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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Click here to add Arctic Cat to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Big Tech Returns to the Wild West

Last fall, the world of big technology was significantly dominated by a few companies. Apple (NASDAQ: AAPL  ) and Google (NASDAQ: GOOG  ) formed the smartphone duopoly that seemed untouchable, and Samsung was a hardware manufacturer that was challenging Apple for sales, but appeared to be the Android poster-child. Fast forward a few months and the landscape looks incredibly different, as BlackBerry (NASDAQ: BBRY  ) fights to survive, Nokia (NYSE: NOK  ) and Microsoft (NASDAQ: MSFT  ) have mounted a serious challenge in the smartphone space, and Facebook (NASDAQ: FB  ) is threatening the status quo in how we interact with our smartphones. And that's just in smartphones.

Samsung is developing a new operating system that hopes to challenge Android, it has moved into Best Buy (NYSE: BBY  ) retail locations to challenge Apple's retail model, and it has put together an ecosystem that allows it to become a single solution for smartphones, tablets, laptops and home entertainment. Microsoft has released its own hardware, become a major player in cloud computing, and upped its game in everything it touches -- video games, music, enterprise solutions and more. Intel (NASDAQ: INTC  ) , largely as it sees PC sales get hit, is working with Samsung on the release of the Tizen operating system and has upped its game in the server space to stave off its own stumble. These are just some of the example of shifts that have taken technology to the next level recently.

What's really changed?
It's certainly reasonable to argue that technology is always in a state of violent transition, with what Joseph Schumpeter called "creative destruction" driving us forward. The concept states that the creation of new technologies must, by definition, destroy old ones. The process is a fluid one, and it's always going on, particularly in the area of high tech.

So if this process is constant, you ask, what's different about right now? The answer is simultaneously "nothing" and "quite a bit." The process does march unstoppably forward, but there are always events that create little accelerations that can't be denied. These events are not always obvious, but they change perception in ways that are hard to escape.

If you're wondering what has changed this time -- and knowing that I will receive violent disagreement to this argument -- the introduction of Windows 8 has made a sweeping difference in how tech looks at the world. Apple changed the world with the introduction of the iPhone and then the iPad. The touchscreen as a way to interact with a computer was revolutionary and deserves credit as being the spark that got things started.

The reason Windows 8 is so important, however, is that it is an acknowledgement that the very core of personal computing is changing. The ink that's been spilled about why Windows 8 is terrible is copious to be sure, but it's still at the center of the conversation. A few years ago, Microsoft was barely mentioned. The OS may be the product people love to hate, but it has propelled Mr. Softy back into the limelight. Furthermore, because being the subject of discussion is not enough alone, Windows 8 has had a sweeping impact.

Nokia's Windows Phones have become serious contenders in several markets, making the battle for third place even more interesting, and that's before Tizen gets into the game this summer. While the Surface RT and Surface Pro haven't been huge sellers, they've spawned an explosion of Windows-based tablets and hybrids that has opened up the space. You now can choose between iOS and Android with flash memory, or a Windows machine with more complete capabilities. Hate Windows 8 all you want, but this is the point, and it's working. Microsoft phones and tablets didn't exist a few months ago, and now they're in the thick of the conversation.

Without going into a discussion of each of the technologies mentioned, suffice it to say that advances are numerous and significant. Big tech has returned to the Wild West, and the prizes have gotten larger and the stakes higher. The ultimate beneficiary is the consumer, and the savvy and, yes, Foolish investor finds ways to benefit from this new, open landscape.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

Why Fortinet Shares Got Walloped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of computer-network security specialist Fortinet (NASDAQ: FTNT  ) plummeted 18% today after its preliminary quarterly results disappointed Wall Street.

So what: One slow quarter isn't a huge deal, of course, but Fortinet's 35-plus P/E forces analysts to come down extra-hard on the stock. In fact, management blamed the warning on waning U.S. service provider demand, EMEA/Latin America weakness, and inventory shortages, giving investors plenty of concerns over slowing growth going forward.

Now what: Management now expects first-quarter EPS of $0.10 on revenue of $134 million-$136 million, clearly below the consensus of $0.12 and $140.4 million, respectively. "We remain optimistic about Fortinet's long-term opportunities as our products and innovation are strong and security demand drivers remain high," CEO Ken Xie reassured investors. Given the stock's still-lofty forward P/E of 25, however, I'd wait for even more of a pullback before buying into that bullishness.

