Target (NYSE: TGT) Stock Up on Earnings, But Slowdown Ahead

Target (NYSE: TGT) stock was up 2% in early morning trading after the company delivered a strong earnings report before the bell today (Wednesday).

Target Corp. reported earnings Wednesday morning, with a net earnings per share of $1.04 compared to analysts' expectations of $1.01 per share. Adjusted earnings per share, a measure the company believes is useful in providing period-to-period comparisons of results of its U.S. operations, was $1.11 in the first quarter of 2012, up 11% from $0.99 in 2011.

Same store sales rose 5.3% in the quarter, the highest growth in six years as consumers took advantage of the warm winter in many regions.

"We're very pleased with our first quarter earnings, which benefited from better-than-expected sales," said Gregg Steinhafel, chairman, president, and chief executive officer of Target.

But a continued Target stock rally is in jeopardy as 2012 bears a feeble retail outlook and cautious investor sentiment.

"We're in a period where there's little conviction to buy," Richard Cripps, chief investment officer at Stifel Financial, told USAToday. "The road ahead is too uncertain because of European concerns and the presidential election later this year."

TGT's Outlook For the second quarter of 2012 Target expects adjusted EPS of $1.04 to $1.14 and GAAP EPS of $0.94 to $1.04. The difference between the GAAP and adjusted EPS ranges represent the expected impact of expenses from store openings in Canada.

It might be hard for Target to continue the success of the first quarter, though, as April saw the slowest growth in retail sales of the year. Sales grew in April at 0.1% compared to 0.7% in March.

And shoppers haven't been letting loose at Target like they once did. Instead they were steady, but restrained.

"Consumers are not buying more at Target. What's driving their sales is maybe people are shopping a bit more often," Brian Sozzi, chief equities analyst at NBG Productions, told Reuters. "It's not like people are going in and loading up their baskets as much as they were a couple of years ago."

As uncertainty looms over the economy and job growth sputters, consumers are less and less willing to spend. After such a strong first quarter it seems that the economy, especially retail sales, cannot match that success in the second quarter.

The one area where Target and other U.S. retailers have an advantage over other international companies is their lack of exposure to Europe, which right now is a very good thing.

Wal-Mart Stores Inc. (NYSE: WMT), the leading U.S. discount retailer ahead of Target, reports their earnings tomorrow (Thursday). This will be another key indicator for the retail segment and the overall economy.

Investors are hoping that Wal-Mart's earnings are more in line with Target than with the dismal report J.C. Penny Co. Inc. (NYSE: JCP) offered.

Target Stock Thrives; J.C. Penny PlummetsTarget proved that it can still compete with Wal-Mart while J.C. Penny is starting to look more and more like a thing of the past.

J.C. Penny reported lower than expected earnings yesterday after markets closed. The company announced it would discontinue its quarterly dividends, sending shares down more than 15% in early morning trading. Earnings per share came in at a net loss of 75 cents per share compared to a profit of 28 cents a share a year earlier.

The string of bad numbers seems to have no end in sight for J.C. Penny. It reported that sales fell 20%, same store sales slid almost 19%, and it plans to lay off 15% of its staff by 2013 at the corporate headquarters in Plano, TX.

The decision to discontinue the dividend was the worst news delivered yesterday from CEO Ron Johnson, a former Apple Inc. (Nasdaq: AAPL) executive. At close to 3%, J.C. Penny's dividend yield was a primary attraction for investors in the troubled company. Discontinuing it leaves little hope for J.C. Penny stock and its turnaround efforts.

The company's outlook for the remainder of the year does not appear to be any better, as most analysts still expect J.C. Penny to report a loss.

JCP stock was down almost 18% by 2:30 p.m. EDT. Target stock was up 0.71% to $55.47.

Related Articles and News:

• Money Morning:
  Target's (NYSE: TGT) Earnings Follow Weak Reports
• Money Morning:
  Does the Showroom Effect Spell Trouble for Amazon (Nasdag: AMZN)?
• Money Morning:
  Target Corp. (NYSE:TGT) Has Dethroned Wal-Mart as the Discount King
• Bloomberg News:
  U.S. Retail Sales Cool After Warm-Weather Spree: Economy
• Reuters:
  Target raises profit forecast; shares inch up
• USAToday:
  Stocks turn mixed despite U.S. housing, factory data

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Top Stocks For 2011-12-23-17

Smart Balance, Inc (Nasdaq:SMBL) will host a live audio webcast at www.smartbalance.com on November 3, 2011, at 9:30 a.m. ET to discuss 2011 third quarter results, which will be issued at approximately 8:30 a.m. ET the same day.

Smart Balance, Inc., a consumer food products company, distributes various food products in the United States and internationally.

Netspend Holdings, Inc (Nasdaq:NTSP) announced it has expanded its reload network to include more than 6,000 7-Eleven store locations nationwide. 7-Eleven is the premier name and largest chain in the convenience retailing industry.

Netspend Holdings, Inc., together with its subsidiaries, provides general-purpose reloadable prepaid debit cards (GPR cards) and related alternative financial services to underbanked consumers in the United States.

Key Tronic Corp. (Nasdaq:KTCC) announced that it plans to report its results for the first quarter of fiscal 2012 after market close on November 1, 2011.

Key Tronic Corporation, doing business as KeyTronicEMS Co., together with its subsidiaries, provides electronic manufacturing services (EMS) and solutions to original equipment manufacturers in the United States, Mexico, and China.

Cleantech Transit, Inc. (CLNO)

Biomass is a proven option for electricity generation. Biomass used in today’s power plants includes wood residues, agricultural/farm residues, food processing residues, and methane gas from landfills. In the future, farms cultivating energy crops, such as trees and grasses, could significantly expand the supply of biomass feedstock. Currently, there are over 7000 megawatts of biomass power capacity installed at more than 350 plants in the U.S. These plants are owned by a diverse range of producers including the pulp and paper industry, wood manufacturing industry, electric utilities, and independent power producers.

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.

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

Netflix Headed Lower In Medium To Long-Term

Now this makes my blood boil. There was a front page story in the Huffington Post stating that Netflix (NFLX) “CEO Reed Hastings will pay a $1.5 million penalty for blunders that alienated the video subscription service’s customers and pulverized its stock.” Digging deeper, we find that Mr. Hastings will receive $1.5 million in stock option allowance in 2012 instead of the $3 million allowance he received in 2011. Now if you call that a penalty, then someone please sign me up.

For the all the blunders he made this year which led to several respectable publications and commentators naming him one of the worst CEOs of the year, Mr. Hastings should have lost his job, not receive a $1.5 million stock option allowance in addition to his $500,000 base salary. In fact, as a face saving gesture, if I was his advisor, I would have recommended that he give back his stock options and salary for the year and modify his contract to receive $1 in salary a year until Netflix gained back its lost reputation on the Street. Trust me, Mr. Hastings can afford the temporary pay cut. Until recently, he had scheduled a stock sale of 20,000 shares every two weeks and had reportedly amassed $100 million in stock sales over time.

Mr. Hastings’s boneheaded moves, which have cost the shareholders a combined $12 billion, have been well documented on this site and I will not bore you all with the details. But I would just like to discuss the capital management blunders made by Mr. Hastings and his team during the last year. As I predicted in a previous article, the company had to raise capital ($400 million in a stock and debt offering) to bolster its balance sheet. Now, there is nothing wrong with that. Every company needs to raise capital to generate future growth.

What I do have a problem is the fact that the company is now issuing shares at $70 share to raise $200 million. This, after the company bought back $199.7 million worth of stock at an average price of $222 per share during the first nine months of the year. Now that’s a great investment Mr. Hastings – a loss of 68% to the shareholders on that $199.7 million investment. It sure did go a long way in helping improve my impression of Cisco's (CSCO) historical stock buyback. The prudent thing to do would have been to issue shares when the stock was trading at $300 a share earlier this year. The company could have raised approximately $850 million by issuing the same number of shares as that issued in November this year which would have gone a long way towards meeting the $3.45 billion in streaming content obligations due in the next 5 years.

At the very least, NFLX should not have repurchased shares at all. As recently as the last reported quarter (3 months ending Sep 30, 2011), NFLX repurchased 182,000 shares at an average price of $218 per share for a total of $39.6 million. That is inexcusable in my opinion. If you cannot project your cash needs 3 months in advance, then are you are probably not fit for the job.

The company now expects to report a loss during FY 2012 primarily due to increased investments in the international segment. While the Street projects a loss of $0.23 a share on revenue of $3.62 billion, I estimate that the company will report a loss of $0.46 a share on earnings of $3.24 billion. Based on my updated valuation model which assumes a long term growth of 14% (compared to analyst average growth rate of 20%) and a 15% discount rate (to account for the high risk associated with the stock), I estimate a fair value of $59 a share. In my opinion, the recent uptick in stock price from a low of $62.37 a share to its current price of $73 presents a good opportunity to short the stock. Although there might some sporadic appreciation in stock price, I believe that the stock is headed lower in the medium to long term.

Disclosure: I am long CSCO.

2 Very Bullish And Optionable Stocks For 2012

With literally thousands of stocks for investors to sift through, here are two that have had strong bullish tendencies through the second half of 2011 and should continue into 2012. Both these stocks are optionable and offer either an opportunity for long term investment or sorter term option investing.

