Lesson from Amazon's earnings debacle

SAN FRANCISCO — Quarterly earnings this week from Apple, Yahoo, Facebook, Google and Amazon all prompted big stock moves in their wakes, reminding us of both the agony and the ecstasy of owning tech shares.

Yet the big disappointment from Amazon provided arguably the most important lesson for investors.

Namely: Be wary of bullish reports that come late in a quarter, especially those that surface in December.

The week between Christmas and New Year's tends to be a dead one for public companies and news junkies alike, which means any story from a tech giant has a good chance of getting some prominent play both online and in print.

Such was the case on Dec. 27, when Amazon issued a statement that said overall holiday sales and those made through its Amazon Prime delivery service both set records.

The company said then that sales of its Kindle device also set a holiday record, and that Amazon converted more than 1 million harried shoppers into Prime subscribers during the third week of December alone.

All that sure sounded impressive, and the widely-reported news helped to raise expectations about Amazon's fourth-quarter results, as well as its prospects for 2014.

What the company didn't say then was that its shipping costs rose 19 percent in the fourth quarter, putting a big damper on the benefit from all those additional Amazon Prime sales.

Only now do investors know just how much those extra sales hurt the company's bottom line, as Amazon barely missed Wall Street's revenue expectations yet missed per-share profit estimates by almost 50 percent.

The Seattle-based ecommerce giant this week also issued a disappointing first-quarter forecast, while adding that it might have to raise the price of its Amazon Prime service by as much as $40.

That news helped drive its stock down as much as 10 percent Friday.

Taken together, the large shortfall in profit on sales that were only slightly worse than expected, along with the move to raise prices, s! trongly suggest that the company took a loss on at least some of its Amazon Prime sales as delivery costs rose.

The take-away for mom-and-pop investors is this: While big-money growth investors will hold their noses and keep supporting the stock despite Amazon's razor-thin profit margins, they won't support incremental sales growth that flat out hurts the company's bottom line.

Big post-earnings stock moves are nothing new for Amazon, of course. Its stock dropped as much as 8 percent last April the day after a lackluster report, then came roaring back in the second half of last year.

But Friday's stock drop came on very heavy trading volume, with more than 11 million shares trading hands by midday Friday, compared to average volume of less than 3 million shares.

With the shares still up almost 90 percent over the past two years, many on Wall Street may be tempted to take some profits off the table now that one of the company's growth drivers, namely Amazon Prime, has been shown to be a drag on earnings growth.

And next year, investors big and small may want to view any bullish holiday-season news from Amazon with a bit more skeptical eye.

John Shinal has covered tech and financial markets for 15 years at Bloomberg, BusinessWeek, the San Francisco Chronicle, Dow Jones MarketWatch, Wall Street Journal Digital Network and others. Follow him on Twitter: @johnshinal.

Ways to Save Money at Walt Disney World

Whenever I'm traveling, it's a safe bet I'm going to Disney World, near Orlando, Fla. I've averaged four to five trips a year over the past decade, and I've learned a thing or two about saving money. There's no reason anyone should spend a fortune to see Mickey & Co. Here are my secrets.

Stay Off-Property. There are certainly affordable rooms on Walt Disney World property. At Disney's All-Star resorts, standard rooms go for as low as $96 per night during off-peak times. But it's important to consider just what you get in most of Disney's value hotel rooms: two beds, a bathroom and a TV. If you don't plan to do anything in your room except sleep, and you want the convenience of staying on the property, check out the "value" tier Disney hotels for the lowest prices.

See Also: How to Visit New York City on a Budget

The biggest bang for your buck, however, can be found off-property in surrounding Lake Buena Vista, or neighboring Orlando and Kissimmee, where there's an abundance of affordable chain hotels. Consider a room similar to the one described above at a local Holiday Inn Express. An overnight stay there in early November would cost around $85 including breakfast, compared with $110 to $133 at the All-Star Disney hotels, no food included.

Check out the certified Walt Disney World Good Neighbor Hotels for off-property options, all of which also provide transportation to the parks.

Visit at Off-Peak Times. Crowds change with the seasons at Disney World. So do room rates. That $96 "value" room costs $198 during the Christmas season. Likewise, a standard "moderate" tier room jumps from $198 on an off night to $284 on New Year's Eve.

Generally, Disney's off seasons fall between holidays and school vacations. The easiest way to see when the hotels will be at their cheapest is to consult the online pricing calendar. First, select a hotel on Disney's booking Web site. Then pick a room type. To the right of each, under the price, is a blue link to "view price per night." Click that to reveal a pop-up window, then click on "view seasonal pricing" in the lower left. This calendar will let you view room prices through December 2014.

Keep Your Eyes Peeled for Savings Promos. Disney World runs a number of promotions for money-saving vacation packages throughout the year. So, if you're set on staying on-property, try to snag one of these. Right now, the offer is for a five-night/six-day package for a family of four that includes tickets, the Disney Dining Plan and a standard room at select Disney moderate resort hotels for $2,606. When compared with the same trip a la carte, that's up to a $600 savings. Check back with Disney's Web site periodically to stay on top of new deals.

Visit Only One Park Per Day. Whether you stay on or off-property, you'll save money by dedicating a whole day to each park. A three-day ticket, which allows admission to one park a day, costs $262, or about $87 per day for an adult (when booked separately from a hotel room). Purchasing the park hopper option, which lets you go into and out of each of the four parks as you please, adds an extra $59 per ticket or $84 if you want to tack on the water parks.

There's no real need to be able to hop, aside from a bit more flexibility in scheduling. And you will be able to go into and out of the same park throughout the day if need be. Just note that on major holidays and some days during the summer, one or all of the parks may close due to capacity crowds. In that case, you won't be able to get back in until some people leave.

Consider the Disney Dining Plan. Disney travel experts are split as to whether the DDP is a good value or not. I say, if you're set on staying on property, and you're healthy eaters, go for it. First, the basics: There are different DDP levels with varying meal allotments, and they are only available to guests staying at one of the Disney resorts. Adult prices apply to anyone 10 and older, the children's rate is for ages 3 through 9, and those under 3 can share food at no cost. Kids must order off the children's menu. The most basic (and cheapest) plans are the Quick-Service Dining Plan and the Dining Plan.

The Quick-Service plan includes credits for two counter-service meals and one snack per person per night of your stay. The Dining Plan includes credits for one counter-service meal, one table-service meal and one snack per person per night of your stay. One meal is defined as a full buffet at breakfast, lunch, or dinner, or an entrée, dessert and non-alcoholic beverage at lunch or dinner, and an entrée plus non-alcoholic drink at breakfast.

Note that you may use more than one day's worth of credits in a day, and that some dining experiences will require two meal credits. Gratuities are not included. All dining plans also include a souvenir mug that can be refilled for free, as often as you like during your stay, at your resort only.

Gun safety advocates develop smart weapons

Smart guns and locks are the focus of this year's Smart Tech Challenges Foundation competition.

NEW YORK (CNNMoney) "Safe firearms" sound like an oxymoron, but they're exactly what several tech entrepreneurs are trying to develop.

In response to the Sandy Hook Elementary School shooting that left 20 dead, several prominent tech investors have launched the Smart Tech Challenges Foundation, awarding entrepreneurs $1 million to develop gun safety technology in weapons.

"Technology has been proven to solve today's greatest social challenges, and curbing gun violence in this country is one of the greatest challenges we face," investor Ron Conway said.

Conway, who has invested in a number of technology companies, including Facebook (FB, Fortune 500) and Twitter (TWTR), joined long-term entrepreneur Jim Pitkow to launch the initiative for safer firearms. The group is accepting proposals for better safeguards through the end of March.

  Machine gun tourism in Las Vegas

A panel of judges will award funding to the teams with the best idea. The foundation will also provide resources and guidance to the winning teams.

Pitkow made it clear the initiative would focus on gun safety rather than gun control.

"In no way do our efforts challenge the right to bear arms," he said.

Most of the developers who have entered the competition are looking to put biometric technology on weapons, such as voice recognition or palm print scanners, which would only allow authorized people to fire them.

Several of the innovators who have entered the challenge were personally touched by gun violence.

Carmen Lobis, who is working on a biometric lock for long guns, is the grandfather of Benjamin Wheeler, one of the students killed at the Sandy Hook Elementary School shooting. His device can store and lock rifles and shotguns, and they can be unlocked instantly when the owner touches a fingerprint reader.

Another entrepreneur, Omer Kiyani, was hit by a stray bullet as a teen. Now he's working on a biometric trigger lock for guns.

This type of technology isn't new. Researchers at the New Jersey Institute of Technology have been working on 'smart gun' technology for years.

Pitk! ow hopes that the competition can help developers who have previously worked on gun safety technology but may need more resources to bring those products to life. He also wants people with new ideas to enter the competition.

Conway said he believes the competition could help create the "Mark Zuckerberg or Larry Page of gun safety."

Is Facebook an Attractive Investment?

With shares of Facebook (NASDAQ:FB) trading around $53, is FB an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Facebook is engaged in building social products in order to create utility for users, developers, and advertisers. People use Facebook to stay connected with their friends and family, to discover what is going on in the world around them, and to share and express what matters to them with the people they care about. Developers can use the Facebook platform to build applications and websites that integrate with Facebook to reach its global network of users, building personalized and social products. Advertisers can engage with more than 900 million monthly active users on Facebook — or subsets of its users — based on information they have chosen to share.

