We reaffirm our Neutral recommendation on fast moving consumer goods giant Unilever Plc (UL) following an appraisal of its first quarter 2013 results.
Why the Reiteration?
On Apr 25, Unilever reported strong first quarter 2013 sales and recorded organic (excluding the impact of acquisitions and disposals) sales growth of 4.9%. The increase was driven by volume and pricing gains of 2.2% and 2.6%, respectively. Increased investment in innovation, improved product quality and introduction of brands in new markets contributed to the growth. Underlying sales expanded 10.9% in the emerging markets while sales in the developed markets declined in the quarter due to global macroeconomic headwinds.
Unilever witnessed strong growth in Home Care and Personal Care categories and modest growth in the Refreshment category, despite weak ice cream sales in Europe. The Foods category was sluggish due to weak performance of spreads, which offset improved performance in savory and dressings.
Overall, we are optimistic about Unilever's wide portfolio of globally recognized flagship brands, which caters to a fast growing consumer goods sector. Unilever has also been strengthening its portfolio through a number of acquisitions and divesting its non-core businesses. The company divested its European frozen foods business long back in 2006 and sold its North America frozen meals business (brands of Bertolli and P.F. Chang) to ConAgra Foods Inc (CAG) in Aug 2012. Later in Mar 2013, Unilever agreed to sell its Skippy peanut butter business to Minnesota-based meat producer Hormel Foods Corporation (HRL), which is expected to close in 2013.
Unilever is expanding its presence in the emerging markets of Brazil, India, Indonesia, Turkey, South Africa, China, Mexico and Russia in order to take advantage of the increasing population and growing per capita income of the emerging markets. Last week, Unilever agreed to increase its stake in its Indian unit, Hindustan Unilever Limited to 67.28% from ! 52.48% for Euro 2.45 billion.
However, a decline in spread sales volume and an uncertain macro-economic environment are denting Unilever's profits. The company has posted weak sales in its spreads business compared to the last few quarters. The company also closed its spreads manufacturing plant in Atlanta in Jun 2013 due to a sluggish spreads business. In addition, the developed markets are nearing saturation and therefore experiencing sluggish growth. Unilever is thus reducing its presence in these markets owing to disappointing volumes. Moreover, the debt crisis in Europe, commodity cost headwinds and unfavorable foreign currency translations remain a significant overhang. Unilever has a Zacks Rank #4 (Sell).
Stocks That Warrant a Look
While we prefer to avoid Unilever until we see signs of improvement, another food company Flower Foods Inc (FLO) carrying a Zacks Rank #1 (Strong Buy), is worth considering.
Friday, August 30, 2013
Thursday, August 29, 2013
Hot Dividend Companies To Watch In Right Now
LONDON --�The last five years have been tough for those in retirement. Portfolio valuations have been hammered and annuity rates have plunged. There's no sign of things improving anytime soon, either, as the eurozone and the U.K. economy look set to muddle through at best for some years to come.
A great way of protecting yourself from the downturn, however, is by building your retirement fund with shares of large, well-run companies that should grow their earnings steadily over the coming decades. Over time, such investments ought to result in rising dividends and inflation-beating capital growth.
In this series, I'm tracking down the U.K. large-caps that have the potential to beat the FTSE 100 over the long term and support a lower-risk income-generating retirement fund (you can see the companies I've covered so far�on this page).
Hot Dividend Companies To Watch In Right Now: Potomac Electric Power Company(POM)
Pepco Holdings, Inc., through its subsidiaries, engages in the transmission, distribution, and supply of electricity. The company also distributes and supplies natural gas. It distributes electricity to approximately 1.8 million customers in the mid-Atlantic region and delivers natural gas to approximately 123,000 customers in Delaware. In addition, the company involves in the retail supply of electricity and natural gas; provision of energy efficiency services to federal, state, and local government customers; and designs, constructs, and operates combined heat and power and central energy plants, as well as owns and operates two oil-fired generation facilities. Further, it offers high voltage electric construction and maintenance services, low voltage electric construction and maintenance services, and streetlight construction and asset management services to utilities, municipalities, and other customers in the Washington, District of Columbia. Additionally, the company holds investments in eight cross-border energy leases. Pepco Holdings, Inc. was founded in 1896 and is based in Washington, District of Columbia.
Advisors' Opinion:- [By Rahemtulla]
Pepco Holdings (POM) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Pepco Holdings, Inc., through its subsidiaries, engages in the transmission, distribution, and supply of electricity. The company also distributes and supplies natural gas. The company has a P/E ratio of 22.4, above the average utilities industry P/E ratio of 20.4 and above the S&P 500 P/E ratio of 17.7. Pepco has a market cap of $4.3 billion and is part of the utilities sector and utilities industry. Shares are up 1% year to date as of the close of trading on Monday.
Hot Dividend Companies To Watch In Right Now: Cellcom Israel Ltd.(CEL)
Cellcom Israel Ltd. provides cellular communications services in Israel. It offers basic and advanced cellular telephone services, text and multimedia messaging services, and advanced cellular content and data services. The company?s basic cellular telephony services include voice mail, cellular fax, call waiting, call forwarding, caller identification, collect call, conference calling, ?Talk 2?, additional number services, and collect call services; and outbound and inbound roaming services. It also provides value-added services comprising Cellcom volume that includes downloadable content, such as music, games, on-net-reality programs, drama series, and video games; SMS and MMS services to send and receive text, photos, multimedia, and animation messages; access to third party application providers for notification of roadway speed detectors, mange vehicle fleets, and enable subscribers to manage and operate time clocks and various controllers for industrial, agricultural , and commercial purposes; video calls to communicate with each other through video applications; zone services for calls initiated from a specific location; location-based services; voice-based information services; text-based information services and interactive information services, including news headlines, sports results, and traffic and weather reports; and data services to access handsets, cellular modems, laptops, tablets, and cellular routers, as well as Internet based payment services. In addition, the company sells handsets, modems, routers, tablets, and laptops, as well as provides repair and replacement services; and offers landline telephony, transmission, and data services through its approximately 1,500 kilometers of inland fiber-optic infrastructure and complementary microwave links to selected business customers. As of March 31, 2011, it provided its services to approximately 3.395 million subscribers. The company was founded in 1994 and is headquartered in Netanya, Israel.
Advisors' Opinion:- [By Richard Band]
Cellcom Israel (NYSE: CEL), Israel’s largest wireless carrier with 34% of the market, just declared its first quarterly dividend for 2011 — the equivalent of 85.7 cents (U.S.) per share. Annualized, that works out to a super-sweet yield of almost 11%!
CEL hands over virtually all its profits to shareholders as dividends, so there’s a chance the company may have to trim the payout in future quarters if business hits a speed bump. On the other hand, this “pay it all out” policy (similar to the approach taken by most U.S. master-limited partnerships) imposes rigorous capital allocation discipline on management. In short, Cellcom execs don’t waste money.
Buy dividend stock CEL on a pullback below $33.
10 Best Cheap Stocks To Buy For 2014: Resource Capital Corp.(RSO)
Resource Capital Corp. operates as a specialty finance company that focuses primarily on commercial real estate and commercial finance in the United States. The company?s commercial real estate-related investments include first mortgage loans, first priority interests in first mortgage real estate loans, subordinate interests in first mortgage real estate loans, mezzanine loans, and commercial mortgage-backed securities. It also invests in commercial finance assets, including senior secured corporate loans, other asset-backed securities, equipment leases and notes, trust preferred securities, and debt tranches of collateralized debt and loan obligations. The company qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, it is not subject to federal corporate income tax to the extent that it distributes 90% of its REIT taxable income. The company was founded in 2005 and is based in New York, New York.
Hot Dividend Companies To Watch In Right Now: Nucor Corporation(NUE)
Nucor Corporation, together with its subsidiaries, engages in the manufacture and sale of steel and steel products in North America and internationally. It operates through three segments: Steel Mills, Steel Products, and Raw Materials. The Steel Mills segment produces hot and cold-rolled sheet steel; plate steel; structural steel comprising wide-flange beams, beam blanks, and sheet piling; and bar steel, such as blooms, billets, concrete reinforcing bar, merchant bar, and special bar quality products. The Steel Products segment offers steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold finished steel, steel fasteners, metal building systems, light gauge steel framing, steel grating and expanded metal, and wire and wire mesh products. The Raw Materials segment produces direct reduced iron (DRI); brokers ferrous and nonferrous metals, pig iron, hot briquetted iron, and DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap metal products. The company?s operations also include various international trading companies that buy and sell steel and steel products. It sells its hot-rolled steel and cold-rolled steel to steel service centers, fabricators, and manufacturers; steel joists and joist girders, and steel deck to general contractors and fabricators; and cold finished steel and steel fasteners to distributors and manufacturers. The company?s products are used by contractors in constructing highways, bridges, reservoirs, utilities, hospitals, schools, airports, stadiums, and high-rise buildings. Nucor Corporation was founded in 1940 and is based in Charlotte, North Carolina.
Hot Dividend Companies To Watch In Right Now: ITT Industries Inc.(ITT)
ITT Corporation designs, manufactures, and sells a range of engineered products, and provides related services worldwide. Its Defense & Information Solutions segment develops tactical communications equipment, electronic warfare and force protection equipment, radar systems, integrated structures equipment, and imaging and sensor equipment, including night vision goggles, as well as weather, location, surveillance, and other related technologies for military and government agencies. It also provides services comprising air traffic management, information and cyber solutions, large-scale systems engineering, and integration and defense technologies; satellite-based imaging payloads for intelligence, surveillance, and reconnaissance solutions; and high-resolution commercial imaging systems with earth and space science applications, climate and environmental monitoring sensors and systems, and GPS navigation and software applications designed for image and data processing and dissemination. The company?s Fluid Technology segment provides water transport and wastewater treatment systems, pumps and related technologies, and other water and fluid control products with municipal, residential, commercial, and industrial applications. Its Motion & Flow Control segment manufactures shock absorbers and brake friction materials for the transportation industry; switch applications for the industrial and aerospace industries; electrical connectors used in telecommunications, computers, aerospace, medical, and industrial applications; and a range of pumps and tailored products for marine, food and beverage, and general industrial markets. The company was formerly known as ITT Industries, Inc. and changed its name to ITT Corporation in July 2006. ITT Corporation was founded in 1920 and is based in White Plains, New York.
Advisors' Opinion:- [By McWillams]
The shares closed at $41.46, up $0.61, or 1.49%, on the day. Its market capitalization is $7.68 billion. About the company: ITT Corporation designs and manufactures a variety of engineered products. The Company produces pumps, systems, and services to measure and control water and other fluids. ITT also supplies military defense systems, including night vision devices, secure communication systems, and avionics, in addition to providing electrical interconnects, and data storage and PC cards.
Hot Dividend Companies To Watch In Right Now: JDS Uniphase Corporation(JDSU)
JDS Uniphase Corporation provides communications test and measurement solutions, and optical products for telecommunications service providers, wireless operators, cable operators, network-equipment manufacturers, and enterprises worldwide. The company?s Communications Test and Measurement segment supplies instruments, software, and services to enable the design, deployment, and maintenance of communication equipment and networks. Its product portfolio consists of test tools, platforms, software, and services for wireless and fixed networks. The company?s Communications and Commercial Optical Products segment offers components, modules, subsystems, and solutions that are used by communications equipment providers for telecommunications and enterprise data communications. This segment?s products comprise transmitters, receivers, amplifiers, ROADMs, optical transceivers, multiplexers and demultiplexers, switches, optical-performance monitors and couplers, splitters, and circ ulators, which enable the transmission of video, audio, and text data through fiber-optic cables. It also provides various laser products, including diode, direct-diode, diode-pumped solid-state, fiber, and gas lasers for micromachining, materials processing, bioinstrumentation, consumer electronics, graphics, medical/dental, and optical pumping; and photovoltaic products, such as concentrated photovoltaic cells and receivers for generating energy from sunlight, as well as fiber optic-based systems for delivering and measuring electrical power. The company?s Advanced Optical Technologies segment offers optical solutions for security and brand-differentiation applications; and thin film coatings for a range of public and private-sector markets. This segment also provides multilayer product-security solutions that deliver overt, covert, forensic, and digital product and document verification. JDS Uniphase Corporation was founded in 1979 and is headquartered in Milpitas, Califo rnia.
