Mosaic: Back in the Saddle

Fertilizer producer Mosaic (MOS) was my top dog position for much of latter 2007 into early 2008, often sitting at 6-7% of the portfolio. While much of the rest of the market was falling apart after the October 2007 peak, there was a harbor of safety in the commodity space....until there wasn't. After the blowup of commodities that started in mid 2008 - it, along with a host of companies across the commodities spectrum (and indeed the entire market) went into a death spiral. In retrospect, once more the "front page" indicator worked like a charm in this space - no different than most investment crazes. (be wary of the 'rare earth metal' cover story coming soon!) [Apr 30, 2008: Finally (a Year Late) Fertilizer Hits the Front Page of the NYTimes; and an Interview with Mosaic CEO] Much like auto companies/suppliers the fertilizer space has extremely high leverage with a supreme level of fixed costs. So when business goes bad, it tends to go really bad - but when it is good, gross margins balloon, andmuch of the incremental revenue drops straight to the bottom line.

• Mosaic's gross margin for the second quarter of fiscal 2011 was $768.3 million, or 29 percent of net sales, compared with $307.0 million, or 18 percent of net sales, a year ago.

Now appears to be one of those times... the stock is up some 100% in just over 6 months and reported another very nice quarter last evening. I keep saying it, but this feels like deja vu with latter 2007, early 2008 across the commodity space.

Indonesia ETF Surges Ahead

More than one year after the market bottom, most equity ETFs have seen a big rebound, but few have been able to match the meteoric rise of the Market Vectors Indonesia ETF (IDX), which is up more than 200% since last March. In fact, only two non-leveraged ETFs have outperformed IDX over the time period: coal (KOL) and preferred stock (PGF) (see our full list of top performing ETFs over the past year). With IDX up close to 10% already in 2010, some investors are wondering if the Indonesian economy can continue to surge ahead or if a bubble has begun to form.

A number of data points suggest that good times are still ahead for the Indonesian economy as it looks to continue its post-financial crisis growth. UBS is forecasting 6% growth for the economy over the next two years, while Bank Indonesia, the country’s central bank, recently upped its growth rate to 5.6% for the year.

Impressive projected returns are nothing new for Indonesia, but controlling risk has historically been a challenge for Indonesia, particularly as corruption remains a significant problem in this emerging market. However, Indonesia is currently experiencing one of its most stable political periods since Suharto was removed from power in 1998. This relatively stable political climate has allowed the rising middle class to increase its consumption, which has helped to boost consumer spending in Indonesia. In January, auto sales rose 69%, the highest growth in a year, while sales of other non-durable goods also increased. Growth in imports of capital goods in January hit 35.6% from the previous month’s 9.29%, indicating preparation for more investment.

Sino-American Tensions

Another key driver of Indonesian growth relates to increased interest and activity from U.S. firms, part of which may be attributable to the recent strains in relationships between the United States and China. “What we are seeing is a diversification of sourcing from U.S. companies away from China toward Indonesia in a number of areas, such as footwear, textiles and clothing and furniture, we do see a lot of prospects there with increased interest from U.S. buyers coming to Indonesia” said Trade Minister Mari Pangestu in an interview with Bloomberg Television in Jakarta. This trend suggests that further tensions between the two superpowers will ultimately be to Indonesia’s benefit.

Indonesia ETF Profile

IDX consists of the 28 securities included in the Market Vectors Indonesia Index, a benchmark that tracks the performance of companies that are based in or generate at least half of their revenues from Indonesia. The fund is skewed towards large firms, with almost 60% of holdings in large cap securities. IDX has a diverse mix for sectors with just under one-quarter in financial services and materials, with the energy (15%) and consumer discretionary (12%) sectors rounding out the top four. IDX charges an expense ratio of 0.71%.

2010 Outlook: Interest Rates In Focus

In order to further encourage growth, the central bank has kept rates at a record low of 4.5%, which is still high compared to many of its Southeast Asian neighbors. Inflation remains in check for the time being, but at close to 4% may be approaching the tolerable limit. In addition, many other central banks, including China, India, and Australia have raised rates recently, which may force the country to raise rates sooner rather than later in order to prevent asset outflows, ensure low levels of inflation, and prevent an asset bubble from developing in the world’s fourth most populous nation.

Disclosure: No positions at time of writing.

Introducing the 27-inch iLemon

By MG Siegler

Regular readers will know my affinity for Apple (AAPL) products. In general, they’re high quality, and I’m willing to pay a bit more for that. But a lemon is a lemon, regardless of who it’s made by, and must be labeled as such. These new 27-inch iMacs? Lemons.

In case you haven’t heard yet, the screens on these massive things are failing left and right. Granted, not all of them seem to be affected, but 110 pages worth of support questions/rants on Apple’s Support page for the issue tells me the problem is pretty widespread. That’s 1,640 replies, so far. And that thread has been viewed an incredible 264,630 times. The next closest recent page with that many views has 26,852 — and guess what? It’s also about a problem with the 27-inch iMac screen.

Two days ago, Apple issued a fix for the issue. The only problem? The fix doesn’t appear to work.

It did look like the fix was working for a little while, but now I’m back with the same constant flickering and random screen shutoffs that have plagued many of us. It basically makes the machine unusable. The support board is already filling up with users who applied the fix and still have the same problem. And, in fact, the only other TechCrunch writer with the new 27-inch iMac also has had the same issue and the fix hasn’t worked for him either.

Earlier this month, it was reported that Apple was delaying further shipments of the 27-inch iMacs until it could get to the bottom of the screen issue. Many believed the fix two days ago was the solution, but it’s not. And so Apple appears to have a very big problem on its hands, literally. If I have to send this bad boy back, it will be the second time I’ve done so. The first time, it shipped to me with a crack in the screen. A problem which is also not an isolated one.

Perhaps you read about how the FDA delayed the replacement one because it thought it was a piece of fruit. I was mad, but I shouldn’t have been. The truth is, these new iMacs are a piece of fruit. They’re lemons.

Original post

Nuance Communications FY Q4 Beats Street Expectations

Nuance Communications � a once obscure voice technology company that has emerged into the spotlight as a key player in the Apple iPhone 4S Siri voice command system � this afternoon posted financial results for its fiscal fourth quarter ended September 30 that topped Street estimates.

For the quarter, the company reported non-GAAP revenue of $399.5 million, with non-GAAP profits of 42 cents s share, ahead of the Street at $393.3 million and 41 cents. Non-GAAP revenue was up 23% from a year ago.

The company saw 22.6% revenue growth in its healthcare segment; 31.6% growth in the mobile and consumer segment; 2.6% growth in the enterprise segment.; and 47.2% growth in document imaging solutions.

NUAN in late trading is up 22 cents, or 0.75, to $23.35.

China in 2011: 7 Important Themes

By Simon Cai

China made plenty of headlines in 2010. Here is a reflection on several of the most discussed topics related to China in the past year, along with predictions on how they are likely to impact economic growth and development in the year ahead:

1. GDP Growth

The rate of GDP growth was strong in China in 2010 with an estimated 10% year-on-year growth. Growth was buoyed by a relatively high level of credit quota (the amount of new loans that banks can issue) at 7.5 trillion RMB along with a number of government stimulus programs. With concerns surrounding the sustainability of the global economic recovery, including the sovereign debt crisis in Europe, the lending quota for 2011 will likely remain near the same level as last year. As well, investment and consumption should continue to increase at a steady rate. According to estimates from Bank of America Merrill Lynch and Goldman Sachs, GDP growth will likely remain in the 9% to 10% range even as the government cautiously implements measures to cool off the overheating economy in 2011.

2. Inflation

In the last quarter of 2010, high inflation in China resulted in headlines all over the world due to its potential to cause social unrest (e.g., high inflation was one of the factors behind the Tiananmen square protests of 1989) among the working class Chinese population, and the tight monetary policy that could follow which would have a negative impact on global economic growth. In November the CPI increased by 5.1% on a year-to-year basis, with food and residence expenses accounting for 92% of the price increases. In 2011, the Chinese government will continue to intervene to keep inflation at a reasonable level of 4% to 4.5%. From rising interest rates to more restrictions in the housing sector, a range of policies will be implemented as needed to contain inflation due to its political importance.