Last week, Princeton released a widely-cited but pretty flawed study saying that Facebook will lose 80 percent of its users between 2015 and 2017. On Thursday, Facebook responded by using Princeton's methodology to prove that Princeton will lose all of its students by 2021, and the Earth will in fact run out of air by 2060. In a Facebook post titled "Debunking Princeton," Facebook used Princeton's "correlation equals causation" idea on the university itself to show that just because Princeton says it, doesn't mean it's true. The Princeton study is flawed for several reasons. It uses a strange epidemiology metaphor likening Facebook to a virus that Facebook users will eventually "recover" from. Just because Facebook can be addicting and takes up more of our time than many people are proud of, it doesn't mean the social media site actually operates like a sickness.

T = Technicals on the Stock Chart Are Mixed

Facebook stock has been exploding to the upside in recent years. However, the stock is currently pulling back and may need time to consolidate before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Facebook is trading above its rising key averages which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Facebook options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Facebook options	60.84%	93%	90%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
February Options	Flat	Average
March Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Facebook’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Facebook look like and more importantly, how did the markets like these numbers?

	2013 Q3	2013 Q2	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	108.33%	58.33%	0.00%	-89.46%
Revenue Growth (Y-O-Y)	59.75%	53.13%	37.81%	40.14%
Earnings Reaction	2.44%	29.61%	5.61%	-0.83%

Facebook has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Facebook’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Facebook stock done relative to its peers, Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOG), LinkedIn (NASDAQ:LNKD), and sector?

	Facebook	Microsoft	Google	LinkedIn	Sector
Year-to-Date Return	-3.62%	-3.37%	-2.15%	-4.10%	-2.31%

Facebook has been an average relative performer, year-to-date.

Conclusion

Facebook looks to provide a valuable social networking experience to its users, developers, and advertisers. Last week, Princeton released a widely-cited but pretty flawed study saying that Facebook will lose 80 percent of its users between 2015 and 2017. The stock has been exploding to the upside, but is now pulling back. Over the last four quarters, earnings and revenues have been increasing, which has left investors pleased about recent earnings announcements. Relative to its peers and sector, Facebook has been an average year-to-date performer. Look for Facebook to continue to OUTPERFORM.

Stock Futures Higher as Fed Stays With Stimulus

NEW YORK (TheStreet) -- Stock futures were pointing to a stronger open on Wall Street Thursday, poised for a fifth day of gains and an extension of all-time highs on the S&P 500 amid a global relief rally driven by the Federal Reserve's decision to maintain its ultra-loose monetary policy of $85 billion a month in asset purchases because of worries the U.S. economy hasn't improved enough for tapering.

Futures for the S&P 500 were gaining 3.5 points, or 3.48 points above fair value, to 1,721.25. The benchmark index increased 1.22% to reach a new all-time high of 1,725.52 following the Fed announcement. Futures for the Dow Jones Industrial Average were adding 20 points, or 28.06 points above fair value, to 15,614. Futures for the Nasdaq were ahead by 6.5 points, or 5.74 points above fair value, to 3,228.25.

"This raises the possibility that the Fed is back in QE-forever mode. It certainly reduces the likelihood that QE will be terminated by mid-2014," Ed Yardeni, the New York-based chief investment strategist at Yardeni Research, said in a note.

In company news, Chrysler Group is late in the stages of preparing documents for an initial public offering, a person familiar with the offer told CNBC, and JPMorgan Chase is expected to underwrite the IPO.

Rite Aid (RAD) was jumping nearly 13% to $4.19 in premarket trading after the U.S. retail drugstore chain raised its fiscal 2014 earnings guidance and posted a surprise second-quarter profit driven by its ongoing sales growth momentum and improving margins.

Agilent Technologies (A) was surging more than 11% to $54.88 after the company announced that it plans to separate the company into two independent publicly traded companies. One will be focused on life sciences, diagnostics and applied markets, retaining the Agilent name, and the other will be focused on electronic measurement, which will be named later.

Oracle (ORCL) shares were off 0.38% to $33.74 in premarket trading after the software maker reported that revenue rose 2% to $8.37 billion; analysts were looking for revenue of $8.48 billion. Adjusted earnings for the quarter of 59 cents a share topped Wall Street estimates of 56 cents. Software revenue rose 6% to $6.08 billion and included a 5% increase in new software licenses and cloud software subscriptions to $1.65 billion.

A rise in initial jobless claims during a nonfarm payrolls survey week was reported by the Labor Department Thursday. Claims increased by 15,000 to 309,000 in the week of Sept. 14 after the prior week's figure was revised to 294,000 from 292,000 or what had been the lowest initial claims print since March 2006 thanks to state computer system upgrade that resulted in delayed claims processing. It's expected that the computer system upgrades will require a few more weeks to be completed.

Meanwhile a second-quarter U.S. current account deficit of $98.9 billion was reported by the Bureau of Economic Analysis versus the average economist expectation of $97 billion and the first quarter deficit of $104.9 billion.

A number of U.S. economic reports will be published at 10 a.m. The National Association of Realtors is predicted to say that existing home sales fell to a seasonally adjusted annual rate of 5.25 million in August from 5.39 million.

The general business conditions index of the Philadelphia Fed's Business Outlook Survey for September is expected to have edged up to 10 after dropping to 9.3 in August.

The Conference Board's Index of Leading Indicators is estimated to have increased by 0.6% in August after rising by the same amount in July.

At 11:30 a.m. Cleveland Federal Reserve Bank President Sandra Pianalto speaks on housing finance policy in Cleveland.

The benchmark 10-year Treasury was down 2/32, boosting the yield to 2.699%. The dollar was falling 0.08% to $80.17 according to the U.S. dollar index.

The FTSE 100 was advancing 1.43% and the DAX in Germany was tacking on 1.6%. The Hong Kong Hang Seng finished up 1.67% while the Nikkei 225 in Japan settled up 1.8%.

December gold contracts were surging $55.90 to $1,363.50 an ounce while November crude oil futures were up 62 cents to $107.90 a barrel.

Follow @atwtse

-- Written by Andrea Tse in New York

>To contact the writer of this article, click here: Andrea Tse.>

5 Best Tech Stocks To Own For 2015

Popular Posts: 3 Small-Cap Gems to Winterize Your Portfolio2 Rock-Solid Stocks Rising to the TopIs the Game Over for Zynga? ZNGA Recent Posts: Is the Game Over for Zynga? ZNGA Our Stock Earnings Rundown – HSY KMB DFS SHW LUV TMO AMGN How to Miss Out on Double-Digit Gains View All Posts

When it comes to the biggest tech IPOs from the past few years, the name Zynga (ZNGA) will live in infamy. After going public in late 2011 and bolting out of the gate, it only took a few months for the party to end for ZNGA. A series of estimate cuts sent ZNGA shares plummeting in early 2012 and the stock hasn�� recovered since.

5 Best Tech Stocks To Own For 2015: LinkedIn (LNKD)

LinkedIn Corporation operates an online professional network. The company, through its proprietary platform, allows members to create, manage, and share their professional identity online; build and engage with their professional networks; access shared knowledge and insights; and find business opportunities. Its platform also offers members with solutions, including applications and tools to search, connect, and communicate with business contacts, learn about career opportunities, join industry groups, research organizations, and share information. In addition, the company provides LinkedIn mobile applications across various platforms and languages, such as Android, Blackberry, iPad, and iPhone mobile devices; a public Website that allows developers to integrate its content and services into their applications; and a set of embeddable widgets to allow Web developers to include content from the company�s network into their Website or application. Further, it offers hiring solutions comprising LinkedIn Corporate Solutions that enable enterprises and professional organizations to find, contact, and hire qualified candidates; LinkedIn Jobs that allow enterprises and professional organizations to advertise job opportunities on the company�s network; and Subscriptions, which enable recruiters and hiring managers to find, contact, and manage potential candidates. Additionally, the company provides marketing solutions, such as LinkedIn Ads, a self-service platform that enable advertisers to build and target their advertisement to its members; and LinkedIn Ads for Enterprise, which are marketing solutions to target larger advertisers that receive dedicated account management and additional marketing solutions. It also offers premium subscriptions that are subscription packages designed for general professionals to manage their professional identity and connect with talent. LinkedIn Corporation was founded in 2002 and is headquartered in Mountain Vi ew, California.

Advisors' Opinion:

• [By Evan Niu, CFA]

  During the early rise of social media, Facebook's (NASDAQ: FB  ) similarities to LinkedIn (NYSE: LNKD  ) were only skin-deep.

5 Best Tech Stocks To Own For 2015: VirnetX Holding Corp(VHC)

VirnetX Holding Corporation engages in developing and commercializing software and technology solutions for securing real-time communications over the Internet. Its software and technology solutions, which include secure domain name registry and GABRIEL Connection Technology, facilitate secure communications and create a secure environment for real-time communication applications, such as instant messaging, voice over Internet protocol, smart phones, eReaders, and video conferencing. The company focuses on commercializing its technology to original equipment manufacturers within the IP-telephony, mobility, fixed-mobile convergence, and unified communications markets. VirnetX Holding Corporation was founded in 2005 and is headquartered in Scotts Valley, California.

Advisors' Opinion:

• [By Richard Lomas]

  Further declines in profit margins will most likely cause further declines in share price. One key upcoming event could have a significant impact on Apple's profit margin, the setting of a royalty rate for Apple's products that infringe on Virnetx (VHC) patents. Apple was sued by Virnetx for infringing on its data security patents with the trial concluding in November, 2012, with a Virnetx victory. After many motions and negotiations no settlement has been reached between Virnetx and Apple. Judge Davis is expected to rule shortly (probably within the next two weeks) on a royalty rate for the offending products. The royalty rate could be set anywhere between .5% to 1.5% and possibly even more. As this royalty rate will apply to all infringing products, (iPhone, iPad, and others supporting Face Time and iMessage), this will have a direct effect on Apple's profit margin which will also impact stock price.

