Tuesday, December 31, 2013

After Rare Upgrade, Is Xerox Becoming Cool Again?

This is a rare event we are seeing today. When was the last time anyone heard about anything great happening at Xerox Corporation (NYSE: XRX)? This document management provider has two positive developments happening at once. That would be hard to imagine if you just thought about Xerox as the good old copier company. That reference also seems to be long ago now.

First is that the stock is hitting a 52-week high. Actually, make that a high not seen since January of 2011. The second great thing is that Standard & Poor’s just upgraded its corporate credit rating. Both of these are probably hard to imagine if you just think back to the days of its office copier days.

What is interesting about the 52-week high is that this high would be even further back if you adjust for dividend payments. Xerox has paid out in excess of $0.50 per share in dividends to shareholders since the start of 2011. It also yields about 2% now.

Monday’s S&P corporate long-term credit rating was raised to “BBB” from “BBB-” and the outlook has moved to “Stable” from “CreditWatch positive” in the call. This upgrade is an important one because it removes Xerox from being on the last notch of investment grade. S&P also raised the short-term credit rating to A-2 from A-3.

S&P had previously changed the Xerox corporate credit rating outlook to “CreditWatch with positive implications” back on November 26. A criteria revision was cited, based upon ratios and adjustments to include surplus cash. The Stable outlook reflects the belief by the ratings agency that Xerox will maintain good free operating cash flows and that it will maintain a consistent capital allocation.

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S&P believes that Xerox will keep cash flows and leverage solidly within the intermediate financial risk profile while still having headroom for what was called “moderate acquisition activity.” S&P also believes that Xerox will maintain a sizable cash balance as surplus cash. The ratings agency even believes that the services segment will support a revenue and earnings base even with expected weakness in document technology operating trends.

It seems hard to imagine that great things are happening at Xerox in this day and age. That being said, apparently Chairman and CEO Ursula Burns and her team are quietly coming back from nowhere. Is it possible that Xerox is becoming cool again? Apparently so, at least as far as investors are concerned.

This S&P upgrade is not an equity upgrade, but it theoretically does support lower borrowing rates and shows better credit metrics for those lending money or doing business with Xerox. Another aspect making the upgrade stand out is that Thomson Reuters is calling for another drop of almost 4% in sales in 2013 followed by only a 0.5% revenue gain in 2014.

Xerox shares were up 2.6% at $11.68 on last look, up from a low of $6.62 in the last year, and with a market cap that is back up to almost $14.4 billion. The consensus price target according to Thomson Reuters is $10.55, and the highest equity analyst price target is up at $13.00.

Monday, December 30, 2013

5 Rocket Stocks to Buy for 2014 Gains

BALTIMORE (Stockpickr) -- Traders are gearing up for the start of another shortened trading week this morning, hoping to eke out every last bit of gains before the calendar flips over to 2014.

>>5 'Dogs of the Dow' to Buy in 2014

Across the Pacific, Japanese equity markets have already ended trading for 2013, taking home a 57% year-to-date gain -- the biggest one-year return for the country's Nikkei 225 Index in four decades. It's enough to make the S&P 500's 29% run this year look downright calm. Even though U.S. stocks aren't on track for quite as historic a close for 2013, we're still set to end the year on a very high note.

And that bodes well for 2014 as well. Looking back at every year since 1975 when the S&P earned greater than 20% gains, the year that followed averaged gains of 12.8%. So while I doubt the New Year will be able to keep up the breakneck pace in stocks, history suggests that it'll be a strong year for equities all the same.

That's why we're turning to a new set of Rocket Stocks worth buying this week.

For the uninitiated, "Rocket Stocks" are our list of companies with short-term gain catalysts and longer-term growth potential. To find them, I run a weekly quantitative screen that seeks out stocks with a combination of analyst upgrades and positive earnings surprises to identify rising analyst expectations, a bullish signal for stocks in any market. After all, where analysts' expectations are increasing, institutional cash often follows. In the last 229 weeks, our weekly list of five plays has outperformed the S&P 500 by 84.7%.

Without further ado, here's a look at this week's Rocket Stocks.


By any account, 2013 has been a stellar year for shares of payment network MasterCard (MA) -- the $99 billion firm has seen its share price rally more than 68% in the last 12 months. Investors have some big tailwinds to thank for all that upside; and those macro factors aren't showing any signs of dying down as we head into another year.

MasterCard is the second-biggest payment network in the world, with nearly a third of the world's credit and debit cards bearing its logo. Like larger competitor Visa (V), MasterCard is a payment network only - that means that it doesn't carry credit risk on its balance sheet from lending cash to consumers and businesses. MA only facilitates the transaction for a fee, which means that the firm's revenues are tied to global spending volumes, not debt levels. Card networks tend to have a positive feedback loop -- consumers choose MasterCard, for example, because it's accepted nearly universally, and merchants accept MasterCard because of the large numbers of consumers who carry the card. That makes it even more challenging for new competitors to break into the field.

The big macro trend boosting MasterCard is the worldwide shift from cash to electronic payments. Despite the popularity of electronic card payments in countries like the U.S., the vast majority of worldwide transactions are still settled in cash. Because of the extra convenience and security of payment cards, that tide is turning - and MA and its competitors all stand to benefit from the growth.

MasterCard's momentum still looks strong heading into 2014, and that makes this Rocket Stock worth a closer look as we head into a new year.


Paychex (PAYX) has been another top performer in 2013, buoyed by growth in jobs numbers to eke out gains of more than 46% since the first trading day of the year. Paychex is one of the biggest names in the outsourced HR services business, providing around 550,000 small and medium-sized businesses with payroll processing. By hiring Paychex, business owners can avoid dealing with the bevy of tax and compliance minutiae that come with having employees.

Because Paychex's fortunes are tied to the health of the job market (it gets paid by having more accounts, after all), the firm faced a real problem heading into the soft economy of the Great Recession. To combat that, PAYX expanded its role, pulling out its massive customer Rolodex to offer other ancillary HR services such as 401(k) management and worker's comp insurance. Adding new services onto its menu gives Paychex another big revenue driver from its existing client base.

Going forward, the firm has a lot to gain from upward mobility in interest rates: historically, Paychex has earned considerable profits from its float portfolio -- the huge amount of cash it holds between the time employers deposit it and employees cash their paychecks. While extremely low interest rates have hurt PAYX's float income, there's a huge revenue stream waiting to be unlocked when rates perk back up. Paychex is another Rocket Stock name that's heading into 2014 with strong momentum in tow.


The automotive industry has fared well this past year, turning out the best sales numbers in a decade, as consumers replace a fleet that's older on average than ever before. That brisk sales pace has been a big tailwind for parts suppliers such as BorgWarner (BWA). Even if you're not familiar with the BorgWarner name, there's a good chance that your car is on the road today because of this $13 billion tier-1 parts supplier -- the firm makes engine and drivetrain components like turbochargers, timing belts, and transmissions for a huge group of automakers.

BorgWarner boasts a big customer list that includes the likes of Volkswagen, Ford, Daimler, and GM. The emphasis on increased efficiency without sacrificing performance has been a boost for BWA -- it's one of the reasons why the market for turbochargers has grown at brisk rates, and it's helped user in the adoption of diesel cars here in the U.S. Like any tier-1 auto supplier, BorgWarner benefits by locked-in customers; since automakers rely on BWA to produce specific parts for specific vehicles, switching costs are extremely high if Ford or Volkswagen decide to switch suppliers. And OEMs aren't likely to switch in the first place, since BWA's enormous scale means that it can produce quality parts more cheaply than most.

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From a financial standpoint, BorgWarner is in solid shape, with a $1.4 billion cash and investment balance more than offsetting the firm's $1.2 billion debt load. The parts business is capital intense, but BWA has been a great capital allocator, keeping balance sheet leverage at zero. Look for a possible upside catalyst at BWA's next earnings call this coming month.

Hertz Global Holdings

Rental car company Hertz Global Holdings (HTZ) has been benefitting from strong car sales too. Hertz is one of the biggest car rental providers in the world, with approximately 10,400 locations in 150 countries. In addition to the firm's namesake brand, Hertz owns Thrifty Car Rental and Dollar Rent A Car.