3. Credit Growth

The government has tried to control the growth of credit in China mainly through regulating the following three channels: credit quota, reserve requirements and benchmark interest rates. Out of those three, the one with the most impact on credit availability is credit quota since it strictly limits the amount of loans banks can issue. The quota for 2010 was set at 7.5 trillion RMB, but this limit will likely be breached since well over 95% of that amount was already issued by the end of November. With one eye on maintaining strong GDP growth and another on controlling inflation, it is expected government officials will likely keep the credit quota somewhere near the 2010 target.

click to enlarge images

4. Currency

Controversy over the RMB’s under-valuation was most prominent during the run-up to the G-20 meeting in Toronto last year when Chinese authorities gave in to international pressure and decided to let the currency float. Since then, the appreciation has been limited. More international pressure will likely manifest this year from not only the U.S., but also other countries such Brazil, in order to maintain the competitiveness of their exports. The Chinese government will likely let its currency rise by 3 to 5 percent, partly to ease inflationary pressure as a higher currency will make the country’s imports cheaper.

5. Domestic Consumption

Household consumption makes up a small percentage of the country’s GDP, with most estimates between 35 to 40%. In contrast, consumption contributes to 65% of the GDP in the United States. In an attempt to wean the Chinese economy off its dependency on exports, the Chinese government’s new five-year plan will likely include measures that will encourage consumers to save less and spend more with the goal of having consumption drive economic growth instead of exports. This will likely be accomplished through a redistribution of income from the state to the working class and the implementation of a wider social safety net.

6. Offshore RMB Market in Hong Kong

As part of the push to establish the RMB as a trade settlement currency to reduce currency transactions costs and currency fluctuation risks faced by the nation’s exporters and importers, China started to ease its capital controls in 2009 to allow for the development of an offshore RMB market in Hong Kong. In 2010, the offshore market grew exponentially with retail deposits totalling 280 billion RMB by the end of November, which represents an increase of 246% from a year ago. Some developments in this market include new financial instruments being offered by banks to investors such as forwards, swaps, and other derivative instruments. Companies can also now raise RMB funds in HK through RMB denominated bonds, also known as Dim Sum bonds. In 2011, it is likely that more RMB denominated securities are issued to satisfy the strong demand from investors eager to put their RMB deposits to work.

7. Hunt for Energy

With rapid economic expansion in place, the demand for energy and other natural resources has been increasing exponentially for a number of years now. Notable deals in 2010 include Sinopec’s acquisition of a 40% stake in Repsol Brazil for $7.1 billion for Brazilian offshore oil reserves and CNOOC’s $1.08 billion investment for a 33% stake in Chesapeake Energy’s Eagle Ford shale project in Texas. With steady growth on the horizon, this trend will continue for the foreseeable future. This translates into more Chinese state-owned companies looking outside of China to buy assets or acquire stakes in natural resource companies. Taking into account the political hurdle that Chinese state-owned firms must overcome in North America and Europe, the most likely targets for acquisition will be located in South America, Africa and Southeast Asia. Coming off a year of double digit returns for most commodities, 2011 will be another strong year for commodities helped with growing demand from China and other emerging countries.

Conclusion

Coming off years of double-digit growth, this year should mark the beginning of a period where we will start to see a lower yet more sustainable rate of growth in China as the country continues its transition to a more domestically driven economy. From acquisitions to satisfy China’s voracious energy needs to sensitive issues including inflation and currency, China is guaranteed to garner its fair share of headlines this year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The U.S. Dollar is Falling Fast -- Get Out Now

Early March 2009 is not only notable for its cheap stocks. It's also the strongest the dollar has been since 2006. It's also the strongest it will be for quite some time.

At its high on March 5, it took $1.25 to buy a euro. The dollar has since lost -13% of its value against the pan-European currency, and it now takes $1.42 to buy a single euro.

Against the currency of its largest trading partner, Canada, the situation is just as bleak. The U.S. dollar was worth as much as CAD 1.30 in March. It has since dropped -13% to CAD 1.11.

 

It's much the same story around the world:

Several things are at play here.

Huge imbalances were plaguing the U.S. economy before the global recession. Now it appears even worse. Both the trade deficit and budget deficit are massive and growing by leaps and bounds, and the huge increase in federal spending may induce inflationary pressure once the recession begins to turn.

The recession helped strengthen the dollar, for a time. In a flight to safety, investors turned to U.S.-Government Treasuries. An index that tracks the 10-Year Treasury Note peaked in December 2008 30% higher than it had been two years earlier. It has since shed a little more than half those gains.

While the dollar crash many have been predicting for some time now may or may not happen, the greenback's weakness is apparent. Investors should s consider limiting their exposure to U.S.-dollar-denominated investments. Now is time to move a significant part of your portfolio onto foreign exchanges, into U.S.-listed closed-end fund put together by the fine people at Templeton. And while I'll tell you what they are in a moment, it doesn't really matter where you put your capital as long as they're reasonably well-run companies and funds that aren't shackled to the U.S. dollar.

Any global index would work that either has a very small portion of its holdings in the U.S. or excludes it entirely. iShares All-Country World Index excluding U.S. (Nasdaq: ACWX) is a perfect fit. It's a cheap and easy way to get broad exposure to non-U.S. equities.

As for my favorite ADR, I like Shell (NYSE: RDS.A), the Dutch oil and gas company. It's cheaper than most of its peers on both a price-to-earnings and price-to-sales basis. It's got less debt than its peers and it pays a healthy quarterly dividend north of 6%.

Ancestry.com: Still Profitable Despite Slowed Growth

(This is the third in our series about a certain kind of Internet Information provider that we call, “Desired Monopolies.” Please see the previous reports in the series, about Ariba (ARBA) and Zillow (Z).)

Ancestry.com: Who’s your (Grand)daddy?

Did you know that, on average, about 3% of the world’s population is mistaken about who their biological father is? And in cases where a man has cause to doubt whether he is the father of a child (i.e., he’s being compelled by a court order to provide child support), about 30% of the time a DNA test will prove he’s NOT the biological father?

And yet in many jurisdictions (including many U.S. States), if the man voluntarily signs a document acknowledging (i.e., “agreeing”) that he is the father, then he’s legally bound to support the child, even if subsequent DNA tests prove he’s not the biological father. And that obligation will remain in force even if the biological mother marries the biological father. Yes, that’s right: our hero could easily be in the position of paying the real parents to raise their real kid – just because the blushing bride couldn’t keep her boyfriends straight.

This is where the Paternity-Industrial Complex kicks into gear. With lawyers warming up their laptops and paralegals swabbing the insides of everybody’s cheeks.

You see, here in the U.S., child support is big business. Specifically, in 2010, $26.6 billion was collected from parents (almost always fathers) and re-distributed to over 17.5 million children. Further, the entire Federal and State administration of these child support programs cost $5.8 billion in 2010. Along the way, over 1.7m paternities were “established” last year. The vast majority of these paternities are uncontested, and simply the result of the father acknowledging as much in writing. But plenty of paternities are contested because the financial obligation of raising a child is now so great.

There are legitimate reasons for non-paternity, like adoption, innocent switched-at-birth events and surrogate parenting. But the 3% figure excludes all these and still leaves us with a whole lot of people mistaken about a very crucial fact, one with implications for say, inheritances. Or inherited medical conditions.

Now, thanks to modern technology, these issues are only getting more complex. In-vitro fertilization, sometimes done with anonymously donated eggs and/or sperm, has brought new life and great joy to infertile couples. But the unintended consequences are shocking: in September, the New York Times reported that one sperm donor in California was so popular, he’d ended up fathering 150 kids, most of whom had no idea they had 149 siblings. One of the mothers quoted in the article put it succinctly, “Is it fair to bring a child into the world who will have no access to knowing about one half of their genetics, medical history and ancestry?”

Right now, Ancestry.com (ACOM) is the commercial market leader in genealogy and we think it’s a Desired Monopoly in that field. But with so much money and emotion riding on the issue of, “who’s your daddy?” one wonders if combining the actual, lived-in real world of family relationships with the genetic connectivity is a logical next step for the company.

Consider that along with its traditional business helping people search historical databases and create family trees, Ancestry.com also sells two kinds of DNA testing kits. The Paternal Lineage Test (Y-chromosome) matches the test-taker with genetic relatives who share a common paternal ancestor. The Maternal Lineage Test (mitochondrial DNA) provides information about maternal ancestral origins. Right now, these tests are a very small part of the company’s business. But with the issues previously discussed, they seem likely to grow in importance to the company’s mission.

