Investing Ideas

2009-09-28T14:34:00.005-04:00

FedEx Repeats Itself Successfully

via WSJ.com: Stocks To Watch Today by Bob O'Brien on 9/28/09

The secret to a successful outlook, as learned Monday by FedEx (FDX): in a circumstance when Wall Street ignores you the first time, just repeat yourself.
Here's the reality: FedEx shares have moved 3% in higher in Monday's trading, after the package-delivery concern said it thought the challenges in the broad economy had troughed, and that conditions could be expected to improve through the balance of the year.
"We think we have hit bottom, and traffic is climbing up from a multi-year low," FedEx chief executive Frederick Smith said Monday in Memphis, where the company is hosting its annual meeting. "We definitely see the light at the end of the tunnel" in terms of the economy.
The stock jumped 3% on his comments.
By contrast, when Smith offered a similar - but actually more precise - assessment of the economy two weeks ago, Wall Street not only ignored the good news, it focused on the year-over-year decline in profit performance the company recorded.
At that time, Smith said he expected the U.S. gross domestic product to grow by 3% in the current quarter, nearly 5% next quarter, and about 3% next year.
Smith wasn't as specific in Monday's outlook, though the tone of his comments sounded similarly constructive.
Of course, it might be asked whether relatively modest growth coupled with some challenging earnings comparisons warranted a 27 times earnings multiple, which is what investors have placed on FedEx shares.

Value Investing Benjamin Graham style

2009-08-03T20:05:00.003-04:00

Where long term value investing is concerned, Benjamin Graham was the original Intelligent Investor. Graham, (1894-1976) contributed enormously to the subjects of Value Investing and Security Analysis. Whether you are performing your own portfolio management or just need ideas on buying stocks to boost your Roth IRA or 401k retirement savings accounts ahead of Wall Street, The Intelligent Investor is a must read for Value Investors.

Real-time stock quotes on iPhone

2009-08-02T11:29:00.007-04:00

If you are an iPhone user looking for a application to follow the market in real-time then you need to download this free application. DailyFinance is the only free application that provides real-time stock quotes, tracking for multiple portfolios, customizable news from over 3,000 sources and professional-grade charting.

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Rankings of S&P 500 Stocks

2009-08-02T11:07:00.006-04:00

http://www.nasd100.com is a good source to look for stocks satisfying various fundamental criterias. Of course you will still have to study each stock individually before you blindly go ahead and start buying the top stocks.

Below are rankings of stocks in the S&P 500 Index, based on the following metrics:

P/E Ratio: Price-Earnings Ratio based on EPS for the last 12 months.
Long-Term Growth: Long-Term (next 3-5 years) EPS Growth Rate estimated by Wall Street analysts.
PEG Ratio: Price/Earnings-to-Growth Ratio, which equals P/E divided by Long-Term EPS Growth Rate.
Net Profit Margin: Net Profit Margin for the last 12 months.
Analyst Rating: Average rating given by Wall Street analysts.
Potential Upside: Difference between Wall Street analysts' average target price and current price.
Year-to-Date Performance: Percentage change in stock price year-to-date.
Institutional Ownership: Percentage of shares held by institutional investors.
Short Interest: Short Interest as a % of total publicly owned shares.

2009-07-30T16:37:00.014-04:00

TJX Companies (TJX)

via Stock Picks Bob's Advice on 7/28/09

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice! As always, please remember that I am an amateur investor so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

This past month I presented TJX Companies to my Stock Club and they went ahead and bought a few shares for our portfolio. I do not personally own any shares of TJX Cos. (TJX) but do think it deserves a spot in this blog. TJX closed today (7/28/09) at $36.25, up $.35 or .97% on the day.

Most of us know TJX through the 'flagship' store of the chain TJ Maxx, however, TJX is more than just the Maxx chain. As noted on this Yahoo "Profile" for TJX:

"The TJX Companies, Inc. operates as an off-price retailer of apparel and home fashions in the United States and internationally. It sells off-price family apparel and home fashions through T.J. MAXX and MARSHALLS, HOMEGOODS, and A.J. WRIGHT in the United States; WINNERS and HOMESENSE in Canada; and T.K. MAXX and HOMESENSE in Europe."

In general we have an AWFUL retail environment in the US as well as elsewhere. As this article from the NYTimes points out, June, the latest recorded figures available, continued the trend of weak sales numbers for United States retail firms.

"On Thursday, the industry posted a 4.9 percent sales decline in June, in contrast to a 1.9 percent increase a year ago, according to Thomson Reuters, which said the decline capped the longest negative streak on record."

Then WHY would I be writing up a retail firm in this sort of awful environment? Well it turns out that as one might expect there are always some bright spots even in negative news. In fact, TJX has been bucking the trend and last month reported positive same store sales growth with a 4% same-store sales increase! It seems that customers are still seeking those 'name brands' normally found in more expensive chains but now being sold at TJ Maxx and elsewhere as part of 'close-outs'. Anyhow, that's my take on this apparently paradoxical retail report.

In fact, on July 9th, 2009, TJX raised guidance for the upcoming 2nd quarter report. As reported:

"TJX now anticipates second-quarter earnings from continuing operations of 56 cents to 59 cents per share. Its previous guidance was for earnings of 43 cents to 49 cents per share."

Apparently, as the story relates, analysts from Thomson Reuters had been expecting a profit of 49 cents per share. And the stock has recently been responding to this series of good news reports!

Looking at the latest quarterly report, TJX reported 1st quarter results on May 19, 2009. In the quarter, net sales climbed 1% to $4.35 billion and comparable store sales growth increased 2% over last year. (We can see that for the last couple of months, same store sales growth has been closer to 4-5% each month).

Net income from continuing operations was $209 million, and diluted earnings per share worked out to $.49/share compared to $.44/share last year. Excluding last year's "tax benefit", diluted earnings actually increased 17% over last year's results. The company beat expectations of $.45/share on $4.3 billion in sales according to analysts polled by FactSet Research.

Reviewing the Morningstar.com "5-Yr Restated" financials from Morningstar.com, we can see that sales have grown steadily from $14.8 billion in 2005 to $19 billion in 2009 and $19.05 billion in the trailing twelve months (TTM). Earnings have also steadily increased from $1.41/share in 2006 to $2.00/share in 2009 and $2.05 in the TTM. Dividends have been paid and increased yearly at least since 2005 when $.17/share was paid. This has been increased annually to $.45/share in the TTM. The company has also been reducing outstanding shares from 512 million in 2005 to 438 million in the TTM.

Free cash flow has been steady with $817 million reported in 2007, and $714 million in the TTM. In terms of the balance sheet, TJX is reported by Morningstar to have $1.012 billion in cash and $3.394 billion in other current assets, compared to $3.33 billion in current liabilities and $1.28 billion in long-term liabilities. This works out to a current ratio of approximately 1.3.

Looking at Yahoo "Key Statistics" for some valuation numbers, we can see that this is a Large Cap stock with a market capitalization of $14.99 billion. The trailing p/e is a moderate 17.61 with a reasonable PEG ratio of 1.27. There are 413.5 million shares outstanding with 410.97 million that float. Currently, as of 6/25/09 there are 10.25 million shares out short representing 1.9 trading days (the short interest ratio), less than my own 3 day rule for significance.

The forward annual dividend is $.48/share with a forward dividend yield of 1.3%. The last split according to Yahoo was in May, 2002, when the stock split 2:1.

If we review a "point & figure" chart on TJX from StockCharts.com, we can see that after hitting a low of $15.00 in February, 2003, the stock climbed the next 5 years to hit a high of $37 in August, 2008. With the retail 'melt-down' TJX melted with the rest of the stocks to a low of $18.00 where it bounced twice first in November, 2008, and then again in December, 2008, only to tun higher in February, 2008, where it has moved strongly from a $19.50 level to its current level of $36.25! The chart looks quite strong if possibly a bit over-extended in its current move.

To summarize, retail is a very difficult place to be 'playing' today. However, maybe the 'cheap chic' so often attributed to Target (TGT) might actually be better-played with TJX. Here is a company that has shown positive same store comparisons the last couple of months, come in with earnings that beat expectations and has raised guidance. Just like old times!

Anyhow, this is the kind of stock that I like and would love to add to my portfolio if I get the right signal at the right time.

Thanks again for visiting and my apologies once more for being so lax about posting here! If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

Bob

2009-07-30T16:37:00.010-04:00

Colgate Palmolive (CL) and Coca-Cola (KO) "Trading Transparency"

via Stock Picks Bob's Advice on 7/30/09

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice! As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

Colgate-Palmolive (CL) is definitely one of my favorite 'comfort stocks'. However, I wasn't very comfortable when they reported their 2nd quarter results that beat expectations on earnings but missed on revenue. As reported today before the open, profit came in at $1.07/share exceeding expectations of $.98/share, but revenue came in a little light at $3.75 billion, under the expected $3.83 billion. Not really a big deal imho, but enough to spook skittish investors (like myself) who really don't enjoy hanging on to a stock when the market roars ahead and the stock price drops on a small disappointment. Earlier today I sold my 43 shares of CL at $71.92/share. These shares had been purchased 4/24/09, just 3 months ago at a cost basis of $59.55/share. Thus, I had a gain of $12.37/share or 20.8% since purchase.

Preserving gains is about as important as avoiding losses in my strategy and I chose to swap out of Colgate (CL) and purchased some shares of Coca-Cola (KO) hoping that my portfolio would 'go better with Coke'!

I went ahead and purchased 50 shares of Coca-Cola (KO), a slightly smaller position than my Colgate, at $50.39/share this morning.

Let's take a brief look at Coke and see if it makes sense and might offer almost as good an opportunity for this investor as my shares in Colgate!

On July 21, 2009, Coca-Cola (KO) reported 2nd quarter results. Earnings climbed 43% to $.88/share vs. $.61/share last year...but last year's results were dampened by $.40/share in one-time restructuring charges and asset 'write-downs'. Sales dipped 9% to $8.27 billion. So in fact, this was less than stellar.

Looking at the Morningstar.com "5-Yr Restated" financials on Coke, we can see the steady revenue growth from 2004 at $21.7 billion, increasing to $31.9 billion in 2008 only to dip slightly to $31.7 billion in the trailing twelve months.

Earnings have increased from $2.00/share in 2004 to a peak of $2.57/share in 2007, dipping to $2.49/share in 2008 and $2.43/share in the TTM. Again demonstrating a little weakness recently.

Free cash flow is not a problem with KO, with $4.5 billion in 2006 increasing to $5.3 billion in the TTM. This contributes to a balance sheet with $6.8 billion of cash, $7.9 billion of other current assets balanced against current liabilities of $13.2 billion. The company also has a moderate level of $9.2 billion in long-term liabilities.

Looking at some valuation numbers on Yahoo "Key Statistics", we can see that this is a large cap stock with a market cap of $116.5 billion. The trailing p/e is a moderate 18.63 with a forward p/e of 15.16. The PEG ratio, however, is a bit rich at 2.44 suggesting a bit of a premium price for this stock relative to its growth rate as estimated.

There are 2.32 billion shares outstanding with 2.30 billion that float. Currently there are 27.14 million shares out short representing 2.7 trading days of volume (the short interest ratio) below my own 3 day cut-off for significance. The company pays a $1.64 dividend yielding a forward dividend yield of 3.3%. The company last split its shares 2:1 in May, 1996.

And the chart? Looking at the 'point & figure' chart on Coca-Cola (KO), we can see that the stock hit a high of $62 in January, 2008, before pulling back as low as $37 in March, 2009. The stock recently has broken out past resistance and is acting quite strong at its current level of $50.32.

Quite frankly, I like Coca-Cola (KO) stock as a long-term growth and recovery play on the global economy. It is a 'comfort stock' from my perspective, but the numbers are not quite as strong currently as I might like to see in a stock in my portfolio. Technically, the stock appears to be anticipating improved numbers as the stock price has appreciated nicely the past couple of months.

I am not sure if this stock is the 'Real Thing' or not. However, as I build my portfolio, while stepping aside from Colgate--at least temporarily--I shall try to see if this stock has enough 'fizz' to help move my portfolio in the right direction. If instead it turns out to be 'flat' instead, well I can always move on with another stock holding!

Thanks again for stopping by and visiting my blog! If you have any questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

2009-07-26T14:56:00.004-04:00

After Strong Week, ETFs Finish Flat Friday (Daily ETF Wrap-Up)

via SmartMoney.com by letters@smartmoney.com (Dan Burrows) on 7/23/09

Market Wrap Up

Exchange-traded funds finished Friday's session flat but posted strong gains for the week as the Dow Jones Industrial Average broke the psychologically key 9000 level for the first time since early January.

Weaker-than-expected results from American Express (AXP), Microsoft (MSFT) and Amazon.com (AMZN) after the close Thursday led to some profit taking Friday, especially among red-hot technology stocks. However, better-than-expected news from Apple (AAPL), Caterpillar (CAT) and Starbucks (SBUX), among others, as well as a third straight monthly increase in existing homes sales, allowed equities to gain 4% on the week.

At market close the Dow added 24 to finish at 9093, while the Nasdaq Composite fell 8 to 1966. The S&P 500 gained 3 to 979. For a detailed rundown on Friday's trading session see our market story.

Winners

Oil prices finished the week above $68 a barrel, boosting shares of energy and oil ETFs. United States Oil Fund (USO) jumped 5.8% for the week, while Oil Service HOLDRS Trust (OIH) gained 6.6%.

Losers

With the Dow above 9000 and the S&P 500 enjoying its best two-week gain since March, it was mostly only leveraged ETFs that suffered significant losses on the week. However, a drop in the price of gold Friday -- just one day after the precious metal hit a six-week high -- didn't do much for gold ETFs. Market Vectors Gold Miners ETF (GDX) and iShares COMEX Gold Trust (IAU) each finished the week with a fractional loss.

This Week's Industry News

Emerging Global Advisors announced the launch of the Emerging Global Shares Dow Jones Emerging Markets Titans Fund (EEG) which seeks to track the performance of the Dow Jones Emerging Markets Titans Composite 100 Index. Fifteen emerging markets countries are represented in the index, giving investors a pure play on stocks in those economies, the company said. The ETF will charge an annual expense ratio of 0.75%.

The Financial Industry Regulatory Authority softened its stance on leveraged ETFs, saying in a podcast that these investment vehicles "can be appropriate if recommended as part of a sophisticated trading strategy that will be closely monitored by a financial professional. At times, this trading strategy might require a leveraged or inverse ETF to be held longer than one day." In June FINRA issued a warning to advisors about holding leveraged ETFs for longer than one day, as compounding causes them to stray from their underlying benchmarks over time.

Next Week's Notebook

Earnings and Conference Calls

Monday
A. H. Belo, Ace Limited, Alberto Culver, American River Bankshares, Buffalo Wild Wings, Cal-Maine Foods, Curtiss-Wright, Franklin Electric, GulfMark Offshore, Honeywell, International Coal Group, Owens & Minor, RadioShack, Rent-a-Center, Sohu.com, Trident Microsystems, Zoran

Tuesday
A.M. Castle, Advent Software, AMB Property, Amedisys, BE Aerospace, BP, Celanese, Ceradyne, Check Point Software Technologies, Chicago Bridge & Iron, Coach, Columbia Sportswear, Coventry Health Care, Deutsche Bank, Energizer, Fresh Del Monte Produce, Heidrick and Struggles, Landec, LCA-Vision, Luxottica, McKesson, Nash Finch, National Oilwell Varco, Norfolk Southern Corp., Office Depot, Panera Bread, Patriot Coal, PepsiAmericas, Questar, RenaissanceRe Holdings, Rockwell Automation, SeaBright Insurance Holdings, Silicon Storage Technology, Supervalu, Teva Pharmaceutical, Textron, Interpublic Group, McGraw Hill, Unisys, U.S. Steel, Valero Energy, Viacom, Western Digital, XL Capital

Wednesday
Acadia Realty Trust, Adolor, Advantest, Aetna, Aflac, Akamai, ArcelorMittal, Assurant, Banco Santander, BorgWarner, Brookfield Homes, Brookfield Properties, Cabot, Cadbury, CB Richard Ellis, CBIZ, Coca-Cola Enterprises, ConocoPhillips, Covance, Daimler, Equity One, Equity Residential, Express Scripts, FBR Capital Markets, Fiserv, FMC, General Dynamics, Hanesbrands, Hess, Hospira, Jones Apparel, Lazard, Lincoln National, Martha Stewart Living Omnimedia, MeadWestvaco, Medco Health Solutions, Meredith, Moody's, Penske Automotive Group, Portfolio Recovery Associates, Qwest, Royal Caribbean Cruises, Sanofi-Aventis, SAP, Sprint Nextel, Symantec, Taser, Teradyne, Scotts Miracle-Gro, Timberland, Thomas Weisel Partners, Time Warner Cabel, Time Warner, Trico Marine Services, Tyco Electronics, United Rentals, Visa, Watson Pharmaceuticals, Wyndham Worldwide

Thursday
Alcatel-Lucent, AmeriSourceBergen, Aon, Apache, Arch Chemicals, AstraZeneca, Automatic Data Processing, Avery Dennison, Avon, Barrick Gold, Becton, Dickinson, Brunswick Corp., Cabela's, Cablevision, Canadian Pacific Railway, CEC Entertainment, Cepheid, CGGVeritas, CH Energy Group, Charles & Colvard, Cigna, Colgate-Palmolive, Covidien, Cummins, Dolby Laboratories, Double Eagle Petroleum and Mining, Dow Chemical, Duke Realty, Eastman Kodak, Evergreen Solar, Expedia, ExxonMobil, First Solar, Franklin Resources, Genworth Financial, Goodyear Tire & Rubber, Helmerich & Payne, Horizon Financial, Ingram Micro, International Paper, Iron Mountain, Kellogg, Kimco Realty, Las Vegas Sands, Level 3 Communications, MarineMax, MasterCard, McAfee, MetLife, Monster Worldwide, Morningstar, Motorola, Mylan, Newell Rubbermaid, Noble Energy, NTT DoCoMo, NYSE Euronext, OfficeMax, Olympic Steel, Oppenheimer Holdings, Oshkosh Corp., Palomar Medical Technologies, Parker Hannifin, PerkinElmer, Pitney Bowes, Provident Financial Holdings, RealNetworks, Reed Elsevier, Regal Entertainment, Republic Airways, Republic Services, Revlon, Rockwell Collins, Sony, SourceForge, Taleo, Taylor Capital, Tennant, The Brinks Company, The Hanover Insurance Group, The Travelers Cos., Tyco International, Varian Semiconductor, Walt Disney, Waste Management, WisdomTree Investments, Wynn Resorts

Friday
Allergan, Anglogold Ashanti, AutoNation, Belo, Calpine, Chevron, Constellation Energy, DryShips, Eldorado Gold, HMS Holdings, ITT, Johnson Outdoors, Lafarge, MDC Holdings, NorthStar Realty Finance, Snap-on Inc., Washington Post Co., Weyerhaeuser

Economic Data

Monday
10:00 a.m. New Home sales

Tuesday
7:45 a.m. ICSC-Goldman Store Sales
9:00 a.m. Consumer Confidence
9:00 a.m. S&P/Case-Shiller Home Price Index

Wednesday
8:30 a.m. Durable Orders
10:30 a.m. Crude Inventories
2:00 p.m. Beige Book

Thursday
8:30 a.m. Initial Jobless Claims
10:30 a.m. EIA Natural Gas Report

Friday
8:30 a.m. GDP
9:45 a.m. Chicago PMI

A look at how the industry's most popular ETFs did on Friday:

10 Largest ETFs
Symbol	Current Price	Net Assets	Volume	Expense Ratio	52 Week High	3 Year Return
SPY	97.86	63,739	153,678,812	0.090	130.7	-5.63
EFA	49.26	29,392	15,432,526	0.340	67.37	-5.11
EEM	35.4	28,449	49,253,525	0.720	43.16	7.33
GLD	93.41	NA	4,732,231	0.420	97.24	13.95
IVV	98.39	18,337	8,785,076	0.090	130.92	-5.61
QQQQ	39.05	14,025	110,144,969	0.200	48.32	NA
IWF	43.67	9,479	2,402,457	0.200	55.45	-2.06
SHY	83.7	7,044	969,766	0.150	85	5.39
VTI	49.39	10,258	1,639,727	0.070	65.56	-4.75
IWD	50.44	7,068	2,337,692	0.200	70.64	-9.07

2009-07-22T19:56:00.009-04:00

3 Stocks With Bigger Dividends (Screens)

via SmartMoney.com by letters@smartmoney.com (Jack Hough) on 7/21/09

For dividend investors, the U.S. stock market is starting to look stingy. The S&P 500 index has rebounded more than 40% since early March, while its underlying dividend payments are forecast to fall 23% this year. The result is a yield of just 2.3%.

That's not as skimpy as the 1.6% yield the index offered over the bubbly decade ended 2007, but it's well below the average yield of nearly 5% that U.S. stocks provided over the past two centuries.

Nonetheless, careful shoppers can still find handsome, growing dividends. Payment trends for the S&P 500 index perhaps paint too grim of a picture, because the index assigns significant weight to the giant banks that have eliminated dividends this year to shore up capital. Viewing all 500 companies as equals, more have increased payments this year than have decreased or cut them.

The three companies below have yields above the index's 2.3%, recently increased their payments and are what Standard & Poor's calls Dividend Aristocrats: companies that have boosted their payments in each of the past 25 years.

Clorox

(CLX)
Dividend yield: 3.4%
Dividend increase: to $2.00 from $1.84 in June

Beyond its namesake bleach, Clorox sells Glad trash bags, Brita water filters, Kingsford charcoal, Hidden Valley salad dressing and much more. More than 80% of company sales come from brands that are the No. 1 or No. 2 sellers in their category. Since the products aren't terribly sensitive to the economy, Clorox is growing despite the current recession. Sales and earnings per share for its fiscal year ended June increased 3% and 17%, respectively.

Supervalu

(SVU)
Dividend yield: 5.2%
Dividend increase: to 70 cents from 69 cents in May

America's third-largest grocer, Supervalu ran more than $44 billion through its sales registers over the past year, yet it has a stock market value of just $2.8 billion. That's likely because the company owes a worrisome $8 billion, and sales and earnings per share are expected to fall 5% and 25%, respectively, in its current fiscal year. Simeon Gutman, who covers the stock for Canaccord Adams, an investment bank, recently changed his recommendation to "buy" from "hold," noting that Supervalu has a new chief executive, is well-positioned for a turnaround and has no major debts coming due until 2011. However, until the company's financial results show clear signs of improvement, the stock is perhaps best left to speculative investors rather than those living off their dividends. Supervalu reports fiscal first quarter results Tuesday, July 28.

Johnson & Johnson

(JNJ)
Dividend yield: 3.3%
Dividend increase: to $1.96 from $1.84 in April

Johnson & Johnson is three businesses in one. It sells consumer products like Band-Aids, Tylenol, Mylanta antacid; prescription drugs like Risperdal for schizophrenia; and medical devices like sutures and stents. Drugs have been the weak point lately due to increased generic competition, but analysts say the company's development pipeline looks robust. Earnings per share are forecast to remain largely unchanged this year but resume growth next year. JNJ has negligible net debt, suggesting its dividend is plenty safe.

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2009-07-22T19:56:00.007-04:00

Stock Picks: SBUX Up; WFC Down (Market Movers)

via SmartMoney.com by letters@smartmoney.com (AnnaMaria Andriotis) on 7/21/09

Starbucks Shares Perk Up on Brighter Prospects

Shares of coffeehouse chain Starbucks (SBUX) climbed more than 15% in midday trading Wednesday after the company posted better-than-expected profits for its fiscal third quarter.

After the market closed Tuesday, Starbucks reported third-quarter net earnings of $151.5 million or 20 cents per share, beating analysts' estimates of 19 cents per share, according to Thomson Reuters, and compared to a loss of one cent per share a year earlier.

The company credited cost-cuts – mainly in the form of store closures — for the upside surprise. In a statement it said that cost savings reached $175 million, exceeding its third-quarter target of $150 million. The company plans to cut another $180 million in costs during the fourth quarter.