Oxford Industries (OXM) Oxford Industries, Inc. engages in designing, sourcing, and marketing apparel products primarily in the United States and the United Kingdom. The company's apparel products comprise a portfolio of company-owned lifestyle brands, as well as company-owned and licensed brands of tailored clothing and golf apparel. Its owned and licensed brands include Tommy Bahama, Lilly Pulitzer, Ben Sherman, Billy London, Oxford Golf, Nickelson and Arnold Brant. The company also holds licenses to produce and sell various categories of apparel products under the Kenneth Cole, Dockers, and Geoffrey Beene brand names. Presently trading at 45.71, OXM continues to move up on a breakout from its bullish channel. With a high target of 49, Analysts give OXM another 10% movement. A high class apparel manufacturer, OXM just purchased Sugartown Worldwide which owns the Lilly Pulitzer apparel brand. This popular brand features bright colored clothing for women ans children in a relaxed style. With this addition and the surge in stock, it is ripe to invest in and should continue its climb well into 2012. If you are interested in looking at options instead (or with stocks), try buying an April 2012 50 call (presently trading at $3.20). With the continued surge, one will have the choice to resell the option at a later date in 2012 as it increases in value.

NiSource Inc (NI) NiSource Inc, is an energy holding company, and through its subsidiaries, provides natural gas, electricity, and other products and services. It operates in three segments: Gas Distribution Operations, Gas Transmission and Storage Operations, and Electric Operations. The Gas Distribution Operations segment provides natural gas service and transportation to residential, commercial, and industrial customers. As of December 31, 2010, it owned and operated a total of 58,608 miles of pipelines and certain related facilities. This segment serves approximately 3.3 million customers in Ohio, Pennsylvania, Virginia, Kentucky, Maryland, Indiana, and Massachusetts. NI is presently trading at 23.66. Having broken through its bullish upper resistance trend line, NI might be a stock worth investing in right now with the ability to bring in a 10% growth rate by late winter of 2012. With an"investment-driven growth strategy,"it is investing $1 billion from the Gulf Coast through the Midwest and into New England-- counting on growth through 2012. Ni should be a good investment on the next dip that comes in about the 24 level if it continues in its present pattern. A good investment for option hunters may be a February 2012 25 call presently selling for $.30. We expect the stock to continue its move up, and holding on to the option may offer a nice resale value in the next 30 days.

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

Akeena Q2 Revs Beat; Changing Name To Westinghouse Solar

Akeena Solar (AKNS) this morning reports Q2 revenue of $9.9 million, up 54% from Q1, and above the Street consensus at $8.9 million. The solar installation company� posted an adjusted loss for the quarter of $3.4 million, or 9 cents a share; the Street had expected a loss of 8 cents.

Meanwhile, the company also said it is changing its name to Westinghouse Solar, and will take the new symbol WEST, effective tomorrow.

“Solar is going mainstream, and well-known brand names are key to widespread consumer adoption,” CEO Barry Cinnamon said in a statement. “In May, we announced a partnership with Westinghouse, which unites their trusted brand name with our safe and reliable solar panels. As Westinghouse Solar, we will continue to drive the adoption of solar power through our own installation services, through our retail channel via Lowe’s Home Improvement stores and through our expanding dealer channel network in the United States and Canada.”

AKNS is up 2 cents, or 2.3%, at 88 cents.

Food Inflation Coming?

Agricultural prices are a leading indicator for food prices and the UBS Bloomberg CMCI Agriculture Price index has been surging in the past few months. The following graph from the 5 Min. Forecast tells the story:

The implication from this graph is that, unless agricultural prices come back down to 2009 levels, food CPI could rise by 20 - 30%. Food, like energy, is an area where compression of margins is very limited: Raw material prices are largely passed through to the consumer.

The only hope depends on the fact that agricultural prices are very volatile. The index spike to 150 could very well be largely reversed within months. That would mute the CPI response to a significant degree.

The agriculture ETFs have tracked the UBS Bloomberg CMCI chart very well. In the following graph from Yahoo Finance the YTD results for PowerShares DB Agriculture ETF (DBA) in blue and iPath Dow Jones AIG-Agriculture ETN (JJA) in red are plotted.

click to enlarge

The bottoms for both ETFs and for the UBS Bloomberg CMCI Index all occurred in the same week in June. The moves that each made in 2010 are summarized in the following table:

The UBS Bloomberg CMCI Agricultural Price Index follows ten commodities. JJA holds futures contracts on seven of the commodities that are in the index. DBA holds contracts on five of the index commodities, but has significant positions in live cattle, feeder cattle and hogs that are not in the index. That accounts for the divergence of DBA performance from JJA and the UBS Bloomberg CMCI Agricultural Commodity Index. Curiously, though, the low point for all three did occur in the same week.

Disclosure: No positions.

CenturyLink Whiffs on Earnings

CenturyLink (NYSE: CTL  ) reported earnings on Feb. 15. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), CenturyLink met expectations on revenues and whiffed on earnings per share.

Compared to the prior-year quarter, revenue increased significantly and GAAP earnings per share shrank significantly.

Margins shrank across the board.

Revenue details
CenturyLink chalked up revenue of $4.65 billion. The 14 analysts polled by S&P Capital IQ expected to see revenue of $4.62 billion on the same basis. GAAP reported sales were much higher than the prior-year quarter's $1.72 billion.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
Non-GAAP EPS came in at $0.24. The 17 earnings estimates compiled by S&P Capital IQ forecast $0.56 per share on the same basis. GAAP EPS of $0.18 for Q4 were 76% lower than the prior-year quarter's $0.74 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 57.9%, 880 basis points worse than the prior-year quarter. Operating margin was 12.8%, 1,810 basis points worse than the prior-year quarter. Net margin was 2.3%, 1,080 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $4.61 billion. On the bottom line, the average EPS estimate is $0.56.

Next year's average estimate for revenue is $18.25 billion. The average EPS estimate is $2.24.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 535 members out of 577 rating the stock outperform, and 42 members rating it underperform. Among 188 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 175 give CenturyLink a green thumbs-up, and 13 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on CenturyLink is outperform, with an average price target of $43.06.

Can your retirement portfolio provide you with enough income to last? You'll need more than CenturyLink. Learn about crafting a smarter retirement plan in "The Shocking Can't-Miss Truth About Your Retirement." Click here for instant access to this free report.

• Add CenturyLink to My Watchlist.

How Banks Are "Crowding Out" the U.S. Rebound

When U.S. President Barack Obama unveiled the $787 billion "stimulus" bill of extra spending and modest tax cuts last year, it became clear that the U.S. budget deficit was going to eclipse the 10% of gross domestic product (GDP) level for at least one year (and, as we now know, probably three years).

On those grounds, I opposed the "stimulus" - a position that was a lot less popular then than it has since become. However, as I'll show you below, it now looks as if I was right - and the implications for the U.S. economy are highly worrisome.

You see, the theory postulated by economist John Maynard Keynes holds that the extra spending stimulates additional output fails to address the question of where the money comes from.

Government cannot create wealth - it has to borrow it. If, before the stimulus, government finances were in good shape, as was the case in China, then stimulus does indeed stimulate: The modest budget deficit that it causes is easily financed, and the extra spending creates some jobs and maybe some useful infrastructure, depending on how well targeted it is.

In the United States, however, government finances were in a mess before the stimulus began.

The Bush administration had cut taxes, then indulged itself in new entitlement programs and an expensive Middle Eastern foreign policy, with military operations in Iraq and Afghanistan. On top of the $413 billion deficit that this caused in the fiscal 2008 budget year, there were then the various bailouts, which were only free if you don't count the ones like American International Group Inc. (NYSE: AIG), Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), that actually cost serious money.

That meant the U.S. capital market was already stressed at the beginning of 2009. Yes, foreign money had flooded into U.S. Treasury bonds as a "safe haven," but it was obvious that that "hot money" would flood out again as soon as it found something better to invest in - which it did, in the 2009-10 gold-and-commodities bubble.

So the deficits that stimulus produced prolonged the period of stress far beyond the trough in the economy. That trough occurred about May 2009, before any stimulus expenditures had time to kick in. Instead of lessening the recession, the deficits that the stimulus caused were to hinder the recovery, through a process known as "crowding out."

There is after all only so much investment capital to go around. Currently, the U.S. Treasury Department is taking far more of it than it should, and mortgage bonds are being propped up artificially with another $1 trillion of government guaranteed paper being issued in 2009. Meanwhile, U.S. Federal Reserve Chairman Ben S. Bernanke's monetary stimulus - while ensuring plenty of liquidity - is keeping short-term interest rates artificially low.

If the banks can borrow at less than 1% in the short-term inter-bank market, and get nearly 4% on Treasuries, or 5% on government-guaranteed mortgage bonds, why should they ever bother doing anything else? Leverage that 3%-4% risk-free return 15 times, and you're talking about a 40%-50% return on capital, enough to pay everybody's bonuses and keep the shareholders happy.

Of course, it's not really risk-free; when Treasury bond yields rise, the banks will have a capital loss, but hey - Bernanke says rates will be ultra-low for an "extended period," so banks should be able to extract at least one more year's bonus out of it, probably.