Hertz operates in a concentrated, competitive market, but car rental strategies have been maturing in recent years. Rental firms have spent the last decade courting frequent business travellers more than before, partnering with airlines and credit card companies to offer more perks over prices. As travel spending continues to tick higher into 2014, a rising tide should lift all ships - but particularly league-leader Hertz.

I mentioned that Hertz was benefitting from car sales. A rental car firm's attractiveness hinges on a modern, well-equipped fleet of cars. To pull that off, Hertz has to sell its existing cars on the used wholesale market after just a couple of years. That quick turnover rate is a challenge when times are tough, but with used car prices soaring amid low inventory right now, higher proceeds should help buoy the firm's bottom line. With rising analyst sentiment in Hertz this week, we're betting on shares.

Red Hat

Red Hat (RHT) has found a winning solution for getting its software used in data centers: Just give it away for free. No, that's not charity -- Red Hat used its strategy to generate $1.3 billion in sales last year. The firm is one of the biggest providers of open source software, with its namesake enterprise Linux operating system the biggest piece of the empire.

Red Hat's product is essentially free -- and its consumer Linux distribution, Fedora, is completely free -- but the firm makes money through training, maintenance and tech support fees that it charges businesses. Red Hat has some very attractive arguments for corporate IT departments. Since the software is open source and free, licensing costs are nil and customization is far less expensive than it would be on a commercial server or workstation operating system. Selling open source software does mean that competition is stiff, but Red Hat's expertise and software packages keep customers coming back. As a result, RHT owns more than 60% of the Linux server market.

It's easiest to compare Red Hat's business to that of a technology consultancy, albeit one with a software product that's must-have for its customers. But the model means that RHT operates with low capital needs, no debt, and deep margins. As of the most recent quarter, RHT carries more than $1.3 billion in net cash and investments -- enough to cover more than 12% of the firm's market capitalization at current price levels. That's a big discount on a stock that few investors would think of as "cheap" right now.

To see all of this week's Rocket Stocks in action, check out the Rocket Stocks portfolio at Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

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Sunday, December 29, 2013

Survey: Shutdown shrinks economists’ optimism

The budget standoff in Congress is over for now, but the U.S. economy is likely to feel the hangover for some time.

Two weeks after Washington's latest showdown, more than half of economists surveyed by USA TODAY -- 56% -- are less optimistic about growth prospects than they were three months ago. The survey of 41 top economists was conducted Oct. 23-24.

What's more, repeated budget battles in Washington the past few years are having a cumulative effect. Sixty-three percent of the economists say the recurring standoffs are hurting the economy "some" or "a lot." The remainder cite "a little" damage.

"We're falling down a fiscal flight of stairs and we're bouncing from one step to the next, one crisis to the next," says Sean Snaith, an economist at the University of Central Florida. Snaith is among the economists who have turned less optimistic, saying uncertainty among businesses could persist into next year and dampen capital spending.

Lawmakers on Oct. 16 agreed to fund the government until mid-January and raise the nation's borrowing authority until early February, which sets the stage for another battle early next year. The recent episode and lingering fears of a stomach-churning rerun helped lead the economists surveyed to lower their forecasts.

They now expect the economy to grow at a tepid 2.1% annual rate in the fourth quarter and 2.6% in the first quarter, down from their median estimates three months ago of 2.6% and 2.8%, respectively.

A federal employee protests outside the Capitol on Wednesday.(Photo: H. Darr Beiser, USA TODAY)

Job growth, which began the year at a brisk monthly pace of about 200,000 before slowing to 143,000 in the third quarter, isn't expected to rev back up! to a 200,000 rate until the third quarter. Previously, they had targeted the second quarter.

At least partly as a result of the ongoing budget drama, most of the economists don't expect the Federal Reserve to begin scaling back its bond-buying stimulus until next year. Twenty-three percent say the tapering will begin in January, and 40% picked March. Fed policymakers meet Tuesday and Wednesday but economists don't expect them to take any significant action.

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At least some economists say the upcoming battle has a better chance of producing a short-term compromise with less down-to-the-wire drama after polls showed the recent episode tarnished Republicans' image. Michael Hanson, senior U.S. economist for Bank of America, expects a "status quo" deal among lawmakers that lasts three to 11 months. He thinks the agreement will maintain the current level of spending cuts, known as sequestration, and avoid longer-term reductions to entitlements, such as Social Security.

Hanson says that, along with a strengthening private sector, should be enough to propel the economy to a 3%-plus rate of growth and more than 200,000 monthly job gains by mid-year — a forecast that reflects the economists' median estimates.

Several economists noted that, more than four years into the recovery, the economy remains poised to accelerate from its listless pace — regardless of Washington's budget skirmishes. Household debt levels are at 30-year lows, the housing recovery is picking up steam, stocks are near all-time-highs and bank-lending standards are easing for both consumers and businesses. And corporate America may be growing wise to political theatrics that inevitably result in 11th-hour deals to avert crises.

"A lot of the business leaders I've spoken to have come away realizing that they can begin to tune out some of the rancor in Washington and focus on ! the stren! gth of the private economy," says Bernard Baumohl, chief economist of The Economic Outlook Group.

Friday, December 20, 2013

Stocks Going Ex-Dividend on Monday, December 23 (MO, PM, 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 we highlight 10 big-name stocks going ex-dividend on Monday, December 23.

Altria Group Inc (MO) offers a dividend yield of 5.02% based on Thursday's closing price of $38.22 and the company's quarterly dividend payout of 48 cents. The stock is up 22% year-to-date. Dividend.com currently rates MO as “Recommended” with a DARS™ rating of 3.5 stars out of 5 stars.

Philip Morris
Philip Morri

Tuesday, December 17, 2013

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.

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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.

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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 The 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.

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

Bio-Reference Laboratories

My first earnings short-squeeze play is laboratory testing services player Bio-Reference Laboratories (BRLI), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Bio-Reference Laboratories to report revenue of $191.45 million on earnings of 43 cents per share.

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This company recently slashed its profit guidance for the quarter and the year, citing the government shutdown and the transitions under the Affordable Care Act disrupted business, as did changes in reimbursements from both public and private insurers.

The current short interest as a percentage of the float Bio-Reference Laboratories is extremely high at 36.3%. That means that out of the 24.44 million shares in the tradable float, 9.59 million shares are sold short by the bears. This is a huge short interest on a stock with a very low tradable float. Any bullish earnings news could easily spark a monster short-squeeze for shares of BRLI post-earnings.

From a technical perspective, BRLI is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly over the last month, with shares moving lower from its high of $37.97 to its recent low of $26.12 a share. During that downtrend, shares of BRLI have been consistently making lower highs and lower lows, which is bearish technical price action. That move has now pushed shares of BRLI into oversold territory, since its current relative strength index reading is 28.48.

If you're bullish on BRLI, then I would wait until after its report and look for long-biased trades if this stock manages to take out its 200-day moving average of $28.72 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 311,738 shares. If we get that move, then BRLI will set up to re-test or possibly take out its 50-day moving average at $31.91 a share. Any high-volume move above $31.91 will then give BRLI a chance to re-test its recent gap down day high of $35 a share.

I would simply avoid BRLI or look for short-biased trades if after earnings it fails to trigger that move and then drops back below some key near-term support levels at $26.12 to $25.38 a share with high volume. If we get that move, then BRLI will set up to re-test or possibly take out its next major support level at its 52-week low of $23.36 a share. Any high-volume move below $23.36 will then give BRLI a chance to trend back below $20 a share.


Another potential earnings short-squeeze trade idea is aviation services and products player AAR (AIR), which is set to release its numbers on Thursday after the market close. Wall Street analysts, on average, expect AAR to report revenue $536.14 million on earnings of 48 cents per share.

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The current short interest as a percentage of the float for AAR is notable at 6.5%. That means that out of the 36.40 million shares in the tradable float, 2.42 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 31.3%, or by about 576,000 shares. If the bears get caught pressing their bets into a strong quarter, then shares of AIR could easily rip sharply higher post-earnings as the bears rush to cover some of their short positions.

From a technical perspective, AIR is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last six months, with shares moving higher from its low of $20.76 to its recent high of $31.55 a share. During that uptrend, shares of AIR have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of AIR within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on AIR, 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 $31 to its 52-week high at $31.55 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 295,734 shares. If that breakout hits, then AIR will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $40 to $45 a share.