Cost cuts weren't the only thing boosting Starbucks' profits, however.

"We expect that sales may have been positively impacted by the recent advertising campaign and the value initiatives in place," wrote McAdams Wright Ragen analyst Dan Geiman in a July 22 report. "The results also suggest that the competitive pressures some had feared, specifically McDonald's introduction of espresso beverages and the swirl of advertising surrounding it, have had little if any negative impact on SBUX's results."

Geiman expects sales trends to continue their rebound in the coming quarters.

"SBUX can't rely on cost-cutting alone, and over the mid- to long-term must generate continued improvement on the top-line. But we think the company is making significant progress on that front and with the advertising campaign continuing, new products in its arsenal…we expect further progress in coming quarters," Geiman wrote.

The stock is already up 55% this year.

Bottom line: Buy
The future appears bright for Starbucks, which so far has proven itself equipped to handle competitors and budget-strapped consumers

Loan Losses Overshadow Wells Fargo's Big Upside Surprise

Despite beating analysts' second-quarter estimates, shares of Wells Fargo (WFC) fell more than 6% in trading Wednesday amid concerns about the bank's loan portfolio.

Earlier, Wells Fargo reported earnings per share of 57 cents for the second quarter, slightly higher than the 56 cents it reported in the previous quarter and the 53 cents it earned in the year-ago period. Analysts on average expected the company to report second-quarter earnings of 34 cents per share, according to Thomson Reuters.

Revenue hit a record $22.5 billion, up 28% from the first quarter due in part to an increase in average checking and savings deposits (up 20% from first quarter). "This inflow of new customers…has the potential to continue to add to earnings well beyond the turn in the credit cycle," said Wells Fargo CFO Howard Atkins in today's conference call.

Weighing on the strong report, are the deep credit losses the bank has incurred in part due to bad loan write-offs. Total net loan charge-offs came to $4.39 billion for the quarter (the figure includes the loan portfolio of Wachovia.) As a percentage of all of the bank's loans, these charge-offs represented 2.1%, up from 1.5% during the quarter that ended on March 31.

"While the loss amounts are directly correlated to these property values, other events affecting the consumer, such as unemployment, drive the loss frequency," said Wells Fargo chief credit officer Mike Loughlin in a statement. "Many of our home equity losses involve customers who are having problems with their first mortgage due to unemployment or over-indebtedness," said Loughlin.

While credit card charge-offs increased by $82 million to $664 million in the second quarter, the business remains profitable, according to Atkins. "Card fees grew 33% annualized in the first quarter on higher volumes, not by raising the fees we charge our customer," he said.

"The real problem is that their credit continues to deteriorate across all portfolios," says Frederick Cannon, chief equity strategist at Keefe, Bruyette & Woods. He expects that the bank will continue to make money but not at this level. The bank's mortgage banking income (from mortgages they originated and sold in the first half of the year) doesn't appear to be sustainable now that interest rates are rising again and homeowners who could refinance already did, he says. Cannon also expects the bank's loan losses to get worse before they get better.

"There's a pretty rocky road ahead for Wells Fargo…over the next year or so," says Cannon. "That said though Wells Fargo will be here for the long term and investors who have staying power should hold on."

Bottom line: Sell
Wells Fargo stock will experience more declines due to borrowers' inability to repay loans and an uncertain lending market in the near term.

2009-07-20T14:14:00.002-04:00

When Will Buffett Bounce Back?

via SmartMoney.com by letters@smartmoney.com (Dyan Machan) on 7/19/09

For several months now, even the most hard luck investors have had a decent run on Wall Street. Yet one accomplished moneyman is still waiting for good news: a rumpled 78-year-old Omaha resident named Warren Buffett.

He's the second-richest man in the world, so he's not getting any sympathy votes. Still, the past 10 months of Buffett's career have been jaw-droppingly bad—contributing to what he himself says was his worst year ever. He sailed into the crash with a portfolio full of financial stocks, just in time to see the global banking sector implode. Last October, five months before the market hit bottom, Buffett published a widely circulated editorial urging investors to "Buy American, I Am"—giving "Dewey Beats Truman" a challenger in the bad-timing sweepstakes. And when stocks finally rallied, the cheerleader got left off the team bus. Since his editorial hit the presses, the Standard & Poor's 500 stock index has returned nearly 2 percent—but Berkshire's stock is down about 24 percent.

Of course, one bad year doesn't negate a storied career. The last time Buffett trailed the market this badly was during the tech bubble—and he had the last laugh. Unlike a decade ago, however, Buffett was hurt this time by going with the grain, his portfolio sucked into the same downward spiral as everyone else's, his reputation scuffed by a foray into derivatives.

Investors have long seen Buffett as a safe harbor in rough seas. Today, some are asking the unthinkable: Has the Buffett Way lost its magic?

That magic has influenced the investing habits of millions of Americans, everyone from do-it-yourselfers who studied his strategies to mutual fund managers who believed that Buffett's way was the only way. Building on the teachings of his mentor, Ben Graham, Buffett has become the most famous practitioner of the "buy and hold" school of investing. His approach: Seek out companies with big "moats," or advantages over competitors; buy them cheap, ideally when other investors are pessimistic; plow their profits and dividends into other investments; and hold on as long as the businesses are valuable, no matter what the stock price does.

Those tactics worked like a charm for decades. But in the past year, investors lost confidence in the Buffett Way to an unprecedented degree. Berkshire's stock dropped 50 percent between December 2007 and the market bottom in March, wiping out $110 billion in wealth for its Class A shareholders. Although it rallied last week along with the overall market, it's still about 40 percent off its peak.

Losing Faith in the Buffett Way?

The sell-off was driven by harsh short-term numbers. Berkshire's nearly 80 subsidiary companies include dozens that were especially vulnerable to the downturn, including home builders, furniture makers and insurance companies. Its operating profits fell 62 percent in 2008 from the previous year, to $7.5 billion. And investors were just as leery of the $128 billion portfolio that Buffett manages under Berkshire's umbrella. Around 85 percent of that cache is concentrated in a small handful of stocks—many of which got clobbered in 2008. When the credit crisis started, Buffett held major stakes in American Express, Wells Fargo and U.S. Bancorp, all of which plummeted. He built a huge stake in ConocoPhillips, then watched oil prices nose-dive. And just as consumers began to see derivatives as a dirty word, the news emerged that Buffett had a $37 billion bet on future prices of the S&P 500 and other stock indexes.

Not all of Buffett's bets have gone bad, of course. He bought Goldman Sachs as it was sinking and was vindicated when it survived the crash and went on to post strong earnings. He snared preferred stock in General Electric that could pay him royally when the economy fully recovers. But last year's perceived slipups may still be driving investors away from Berkshire's stock. And Buffett himself raised his public profile just as he hit this exceptionally rough patch: He didn't just strike out; he struck out on national TV. Over the past two years, he has spent much more time in the public eye, with a ramped-up schedule of media appearances. Is it coincidence that Berkshire's performance stalled just as Buffett stepped out? "It's a false correlation," he insists, saying he needed to appear more often in public as Berkshire grew. (Buffett declined to be interviewed more broadly, saying he prefers speaking to TV anchors "because the reach is so much wider.")

The Buffett cognoscenti have learned some lessons from the annus horribilis. They now suspect Buffett's not as good an economist as he is an investor. As recently as his May 2008 shareholder meeting, when sidekick Charlie Munger predicted "turmoil as far ahead as we can see," Buffett shushed him, saying the real estate bubble wouldn't hurt the economy. Oops. "Buffett's a great, disciplined investor," says Bruce Greenwald, finance professor at Columbia University, "but he shouldn't make those calls." Others say Buffett's gospel of buy-and-hold is outmoded, now that markets have grown increasingly volatile. It's telling to compare his recent performance with those of hedge funds, which often dip quickly in and out of stocks. Over the past decade, the average North American stock-oriented hedge fund earned 9.7 percent a year after fees, compared with 2.9 percent for Berkshire, according to research by asset-management firm Lyster Watson & Co.

But most investors still believe in the Buffett Way. In their telling, it's the guru's timing, not his analysis, that went wrong—and to true Buffett acolytes, short-term timing is irrelevant. Buffett has said he underestimated the impact of banks' fuzzy math and called his ConocoPhillips buy "a mistake." As for his other decisions, if there's anyone with the patience to wait for them to pay off, it's the oracle in Omaha.

2009-07-19T18:13:00.002-04:00

High-Flying Week Ends With a Whimper (Daily ETF Wrap-Up)

via SmartMoney.com by letters@smartmoney.com (Will Swarts) on 7/16/09

Market Wrap-Up

Traders remained cautious on Friday as they digested earnings results from Bank of America (BAC) and Citigroup (C). Tepid earnings from General Electric (GE) also clouded the session. The Dow Jones Industrial Average added 32 points to close at 8744. The Nasdaq gained 1.6 to 1887 and the S&P 500 stayed flat at 940. For a detailed rundown on Friday's trading session see our market story.

That lukewarm session came after a series of rallies that saw the Dow climb almost 600 points higher over the course of the week.

Winners

Boosted by blowout results from Goldman Sachs (GS) and JPMorgan Chase (JPM), financial stocks had a strong week despite tepid Friday trading. That pushed the iShares Dow Jones US Financial Sector (IYF) ETF up almost 9% for the week. The SPDR KBW Bank (KBE) ETF gained more than 8%.

Losers

As equities rose, money came out of the investment grade corporate bond market. The iShares iBoxx $ Invest Grade Corporate Bond (LQD) ETF shed nearly 1%. Meanwhile, the specter of trillion-dollar deficits hurt long-term government debt. The iShares Barclays 20+ Year Treasury Bond (TLT) ETF lost more than 5% on the week.

This Week's Industry News

Massachusetts Secretary of State William Galvin launched an inquiry into how three leveraged ETF providers -- Rydex, ProShares and Direxion -- are selling their products to investors in his state. (See story.)

Next Week's Notebook

Earnings and Conference Calls

Monday
Boston Scientific, Brown & Brown, Citizens South Banking, Great Atlantic & Pacific Tea, Halliburton, Hasbro, Johnson Controls, Legg Mason, M&T Bank, Merck, PetMed Express, Texas Instruments, Volterra Semiconductor, Zions Bancorp

Tuesday
Advanced Micro Devices, AK Steel Holding, Apple, Arbitron, Bank of Florida, BJ Services, BlackRock, Boston Properties, Caterpillar, Charlotte Russe Holding, Coca-Cola, Comerica, Dearborn Bancorp, Dr. Reddy's Laboratories, DuPont, First Cash, Gilead Sciences, Illinois Tool Works, Jefferies, Journal Communications, Lexmark International, Lockheed Martin, McClatchy, Peabody Energy, Precision Castparts, Regions Financial, Robert Half International, Schering-Plough, Seagate Technology, Sherwin-Williams, SLM, Southwest Airlines, Starbucks, State Street, Stryker, Sybase, TD Ameritrade Holding, UAL, United Technologies, UnitedHealth Group, Western Union, Yahoo

Wednesday
AirTran Holdings, Alcon, Allegheny Technologies, Alliance Data, Altria Group, Amdocs Limited, BancorpSouth, Bank of New York Mellon, Boeing, Chipotle Mexican Grill, Cirrus Logic, Cohen & Steers, Delta Air Lines, Domino's, E*Trade Financial, eBay, Eli Lilly, Equifax, Genzyme, GlaxoSmithKline, iRobot, KeyCorp, Lennox International, Logitech International, Northern Trust, Old Dominion Freight Line, P.F. Chang's China Bistro, PepsiCo, Pfizer, SanDisk, SunTrust, Tupperware Brands, U.S. Bancorp, VMware, Wells Fargo, Westell Technologies, Whirlpool, Wipro

Thursday
3M Company, ABB, Airgas, Alaska Airlines, Amazon.com, American Express, Ameriprise Financial, AT&T, Ball Corp., Bristol-Myers Squibb, Broadcom, Capital One Financial, Cheesecake Factory, Chubb, CIT Group, Compuware, Eastman Chemical, Fifth Third Bancorp, Freescale Semiconductor, Goodrich, Healthways, Hercules Offshore, Hershey, Huntington Bancshares, Immucor, Invesco, Janus Capital Group, JetBlue Airways, L-3 Communications Holdings, Manpower, McDonald's, NCR, Netflix, Newmont Mining, Nucor, Occidental Petroleum, Philip Morris International, PNC Financial Services, Potash Corp. of Saskatchewan, ProLogis, Provident Financial Services, Raytheon, Ryder System, Safeway, Synovus Financial, Union Pacific, United Parcel Service, W.R. Grace, Wyeth, Xerox

Friday
Arch Coal, Black & Decker, Fortune Brands, Ingersoll-Rand, Schlumberger, United Community Banks

Economic Data

Monday
10:00 a.m. June Conference Board Leading Indicators

Tuesday
7:45 a.m. ICSC Chain Store Sales Index for July 18
8:55 a.m. Redbook Retail Sales Index for July 18
5:00 p.m. ABC/Wash Post Consumer Confidence for July 18

Wednesday
No economic events scheduled

Thursday
8:30 a.m. Initial Jobless Claims for July 18
10:00 a.m. July Philadelphia Fed Business Index
10:00 a.m. July Existing Home Sales
10:00 a.m. DJ-BTMU Business Barometer for July 11

Friday
10:00 a.m. End-July Reuters/Univ. Michigan Sentiment Index

A look at how the industry's most popular ETFs did on Friday:

10 Largest ETFs
Symbol	Net Assets	Price	52 Week High	52 Week Low	Volume
SPY	63,739	94.13	130.7	68.13	138,303,571
EFA	29,392	46.82	67.84	32.16	16,180,892
EEM	28,449	33.57	43.75	19.12	56,896,466
GLD	NA	91.93	97.24	70.14	8,747,804
IVV	18,337	94.48	130.92	68.24	2,729,764
QQQQ	14,025	37.56	48.32	25.51	103,564,248
IWF	9,479	42.12	55.45	30.49	1,862,134
SHY	7,044	83.75	85	82.52	833,076
VTI	10,258	47.32	65.56	33.75	1,761,473
IWD	7,068	48.02	70.64	34.22	1,678,389

2009-07-19T18:01:00.002-04:00

Pepsi remains the choice of a new generation

07-17-2009

From: BloggingStocks

Forget the mantra about Pepsi's North American market's beverage and snack revenue being hurt, yada yada.

I'm Reiterating my Buy rating for PepsiCo, Inc. (NYSE: PEP) first recommended on March 13, 2009 at a price of $48.62.
Pepsi has successfully positioned itself in the health and sports drink segment with its Gatorade and Aquafina brands, and Tropicana is still the standard in branded, mass-appeal orange juice. The FY2009/FY2010 EPS estimates for PEP are $3.68 to $4.00.

Who will dance, on the floor, in the round...
Further, Pepsi's market share gains in international markets, from its namesake cola to snacks, will continue to drive solid top-line growth: a company with a 200-country presence, international markets accounted for 40% of FY2008 revenue. Further, the company's decision to add 20% more product in snack packages with no price! increas e will also undoubtedly support sales, gladden the hearts of shareholders, and no-doubt Doritos lovers, as well.

Stock Analysis: PepsiCo is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in PEP now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your PEP position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $27.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

2009-07-19T17:56:00.002-04:00

Consider Baxter: Its products don't go out of style

07-18-2009

From: BloggingStocks

I'm reiterating my Buy rating for Baxter (NYSE: BAX) first recommended on March 13, 2009 at a price of $51.16.

Baxter's near-recession-proof story remains intact. Baxter, a maker of a variety of medical products across three divisions, including drugs and vaccines, dialysis equipment, and IV supplies, should record a FY2009 revenue increase of 2-4%, led by demand for recombinants, plasma proteins, and antibody therapies in its bioscience unit.

Slower growth is seen in its medication delivery unit, but Baxter has done a good job focusing on high-margin businesses, divesting low-margin lines, and eliminating excess manufacturing capacity.

Further, Baxter's buy of a hemofiltration product line from Edwards Lifesciences (NYSE: EW) should reinvigorate the company's renal care business. The FY2009/FY2010 EPS estimates for BAX are $3.77 to $4.24.

Stock Analysis: Baxter is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in BAX now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your BAX position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $37.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

2009-07-14T09:53:00.002-04:00

For Buffett Fans, the Price Is Right

via SmartMoney.com by letters@smartmoney.com (Andrew Bary) on 7/13/09

WARREN BUFFETT HAS TAKEN ADVANTAGE of the past year's financial turmoil to make more than $20 billion of promising investments for Berkshire Hathaway, including preferred stock and warrants issued by Goldman Sachs and General Electric , and a convertible issue from Swiss Re, the European reinsurer.

Buffett's investment coups haven't registered on Wall Street, where Berkshire's class A shares (BRK.A) are languishing at around $85,000. Down 12% this year, and way below their late 2007 peak of $149,000, the shares haven't participated much in the stock market's rally since the end of March.

Yet Berkshire itself looks appealing, at just 1.2 times our estimate of its current book value of $72,000 a share. In the past decade, the stock has traded for an average of 1.6 to 1.7 times book value, a measure of shareholder equity per share. The current price-to-book ratio is near the low reached in early 2000, when Berkshire's stock bottomed at about $40,000.

One fan tells Barron's that the stock could top $110,000 in the next year. If so, it would trade for roughly 1.4 times our estimate of book value in 12 months: $80,000 a share. That price target doesn't seem outlandish in view of the projected price-to-book-value ratio. In a better economic and financial environment, Berkshire might even trade up to $125,000 a share, implying a multiple of book value closer to the 10-year average.

Berkshire's class B shares (BRK.B), worth 1/30th of the A shares, fetch about $2,750 each. The B shares look like a better buy than the A shares, because they sell at a 3% discount to their theoretical value. But the discount has persisted for some time, and could continue, as the B shares can't be converted into A shares.

Berkshire's book value, which stood at $66,250 per share as of March 31, likely has risen since then because of the market's powerful rally. That has lifted the value of the company's famed equity portfolio, which now totals more than $50 billion. The market value of Berkshire's equity and bond derivatives also has increased, and we assume the company earned more than $1,000 a share from operations in the second quarter, in line with reported first-quarter figures. That's how we arrive at an estimated book value of $72,000 a share.

Following Buffett's advice, most Berkshire watchers focus on book value as a measure of the company's valuation, as reported earnings can be distorted by realized investment gains and losses. Historically, Berkshire's shares have tracked changes in book value.

The sluggish performance of Berkshire's shares may owe to several factors. Investors recently have favored economically sensitive and other "offensive" stocks; Berkshire is perceived to be defensive due to its financial strength, including a cash position of $23 billion on March 31.

Also, investors remain concerned about Buffett's miscalculated sale of long-term put options on $35 billion of equity indexes, including the Standard & Poor's 500, when stock prices were much higher. The puts showed a loss of about $5 billion on March 31, and it is difficult to value them based on Berkshire's limited disclosure. Berkshire has taken a big hit, as well, on some of its own equity holdings, including large stakes in ConocoPhillips (COP) and American Express (AXP). Both stocks have fallen more than 50% from their highs.

IT ALSO DOESN'T HELP THAT SHARES of property-and-casualty insurers are out of favor amid concerns about weak insurance pricing. Berkshire owns Geico, the No. 3 domestic auto insurer, as well as reinsurer General Re and a specialized reinsurance business focused on hurricanes, earthquakes and other high-risk events shunned by many insurers. Some investors worry, too, that Berkshire's large size -- the company now has a market value of $132 billion -- makes it tough for Buffett to generate high returns. Then there is his age: The Great One turns 79 next month.

None of these issues, save Buffett's age, is significant. Buffett sounded upbeat at Berkshire's annual meeting in May, saying he thought Berkshire stock could best the S&P 500 in the coming years. He noted that the stock hadn't kept pace with the growth in retained earnings in recent years. Asked whether Berkshire's competitive advantage would die with him, Buffett replied that Berkshire's strengths, including a unique business mix and culture, long-term orientation and patient shareholder base, will outlive him.

Vice chairman Charlie Munger, 85, was more blunt about the difference between Berkshire's view and the short-term focus of much of Corporate America: "The stupidity of other companies' approach will likely give us a long-term advantage," he said, according to a meeting attendee. Buffett declined to comment for this story.

Barron's has written about Berkshire often in recent years, including a bearish cover story in late 2007, when the stock was near its peak. Last year, we were more bullish on the shares, and have speculated in other stories that Buffett's likely successor as CEO will be David Sokol, chairman of Mid- American Energy, Berkshire's big utility.

EVEN IF THE MARKET TANKS again this year, the downside in Berkshire stock seems limited due to its low price/book ratio and the company's earnings power. Despite its cyclical businesses, Berkshire's after-tax profits from operations could top $7 billion, or $4,500 a share, this year. Peak profits could approach $7,000 a share. And behind Berkshire's rising earnings are the shrewd investments Buffett has made in recent quarters (see table). The company bought $5 billion worth of 10% Goldman Sachs (GS) preferred stock; $3 billion of GE (GE) 10% preferred; and $2.75 billion of Swiss Re (RUKN.Switzerland) 12% convertible preferred. All likely have risen in value.

Berkshire's ability to nab these deals highlights the company's deep pockets, Buffett's willingness to make quick decisions, and the desire of many other companies to get Berkshire's money, with its implied vote of confidence from the world's greatest investor. These new investments will throw off more than $2 billion of annual income, much of it tax-advantaged.

The Goldman and GE preferred issues carry above-market yields, and came with stock warrants. The warrants to buy 43 million Goldman shares carry an exercise price of $115 and a maturity date of 2013. With Goldman shares above $140, the warrants are worth more than $1 billion. Given Goldman's improved balance sheet and profits since last fall, the firm might redeem the $5 billion of preferred this year by paying Berkshire a 10% premium. If that happens, look for Berkshire to exercise its warrants and become Goldman's single largest holder.

Berkshire would benefit from a stronger stock market and economy because of its large equity portfolio, derivatives holdings, and wholly owned businesses, including carpet maker Shaw Industries, paint producer Benjamin Moore, Acme Brick, Clayton Homes, and private-jet operator NetJets. Their depressed profits are likely to recover as business conditions improve.

Berkshire's large insurance operations are doing well, even in a weak economy. Geico picked up more than 500,000 new auto-policy holders in the first four months of 2009, 75% of its '08 total, as cost-conscious consumers gravitated toward the company, whose ads trumpet potential insurance savings of 15% or more for many drivers.

Berkshire's largest unit, MidAmerican Energy, owns electric utilities in the U.S. and Britain, and two big U.S. natural-gas pipelines. Both Geico and MidAmerican probably are worth at least $15 billion, although valuing them is academic, given Buffett's aversion to selling any businesses.

Some think Berkshire's best days are over and there isn't much money to be made in the stock, which was just $20 when Buffett took control in 1965. Yet the company looks stronger than ever, due to its promising portfolio and some top-flight businesses. Investors could now buy that package for a low premium to book value and get the talents of Buffett, who continues to demonstrate his incomparable investment skills.

2009-07-14T09:43:00.003-04:00

Earnings preview: Johnson & Johnson could surprise Wall Street

07-13-2009

From: BloggingStocks

Johnson & Johnson (NYSE: JNJ), a company that counts Procter & Gamble (NYSE: PG) and Pfizer (NYSE: PFE) as colleagues, will report results for the second quarter on Tuesday, July 14. JNJ is expected to post a bit of a profit decline. Last year's Q2, according to Earnings.com, saw the health-care business earn $1.18 per share. This time around, analysts are thinking that JNJ will do somewhere around $1.11 per share.

Will JNJ beat the analysts? It's quite possible, since the company has a good record on this count. As a matter of fact, JNJ beat predictions by four cents back in April. Sales, however, came in a little weak. Interestingly enough, the market didn't really care too much about the earnings performance on that day. Shares had rallied a bit in pre-market trading, but they closed slightly down by the end of the regular session. I found a similar situation back in January.