Advisors' Opinion:- [By he Fiscal Times]
JDS Uniphase (JDSU +0.85%), like Akamai, is a name that will be familiar to anyone who watched the big technology bubble of the 1990s take shape. It has been a volatile ride ever since, and the company's earnings are flagging, but the telecommunications technology provider, which specializes in optical products, offers rising revenues and adequate cash flow. The company got a boost in December from the decision by Piper Jaffray analyst Troy Jensen to boost his price target to $16 from $12 (the stock now trades at about $14 a share). Jensen's bullishness stems from a conviction that spending by telecom companies is about to take an upward turn, and that JDS Uniphase is likely to be one of the beneficiaries as its customers move to improve their network infrastructures later this year. JDS Uniphase climbed 16.2% in December.
- [By Eric Fox]
JDS Uniphase (Nasdaq:JDSU) also beat street estimates on earnings and revenues when it reported its results in early February, ending up 38% in February. The company reported non-GAAP earnings of $0.12 per share compared to an estimate of $0.09 per share. It should be noted that the company lost $19.5 million on a GAAPbasis.
Tuesday, August 27, 2013
Dr. Reddy's Launches Generic Dacogen - Analyst Blog
Dr. Reddy's Laboratories Ltd. (RDY) recently announced the launch of its therapeutic equivalent generic version of Astex Pharmaceuticals, Inc. /Eisai Co., Ltd.'s (ASTX/ ESALY) Dacogen. The 50 mg injection dose of Dacogen is available as a single-dose vial in the US.
Dacogen is approved for the treatment of patients with myelodysplastic syndromes (MDS), including previously treated and untreated, de novo and secondary MDS of all French-American-British (FAB) subtypes, and Intermediate-1, Intermediate-2 and High-Risk International Prognostic Scoring System (IPSS) groups. According to IMS Health, Dacogen generated US revenues of approximately $260 million MAT (moving annual total) in the last 12 months ending Jul 2013.
Currently, the MDS market has drugs like Vidaza and Revlimid. Many candidates are being developed for the treatment of MDS, like Astex' SGI-110, to treat patients with intermediate or high risk relapsed or refractory MDS. Another candidate, Telintra, is being developed for MDS.
Dr. Reddy's boasts of a strong generic product portfolio. Revenues at the Global Generics segment were up 17.5% to $1.5 billion in fiscal year ended Mar 31, 2013. Strong sales in North America and emerging markets were primarily responsible for the growth displayed by the Global Generics division. Generics revenue increased in North America (up 19%), Russia (up 27%), other CIS (Commonwealth of Independent States) markets (up 28%), India (up 13%) and the rest of the world/RoW (up 42%).
During fiscal 2013, Dr. Reddy's filed 18 abbreviated new drug applications (ANDAs) with the FDA. Dr. Reddy's had 65 ANDAs pending approval with the FDA at the end of fiscal 2013.
Dr. Reddy's carries a Zacks Rank #4 (Sell). Currently, Mylan, Inc. (MYL) looks more attractive with a Zacks Rank #2 (Buy).
Sunday, August 25, 2013
Almost Everyone Who Owns Stocks Is a Fool
Stocks are for fools.
Sorry to be so blunt. But there's just no other way to put it. Buying stocks is a foolish way to invest. And you know what they say about a fool and his money.
Think about it... When you buy a stock, you put up money and then you sit back and wait. If the stock goes up, you profit. If it goes down, you lose money.
At best, buying stocks is a 50/50 proposition. That's not much different than betting on a coin toss.
But what if you could shift those odds dramatically in your favor?
What if, instead of a 50% chance to make money, you could have an 80% or 90% chance to profit?
Well... you can – by using options.
Don't let the word "options" freak you out. It's true that most people lose money in the options market. That's because most people use options the wrong way.
Most people use options to increase leverage... to get more "bang for their buck." In other words, most people use options to increase risk.
That's wrong. That's the exact opposite of what options were designed for.
The options market was created so investors could reduce risk. Options allow investors to hedge their positions... and to control the same amount of stock by putting up much less money.
Let me explain...
Let's say you want to buy stock in Company X. It trades for $10 a share. You could put up $1,000 to buy 100 shares... But you can control the same amount of stock with one option contract. You can buy a contract for, let's say, $50... and leave the other $950 in your account.
If Company X's stock goes up, you'll make money. If the stock goes down, the most you'll ever lose is that $50. The remaining $950 is safely tucked away.
This is a simple example. And it's the simplicity that proves my point. Only a fool would risk $1,000 when he could profit just as much with $50.
Now, imagine you didn't even have to put up that $50. Better yet... imagine you could actually collect money upfront for making a trade.
All of your money is safely tucked away, and you collect a portion of your potential profit upfront. Your odds of making a profit increase dramatically.
That's possible with options.
I've been trading options for 30 years. I ran a brokerage firm that specialized in option transactions. I've written hundreds of articles about trading and using options the right way.
And I'm blown away by what my friend Porter Stansberry has just done.
Porter has created an advisory service that specializes in using options the right way. He takes his best stock ideas over to the options market and crafts a strategy that increases the potential reward while reducing the possible risk.
Porter is a brilliant financial analyst. He called the General Motors bankruptcy. He predicted the demise of Fannie Mae.
Porter is known for making outlandish predictions. But the thing is... he's usually right.
I've made a lot of money over the years using options the right way to trade off Porter's ideas. Now, with Porter's new Stansberry Alpha service, you can do the same thing.
In tomorrow's essay, you'll see exactly what Porter is doing... step by step. Don't miss it.
If you'd like to learn more about how it works right now, click here.
Best regards and good trading,
Jeff Clark
Saturday, August 24, 2013
LPL Beefs Up Retirement Plan Platform
LPL Financial (LPLA) said Thursday that it has beefed up its retirement planning platform with tools for financial advisors and plan participants from Morningstar Associates, Financial Finesse and Wealth Management Systems.
With these new tools, the Worksite Financial Solutions platform, which LPL launched in early March, can serve as a more effective “end-to-end solution” for retirement plan sponsors and advisors, according to LPL, while better meeting the needs of plan participants with tools for financial education, personalized advice and account-transition services.
“We are tremendously excited to work with some of the most outstanding and forward-thinking service providers in the industry, in order to give our nation’s workers the tools and resources they need to plan for all stages of their financial lives, including retirement, and to make our vision become a reality.”
In late March, LPL rolled out a program, the Retirement Partners Group, to recognize and support top financial advisors focused on advising retirement plans for corporate clients. The group was launched with 87 advisor members, who advise 4,000 retirement plans with nearly $40 billion in assets. It is staffed by about 65 LPL employees.
Of LPL’s 13,300 affiliated reps, about 1,400 have five or more retirement plans in their books of business, the independent broker-dealer said earlier this year. For most, this market represents about 25% or more of their total sales.
For the Worksite Financial Solutions platform, LPL's partners are contributing the following enhancements:
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Check out LPL’s RIA Platform Hits $50B in Assets on AdvisorOne.
Friday, August 23, 2013
Interest rates pinching pockets? Experts at rescue
Below is the verbatim transcript of the interview. Also watch the accompanying videos.
Q: How exactly would you define interest rate cycle that we live through?
Purwar: We are in a very interesting phase of the economy. The numbers on the inflation side are refusing to respond to the policy stimulus by Reserve Bank of India (RBI). They are much above RBI's comfort zone. For last one year, the hikes on interest rates have been unabated. Even today, the hikes in immediate foreseeable future cannot be ruled out.
Q: As a banker, you are living through the interest rate cycle at this point. What would determine the trajectory of interest rates? Is it just an inflation led issue? Is it about global macros and what that does for the country's inflation and rate trajectory? Is it a whole host of factors that goes into combining the direction that interest rates take over a period of time?
Mallya: No. It's a combination of all factors. Obviously, inflation is one of the important factors that determines in which direction the interest rate moves. As far as the overall indicators are concerned, the global cues are equally important. Ultimately when talks in terms of direction in which interest moves, it is on account of the various mentioned factors.
Q: The RBI leads the entire process with the baton. How important is the RBI in setting this trajectory and ensuring that there is a trickle down effect into the general economy?
Wandesforde: The RBI is fundamentally setting the rates trajectory in India. This is one of the main purposes of central banks across the world. However, it doesn't necessarily work one for one.
What really matters is how the commercial banks respond to what the central bank has done. In the context of rising interest rates from the RBI over the last year or so, it took time for the commercial banks to start passing on the rates to the consumer and companies. It took about six months before the commercial banks were actually ready to start increasing their interest rates.
Certainly, there can be lags which can also depend on the commercial banks owned liquidity position on to what extent they can pass on increases from the central bank. One for one relationship is not necessary. The RBI is fundamental to the rough trajectory at least of interest rates.
Q: The first impact is on lending rates which affects every consumer in the system. What happens when the interest rate cycle moves up as directed by the RBI? How much of a trickle down happens into lending rates? Do they start inching increasingly in tandem with the interest rate cycles set by the RBI or is there some dispersion in movement?
Mallya: As far as the interest rate direction is concerned, one goes by the guidance given by the RBI. The changes take place as per the signal rates. Therefore, the transmission takes place.
Coming to the lending rates, one would have to price the borrowings on account of factors like the liquidity and credit demand available in the system. In case the liquidity is comfortable and the credit demand of pickup is not in pace with the accretion of resources or liquidity, there might not been any increase in the interest rates per se immediately.
There are other host of factors that determine the lending rate, both the base rate as well as margins above the base rate, which takes into account the operational and credit cost.
Q: Inflation is the greatest interlocking for interest rates and the impact on growth. Generally in a rising interest rate scenario, what is the impact that is expected in terms of inflation? Is it a one to one correlation that high interest rates bring down or dampen the inflation trajectory in an economy?
Purwar: If the interest rates go up, certain sectors in the economy get immediately impacted and the demand starts going down. As soon as the interest rates go up, one of the obvious markets, realty industry gets affected as the prices are very closely related.
Similarly, the auto sector also gets immediately impacted because the demand for car loans gets impacted. Rising interest rates are a way to tackle inflation sight. If we see the larger picture, there has to be a very conscious organised effort on the supply side management.
With the current scenario, there is a possibility of 25 basis points interest rates hike coming in. People also say that we might see two-three in the future.
In the present scenario, inflation is continuing to not respond to the various monetary policy measures. In the overall growth side, high interest rates will have adverse impact which has to be carefully evaluated.
Q: how important is the global backdrop in determining what happens to the interest rate trajectory within a particular economy or a particular country?
Wandesforde: It depends on the particular country's economy. In South-East Asia, a lot of smaller pretty open economies are extremely dependent on what happens in key trading partners such as the United States or Europe.
At one end of the spectrum, Hong Kong's exchange rate is formally linked to the US dollar and interest rates are formally linked to the US. At the other end of the spectrum we have India which is a domestically orientated economy, where international developments are not as important as they are in some of these other Asian countries.
Therefore, what happens domestically to the consumers spending and investment is in India's own hands than in the hands of key trading partners. The central bank pays more attention internally, than externally.