Interested in more info Fortinet? Add it to your watchlist.

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5 Hated Earnings Stocks You Should Love

DELAFIELD, Wis. (Stockpickr) -- Short-sellers hate being caught short a stock that reports a blowout quarter. When this happens, we often see a tradable short squeeze develop as the bears rush to cover their positions to avoid big losses. Even the best short-sellers know that it's never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.

Must Read: 5 Stocks Ready for Breakouts



This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks in a year to help enhance your portfolio returns -- the gains become so outsized in such a short time frame that your profits add up quickly.



That said, let's not forget that stocks are heavily shorted for a reason, so you have to use trading discipline and sound money management when playing earnings short-squeeze candidates. It's important that you don't go betting the farm on these plays and that you manage your risk accordingly. Sometimes the best play is to wait for the stock to break out following the report before you jump in to profit off a short squeeze. This way, you're letting the trend emerge after the market has digested all of the news.



Of course, sometimes the stock is going to be in such high demand that you risk missing a lot of the move by waiting. That's why it can be worth betting prior to the report -- but only if the stock is acting technically very bullish and you have a very strong conviction that it is going to rip higher. Just remember that even when you have that conviction and have done your due diligence, the stock can still get hammered if Wall Street doesn't like the numbers or guidance.



If you do decide to bet ahead of a quarter, then you might want to use options to limit your capital exposure. Heavily shorted stocks are usually the names that make the biggest post-earnings moves and have the most volatility. I personally prefer to wait until all the earnings-related news is out for a heavily shorted stock and then jump in and trade the prevailing trend.

With that in mind, here's a look at several stocks that could experience big short squeezes when they report earnings this week.

Must Read: 5 Dividend Stocks About to Hike Payments to Shareholders

Container Store Group

My first earnings short-squeeze play is storage and organization products player Container Store Group (TCS), which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect Container Store Group to report revenue of $199.24 million on earnings of 11 cents per share.

The current short interest as a percentage of the float for Container Store Group is extremely high at 20.8%. That means that out of the 16.69 million shares in the tradable float, 3.47 million shares are sold short by the bears. This is a large short interest on a stock with a very low tradable float. If the bulls get the earnings news they're looking for, then shares of TCS could easily rip sharply higher post-earnings as the bears rush to cover some of their trades.

From a technical perspective, TCS is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending sideways and consolidating for the last two months and change, with shares moving between $20.32 on the downside and $23.72 on the upside. Any high-volume move above the upper end of its recent range post-earnings could trigger a big breakout trade for shares of TSC.

If you're bullish on TCS, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some key near-term overhead resistance levels at $23.23 to $23.72 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 455,380 shares. If that breakout hits post-earnings, then TSC will set up to re-test or possibly takeout its next major overhead resistance levels at $28 to its 200-day moving average of $29.76 a share. Any high-volume move above those levels will then give TCS a chance to trend north of $30 a share.

I would simply avoid TCS or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support levels at $21.11 to $20.65 a share and then below its all-time low of $20.32 a share with high volume. If we get that move, then TCS will set up to enter new all-time-low territory, which is bearish technical price action. Some possible downside targets off that move are $17 to $15 a share.

Must Read: How to Trade the Market's Most-Active Stocks

E2open

Another potential earnings short-squeeze trade idea is cloud-based and on-demand software solutions for supply chain management provider E2open (EOPN), which is set to release its numbers on Wednesday after the market close. Wall Street analysts, on average, expect E2open to report revenue $20.53 million on a loss of 14 cents per share.

The current short interest as a percentage of the float for E2open is extremely high at 20.7%. That means that out of the 18.04 million shares in the tradable float, 3.74 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period b 2.6%, or by 93,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of EOPN could easily trend sharply higher post-earnings as the bears rush to cover some of their positions.

From a technical perspective, EOPN is currently trending well below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last three months, with shares plunging lower from its high of $21.90 to its new 52-week low of $8.89 a share. During that downtrend, shares of EOPN have been consistently making lower highs and lower lows, which is bearish technical price action.

If you're in the bull camp on EOPN, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $9.67 to $10.96 a share and then above $11.30 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 280,178 shares. If that breakout kicks off post-earnings, then EOPN will set up to re-fill some of its previous gap-down-day zone from September above $11.30 that started near $16 a share.