So, if you ask me, I think we'll see a beat on the bottom line this week, but I'm not convinced the market will send shares of JNJ higher. Of course, how many individual investors actually trade a blue chip like JNJ? For the most part, shareholders are probably keeping this one for the long term in a core portfolio. Recently, Joseph Lazzaro highlighted the business as a potential idea for a college fund. I would tend to agree. To that point, most investors love to read the statement of cash flows and gauge how well JNJ is doing when it comes to money generated from operations. So long as that metric is keeping ahead of dividend obligations, everything should be fine. Investors love JNJ and its dividend-growth quotient.

JNJ just isn't on my radar in terms of buying ahead of the report. I'll leave such posturing to the bigger guns on Wall Street. I just want to know that cash is still flowing to the company's coffers -- and I'm sure it will be.

2009-07-14T09:42:00.002-04:00

Guangshen (GSH): Riding the rails in China

07-13-2009

From: BloggingStocks

"A focal point of China's ambitious $586 billion stimulus package will be railroads; in fact, investment in railways has already tripled over this time last year." explains value Investor Nathan Slaughter.

In his Half-Priced Stocks he adds, "Guangshen Railway Limited (NYSE: GSH) looks to be an obvious choice to benefit from this trend. Indeed, pricing flexibility, stellar efficiency and utilization has made Guangshen the most profitable rail company in China."

"Growth in China's railways doesn't come as a surprise. Years before this plan was put in motion, China already had bold ideas about building out its railway system -- and was bankrolling those ideas with about $200 billion in government cash.

"And now, those commitments will be supplemented with an additional $100 billion earmarked from this latest stimulus package.

"To be sure, the sprawling country is certainly in need of additional rail capacity, and many rural areas have no service at all.

"Meanwhile, we all know that China has a ravenous appetite for iron ore, petroleum, coal and just about every other raw material.

"Much of the nation's commodities production takes place in the Western provinces, and those goods must then be shipped to population centers and economic hubs on the Eastern seaboard.

"However, the Chinese Railway Ministry estimates that railroads can only handle about 35% of the country's massive cargo demand -- the other two-thirds must be carried by less efficient means of transportation.

"But this is all changing. Thanks to heavy investment from both foreign and domestic sources, more than 10,000 miles of new railroad networks will be on the ground within the next few years.

"Guangshen Railway Limited operates both passenger and freight lines, and it's sitting on some prime real estate -- including routes between Guangzhou and Shenzhen, as well as the only network linking Hong Kong with the Mainland.

"Despite damaging earthquakes, record snowfall and other headaches, GSH still carried about 83 million passengers to their destinations last year -- representing volume growth of +15%.

"And the company has started off 2009 on the right foot, posting healthy double-digit first quarter gains in both revenues and earnings. Going forward, recent acquisitions and continued optimization of existing lines should lead to solid (though not spectacular) growth.

"I like the fact that GSH is sitting smack in the middle of the Pearl River delta of Guangdong Province, among the most affluent and rapidly expanding regions in all of China.

"This is a heavily traveled artery, and the company has it all to itself -- as a state-owned enterprise, I don't see many competitors being allowed in.

"The shares are currently approaching a 52-week high, but I think they could continue on this path and take investors on a quick ride to fair value at $30. Nevertheless, the stock is still best suited to risk-tolerant investors, preferably with a wide +25% or greater margin of safety."

Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

2009-07-14T09:41:00.002-04:00

Reiterating: CVS - Defensive play, extraordinaire

07-13-2009

From: BloggingStocks

Do hang onto to those CVS Caremark Corporation (NYSE: CVS) shares, to say the least: I'm Reiterating my Buy rating for the company, first recommended on February 16, 2009 at a price of $27.30.

CVS, a classic defensive, is performing well, despite choppy macroeconomic conditions. Nothing has occurred within the last half-year to suggest that CVS will not be able to successfully incorporate recent acquisitions, and increase sales in key, new growth markets in the U.S.

Hence, as noted, if you're thinking about opening a "Mom & Pop' drug store next to CVS, think again. The First Call FY2009/FY2010 EPS estimates for CVS are $2.60 to $2.99.

Stock Analysis: CVS is a moderate-risk stock. CVS is an investment, not a trade. If you've already purchased CVS's shares, hold them. If not, consider buying a 25% position in CVS now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your CVS position before October 2009.! Sell/St op Loss if you were to buy shares in this company: $18.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Western Union: Technical indicators generate a Buy rating

2009-07-10T16:01:00.001-04:00

Posted Jul 9th 2009 5:40PM by Joseph Lazzaro @ www.bloggingstocks.com
Filed under: Western Union (WU), Stocks to Buy

This is a case in which the technical indicators have tipped the scale vs. the fundamentals. I'm issuing a Buy recommendation for Western Union (NYSE: WU) after the stock held a key technical support level.

That support level: the 200-day moving average - the toughest average to break in trading. After trending lower for about two months, veering toward the 200-Day MA, WU has closed above the 200-day moving average for four consecutive days, not including today. And, trading at $16.50 Thursday afternoon, WU is likely to close above the average, at $15.13, again.

Western Union's fundamentals are mixed: revenue is likely to fall 6% in FY 2009 and increase 3-5% in FY2010 - not the best outlook nor growth scenario, and not enough to build on, despite a restructuring, cost cuts, and a solid market position (375,000 agent locations in more than 200 countries) in the money transfer segment.

However, the 200-day MA has held and that suggests institutional investors may know something that others don't, hence the Buy. However, don't buy WU if you can not tolerate moderate risk. The First Call FY2009/FY2010 EPS estimates for WU are $1.26 to $1.39.

Stock Analysis: Western Union is a moderate-risk stock. Consider buying a 25% position in WU now; then buy another 25% in four months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your WU position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $9.

Warren Buffett, tells us more!

2009-07-10T15:59:00.001-04:00

Posted Jul 9th 2009 6:40PM by Sheldon Liber @ www.bloggingstocks.com
Filed under: Other issues, Management, Rants and raves, Interviews, Market matters, Next big thing, Headline news, Recession, Financial Crisis

This morning Warren Buffett was interviewed and said he would be in favor of the federal government passing legislation for a second stimulus bill -- increasing the money supply again by gargantuan proportions.

While "my pal" Warren got plenty of ink (and pixels) for his comments it left me wanting more. Buffett has the most to gain, and the most to lose -- and at the same time he cannot really lose.

Since Buffett has so many billions of dollars and controls billions more, and influences still more in the hundreds of billions, he clearly has been and continues to be negatively affected by our economic firestorm more than almost any other individual could be.

Clearly a second influx of capital into the economy would be of great benefit to him directly. However, I also stated that he cannot lose, simply because he could lose 95% of his fortune and not have to change much in his life.

Getting past all this, what troubles me the most, is that Warren Buffett, the greatest investor of the last three generations only tells us what he would do in general -- not specifically!

If he thinks he could do some good by sharing a more detailed plan or approach to healing the economy then by all means he should do so. It bothers me that he does not get more involved. It bothers me that he does not get in the trenches and use his brilliance where it would do some good. Giving his opinion on talk shows and the occasional phone call from the President and others in Congress is just not good enough.

I cannot accept his broad concepts on the fly, along with his criticism of Congress if he does not get involved. There are very few people that think the folks that got us into this mess know what they need to do to get us out. Many of them will tell you that, in all candor, they are doing their best, trying this and that to see what works.

Buffett does not have all the answers, but he could help more than he does, and Warren, if you are doing more than any of us are aware of, at least let us know you are on the case. That alone might calm the markets.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.

Infosys profits up 17%, long-term looks great

2009-07-10T15:58:00.001-04:00

Posted Jul 10th 2009 10:30AM by Tom Johansmeyer @ www.bloggingstocks.com
Filed under: Earnings reports, Hewlett-Packard (HPQ), India, International Business Machines (IBM), Stocks to Buy

Infosys Technologies (NASDAQ: INFY) increased its first quarter profits by 17% by tapping new markets and wrangling in 27 new clients, according to the Financial Times. The second-largest software services exporter in India, Infosys even scored some major clients, such as Waitrose, a top-shelf food retailer in the United Kingdom. Tough economic conditions can tend to favor companies that provide outsourcing services -- as well as consulting services with high, easily justifiable returns on investments (ROIs).

Nonetheless, this is a competitive space, and Infosys did caution that IBM (NYSE: IBM), Accenture (NYSE: ACN) and Hewlett-Packard (NYSE: HPQ) will be formidable global foes. With the announcement, Infosys increased the lower end of its forecast for the year, expecting revenues to fall in the $4.45 billion to $4.52 billion range.

Investors seem to be pretty happy with the company's performance. Shares were up 2.8% on the announcement and are up 53% for the year. And, as Indian software and outsourcing companies begin to carve out their global spaces, they will see the United States as an available market, taking pieces of the pie owned by the major consulting firms. The next six to nine months will be tough, but Infosys will be a long-term success story.

Biotech ETFs: Best bets on health care reform

2009-07-10T15:57:00.001-04:00

Posted Jul 10th 2009 11:40AM by Steven Halpern @ www.bloggingstocks.com
Filed under: Newsletters, ETF Investing, Stocks to Buy, Obama Picks

"Health care reform could mean opportunities for astute investors," says Brandon Clay in his Invest With an Edge.

Here, eyes two biotech ETFs that "should be on everyone's watch list." The advisor notes, "With health care on the front burner in Washington, these biotechnology ETFs may finally be ready to pop."

"Investors in health care should think outside the realm of traditional pharmaceutical companies and health insurers. Those sectors are each facing headwinds that make stock picking difficult.

"In addition, several big pharma companiesare desperate to reload their empty pipelines in the face of increased competition from generic drug makers.

"Acquiring a smaller biotech firm is the easiest way for a pharma giant to find a potential new blockbuster drug.

"The best way to play the government-sponsored health care boom is through biotech ETFs. Today, we focus on the two that should be on everyone's watch list.

"As a trading vehicle, we like the iShares Nasdaq Biotechnology Trust (NYSE: IBB), the most popular and liquid of the biotech ETFs with an average trading volume of nearly one million shares per day.

"The bid/ask spreads are typically well maintained, even though it holds 123 stocks. This ETF mirrors the performance of the Nasdaq Biotechnology Index and has been steadily advancing the past two months.

"For longer-term investors, we like the S&P SPDR Biotech ETF (ASE: XBI), which holds 25 equally weighted stocks and tracks the S&P Biotechnology Select Index.

"XBI does a good job of mixing solid large cap names such as Amgen (AMGN) and Gilead Sciences (GILD) with riskier small cap fare. This ensures good diversification within the biotech space and gives you the opportunity to profit from the smaller players.

"XBI lagged the market dramatically since late February, making now a great opportunity to get on board without the risk of buying an overextended ETF.

"With health care on the front burner in Washington, these biotechnology ETFs may finally be ready to pop after missing the recent market rally.

"They offer exciting profit potential on Washington's next boondoggle, and their defensive characteristics may insulate investors if the market turns down again. To play health care reform defensively, go with IBB or XBI."

Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

Reiterating: Verizon - A smooth oceanliner amid choppy seas

2009-07-10T15:53:00.001-04:00

Posted Jul 10th 2009 3:00PM by Joseph Lazzaro @ http://www.bloggingstocks.com
Filed under: Verizon Communications (VZ), Stocks to Buy

I'm reiterating my Buy rating for Verizon (NYSE: VZ), first recommended on February 12, 2009 at a price of $29.86.

Verizon has born the brunt of the recession and related credit shocks well. Further, while VZ's landline business will continue to be pressured by wireless, cable, and Internet phone services, FiOS will prevent some of that attrition. Meanwhile, VZ's dividend is rock solid and it has ample cash.

And, as noted, Verizon boasts a large, moneyed customer base, and dominate positions in key markets. Underscoring, this is not a market for 'experimental' business models, which increases the appeal of VZ. The First Call FY2009/FY2010 EPS estimates for VZ are $2.53 to $2.67.

Stock Analysis: Verizon a low-risk stock. If you already purchased Verizon's shares, hold them. Verizon is an investment, not a trade. If you haven't purchased VZ, consider buying a 25% position in VZ now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your VZ position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $18.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

2009-07-07T13:19:00.002-04:00

Buy Oshkosh, by gosh

07-06-2009

From: BloggingStocks
It goes without saying that, if you're a defense contractor in an equipment sector preferred by the U.S. Department of Defense, you're in the catbird seat. Oshkosh Corporation (NYSE: OSK) is one. Here's why:

In general, analysts see good things ahead for special purpose vehicle manufacturer Oshkosh. Earlier this month, the company won a $1.05 billion contract from the U.S. Army to fund production of 2,224 MRAP all terrain vehicles for the Afghanistan War.
Follow-on contracts are expected in the years ahead, which will push OSK's defense revenue to well over $5 billion in FY2010.

Further, although FY2009 revenue is likely to decline 20-25%, the street has looked past that to the likely double-digit revenue gain in FY2010 on the defense contract win; institutional investors have bid up shares accordingly, taking OSK up to about $20 from roughly $5 in a scant four months. The First Call FY2009/FY2010 EPS estimates for OSK are a loss of 49 cents to a profit of $1.49.

Hence, Oshkosh is overbought short-term, so I'm recommending a Buy of OSK on a pull-back to $17-19. Note: Keep in mind that shares may not pull-back to that level. Other positives: continued signs of the U.S./global economic recoveries would provided an additional tailwind to OSK's commercial business, which includes basic trucks, earth movers, snow plows, concrete mixers, emergency rescue vehicles for airports, and ambulances.
Stock Analysis: Oshkosh is a moderate-risk stock. Consider buying a 50% position in OSK on a pull-back to $17-19; then buy another 25% in four months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your OSK position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $7.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

"Street Critique"-Hilary Kramer, Chief Market Strategist at Greentech Research on Nightly Business Report

2009-07-07T10:04:00.001-04:00

Wednesday, June 24, 2009

PAUL KANGAS:Tonight's "Street Critique" guest says investors must tread carefully in the current market. She's Hilary Kramer, chief market strategist at Greentech Research and author of "Ahead of the Curve." And Hilary, good to see you again.

HILARY KRAMER, CHIEF MARKET STRATEGIST, GREENTECH RESEARCH: It's a pleasure to be here, Paul.

KANGAS: This market seems to be bumping up against some resistance despite bad news, here there and the other place, like today's new durable goods orders very strong and yet the Dow ends down 23 points. What's going on?

KRAMER: Well, the problem is that we have a jobless recovery going on. Unemployment continues to rise, which means ultimately people don't have money to spend. The consumer has their hand against their back pocket and therefore stocks can't rise because the earnings won't be there and the market comes off.

KANGAS: How about today's open market committee decision? Were you impressed in any way?

KRAMER: Not at all, I was very disappointed with the Fed today because they spoke from both sides of their mouth. They wouldn't be clear. We have a recovery but it will take more time, and the bottom line is the Fed implicitly told us in their statement that mortgage rates are going to rise. If that happens, all the work that they've done will be for naught, because mortgage operates rising are going to put us back into a housing crisis.

KANGAS: So what are you telling your followers to do? What kind of a strategy in this market?

KRAMER: I've been very careful, as you know and very conservative. So what I say is be very, very careful, stay on the side lines, don't worry about jumping in and missing the opportunity in any kind of correction. We could have a five to 15 percent correction. But it doesn't mean that that's your entry point. Remember, the market just went up 40 percent; it can go down significantly.

KANGAS: So they should keep their gun powder dry for the moment?

KRAMER: Absolutely.

KANGAS: But yields in the Treasury market are so low, there must be some way to generate a little more cash?

KRAMER: Well I think the reality is that prices are dropping, especially in real estate. We don't have inflation right now like that was feared. So cash can go further and cash is king, because I've never seen this little money floating around. There's such a run for cash. So it's fine to have cash on the sidelines and make 3 percent in a certificate of deposit.

KANGAS: So you're saying that anything on the up side is nothing more than a non-lasting bear market rally, correct?

KRAMER: That's right. And the reason, Paul, is that it has taken us, it took us four years to get to this point, from 2003 to 2007, excess, creating profits from nothing on Wall Street. And now we can't just have a recovery in three months or six months; it doesn't work that way. We have to work through and pay for the excesses and the crimes of a few, but we will over time and the economy will improve and we are significantly better than the rest of the world in their situation.

KANGAS: Very good. Still bearish and every market rally we see should be sold into, is that what you're telling us?

KRAMER: I would say take your profits off the table if you went into the market in 2009. However, if you're a long, long-term investor, ultimately we will recover. It just isn't overnight, so you can stay there in the market and wait.

KANGAS: All right Hilary, very good. Thanks for being with us again.

KRAMER: Thank you, Paul.

KANGAS: My guest, Hilary Kramer of Greentech Research.

2009-07-06T16:36:00.002-04:00

Nothing Always Works, but Here Are 3 Market Truths (Tradecraft)

via SmartMoney.com by letters@smartmoney.com (Jonathan Hoenig) on 7/5/09

Three Market Truths

Even after trading for more than a decade, I still haven't figured out any market maneuver that always results in a guaranteed profit. From "Don't Fight the Fed" to the January Effect, markets are littered with a long list of "surefire" tips that don't always turn out.

It's a reality lost on many new investors looking for a quick score. Simply put, nothing "always works." When inefficiency develops in a competitive and open marketplace, opportunistic investors are quick to capitalize. This is what makes markets function.

So I don't know of an asset class, a time period, an investment style or an approach that always mints money. And if I did, I certainly wouldn't write about it online.

Turns out the truisms that always work have less to do with the markets than with the technique we use to approach them. This is congruent with our overall philosophy at Tradecraft -- that it's how you trade that has a much bigger impact on your results than what you trade. What follows are three market truths that speak to the importance of solid technique.

1. The shorter the time horizon, the more difficult it is to make money.

There's a fantasy, especially among new traders, that markets function as some sort of ATM machine to which you can roll up and make a withdrawal whenever the feeling strikes you. In reality, the shorter the time horizon, the more difficult it is to make money. That's why so many day traders fail miserably after even a few weeks time.

Traders in such an immense hurry forget the biggest wins come from buying and holding over a sustained move, not trading an investment away the minute it shows a gain.

2. Winning trades usually start out as winning trades.

Another truism holds that, more often than not, winning trades are profitable right from the start. Of course, it doesn't mean XYZ never goes a point against us, but that winning investments have a tendency to show a profit — even a modest one — within the first few days after having taken the position.

Where traders often fall off the track is that they take a position and hold on, even as it falls sharply below their initial purchase price. Of course, because of the mathematics involved, they end up digging themselves a hole out of which it's nearly impossible to climb. For Citigroup (C) to get back to the levels it was at two years ago, the stock needs to climb some 1,600%.

3. Avoid buying stocks solely because they are cheap or boast good dividends.

Finally, experienced investors know to avoid buying a stock or fund solely for cosmetic reasons — namely, because it's either low-priced or has an attractive dividend. Low-priced stocks, as we've covered in this space before, are the lottery ticket of the market world, albeit probably with worse odds. With a small handful of exceptions, low-priced stocks are low priced for a reason — and it's not because they're poised to make a miraculous comeback. Penny stocks, the pink-sheet-listed companies that trade for a few cents a share, should be avoided altogether.

Similarly, don't be fooled into buying a stock simply because of an attractive dividend, a common error, especially among older investors looking for income. The problem with picking a stock solely for the dividend is that not only can it be cut at the company's whim, but that the payout always ends up paling in comparison to the price action of the security itself. Just witness the performance of San Juan Basin Royalty Trust (SJT) or Provident Energy Trust (PVX): Even double-digit dividends couldn't help overcome the losses from holding shares as they fell with energy prices. Same goes for high-yielding REITs. Even a 10% dividend yields means nothing when the stock falls 25%.

2009-07-06T16:35:00.003-04:00

DuPont (DD): 'World class'

07-06-2009

From: BloggingStocks

"DuPont EI Neumours (NYSE: DD) is a world-class company with a world-class dividend yield," says growth & income expert Bryan Perry. Here's the latest from his The Cash Machine.

"Some of the biggest winners in a recovering economy are those stocks of companies engaged in the basic businesses such as industrial chemicals, plastics, and adhesives.

"The firm can implement price increases along the way, which could translate into phenomenal earnings surprises and set a stock like DuPont in motion higher.

"Since 1802, DuPont's business has been focused on science-based products and services. Currently, the company has operations in more than 70 countries, and offers a wide range of innovative products and services that include agriculture. It stays ahead of their competition by investing in research.

"With greater emphasis on the execution of its product development efforts, DuPont delivered more than $10 billion in sales from new products that are less than five years old in 2008.

"And in the first quarter of 2009, DuPont commercialized more than 500 new products to the market, nearly double compared to first quarter 2008.

"The shares are sporting a dividend yield of 5.70%, one of the highest yields for any blue chip stock traded today. 2010 sales are estimated to rise by 6.5%, and earnings are forecast to advance by 12% -- not bad for a company doing $26 billion in sales.

"In the latest quarter, the company earned 54 cents per share, beating Wall Street estimates by two cents, and maintained forward guidance for the second quarter.

"Overall, DuPont is a world-class company with a world-class dividend yield poised to benefit from the eventual upward pressures of inflation. From and fundamental and technical standpoint, DuPont looks good to go. The stock deserves to be on our Conservative High-Yield Buy List."

Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

2009-07-06T16:33:00.004-04:00

New McDonald's to include recharging stations for electric cars

07-06-2009

From: BloggingStocks

McDonald's (NYSE: MCD) struck gold when it entered the breakfast market decades ago. Today it's fighting for Starbucks' boutique coffee business. Where will it turn next to expand its business? How about electricity?

According to our sister blog, Engadget, a new North Carolina McDonald's will include electric vehicle (EV) recharging stations, part of the ChargePoint network. While you stuff your face, your car could be stuffing its battery.

The cross-marketing potential is intriguing. Since most current EVs take a couple of hours to recharge, McD's would have a captive audience to buy desserts and frou-frou coffee drinks to fill the idle time. It could offer discounts on fill-ups with meals, and Happy Watts meals for the kids. And with over 30,000 locations worldwide, what company is better placed to establish a recharging network?

It could also refuel those green vehicles retrofitted to run on French fry grease.

While this business might seem inconsequential today, given the paucity of EVs on the American roads, vehicles by major manufacturers such as Subaru and Mitsubishi are already rolling down the assembly line. The Subaru Stella will appear on the Japanese market in August, while the first Mitsubishi's i-MiEV will hit the road this month and go on sale to the public next April.

So welcome to McDonald's. Would you like some electrons with your Big Mac and fries?

2009-07-06T16:32:00.002-04:00

Paccar is undervalued

07-06-2009

From: BloggingStocks

Any experienced investor who has followed emerging markets knows that the global recession and accompanying decline in international trade has weighed on the truck manufacturing sector.

But now that it appears the global recession has bottomed, more-pleasant times are likely to return to the sector, which bodes well for PACCAR Inc. (NASDAQ: PCAR).

Look for PCAR's heavy truck segment to start to improve near the end of FY2009, with the drive to replace higher-emission trucks with lower-emission trucks providing an additional tailwind. Further, raw material costs are moderating.

In addition, shares have already priced-in continued softness in the developed world's North American market, so any upside surprise in that region will help shares move north. The First Call F2009/F2010 EPS estimates for PCAR are 46 cents to $1.21.

The qualifiers include a delayed global economic recovery, which would substantially hurt emerging market sales; still, with institutional investors sensing a better FY2010, the risk/reward is tipped toward the Buy for PCAR.

Stock Analysis: Paccar is a moderate-risk stock. Consider buying a 25% position in PCAR now; then buy another 25% in four months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your PCAR position before October 2009. Sell/stop loss if you were to buy shares in this company: $17.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

2009-07-04T14:11:00.003-04:00

All-American stock #3: Colgate-Palmolive (CL)

07-04-2009

From: BloggingStocks

My final all-American brand is Colgate-Palmolive (NYSE: CL). The company is well-known for its toothpaste and toothbrushes. But Colgate-Palmolive also owns dozens of strong brand names, including Irish Spring, Speed Stick, Ajax, and many others.

Some investors may think of Colgate-Palmolive as a dull stock. That's fine by me.

The shares are far less volatile than most stocks on Wall Street. Even though the market overall is well below the highs it reached in the third quarter of 2007, shares of Colgate-Palmolive were never punished nearly as hard.