Today, however, Ancestry.com has its hands full merely keeping track of millions of innocently created family trees. And the company is very successful in this more genteel side of genealogy, the one more redolent of the Daughters of the American Revolution, rather than say, the Sons of Anarchy.

Data Sheet:

Name: Ancestry.com

Market Cap: $993 million

Trailing 12-months Revenue: $378.2 million

Forward Price:Earnings Ratio (estimated): 14.3x

HQ: Provo, Utah

Founded: 1983

Description:

The company’s lineage begins with Ancestry Inc.’s founding in 1983, and descends through several names/incarnations/business models. Its most recent transformation occurred in December 2007; what was by then known as The Generations Network became Ancestry.com as part of a restructuring/refinancing. Ancestry.com became a public company via an IPO on November 5, 2009.

Ancestry.com is the world’s largest online family history resource, with just over 1.7 million paying subscribers worldwide as of September 30, 2011. Subscribers in the U. S. pay $19.95/month, or $155.40/year (= $12.95/month). International subscription rates are slightly different and generally higher. In the second half of 2011, Ancestry.com has been experimenting with different price points (via promotional efforts) in order to maximize the length of time that subscribers remain involved and pay for doing so. The current monthly “churn” rate of ~4% implies that the average Ancestry.com subscriber remains a paying customer for just over two years.

Subscribers use the dedicated website and vast digital historical record collection to research family histories, build family trees, collaborate with other subscribers, upload their own records and publish and share, in way familiar to users of social networking sites. (In fact, staring in November, the company is planning to release a number features that allow and encourage greater integration with Facebook, a natural platform for exploring family relationships.)

As of the end of September, Ancestry.com users had created more than 28 million family trees on the website. Additionally, users have uploaded and attached to their trees more than 50 million photographs, scanned documents and written stories. Such user-generated content costs Ancestry.com nothing, yet adds color and context to the family trees. Registered users also have attached to their trees more than 800 million records, a process that is helping further curate the collection. Ancestry.com operates country country-specific Web sites for seven countries in addition to the United States: the United Kingdom, Canada, Australia, Sweden, Germany, France and Italy. Twenty five percent of Ancestry.com’s revenue is from non-U.S. customers.

Market Opportunity/Addressable Market:

Various sources estimate that roughly 10 million Americans consider genealogy a hobby. Ancestry currently has approximately 1.4 million U.S. subscribers, or roughly 14% of the total domestic market.

Ancestry.com can expand its business (and its market opportunity) in a variety of dimensions:

· More databases made available to existing subscribers;

· A higher proportion of subscribers (currently 47%) choosing premium subscriptions, which provide access to more databases;

· More geographies: while any subscriber can create a family tree on Ancestry.com, the real draw is the availability of census-type info from a particular country;

· A greater emphasis on genetic information, perhaps with a tie-in to medical histories, in order to track genetic anomalies in order to reveal, or even prevent, unwanted inherited traits;

· More interest in genealogy from individuals younger than the typical 50- to 60-year-old subscriber.

Recent Financial Performance:

Ancestry.com just reported its September quarter financial performance on October 26, 2011. Ancestry.com reported earnings per share of $0.40, better than the consensus estimate of $0.36; revenue in the quarter was $103.1m, in-line with the consensus estimate and an increase of 30% year-over-year. Management offered revenue guidance for the current quarter (Q4, ending in December) that was slightly below consensus.

Subscribers totaled 1,701,000 as of September 30, up 24% year-over-year and 2% sequentially. Monthly churn was 4.2% vs 4.0% a year ago and 4.6% in Q2. By the company’s own admission, gross subscriber growth has decelerated from the high teens to the high single digits and for the first time in its history, Ancestry.com’s net subscriber count is forecast to decline from Q3 2001 to Q4 2011;

In addition to its earnings release, Ancestry.com announced a $50 million stock buyback, equivalent to 2.3 million shares or about 7% of the shares outstanding. This follows a $50m buyback completed in Q3.

The bottom line on Ancestry.com’s third quarter: growth is decelerating, but the company is still exceptionally profitable. It is choosing to use those profits to a) make more content available to subscribers; and b) buy back stock in order to provide greater returns per share. But it was unsurprising that ACOM shares fell 9% the day after the earnings announcement. Investors who bought ACOM expecting continued 30% growth have been disabused of that notion.

Concerns/Risks/Issues:

Effect of “Who Do You Think You Are?”

This television program, which has been broadcast in each of the last two Springs on NBC, is set for a third season in Spring 2012. WDYTYA has earned solid ratings, depicting very high quality A- and B- list celebrities (e.g. Gwyneth Paltrow, Matthew Broderick, Tim McGraw, Marisa Tomei) researching their personal genealogy. Ancestry.com pays the show’s producers for what it terms, “product integration,” as well as buys national advertising during each airing.

The US version follows on multiple other country versions, including the UK, Canada, Russia, South Africa, Denmark, Sweden and Ireland. The good news is that the show appears to drive subscriber additions: traffic to ancestry.com’s primary U. S. web site rises 35% from November to March. The bad news is that Ancestry.com management noted just two days ago that the positive effects of the show in the UK (where it has aired the longest) have apparently worn off.

Customer acquisition costs vs. ARPU

Ancestry.com’s average monthly revenue per user (ARPU) is ~$18.75. The average subscriber stays for roughly 25 months, paying roughly $469 in total. This figure is increasing about 5% annually. Meanwhile, the cost to acquire each customer is now $93, up about 15% annually. This means there is an increasing disincentive to grow the number of subscribers, unless each subscriber can be made to pay more. Barring a quick fix, these two trends cement Ancestry.com’s new reality as a slower growing but profitable enterprise.

Competitive Landscape:

· Other Websites: FamilySearch.org (LDS), Geni.com, Myheritage.com, Footnote.com, Familybuilder.com, Archives.com;

· Paid competitors: Origins Network, FindMyPast, Genes Reunited (UK), OneGreatFamily, GenealogyBank;

· Commercial Entities: Genealogical societies, Search engine portals, Social Networking sites;

· Public Entities: City halls, local governments, federal agencies.

While numerous, none of these many competitors comes close to Ancestry.com’s combination of paid subscriber base and its database of company-owned and user-generated content. And in terms of web traffic, Ancestry.com’s eight million unique monthly visitors dwarfs second place familysearch.org’s 1.2 million.

Financial Analysis (DCF and Comparative):

As part of our analysis of Ancestry.com, we built a Discounted Cash Flow (DCF) model for the company. We used the following parameters and values to arrive at our DCF value:

· Term: 5 years;

· Initial Cash Flow: $100.050 million (this represents the estimated annual free cash flow for the current fiscal year);

· Short Term Cash Flow Growth Rate: 8% (lower than the most recent few quarters, but consistent with near-term guidance.);

· Long Term Cash Flow Growth Rate: 4%;

· Discount Rate: 8.94% (derived using CAPM: Risk Free Rate = 3.22% from the 30–year Treasury Bond; 4.4% equity risk premium from Ibbotson; an estimated Beta of 1.3);

· Current Share Count: 49.833 million (conservative, considering the company’s penchant for announcing and executing significant share buy-backs).

Using these inputs, our calculated DCF value per Ancestry.com share is $51.99, about 135% higher than the current share price of around $22. DCF models have their flaws, but are most useful in valuing slower-growing companies with predictable cash flow. Conveniently, Ancestry.com has just become such a company.

Now let’s look at Ancestry.com compared with six other software-as-a-service peers. (Note that Ancestry.com’s most-recent-quarter revenue growth is well ahead of the expected high-single-digit growth expected in Q4 and beyond.)

	Ancestry.com	Ariba	CoStar	LinkedIn	OpenTable	Zillow	Google
Ticker	(ACOM)	(ARBA)	(CSGP)	(LNKD)	(OPEN)	(Z)	(GOOG)
Market Cap	$992.7m	$3.09b	$1.62b	$8.40b	$1.11b	$847.93m	$193.46b
LTM Revs	$378.2m	$443.8m	$237.1m	$358.5m	$123.3m	$44.9m	$35.76b
Op CF Margins	32.8%	16.8%	14.3%	25.8%	37.2%	25.9%	39.6%
MRQ Rev Growth	30%	44.5%	11.3%	120.5%	52.7%	116.0%	33.4%
Forward P/E	14.3	33.8	59.2	290.8	27.8	109.9	13.6
EV: Revs	2.88	6.33	3.87	21.64	8.62	17.45	4.31
Float: Shares Out	0.693	0.985	0.954	0.055	0.815	0.233	0.784
Source:	Yahoo Finance

Will Flowers Foods Earn or Burn?