Small-business lending is difficult. You have to analyze the company's balance sheet and income statement properly, then make a judgment on whether or not the small businessman is both competent and honest. There are many easier ways to make money, particularly in a recession, when small businesses tend to go bust. And in this recession, Messrs Obama and Bernanke have given bankers a much easier way to "earn" their bonuses.

You can see the result of this in two places. First, in the Senior Loan Officer Survey published by the Fed last week, it was reported that small business defaults had continued rising, while demand for loans was low.

Before you jump to the conclusion that low loan demand means there isn't a problem, consider that banks have tightened lending standards to an unprecedented degree over the past year, and have not begun to loosen them. If you're an intelligent small business owner, you therefore don't bother applying for a loan, because you know you won't get it. The senior loan officers sit in their plush offices, playing with their paper clips and reporting to the Fed that there is no demand for loans, while small businesses are left out in the cold (and snow), deprived of the funding they need, and collapsing in droves.

You can also see the result of this - demonstrated quantitatively - in the Fed's weekly report H8 "Assets and Liabilities of Commercial Banks." Overall, bank credit (including bonds) declined by about 5% between December 2008 and Jan. 27, 2010, as banks downsized their balance sheets. However, bank holdings of Treasury and agency securities (mostly housing-related) rose by 18% over the same period - very easy money, as I said. Overall loan volume dropped by 9%, but real estate loans (including lots of government-guaranteed home mortgages) dropped by only 2%. Consumer loans dropped by 8%, but the big drop was in commercial and industrial loans, which fell fully 20% during the period. These loans, which are the main purpose of banking, were a mere 17.3% of bank credit in December 2008, but fell to 14.6% of bank credit in late January.

The banks aren't evil; they're just following the normal, free-market imperative to make a juicy living with the least effort possible. But government borrowing and prolonged ultra-low interest rates are making it too easy for them to starve the small business sector, the main creator of jobs and the main source of innovation in the economy.

This recovery is thus not going to be a healthy one. And Americans will pay the costs of the misguided "stimulus" for a decade or more, in fewer jobs and a less dynamic economy.

[Editor's Note: Martin Hutchinson has terrific foresight. He warned investors about the dangers of credit-default swaps - half a year before those deadly derivatives ignited the worldwide financial firestorm. Hutchinson even predicted where and when the U.S. stock market would bottom (a feat that won him substantial public recognition).

During the stock-market rebound that started in mid-March, Hutchinson's calls on gold, commodities and high-yielding dividend stocks made winners of investors who took his advice.

Experts are taking notice. And so should you.

Hutchinson is now making those insights available to individual investors. His trading service, The Permanent Wealth Investor, combines high-yielding dividend stocks, gold and specially designated "Alpha-Bulldog" stocks into winning portfolios.

To find out more about The Permanent Wealth Investor, please just click here.]

Tony Hsieh: The best advice I ever got

FORTUNE -- "Fred Mossler and I joined Zappos at the same time in 1999. Early on, it was hard to get brands to sign up. The traditional mentality for a lot of retailers was: Squeeze your suppliers. I didn't come from a retail background, but Fred did. Before Zappos he was with Nordstrom (JWN, Fortune 500). I thought I should be negotiating hard, but Fred was focused on coming up with win-win situations. He told me to build relationships for the sake of the relationships. That really shifted my thinking.

"Six years ago Fred had a friendship with a rep for a small brand. The brand's contribution to our sales was insignificant, so going to a dinner with him during a shoe show, when there were hundreds of other brands there, didn't make a lot of sense. But it was still something Fred prioritized, based on the friendship. A week after the dinner, Fred's friend became president of a major brand we had been trying to get. If you're focused on the friendship as its own reward, serendipitous stuff just happens. I know that sounds weird, but I can tell you for our 12 years of existence, it's actually how a lot of stuff happens."

Tony Hsieh

Age: 38

Job experience: Co-founder of LinkExchange, an Internet advertising network; co-founder of Venture Frogs, an investment firm that put money into Zappos and OpenTable (OPEN), among others; later became CEO of online shoe and clothing retailer Zappos.com, which in 2009 reached $1 billion in gross sales.

Claim to fame: In 1998, Hsieh (pronounced shay) sold LinkExchange, which he co-founded, to Microsoft (MSFT, Fortune 500) for $265 million. In 2009, Zappos was acquired by Amazon (AMZN, Fortune 500) for $1.2 billion. His 2010 book, Delivering Happiness, is about the blissful (and successful) corporate culture at Zappos. In March, Zappos set the Guinness world record for Most Simultaneous High Fives.

This story is from the April 30, 2012 issue of Fortune. 

FPL: Just Keeping the Lights On

Important utility news out of Florida (again) on FPL (A2/A- at holdco):

The Florida Public Service Commission ruled that FPL’s Florida Power & Light Co. utility will be allowed a $75.5 million revenue increase this year. The company had requested $959 million. Commissioners also turned down FPL’s request for an additional $427 million increase in 2011.

FPL responded by announcing suspension of investments in Florida worth about $10 billion over the next five years. The company will halt efficiency and reliability projects, as well as development of new nuclear reactors and modernization of its Riviera Beach and Cape Canaveral plants.

Earlier this week, Florida denied a request by Progress Energy Inc. (PGN) for a $500 million rate increase at its utility in the state. In declining to give Progress and FPL the increases they requested, members of the Public Service Commission cited concern over increasing utility bills at a time when consumers are being hurt by the recession.

Another key decision was to suspend the collection of money from customers for a storm repair reserve fund. That reduced the staff recommendation by another $50 million. FPL had sought $150 million a year for the fund that's now at $215 million.

Republican Attorney General Bill McCollum and Democratic Chief Financial Officer Alex Sink, both candidates for governor and Republican Gov. Charlie Crist who is running for US Senate opposed increasing rates. Yes Virginia, there can be bipartisan agreement when running for office.

S&P came out with the following action:

Standard & Poor's Ratings Services placed the 'A' corporate credit ratings and all other ratings on FPL Group Inc. and subsidiaries on CreditWatch with negative implications based on this week's decision by the Florida Public Service Commission (FPSC) to drastically cut a requested base rate increase and discontinue a credit-enhancing rate mechanism for generating plant additions for FPL subsidiary Florida Power & Light Co. (FP&L). The lower-than-expected revenues combined with continued economic sluggishness in the state are likely to impede the ability of the company to achieve credit metrics that support current ratings. The deterioration in the regulatory and economic environments in Florida could also affect business strategy decisions at the parent that could place further pressure on the business risk profile.

Earlier, the other rating agencies weighed in:

Fitch Ratings has placed the ratings of FPL Group, Inc. (FPL), FPL Group Capital, Inc. (Group Capital) and Florida Power & Light Company (FP&L) on Rating Watch Negative. The action is taken in response to the adverse decision by the Florida Public Service Commission (FPSC) on Jan. 11 in the Progress Energy Florida (PEF) rate case and the greater possibility of a poor outcome of the pending FP&L rate case, to be determined by the FPSC on Jan. 13. The change in status affects approximately $11 billion of securities.

On the news, the equity was down 2.9%, bonds widened out (at holdco) by 5bps, preferreds were down less than 1% and hybrids didn't budge. I would expect that the company might lose one of their As.

On a final note, wasn't there talk of upgrading the utility infrastructure within the country? If Florida, with one of the lowest cost of power to consumers, can dial back requests to this degree, what can we expect from other hard hit states (which number quite a few).

Disclosure: No positions

Before Short Selling-Know These Shocking Facts

Short selling is one of the favorite day trading strategies employed by many day traders. Many companies hate short sellers as they believe that short sellers were responsible in the fall of their stock prices. Nothing can be far from the truth. Short selling is just like anyother market mechanism that provides liquidity and better price discovery. Short selling can never destroy a company if its’ fundamentals are strong. Many stock brokers now let you short stocks with just the click of a mouse. When you sell stocks from your online brokerage account, the message asks you whether you are selling your own shares or short selling. You just need to click once on short selling and the rest is taken care of by the broker. These shares are a loan to you by the broker that you will have to return at a later date!

Now, you cannot always short a stock instantly. Most of the investors work on rumors. In some cases,a stock gets so much shorted that there are no more shares of that stock left for you or your broker to borrow anymore. In that case, you simple will have to cross your fingers and see how the other short sellers do on that stock while you search for another stock to short!

Now, shorting is one of the favorite strategies employed by day traders. A day trader may short stock on the mundane reason like its price had been going up for three days and it’s time to come down! Day traders are not fundamental traders. Day traders are simply interested in the daily volatility in the stock. Most even don’t do any financial or fundamental analysis of the companies whose stocks they are trading. Almost all are technicians or what you call technical analysis experts.

In simple words, once the stock starts to move down, you cannot short it. You will have to wait for its price to move up on the last trade, before your short selling order can be executed by the broker. Now, you cannot straight away short a stock as there are mechanisms in place employed by msot of the stock exchanges that don’t want a massive shorting attack on a stock. There is the famous Uptick Rule that has been put in place to prevent that from happening. What the Uptick Rule means is that you cannot short a stock unless it moves up on the last trade. This rule has been placed to prevent a stock from being driven down to almost zero by short sellers.