I would simply avoid EOPN or look for short-biased trades if after earnings it fails to trigger that breakout and then drops below its new 52-week low of $8.89 a share with high volume. If we get that move, then EOPN will set up to enter new 52-week-low territory, which is bearish technical price action. Some possible downside targets off that move are $8 to $7 a share.

Must Read: 5 Stocks With Big Insider Buying

Monsanto

Another potential earnings short-squeeze candidate is agricultural products player Monsanto (MON), which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Monsanto to report revenue of $2.41 billion on a loss of 23 cents per share.

The current short interest as a percentage of the float for Monsanto stands at 6%. That means that out of the 523.10 million shares in the tradable float, 31.37 million shares are sold short by the bears. This isn't a huge short interest, but it's more than enough to spark a decent short-covering rally post-earnings if Monsanto can deliver the earnings news the bulls are looking for.

From a technical perspective, MON is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last three months and change, with shares moving lower from its high of $128.35 to its recent low of $109.36 a share. During that downtrend, shares of MON have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of MON have now traded into some previous support levels from back in April at around $109 a share.

If you're bullish on MON, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance at $112 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 3.86 million shares. If that breakout begins post-earnings, then MON will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $114.60 a share to its 50-day moving average of $114.88 a share. Any high-volume move above those levels will then give MON a chance to tag its next major overhead resistance level at $116.33 a share.

I would avoid MON or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below some key near-term support levels at $109.36 to $109 a share with high volume. If we get that move, then MON will set up to re-test or possibly take out its next major support level at $103.33 to its 52-week low of $102.88 a share.

Must Read: 5 Breakout Stocks Under $10 Set to Soar

CalAmp

Another earnings short-squeeze prospect is wireless communications products and solutions developer CalAmp (CAMP), which is set to release numbers on Monday after the market close. Wall Street analysts, on average, expect CalAmp to report revenue of $59.06 million on earnings of 19 cents per share.

The current short interest as a percentage of the float for CalAmp is pretty high at 8%. That means that out of 34.05 million shares in the tradable float, 2.72 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 13%, or by 314,000 shares. If the bears get caught pressing their bets into a bullish quarter, then shares of CAMP could easily rip sharply higher post-earnings as the shorts move to cover some of their trades.

From a technical perspective, CAMP is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has started to form a bottoming chart pattern over the last three months, since shares have found buying interest each time its pulled back below $17 a share. If that bottom can hold post-earnings, then shares of CAMP could set up to trend higher and break out above some near-term overhead resistance levels.

If you're bullish on CAMP, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day moving average of $18.37 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 636,777 shares. If that breakout develops post-earnings, then CAMP will set up to re-test or possibly take out its next major overhead resistance levels at $20.84 to $22.36 a share, or even its 200-day moving average of $23 a share.

I would simply avoid CAMP or look for short-biased trades if after earnings it fails to trigger that breakout and then takes out some key near-term support at $16.03 a share with high volume. If we get that move, then CAMP will set up to re-test or possibly take out its next major support levels at its 52-week low of $14.74 a share.

Must Read: 7 Stocks Warren Buffett Is Selling in 2014

Alcoa

My final earnings short-squeeze play is aluminum, fabricated aluminum and alumina producer Alcoa (AA), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Alcoa to report revenue of $5.84 billion on earnings of 22 cents per share.

The current short interest as a percentage of the float for Alcoa sits at 1.9%. That means that out of the 36.73 million shares in the tradable float, 689,900 shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 2.2%, or by 1.34 million shares. If the bears get caught pressing their bets into a bullish quarter, then shares of AA could easily move sharply higher post-earnings as the shorts rush to cover some of their bets.

From a technical perspective, AA is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been downtrending a bit over the last month, with shares moving lower from its high of $17.36 to its recent low of $14.89 a share. During that move, shares of AA have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of AA have now started to bounce off that $14.89 low and it's quickly approaching a breakout trade that could trigger post-earnings.

If you're in the bull camp on AA, then I would wait until after its report and look for long-biased trades if this stock manages to break out above its 50-day moving average of $16.38 a share and then above more near-term overhead resistance levels at $16.34 to $$16.50 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 17.47 million shares. If that breakout materializes post-earnings, then AA will set up to re-test or possibly take out its 52-week high of $17.36 a share. Any high-volume move above that level will then give AA a chance to trend north towards $20 a share.