• [By James E. Brumley]

  While there's no denying that Vringo, Inc. (NASDAQ:VRNG) and VirnetX Holding Corporation (NYSEMKT:VHC) have made a big name for themselves - not to mention made big, even if uneven, gains for shareholder of VHC and VRNG - within the worked of intellectual property enforcement, bigger isn't always better. Smaller companies in the IP arena have a focus and flexibility that larger players like VirnetX and Vringo could never enjoy. Take, for instance, Endeavor IP Inc. (OTCBB:ENIP). This little patent owner may not look like much at first glance, but just ask the four organizations that have already entered licensing deals with ENIP and/or the four, well, now five companies that are currently litigating against Endeavor IP.... this little outfit packs a huge punch.

• [By Anders Bylund]

  Apple's (NASDAQ: AAPL  ) extremely simple workaround for VirnetX's (NYSEMKT: VHC  ) networking patents reveal how easily the company's claims can be ignored. Add in a recent court victory by Cisco Systems (NASDAQ: CSCO  ) over many of the same VirnetX claims, and the cracks in the patent trolling strategy start to show.

Hot Financial Stocks For 2015: Amgen Inc.(AMGN)

Amgen Inc., a biotechnology medicines company, discovers, develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses primarily in the United States, Europe, and Canada. The company markets recombinant protein therapeutics in supportive cancer care, nephrology, and inflammation. Its principal products include Aranesp and EPOGEN erythropoietic-stimulating agents that stimulate the production of red blood cells; Neulasta and NEUPOGEN to stimulate the production of neutrophils, which is a type of white blood cell that helps the body to fight infections; and Enbrel, an inhibitor of tumor necrosis factor that plays a role in the body?s response to inflammatory diseases. The company also markets other products comprising Sensipar/Mimpara, a small molecule calcimimetic that lowers serum calcium levels; Vectibix, a monoclonal antibody that binds specifically to the epidermal growth factor receptor; and Nplate, a thrombopoietin (TPO) receptor agonist that mimics endogenous TPO, the primary driver of platelet production. In addition, it provides Denosumab, a human monoclonal antibody that targets RANKL, an essential regulator of osteoclasts. Further, the company offers product candidates in mid-to-late stage development in a variety of therapeutic areas, including oncology, hematology, inflammation, bone, nephrology, cardiovascular, and general medicine consisting of neurology. It markets its products to healthcare providers, including physicians or their clinics, dialysis centers, hospitals, and pharmacies; consumers; and wholesale distributors of pharmaceutical products. The company has various collaborative arrangements with Pfizer Inc.; GlaxoSmithKline plc; Takeda Pharmaceutical Company Limited; Daiichi Sankyo Company, Limited; Array BioPharma Inc.; Kyowa Hakko Kirin Co. Ltd.; and Cytokinetics, Inc. Amgen Inc. was founded in 1980 and is headquartered in Thousand Oaks, California.

Advisors' Opinion:

• [By Keith Speights]

  1. Onyx Pharmaceuticals (NASDAQ: ONXX  )
  This one's virtually a no-brainer. A few weeks ago, Amgen (NASDAQ: AMGN  ) made an unsolicited offer for Onyx. Although Onyx rejected Amgen's bid of $120 per share as being too low, that wasn't the end of the story.

• [By WWW.GURUFOCUS.COM]

  Amgen Inc. (0.2%) (AMGN - $111.94 - NASDAQ)(AMGN) is one of the largest biotechnology companies in the world, with medicines for cancer, kidney dialysis, osteoporosis, and other conditions. Given its large size and mature product portfolio, revenue growth has slowed, but the company has been able to cut costs and repurchase shares to sustain double digit earnings per share growth. Earlier this year, Amgen offered to acquire Onyx Pharmaceuticals Inc. (less than 0.1%) to bolster its oncology portfolio, with Nexavar for liver cancer and Kyprolis for blood cancers. On Aug 25, after a brief auction, Amgen agreed to pay $125 per share, or $10.4 billion, for Onyx. While initially dilutive to earnings, this acquisition provides significant visibility into Amgen's future, with two blockbuster drugs that could eventually generate over $5 billion in annual sales.�

• [By Maxx Chatsko]

  Amgen� (NASDAQ: AMGN  ) �is pouring billions of dollars into biosimilar development in an attempt to capture lucrative markets enjoyed by several widely successful biologic drugs that are due to come off patent in the next several years. Ironically, the company knows how it feels to lose out to generic competition, with three successful biologics coming off patent in major markets. There are millions of dollars at stake, so investors need to watch both sides of the biosimilar equation. In the following video, Fool contributor Maxx Chatsko goes over the immediate generic threats facing Amgen's Aranesp, Epogen, and Neupogen.�

• [By Bryan Murphy]

  When most investors think of cancer stocks, names like Amgen, Inc. (NASDAQ:AMGN) or Roche Holding Ltd. (OTCMKTS:RHHBY) come to mind. And to be fair, they're both top-of-mind names for good reasons. Five of the world's top-ten selling cancer drugs are from Roche Holding, and Amgen is the world's biggest biotech company; it just spent $10 billion on the acquisition of an entire company almost to add just one cancer therapy to its library. Thing is, while Roche Holding Ltd. and Amgen, Inc. make top-notch drugs to treat cancer once acquired, neither actually does anything to prevent the development of cancer through metastasization. Indeed, the prevention of the spread of cancer isn't on the biopharma industry's radar at all, save one company - a little outfit called MetaStat Inc. (OTCBB:MTST).

5 Best Tech Stocks To Own For 2015: Neurocrine Biosciences Inc.(NBIX)

Neurocrine Biosciences, Inc. engages in the discovery, development, and commercialization of drugs for the treatment of neurological and endocrine-related diseases and disorders in the United States. It develops drugs for endometriosis, stress-related disorders, pain, tardive dyskinesia, uterine fibroids, diabetes, insomnia, and other neurological and endocrine-related diseases and disorders. The company?s products in clinical development include Elagolix, a Phase II drug for endometriosis; Vesicular Monoamine Transporter 2 Inhibitor (VMAT2), a Phase II drug for movement disorders; CRF2 Peptide Agonist, a Phase II drug for cardiovascular diseases; CRF1 Antagonist, a Phase II drug for stress-related disorders; and Elagolix, a Phase II drug for uterine fibroids. Its research programs comprise G Protein-Coupled Receptor 119 (GPR119) for type II diabetes; VMAT2 for schizophrenia; GnRH Antagonists for men?s and women?s health, and oncology; Antiepileptic Drugs for epilepsy, essential tremor, and pain; and G Protein-Coupled Receptors for other conditions. The company has collaborations with GlaxoSmithKline to develop and commercialize CRF antagonists for psychiatric, neurological, and gastrointestinal diseases; Dainippon Sumitomo Pharma Co. Ltd. to develop and commercialize Indiplon in Japan; Abbott International Luxembourg S.�r.l. to develop and commercialize elagolix and GnRH antagonists for women?s and men?s health indications; and Boehringer Ingelheim International GmbH to research, develop, and commercialize small molecule GPR119 agonists for the treatment of type II diabetes and other indications. Neurocrine Biosciences, Inc. was founded in 1992 and is headquartered in San Diego, California.

Advisors' Opinion:

• [By Lisa Levin]

  Neurocrine Biosciences (NASDAQ: NBIX) shares moved up 76.95% to $17.27. The volume of Neurocrine Biosciences shares traded was 4406% higher than normal. Neurocrine Biosciences reported positive results of VMAT2 inhibitor NBI-98854 in Kinect 2 study.

• [By Jake L'Ecuyer]

  Equities Trading UP
  Shares of Neurocrine Biosciences (NASDAQ: NBIX) got a boost, shooting up 57.43 percent to $15.37 after the company reported positive results of VMAT2 inhibitor NBI-98854 in Kinect 2 study.

• [By John Udovich]

  Yesterday, small cap biopharmaceutical stock Neurocrine Biosciences, Inc (NASDAQ: NBIX) surged 89.69% after announcing positive results for its VMAT2 inhibitor NBI-98854 as a treatment for tardive dyskinesia, meaning investors late to the party or those already in should take a closer look at the stock along with its performance verses that of biotech ETFs like the iShares NASDAQ Biotechnology Index ETF (NASDAQ: IBB) and SPDR S&P Biotech ETF (NYSEARCA: XBI).

5 Best Tech Stocks To Own For 2015: DSP Group Inc.(DSPG)

DSP Group, Inc. provides wireless chipset solutions for converged communications at home. It enables consumer electronics (CE) manufacturers to develop new applications through system solutions that combine semiconductors and software with reference designs. The company offers solutions supporting various major digital cordless technologies with a primary share in the wireless home telephony market. It provides a portfolio of wireless chipsets integrating digital enhanced cordless telecommunications, Wi-Fi, public switched telephone network, and voice over Internet protocol (VoIP)/communications over Internet Protocol technologies with application and multimedia processors. The company?s products enables converged voice, audio, video, and data connectivity across various consumer products, including cordless and VoIP phones, home gateways and broadband multimedia terminals, and home automation and wireless audio to fixed mobile convergence offerings, as well as partners w ith CE manufacturers to provide converged communications at home. It markets its products through direct sales and marketing offices, as well as through a network of distributors to CE brands, original equipment manufacturers, original design manufacturers, telecommunications operators, and service providers primarily in the United States, Japan, Europe, Hong Kong, and Korea. The company was founded in 1979 and is based in San Jose, California.