During a recession, folks don't really cut back on their toothpaste and deodorant. The stock has a very good shot at making a new all-time high very soon. There aren't many banks that can say that.

Not only did Colgate-Palmolive manage to grow its earnings last year, but I currently project that the company will grow its earnings again in 2009 as well. Earlier this year the company raised its dividends by 10% and in April said they were comfortable with Wall Street's second-quarter earnings forecast.

At the current price, the stock pays a dividend of 2.4%, which is about as much as a five-year Treasury bond. Ben Bernanke may be snapping up Treasuries left and right, but a stock like Colgate-Palmolive is a far better long-term investment.

2009-07-04T14:10:00.004-04:00

All-American stock #2: Amazon (AMZN)

07-04-2009

From: BloggingStocks

The next all-American brand is the world's largest bookstore, Amazon (NASDAQ: AMZN). Actually, it's not quite correct to call Amazon just a bookstore anymore.

Relentless expansion has propelled Amazon in countless directions in the quest of bigger sales and profits. The company's main website now offers everything from books to auto parts to groceries!

Shoppers can also download digital content, such as games, MP3s, and movies to their computers or handheld devices -- including Amazon's innovative portable reader, the Kindle, which is on fire.

While the recession has cut into some retailers, Amazon has weathered the storm just fine. In fact, the recent success of Amazon is partly due to the fact that it allows shoppers to avoid sales tax. And on pricey items like plasma screen TVs, that's no small discount. AMZN has also captured a lot of market share from eBay, thanks to a suite of diverse and hard-to-find items, as well as the sale of cheaper used products alongside new items.

The stock is clearly catering to more frugal consumers, making it a great buy right now with tremendous growth potential as the recovery sweeps across the U.S. economy later this year. Earnings jumped 20% last quarter, and I'm looking forward to seeing another solid earnings report in late July.

2009-07-04T14:06:00.003-04:00

All-American stock #1: McDonald's (MCD)

07-04-2009

From: BloggingStocks

Leading off is one of the very symbols of U.S. capitalism, McDonald's (NYSE: MCD). You can't get much more American than MickeyD's.

The irony is that McDonald's strength recently has been due to its expansion in foreign markets.

There are currently more than 30,000 restaurants in 120 countries. Less than half of the restaurants are located in the United States. McDonald's has been doing especially well lately, thanks to the recession.

Last quarter, McDonald's beat Wall Street's earnings estimate by a penny a share, 83 cents to 82 cents. That was their 10th straight quarterly earnings beat. The shares have been pulling back for the past few weeks, making now a perfect time to add MCD to your portfolio.

The next earnings report is scheduled for July 23, and I expect to see more good results. The weak dollar should especially help McDonald's bottom line.

2009-07-02T18:36:00.003-04:00

Chasing Value: 2009 picks 731% better than S&P -- 2nd quarter review

07-02-2009

The second quarter is now behind us and for the most part it was a positive one in terms of the market pushing higher almost 40%. This is the second review of my 2009 stock picks through June 30 (see: Chasing Value: 9 picks for 2009 -- APC, GE, ISRG, WFC and more). There was a lot of talk about green shoots this past quarter as Wall Street was looking for any small bit of optimistic data to support the market.

The federal printing presses continued to run at full speed pushing the dollar lower and oil prices higher. While the feds were printing money to cover their deficits, the States do not have that same luxury and many of them are having trouble balancing their budgets to the tune of billions of dollars.

California raised sales taxes and many fees to try and make up some of the shortfall but remains $24 billion in the red, so today it started issuing IOU's, which sent me ranting.

In my first review the big winner was American Eagle Outfitters (NYSE: AEO), and it remained the best performer. In addition five of the nine stocks were in positive territory this time around, improving significantly.

On March 9, I posted Nostradamus was a punk! Have we reached bottom? -- what timing! So far that remains the low point.

Contrasting American Eagle Outfitters (NYSE: AEO), the big loser after the last review was Wells Fargo & Company (NYSE: WFC), however, WFC picked up a steam in the second quarter, besting our new loss leader EZCorp Inc. (NASDAQ: EZPW) by a large margin.

Among the nine stocks, seven originally paid a dividend. The average yield for the nine stocks was 4.82% when the year started. However, during the first quarter AAUK stopped paying a dividend and GE and WFC cut their dividends substantially, reducing the average payout to 3.31%. This is still a nice yield but not nearly what I hoped for.

In previous yearly recommendations I included both stocks that I owned and did not own, for 2009 I own all of them. I have been a buyer throughout the turbulence and have benefited by capitalizing on others' fears. I have reviewed the nine stocks from year end as of the date of the December post and also from my cost basis, which is not a static point, and there is a big difference in results.

Review based on December 30 closing price: The average change ended positively gaining 7.65%, but adding the dividend of 1.66% (3.31 x ..5) totaled 9.31%, a decent gain, beating the DJIA and S&P by a large margin but losing out to the NASDAQ which made strong gains. There were five winners among the nine this time.

American Eagle Outfitters (NYSE: AEO) improved dramatically from $9.13 to $14.17 for a 55.2% gain.
Anadarko Petroleum (NYSE: APC) went from $37.95 to $45.39 for a 19.6% gain.
Anglo American ADR (NASDAQ: AAUK) began at $11.37 and increased to $14.63 for a 28.67% gain.
Annaly Capital Management (NYSE: NLY) started at $15.29 going to $15.14 for a 1% loss.
Diageo plc (NYSE: DEO) was $55.65 and rose to $57.25 for a 2.88% gain.
EZCorp Inc. (NASDAQ: EZPW) sank from $14.81 to $10.78 for a 27.21% loss.
General Electric Company (NYSE: GE) was initiated at $15.82 compressed to $11.72 for a 25.92% loss.
Intuitive Surgical Inc (NASDAQ: ISRG) was $124.34 but sprang up to $163.66 for a 31.62% gain.
Wells Fargo & Company (NYSE: WFC) began at $28.80 improved a lot but still lagged behind at $24.26 for a 15.76% loss.

Review based on my cost to date: The average return was a whopping 21.88.% gain, plus the dividend of 1.66% (3.31% x .5), totaling 23.54% beating the market and besting the Standard and Poors Index by 731%. Current yields are in parentheses. Acquiring additional shares reduced my basis on several stocks. Seven out of the nine ended June in positive territory.

American Eagle Outfitters (NYSE: AEO) from $8.99 (4.39%) up to $14.17 for a 57.62% gain.
Anadarko Petroleum (NYSE: APC) from $34.00 (0.97%) up to $45.39 for a 33.5% gain.
Anglo American ADR (NASDAQ: AAUK) from a lower $9.80 (cut to 0%) up to $14.63 for a 49.29% gain. This is the only stock of the nine I chose to sell on the upside and buy back two days later. I am not counting the gain from the sale, just the current buy-in price.
Annaly Capital Management (NYSE: NLY) doubled down lowering the average to $14.40 (15.01%) and ending at $15.14 for a 5.1% gain.
Diageo plc (NYSE: DEO) added shares reducing the average to $49.48 (4.67%), which rose to $57.25 for a 15.7% gain.
EZCorp Inc. (NASDAQ: EZPW) adding shares reduced the average to $12.34 (0%), which closed down to $10.78 for a 12.64% loss.
General Electric Company (NYSE: GE) held at $16.00 (reduced to 3.03%) that dropped to $11.72 for a 26.75% loss.
Intuitive Surgical Inc (NASDAQ: ISRG) added shares reducing the average to $119.27 (0%), which jumped to $163.66 for a 37.22% gain.
Wells Fargo & Company (NYSE: WFC) added shares several times reducing the average significantly to $17.60 (cut to 1.76%), which improved to $24.26 turning around for a huge 37.84% gain.

Review of the three major indices: Two were up and one was down. The average return was a 6.31% gain, plus the dividend of 1.2% (2.4% x .5) totaling a 7.51% return if you invested in all three equally.

The Dow Jones Industrial Average (DJIA) dropped from 8,668.39 to 8,447.00 for a loss of 2.6%.
The NASDAQ Composite sprang from 1,550.70 to1,835.04 for a very good gain of 18.34%.
The S & P 500 Index fell from 890.64 to 919.32 a gain of 3.22%.

The 2009 picks are doing very well so far although the NASDAQ has shined even more brightly. My own portfolio obviously is managed and responds to opportunities that the fixed portfolio from December is not meant to do.

Any suggestions you find on our site are subject to change rapidly and you cannot depend on following blindly given so many variables, and hope to come out with similar results to another investor. I made changes during the first six months of the year; I reported many of these trades, but did not have the time or the obligation to report every detail.

In addition actual portfolio results beyond these picks were juiced dramatically by naked puts at moments of extreme fear. As an example, I "sold to open" a position in Bank of America (NYSE: BAC) at a May strike price of $7.50 expiring next Friday May 15. I was paid $1.45 per share and on Friday May 8 the premium had dropped down to 2 cents and it will go to zero and expire. I posted several stories on this subject see: Chasing Value: Will we be eating out of trash cans?

American Eagle Outfitters: I have been surprised that a retailer is the winner among my picks but AEO has a very strong balance sheet with about 10% of its capitalization in cash, when last I checked, and no debt.

Anadarko Petroleum: APC has moved up as oil has moved up. Having 70% of its reserves in North America remains a very positive attribute. Natural gas prices have remained soft but if this changes it should contribute to further gains .

Anglo American: last time I reported that AAUK had eliminating it's dividend, sold off assets, closed mining operations, cut its workforce in an effort to "right-size the company. It has succeeded to some degree and clearly this has been recognized by other. Serious Money: Anglo American - Xstrata merger?

Annaly Capital Management: The stock is just floating along for the most part paying its sizable dividend as planned, and that alone has beaten the market by a lot.

Diageo: The company has been on the upswing for the past two months. The company has been wheeling and dealing globally with noteworthy activity in China and India, bringing out new products and making changes in its manufacturing plants.

EZCorp: This has been my biggest surprise and for reasons beyond my grasp. The company continues to grow and prosper but the stock is doing poorly.

General Electric: GE has been issuing press releases faster than any company I know of. It still pays a dividend, and raised its cash position, but still struggles under the shadow of its financial division and the threat of unknown damage that could be caused by its commercial mortgage and real estate assets.

Intuitive Surgical: ISRG made a strong move after dropping below $100 dollars a share. They still have a great product and no competition but there are those that think hospital budgets will constrain potential near term growth.

Wells Fargo: WFC has been down with the financial sector and rebounded with the sector as well. The bank is benefiting from reduced competition, lower interest rates, and higher margins and a lot of refinancing that has been spurred as a result. They have reported that a third of the Wachovia branches they inherited will be closed.

I will review the picks again after the third quarter and at year's end. After climbing for almost 12 weeks the market is down on worrisome employment data. Since this is not a surprise and also a lagging indicator I wonder if the market is not responding more to the upcoming long weekend.

I know that a lot of people are still sitting on the sideline earning little so I posted Serious Money: Five high-yield, safe, diversifed stocks to show those folks that you can participate relatively safely in the market and make a profit while waiting out better times.

I wish all my readers a joyous and peaceful 4th of July week end. Even in these troubled times I would not want to live anywhere else.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of all nine stocks as indicated.

2009-07-02T14:23:00.002-04:00

POT Smokes The Market: Up 7% on Russia, Industry Developments

via BARRONS.com: Stocks To Watch Today by Tiernan Ray on 7/2/09

Shares of fertilizer makers Potash of Saskatshewan (POT), and Intrepid Potash (IPI), are jumping today after positive remarks from trade Web site Agriculture.com, which suggest that a recent slump in prices is not likely to last, and urging farmers to buy fertilizer now.

Potash and the rest of the industry have struggled with slumping demand, in the face of which, they have refused to lower prices, believing that demand will bounce back with an economic rebound.

Agriculture.com comments on the International Fertilizer Association's 2009 to 2013 report, which says demand could snap back this year after last year's slump. After a 14% decline in fertilizer consumption overall this year, globally, the IFA predicts a 3.6% rise from this year to next, as farmers regain credit and commodity prices stay high.

Adding to today's enthusiasm, Uralkali, Russia's second-largest potash maker, said today it would raise prices 20% on rising demand for complex fertilizers, Bloomberg reports.

I've written in a recent "Barron's Take" that Potash has what it takes to weather this downturn till demand picks up.

Potash shares today are up $6.37, or 7%, at $97.26, while IPI stock is $1.64, or 6%, at $28.84.

4 Gadgets to Stay Connected on the Road (Deal of the Day)

2009-07-02T13:57:00.000-04:00

by letters@smartmoney.com (Kelli B. Grant)

As Americans look to save on travel costs and gasoline prices hold fairly steady, more people are turning to their own cars to get them where they want to go. But few sounds drown out the joy of a summer road trip faster than a backseat chorus of "Are we there yet?"

Fortunately for the chauffeurs of the vocal and impatient, gadget makers have released new devices designed to make car trips easier for passengers, not to mention drivers. Among the possibilities: tuning into live TV while idling in traffic, getting enough battery power from your computer to play the entire "Harry Potter" DVD lineup back-to-back, and turning your cellphone into a radar detector.

SmartMoney.com talked to auto and electronics experts, as well as drivers, to find car-worthy gadgets. Here are four ways to stay in touch on the road:

1) Live TV

New satellite services ensure that a lengthy road trip doesn't mean the family misses the latest episodes of hit summer series like "Burn Notice," or popular kids' shows, such as "Hannah Montana." "This would be a lifesaver," says Lisa Tyler, a spokeswoman for social networking site MomsLikeMe.com. She routinely sets up the car's DVD player with videos for her four-and-a-half year-old twin boys but says it's tough to keep their interest with the same shows on the family's annual 14-hour summer roadtrip from Virginia to Florida. "With TV, you get the variety of programming," Tyler says.

Systems can be installed in most vehicles, as long as you have an FM radio and a monitor. The technology is still in early adoption, so expect to pay steep fees for equipment. A few systems on the market:

AT&T (T) CruiseCast. Browse the lineup of 42 satellite TV and radio channels, including Disney (DIS) XD, Discovery Kids, Animal Planet and Accuweather. The antenna/receiver combo costs $1,300, and a monthly subscription is $28.
DirecTV (DTV) Total Choice Mobile. Watch any of the satellite service's 185 channels, including the major networks and niche offerings like The History Channel and Spike. The service requires a subscription to the satellite provider (packages start at $30 per month) and an unobtrusive receiver (roughly $2,000) to be installed on your vehicle's roof.
Sirius (SIRI) Backseat TV. Programming is currently limited to three kid-friendly channels: Nickelodeon, Disney Channel and Cartoon Network. To set up the service you'll need an audio/video tuner ($300), as well as a monthly subscription ($7, in addition to regular satellite radio subscription fees, which start at $7 a month).

2) Power converter

Forgot the car charger for your favorite electronic device? No sweat. Inexpensive power converters enable you to power any device that uses a standard plug, including your cellphone, your laptop or a blender for smoothies near the beach. This coffee-cup-shaped version ($30, from ThinkGeek) plugs into the cigarette lighter in your vehicle. It can power up to three devices at the same time, and fits into the car's drink holder for easy storage and access.

3) Your smartphone

Whether he's driving the family car or his motorcycle, debt counselor Steve Rhode of GetOutofDebt.org always brings his Apple (AAPL) iPhone along for the trip. "It's my travel essential," he says. "I rely on it." In addition to music and games, Rhode has loaded his phone with apps to make his trips easier, including weather monitor RadarScope ($9.99 on iTunes) and "AroundMe" (free), which locates the nearest restaurants and other amenities. "I can make a more informed decision about where I get off the highway," Rhode says. A few other useful apps for the road:

Trapster. Avoid speeding tickets with this free app for the BlackBerry, iPhone, Android device or other phone operating system. It uses GPS to alert you when you're approaching known speed traps, red-light cameras and speed cameras.
SitorSquat. This free app for BlackBerry and the iPhone uses GPS to find nearby restrooms. An active user community rates each from zero to five stars for cleanliness.

4) GPS

New standalone and dashboard models on the market do more than direct you from Point A to Point B. Some alert you to congested roadways and offer alternate routes to cut your travel time. Voice activation commands let you keep your eyes on the road and your hands on the wheel. A handful — like the Garmin (GRMN) nüvi 265WT (on sale at Best Buy for $220, a 33% discount) — include Bluetooth technology, which allows you to reroute cellphone calls through the device's built-in speakers and microphone. "We're all in favor of anything that prevents distraction in a vehicle," says Fran Clader, a spokeswoman for the California Highway Patrol, which has issued more than 100,000 citations to drivers using handheld cellphones on the road. And in New Jersey, hands-free might soon be the only legal way to operate your GPS.)

Many GPS models also include programs that can play your MP3 collection, point you to the nearest bookstore or amusement park and locate the cheapest gas around.

2009-07-02T13:51:00.001-04:00

Step up to Nike (NKE): A 'great company'

07-02-2009

"The conditions are in place for a 'Best Buy' opportunity," says Jim Stack, whose buy signal should receive special attention give the accuracy of his sells signals which side-stepped the bear market.

In addition, the money manager and editor of Investech Market Analyst is beginning to increase his equity positions, such as Nike (NYSE: NKE). He states, "With a portfolio of iconic brands, an identified growth strategy, recognized innovation, and sound financial footing, Nike fits the bill of being a great company."

"Very rarely do we have all these conditions in place – that's only occurred five times in the last 45 years. Historically, this means we should give the growing evidence of a new bull market every benefit of doubt.

"While it's true the market has moved quickly, we must remember that this would still be early in the cycle compared to historical bull markets. We are only three months past the March 9 low, and bull markets typically last 2-5 years, with an average length of 3.8 years.

"Although this may not turn out to be a long bull market like the 1990s or 2002-07, given the massive stimulus and its potential aftereffects, it should be clear sailing through this year and into 2010.

"Nike is the largest seller of athletic footwear and apparel in the world. Mark Parker, CEO of Nike, is not content with business as usual. Management is quick to reaffirm the principles that have won Nike an industry leading position – innovation, consistency, and competitive fire.

"Nike is both an innovator and industry leader. In the roughly $20 billion market for athletic footwear, Nike dwarfs its nearest competitor with a nearly 50% market share.

"Nike immerses itself into each product's culture and maintains close connections with the athletes they seek to serve, both professionals and weekend warriors.

"Innovation is leveraged into an offensive strategy. Over 60% of Nike sales are international, which is providing growth even as the domestic market for athletic wear becomes saturated.

"Specifically, the Asia Pacific region is seeing tremendous gains as consumers trade-up in brand due to a burgeoning middle class and the relative affordability of Nike's discretionary products.

"The company's balance sheet currently boasts over $2.6 billion in cash – enough cash to pay-off all of the firm's debt three times over. This in itself highlights Nike's easily manageable long-term debt to capital ratio of 5.3%.

"On a historic basis, all of the major valuation metrics (Price/Cash Flow, Price/Earnings, Price/Book Value, etc.) have Nike at a discount to median. Bottom line, the current economic upheaval is providing the opportunity to own a premier growth company at a very attractive price."

Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

2009-07-01T20:40:00.000-04:00

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2009-07-01T16:38:00.003-04:00

That's America: 10 Stocks Launched by Immigrants (On the Street)

via SmartMoney.com by letters@smartmoney.com (Dan Burrows,Jason Kephart) on 6/30/09

America may be the great melting pot, but it hasn't always fully embraced the immigrants who have arrived on its shores and helped build its foundations. For years, there have been heated debates over everything from how many visas the government should issue to whether newcomers to America are stealing jobs and lowering wages for U.S. citizens.

Indeed, former Pennsylvania Senator Rick Santorum rose to national prominence partly on his support for building a barrier along the border with Mexico. On the other side of the debate, the Obama administration has pledged to make creating a path for illegal immigrants to become legal a top priority.

But no matter where people stand on the immigration issue there is one thing that isn't up for debate: Foreign-born entrepreneurs have founded some of the nation's biggest companies, and have been responsible for employing millions of Americans over the course of U.S. history.

See 10 companies that were started by immigrants

Nearly 30 years after coming to this country, Vivek Wadhwa, an Indian immigrant, two-time entrepreneur and visiting scholar at the University of California, Berkeley (he holds similar appointments at Harvard and Duke Universities) co-authored a study that found that, between 1995 and 2005, more than a quarter of the nation's tech startups had at least one founder who was foreign born. Perhaps more important, immigrant-founded tech companies generated more than $50 billion in annual sales and, in 2005, employed some 450,000 people. The numbers are even greater if you look beyond the tech sector, he says.

"America is the most desirable country in the world for a foreigner," says Wadhwa. "And it is also the most entrepreneurial society on earth. America encourages risk-taking. It's called the American Dream."

From the French-born founder of DuPont (DD) who started out selling gunpowder in the early 1800s to Hungarian-born Andy Grove, the co-founder of Intel (INTC), corporate America and Americans have long benefitted from such risk-taking immigrant entrepreneurs. With Independence Day upon us, SmartMoney surveyed the corporate landscape looking for major American companies that were founded by immigrants. From the bluest (and oldest) of blue chips to the biggest of upstart tech giants, here is a look at 10 companies that fulfill the promise of the American Dream -- and provide tens of thousands of Americans with jobs.

Carnival Corporation

Founder: Ted Arison
Born in Israel
U.S. employees: 36,500

Israeli-born Arison started Carnival Cruise Lines in 1972 with a single ship – The Mardi Gras. But the party got off to a slow start. By 1974, the fledgling cruise line was struggling so much that Arison was able to buy full ownership of the company for $1. Now 35 years later, Carnival Cruise Lines has morphed into Carnival Corporation (CCL), which operates 11 separate cruise lines, and has a market cap of over $26 billion. The swine flu outbreak and consumers cutting back on travel haven't helped the company's bottom line this year. Analysts on average are expecting sales to fall 11% from 2008 to $13 billion, according to data from Thomson Reuters. The consensus is that 2010 will offer some calmer seas, with sales expected to rise to around $14 billion.

The photos in this article were supplied by the companies, except for the following: Pierre Omidyar and Sergey Brin are from Getty Images; Ted Arison is from the National Foundation for Advancement in the Arts.

DuPont

Founder: Éleuthère Irénée du Pont de Nemours
Born in France
U.S. employees: 25,000

DuPont (DD), the world's second-largest chemicals company and a long-time component of the Dow Jones Industrial Average, has given the world everything from nylon to Lycra to Teflon, but it started out as a humble gunpowder manufacturer in 1802. Éleuthère Irénée du Pont de Nemours, the son of a Paris watchmaker, came to the U.S. two years earlier to escape the violence of the French Revolution. By the mid-1800s, DuPont was the largest supplier of gunpowder to the U.S. military.

Based in Wilmington, Del., the company now operates in 70 countries and employs workers in nearly 30 U.S. states. As a basic materials company and early cycle stock, DuPont is well poised to benefit from an upturn in the global economy, especially when it comes to Chinese stimulus spending, says Laurence Alexander, an analyst at Jefferies & Co., who rates the company's shares at Outperform.

eBay

Founder: Pierre Omidyar
Born in France
U.S. employees: Approximately 10,000

French-born Pierre Omidyar's eBay (EBAY) not only employs roughly 10,000 Americans, but there are thousands more who have made a living off of the company he founded by auctioning items from their basements and attics. Born to Iranian-immigrant parents, Omidyar moved to the U.S. when he was 6. After graduating from Tufts with a degree in computer science he went to work at a subsidiary of Apple (AAPL), grinding out code by day -- and working on his entrepreneurial venture at night. Launched in 1997, eBay now claims the title of the world's largest online marketplace, but its outsize growth has cooled off due to competition from Amazon.com (AMZN) and other online retailers. Whether new Chief Executive John Donahoe, who succeeded Meg Whitman a year ago, can reinvigorate this growth story remains to be seen, says Benchmark analyst Frederick Moran, who rates shares at Hold.

