Friday, May 31, 2013
Shell's Misadventures in Alaska
Though Royal Dutch Shell (NYSE: RDS-A ) has made major strides over the past decade in overcoming the negativity surrounding the 2004 reserve overstatement scandal, which led to the ouster of its CEO and other top executives, the company continues to be plagued by operational blunders that are straining its relationships with shareholders.
At the company's annual meeting last Tuesday, top executives were overwhelmed by a barrage of questions from anxious shareholders about the company's beleaguered oil campaign off the northern coast of Alaska, which, despite nearly $5 billion of investment, has yet to produce a single drop of oil. Many even urged the company to overhaul its operations and strategy in the region altogether. Let's take a closer look.
Trying times for Shell in Alaska
Shell's Alaskan oil campaign has been beset by various challenges, including regulatory and legal hurdles, as well as equipment failures. Last summer, the company was planning to drill five exploratory wells but was forced to push back its plans after the containment dome – a crucial piece of safety equipment intended to prevent oil spilling into the Arctic sea – was damaged during the test phase.
Then, on New Year's Eve, one of its two Alaskan drillships, the Kulluk, ran aground near Kodiak Island in the Gulf of Alaska. Shortly thereafter, a company official told a U.S. Coast Guard panel that, just days before the accident, it was clear to him that towing issues posed a serious threat to the safety of the vessel. As if that wasn't enough bad publicity for the Hague-based company, more incriminating evidence has emerged this past week.
On Saturday, Sean Churchfield, Shell's Alaskan operations manager, testified during a hearing that the Kulluk was ordered to leave its port mainly due to financial considerations. Had the drillship remained stationed at Alaska's Dutch Harbor, Shell would have had to pay millions of dollars in taxes, he revealed. His testimony flies in the face of statements he made immediately after the accident, in which he argued that tax considerations did not play a role in the drillship's departure from its port.
Additional reviews and investigations
Even before this information emerged, the U.S. Department of the Interior initiated a review of Shell's practices, which determined that it was "not fully prepared" when it entered last year's drilling season and that its management of contractors illustrated "serious deficiencies" in its operations. The departmental review concluded with a harsh warning, asking the company to completely overhaul its plans before being permitted to resume drilling in the Alaskan Arctic.
In addition to the Department of Interior investigation, Shell faces other serious probes that could result in civil or criminal convictions. The U.S. Department of Justice, for instance, is considering imposing sanctions on the company for violations that allegedly occurred on both of its Arctic drillships.
In the wake of these incidents and elevated regulatory scrutiny, other companies looking to drill in the region are also rethinking their operations. ConocoPhillips (NYSE: COP ) , for instance, has cancelled its plans to drill in the Chukchi Sea due to federal regulatory uncertainty, while Statoil (NYSE: STO ) , which also holds leases in Chukchi, said last year that it would delay drilling in the American Arctic until 2015.
Implications for integrated oil companies
As Shell's experience highlights, the world's largest integrated oil companies are taking on tremendous risk by venturing into remote parts of the world in search of oil. In doing so, they are offered no guarantee of success, while taking on challenges ranging from political and regulatory uncertainty to harsh climates and equipment failures.
All told, Shell still has a way to go before it can spend more freely. While cash flow has doubled over the past three years, its capital budget has also grown by leaps and bounds. This year, the company plans on spending $34 billion, about $8 billion more than it thought it would spend in 2011.
Minimizing operational blunders, such as those in Alaska and Nigeria – where oil spills, theft, and vandalism have cost the company 60,000 barrels of oil a day in lost production – and capital efficiency will be crucial for the company to keep shareholders happy and sustain its generous 4.7% dividend.
Though Shell and the rest of the oil majors are having difficulty boosting production, companies focused exclusively on exploration and production are having better luck. Chesapeake Energy, for instance, has reported nearly 40% year-over-year growth in liquids production. As the company transitions away from natural gas, will it manage to meet its oil production target and boost cash flow? Or will it languish under the weight of its heavy debt load? To answer that question and to learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy, and as an added bonus, you'll receive a full year of key updates and expert guidance as news continues to develop.
Why Spotting Bubbles Is So Much Harder Than You Think
It's that time again.
A growing group of pessimists are asking whether the stock market is back to bubble territory. Some are even comparing it to 1999. They say stocks are being inflated by the Fed. That they're disconnected from the reality of a weak economy. That they're overvalued and bound to fall.
Could they be right? Of course.
They make a forceful case with charts and ratios and historical data.
But they have been making the same argument for four years now, and they have been wrong all the way. Clearly, the world is more complicated than the pessimists assume.
Consider that the S&P 500 has risen as much as 60% since these quotes went to press:
"The S&P 500 is about 40 percent overvalued" -- October, 2009
"US Stocks Surge Back Toward Bubble Territory" -- January, 2010
"On a valuation basis, the S&P 500 remains about 40% above historical norms on the basis of normalized earnings." -- July, 2010
"Is The Stock Market Overvalued? Almost Every Important Measure Says Yes" -- November, 2010
"The market is as overvalued now as it was undervalued [in early 2009]," said David A. Rosenberg, chief economist and strategist for Gluskin Sheff, an investment firm." -- March, 2010
"Andrew Smithers, an excellent economist based in London, is telling us that we're way too optimistic, that fair value for the S&P 500 is actually in the 700-750 range. Smithers, therefore, thinks the stock market is about 50% overvalued." -- June, 2010
Sure, you might say these calls were just early. But let me put forth a truism in finance: When an average business cycle lasts five years, there is no such thing as four years ahead of the game. You are just wrong.
Some of the bubble arguments haven't changed in the face of a 50% rally. Take the cyclically adjusted price/earnings ratio, or CAPE. In 2010, the S&P 500, which traded near the 1,000 level, had a CAPE valuation of around 22, which many pointed out was about 40% above historic norms. Today, trading above 1,600, the S&P 500 has a CAPE of about ... 23. Even as the market exploded higher, the degree to which the market is supposedly overvalued hasn't changed that much, since companies have been busy investing in their operations and boosting earnings. That's why being four years early means being four years wrong.
My point here isn't to relish in other people's bad predictions -- although I never tire of doing so. And let's state loud and clear: The higher the market goes today, the lower returns will be tomorrow. There will be more recessions, pullbacks, crashes, and panics in the future.
But there are several lessons we can learn from four years of failed bubble predictions.
1. Never rely on single-variable analysis.
Einstein said, "Everything should be made as simple as possible, but not simpler."
Wall Street blew up in 2008 after relying on mind-blowingly complex forecasting models that attempted to measure risk out to the fifth decimal point. Most investors now realize how flawed these complicated models were. But then they turn around and do the opposite, dramatically oversimplifying by trying to explain the global economy with a single metric. That's just as crazy.
History tells us that the single best gauge of future market returns is current valuations. But even a rational valuation measure like CAPE only has a small amount of predictive power.
The single most powerful variable when trying to predict the future is the "X" factor that represents human psychology, historical unknowns, and random chance. It doesn't care about your political views or what you think is a fair market value, and it's going to humiliate your predictions 90% of the time.
2. Realize that some analysts are stubborn to a fault
Some people predicted the financial crisis in 2008. And good for them. But many of them also predicted a financial crisis in 2007, 2006, 2005, 1997, 1995, 1992, 1985, 1970, and so on. They are perma-bears who get ignored during booms and lionized during busts, even though their arguments rarely change. It's the classic broken-clock-is-right-twice-a-day syndrome.
Author Daniel Gardner wrote earlier this year:
In 2010, [Robert] Prechter said the Dow would crash to 1,000 this year or in the near future. The media loved it. Prechter's call was reported all over the world. Which was nice for Prechter.
Even better, very few reporters bothered to mention that Prechter has been making pretty much the same prediction since 1987.
It was similar for investor Peter Schiff. There's a great YouTube video -- worthy of some 2.1 million views -- of Schiff predicting a market crash circa 2007. That was an excellent call. But here's another video of Schiff in 2002 predicting all kinds of gloom that never happened. Sadly, that video received only a handful of views. Gardner writes in his book Future Babble:
[Schiff predicted the 2008 crisis,] but it's somewhat less amazing if you bear in mind that Schiff has been making essentially the same prediction for the same reason for many years. And the amazement fades entirely when you learn that the man Schiff credits for his understanding of economics -- his father, Irwin -- has been doing the same at least since 1976.
The ideal pundit is one with a flexible mind who doesn't become wedded to forecasts for ideological reasons. Alas, few of them exist.
3. Missing a rally can be more devastating that getting caught in a crash
The vast majority of entrepreneurs, business leaders, policymakers, teachers, and consumers try hard to make the world a better, more productive place. In aggregate, they succeed the vast majority of the time. That's why there's a strong upward bias to equity markets over time.
It's also why missing a market rally can be a bigger risk to your finances than getting caught up in a crash. Getting caught in a crash usually means having to wait a few years at most -- which everyone invested in stocks should be prepared to do. But missing a rally can be a permanently lost opportunity. People spend so much time trying to avoid temporary pullbacks that they forego enduring market gains. If that's your thing, stick with bonds -- stocks aren't for you. I can say with high confidence that over the next 20 years we will have several severe market pullbacks, yet stocks will trade substantially higher than they do now. Why focus on the former and ignore the latter?
Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.
Thursday, May 30, 2013
How British American Tobacco Measures Up as a GARP Investment
LONDON -- A popular way to dig out reasonably priced stocks with robust growth potential is through the "Growth at a Reasonable Price," or GARP, strategy. This theory uses the price-to-earnings to growth (PEG) ratio to show how a share's price weighs up in relation to its near-term growth prospects -- a reading below 1 is generally considered decent value for money.
Today, I am looking at British American Tobacco (LSE: BATS ) (NYSEMKT: BTI ) to see how it measures up.
What are British American Tobacco's earnings expected to do?
| EPS Growth | 10% | 9% |
| P/E Ratio | 16 | 14.6 |
| PEG Ratio | 1.6 | 1.6 |
Source: Digital Look.
British American Tobacco has posted strong double-digit growth in four of the past five years, with last year's 6% expansion proving the exception, and the firm is expected to keep earnings rolling higher over the medium term.
At current prices, the firm's PEG reading registers above the benchmark representing good value, however. And the tobacco specialist's price-to-earnings (P/E) ratio is also running above the value benchmark of 10 for this period.