5 Best Tech Stocks To Own For 2015: ADTRAN Inc.(ADTN)

ADTRAN, Inc. designs, manufactures, markets, and services communications network solutions that enable voice, data, video, and Internet communications across wireline and wireless networks worldwide. Its Carrier Networks division provides fiber and copper-based solutions for service providers to deliver voice, data, and video services to customers? premises and mobile network cell sites. Its products enable services, such as voice, VoIP, IP television, RF video, high speed Internet access, and data services based upon Ethernet, frame relay, TDM, and ATM networks, connecting the network with user components, such as switches, routers, gateways, integrated access devices (IADs), private branch exchanges (PBXs), and telephone key systems. This division serves local exchange carriers, independent operating companies, competitive local exchange carriers, utilities, municipalities, cable MSOs, international carriers, and wireless service providers. The company?s Enterprise Net works division provides Internetworking solutions for enterprise customers to construct voice, data, and video networks within their sites or among distributed sites. It offers Internetworking solutions, including IP business gateways, optical network terminals, virtual wireless LAN products, multi-service routers, managed Ethernet switches, IP PBX products, IP phone products, unified communications and unified threat management solutions, and carrier Ethernet network terminating equipment, as well as provides IADs. This division serves the retail, food service, healthcare, finance, government, education, manufacturing, military, transportation, hospitality, and energy/utility markets. ADTRAN, Inc. also provides digital data service and integrated services digital network products, high bit-rate digital subscriber line products, T1/E1/T3, channel service units/data service units, and fixed wireless products. The company was founded in 1985 and is headquartered in Huntsville, Alabama.

Advisors' Opinion:

• [By Seth Jayson]

  When judging a company's prospects, how quickly it turns cash outflows into cash inflows can be just as important as how much profit it's booking in the accounting fantasy world we call "earnings." This is one of the first metrics I check when I'm hunting for the market's best stocks. Today, we'll see how it applies to ADTRAN (Nasdaq: ADTN  ) .

• [By Laura Brodbeck]

  Next week investors will be waiting for several key earnings reports including�Lindsay Corporation (NYSE: LNN),RPM International Inc. (NYSE: RPM), ADTRAN, Inc. (NASDAQ: ADTN), and Del Frisco�� Restaurant Group, Inc (NASDAQ: DFRG)

5 Best Tech Stocks To Own For 2015: AOL Inc (AOL)

AOL Inc. (AOL) is a global Web services company with a range of brands and offerings, and a global audience. The Company�� business spans online content, products and services, which it offers to consumers, publishers and advertisers. Its business operations are focused on AOL Properties and Third Party Network. AOL Properties include its owned and operated content, products and services in the Content, Local, Paid Services and Consumer Applications strategy areas in addition to its AOL Ventures offerings. AOL Properties also include co-branded Websites owned by third parties. It generates advertising revenues from AOL Properties through the sale of display advertising and search and contextual advertising. It offers a range of display advertising, including text and banner advertising, mobile, video and rich media advertising, sponsorship of content offerings, and local and classified advertising. It also generates revenues through its subscription access service. It also generates revenues from subscriptions to other products and services. It also generates advertising revenues through the sale of advertising on third-party Websites, which it refers to as the Third Party Network. It markets its offerings to advertisers on both AOL Properties and the Third Party Network under the brand AOL Advertising. It markets its offerings to publishers on the Third Party Network under the brand Advertising.com and also market offerings as video advertisements distributed through goviral A/S (goviral) and 5 Minutes Ltd (5min Media).

On January 22, 2010, the Company completed the acquisition of StudioNow, Inc. On September 28, 2010, the Company completed the acquisition of 5min Media. On September 28, 2010, the Company completed the acquisition of Thing Labs, Inc. On September 29, 2010, the Company completed the acquisition of TechCrunch, Inc. On December 15, 2010, the Company completed the acquisition of Pictela, Inc. On December 20, 2010, the Company completed the acquisition of About.me, Inc. On! January 31, 2011, the Company completed the acquisition of goviral A/S. On February 26, 2010, the Company sold buy.at to Digital Window Limited. On June 16, 2010, the Company sold Bebo, Inc. On July 8, 2010, the Company completed the sale of ICQ operations (ICQ). During the year ended December 31, 2010, the Company sold its investments in Kayak Software Corporation and Brightcove, Inc.

AOL Properties

AOL Media offerings include original content produced through its network of content creators, which includes professional journalists from media, freelance writers and bloggers, content, which it licenses from third parties and aggregations of user-generated content. Its content offerings are made available to audiences through sites, such as the AOL.com homepage, as well as to audiences branded properties, such as Engadget, TechCrunch, PopEater, Moviefone, AOL Shopping, AOL Autos, AOL Travel, AOL Real Estate, MapQuest and StyleList. Its Seed.com platform allows writers and photographers to submit original content for its editors to review and publish on AOL Properties or on third party sites.

The Company has developed and acquired platforms, which are designed to facilitate the production, aggregation, distribution and consumption of local content. This local content includes professional editorial content, user-generated content and business listings. Its local offerings include Patch, which is a community-specific news and information platform dedicated to providing local coverage for individual towns and communities; MapQuest, which is an online mapping and directions service, and City�� Best, which provides local entertainment information for metropolitan areas. It offers a range of consumer applications, including a range of communications products and services. Its consumer applications offerings include AOL Mail, which is an e-mail services in the United States; AIM, which is an instant messaging service in the United States; and a range of mobile offerin! gs, which! extend its content, products and services to a range of digital devices.

The Company offers AOL Search on AOL Properties. It provides its consumers with a general, Internet-based search experience, which utilizes Google�� organic Web search results and additional links on the search results and third-party content and information, as well as provides a range of search-related features, such as suggesting related searches to help users refine their search queries. It also provides consumers with relevant paid text-based search advertising through its relationship with Google, in which it provides consumers sponsored link ads in response to their search queries. It offers vertical search services and mobile search services on AOL Properties.

The Company offers contextually relevant advertising, which is generated based on the content of the AOL Properties Webpage the consumer is viewing. It also offers MapQuest, a service, which provides maps, turn by turn driving directions and other location-based information for consumers globally. During 2010, it launched a new MapQuest platform, which simplified the user interface and included enhanced features. In addition, it provides local directory listings through its AOL Yellow Pages product, which listings are provided by a third party and from which AOL receives a revenue share. The Company�� subscription service has been its subscription access service, including narrow-band (telephone dial-up) access to the Internet. Computer tools and maintenance services, online technical support, anti-virus software, identity theft protection, online and social media privacy and reputation monitoring services, diet fitness services, online learning and other lifestyle services are offered on a subscription basis. Content, products and services on AOL Properties are available to online consumers.

The Company�� AOL-brand subscription access service, which it offers to consumers in the United States for a monthly fee, is a val! uable dis! tribution channel for AOL Properties. As of December 31, 2010, it had 3.9 million AOL-brand access subscribers in the United States. In addition to its content, products and services, which are available to all online consumers, an AOL-brand access subscription provides members with dial-up access to the Internet. It offers Internet access services under the CompuServe and Netscape brands. Its access service partners are Level 3 Communications, LLC and MCI Communications Services, Inc., who provides it with modem networks and related services for a substantial portion of its subscription access service.

The Company also distributes AOL Properties through a range of other channels, including agreements with manufacturers of digital devices and other consumer electronics, broadband access providers and mobile carriers. AOL also distributes its content, products and services directly to consumers on the open Web and through the Apple Apps Store. Additional distribution channels include toolbars, widgets, co-branded portals and Websites, and third-party Websites and social networks that link to AOL Properties. It also utilizes search engine marketing and search engine optimization as distribution methods. In addition, it makes available open standards and protocols for use by third-party developers. It generates advertising revenues from AOL Properties through the sale of display advertising and search and contextual advertising.

Third Party Network

The Company generates advertising revenues through the sale of advertising on third party Websites. Its advertising offerings on the Third Party Network consists of the sale of display advertising and also includes search and contextual advertising. It markets its offerings to publishers on the Third Party Network under the brand Advertising.com and also market offerings as video advertisements distributed through goviral and 5 Minutes Ltd. Its revenues in the Third Party Network are generated from the advertising invent! ory acqui! red from publishers. The Third Party Network includes a display advertising interface, which gives advertisers the ability to target and control the delivery of their advertisements and provides advertisers and agencies with relevant display analytics and measurement tools. It focuses to utilize self-service systems. For its publishers, inclusion in the Third Party Network offers a range of tools and technologies. It aims to develop its relationships with publishers and advertisers.

The Company utilizes a scheduling, optimization and delivery technology, which optimize advertisement placements across the Third Party Network and the available inventory on AOL Properties. AdLearn allows performance to be analyzed and advertisement placement to be optimized based on specific objectives, including click-through rate, conversion rate, sales volume and other metrics. In addition to advertising and subscription revenues, it also generates fee, license and other revenues. It generates fees from its consumer applications associated with mobile e-mail and instant messaging functionality from mobile carriers. Through MapQuest�� business-to-business services, it generates licensing revenue from third-party customers. It also generates revenues by licensing its ad serving technology to third parties, through its subsidiary, ADTECH AG.

The Company competes with Yahoo! Inc., Google Inc., Microsoft Corporation�� MSN, IAC/Interactive Corp., Facebook, Inc., Twitter, Inc., News Corporation, WPP plc and ValueClick, Inc.

Advisors' Opinion:

• [By Douglas A. McIntyre]

  Facebook’s (NASDAQ: FB) growth has put it in a place just behind the top portals, with a November unique visitor count of 140.7. AOL (NYSE: AOL), the third portal ranked fifth among all sites at 118.9 million unique visitors.