I would simply avoid AIR or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 50-day moving average of $29.43 a share to more near-term support at $29.02 a share with high volume. If we get that move, then AIR will set up to re-test or possibly take out its next major support levels at $27 to $26 a share. Any high-volume move below those levels will then set up AIR to re-test or possibly take out its 200-day moving average of $23.83 a share.

Darden Restaurants

One potential earnings short-squeeze candidate is full service restaurant player Darden Restaurants (DRI) which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Darden Restaurants to report revenue of $2.07 billion on earnings of 21 cents per share.

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Just today, Activist hedge fund Barington Capital Group issued a report arguing that Darden Restaurants could be worth $71 to $80 a share if the company enacts a series of strategic changes. Those changes would be Darden splitting into two companies – one for Olive Garden and Red Lobster, and the other for its higher-growth brands, including LongHorn Steakhouse, Capital Grille, Yard House and Bahama Breeze. The firm also recommends Darden explore creating a publicly traded real estate investment trust.

The current short interest as a percentage of the float for Darden Restaurants stands at 6%. That means that out of the 129.46 million shares in the tradable float, 8.3 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of DRI could easily explode sharply higher post-earnings as the bears jump to cover some of their short bets.

From a technical perspective, DRI is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending sideways and consolidating for the last two months, with shares moving between $50.69 on the downside and $54.08 on the upside. Shares of DRI have now started to bounce higher off its 50-day moving average of $52 and it's quickly moving within range of triggering a big breakout trade above the upper-end of its recent range.

If you're bullish on DRI, 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 $54.08 to its 52-week high at $55.25 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.90 million shares. If that breakout hits, then DRI will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $60 to $65 a share.

I would avoid DRI 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 $50.69 to its 200-day moving average of $49.69 a share with high volume. If we get that move, then DRI will set up to re-test or possibly take out its next major support levels $46 to $44 a share.

Rite Aid

Another earnings short-squeeze prospect is retail drugstore chain player Rite Aid (RAD), which is set to release numbers on Thursday before the market open. Wall Street analysts, on average, expect Rite Aid to report revenue of $6.32 billion on earnings of 4 cents per share.

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Just recently, JPMorgan analyst Lisa Gill said the near-term could be somewhat more bumpy for Rite Aid than in recent quarters, citing the economy, reimbursement pressure and ongoing work in executing its turnaround plan.

The current short interest as a percentage of the float for Rite Aid sits at 4.4%. That means that out of the 902.05 million shares in the tradable float, 39.13 million shares are sold short by the bears. If this company can deliver the earnings news the bulls are looking for, then shares of RAD could trend sharply higher post-earning as a sharp short-covering rally takes over.

From a technical perspective, RAD is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last six months, with shares moving higher from its low of $2.62 to its recent high of $6.15 a share. During that uptrend, shares of RAD have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of RAD within range of triggering a big breakout trade post-earnings.

If you're bullish on RAD, 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 $6 to its 52-week high at $6.15 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 31.18 million shares. If that breakout hits, then RAD will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $7 to $8 a share, or even $9 a share.

I would simply avoid RAD or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below both its 50-day moving average of $5.36 a share with high volume. If we get that move, then RAD will set up to re-test or possibly take out its next major support levels at $5 to $4.50 a share, or even $4 a share.


My final earnings short-squeeze play is corporate identity uniforms and related business services provider Cintas (CTAS), which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Cintas to report revenue of $1.12 billion on earnings of 68 cents per share.

The current short interest as a percentage of the float for Cintas is pretty high at 6.9%. That means that out of the 99.88 million shares in the tradable float, 6.69 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 0.7%, or by 46,000 shares. If the bears get caught pressing their bets into a bullish quarter, then shares of CTAS could soar sharply higher post-earnings as the bears rush to cover some of their short positions.

From a technical perspective, CTAS is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last six month, with shares moving higher from its low of $44.01 to its recent high of $57.99 a share. During that uptrend, shares of CTAS have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CTAS within range of triggering a big breakout trade post-earnings.

If you're in the bull camp on CTAS, 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 $55.97 to its 52-week high at $57.99 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 550,661 shares. If that breakout hits, then CTAS will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $65 to $70 a share.

I would avoid CTAS or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 50-day moving average of $53.50 a share to more near-term support at $52.27 a share with high volume. If we get that move, then CTAS will set up to re-test or possibly take out its next major support levels at $49 to its 200-day moving average of $47.86 a share.

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.


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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.

Monday, December 16, 2013

Weekly Three-Year Low Highlight

According to GuruFocus list of 3-year lows; Cenovus Energy Inc, Altera Corp, Boardwalk Pipeline Partners LP, and RetailMeNot Inc hae all reached their 3-year lows.

Cenovus Energy, Inc. (CVE) Reached the 3-year Low of $28.17

The prices of Cenovus Energy, Inc. (CVE) shares have declined to close to the 3-year low of $28.17, which is 33.3% off the 3-year high of $40.73.

Cenovus Energy, Inc. has a market cap of $21.29 billion; its shares were traded at around $28.17 with a P/E ratio of 37.10 and P/S ratio of 1.26. The dividend yield of Cenovus Energy, Inc. stocks is 3.32%.

Cenovus Energy has released its third quarter 2013 results. For this quarter, operating cash flow was $1.1 billion, a 12% decrease compared with the same quarter of 2012. Operating earnings were $313 million ($0.41 per diluted share), a 28% decrease over last year. Cenovus' net earnings were $370 million compared with $289 million the prior year quarter.

3 Gurus Kept Positions in CVE Unchanged or Slightly Adjusted: Jean-Marie Eveillard owns 20,263,412 shares as of 09/30/2013.Third Avenue Management owns 19,200 shares as of 09/30/2013. Bill Nygren owns 3,930,000 shares as of 09/30/2013.

4 Gurus Reduced Positions: Ray Dalio owns 265,000 shares as of 09/30/2013, a decrease of 22.4% of from the previous quarter. PRIMECAP Management owns 100,000 shares as of 09/30/2013, a decrease of 33.33% of from the previous quarter. Ken Fisher owns 8,467 shares as of 09/30/2013, a decrease of 38.05% of from the previous quarter. Lou Simpson sold out his holdings in the quarter that ended on 09/30/2013.

Altera Corp. (ALTR) Reached the 3-year Low of $30.86

The prices of Altera Corp. (ALTR) shares have declined to close to the 3-year low of $30.86, which is 40.3% off the 3-year high of $49.59.

Altera Corp. has a market cap of $9.9 billion; its shares were traded at around $30.86 with a P/E ratio of 21.70 and P/S ratio of 5.81. The dividend yield of Altera Corp. stocks is 1.62%. Altera Corp. had ! an annual average earnings growth of 13.50% over the past 10 years. GuruFocus rated Altera Corp. the business predictability rank of 4.5-star.

Altera reported third quarter 2013 net sales of $495 million, up 6% from the prior year quarter. Third quarter net income was $157.5 million ($0.49 per share) compared with net income of $162.7 million ($0.50 per share) last year.

2 Gurus Kept Positions in ALTR Unchanged or Slightly Adjusted: Chris Davis owns 48,800 shares as of 09/30/2013. PRIMECAP Management owns 9,641,100 shares as of 09/30/2013.

1 Guru Sold Out ALTR: Ray Dalio sold out his holdings in the quarter that ended on 09/30/2013.

Boardwalk Pipeline Partners LP (BWP) Reached the 3-year Low of $24.62

The prices of Boardwalk Pipeline Partners LP (BWP) shares have declined to close to the 3-year low of $24.62, which is 29.7% off the 3-year high of $33.50.

Boardwalk Pipeline Partners LP has a market cap of $5.98 billion; its shares were traded at around $24.62 with a P/E ratio of 25.70 and P/S ratio of 4.89. The dividend yield of Boardwalk Pipeline Partners LP stocks is 8.67%. Boardwalk Pipeline Partners Lp had an annual average earnings growth of 3.30% over the past 5 years.