Does British American Tobacco provide decent value against its rivals?
| Prospective P/E Ratio | 17.1 | 14 |
| Prospective PEG Ratio | 4.8 | 2.2 |
Source: Digital Look.
British American Tobacco surpasses the FTSE 100 average in terms of both PEG and P/E ratings, and although it lags the broader tobacco sector when considering the latter reading, a superior PEG ratio illustrates the company's better growth potential.
At first glance, British American Tobacco would not appear to be a traditional GARP investment owing to a PEG reading above 1, even though the reading is not excessively high. Still, for those looking for reliable earnings growth over a long time horizon, I believe the firm is worthy of strong consideration.
Developing markets ready to drive earnings
British American Tobacco advised in last month's interims that revenues nudged 5% higher during the first quarter, although news of a 3.7% slip in cigarette volumes, to 160 billion sticks, concerned investors that demand may be waning for its products.
Even as enduring financial woes in Europe continues to hamper performance, I believe that the firm's revenues should continue to grow as off-take from emerging regions heads skywards. Demand from Asia-Pacific rose 6.7% on an annual basis to 48 billion sticks, the firm noted, and it is hiking its activities in these regions to cash in on these lucrative markets.
And helping to mitigate fears over reduced groupwide volumes last quarter, British American Tobacco advised that "the pricing environment remains strong," and the company is able to use its catalogue of marquee Global Brands -- namely Lucky Strike, Dunhill, Kent, and Pall Mall -- to maintain its pricing power and keep margins steady.
The firm is also tipped to launch its Vype e-cigarette technology in Europe in the next few months, according to recent reports from Sky News, giving it a strong foothold in another rapidly growing market.
Multiply your investment income with the Fool
If you already hold shares in British American Tobacco, and are looking for more FTSE 100 winners to really jump-start your investment income, then you should check out this brand-new and exclusive report covering a multitude of other premium payers right now.
Our "5 Dividend Winners to Retire On" wealth report highlights a selection of tasty stocks with an excellent record of providing juicy shareholder returns. Among our picks are top retail, pharmaceutical, and utilities plays that we are convinced should continue to provide red-hot dividends. Click here to download the report -- it's 100% free and comes with no obligation.
link
Big Banks Pull Dow Higher as Housing Improves
The day-to-day movements of the stock market can be hard to decipher, and today is a classic head-scratcher. This morning it was reported that the U.S. economy grew just 2.4% in the first quarter, falling short of the previous estimate of 2.5%, while jobless claims rose 10,000 to 354,000 . Still, the Dow Jones Industrial Average (DJINDICES: ^DJI ) is up 0.54% near the end of the trading session, and the S&P 500 (SNPINDEX: ^GSPC ) has risen 0.75%.
The big banks are leading the charge, with Bank of America (NYSE: BAC ) up 3% and JPMorgan (NYSE: JPM ) gaining 2.1%. RealtyTrac said that foreclosure sales fell 18% sequentially in the first quarter and were down 22% from a year ago. This is just the latest sign that housing has recovered, and a drop in foreclosures means Bank of America and JPMorgan are being paid back for loans outstanding.
The National Association of Realtors also said that pending home sales were up 0.3% in April -- another strong sign for housing. It's been a long road to recovery for housing, but data this year has shown strong improvement, and that will continue to drive big banks higher.
Bank of America's stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it's critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool's premium research report on B of A, analysts Anand Chokkavelu, CFA, and financials bureau chief Matt Koppenheffer lift the veil on the bank's operations, detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.
Shares of Disney (NYSE: DIS ) are down 2.3% after the company hit the headlines for all the wrong reasons. First, a patron at Disney World found a loaded gun on a ride where another patron lost it. Then, a Disneyland employee was charged with possession of a destructive device following a small explosion in Mickey's Toontown on Tuesday. The explosion was reportedly caused by two water bottles filled with dry ice, and early reports say this was a prank.
This isn't good news in the short term for Disney, but in the long term it doesn't change the investment thesis for the stock. Disney is still a well-positioned media company with one of the best assets in the business in ESPN. Today's drop is a blip on the radar and can be seen as a buying opportunity for investors looking to jump in.
#pitch{ margin-bottom: 15px; }Making the Most of the Eagle Ford Shale
There are a handful of companies that may be on the verge of discovering the next big shale play, but because the Eagle Ford has been so prolific over the past two years, these initiatives remain "wait and see" stories. In this video, Fool.com contributor Aimee Duffy addresses two such developments, and gives us an update on the overall production numbers for the Eagle Ford, helping to explain exactly why oil producers can't focus on anything else right now.
It isn't solely oil companies making big investments in the Eagle Ford -- it's midstream companies as well. Enterprise Products Partners is one such company spending big money -- and seeing big returns. To help investors decide whether Enterprise Products Partners is a buy or a sell today, click here now to check out The Motley Fool's brand-new premium research report on the company.
Northrop Grumman Is Looking Desperate
Last week, Northrop Grumman (NYSE: NOC ) announced a plan to buy back $5 billion worth of shares, hoping to retire 25% of its share count over the next two-and-a-half years. But why is Northrop buying back stock?
And should it be?
And can it afford to?
And can it afford not to?
Listen in as Fool contributor Rich Smith lays out the answers to these and other questions you may not even have thought of yet.
Boeing is another major player in the multitrillion-dollar defense market, in which the opportunities and responsibilities are absolutely massive. However, emerging competitors and the company's execution problems have investors wondering whether Boeing will live up to its shareholder responsibilities. In our premium research report on the company, two of The Motley Fool's best minds on industrials have collaborated to provide investors with the key, must-know issues surrounding Boeing. They'll be updating the report as key news hits, so don't miss out -- simply click here now to claim your copy today.
Wednesday, May 29, 2013
Shareholders Still Dealing With Troublesome Nabors
What's the best way to win an election? Make sure nobody runs against you!
Unfortunately for shareholders, Nabors Industries (NYSE: NBR ) wants to ensure it continues to have this advantage even though a majority of shares voted against the practice last year.
But shareholders are fighting back and putting up a renewed effort to gain the right to proxy access (i.e., the right to list their own director nominees on the proxy). The same proxy access proposal that passed in 2012 appears on Nabors' 2013 proxy, despite the company's effort to gain permission from the SEC to omit it. We'll know the preliminary shareholder voting results on June 4.
Governance woes
I believe shareholders have been poorly represented under Nabors' current leadership. For example, in addition to failing to implement a proposal calling for proxy access that received 56% of share votes, the company also failed to implement a compensation-related shareholder proposal that received 66% of share votes.
In contrast, Chesapeake Energy (NYSE: CHK ) responded to majority support for proxy access in 2013 by sponsoring its own proxy access proposal in its 2013 proxy, while Hewlett-Packard (NYSE: HPQ ) sponsored its own proxy access proposal in its 2013 proxy in response to shareholder demands, and Western Union (NYSE: WU ) responded to shareholder pressure by granting some shareholders the right to post director nominees on the ballot.
I also believe shareholders have a reason to blame Nabors' leadership for creating executive compensation plans that failed to gain majority shareholder support in 2011 and 2012. In fact, the company's 2012 plan was so controversial that it managed to gain only 25% support from shareholders. The perks offered to executives and board directors were shady enough to attract the SEC's attention in 2011.
Benefits of proxy access
Given these governance disasters, it shouldn't be a surprise that shareholders want more of a say over who will represent them on the board of directors.
Without proxy access, shareholders' ability to oust underperforming directors is limited because Nabors has to list only directors nominated by company insiders on its ballot. The only way shareholders can nominate alternative directors can is by pouring money into an expensive proxy contest.
With no alternative candidates, there's no guarantee that directors will leave even if they fail to receive majority support. Consider the case of Cablevision (NYSE: CVC ) . In 2010 and 2012, directors Thomas V. Reifenheiser, John R. Ryan, and Vincent S. Tese remained on the board even though they all failed to receive majority support in the company's 2010 and 2012 elections. Worse, Cablevision renominated the shunned directors yet again in 2013.
Even if a company does get rid of directors who fail to receive majority support in uncontested elections, shareholders have to trust the board to select new board members that will better represent their interests.
In short, without proxy access, shareholders have a limited ability to hold directors accountable for underperformance.
The Foolish takeaway
The procedural concerns associated with shareholders' limited ability to nominate director candidates becomes especially significant at companies where leadership compromises our trust, as I believe Nabors' leadership has repeatedly done. If the proposal passes again, and Nabors actually implements it, then I think we may see some positive changes. As it is, I think investors should be reluctant to own the stock until the company's management and board begin to make decisions that better reflect shareholders' interests.
These 3 Stocks Are Pushing the Dow to Finish Higher
The stock market is slipping after the Organization for Economic Cooperation and Development cut its outlook for global growth. As of 1:25 p.m. EDT the Dow Jones Industrial Average (DJINDICES: ^DJI ) is down 123 points, or 0.8%, to 15,287. The S&P 500 (SNPINDEX: ^GSPC ) is down 0.78% to 1,647.
There were no U.S. economic releases today. The OECD now believes global growth will be 3.1% in 2013, down from its earlier forecast of 3.4%. It revised its 2014 growth forecast downward from 4.2% to 4%. The biggest reasons for the drop are the eurozone and Chinese economies. The OECD now expects the eurozone to shrink by 0.6% in 2013, worse than its previous prediction of a 0.1% contraction. In China, the OECD expects the economy to grow just 7.8% this year, down from a previous projection of an 8.5% gain. As many U.S. companies now get nearly 50% of their revenue from abroad, the effects of slower global growth are quickly felt, which is why the stock market is down today.
Today's Dow leader
Today's Dow leader is Hewlett-Packard (NYSE: HPQ ) , up 1.3% to make it one of just four Dow stocks up for the day. HP and other PC stocks got crushed in April when IDC announced that PC shipments declined year over year by 14%, the worst drop in history for the PC market. Yesterday, IDC announced that it now expects PC sales to decline by only 1.2% next year after a dismal drop of 8% this year. The company expects that sales will slow less as Microsoft makes changes to Windows 8 and stops supporting Windows XP next year, prompting companies to upgrade to Windows 8 and buy new computers at the same time.