If you are wrong in your short selling decision, your loss can be catastrophic.How much risky short selling can be? Well, in theory there is no stopping a stock price to reach the sky. But don’t worry, short sellers also use stop loss so if the price starts to move up, your position will get closed automatically by the stop loss order.

Now, don’t get caught in the market with short selling when good news spreads about the stock that you had shorted driving its price up. This is known as Short Squeeze. Once that happens, almost all short sellers get desperate to dump their stocks and exit but when they try to buy back the stock, they get more hurt as the prices go even higher and higher on rising demand for the stock in the market.

Now many companies, brokers and investors hate short sellers and try tactics to bust them. Sometimes, they will issue good news or spread rumors of good news to create a squeeze. Other times, they can ask the stock holders collectively to tell their brokers not to loan out their shares. What this means is that short sellers have to buy back the shares and return them to the brokerage firm and close their short positions even if it does not make any sense.

Mr. Ahmad Hassam has done Masters from Harvard University. Read this 49 page Quantum Swing Trading FREE Report plus the shocking Profit Button Report that applies no matter what you trade-stocks, forex, futures or options! Turn $200 into $100K in just 3 months with this Penny Stock Trading FREE Report!

Unofficial Problem Bank List Reaches 844

Calculated Risk maintains an unofficial problem bank list compiled from publicly available records. The latest list contains 844 names with a total of $412 billion in assets. The FDIC announced this week that they have (as of June 30) an official count of problem institutions at 829 with assets of $403 billion. The FDIC just releases a count quarterly, but no names.

The Calculated Risk list has tracked the FDIC count reasonably well over the past year (click to enlarge images):

The trend line tightly matches the data since last August, with a slope of +33 banks/month. Although no curve has been drawn for the FDIC data points, it is easy to see that there possibly is a slight concave curvature (downward) to that data. One might infer that the rate of problem bank counting by the FDIC might be slowing ever so slightly. Such a slowing of problem bank creation is not evident in the Calculated Risk data.

There is a clear indication that more smaller banks are coming onto the problem bank list than are leaving. Banks leave either by resolution of deficiency or failure, overwhelmingly the latter in the past three years. On August 7, 2009 there were 389 banks with assets totaling $276 billion on the unofficial problem bank list. Thirteen months later, the number of banks is 2.2 times larger, but the total of assets is only 1.5 times as large. The average assets per problem list bank in August 2009 was $720 million; now the number is $490 million per bank.

So far in this crisis, the FDIC has closed 286 banks. At the current rate of closures, another 80 may be closed by the end of the year and the problem bank list may reach 1,000. That would put over 1,360 banks in trouble or already closed at the end of 2010. That is getting closer to the number of troubled banks estimated at close to 1,900 by banking analyst Chris Whalen over a year ago, but is still far short of the nearly 3,000 troubled banks estimated by Elizabeth Warren's Congressional Oversight Panel in February this year.

If the analysis done by the references given is accurate, the 286 banks closed thus far in this crisis is not only far short of the total failures to be expected. The number 286 is probably far short of half of the bank failures we will see.

Disclosure: No positions.

Top Stocks For 3/4/2012-10

Foster Wheeler AG (Nasdaq:FWLT) announced that a subsidiary of its Global Power Group has been given the full notice to proceed (FNTP) by Hyundai Engineering and Construction for the design and supply of four 550 MWe (gross megawatt electric) supercritical circulating fluidized-bed (CFB) steam generators for the Samcheok Green Power Project for Korea Southern Power Co., Ltd. (KOSPO), the owner and developer of the project.

Foster Wheeler AG provides construction and engineering services to oil and gas, oil refining, chemical/petrochemical, pharmaceutical, environmental, power generation, and power plant operation and maintenance industries worldwide.

United Stationers Inc. (Nasdaq:USTR) will report second quarter 2011 results on Monday, July 25, 2011, after close of market. In connection with the earnings release, United Stationers will host a conference call, which will also be broadcast over the Internet on Tuesday, July 26, beginning at 10:00 a.m. Central Time. The press release containing the full text of the earnings announcement and accompanying financial tables, along with a financial slide presentation and other information relating to the call, will be available on the Investor Information section of United Stationers’ website, ir.unitedstationers.com.

United Stationers Inc., through its principal subsidiary, United Stationers Supply Co., engages in the wholesale distribution of business products in North America.

National Health Partners, Inc. (NHPR)

National Health Partners, Inc. (NHPR), a leading provider of unique discount healthcare membership programs, announced that it has entered into agreement with a major Hispanic marketing group for the sale of its CARExpress programs. The company also sees growth in new sales of memberships of more than 300% thru the remainder of the year.

Under the new agreement, this national Hispanic marketing group will be promoting the company’s CARExpress discount healthcare membership program to Hispanic communities located across the United States, with particular focus on cities and regions containing a large number of Hispanics. With the previously announced plans to increase monthly sales by 75% with its newest and most successful marketing partner, the company now expects sales of new members to grow more than 300% thru the remainder of the year.

National Health Partners, Inc. is a national healthcare savings organization that provides discount healthcare membership programs to uninsured and underinsured people through a national healthcare savings network called “CARExpress.”CARExpress is one of the largest networks of hospitals, doctors, dentists, pharmacists and other healthcare providers in the country and is comprised of over 1,000,000 medical professionals that belong to such PPOs as CareMark and Aetna. The company’s primary target customer group is the 47 million Americans who have no health insurance of any kind. The company’s secondary target customer group includes the millions of Americans who lack complete health insurance coverage.

Just close your eyes for few minutes and you will be plunged into total darkness. Eyes are the most precious gifts of God and we just cannot afford to ignore it. But it is the most sensitive sense organ of the body. So the chances of the malfunction of the eyes due to various diseases are plenty.
Some of the main causes of eye diseases

Working in insufficient or strong light
Working for long conditions before the computer can harm your beautiful eyes.
Watching too much of television.
Lack of vitamins in diet can lead you to night blindness.
Diabetics in people can cause eye diseases.
Certain kidney and liver medicines if taken without the doctor’s advice can cause eye disorder in the long run.
Use of heavy makeup such as false eye lashes and contact lenses can cause problems in eyes

More and more people are looking for vision services. By joining the CARExpress program, you will have access to 11,500 vision providers nationwide including: JCPenney, Target, LensCrafters, For Eyes, Sears and thousand of independents. You will be able to save an average of 10% - 50% on most frames, prescription lenses and non-prescription sunglasses. And for those who like to shop by mail, they can use CARExpress mail order program and save an average of 5% - 50% on most contact lenses. Not only do you receive significant savings on eyewear, but Laser Vision Correction (LASIK) is also included in this program. Special discounts on eye examinations at participating locations where approved.

Please visit its website at www.nationalhealthpartners.com

ECOtality, Inc. (Nasdaq:ECTY) announced a partnership with car2go N.A. LLC, a subsidiary of Daimler North America Corporation, to provide electric vehicle charging infrastructure to support the first 100-percent electric car sharing program in North America. With plans for approximately 300 smart fortwo electric drive vehicles, the program in San Diego represents the largest fleet of EVs in the United States.

ECOtality, INC., through its subsidiaries, provides clean electric transportation and storage technologies in the United States and internationally.

Synopsys Inc. (Nasdaq:SNPS) announced that Renesas Electronics Corporation (TSE:6723.to - News), a premier supplier of advanced semiconductor solutions, adopted Synopsys’ HAPS-64 FPGA-based prototyping systems for their prototyping environment for systems-on-chips (SoCs) and microcontrollers. By deploying the HAPS systems, Renesas Electronics achieved more than a 4X speed-up in prototype performance over their previous FPGA prototyping solution.

Synopsys, Inc. provides technology solutions used to develop electronics and electronic systems worldwide.

Gulf Resources Is An Opportunity To Make A Fortune.

Gulf Resources (GURE) is known to be a leading manufacturer of bromine, crude salt and specialty chemical products in China. As with many other Chinese firms, the company had a significant decrease in its stock price during 2011 owing to fear of fraud spreading among investors. However, looking closely into GURE’s legitimacy proofs, operating performance, financial condition and business outlook, I believe that GURE is one of the best investment opportunities I have ever seen.

Legitimacy Proofs

• The company provided verifications from three local government agencies that validate the Company's market leadership, number of facilities, and 2010 production volume.
• The Company has received an appraisal report assessing its production capacity from a third-party independent international appraisal firm, Grant Sherman Appraisal Limited (“Grant Sherman”).
• GURE’s Site visit by an individual investor has confirmed 2011 Guidance.

Given the above detailed proofs, it’s no longer logic to question the company’s legitimacy with baseless accusations.

Operating Performance

During the third quarter of 2011, GURE has retained strong operating cash flow despite the decrease both in sales volume and price of bromine. In fact, bromine prices have already picked up and stabilized around $3900 (25,000 yuan) per metric ton after bottoming in November. Furthermore, the company has proven profitable even at the lowest bromine prices of $1680 per metric ton recorded in early 2009. In other words, GURE is a “Cash Cow” company.

