterinarian-controlled part of this industry; it's twice as large as its closest competitor, and has boasted a return on equity greater than 30% for the last nine years.

Hinmon says one of PetMed's greatest strengths is its licenses across all 50 states to sell pet pharmaceuticals. This protects the company from threats such as Amazon.com (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT) , which focus on over-the-counter medication.

The stock is heavily shorted, but Hinmon believes threats are overblown. PetMed also has a loyal customer base; about 70% of its orders are reorders. Investors are underestimating the strength of PetMed's brand and competitive advantage.

This article was originally published as Why We're Buying PetMed Expresson Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.