HP has been diversifying away from reliance on the PC market under the leadership of Meg Whitman, and its turnaround is slowly beginning to bear fruit: The company reported better-than-expected earnings last week on the strength of its printing and enterprise IT segments. But does this make HP one of the least-appreciated turnaround stories on the market, or is this a minor detour on its road to irrelevance? The Motley Fool's technology analyst details exactly what investors need to know about HP in our new premium research report. Just click here now to get your copy today.
Second for the Dow today is Bank of America (NYSE: BAC ) , up 1% after Moody's upgraded the banking system from "negative" to "stable." Later this week Bank of America goes to court over whether or not its $8.5 settlement with 22 institutional investors was reasonable. If the court decides the settlement was not appropriate, the bank could be on the hook for a larger penalty over Countrywide, as well as a long court battle.
Third for the Dow today is Cisco (NASDAQ: CSCO ) , up almost 1%, making it a top-three Dow stock for the second day in a row. Today Cisco announced that it is acquiring JouleX for $107 million. Cisco is a serial acquirer that has fended off being disrupted by continuously making small acquisitions of promising upstarts. JouleX automates energy management for enterprise customers running large networks in an effort to "reduce energy consumption and realize cost savings." There is lots to like about Cisco, including a low valuation, a 2.9% dividend, and more than $6 per share of net cash.
#pitch{ margin-bottom: 15px; }10 Best Construction Stocks To Own For 2014
On this day in economic and business history ...
The Panic of 1893 reached its frenzied apex on May 5, 1893. This event, and the depression that followed it, represent a major turning point in the economic growth of the United States. Let's take a good look at what happened that day, and how it changed the country.
The signs were not always obvious, but by the spring of 1893 it was increasingly apparent that the American economy was slowing. Construction of all sorts had been in decline for the past year. Consumption and production trends fell across a broad range of materials (cotton, rubber, iron, coal, crude oil, and so on) throughout the early months of 1893. Vicious cycles of overproduction and weather-diminished poor harvests had ground all prosperity out of agriculture. Railroad shares, which had driven a huge investment boom through the decade's early years, were starting to wobble, as many shaky business models became apparent throughout the sector.
10 Best Construction Stocks To Own For 2014: Foster Wheeler AG. (FWLT)
Foster Wheeler AG, through its subsidiaries, operates as an engineering and construction contractor; and power generating equipment supplier worldwide. Its Global Engineering and Construction division designs, engineers, and constructs onshore and offshore upstream oil and gas processing facilities; natural gas liquefaction facilities and receiving terminals; gas-to-liquids facilities; and oil refining, chemical and petrochemical, pharmaceutical, and biotechnology facilities, as well as related infrastructure, including power generation, distribution, gasification, and processing facilities for metals and mining sector. This division also designs carbon capture and storage, and solid fuel-fired integrated gasification combined-cycle power plants, as well as coal-to-liquids, coal-to-chemicals, and biofuels facilities; and operates power generation facilities, such as conventional and renewable source, and waste-to-energy facilities. In addition, it offers project and constr uction management services, including procurement of equipment, materials, and services from third-party suppliers and contractors; provides environmental remediation services; and designs and supplies direct-fired furnaces comprising fired heaters and waste heat recovery generators used in refinery, chemical, petrochemical, and oil and gas processes. The company�s Global Power division designs, manufactures, and erects steam generators and auxiliary equipment, including surface condensers, feedwater heaters, coal pulverizers, steam generator coils and panels, biomass gasifiers, and replacement parts; nitrogen-oxide reduction systems and components; and flue gas desulfurization equipment for steam generators. It also offers various site services; conducts research and development in combustion, fluid and gas dynamics, heat transfer, materials, and solid mechanics areas; and licenses technology to other steam generator suppliers. The company was founded in 1894 and is based in Geneva, Switzerland.
10 Best Construction Stocks To Own For 2014: CEMEX SAB de CV (CX)
CEMEX, S.A.B. de C.V. (CEMEX), incorporated on January 20, 1931, is a global cement manufacturer with operations in North America, Europe, South America, Central America, the Caribbean, Africa, the Middle East and Asia. The Company is a holding company engaged through the operating subsidiaries in the production, distribution, marketing and sale of cement, ready-mix concrete, aggregates and clinker. As of December 31, 2009, the Company�� cement production facilities were located in Mexico, the United States, Spain, the United Kingdom, Germany, Poland, Croatia, Latvia, Colombia, Costa Rica, the Dominican Republic, Panama, Nicaragua, Puerto Rico, Egypt, the Philippines and Thailand.
The Company manufactures cement through a closely controlled chemical process, which begins with the mining and crushing of limestone and clay, and, in some instances, other raw materials. The clay and limestone are then pre-homogenized, a process which consists of combining different types of clay and limestone. The mix is typically dried, then fed into a grinder, which grinds the various materials in preparation for the kiln. The raw materials are calcined, or processed, at a very high temperature in a kiln, to produce clinker. Clinker is the intermediate product used in the manufacture of cement.
Ready-mix concrete is a combination of cement, fine and coarse aggregates, admixtures (which control properties of the concrete including plasticity, pumpability, freeze-thaw resistance, strength and setting time), and water. The Company is a supplier of aggregates primarily the crushed stone, sand and gravel, used in virtually all forms of construction.
Mexican Operations
During the year ended December 31, 2009, the Mexican operations represented approximately 21% of the Company�� net sales. CEMEX Mexico is a direct subsidiary of CEMEX and is both a holding company for some of the operating companies in Mexico and an operating company involved in the manufacturing and ma! rketing of cement, plaster, gypsum, groundstone and other construction materials and cement by-products in Mexico. CEMEX Mexico, indirectly, is also the holding company for the international operations. The Company owns Tolteca, Monterrey, Maya, Anahuac, Campana, Gallo, and Centenario brands in Mexico. As of December 31, 2009, the Company owned 100% of CEMEX Mexico.
The Company competes with Holcim Ltd., Sociedad Cooperativa Cruz Azul, Cementos Moctezuma, Grupo Cementos Chihuahua and Lafarge Cementos in Mexico.
U.S. Operations
As of December 31, 2009, the Company�� operations in the United States represented approximately 19% of the Company�� net sales. As of December 31, 2009, the Company held 100% of CEMEX, Inc. As of December 31, 2009, CEMEX had a cement manufacturing capacity of approximately 17.9 million tons per year in the United States operations. As of December 31, 2009, the Company operated 14 cement plants located in Alabama, California, Colorado, Florida, Georgia, Kentucky, Ohio, Pennsylvania, Tennessee and Texas. As of December 31, 2009, it also had 48 rails or water served active cement distribution terminals in the United States. As of December 31, 2009, the Company had 336 ready-mix concrete plants located in the Carolinas, Florida, Georgia, Texas, New Mexico, Nevada, Arizona, California, Oregon and Washington and aggregates facilities in North Carolina, South Carolina, Arizona, California, Florida, Georgia, Kentucky, New Mexico, Nevada, Oregon, Texas, and Washington.
Spanish Operations
As of December 31, 2009, the operations in Spain represented approximately 5% of the Company�� net sales. As of December 31, 2009, the Company held approximately 99.8% of CEMEX Espana, the main operating subsidiary in Spain. The cement activities in Spain are conducted by CEMEX Espana. The ready-mix concrete activities in Spain are conducted by Hormicemex, S.A., a subsidiary of CEMEX Espana, and the aggregates activities in Spain ar! e conduct! ed by Aricemex S.A., also a subsidiary of CEMEX Espana.
U.K. Operations
As of December 31, 2009, the Company�� operations in the United Kingdom represented approximately 8% of the Company�� net sales. As of December 31, 2009, it held 100% of CEMEX Investments Limited, the holding subsidiary in the United Kingdom. The Company is a provider of building materials in the United Kingdom with vertically integrated cement, ready-mix concrete, aggregates and asphalt operations. It is also a provider of concrete and precast materials solutions, such as concrete blocks, concrete block paving, roof tiles, flooring systems and sleepers for rail infrastructure.
The Company competes with Lafarge, Heidelberg, Tarmac, and Aggregate Industries in the United Kingdom.
German Operations
As of December 31, 2009, the operations in the Rest of Europe consisted of the operations in Germany, France, Ireland, Poland, Croatia, the Czech Republic, Latvia, Austria and Hungary, as well as the other European assets. The Company is a provider of building materials in Germany, with vertically integrated cement, ready-mix concrete, aggregates and concrete products operations (consisting mainly of prefabricated concrete ceilings and walls). It maintains a network for ready-mix concrete and aggregates in Germany. As of December 31, 2009, the Company held 100% of CEMEX Deutschland AG, the holding subsidiary in Germany.
The Company competes with Heidelberg, Dyckerhoff, Lafarge, Holcim and Schwenk in Germany.
French Operations
As of December 31, 2009, the Company held 100% of CEMEX France Gestion (S.A.S.), the holding subsidiary in France. It is a ready-mix concrete producer and aggregate producer in France. As of December 31, 2009, the Company operated 239 ready-mix concrete plants in France, one maritime cement terminal located in LeHavre, on the northern coast of France, 20 land distribution centers and 42 aggregates quarries.
The Company competes with Lafarge, Holcim, Italcementi, Vicat, Lafarge, Italcementi, Colas (Bouygues) and Eurovia (Vinci) in France.
Irish Operations
As of December 31, 2009, the Company held approximately 61.2% of Readymix Plc, the operating subsidiary in the Republic of Ireland. The operations in Ireland produce and supply sand, stone and gravel, as well as ready-mix concrete, mortar and concrete blocks. As of December 31, 2009, we operated 43 ready-mix concrete plants, 27 aggregates quarries and 15 block plants located in the Republic of Ireland, Northern Ireland and the Isle of Man. The Company imports and distributes cement in the Isle of Man.
The Company competes with CRH, the Lagan Group and Kilsaran in the Republic of Ireland.
Polish Operations
As of December 31, 2009, the Company held 100% of CEMEX Polska Sp. z.o.o. (CEMEX Polska), the holding subsidiary in Poland. It is a provider of building materials in Poland serving the cement, ready-mix concrete and aggregates markets. As of December 31, 2009, CEMEX operated two cement plants and one grinding mill in Poland, with a total installed cement capacity of three million tons per year. As of December 31, 2009, the Company also operated 39 ready-mix concrete plants and nine aggregates quarries in Poland. As of December 31, 2009, the Company also operated 10 land distribution centers and two maritime terminals in Poland.