• [By Brian Pacampara]

  What: Shares of online media group AOL (NYSE: AOL  ) sank 10% today after the company's quarterly results missed Wall Street expectations.

• [By Douglas A. McIntyre]

  However, Microsoft persisted to be a central force online. It funded MSN, and its own search tools, which went up against AOL (NYSE: AOL), whose founder Steve Case is long gone. Along with Case was there was Yahoo!”s (NASDAQ: YHOO) founder Jerry Yang the off and on leader until his refusal to accept Ballmer’s insistent efforts to buy the portal company injured him.

5 Best Tech Stocks To Own For 2015: International Game Technology (IGT)

International Game Technology (IGT) designs, manufactures, and markets electronic gaming equipment and systems worldwide. The company offers casino-style slot machines that determine the game play outcome at the machine; wide area progressive jackpot systems with linked machines across various casinos; central determination system machines connected to a central server that determines the game outcome, encompassing video lottery terminals used primarily in government-sponsored applications and electronic or video bingo machines; and amusement with prize games. Its systems products include applications for casino management, customer relationship marketing (CRM), and server-based games and player management. IGT?s casino management solutions comprise integrated modules for machine accounting, patron management, cage and table accounting, ticket-in/ticket-out, bonusing (jackpots and promotions), and table game automation. The company?s CRM solutions feature integrated market ing and business intelligence modules that provide analytical, predictive, and management tools for maximizing casino operational effectiveness; and server-based solutions enable game delivery to slot machines, computers, mobile phones, tablets, and other networked devices. Its gaming markets comprise the United States, Canada, Europe, the Middle East, Africa, Mexico and South/Central America, Asia, Australia, New Zealand, the Pacific, and the United Kingdom. The company was founded in 1980 and is headquartered in Reno, Nevada.

Advisors' Opinion:

• [By Jake L'Ecuyer]

  International Game Technology (NYSE: IGT) shares tumbled 11.44 percent to $15.63 after the company reported weaker-than-expected fiscal first-quarter results. Sterne Agee downgraded the stock from Buy to Neutral and cut the price target from $21.50 to $18.00.

• [By Stock Maelstrom]

  International Games Technology (IGT) is the leading company in this industry. Its market capitalization of $4.6 billion is twice that of Bally Tech. International's fiscal 2013 ends September 30th, and by all indications it will be an excellent year, both in terms of comparisons with 2012 and historical references. For instance in its second quarter, the company's $600 million in revenue were up about 12% from the second quarter of fiscal 2012, and profits of $95 million, or $0.36 per share, were up 33% from the year ago. The stock market has rewarded three consecutive quarters of strong profit comparisons, bidding up shares by over 50% since September, 2012. The company also recently raised its dividend by 12.5%, paying a current yield of 1.8%. But most analysts see profit growth flattening off in fiscal 2014. I wonder if much of International Games' growth is actually behind it. For that reason, I do not like this otherwise impressive company as much as Bally Tech over the next two to three year period.

• [By Michael Flannelly]

  Analysts at Sterne Agee noted on Monday that International Game Technology’s (IGT) fiscal 2014 growth is stronger than it appears. As such, the analysts raised the price target on the casino gaming equipment manufacturer.

  The analysts maintain a “Buy” rating on IGT and now see shares reaching $25, up from the previous target of $23. This new price target suggests a 23% upside to the stock’s Friday closing price of $20.32.

  “Excluding FY13 Canadian VLT sales, which do not recur in FY14, consensus FY14 EPS growth is ~14% versus ‘in-print’ consensus EPS growth of ~4%,” Sterne Agee analyst David Bain said. “We believe IGT’s peer-low stock valuation is partly driven by a misinterpretation of forward growth using ‘in-print’ FY14 EPS projections.”

  Futhermore, the firm raised IGT’s fourth quarter EPS estimates from 33 cents to 34 cents.

  IGT shares were inactive during pre-market trading on Monday. The stock is up 43.4% year-to-date.

• [By John Divine]

  Lastly, slot machine maker International Game Technology (NYSE: IGT  ) slumped 7.3%, due largely to negative analyst sentiment. Unlike AMD and Microsoft, IGT doesn't report quarterly results until next Tuesday, so the comments today were sure to attract the attention of some uneasy investors before official numbers come out. A Janney Capital Markets analyst said that the stock's been driven up to a point where it no longer offers newcomers an attractive entry point. On top of that, IGT is set to start losing market share, will see higher costs, and will be able to buy back less stock in the future, according to the report.�

5 Best Tech Stocks To Own For 2015: Micrel Incorporated(MCRL)

Micrel Incorporated, doing business as Micrel Semiconductor, designs, develops, manufactures, and markets high-performance analog power, mixed-signal, and digital integrated circuits (ICs) primarily in North America, Europe, and Asia. It offers power management products, including cloud, single-board, and enterprise servers; network switches and routers; storage area networks; and wireless base stations for the networking and communications infrastructure markets. The company also provides power management standard products for industrial, consumer, defense, and automotive electronics markets. In addition, it manufactures custom analog and mixed-signal circuits; and provides wafer foundry services for the customers who produce electronic systems for communications, consumer, and military applications. Further, the company offers general linear parts; power analog circuits; high speed physical media devices and interface ICs; and Ethernet products, which comprise physical l ayer transceivers, media access controllers, switches, and system-on-chip devices. Additionally, it provides radio frequency (RF) data communications products, including QwikRadio family of RF receivers and transmitters, which include garage door openers, lighting and fan controls, automotive keyless entry, and remote controls; and RadioWire transceivers for applications, such as remote metering, security systems, and factory automation. The company?s products address a range of end markets, including cellular handsets, portable computing, enterprise and home networking, wide area and metropolitan area networks, digital televisions, and industrial equipment. Micrel Incorporated sells its products through a network of independent sales representatives, independent distributors, and stocking representative firms, as well as through a direct sales staff. The company was founded in 1978 and is based in San Jose, California.

Advisors' Opinion:

• [By Evan Niu, CFA]

  What: Shares of Micrel (NASDAQ: MCRL  ) jumped temporarily this morning, up by as much as 10% before giving back nearly all of those gains, following first-quarter earnings.

• [By gurujx]

  Micrel (MCRL): CFO/VP Finance/HR Ray Wallin Sold 59,701 Shares

  CFO/VP Finance/HR of Micrel, Inc. (MCRL) Ray Wallin sold 59,701 shares during the past week at an average price of $9.56.

Another reason to file and suspend Social Security benefits

Thank goodness for Investment News readers who come up with such intriguing questions. By pushing the envelope on what I know about Social Security claiming rules, their queries sometimes send me scurrying to the Social Security Administration for answers and we all learn a little bit more as a result.

Just before Christmas, a reader wrote to me asking what would happen if he filed and suspended his Social Security benefits at his full retirement age of 66 and later decided he would like a partial lump-sum payout? Could he request one?

As regular readers of this column now know, it is possible to lift a voluntary suspension of retirement benefits and request a lump-sum payment of benefits back to the date of suspension.

This recently discovered use of the file and suspend strategy makes particular sense for single people who, unlike married couples, don't have to worry how their claiming decision might affect spousal or survivor benefits.

For single people especially, the file and suspend strategy can be used as an insurance policy.

The premise is to file for benefits at full retirement age, currently 66, and then immediately suspend benefits with the intention of earning delayed retirement credits worth 8% per year for every year they postpone collecting benefits beyond full retirement age, up to 70.

But anyone who files and suspends benefits can change their minds and request a lump-sum payout back to the date of the original suspension. Of course, if they did, they would forfeit the delayed retirement credits earned during that period.

Why would you want to file and suspend and then request a lump sum?

Let's say you're single and had expected to live a long time, and at 68 receive a terminal diagnosis. Longevity is suddenly the least of your worries and a lump sum payout might come in handy. Going forward, you would collect Social Security benefits based on your age when you suspended benefits, not larger benefits based on your current, older age.

Married beneficiaries may also file and suspend, but probably would be more concerned about maximizing their retirement benefits and subsequent survivor benefits by accruing delayed retirement credits rather than requesting a lump sum payout.

But what about receiving a partial lump sum benefit?

“What if you file and suspend at full retirement age and then three years later wish you had a lump sum? Can you request a partial payout?” the reader asked in an e-mail. “Maybe just a year's worth? “

Frankly, I didn't know the answer, so I asked my contacts at the Social Security national press off

Apple Scores Court Victory in E-books Trial

Apple Inc. (NASDAQ: AAPL) scored a modest victory on Tuesday in a trial related to price-fixing on e-books at its App Store. The same judge who has ruled against Apple on the price-fixing charges gave the company some relief from the penalties proposed by the U.S. Department of Justice.

The judge denied the Justice Department's proposal to that would have regulated the way Apple conducted business in the App Store, provided that Apple promise not to attempt to circumvent sanctions on the iBookstore. The Justice Department wanted a five-year ban on entering new contracts to sell e-books and the termination of Apple's existing contracts with five publishers. The DoJ and Apple agreed in Tuesday's hearing to allow the company to modify rather than terminate the deals with the publishers.

The court also rejected a DoJ proposal to appoint a monitor on Apple's activities for a period of five years. The judge set the time period to two years and scaled back the monitor's activities to include mainly antitrust policy and training.

And in a defeat for competitive book sellers like Amazon.com Inc. (NASDAQ: AMZN) and Barnes & Noble Inc. (NYSE: BKS), the judge rejected a proposal that would have forced Apple to offer links to competitors online stores for in-app purchases without paying a commission to Apple.

