NEW YORK (TheStreet) -- Sprint (S) is reportedly ready to "one up" the competition and offer its customers an early upgrade plan of its own. But Sprint's "One-Up" plan carries an important distinction.According to a CNet report Sprint's new plan will be similar in many ways to T-Mobile's (TMUS), AT&T's (T) and Verizon's (VZ) "easy payment" scheme. Sprint will ask for no money down and will allow customers to pay the balance of the phone's (or tablet's) cost in 24 monthly payments. After one year, One Up customers will be allowed to trade-in their phone for a new device. [Read: 10 Best Cars On The Market] For example a phone that costs $650 would be paid off in 23 payments of $27 ($621) and a final monthly payment of $56 ($27 plus the $29 balance). If customers leave the program completely they would be responsible for paying the balance of the phone cost in the next month.But here's how the Sprint plan differs from the others: when you agree to the deal you're also signed-up for a Sprint "Unlimited, My Way" or All-in-One" service plan which will be discounted $15 per month for One Up customers. These plans allow for unlimited voice calling, texting and data. Sprint shares were retreating 0.11% to $22.78 at 10:21 am in New York. [Read: Microsoft Fails In Mocking Apple] T- Mobile announced service plan discounts when it became the first carrier to offer device upgrade deals back in July. AT&T's and Verizon's plans followed but do not offer service discounts. Under Sprint's One Up plan unlimited everything drops from $80 to $65 each month. That's $5 less that T-Mobile charges in their "Jump" plan.Existing Sprint customers whose contracts are at least a year old could also be eligible to trade-in their phones for the One Up plan. Sprint pre-paid customers will not be offered this deal.Sprint will reportedly launching the One Up program this week.-- Written by Gary Krakow in New York.To submit a news tip, send an email to tips@thestreet.com.
Saturday, July 11, 2015
Thursday, July 9, 2015
The Deal: Vivendi's Activision Sale Stalled by Court
Paris - (TheDeal) - A Delaware court has slapped an injunction on Vivendi's (VIV) plan to sell an $8.2 billion stake in Activision Blizzard (ATVI) back to the video game maker and its management.
The ruling follows a challenge to the deal, filed last week, by a minority shareholder who successfully argued that the transaction should be subject to approval by a majority of Activision's minority shareholders. [Read: Blackberry Fails at the 'Vision Thing']
Vivendi in July agreed to sell a 49.1% stake in Activision, leaving the Paris-based group with an about 3.9% holding. The deal involved the sale of 429 million shares in Activision to the Santa Monica, Calif.-based company, and 172 million shares to ASAC II LP, an investment consortium led by Activision CEO Bobby Kotick and co-chairman Brian Kelly.
"The Delaware Chancery Court, in Hayes v. Activision Blizzard, Inc., preliminarily enjoined the previously announced concurrent transactions between the Company [Activision] and ASAC II LP, on the one hand, and Vivendi SA, on the other hand, halting the closing of the transaction unless the injunction is modified on appeal or the transaction is approved by a stockholder vote of the non-Vivendi stockholders," Activision said after the market closed on Thursday, Sept. 18. The maker of World of Warcraft and Call of Duty video games said it remained committed to the deal and "is exploring the steps it will take to complete the transaction as expeditiously as possible." The injunction raises the prospect that the deal will not close by an Oct.15 deadline, after which any of Vivendi, Activision or ASAC II have the option to terminate their agreement. Unless Activision wins an appeal against the injunction it will have to call an extraordinary general meeting, a process that usually requires 60 days' notice. A vote amongst non-Vivendi shareholders is likely to approve a deal that was struck at $13.60 per share, about 5% below Activision's Wednesday closing share price of $17.15. "We see a modest risk that Vivendi sees it left money on the table from the original transaction and seeks to modify the purchase agreement," Bank of America Merrill Lynch analysts Justin Post and Ryan Gee wrote Thursday. "However, we still think Vivendi has few other options without a willing buyer." [Read: 5 Stocks Under $10 Set to Soar] Vivendi's agreement to sell its Activision stake is part of a disposal program that is repositioning the French conglomerate as a pure-play media group. Vivendi has also sold a majority stake in Maroc Telecom SA and last week announced that it will split its supervisory board in preparation for a spinoff of French telecommunications unit Soci�t� Francaise du Radiotelephone SA, or SFR. Shares in Vivendi traded Thursday morning in Paris at �17.59 ($23.83), up �0.14, or less than 1% on their Wednesday close. By Paul Whitfield In Paris
Thursday, June 18, 2015
Homebuilding Sector: Time to Buy or Sell?
News alert: The American public’s love affair with housing market has been rekindled. Although it may be difficult to accept, the very same properties they hated from 2008-09 are now increasing in value.
To further understand the velocity of the run-up in property values, not one of the 20 cities posted a loss over the past year. Furthermore, cities like Dallas and Denver have now surpassed their pre-financial crisis peaks established in June 2007 and August 2006!
David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, noted: “The Southwest and the West saw the strongest year-over-year gains as San Francisco home prices rose 24.5% followed by Las Vegas (+23.3%) and Phoenix (+20.6%). New York (+3.3%), Cleveland (+3.4%) and Washington DC (+6.5%) were the weakest. Monthly numbers before seasonal adjustment showed all 20 cities experienced rising prices. San Francisco (+4.3%), Chicago (+3.7%) and Atlanta (+3.4%) were the leaders.”
Most housing analysts expect home prices to keep gaining and so far they’ve been right.
A March survey of home and mortgage analysts by Zillow showed the consensus median appreciation in 2013 was 4.8%, with only two respondents out of 117 indicating a decline.
Does this make the homebuilding sector and related REITs a buy?
First, it’s important to have some historical perspective.
Although home prices have staged an impressive rebound, the S&P/Case-Shiller 20-City Index is still 22% lower compared to its 2006-07 peaks. And by definition, market losses greater than 20% are still considered a bear market.
The still elevated number of homeowners with a larger mortgage than the value of their homes is problematic.
CoreLogic reports the percentage of all residential mortgages with negative equity or “underwater” at the end of the first quarter stood at 19.8%. Among the 39 million residential properties with positive equity, 11.2 million have less than 20% equity.
Nevada was the state with the highest percentage of mortgaged properties in negative equity at 45.4%, while Tampa-St. Petersburg-Clearwater, Fla. had the highest percentage of top-25 metropolitan areas at 41.1%.
The threat of higher interest rates is another looming risk that could easily derail the housing rally.
A 30-year fixed rate mortgage now costs 4.53% compared to 3.54% before. In other words, the cost of financing homes is more expensive. And it’s already taken a toll on mortgage refinancing. The Mortgage Bankers Association reports its weekly refinance index has fallen by more than 50% since early May.
While it may yet take a few more months for the housing market to feel the pain of higher rates, ETFs closely tied to U.S. residential real estate are already signaling warning signs.
The iShares DJ US Home Construction ETF (ITB), has slid 9% over the past three months, while the iShares Mortgage Real Estate Capped ETF (REM) has fallen 24.84%. And the iShares Barclays MBS ETF (MBB) has fallen 3.5%, which is almost three-years worth of its 12-month trailing yield!