The Company competes with Heidelberg, Lafarge, CRH and Dyckerhoff in Poland.
Southeast European Operations
As of December 31, 2009, the Company held 100% of CEMEX Hrvatska d.d. (Hrvatska), the operating subsidiary in Croatia. As of December 31, 2009, it operated three cement plants in Croatia, with an installed capacity of 2.4 million tons per year. As of December 31, 2009, the Company also operated ten land distribution centers, three maritime cement terminals, eight ready-mix concrete facilities and one aggregates quarry! in Croat! ia, Bosnia and Herzegovina, Slovenia, Serbia and Montenegro.
Best High Dividend Companies To Own In Right Now: Clean Wind Energy Tower Inc (CWET.PK)
Clean Wind Energy Tower, Inc. (Clean Wind), incorporated on January 22, 1962, focuses on becoming a provider of green energy. As of December 31, 2011, Clean Wind had designed and was preparing to develop, and construct Downdraft Towers that use non-toxic elements to generate electricity and clean water by integrating and synthesizing a range of proven, as well as emerging technologies.
The Downdraft Tower is a hollow cylinder with a water spray system at the top. Pumps deliver water to the top of the Downdraft Tower to spray a fine mist across the entire opening. The water evaporates and cools the hot dry air at the top. The cooled air is denser and heavier than the outside warmer air and falls through the cylinder at speeds up to and in excess of 50 miles per hour (mph), driving the turbines located at the base of the structure. The turbines power generators to produce electricity.
The Company competes with Southern California Edison Company, Pacific Gas & Electric Company, San Diego Gas & Electric Company, Arizona Public Service Company, Florida Power & Light Company, enXco, Inc., PPM Energy, Inc. and UNS.
10 Best Construction Stocks To Own For 2014: Fluor Corporation(FLR)
Fluor Corporation, through its subsidiaries, provides engineering, procurement, construction, maintenance, and project management services worldwide. Its Oil & Gas segment offers design, engineering, procurement, construction, and project management services to upstream oil and gas production, downstream refining, chemicals, and petrochemicals industries. This segment also provides consulting services comprising feasibility studies, process assessment, and project finance structuring and studies. The company?s Industrial & Infrastructure segment offers design, engineering, procurement, and construction services to the transportation, wind power, mining and metals, life sciences, manufacturing, commercial and institutional, telecommunications, microelectronics, and healthcare sectors. Its Government segment provides engineering, construction, logistics support, contingency response, management, and operations services to the United States government focusing on the Departme nt of Energy, the Department of Homeland Security, and the Department of Defense. The company?s Global Services segment offers operations and maintenance, small capital project engineering and execution, site equipment and tool services, industrial fleet services, plant turnaround services, temporary staffing services, and supply chain solutions. Its Power segment provides engineering, procurement, construction, program management, start-up and commissioning, and operations and maintenance services to the gas fueled, solid fueled, plant betterment, renewables, nuclear, and power services markets. The company also offers unionized management and construction services in the United States and Canada. Fluor Corporation was founded in 1912 and is headquartered in Irving, Texas.
10 Best Construction Stocks To Own For 2014: URS Corporation(URS)
URS Corporation provides engineering, construction, and technical services to the power, infrastructure, federal, and industrial and commercial market sectors in the United States and internationally. Its services for power sector include planning, designing, engineering, constructing, retrofitting, and maintaining a range of power-generating facilities; and the systems that transmit and distribute electricity, as well as the development and installation of clean air technologies that reduce emissions at fossil fuel power plants. The company?s services for infrastructure sector comprise program management, planning, architect, engineering, general contracting, construction, and construction management for surface, air, and rail transportation networks; ports and harbors; and water supply, and treatment and conveyance systems. Its services for federal sector consist of program management; planning, design, and engineering; systems engineering and technical assistance to con struction and construction management; operations and maintenance; and decommissioning and closure primarily for the United States federal government and national governments of other countries. URS Corporation?s services for industrial and commercial sector include front-end studies, engineering and process design, procurement, construction and construction management, facility management, and operations and maintenance, as well as due diligence, permitting, compliance, environmental management, pollution control, health and safety, waste management, and hazardous waste remediation. The company was formerly known as Broadview Research Corporation and changed its name to URS Corporation in 1976. URS Corporation was founded in 1904 and is headquartered in San Francisco, California.
10 Best Construction Stocks To Own For 2014: Tutor Perini Corporation(TPC)
Tutor Perini Corporation, together with its subsidiaries, provides diversified general contracting, construction management, and design-build services to private clients and public agencies worldwide. It operates in three segments: Civil, Building, and Management Services. The Civil segment involves in public works construction, and the repair, replacement, and reconstruction of infrastructure. This segment?s civil contracting services include construction and rehabilitation of highways, bridges, mass transit systems, and wastewater treatment facilities. The Building segment provides services to various specialized building markets for private and public works clients, such as the hospitality and gaming, transportation, healthcare, municipal offices, sports and entertainment, education, correctional facilities, biotech, pharmaceutical, industrial and high-tech markets, electrical and mechanical, plumbing, and HVAC services. The Management Services Segment offers diversifie d construction and design-build services to the United States military and government agencies, surety companies, and multi-national corporations in the United States and internationally. This segment also provides rapid response and contract completion services; and management or general contracting services to fulfill the contractual and financial obligations of the surety on notification from the surety of a contractor bond default. The company was founded in 1894 and is headquartered in Sylmar, California.
10 Best Construction Stocks To Own For 2014: Clean Wind Energy Tower Inc (CWET)
Clean Wind Energy Tower, Inc. (Clean Wind), incorporated on January 22, 1962, focuses on becoming a provider of green energy. As of December 31, 2011, Clean Wind had designed and was preparing to develop, and construct Downdraft Towers that use non-toxic elements to generate electricity and clean water by integrating and synthesizing a range of proven, as well as emerging technologies.
The Downdraft Tower is a hollow cylinder with a water spray system at the top. Pumps deliver water to the top of the Downdraft Tower to spray a fine mist across the entire opening. The water evaporates and cools the hot dry air at the top. The cooled air is denser and heavier than the outside warmer air and falls through the cylinder at speeds up to and in excess of 50 miles per hour (mph), driving the turbines located at the base of the structure. The turbines power generators to produce electricity.
The Company competes with Southern California Edison Company, Pacific Gas & Electric Company, San Diego Gas & Electric Company, Arizona Public Service Company, Florida Power & Light Company, enXco, Inc., PPM Energy, Inc. and UNS.
10 Best Construction Stocks To Own For 2014: KBR Inc. (KBR)
KBR, Inc. operates as an engineering, construction, and services company supporting the energy, hydrocarbon, government services, minerals, civil infrastructure, power, and industrial sectors worldwide. Its Downstream business unit provides front end engineering design; detailed engineering; engineering, procurement, and construction (EPC); EPC management; and program management services to petrochemical, refining, coal gasification, and syngas markets. The company?s Government and Infrastructure business unit provides program and project management, contingency logistics, operations and maintenance, construction management, engineering, and other services to military and civilian branches of governments and private clients. Its Services business unit delivers engineering, construction, construction management, fabrication, maintenance, and turnaround services. It also offers maintenance, construction, and drilling support services for offshore oil and gas producing facili ties using semisubmersible vessels. This segment serves oil, gas, petrochemicals, and hydrocarbon processing industries, as well as power, alternate energy, pulp and paper, industrial and manufacturing, and pharmaceutical industries. The company?s Technology business unit offers various process technologies, including value-added technologies in the coal monetization, petrochemical, refining, and syngas markets. Its Upstream business unit constructs liquefied natural gas, gas-to-liquids, onshore oil and gas production facilities, offshore oil and gas production facilities, and onshore and offshore pipelines. The company?s Ventures business unit invests in and manages projects, where the company provides engineering, construction, construction management or operations, and maintenance services. KBR, Inc. was founded in 1901 and is based in Houston, Texas.
10 Best Construction Stocks To Own For 2014: Stanley Black & Decker Inc.(SWK)
Stanley Black & Decker, Inc. manufactures tools and engineered security solutions worldwide. The company?s Security segment provides a range of mechanical and electronic security products and systems, as well as various security services consisting of security integration systems, software, and related installation, maintenance, monitoring services; automatic doors, door closers, and exit devices; healthcare storage and supply chain solutions; patient protection products; hardware; and locking mechanisms. This segment sells its products to retailers; educational, financial, and healthcare institutions; and commercial, governmental, and industrial customers through direct sales forces and third party distributors. Its Industrial segment offers mechanics tools and storage systems, including wrenches, sockets, electronic diagnostic tools, tool boxes, and industrial storage and retrieval systems; engineered healthcare storage and retrieval systems; hydraulic tools and accessor ies; plumbing, heating, and air conditioning tools; assembly tools and systems; and specialty tools. This segment sells its products to industrial customers through third party distributors and direct sales forces. The company?s Construction & Do-It-Yourself segment manufactures hand tools, including measuring and leveling tools, planes, hammers, demolition tools, knives and blades, saws, chisels, and consumer tackers; consumer mechanics tools; storage units comprising plastic and metal tool boxes; and pneumatic tools and fasteners for use in construction, remodeling, furniture making, pallet and manufacturing applications. This segment sells its products to professional end users and consumers through retailers, including home centers, mass merchants, hardware stores, and retail lumber yards. The company was formerly known as The Stanley Works and changed its name to Stanley Black & Decker, Inc. in March 2010. Stanley Black & Decker was founded in 1843 and is based in New B ritain, Connecticut.
Advisors' Opinion:- [By SamSam Collins Collins]
Stanley Black & Decker, Inc. (NYSE: SWK ) is the largest producer of power tools and accessories with brands such as Stanley, Black & Decker, FatMax, DeWalt, Bostitch, Porter-Cable, Facom, Emhart Teknologies, Proto, Kwikset and Mac Tools. Sharp sales growth following the acquisition of Black & Decker in March 2010 focuses the company on the construction and do-it-yourself segments.
Credit Suisse has an "outperform" rating on SWK with an earnings estimate of $6.11 for 2012. Their price target is $72. Technically the stock is holding above both its 200-day moving average and its bullish support line. A break above $65 supports a price target of $73.