Boardwalk Pipeline Partners generated third quarter operating revenues of $275.5 million, a 2% increase from the $270.6 million of 2012. Net income was $62.3 million compared to $58.2 million prior year quarter. Distributable cash flow was $116.6 million for this quarter.

1 Guru Kept Positions in BWP Unchanged or Slightly Adjusted: Jean-Marie Eveillard owns 100,000 shares as of 09/30/2013, which accounts for 0.0088% of the $34.43 billion portfolio of First Eagle Investment Management, LLC.

RetailMeNot Inc (SALE) Reached the 3-year Low of $25.91

The prices of RetailMeNot Inc (SALE) shares have declined to close to the 3-year low of $25.91, which is 35.4% off the 3-year high of $39.50.

RetailMeNot Inc has a market cap of $1.31 billion; its shares were traded at around! $25.91 w! ith a P/E ratio of 41.80.

The company has released its third quarter 2013 results. Net revenues for the third quarter were $47.4 million, an increase of 39% compared to $34.2 million prior year quarter. Net income was $5.6 million compared to net income of $6.6 million last year.

1 Guru Initiated Positions: George Soros bought 200,000 shares in the quarter that ended on 09/30/2013, which is 0.078% of the $9.14 billion portfolio of Soros Fund Management LLC.

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List of 52-Week Lows, 52-Week Highs List of 3-Year Lows, 3-Year Highs List of 5-Year Lows,

Sunday, December 15, 2013

The U.S. Army Is About to Make a Huge Mistake

After 44 years of honorable service, the U.S. Army may soon scrap its entire fleet of OH-58 Kiowa Warrior scout helicopters.

U.S. Army OH-58D Kiowa Warriors. Destined for the scrapheap? Source: Wikimedia Commons

That's the upshot of a story on DefenseNews website this week, which reports that the Army is mulling plans to retire all 338 Kiowas in active service -- and 30 more serving in the National Guard, as well. According to Defense News, the aim is to streamline the number of different kinds of aircraft that the Army is flying... and that it must buy parts for... and must train its mechanics to keep flying, as well. All of this costs money, and in a still-constrained defense spending environment, every nickel counts.

Counting nickels
Which is not to say that scrapping the Kiowa would save money.

Col. Frank Tate, the Army's chief of aviation force development, says that killing the Kiowa would save the Army "approximately $1 billion a year in direct operating and sustainment cost," plus unspecified savings farther down the line.

There is, however, a catch.

Upon taking Kiowas out of its inventory, the Army would find itself without a light helicopter suited to the Kiowa's traditional fire support and reconnaissance roles. The Army says it can press Apache attack helicopters into these missions temporarily, pulling these helos from the Guard, and replacing them with Black Hawks.

According to the Logistics Management Institute, however, the cost of fueling and maintaining Apaches, rather than Kiowas, can run as high as an extra $400 million a year. Other estimates put the cost of fielding Apaches at 50% greater than the cost of keeping Kiowas in place -- and that's not counting the cost of switching the Guard's helo force over to Black Hawks. Roughly seven times as heavy as a Kiowa, you have to figure the Black Hawks would be commensurately more expensive to fuel.

Counting time
Granted, an Apache-Black Hawk solution would be only temporary -- in theory. The Army is currently developing an "Armed Aerial Scout," also known as an "Armed Reconnaissance Helicopter", or ARH, to replace the Kiowa. Most major defense contractors are bidding on the work -- Textron (NYSE: TXT  ) , which builds the Kiowa, and also Lockheed Martin (NYSE: LMT  ) , Boeing (NYSE: BA  ) , United Technologies (NYSE: UTX  ) , AgustaWestland, and even Airbus parent EADS.

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But there's no guarantee ARH will ever get built. A previous attempt by Boeing and UTC's Sikorsky unit to build a replacement scout, the "Comanche," was canceled over cost-overruns in 2004... after burning through $7 billion in taxpayer dollars. The current ARH effort, meanwhile, is at risk of cancellation due to the same budget cuts that now have the Army talking about killing the Kiowa!

What it means to you
All of this seems to argue against retiring the Kiowa -- or in any event suggests savings from such a move may be much less than the Army is counting on. A further argument against killing the Kiowa is that the Army just finished upgrading every last one of the birds in 2011. One would think that the best time to retire the Kiowas -- if that's the way to go -- was before investing tens of millions of dollars to upgrade them.

So how should stock investors be looking at the situation?

First, understand that the decision to kill the Kiowa is not set in stone. Defense News reported that the decision is "all but done," but that was before Congress announced its deal Wednesday to roll back part of the sequester. If Kiowa survives the Army's attempts to kill it, this whole discussion could become moot.

But if the Kiowa does get dumped, that's probably bad news for Textron, which will lose a big part of its services business. It will be better news for Boeing and United Technologies, who will see their Apaches and Black Hawks (respectively) get more flight time, and consequently require more maintenance work and spare parts.

And farther down the road... the gap created in the Army's aerial capability by lacking a dedicated scout helicopter must be filled. A return of funds previously thought lost to sequester, combined with a clear need for a new aircraft, could breathe new life into the ARH program. It would also mean billions of dollars for whichever company is eventually tapped to build it.

Retiring the Kiowa turns logic on its head. Source: Wikimedia Commons

Invest ahead of the news
If the Army announces a decision to keep the Kiowa, investors will immediately recognize it as good news for Textron, the helicopter's maker. But not all good news is quite so public. Our top technology analyst recently infiltrated one of Wall Street's most exclusive gatherings and left with three incredible investment opportunities, straight from the CEOs. These are profit-building strategies Main Street isn't meant to hear about -- so you must act now before someone shuts us up. Click if you want "industry insider" earnings -- now!

Saturday, December 14, 2013

General Motors: Big Changes, Big Benefits

When David Bowie sang “Changes,” he was singing about people, not auto companies. But he sure could have been singing about General Motors (GM). Strike “man” and replace it with “car company” and “Ch-ch-Changes/Just gonna have to be a different man” makes a lot of sense.


In fact, it could be argued that General Motors needs change more than Ford Motor (F), Toyota Motor (TM), or even Honda Motor (HMC), which had to recall a slew of Acuras today.

And big changes its making. General Motors dumped their stake in Peugeot-Citro├źn and Ally Financial, and closed factories overseas. JPMorgan’s Ryan Brinkman and team explain why these are all positive steps for General Motors:

Firstly, the Ally and PSA stakes did little to benefit GM either financially or strategically, and the cash raised is better invested in restructuring efforts to improve the profitability of GM's core operations. Secondly, the Holden announcement confirms our suspicion that the Chevrolet in Europe plan announced last week is only part of a broader effort to vastly improve the profitability of consolidated International Operations, with a potential Korea capacity reduction likely next.

Thirdly, we are impressed with the rapid pace at which GM is moving to
diagnose and aggressively fix problems, overcoming organizational inertia without undue deference to history (the decision to cease manufacturing in Australia was likely a difficult one internally, given Holden's storied presence in that market). The net effect of these changes is a modest -$0.04 reduction to 4Q13 earnings on increased near-term severance costs (other non-cash Australia wind-down costs will be called out as special items, as will gains booked on equity stake sales); we expect the moves to benefit earnings beyond 2016, after the Australian plants close. We continue to see +30% upside to our $52 December 2014 price target. Reiterate Overweight rating.

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Shares of General Motors have gained 0.3% to $40.17 today at 3:22 p.m., while Ford Motor has gained 1.7% to $16.66, Toyota Motor has fallen 0.8% to $119.36 and Honda Motor has dropped 0.4% to $40.41.

Friday, December 13, 2013

Lululemon Athletica: If Life Gives You Lemonade…Spill It

Lululemon Athletica (LULU) earned itself a second chance with investors on Tuesday, when it announced that its controversial founder, Chip Wilson, was out as chairman and a new CEO was in. It might already have blown it.


The yoga apparel maker disappointed investors today when it said it would report far lower sales during the fourth quarter than investors had expected. Reuters reports:

For the current quarter, which includes the holiday shopping season, Lululemon forecast earnings between 78 and 80 cents a share, and revenue from $535 million to $540 million. Analysts had been expecting earnings of 84 cents a share on revenue of $571.8 million.