For home buyers, higher borrowing rates will make home affordability harder. And if the 10-year Treasury yield dances with 3%, it won't be good for the rate sensitive housing market.
***
The ETF Advisor Pro Newsletter and its Mega Investment Theme Report identifies major market trends along with actionable ETF strategies.
Wednesday, June 17, 2015
AEP Venture Awaits PUCT Nod - Analyst Blog
The Cross Valley Project is a proposed 345-kilovolt transmission line. The project costs in the range of $314 million to $405 million and is expected to be completed in mid 2016. The line will extend from AEP Texas North Edinburg Substation in Hidalgo County, will move south to a location near the existing AEP Texas South McAllen Substation and then head east to the Brownsville Public Utilities Board Loma Alta Substation in Cameron County near the Brownsville Ship Channel. Therefore, this 345-kilovolt transmission line will be crossing portions of Hidalgo and Cameron counties in the Lower Rio Grande Valley of Texas.
Based on this route the length of the transmission line would range from 96 miles to 125 miles. However, the final length would depend on the route approved by PUCT. ETT is responsible for the western portion of the line while Sharyland will be constructing the eastern portion.
Besides promoting economic growth, this transmission line will allow the customers of lower Rio Grande Valley to experience continued reliable electric service.
We note that in May this year, ETT received approval for the construction of another 345-kV transmission line. The line will extend from the Laredo area into the Rio Grande Valley. The project with an estimated cost of $318 million includes construction of approximately 156 miles of 345-kV transmission lines that will connect ETT's Lobo Substation near Laredo with substations north of Edinburg.
American Electric Power is one of the largest investor-owned utility holding companies in the country, catering to over 5 million customers spread over 11 states. How! ever, tepid economies in a number of its service states restrict opportunities for growth. Also, we remain concerned about the uncertainty surrounding pending regulatory cases, its predominantly fossil fuel based generation assets and lower wholesale sales. The company presently retains a short-term Zacks Rank #4 (Sell).
Stocks that are well placed in the industry are Black Hills Corp. (BKH), Companhia Paranaense de Energia (ELP), CPFL Energia S.A. (CPL), all with a Zacks Rank #2 (Buy).
Sunday, June 14, 2015
Could the Surging Housing Market Ultimately Hurt the Average American?
In this segment of The Motley Fool's everything-financials show, Where the Money Is, banking analysts Matt Koppenheffer and David Hanson discuss the continued surge of U.S. home prices and what it means for consumers and investors.
Matt and David talk about homebuilder stocks and the long-term outlook for the future of housing prices.
On the heels of the surging housing market, American markets are reaching new highs, and some investors are skeptical about future growth. They shouldn't be. Many global regions are still stuck in neutral, and their resurgence could result in windfall profits for select companies. A recent Motley Fool report, "3 Strong Buys for a Global Economic Recovery," outlines three companies that could take off when the global economy gains steam. Click here to read the full report!
Want more Foolish insight on the housing market? Click here!
You can follow David and Matt on Twitter.
Wednesday, June 10, 2015
Is This the Key to Extending Apple's Recent Rally?
Whether or not tech giant Apple (NASDAQ: AAPL ) remains a buy is one of the most constantly talked about issues for tech investors everywhere -- and for good reason. Although the company's certainly created plenty of fortunes with its historic rise, it's also proven quite disappointing over the last 12 months. It seem Apple's shares might have finally found a floor after it announced the astounding increase to its capital return program in late April. However, Fool contributor Andrew Tonner recently saw an analyst note detailing at least one more major move Apple could do this year to keep the gains coming. To find out more, watch the video below.
It's especially worth noting that Apple has a history of cranking out revolutionary products... and then creatively destroying them with something better. Read about the future of Apple in the free report, "Apple Will Destroy Its Greatest Product." Can Apple really disrupt its own iPhones and iPads? Find out by clicking here.
Tuesday, June 9, 2015
3 FTSE Dividends Lifted This Week
LONDON -- The FTSE 100 (FTSEINDICES: ^FTSE ) has suffered a bit of a reversal over the past week. After reaching a 13-year high of 6,876 on May 22, the index of top U.K. shares has since dropped 293 points to today's close of 6,583. But the fall has at least boosted the index's average forward dividend yield a little to 3.2%. But if you're investing for income, you can do probably better than that.
We take a look at three companies that have lifted their dividends this week.
Severn Trent (LSE: SVT )
Severn Trent raised its full-year dividend by 8.2% to 75.85 pence per share on Thursday after reporting a 3.4% rise in full-year turnover, a 37.3% rise in pre-tax profits, and an 11.2% rise in adjusted earnings per share. The payment consists of a final dividend of 45.51 pence to be added to the earlier interim 30.34 pence.
On the current share price of 2,052 pence, the dividend represents a yield of 3.7%, which is pretty good for such a dependable payer. In fact, with Severn Trent's policy of growing its dividend by RPI plus 3% each year, the firm has already indicated an expected 80.4 pence for the year to March 2014 for a rise of 6%.
Tate & Lyle (LSE: TATE )
Tate & Lyle also released full-year results on Thursday, revealing a 5% rise in sales. Adjusted pre-tax profit and adjusted earnings per share both gained 4%, allowing the firm to declare a final dividend of 18.8 pence per share, taking the full-year total up 5.2% to 26.2 pence. The shares are currently trading at 825 pence, giving a yield of 3.2%, which is bang on that FTSE average.
Forecasts for next year suggest another 4% rise in earnings and a 5% boost to the dividend to 27.5 pence per share. But those were made before this week's results, so we'll need to wait for any possible reevaluation.
Victrex (LSE: VCT )
It was interim time for Victrex on Tuesday, and the plastics specialist told us of a modest rise in EPS from 41.6 pence to 41.7 pence. But that had no adverse effect on the company's "progressive dividend policy," and we saw the interim dividend raised by 15% to 10.35 pence per share -- and that comes after a 16% rise in the 2012 final dividend. We were told that the payment "reflects the Board's confidence in the future growth prospects for the business."
For the full year, analyst are currently forecasting a 10% rise in the total dividend to about 41.3 pence, which would provide a yield of 2.4% on the current share price of 1,702 pence.
Finally, if you're looking for top investment ideas, it could well pay to take a close look at what Neil Woodford is buying. The ace investor, whose Invesco Perpetual High Income fund would have turned £10,000 into £193,000 since its launch in 1988, remains bullish on the aerospace and defense sector. If you want to learn more, check out the Fool's latest examination of Woodford's holdings. But hurry, because the report will be available for a limited period only. Click here to enjoy your copy today.
Monday, June 8, 2015
A Fool Looks Back
Earlier this month it seemed as if Facebook (NASDAQ: FB ) would be buying Waze, the fast-growing traffic app that uses crowdsourcing to deliver breaking news on traffic tie-ups and speed traps. Facebook was reportedly willing to pay $800 million to $1 billion for the Israeli-based company.
Well, now chatter finds Google (NASDAQ: GOOG ) potentially interested in Waze.
Can we get some navigation tips to get around Waze's headquarters? Things seem to be getting a bit busy with gentleman callers on its porch.
Facebook and Google have the money to complete the deal. They also have the resources to whip up their own Waze knockoff. The problem there is that Waze already has 47 million active users worldwide submitting real-time information to help out their fellow drivers. Why compete against Waze -- and probably lose this game of numbers -- when you can buy it?