Google

Founder: Sergey Brin
Born in Russia
U.S. employees: Approximately 13,000

Born in Moscow, Brin immigrated to the U.S. at age 6. After graduating from the University of Maryland, College Park, with a bachelor's degree in science (and with honors in mathematics and computer science), he enrolled at Stanford University's prestigious graduate school in computer science where he met Larry Page. The two founded Google (GOOG) in 1998 and Brin -- now President, Technology -- is part of the three-man team (including Page and Chairman and Chief Executive Eric Schmidt) that shares day-to-day responsibility for running the company. At one point Google's growth seemed unstoppable, but the recession has taken a toll on its share price. Regardless, the company continues to grab market share in the all-important search business, making the stock a Buy, according to Jefferies analyst Youssef Squali.

Intel

Co-founder: Andy Grove
Born in Hungary
U.S. employees: Approximately 44,000

A refugee of the Hungarian Revolution, Grove immigrated to the U.S. under cover of darkness in 1956. After earning a bachelor's degree from City College of New York and a Ph.D. from U.C., Berkeley in 1963, Grove worked in the semiconductor industry for the next few years until becoming the fourth employee of a start-up called Intel (INTC), which was launched in 1968. Grove transformed Intel from a maker of memory chips to a manufacturer of microprocessors. The rest, as they say, is history: Today this Dow component is the world's largest maker of central processing units, or CPUs -- the central brain in the majority of the world's PCs. As an early cycle stock that's very sensitive to an uptick in the global economy (and a major exporter that benefits from a weaker dollar), Intel's fortunes look bright as the economy recovers, or so the thinking goes in the market. Investors have pushed Intel's stock up 30% since the broader market bottomed in early March.

Nvidia

Founder: Jen-Hsun Huang
Born in Taiwan
U.S. employees: 3,300

From rising ping pong star to the co-founder of a $6 billion graphics chip maker, the career track of Taiwan-born Jen-Hsun Huang has been event-filled to say the least. As a teenager, Huang was a nationally-ranked table tennis player; he competed in his first national tournament at the age of 14 in Las Vegas. He earned a degree in electrical engineering at Oregon State University and a masters at Stanford University. In 1993, he co-founded Nvidia (NVDA) with Chris Malachowsky and immediately began serving as president and CEO. It took two years for the company's first product to launch, but it's been on a roll ever since. One of their crowning achievements? Graphics technology that makes the yellow first-down line appear on live football games. The stock took last fall's crash particularly rough: It fell 76%. But so far this year it's risen 43%.

Pfizer

Founders: Charles Pfizer and Charles Erhart
Born in Germany
U.S. employees: 30,000

It sounds like something out of a bad sci-fi movie: Two German chemists, cousins in fact, move to America seeking opportunity and find it – battling parasitic worms. But that's how this pharma giant got its start. Charles Pfizer and Charles Erhart came to the U.S. in 1849, with a $2,500 loan, and set up shop in Williamsburg, Brooklyn. The cousins' first pharma hit was Santonin, a drug used to fight tapeworms. Today, Pfizer (PFE) sells blockbuster drugs like the cholesterol-fighting Lipitor, which brings in $12 billion a year, more than a quarter of the company's 2008 sales. Linda Bannister, a senior health care analyst at Edward Jones, is concerned that when Lipitor loses its patent protection in 2012, the company will be hard-pressed to replace those sales. But its pending acquisition of fellow drug maker Wyeth (WYE), which had $23 billion in sales last year, should help ease any withdrawal symptoms.

Procter & Gamble

Founders: William Procter and James Gamble
Born in England and Ireland, respectively
U.S. employees: Almost 40,000

Look around your home and you're likely to find P&G's (PG) products everywhere. From Tide detergent to Pampers diapers to Crest toothpaste, the nation's biggest consumer products company and Dow component is truly a red, white and blue chip. Less well-known is that it was founded in 1837 by an English candle maker named William Procter and a soap maker from Ireland named James Gamble. Another interesting piece of P&G trivia: In 1887, the company instituted a pioneering profit-sharing program that gave employees ownership stake in the company. Today P&G investors -- both those who are employed at the company and those who are not -- can scoff at the notion that the U.S. equity market is suffering from a lost decade. Instead, they can take comfort in the fact that this stalwart consumer staples stock outperformed the broader market by a full 50 percentage points over the last 10 years.

U.S. Steel

Founder: Andrew Carnegie
Born in Scotland
North American (figure includes Canada) employees: 28,680

Pittsburgh's always been the home of the Steelers, but before there was Terry Bradshaw, Chuck Noll and the Steel Curtain defense, there was Andrew Carnegie and the Carnegie Steel Company. Carnegie, a Scottish immigrant, formed the company in the 1870s. In 1901, it was sold to Elbert H. Gary and J.P. Morgan, who already owned the Federal Steel Company. Together, the two steel manufacturers formed the nucleus of United States Steel Corporation (X), which today produces 31.7 million tons of raw steel annually. The past 18 months haven't been kind to the steel giant -- sagging demand has sent the stock price down more than 65%, but the company's been down this road before. Ten years ago, the steel industry hit a similar rough patch and U.S. Steel's stock fell 64%, only to bounce back and gain 621% over the next six years.

Yahoo

Founder: Jerry Yang
Born in Taiwan
U.S. employees: 6,000

What started out as a directory of web sites eventually grew into one of the most trafficked sites on the internet, thanks in large part to its Taiwanese co-founder Jerry Yang. Yang, along with fellow Stanford University Ph.D. candidate, David Filo, began creating the web site that would later be named Yahoo (YHOO) in 1994. Two years later Yahoo went public, with just 46 employees. Now it employs 260 times that amount world-wide, and roughly 6,000 in the U.S. Yang traded in his title of Chief Yahoo to take the helm as CEO in 2007. But the role wasn't for him – Yahoo's earnings fell 1% to $1.8 billion and its stock dropped 58% to $12 a share in less than two years. Yang handed over the CEO title to Carol Bartz in January and returned to his Chief Yahoo post. Analysts like Jefferies' Squali have high hopes that Bartz can reinvigorate Yahoo's growth. Squali rates the company's shares a Buy.

10 best stocks for 2009: Doing fine

2009-07-01T14:56:00.001-04:00

A mid-year review of our market-beating picks for investors.

By Jon Birger, senior writer

June 26, 2009: 11:42 AM ET

NEW YORK (Fortune) -- So far, so good.

Our 10 "Best Stocks for 2009 -- as featured in Fortune's annual Investor's Guide -- have returned 22.5%. That's eight percentage points better than the total return of the Standard & Poor's 500 (SPX) over the same period (from Dec. 1, 2008 through June 25, 2009).

Only one of our picks lost money (Devon Energy), while seven boast double-digit returns. Here's a run-down on all 10:

Altria (MO, Fortune 500)

We thought the cigarette maker would prove to be a good defensive stock, and indeed, Altria has returned 15.1% and still boasts an 8% dividend yield. Better still, new tobacco regulations just passed by Congress -- limiting cigarette advertising and prohibit new flavors -- will help protect the dominant market share of Marlboro and other Altria brands.

Bottom line: Hold.

Annaly Capital Management (NLY)

Our argument for Annaly boiled down to the stock being misunderstood. Since then, the stock has returned 26.9% thanks in large part to Annaly's 14% dividend yield.

Structured as a REIT, Annaly is basically an investment fund that buys Fannie Mae or Freddie Mac-guaranteed mortgages with borrowed money. In this environment that sounds scary. Fact is, with the government takeovers of Fan and Fred, Annaly's business model has never been more secure. Not only that but Annaly's interest rate spread -- the margin between what its mortgages are yielding and the interest Annaly is paying on its debt -- widened to 2.08% at the end of the first quarter from 1.46% the same period last year.

Bottom line: Buy.

Dell (DELL, Fortune 500) delivered at 35.8% total return, but we got a little lucky with this one. We predicted that Dell's market share gains in 2008 would continue into 2009. What happened? Dell has seen its share of the worldwide PC market fall from 14.7% to 13.1%, according to Gartner. Dell's net income fell 63%.

Bottom line: Count your blessings and take profits.

Devon Energy (DVN, Fortune 500)

Devon is basically a natural gas play, which explains why the stock has lost 12.8%. While oil prices have doubled since February, natural gas prices have actually fallen. That cannot hold.

Bottom line: Buy.

Diamond Offshore (DO)

Diamond is a leading offshore driller, and the rebound in oil prices has driven Diamond stock to a 40.9% total return. We still like the stock -- particularly the $8 a year in regular and special dividends -- but there is something of a disconnect right now between oil prices (which are rising) and demand for drilling rigs (which is falling).

Bottom line: Take profits.

Fluor (FLR, Fortune 500)

A construction and engineering firm, Fluor has returned 27.1% with investors betting the company will be a big beneficiary of all the new infrastructure spending included in President Obama's stimulus plan. That's still a wise bet.

Bottom line: Hold.

Johnson & Johnson (JNJ, Fortune 500)

We called it a comfort stock, and the label still applies, despite underperforming the market with a 3.5% total return. Part Big Pharma, part consumer staples giant, J&J boasts a healthy dividend yield (3.6%) and a low price-earnings ratio (12).

Bottom line: Hold.

Medco Health Solutions (MHS, Fortune 500)

The largest pharmacy benefits manager (or PBM), Medcocould be one of the biggest beneficiaries of health reform. President Obama wants to use technology to bring down healthcare costs and that's Medco's forte. The stock has already returned 18.9%, and we think more gains are coming.

Bottom line: Hold.

Pfizer (PFE, Fortune 500)

A classic value play, Pfizer has been weighed down by the healthcare reform debate, which is why it's lagged the market with a 3.7% return. But with a 4.3% dividend yield and a 6 P/E, we're comfortable betting that whatever legislation is ultimately passed, it won't do much to derail the demographic freight train pushing demand for pharmaceuticals ever higher.

Bottom line: Hold.

Potash Corp. of Saskatchewan (POT)

Let this be a lesson. The next time you see a leading company in a growing industry trading at a mere three times earnings, scoop that stock up ASAP no matter how scary the overall market may seem. Potash Corp. is up 66.1% since December. While we remain fertilizer fans, locking in some of those gains makes sense.

Bottom line: Take profits.

How Not to Get Laid Off

2009-07-01T14:45:00.001-04:00

by Ariane de Bonvoisin and John Kilcullen
Wednesday, June 24, 2009provided by

Managing your career: Ariane de Bonvoisin and John Kilcullen identify 10 skills you need to survive the next round of layoffs at your job

What's triggering fears and sleepless nights for many of us about the unemployment abyss is not the job-loss stats themselves, but the depth of the cuts—and the qualifications of some of the people getting jettisoned. The questions we keep hearing are: Why do highly skilled, seemingly essential people get cut while others don't? Are there patterns? How can I make myself indispensable?

In talking with employers about what they most value in employees right now, it became clear that the key to surviving isn't so much about the skills you have, the awards you've won, or the tasks you perform day in and day out. It's as much about qualities, habits, and capacities.

This is no time to keep plugging along head down, half expecting every meeting invitation you open to be your exit interview. You must take action to embody the qualities of those employees who always get promoted and always avoid the next round of layoffs.

And don't think that just because your company isn't downsizing or has said it has no plans to that you're safe. Things can and do change fast in this environment, so take preventive measures. Plus, the kinds of qualities we're talking about will serve you well when things turn around.

1. Remember: It's Not About You Right Now

Force yourself to focus with laser accuracy on your company's success, not your own. In challenging times, the last thing your employer wants is to cater to you and your fears. They want you to be a selfless, highly collaborative team player who meets and exceeds your commitments. Your presence can't be an energy drain or create work.

2. Become a Black Belt at Change

The most important skill to develop right now is finesse at navigating change. That means flexibility and open-mindedness. Accept whatever management throws your way. If they change direction (again), shuffle the product mix, add new goals, or refine strategy on the fly, say yes to all of it. Resisting change only makes life more difficult for management and for everyone.

This also applies to those things you took for granted. Accept that your expense budget and staff have been cut. Accept that you now have more work on your plate with the same (or fewer) resources than you had a year ago.

3. Everything Is Your Job

Demonstrate your commitment to the overall success of your team and your company by taking on tasks that fall outside your job responsibilities. Pitch in on packing up the trade-show booth. Manage your own schedule/address book/travel plans. Offer to take notes and follow up after every meeting.

Nothing is beneath you. The little things you do above and beyond your job description will serve you well when it's performance appraisal and/or downsizing time. Forget your fancy title, your impressive résumé—and your ego.

4. Walk Away from the Water Cooler

When straits are dire and headlines scary, the last thing your company needs is negative, gossipy employees who polarize colleagues into an us-vs.-them dynamic. Employers value passionate overachievers whose uplifting attitude contributes to a more energizing team culture. Whatever it takes, keep the negative mindset out of the office. This is your mantra: No complaining, no blaming! Dwell on what can be rather than what can't.

5. "Unwritten Rules" Are Now Engraved in Stone

Show up early, stay late. Everyone notices people who leave on the dot of 5 (or before) or take very long lunches or excessive coffee/smoking breaks. Don't get a reputation for being one of those people who takes forever to respond to an e-mail, voicemail, or a simple question. Vigilantly follow up on all assigned action items. Management is increasingly scrutinizing your every move.

6. Step Up—and Wear Very Big Shoes

Don't wait for someone else to solve your problems. Your manager needs to hear how the organization can trim costs, manage the supply chain better, find a new client, improve processes, motivate the workforce, and deliver the next big thing.

Observe what your competitors are trying and testing, read everything relentlessly, and ask people how you can improve what you do.

Your goal here is to make sure there'd be a gaping hole if you were no longer around. Make the choice every day to do work that really matters to the success of the team and the company. Put yourself in a position that is crucial to the success of a new initiative, or dig in to solve a vexing, long-neglected problem. Maintain a bias for action in every meeting.

7. Transparency Is Your New Trump Card

You must be totally transparent as to what you're working on and how it fits with management objectives. There can be no hiding, and no withholding information. If you don't have enough on your plate, say it. Ask to take on more—or better yet, suggest projects you can spearhead that have killer ROI.

The more honest your superiors believe you are, the more likely they are to trust you and keep you close. Being authentic builds relationships, even more than just hard work. Stop hoping no one finds out who you are or what you really do all day. Let people in…or they'll be showing you the door. Employers are likely to keep you around if they see you as a vital associate.

8. Make Friends in New Places

Human resources and finance are two departments that can have a significant impact on your career whether you realize it or not. They know a lot about you that can influence how you're perceived. Respect those folks, socialize with them, ask for their advice, and make sure you carefully do a little self-promotion. When cuts need to be made, you won't be an unknown quantity to them.

9. Start Tweeting or Start Packing

Look at the Millennials and see how they work, how they make decisions, and what technology and tools they use. No time for "I don't do Twitter or Facebook." Acquaint yourself with social networks, mobile applications, and commerce platforms to remain relevant. Let them intimidate you and you give your boss reasons to replace you with someone younger and more in the game. Ask a family member to help, take a course, read a book…and dive in.

10. Fit Club

Healthy people tend to have better outlooks and are easier to be around. They take good care of themselves, which in turn earns them the respect of others. Fit people often set high standards for themselves both at work and at play. And they just have more stamina, so they tend not to get tired when on deadline, and they don't call in sick as much. They have incredible endurance when others are reaching for that 10th Coke or itching to make that next trip to Starbucks. They are also calmer and more productive. So get your sleep, eat well, exercise, stay hydrated, and avoid excessive caffeine and alcohol. This is an investment that will pay dividends for you and your employer. And yes, your employer does notice.

Rate yourself. Which of these 10 areas are you excelling in, which are you doing O.K. in, and where do you need to change your behavior? The truth hurts, doesn't it? But take the steps to make sure that it's your career that gets rolling, rather than your head.

2009-06-30T22:46:00.009-04:00

H&R Block has nice Q4 -- buy it now?

via BloggingStocks by Steven Mallas on 6/30/09

Filed under: Earnings reports, H and R Block (HRB), Intuit Inc (INTU)

H&R Block (NYSE: HRB), a tax-preparation company whose colleagues include Intuit (NASDAQ: INTU) and Jackson Hewitt Tax Service (NYSE: JTX), was up in the after-hours session on Monday because the market approved of the company's Q4 earnings report. At one point, shares had gained almost 5.8%, and that was on top of 1.6% gain during the regular session. Volume was okay during the regular session, not overly spectacular.

H&R Block did pretty well considering revenues declined almost 3%. Earnings from continuing operations were flat at $2.09 per diluted share. This was enough to beat estimates of $2.05 per share according to this source.

Continue reading H&R Block has nice Q4 -- buy it now?

H&R Block has nice Q4 -- buy it now? originally appeared on BloggingStocks on Tue, 30 Jun 2009 15:15:00 EST. Please see our terms for use of feeds.

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2009-06-30T22:46:00.007-04:00

Bank on India: HDFC (HBN)

via BloggingStocks by Steven Halpern on 6/30/09

Filed under: International markets, India, Newsletters, Stocks to Buy

For those seeking exposure to the India markets, Paul Goodwin looks to HDFC Bank (NYSE: HDB), the leading private-sector bank in India.

In his The Cabot China & Emerging Markets the advisor explains, "The company puts itself at the top of its class with its relentless revenue growth, which has averaged over 42% a year." Here's his review.

"The bank became an independent company as part of the liberalization of the Indian banking industry that began in 1994.

Continue reading Bank on India: HDFC (HBN)

Bank on India: HDFC (HBN) originally appeared on BloggingStocks on Tue, 30 Jun 2009 11:20:00 EST. Please see our terms for use of feeds.

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2009-06-30T22:46:00.006-04:00

Whole Foods looking tastier?

via BloggingStocks by Alex Salkever on 6/30/09

Filed under: Whole Foods Market (WFMI), Stocks to Buy

It was easy to discount a company dedicated to selling high-end groceries in the midst of a terrible global downturn. And Whole Foods (NASDAQ: WFMI) has indeed suffered from investor fears. Shares of the company fell from year-ago levels of about $22 per share to lows of near $8 per share in the dark days of December 2008. They have since rebounded to the $22 level on green shoots speculation. On Monday, however, they tumbled again to $18.80. Is it time to buy?

That's a tricky question. First, the positives. Whole Foods is a well-managed grocery chain. It has been extremely disciplined in its expansion push, choosing good locations. It has also overcome relatively low revenues per employee by posting higher margins on items and much higher average cash register rings.

Continue reading Whole Foods looking tastier?

Whole Foods looking tastier? originally appeared on BloggingStocks on Tue, 30 Jun 2009 11:00:00 EST. Please see our terms for use of feeds.

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25-Year Dividend Increasing Stocks

2009-06-28T20:40:00.003-04:00

The following stocks have been increasing their dividends for 25 years in a row. If you are looking for long term investments these are ideal stocks to do so.

1. Wal-Mart Stores (WMT)
2. Coca-Cola Co. (KO)
3. McGraw-Hill (MHP)
4. Johnson & Johnson (JNJ)
5. Kimberly-Clark (KMB)
6. Consolidated Edison (ED)
7. Sherwin Williams (SHW)
8. Colgate-Palmolive (CL)
9. Becton Dickinson (BDX)
10. Family Dollars Stores (FDO)
11. Lowe's (LOW)
12. Aflac (AFL)
13. Emerson Electric (EMR)
14. Air Products & Chemicals (APD)
15. Medtronic (MDT)
16. National Fuel Gas (NFG)
17. PPG Industries (PPG)
18. Pfizer (PFE)
19. Genuine Parts (GPC)
20. Pitney Bowes (PBI)

Research In Motion (RIMM 72.78)

2009-06-19T17:44:00.001-04:00

RIMM was down 4.92% today, to 72.78, but it would be good idea to keep a tab on it since it looks like a solid company.

BlackBerry maker Research In Motion (RIMM 72.78) topped the consensus earnings estimate in its first quarter and issued in-line guidance for the second quarter.

Research In Motion reported first quarter earnings of $0.98 per share, excluding nonrecurring items, $0.04 better than the First Call consensus of $0.94.

Revenues rose 52.7% year-over-year to $3.42 billion, in-line with the $3.43 billion consensus. Gross margins of 43.6% were also in-line with the 43.3% consensus.

The company added approximately 3.8 million net subscribers in the quarter and has a total subscriber account base of approximately 28.5 million.

Looking ahead, Research In Motion projects second quarter earnings of $0.94 to $1.03 per share; the consensus expects $0.97. The company projects second quarter revenues between $3.45 billion and $3.70 billion; the consensus stands at $3.61 billion.

Gross margins for the second quarter are projected between 43% and 44% and the company expects net subscriber additions between 3.8 million and 4.1 million.

Shares of RIMM are up more than 88% year-to-date but are currently valued at less than half of the 52-week high of $148.13.

Buys

2009-05-10T21:57:00.000-04:00

IFF@ 31.65
ASGR@ 15.50
TTEK @ 25.75

Buys

2009-04-18T23:39:00.002-04:00

Buy ANF @ 24.00 Target Price: 27.00 Stop Loss : 22.50
Buy CSC @ 38.50 Target Price: 40.50 Stop Loss : 37.00
Buy GNW @ 2.40 Target Price: 2.75 Stop Loss : 2.20
Buy RRC @ 43.00 Target Price: 46.00 Stop Loss : 40.00

Warren Buffet holdings

2008-08-14T22:58:00.000-04:00

Complete Interview with Google CEO, Eric Schmidt on Mad Money

2008-08-14T14:51:00.001-04:00

Jim: All right, let's get right to it... You have a stock that's at $500 bucks. I get stopped all the time by people who know I love Google, and they say, will you get the guy to spit the stock? I can't afford $500 bucks. Why don't they split it? Right away... tell me how stupid that is?...

Eric Schmidt: This is New York. They can afford $500 dollars...

Jim: I like that, but I actually get this question when I go to, say, North Carolina too...

Eric Schmidt: Well, that's more serious... but we're not going to split the stock... at least not for a while. It's just better... people think that the value of a stock is really the dollars, so we'll keep it higher.

Jim: All right, good. I think that's right. I like individuals to buy one share. BRK-B did the same thing.

Eric Schmidt: It worked really well for him.

Jim: A lot of people feel that you don't provide enough guidance... enough management share...

Eric Schmidt: We don't provide any guidance... that would be the same thing as "none"...

Jim: True, and that's because you...

Eric Schmidt: Because we don't want it to get in the way of running the business... All right, if we starting giving quarterly guidance, all of the sudden, the whole company would start focusing on the quarter, rather than trying to change the world.

Jim: Totally true. I wish other people would do it. Now, there are 31 out of 33 people (i.e., analysts) recommending the stock so clearly it may not have mattered that you're not hand holding us.

Eric Schmidt: Well, these are the smart people...

Jim: Right. No, it's true. Now, information technology and advertising. I think you guys have revolutionized everything. Could you tell me... a lot of people... Goldman Sachs is using a percentage of the GDP (i.e., gross domestic product) that you are... I think that that's a little too... they are... right now, you're 0.7% of the GDP of the United States... yeah, 7 basis points... actually .07%...

Eric Schmidt: That's quite a difference...

Jim: Hey, catch me... Here's what I want to know... There's $600 billion in advertising. Isn't it fair to think that, one day, you'll capture 10% of it?...

Eric Schmidt: Well, we could... And, by the way, the number's larger than the $600 billion. It's about $1 trillion globally... And it's perfectly possible that the online world will be half (i.e., $500 billion), and Google could be 8% of that (i.e., $40 billion). We won't get 100%. And then we don't know how long it will take, but we know that everybody's moving from these traditional mechanisms to more targeted, more measurable ones, and online is where the measurements are.

Jim: Right now, predominantly desktop, but we know that, in countries that are more advanced than us, like Japan, mobile computing... Is your mobile computing going to be up to snuff, and can you make us much money in mobile computing, because the cell phone companies have historically taken too much of a toll?

Eric Schmidt: Well, we can make more money in mobile than we do in the desktop eventually. And the reason is, the mobile computer is more targeted. Think about it. You carry your phone. Your phone knows all about you, right?

Jim: Oh, everywhere.

Eric Schmidt: It knows exactly what you're up to, so we can do a very targeted ad. Over time, we will make more money from mobile advertising. Not now, but over time.

Jim: Okay, now... there are questions that I'm reading about you in the paper. There's a lot of stuff about you guys in the paper every single day... You're competing against the original content players, like The New York Times said earlier this week.