For fiscal 2013, which ends around February, the retailer now projects net revenue to be between $1.605 billion and $1.610 billion, down from an already lowered forecast of $1.625 billion to $1.635 billion. Diluted earnings per share are forecast to be between $1.94 and $1.96 for the year.

Color Canaccord Genuity’s Camilo Lyon and Patrick O’Brien perplexed. They write:

We are perplexed by the change in Q4 comp trend implied by the guidance as it would imply a significant, structural shift in the business that we do not believe has happened. Recall initial Q4 comp guidance was HSD and today's guidance is implying a 1300bp two-year deceleration from Q3. While the retail landscape is highly promotional, we do not believe LULU is suffering disproportionately to explain this magnitude of change in the guidance.

As Reuters notes, its also possible that Under Armour (UA), Nike (NKE), and Gap’s (GPS) Athleta brand could also be stealing some of Lululemon’s thunder. Sterne Agee’s Sam Poser and Ben Shamsian explain what Lululemon needs:

In order for LULU to flourish we contend that there must be a perfect balance between a great in store experience, an efficient supply chain, and great operations. If any of the aforementioned breakdown, especially the in store experience, the Lululemon brand will be in trouble, as guests will become unwilling to pay the historical premium prices for the company’s goods.

For investors seeking a bright side, there’s this from Buckingham Research Group’s John Zolidis:

…investors should keep in mind two things: 1) The stock is heavily shorted which will likely have its largest impact on trading today and 2) The new CEO's option grants price over a January-March 2014 timeframe which in some ways suggests he is incentivized to get the stock lower between now and then.

For Barron’s take, click here.

Lululemon has dropped 11% to $60.76 at 3:25 p.m., while Under Armour has dipped 0.3% to $84.19, Nike has fallen 0.3% to $76.37 and the Gap has gained 0.3% to $38.44.

Wednesday, December 11, 2013

Hot Value Companies To Watch In Right Now

LONDON -- To me, capital growth and dividend income are equally important. Together, they provide the total return from any share investment and, as you might expect, my aim is to invest in companies that can beat the total return delivered by the wider market.

To put that aim into perspective, the FTSE 100 (FTSEINDICES: ^FTSE  ) has provided investors with a total return of around 3% per annum since January 2008.

Quality and value
If my investments are to outperform, I need to back companies that score well on several quality indicators, and buy at prices that offer decent value.

So this series aims to identify appealing FTSE 100 investment opportunities, and today I'm looking at�United Utilities Group� (LSE: UU  ) , the regulated water and sewage utility company operating in North West England.

With the shares at 739 pence, United's market cap. is 5,036 million pounds.

This table summarises the firm's recent financial record:

Hot Value Companies To Watch In Right Now: Schlumberger N.V.(SLB)

Schlumberger Limited, together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. The company?s Oilfield Services segment provides exploration and production services; wireline technology that offers open-hole and cased-hole services; supplies engineering support, directional-drilling, measurement-while-drilling, and logging-while-drilling services; and testing services. This segment also offers well services; supplies well completion services and equipment; artificial lift; data and consulting services; geo services; and information solutions, such as consulting, software, information management system, and IT infrastructure services that support oil and gas industry. Its WesternGeco segment provides reservoir imaging, monitoring, and development services; and operates data processing centers and multiclient seismic library. This segment also offers variou s services include 3D and time-lapse (4D) seismic surveys to multi-component surveys for delineating prospects and reservoir management. The company?s M-I SWACO segment supplies drilling fluid systems to improve drilling performance; fluid systems and specialty tools to optimize wellbore productivity; production technology solutions to maximize production rates; and environmental solutions that manages waste volumes generated in drilling and production operations. Its Smith Oilfield segment designs, manufactures, and markets drill bits and borehole enlargement tools; and supplies drilling tools and services, tubular, completion services, and other related downhole solutions. The company?s Distribution segment markets pipes, valves, and fittings, as well as mill, safety, and other maintenance products. This segment also provides warehouse management, vendor integration, and inventory management services. Schlumberger Limited was founded in 1927 and is based in Houston, Texas.

Advisors' Opinion:
  • [By David Smith]

    As June came to an end, the company finalized a joint venture, OneSubsea, with Schlumberger (NYSE: SLB  ) . The intriguing partnership -- in which Cameron has a 60% interest, with the remainder Schlumberger's -- will develop products, systems, and services for the subsea oil and gas market.

Hot Value Companies To Watch In Right Now: Caterpillar Inc.(CAT)

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through three lines of businesses: Machinery, Engines, and Financial Products. The Machinery business offers construction, mining, and forestry machinery, including track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment, and related parts. It also manufactures diesel-electric locomotives; and manufactures and services rail-related products and logistics services for other companies. The Engines business provides diesel, heavy fuel, and natural gas reciprocating engines for Caterpillar machinery, electric power generation systems, marine, petrol eum, construction, industrial, agricultural, and other applications. It offers industrial turbines and turbine-related services for oil and gas, and power generation applications. This business also remanufactures Caterpillar engines, machines, and engine components; and offers remanufacturing services for other companies. The Financial Products business provides retail and wholesale financing alternatives for Caterpillar machinery and engines, solar gas turbines, and other equipment and marine vessels, as well as offers loans and various forms of insurance to customers and dealers. It also offers financing for vehicles, power generation facilities, and marine vessels. The company markets its products directly, as well as through its distribution centers, dealers, and distributors. It was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. Caterpillar Inc. was founded in 1925 and is headquartered in Peoria, Illinois.

Advisors' Opinion:
  • [By Rich Duprey]

    China's manufacturing sector is contracting at an alarming rate, and Caterpillar's (NYSE: CAT  ) stock may not be able to surmount the obstacles the collapse is throwing in its path.

  • [By Taylor Muckerman and Joel South]

    On the heels of a better-than-expected release from Peabody Energy (NYSE: BTU  ) and expectations from Caterpillar (NYSE: CAT  ) that coal prices could rise somewhat in 2013, both businesses might be set to succeed in tandem. The price of natural gas has been climbing rapidly to start 2013, which should help coal regain some traction. And its East Coast export facility continues to provide access to the demanding European market. In the following video, Taylor Muckerman expects some positive news on Thursday and thinks you should, too.

  • [By John Divine]

    Lastly, Caterpillar (NYSE: CAT  ) stock was one of just seven decliners in the index, losing 1.5% today. Nearly 5% of Caterpillar's float is being sold short, making it the second most loathed stock in the Dow. Talks between Caterpillar and the United Steelworkers Union broke off late yesterday, showing the extent of the differences between the two sides as the 800 workers try to negotiate new contracts.

  • [By Anders Bylund]

    Other anomalies include Caterpillar (NYSE: CAT  ) falling 7% on slow investments in global infrastructure construction. Thanks to the CAT's large share price, this move dragged the Dow down by 47 points. For a sense of scale, that's more than the 40 points that Cisco Systems (NASDAQ: CSCO  ) brought to the table -- with a huge 27% move to the upside. Cisco's long-term vision of dominance across the data center is finally coming together and the market is responding strongly. But like I said, this 27% jump makes less of a difference to the Dow than Caterpillar's much smaller 7% move.

Top 5 Casino Stocks To Own Right Now: Tupperware Corporation(TUP)

Tupperware Brands Corporation operates as a direct seller of various products across a range of brands and categories through an independent sales force. The company engages in the manufacture and sale of kitchen and home products, and beauty and personal care products. It offers preparation, storage, and serving solutions for the kitchen and home, as well as kitchen cookware and tools, children?s educational toys, microwave products, and gifts under the Tupperware brand name primarily in Europe, Africa, the Middle East, the Asia Pacific, and North America. The company provides beauty and personal care products, which include skin care products, cosmetics, bath and body care, toiletries, fragrances, nutritional products, apparel, and related products principally in Mexico, South Africa, the Philippines, Australia, and Uruguay. It offers beauty and personal care products under the Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo, and Swissgar de brand names. The company sells its Tupperware products directly to distributors, directors, managers, and dealers; and beauty products primarily through consultants and directors. As of December 26, 2009, the Tupperware distribution system had approximately 1,800 distributors, 61,300 managers, and 1.3 million dealers; and the sales force representing the Beauty businesses approximately 1.1 million. The company was formerly known as Tupperware Corporation and changed its name to Tupperware Brands Corporation in December 2005. The company was founded in 1996 and is headquartered in Orlando, Florida.