5 Reasons to Worry About Next Week
The economy is showing signs of fumbling the recovery.
Even though some Fed members have suggested easing back on central bank stimulus, the coast isn't exactly clear. Despite the spike in home sales and this week's better-than-expected report on new claims for jobless benefits, we still saw a report showing that manufacturing has slowed for the second month in a row.
The news isn't just iffy on the macro level. There are also more than a few companies that aren't pulling their own weight in this supposed economic recovery.
There are still plenty of names posting lower earnings than they did a year ago. Let's go over a few of the companies that are expected to go the wrong way on the bottom line next week.
| Seadrill (NYSE: SDRL ) | $0.58 | $0.71 |
| Guidewire (NYSE: GWRE ) | $0.03 | $0.10 |
| Splunk (NASDAQ: SPLK ) | ($0.06) | ($0.04) |
| Yingli Green Energy (NYSE: YGE ) | ($0.43) | ($0.20) |
| Joy Global (NYSE: JOY ) | $1.58 | $2.04 |
Source: Thomson Reuters.
Clearing the table
Let's start at the top with Seadrill. The deep-sea offshore oil-drilling rig contractor has been magnetic to income investors seeking out beefy dividends. Seadrill's 8.4% yield is certainly attractive. Is it sustainable? Payout chasers need to be careful when their investments start reporting dips in profitability. If the trend continues to worsen, the chunky dividend checks will be endangered.
Thankfully, that isn't the case at Seadrill. Yes, net income is expected to take a hit in Tuesday's report, but analyst see earnings climbing 29% for all of 2013 and another 31% come next year.
Guidewire is a provider of enterprise software solutions for the property and casualty insurance industry. It went public last year at $13, and has gone on to more than triple in value. You certainly don't expect that kind of ascending stock chart to be accompanied by a company with profits going the other way.
Top-line growth is still there. The pros see Guidwire's revenue increasing at a reasonable 12% clip in its latest quarter. The problem here is contracting margins, and that often happens when a company is early in its growth cycle and investing in expanding its reach.
Splunk is another of last year's hot IPOs. The "big data" specialist has gone on to more than double since going public at $17.
Splunk provides the software that thousands of companies, government agencies, and universities use to get smarter by analyzing the streams of real-time and historical machine data that can be used to improve operations.
Just like Guidewire, there isn't a growth crisis at Splunk. Analysts see a hearty 45% surge in revenue. The problem here is that Splunk has been losing money. It did manage to squeeze out a rare profitable showing three months ago, but the pros see a return to red ink this time around.
Yingli's future is bright. Few deny the long-term significance of solar energy. The problem for Yingli is that dicey global economies have forced countries and corporations to scale back on the costly initial outlays to go public, leaving the vertically integrated maker of photovoltaic products posting widening losses.
Shares of Yingli did open sharply higher today after it announced a lucrative deal to provide multicrystalline photovoltaic modules to a major Malaysian power plant. However, that deal obviously had no bearing on Yingli's recently concluded quarter.
Finally, we have Joy Global. The maker of mining equipment was a big winner when metal prices were soaring and emerging markets were digging deep for natural resources. It's a different scene these days, and Joy Global joins Yingli as a company projected to post a sharp drop on the bottom line and a double-digit percentage decline in revenue.
Joy Global has managed to beat profit targets in three of its past four quarters, but analysts don't see its revenue growing again on an annual basis until fiscal 2015.
Why the long face, short-seller?
These companies have seen better days. The market has rewarded many of these stocks with reasonable gains over the past year, but they still haven't earned those upticks. Lower earnings translates into higher earnings multiples, and nobody wants to see that happen.
The good news here is that Wall Street already expects these companies to deliver shrinking bottom lines. In other words, the bad news is already baked into the shares.
The more I think about it, the less worried I become.
Start moving in the right direction
The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.
Tuesday, May 28, 2013
20 Tuesdays in a Row
Combined with the long holiday weekend giving investors time to relax and forget about the Fed-induced fears that caused the markets to fall last week and two positive economic data points, market participants pushed the major indexes to extend some very impressive winning streaks today.
After closing higher by 106 points, or 0.69%, the Dow Jones Industrial Average (DJINDICES: ^DJI ) has now increased in value every Tuesday for the past 20 weeks. And the Nasdaq has increased the last 10 straight Tuesdays after it ended today higher by 0.86%. Although the S&P 500 (SNPINDEX: ^GSPC ) doesn't have quite the same streak, it also rose higher by 0.63% today and now rests at 1,660, while the Dow has broken the 15,400 mark and sits at 15,409.
One of the two data points came from the Conference Board, which released information indicating that consumer confidence has risen to a five-year high in May. After hitting 69 in April and economists expecting only a 71, the report released today had the confidence index hitting 76.2 for the month of May. The other positive report was pertaining to housing and came from the Case-Schiller index, which showed home prices rose once again in March, and have now increased 11% on a year-over-year basis.
A few Dow winners
The positive reports certainly helped push stocks higher today, but a somewhat negative report from the IDC also seemed to have Microsoft (NASDAQ: MSFT ) rising today. The IDC released a research report and figures on estimated total PC shipments for 2013, 2014, and 2017 today, and although it is estimated that shipments will decline by 7.8% in 2013, the IDC believes PC sales will only decline by 1.2% in 2014 partly due to support for Windows XP expiring next year. This announcement is also likely the reason shares of Hewlett-Packard (NYSE: HPQ ) rose by 1.82%. But regardless of whether corporations opt to purchase all new hardware or just upgrade the software, Microsoft will likely see Windows 8 sales climb higher in 2014 and that's the real reason Big Softy rose 2.19% today.
Shares of UnitedHealth (NYSE: UNH ) also increased by more than 2% today after it was recently revealed that it would not partake in California's health insurance exchange. The company reported that it wants to sit by and see how the whole process plays out before participating. The exchange is basically a place where all the major insurance companies will offer pricing to customers in a very transparent manner. Since UnitedHealth is sitting out the first big exchange, the company will likely be able to learn from others' mistakes without costing shareholders money.
When President Obama was reelected, shares of UnitedHealth and other health insurers fell immediately. Is Obamacare a death knell for health insurers or is the market missing out on some of the opportunities the law presents? In this brand-new premium report on UnitedHealth, The Motley Fool takes a long-term view, honing in on prospects for UnitedHealth in a post-Obamacare world. So don't miss out -- simply click here now to claim your copy today.
Top 10 Biotech Stocks To Invest In 2014
What goes up must come down. Or can it just keep going up?
Two high-flying biotech stocks of late are NPS Pharmaceuticals (NASDAQ: NPSP ) and Regeneron Pharmaceuticals (NASDAQ: REGN ) . Both have had great results over the past month.
NPSP data by YCharts.
Is gravity waiting to kick in for NPS and Regeneron, or can their momentum continue? Let's take a look.
How they got here
NPS received good news in December when the Food and Drug Administration approved Gattex for treatment of short bowel syndrome, or SBS. However, the stock didn't take off. Instead, shares actually drifted downward for much of the next two months.
Things began to change shortly after NPS provided an update on the Gattex launch in late February. The real catalyst, though, came on March 19 when the company announced that it was regaining full worldwide rights for Gattex (known in Europe as Revestive) and Preotact for $50 million in stock.
Top 10 Biotech Stocks To Invest In 2014: Amgen Inc.(AMGN)
Amgen Inc., a biotechnology medicines company, discovers, develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses primarily in the United States, Europe, and Canada. The company markets recombinant protein therapeutics in supportive cancer care, nephrology, and inflammation. Its principal products include Aranesp and EPOGEN erythropoietic-stimulating agents that stimulate the production of red blood cells; Neulasta and NEUPOGEN to stimulate the production of neutrophils, which is a type of white blood cell that helps the body to fight infections; and Enbrel, an inhibitor of tumor necrosis factor that plays a role in the body?s response to inflammatory diseases. The company also markets other products comprising Sensipar/Mimpara, a small molecule calcimimetic that lowers serum calcium levels; Vectibix, a monoclonal antibody that binds specifically to the epidermal growth factor receptor; and Nplate, a thrombopoietin (TPO) receptor agonist that mimics endogenous TPO, the primary driver of platelet production. In addition, it provides Denosumab, a human monoclonal antibody that targets RANKL, an essential regulator of osteoclasts. Further, the company offers product candidates in mid-to-late stage development in a variety of therapeutic areas, including oncology, hematology, inflammation, bone, nephrology, cardiovascular, and general medicine consisting of neurology. It markets its products to healthcare providers, including physicians or their clinics, dialysis centers, hospitals, and pharmacies; consumers; and wholesale distributors of pharmaceutical products. The company has various collaborative arrangements with Pfizer Inc.; GlaxoSmithKline plc; Takeda Pharmaceutical Company Limited; Daiichi Sankyo Company, Limited; Array BioPharma Inc.; Kyowa Hakko Kirin Co. Ltd.; and Cytokinetics, Inc. Amgen Inc. was founded in 1980 and is headquartered in Thousand Oaks, California.
Advisors' Opinion:- [By TheStreet Staff]
The Amgen (AMGN) strategy of returning cash to shareholders in form of share buybacks, Dutch tender offers and dividends is abandoned in favor of ramped up acquisitions i.e. Gilead Sciences buying Pharmasset. Large-cap biotech firms start acting like Big Pharma -- choosing to buy growth instead of seeking it from internal drug development.
- [By Paul Goodwin]
For many investors Amgen is considered the biotech stock to own, and one of the very best in this sector. With an international focus and excellent returns this stock is one that many financial advisors own.
Top 10 Biotech Stocks To Invest In 2014: OncoGenex Pharmaceuticals Inc.(OGXI)
OncoGenex Pharmaceuticals, Inc., a biopharmaceutical company, engages in the development and commercialization of new cancer therapies that address treatment resistance in cancer patients. The company?s clinical stage products include Custirsen, a phase III clinical stage product for treatment in men with metastatic castrate-resistant prostate cancer; OGX-427, which is in phase II clinical development stage is designed to inhibit heat shock protein 27; and SN2310 that completed phase I stage of clinical development is designed to evaluate safety in patients with advanced cancer. Its pre clinical stage products include GX-225 that is focused on reducing the production of IGFBP-2 and IGFBP-5; and CSP-9222, lead compound from a family of caspase activators. OncoGenex Pharmaceuticals, Inc. is based in Bothell, Washington.