I would avoid AA or look for short-biased trades if after earnings it fails to trigger that breakout, and then drop below some key near-term support levels at $15.50 to $14.89 a share with high volume. If we get that move, then AA will set up to re-test or possibly take out its next major support levels at its 200-day moving average of $13.74 a share to $13 a share.

Must Read: 10 Stocks George Soros Is Buying

To see more potential earnings short squeeze plays, check out the Earnings Short-Squeeze Plays portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

>>Must-See Charts: How to Trade 5 Big Stocks for Big Gains

>>4 Stocks Breaking Out on Unusual Volume

>>3 Hot Stocks to Trade (or Not)

Follow Stockpickr on Twitter and become a fan on Facebook.

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

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

CNBC.com and Forbes.com.

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

Will the DOJ Pursue Big Banks After Holder Departs?

Do you hear that? That's the sound of big banks breathing a sigh of relief.

Attorney General Eric Holder is stepping down. And according to Wall Street Journal writer Deborah Solomon, his departure signals the end of the Justice Department's crusade to hold financial institutions culpable for their conduct prior to the financial crisis.

Solomon writes:

While several big banks remain in the Justice Department's crosshairs for their sale of flawed mortgage securities ahead of the 2008 financial crisis, the settlements are expected to be much smaller than the record sums extracted from Bank of America (BAC), J.P. Morgan Chase & Co. (JPM) and Citigroup Inc. (C), according to people familiar with the matter.

Those still under investigation by Justice include Goldman Sachs Group Inc. (GS) and Wells Fargo & Co. (WFC). But those cases are not expected to produce the headline-catching sums like Bank of America's $16.65 billion tab, given they involve a smaller volume of mortgage securities than the other banks.

Among the signs that the big bank cases may be winding down: Tony West, who was Mr. Holder's point-man in the big bank settlement talks, recently left the Justice Department and will join PepsiCo (PEP) as its general counsel.

Dow 17,000: The Fourth of July Celebration Starts Early

On the last, abbreviated trading day of an already short week, the Dow Jones Industrial Average closed above 17,000 for the first time. How’s that for pre-Fourth of July fireworks?

REUTERS

The Dow Jones Industrial Average climbed 1.3% to 17,068.26 this week, the first time its closed above 17,000. The S&P 500, meanwhile, rose 1.2% to 1,985.44, its 25th record high of the year.

The Nasdaq Composite jumped 2% to 4,485.93, its highest close since March 31, 2000. Even the beleaguered small-company Russell 2000 isn’t so beleaguered anymore: It gained 1.6% to 1,208.15, just off its record high of 1,208.65 hit back in March.

Birinyi Associates’ Laszlo Birinyi and Kevin Pleines think the S&P 500 is heading higher:

The stock market has traded above our target of 1,970 and done so with some authority. We now view the market as having the wherewithal to trade to 2,100 within the next six months. While that would coincide with the beginning of 2015, several of our forecasts have surprised us with their intensity…

Commentators have distracted investors with concerns such as small stocks, VIX/complacency, utilities/sector movements which we have detailed as peripheral issues…Like most indicators they are descriptive, not indicative and there-fore have no further implications or information.

Sentiment, by our measures, is still unsupportive. We see more hedging in terms of market calls. The market is not climbing a wall of worry, rather it is climbing a wall of skepticism and misinformation.

Nor is the stock market looking all that expensive. The Dow Jones Industrial Average is now trading at 15.7 times the last 12-months of earnings, only slightly above its historical average of 15 times. The S&P 500, meanwhile, trades at 17.6 times trailing earnings, above its long term average of around 15.5, but not at a level that screams overvaluation. The folks at MRB Partners argue that stocks are especially attractive relative to bonds:

…based on the MRB Cyclically-Adjusted P/E Ratio, the earnings yield on stocks is nearly 6%, broadly in-line with the post-1990 average. By contrast, the real yield on G7 government bonds is close to 0%, resulting in a gap with equities that is wide by historical standards. As we discuss later, equity valuations are not compelling in absolute terms; ie. they are slightly above a neutral reading. Yet measured against significantly overvalued bonds, stocks are appealing at this stage of the economic cycle.