Advisors' Opinion:
  • [By Eric Volkman]

    Tupperware Brands (NYSE: TUP  ) is reaching into its corporate bowl for a fresh payout to shareholders. The company has declared a quarterly dividend of $0.62 per share. This will be paid on July 8 to stockholders of record as of June 19. That amount matches the firm's previous distribution, which was paid in early April. Prior to that, Tupperware Brands was rather less generous, handing out $0.36 per share.

  • [By Dan Caplinger]

    Where growth will come from
    One area that Newell Rubbermaid still has to tap fully is emerging markets. The company has done a good job of expanding overseas, with 17% annual growth in Latin America. But with barely a quarter of its sales coming from outside the U.S. and Canada, the company has a lot further to go. Storage rival Tupperware (NYSE: TUP  ) gets fully 60% of its total revenue from emerging markets, and it too has seen impressive gains in South America as well as the Asia-Pacific region.

Hot Value Companies To Watch In Right Now: Dollar Tree Inc.(DLTR)

Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise primarily at the fixed price of $1.00. The company operates its stores under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant, and Dollar Bills. Its stores offer consumable merchandise, including candy and food, and health and beauty care, as well as household consumables, such as paper, plastics, household chemicals, in select stores, and frozen and refrigerated food; variety merchandise, which includes toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and seasonal goods, such as Easter, Halloween, and Christmas merchandise. As of April 30, 2011, it operated 4,089 stores in 48 states and the District of Columbia, as well as 88 stores in Canada. The company was founded in 1986 and is based in Chesapeake, Virginia.

Advisors' Opinion:
  • [By Demitrios Kalogeropoulos]

    Costly market share gains
    The problem is that Family Dollar has had to pay up for its increasing market share and sales levels. The company's gross profit margin fell by more than a full percentage point, to 34.7% last quarter. In contrast, Dollar Tree (NASDAQ: DLTR  ) booked an expansion of profits, to 35.2%, continuing a trend that's seen it pull away from Family Dollar.

  • [By Terri Stridsberg]

    Dollar Tree (DLTR), has had a banner 2013, gaining 45.3% year-to-date, and tagging a new record high of $59.68. Nevertheless, short interest skyrocketed by close to 398% over the most recent reporting period, and now accounts for a healthy 6.7% of the equity's available float.

Tuesday, December 10, 2013

Indexed, Income Annuity Sales Beat Quarterly, YTD Records

Beacon Research announced Monday that annuities in several categories broke sales records in the third quarter of 2013. Total annuity sales were nearly $22.5 billion in the third quarter, up from $17 billion in the second quarter. Total annuity sales increased more than 35% since the third quarter of 2012,

"Quarter-over-quarter sales were up among all fixed annuity product types and, for the first time since 2008, in all major distribution channels," Jeremy Alexander, CEO of Beacon Research, said in a statement. "Sales of indexed annuities surpassed $10 billion for the first time, and nearly two-thirds of carriers experienced an increase in MVA annuity sales during the quarter."

Indexed annuity sales increased more than 10% over the second quarter to $10.1 billion. Sales for income annuities, including immediate and deferred income, reached $2.8 billion, also beating year-to-date and quarterly records. Deferred income annuities were especially popular, tripling since the third quarter of 2012. Beacon said that deferred income annuities account for 22% of all income annuity sales, an increase of 11% since last year.

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New York Life was the top annuity issuer, bringing in $2.3 billion in total fixed annuity sales for the third quarter. Security Benefit came in second with $1.8 billion, followed by Allianz Life at $1.3 billion; Western National with $1.2 billion; and Great American with $1.1 billion.

Beacon noted that the top issuers for the quarter also led the industry in year-to-date sales.

Captive agents sold the most annuity products, followed by independent producers and wirehouses. Large and regional broker-dealers and independent broker-dealers were in fourth and fifth place for total third-quarter annuity sales.

"At the pace seen in the past two quarters, we expect total fixed annuity sales for 2013 to exceed last year's numbers for the first year-over-year increase since 2008," Alexander said. "The outlook for indexed and deferred income annuities remains strong, in particular, and we expect to see increases in fixed-rate annuities as well, should interest rate trends continue."


Check out What the U.S. Private Retirement System Gets Right on ThinkAdvisor.

Monday, December 9, 2013

Viacom's Dauman Wants Better Digital Measurement

NEW YORK (TheStreet) -- Viacom (VIA) CEO Philippe Dauman said a lot of his company's content on Nickelodeon and MTV isn't getting enough credit from advertisers.

Dauman said that as media measurement services such as Nielsen (NLSN) introduce new technologies better able to measure usage time on big and small mobile devices, Viacom will particularly benefit owing to its concentration of teen and 20-something viewers.

"We have a lot of viewing of our content that is not sufficiency measured," Dauman said in a talk Monday at the UBS Media and Telecommunications Conference. As Nielsen introduces new measurements, those reworked numbers, he said, "will play in our favor." Viacom shares have gained a gaudy 50% in 2013, not bad for a big media company competing in the newfangled world of digital where "social" Web sites are all the rage and advertisers are stumbling around trying to win the fickle hearts and pliable minds of the under-30 set.

It's always a bit curious to watch the button-down Dauman talk about "Sponge Bob" and "Dora the Explorer," but with suitable confidence the Viacom CEO said both Nickelodeon characters are benefiting from a recent resurgence and are helping to drive Viacom's expansion into all parts of Europe.

"They travel very well and are the fuel for us to expand Nickelodeon around the world," he said. "Sponge Bob" can be shown anywhere, he said "because it's dubbed." Thereby eliminating the need for "Sponge Bob" to speak in his native language, whatever that is. Viacom is planning another "Sponge Bob" movie.

Dauman took over Viacom in September 2006, replacing the popular Tom Freston, who had helped create MTV and the loyalties of the company's creative teams. Yet Viacom's fiery Chairman Sumner Redstone ruled that Freston hadn't been sufficiently aggressive about acquiring digital properties, specifically MySpace, and was all but thrown under the bus.

Of course, Freston's apparent failure to lose to Rupert Murdoch in the MySpace sweepstakes proved to be fortuitous. MySpace was a disaster and News Corp. paid the price. Murdoch later called the $580 million MySpace acquisition in 2005 a "huge mistake." News Corp. sold MySpace to Specific Media and Justin Timberlake for $35 million in June 2011.

Since Dauman took over Viacom, shares have gained 209%. Shares slipping 0.3% on Monday to close at $82.09. 

-- By Leon Lazaroff in New York.

Sunday, December 8, 2013

Can Goldman Sachs Continue to Move Higher?

With shares of Goldman Sachs (NYSE:GS) trading around $168, is GS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Goldman Sachs is engaged in investment banking, securities, and investment management. It provides a range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments, and high net worth individuals. The company operates in four segments: investment banking, institutional client services, investing and lending, and investment management. Through its segments, Goldman Sachs provides valuable investment services to consumers and companies worldwide.

A former Goldman Sachs trader who pleaded guilty to fraudulently building an unauthorized $8.3 billion futures trade should repay $118 million to his former employer to cover its losses and spend about three years in prison, federal prosecutors said.

T = Technicals on the Stock Chart Are Strong

Goldman Sachs stock has made significant progress in the last several quarters. The stock is currently surging higher and looks set to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Goldman Sachs is trading above its rising key averages, which signal neutral to bullish price action in the near-term.


(Source: Thinkorswim)

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

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Goldman Sachs options




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

Put IV Skew

Call IV Skew

December Options



January Options



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

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

E = Earnings Are Increasing Quarter-Over-Quarter

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

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)





Revenue Growth (Y-O-Y)





Earnings Reaction





Goldman Sachs has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about Goldman Sachs’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Goldman Sachs stock done relative to its peers, JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Morgan Stanley (NYSE:MS), and sector?

Goldman Sachs

JPMorgan Chase


Morgan Stanley


Year-to-Date Return






Goldman Sachs has been a relative performance leader, year-to-date.