Q: Deposit rates are important for banks and even for investors. What kind of flow through does one see in a rising interest rate scenario for deposit rates?
Mallya: As far as the investor is concerned, the primary concern would be to ensure that one has a real interest income in terms of the deposits. When inflation numbers are quite high, one would expect the rates of interest on the deposits to be reasonably above that.
Therefore, the interest rates get aligned on account of a larger inflation especially guided by the cues given by the central bank as per the various rate scenario is concerned.
If we look at it, a one year deposit would give a yield of around 9.5-9.75%, which is marginally higher than the inflation. The overall interest rate scenario is determined on account of number of factors like the inflation numbers. Therefore, the investor would always like to get a positive return.
Q: There is a negative correlation for equity markets, both in terms of where interest rates and inflation goes. Given the situation that India is living through, would fixed deposits remain the best investment asset that someone should look at?
Mallya: There are many factors one needs to look at. As far as fixed deposits with the banks are concerned, they are safe, secure and liquid. Liquidity is a very important thing as far as the investment is concerned.
Therefore, deposits with the banking system could be considered safe, secure and liquid. From that point of view, it is again a good available avenue of investing the surplus money.
Q: A couple of sectors are impacted with this interest rate scenario which is widely documented. One knows the impact that banks face once interest rates start moving up. For autos, there is a very sensitive correlation. Once rates start going up, it is difficult to get the auto and infrastructure growth. Would these remain the most vulnerable pockets once interest rates start going up in the system the way infrastructure and a couple of these consumption sectors perform?
Purwar: Absolutely. Not only these vulnerable sectors which are eluded, even in general the high interest rates are coupled with the environment prevailing in the society or economy. The industrialist and investments are perception driven these days.
Therefore, the investment businesses to that extent are impacted by the current interest rates and the perception on the economic environment. In the long run, it is not very healthy for the system.
The inflation numbers decide the interest rates and the rest would be a positive real interest rate for the investor in the present uncertain environment with high inflation numbers and the expected growth. In today's environment, people sit on cash also called as fixed deposits which is the best form of investment.
Q: You have lived through many rate cycles in your previous avatar with the SBI. For example, the RBI has moved about 10 times its accumulative impact of 450 bps in this year. How long does it take for the economy to recover from this kind of rising interest rate cycle and get back to a normal platform?
Purwar: If the interest rates start going up, the investment decision start getting very adversely impacted. The momentum of growth of the economy starts slackening. Once it starts slackening, it takes couple of years to get back to that momentum.
The economy had an opportunity to graduate from 8-10% growth rate which was feasible. In the global market with the heavy commodity prices, the global financial structure is under huge stress. If the growth rate slackens to 5-7% which could be possible, we will require couple of years to build up the growth rate at 8-9%.
Q: The real-estate developers would point out that if lending rates were to go beyond that 10-11% ratio, it becomes too difficult for an investor to absorb which in turn starts crimping lending rates and loan growth for banks considerably. Would there be a level to keep in mind when talking about these interest rates beyond which it becomes difficult to absorb and when we start seeing a big drop down in growth or volumes?
Mallya: I don't think so. At this point in time, the real-estate developers are paying interest rate ranging from 14-15%. Even at this rate of interest, the projects appear to be viable. One cannot say that a small increase in interest rates of about 50-100 bps would alter the economics or viability, as far as the project is concerned.
There are capital intensive projects like in the infrastructure where interest rate changes to a large extent could alter the viability very substantially. As far as the real-estate is concerned, there would not be a substantial slowdown because of the interest rate hike at this point in time.
If one looks at it, the prices have not come down as far as the real-estate is concerned, but then sales would have gone down because of that. One sees that developers are holding on the price levels and not many sales taking place.
Q: Where do you stand on this calling of a peak in interest rates? Are there any tools to work with? Does it depend on seeing that sustained cool off in inflation? Is it other parameters like growth getting crimped too much which is when you can call, either the peak or start of the cycle in interest rates?
Wandesforde: In India, as in most countries, it is a combination of the two key factors growth and inflation determining interest rate decisions. The importance of these factors has to change over time. Right now, inflation is the predominant concern for the central bank in India.
In the short-term, central bank has made it clear that they have prepared to tolerate some weakening in growth to ensure medium-term sustainability as far as the economy's growth prospects are concerned which is the right approached to be taken.
It should have been taken sometime ago, but at least has been taken right now. We expect wholesale price inflation to remain elevated for a few months around 9-10% level. We don't expect it to start falling until the end of this calendar year.
Therefore, we can see at least another two tranche of 25bps increases in interest rates from the RBI which the commercial banks will pass it on. Unfortunately, that will impact the purchasing power of companies and consumers. Therefore, it will act to slow growth somewhat.
Q: Could you give me a sense of where do you see the interest rate cycle at right now? When could we be looking at a peak?
Mallya: It is a difficult question to answer. At this point in time, as we have seen the recent credit policy announced by the RBI, the inflation continues to be a concern which is about 9% plus. RBI has gone about with a calibrated approach as far as the tightening is concerned.
It would be difficult to say whether we have raised a peak as far as the tightening is concerned. There is a general expectation that there might be a further increase of another 25-50 bps in next couple of months.
As of today, by and large the banks have been charging an interest of about 10-10.5% as far as the housing loans are concerned. In the current scenario where one sees the interest rates gone up substantially, the rates of 10-10.5% are quite reasonable.
Especially, one looks at your investments which are getting a yield of around 9.5%. Overall, we are still in an interest rate cycle which is not very substantially high.
If the inflation numbers come down to a level of around 6-6.5% by March 2012 which has been RBI's indication in the credit policy, one could again look at the interest rate scenario coming down and the customers might get a better deal.
Q: What is your sense of where we are in this cycle? The difference between this cycle and the last one is that the last time we moved very aggressively and very fast. The bounce back both for the economy and individual borrowers happened quite quickly. This time, it has been more calibrated and one doesn't know how long the cool-off will take.
Purwar: We haven't touched the peak. It is very difficult to predict as to how things will move. It looks like 25-50 bps and in the worst scenario 75bps in the next six-nine months cannot be completely ruled out. We are at a point of time interest rates are high and there is definitely an upward pressure on the interest rates.
Therefore, investment decisions by various corporates particularly in the infrastructure and real-estate sector will be impacted. Various industry houses may like to wait for some more time before embarking on very serious and substantial expansion in the industrial sector.
Monday, August 19, 2013
10 Best Gold Stocks To Buy For 2014
Gold and copper miner Freeport-McMoRan (NYSE: FCX ) will pay its shareholders a supplemental dividend of $1.00 per share upon the completion of its acquisition of Plains Exploration & Production (NYSE: PXP ) , the company announced today. The supplemental payout will be in addition to the miner's regular quarterly dividend of $0.3125 per share.
Plains Exploration shareholders are set to vote on the $6.9 billion cash and stock deal today.
Additionally, Freeport's board of directors said they would pay to shareholders of Plains Exploration�a $3.00-per-share cash dividend upon completion of the transaction.
Freeport Chairman James R. Moffett and President and CEO Richard C. Adkerson said in a joint statement: �"This dividend in no way changes our commitment to reduce debt on completion of the pending acquisitions.�The planned asset sales, combined with our significant cash flows and disciplined approach to investing in capital projects, will enable us to meet our target of reducing debt to $12 billion over a three year period."
10 Best Gold Stocks To Buy For 2014: Golden Star Resources Ltd(GSS)
Golden Star Resources Ltd., a gold mining and exploration company, through its subsidiaries, engages in the acquisition, exploration, development, and production of gold properties. It owns and operates the Bogoso/Prestea gold mining and processing operation that covers approximately 40 kilometers of strike along the southwest-trending Ashanti gold district in western Ghana; and the Wassa open-pit gold mine located to the east of Bogoso/Prestea in southwest Ghana. The company also has an 81% interest in the Prestea underground gold mine located in Ghana. In addition, it holds interests in various gold exploration projects in Ghana, Sierra Leone, Burkina Faso, Niger, and Cote d?Ivoire, as well as holds and manages exploration properties in Brazil in South America. The company was founded in 1984 and is based in Littleton, Colorado.
Advisors' Opinion:- [By Curtis]
Golden Star Resources, Ltd Com (AMEX:GSS): This equity had 10,766,183 shares sold short as of Aug 31st, as compared to 9,400,663 on Aug 15th, which represents a change of 1,365,520 shares, or 14.5%. Days to cover for this company is 3 and average daily trading volume is 3,419,976. About the equity: Golden Star Resources Ltd. is a mid-tier gold mining company. The Company’s operating mines are situated along the Ashanti Gold Belt in Ghana, West Africa.
10 Best Gold Stocks To Buy For 2014: Newmont Mining Corporation(Holding Company)
Newmont Mining Corporation, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties. The company?s assets or operations are located in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand, and Mexico. As of December 31, 2009, it had proven and probable gold reserves of approximately 93.5 million equity ounces and an aggregate land position of approximately 27,500 square miles. The company was founded in 1916 and is headquartered in Greenwood Village, Colorado.
Top Clean Energy Companies To Watch In Right Now: Australian Dollar(AU)
AngloGold Ashanti Limited primarily engages in the exploration and production of gold. It also produces silver, uranium oxide, and sulfuric acid. The company conducts gold-mining operations in South Africa; continental Africa, including Ghana, Guinea, Mali, Namibia, and Tanzania; Australia; and the Americas, which include Argentina, Brazil, and the United States. It also has mining or exploration operations in the Democratic Republic of the Congo, Guinea, and Colombia. As of December 31, 2010, the company had proved and probable gold reserves of 71.2 million ounces. The company has a strategic alliance with Thani Dubai Mining Limited to explore, develop, and operate mines across the Middle East and parts of North Africa. AngloGold Ashanti Limited, formerly known as Vaal Reefs Exploration and Mining Company Limited, was founded in 1944 and is headquartered in Johannesburg, South Africa.
Advisors' Opinion:- [By Mel Daris]
AngloGold Ashanti (AU), a South African company, is trading for $33 and pays a dividend which yields 3.20%. The stock has an astonishing P/E of 1,015. Its net income totaled $112 million last year, but negative cash flows of $620 million. It holds net tangible assets of $4.3 billion and its balance sheet has not grown nearly as quickly as the other companies on this list. AngloGold has two new mines coming online in Congo and Colombia.
10 Best Gold Stocks To Buy For 2014: CME Group Inc.(CME)
CME Group Inc. operates the CME, CBOT, NYMEX, and COMEX regulatory exchanges worldwide. The company provides a range of products available across various asset classes, including futures and options on interest rates, equity indexes, energy, agricultural commodities, metals, foreign exchange, weather, and real estate. It offers various products that provide a means of hedging, speculation, and asset allocation relating to the risks associated with interest rate sensitive instruments, equity ownership, changes in the value of foreign currency, credit risk, and changes in the prices of commodities. CME Group owns and operates clearing house, CME Clearing, which provides clearing and settlement services for exchange-traded contracts and counter derivatives transactions; and also engages in real estate operations. Its primary trade execution facilities consist of its CME Globex electronic trading platform and open outcry trading floors, as well as privately negotiated transact ions that are cleared and settled through its clearing house. In addition, the company offers market data services comprising live quotes, delayed quotes, market reports, and historical data services, as well as involves in index services business. CME Group?s customer base includes professional traders, financial institutions, institutional and individual investors, corporations, manufacturers, producers, and governments. It has strategic partnerships with BM&FBOVESPA S.A., Bursa Malaysia Derivatives, Singapore Exchange Limited, Green Exchange, Dubai Mercantile Exchange, Johannesburg Stock Exchange, and Bolsa Mexicana de Valores, S.A.B. de C.V., as well as joint venture agreement with Dow Jones & Company. The company was formerly known as Chicago Mercantile Exchange Holdings Inc. and changed its name to CME Group Inc. in July 2007. CME Group was founded in 1898 and is headquartered in Chicago, Illinois.