Much has been made of the Dow’s 153 trading-day journey from 16,000 to 17,000, the seventh-fastest 1000-point gain since the measure was launched. The folks Bespoke Investment Group note that it’s getting easier for the Dow Jones Industrial to break those big round numbers:

As you can see in the table, a 1,000 point move in the DJIA is not what it used to be. Back in the mid-1990s, when the DJIA was crossing 1,000 point thresholds at a fast clip, each of those moves required a sizable gain. With the law of large numbers kicking in these days, though, a 1,000 point move requires a rally of just 6%. And once the DJIA does close above 17,000, the road to 18,000 will require a gain of less than 6%.

Here’s the table Bespoke mentioned:

And after today’s close, that’s just 5.5% higher. Last one to 18,000 is a rotten egg.

Zynga's Mobile Investments Can Take It Higher

Zynga (ZNGA) is trying hard to turnaround. Although the company's share price has declined in 2014, it looks like a good investment, primarily because of its investments in mobile. Zynga is at the forefront of an entertainment revolution. The rapid consumer adoption of smartphones and tablets is expected bring unprecedented opportunity, and games are the number one time-based use case for consumers.

In the next few years, more than 1.3 billion people are expected to be gaming on their mobile devices. By 2017, one-third the world's population is forecasted to be using smartphones and the tablet installed base is projected to cross 1 billion. Zynga is targeting this opportunity.

Zynga's moves

In addition to crossing 4 million installs, Zynga is seeing a number of early signs that FarmVille 2: Country Escape is resonating well with consumers. In the U.S., the game has achieved number one top free app and number one top free game on iPad. On iPhone, the game has achieved the top three positions in the free app and free game charts. Across the Apple platform, it has reached the number one top free app position in 20 countries, the number one top free game in 40 countries and has broken into the top 20 grossing chart on both the iPad and the iPhone in the U.S.

The primary focus of the gaming major is to always achieve category leading engagement and retention. FarmVille 2: Country Escape is already showing strong player engagement metrics compared to other Zynga games.

It has created a rich entertainment experience that matters to the mobile play patterns consumers want which is illustrated by the amount of time people are playing them.

Strong engagement with users

Zynga has witnessed strong engagement from these existing FarmVille web players, an encouraging number of new players are coming to the franchise for the first time because of Country Escape on mobile. This is believed to be an important milestone for it with focus on growing and sustaining its core franchises and demonstrates Zynga's ability to sustain its franchises over time and create mobile entertainment experiences that meaningfully engage and extend its games to new large – scale groups of consumers around the world.

At the same time, Zynga expects to deliver both breakthrough consumer experiences and profitability as it continues to align its business around focus, quality and execution. In order to achieve this, it remains focused on doing more with less and achieving more operating leverage across the organization.

Additionally, in the first quarter, Zynga reduced its technology spend by 15%, driven by restructuring and discontinuing one of its data centers. All of these changes have put Zynga in a stronger position to deliver growth in 2014 and beyond.

Conclusion

According to Yahoo Finance, the forward P/E ratio of 51.33 indicates that the stock is costly as compared to the industry's average of 17.41. However, it is better than Electronic Arts, which has a P/E ratio of 1,373.08. The PEG ratio of 5.13, above 1, depicts slower growth as compared to the industry's average of 1. Instead, its competitor Electronic Arts has an impressive PEG ratio of 0.80. The current ratio of 3.32 depicts healthy current assets. Therefore, apart from the weaknesses shown in the results above, the company is worth investing in seeing the impressive CAGR for the next 5 years of 30%, which is well above the industry's average of 18.57%. Hence, investors are advised to bet on this growth story and expect satisfactory returns in the long run.

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Cash-Flush Weitz Value Fund Is Ready to Pounce

Cash is no longer a four-letter word for some mutual fund managers, especially as stocks continue marching to new highs and bargains become few and far between. But few funds are as fond of the green stuff as Weitz Value(WVALX). At the end of the first quarter, the fund had nearly 30% of its $1.2 billion in assets in cash.

See Also: Market Strategist Sees 'Mini Corrections' for Stocks

Why so much? One word: discipline. "Fear of missing out in up markets can lead to an erosion of price discipline," says co-manager David Perkins. "We're trying to be prepared for the emergence of more meaningful discounts." Perkins is wise to prepare—U.S. stocks haven't had a correction (defined as a downturn of 10% to 20%) since October 2011 and haven't experienced a full-fledged bear market (a decline of at least 20%) since the last one ended in March 2009. Because corrections occur roughly every two years, on average, it's safe to say that the market is due.