Margins matter. The more Flowers Foods (NYSE: FLO  ) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. Healthy margins often separate pretenders from the best stocks in the market. That's why we check up on margins at least once a quarter in this series. I'm looking for the absolute numbers, so I can compare them to current and potential competitors, and any trend that may tell me how strong Flowers Foods's competitive position could be.

Here's the current margin snapshot for Flowers Foods over the trailing 12 months: Gross margin is 47.4%, while operating margin is 7.6% and net margin is 4.9%.

Unfortunately, a look at the most recent numbers doesn't tell us much about where Flowers Foods has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter (LFQ). You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.

Here's the margin picture for Flowers Foods over the past few years.

Source: S&P Capital IQ. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.

Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. To compare quarterly margins to their prior-year levels, consult this chart.

Source: S&P Capital IQ. Dollar amounts in millions. FQ = fiscal quarter.

Here's how the stats break down:

• Over the past five years, gross margin peaked at 49.7% and averaged 48.1%. Operating margin peaked at 8.0% and averaged 7.3%. Net margin peaked at 5.3% and averaged 4.8%.
• TTM gross margin is 47.4%, 70 basis points worse than the five-year average. TTM operating margin is 7.6%, 30 basis points better than the five-year average. TTM net margin is 4.9%, 10 basis points better than the five-year average.

With recent TTM operating margins exceeding historical averages, Flowers Foods looks like it is doing fine.

Over the decades, small-cap stocks, like Flowers Foods have provided market-beating returns, provided they're value priced and have solid businesses. Read about a pair of companies with a lock on their markets in "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke." Click here for instant access to this free report.

• Add Flowers Foods to My Watchlist.

Good News and Bad News for This International Titan

The following video is part of our "Motley Fool Conversations" series, in which consumer goods editor/analyst Austin Smith and industrials editor/analyst Brendan Byrnes discuss topics across the investing world.

In today's edition, Austin and Brendan take a look at Siemens, which recently said that its may struggle to meet its full-year earnings targets due to global headwinds. The company is cheap, and just got two big orders in its energy segment. A recently announced $1 billion contract will have Siemens exporting turbines to Saudi Arabia, and other deals have been struck as well. How does Siemens compare to its peers right now?

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Siemens may be struggling to overcome its exposure to Europe, but we've found another stock that has us so excited we can hardly contain our investing enthusiasm. This stock has so much promise we've dubbed it The Motley Fool's top stock for 2012. This free report highlights a company that is revolutionizing commerce in Latin America, and you can get instant access to the name of this company by clicking here. Thousands have already requested the report, which is free today, but it won't be forever -- so click here to access it now.

Best Potential Returns: Gold ETF Or Gold Miners ETF?

ETF investors or traders looking to take a position on the value of gold have a range of choices from the various ETF providers. This discussion concerns the choice between the two basic types of gold exchange traded funds: ETFs which track the spot price of gold and the ETF's which hold shares of gold mining companies. The gold ETFs - those tracking the price per ounce of the shiny metal - have become so popular, some ETF investors may not be away funds exist which invest in gold miner stocks.

The Players

The ETFs which directly track the spot price of gold do so by owning gold bullion to back the ETF shares trading on the markets. The available bullion ETFs are the SPDR Gold Trust (GLD), the iShares Comex Gold Trust (IAU) and the ETFS Gold Trust (SGOL).

The choices of gold miner ETFs include the Market Vectors Gold Miners ETF (GDX), the Market Vectors Junior Gold Miners ETF - (GDXJ), the Global X Pure Gold Miners ETF (GGGG) - and the Global X Gold Explorers ETF (GLDX). Of these funds GDX and GGGG hold the large gold mining companies producing large amounts of gold and GDXJ and GLDX hold smaller companies who primarily search the world for new gold finds with the goal of becoming or selling out to one of the major gold mining companies.

Pros and Cons

The gold bullion ETFs provide investors and traders any easy way to participate in the changes in the value of spot gold. Instead of buying bullion or coins and locking them in the basement or setting up an account with a bullion company, an investor buys the ETF shares through a discount brokerage account. The bullion ETF investor can participate in the dollar for dollar rise in gold and catch the benefits of gold as an inflation hedge. The downside of bullion investing is there is no support if the price of gold drops or no gains if gold goes nowhere. The bullion ETFs can be viewed as a long term hold on gold or a trader can use timing to catch the upswings in the price of gold.

Gold mining stocks and the ETFs holding the stocks are considered a leveraged bet on the price of gold. If a miner earns $100 per ounce when gold is at $500, his profits double if gold goes to $600. In theory, gold miners should outperform gold as the price rises, due to this leverage effect. Gold mining companies can also pay dividends, boosting the potential return and providing an investor with an income stream from his gold investment. Also, gold mining companies can grow profits even when the price of gold is flat by producing more gold and lowering expenses. The downside of gold stocks is the share prices may follow the overall stock market into a bear market, even if the price of gold is climbing.

Picking Your Investments

The reality is the gold miners have seriously under performed the price of gold. Over the last five years, from early 2007 to early 2012, the gold bullion ETFs increased by 160 percent and the only gold miner ETF that old (GDX) gained just over 40 percent. And the dividends paid by the gold miner ETFs are disappointingly low. It is understandable why the investor and trader money has gone into the bullion funds. One change on the horizon is the realization by the gold miners that their shares have under-performed. These companies have been discussing increased dividend rates and other methods to boost shareholder returns. The gold miner ETFs came out with a hot start for the first five weeks of 2012, matching or beating the 10 percent gain in spot gold. Investors should consider putting a portion of their gold investment into one or two of the gold miner ETFs.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

House to Explore Reforming Fannie Mae, Freddie Mac

Rep. Scott Garrett, R-N.J., chairman of the House Financial Services Committee’s Subcommittee on Capital Markets announced Thursday that he would hold a hearing on Feb. 9 on reforming Fannie Mae and Freddie Mac.

“This hearing will be the first in a series of hearings to examine the steps Congress can take right now to protect taxpayers from the ongoing bailout of Fannie Mae and Freddie Mac,” Garrett said in a statement announcing the hearing. “With a price tag of $150 billion and counting, Congress must take immediate measures to minimize this cost and ensure taxpayers are never put in this situation again. The status quo is unacceptable, which is why we will continue to seek alternative solutions to housing finance in the United States that decrease the government’s exposure and get private capital off the sidelines.”

The hearing, entitled GSE Reform: Immediate Steps to Protect Taxpayers and End the Bailout, will focus on immediate steps that Congress can take to begin Fannie Mae’s and Freddie Mac’s transition out of Federal conservatorship and examine ways to end the $150 billion--and growing--bailout of Fannie Mae and Freddie Mac, Garrett’s subcommittee said in the release.

House Financial Services Committee Chairman Spencer Bachus, R-Ala., said in the same release that “just because the Administration is not prepared to act on GSE reform does not mean that House Republicans will not take action. This is the beginning of our efforts to wind down the operations of Fannie Mae and Freddie Mac in order to protect taxpayers from having even more of their hard-earned money thrown at these two companies.”

Top Stocks For 2012-1-12-2

Enzo Biochem Inc. (ENZ)

Enzo Biochem, Inc., is a growth-oriented integrated life sciences and biotechnology company focused on harnessing biological process to develop research tools, diagnostics and therapeutics, and serves as a provider of test services, including exotic tests, to the medical community. Since ENZ was founded in 1976, their strategic focus has been on the development of enabling technologies in the life sciences field.

The main applications of biotechnology are:
1 (Bio) medicine: macromolecules; biosimilar products (meaning medicines containing the same biomolecules as medicines that are no longer covered by patents); molecules of medium-small dimensions;
2 Innovative therapeutic techniques: cell therapies, based also on stem cells; genetic therapies; therapies based on antisense and RNA interference; xenotransplants (production of genetically modified animals to supply organs for transplants);
3 Vaccines, both preventive and therapeutic;
4 Diagnostics, mainly using techniques based on proteins and nucleic acids (DNA/RNA).

Enzo Biochem Inc. recently announced that it has added four highly experienced executives at its Enzo Life Sciences subsidiary to focus on rapidly evolving new pharmaceutical and clinical applications.