10 Best Gold Stocks To Buy For 2014: Iamgold Corporation(IAG)
IAMGOLD Corporation, together with its subsidiaries, engages in the exploration, development, and production of mineral resource properties worldwide. It primarily explores for gold, silver, zinc, copper, niobium, diamonds, and other metals. The company holds interests in eight operating gold mines, a niobium producer, a diamond royalty, and exploration and development projects located in Africa and the Americas. Its advanced exploration and development projects include the Westwood project in Canada; and the Quimsacocha project, which consists of 3 mining concessions covering an aggregate area of approximately 8,030 hectares in Ecuador. The company was formerly known as IAMGOLD International African Mining Gold Corporation and changed its name to IAMGOLD Corporation in June 1997. IAMGOLD Corporation was founded in 1990 and is based in Toronto, Canada.
Advisors' Opinion:- [By Christopher Barker]
Although I have not shed my long-standing contention that Yamana Gold offers one of the more deeply discounted vehicles for long-term gold exposure, lately my outlook for IAMGOLD has turned particularly bullish. With a looming spin-off of a 10% to 20% stake in the company's reliably profitable Niobec niobium mine, and the recent sale of its interest in a pair of high-cost gold operations in Ghana for $667 million, IAMGOLD finds itself in terrific financial shape to execute an aggressive $1.2 billion expansion imitative at existing operations.
Considering the $1.6 billion net asset value (after tax) that IAMGOLD recently assessed for the Niobec mine alone, and a presumed hoard of more than $1.2 billion (in cash, cash equivalents, and gold bullion held for investment), at a market capitalization of $6.9 billion I find extreme comfort in the market's resulting valuation for IAMGOLD's 15.2 million ounces of attributable gold reserves.
10 Best Gold Stocks To Buy For 2014: First Majestic Silver Corp.(AG)
First Majestic Silver Corp. engages in the production, development, exploration, and acquisition of mineral properties with a focus on silver in Mexico. The company owns interests in La Encantada Silver Mine comprising 4,076 hectares of mining rights and 1,343 hectares of surface land located in Coahuila; La Parrilla Silver Mine consisting of mining concessions covering an area of 69,867 hectares; and San Martin Silver Mine comprising approximately 7,841 hectares of mineral rights and approximately 1,300 hectares of surface land rights located in Jalisco. It also holds interests in Del Toro Silver Mine consisting of 393 contiguous hectares of mining claims and an additional 129 hectares of surface rights located in Zacatecas; Real de Catorce Silver Project comprising 22 mining concessions covering 6,327 hectares located in San Luis Potosi state; and Jalisco Group of Properties consisting of mining claims totalling 5,240 hectares located in Jalisco. The company was founded in 1979 and is headquartered in Vancouver, Canada.
Advisors' Opinion:- [By Goodwin]
The shares closed at $88.19, down $1.1, or 1.23%, on the day. Its market capitalization is $77.08 billion. About the company: Siemens AG manufactures a wide range of industrial and consumer products. The Company builds locomotives, traffic control systems, automotive electronics, and engineers electrical power plants. Siemens also provides public and private communications networks, computers, building control systems, medical equipment, and electrical components. The Company operates worldwide.
10 Best Gold Stocks To Buy For 2014: Agnico-Eagle Mines Limited(AEM)
Agnico-Eagle Mines Limited, through its subsidiaries, engages in the exploration, development, and production of mineral properties in Canada, Finland, and Mexico. The company primarily explores for gold, as well as silver, copper, zinc, and lead. Its flagship property includes the LaRonde mine located in the southern portion of the Abitibi volcanic belt, Canada. The company was founded in 1953 and is based in Toronto, Canada.
Advisors' Opinion:- [By Vatalyst]
With headquarters in Canada, Agnico-Eagle is a gold producer that has been around for a while with operations in Canada, Finland and Mexico and the United States that has paid a cash dividend for 29 consecutive years. AEM gained 25% over the year and reported 83.5% growth in quarterly earnings. It has a market capitalization of $11.4 billion and a trailing P/E ratio of 34x with expectations of earning $0.55 per share. AEM, like other operators like it, are likely a better bet than ETF trust options like SPDR Gold Shares (GLD).
10 Best Gold Stocks To Buy For 2014: Goldman Sachs Group Inc.(The)
The Goldman Sachs Group, Inc., together with its subsidiaries, provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide. Its Investment Banking segment offers financial advisory, including advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense, risk management, restructurings, and spin-offs; and underwriting securities, loans and other financial instruments, and derivative transactions. The company?s Institutional Client Services segment provides client execution activities, such as fixed income, currency, and commodities client execution related to making markets in interest rate products, credit products, mortgages, currencies, and commodities; and equities related to making markets in equity products, as well as commissions and fees from executing and clearing institutional client transactions on stock, options, and fu tures exchanges. This segment also engages in the securities services business providing financing, securities lending, and other prime brokerage services to institutional clients, including hedge funds, mutual funds, pension funds, and foundations. Its Investing and Lending segment invests in debt securities, loans, public and private equity securities, real estate, consolidated investment entities, and power generation facilities. This segment also involves in the origination of loans to provide financing to clients. The company?s Investment Management segment provides investment management services and investment products to institutional and individual clients. This segment also offers wealth advisory services, including portfolio management and financial counseling, and brokerage and other transaction services to high-net-worth individuals and families. In addition, it provides global investment research services. The company was founded in 1869 and is headquartered in New York, New York.
10 Best Gold Stocks To Buy For 2014: Claude Resources Inc.(CGR)
Claude Resources Inc. engages in the acquisition, exploration, and development of precious metal properties, as well as production and marketing of minerals in Canada. It primarily explores for gold in northern Saskatchewan and northwestern Ontario. The company holds interests in the Seabee gold mine located at Laonil Lake, northern Saskatchewan; and the Madsen property that consists of 6 contiguous claim blocks totaling approximately 10,000 acres, located in the Red Lake Mining District of northwestern Ontario. It also holds interest in the Amisk Gold project, which covers an area of 13,800 hectares in the province of Saskatchewan. The company was founded in 1980 and is based in Saskatoon, Canada.
Advisors' Opinion:- [By Christopher Barker]
Hardly a johnny-come-lately, Claude Resources initiated small-scale gold production from its flagship Seabee mine in Saskatchewan in 1991. Just last year, Claude added the Santoy 8 mine to that operation to offer a touch of timely growth. Meanwhile, the operation hosts a number of compelling exploration targets like the recently discovered Neptune zone. After 10 of 15 recent drill holes from Neptune featured visible gold, including a nice high-grade intercept of 84.66 g/t over 3.2 meters, prospects are building for Claude to add some additional years to this time-tested operation.
While I welcome the existing cash flow from Seabee, my investment thesis for Claude Resources centers around a pair of exciting exploration properties: the Amisk joint venture project southeast of Seabee and the Madsen property at Red Lake, Ontario. At Madsen, historical gold production between 1938 and 1976 yielded 2.4 million ounces at an average grade of 9 g/t. To date, Claude has identified an indicated resource of 928,000 ounces at a comparable grade. At Amisk, drill intercepts of eye-catching thickness suggest strong potential for a profitable open pit operation, including an intercept of 2.16 g/t over 241 meters! The deposit's 921,000 indicated gold-equivalent ounces represent only an early stage hint of the deposit's full potential. The stock is a top-10 holding for Sprott Asset Management, and a core holding for this Fool as well.
10 Best Gold Stocks To Buy For 2014: NEW GOLD INC.(NGD)
New Gold Inc. engages in the acquisition, exploration, extraction, processing, and reclamation of mineral properties. The company primarily explore for gold, silver, and copper deposits. Its operating properties include the Mesquite gold mine in the United States; the Cerro San Pedro gold-silver mine in Mexico; and the Peak gold-copper mine in Australia. The company also has development projects, including the New Afton gold, silver, and copper project in Canada; and a 30% interest in the El Morro copper-gold project in Chile. The company was formerly known as DRC Resources Corporation and changed its name to New Gold Inc. in June 2005. New Gold Inc. was founded in 1980 and is headquartered in Vancouver, Canada.
Advisors' Opinion:- [By Christopher Barker]
This stock has set the gold standard for share price appreciation among gold miners, advancing more than 140% since I introduced Fools to the new face of New Gold back in January 2010. Looking out over the long-term horizon, New Gold has constructed a gorgeous development pipeline to complement its trio of producing gold mines, featuring: a low-risk 30% stake in Goldcorp's El Morro project in Chile, the New Afton copper and gold project in British Columbia (with production scheduled to begin mid-2012), and the recently acquired Blackwater project north of New Afton.
Although I expect the Blackwater deposit to expand considerably with further exploration, the project's initial indicated gold resource of 1.8 million ounces already leaves New Gold in command of 14.7 million ounces of measured and indicated gold resource. Tossing in copious supplies of by-product metals -- most notably 83.5 million ounces of silver and 3.5 billion pounds of copper -- New Gold is positioned to enjoy consistently low production costs throughout its sustained growth trajectory.
Sunday, August 18, 2013
Top Energy Companies To Buy Right Now
While in many ways alternative energy remains in its infancy, continuing developments have put the U.S. in a better position relative to energy independence than seemed even thinkable a decade ago. The advent of hydraulic fracturing -- known as fracking -- has opened up a significant oil and gas supply that continues to lower the need to import resources from abroad. Similarly, advances in solar energy are making it an increasing viable solution, and positive guidance from the solar sector supports this belief. Finally, the U.S. is sitting on huge deposits of kerogen that could contain as much as 6 trillion barrels of oil if it could be extracted.
A case for liquefied natural gas
While thus far liquefied natural gas, or LNG, has remained impractical and unavailable in smaller, non-commercial vehicles, there has been an increasing push toward adopting this fuel for larger applications. Within the past month, Warren Buffett's Berkshire Hathaway (NYSE: BRK-A ) announced that it's rolling out a pilot program to test the viability of using LNG to power locomotives at its BNSF Railway. The rail company is the second largest consumer of diesel in the country, using more fuel than any entity other than the U.S. Navy. If rail could effectively switch to LNG, the reduction in oil consumption would be dramatic.
Top Energy Companies To Buy Right Now: American Petro-Hunter Inc (AAPH)
American Petro-Hunter Inc., incorporated on January 24, 1996, is an oil and natural gases exploration and production company with projects in Kansas and Oklahoma. As of March 15, 2012, the Company has two producing wells in Kansas and six producing wells in Oklahoma. The Company also has rights for the exploration and production of oil and gas on an aggregate of approximately 6,230 acres in those states. On January 4, 2011, the Company announced plans to drill the NOS227 Well as a direct offset to the NOJ26 Well.
On March 25, 2011, the Company announced that the Company had acquired a working interest in an additional 2,000 acres located in Payne County in northern Oklahoma, near the Company�� Yale Prospect. The project has been named North Oklahoma Mississippi Lime Project. On May 16, 2011, the Company announced that drilling operations had commenced at the Company�� first horizontal well, NOM1H. The Company owns a 25% Working Interest in the lease. On June 29, 2011, the Company announced that NOM1H had begun commercial production. On July 18, 2011, the Company announced drilling plans for a total of 11 horizontal wells at the North Oklahoma Project. On July 20, 2011, the Company announced the acquisition of a 40% working interest in the South Oklahoma Project on 3,000 acres of land in south-central Oklahoma.