Hot Chemical Stocks To Invest In 2014: Navidea Biopharmaceuticals Inc (NAVB.A)
Navidea Biopharmaceuticals, Inc. (Navidea), formerly Neoprobe Corporation, incorporated in 1983, is a biopharmaceutical company focused on the development and commercialization of precision diagnostic agents. As of December 31, 2011, the Company�� radiopharmaceutical development programs included Lymphoseek (Lymphoseek, Kit for the Preparation of Technetium Tc99m for Injection), a radiopharmaceutical agent for lymph node mapping; AZD4694, an imaging agent, and RIGScan, a tumor antigen-specific targeting agent. In January 2012, the Company executed an option agreement with Alseres Pharmaceuticals, Inc. (Alseres) to license [123I]-E-IACFT Injection, also called Altropane, an Iodine-123 radiolabeled imaging agent, being developed as an aid in the diagnosis of Parkinson�� disease, movement disorders and dementia. In August 2011, the Company sold its gamma detection device line of business (the GDS Business) to Devicor Medical Products, Inc.
Lymphoseek
< p>Navidea�� pipeline includes clinical-stage radiopharmaceutical agents used to identify the presence and status of disease. Lymphoseek (Kit for the Preparation of Technetium Tc99m for Injection) is a lymph node targeting agent intended for use in intraoperative lymphatic mapping (ILM) procedures and lymphoscintigraphy employed in the overall diagnostic assessment of certain solid tumor cancers. The lymph system is a component of the body�� immune system. The key components of the lymph system are lymph nodes-small anatomic structures that contain disease-fighting lymphocytes, filter lymph of bacteria and cancer cells, and signal infection in response to heightened levels of pathogens. In Navidea�� Phase III clinical studies of Lymphoseek, it detected over 99% of positive nodes identified by vital blue dye (VBD). As of December 31, 2011, Navidea, in co-operation with UC, San Diego affiliate (UCSD), completed or initiated five Phase I clinical trials, one multi-c enter Phase II trial and three multi-center Phase II trial! s ! involving Lymphoseek. Two Phase III studies were completed in subjects with breast cancer and melanoma. During the year ended December 31, 2011, data from NEO3-09 were released, which indicated that all primary and secondary endpoints for the study were met. As of December 31, 2011, third Phase III clinical trial for Lymphoseek in subjects with head and neck squamous cell carcinoma (NEO3-06) was in progress.
AZD4694
AZD4694 is a Fluorine-18 labeled precision radiopharmaceutical candidate for use in the imaging and evaluation of patients with signs or symptoms of cognitive impairment such as Alzheimer's disease (AD). It binds to beta-amyloid deposits in the brain that can then be imaged in positron emission tomography (PET) scans. Amyloid plaque pathology is a required feature of AD and the presence of amyloid pathology is a supportive feature for diagnosis of probable AD. Patients who are negative for amyloid pathology do not have AD. AZD4694 has b een studied in several clinical trials. Clinical studies through Phase IIa have included more than 80 patients to date, both suspected AD patients and healthy volunteers. No significant adverse events have been observed. Results suggest that AZD4694 has the ability to image patients quickly and safely with high sensitivity.
RadioImmunoGuided Surgery
As of December 31, 2011, RIGScan had been studied in a number of clinical trials, including Phase III studies. Navidea has conducted two Phase III studies, NEO2-13 and NEO2-14, of RIGScan in patients with primary and metastatic colorectal cancer, respectively. Both studies were multi-institutional involving cancer treatment institutions in the United States, Israel, and the European Union.
The Company competes with Pharmalucence, Eli Lilly, Bayer Schering, General Electric and GE Healthcare.
Top 10 Biotech Stocks To Invest In 2014: Exelixis Inc.(EXEL)
Exelixis, Inc., a biotechnology company, develops small molecule therapies for the treatment of cancer. It focuses on developing Cabozantinib, an inhibitor of tumor growth, metastasis, and angiogenesis that target MET, VEGFR2, and RET, which are key kinases involved in the development and progression of various cancers. The cabozantinib is in Phase III clinical trial for the treatment for medullary thyroid cancer. The company also engages in various clinical programs for cabozantinib focused on the treatment of metastatic castration-resistant prostate cancer, ovarian cancer, breast cancer, renal cell carcinoma, non-small cell lung cancer, hepatocellular cancer, and melanoma. In addition, Exelixis, Inc. involves in developing a portfolio of other novel compounds to address serious unmet medical needs through collaborations with various pharmaceutical and biotechnology companies, including Bristol-Myers Squibb Company, sanofi-aventis, Genentech, Inc., Boehringer Ingelheim Gm bH, and GlaxoSmithKline and Daiichi Sankyo Company Limited. Its products under development through collaborations include XL475, XL281, XL139, and XL413 inhibitors; ROR antagonists; therapies targeted against LXR, a nuclear hormone receptor implicated in various cardiovascular and metabolic disorders; XL147, XL765, and isoform-selective PI3K inhibitors; XL518, a small-molecule inhibitor of MEK; sphingosine-1-phosphate type 1 receptor; XL880 inhibitor; and therapies targeted against the mineralocorticoid receptor, a nuclear hormone receptor implicated in various cardiovascular and metabolic diseases. The company was formerly known as Exelixis Pharmaceuticals, Inc. and changed its name to Exelixis, Inc. in February 2000. Exelixis, Inc. was founded in 1994 and is headquartered in South San Francisco, California.
Advisors' Opinion:- [By Stephen]
This drug-development company will go before the FDA later this year and throughout 2012 and 2013 with a series of new drug applications. Exelixis' drug cabozantinib, code-named XL1-84, has shown a great deal of promise with a range of metastasizing tumors. The drug is being tested in the treatment of several types of cancers, hence the multiple filings with the federal regulator.
But a much closer catalyst exists: at the annual American Society of Clinical Oncology meeting, to be held in early June, Elexilis will present data from the phase II trial of cabozantinib. If history is any guide, then the interim testing results will be well-received by shareholders.
During the second half of 2011, the drug will go deeper into the clinical testing trials. Each time that happens, the company will provide effectiveness data on the performance of the prior round of testing. Results from a phase III study of metastasized thyroid cancers are expected to be concluded in a few months, while phase III studies for the treatment of prostate cancer are expected to begin later this year. Every one of these instances could be a catalyst to take shares higher.
As a final catalyst, Exelixis has allegedly been having discussions with potential buyers, according to Bloomberg, though waiting on such a transaction before making a move also represents risk. Investors bid up shares of Savient Pharma (Nasdaq: SVNT) after the company put itself up for sale. Hopes for a quick profit were dashed when the company couldn't find any suitors and shares lost almost half of their value in just one day.
Top 10 Biotech Stocks To Invest In 2014: Cell Therapeutics Inc (CTIC)
Cell Therapeutics, Inc. (CTI), incorporated in 1991, develops, acquires and commercializes treatments for cancer. The Company�� research, development, acquisition and in-licensing activities concentrate on identifying and developing new ways to treat cancer. As of December 31, 2011, CTI focused its efforts on Pixuvri (pixantrone dimaleate) (Pixuvri), OPAXIO (paclitaxel poliglumex) (OPAXIO), tosedostat, brostallicin and bisplatinates. As of December 31, 2011, it developed Pixuvri, an anthracycline derivative for the treatment of hematologic malignancies and solid tumors. Another late-stage drug candidate of the Company, OPAXIO, is being studied as a potential maintenance therapy for women with advanced stage ovarian cancer, who achieve a complete remission following first-line therapy with paclitaxel and carboplatin. As of December 31, 2011, it also developed tosedostat in collaboration with Chroma Therapeutics, Ltd. (Chroma). On May 31, 2012, CTI completed its acquisition gaining worldwide rights to S*BIO Pte Ltd.'s (S*BIO) pacritinib.
Pixuvri
As of December 31, 2011, the Company developed Pixuvri, an aza-anthracenedione derivative, for the treatment of non-Hodgkin�� lymphoma (NHL), and various other hematologic malignancies, and solid tumors. Pixuvri was studied in the Company�� EXTEND, or PIX301, clinical trial, which was a phase III single-agent trial of Pixuvri for patients with relapsed, refractory aggressive NHL who received two or more prior therapies and who were sensitive to treatment with anthracyclines. On September 28, 2011, CTI announced that a second independent radiology assessment of response and progression endpoint data from its PIX301 clinical trial of Pixuvri was achieved with statistical significance. The results of the EXTEND trial met its primary endpoint and showed that patients randomized to treatment with Pixuvri achieved a significantly higher rate of confirmed and unconfirmed complete response compared to patients treated with standard chem! otherapy had a significantly increased overall response rate and experienced a statistically significant improvement in median progression free survival. Pixuvri had predictable and manageable toxicities when administered at the proposed dose and schedule in the EXTEND clinical trial in heavily pre-treated patients. In March 2011, the Company initiated the PIX-R trial to study Pixuvri in combination with rituximab in patients with relapsed/refractory diffuse large B-cell lymphoma (DLBCL). Pixuvri has also been studied in patients with HER2-negative metastatic breast cancer who have tumor progression after at least two, but not more than three, prior chemotherapy regimens. In the second quarter of 2010, the NCCTG opened this phase II study for enrollment. The study is closed to accrual and results are expected to be reported by the NCCTG later in 2012.
OPAXIO
OPAXIO is the Company�� biologically-enhanced chemotherapeutic agent that links paclitaxel to a biodegradable polyglutamate polymer, resulting in a new chemical entity. As of December 31, 2011, the Company focused its development of OPAXIO on ovarian, brain, esophageal, head and neck cancer. OPAXIO was designed to improve the delivery of paclitaxel to tumor tissue while protecting normal tissue from toxic side effects. In November 2010, results were presented by the Brown University Oncology Group from a phase II trial of OPAXIO combined with temozolomide (TMZ), and radiotherapy in patients with newly-diagnosed, high-grade gliomas, a type of brain cancer. The trial demonstrated a high rate of complete and partial responses and a high rate of six month progression free survival (PFS). Based on these results, the Brown University Oncology Group has initiated a randomized, multicenter, phase II study of OPAXIO and standard radiotherapy versus TMZ and radiotherapy for newly diagnosed patients with glioblastoma with an active gene termed MGMT that reduces responsiveness to TMZ. A phase I/II study of OPAXIO combined with radi! otherapy ! and cisplatin was initiated by SUNY Upstate Medical University, in patients with locally advanced head and neck cancer.