The officers, all filling newly created positions, are Bruce Taillon, PhD, as head of global technology business development, John D’Errico, PhD, to lead the commercial merchandising operations, Kara Cannon, as head of global marketing and Paul Munger, PhD, to lead Global Manufacturing.

Over the past two years, Enzo has been engaged in enhancing the Life Sciences subsidiary’s operating performance through added capabilities, greater integration and a more focused product mix. These efforts are all aimed at significantly expanding Enzo’s presence and marketing beyond the traditional academic and research laboratory core to greater penetrate the pharmaceutical and clinical customer base with new and cutting edge platform technologies.

For more information about Enzo Biochem Inc. visit its website: http://www.enzo.com

Cleantech Transit, Inc. (CLNO)

Cleantech Transit Inc. was founded to capitalize on technology advances and manufacturing opportunities in the growing clean energy public transportation sector. The Company has expanded its focus to invest directly in specific green projects. Recognizing the many economic and operational advances of converting wood waste into renewable sources of energy, Cleantech has selected to invest in Phoenix Energy (www.phoenixenergy.net). This project could benefit the Company’s manufacturing clients worldwide.

Biomass energy supports U.S. agricultural and forest-product industries. The main biomass feedstocks for power are paper mill residue, lumber mill scrap, and municipal waste. For biomass fuels, the most common feedstocks used today are corn grain (for ethanol) and soybeans (for biodiesel). In the near future and with National Renewable Energy Laboratory (NREL) developed technology agricultural residues such as corn stover (the stalks, leaves, and husks of the plant) and wheat straw will also be used. Long-term plans include growing and using dedicated energy crops, such as fast-growing trees and grasses, and algae. These feedstocks can grow sustainably on land that will not support intensive food crops.

Cleantech Transit, Inc. (CLNO) is pleased to announce it has met its funding requirement to secure the Company’s ability to earn in 25% of the 500KW Merced Project.

The Company is in the final stages of closing its initial interest in the Merced Project and is currently working on completing the necessary documentation and expects closing the transaction soon. As previously announced Cleantech has the option to earn up to 40% of the Merced Project and the Company plans to continue to work towards increasing its interest in the Merced Project as they move ahead.

For more information about Cleantech Transit, Inc. visit its website www.cleantechtransitinc.com

Black Box Corp. (Nasdaq:BBOX) a leading communications system integrator dedicated to designing, sourcing, implementing, and maintaining today’s complex communications solutions, announced the opening of a new office in Albany, NY.

Black Box Corporation provides network infrastructure services for communications systems worldwide. Its services include design, installation, integration, monitoring, and maintenance of voice, data, and integrated communications systems.

Power Integrations Inc. (Nasdaq:POWI) introduced HiperLCS, a family of high-voltage LLC power supply ICs that incorporate the controller, high- and low-side drivers, and both MOSFETs into a single low-cost package

Power Integrations, Inc. designs, develops, manufactures, and markets proprietary, high-voltage, analog, and mixed-signal integrated circuits (ICs) in the United States and internationally.

Sentiment for Apple Weakens Ahead of Earnings: What It Means

Today's Piqqem sentiment results for Apple (AAPL) going into their earnings announcement on Tuesday, July 20, surprisingly show that sentiment for Apple has dropped 15 points to the lowest level in the past 15 months.

(Click to enlarge)

The above chart shows Apple’s sentiment dropping by 15 points from the beginning of the quarter thru today. In comparison, sentiment for the Piqqem Technology Index rose 2 points in the same period, which means Apple’s decreasing sentiment was not strongly influenced by market forces. On the Piqqem scale, Apple’s sentiment rating of 34.60 is still considered positive and indicates a quality stock.

This drop in Apple’s sentiment is certainly a cause for concern. Apple has consistently been a top 3 rated company on Piqqem’s top rated list and now doesn’t appear in the top twenty-five. At its peak, Apple had a sentiment rating of 58 at the beginning of the year. Is there any rational for the drop?

In analyzing the sentiment line, I can identify 2 primary issues. On April 29 Steve Jobs wrote his open letter regarding the state of Flash from Apple’s perspective and this corresponded to a 7 point drop in Apple’s sentiment. On June 24, Apple released the iPhone 4 which received some bad reviews and this corresponded to another 5 point drop in sentiment. As of now, both of these events remain more of a PR issue and Apple’s briefing last week about the iPhone 4 should put the company back on track.

Analysts Still Love Apple

Average analyst estimates for the iMac and iPhone giant are $3.10/share in EPS and $14.74 billion in Revenue. 40 analysts track the stock with 15 upward EPS revisions in the last 30 days and no downward EPS revisions in the last 30 days. The 15 upward revisions is a real vote of confidence for the expected performance in the third quarter. Last quarter, Apple beat average analyst expectations by $.88 per share, $3.33/share versus $2.45 per share. Apple’s share price also remains strong with Friday’s close of $249.90 being at 78% of its 52 week price range.

Apple’s Hardware and Networking Sectors Remains Strong

Apple is also part of the Piqqem Technology Sentiment Index which tracks sentiment for 28 technology stocks in the Hardware and Networking, Software and Gaming, Internet and Mobile, and Semiconductor sectors. Apple is part of the hardware and networking sector and it has shown growing strength and remains the strongest of the four technology sectors. So this is positive for Apple.

Previous Sentiment Results Ahead of Apple Earnings

(Click to enlarge)

Sentiment has proven to be a good indicator of upcoming earnings. In the above table, sentiment has remained positive to very positive in the previous 5 quarters for Apple. This positive sentiment has correctly forecasted the general earnings result.

Q3 Earnings – What Does It All Mean?

The financial analysts remain bullish on Apple and the stock price closed Friday in the upper 25% of its 52 price range. Apple’s recent product releases of the iPhone 4 and the iPad have had phenomenal success. But even with this momentum, something has changed. In the end, only Apple knows their actual results and current sentiment points to the iMac and iPhone giant delivering good results on Tuesday, but there may be clouds forming for the future – a future where Apple is no longer the darling underdog, but the 700 pound gorilla that everyone else is gunning for.

About Piqqem Sentiment

Piqqem uses a -100 to 100 scale and leverages the wisdom of crowds and its own proprietary algorithms to capture and calculate sentiment. Any sentiment rating above 25 is considered positive, below 0 is considered negative, while 0-25 is considered neutral. Changes in sentiment are also crucial in understanding and interpreting a company’s sentiment ahead of an event like earnings. Finally, market forces need to be considered to make sure overall market sentiment changes are not overly influencing a stock’s individual sentiment.

Disclosure: No positions

Top Stocks For 2011-12-11-3

DrStockPick News Report!

Dr Stock pick Hot Stock NEWS & Alert!

“Cavitation Technologies Announces More Progress With

its Green D+ Plus Vegetable Oil Degumming Technology”

 

Today’s Stock of Interest Is :

• CVAT Cavitation Technologies, Inc. (CVAT.OB)

CRWENEWSWIRE.COM July 23, 2009

Cavitation Technologies Announces More Progress With its Green D+ Plus Vegetable Oil Degumming Technology

Cavitation Technologies, Inc. (CTI) (OTC Bulletin Board: CVAT) announced recently that since its last announcement concerning its chemical free “Green D+ Plus Degumming” (GPD) technology they have had a huge response from around the world with interest in installing the GPD technology.

CTI’s new GPD system is based on its patent-pending flow-through Nano Cavitation Reactor technology that promotes the formation, growth, and implosive collapse of gas or vapor-filled bubbles in liquids. The process involves the mixing of crude vegetable oil and water and exposing them to high-pressure impulses and micro explosions at the molecular level causing the gums to become denser thus allowing efficient separation and higher oil yields.

This environmentally friendly technology represents a significant advancement over current 40-year-old process techniques and will save oil mills and refineries a substantial amount of money by reducing the amount of equipment, energy, eliminating the use of acid and the need for neutralization.

According to CTI’s industry analyst, this new technology will save processors more than $6.00 per ton of oil processed and another $1.25 in additional oil yield per ton. In the USA, where more than 13 million tons of soybean oil is produced each year, this would mean more than $100,000,000 in savings and additional revenue to processors. The process is also expected to create additional value from increased production volumes of high quality lecithin and savings from other downstream processes.