On February 6, 2012, the Company announced that the Company had drilled a total of 1,988 feet in the horizontal well segment penetrating into the 100 plus foot thick Mississippi pay zone. As of March 2012, there are nine locations left to drill on the acreage. The Company's crude oil production is sold to N.C.R.A. in MacPherson Kansas and Sunoco in Oklahoma. The Company sells natural gas through such pipeline to DCP Midstream, LP of Tulsa, Oklahoma.
Top Energy Companies To Buy Right Now: Fleetcor Technologies Inc (FLT)
FleetCor Technologies, Inc. (FleetCor) is an independent global provider of specialized payment products and services to businesses, commercial fleets, oil companies, petroleum marketers and government entities in countries throughout North America, Latin America and Europe. During the year ended December 31, 2011, the Company processed more than 215 million transactions on its networks and third-party networks. The Company operates in two segments: North American and International segments. The Company provides its payment products and services in a variety of combinations to create payment solutions for its customers and partners. In August 2011, the Company acquired Mexican prepaid fuel card and food voucher business based in Mexico City, Mexico. On December 13, 2011, the Company acquired Allstar Business Solutions Limited, a fleet card company based in the United Kingdom. In July 2012, the Company acquired a Russian fuel card company. In July 2012, the Company acquired CTF Technologies, Inc.
The Company uses third-party networks to deliver its payment programs and services. In order to deliver its payment programs and services and process transactions, it owns and operates closed-loop networks through which it electronically connects to merchants and captures, analyzes and reports information. The Company also provides a range of services, such as issuing and processing. The Company markets its payment products directly to a range of commercial fleet customers, including vehicle fleets of all sizes and government fleets. Among these customers, it provides its products and services to small and medium commercial fleets. The Company also manages commercial fleet card programs for oil companies, such as British Petroleum (BP) (including its subsidiary Arco), Chevron and Citgo, and over 800 petroleum marketers.
The Company sells a range of fleet and lodging payment programs directly and indirectly through partners, such as oil companies and petroleum marketers. It provides it! s customers with various card products that function like a charge card to purchase fuel, lodging and related products and services at participating locations. The Company supports these cards with issuing, processing and information services that enable it to manage card accounts, facilitate the routing, authorization, clearing and settlement of transactions. The Company provides these services in a variety of outsourced solutions ranging from an end-to-end solution (consisting issuing, processing and network services) to limited back office processing services.
In addition, the Company offers a telematics solution in Europe that combines global positioning, satellite tracking and other wireless technology to allow fleet operators to monitor the capacity utilization and movement of their vehicles and drivers. The Company offers prepaid fuel and food vouchers and cards in Mexico that may be used as a form of payment in restaurants, grocery stores and gas stations. Approximately 10.4% of its revenue during the year ended December 31, 2011 came from its lodging and telematics products.
During 2011, the Company owns and operates eight closed-loop networks in North America and internationally. Fuelman network is the Company�� primary fleet card network in the United States. Corporate Lodging Consultants network (CLC) is the Company�� lodging network in the United States and Canada. The CLC Lodging network covers more than 17,700 hotels across the United States and Canada. Commercial Fueling Network (CFN) is the Company�� members only unattended fueling location network in the United States and Canada. Keyfuels network is the Company�� primary fleet card network in the United Kingdom.
CCS network is the Company�� primary fleet card network in the Czech Republic and Slovakia. Petrol Plus Region (PPR) network is the Company�� primary fleet card network in Russia, Poland, Ukraine, Belarus, Lithuania, Estonia and Latvia. Mexican network is the Company�� fuel! and food! card and voucher network in Mexico. Allstar network is the Company�� fleet card network in the United Kingdom. In the United States, the Company issues corporate cards that utilize the MasterCard payment network, which includes 176,000 fuel sites and 398,000 maintenance locations across the country. The networks of locations owned by the Company�� oil and petroleum marketer partners in both North America and internationally are utilized to support the card programs of these partners.
UNION TANK Eckstein GmbH & Co. KG (UTA) operates a network of over 46,000 fleet card-accepting locations across 38 countries throughout Europe, including more than 31,000 fueling sites. DKV operates a network of over 45,000 fleet card-accepting locations across 36 countries throughout Europe, including more than 30,500 fueling sites. In Mexico, the Company issues fuel cards and food cards that utilize the Carnet payment network, which includes approximately 8,700 fueling sites and 78,890 food locations across the country.
The Company competes with Wright Express Corporation, Comdata Corporation, U.S. Bank Voyager Fleet Systems Inc., Edenred and Sodexo, Inc.
Advisors' Opinion:- [By Ed Carson]
FleetCor isn't a one-stop financial behemoth. It's more of a truck-stop financial, providing fuel cards and budget management tools for trucking firms and other commercial and government fleets. In its most recent quarter, earnings per share rose 48%, the best gain in seven quarters. Revenue growth accelerated to 39%, the best in 10 quarters.
Shares have been rising strongly for the past six months. The stock is up nearly 3% so far in 2013, hitting a fresh high intraday on Friday.
Best Value Companies To Invest In 2014: Neoprobe Corporation(NEOP)
Neoprobe Corporation, a biomedical company, engages in the development and commercialization of precision diagnostics that enhance patient care and improve patient benefit. The company is developing and commercializing targeted agents aimed at the identification of occult (undetected) disease. Neoprobe?s two lead radiopharmaceutical agent platforms, Lymphoseek and RIGScan are intended to help surgeons better identify and treat certain types of cancer. Lymphoseek is a diagnostic imaging agent intended for radiolabeling and administration in radiodetection and visualization of the lymphatic system draining the region of injection for delineation of the lymphatic tissue; and RIGScan is an intraoperative biologic targeting agent consisting of a radiolabeled murine monoclonal antibody. The company has a biopharmaceutical development and supply agreement with Laureate Biopharmaceutical Services, Inc. to support the initial evaluation of the viability of the CC49 master working c ell bank, as well as the initial steps in re-validating the commercial production process for the biologic agent used in RIGScan CR. The company was founded in 1983 and is based in Dublin, Ohio.
Advisors' Opinion:- [By Putnam]
Neoprobe Corporation Common St (AMEX:NEOP): This equity had 12,374,458 shares sold short as of Aug 31st, as compared to 11,847,479 on Aug 15th, which represents a change of 526,979 shares, or 4.4%. Days to cover for this company is 17 and average daily trading volume is 745,501.
Top Energy Companies To Buy Right Now: Hanwha SolarOne Co. Ltd.(HSOL)
Hanwha Solarone Co., Ltd., an investment holding company, engages in the manufacture and sale of silicon ingots, silicon wafers, and PV cells and modules. The company also offers mono crystalline and multi crystalline silicon cells; and provides PV module processing services. It sells its products to solar power system integrators and distributors primarily in Germany, Italy, Australia, the United States, the Czech Republic, Spain, and China. The company was formerly known as Solarfun Power Holdings Co., Ltd. and changed its name to Hanwha SolarOne Co., Ltd. in December 2010. Hanwha Solarone Co., Ltd. was founded in 2004 and is based in Qidong, the People?s Republic of China.
Advisors' Opinion:- [By Sherry Jim]
Hanwha SolarOne Co., Ltd.(NASDAQ: HSOL) closing price in the stock market Tuesday, Jan. 3, was $1.06. HSOL is trading -15.30% below its 50 day moving average and -67.04% below its 200 day moving average. HSOL is -89.16% below its 52-week high of $9.78 and 16.48% above its 52-week low of $0.99. HSOL‘s PE ratio is 1.64 and its market cap is $89.18M.
Hanwha SolarOne Co., Ltd. is an investment holding company which engages in the manufacture and sale of silicon ingots, silicon wafers, and PV cells and modules. HSOL also offers mono crystalline and multi crystalline silicon cells; and provides PV module processing services.
Top Energy Companies To Buy Right Now: New Energy Technologies Inc (NENE)
New Energy Technologies, Inc., incorporated on May 5, 1998, is a development-stage company. The Company is engaged in renewable and alternative energy business. The Company conducts its operations through two wholly owned subsidiaries: Kinetic Energy Corporation (KEC), Sungen Energy, Inc. and New Energy Solar Corporation (New Energy Solar). The Company focuses on the development of two technologies: MotionPower Technology for capturing the kinetic energy of moving vehicles to generate electricity, and SolarWindow Technology, which enables see-through glass windows to generate electricity by spraying glass surfaces with its electricity-generating coatings to their glass surface. It has filed 10 patent applications for inventions related to its MotionPower Technology and one for its SolarWindow Technology. As of June 21, 2012, it had no commercial products. As of June 21, 2012, the Company had no revenues.
SolarWindow
The Company�� SolarWindow products in development are designed to generate electricity on glass while remaining see-through. It has six product development goals for its SolarWindow technology: SolarWindow - Commercial, which is a flat glass product for installation in new commercial towers under construction and replacement windows; SolarWindow - Structural Glass, which is a structural glass walls and curtains for tall structures; SolarWindow - Architectural Glass, which is a textured and decorative interior glass walls and room dividers; SolarWindow - Residential, which is a window glass for installation in residential homes under construction and replacement windows; SolarWindow - Flex , which is a film which may be applied directly onto glass, similar to aftermarket window tint films, for retrofit to existing commercial towers, buildings, and residential homes; and SolarWindow - BIPV, which is a building product components associated with building-integrated-photovoltaic (BIPV) applications in homes, buildings, and office towers.
MotionPower
MotionPower products are designed to generate electricity from the capture and conversion of available kinetic energy into electricity, which is present in vehicles which are slowing down before stopping. It is developing three MotionPower products: MotionPower - Heavy, which is a fluid-driven, system with limited moving mechanical components for installation at sites where big rigs, such as tractor trailers, buses, and commercial vehicles are traveling at below 15 miles per hour and are in the process of slowing down; MotionPower - Auto, which is a fluid-driven, system similar to MotionPower - Heavy for installation at sites where cars and light-duty trucks, such as sport utility vehicles and automobiles, are traveling at below 15 miles per hour and are in the process of slowing down; and MotionPower - Express, which is a mechanical system for installation at sites where all cars, light-duty trucks, motor homes, buses, big rigs, and commercial vehicles are traveling faster than 15 miles per hour and are in the process of slowing down.
The Company competes with Konarka Technologies, Inc., XsunX, Inc. and Sharp Corporation.
Top Energy Companies To Buy Right Now: Worthington Energy Inc (WGAS.PK)
Worthington Energy, Inc. (Worthington), formerly Paxton Energy, Inc., incorporated July 30, 2004, is an oil and gas exploration and production company with assets in Texas and in the Gulf of Mexico. Worthington�� assets in Texas consist of a minority working interest in limited production and drilling prospects in the Cooke Ranch area of La Salle County, Texas, and Jefferson County, Texas, all operated by Bayshore Exploration L.L.C. (Bayshore). The Company�� assets in the Gulf of Mexico consist of a leasehold working interests in certain oil and gas leases located offshore from Louisiana, upon which no drilling or production has commenced as of December 31, 2011, and a 10.35% interest in the recently drilled I-1 well and a 2% royalty interest in 14,400 acres in the Mustang Island Tract 818. On March 27, 2012, it acquired certain assets from Black Cat Exploration & Production, LLC.
In Texas, the Company has working interests ranging from 4% to 31.75% (ne t revenue interests ranging from 3% to 23.8125%) in the various wells. In the Gulf of Mexico it has a 70% leasehold working interest, with a net revenue interest of 51.975%, of certain oil and gas leases in the Vermillion 179 tract and 10.35% interest in the recently drilled I-1 well and a 2% royalty interest in 14,400 acres in the Mustang Island Tract 818. As of December 31, 2011, it had one producing well that generated average total monthly net revenue.