Goldman Sachs is a bellwether in the financial sector that strives to provide valuable financial products and services to consumers and businesses around the world. A former Goldman Sachs trader who pleaded guilty to fraudulently building an unauthorized $8.3 billion futures trade should repay $118million to his former employer. The stock has been moving higher in recent years and is currently trading near highs for the year. Over the last four quarters, earnings and revenues have been on the rise. However, investors have had conflicting feelings about Goldman Sachs's earnings announcements. Relative to its peers and sector, Goldman Sachs has been a relative performance leader year-to-date. Look for Goldman Sachs to OUTPERFORM.

Saturday, December 7, 2013

At Work: Tweet as if Big Brother were watching

Here's more proof that social media can mean a boon or doom to your career.

First, a brief history lesson: Think back — if you were alive and working — to a time before we had social media.

STORY: Tool aims to protect social media reputation
STORY: Social media speech rights complex for workers

If you wanted others to know you existed, influence how they saw you and tell what they knew about you, here were your choices: communicating face to face, networking, writing a letter, calling, sending a letter to the editor, getting in the news, authoring articles in professional journals and giving presentations.

Then came social media.

Most employers early on didn't consider chat rooms, forums, and later Facebook and LinkedIn as a viable source for finding or digging up dirt on potential workers. But through the years, I've watched those numbers increase dramatically.

The exact number of employers who use social media to investigate prospective employees is up for debate. Some surveys say as many as 91% of recruiters and managers look at social media when hiring.

A survey of more than 7,000 United Kingdom recruiters and human resource managers from Oilandgaspeople.com — it specializes in one hot employment area, the oil and gas industry — shows social media is definitely on the radar.

Eighty-two percent of employers say they have looked up potential candidates on social-media sites. They mostly use LinkedIn, then Facebook.

Think before you tweet. A future job could be on the line.(Photo: Getty Images/USA TODAY illustration)

Not only is it cost effective for them to use these sites to get access to workers, 41% say it gives them better insight into whether a candidate is sui! table.

Specifically, employers look for clues about your character and personality, whether you present yourself professionally and if are you are a good fit for their culture.

In the survey, 64% rejected an applicant after looking at a social media profile.

What employers find and don't like are things you typically hear: provocative or inappropriate photographs or information about the person drinking or using drugs.

They also unearth poor communication skills; bad judgment in the form of badmouthing previous employers; lies about qualifications; and discriminatory comments related to race, gender or religion.

But 71% surveyed successfully hired an employee or contractor because they liked what they found.

Overall, this is content that conveys a professional image, shows someone is well rounded, has great communication skills and is creative. Good references also help.

Social media can work for or against you. If you're serious about using it to establish your expertise and build your professional reputation, manage this public face to your advantage.

Look for ways to educate instead of entertain, build up instead of tear down and be seen as a resource instead of a rebel. Before you post anything online, ask yourself:

• Is it stupid or insensitive?

• How will this affect my company or others?

• How could strangers interpret this?

• What will this say about me?

Be wary of Twitter. Its very nature implores you to be acerbic or derisive.

what i love about twitter and facebook is that it has outed reporters from their phony facade of pretend non-partisan commentary.

— Richard Grenell (@RichardGrenell) March 27, 2012

On Slate.com, David Weigel wrote last year how tweets hurt the career of communications adviser Richard Grenell. GOP presidential candidate Mitt Romney hired him in mid-April 2012, but by early May he had quit his new job.

Quoting journalist Jonathan Rauch who was familiar with Grenell, Wei! gel wrote! : "Grenell's problem reveals 'what an embarrassing waste of time Twitter is. It's not a medium for adults — it practically begs you to be short, snarky and stupid.' "

Since Hollywood loves Obamacare, I propose having an actors and studio heads fee to pay for it.

— Richard Grenell (@RichardGrenell) November 26, 2013

Career consultant Andrea Kay is the author of This Is How To Get Your Next Job: An Inside Look at What Employers Really Want. Reach her at andrea@andreakay.com. Twitter: @AndreaKayCareer.

Friday, December 6, 2013

Brazil's Petrobras may end costly fuel subsidy

Brazil's state-run oil company Petroleo Brasileiro SA (PBR, PETR3.BR, PETR4.BR) is expected to decide Friday whether to end an unofficial fuel subsidy that has cost it billions of dollars in lost revenue and raised questions about the company's ability to complete its huge investment plan.

Petrobras, as the company is known, sells gasoline and diesel prices to Brazilian consumers and industry at prices that are below those in global oil markets as part of government efforts to tamp down on inflation. Soaring consumption means Petrobras's refineries can't keep up with demand, and the company has to import expensive fuel from abroad. The losses have raised doubts about the company's capacity to complete the $237 billion spending program planned for the next five years.

Credit Suisse, a Swiss investment bank, calculates that publicly listed Petrobras would have made an extra $12 billion in revenue over the last two years if prices had been adjusted every three months in line with global markets.

The government, which owns a majority of Petrobras's common shares, argues that allowing fuel prices to rise or fall in line with international oil prices could add volatility to the Brazilian economy, and could also pressure inflation, which has been running at around 6% a year for the last four years. The central bank began raising its key interest rate in April to try to bring inflation down to its target of 4.5%, but has had to go much higher than had been initially expected. The monetary authority raised the rate to 10% on Wednesday and signaled more rates are likely in coming months.

"I've said this isn't something that can be improvised, it has to be done very carefully, so you have a methodology that isn't inflationary and doesn't index the economy" Guido Mantega, the country's finance minister and chairman of the Petrobras board of directors, told reporters this week.

The choice requires a careful political consideration by President Dilma Rousseff and her administration. Petrobras's huge spending is an important driver of the economy, and the revenue that could flow from its oil fields could have a profound impact on the economy for years to come. But in the short term, Brazilian voters might reject any surge in prices, just as the president prepares for a re-election bid next year.

Ms. Rousseff holds a comfortable lead in polls ahead of the presidential election scheduled for October 2014. Yet political watchers say the opposition hasn't yet started campaigning in earnest. A slowing economy and rising inflation would provide an opportunity that her opponents would welcome. The political environment is fragile following nationwide street protests that erupted in June, and that have continued sporadically ever since.

At the moment, there is no clear mechanism for Petrobras to adjust fuel prices. Increases come at random intervals without any apparent trigger. That lack of predictability is one of the biggest gripes among investors in the company's shares. When the Petrobras management team proposed the introduction of a more transparent method for raising prices in late October, investors sent the company's voting stock soaring nearly 10% on the Sao Paulo stock exchange.

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"The way it is today, the government is carrying out public policy with a company that's trading on the stock exchange," said Mauricio Canedo Pinheiro, a professor of applied economics at the Brazilian Institute of Economy, part of the Fundacao Getulio Vargas business school. He argues that if the government wants to subsidize fuel prices at all, it should come directly out of the government budget.

The Petrobras proposal would allow automatic adjustments for diesel and gasoline at regular intervals. Prices would be adjusted based on changes in international oil prices, exchange rates and whether the gasoline and diesel were produced at home or imported. It is unclear whether this will be adopted outright.

Analysts have suggested the government may choose to delay a decision and simply award a one-off price increase. It might also provide some greater transparency, but still find a way to allow the government the ultimate decision.

Government officials have been keen to play down any suggestion that there is a rift between the Petrobras's chief executive, Maria das Gracas Foster, and Mr. Mantega over the pricing proposal. Both were appointed by the president, and are considered two of her closest allies in a cabinet.

Petrobras, the finance minister and the president's office declined to comment for this article.

Ms. Foster has previously defended the strong role the government plays within the firm's board of directors. But she has also made clear she must defend the firm's interests. "It's up to me as the president of the company to take [to the board of directors] the numbers that represent the health of the company," Ms. Foster said in an interview earlier this year.

The firm has had four diesel and two gasoline price increases in the last 16 months, totaling 21.9% and 14.9%, respectively. But the sharp depreciation of the Brazilian currency against the U.S. dollar worsened the price differential in the third quarter of the year.

Petrobras's board had been expected to make a decision Nov. 22, but that was delayed a week. The board is now due to meet Friday.

"Petrobras is in a pickle. It needs all this money to develop resources but it's not allowed to raise fuel prices beyond what the government allows," said Karen Hooper, director of analysis for Latin America at Stratfor, a risk-analysis firm.

-Paulo Trevisani contributed to this article.