The dispute centered on the agreement Apple struck with several publishers to sell e-books at a price set by the publisher and from which Apple would take a 30% cut. This so-called agency model was opposed by retailers like Amazon, which followed a wholesale model where it purchased e-books and then resold them at any price Amazon chose. The publishers hated the model, claiming it devalued their intellectual property.

Tuesday's ruling may have been a modest victory for Apple, but the impact is significant. In her ruling last month, the judge said, "Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did in the Spring of 2010." In yesterday's ruling she indicated that she did not want to punish Apple as much as she wanted to address the anticompetitive behavior in the e-book market. A final ruling is due next week.

Hot Small Cap Stocks To Invest In 2014

It is amazing how quickly things change on Wall Street. Everything suddenly turns from rosy to ugly in a matter of weeks. Both the Dow and S&P 500 lost more than 6% in May. At the time of this writing, the Dow lost more than 200 points for the day.

The market plunging shouldn�� surprise the readers who have been following our monthly market valuation comment. The market has been overvalued for a while. When it is overvalued, it may still go up. Just the risk is much higher and the possible returns will be much lower. The market plunging may hurt a lot of people. But it is good news for those who are prepared. It is hard to hold cash sometimes. But it is a discipline required for long-term successful investing.

It is a good thing to see the market going in the direction of more reasonable valuation. Though it is still not enough to be fair valued or give satisfactory future returns.

GuruFocus hosts three pages about market valuations. The first is the market valuation based on the ratio of total market cap over GDP; the second is the measurement of the U.S. market valuation based on the Shiller P/E. These pages are for the U.S. market. We have also created a new page for international markets. You can check it out here. All pages are updated at least daily. Monthly data is displayed for international markets.

Why is this important?

As pointed out by Warren Buffett, the percentage of total market cap (TMC) relative to the U.S. GNP is ��robably the best single measure of where valuations stand at any given moment.��

Knowing the overall market valuation and the expected market returns will give investors a clearer head on where we stand for future market returns. When the overall market is expensive and positioned for poor returns, the overall market risk is high. It is important for investors to be aware of this and take consideration of this in their asset allocation and investing strategies.

Please keep in mind that the long-term valuations published! here do not predict short-term market movement. But they have done a good job predicting the long-term market returns and risks.

Howard Marks also pointed out that investors should always know where we are with the market. Predicting the direction of the market is hard. But investors can always make educated decisions based on current conditions.

Why did we develop these pages?

We developed these pages because of lessons we learned over years of value investing. From the market crashes in 2001 to 2002 and 2008 to 2009, we learned that value investors should also keep an eye on overall market valuation. Many times value investors tend to find cheaper stocks in any market. But a lot of times the stocks they found are just cheaper, instead of cheap. Keeping an eye on the overall market valuation will help us to focus on absolute value instead of relative value.

The indicators we develop focus on long term. They will provide a more objective view on the market.

Ratio of Total Market Cap over GDP - Market Valuation and Implied Returns

The information about the market valuation and the implied return based on the ratio of the total market cap over GDP is updated daily. The total market cap as measured by Wilshire 5000 index is now 91% of the US GDP. The stock market will barely return 4.7% a year in the coming years. As a comparison, at the beginning of the year, the ratio of total market cap over GDP was 87.4%, it was likely to return 5.7% a year from that level of valuation. The first quarter gain of 12% has reduced the future gains by about 1.7% a year.

For details, please go to the daily updated page. In general, the returns of investing in an individual stock or in the entire stock market are determined by these three factors:

1. Business growth

If we look at a particular business, the value of the business is determined by how much money this business can make. The growth in the value of the business comes from the growth of the earnings ! of the bu! siness growth. This growth in the business value is reflected as the price appreciation of the company stock if the market recognizes the value, which it does, eventually.

If we look at the overall economy, the growth in the value of the entire stock market comes from the growth of corporate earnings. As we discussed above, over the long term, corporate earnings grow as fast as the economy itself.

2. Dividends

Dividends are an important portion of the investment return. Dividends come from the cash earnings of a business. Everything being equal, a higher dividend payout ratio, in principle, should result in a lower growth rate. Therefore, if a company pays out dividends while still growing earnings, the dividend is an additional return for the shareholders besides the appreciation of the business value.

3. Change in the market valuation

Although the value of a business does not change overnight, its stock price often does. The market valuation is usually measured by the well-known ratios such as P/E, P/S, P/B etc. These ratios can be applied to individual businesses, as well as the overall market. The ratio Warren Buffett uses for market valuation, TMC/GNP, is equivalent to the P/S ratio of the economy.

Putting all three factors together, the return of an investment can be estimated by the following formula:

Investment Return (%) = Dividend Yield (%)+ Business Growth (%)+ Change of Valuation (%)

From the contributions we can get the predicted return of the market.

The Predicted and the Actual Stock Market Returns

This model has done a decent job in predicting the future market returns. You can see the predicted return and the actual return in the chart below.



The prediction from this approach is never an exact number. The return can be as high as 10% a year or as long as -2% a year, depending where the future market valuation will be. In general, investors need to be cautious when the expected return is low.
Shiller! P/E - Market Valuation and Implied Returns

The GuruFocus Shiller P/E page indicates that the Shiller P/E: 20.5. Shiller P/E is 25% higher than the historical mean of 16.4. Implied future annual return: 3.5%. As a comparison, the regular trailing twelve month P/E is 15, slightly lower than the historical mean of 15.8. That is also why many media pundits are saying that the market is cheap.

The Shiller P/E chart is shown below:



Over the last decade, the Shiller P/E indicated that the best time to buy stocks was March 2009. However, the regular P/E was at its highest level ever. The Shiller P/E, similar to the ratio of the total market cap over GDP, has proven to be a better indication of market valuations.

Overall, the current market valuation is more expensive than the most part of the last 130 years. It is cheaper than most of the time over the last 15 years.

To understand more, please go to GuruFocus' Shiller P/E page.

John Hussman�� Peak P/E:

John Hussman uses the peak P/E ratio to smooth out the distortion of the corporate profits caused by the fluctuations of the profit margins. The current market return projected by his model is 4.4% a year. This agrees with the returns projected by the ratio of total market cap over GDP and Shiller P/E. This is the chart of the actual S&P 500 10-year annual total return and the projected return by John Hussman:

[ Enlarge Image ]

In all the three approaches discussed above, the fluctuations of profit margin are eliminated by using GDP, the average of trailing 10-year inflation-adjusted earnings, and peak-P/E. Therefore they arrive at similar conclusions: The market is overvalued, and it is likely to return only 2-4% a year in the future years.

Jeremy Grantham�� 7-Year Projection:

Jeremy Grantham�� firm GMO publishes a monthly 7-year market forecast. The latest 7-year forecast published by GMO is below:

Asset Class	Annual Real Return!
US Large Cap	-.2%
US Small Cap	-1.70%
US High Quality	3.9%
International Large Cap	4.6%
International Small Cap	3.3=40%
Emerging Market	5.2%
US Bonds	0.9%
International Bonds	-1.80%
emerging Debt	0.80%
Index Linked Bonds	-1.10%
Cash	0.1%

GMO expected US large cap real return is -.2%. This number agrees with what we find out with market/GDP ratio and Shiller P/E ratio. The US high quality will have higher return. The return is expected to be 4.4% a year.

Insider Trends

As indicated by the three different approaches discussed above, the best buying opportunities over the last five years appeared when the projected returns were at their highest level from October 2008 to April 2009, when investors could expect 10% a year from the U.S. market.

If average investors missed this opportunity, corporate insiders such as CEOs, CFOs and directors did not. As a whole they purchased their own company shares at more than double the normal rate from October 2008 to April 2009. Many of these purchases resulted in multi-bagger gains. This confirmed again the conclusions of earlier studies: The aggregated activities of insiders can serve a good indicator for locating the market bottoms. Insiders as a whole are smart investors of their own companies. They tend to sell more when the market is high, and buy more when the market is low.

As of May, we observed more insider buying activities. This is the current insider trend for S&P 500 companies:



The latest trends of insider buying are updated daily at GuruFocus' Insider Trend page. Data is updated hourly on this page. The insider trends of different sectors are also displayed in this page. The latest insider buying peak is at th! is page: ! September of 2011, when the market was at recent lows.

Conclusion: The market is not cheap, although it is about 8% cheaper than a month ago. It is positioned for about 3-5% of annual returns for the next decade. By watching the overall market valuations and the insider buying trends investors will have a better understanding of the risk and the opportunities. The best time to buy is when the market valuation is low, and insiders are enthusiastic about their own company's stocks.

Investment Strategies at Different Market Levels

The Shiller P/E and the ratio of total market cap over GDP can serve as good guidance for investors in deciding their investment strategies at different market valuations. Historical market returns prove that when the market is fair or overvalued, it pays to be defensive. Companies with high quality business and strong balance sheet will provide better returns in this environment. When the market is cheap, beaten down companies with strong balance sheets can provide outsized returns.

To summarize:

1. When the market is fair valued or overvalued, buy high-quality companies such as those in the Buffett-Munger Screener.
2. When the market is undervalued, buy low-risk beaten-down companies like those in the Ben Graham Net-Net Screener. Buy a basket of them and be diversified.
3. If market is way over valued, stay in cash. You may consider hedging or short.