Financial Condition

As of September 30, 2011, Gulf Resources had cash of $85.8 million, current liabilities of $17.1 million, and current ratio of 6.7:1. The strong cash position coupled with the consistently positive operating performance give GURE the peace of mind in withstanding the moderate slowdown in China’s manufacturing activity.

Business Outlook

Here comes another favorable story. Between 40% and 50% of bromine consumption is for Flame Retardants [FRs]. In 2010, demand for FRs, particularly in the construction and electronics industries, increased as the economy recovered. U.S. consumption was forecasted to rise by 2.7% per year through 2013 as a result of bromine use in insulated wire and cable and in construction as well as more stringent fire codes and flammability requirements. Recycling efforts in Europe for Brominated Flame Retardant [BFR] plastics in electrical usage may also increase the demand for BFR products. In 2007, Asia and the Pacific region were forecasted to be the leading consumers of FRs,with consumption rising by 7% per year.

Moreover, several companies were pursuing new markets for bromine to mitigate mercury emissions at power plants. Bromine compounds bond with mercury in flue gases from coal-fired power plants creating mercuric bromides. Wide acceptance of the new technology would likely increase the demand for bromine.

Bromine water treatment is also expected to show growth during the next several years. Bromine has been found to be safer than its substitutes in sanitary preparations because bromine has a higher biocidal activity level for the same volume of product.

Now, how is GURE valued?

If you buy GURE stock at $1.70 (Dec 14, 2011 closing price), it’s just like buying $100 for only $69 in cash. Unbelievable, but that’s just what it is. As of September 30, 2011, the company had cash of $85.8 million, or about $2.47 per share. Thus, ignoring all GURE’s production factories, customer base and business relationships, the stock price is only 69% of its current cash in banks, not to mention the continued cash generation by the company.

In conclusion, GURE looks to provide an unbeatable opportunity for investors. The old accusation about production claims are currently nonsense. I feel very comfortable that GURE is a well-managed company with extreme undervaluation.

Disclosure: I am long GURE.

November Consumer Debt Drops Most Ever; COF, DFS, BAC Down

Following on the biggest drop on record for household debt in Q3, the Federal Reserve Board this afternoon said consumer credit in November dropped 8.5% on an annualized basis from October’s reading, to $2.5 trillion.

The drop of $17.5 billion was much larger than the $5 billion observers were expecting and the 10th straight month-over-month decline. It was also the biggest drop on record since they started tracking these things in 1943, writes Dow Jones Newswires’s Jeff Bater.

The vast bulk of that came in revolving credit lines, mostly credit cards, which dropped 18.5%.

Equity markets continued in a general downdraft on the news, with the Dow down 25 points at 10,581 and the S&P 500 Index down 19 points at 1,141. The Nasdaq composite, however, rose 14 points to 2,314.

Stocks of large card issuers were already down before the report, and showed no immediate reaction. Capital One Financial (COF) was off 75 cents, or 1.8%, at 42.08, Discover Financial Services (DFS) was down 9 cents, or 0.6%, at $15, and Bank of America (BAC) was off 20 cents, or 1.2%, at $16.73.

What Are LEAP Options?

British Pound is known to be a stable currency. Great Britain is a strong economy. But, Great Britain was finding it difficult to stay within the tight exchange rate band set by the European Monetary Union (EMU) in the early’90s. One person who made history with options was George Soros who is famously known as the man who broke the Bank of England.

George Soros is a famous name in the world of investing. He is famous for his speculative attacks on currencies that he had the intuition of being intrinsically weak. He had always believed in contrarian investing. Contrarian investing means doing exactly opposite of what the crowd is doing. George Soros had this intuition that the Bank of England could be forced to devalue British Pound. So he bought call options on German Marks and put options on British Pound. He made a bet of $10 Billion by leveraging all the assets in his hedge fund.

Bank of England had made a number of public statements regarding its intention of staying within the EMU. However, within a few days of the speculative attack on the British Pound, Bank of England was brought to its knees as it was unable to sustain the immense selling pressure on the British Pound. Bank of England was forced to devalue British Pound in view of the speculative attack on the British Pound.

In a matter of a few days, George Soros made a cool $1 Billion profit on his bet. Can you make such a bet? Maybe not but this one example show the immense power options have if used correctly. Options are risky; there should be no doubt about it.

Options contract give you the right to buy or sell an underlying security like stocks, futures, commodities or currencies at a price before a certain date. This price is known as the Strike Price. This date is known as the Expiry Date. However, in European Style options you can only buy or sell on the expiry date not before that. Most people who trade options lose money, plain and simple.

Trading options without training is risky. You need to learn the Options Greeks. One of the important things that you need to learn while trading options is the importance of time factor. Time factor is very important when valuing an option. Further out the options contract is from expiration, you will have to pay a higher premium. As the options contract approaches the expiration date and if it is out of money, it loses its value very fast.

LEAP options are basically long term options. Leap options can help you profit over the long haul. You can use LEAP options in options strategies like the covered calls, straddles, spreads and so on. LEAP stands for long term equity anticipation. It basically means that the option is much like the regular option except that the timeframe to expire is greater than 1 year.

LEAP options can be incredibly profitable if used correctly. However, LEAP options are risky because the option writer usually demands a hefty premium for taking on the long term risk. The buyer of the LEAP options has the right to exercise the option prior to expiration should the price of the underlying stock move in the money. Long timeframe means that the possibility of the LEAP options moving in the money is always high hence a high LEAP options premium.

LEAP options can be a great trading vehicle for swing traders as they mitigate some of the time decay that is inherent in short term options. See, closer the out of money option is to expiration, faster its value drops. What this means is that the buyer of the options loses the premium that was paid for getting the right to buy or sell the underlying security.

Mr. Ahmad Hassam has done Masters from Harvard University. Learn Candlestick Charting! Know Fibonacci Retracement! Visit the Uber Article Directory to get a totally unique version of this article for reprint.

Hyundai Recalls 18,000 Velosters

Hyundai is recalling nearly 18,000 Veloster subcompact cars for a pair of unrelated defects.

The larger recall relates to 11 consumer complaints alleging that the panoramic sunroof on the 2012 model year Hyundai Veloster "shattered or exploded." Hyundai is recalling 13,500 units of the vehicle, manufactured between Nov. 1, 2011, and April 17, 2012, which are thought to have been potentially manufactured with a weakened panoramic sunroof assembly.

The smaller recall (of 4,490 vehicles) also relates to model year 2012 Velosters. Hyundai says that the emergency parking brakes installed in cars manufactured from July 2, 2011, through Feb. 27, 2012, and equipped with manual transmissions may "bind" from exposure to moisture and grime, preventing the brake from operating properly.�

In each case, Hyundai expects to notify car owners of the recalls beginning in January.

link

Rodham & Renshaw to Drop China Research: Report

There's nothing like widespread allegations of fraud and accounting irregularities to diminish investor interest in a particular sector, and that's what's happened with Chinese companies with public listings in the United States.

In fact, the buzz has gotten so faint about China that one of the investment firms known for its coverage of companies from the region, Rodman & Renshaw, is reportedly shutting down its China research operations.

See if (ABAT) is in our portfolio

Dow Jones News Service, citing an undisclosed person familiar with the matter, said Rodham & Renshaw plans to announce the closure on Monday because the business has become "hard to monetize." The firm is a unit of Rodham & Renshaw Capital Group(RODM), whose shares closed Friday at 94 cents, up 7 cents. A company spokesperson wasn't immediately available to comment for this story. The Justice Department and the Securities and Exchange Commission are both investigating alleged accounting irregularities at Chinese companies, and a number of fraud allegations have sunk Chinese companies that secured public listings in the U.S. through reverse takeovers, as documented in TheStreet's The Shanghai Numbers investigative report. Rodham & Renshaw's Web site still features its research on China-based companies. Among the stocks the firm covers are Advanced Battery Technologies(ABAT), Origin Agritech(SEED), Sina Corp.(SINA), and Zhongpin(HOGS). The firm lists four analysts as covering China-based stocks. -->To submit a news tip, send an email to: tips@thestreet.com

>To order reprints of this article, click here: Reprints

Six Biotech Stocks Riding the Baby Boomer Wave

The size and scope of the Baby Boom generation has opened up an abundance of health care opportunities --especially ground-breaking and game-changing biotech stocks.

As this "gray wave" matures the need for better treatments for the myriad health problems that often accompany old age only grows stronger.

And while no one has discovered a cure for Alzheimer's, cancer, Parkinson's or other ailments that come along with old age, several biotech companies are racing to cure a long list of diseases and disorders.

The prospects are certainly daunting, but the possibilities in the biotech field are literally endless-for patients and investors alike.

With that in mind, here are six biotech companies that are working on radical and revolutionary drugs.

From A TO Z: Investing in Biotech Stocks Alexion Pharmaceuticals (Nasdaq: ALXN) is a biotech company that engages in the innovation, development and commercialization of therapeutic products for treating patients with ultra-rare and severe disorders around the globe. The Connecticut-based business focuses on developing products for the treatment of diseases in hematology, nephrology, neurology, metabolic disorders, oncology and ophthalmology.

Unlike scores of other biotech companies, Alexion boasts a strong growth trend and has plenty of cash to fund its research and development.