About Cavitation Technologies

Cavitation Technologies, Inc. (CTI); (OTC: CVAT); is a “Green-Tech” company, established in 2006 to become a world leader in the development and licensing of new cutting edge technologies for the, biodiesel, vegetable oil refining, renewable fuel, petroleum, water treatment, wastewater sanitation, petroleum, food and beverage, and chemical industries. Our mission is to apply our technology in order to make the world better through renewable energy. For more information please visit our website: www.cavitationtechnologies.com

 

Seven Ways to Profit From the Worldwide Currency War

If you're like me, and you spend a lot of time perusing financial Web sites in search of the latest global investing news, you've probably started to see a lot of stories about rapid shifts in foreign exchange rates - including some "currency pairs" that have traditionally been rather slow-moving.

Back during the spring, for instance, the news was full of stories about how Switzerland was buying up European euros in an effort to weaken the strong Swiss franc - only to have that country change course and diversify its holdings by purchasing U.S. dollars.

During the summer, we watched as Japan entered the foreign exchange (or "FX") markets for the first time in nearly a decade in order to buy U.S. dollars.

Even South Korea has been a contestant in the currency-transaction arena, with that Asian tiger working to weaken its currency, the won, in an effort to improve its exports. Just yesterday (Monday), the won rose for the sixth-straight day, its longest winning streak in eight weeks, after the nation's foreign-exchange reserves climbed to a record $290 billion.

These events aren't random. But they are related. They're part of a worldwide currency war that's being waged before our eyes - and that will prove very costly to investors who don't recognize the game that's being played. Fortunately, we do - and we're going to tell you all about it.

Central Banks Duke it OutA new global war has broken out. But this war is economic. So far, it's not a shooting war - at least, not a shooting war involving physical bullets. Yet each nation is firing financial bullets at its own currencies.

This international currency war already involves China, Japan, Brazil, Korea and even the United States, to name just a few of the main combatants, with each country's central bank taking the point position on the front line.

Through the central bank, each nation is attempting to help its own economy by lowering the value of its national currency in foreign exchange terms. The central bank that succeeds will see its country's export total zoom and will either narrow (or even eradicate) an existing current-account deficit, or (as is the case with countries such as Korea and China) will see its currency reserves soar.

You see, this war is over the ability to export finished products, to importing nations. It is about keeping your own citizens employed during an extended economic slowdown in global demand, even if that means damaging national relationships. This war will vault the winners into positions of global leadership, while severely penalizing the losers.

"We're in the midst of an international currency war, a general weakening of currency," says Brazil Finance Minister Guido Mantega. "This threatens us because it takes away our competitiveness."

Here's how this battle gets fought.

Given the budgetary jam U.S. leaders find themselves facing, they understand that one of the few options they have is to boost American exports by devaluing the dollar.

But other export-driven economies - such as Brazil, South Korea and Japan - don't want to have this happen. They want to stop the drop in the U.S. dollar. And there's only one way to stop this: Print more of their own money and then use that additional currency to purchase dollars out in the international currency market.

Once they have purchased these dollars, they usually park the dollars in U.S. Treasuries, which pay a dividend to their new foreign holder. This has helped the U.S. Treasury issue U.S. government debt at historic low interest rates - despite a staggering budgetary gulf that is threatening to widen.

As investors, there's an important reality, or rule, to understand about currency wars of this type: Unilateral actions by the central banks that are waging these campaigns on behalf of their own government are rarely successful.

Surprised? Don't be, for it gets even better. As an investor, you can profit from this easy-to-predict outcome.

Veteran institutional traders understand this reality. That's why one of the easiest trades in the professional-investor playbook has always been to go against a central bank ... after it has shot its currency wad.News From the FrontIt's well known that the central banks of the world will take action on behalf of their national exchange rates from time to time.
These "interventions," as Wall Street refers to them, are sudden-and-rapid currency moves that are usually deadly to the highly leveraged "FX" trader who takes the other end of this transaction.

While brutal and effective for periods that are measured in days or weeks, interventions are rarely characterized as successes when viewed over a period measured in months or years. The market is always bigger than any one player.

In fact, it takes a concerted effort of a group of central banks, to change market direction. It has happened before, an example being the Plaza Accord. These events are bigger than the near-term market movement, as traders understand that all central bankers are on one script.

In the current environment, however, central banks are intervening in currency markets against the best interests of each other. The brawl is actually pitting central banks against each other in the currency trading pits.

In fact, this battle has heated up so much that the U.S. House of Representatives has gotten involved. Growing ever-more concerned about the problem of the U.S. dollar being manipulated by foreign central banks, the House just last week overwhelmingly passed a bill that would enable the Obama administration to impose punitive tariffs on almost all Chinese imports into the United States. The controversial move is intended to punish China for refusing to revalue its currency.

As the world's reserve currency, the United States normally stands clear of these currency skirmishes. In this case, however, each nation is basically attempting to manipulate the U.S. dollar to its advantage.

For instance, the greenback is being held artificially stable by China's yuan policy. This enables China to enjoy any benefits the United States would normally gain from having a weak currency.

"China's persistent manipulation is a major distortion in the international marketplace," said Sander Levin, chairman of the House Ways and Means committee. The yuan "has a major impact on American workers and therefore American jobs. That's what this is really all about."

There's an old saying that you "can't tell a player without a program." So here's a quick rundown on the countries currently involved in the currency war, as well as the objective each of these players is hoping to achieve:

• China is keeping its currency, the yuan, tightly bound to the U.S. dollar, so it gains an advantage if the dollar drops in value.
• China is buying Japanese yen and European euros to hamper the exports of its rivals.
• Japan is selling yen to buy U.S. dollars, hoping to boost Japanese exports.
• Brazil is selling its currency, the real, to buy dollars, hoping to help Brazil's exports.
• Switzerland was a huge buyer of euros this spring, before switching to U.S. dollars.

This new currency war is rapidly expanding into an international economic world war that pits each combatant against all the others. Even formerly "friendly" nations - at least insofar as they'd been major trading partners - have been transformed into combatants. Each day's headlines contain examples of the breakdowns in formerly normal global trade relations. Likewise, a careful read of the daily news roundup will reveal new alliances taking shape.

Celso Amorim, Brazil's foreign minister saidthat he believes "that this idea of putting pressure on a country is not the right way for finding solutions." Amorim also noted that "we have good co-ordination with China and we've been talking to them. We can't forget that China is currently our main customer."

China has been observed selling U.S. dollars and buying up yen, which would cause Japan exports to drop in volume while increasing Chinese demand. This caused Japan to intervene in its own markets, selling as much as $20 billion in U.S. dollar equivalents in one day.

Currently, China is Japan's No. 1 export market, exceeding the U.S. in dollar value. This relationship, however, is not stable, as each nation is taking unilateral actions to defend its economy from the other. This mindset spilled over into a diplomatic crisis last month, when Japan held a Chinese fishing craft.

China responded with restricting exports of rare earth minerals to Japanese refineries during an escalation of diplomacy. It is unknown for how long this restriction will apply, but its impact on strategic planning for Japan is obviously critical going forward.

The era of "friendly globalism" is over. It's been exposed for what it always really has been - a series of negotiations. Now, however, the niceties and decorum that were always displayed to the outside world are gone, having been replaced by hard-ball/take-no-prisoners economic tactics.

In that kind of an environment, however, some very interesting profit opportunities can crop up. We'll keep an eye peeled for those profit plays in the future. For now, here are the best ones to consider.

Action to Take: In my opinion, the currency markets have become too dangerous for retail FX investors to navigate using the widely accepted, "normal" FX arrangements. After all, an FX account can have 50-1 or even 100-1 leverage.

Due to the strategic interventions central banks are engineering on an all-too-regular basis, it is now safer to hold your currency exposure in your regular brokerage account. One way to do this is via exchange-traded funds (ETFs). Some examples include:

• FXA = CurrencyShares Australian Dollar Trust (NYSE: FXA).
• FXB = CurrencyShares British Pound Sterling Trust (NYSE: FXB)
• FXC = CurrencyShares Canadian Dollar Trust (NYSE: FXC).
• FXE = CurrencyShares Euro Trust (NYSE: FXE).
• FXF = CurrencyShares Swiss Franc Trust (NYSE: FXF).
• FXS = CurrencyShares Swedish Krona Trust (NYSE: FXS).
• FXY = CurrencyShares Japanese Yen Trust (NYSE: FXY).

If the currency you are most interested in trading is not this list of pairs, you can also buy options on futures for most FX pairs. This would give you the exposure to your favorite pair that you seek - using futures leverage without taking on the margin risk.

Finally, if you are unable to find the pair you like, or are open to levels of risk above what is warranted for the typical retail investor, the FX market awaits your decision to stand in front of a government printing press that's been shifted into overdrive.