Would Google be a better fit than Facebook? That's not the point. At its very core, Google's interest may be primarily to keep Facebook away. Facebook is already siphoning away search traffic and online time. If it wins over the mobile crowd, it will become an even fiercer competitor.
Watch this battle. It will get interesting.
Briefly in the news
And now let's take a quick look at some of the other stories that shaped our week.
Tech battles can be profitable for investors
It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged among the five kings of tech. Click here to keep reading.
Hercules Offshore to Sell Inland Rigs
Hercules Offshore (NASDAQ: HERO ) is soon to be roughly $45 million richer thanks to an asset sell-off. The company has inked a deal to sell 11 of its inland barge rigs plus related assets. In the press release announcing the move, the firm did not name the counterparty.
The price will be paid in cash across two tranches. The first will see the company receive $35 million for 10 of the rigs, while the second will see the remaining one change hands and $10 million exchanged. The former tranche is expected to close in the late second quarter of this year, with the latter following shortly thereafter.
Of the rigs being divested, three are active while eight are cold stacked.
Thursday, June 4, 2015
Why EZCORP Is Ready to Rebound
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, pawn shop operator EZCORP (NASDAQ: EZPW ) has earned a coveted five-star ranking.
With that in mind, let's take a closer look at EZCORP and see what CAPS investors are saying about the stock right now.
EZCORP facts
| Headquarters (founded) | Austin, Texas (1989) |
| Market Cap | $975.6 million |
| Industry | Consumer finance |
| Trailing-12-Month Revenue | $1.0 billion |
| Management | CEO Paul Rothamel (since 2010) CFO Mark Kuchenrither (since 2012) |
| Return on Equity (average, past 3 years) | 19.5% |
| Cash/Debt | $46.7 million/$236.8 million |
| Competitors | Cash America International First Cash Financial Services |
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 97% of the 669 members who have rated EZCORP believe the stock will outperform the S&P 500 going forward.
Earlier this year, one of those Fools, ValueSpreadsheet, succinctly summed up the EZCORP bull case for our community:
Intrinsic value estimate between [$35 and $50 per share].
Has seen its net profit margin and book value increase steadily over the past years.
PEG ratio way below 1.
In addition, the pawn shop business does great in tumultuous times and is becoming more and more accepted, partly due to the numerous TV shows. I'm convinced!
If you want market-thumping returns, you need to put together the best portfolio you can. Of course, despite a strong five-star rating, EZCORP may not be your top choice.
We've found another stock we are incredibly excited about -- excited enough to dub it "The Motley Fool's Top Stock for 2013." We have compiled a special free report for investors to uncover this stock today. The report is 100% free, but it won't be here forever, so click here to access it now.
Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.
Monday, June 1, 2015
Abbott Laboratories to Acquire Veropharm (ABT)
After an M&A packed morning, Abbott Labs (ABT
The definitive agreement will see Abbott Labs acquire Limited Liability Company Garden Hills, which has a controlling interest in Veropharm. The price of the sale will be between $395 million and $495 million, depending on how much of Veropharm Garden Hills owns at the time. Garden Hills currently owns 80% of Veropharm, but is expected to own 95% by the time the deal closes. The deal is expected to close in the fourth quarter. In May, Abbott Labs announced that it was acquiring CFR Pharma for $3.3 billion.
Abbott stocks ended the day down 12 cents, or 0.29%, but were climbing slightly higher in after hours trading. YTD, the company’s stock is up 6.85%.
ABT Dividend SnapshotAs of Market Close on June 23, 2014
Click here to see the complete history of ABT dividends.
Sunday, May 31, 2015
You Can Make Money in Stocks (Especially These Three) No Matter What Rates Do
It's commonly held wisdom that stock markets go to heck in a hand basket when interest rates rise. So, the thinking goes, you'd be better off selling ahead of time before that happens.
No doubt it's tempting to head for the hills with rates at historical lows, but it pays to do your research before you hit the "sell" button.
The three companies I'm going to show you today, for example, can actually benefit from rising rates.
First, let's take an "Econ 101" look at the impact interest rates can have on stocks, especially when rates start rising...
How This Urban Legend Got StartedLike most urban legends, there's a grain of truth when it comes to interest rates and your money. That's because interest rates are quite literally a reflection of the time value of money. When rates are rising, the cost of borrowing goes up. When rates are falling, money gets cheaper.
Economic theory tells us that more expensive money decreases the amount of money in circulation because customers tighten up while cheaper money increases the amount of money at work. That's why the Fed, which subscribes to this theory, has kept rates so low for so long. Team Bernanke and now Team Yellen want to ensure there's money available and, by implication, that people borrow enough to keep it moving and the economy in recovery mode.
Practically speaking, you see this in everything from credit card statements to home mortgages. As rates rise, the propensity to borrow declines and there's less discretionary money spent. But as they fall, consumers head out to spend based in good part on borrowing that has "stimulated" the system. Personally, I think it's a sad state of affairs that debt has become so critical to our way of life, but that's really a story for another time.
What you need to know today is how the relationship I've just described impacts stock prices.
Companies are valued based on earnings. And earnings, in turn, are a function of the time value of money associated with all future cash flows. Loosely speaking, therefore, the more a company earns, the higher the expected stock price is ahead.
Theoretically, if rates rise that means money is getting more expensive so the cost of debt rises and revenue from customers drops. Earnings then take a nose dive and, not surprisingly, so do stock prices which, in turn, makes stock ownership less desirable.
Here's where it gets sticky.
By stimulating the economy and keeping rates so low for so long at the same time, the Fed is clearly fanning inflationary embers while seemingly acting to keep rates low. Every dollar the Fed kicks into the system diminishes the value of every other dollar already out there.
Ultimately rates will have to rise to compensate for the lost value, goes the argument for millions of investors.
Take Winners on the Overlooked Rising Rate BounceBut here's the thing. You don't just immediately jump from a slight increase in "Treasury yields that's barely noticeable on a ten-year chart to hyperinflation even when it's the worry du jour," according to Jim Cramer in his book Getting Back To Even.
As we talk about so frequently, there has to be growth first. More to the point, there's also got to be a real, meaningful rise in interest rates to affect the markets on anything more than a short- term basis.
Look, you and I both know that rates will eventually rise. That's a harsh reality that our political leaders don't understand, which is why they're constantly kicking the can down the road and spending our country into oblivion.
But pulling your money out of the markets preemptively when we haven't had real interest rate hikes based on growth yet is a mistake. It's one thing to take heed of the lessons that led up to the Financial Crisis and entirely another to fall prey to erroneous conclusions by keeping your finger on the sell button or hitting it too early.
That's not to say the thinking isn't compelling - it is, especially since it's based on the intense emotional distress of the Financial Crisis. It's just not in your best interest. Ask anybody who sat out the rally off March 2009 lows. They've missed an amazing 273% S&P 500 run to new all-time record highs.
And that brings me to what happens when rates actually do rise.
Believe it or not, stocks have rallied for nearly two full years following the first interest rate hike according to Sadoff Investment Management and Fed data.
Here's something else.