Tosedostat
In March 2011, the Company entered into a co-development and license agreement with Chroma Therapeutics, Ltd. (Chroma), providing the Company with marketing and co-development rights to Chroma�� drug candidate, tosedostat, in North, Central and South America. Tosedostat is an oral, aminopeptidase inhibitor that has demonstrated anti-tumor responses in blood related cancers and solid tumors in phase I-II clinical trials. Interim results from the phase II OPAL study of tosedostat in elderly patients with relapsed or refractory acute myeloid leukemia (AML) showed that once-daily, oral doses of tosedostat had predictable and manageable toxicities and results demonstrated response rates, including a high-response rate among patients who received prior hypomethylating agents, which are used to treat myelodysplastic syndrome (MDS), a precursor of AML.
Brostallicin
As of December 31, 2011, the Company developed brostallicin through its wholly owned subsidiary, Systems Medicine LLC, which holds rights to use, develop, import and export brostallicin. Brostallicin is a synthetic deoxyribonucleic acid (DNA) minor groove binding agent that has demonstrated anti-tumor activity and a favorable safety profile in clinical trials, in which more than 230 patients have been treated as of December 31, 2011. The Company uses a genomic-based platform to guide the development of brostallicin. A phase II study of brostallicin in relapsed, refractory soft tissue sarcoma met its predefined activity and safety hurdles and resulted in a first-line phase II clinical trial study that was conducted by the European Organization for Research and Treatment of Cancer (EORTC).
The Company competes with Bristol-Myers Squibb Company, Sanofi-Aventis, Pfizer, Roche Group, Genentech, Inc., Astellas Pharma, Eli Lilly and Company, Celgene, Telik, I! nc., TEVA! Pharmaceuticals Industries Ltd. and PharmaMar.
Top 10 Biotech Stocks To Invest In 2014: (DYMTF)
Dynamotive Energy Systems Corporation engages in the development and commercialization of energy solutions for biomass-to-liquid fuel conversion based on its fast pyrolysis technology. The company?s fast pyrolysis technology uses biomass or biomass waste feedstock to produce BioOil as a fuel and char. BioOil is a renewable fuel, which could be replaced with natural gas, diesel, and other fossil fuels to produce power, mechanical energy, and heat in industrial boilers, fuel gas turbines, and fuel reciprocating engines. The company has a strategic alliance with Tecna S.A. of Argentina to develop commercial energy systems based on Dynamotive?s pyrolysis technology in Latin America and other markets on a non-exclusive basis. It has operations in Canada, the United States, Argentina, and the United Kingdom. The company was formerly known as Dynamotive Technologies Corporation and changed its name to Dynamotive Energy Systems Corporation in June 2001. The company was founded i n 1991 and is headquartered in Richmond, Canada.
Advisors' Opinion:- [By Paul]
Although Dynamotive Energy Systems stock has lost value in 2012, so did a lot of green biotech and biofuel companies, and it has held its own since September, hovering around the $0.25 mark. The bio-oil company continues to grow and signed a new agreement, for project development in China, on December 1, 2012, generating a burst of excitement and growth for DYMTF shares.
Top 10 Biotech Stocks To Invest In 2014: AMAG Pharmaceuticals Inc.(AMAG)
AMAG Pharmaceuticals, Inc., a biopharmaceutical company, engages in the development and commercialization of a therapeutic iron compound to treat iron deficiency anemia (IDA). Its principal product includes Feraheme (ferumoxytol) injection for intravenous (IV) use, which was approved for marketing in the United States in June 2009 by the U.S. Food and Drug Administration, for use as an IV iron replacement therapy for the treatment of IDA in adult patients with chronic kidney disease (CKD). The company is pursuing marketing applications in the European Union, Canada, and Switzerland for Feraheme for the treatment of IDA in CKD patients. AMAG Pharmaceuticals was founded in 1981 and is based in Lexington, Massachusetts.
Top 10 Biotech Stocks To Invest In 2014: Sanofi(SNY)
sanofi-aventis engages in the discovery, development, and distribution of therapeutic solutions to improve the lives of everyone. The company offers a range of healthcare assets, including a broad-based product portfolio in prescription drugs, OTC/OTX, generics, vaccines, and animal health. It has a strategic alliance with Regulus Therapeutics Inc. to discover, develop, and commercialize micro-RNA therapeutics, initially in fibrosis. The company was founded in 1970 and is headquartered in Paris, France.
Advisors' Opinion:- [By Michael]
Sanofi is a global and diversified healthcare company. Cramer holds 2,600 shares of SNY stocks. SNY has a dividend yield of 5.40% and returned 7.19% since the beginning of this year. It has a market cap of $87.11B and a P/E ratio of 14.42. Ken Fisher invested nearly $600 million in SNY.
- [By Dividend Stocks Online]
Sanofi (SNY) has a market capitalization of $129.70 billion. The company employs 113,719 people, generates revenue of $47.297 billion and has a net income of $6.562 billion. The firm’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $13.805 billion. The EBITDA margin is 29.19 percent (the operating margin is 16.18 percent and the net profit margin 13.87 percent).
Financial Analysis: The total debt represents 15.41 percent of the company’s assets and the total debt in relation to the equity amounts to 27.46 percent. Due to the financial situation, a return on equity of 10.42 percent was realized. Twelve trailing months earnings per share reached a value of $3.05. Last fiscal year, the company paid $1.79 in the form of dividends to shareholders.
Market Valuation: Here are the price ratios of the company: The P/E ratio is 16.07, the P/S ratio is 2.74 and the P/B ratio is finally 1.70. The dividend yield amounts to 3.46 percent and the beta ratio has a value of 0.91.
Top 10 Biotech Stocks To Invest In 2014: Organovo Holdings Inc (ONVO.PK)
Organovo Holdings, Inc. (Organovo), formerly Real Estate Restoration & Rental, Inc., incorporated in 2007, is a development-stage company. The Company has developed and is commercializing a platform technology for the generation of three-dimensional (3D) human tissues that can be employed in drug discovery and development, biological research, and as therapeutic implants for the treatment of damaged or degenerating tissues and organs. On December 28, 2011, Real Estate Restoration and Rental, Inc.�� (RERR) entered into an Agreement and Plan of Merger, pursuant to which RERR merged with its, wholly owned subsidiary, Organovo (Merger Sub). On February 8, 2012, the Company merged with and into Organovo Acquisition Corp. (Acquisition Corp.), a wholly owned subsidiary of Organovo, with the Company surviving the merger as a wholly owned subsidiary of Organovo Holdings (the Merger). As a result of the Merger, Organovo acquired the business of Organovo, Inc.
The C ompany has collaborative research agreements with Pfizer, Inc. (Pfizer) and United Therapeutic Corporation (Unither). As of March 31, 2012, it has five federal grants, including Small Business Innovation Research grants and developed the NovoGen MMX Bioprinter (its first-generation 3D bioprinter). The Company is engaged in the development of specific 3D human tissues to aid Pfizer in discovery of therapies in two areas of interest. In addition, in October 2011, it entered into a research agreement with Unither to establish and conduct a research program to discover treatments for pulmonary hypertension using its NovoGen MMX Bioprinter technology. Additionally, under the research agreement with Unither, the Company granted Unither an option to acquire from the Company a worldwide, royalty-bearing license in certain intellectual property created under the research agreement solely for use in the treatment or prevention of pulmonary hypertension and all other lung diseases.
The Company�� NovoGen MMX Bioprinter is an aut! om! ated device that enables the fabrication of three-dimensional (3D) living tissues comprised of mammalian cells. A custom graphic user interface (GUI) facilitates the 3D design and execution of scripts that direct precision movement of the dispensing heads to deposit cellular building blocks (bio-ink) or supporting hydrogel. The Company is using a third party manufacturer, Invetech Pty., of Melbourne, Australia, to manufacture its NovoGen MMX Bioprinter. Its bioprinting technology and surrounding intellectual property and commercial rights serve as a platform for product generation across multiple markets that employ cell- and tissue-based products and services.
The Company competes with Organogenesis, Advanced BioHealing, Tengion, Genzyme, HumaCyte and Cytograft Tissue Engineering.
Top 10 Biotech Stocks To Invest In 2014: ARIAD Pharmaceuticals Inc.(ARIA)
ARIAD Pharmaceuticals, Inc., a biopharmaceutical company, focuses on the discovery, development, and commercialization of small-molecule drugs for the treatment of cancer. The company?s lead cancer product, ridaforolimus is being studied in multiple clinical trials in patients with various types of cancers, including metastatic sarcomas, breast cancer, endometrial cancer, prostate cancer, and non-small cell lung cancer. Its product pipeline also includes ponatinib, a pan BCR-ABL inhibitor in phase 2 clinical trial for applications in various hematological cancers and solid tumors; and AP26113, an anaplastic lymphoma kinase inhibitor in preclinical studies for the treatment of various cancers, including non-small cell lung cancer, lymphoma, and neuroblastoma. In addition, the company focuses on a drug discovery program centered on small-molecule therapies that are molecularly targeted to cell-signaling pathways implicated in cancer. Further, it licenses its ARGENT cell-sign aling regulation technologies to pharmaceutical and biotechnology companies to develop and commercialize therapeutic products, and to conduct drug discovery research. The company has collaboration and license agreements with Merck & Co., Inc. for the development, manufacture, and commercialization of ridaforolimus; and license agreements with Medinol Ltd. and ICON Medical Corp. to develop and commercialize stents and other medical devices to deliver ridaforolimus to prevent restenosis of injured vessels. ARIAD Pharmaceuticals, Inc. was founded in 1991 and is based in Cambridge, Massachusetts.
Advisors' Opinion:- [By Hilary Kramer]
Ariad Pharmaceuticals (NASDAQ:ARIA) is developing novel cancer treatments, and it has three promising drugs in its pipeline: ridaforolimus (which I expect to get FDA approval shortly), ponatinib (recently reported good Stage I/II results), and AP-26113 (a compound with strong potential that just started clinical testing). The stock is up nearly 50% since the early October lows, and while concerns over the possibility that Ariad will raise money could be a short-term overhang on the stock, I look for share prices to continue to climb as the company’s drugs move through the approval process.