The fund owns only 29 stocks, and its contrarian managers—Perkins works alongside Wallace Weitz and Bradley Hinton—seek to buy out-of-favor stocks that sell at a discount to what they think the business is worth.

The managers aren't concerned about holding a diverse mix of stocks or industries, or hewing to a particular asset allocation. Instead, they favor a stock-by-stock approach, searching, according to fund documents, "for companies that are in control of their own destiny that have honest, intelligent management."

For the most part, the formula works for patient investors. The fund's long-term record is solid. Over the past 15 years, Weitz returned 6.3%, beating Standard & Poor's 500-stock index by an average of 1.7 percentage points (all returns are through June 2). More recently, it has lagged the index, perhaps hurt by all that cash. Over the past year, Weitz earned 16.6%, lagging the S&P 500 by 4.0 percentage points.

For now, the bull market has shrunk the pool of stocks that appeal to the bargain hounds at Weitz Value. "Many of the stocks we follow appear to have baked in perfect operating scenarios over the next few years," Perkins says. "That's a difficult backdrop."

Don't get him wrong; Perkins isn't calling for a bear market or even a meaningful correction in stock prices. "We shy away from making short-term predictions," he says. "We're not bearish on the economic prospects for the U.S. or for the globe." But if trouble comes—be it company-specific or to the broader market—"we're not afraid to move quickly or decisively."

At any given time, the fund has a watch list with 40 to 50 names on it. Those companies have been thoroughly analyzed and valued, so when the price is right, Perkins or his colleagues can pounce. Stocks on the watch list tend to fall into three buckets, says Perkins. The first contains "more of what we own and love," he says.

The second contains companies that can deploy excess cash and buy assets at attractive prices, taking advantage of disruptions in the market to buy back their own stock or make profitable acquisitions. "In that bucket, we've been looking at a number of companies in the media, health care and aerospace sectors," says Perkins.

The third bucket contains businesses that lead the competition and can produce steady returns over long periods. Examples include payment processors, such as eBay (EBAY), which owns PayPal.

Naturally, Perkins is most willing to chat about stocks in the first bucket—the ones he already owns. Roughly one-third of the stocks in the fund are within 10% of a price at which the managers would buy more, he says. One example is Valeant Pharmaceuticals International (VRX), a Canada-based drug and medical-device maker with an aggressive mergers-and-acquisitions bent. Valeant acquired Bausch & Lomb last year and is currently pursuing Allergan.

Other health care holdings on the watch list include Express Scripts (ESRX), the giant pharmacy-benefits manager, and Endo International (ENDP), a specialty drug maker that is developing medicines to manage pain and treat cancer, among other conditions. The Food and Drug Administration recently approved the company's drug for the treatment of low testosterone. Media companies on the watch list include Liberty Media (LMCA), which owns a variety of media and entertainment properties, including SiriusXM radio and the Atlanta Braves baseball franchise.

Perkins will buy when investors become disenchanted with any of the stocks on his list for the wrong reason. But for now, that mountain of cash remains largely undisturbed. Says Perkins: "We've found opportunities, but they've been very one-off in nature, as opposed to being able to back up a truck to a specific sector or the market in general."

A Buying Opportunity in Check Point Software?

IT security company Check Point Software (NASDAQ: CHKP  ) delivered a good set of results recently, but its guidance disappointed and the stock took a hit. The company has long been known for its high profit margins and excellent cash flow, but the security marketplace is very competitive. Is Check Point starting to feel the heat from competitors like Fortinet (NASDAQ: FTNT  ) and Palo Alto Networks (NYSE: PANW  ) ? Or, is its guidance too conservative?

Check Point reports a good quarter
A brief look at the results indicates that Check Point's first-quarter earnings came in slightly better than the mid-point of its guidance:

Revenue of $342.2 million versus guidance of $330 million-$350 million Non-GAAP EPS of $0.84 versus guidance of $0.79-$0.86 Full-year guidance unchanged, with expected revenue of $1.45 billion-$1.50 billion and non-GAAP EPS of $3.50-$3.70 Second quarter guidance that is wider than the usual range, with expected revenue of $340 million-$375 million and non-GAAP EPS of $0.82-$0.90

The sticking point is clearly the second-quarter guidance, which predicts that revenue will come in between a 0.1% decline and a 9.6% increase compared to last year. That is a pretty big range, and it suggests a significant amount of uncertainty in the quarter.