(**) Special Note of Disclosure: Jack Barnes holds no interest in any of the FX pairs listed above.

Top Stocks For 2011-12-1-8

 

IRVING, Texas– 11/30/2011 - (CRWENEWSWIRE) — Nexstar Broadcasting Group, Inc. (Nasdaq:NXST) announced today that it has reached a new, multi-year retransmission consent agreement with DISH Network Corporation (NASDAQ:DISH), the third largest multichannel TV provider in the U.S. The agreement grants DISH Network the right to carry 55 television stations and related digital programming channels owned by Nexstar and Mission Broadcasting, Inc.

Perry A. Sook, Chairman, President and Chief Executive Officer of Nexstar Broadcasting Group, Inc., said, �We are delighted to enter into a new agreement with DISH as it validates the strength of our award-winning local content and leading national programming. The agreement ensures that DISH subscribers have access to Nexstar�s locally produced, market-leading local newscasts and network and syndicated programming, and gives advertisers the benefit of DISH�s wide distribution.�

�DISH Network is pleased to announce this new agreement to carry dozens of local broadcast stations owned by Nexstar and Mission around the country,� added Dave Shull, DISH Network�s senior vice president, Programming. �We thank Nexstar for serving as a valuable partner and for respecting our customers� wishes to have uninterrupted access to their local channels throughout these negotiations. We pledge to work hard to offer the most channel choices and the lowest everyday prices in the industry.�

About DISH Network

DISH Network Corporation, through its subsidiary DISH Network L.L.C., provides approximately 13.945 million satellite TV customers, as of Sept. 30, 2011, with the highest quality programming and technology with the most choices at the best value, including HD Free for Life. Subscribers enjoy the largest high definition line-up with more than 200 national HD channels, the most international channels, and award-winning HD and DVR technology. DISH Network’s subsidiary, Blockbuster L.L.C., delivers family entertainment to millions of customers around the world. DISH Network Corporation is a Fortune 200 company. Visit www.dish.com.

About Nexstar Broadcasting Group, Inc.

Nexstar Broadcasting Group is a leading diversified media company that leverages localism to bring new services and value to consumers and advertisers through its traditional media, e-MEDIA, digital and mobile media platforms. Nexstar owns, operates, programs or provides sales and other services to 75 television stations and related digital signals in 36 markets in 16 states and reaches approximately 13.5 million viewers or approximately 11.6% of all U.S. television households. 72 of the stations are affiliates of NBC, CBS, ABC, FOX, MyNetworkTV, The CW, LATV, Azteca America, Telemundo and Bounce TV, the nation�s first over-the-air broadcast television network programmed for African-American audiences and three are independent stations. The Company’s 35 community portal websites offer additional hyper-local content and verticals for consumers and advertisers.

Forward-Looking Statements

This news release includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Forward-looking statements include information preceded by, followed by, or that includes the words “guidance,” “believes,” “expects,” “anticipates,” “could,” or similar expressions. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this news release, concerning, among other things, changes in net revenue, cash flow and operating expenses, involve risks and uncertainties, and are subject to change based on various important factors, including the impact of changes in national and regional economies, our ability to service and refinance our outstanding debt, successful integration of acquired television stations (including achievement of synergies and cost reductions), pricing fluctuations in local and national advertising, future regulatory actions and conditions in the television stations’ operating areas, competition from others in the broadcast television markets served by the Company, volatility in programming costs, the effects of governmental regulation of broadcasting, industry consolidation, technological developments and major world news events. Unless required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this news release might not occur. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this release. For more details on factors that could affect these expectations, please see our filings with the Securities and Exchange Commission.

Source: Nexstar Broadcasting Group, Inc.

Contact:
Nexstar Broadcasting Group, Inc.
Thomas E. Carter
Chief Financial Officer
972-373-8800
or
Jaffoni & Collins Incorporated
Joseph Jaffoni, 212-835-8500
nxst@jcir.com

 

 

THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY!

Wal-Mart Options Active Post Earnings

In the wake of Wal-Mart�s (NYSE:WMT) ill-received earnings report, options traders are scurrying to set up a short-term play. For the fourth quarter, Wal-Mart earned $1.50 per share (before items); this compares to $1.70 in the year-earlier quarter. Comparable-store sales figures rose, but just by 1.5%, which was shy of most analysts� projections.

WMT shares responded by gapping 3.5% lower out of the gate and continuing to lose momentum throughout the session, ending down 3.9% at $60.07. This is a sizable single-day move for this usually stable blue chip — the stock�s 30-day historical volatility reading is just 8.6%.

By the end of Tuesday�s trading session, about 89,000 total options had already traded on WMT (59,000 calls and 30,000 puts). This compared to Friday�s overall option volume of 53,000 and average option volume around 30,000 contracts.

Long Call Buyers in Control?

More than 4,000 contracts traded at the Feb. 24 60-strike call option. This near-the-money weekly option, which expires at the close of Friday�s trading, had open interest of just 54 contracts heading into Tuesday�s session. The volume, therefore, consists of new activity, and it looks as though these calls were purchased for an average premium of around 43 cents apiece.

For these calls to be profitable, WMT needs to rise above $60.43 by Friday�s close. That�s a move of just 0.6% or so, but the move needs to happen in a few days� time. And the closer these weekly options get to expiration, the more rapidly their respective time value will deteriorate. Gains are potentially unlimited if WMT charges higher, but traders risk losing 100% of the 43-cent premium paid if WMT is trading below $60 when the options expire.

Or Short-Term Volatility Traders?

Of course, option traders might have another strategy in mind — the long straddle. In addition to the aforementioned call activity, WMT also saw just over 5,000 contracts change hands at the Feb. 24 60-strike put option. Open interest at this put was unremarkable ahead of Tuesday�s trading, so it appears that this volume also consisted of new short-term bets.

A straddle does not aim to predict a stock�s direction; it projects the magnitude. For long straddle to succeed, the underlying shares need to move in either direction (as long as they move). In the example of Wal-Mart, the calls traded for about 43 cents apiece while the puts traded in the neighborhood of 30 cents.

To break even, WMT would need to move 73 cents above or below the 60 strike, to $60.73 or $59.27, respectively. Above or below these levels, the straddle becomes profitable. Gains are unlimited to the upside and capped only by zero if the shares decline. Losses for a long straddle, meanwhile, are limited to the total premium paid for the combined call and put (73 cents, give or take).

Given the similarity in volume at these short-term 60-strike options, it could be that Tuesday�s active option traders are adopting the long-straddle strategy.

Either way, these investors are expecting to see WMT continue to move in the next few sessions through the end of the week.

As of this writing, Beth Gaston Moon did not hold a position in any of the aforementioned securities.

What S&P 500 Stocks Say About the Index

By Bryan McCormick

I have written on a few occasions about how we can use the relative health of the underlying components in an index to get a better sense of what is happening under the hood. Although a basic technical analysis of the index itself is helpful, looking at the behavior of each of the underlying components can give us more insight before moves show up in the index. One way to do that is to look at the breadth statistics of the stocks, in this case using their price in relation to moving averages.

At the time of this writing, more than 400 of the S&P 500 names were trading below their 10-day moving averages; on Friday "just" 257 names were below that moving average. This is a rather breathtaking expansion of breadth deterioration as far as short-term prices direction is concerned. Worse still is that the bulk of those 10-day averages are now acting as overhead resistance (green line on chart below).

When we expand our analysis by moving out to the intermediate-term, the number of stocks in the index that are trading below their 50-day moving averages has also expanded, but by a much smaller number. Today more than 238 names were last trading below their respective 50-day moving (black line on chart below), compared to 191 on Friday.

Last, the 200-day moving averages show that the long-term trend is still intact (purple line on chart). As of Friday, 72 names were below the 200-day line, whereas this morning there were 77 names in that position.

[Click to enlarge]



Summing up the technical condition, we have definitely seen the near-term trend change from more or less neutral to overtly bearish. The intermediate-term is becoming progressively neutral. That is evident too, by the way, in the S&P 500's relatively flat 50-day moving average, which suggests that the intermediate-term is more or less undecided.

We should note, however, that the index is trading below its 50-day moving average. The long-term uptrend is still intact, and that is borne out when we look at the large distance between price in the index and its 200-day average, which is nearly 80 points.