Hot Small Cap Stocks To Invest In 2014: Texas Instruments Incorporated(TXN)

Texas Instruments Incorporated engages in the design and sale of semiconductors to electronics designers and manufacturers worldwide. The company?s Analog segment offers high-performance analog products comprising standard analog semiconductors, such as amplifiers, data converters, and interface semiconductors; high-volume analog and logic products; and power management semiconductors and line-powered systems. Its Embedded Processing segment includes DSPs that perform mathematical computations to process and enhance digital data; and microcontrollers, which are designed to control a set of specific tasks for electronic equipment. The company?s Wireless segment designs, manufactures, and sells application processors and connectivity products. Its Other segment offers smaller semiconductor products, which include DLP products that are primarily used in projectors to create high-definition images; and application-specific integrated circuits. This segment also provides handhe ld graphing and scientific calculators, as well as licenses technologies to other electronic companies. The company serves the communications, computing, industrial, consumer electronics, automotive, and education sectors. Texas Instruments Incorporated sells its products through a direct sales force, distributors, and third-party sales representatives. It has collaboration agreements with PLX Technology Inc.; Neonode, Inc.; and Ubiquisys Ltd. The company was founded in 1938 and is headquartered in Dallas, Texas.

Advisors' Opinion:

• [By gurujx]

  Texas Instruments (TXN): Sr. Vice President & CFO Kevin March Sold 180,000 Shares

  Sr. Vice President & CFO Kevin P March sold 180,000 shares of TXN stock on Oct. 25 at the average price of $40.03. Kevin March owns at least 344,777 shares after this. The price of the stock has increased by 5% since.

Hot Small Cap Stocks To Invest In 2014: Voyager Oil & Gas Inc.(VOG)

Voyager Oil & Gas, Inc. engages in the exploration and production of oil and gas in the United States. It primarily focuses on oil shale resource prospects in Montana, North Dakota, Colorado, and Wyoming. As of May 17, 2011, the company controlled approximately 141,500 net acres in the five primary prospect areas comprising 28,000 net acres targeting the Bakken/Three Forks in North Dakota and Montana; 14,200 net acres targeting the Niobrara formation in Colorado and Wyoming; 800 net acres targeting a Red River prospect in Montana; 33,500 net acres in a joint venture targeting the Heath Shale formation in Musselshell, Petroleum, Garfield, and Fergus counties of Montana; and 65,000 net acres in a joint venture in the Tiger Ridge gas field in Blaine, Hill, and Chouteau counties of Montana. It supplies energy and fuel for industrial, commercial, and individual consumers. The company is based in Billings, Montana.

Top 10 Value Stocks To Own Right Now: China Metro-Rural Holdings Limited(CNR)

China Metro-Rural Holdings Limited, through its subsidiaries, primarily engages in the development and operation of agricultural logistics and trade centers in northeast China. It also involves in purchasing, processing, assembling, merchandising, and distributing pearls and jewelry products. The company markets its pearls and jewelry products to wholesale distributors and mass merchandisers in Europe, the United States, Hong Kong, and other parts of Asia. In addition, it develops, sells, and leases residential and commercial properties in Hong Kong and the People?s Republic of China. The company is based in Tsimshatsui, Hong Kong.

Advisors' Opinion:

• [By Katie Brennan]

  Canadian National Railway Co. (CNR) added 0.9 percent to C$104.93 and Canadian Pacific Railway Ltd. rose 1.7 percent to C$131.73.

  Niko Resources surged 3.4 percent to $8.64 after the company entered an agreement for a $60 million loan that will be funded by a group of institutional investors. Net proceeds from the loan will be used to fund working capital requirements.

Hot Small Cap Stocks To Invest In 2014: Hot Topic Inc.(HOTT)

Hot Topic, Inc., together with its subsidiaries, operates as a mall- and Web-based specialty retailer in the United States. The company operates Hot Topic and Torrid store concepts, as well as an e-space music discovery concept, ShockHound. Its Hot Topic stores sell music/pop culture-licensed merchandise, including tee shirts, hats, posters, stickers, patches, postcards, books, novelty accessories, CDs, and DVDs; and music/pop culture-influenced merchandise comprising women?s and men?s apparel and accessories, such as woven and knit tops, skirts, pants, shorts, jackets, shoes, costume jewelry, body jewelry, sunglasses, cosmetics, leather accessories, and gift items for young men and women primarily between the ages of 12 and 22. The company?s Torrid stores sells casual and dressy jeans and pants, fashion and novelty tops, sweaters, skirts, jackets, dresses, hosiery, shoes, intimate apparel, and fashion accessories for various lifestyles for plus-size females primarily betw een the ages of 15 and 29. As of July 30, 2011, it operated 636 Hot Topic stores in 50 states, Puerto Rico, and Canada; 145 Torrid stores; and Internet stores, hottopic.com and torrid.com. The company was founded in 1988 and is headquartered in City of Industry, California.

Advisors' Opinion:

• [By Marshall Hargrave]

  In May True Religion (TRGL) announced a buyout offer from TowerBrook Capital for $826 million. Also in May, Rue21 decided to sell itself to Apax Partners for $2.2 billion. Before that, in March, Hot Topic (HOTT) announced that Sycamore Partners was buying out it out for $600 million.

Hot Small Cap Stocks To Invest In 2014: ATA Inc.(ATAI)

ATA Inc., through its subsidiaries, provides computer-based testing services in the People?s Republic of China. It offers services for the creation and delivery of computer-based tests utilizing its test delivery platform, proprietary testing technologies, and testing services; and provides logistical support services relating to test administration. The company?s computer-based testing services are used for professional licensure and certification tests in various industries, including information technology (IT) services, banking, securities, teaching, and insurance. Its e-testing platform integrates various aspects of the test delivery process for computer-based tests ranging from test form compilation to test scoring, and results analysis. ATA also provides career-oriented educational services, such as single course programs, degree major course programs, and pre-occupational training programs focusing on preparing students to pass IT and other vocational certification tests; test preparation and training programs and services to test candidates preparing to take professional certification tests in securities, futures, banking, insurance and teaching industries; online test preparation and training platform for the securities and banking industries; and test preparation software for the teaching industry. In addition, the company offers HR select employee assessment solution, an online system that utilizes its proprietary software and an inventory of test titles to help employers improve the efficiency and accuracy of their employee recruitment process. As of March 31, 2010, it had contractual relationships with 1,988 ATA authorized test centers. The company serves Chinese governmental agencies, professional associations, IT vendors, and Chinese educational institutions, as well as individual test preparation services. ATA Inc. was founded in 1999 and is based in Beijing, the People?s Republic of China.

Hot Small Cap Stocks To Invest In 2014: InterDigital Inc.(IDCC)

Interdigital, Inc. engages in the design and development of digital wireless technology solutions. The company offers technology solutions for use in digital cellular and wireless products and networks, including 2G, 3G, 4G, and IEEE 802-related products and networks. It holds patents related to the fundamental technologies that enable wireless communications. The company licenses its patents to equipment producers that manufacture, use, and sell digital cellular and IEEE 802-related products; and licenses or sells mobile broadband modem solutions, including modem IP, know-how, and reference platforms to mobile device manufacturers, semiconductor companies, and other equipment producers that manufacture, use, and sell digital cellular products. InterDigital?s solutions are incorporated in various products comprising mobile devices, such as cellular phones, tablets, notebook computers, and wireless personal digital assistants; wireless infrastructure equipment, such as base stations; and components, dongles, and modules for wireless devices. The company was founded in 1972 and is headquartered in King of Prussia, Pennsylvania.

Advisors' Opinion:

• [By Bryan Murphy]

  Well, it would be inaccurate to see patent-defense companies like Vringo, Inc. (NASDAQ:VRNG), InterDigital, Inc. (NASDAQ:IDCC), and Acacia Research Corp. (NASDAQ:ACTG) have been forced into going out of business. But, it wouldn't be inaccurate to say some of these so-called patent trolls are now potentially facing a much bigger legal headwind. Investors of companies like IDCC, ACTG, and VRNG may want to reassess the upside of their holdings, now that new laws regarding patent litigation have all but been put into place.

• [By James E. Brumley]

  Endeavor IP isn't the only publicly-traded intellectual property enforcement company out there. It is, however, the only one to focus on quality over quantity. Whereas other players like patent portfolio names like InterDigital, Inc. (NASDAQ:IDCC) and Vringo, Inc. (NASDAQ:VRNG) will literally buy patents by the hundreds - perhaps sometimes without even knowing what some of those patents even cover - in an effort to arm itself with any and every possible patent for any and every contingency. Most are likely worthless, which means companies like InterDigital or Vringo may have wasted shareholder money by buying IP that isn't capable of bearing revenue.

• [By James E. Brumley]

  When traders think of an IP (intellectual property) company, they tend to conjure up names like InterDigital, Inc. (NASDAQ:IDCC), VirnetX Holding Corporation (NYSEMKT:VHC), or of course, the well-known Vringo, Inc. (NASDAQ:VRNG). And, investors see these patent-enforcement names as such for good reason.... between VRNG, IDCC, and VHC, the three organizations own well over 20,000 technology patents, and their efforts to enforce them have been well-documented, and well publicized. Thing is, as the patent-protection industry matures, companies like Vringo, InterDigital, or VirnetX Holding may well find that it's the quality of the patent portfolio rather than the quantity of patents that makes an IP owner a potent investment. Enter Endeavor IP Inc. (OTCBB:ENIP).

Hot Small Cap Stocks To Invest In 2014: bebe stores inc.(BEBE)

bebe stores, inc. engages in the design, development, and production of women?s apparel and accessories. Its products include a range of separates, tops, dresses, active wear, and accessories in career, evening, casual, and active lifestyle categories. The company markets its products under the bebe, BEBE SPORT, bbsp, and 2b bebe brand names targeting 21 to 34-year-old woman. As of July 2, 2011, it operated 252 retail stores, and an online store at bebe.com in the United States, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Japan, and Canada, as well as 60 international licensee operated stores in south east Asia, the United Arab Emirates, Israel, Russia, Mexico, and Turkey. The company was founded in 1976 and is headquartered in Brisbane, California.