Eric Schmidt: Well we think we send a lot of traffic to them. What actually happens is, people come to Google, and they look for information, and they immediately go to the content provider. And we don't want to disintermediate them out. We want to take them... because we need their content... we need them to be successful. We build advertising products for them, and so forth. So, very much, we maintain that separation.

Jim: Okay, so when I read those kinds of articles, I should just think twice about whether they aren't... Uh, there is a kind of a bias... You know, you guys have gotten so big, I feel that, when I pick up an article... Yesterday, there was an article about how you didn't have (the Republic of) Georgia in the map...

Eric Schmidt: Well that turns out not to be true. We had the same amount of Georgia before the war as after the war. And we're adding more Georgia going forward, because it's such an interesting place.

Jim: Well, I've got people complaining. I do all my show back and forth with GMail. You were out on Monday, GMail.

Eric Schmidt: Well that was just a screw-up... ...and we fixed that. We're not perfect.

Jim: Well, there you go...

Eric Schmidt: ...and we fixed that. We're not perfect.

Jim: Okay, now... I want talk about philosophically... I know we've got some real time here... philosophically... when my daughter got her 5th grade assignment... the first thing that happened was, at the top of the assignment... "you are not allowed to Google it"...

Eric Schmidt: Really?...

Jim: Yes, you're not allowed to Google...

Eric Schmidt: It's like the old thing, "you can't use a calculator"... now you can't use Google?

Jim: Yes, well I was thinking slide rule, but you can't... Talk about the impact...

Eric Schmidt: But kids use Google all the time, because it's a new way of learning. When I was in... when I was growing up, they made me - in Virginia - memorize the names of the capitals of every county in the whole state... completely useless information. It took me a week.

Jim: Completely and utterly...

Eric Schmidt: Today, you just look it up. So people are going from knowing everything to learning how to search very quickly... The kids need to learn how to search, because they're going to have search everywhere. They're going to have little devices that they're going to carry with them like an iPod, that will have all the world's information with them, for their whole lives.

Jim: So you're not worried about intellectual laziness...

Eric Schmidt: No...

Jim: ...because you guys have basically absorbed what it took me four years of college to do, which is how to do thorough research to be able to do a paper, to be able to...

Eric Schmidt: But what's interesting is now, when you walk down the street, there's a question... You can say, wow, that's interesting... you can have the answer. I'm riding the train between here and D.C. and, all of the sudden, I read the history of the train line. I could never have done that before.

Jim: Okay, well... A lot of times I just think that what has happened is that Google has become so powerful that we have taken it for granted, and wouldn't know how to do a lot of things that we...

Eric Schmidt: But see I don't believe in this sort of lazy people, dumb people idea... I think...

Jim: But you've thought about it. Clearly, you had to have thought about it.

Eric Schmidt: No, no... but I actually think people are smarter, because they have access to more information. Google just organizes it. The people are still asking the questions, their still acting based on it, and they have so much more information available to them.

Jim: All right, okay... Now, a lot of people feel... and I know that we're going to spend the next segment talking about what really drives the stock... that, with the 26% growth that you hit for domestic this quarter, that you've tapped out domestically, and that your growth is going to almost entirely have to be international.

Eric Schmidt: Well, by the way, most people would say 26% growth is pretty good...

Jim: (laughing) I agree, but there's 31 analysts who say, listen Jim, you ought to focus on this...

Eric Schmidt: Well, first place, we don't really know what's going on with the global economy, and Google will do better in any kind of slowdown than non-targeted advertising, but we might be affected by it... you never know. The important point is that our model continues to work, as people are shifting from offline to online. And that shift is inexhorible. It's going to happen no matter what.

Jim: Do you think that we're going to see, and I've got a picture of it I believe... Let me do this... Google home page... (pointing to a monitor of the live Google website home page)... Let me do this before we get to the break. If we can get the Google home page up for a second? I think you've revolutionized advertising and I think you know it too... Why can't you sell, "as presented by Anheuser Busch" right here? (pointing to where a advertising banner could be placed at the bottom of the Google home page)... Why don't you sell the home page?

Eric Schmidt: We absolutely could.

Jim: And how much do you think people would pay to be on that page?

Eric Schmidt: Some number of billions of dollars.

Jim: Well, why not do it?

Eric Schmidt: Because people wouldn't like it. We make the decisions based on what the end user wants. We prioritize the end user over the advertiser.

Jim: You're willing to throw away potentially...

Eric Schmidt: We absolutely...

Jim: ...what I believe would be a half a billion dollars in revenue right now by selling that page?

Eric Schmidt: We absolutely are not going to sell that page.

Jim: But, but wait a second. If I'm a shareholder, what kind of attitude is that?

Eric Schmidt: Because you want to be a shareholder for 20 years, and you want every one of those users to come back to Google over and over and over again.

Jim: But the domestic (i.e., revenue numbers) would be jump started like you wouldn't believe...

Eric Schmidt: You could take a magazine and you could print nothing but ads in it and, eventually, people would stop reading it.

Jim: Well, right now, you're far from that. Do you think that we will see, within our lifetime, the international business dwarfing the United States business?

Eric Schmidt: The world is a really big place, and advertising is global. We're already in a majority international, and I think eventually it's going to be 65/35... something like that.

Jim: Right now, it's about, what?... It was 52%...

Eric Schmidt: 52/48... But it's clear to me that the world is... And, by the way, look at the growth of India, look at the growth of China... Big deal...

Jim: All right, stick with me. I've got granular questions about what's going to happen, that the Street needs more than my global, "my kids are lazy because of Google." All right? Stay here...

[commercial break]

Jim: We're talking with Eric Schmidt. I have to tell you, I'm going back with a $750 price target...

Eric Schmidt: I've never seen a Google employee with than many tatoos...

Jim: Well... 'toos are big... 'toos are big. You guys've got to get a little more hip. I would show you my ring here too (pointing to his belly button). I've got a nice ring here... Uh, what do you... I know we were talking in the break. I know you've got some stuff that you wanted to ask me.

Eric Schmidt: Well, I have a real simple question, right... You think the market's going to turn pretty quick here.

Jim: Yes I do.

Eric Schmidt: But when's business going to turn in America, right? Because Google will do well I think as this turns but, you know, things are kind of rocky right here.

Jim: Well, I've got to tell you, the market has always anticipated between six and nine months, in terms of business. For instance, housing right now... I don't mean to get too far afield. I have the CEO of Google here. But the housing market I think is nine months away from a turn... you see those stocks turning. The stocks tell me more. In your particular case, I believe that you will get back to your old prices, because inflation is coming down, and I'll pay more for the out-year earnings. Let me tell you the things that keep me up at night about Google, and what I'm really worried about. It's different from what the analysts are worried about. First of all, I think... when I first started trading... IBM... I never thought anybody could touch them. Big, big, big... and then flat. MSFT... Big, big, big... and then flat. I worry that there's a price... there's a level... where Google just simply can't get any bigger. Your concern on that?

Eric Schmidt: Well, you know, all these tech companies hit something called... they hit the "S curve" and the S curve is basically... they go like this (motioning upward on a climb) and through this very, very rapid growth period, and then slows... and it slows because of laws of large numbers, basically... Just, you know, you're growing, you're adding billions of revenue... You just can't put enough numbers on the board. So the way you solve that problem is by having new businesses. So we're busy working on new businesses. The display business, which is a huge opportunity, which we should become a significant player, but we're not today. We're working very hard on that. Mobile should be a large one. So the way you address that S curve slowdown, in any technology business, is you keep adding other businesses that are growing. And there's enough in advertising...

Jim: But didn't Ballmer think of that?... And Gates?... (from Microsoft) And it didn't seem to work?...

Eric Schmidt: Well, that's a different generation. This is an advertising generation, and advertising is a very, very multi-sector thing. We can do these kind of ads, which we do really well, but there's a lot of other opportunities for us, and they'll organize themselves as the technology allows. Some of them will grow faster than the others, but that's how we address that question.

Jim: Okay... Uh, I used to manage money for INTC executives. In the late 80s, when they decided to switch from a commodity product, to the 86, which became the Pentium, the thing that they saw and recocognized was that they're only enemy would be the government. They literally believed that, one day, they could have 80-90% market share. They were the 20th largest semiconductor company. I worry that, at a certain place, the world... well, certainly the U.S. government... will come down on you, because you're just too darn powerful. Each month, I see your share go up. At a certain level, people are going to go to Washington and say this isn't right.

Eric Schmidt: Well, we've actually talked about this, because our algorithms are doing better, it appears that we're gaining share... Certainly our advertising business... we have the best technology in the business, and so forth... So, how do we behave, right?... We shouldn't behave the way Microsoft did, all right... I think everyone agrees with that. Certainly, I would never do that.

Jim: You're not going to say those nasty things about the Attorney General?

Eric Schmidt: No, no... We're just not going to do that. So how do you be big without being evil, is the way we need to say it. Well, one of the things is that we don't trap end users. So, if you don't like Google... for whatever reason... if we do a bad job for you, we make it easy for you to move to our competitor. We're trying to make sure that a competitive market is maintained by everything that we do.

Jim: I know the Yahoo deal (to work in conjunction with Google for distribution of advertising) which, on the surface looked anti-competitive, isn't.

Eric Schmidt: But look at it. The Yahoo deal is non-exclusive, text ads only. It's a classic outsourcing deal for some of its advertsing. They can choose to implement it or not. It's a good deal for them, it's a good deal for us. That's the kind of deal... And, by the way, they're free to work with whomever else they wish.

Jim: Now, one of the things that's been brought up repeatedly in all the analyst reports - and it was mentioned in conference call - is that you must be seeing some cyclicality. We know the airlines are in trouble... we know that travel's in trouble... we know the autos are in trouble. That has simply been completely and utterly wrong, hasn't it?

Eric Schmidt: Well, it's bizzarre because, while autos are in trouble, because the automobile dealers are really smart, they move to more targeted advertsing to sell the inventory that they have. So we can do well, if people transition to more targeted, more measurable, more ROI-based advertsing. The ones that are being hit, unfortunately, are these non-measurable advertsing things. There's no reason to put money there.

Jim: You should explain... that's newspapers and magazines...

Eric Schmidt: ...and traditional display ads.

Jim: When my kids... when I tell them to read The New York Times, they have no idea what I'm talking about. What they say is they go to Google. That's what The New York Times is. What do you say to the executives at The New York Times, using that as an example, who have a $500 million ad budget, that you are... Why are you not just the parasite?...

Eric Schmidt: Well, in fact, we have a big deal with The New York Times, and with a bunch of other newspapers, for precisely this. And what we do, when people come to Google looking for news, we send them to The New York Times, and we also show some of our ads on their sites, and they get the majority of the revenue. So they make money, both on the traffic coming to them as well our ad system, along with their own advertising.

Jim: All right, now let's speak about the... a question that, again, I'm trying to address all the questions that are holding the stock down in my view. You've got a tremendous... the amount of downloads in YouTube are extraordinary. But over the...

Eric Schmidt: Do you know it's up to 1.3... let's see... 1.3 million minutes ever 10 minutes of upload. In other words, every minute, we're putting that many videos in. It's unbelievable.

Jim: But, at the same time, what advertiser wants to put a 30-second advertisement on YouTube?... Who wants to look at that, versus the advertisements we're using at the Olympics now, which are just gigantic... $1.7 billion in revenue. I mean, isn't it true that people just don't like ads on YouTube?

Eric Schmidt: But we haven't figured that model out yet, right... You're comparing a 50-year-old mature model, which worked really, really well once every four years, right... in the Olympics... or once every two years... versus something which is completely beginning. We know we have enormous amounts of traffic. Literally hundreds of millions of people watching those videos...

Jim: So you're just saying that somebody will figure it out in your organization?

Eric Schmidt: And hopefully, it's going to be us that figures it out. So we're trying different things. We tried pre-roll and post-roll and so forth. Not any one of them is really got it... we've got a couple of new ones coming out in the next month. We'll give them a try.

Jim: You're making so much money that we don't have to worry about it, right. It isn't like it's going to hit your bottom line here...

Eric Schmidt: It does hit our bottom line big time right now... but, eventually, we'd like to make some money at it. But, even if we don't... even if, ultimately, it's a loss leader... let me tell you that the fact that so many people come to YouTube means that they ultimately go to Google and do Google searches and click on ads. So don't be too worried about all that traffic going to YouTube. I'd be worried if people weren't using YouTube... Since it's an enormous success globally, we know we will eventually benefit from it.

Jim: All right, last question to Eric Schmidt, the CEO of Google... I want to know... The press, everyday... It's kind of like the iPhone... Everyone says the Android is coming, the Android... you'll never see anything like the Android... There could be a September release... Here, I'm talking about mobile computing which... Remember, Google is dominating, taking big share from Yahoo, for AOL, from everybody, when it comes to desktop... but owning mobile may be up to you guys developing Android and being successful. Where is it? How big it can be? Can you give me a Steve Jobs' "10 million this year" kind of thing?

Eric Schmidt: No it can't.

Jim: Why not?

Eric Schmidt: Because it hasn't shipped yet.

Jim: Okay, but tell me...

Eric Schmidt: It's going to ship between now and the end of the year. It's software...

Jim: No, no, no... I need "September"... I need "October"...

Eric Schmidt: ...between now and the end of the year, and it's going to be software...

Jim: Well why don't you just take away my ratings, and give them to some other show?...

Eric Schmidt: And, by the way, it's software, so it's really going to be other people... And our goal is to get lots of people to use the software to build a new platform... a completely different kind of platform than anybody else...

Jim: Well, like cloud computing...

Eric Schmidt: Absolutely.

Jim: Oh, by the way, your last... There was a Pacific Crest speech that one of your guys gave that just basically said that cloud computing is interesting, but that Microsoft should be terrified. Should Microsoft be terrified by cloud computing?

Eric Schmidt: I never worry about Microsoft.

Jim: Very smart. Eric Schmidt, you are a delight... CEO of Google... and where's my pen? I want to write Google $750... Well, whatever, you get the point!

Buy High, Sell Much Higher

2008-08-07T16:24:00.000-04:00

One of the tenets of stock investing that the average investor, as well as the sophisticated day trader, has heard repeatedly is "buy low, sell high". Sounds like a reasonable approach to investing, right?

Unfortunately, it is much more difficult than it seems. This is partly because some rookie investors may equate stock investing with shopping at the mall. If a cashmere sweater costs $250 in December but has been marked down to $50 in July, then it must be a good deal, or have some type of value. Maybe so, but stocks are different. If the price of a stock over the last year or so has ranged from $24 to $60 a share and it's currently trading at around $26, it appears to be cheap - so, it's a good value, right?

Not so fast! Buying stocks that are near or at yearly lows may actually add risk to your portfolio, rather than reduce it.

Why Lows May Not Be a "Deal"

Beaten down stocks may never recoup their losses or it may take a very long time for the stock to recover its highs. For example, technology stocks such as Juniper Networks (Nasdaq:JNPR) and Yahoo! (Nasdaq:YHOO) soared during the technology bubble in 2000 - and crashed when it burst. By 2008, these companies had yet to recover to their pre-bubble values.
The opportunity costs of holding the stock increases over time - if the stock doesn't recover relatively quick enough.
Picking the bottom in a stock is very difficult for individual investors. Many investors are lured into a false sense of security when buying beaten down companies, only to be disappointed as the stock continues to fall.
You are betting against the Wall Street conventional wisdom when you purchase a stock that is out of favor. In other words, the stock is cheap for a reason: managers of big money do not see the future value in the company at so-called "cheap" prices. In a sense, they are willing to wait for much lower prices before buying the stock.

A Different Spin on the Buy Low, Sell High Strategy
Some investors may want to adjust their strategies to "buy high, sell higher". That's not a typo. Many traders wisely look for stocks that are near their yearly highs and are in strong industries. There are many resources on the internet that allow the average investor to easily find a list of the strongest stocks and the best sectors. However, it should be noted that it is not a good idea to blindly buy stocks off of the new high list.

Consider these reasons for buying relatively expensive stocks:

You are buying a stock that is trending upward, not downward. You are not hoping or waiting on a turnaround story or a buyout. Chances are, your stock has proved its value before you buy it.
A stock at or near its high is working with Wall Street money instead of fighting it. And, institutional money moves stocks. Unfortunately, retail buying and selling are not significant market events. Aligning your investments with money managers who manage billions of dollars may reduce the risk that you'll lose a lot of your own money.

Cheap stocks tend to trade less frequently. If you own a stock that trades lightly, chances are you may have difficulty finding a lot of buyers at your desired price(s). Stocks that lack volume also lack institutional support. And, as stated above, it's the institutional money that determines stock prices on Wall Street.
Making any investment decision solely based on one indicator is not a good strategy. As you find these uptrending stocks in leading industries, one strategy may be to wait for a minor correction of 8-12% before pulling the trigger. This will mitigate the risk of "buying at the top" and therefore provide some cushion for any potential losses that you may incur.

Let's take a look at a well-known company's stock chart over the last few years. In Figure 1, Exxon Mobil (NYSE:XOM) shows a long-term uptrend starting around October of 2006. The oil and gas sectors have been market leaders over this period. On the graph, each circle on the trendline represents buying opportunities along the way. Value investors may have been reluctant to purchase XOM at around $70 per share in early 2007 because at that time, this was near Exxon's all-time high. However, buyers of this stock were rewarded as the shares continued to rise.

Figure 1

Source: StockCharts.com

Conclusion
Some inexpensive stocks are actually true value plays and buying them will result in substantial gains. However, buying cheap stocks is not a risk-free strategy. In fact, your risk of losing money may actually increase over time as the stock loses value or fails to appreciate to your expectations. Consider buying strength, and get in on relatively expensive stocks. The risks are not as great as they appear and the potential for upside is consistently better than bottom fishing for inexpensive stocks.

Source: Investopedia

Billionaire Carlos Slim Loves These Stocks

2008-08-06T18:16:00.001-04:00

Depending on the source and what month it is, Carlos Slim is either the richest, second-richest or third-richest man in the world, with a reported net worth of $53 billion, according to Forbes magazine.

Slim is a Mexican businessman who made much of his wealth in the telecommunications industry in Latin America. He has been the vice president of the Mexican Stock Exchange and the president of the Mexican Association of Brokerage Houses.

If he's so rich, maybe it is time to pay closer attention to what he invests in.

One of the stocks that Slim owns is Allis-Chalmers Energy (ALY), a provider of equipment and services to oil and gas exploration and production companies in Alabama, Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Texas, Utah, Wyoming and West Virginia. Standard & Poor's Ratings Services just boosted its ratings for the company to B+ from B. The company is in the process of acquiring Bronco Drilling Company. The stock has a P/E of 11 and a PEG of 0.72.

Allis-Chalmers Energy shows up in a Stockpickr portfolio called Barron's Insider Purchases 3-08-08, which lists the largest insider purchases. Other stocks in the portfolio include General Electric (GE), with a PE of 13 and a yield of 4.4%; Enterprise GP Holdings (EPE), with a P/E of 33 and a yield of 6%; and Eli Lilly (LLY), with a P/E of 15 and a yield of 2.9%.

Another stock of Slim is America Movil (AMX), the fifth-largest mobile network operator and the largest corporation in Latin America, with over 152 million wireless subscribers. The company is expected to post an 8.5% increase in second-quarter net profit. The stock has a P/E of 16 and a PEG of 0.54, and it pays a yield of 4.2%.

America Movil is also owned by Level Global Investors, a $1.7 billion hedge fund managed by David Ganek and Anthony Chiasson, who formerly worked at SAC Capital Advisors. Level Global has a minimum investment of $5 million. It also holds Electronic Arts (ERTS), with a forward P/E of 21 and a PEG of 1.53; Devon Energy (DVN), with a P/E of 12 and a PEG of 1.32; and Qualcomm (QCOM), with a P/E of 22 and a PEG of 1.35.

Another stock owned by Slim is Kraft Foods (KFT), the third-largest food and beverage company in the world and the second-largest based in North America. The stock has a P/E of 19, a PEG of 2.19 and a yield of 3.6%.

Kraft is also owned by the Allianz NFJ Dividend Value Institutional Fund, a Morningstar-rated five-star fund managed by Ben Fisher. The fund has had an average annual return of 14.19% over the last five years. The fund also owns GlaxoSmithKline (GSK), with a P/E of 13 and a yield of 4.3%; Dow Chemical (DOW), with a P/E of 11 and a yield of 4.9%; and Seagate Technology (STX), with a P/E of 5 and a yield of 3.2%.

Source: http://www.stockpickr.com

The One Warren Buffett Stock You Have to Own

2008-08-06T18:10:00.002-04:00

When people look at Warren Buffett’s portfolio, they typically want to own the latest stocks he’s been in, and they neglect the older guys. They want to know if Wells Fargo (WFC) or U.S. Bancorp (USB) are the right financials to own. Or if Johnson & Johnson (JNJ) is the right health care stock.

But there is a hidden gem in the older stocks.

First off, let's summarize Buffett's most-recent picks, then find the growth stock that is buried in one of his original value plays.

In Buffett’s most recent filing, he added to his Wells Fargo position. Wells Fargo had been crushed along with the other banks in the subprime mess, but it is probably one of the few banks to have limited subprime exposure early on. The bank is now 50% higher than its recent lows, and while it probably is a buy (particularly with its solid 4.5% dividend), there are better picks among Buffett’s stocks.

Buffett also bought 3 million shares of his favorite railroad play, Burlington Northern Santa Fe (BNI). If you have been following his portfolio closely, you had the opportunity to pick up Burlington a year ago at prices lower than Buffett paid, in the low $70s. But with the stock at $102, I’d stay away for the moment, although, again, it's probably still a long-term buy.

However, the long-term pick that Buffett owns that I think is an enormous buy right now is Washington Post (WPO). What!? Isn’t the newspaper industry dead? Doesn’t Craigslist (30% owned by eBay (EBAY)) dominate the classifieds space? Isn’t everyone advertising on Google (GOOG) now or getting the news from AOL (Time Warner (TWX))?

Oh, did we mention that Washington Post is not really a newspaper company? Quick, before reading further, guess where more than 50% of its revenues come from and almost all of its EBITDA? If you guessed the education segment of its business (built off of its Stanley Kaplan acquisition), then you’d be correct.

First off, for the first time in years, the company reported a net income loss due to its retirement program at the newspaper. However, overall revenue was up 6% to $1.106 billion due to “significant revenue growth at the education and cable television divisions.” Revenues were down at the newspaper, magazine and television divisions.

Specifically, the education division revenue was $576 million for second-quarter 2008, up 14% over the same period in 2007. Stanley Kaplan reported income of $47.4 million, up 26% from the $37.5 million recorded in second-quarter 2007. For the past six months, Kaplan had net income of $94 million, up 31% from the year-ago period.

Let's just annualize that to about $200 million in income expected from the education group. Now let's slap a multiple similar to other education companies. Apollo Group (APOL), for instance, has a P/E ratio of 30. That would give the education segment at Washington Post a market cap value of $6 billion were it to be on its own.

The market cap of Washington Post is currently $6 billion.

Which means buying stock in Washington Post gives you The Washington Post, Newsweek, the cable and television business and the Internet business, all for free. I admit that the newspaper industry is struggling. But the brand-name leaders (The Wall Street Journal, which was acquired by News Corp. (NWS); the New York Times; USA Today) will find a way to survive and, worst case, will be sold. Even in a fire sale, The Washington Post would get a value greater than zero.

The cable television business is showing some growth and is profitable ($40 million in operating income in the second quarter.) Annualize that and slap a multiple similar to that of Time Warner Cable (a 26 P/E), and you get $4160 million.

So we are still valuing the entire newspaper and magazine business at zero, and a sum of the parts shows the potential stock at 66% higher than where it currently is.

Value Washington Post wherever you want. It’s a great newspaper, and I highly recommend Katherine Graham’s memoirs to see her experiences of building the paper during the difficult times in the '60s and '70s and when she first met the young Warren Buffett.

Gannett (GCI) and New York Times (NYT) are valued at about a half to two-thirds times sales. That might value the Post newspaper (plus Newsweek) at about $500 million to $660 million.