Since 1929, the average increase in short-term rates is 107% before the markets falter. Practically speaking, this means the 10-year Treasury yield would have to rise from a July 2012 of 1.53% to 3.16% before we hit the threshold. That's another 61 basis points or 23.9% above where the yield is today, according to Bloomberg.
So how do you invest until then?
Plenty of Great Investment Runway AheadFirst, you miss 100% of the shots you never take, and what I mean by that is that you stand to gain nothing if you aren't in the markets. DALBAR data shows that the average investor may be 200% to 300% behind the markets because they are prematurely trying to time the markets. Ouch!
The Fed has made it very clear that it won't be raising rates until mid-next year at the earliest and only if Yellen gets comfortable with progress in the meantime. So, barring an economic meltdown or global market reset, we've got some runway in front of us.
My preference is definitely for "global challengers" with strong cash flow, experienced management, and powerful brands in the meantime. Examples include ABB Ltd (ADR) (NYSE: ABB), Becton Dickinson and Co. (NYSE: BDX), and American Water Works Company Inc. (NYSE: AWK) that are drawn from our Money Map Report recommendations. Not only are these companies and others like them tapped into global money flows that continue unabated, but these types of companies can actually benefit from rising rates rather than get crushed by them. Remember, earnings... earnings... earnings!
Second, new highs are inevitably accompanied by short-term market noise, so it's not uncommon to get some give and take as the markets digest the implications of record price levels. In fact, I'd bet on it.
Make sure you have trailing stops in place ahead of time to protect profits and your capital in the event there is a hiccup. My suggestion is that 25% below your entry price is a pretty good place to start. You can always tighten that up if you like, but that's really splitting hairs. Protection against the unexpected at all times is the issue. [Editor's Note: You can track your trailing stops much more easily now. Money Morning Members have access to the best deal (in the world) on TradeStops. Learn more.]
If you don't like trailing stops, consider using options or a specialized inverse fund to protect your money and take the sting out of any short-term market movements that catch others by surprise.
Third, you want to be constantly hunting for new opportunities. I am sure your parents instructed you on the importance of "buy low and sell high." So wading in on pullbacks when everybody else is heading for the exits makes sense as a path to bigger profits...
...especially when the markets could run for a lot longer than interest rate doomsters think.
Gilead Sciences: Big Buyback ‘Good Use’ of Sovaldi Windfall
Who’d have thunk it? After lagging for much of the year, Gilead Sciences (GILD) is now outperforming the other big biotech stocks like Amgen (AMGN) and Biogen Idec (BIIB).
Bloomberg Shares of Gilead have gained 6.4% this year, while Amgen has dropped 0.8% and Biogen Idec has risen 3.6%. The iShares Nasdaq Biotechnology ETF (IBB) has advanced 1.4% so far this year.
Gilead Sciences big earnings beat has certainly helped, as well as the fact that it lagged earlier this year. Sovaldi, too, looks like the blockbuster everyone expected. And now, Gilead has announced that it’s buying back even more shares. Barclays analyst Ying Huang and team call Gilead’s buyback “a good use of the cash flow generated by Sovaldi.” They explain:
[Gilead] announced that its Board approved the repurchase of up to $5bn of the company's common stock. This new share repurchase program will expire 3 years after the completion of the current repurchase program…In January 2011 the [Gilead] Board approved the repurchase of $5bn in shares, which has ~$2.9bn left and is expected to be completed by September 2014…However, we expect [Gilead] to accelerate the share repurchase given the recent share weakness and the apparent lack of opportunities in the business development front…In light of the strength of [Gilead's] HIV and HCV franchises, we expect the company to further increase its share buyback at some point in the future.
Shares of Gilead Sciences have gained 1.3% to $79.82 at 11:24 a.m., while Amgen has risen 0.4% to $113.17, Biogen Idec has advanced 1.8% to $289.19 and the iShares Nasdaq Biotechnology ETF is up 1.2% at $230.10.
Thursday, May 28, 2015
Chevron Corporation (CVX) Dividend Stock Analysis
Linked here is a detailed quantitative analysis of Chevron Corporation (CVX). Below are some highlights from the above linked analysis: Company Description: Chevron Corporation is a global integrated oil company (formerly ChevronTexaco) has interests in exploration, production, refining and marketing, and petrochemicals.
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description: 1. Avg. High Yield Price 2. 20-Year DCF Price 3. Avg. P/E Price 4. Graham Number CVX is trading at a discount to only 3.) above. The stock is trading at a 44.9% premium to its calculated fair value of $82.00. CVX did not earn any Stars in this section. Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description: 1. Free Cash Flow Payout 2. Debt To Total Capital 3. Key Metrics 4. Dividend Growth Rate 5. Years of Div. Growth 6. Rolling 4-yr Div. > 15% CVX earned two Stars in this section for 2.) and 3.) above. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. CVX earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1912 and has increased its dividend payments for 27 consecutive years. Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description: 1. NPV MMA Diff. 2. Years to > MMA The NPV MMA Diff. of the $256 is below the $800 target I look for in a stock that has increased dividends as long as CVX has. The stock's current yield of 3.37% exceeds the 3.31% estimated 20-year average MMA rate. Memberships and Peers: CVX is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: BP plc (BP) with a 4.7% yield, Exxon Mobil Corporation (XOM) with a 2.6% yield and ConocoPhillips (COP) with a 3.9% yield. Conclusion: CVX did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks CVX as a 2-Star Weak stock. Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $86.39 before CVX's NPV MMA Differential increased to the $800 minimum that I look for in a stock with 27 years of consecutive dividend increases. At that price the stock would yield 4.6%. Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $800 NPV MMA Differential, the calculated rate is 5.8%. This dividend growth rate is higher than the 2.6% used in this analysis, thus providing no margin of safety. CVX has a risk rating of 1.50 which classifies it as a Low risk stock. CVX has an impressive business model. Its oil and gas development project pipeline is among the best in the industry with many large, multi-year projects. The company's Myanmar subsidiary was recently awarded exploration rights in Block A5 in the Rakhine basin, off the coast of Myanmar. However, since it operates as an integrated producer, the company is susceptible to downside risk from weakness in the global economy. CVX is reducing its refining footprint and focusing on large, long-lived upstream projects with higher margins and growth potential. As with other large multinationals, the company is finding it increasingly difficult to add reserves. Much of the remaining easily accessible reserves are owned by governments and national oil companies. As a result, CVX is focusing more on deep-water exploration. The company's free cash flow payout continues to to be unfavorable. This is primarily the result of increased capital expenditures (CapX). From 2008 to 2010 CapX averaged $19.7 billion. In 2011 it increased 35% to $26.5 billion, 2012 it was up an additional 17% to $30.9 billion and 2013 was up 25% to $38.0 billion. In addition, CVX had two years of negative free cash flow during the last ten years. The stock is trading at a premium to my $82.00 calculated fair value. Until I see improvement in the free cash flow payout, I will not significantly add to my position. Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information. Full Disclosure: At the time of this writing, I was long in CVX (2.8% of my Dividend Growth Portfolio). See a list of all my dividend growth holdings here. Related Articles: - United Technologies Corp. (UTX) Dividend Stock Analysis - General Dynamics (GD) Dividend Stock Analysis - Walgreen Co. (WAG) Dividend Stock Analysis - Exxon Mobil Corporation (XOM) Dividend Stock Analysis - More Stock Analysis
About the author:Dividends4LifeVisit Dividends4Life at: http://www.dividend-growth-stocks.com/| Currently 5.00/512345 Rating: 5.0/5 (1 vote) | Voters: |
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Wednesday, May 27, 2015
Apple Inc. (AAPL): Can Apple TV Succeed Post Comcast-TWC Deal?