Most recently, the cutting-edge company received FDA and European Commission approval on its marquee drug called Soliris. Developed for the treatment of a blood disorder called atypical hemolytic uremic syndrome (aHUS), Soliris sales have been growing at a 45% compounded annual growth rate.

Biogen Idec Inc. (Nasdaq: BIIB) works in the worldwide discovery, development, manufacturing and marketing of therapies for the treatment of neurodegenerative diseases, hemophilia and autoimmune disorders. Its key product is AVONEX for the treatment of relapsing multiple sclerosis (MS).

The company continues to advance and improve therapies for MS which afflicts roughly 400,000 in the U.S. and 2.5 million worldwide. Every week, 200 people are diagnosed with the neurological disease in America. Its MS drug Tysabri, marketed in conjunction with Irish pharmaceutical company Elan (NYSE: ELN) had sales of $1.5 billion in 2011.

Celgene (Nasdaq: CELG) is a biopharmaceutical company involved in the discovery, development and commercialization of various therapies to treat cancer and immune inflammatory diseases primarily in the United States and Europe. The company has an FDA decision date of Oct.12, 2012 for Abraham, a promising lung cancer treatment. Abraxane has already been approved by the FDA for the treatment of breast cancer.

The California-based established company has a number of FDA-approved drugs already in the market including Revlimid for the treatment of multiple myeloma and MDS; Vidaza for the treatment of MDS and acute myeloid leukemia; Thalomd for the treatment of multiple myeloma; and Istodax for the treatment of a specific form of T-Cell lymphoma.

In addition Celgene has a far-reaching pipeline of drugs in various clinical trial stages under the categories of hematology, oncology, inflammation and immunology.

Gilead Sciences (Nasdaq: GILD) has been working since 1987 to discover, develop and commercialize medications to advance the care of patients suffering from life-threatening diseases in areas of unmet medical needs.

In just two decades, this Foster City, CA-based company has skyrocketed to become a leading biopharmaceutical company with a portfolio of 14 marketed products and a growing channel of investigational drugs.

Growth prospects of Gilead's HIV drugs Truvada and Atripla look very promising. The company continues to expand with collaborations, by making acquisitions and introducing new products.

Rengeron (Nasdaq: REGN) works in the discovery development and commercialization of medicines for the treatment of serious medical conditions in the U.S. One of its key products is EYLEA for the treatment of neovascular age-related macular degeneration. Advanced macular degeneration is a common eye condition among people age 50 and older. It is the leading cause of vision loss in older adults.

On the list awaiting FDA approval is Aflibercept, commonly referred to as Zaltrap. Its Rengeron's protein fusion agent developed in partnership with Sanofi Aventis (NYSE: SNY). The drug aims to prevent angiogenesis of blood vessel development to tumors. The colorectal cancer therapy will hear from the FDA on Aug. 4.

Vertex Pharmaceuticals (Nasdaq: VRTX) is a major force in the biotech arena in treating cystic fibrosis (CF ), a life threatening genetically transferred disease that is the most common form of lung disease in children and young adults. On May 29, shares fell after it was reported that an experimental drug candidate called VX-809, and its newly approved CF medication Kalydeco may not be as effective as first anticipated. Full results from a Phase II study testing the combination are set for July.

Despite the setback, several analysts remain upbeat on Vertex. In a note to investors, Alan Carr of Needham reiterated his "Buy" rating with a price target of $65, a good seven points above its current level.

"While the corrected data are not as strong, our view towards commercial potential of this drug is not markedly diminished. We believe this is an exceptional patient population where there will be strong interest in early treatment initiation and a bias towards remaining on drug in the long-term, assuming the safety profile stays clean," Carr noted.

Without a doubt, biotech stocks are pushing the boundaries of medicine. But biotech investments are for the patient - great scientific discovery doesn't materialize in just one day.

Even still, as 78 million baby boomers continue to age stocks associated with health care will only become stronger. This is one wave that cannot be stopped.

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IMF to Test British Banks for Solvency; Euribor Rises Again

The International Monetary Fund (IMF) will begin checking data from the largest banks in Britain this week, in a preliminary move before conducting stress tests across the broader banking sector of five nations within the euro zone. Meanwhile, the Euribor rate saw another rise on Wednesday as continued concerns over inflation after last week’s European Central Bank (ECB) warning continued to reverberate.

According to a Reuters report, the IMF is performing routine stress tests, beginning with Britain and continuing on to Sweden, Germany, Luxembourg, and the Netherlands. Previous stress tests in 2010 conducted by the European Union (EU) found just a small capital shortfall; however, that preceded the devastating shortfall at Irish banks that necessitated a bailout.

The EU has discussed toughening its stress tests, also called Financial Sector Assessment Programs (FSAP), but remains deadlocked on just how to do that. While members have agreed to toughen tests of the banks’ ability to survive financial shocks, one issue under dispute is liquidity. These new tests would theoretically include liquidity targets, and be conducted by the end of May. Results, according to EU presidency sources, would be announced in the third quarter. The tests to be conducted on the five nations listed above are to be completed by the end of the first quarter of 2011.

Germany had previously resisted liquidity tests, but, according to an EU source, “The message is that the tests have to be much more stringent and credible.” To that end, the tests will evaluate the same 91 banks previously tested, but this time with a tougher methodology that will cover not only bank trading books but also banking books and searching tests of core tier 1 capital.

The FSAPs became mandatory last September for 25 "systemically important" countries; it was thought that this would avoid a repeat of the credit crisis. They were established in 1999, and according to the website of the IMF, they are "a comprehensive and in-depth analysis of a country's financial sector."

My Favorite Stock for a Natural Gas Rebound

"Good things come to those who wait" is an adage I've always subscribed to as an investor, although it may be hard to believe if you're heavily invested in natural gas right now. The stocks of natural gas firms have seen their share of woe in 2012, with many already dropping 10%, 15% or even more year to date.

But I'm certain investors with significant natural gas exposure will reap big rewards if they stay patient.

A key factor in future profits for the natural gas industry will be rising natural gas prices, something we haven't seen for more than a year. In fact, it has been just the opposite. Natural gas is currently around $2.40 per thousand cubic feet, or roughly 50% lower in price than it was last summer.

As you may know, a weak economy combined with dramatic production increases during the past few years contributed to a massive oversupply of natural gas. This, in turn, caused the price of natural gas to drop so much that many producers have had to shut down some of their operations because they're no longer profitable.

  Again, though, be patient. It'll take a while, but I think relief is on the way.

One of the best signs of this is natural gas futures, which are exchange-traded contracts requiring the delivery of natural gas for specific prices on specified dates in the future. These contracts foretell increases in natural gas prices to about $3.25 per thousand cubic feet by the end of 2012, $3.90 per thousand cubic feet by the end of 2013 and $4.20 per thousand cubic feet by the end of 2014. Based on this, we're looking at a75% price increase during the coming 34 months, and a 35% spike in price this year alone.

This is good news for natural gas producers, especially those with the lowest production costs. As natural gas prices recover, these low-cost producers will be the first to see their profits and stock prices bounce back. And barring any unforeseen management gaffes or costly accidents, they should also have the best long-term growth potential, since they're profitable even when natural gas is priced so low that other producers are losing money.

There's one well-known natural gas producer in particular that fits this description very nicely and, in my opinion, it could be the best way to play a natural gas rebound. The company is Ultra Petroleum Corp. (NYSE: UPL), which generates 90% of its $1.2 billion in annual revenue from natural gas and currently produces about 250 billion cubic feet of the fuel per year.

As a low-cost producer, Ultra Petroleum is difficult, if not impossible, to beat. Indeed, analysts estimate the company breaks even when natural gas is $2.70 per thousand cubic feet. At this price, the typical producer has long since packed up and gone home, since most are in the red when natural gas falls below $3.00 per thousand cubic feet.

Of course, this means Ultra Petroleum is losing money now, too, and analysts see earnings per share (EPS) declining 15% in 2012 to $2.20, from $2.60 in 2011. However, assuming natural gas prices behave as futures suggest they will, analysts forecast annual growth rates of 17% for revenue and 16% for earnings during the next three to five years. At these rates, revenue would more than double to $2.6 billion in 2016, from $1.2 billion in 2011. Earnings would more than double, too, to $5.68 per share in 2016, from $2.60 last year.

In terms of valuation, Ultra Petroleum is an absolute steal.

For example, the stock has a price-to-book (P/B) ratio of only 2.2, though historically investors have been willing to pay as much as 7.7 times book value. This suggests the stock could trade as high as $80 a share (7.7 X $10.45 a share in book value = $80.47 a share) once natural gas prices pick up, implying explosive upside potential of as much as 250% from the current share price of about $23.

Risks to Consider: Although natural gas futures can be very good indicators of where natural gas prices are headed, they're by no means set in stone. If the global economy stagnates or weakens, then natural gas prices probably won't rise as much as futures suggest they will. If that occurs, don't expect Ultra Petroleum to perform as I've described.

> It could be at least another six months before natural gas prices return to levels that enable Ultra Petroleum to begin showing rapid profit growth, so expect the stock to continue doing poorly in the short-term. It's down about 20% year-to-date, and could fall further. I won't be surprised at all if it finishes 2012 with a loss, just like it did the prior two years.