The Mustang Island 818-L Field, located in the Kleberg County waters of the Gulf of Mexico, is a field re-habilitation project targeting bypassed or only partially produced gas-condensate. Total production from the wells within the seismic coverage was 125.6 billion cubic feet. In January 2011, the Hercules Offshore 205 jack-up rig was contracted to re-enter the I-Well on the Mustang License Area. The oil and gas leases are located in the VM 179, which is in the shallow waters of the Gulf of Mexico offshore fr om Louisiana. VM 179 is at 85 inches water depth approxima! te! ly 46 miles offshore Louisiana in the Gulf of Mexico.
Saturday, August 17, 2013
After A Sharp Pullback, Is Allergan Pretty Enough?
With its very strong (and lucrative) positions in markets like aesthetics (including the well-known Botox), eye care, device-based plastic surgery, Allergan (NYSE:AGN) arguably merits the premium valuation it typically gets from the Street. Recent developments pertaining to generic competition to Restasis has shaken investor confidence, though, and sent the shares down more than 20% to today's level. Although I do believe that bears may be overestimating the threats to key franchises like Botox and Restasis, it is hard to make a confident call that Allergan is dramatically undervalued now, other than to say that the Street has often been willing to overpay for these shares and may again in the future.
The Current Business Is Still Pretty Good
With almost all of the worries around Allergan involving what may be, it's worth noting that the business is doing pretty well in the here and now.
Revenue rose 7% from last year, a bit above the average expectation. Growth was fueled by the drug business, as pharmaceutical sales rose 11%, while device revenue rose 7%. Within drugs, Botox and Restasis both continue to grow at double-digit rates, while both the breast and facial devices segments saw double-digit sequential growth as the aesthetics procedures market improves.
Allergan likewise did pretty well below the top line. Gross margin improved about a point, and was better than the sell-side expected. Although Allergan did give some of that back through higher R&D spending (up 17%), operating income still rose 12% and operating margin was about a half-point better than last year (and in-line with expectation).
Multiple Challenges To Lucrative Franchises On The Horizon
There are definitely clouds on Allergan's horizon, and the extent to which the company can navigate the impending challenges will go a long way towards solving Allergan's future revenue growth rate and margin structure.
On Botox, Allergan continues to expand the usage in migraine and overactive bladder, even though the reimbursement for OAB isn't always that strong. But while this should be a growing $2 billion business this year, competition from Merz's Xeomin and Johnson & Johnson's (NYSE: JNJ) PurTox could challenge the business. Looking back a bit into the past, Allergan did absorb the introduction of Medicis' (now Valeant (NYSE: VRX)) rival compound Dysport, but it did lead to meaningful reductions in effective price.
As an aside, it's also worth noting that Johnson & Johnson and Valeant have formed an alliance to work together in the aesthetics space. In broad strokes, this alliance will reward physicians for prescribing/using products from either company, essentially neutralizing the loyalty and volume benefits that Allergan can offer due to its wider range of products for the aesthetics market.
Last and not least is the pipeline. The trouble for Allergan is that most of the high-potential products are a ways back, while the products closer to market seem less likely to generate strong revenue. Levadex, the troubled migraine drug that Allergan acquired with the MAP deal, should get approval by year-end and though I was once bullish on this drug, the current sentiment is that Allergan will be lucky to generate more than $300 million in sales (though management believes it's a $500M-plus drug). Elsewhere, orzurdex is likely to be a modest revenue contributor, while the anti-VEGF DARPin drug for wet AMD isn't likely to see a launch before 2017.
SEE: A Primer On The Biotech Sector
The Bottom Line
By and large, betting against Allergan for any sustained period of time (and/or failing to buy on significant pullbacks) has been a mistake. Along those lines, it's well worth noting that Allergan may fend off rivals in Botox and generic Restasis better than feared, and that Allergan's significant marketing muscle in the migraine space (where it has been able to successfully market an injected paralytic agent) could spell better things for Levadex.
Today's valuation seems to factor in about 7% long-term free cash flow growth (with approximately 5% underlying revenue growth in my model). Taking a more bullish view (one that includes $500 million in Levadex sales in 2018, as well as success with DARPin and brimonodine, and modest Botox and Restasis pressure), I think free cash flow growth of around 9% and a fair value of $98.50 is a reasonable bullish outlook. With that, Allergan isn't exactly shockingly cheap, but this is a company with multiple valuable franchises, a good marketing team, and potential takeover value to a growth-starved pharma space.
Disclosure – At the time of writing, the author had no position in any companies mentioned.
Earnings Preview: Will JPMorgan Beat Again? - Analyst Blog
We expect JPMorgan Chase & Co. (JPM) to beat earnings expectations when it reports second-quarter 2013 results before the opening bell tomorrow, Jul 12.
Why a Likely Positive Surprise?
Our proven model shows that JPMorgan has the right combination of two key ingredients to beat earnings.
Positive Zacks ESP: The earnings ESP (Read: Zacks Earnings ESP: A Better Method) for JPMorgan is +2.11% – the difference between the Most Accurate estimate of $1.45 and the Zacks Consensus Estimate of $1.42. This indicates a likely positive earnings surprise.
Zacks Rank #2 (Buy): JPMorgan's Zacks Rank of 2 increases the predictive power of its ESP. The combination of its Zacks Rank and Earnings ESP makes us confident of a positive earnings surprise in the to-be-reported quarter.
Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Expected Earnings Drivers
Cost containment is expected to be the primary driving factor this quarter. JPMorgan has progressed well with respect to its cost cutting efforts through workforce reduction announced earlier this year. It planned to axe as many as 17,000 jobs, including 13,000–15,000 positions in mortgage banking, by the end of 2014. Mortgage banking job cuts will in particular be reflected in JPMorgan's expenses for the quarter.
Moreover, top-line growth is expected to be significant primarily on higher trading revenues. As capital market activities witnessed improvement during the April–June period with continued support from the Fed, the propensity to invest in the market increased.
Also, in a persisting low interest rate environment, trading activities for financial instruments that are not interest rate sensitive and offer better returns have increased. As a result, trading revenue should strongly support the top line this time around.
Though! we don't expect any significant improvement in interest income due to sluggish loan growth, an uptick in mortgage activity should make up the shortfall.
Another major contributor to the bottom line should be lower provision for loan loses due to overall macroeconomic improvement. Additionally, we expect continued improvement in asset quality trends – including declines in net charge-offs (NCOs) and nonperforming assets (NPAs).
Similar to the first quarter, activities of this banking giant during the second quarter were sufficient to win analysts' confidence. The Zacks Consensus Estimate for the second quarter has inched up by a cent to $1.42 per share over the last 7 days on an obvious tendency for upward estimate revision.
Other Stocks to Consider
JPMorgan is not the only bank looking up this earnings season. Here are some other banks you might consider as our model shows the right combination of elements in these to result in an earnings beat:
Wells Fargo & Company (WFC) has an earnings ESP of +1.09% and carries a Zacks Rank #3. Its second quarter release is scheduled on the same day as JPMorgan.
Fifth Third Bancorp (FITB) has an earnings ESP of +2.27% and carries a Zacks Rank #3. It is scheduled to report second quarter results on Jul 18.
The earnings ESP for Citigroup Inc. (C) is +0.86% and it carries a Zacks Rank #3. The company is scheduled to release second quarter results on Jul 15.
In the banking sector, JPMorgan, which has exposure in almost all banking businesses, is set to kick off the second quarter earnings with Wells Fargo. Therefore, the release will be a significant indicator of performance in the key banking sector.
Why a Likely Positive Surprise?
Our proven model shows that JPMorgan has the right combination of two key ingredients to beat earnings.
Positive Zacks ESP: The earnings ESP (Read: Zacks Earnings ESP: A Better Method) for JPMorgan is +2.11% – the difference between the Most Accurate estimate of $1.45 and the Zacks Consensus Estimate of $1.42. This indicates a likely positive earnings surprise.
Zacks Rank #2 (Buy): JPMorgan's Zacks Rank of 2 increases the predictive power of its ESP. The combination of its Zacks Rank and Earnings ESP makes us confident of a positive earnings surprise in the to-be-reported quarter.
Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Expected Earnings Drivers
Cost containment is expected to be the primary driving factor this quarter. JPMorgan has progressed well with respect to its cost cutting efforts through workforce reduction announced earlier this year. It planned to axe as many as 17,000 jobs, including 13,000–15,000 positions in mortgage banking, by the end of 2014. Mortgage banking job cuts will in particular be reflected in JPMorgan's expenses for the quarter.
Moreover, top-line growth is expected to be significant primarily on higher trading revenues. As capital market activities witnessed improvement during the April–June period with continued support from the Fed, the propensity to invest in the market increased.
Also, in a persisting low interest rate environment, trading activities for financial instruments that are not interest rate sensitive and offer better returns have increased. As a result, trading revenue should strongly support the top line this time around.
Though! we don't expect any significant improvement in interest income due to sluggish loan growth, an uptick in mortgage activity should make up the shortfall.
Another major contributor to the bottom line should be lower provision for loan loses due to overall macroeconomic improvement. Additionally, we expect continued improvement in asset quality trends – including declines in net charge-offs (NCOs) and nonperforming assets (NPAs).
Similar to the first quarter, activities of this banking giant during the second quarter were sufficient to win analysts' confidence. The Zacks Consensus Estimate for the second quarter has inched up by a cent to $1.42 per share over the last 7 days on an obvious tendency for upward estimate revision.
Other Stocks to Consider
JPMorgan is not the only bank looking up this earnings season. Here are some other banks you might consider as our model shows the right combination of elements in these to result in an earnings beat:
Wells Fargo & Company (WFC) has an earnings ESP of +1.09% and carries a Zacks Rank #3. Its second quarter release is scheduled on the same day as JPMorgan.
Fifth Third Bancorp (FITB) has an earnings ESP of +2.27% and carries a Zacks Rank #3. It is scheduled to report second quarter results on Jul 18.
The earnings ESP for Citigroup Inc. (C) is +0.86% and it carries a Zacks Rank #3. The company is scheduled to release second quarter results on Jul 15.
In the banking sector, JPMorgan, which has exposure in almost all banking businesses, is set to kick off the second quarter earnings with Wells Fargo. Therefore, the release will be a significant indicator of performance in the key banking sector.
Friday, August 16, 2013
How many stocks should you have in your portfolio?
To be fair though, a loss of a certain size was all but inevitable. Simply because the magnitude of the crisis and the asset deflation that followed was one of the biggest that the world has ever seen. But some of the portfolios capitulated really badly. This even includes managers with stellar long term track records. And that was perhaps unacceptable we believe.
We are sure that a lot of analysis would have gone into finding out why some of the well known stock portfolios fared so miserably. We believe that the poor relative performance could be put down to two main things. One is of course insufficient diversification and the second would be staying fully invested i.e. not having a sufficient enough cash buffer.
At first glance, both of these criteria would appear to be subjective. In other words, there isn't a single number to which all investors would want to converge. However, we can study the principles followed by some of the most successful investors of our times to get an idea as to what should be the ideal number stocks in a portfolio and also the optimum cash level.
As for the first factor, thoughts from Seth Klarman, a very successful investor and author, would be useful we guess. Klarman has argued a lot of times that a stock should form no more than 5%-6% of one's portfolio. And only in cases where the confidence with respect to a stock is very high should the size reach 10%. Anything more than that and we are exposing ourselves to risk he believes. Besides, if a stock forms only 1% of a portfolio, then it is too small a position to make any meaningful difference to the overall performance as per him.
Then there's Mohnish Pabrai who suffered very badly during the crisis. One of the big lessons that he learnt from the crisis was the fact that no position should make up more than 10% of one's portfolio. Clearly, a thought very similar to that echoed by Klarman.