The proposed $45.2 billion acquisition of Time Warner Cable Inc. (NYSE:TWC) by Comcast Corp. (CMCSA) is a mixed bag for Apple, Inc. (NASDAQ:AAPL) as the implications are not yet clear for new Apple TV.
The deal will merge the largest and the second-largest cable operators in the U.S. Comcast's subscribers will have access to the cloud-based X1 Entertainment Operating System, plus 50,000 video-on-demand choices on television, 300,000 plus streaming choices on XfinityTV.com, Xfinity TV mobile apps that offer 35 live streaming channels plus the ability to download to watch offline later, and the newly launched X1 cloud DVR.
[Related -Will Apple Inc. (AAPL) Join Hands With Tesla Motors Inc (TSLA)?]
Time Warner Cable will combine its products and services with those of Comcast's, including StartOver and LookBack. StartOver allows customers to restart a live program in progress to the beginning while LookBack allows customers to watch programs up to three days after they air live, all without a DVR.
The merger news comes at a time when Apple was reportedly close to strike a content deal with TWC for its revamped Apple TV. Apple TV is nothing but a set-top box that lets users stream movies, TV shows and other content from iTunes and a select set of Internet content providers onto their HD televisions.
[Related -Apple Inc. (AAPL): Quick Update on Apple Color Value Area Targets]
A Bloomberg article suggests that Apple is planning to introduce a new Apple TV for holiday shipment and revives speculation that Apple is working to secure a content deal with TWC after failing to convince programmers and cable operators.
Apple is attempting to develop a device that is capable of delivering both Internet-based and linear multi-channel media as well as its own app store for other useful content.
UBS analyst Steven Milunovich thinks it behoves Apple to unveil a TV product sooner rather than later. TWC's involvement with Apple makes sense to since TWC appears behind in capabilities to develop a cloud-integrated user interface. The Street believed TWC was Cupertino's best chance at an Apple TV partnership.
The latest Comcast-TWC deal puts Apple in a fix as it may have to start over as Comcast is not warm to the idea of Apple TV and the cable TV giant has its own set top box. Obviously, Comcast may not be interested in ceding any part of the Internet TV market to a competitor (and one as big as Apple).
Comcast sets the set-top box bar. Today's X1 features include voice-based navigation and search, personalized recommendations, a collection of customizable widgets, and access to third-party apps such as Facebook, Twitter, and Pandora. Internally referred to as X2, Comcast is in the midst of migrating its X1 users to a next-gen cloud-based device. This upgrade provides cloud-based DVR, mobile device synchronization and app airplay capabilities.
Apple usually does not announce new products for future release (though it did for the original iPhone and iPad). However, Milunovich notes that it is essential that cable operators looking for an outsourced, user-interface solution gain familiarity before committing to potentially exclusive agreements with competing platforms.
For its TV service, Apple's strategy is to partner with cable firms rather than signing deals with media companies. The potential deal with TWC may have given the users of Apple TV option of selecting various live TV. Currently, Apple TV offers channel apps from a few content providers including HBO, Disney, ABC and ESPN. For accessing those services, users should pay for respective cable and satellite providers.
Apple should need to diversify its revenue base as smartphone market is maturing, tablets are losing their initial charm, and iPod growth is falling. Apple does care about share but in "real" smartphones where it is #1 or #2 around the world, not feature phones or smartphones functioning as feature phones.
In addition, the tablet market may be cannibalized by phablets and tablet being a tweener product creates longer upgrade cycles.
Speculation is rampant regarding Apple's new categories. Wearables, most notably the iWatch, appear likely given the hiring of former Nike designers and health experts. Those things face constraints too, due to their battery limitations.
As of now, Apple TV is the best bet for Apple, but without content, it may not get the desired traction. So, the company needs to strike a deal with Comcast if it wants to taste success with Apple TV. Meanwhile, a deal with TWC cannot not be ruled out as the Comcast-TWC deal has to clear massive regulatory hurdles.
The $99 Apple TV, which went on sale in 2007, faces competition from Roku and others. Amazon is also reportedly readying a set-top box.
Monday, May 25, 2015
Factory Orders Fall on Drop in Demand for Transportation
Sunday, May 24, 2015
The Most Important Trading Tool That Money Can’t Buy
This is the last part four of my four part series. The biggest mistakes traders and investors make which costs them time, money and usually self-confidence when trading are laid out in in the information below.
This last mistake is the by far the biggest and hardest problem individuals have. Believe it or not, the best way around it is with the use of algorithmic trading strategies which trades for you simply because we cannot mess things up. This is one of the reason automated trading has exploded in the recent years.
The Four Biggest Mistakes1. Lack Of A Trading Plan – Part I2. Using To Much Leverage – Part II3. Failure to Control Risk – Part III4. Lack Of Self-Discipline – Part IIII
Mistake #4 – Lack Of Discipline, this silent killer is in all of us!Over the 16 years in which I have been trading and investing, I have never found a person who has not had discipline issues in their trading career. The brutal honest truth you likely do not want to hear is that you will never succeed at trading if you cannot follow a proven trading strategy and all its rules over and over again.
While some individuals just don't have enough discipline to trade, most of us fall victim to fear, greed or our ego causing us to break our trading rules and do silly things with our money or open positions.
Lack of discipline is failing to do what you should do in a given circumstance when trading your strategies. We all know how easy it is to break rules from time to time because our gut feeling is so strong against what our trading strategy is doing but it is a huge mistake to intervene.
How to Avoid Your Lack Of DisciplineThere are only three ways that will only help reduce (not eliminate) your lack of discipline.
1. Lose enough money that you now respect the market.
2. You have taken the time to think, create, and test a proven trading strategy that trades within your market philosophy and risk levels. I talk about this in great detail in my book "Technical Trading Mastery – 7 Steps To Win With Logic".
3. You either automate your trading strategies or subscribe to a Automated Trading Strategy that removes you from the equation.
An interesting way to think of trading is not think but react.
The key to defeating your lack of discipline is to create and trade a system that is very simple to execute. And you must have 100% confidence in the system so you do not step in and alter its trading decisions. The key is to react and execute trade first with your proven strategy, and then once you are done you can think about what and why things did what they did all you want.
The last point I want to make, is that if you have your own system it is crucial that you are not tinkering with it all the time. If you keep tinkering with it, then you will never truly know how well it works thus you will second guess its activities and remain an un-disciplined trader.
Four Biggest Mistakes Series Conclusion:My primary goal of this series has been to show you that there really is only one person who can control your success or failures in trading along with everything else in life. That person is you. In the end you are responsible for everything you have done.
The most common pitfall traders fall into is that when something goes wrong, they blame the market for the loss and not himself.