Advisors' Opinion:

• [By Jeremy Bowman]

  What: Shares of Bebe Stores (NASDAQ: BEBE  ) were back in style today, gaining as much as 11% after receiving an upgrade from Janney Capital from Neutral to Buy.

Hot Small Cap Stocks To Invest In 2014: Panera Bread Company(PNRA)

Panera Bread Company, together with its subsidiaries, owns, operates, and franchises retail bakery-cafes in the United States and Canada. Its bakery-cafes offer fresh baked goods, sandwiches, soups, salads, custom roasted coffees, and other complementary products, as well as provide catering services. The company also manufactures and supplies dough and other products to company-owned and franchise-operated bakery-cafes. As of March 29, 2011, it owned and franchised 1,467 bakery-cafes under the Panera Bread, Saint Louis Bread Co., and Paradise Bakery & Cafe names. The company was founded in 1981 and is based in St. Louis, Missouri.

Advisors' Opinion:

• [By Daniel Sparks]

  Growth investing relies on a simple premise: Find great companies that will outperform over the long haul, outgrowing their premium valuations over time. This, of course, is easier said than done. In the video below, Fool contributor Daniel Sparks discusses a great way to tell the gold from the fool's gold. To illustrate, he takes a look at Whole Foods Market (NASDAQ: WFM  ) and Panera Bread (NASDAQ: PNRA  ) .

• [By Ben Levisohn]

  At the same time they downgraded Panera Bread (PNRA) to Equal Weight from Overweight on concerns that consumers believe it’s expensive. They write:

• [By Chris Hill]

  Last Friday, McDonald's (NYSE: MCD  ) CEO Bob Thompson told CNBC that McDonald's may consider serving breakfast throughout the day. Starbucks (NASDAQ: SBUX  ) and Panera (NASDAQ: PNRA  ) have racked success with their breakfast offerings. Will McDonald's be able to take a bite out of the competition with all-day breakfast offerings? In this installment of MarketFoolery, our analysts talk about the business of breakfast.

• [By Adrian Campos]

  The attractive combination of high margins and aggressive revenue expansion has caused Starbucks' value to increase enormously. How did Starbucks manage to create a strong coffee empire despite increasing competition from traditional players such as Dunkin' Brands (NASDAQ: DNKN  ) , and the emergence of challengers like Panera Bread (NASDAQ: PNRA  ) ? More importantly, how long will Starbucks' dominance in the coffee world last?

Citrix Systems, Inc. (NASDAQ:CTXS): A Look At Opportunities And Threats

Citrix Systems, Inc. (NASDAQ:CTXS) is one of the best-positioned companies to take advantage of the growing mobile trend, web collaboration, data sharing, and datacenter transformation. However, execution has been inconsistent as the company is in the midst of transitioning into a broader enterprises mobility, collaboration, and infrastructure provider.

Citrix is a cloud computing company that enables people to work and collaborate from anywhere, accessing enterprise apps and data on any of the latest devices, Citrix cloud computing solutions help IT and service providers build both private and public clouds, leveraging virtualization and networking technologies to deliver high-performance, elastic, and cost-effective services for mobile work styles.

[Related -Cisco Systems, Inc. (NASDAQ:CSCO): What Cisco May Add To Next-Gen UCS?]

Citrix Desktop Solutions include XenDesktop, XenApp, App-DNA, VDI-in-a-Box, and XenClient. Citrix's Datacenter and Cloud Solutions include Cloud Networking and Cloud Platform products including NetScaler and CloudStack.

While the desktop pipeline remains at record levels (some of the deals showing up in backlog), deal slippage and end market confusion has caused a bit more uncertainty, according to BMO Capital Markets analyst Joel Fishbein, Jr.

In addition, the transitioning desktop business to more solutions-based sales around broader mobility (desktop/apps/mobile) could continue to hamper overall license growth near term.

[Related -Cisco Systems, Inc. (CSCO) Dividend Stock Analysis]

Fishbein is concerned that changes to the sales organization will take time to re-accelerate billings, which could pressure margins and cash flow as the company continues to invest.

Citrix is redefining its strategy around mobile as it has become a more significant "pain point" for customers versus desktops over the past few years. XenMobile comes in three editions covering devices, apps, and an umbrella edition that includes data sharing via SharePoint. 

Citrix has invested for the long term. It acquired Zenprise in December 2012, and this has created a significant opportunity to expand just within its existing customer base. It recently bought Framehawk. The Framehawk solution, which optimizes the delivery of virtual desktops and applications to mobile devices, will be combined with HDX technology in the Citrix XenApp and XenDesktop products.

On the flip side, the recently announced Amazon WorkSpaces and the rise of desktops as a service (DaaS) could be a longer-term threat. Amazon Web Services began limited previews of Amazon WorkSpaces, which offers fully managed desktop services billed monthly, a challenge to traditional on-premises virtual desktop.

Amazon WorkSpaces is a cloud-based service, claiming to deliver desktops, applications, and data to multiple types of devices including Windows, Mac OS desktops, iPad, and Android, etc.

On the DaaS front, Citrix's Cloud Provider Pack 2 enables a simple approach to providing differentiated and vertical-specific Desktop-as-a-Service (DaaS) offerings delivered with Citrix XenApp and Citrix XenDesktop.

Meanwhile, new opportunities help underpin confidence in Citrix' longer-term growth. The Networking segment is being aided by continued desktop cross-sell, NetScaler SDX and increased total available market (TAM) opportunity in ByteMobile. Citrix has a new ADC partnership with Cisco Systems, Inc. (NASDAQ:CSCO), where NetScaler will be the preferred reference sell.

Fishbein noted that enterprise mobility management expands more aggressively into mobile, and the release of Project Avalon should help speed desktop deployments by enabling customers to deliver Windows as a cloud service. ShareFile is gaining traction and seeing growth north of 75 percent.

In addition, growth in long-term deferred revenue underlines Citrix's position within the enterprise. In the past quarter, deferred revenue grew 20 percent, significantly outpacing the growth in revenue. This was in large part driven by a 41 percent increase in long-term deferred revenue as more and more customers begin to realize the value of Citrix as a strategic vendor thus opting for longer-term contracts.

As pipelines remain strong, Fishbein expects this trend to continue for the foreseeable future. This should help drive free cash flow growth and increase visibility into future revenue.

As of the third quarter 2013, the company had $683.0 million in cash and current investments and $1.4 billion including long-term investments. Citrix is in the midst of a $500-million share repurchase program instituted in October of this year.

SABESP

My conservative favorite for the coming year is the largest water utility in Brazil; it is majority-owned by the state of Sao Paulo, and provides water and sewage services to over 25 million people, notes Carl Delfeld, editor of Capital Gains.

Companhia de Saneamento Basico do Estado de Sao Paulo (SBS) is commonly called SABESP. I like the stock for three reasons:

First, the company has plenty of room to grow in Sao Paulo, other regions in Brazil, and even in neighboring countries. Sao Paulo has a population over 40 million and represents 30% of Brazil's total economic output.

Second, the stock has had a stellar record over the past decade, with an annual earning-per share growth rate of just over 19%. The stock is trading at just 7.5 times earnings and has begun a nice uptrend, which I always like to see.

Third, as a utility, SBS offers a nice 7.82% dividend yield. In comparison, the average dividend yield for a US utility is 4%.

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Disney: “The Force is Strong With This One”

We always love when analysts try to get clever, and Nomura’s Anthony DiClemente sure gave it the old-college try when he stuck that title on his report about Disney (DIS).

Walt Disney Co./Everett

As should be obvious, DiClemente is bullish on Disney. Very bullish. He explains why:

With perhaps the industry's most well-rounded and global stable of media brands, we believe Disney is positioned best to manage industry changes that are driven by digital technology. Why? Of any media company, we think Disney best monetizes content across multiple business segments; looking broadly at the Disney "halo effect," the synergies produced between the Studio, Parks, and Consumer Products segments are what defines Disney's "edge." Technology allows this effect to reverberate globally; while Disney's cable networks are primarily US.-focused, proliferation of mobile technology will also allow for Disney's content to touch many more customers at many more points of purchase. Although FY13 financial results were impacted by declines at Broadcasting and the Studio, we believe that further growth at ESPN and the theme parks will drive operating income acceleration in F2014E and generate consistent EPS growth in the coming years. At a historically reasonable valuation, we rate the shares Buy.

And what content Disney could be producing in the years ahead. DiClemente explains:

Following a year hampered by the financial burden of The Lone Ranger, we are expecting further success of Marvel and Disney's animation studio content (like its successful holiday release of Frozen) to drive an acceleration in studio operating income off a year that has created easy YoY comparables. This will serve as a prelude for the return of a Pixar film in 2015, followed by the much-anticipated Star Wars (Epidode 7) at
the end of 2015. Marvel, Pixar, and Lucasfilm content will reverberate throughout the Disney businesses, as international box office, consumer products, and theme parks are all poised to benefit from their halo.

So yes, Disney is a Buy, and DiClemente’s $90 price target suggests another 19% of upside from yesterday’s close, though it should be noted he also likes CBS (CBS), Twenty-First Century Fox (FOXA) and Discover Communications (DISCA).

Shares of Disney have dropped 0.1% to $74.34 at 2:34 p.m., while CBS has gained 0.3% to $60.80, Twenty-First Century Fox has risen 1.5% to $32.77 and Discovery Communications is off 0.1% at $82.61.