Indeed, in discussing the outlook on the conference call, Check Point's management alluded to "some softness in international markets, particularly Asia." Europe was also cited as having a slow start, but this is possibly due to the last two quarters being strong for Check Point within the region. The Americas, which contributed 48% of revenue in the first quarter, continue to be strong, with North American product sales up an impressive 20%. 

Four reasons why Check Point is doing well
First, it usually makes sense to listen to what a management says about current trading conditions, but bear in mind that Check Point's guidance does tend to be a little conservative. While a slight pause in European growth is expected, the fact that North American growth remains strong is an indication that any "softness" is not due to a lack of competitiveness with rivals Fortinet and Palo Alto Networks. Check Point's products can't be losing their competitive edge if North America is doing well.

Second, the weakness in Asia is somewhat surprising. Check Point certainly wouldn't be the only IT company to report some weaker conditions in emerging markets, but its peers actually reported good growth in Asia. Fortinet generated 11% growth its Asia-Pacific revenue, and it claimed to have won a "seven-figure firewall deal" with a "large diversified telecommunications company," beating out Palo Alto, Check Point, and others in the process.  

As for Palo Alto, its Asia-Pacific revenue grew 42%, although its second quarter ended in January. Fools will be well advised to keep an eye out for Palo Alto's next results at the end of May for a better gauge on conditions in Asia.

Third, Check Point's underlying performance was pretty good in the first quarter. Total revenue grew 6%, while software growth remained strong. Note that the product and licenses figure includes software blade -- as distinct from software revenue -- subscriptions, sales that used to be included in Check Point's product sales line.

Source: Check Point Presentations, author's adjustment

As readers can see, Check Point underwent a superficially difficult period of product sales growth in 2012-2013, but the underlying picture was that its software blade sales were growing strongly. In fact, software blade sales grew nearly 26% in the quarter and now make up more than 35% of its product sales.

Fourth, its cash-flow generation continues to grow strongly. Management claimed that adjusted operating cash flow increased by 12.7% to $282 million in the first quarter -- noticeably more than the 6% rise in non-GAAP EPS. If you think that cash flow growth is more important than EPS, particularly with companies that are increasing their software-based sales, then Check Point is growing at a faster rate than its headline earnings suggest.

The bottom line
Check Point's guidance has possibly created a decent buying opportunity in a stock that is undoubtedly the value play in the IT security sector. On the other hand, the revenue range was widened in order to reflect some uncertain trading conditions. Cautious investors will want to monitor the IT sector for signs of general weakness in Asia and focus on what Fortinet and  Palo Alto Networks say in their next reports.

Are you ready to profit from this $14.4 trillion revolution?
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Evening Traders Rejoice! Nadex Adds Nighttime Intraday Nikkei 225 Contracts

The Nadex exchange has just recently added additional binary expirations for the underlying international Indice Nikkei 225. This is great news for evening traders!  Also, if you have a day-time job and are looking for a low-risk way to trade in the evening, this may be a solution for you.

Most markets are known for being pretty flat in the evening, but the Nikkei isn't like other markets. It has great volatility and great trends and reversals. On average, the Nikkei moves approximately 100 ticks per hour! This would be very intimidating to trade the futures markets due to risk of margin calls on big fast moves, but with Nadex spread and binary contracts, all contracts have capped risk.

Related: Using Nadex Spreads To Help You Trade The Australian Dollar CPI News

Here is a chart of the Nikkei 225 over the past week. To ensure you are looking at the correct chart when making trading decisions, it is important you look at the Nikkei 225 at the Singapore exchange (SGX) and not the CME Nikkei 225 listed futures.

As you can see above, the Nikkei 225 is known for having large moves and provides a great opportunity for night-time traders to trade with capped risk. Previously on Nikkei 225, Nadex Japan 225 binaries only had 1 expiration time per day and 1 weekly expiration, but now they have added five additional expiration times in the evening. This makes it even easier to find a binary contract that is right for your trade. The additional intraday binary contracts added by Nadex have the following expirations: Intraday: 7-9 P.M., 8-10 P.M., 9-11 P.M., 10 P.M.-12 A.M., and 11 P.M.-1 A.M, all US Eastern Time.  The Japan 225 binary contracts are a derivative of the Nikkei 225 on the SGX exchange.  Who is Nadex?