Well, whatever. It's yours for free now at the current price of Washington Post.
Source: http://www.stockpickr.com

NICOLAS DARVAS - HOW I MADE $2,000,000 IN THE STOCK MARKET

2008-07-22T16:06:00.001-04:00

I’d wanted to read this stock market classic for a long time but it is notoriously hard to find. Finally I bought it through a reseller on Amazon.com. The seller was in England and the book arrived in my mailbox a couple of weeks later. It was worth the wait!

What adds to the book’s appeal is that, unlike Jesse Livermore, Darvas was not a professional investor. He was a professional dancer. He and his dance partner Julia entertained at nightclubs around the world. And because he was not a professional, he got his chops in the school of hard knocks. He learned by doing. And he chronicles his progress, all the mistakes he made along the way, where his thinking went wrong, and how he eventually developed his own theory which made him $2 million in 18 months, starting with a stake of less than $25,000.

Darvas got involved in the stock market quite by accident. In 1952 he was offered a dancing gig in Toronto. The twin brothers who owned the club, Al and Harry Smith, made Darvas an unusual offer. They wanted to pay him in shares of a Canadian junior mining company called Brilund. It was trading at 50 cents a share – 6000 shares worth $3000 for his appearance. Darvas was a bit skeptical as he knew stocks went up and down in price. The Smiths agreed to make up the difference in cash if the stock dropped below 50 cents for the six months following the deal. Darvas agreed.

As it turns out, Darvas could not keep his playdate and felt badly about letting the brothers down. So he offered to buy the 6000 shares for $3000. He got the shares and forgot about them until he noticed two months later that the stock was up to $1.90. He sold and made an $8000 profit. His appetite, as they say, was whetted.

Then began the education. He thought Canadian penny mining stocks were the cat’s meow. “I jumped in and out of the market like a grasshopper,” he writes. He became enamored of some, calling them his “pets”. And he started losing money. So he quit the Canadian market and opened an account with a broker on Wall Street.

His education continued. He followed broker tips. He subscribed to newsletters. He read books. He tried fundamental analysis. And he over-traded like crazy. When Rayonier went from $50 to $100, he was in and out three times picking up $5 here, $8 there and $2 in his last trade. He made $13 a share on Rayonier instead of $50.

When he found out about industry groups, he decided buying the strongest stock in the strongest industry was a good idea. He was so convinced he was on to a sure thing he mortgaged some property he owned in Las Vegas, borrowed on an insurance policy and plunked down $50,000 on steel company Jones & McLaughlin using margin. Three days later “lightning struck. Jones & McLaughlin began to drop.” He was stunned. He held on believing it to be a temporary setback. He became afraid. “I trembled when I telephoned my broker,” he writes. “I was scared when I opened the newspaper. I literally lived with my stock. I was watching it the way an anxious parent watches over his new-born child.”

As you can tell, Darvas is a compelling writer. He grabs the reader’s attention. We’ve all been there, done that. We know what he’s talking about!

But Darvas didn’t give up. And he went on to develop his own method of investing, a largely technical approach. He calls it the box theory and it works like this. He noticed that stocks fluctuate and stocks in an upwards trend will often pause and take a breather, fluctuating within a range. A box he called it. And he noticed that when the stock broke out of this box to the upside, it tended to go up further. And if it broke out to the downside, the trend was often broken.

For example, if a stock was fluctuating between 45 and 50 dollars – a 45/50 box, if it broke through to 51, it would likely go higher. If it broke through to 44, it would likely go lower. So he would buy at 51 and set a stop loss for the top of the last box or 50. Darvas used very tight stops on his initial purchases. He reasoned that the stock had broken out of the box and it had no business going back in the box. If it did, then he made a mistake and wanted to get out as quickly as possible with as little damage as possible. He also looked to increased volume as a positive indicator.

He was not averse to playing the same stock several times. For example, he played steel company Cooper-Bessemer three times between November 1956 and April 1957. Bought at 46, stopped out at 45 1/8; bought at 55 3/8, stopped out at 54; bought at 57 and sold for a hefty profit at 70 ¾. Two losses and a victory for an overall gain of over $1500. In the fall of 1957, a bear market developed but he had been stopped out of all his positions well ahead of it. His system had put him in cash when the market went south.

Darvas was fascinated that he didn’t have to have theories or predictions about where the market in general was headed. The individual stocks told him the story by their behavior. And he learned you can’t get emotional about the market. “I accepted everything for what it was – not what I wanted it to be. I just stayed on the sidelines and waited for better times to come.”

It was during this mini-bear that he made an important discovery. He read the stock reports daily. He noticed some stocks gave ground grudgingly, fighting the down trend. Checking these stocks further, he discovered they were growing earnings. “Capital was flowing into these stocks, even in a bad market. This capital was following earning improvements as a dog follows a scent.”

And so he married this fundamental idea to his technical box theory. “I would select stocks on their technical action in the market, but I would only buy them when I could give improving earning power as my fundamental reason for doing so.”

And he decided to focus on “those stocks that were tied up with the future and where I could expect revolutionary new products would sharply improve the company’s earnings.” Yes, he became a tech stock investor…way back in the 1950s. “They were rapidly-expanding, infant industries and, unless something unforeseen happened, their expansion should soon be reflected in the market.”

You may notice some striking similarities to Jesse Livermore’s approach. Others were the idea of probing the market, that is buying a bit now, a bit more on confirmation and still more after that. In fact, like Livermore, Darvas was a plunger. He bought few stocks. After he made a million, he re-invested the proceeds in just two stocks!

Darvas’s book is a fascinating read. It’s almost as valuable for the discussion of the mistakes he made as for his successes. And it reads like an adventure story, a compelling page turner. Get it! You won’t be disappointed.

Source: http://www.superstockpicker.com

POST GURU (Hilary Kramer) HOT IN '08

2008-07-13T16:13:00.000-04:00

The Post's stock picker, Hilary Kramer, is leaving the competition in the dust.

Kramer's 14 stock picks this year are up an impressive 7 percent while the Dow Jones industrial average is down 14.9 percent and the S&P 500 is off 14.0 percent. Even Warren Buffett's Berkshire Hathaway is 15.3 percent on the downside in 2008.

That's right, if you invested $1,000 in each of her 14 stock picks this year, you'd be sitting pretty with a portfolio balance of $14,973.43.

Eleven of Kramer's 14 picks are in positive territory, led by a 63 percent gain in LeapFrog Enterprises, which Kramer picked back on Jan. 13 when it was trading at $4.97. It closed Thursday at $7.85.

http://www.nypost.com

Buying Dow for a Better Deal than Warren Got

2008-07-13T00:42:00.000-04:00

So, after the news of the past couple days, I have added to the position in Dow Chemical (DOW). At prices averaging $32, even we tripled the position in Dow yesterday and today.

Current yield, 5.25% and rock solid safe. Think about it: Berkshire Hathaway's (BRK.A) Warren Buffett only got 8.5% on his $3 billion convertible and it is underwater if shares are under $41 and change (28% higher than today) in 5 years ($41 is the conversion price).

Now, Warren's 8.5% is stagnant. My dividend will grow and I will also gain the additional 28% price appreciation of the shares if they sit at $41 when Warren converts at no gain other than the interest he has received.

Dow has increased the dividend 18% over the past three years. Assuming a consistent growth, three years from now the dividend will be $1.94 for a yield on my investment of 6%. Again given the same growth, I will get $2.17 a share when Warren converts his shares and I will be yielding 6.8% on my initial investment.

The dividend growth enjoyed by shareholders may just turn out to be a conservative growth rate that I am using for comps. The reality may very well be far better than that, but is very unlikely to be anything less than the current yield given the company's history. Even were the dividend to stay flat for 5 years (again, very unlikely scenario), the common at these prices offers superior appreciation prospects.

When you add the 28% share price growth I will get in order for shares to get to $41, right now, common share buyers today are getting a better deal than Warren. He will receive interest totaling a 42.5% over the five years and if the dividend on the common stays the same for 5 five years, I will receive 26.25% plus the 28% appreciation in the shares for a total return of 54.25%. Should the dividend grow as is has, the return on my invested cash goes to 58% plus.

Chances do not come around very often to get a better deal than Warren....grab it.

Source: http://seekingalpha.com

Hilary Kramers latest picks

2008-07-08T16:15:00.001-04:00

To generate investment profit in today's turbulent market environment, it is important to focus on long-term fundamentals and select stocks that are well positioned for long-term growth.

In addition, when one goes "bottom fishing" for stocks that have been beaten down, it is important to focus on stocks with strong fundamentals to avoid picking up "dead fish" that do not recover when the market goes back up.

As the price of oil continues to skyrocket, there are several industries that are well positioned for long-term growth - these include demand response, solar, and wind power.

Demand-response solution providers allow utilities to be able to deal with peak demand in the electrical power grid without building additional expensive peaking power plants that also pollute the environment.

* EnerNOC is currently the market leader in the demand response business. Its shares closed Thursday at $17.82. Last year revenues grew 124 percent, which demonstrated the strong growth potential of this company. My 12-month price target is $23, which means you should start taking profit as the stock goes above $21.

* Comverge is also a leader in the demand response business which in February 2008 executed a new long-term pay-for-performance virtual peaking capacity contract with Southern Maryland Electric Cooperative. Comverge shares closed last week at $13.04. In the last 12 months, it had revenue growth of 77 percent, which is also outstanding. My 12-month price target is $18, which mean profit taking should start above $16.

* MEMC Electronic Materials is a global leader in the manufacture and sale of wafers for solar photovoltaic cells and have been a pioneer in the design and development of wafer technologies over the past four decades. Its shares closed July 3 at $54.96 per share. While its revenue growth was only 21 percent last year, its earnings growth was 47 percent. My 12-month price target is $95, which means profit taking should take place at prices above $85.

* American Superconductors is a leading energy technologies company that serves the wind power and electric power grid transmission industries. Its shares closed last week at $31.98. Revenue for the last year grew at a very healthy clip of 115 percent - and that growth is also expected to continue through 2008. My 12-month price target is $49, which means profit taking should start at prices above $45.

Hilary Kramer runs a green investment fund that owns long positions in the above stocks.

Source : http://www.nypost.com

Portfolio Allocation Tool

2008-07-07T11:41:00.000-04:00

There are many websites that will help you determine what your portfolio should look like. Easyallocator.com, for instance, will analyze your investments and measure what percentage should be in each asset type and in what types of accounts.

In This Bear Market, Be Ready to Buy

2008-07-06T02:05:00.000-04:00

Stock funds are on sale.

And while it's possible that the prices of stocks, and thus stock mutual funds, will be slashed even further, this is a good time for long-term investors to be thinking about putting more money to work in the market.

Many investors are feeling queasy with the Dow Jones Industrial Average down 20.3% from its October closing high -- now technically in bear-market territory, as commonly defined as a 20% drop. Last week the Dow slid 0.5%, bringing its year-to-date drop to 14.9%.

But if you're saving toward a distant goal like retirement, remember that your investment today buys more shares. Despite bear markets and recessions, over time the stock market tends to rise and those extra shares become worth more.

"Volatility is a friend to long-term investors" who can use the "opportunity to buy when things are cheap," says Curtis Jensen, manager of Third Avenue Small-Cap Value Fund.

One way to take advantage of today's discounts without losing too much sleep: seek out mutual funds that have strong long-term returns along with less downside risk than their peers.

Ten Funds to Consider

To that end, Morningstar analysts recently sorted through their database for U.S.-stock funds with strong 10-year records under long-tenured managers -- as well as "below average" or "low" risk ratings as figured by the Chicago research firm. Those risk ratings are based on how often a fund has lost money compared with others in the same category.

A total of 16 funds met these and some additional criteria, including assets of at least $1 billion; of those 16, the 10 funds with the best 2008 performance rankings in their respective categories, including Mr. Jensen's fund, are shown here.

Focusing on a fund's long-term performance allows investors to look past recent market volatility for a better picture of overall fund performance, including how "funds performed through various market cycles," says Morningstar analyst Karin Anderson.

Over the past decade, the 16 funds identified by Morningstar have delivered returns equivalent to 6.91% a year, versus just 2.88% a year for the Standard & Poor's 500-stock index, the most widely used benchmark for U.S.-stock funds.

But investing even in proven, less-volatile stock funds doesn't mean avoiding losses. Indeed, none of the 16 funds showed a positive return from the Dow's all-time high on Oct. 9 through midyear. Over that period, 14 of the funds had smaller declines than the Dow, and 13 had smaller drops than the S&P 500.

Long-Term Perspective

A number of the funds on Morningstar's list aim to hold shares of solid businesses for years at a time. For instance, Baron Growth Fund seeks well-managed small businesses with the potential to double in size every five years, while doubling the value of the fund's investment, says manager Ron Baron. "We look for companies that are going to grow in a long period of time, no matter what happens in the stock market."

While the companies may be growing, however, those share prices on average haven't grown in recent months: Baron Growth was down 14.18% from the market high through midyear.

Mr. Baron figures even the fund's worst-performing holdings this quarter, recreation and resort companies including Wynn Resorts and Ameristar Casinos, will eventually "see a comeback." People are trimming their spending now, but in time "everyone wants to go on vacation and will just work harder to get there," he says.

Mr. Jensen's Third Avenue Small-Cap Value has the best 10-year record among the 10 funds on our list, and it has also declined the least since the market peak. It ranks in the top 10% of Morningstar's "small value" fund category so far this year and over the past 12 months.

Mr. Jensen aims to invest in cheaply priced stocks of companies with strong balance sheets. The fund has benefited from significant holdings in the strong-performing energy sector while avoiding struggling financial companies and home builders.

Taking a different tack, Meridian Growth, run by Rick Aster, tends to avoid cyclical stocks like energy and industrials. "Meridian bets on consumer staples with a patient approach that has been holding up well," Ms. Anderson of Morningstar says. One recent top holding: dental-products supplier Dentsply International.

Stung by Financials

Some funds that favor stable dividend-paying stocks have been stung recently by losses on financial shares, traditionally a core holding of such funds.

For instance, American Century Equity Income Fund sold Citigroup and Freddie Mac at a loss in the second half of last year, co-manager Phil Davidson says. The fund declined 14.5% from the Dow's peak through midyear.

Still, the fund ranks in the top 20% of Morningstar's "large value" category this year and over the past 12 months. "It would be almost impossible not to be down, but we're keeping our record going on a relative basis and hoping for a smoother ride," Mr. Davidson says.

Source : http://online.wsj.com

A Bear Market, Mauling Not Included

2008-07-06T01:57:00.001-04:00

WITH the Dow Jones industrial average and the Nasdaq composite index down about 20 percent from their recent highs, this sure looks like a bear market.

But does it feel like one yet? Before you answer, check how your overall portfolio has performed lately. You’re probably not happy with the returns — but if you have been a conservative, diversified investor, you may well be doing better than the overall stock market. “In most cases, the experience of your own portfolio is not what you’re reading in the headlines,” said Stuart L. Ritter, a financial planner at T. Rowe Price in Baltimore.

To be sure, this has been a particularly painful nine-month span, marked by a historic credit crisis, record-high oil prices, heightened inflation fears and perhaps even a recession. And considering that many foreign markets — like China, India and much of Europe — have declined sharply, there is a growing sense among investors that there is no place to hide.

But most individual investors don’t invest all their money in stocks. They put a portion of it into bonds, in part to stabilize their portfolios in a market storm.

This old-fashioned diversification has demonstrated its value. From the start of October 2007 — around the peak of the domestic stock market — to the end of June, a portfolio of 70 percent stocks and 30 percent bonds fell just 9 percent, according to the research firm Morningstar. The stock portion mirrored the Standard & Poor’s 500-stock index, while the domestic bond allocation was based on the Lehman Brothers Aggregate Bond index.

You would have fared even better if you had been gradually putting money into the stock market, a strategy known as dollar-cost averaging. In a falling market, this offers another form of ballast: it means that investors are buying new shares at ever-lower prices, thereby averaging out the returns they earn on each pot of new money.

“Times like these should remind people of the importance of the basics — like having a long-term asset-allocation strategy,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.

Investors might also want to remind themselves of the following three basic rules:

DON’T PANIC Downturns like this one may be painful, but “they’re a normal part of the market,” Mr. Ritter said.

Generally, the market has experienced a 20-percent-plus pullback every five years or so since 1900, according to James B. Stack, editor of the InvesTech Market Analyst newsletter. Some market strategists, including Ms. Sonders, say they think this downturn won’t be as severe as the bear market of March 2000 to October 2002, which cut the Standard & Poor’s 500 in half and erased nearly 80 percent of the value of the Nasdaq index. That bear was marked by sky-high stock valuations amid weak corporate fundamentals. This time around, corporate balance sheets — with the exception of financial companies — are in decent shape and price-to-earnings ratios are generally in line with historical standards, Ms. Sonders said.

“So I don’t think we’re necessarily going to suffer the same type of market pain as the last time,” she said.

STAY PROPERLY DIVERSIFIED This means not only owning different types of stocks, but also committing a permanent portion of your portfolio to fixed-income investments.

Why? Bonds can be a remarkably valuable part of a portfolio when stock prices decline.

Peng Chen, president and chief investment officer of the investment advisory firm Ibbotson Associates, recently studied the diversification benefits of various assets under different market conditions. He found that when domestic stocks went south, there was a tendency for many other investments to follow suit.

In a recent article in the journal of the CFA Society of the United Kingdom, “Re-evaluating Asset Allocation in a One-Basket World,” he found that correlations between the S.& P. 500 and foreign stocks increased in periods when the American index declined. By contrast, the correlation between American bonds and stocks fell to virtually zero in months when the stock market declined, according to Ibbotson. That makes bonds, as an asset class, an extremely effective buffer when the stock market is shaky.

STAY THE COURSE “Sticking to the original plan is the best course of action,” said Alison Borland, the defined-contribution consulting practice leader for Hewitt Associates.

History certainly bears this out. Say you were dollar-cost averaging $1,000 a month — with 70 percent going into S.& P. 500 stocks and 30 percent into a diversified basket of bonds — during the bear market from 2000 to 2002. While the market slide reduced the value of the stocks around 50 percent, the value of the new investments you made during that period would have fallen about 14 percent during this stretch, according to Morningstar.

Moreover, by continuing to invest through the bad times, investors set themselves up to bask in the long bull market that started in October 2002.

Source : http://www.nytimes.com

Mars, Buffett to buy Wrigley for $23 billion

2008-07-03T13:12:00.004-04:00

SAN FRANCISCO (MarketWatch) -- Mars Inc., backed by billionaire investor Warren Buffett's Berkshire Hathaway Inc., just reached its hand deeper into the candy jar.

Mars said Monday it will buy 117-year-old chewing gum pioneer Wm. Wrigley Jr. (WWY) for about $23 billion -- a deal promising to combine M&M's and Snickers with Juicy Fruit and Life Savers.

Mars, of McLean, Va., will pay $80 in cash for each share of Wrigley share, a 28% premium over Wrigley's Friday closing price of $62.45, closely held Mars said in a statement.

Chicago-based Wrigley, with annual sales of $5.4 billion, is known for its namesake Spearmint and Juicy Fruit gums as well as Life Savers. Mars is paying multiples of more than four times sales and 35 times Wrigley's 2007 earnings per share for those products and others, based on the deal price.

The deal will create a global candy giant with annual sales of $28 billion.

Wrigley will become a stand-alone, separate Mars subsidiary, in which Buffett's Berkshire Hathaway (BRK.A) will make a minority investment, Mars said.

Specifically, Berkshire Hathaway will make a $2.1 billion equity purchase in Wrigley. It will be bought at a discount to the share price being paid to the company's shareholders.

In a statement, Buffett said he has been "a big fan of Wrigley's business model for many years." His investment company has long owned San Francisco-based See's Candies.

In addition to Berkshire Hathaway, financing for the transaction is to be provided by Goldman Sachs and J.P. Morgan. The deal is expected to close in six to 12 months.

Wrigley's shares shot up 23% to $76.91, reaching unseen levels for the stock.

In its many decades as a publicly traded company, Wrigley's stock has never before approached the $80-a-share mark, adjusting for share splits.

The transaction is aimed at strengthening and diversifying Mars' position in the confectionery business worldwide. Mars ranks as the world's largest chocolate maker by sales, with market share of 15%. And its total annual sales are $22 billion, the company claims.

A deal would expand Mars' global reach, already considerable, because Wrigley generates 70% of its sales outside of the U.S. Its products also include Extra, Eclipse and Orbit gums.

Changing competitive landscape

Pending completion of the Wrigley deal, Mars will manufacture everything from chocolates to chewing gum, drinks and pet-care products. Some of its brands will include M&Ms, Snickers, Pedigree, Wrigley's chewing gum and Altoids breath mints.

Mars will move its Starburst and Skittles brands to Wrigley, which will fold those sugar products into its Life Savers and Altoids portfolio.

The transaction brings together the Mars family of Northern Virginia and Wrigley family of Chicago.

Bill Wrigley Jr. will remain executive chairman of Wrigley, reporting to Paul Michaels, global president of Mars. He will work closely with Bill Perez, Wrigley's president and chief executive, and the chewing-gum maker's current management team, Mars said.

In recent years, Wrigley has expanded its offerings far beyond chewing gum.

In 2005, the company bought from Kraft Foods Inc. (KFT) its candy assets, including Altoids and LifeSavers, for about $1.5 billion. Wrigley also recently purchased a Russian chocolate company.

The family-controlled company -- whose name is emblazoned on Chicago's Wrigley Building, which it owns, and Wrigley Field, which it does not -- was close to a deal to acquire Hershey in 2002 for about $12.5 billion, but talks fell apart at the 11th hour, The Wall Street Journal has reported.

Separately Monday, Wrigley's reported first-quarter net income rose 18% from a year ago to $168.6 million, while sales jumped 16% to $1.45 billion from the year-earlier quarter.

Mutual Fund Portfolio Examples

2008-07-02T15:52:00.002-04:00

By looking at examples of different portfolios, we can get a feel for how we should form our portfolio and which mutual funds might be good to look into using.

Remember, as you read through these portfolios, you need to modify these examples to fit your individual financial situation. When you finish, your portfolio might not look like any of these examples. You need to ask yourself, how much risk am I taking and how much reward am I getting for that risk. If you don’t feel comfortable with the risk don’t take it. Money is not worth losing one nights sleep over.

Scott Burns’ Lazy Portfolios (Assetbuilder.com):

Scott Burns’ Lazy Portfolios

Scott Burns is one of the most widely read personal finance writers in the country. Mr. Burns is also in favor of using simple, but effective model portfolios as a foundation for long-term investing. In fact, to illustrate that view, he created five unique portfolios which also have solid long-term track records: Couch Potato, Margarita, Four Square, Five Fold, and Six Ways From Sunday.