The key in trading is to accept that you will have losing trades and understand that it is part of this business. And when you lose a trade be sure not to allow these bad experiences have a negative effect on subsequent trades.
So the next time you find you self contemplating breaking a trading rule that has proven to work well over the long run for you, know that if you fall off the discipline train you will instantly be categories as one of those 90% of losing traders kind of guy.
I hope that his series has helped you. If you missed the previous parts, scroll up and use the links within this article near the top for Part I, II and III.
Here are some important resources for conquering these four biggest mistakes:
1. Read my new book "Technical Trading Mastery – 7 Steps To Win With Logic"
2. Take the Trading As Your Business program
3. Complete the Trading System Mastery Program
4. Build your own Automated Trading System with RIZM
5. Or review my All-In-One Automated Trading System
Chris Vermeulen
Wednesday, May 20, 2015
Stores Open for 100 Hours in Final Push to Attract Shoppers
Tuesday, May 19, 2015
The States With The Most (And Least) Affordable Schools
Average in-state tuition at public four-year universities rose by just 2.9% this year, the smallest increase in more than three decades, according to data released last week by College Board. When adjusted for inflation, it has barely increased at all.
In the current school year, the average cost of tuition and fees at a public, four-year institution for an in-state student is $8,093. At a private four-year university, tuition and fees are more than $30,000. With the cost of tuition for private universities still astronomically high, more students may be opting to attend a public school within their home state.
Not all school systems offer the same discount relative to private education. A student attending a public university in his native Wyoming pays an average of just $4,404 in tuition and fees. Meanwhile, a New Hampshire native would spend $14,665 to attend a public university at home. 24/7 Wall St. reviewed the 10 colleges with the highest and lowest average in-state tuition and fees.
It might be assumed that the states with the highest tuition and fees would have the best colleges, but that doesn't appear to be the case. Based on the U.S. News & World Report's ranking of the best public four-year institutions, only four of the states with the highest tuitions have a school in the top 20-ranked universities. Meanwhile, North Carolina and Florida, both of which have among the lowest tuitions have colleges in the top 20.
Some states invest much more in their public institutions than others, and it appears that this translates into lower costs for their students. The two cheapest state university systems, Alaska and Wyoming, each had more than $15,000 in state appropriations per student. By comparison, only two of the 10 most expensive college systems are in the top half, nationally, for per-student appropriations for higher education. In New Hampshire, the most expensive state, appropriations amounted to just $2,482, the lowest spending in the country.
Usually, the cost of in-state tuition at the state's best-known public institution is a good indicator of how much all of its colleges cost. The three most expensive states for in-state tuition also have the three most expensive flagship universities — New Hampshire's UNH, Vermont's UVM, and Pennsylvania's Penn State – University Park. Penn State has an average in-state tuition of $17,926. In contrast, at the 10 least expensive state school systems, only one has a flagship school with in-state tuition and fees of more than $8,000.
One factor that may affect the higher tuition in many of these states is their relative cost of living. It follows that because the states have to pay more in salary and supplies, they would charge students more. In seven of the 10 most expensive public university systems, the relative cost of goods are among the highest in the country. In the states with the least expensive universities, the cost of goods is generally lower, but does not appear to be as much of a factor as it is with the most expensive states.
Some of these states also may charge in-state students less because they levy a high premium on out-of-state undergraduates. In seven of the 10 least expensive states, students from out of state spend more than three times what natives pay in tuition and fees. In North Carolina, out-of-state tuition and fees are $21,352 per year, compared to just $6,514 for in-state residents.
24/7 Wall St. reviewed College Board's 2013 Trends In College Pricing's list of average tuition and fees for in-state students of public colleges and universities for the 2013-2014 school year. We also reviewed from the report current average and historical inflation-adjusted tuition and fees for public two-year and private two- and four-year universities. College Board also provided these figures for each state's flagship university, which is considered the most prestigious public university within the state. From the U.S. Census Bureau's 2012 American Community Survey, we reviewed household income data, as well as the proportion of state adults with a bachelor's degrees. From the Bureau of Economic Analysis, we reviewed the relative cost of consumer goods and services, by state, for 2011. Figures on student debt for the class of 2011 are from The Institute for College Access & Success (TICAS), while 2-year default rates for the 2011 fiscal year from the Department of Education.
These are the states with the most (and least) affordable colleges
Wednesday, May 13, 2015
Time to re-price old clients
Changing what advisers charge existing clients may be the best way to boost firm profitability, a consultant told advisers at the Financial Services Institute Advisor Summit in Washington yesterday.
Some experienced advisers have increased fees for new clients in recent years after considering all the services they provide, including tasks like restructuring flawed estate plans, helping plan for the care of elderly parents and negotiating mortgages, said Giles Kavanagh, managing director of Pusateri Consulting and Training.
However, a lot of advisers are hesitant and “uncomfortable” about changing the prices they charge their longstanding clients, he said. And that pricing discrepancy is leaving money on the table.
"Re-pricing current clients is the best way to improve your profitability in a justified way," Mr. Kavanagh said.
Advisers should be upfront and tell existing clients they are “correcting” their prices to a fair level after analyzing benchmarking studies, he said. Offer customers a few months to consider the increases and tell them, “We hope you'll come along.”
Mention something about the future, too, he said, suggesting: “Looking forward at your situation and the markets, we believe that our value to you going forward will be even greater.”
Many advisers worry clients don't really appreciate the varied levels of service they offer and fear charging higher prices will reduce asset retention. However, industry surveys suggest otherwise, Mr. Kavanagh said.
“Clients value trust and performance more than price within the overall advisory experience,” he said.
Mr. Kavanagh praised one adviser who addresses the issue of price increases directly with people even before they are clients. She says: “This is my price and it will go up over time.”
Tuesday, May 12, 2015
Two Firms Raise Price Target on Dick’s Sporting Goods (DKS)
On Thursday, two firms raised their price targets on sporting goods retailer Dick’s Sporting Goods Inc (DKS
Credit Suisse reported that it has increased its price target on DKS to $56. This price target suggests a 4% upside from the stock’s current price of $53.56. The firm has also boosted estimates on the company to reflect its updated outlook. Credit Suisse currently has a “Neutral” rating on DKS.
Citigroup also raised its price target on DKS to $63, suggesting a 15% increase from the stock’s current price. Analysts see higher growth opportunities from new stores and higher margins.
Dick’s Sporting Goods shares were up 71 cents, or 1.35%, during Thursday morning trading. The stock is up 17% YTD.
Sunday, May 10, 2015
Investors Become Complacent; Volatility Drops
Volatility in bond and equity markets is back down to levels that would have been familiar to investors back in 2007. Bond and share prices have all moved relentlessly higher, often into uncharted territory.
The only things that have changed for the worse are economic fundamentals.
Growth across developed economies remains subdued and though forecasters are hopeful next year turns out better than this one, that’s still a long way short of the unshakeable optimism most observers felt in the year or two before the financial crisis.
Economic gloom might support high sovereign debt prices, but it’s not so good for equities and corporate bonds. And yes it’s true that a greater share of GDP is accruing to companies than to workers, which at first light is supportive of both corporate debt and share prices. But ultimately the less money people earn the less there is to be recycled into demand, which is bad for firms generally.