The North American Derivatives Exchange is based out of Chicago and is regulated by the U.S. Futures Trading Commission (CFTC). Nadex allows traders to trade binaries and spreads on foreign exchange (forex) markets, U.S. and International Stock Indices, and Commodities like gold and oil. Trades can be opened and closed before expiration and NADEX is not trading against you.

How Can Nadex Binary Contracts Be Used?

These contracts can be used to trade strangles on JPY news, directionally, range bound and premium Collection.

For example, you could buy a strike under the price. If the market moves up stays flat or even down some, you can profit.

You could buy a strike above the price risking $5.00 to make $95. Or risking $500 to make $9500.

Examples Of Nadex Trades

To see examples of trading the news on Nadex binaries and spreads, see these articles posted on Benzinga, click here.

Learn More About Nadex Binaries

On Nadex the markets are open from as early as 6 P.M. ET to as late as 5 P.M. the next day, giving the ability to trade day and/or night on intraday, daily and weekly contracts. 

If you would like to learn more about trading Nadex binaries, check out this 16 video course, absolutely for free, on Marketfy.

 

Posted-In: NK SGX Nikke 225 NadexBinary Options Education News E

Stocks Going Ex-Dividend on Friday, December 13 (MW, RYN, More)

Ex-dividend dates are very important to dividend investors, since you must purchase a stock prior to its ex-dividend date in order to receive its upcoming dividend payout. For more information, check out Everything Investors Need to Know About Ex-Dividend Dates.

Below are six stocks going ex-dividend on Friday, December 13.

The Men’s Wearhouse
The Men’s Wearhouse, Inc. (MW) offers a dividend yield of 1.43% based on Wednesday's closing price of $50.46 and the company's quarterly dividend payout of 18 cents. The stock is up 62% year-to-date. Dividend.com currently rates MW as “Neutral” with a DARS™ rating of 3.4 stars out of 5 stars.

Rayonier

Consumer Spending Rises Despite Stagnant Wages

Julio Cortez/AP WASHINGTON -- U.S. consumers increased their spending in October even though their wages and salaries barely increased, raising questions about how strong the economy will grow at the end of the year. Consumer spending increased 0.3 percent in October compared with September when spending rose 0.2 percent, the Commerce Department reported Friday. Wages and salaries rose a slight 0.1 percent after a much stronger 1 percent rise in September. Overall income actually fell 0.1 percent following a 0.5 percent rise in September. But September's gain was inflated by a legal settlement that boosted farm income that month, leading to a big decline in farm income in October. The personal saving rate dipped to 4.8 percent of after-tax income in October, down from 5.2 percent in September, reflecting the difference between spending and income. The rise in spending reflected gains in purchases of long-lasting manufactured goods such as autos and gains in spending on non-durable goods such as clothing and services such as rent and utilities. It meant a solid increase for the first month of the current quarter. Consumer spending is closely watched because it accounts for 70 percent of economic activity. The economy grew at a 3.6 percent annual rate from July through September, the fastest since early 2012, but nearly half the growth came from a buildup in business stockpiles, a trend that could reverse in the current quarter and hold back growth. When excluding inventories, the economy grew at a 1.9 percent rate in the third quarter, down from 2.1 percent in the spring. That's in line with the same subpar rate that the economy has seen since the Great Recession ended four years ago. Many economists believe overall economic growth will dip below 2 percent in the current October-December quarter, in part because a slowdown in inventory building will act as a drag on activity. But there have been some signs of strength including a separate report Friday showing that the unemployment rate dropped to a five-year low of 7 percent in November as the economy created 203,000 jobs. In the third-quarter, consumers increased their spending at a tepid 1.4 percent annual rate. That was the slowest since the final quarter of 2009, a few months after the recession officially ended. But the spending activity in the third quarter was held back by flat spending on services. That may have reflected an unusually mild summer, which cut demand for air conditioning. One hopeful sign: Consumers spent on goods at the fastest rate since early 2012. An inflation gauge closely watched by the Federal Reserve showed prices were flat in October and have risen just 0.7 percent over the past 12 months, well below the Fed's 2 percent target for inflation.