Couch Potato Portfolio:
- 50% in Vanguard Total Stock Market Index Fund (VTSMX)
- 50% in Vanguard Inflation Protected Securities Fund (VIPSX)

Margarita Portfolio:
- 33.3% in Vanguard Total Stock Market Index Fund (VTSMX)
- 33.3% in Vanguard Inflation Protected Securities Fund (VIPSX)
- 33.3% in Vanguard Total International Stock Index Fund (VGTSX)

Four Square Portfolio:
- 25% in Vanguard Total Stock Market Index Fund (VTSMX)
- 25% in Vanguard Inflation Protected Securities Fund (VIPSX)
- 25% in Vanguard Total International Stock Index Fund (VGTSX)
- 25% in Vanguard REIT Index (VGSIX)

Five Fold Portfolio:
- 20% in Vanguard Total Stock Market Index Fund (VTSMX)
- 20% in Vanguard Inflation Protected Securities Fund (VIPSX)
- 20% in Vanguard Total International Stock Index Fund (VGTSX)
- 20% in Vanguard REIT Index (VGSIX)
- 20% in American Century International Bond Fund (BEGBX)

Six Ways From Sunday Portfolio:
- 16.65% in Vanguard Total Stock Market Index Fund (VTSMX)
- 16.65% in Vanguard Inflation Protected Securities Fund (VIPSX)
- 16.65% in Vanguard Total International Stock Index Fund (VGTSX)
- 16.65% in Vanguard REIT Index (VGSIX)
- 16.65% in American Century International Bond Fund (BEGBX)
- 16.65% in Vanguard Energy (VGENX)

Ted Aronson’s Lazy Portfolio

I’m not sure I know exactly where the term “lazy portfolio” originated, but if you do a simple Google search using those two words, you’re likely to find information about Ted Aronson and his lazy portfolio strategy which has soundly beaten the S&P 500. Last year’s return was +15.9% and the portfolio has a 5-year annualized return of +13.3%. Below you’ll see how the portfolio is set up:

Ted Aronson (AJO Partners)
- 20% in Vanguard Emerging Markets Stock Index (VEIEX)
- 15% in Vanguard 500 Index (VFINX)
- 15% in Vanguard Pacific Stock Index (VPACX)
- 10% in Vanguard Extended Market Index (VEXMX)
- 10% in Vanguard Inflation-Protected Securities (VIPSX)
- 5% in Vanguard European Stock Index (VEURX)
- 5% in Vanguard High-Yield Corporate (VWEHX)
- 5% in Vanguard Long-Term U.S. Treasury (VUSTX)
- 5% in Vanguard Small Cap Growth (VISGX)
- 5% in Vanguard Small Cap Value Index (VISVX)
- 5% in Vanguard Total Stock Market Index (VTSMX)

William Bernstein’s No-Brainer Portfolios

William Bernstein, a neurologist by trade and well-known author of books like “The Four Pillars of Investing,” has made a name for himself by being a vocal critic to the Wall Street establishment. And, like many others, Bernstein believes 1) you should stick with index funds with a risk-return profile that you desire, and 2) that properly diversified low cost funds offer you the best chance of long-term success.

To meet that goal, here are two of his highly recommended lazy portfolios:

William Bernstein’s Basic No-Brainer Portfolio (Regular or Tax Friendly)
- 25% in Vanguard 500 Index (VFINX)
- 25% in Vanguard Small Cap (NAESX) or (VTMSX)
- 25% in Vanguard Total International (VGTSX) or (VTMGX)
- 25% in Vanguard Total Bond (VBMFX) or (VBISX)

William Bernstein’s No-Brainer Coward’s Portfolio:
- 40% in Vanguard Short Term Investment Grade (VFSTX)
- 15% in Vanguard Total Stock Market (VTSMX)
- 10% in Vanguard Small Cap Value (VISVX)
- 10% in Vanguard Value Index (VIVAX)
- 5% in Vanguard Emerging Markets Stock (VEIEX)
- 5% in Vanguard European Stock (VEURX)
- 5% in Vanguard Pacific Stock (VPACX)
- 5% in Vanguard REIT Index (VGSIX)
- 5% in Vanguard Small Cap Value (NAESX) or (VTMSX)

Bill Schultheis’ Coffeehouse Portfolios

Bill Schultheis, author of the very popular and high-regarded book titled “The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life” is another proponent of the keeping it simple approach. A former broker for Smith Barney and current financial advisor for Pacific Asset Management, offers three principles of investing:

1) Don’t put all your eggs in one basket. (Diversify in different asset classes.)
2) There is no such thing as a free lunch. (Capture the entire return of each basket, or asset class, through low cost index funds.)
3) Save for a rainy day. (Develop a long term financial plan).

If you take time explore Bill’s website, you’ll also discover a fresh perspective about investing and money and its influence over your life. In addition, Bill has provided three basic portfolios for you to consider:

Three ETF Fund Portfolio:
- 33.3% in Vanguard Total Stock Market (VTI)
- 33.3% in iShares International MSCI EAFE Value Index (EFV)
- 33.3% in iShares Lehman Aggregate Bond (AGG)

Coffeehouse Portfolio (ETFs):
- 40% in iShares Lehman Aggregate (AGG)
- 10% in iShares S&P 500 (IVV)
- 10% in iShares S&P 500/Barra Value (IVE)
- 10% in iShares MSCI EAFE (EFA)
- 10% in iShares Dow Jones US Real Estate (IYR)
- 10% in iShares Russell 2000 Value (IWN)
- 10% in iShares Morningstar Small Core (JKJ)

Coffeehouse Portfolio (Vanguard):
- 40% in Vanguard Total Bond Index (VBMFX)
- 10% in Vanguard 500 Index (VFINX)
- 10% in Vanguard Value Index (VIVAX)
- 10% in Vanguard International Stock Index (VGTSX)
- 10% in Vanguard REIT Index (VGSIX)
- 10% in Vanguard Small-Cap Value Index (VISVX)
- 10% in Vanguard Small-Cap Index (NAESX)

David Swensen’s Lazy Portfolio

I have tremendous respect for David Swensen. One of my favorite books last year was his book “Unconventional Success: A Fundamental Approach to Personal Investment” and, if you haven’t read it, I recommend it highly.

David is the chief investment officer of Yale University where he produced a two-decade investment record of +16.1% per year returns. His track record easily places him as one of the best managers of institutional money in the United States. So, what does one of the best money managers around recommend for individual investors? Well, here’s the portfolio:

David Swensen’s Lazy Portfolio:
- 30% in Vanguard Total Stock Market Index (VTSMX)
- 20% in Vanguard REIT Index (VGSIX)
- 20% in Vanguard Total International Stock (VGTSX) or (15% in VDMIX and 5% in VEIEX)
- 15% in Vanguard Inflation Protected Securities (VIPSX)
- 15% in Vanguard Short Term Treasury Index (VFISX

Ben Stein’s Model Portfolios

I like Ben Stein. I’ve read enough of his articles and books through the years that in my opinion I think he’s both sincere and dedicated to helping others.

Not surprising, Ben is also in favor of indexed-focused long-term investing and believes that you should focus your investments on dominant big picture themes to produce even greater returns. For example, Ben has made it clear that he thinks Americans would be smart to have exposure to the world’s emerging markets. In addition, Ben’s portfolio is the only one that I will profile this week that actually sets aside some cash “for a rainy day.” Now, there’s an unusual recommendation!

Ben Stein’s Long-Term Portfolio:
- 30% in Fidelity Spartan Total Market Index (FSTMX) or Total Stock Market ETF (VTI)
- 15% to 20% in iShares MSCI EAFE Index (EFA)
- 10% in iShares MSCI Emerging Markets Index (EEM) or Emerging Markets 50 ADR (ADRE)
- 10% in iShares Cohen & Steers Realty Majors (ICF)
- 10% in iShares Russell 2000 Value Index (IWN)
- 15% in Cash

Jim Lowell’s Sower’s Growth Portfolio

Jim Lowell is a jack of all trades. He’s the editor of several well-known publications (like Fidelity Investor and The ETF Trader at Marketwatch), author of several books including “What Every Fidelity Investor Needs to Know,” a partner at investment advisory firm, and founder of The Ranking Service which offers research for institutions. So what does this Harvard educated guru think that investors should do with their money?

The Sower’s Growth Portfolio:
- 25% in iShares MSCI EAFE (EFA)
- 15% in iShares DJ U.S. Total Market (IYY)
- 15% in Mid Cap SPDR Trust (MDY)
- 10% in Diamonds Trust (DIA)
- 10% in iShares Russell 2000 (IWM)
- 10% in iShares MSCI Emerging Markets (EEM)
- 7.5% in Fidelity NASDAQ Composite (ONEQ)
- 7.5% in Power Shares Dynamic Market (PWC)

This portfolio will be of particular interest to those of you who do not like the offerings at Vanguard which seem to dominate so many other lazy portfolios I will profile this week. Jim has also provided a few alternatives that we haven’t seen before in other portfolios.

Frank Armstrong’s Ideal Index Portfolio

Investment advisor Frank Armstrong is well-known for his book, “The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio” as well founding his own advisory firm. While Frank is a big fan of using funds from Dimensional Fund Advisors (which are only available to institutions and financial advisers), in his view this is as close to an ideal portfolio you can get which offers the best returns with the least amount of risk:

Frank Armstrong’s Ideal Index Portfolio:
- 31% in Vanguard Total International Stock (VGTSX)
- 30% in Vanguard Short-Term Bond (VBISX)
- 9.25% in Vanguard Small Cap Value (VISVX)
- 9.25% in Vanguard Value (VIVAX)
- 8% in Vanguard REIT (VGSIX)
- 6.25% in Vanguard Small-Cap Growth (VISGX)
- 6.25% in Vanguard 500 Index (VFINX)

John Wasik’s Nano Investment Portfolio

John Wasik, author of “The Kitchen-Table Investor,” and columnist for Bloomberg News, has also provided us another lazy portfolio to consider which he calls the nano investment portfolio:

John Wasik’s Nano Investment Portfolio:
- 20% in Vanguard Total Stock Market VIPERS (VTI)
- 20% in Vanguard Total International Stock (VGTSX)
- 20% in Vanguard REIT VIPERS (VNQ)
- 20% in iShares Lehman TIPS Bond (TIP)
- 20% in iShares Lehman Aggregate Bond (AGG)

Source: http://www.kiedaisch.com

Cramer recommends Allscripts Healthcare Solutions Inc. (MDRX)

2008-07-02T10:39:00.001-04:00

Allscripts Healthcare Solutions Inc. (MDRX)... The top company for electronic medical records and electronic prescriptions... The new Medicare bill contains both incentives for using e-prescribing systems that will run from 2009 to 2013...

And an e-prescribing mandate that will penalize doctors and hospitals that don't start using e-prescribing software by the end of 2010. Doctors have been notoriously slow to adopt their new technology. They want to keep using their awful handwriting... They want to keep using the same old, same old, that result in pharmacy having to call the doctors office 30% of the time because the print is illegible for these crucial drugs... Not to mention the numerous accidents that occur... But now that the government is going to start providing pay incentives for using this software and penalties for not using it, physicians and hospitals actually have a pretty good reason to change their evil ways in order to protect the bottom line.

Why MDRX?... After digesting its recent merger with Misys Healthcare, a deal that's expected to close in the third quarter, MDRX should have a client basis of roughly 150,000 doctors and 700 hospitals... That's a quarter of the doctors in the US. MDRX has relationships and sells software to all of these doctors, but e-prescribing, the e-prescribing market is still small... Only 2% of the 1.47 billion new prescriptions and renewals eligible for election rally were transmitted electronically in 2007... It has enormous room for growth ... Especially with the e-prescribing mandate coming down from Congress, which might as well just be a check made out to MDRX... As they're already selling software to a huge portion of the market, they are poised to capture the new e-prescribing business that the Medicare boondoggles will bring. This is exceedingly bullish... Buy, buy, buy...

Also, MDRX has a product called ERX, now it's software that they give away for free so doctors don't have to invest in new hardware or even pay for the software... This is a great Gillette kind of razor blade business model ... MDRX gets paid whenever there's a transaction, but there aren't any upfront costs. The main thing that MDRX precipitously from $28 to $8 was its failure to deliver on its electronic health records platform. There were bugs and the company had execution issues, given it was trading at 60-times earnings, any little slip-up would send this stock to growth purgatory, and its share holders, frankly, to Hades, for losing 20 straight points. That's exactly what happened... But, according to MDRX, they expect to resolve this issue by the end of the year with a new less-buggy version of the platform...

MDRX is a comeback stock. It gets 82% of its revenues and over 90% of its profits from its software services division, which provides e-prescribing solutions... And the number of prescriptions filed electronically are expected to grow by 400% this year. The stock is at 18-times earnings, 40% earnings growth, long-term growth rate of 23.5%...

With the help of the new Medicare bill, essentially mandating the hospitals and doctors to use MDRX's product, the stock is going to get its 25 multiple back in 2009... We're talking a 44% gain.

Serious Money: Five stable stocks for troubled times

2008-07-01T15:42:00.001-04:00

The following five companies made the grade.

1) Johnson and Johnson (NYSE: JNJ): This one is probably not any surprise. There was no money to be made here but you would not have lost any either. Year to date it has traded between $68 and $64 and that is about where it has been for quite some time. It does pay almost a 3% dividend yield and that's mighty fine these days.

2) Teva Pharmaceuticals ADR (NASDAQ: TEVA): Pharmaceuticals have long been a safe haven in troubled times and the world's largest maker of generic drugs is sitting pretty these days with expanding markets everywhere it looks. This Israeli company has traded roughly between $43 and $47 for quite some time, pays a 1% yield and looks to have plenty of upside going forward.

3) Chubb Corp (NYSE: CB) the conservative insurance company has held up better than most of its peers. Over the past six months and going back two years it has hovered between $49 and $54, all the time paying about a 2.6% yield.

4) Xcel Energy (NYSE: XEL) is a holding company for numerous utilities. Over the course of the past twelve volatile months it has been trading in a 10% range between $20 and $22 while paying a huge yield, which today stands at 4.8%.

5) Walt Disney (NYSE: DIS) may be a great place to hide if you want to forget your troubles, whether you chose the new Pixar movie hit WALL-E or Disneyland, or a trip down memory lane renting or downloading any one of its countless hits from its film library. The stock is currently trading in the neighborhood of $30.62, mid-point in its 52 week range. Over the past six months it has spent most of the time drifting between $30 and $33 per share with a few drops and pops here and there. The 1.1% yield is not as generous as the others but it I would be happy to take it.

What do they have in common? They are diversified among their industries, have growth horizons, and of course they all pay dividends. But the standout at this juncture seems to be that they all have shrewd conservative management teams -- and they have been in the right place, at the right time, and prepared.

Hilary Kramer's Picks

2008-06-30T14:37:00.003-04:00

NBR Transcripts-June 11, 2008

"Street Critique"-Hilary Kramer, Chief Market Strategist at Greentech Research

PAUL KANGAS: Returns on alternative energy stocks have been mediocre to poor in recent months but tonight's "Street Critique" guest says that just makes them more attractive. She's Hilary Kramer, chief market strategist at Greentech Research and author of "Ahead of the Curve." Hilary, great to see you again.

HILARY KRAMER, CHIEF MARKET STRATEGIST, GREENTECH RESEARCH: Thank you, Paul, very nice to be here.

KANGAS: You're a market strategist. So before we get to your stock picks, let's talk about this market. Is the ugliness going to continue?

KRAMER: In the short term, we are going to see more down days like we have Friday and a day like today. Again the problem is that there's fear and uncertainty in the market. It's not just in terms of individual investors, but institutional leaders fear across Wall Street. There's fear as well. Are prices of oil going to go up? Is there going to be increased unemployment and what's the value of my house or my commercial property? So all of these are contributing to the market going down but eventually the market always goes back up.

KANGAS: All right. Well let's get to your selections tonight. Shares of alternative energy companies especially the solar stocks have been very volatile. Why do you like this sector?

KRAMER: I look for growth. Growth is what drives stock prices upwards so alternative energy is in very strong demand right now. There's a lot of regulatory winds that will eventually make it a better situation and cheaper for companies to utilize alternative energy techniques.

KANGAS: Let's get to some of your specific favorites. What's your first choice and its ticker symbol?

KRAMER: Enernoc and its symbol is ENOC. This is a company in the $13 range that has been as high as $50. Enernoc serves the utility industry and helps them conserve energy. It's called demand response and what they do to an operations center is they control the amount of electricity that's distributed. It's a great company to prevent blackouts and brownouts.

KANGAS: The stock's had quite a tumble hasn't it, so you think it's attractive at this level.

KRAMER: Yes, absolutely. As a matter of fact, I was buying Enernoc. I've been buying Enernoc and I can see Enernoc going back into the mid 20s.

KANGAS: OK, your next choice.

KRAMER: SunPower Corporation, SPWR. This is a solar power company that's both midstream and downstream, meaning that they do everything from put together solar panels to install them. SunPower is very well positioned because the utilities are starting on these projects to build very, very large solar projects, solar thermal is what they call it. And SunPower is positioned to get those contracts. The stock is off, what, almost 50 percent from its high at the end of December.

KANGAS: Quickly, one more here.

KRAMER: MEMC Electronics, the ticker is wafer, WFR. This is a poly silicon maker. This is a company that went from being a semiconductor play to being a solar play.

KANGAS: And we have time for an exchange trade fund that you like.

KRAMER: Anyone who wants to diversify their risk, who wants to be careful the PBW, it's Powershares Wilderhill, but the ticker symbol is PBW. This had SunPower in its (INAUDIBLE) for solar, Sun Tech and you can't go wrong. It's been beaten down. It's a well managed ETF.

KANGAS: All right, do you Hilary own any of these stocks individually?

KRAMER: Yes. I own Enernoc, Sun Power and MEMC. I don't own PBW because I don't do EFTs, but the other three companies I own.

KANGAS: Great to see you again Hilary. Thanks for being with us. KRAMER: Thank you, Paul.

KANGAS: My guest Hilary Kramer of Greentech Research.

Investing: Keeping Inflation at Bay

2008-06-30T14:04:00.002-04:00

By Ben Steverman

After decades in remission, inflation is making a comeback. Rising prices already are making consumers miserable and squeezing corporate profits, but inflation also might cripple investors' returns if they're not careful.

It's not yet clear that higher inflation is here to stay, but there's no doubt the price of many basic materials -- notably fuel and food -- are skyrocketing. Once firmly established, inflation will be hard to dispel, and that worries economists, investors, and the central bankers who set interest rates around the world.

There are investing strategies that can protect portfolios from inflation -- some of which we describe below -- but few investors can fully escape inflation's destructive influence on the economy and financial markets.

A Sinister Beast Uncaged

Richard Fisher, president of the Federal Reserve Bank of Dallas, gave a sense of how much the Fed worries about inflation in a May 28 speech. "Inflation," Fisher said, "is a sinister beast that, if uncaged, devours savings, erodes consumer purchasing power, decimates returns on capital, undermines reliability of financial accounting, distracts the attention of corporate management, undercuts employment growth and real wages, and debases the currency."

And those aren't the only troubles inflation brings. The cure for inflation, hikes in interest rates, can be worse than the problem. Higher lending costs could not only slow down a weak economy, but also exacerbate the U.S. housing crisis.

Although there are things investors can do to prepare for inflation, few are certain to counteract its effects. That's worrisome because evidence of inflation is everywhere lately.

Dow Chemical (DOW) raised product prices by up to 20% on June 1, after executives said the firm's bill for energy and feedstock jumped 42% from the year before.

April's U.S. consumer price index, a measure of all consumer costs, was up 3.9% from a year ago, with energy costs higher by 15.9% and food up 5.1%. The Fed recently revised its 2008 inflation expectations to a range of 3.1 to 3.4%, up a full percentage point from the beginning of the year. According to the Reuters/University of Michigan Surveys of Consumers, Americans in May said they expected the highest levels of inflation in more than two decades.

And it's not just a U.S. worry: European central bankers have not cut interest rates, held back by inflation concerns, and many emerging economies are seeing costs rise, too.

The U.S. economy seemed to slow at the beginning of the year, a trend many thought would stifle inflation, says John Merrill, chief investment officer at Tanglewood Capital Management. "In fact, inflation seems to be building," he says.

Strong Demand Is Buoying Prices

"The global economy remains very strong," meaning demand for natural resources is strong, too, says Susan Perkins, managing director at Provident Investment Counsel. That has pushed the price of energy and other commodities to record levels. Average gas prices are at $4 per gallon nationwide, and the price of oil hit $135 per barrel in late May before backing off recently.

Despite the worries, high inflation isn't a certainty. The yield on a two-year Treasury note is still a low 2.5%, suggesting bond traders don't expect a major spike in inflation. What could prevent inflation? A weak economy crimping demand for goods and services, for one thing. Also, Brian Gendreau of ING Investment Management (ING) notes that up to three-quarters of corporate costs go toward labor, and wages are actually falling by some measures.

If inflation does spike, it presents a dilemma for investors. Government bond yields are likely to rise along with inflation, while the value of bonds in a portfolio could plunge. Putting all your money in cash might be tempting, but inflation will hurt the buying power of that cash.

So how should investors prepare for the possibility of a prolonged period of higher inflation? A simple option is Treasury Inflation-Protected Securities, bonds that keep up with rising inflation since the yield is indexed to the consumer price index. Still, yields on TIPS are low, and financial adviser Kipley Lytel, of Montecito Capital Management, warns they have other disadvantages: They're not tax-friendly for some investors, and they rely on a government inflation adjustment that Lytel thinks is too low.

Looking for a Safe Haven

The "classic formula" for dealing with inflation, according to William Rutherford of Rutherford Investment Management: "Buy things, and go into debt." As inflation pushes up the prices of those "things" -- such as real estate and commodities -- it's much easier to pay off your original debt. This can be a risky strategy, however. Commodity prices are volatile and could be approaching "bubble" levels, Rutherford says. Meanwhile, real estate values are just about the only prices in the U.S. that are falling. Plus, the policymakers' likely reaction to inflation -- higher interest rates -- would make it hard to refinance high levels of debt.

Experts have a variety of advice for investors looking to protect their portfolios against inflation.

Perkins advises "looking for companies that have sustainable competitive advantages." Demand for their products should be so strong that higher raw-material costs can easily be passed on to consumers. She recommends companies with innovative products like Apple (AAPL) and robotic surgery technology outfit Intuitive Surgical (ISRG).

Rutherford has similar criteria, looking for companies with "pricing power" during inflationary times. Dow Chemical, with its recent big price increases, clearly has that power, he says. Other examples are makers of consumer necessities, like Procter & Gamble (PG), Kellogg (K), and General Mills (GIS). "At the end of the day, people do need to eat," he says.

Hats Off to Small-Caps

When inflation is higher, small-cap stocks benefit, Doug Roberts of Channel Capital Research says. Smaller companies do better during times of negative real interest rates, i.e. times -- like now -- when interest rates are lower than the inflation rate.

Lytel invests small portions of his clients' portfolios directly in one of the prime causes of inflation: commodities. He uses exchange-traded funds like the PowerShares DB Commodity Index Tracking Fund (DBC) or the Vanguard Energy Fund (VGENX). Rutherford, however, warns against ETFs focused too narrowly on volatile commodities like oil and gold. He would rather invest in commodities through big, diverse mining companies like BHP Billiton (BHP) or Rio Tinto (RTP).

Depending on where investors put their money, their portfolios might avoid damage from inflation. But consumers, forced to pay more for gas and food, have fewer options. Americans "in the bottom half of the economic spectrum" are hit the hardest, Merrill says. "It seems like these people can't catch a break." That's why, in case of inflation, Merrill advises staying away from retail stocks. "Retail in America is in a real uphill battle," he says.

Bringing On Uncertainty

Inflation is likely to punish anyone -- and any company -- that's not in good financial shape. "People and companies on the margins are going to have a tougher time," Rutherford says.

One of the biggest problems that inflation causes is uncertainty.

Commodity markets are priced for "hyperinflation," Roberts says, while bond markets predict little or no inflation. "One of them has to give," Roberts says. But which one? "We'll only know that in the rearview mirror," Perkins says.

Investors make money by correctly predicting the future. But inflation deals a wild card, making it much harder to anticipate the direction of the economy and the markets. The best investors can hope for is that it acts like an annoying -- but mostly harmless -- party crasher, who pesters the other guests but doesn't get out of control.

Deutsche Bank Increases Their Price Target on Cleveland-Cliffs (CLF) to $150

2008-06-30T13:59:00.001-04:00

Here's a good buy opportunity. Current Price is around $120.

Deutsche Bank increases their price target on Cleveland-Cliffs (NYSE: CLF) from $115 to $150 and reiterates their Buy rating. The firm increases their 2008 EPS estimates from $5.77 to $6.69 and 2009 EPS estimates from $9.57 to $12.52.

The firm said, "Our expectations for Cliffs realization prices were upped for both iron ore and coal. Our previous estimates for 2008 were based on a 65% increase for fines in Asia Pacific which has already been superseded by the announcement of the ~80% increase reached by Rio Tinto with Chinese steelmakers. For 2009, main changes stem from DB's revised commodities forecasts, which now call for a 5% increase for pellets (vs. 0% previously), +20% for fines (vs. previous +10%), and higher realization prices given a ~US$230/mton price assumption for standard hard coking coal. These new benchmarks imply realization prices at around US$99/lton for NA pellets, ~US$154/ston for NA coal, and ~US$113/mton for AP fines."

Cleveland-Cliffs, Inc. engages in the production and sale of iron ore pellets to integrated steel companies in North America and Australia.