Central banks are clearly stitching the whole web together. Weak economies mean central bank liquidity, which supports asset prices, fundamentals notwithstanding.
The problem is that investors have grown convinced nothing can possibly go wrong for them. The VIX, which measures S&P 500 volatility and is popularly called a fear index, is broadly back down to where it was during the boom years–if not quite to those lows. Ditto for the VStoxx volatility index which measures European equity market volatility.
The MOVE index, which measures bond market volatility, has dropped back from the summer’s highs when debt markets were rocked by fears the Federal Reserve would start trimming its bond purchase program by the autumn, and isn’t far off 2007 levels again.
To judge from central banks’ reaction functions, maybe investors have a point. The Fed relented on tapering when equities and bonds wobbled. In effect, the central bank was saying that it is putting a floor under asset prices. As long as investors believe this can be achieved, asset prices will keep climbing.
The key question then is to what degree can central banks achieve this promise? Eventually there will be enough growth to dictate higher interest rates for fear of inflationary consequences. Central banks have to consider where asset prices might be at that point if they maintain their current asymmetric response. Will they abandon price stability for fear of upsetting asset markets? Or will they accept another collapse on the assumption that it won’t be as catastrophic?
Recent history suggests that when asset markets spin out of control–in either direction–central banks find it hard to control them. What investors now have to consider is what might cause asset markets to lose control. Economic fundamentals might yet trump central banking liquidity and government interventions in pricing assets. As they’ve regularly done in Japan over the past two decades.
Tuesday, April 28, 2015
Financial plans not implemented could be a futile exercise
Mr. Kartik Mahadevan is a salaried individual holding a senior position in a telecom company. He is always hard pressed for time and has been postponing his own financial planning to a future date. On and off he has been investing for getting some tax benefits and to honor certain relationship commitments of buying certain products from friends and relatives. He then one day decided to take services of a financial planner and got his complete plan done. However after the plan presentation his planner gave him a list of things which has to be implemented to achieve hi set goals. However as soon as the plan was completed there was no implementation on his part. It�s almost more than a year and Mr. Kartik decides to go back to his financial planner just to realize that his financial commitments have increased for the same goal as he has lost considerable time period of investing.
The story of Kartik is a story of many today. We many at times end up getting good advice from our financial planners but a plan which is not implemented falls flat. Let�s analyze the reasons of why this happens:-
1) Time poverty: - People are hard pressed for time as there are steep commitments on professional front. But what we seem to forget is that we work hard in order to satisfy your personal goals which gets lost in the process.
2) Fear of commitment: - when a plan is discussed many times it recommended starting investing in certain specific instruments in order to achieve ones goals. But on seeing the commitment needed at time there is a fear of not being able to do it currently and that leads to not starting anything. The fact is that it might not always be possible to touch the idealistic investment figure needed to achieve you goals but alteast a start in that direction needs to be done. This is so because goals might change and there could always be changes in our income and expenses so we might be able to catch up with the figure needed even at a slightly future date. But not starting anything will lead us nowhere. we need to remember that � a journey of a 1000 miles starts with a single step�
3) Waiting for something wrong to happen before starting:- we many a times ignore some work in our life which is important and one day it becomes urgent. The decisions taken in panic most of the times end�s up in an unfavorable result. The same rule applies to financial planning. I have seen people not taking a term insurance plan till they encounter an unexpected death in their family. This aspect of human nature makes them postpone their financial planning implementation.
However genuine these reason might sound but the fact remains that goals cannot be achieved by reasons alone but there needs to be an active participation by the entire family in order to ensure that the milestones set by us turns into reality in the future.
Mukund Seshadri is a partner at MSVentures Financial Planners.
Monday, April 27, 2015
Bull of the Day: HEICO Corp (HEI) - Bull of the Day
This group has consistently been in the top 20% of the 265 industries ranked by Zacks, since before the election last fall. Given this outperformance, I was drawn to looking at one of the sub-industries of the Aerospace/Defense sector which currently ranks 24th of 265.A&D Equipment MakersIt makes sense that the suppliers of equipment to large Aerospace & Defense (A&D) companies would be doing well. I looked at these 3 Zacks #1 Rank stocks in the group:Orbital Sciences (ORB) is a leading space technology systems company that designs, manufactures, operates and markets a broad range of space-related products and services.Astronics Corporation (ATRO) is a manufacturer of specialized lighting and electronics for the cockpit, cabin and exteriors of military, commercial transport and private business jet aircraft.HEICO Corporation (HEI) is engaged primarily in certain niche segments of the aviation, defense, space and electronics industries. HEICO's customers include a majority of the world's airlines and airmotives as well as numerous defense and space contractors and military agencies worldwide in addition to telecommunications, elec! tronics and medical equipment manufacturers. I picked HEICO for "Bull of the Day" for two reasons. First, I like their projected earnings and sales growth of 19% and 13% respectively.Secondly, I like the fact they have a diverse mix of products, target markets, and customers, beyond A&D. In other words, commercial and general aviation, not just the space program or the military. They even serve computer, electronics, and healthcare markets.On May 22, the $2.9 billion company reported strong quarterly results and raised guidance. In the chart below, you can see the resulting breakout above $47 on strong volume.
On May 24, upward EPS estimate revisions from analysts caused HEI to become a Zacks #2 Rank (Buy). On June 27, when HEI was still trading below $51, it became a Zacks #1 Rank (Strong Buy).Head-to-Head on All the MetricsOne great resource in the Zacks Premium tools is the ability to compare industry peers on dozens of fundamental metrics. Here's a snapshot of these 3 companies from the Earnings view...
What stands out is that HEICO is more expensive on a valuation basis. But if the global trends of commercial aviation expansion continue to favor the fortunes of companies like Boeing, HEICO should be along for the flight.But, what about that Boeing 787 fire at Heathrow on Friday? We'll get to that in a moment.Here is how HEICO structures itself in two primary business segments...The Flight Support group designs, engineers, manufactures, repairs, distributes and overhauls FAA-approved parts that extend over the entire aircraft, from the engines all the way to hydraulic, pneumatic, electromechanical, avionic, structures, wheels and brakes and even interiors.The Electronic Technologies group produces electrical and electro-optical systems and components serving niche segments of the aerospace! , defense! , communications, and computer industries. Boeing 787 Woes: Where There's Smoke...This week should be an interesting one for many of these A&D stocks after the damage to Boeing shares on Friday. A 787 runway fire at London's Heathrow airport sent the stock down over $8 (7.5%) in less than 20 minutes on the news.But BA shares bounced off of $99 to close just below $102, down only $5 (4.7%). Not terrible considering it just made new all-time highs Friday above $108, eclipsing the record highs set in July 2007 above that mark. The good news for HEI shares is that they only fell 1% and are still within 1% of their closing all-time high just below $55. Going forward, I would trade any of these A&D equipment makers in tandem with their large-cap A&D customers.In other words, as the big guns of the sector go, so go the suppliers. Right now, I like HEI the best for its sold growth, diverse products and customers, and a strong price chart.If Boeing can put out their fires, HEICO should be a good wing man.Kevin Cook is a Senior Stock Strategist with Zacks.com
Monday, April 20, 2015
Don't Get Too Worked Up Over Ingredion's Earnings
Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.
Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.
Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Ingredion (NYSE: INGR ) , whose recent revenue and earnings are plotted below.
Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. FY = fiscal year. TTM = trailing 12 months.
Over the past 12 months, Ingredion generated $353.0 million cash while it booked net income of $444.6 million. That means it turned 5.4% of its revenue into FCF. That sounds OK. However, FCF is less than net income. Ideally, we'd like to see the opposite.
All cash is not equal
Unfortunately, the cash flow statement isn't immune from nonsense, either. That's why it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).
For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable for the short term) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it's ordinary in recessionary times, and you can only increase collections so much. Finally, adding stock-based compensation expense back to cash flows is questionable when a company hands out a lot of equity to employees and uses cash in later periods to buy back those shares.
So how does the cash flow at Ingredion look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.
Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.
When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.
With 10.5% of operating cash flow coming from questionable sources, Ingredion investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 5.0% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 47.5% of cash from operations.
A Foolish final thought
Most investors don't keep tabs on their companies' cash flow. I think that's a mistake. If you take the time to read past the headlines and crack a filing now and then, you're in a much better position to spot potential trouble early. Better yet, you'll improve your odds of finding the underappreciated home-run stocks that provide the market's best returns.
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Add Ingredion to My Watchlist.Tuesday, April 14, 2015
Beyond the Printer Makers: Other Opportunities in 3-D Printing
The 3-D printing industry continues to see major breakthroughs, but the technology has only scratched the surface with consumers. Will we ever reach the point when most homes can print up a new part for the car or a toy for the kid?
That was the topic addressed by experts at CE Week in New York City. Motley Fool analyst Rex Moore was there, and spoke with CNET executive editor Paul Sloan, who moderated the panel "Bringing 3D Printing to Consumers."
In this segment, Sloan talks about the areas investors can consider beyond printer makers such as 3D Systems (NYSE: DDD ) and Stratasys (NASDAQ: SSYS ) .
Printing up a bright future
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion dollar industry." And everyone from BMW, to Nike, to the U.S. Air Force is already using it every day. Watch The Motley Fool's shocking video presentation today to discover the garage gadget that's putting an end to the Made In China era... and learn the investing strategy we've used to double our money on these 3 stocks. Click here to watch now!
Tuesday, March 31, 2015
Today's 3 Best Stocks
In yet another in a series of unexpected moves by the broad-based S&P 500 (SNPINDEX: ^GSPC ) , we were offered disappointing factory data only to have the investors shrug off the bad news and buy Friday's dip.
Today's most important news was the Institute for Supply Management's factory index, which fell to 49 in May. Any figure below 50 signals contraction, and this was a pretty sizable drop from the 50.7 reported in April. What's even more confusing is that the Chicago PMI last week was extraordinarily strong at 58.7, which signaled robust manufacturing growth in the Midwest. The likely answer is that the true growth rate of the manufacturing and factory subset is somewhere in the middle of these two figures, which would put the U.S. economy on a continued slow, but steady, recovery.
For the day, the S&P advanced by 9.68 points (0.59%) to close at 1,640.42. There were also plenty of other solid performances within the index today; here's a glimpse at the top three.
Chip maker Intel (NASDAQ: INTC ) led the charge, rising by 4%, after Samsung introduced its new Galaxy Note 3 tablet, which runs on Google's Android operating system but has an Intel microprocessor inside. Previous to this tablet, Intel hadn't worked its way into any tablets other than those run on Microsoft's (NASDAQ: MSFT ) Windows OS. In fact, Intel's dominance in microprocessors is based almost entirely on its long-running partnership with Microsoft and its Windows OS. However, today's news gives investors hope that Intel will be able to break outside the box and gain industrywide acceptance as it attempts to move beyond just being a PC-processor supplier. All told, I'm impressed with Intel's innovation and consider it the strongest name in technology hardware.
Big Pharma giant Merck (NYSE: MRK ) delivered a solid 3.8% gain after reporting encouraging early-stage data on Lambrolizumab, its experimental anti-PD-1 antibody, at the American Society of Clinical Oncology's annual meeting. According to the phase 1b data, Lambrolizumab showed a phenomenal overall response rate of 38% in treating advanced melanoma. Furthermore, most of the adverse events were grade 1/2 (the less serious type), meaning the treatment was generally well tolerated. Immunotherapy stocks were certainly the stars of ASCO, and now all eyes will be on Merck and its anti-PD-1 drug moving forward.
Finally, game and game accessories retailer GameStop (NYSE: GME ) added 3.7% in spite of some mounting worries that its used-game sales will suffer with the introduction of new gaming consoles that have built in fail-safes to prevent secondary users from playing a game. GameStop has been closing stores, cutting costs, and focusing on digital gaming to prepare itself for this inevitable shift. The company has had quite the run in anticipation of Microsoft's Xbox One and the debut of Sony's PlayStation 4 later this year, so now may not be a bad time to consider taking some of your profits off the table.
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Why Arctic Cat Is at All-Time Highs
On Wednesday, Arctic Cat (NASDAQ: ACAT ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
More than most businesses, Arctic Cat depends on the weather to provide enough winter snow to drive sales of its snowmobiles. After some difficult seasons in past year, the company has hoped to rebound with a return to more normal conditions. Let's take an early look at what's been happening with Arctic Cat over the past quarter and what we're likely to see in its quarterly report.
Stats on Arctic Cat
| Analyst EPS Estimate | ($0.40) |
| Year-Ago EPS | ($0.49) |
| Revenue Estimate | $121.2 million |
| Change From Year-Ago Revenue | 23% |
| Earnings Beats in Past 4 Quarters | 3 |
Source: Yahoo! Finance.
How did Arctic Cat's winter fare?
Analysts have kept their views stable in recent months on Arctic Cat's earnings, leaving estimates for the March quarter unchanged while cutting fiscal-year 2014 projections by $0.02 per share. But the stock has performed very well, climbing more than 30% since early February.
Winter has been kind to Arctic Cat and a number of other companies that rely on snow for their business. Ski-resort operator Vail Resorts (NYSE: MTN ) got out to a slow start this season, leading to an earnings shortfall for its January quarter, but better snow totals later in the season have sent its stock rising sharply. Arctic Cat hopes to benefit from the same conditions.
Yet the March quarter is traditionally a slow period for Arctic Cat because of its concentration on snowmobiles. The company also makes all-terrain vehicles in an attempt to diversify its seasonal exposure, but rival Polaris (NYSE: PII ) has done a far better job of building out an all-season lineup of vehicles that includes not only snowmobiles and ATVs but also motorcycles. For its part, Polaris reported record first-quarter sales late last month, and a rise of more than 200% for its snowmobile segment's revenues suggests that Arctic Cat investors should expect solid sales as well.
One promising area for Arctic Cat to grow is in international markets. Given the company's small size, the opportunity from lucrative markets like Canada and northern Europe would be extremely meaningful in boosting the company's snowmobile revenue, and greater ATV penetration could help smooth its sales throughout the year.
In Arctic Cat's quarterly report, be sure to compare its figures closely with those of Polaris. If Arctic Cat can emulate the success of its rival in broadening its customer base, it could go a long way toward justifying the big jump in its shares recently.
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