If we continue to see short-term breadth deterioration remain as is or worsen, that weakness will eventually translate into deterioration in the intermediate term. A break of the long-term trend is still some time and price away.

The bulls will attempt to use that as their relative advantage in having a long-term bullish outlook on prices. The bears are likely to continue pressing their bets on the short-side in the near-term as long as the underlying condition of the index remain as weak as they are today.

Mutual Fund Families Dysfunctional in 2011

For “Todd” Kennedy and “Nigel” Hussein, family name association is either a blessing or a curse. As SmartMoney notes, the truism holds for mutual fund families as well. The publication took a look at the overall performance of the 10 largest mutual fund companies by assets under management, and although “I have all my money with Fidelity” might impress the neighbors, it won’t do much for quarterly statements.

Sure, each company has the star manager they like to market, but what about their other funds?

“Family pedigree, it would appear, doesn't count for much,” SmartMoney writes. “Indeed, only two of the 10 largest mutual fund clans–bond-focused PIMCO and Vanguard, known primarily for its benchmark-hugging index funds–managed to finish in the black for 2011. (PIMCO's six dozen funds averaged a 3.6% return, despite Bill Gross' admitted recent slipup.)”

The 10 mutual fund firms, as a group, posted returns of negative 1% during the period, the magazine notes while the as Standard & Poor's 500 returned about 2% and the Dow Jones Industrial Average returned more than 8%.

“The gap between the best-performing firm (PIMCO) and the laggard (Dodge & Cox) wasn't small. An investor staking $10,000 with the former firm's funds would end up with $930 more than an investor who bet on the latter,” SmartMoney says.

While the piece adds that they aren’t exactly apples-to-apples, “Dodge & Cox's stock market focus probably hurt it vis-à-vis PIMCO last year.” Even so, brand name doesn’t translate to brand returns, judging from the list.

Vanguard, $1.4 trillion AUM, 1.5% 2011 return

Fidelity Investments, $973 billion, -3.5%

American Funds, $873 billion, -0.3%

PIMCO, $497 billion, 3.6%

T. Rowe Price,$349 billion, -1.4%

Franklin Templeton, $348 billion, -1.1%

John Hancock, $199 billion, -3.4%

Columbia, $163 billion, -2.0%

Oppenheimer, $143 billion, -1.1%

Dodge & Cox, $113 billion, -5.7%

Source: Morningstar and SmartMoney

7 Best Long-Term Stock Picks by Morgan Stanley

Morgan Stanley Research analysts published a report titled "50 for 2015"on Dec. 15, 2011. They have chosen Morgan Stanley's top stocks for 2015 by trying to identify companies "whose business models and market positions would be increasingly differentiated by 2015". In choosing these long-term investment ideas, they have looked for "best franchises" and not just undervaluation. In filtering these stocks, the focus was on sustainability of "competitive advantage, business model, pricing power, cost efficiency and growth."

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From these 50 chosen stocks, we will discuss 7 long-term stock picks by Morgan Stanley in this article.Schlumberger (SLB) has been given an overweight rating by Morgan Stanley due to an advanced technology portfolio and has a $1 billion investment in its Research and Development segment. The company has a leading market share in most of its products, some of the greatest field personnel and a great performance reputation, opines Morgan Stanley. Up until the year 2000, Schlumberger managed to quadruple its size and expand into the Eastern Hemisphere and the next 10 years are expected to witness a new wave of exploration. With high barriers-to-entry technologies, Schlumberger continues to gain market share while also providing an unmatched service quality.Currently, its shares are trading at $68.04 and are expected to go north of $98 by the end of 2012. Earnings per share are expected to grow at 32.6% over the next two years against an industry median of 27.6%, while sales growth of 19.2% is expected, against the industry median of 18.8%. It has a P/E ratio of 15 times. Jim Simons' Renaissance Technologies had $191 million in SLB at the end of September.

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Target (TGT) is in charge of operating the Target general merchandise stores. The company has been given an overweight rating by Morgan Stanley due to its middle market opportunity as it enters the Canadian market (which is expected to be a positive NPV project) and stabilizes U.S. growth (which is expected to provide 90% of estimated earnings in 2017). With an aim to increase customer loyalty, the company has introduced two sales-driving programs.

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Currently, Target's shares are trading at $51.70 and are expected to reach $64 by the end of 2012. Morgan Stanley expects a 16%-20% EPS growth after 2012 and beyond. A P/E ratio of 12.5 times is expected in 2012 against the industry median of 13.7x. Jonathan Jacobson's Highfields Capital Management doubled its stake in TGT during the third quarter, to nearly $300 million.

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Teradata (TDC) has been given an overweight rating by Morgan Stanley as the company is seeing an accelerating growth in revenue, driven by a large increase in the sales force and consultants, recent acquisitions which have led to the expansion of Teradata's customer base, and strong market growth. Teradata sells to Global 3,000 companies, dominating more than one-third of the market.

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Currently, its shares are trading at $50.44 and are expected to go north of $65 by the end of 2012. Earnings per share are expected to grow at 15.2% over the next two years against an industry median of 9%, while sales growth of 12.4% is expected against the industry median of 6.6%. Its EV/EBIT ratio of 13.2x is expected to be greater than the industry median of 6.7x. Stephen Mandel's Lone Pine Capital had nearly $200 million invested in TDC at the end of September.

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Union Pacific (UNP) has been selected as one of Morgan Stanley's best ideas in the freight transportation market segment. Morgan Stanley is bullish on the rail industry's advantage over its truck competitors. Morgan Stanley believes that the EPS growth will come due to latent pricing power, operating leverage, long-term volume growth, and improvements in long-term productivity.

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Currently, the stock is trading at $101.45 per share and is expected to go north of $128. Earnings per share are expected to grow at 18.5% over the next two years, against an industry median of 17.9%, while sales growth is forecast at 7.6% against the industry median of 6.4%. The company's sees a P/E ratio of 12.9 times, lower than the industry median of 14.2 times. Chris Hohn had nearly $300 million invested in UNP at the end of September.

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United Technologies (UTX) provides technology products and services to the building systems and aerospace industries globally. It has been given an Overweight rating by Morgan Stanley, since it is believed to be in the best position for the upcoming wave of aerospace aftermarket. The anticipated acquisition of Goodrich (GR) will help the company surpass its competitors as the leader of aerospace systems suppliers. Almost 65% of its operating income is generated from a less cyclically sensitive aftermarket. Through its six business lines, United Technologies keeps a diverse revenue base and a strong balance sheet.

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Currently, its stock is trading at $74.57 per share and is expected to reach $95. Earnings per share are expected to grow at 13.9% over the next two years against an industry median of 11.7%. Sales growth of 14% is expected against the industry median of 8%. The company forecasts a P/E ratio of 13 times. Billionaire Ken Fisher's Fisher Asset Management had $440 million invested in UTX at the end of September.

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VF Corporation (VFC) has been given an overweight rating by Morgan Stanley. The company is changing its portfolio mix in order to accelerate growth with the acquisition of Timberland. Morgan Stanley expects VF to increase global sales by more than $2.6 billion over the next few years and its recent survey showed that customers in China are responding positively to VF's brands.

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The company wants to double the number of stores by 2015, adding roughly 4% to annual revenue growth. VF also has the lowest volatility in sales and margins. The company's stock is trading at $129.32 per share and is forecast to go north of $152 by the end of next year. Earnings per share are expected to grow at 17.8% over the next two years against an industry median of 14.7%, while sales growth of 14.6% is expected against the industry median of 9.7%. The company's P/E ratio is 14.4 times against the industry median of 15.4 times. Ken Heebner initiated a brand new $68 million position during the third quarter.

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Visa (V) is the owner of the largest credit/debit card network in the world. It has been given an overweight rating by Morgan Stanley. With cash transactions accounting for 85% of all global transactions, there is a large market potential for the company in the coming years.

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Emerging technologies like prepaid, eCommerce, mobile payments and electronic remittances are under Visa's focus for potential sources of growth. Morgan Stanley projects a 10% organic revenue growth for the company over the next 5 years. Currently, its stock is trading at $101.32 and is expected to go north of $105 by the end of 2012. Earnings per share are forecast to grow at 14.5% over the next two years against an industry median of 10.9%. The company has an expected P/E ratio of 16 times. John Scully's SPO Advisory Corp had more than $600 million invested in Visa at the end of the third quarter.>>To see these stocks in action, visit the 7 Best Long-Term Stock Picks by Morgan Stanley portfolio on Stockpickr.

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