We believe even research has shown that in order to ensure sufficient diversification , around 12-15 stocks are sufficient. The risk reduction trade off really does not work in investor's favour beyond these numbers. There is also the additional problem of difficulty in keeping track of each investment if the number of stocks go too high. Thus, from all possible angles, having a portfolio of no more than 12-15 stocks looks like the ideal way to go.
If the issue of determining the correct level of diversification was tricky, we believe arriving at the right level of cash is even more difficult. This is because while some investors swear by the habit of remaining 100% invested at all times, others like to maintain a healthy cash level no matter how attractive the opportunities out there.
However as the financial crisis has shown, remaining 100% invested at all times may not be the best of strategies. Market downfalls happen without prior notice and the extent of correction too can go lower than most people can imagine. Thus, in order to take advantage of such occasions, having a sufficient cash buffer is must we believe. Agreed that holding cash at all times may lead to slightly lower returns than an all stock portfolio when the markets are cheap. But we should be willing to accept this scenario in exchange for not letting our portfolio suffer too much during a strong market correction along with the opportunity to make further investments.
Thus, having cash balance to the tune of 15%-20% of one's portfolio value at all times does look like a prudent strategy to adopt. Of course, during times when the number of attractive ideas is not big enough, the cash holdings could go up even further.
To conclude, as Joel Greenblatt has pointed out, one must be diversified enough to survive bad times or bad luck so that skill and good process can have a chance to pay off over the long term. Very wise words indeed.
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Thursday, August 15, 2013
5 Best Cheap Stocks To Own For 2014
Last week, the difference in price between Brent, the global oil benchmark, and West Texas Intermediate (WTI), the main U.S. benchmark, collapsed to its lowest level since early 2011. This so-called Brent-WTI spread is a crucial gauge of profitability among U.S. refiners; the lower it dips, the lower their refining margins, all else being equal. �
For much of this year, the spread held above $15, even topping $20 in February. That helped refiners with access to cheap WTI, such as Phillips 66 (NYSE: PSX ) , Valero (NYSE: VLO ) , and HollyFrontier (NYSE: HFC ) , deliver solid first-quarter performances.
Phillips 66 reported a realized refining margin of $13.94 a barrel in the first quarter ��the best in the company's recent history��while Valero's refining throughput margin came in at $10.59 per barrel, up from $7.71 per barrel in the same period last year. And�HollyFrontier's consolidated refinery gross margin clocked in at $23.32 per produced barrel, a 34% improvement over the year-earlier quarter.�
5 Best Cheap Stocks To Own For 2014: Ford Motor Credit Company(F)
Ford Motor Company primarily develops, manufactures, distributes, and services vehicles and parts worldwide. It operates in two sectors, Automotive and Financial Services. The Automotive sector offers vehicles primarily under the Ford and Lincoln brand names. This sector markets cars, trucks, and parts through retail dealers in North America, and through distributors and dealers outside of North America. It also sells cars and trucks to dealers for sale to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments. In addition, this sector provides retail customers with a range of after-sale vehicle services and products in the areas, such as maintenance and light repair, heavy repair, collision repair, vehicle accessories, and extended service contracts under the Ford Service, Lincoln Service, Ford Custom Accessories, Ford Extended Service Plan, and Motorcraft brand names. The Financial Services sector offers vari ous automotive financing products to and through automotive dealers. It offers retail financing, which includes retail installment contracts for new and used vehicles; direct financing leases; wholesale financing products that comprise loans to dealers to finance the purchase of vehicle inventory; loans to dealers to finance working capital, purchase real estate dealership, and/or make improvements to dealership facilities; and other financing products, as well as provides insurance services. Ford Motor Company was founded in 1903 and is based in Dearborn, Michigan.
Advisors' Opinion:- [By James K. Glassman]
Two years ago, I started a new tradition: picking a stock myself. In both years, it was iShares MSCI Brazil Index, an exchange-traded fund that tracks the Brazilian stock market. It bombed twice, and I am not going to that well again. I’m picking Ford Motor (symbol: F), whose heroic CEO, Alan Mulally, turned down bailout money and guided the business through tough times to 13 straight quarters of pretax profitability, including surprisingly strong earnings of $1.6 billion in the third quarter of 2012. Ford still has room to grow. Despite the firm's achievements, the stock has dropped 40% since early 2011, and the P/E is 8. The P/E is low because investors apparently don't believe that Ford can sustain those high profits. I think they're wrong and believe that Ford deserves a higher valuation.
- [By Victor Mora]
Ford is a well-established vehicle products and services producer, distributed in a multitude of countries across the globe. The stock is currently consolidating gains after a bullish run, so it may need some time before the company makes its next move. Over the last four quarters, earnings and revenue figures have been mixed, which has resulted in slightly disappointed investors. Relative to its peers and sector, Ford has been an average year-to-date performer. WAIT AND SEE what Ford does this coming quarter.
5 Best Cheap Stocks To Own For 2014: DRDGOLD Limited(DROOY)
DRDGOLD Limited engages in the exploration, extraction, processing, and smelting of gold in South Africa. It holds interests in the Blyvoor mine; and the Crown gold surface tailings retreatment facility that reprocesses sand and slimes dumps, as well as involves in the surface retreatment operations. The company was incorporated in 1895 and is based in Roodepoort, South Africa.
Advisors' Opinion:- [By seekingalpha.com]
With mining assets in South Africa, the company runs operations from exploration through to smelting.
Shares are trading at $4.23 at the time of writing, toward the bottom end of their 52-week trading range of $3.96 to $6.23. At the current market price, the company is capitalized at $162.80 million. Earnings per share for the last fiscal year were $1.21, placing the shares on a price to earnings ratio of 3.49. It paid a dividend of $0.06 last year (a yield of 1.40%) which was covered over 20 times by its earnings.
It has the lowest price-to-earnings ratio of the gold mining stocks, though its share price is being held back by recent employee unrest in the region. There is room for the company to increase its well-covered dividend, and that should be attractive to income investors. With gold prices increasing, and production costs likely to remain stable, DRDGold could be a stock worth investing in for the gearing that the safe haven value of its gold reserves offers to its potential earnings.
Top Gold Stocks To Invest In Right Now: Kohl's Corporation(KSS)
Kohl?s Corporation operates department stores in the United States. The company?s stores offer private and exclusive, as well as national branded apparel, footwear, and accessories for women, men, and children; soft home products, such as sheets and pillows; and housewares primarily to middle-income customers. As of January 29, 2011, it operated 1,089 stores in 49 states. The company also offers on-line shopping on its Web site at Kohls.com. Kohl?s Corporation was founded in 1962 and is headquartered in Menomonee Falls, Wisconsin.
Advisors' Opinion:- [By Dug]
With its value-priced merchandise, private label, and brand-name goods, Kohl's is part department store and part discounter. "It's not quite as high-end as Macy's, or as low as Wal-Mart," says Resendes. The near-term outlook for retailers is gloomy, but Kohl's should be in a good position when the economy rebounds, he says. "A lot of consumers have migrated to Wal-Mart in terms of price, but they'll migrate back up, and a natural first stop is going to be Kohl's." Another plus: Kohl's doesn't offer store credit cards, "so defaults aren't hanging over its head," says Resendes. "That will be a great strength when we exit this economic turmoil." He sees a 25 percent upside to the company's shares, which recently traded at $38.
5 Best Cheap Stocks To Own For 2014: WebMediaBrands Inc(WEBM)
WebMediaBrands Inc., an Internet media company, provides content, education, and career services to media and creative professionals through a portfolio of vertical online properties, communities, and trade shows. The company operates mediabistro.com, a blog network that provides content, education, community, and career resources about media industry verticals, including new media, social media, Facebook, TV news, sports news, advertising, public relations, publishing, design, mobile, and the semantic Web. Its mediabistro.com also includes a job board for media and business professionals focusing on various job categories, such as social media, online/new media, publishing, public relations/marketing, advertising, sales, design, and television. The company also operates a network of online properties, including AdsoftheWorld, DynamicGraphics, LiquidTreat, BrandsoftheWorld, Graphics.com, StepInsideDesign, Creativebits, and GraphicsDesignForum that provide content, educatio n, community, career, and other resources for creative and design professionals. In addition, it offers community, membership, and e-commerce offerings comprising a freelance listing service, a marketplace for designing and purchasing logos, and premium membership services. Further, the company provides online and in-person courses, panels, certificate programs, and video subscription libraries for media and creative professionals. Additionally, it organizes various trade shows that include Semantic Technology Conference, Monetizing Social Media, Social Media Optimization Conference, Social Gaming Summit, and Virtual Goods Summit. The company was formerly known as Jupitermedia Corporation and changed its name to WebMediaBrands Inc. in February 2009. WebMediaBrands Inc. was founded in 1999 and is based in New York, New York.
5 Best Cheap Stocks To Own For 2014: International Business Machines Corporation(IBM)
International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. Its Global Technology Services segment provides IT infrastructure and business process services, including strategic outsourcing, process, integrated technology, and maintenance services, as well as technology-based support services. The company?s Global Business Services segment offers consulting and systems integration, and application management services. Its Software segment offers middleware and operating systems software, such as WebSphere software to integrate and manage business processes; information management software for database and enterprise content management, information integration, data warehousing, business analytics and intelligence, performance management, and predictive analytics; Tivoli software for identity management, data security, storage management, and datacenter automation; Lotus software for collaboration, messaging, and so cial networking; rational software to support software development for IT and embedded systems; business intelligence software, which provides querying and forecasting tools; SPSS predictive analytics software to predict outcomes and act on that insight; and operating systems software. Its Systems and Technology segment provides computing and storage solutions, including servers, disk and tape storage systems and software, point-of-sale retail systems, and microelectronics. The company?s Global Financing segment provides lease and loan financing to end users and internal clients; commercial financing to dealers and remarketers of IT products; and remanufacturing and remarketing services. It serves financial services, public, industrial, distribution, communications, and general business sectors. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. IBM was founded in 1910 and is based in Armonk, New York.
Advisors' Opinion:- [By Paul]
IBM. Emerging markets are a big growth driver for this computer systems and software provider. Not only that, Resendes says, IBM has "a bullet-proof balance sheet that will allow it to weather the current storm and position it for superior growth and profitability in the long term." He thinks the stock, which recently traded at $93, is worth $120 a share: ''There are some obvious companies that offer much bigger discounts, but you have to incorporate the safety factor. You're getting a premium company here that's a good spot to be in within the tech space."
- [By Peter Hughes]
International Business Machines (IBM) -- our aggressive pick for the year -- is one of the world's most dominant technology companies, with annual revenues of $105 billion and net income of $16 billion.
- [By Geoff Gannon] Wells Fargo (WFC) ��that only seem cheap if you believe in their franchises. These are far from Ben Graham bargains.
And then other times, Buffett buys companies like Daehan Flour Mills. Or he buys into a liquidation like Comdisco. Or an arbitrage position like Dow Jones.
How does Buffett choose between:
路 A wonderful business at a fair price
路 A fair business at a wonderful price
路 A business that is liquidating
路 An arbitrage opportunity?
Very few successful investors buy stocks that fall into all these categories. Ben Graham did arbitrage, liquidations, and fair businesses at wonderful prices. But he never bought wonderful businesses at fair prices.
Phil Fisher bought wonderful businesses at fair prices. But he never bought fair businesses at wonderful prices, or liquidations, or arbitrage.
Is Buffett just combining Ben Graham and Phil Fisher?
No.
Buffett invested in GEICO ��in fact he put 75% of his net worth into GEICO ��while he was still taking Ben Graham�� class. GEICO is a great example of Warren�� departure from the Ben Graham approach. Buffett was departing from Graham�� approach from the moment he set foot in Graham�� class.