- [By Peter Leeds]
Based on percentages coming in from 9 battle ground states, and the number of electoral college votes from each, it appears that Obama would win if the election were held today. I expect his lead to increase as the campaign enters full swing.
One company that could benefit from a few more years of a Democratic president would be Ariad Pharmaceuticals (ARIA 0.00%). It is a pharmaceutical company that earned $13.9 million in the third quarter (10 cents per share), and sits on an impressive $86 million in cash. The Bush administration fought against stem cell research, which is a big part of Ariad's approach, and the company and its shares were hammered. Now, after several years of friendlier policies, and the prospect of another four, Ariad is building momentum and gobbling up market share. I think it could trade up to $16.20.
High-Yield Tips, Picks... And A Favorite Yielding 6%
I hope you were able to join me earlier this week on my telephone interview with StreetAuthority Stock Market Strategist Elliott Gue and a few thousand of his closest friends.
During the hour-long conference call Tuesday, Elliott disclosed some of his favorite income stocks and investing strategies (more on that below).
But the revelation I've been thinking about the most the past few days came not from Elliott, but from the audience.
Allow me to explain...
The technology we used on the telephone conference allowed me to survey listeners during the call itself and receive instant results. (I'm sure many of you have participated in a similar exercise: "On your dial pad, press 'one' for 'yes' or 'two' for 'no.'")
One of the questions I asked the audience on Tuesday was this: "Have you ever bought a high-yielder you lived to regret? Press 'one' for yes..."
The virtual switchboard lit up even before I could get to, "Press 'two' for 'no.'" Within seconds, I could see on the computer screen that more than 60% of my listeners had, in fact, been burned by a stock that they purchased primarily on the promise of the big yield it offered.
I'll admit to having been a little surprised -- not to mention unsettled -- by the 60% number. Elliott, on the other hand, has seen it all before.
"One of the biggest mistakes that I see a lot of investors make is that they focus solely on the highest-yielding equities in the U.S. market," Elliott said on the call. "They simply run their finger down the page of The Wall Street Journal looking for stocks yielding 10% or more. The problem is that the highest, most tempting yields are often the riskiest."
The antidote?
"Look for firms with a solid yield AND a history of boosting their payouts over time," said Elliott.
On the conference call, Elliott cited details of a stock screen in which he isolated a group of companies that demonstrated a three-year dividend growth rate, along with prospects for more of the same over the next few years. This basket of stocks returned 619% over the prior decade, trouncing the S&P 500 by a more than 5-to-1 margin.
Elliott's research confirmed that many of the most promising dividend-growers have yields of 5% to 7% rather than 10% or more. Moreover, Elliott found, many of the biggest winners are those stocks that are growing their payouts at a 10%-plus annualized pace.
Another factor Elliott said he watches closely when it comes to selecting a "safe" dividend payer is the payout ratio -- the percentage of profits a company pays out in dividends. When a company needs more than 80% of its profits to pay its dividends, "investors should tread carefully," Elliott said, adding that payouts of more than 100% are unsustainable.
(Don't be fooled again. Click here to learn how you can obtain a copy of Elliott's special report, "Is Your Dividend Safe?" -- four simple rules to help you spot vulnerable dividends. It's part of a subscription package that includes six other bonus reports.)
Elliott also looks at a company's debt levels when assessing dividend safety. "Companies with high debt may have to cut their dividends to pay interest on their loans," Elliott said, while "failure to make debt payments would probably result in default and serious consequences."
But the best tool of all for investors in search of safe, high yields might very well be Elliott's rebranded advisory, High-Yield PRO.
If you haven't heard, Elliott is adding a number of valuable features to the newsletter formerly known as High-Yield International.
For one thing, Elliott will for the first time in this advisory make specific recommendations on U.S. income stocks. These picks will be bought and sold in a portfolio separate from his tried and true international recommendations. All of Elliott's trades going forward will be funded with $200,000 in seed money from StreetAuthority.
Each issue of High-Yield PRO will also include a basic options trade designed to generate even more income. And you won't want to miss Elliott's monthly "Dividend Blacklist" -- a list of companies whose payouts Elliott thinks could be vulnerable to a dividend cut over the next six to 12 months.
For more information on High-Yield PRO, click here.
And for more information from Elliott right now, keep reading...
What follows are some selected quotes from my interview with Elliott this past Tuesday. To read or listen to the full interview, follow this link.
On market conditions worldwide:
Elliott: Global stock markets this year have been very strong. We've seen strength in the U.S. markets, we've seen strength in Europe despite the fact that the region continues to experience a recession, and particularly we've seen a lot of strength out of the Japanese market. In fact, the Nikkei 225 and Topix (which track the performance of Japanese stocks) have been the top-performing major stock market indexes in the world this year.
Generally speaking, I think 2013 is going to be a strong year for global stock markets. The main driver of upside so far has been increasing evidence that the global economy is picking up.
I wouldn't be surprised to see a 5% to 10% pullback in global markets over the next two to three months as investors take some profits off the table. But, this would be an excellent time to buy stocks, and I'm looking to add to the High-Yield PRO portfolios on any dip.
On which sector looks particularly interesting right now:
Elliott: With the global economy perking up, I see more opportunities in cyclical sectors that have lagged.
One example of a cyclical group to watch is energy. With the Chinese economy showing signs of perking up again from a slowdown in 2011 and 2012, demand for oil in China is accelerating. The same is true in other emerging markets like India and Brazil. Growth in oil demand from these fast-growing emerging markets is more than offsetting a modest decline in demand from the developed world, including the European Union and the United States.
Meanwhile, producers outside North America have experienced significant difficulties bringing new sources of supply on-stream. Producers are increasingly targeting fields in deepwater regions and the Arctic, where oil is more difficult and expensive to produce. Growing demand and the need to target more expensive-to-produce fields to grow supply will keep oil prices elevated over the next few years. That's a boon for stocks in the energy industry.
On looking for yields:
Elliott: A few of the things I like to see are steadily increasing dividend payments -- in particular, steadily increasing dividends along with no cuts or missed payments, strong cash flows, strong projected growth and a sustainable payout ratio.
Of course, picking a solid income investment involves a lot more than just running a few screens looking for stocks that meet certain quantitative criteria.
I also spend a great deal of time assessing the big-picture outlook for the economy in the United States and abroad. This analysis can often point me to certain countries or industry groups that look particularly promising.
On ways income investors can limit their tax liability:
Elliott: Investors, retirees and others who depend upon investment income can often shield a substantial portion of their investment income from taxes (whatever their tax bracket) by switching from high-tax investments to some that defer or eliminate taxes entirely.
For example, a number of companies are spinning off divisions as limited partnerships or master limited partnerships (MLPs).
The reason is that income from partnerships like these is not taxed as dividends or interest. A substantial part is legally classified as "return of capital" and therefore is not immediately taxed.
Here's an example: Teekay LNG Partners LP (NYSE: TGP). Teekay owns interests in 29 vessels that transport liquefied natural gas (LNG) and is one of my favorite plays in this segment of the shipping industry.
Now, here's where it gets interesting for investors...
Teekay LNG Partners pays out an annual yield of around 7% -- or between 4 and 11 times what you can get from investing in U.S. Treasury bills.
But, like all MLPs, Teekay LNG Partners estimates that a large proportion of the distributions that investors receive through the end of 2014 will be considered a return of capital by the Internal Revenue Service.
Return of capital payments are not taxable but serve to reduce your cost basis in the partnership, and are taxed only after the partnership units are sold.
That means that a significant portion of your tax liability is deferred each year.
As a result, not only can you, at a bare minimum, quadruple your investment income over what you can earn from U.S. Treasury bills, but you can also potentially defer the tax as well.
Depending upon your situation, this could be a huge advantage. Of course, I recommend that investors consult with a tax professional to determine if investing in MLPs is right for their particular situation.
An investment recommendation:
Elliott: One of my favorite energy recommendations in High-Yield PRO is an Italian firm called Eni (NYSE: E). It's one of the world's largest crude oil and natural gas producers with projects in Africa, Norway, Kazakhstan, the Middle East and the U.S. Gulf of Mexico.
In fact, thanks to some promising new oil and gas finds, Eni will be one of the world's fastest-growing major international energy producers over the next five years -- I see production growing at a more than 4% annualized pace between now and 2016, compared with around 1% to 2% for Exxon Mobil (NYSE: XOM).
The stock also offers a yield of about 6%, more than double Exxon Mobil's 2.9% payout, and trades at 1.05 times its book value compared with nearly 2.4 times for Exxon and 1.7 times for Chevron (NYSE: CVX).
You might be wondering why is Eni so cheap relative to its industry. The answer is that because it's based in Rome, the stock has been pressured by concerns about Europe's economy.
But that's irrelevant: Most of Eni's assets are located outside of Europe, and it produces commodities that are priced in U.S. dollars, not euros. The price of oil has a lot more to do with the state of China's economy than it does with that of Italy's.
On exchange-traded options:
Elliott: For many investors, options are downright scary. The common perception is that options are something traders use to speculate on short-term moves in stocks, commodities and market indexes.
Options can, in fact, be used in that way. However, there are a handful of simple options strategies that actually reduce your overall risk and can be used to generate additional monthly income from stocks you might already own.
One of the simplest and most powerful is what's known as a covered call. A call option is simply a contract that allows the holder to buy a stock at a pre-set price, known as the "strike price," on or before a pre-set expiration date.
To execute a covered call trade you will need clearance from your broker. To obtain that clearance, you'll typically need to fill out a handful of forms online; approval generally takes just a few days. And capital requirements are minimal -- most brokers will let you execute covered calls with as little as $3,000 in your account.
The best news of all about covered calls is that they're easy to execute and among the lowest risk options trades an investor can make.
P.S. -- Every 30 days in High-Yield PRO, Elliott will walk you through at least one options strategy designed to capture yields of 20%-plus on an annualized basis. And that's on top of the regular features in the advisory, which include the best U.S. and international recommendations for the current month. Listen to this Web presentation to learn how you can save 50% off the regular price by taking advantage of a charter subscription to High-Yield PRO (for the text version, click here).