Write to Matthew Cowley at matthew.cowley@wsj.com

Wednesday, December 4, 2013

Supreme Court Not Likely to Broker Frequent Fliers' Woes

Delta Northwest MergerMichael Dwyer/AP WASHINGTON -- The Supreme Court indicated Tuesday it won't offer much help to frequent flyers who want to sue when airlines revoke their miles or their memberships. The justices heard the case of a Minnesota rabbi who was stripped of his top-level "platinum elite" status in Northwest's WorldPerks program because the airline said he complained too much. Rabbi S. Binyomin Ginsberg said Northwest, since absorbed by Delta Air Lines (DAL), didn't act in good faith when it cut him off. The airline says the federal deregulation of the airline industry in 1978 rules out most lawsuits like the one filed by Ginsberg. Most justices signaled they think that ruling for Ginsberg could give rise to state-by-state rules that the deregulation law was intended to prevent. Justice Stephen Breyer said Ginsberg's complaint also could apply to airline ticket prices, which are supposed to be set through competition among airlines. "It sounds to me like I go in to, you know, get a ticket, my reasonable expectation is they're not going to charge me what they're going to charge, you know. I mean, it's unbelievable," Breyer said. Under Ginsberg's view of the case, Breyer said he could sue over the prices. "That might be a great idea, but I don't think that's the idea behind this act," he said. Ginsberg said in court papers that he and his wife flew almost exclusively on Northwest, logging roughly 75 flights a year to travel across the U.S. and abroad to give lectures and take part in conferences on education and administration. He said he flew on Northwest even when other airlines offered comparable or better flights and in 2005, reached the highest level of the WorldPerks program. Northwest cut him off in 2008, shortly after Northwest and Delta agreed to merge. Ginsberg said the move was a cost-cutting measure designed to get rid of the high-mileage customers. Northwest says Ginsberg complained 24 times in a 7-month period, including nine instances of luggage that turned up late on airport baggage carousels. Northwest said that before it took action, it awarded Ginsberg $1,925 in travel credit vouchers, 78,500 bonus miles, a voucher for his son and $491 in cash reimbursements. The airline pointed to a provision of the mileage program's terms that gives Northwest the right to cancel members' accounts for abuse. A federal trial judge cited earlier Supreme Court cases involving claims against frequent flyer programs in dismissing Ginsberg's lawsuit, including his claim that Northwest didn't live up to the terms of the contract. The judge said the contract gives the airlines the right to kick someone out of the mileage program at its "sole judgment." But the 9th U.S. Circuit Court of Appeals in San Francisco said part of the suit could go forward involving whether Ginsberg and others can sue under state laws that require parties to a contract to act in good faith. Justice Elena Kagan showed some sympathy for Ginsberg's claim when she questioned Paul Clement, the Washington lawyer representing Northwest at the Supreme Court. If the airline could easily avoid living up to its end of the bargain in the mileage program, Kagan said, "I don't think that I'd be spending all this time in the air on your planes. You know, I'd find another company that actually gave me the free ticket." Clement replied that Kagan's example shows that the free market, not a court, is the right place to address her problem. "So if some airline really were crazy enough to systematically turn on its most lucrative and loyal customers, surely, the market would solve that. And, of course, if a bunch of airlines did it, the Department of Transportation stands ready to police that," he said. Several justices questioned whether it is important to the case that many people earn and spend miles on items other than airline tickets. "Do we have to worry about that in this case?" Justice Samuel Alito asked. Adina Rosenbaum, Ginsberg's lawyer, told the court that the growth of mileage programs to encompass more than airline tickets is another reason to rule that Ginsberg's lawsuit is not blocked by the deregulation law. Breyer said the court perhaps could leave questions involving miles earned elsewhere "for another day." A decision is expected by late June. The case is Northwest Inc. v. Ginsberg, 12-462.

By Molly McCluskey, The Motley Fool

The shortest path between two points may be a straight line, but rarely does that seem to apply to airline routes. You might not be surprised by a layover in Chicago if you're flying from Boston to Seattle, but rarely will you find so obvious a route, especially on discounted and last-minute tickets.

Monday, December 2, 2013

Big Blue Belongs in Your Portfolio

In the world of stocks, today's losers are often tomorrow's winners and vice versa.  The three top-performing stocks in the Dow Jones Industrial Average for 2013 are Boeing, Nike, and American Express. It would be difficult to argue that any of those companies are cheap, as each costs more than 20-times earnings. However, a superior investment opportunity exists with one of the worst-performing stocks in the DJIA -- IBM  (NYSE: IBM  ) .

Shareholder friendly management
When it comes to returning value to shareholders through buybacks and dividends, no company does it better than IBM. No member of the S&P Information Technology Index, a list that includes rivals Oracle  (NYSE: ORCL  ) and Hewlett-Packard  (NYSE: HPQ  ) , has consistently paid a dividend longer than IBM. A 45-year streak of dividend payments is something to admire. IBM only pays out 25% of its earnings as a dividend, so that streak won't be broken anytime soon. Dividends from IBM have grown more than sevenfold since the turn of the century. A big factor behind that dividend growth has been the company's huge share repurchases. Big Blue has reduced the number of outstanding shares by over 35% during past decade. The company also has more than $20 billion in planned buybacks, representing a further 10% reduction in outstanding shares at current prices..

Management receives a reasonable salary
In 2012, IBM CEO Gini Rommety's pay package totaled $16 million. That's in line with what Hewlett-Packard CEO, Meg Whitman, was paid, but tiny compared to the $96 million in options Larry Ellison received as his 2012 compensation. Companywide stock-based compensation during 2012 totaled $498 million for IBM, while Hewlett-Packard's 2012 total was $635 million. Not surprisingly, Oracle outdid them both, awarding employees more than $1.4 billion in stock-based compensation. Excessive compensation in the form of stock awards shows that Oracle prioritizes enhancing insider wealth over that of shareholders. Fortunately, such excessive compensation is not present at IBM.

Strong growth in the cloud
IBM is ahead of Hewlett-Packard when it comes to the cloud. Its July acquisition of SoftLayer Technologies contributed to strong growth in IBM's cloud computing operations. Its latest 10-Q revealed that the company grew cloud revenue by 70% year-over-year, and for the first time generated more than $1 billion in quarterly revenue from the cloud. That's more revenue than Hewlett-Packard generates from its entire software segment, which includes the company's cloud-based applications. Additionally, HP announced declining revenue from its IT and cloud management products in its latest quarterly report. Gauging Oracle's cloud performance is difficult because the company lumps cloud software sales with sales of traditional software products. While it would be unwise to draw conclusions from this as to Oracle's success in cloud computing, it makes one curious. Why does Oracle conceal what percentage of its software revenue and profits come from cloud-based applications?

Promising results from growth initiatives
Two of IBM's growth initiatives, besides the cloud, are Smarter Planet and business analytics. Revenue from business analytics grew 8% year-over-year for IBM. The company's Smarter Planet initiative is one of the coolest things any company on Earth is doing to improve how efficiently resources are used. IBM's Smarter Planet solution utilizes the company's analytical capabilities to expose inefficiencies in electrical grids, hospitals, highways, and more. The social utility provided by these solutions is simply stupendous. Providing that utility translates into financial rewards for IBM, revenue from Smarter Planet solutions has grown 20% year-over-year.

Foolish bottom line
Shares of IBM have sat out during the market's recent rally. Luckily for investors, this means they can still be obtained for a very reasonable price. Management at IBM is incredibly friendly toward shareholders, showering them with dividends and buybacks. The company's initiatives for growth in a rapidly evolving technological environment are producing promising results. Don't let short-term revenue figures cloud your judgement. In the coming decades, few companies will provide societal benefits of a magnitude equaling IBM's. Mr. Market is offering all of that for less than 13 times earnings, and in my opinion you would be wise to accept. 

Profiting from the technology revolution
Interested in the next tech revolution? Then you'll need to learn about the radical technology shift some say forced the mighty Bill Gates into a premature retirement. Meanwhile, early in-the-know investors are already getting filthy rich off of it... by quietly investing in the three companies that control its fortune-making future. You've likely heard of one of them, but you've probably never heard of the other two... to find out what they are, click here to watch this shocking video presentation!