Huntington: Bank Stress Test Loser

Huntington Bancshares (BAC) was the loser among the largest U.S. financial companies on Tuesday, with share pulling back 3% to close at $4.83.

Huntington is among the 12 financial companies that will join the original group of 19 large U.S. holding companies subjected to two previous rounds of government stress tests, for the Federal Reserve's new Comprehensive Capital Analysis and Review, or CCAR, which will take place early next year.

See if (BAC) is traded within the Action Alerts PLUS portfolio by Cramer and Link

The Fed on Tuesday issued its final rule on the CCAR, with requirements that all U.S. financial holding companies with over $50 billion in total assets submit detailed capital plans by January 9, 2012. In addition to the stress testing the economic scenarios provided by the Fed, the banks will be required to "estimate potential losses stemming from a hypothetical global market shock" based on the "market price movements seen during the second half of 2008, a time of significant volatility, with adjustments made to incorporate potential sharp market price movements in European sovereign and financial sectors."Large U.S. banks facing their third round of stress tests, through which the Federal Reserve will decide whether or not to approve capital distributions - including dividend increases and new authorizations to repurchase shares - include the "big four" of JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC), as well as U.S. Bancorp (USB), PNC (PNC), Goldman Sachs (GS), Morgan Stanley (MS), and 11 other companies.In addition to Huntington, the group of 12 banks joining the original 19 for the next CCAR includes Northern Trust (NTRS), M&T Bank (MTB), Comerica (CMA), and Zions Bancorporation (ZION). The Federal Deposit Insurance Corp. announced that the over 7,000 U.S. banks and thrifts earned a combined $35.3 billion during the third quarter. The broad U.S. stock indexes saw slight declines when the market closed on Tuesday, following an announcement by the International Monetary Fund of a new Precautionary and Liquidity Line, to be available to "crisis bystanders" among IMF member nations, during times of "heightened economic or market stress."The KBW Bank Index (I:BKX) declined over 1% to close at 35.94.Large banks seeing share prices decline 2% on Tuesday included Bank of America, which closed at $5.37; Bank of New York Mellon (BK), at $18.02; Citigroup, at $24.46; JPMorgan, at $29.40; Northern Trust, at $36.00; Regions Financial (RF), at $3.90; and Goldman Sachs, closing at $89.44.

Tuesday's sector winner was First Niagara Financial Group (FNFG), with shares rising two cents, to close at $8.48.

RELATED STORIES: Bank Profits Keep Growing >IMF Creates Country Bailout Fund >Banks Getting Better at Foreclosures: Regulator >Bank of America Will Get Regulator Love: Analysts >Bank of America May Face Regulatory Warnings >Jeffries, Egan Jones in Credibility Title Bout >Jefferies Blames Woes on Lies, Rumors and Hedge Funds >Ex-Warren Buffett Lieutenant Buying More Bank Shares >

-- To contact the writer, click here: Philip van Doorn.To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

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Boeing Upgraded as Delivery Concerns are “Overdone”

Boeing (BA) investors have been fretting about the possibility that deliveries will be deferred due to the slow economy. But Bernstein Research analyst Douglas Harned “continue[s] to see the company’s delivery plan as well-supported through 2015″ and thinks the stock is undervalued.

“We expect Boeing to deliver all of its planned airplanes through 2015, as emerging market demand and the need for replacement aircraft should sustain rising production rates. Even during the 2009-10 economic downturn, we saw a negligible decline in deliveries at a time when global GDP actually declined. This time we do not expect global GDP growth to turn negative. Instead, we expect a smaller number of delivery deferrals to occur, with slots that may open picked up by airlines seeking earlier deliveries.”

Harned also thinks that Boeing has made progress in ramping up 787 production, with the possibility of the company making five of the planes a month by the end of the year getting better. And while its defense business could slump, that shouldn’t hurt the stock too much.

Harned raised his rating to Outperform with an $92 price target. Boeing shares rose 3.3% in Tuesday afternoon trading to $72.46.

Oracle Buys AmberPoint to Boost Application Management

By Leena Rao

On the heels of the EU’s approval of Oracle’s (ORCL) $7.4 billion deal to acquire Sun Microsystems (JAVA), the tech giant has opened up the purse strings to acquire application management software provider AmberPoint. Terms of the deal were not disclosed and the acquisition is expected to close in the first half of this year.

AmberPoint’s software helps organizations diagnose and resolve issues in application performance and business transactions, such as insurance claims processing or account provisioning where multiple applications need to work together. AmberPoint’s software will be folded into Oracle’s Service-Oriented Architecture (SOA) offerings.

Oracle says that the addition of AmberPoint’s software will help diagnose and manage the performance of business applications, provide monitoring for application performance and will enrich SOA design time with run-time metrics for SOA governance.

Original post

Analysts Unhappy with Joy Global (JOYG) Earnings Estimates

Merciless.

That’s the only word I can use to describe the market. Disappoint it, and you will pay the price.

Case-in-point: Mining equipment maker Joy Global (JOYG). Seems that one of this summers’ darlings is now a stock market pariah. Shares dropped a staggering 18% on Thursday.

The company earned $1.03 per share in Q3 but when a $0.22 foreign-tax credit is factored out of the equation, earnings came in $0.07 shy of analyst estimates of $0.88 per share. Sure, revenue rose 45% to $903.8 billion, but operating margins fell considerably at its surface machinery business.

Joy Global also lowered its tax rate to between 31–33% from 33–34% but the full-year earnings guidance it offered of $3.37 to $3.52 per share disappointed analysts. They implied operating income was less than previously forecast.

Why Cramer Jumped for Joy

Earlier this summer Joy Global’s shares hit a high of $90 per share, and even got a “buy, buy, buy!” from noted television regular Jim Cramer.

It seemed at the time insatiable demand from the BRIC countries for coal and steel and new uses for coal here at home would lead to increased orders, revenues and earnings for the foreseeable future (see also, “Cashing In on Coal Stocks“).

Alas, slowing economies in Europe, China, and in the U.S. (not to mention fierce opposition to coal from the green lobby and higher input costs) have conspired against Joy Global as well as its chief competitor, Bucyrus (BUCY)  which was also down this week.

I’ve discussed the danger of owning bubble stocks in the past.  JOYG enjoyed a powerful ride higher as a result of a massive move in commodity prices.  The trouble for investors is determining what is real and what is not (see also, “Exxon Mobil (XOM) Big Oil’s Big Demise“).

In this case, it’s true that global demand for raw materials is growing.  It is also true that at some price, demand will falter.  It would appear that we might have met that threshold over the summer.

It is too simplistic to say that foreign demand will continue no matter what the price.  The concept of decoupling is taking some serious blows here.  With the slowdown in the U.S., suddenly demand for foreign products drops.

A lack of buying in the U.S. puts a big break on foreign activity making it difficult for those companies to continue growing at a breakneck pace.  That fact filters throughout the entire global economy.

The result is lower commodity prices and less demand for products from JOYG.  One can’t help to want to be a contrarian with these stocks, but current headwinds suggest a better entry point can be had at a later time.

This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight likes this, go to: www.InvestorPlace.com.

Starbucks has been the subject of punch lines about chain store ubiquity at least since the summer of 1998, when The Onion, a satirical newspaper, ran a headline about the opening of a new Starbucks inside the restroom of an existing one. Shares have since gone from hitting new highs to hitting much higher ones, a plunge during the Great Recession notwithstanding. Investors who held straight through have made about five times their money -- not bad for a chain that was already everywhere.

More From Jack Hough

• How to Know If a Pricey Stock Is Worth It
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Of course, Starbucks wasn't everywhere back then. It has since opened thousands of stores in the U.S. and abroad (the tiny Caribbean island of Curacao just got its first), and it has learned how to push more beans and brewed coffee by teaming up with grocers and fast-food chains.

If the world is finally saturated with Starbucks coffee, it isn't showing. Its quarterly sales recently jumped 9 percent, not counting the contribution of recently opened stores.

The lesson for investors: Sometimes the next big thing is the current big thing, and there's nothing wrong with buying a stock that's trading higher than ever. In fact, all else held equal, new highs are a promising sign. Stocks reaching them tend to beat the market in subsequent years, according to research by Thomas George at the University of Houston and Hwang Chuan Yang at Singapore's Nanyang Technological University.

Certainly, not all highfliers are good buys. Some are too expensive. Others are at risk of slowing down. For stock investors, it's increasingly important to be able to predict which winners will keep winning, because the stock market is closer to an all-time high than it might seem. Standard & Poor's 500-stock index needs to climb about 16 percent from its recent level to retake its October 2007 high. But it weights companies by their stock market values, so the decline of a handful of giant banks has held back the S&P 500's overall returns. Most stock investors weight their holdings more or less equally, not by market value; hence, a better representation of the choices they face is the S&P 500 Equal Weight index. It's only about 3 percent away from hitting a new high.

To buy high and sell higher, forget knowing which companies seem to have room to expand. Clever managers make room. What matters is the return companies earn on the capital they invest. Starbucks has produced a return on invested capital of about 20 percent, on average, over the past five years, and greater than 25 percent over the past year. Returns that strong suggest management isn't nearly out of ideas on how to sling more lattes.