How?
He was focused on his return on investment. He was focused on compounding his wealth. Graham wasn��. Buffett was. That was the difference.
And so Buffett immediately started buying the same stocks as Ben Graham ��but he focused on just the very best ideas in Graham�� portfolio. A great idea for Ben Graham would ��at most ��account for about 10% of his common stock portfolio. A great idea for Warren Buffett could be ��like GEICO was ��75% of his portfolio.
When Buffett started his partnership, he had a 25% position size cap. But he removed that to allow for a 40% investment in American Express (AXP). Buffett made many investments of 10% to 20% of the partnership�� portfolio over the years. For Ben Graham, 10% to 20% was a real! ly big position. It wasn�� the kind of thing you bought every year.
So a huge difference between Ben Graham and Warren Buffett was focus. Buffett was always focused on his best ideas. This is part of what makes Warren Buffett similar to Phil Fisher. And very different from almost all other investors.
The other part of Warren Buffett�� approach that separates him from most investors is that he�� wedded to a very specific idea ��return on investment ��rather than a very specific style of investing.
The only way Buffett can sort through a range of different ideas including good companies, mediocre companies, liquidations, and arbitrage ��is by looking at his return on investment.
I wrote about this back in 2011 in an article entitled: ��arren Buffett: Mid-Continent Tab Card Company.��br>
That article was based on Alice Schroeder�� description of Warren Buffett�� investment in Mid-Continent Tab Card Company.
And it�� a good article to read if you want to know how Warren Buffett thinks about stocks. Because it includes such heretical ideas as: ���growth had the potential to be either an added kicker or the most serious risk to his investment��and ��ou build the margin of safety into each step. You don�� just slap a 40% discount on the intrinsic value estimate you get at the end.��br>
But the most important statement in that article was:
��uffett doesn�� seem to make actual estimates. Alice Schroeder says she never saw anything about future earnings estimates in his files. He didn�� project the future earnings the way stock analysts do.��br>
How is that possible?
How can you sort through a variety of different investment options without using any explicit future estimates?
You have to think in terms of return on investment.
In fact, the reader who asked me the question that prompted the Mid-Continent Tab Card Company article actually got very close to identifying how Warren Buffett thinks about st! ocks:
!
��ou wrote that Buffett just looked at the initial return (>15%) he was getting and the business�� own ROC. When you aid ��nitial��do you mean the 1st year? I think that sort of makes sense because his return of the subsequent years would be taken (from) the firm�� own ROC and sales growth. Is that how you see it?��br>
Now, what did that reader get wrong? He came very, very close to describing how Buffett looks at a business. But he just missed.
What variable isn�� being considered there?
Is it really true that: ��is return of the subsequent years would be taken (from) the firm�� own ROC and sales growth��
Let�� say a company has zero leverage. And its return on assets has been 10% a year for each of the last 100 years. You can bet on that 10% a year. Okay. Now, let�� say it is growing sales by 10% a year.
How much is the business worth?
And how much should an investor expect to make in that stock if he pays exactly tangible book value?
Can the investor expect to earn 20% a year or 10% a year?
Or something in between?
Now, if you expect to hold the stock for a short-period of time your return will largely be based on what the market is willing to pay for each dollar of earnings the stock has in the future. So, you can certainly make over 100% a year if you buy a stock at 10 times earnings and sell it at 20 times earnings exactly one year from today.
I�� not talking about that. Don�� worry about the resale value right now. Just look at the question of what the owner of a business can expect to make if the following facts are true:
路 Total Assets: $100
路 Annual Earnings: $10
路 Future Annual Sales Growth: 10%
Do you think you can answer that question?
A lot of people think they can answer that question. But Warren Buffett would say you can�� answer that question.
Not until you consider two possible future scenarios. Ten years from today, that same business cou! ld look l! ike:
路 Total Assets: $260
路 Annual Earnings: $26
路 Future Sales Growth: ?
Or it could look like:
路 Total Assets: $100
路 Annual Earnings: $26
路 Future Sales Growth: ?
Or it could look like anything in between. In fact, I�� simplifying. If you look at their 10-year records, quite a few businesses grew assets faster than earnings. So, the range of possible outcomes in terms of the ratio of change in earnings to change in assets is even wider than I just presented.
If we look at two businesses each earning 10% on their assets, each unleveraged, and each growing at 10% a year ��we can imagine one future where assets have grown by $160 over 10 years. And we can imagine another future where assets haven�� grown at all over 10 years.
Which is the better future for an owner?
Obviously, the future with sales growth that far exceeds asset growth.
That would allow the company to buy back stock, pay dividends, etc.
So we can think of the combination of a company�� return on assets and its change in assets and sales as being like the total return on a stock. The total return on a stock includes both price appreciation and dividends.
The total return on a business includes both the return on assets (from this year) and the growth in sales. But it does not include sales growth apart from asset growth. Rather, to the extent that assets and sales grow together ��growth is simply the reinvestment of more assets at the same rate of return.
In other words, a business with a 10% ROA and 0% sales growth and a business with a 10% ROA and 10% sales growth could be more comparable than they appear. If the company with no sales growth pays out 10% of its assets in dividends each year, why is it worth less than the business with a 10% ROA and 10% sales growth?
In the no-growth company, I get 10% of my initial investment returned to me. In the growth company, I get 10% of my initial investment reinv! ested for! me. If the rate of return on that reinvested cash is the same rate of return I can provide for myself on the cash paid out in dividends ��why does it matter which company I choose?
Doesn�� an owner earn the same amount in both businesses?
Now, I think there are qualitative reasons ��basically safety issues ��that would encourage me to prefer the growing business. Usually, companies try to grow. If a company isn�� growing, it could be a sign of something serious.
So a lack of growth is sometimes a symptom of a greater disease. But growth is not always good.
In more cases than people think, growth is actually a pretty neutral consideration in evaluating a stock.
There is an exception. At unusually high rates of growth ��growth is almost universally good. This is a complex issue. But I can simplify it. Very few businesses that grow very fast do so by tying up lots of assets relative to the return they earn on those assets. Therefore, it is unnecessary to insist on high returns on capital when looking at very high growth companies. You��l get the high returns on capital ��at least during the company�� fast growth stage ��whether you ask for them or not.
What do I mean when I say growth is often a pretty neutral consideration?
Let�� use live examples.
Here is Hewlett-Packard (HPQ)��br>
10-Year Average Return on Assets: 3.2%
10-Year Annual Sales Growth: 10.7%
10-Year Annual Asset Growth: 14.5%
And here is Value Line (VALU)��br>
10-Year Average Return on Assets: 76.2%
10-Year Annual Sales Growth: (8.2%)
10-Year Annual Asset Growth: (11.1%)
Whose assets would you pay more for?
I have a problem with an 8% a year decline in sales. And worry that the future looks really, really grim for Value Line.
But it�� hard to say Hewlett-Packard has gained anything through growing these last 10 years. The company has retained a lot of earnings. And it retained those earnings e! ven while! return on assets was low.
The 10-year total return in Value Line shares has been (0.9%) a year over the last 10 years. The 10-year year total return in Hewlett-Packard has been a positive 4% a year.
So it sounds like Hewlett-Packard has done much better. But all of that is attributable to investor perceptions of their industry. If you look at HP�� industry, total returns ��from 2002 to 2012 ��in the stocks of computer makers were around 14% a year. Meanwhile, publishers ��like Value Line ��returned negative one percent a year. So, Value Line�� underperformance relative to Hewlett-Packard is probably better explained by the miserable future prospects for publishers compared to the much more moderate future prospects for computer companies.
Why does this matter in a discussion of Warren Buffett?
Because it illustrates the one future projection I do think Buffett makes. I think he looks out about 10 years and asks himself whether the company�� moat will be intact, its growth prospects will still be decent, etc.
In other words: will this stock deserve to sell at a fairly high P/E ratio 10 years from today?
Warren Buffett doesn�� want to buy a stock that is going to have its P/E ratio contract over 10 years.
To put the risk of P/E ratio contraction in perspective, consider that Value Line traded at over 5 times sales and nearly 25 times earnings just 10 years ago. Whatever the company�� future holds, it�� unlikely we��l see the stock at those kinds of multiples any time soon. Publishers just don�� deserve those kinds of P/E ratios any more.
So, how much the market will value a dollar of earning power at in the future matters. And that is one place where projecting the future is probably part of Buffett�� approach. This is mostly a tool for avoiding certain companies rather than selecting certain companies.
For example, Buffett was willing to buy newspaper stocks in the 1970s but not the 2000s. The reason for that was ! that in t! he 1970s he thought he saw at least a decade of clear sailing for newspapers. In the 2000s, he didn��.
Today, I think Buffett sees at least a decade of clear sailing for the railroads and for IBM. In both cases, his perception of their future prospects was almost certainly the last puzzle piece to fall into place. It wasn�� an issue of IBM (IBM) getting to be cheap enough. It was an issue of Warren Buffett being confident enough to invest in IBM.
By the way, let�� look at IBM�� past record:
10-Year Average Return on Assets: 10.3%
10-Year Annual Sales Growth: 2.8%
10-Year Annual Asset Growth: 1.9%
As you can see, IBM isn�� much of a growth company. But that doesn�� mean the shares can�� be growth shares. IBM has improved margins and bought back stock. That has led to a 20% annual increase in earnings per share compared to just a 3% annual increase in total revenue.
So can we answer the question of why Warren Buffett is interested in companies like IBM and Norfolk Southern (NSC) rather than Hewlett-Packard and Value Line?
Well, Value Line is obviously too small an investment for Buffett. But we��e using it as a stand in for all the publishers Buffett once loved but now shuns.
Buffett is a return on investment investor. He isn�� exactly a growth investor or a value investor ��if by growth we mean total revenue growth and if by value we mean the company�� value as of today.
Buffett wants to compound his money at the fastest rate possible. So he looks at how much of the company�� sales, assets, etc. he is getting. Basically, he looks at a price ratio. And then he looks into the company�� return on its own sales, assets, etc. When you take those two numbers together you get something very close to a rate of return.
The last part you need to consider is the change in assets versus the change in sales (and earnings). Does the company need to grow assets faster than earnings?
Or ��like See�� Candy �! �can it ! grow sales a little faster than assets?
Let�� take a look at Norfolk Southern as a good example of the kind of railroad Buffett would own ��if he didn�� own all of Burlington Northern.
Norfolk Southern
10-Year Average Return on Assets: 4.9%
10-Year Annual Sales Growth: 6.0%
10-Year Annual Asset Growth: 3.6%
Now, how much earning power do you get when you invest in Norfolk Southern?
Total Assets are $28.54 billion. And the market cap is $21.28 billion. So, $28.54 billion / $21.28 billion = $1.34 in assets for every $1 you pay for the stock today.
Now, Norfolk Southern�� return on assets has averaged a little less than 5% over the last decade. But I think that ��like he does with IBM ��Buffett believes the current returns on assets of the railroads are sustainable. So, we are talking something in the 5% to 7% range for a railroad like Norfolk Southern.
On top of this, he sees that the railroads have grown sales faster than assets. Now, we could do an elaborate projection of future margins, returns on assets, etc. to try to figure out what the railroads of the future will look like.
Or, we could just assume that over the last 10 years, Norfolk Southern has grown sales about 2.5% a year faster than it has grown assets. And Norfolk Southern can earn 5% to 7% on its assets. As a result, an investor in Norfolk Southern will see his wealth grow by about 7.5% to 9.5% of the company�� assets he owns. This doesn�� sound like much. But, railroads use leverage. And they often have price-to-book ratios lower than their leverage ratios. As a result, investors can often buy more than $1 in railroad assets for every $1 they spend
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