Back In the High Life Again

The S&P 500 must climb 16 percent to reach its October 2007 peak hit before the global financial crisis, but some pockets of the market have climbed back to the top.

Little Guys

The S&P SmallCap 600 index reached a new high in February. Small-company stocks tend to outperform large-company ones over long time periods, studies show.

Pantry Shares

The consumer staples sector of the S&P 500 rose to a record level near the end of 2011, driven by demand for steady stocks.

All Things Equal

The S&P 500 Equal Weight index was recently just 3 percent away from the high it hit in May 2011. It has beaten the standard 500 index, which weights companies by market value, by close to two percentage points a year during the past two decades.

Second, look for firms with the financial capacity to expand. S&P 500 companies are clutching record amounts of cash. Some prosperous firms borrow to take advantage of low interest rates, so that's not always a good indication; watch for those that have plentiful free cash coming in.

Third, of course, is a reasonable valuation. Starbucks shares fetch a fully caffeinated 27 times projected earnings, versus a median of about 15 times for S&P 500 companies. The firms listed below are less expensive relative to profits and bring in plenty of free cash. Each recently hit an all-time-high stock price, but each also seems to have plenty of good growth left, judging by the high returns on invested capital.

Apple (AAPL) recently had the largest stock market value in America, but that doesn't make it expensive. Its shares sell for 12 times this year's earnings forecast, and the company holds enough cash and investments to buy, say, McDonald's. Investors looking for signs of a slowdown won't find it in the iPhone maker's recent quarterly report. Sales jumped 73 percent, and earnings beat Wall Street forecasts by so much, it looked like a misprint.

Despite the depressed housing market, Bed Bath & Beyond (BBBY) isn't struggling to sell furnishings. Its sales at long-standing stores recently rose 4 percent, and management boosted its earnings-per-share forecast, calling for growth of 26 to 28 percent in the recently ended fiscal year. It has more than 1,000 stores, but its thriving 61-store Buy Buy Baby chain has room to grow. Shares are getting scarcer; Bed Bath bought back 6 percent in the past three quarters.

Asked in November why he bought IBM (IBM) at an all-time high, Warren Buffett said he has done the same in the past with railroads and insurers. The purchase has made around 15 percent so far for Berkshire Hathaway, and IBM shares still look reasonably priced, trading at about 13 times this year's forecast earnings. Thanks to a focus on data centers and other high-margin work, IBM turns about 20 cents of each sales dollar into operating profit, versus an average of less than 8 cents for other diversified computing companies.

Cummins (CMI) makes engines and related components used in big trucks, machines and power generators. The stock sells for about 12 times earnings, even after the price has increased more than 10 times in a decade. More than half of the firm's sales come from abroad, and China is a key market. Economic growth there recently hit the slowest pace in two and a half years: 9 percent. That's still triple the U.S. rate. Cummins isn't struggling: Its sales shot 36 percent higher last quarter.

Businessmen Versus Bureaucrats

There are generally just two ways people deal with each other: with reason or with force.

Reason is the businessperson's approach. Regardless if he is a trader, a CEO or lemonade-stand operator, the capitalist understands that if he wants something from you, he's got to offer you a value in return. He can't force you to buy his real estate, "green" energy, or failing auto company, he can only try and convince you though discussion and trade that it's in your own self interest. The choice is always yours.

That basic fundamental negates the cliched and commonplace assertion, popularized even by our own elected officials, that trade is destructive and that profit-seeking businessmen are evil. In reality, just the opposite is true: Regardless if it's for a share of stock, an education or a sandwich, voluntary trade is productive as both parties' needs are satisfied. After all, that's why they're trading.

Force is not the tool of businessmen, but of bureaucrats. Whereas a businessman must appeal to your mind, government bureaucrats effectively put a gun to your head. They force you to you pay for banks, insurance companies, and deadbeat homeowners. They also force businesses to sell certain types of products, offer certain types of wages and operate in a certain fashion.

If a hooded thug stole your savings or tied your arms behind your back, we'd call it a crime. It's still a crime even though it's a suit-wearing bureaucrat doing the stealing.

In a free market, the economic power achieved by Wal-Mart (WMT), McDonald's (MCD) or any other successful company has been earned, not expropriated.

And while a businessman can't insist you to act against your own judgment, our government can and increasingly does, Obamacare is just the latest example of government force replacing individuals' own voluntary judgment regarding what's in their own self interest.

Stripped of the flowery language about how "we are our brother's keeper" and "the common good", government intervention into the free market is done by those who believe your judgment or voluntary choice is moot.

For over four years, government has been engaged in an arbitrary campaign purportedly to spur economic growth. Every single initiative, from stifling regulation to "Cash for Clunkers" to inflationary manipulation of interest rates has involved the use of government force, the result of which has been more debt, less liberty and continued economic lethargy. Economic freedom, as we wrote last year, remains the one stimulus that has yet to be actually tried.

The reason the average income in communist North Korea is $1,800/year compared to nearly $50,000 in the United States isn't because the water in New York Harbor is any different than that in Pyongyang. Rather, it's the ideas and dominant philosophy that determine the result. North Korea, like Cuba, Venezuela, Zimbabwe and a long list of other collectivist countries, employ force against their own citizens as a matter of practice. The results speak for themselves.

The United States' historical success came not from natural resources or global plunder, but ideological commitment to reason. From the smallest start-up to the S&P 500's biggest names, wealth is a product of man's capacity to think: to deal with others in voluntary, mutually beneficial and productive trade.

If Washington and the American people are looking for a "secret sauce" to remedy our economic malaise, that's it.

Jonathan Hoeing is managing member at Capitalistpig Hedge Fund LLC

Coinstar Sells E-Payments Business For $40M; Updates Outlook

Coinstar (CSTR) this afternoon said it sold its E-Payment services business to Atlanta-based InComm for $40 million. The unit offers prepaid card products from more than 65 issuers. The deal closed May 25.

Coinstar also adjusted its financial guidance to reflect the impact of the deal.

For Q2, the company now sees revenue of $363 million to $383 million, adjusted EBITDA of $57 million to $62 million and EPS of 28-32 cents. Street consensus had been for revenue of $386.5 million and profits of 35 cents.

For all of 2010, the company sees revenue of $1.505 billion to $1.595 billion, with adjusted EBITDA of $270 million to $285 million and EPS of $1.74 to $1.86. The Street has been expecting revenue of $1.58 billion and profits of $1.84.

In late trading, CSTR is up $1.39, or 2.6%, or $51.59.

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Please be advised that Getty Realty Corp. (NYSE: GTY) will release its financial results for the quarter ended September 30, 2009, after the market closes on Tuesday, November 3, 2009.

CIGNA (NYSE:CI) and ProHealth Physicians, Inc., have expanded their longstanding relationship by implementing an enhanced care coordination program that includes pay-for-performance provisions and many of the features of a patient-centered medical home program. This is the first program of its kind in Connecticut.

The Insurance Solutions division of Lincoln National Corporation (NYSE: LNC) today announced the enhancement of its Dental coverage with the launch of new benefit features. These features are available on the Lincoln DentalConnect(SM) PPO plan, which includes more than 58,000 unique providers and over 105,000 provider locations, offering even greater choices for affordable, local dental care.

Cowlitz Bancorporation (Nasdaq: CWLZ) announced that effective October 8, 2009, the Company’s common stock will be listed on the Nasdaq Capital Market. The Company has previously traded on the Nasdaq Global Market. This listing transfer is a reassignment based on the current market value of the Company’s publicly held securities and has no effect on the trading of the Company’s common stock. The Company is currently in compliance with all Nasdaq Capital Market listing requirements.

Jones Lang LaSalle, the leading integrated financial and professional services firm specializing in real estate, announced today that it was selected by SunTrust Banks, Inc. (NYSE: STI), an Atlanta-based financial holding company, to provide integrated facility management to its 16 million-square-foot portfolio located throughout Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia and Washington, DC.

Between Friday, July 10 and Thursday, July 16, 2009, Texas Industries (NYSE:TXI) helped to build a new home for the Marshall family with the crew of Extreme Makeover: Home Edition (EMHE). The episode is scheduled to air at 7:00 p.m. Central Time on Sunday, October 18, 2009 on ABC.

Comcast Demos Prototype iPad App For Controlling Your Cable Box

Now, this is a nifty use of the Apple (AAPL) iPad.

At an event at The Cable Show in Los Angeles today, Comcast (CMCSA) CEO Brian Roberts gave a cool demo of a prototype iPad app for controlling your cable box.

The app pops up a guide that looks a lot like the one on your TV, with a few key improvement. One, it’s a touch screen, so you can flick through the guide. Two, you have a pop-up keyboard, so you can search for programming by name. And three, you are on the Internet, so you can add social networking features, like inviting people to watch along with you, and live chat. Basically, the app turns your iPad into a souped-up remote control, fixing a lot of what is wrong with regular remotes.

Comcast is actually planning to offer the application on a range of IP-enables devices – not just the iPad – but it would be hard to find a better form-factor for controlling your TV content.

No official word from Comcast on when it might deliver the app, but in a blog post the company said that it has “developers working now to finish and launch this application.”

Update: A spokesperson for the company said the app will be available later this year.

Here’s a video of the demo: