3 Stocks That Blew the Market Away

Don't settle for ordinary quarterly reports.

Every week, I take a look at three companies that beat market expectations, since I believe that it's the biggest factor in a stock beating the market. Leaving Wall Street's pros with stunned expressions can be a good thing. It usually means that the companies have more in the tank than analysts figured. Capital appreciation typically follows.

Let's take a look at a few companies that humbled the pros over the past few trading days.

We can start with Diamond Foods (NASDAQ: DMND  ) . Analysts were expecting the snack distributor to post a steep loss of $0.17 a share. Diamond surprised the pros by generating an actual profit of $0.05 a share.

Revenue may have taken an 11% hit, but that too was well ahead of expectations. The company behind Pop Secret microwaveable popcorn, Kettle Chips potato chips, and its namesake nuts has struggled to find firm footing with Wall Street since being rocked by an accounting scandal. The embarrassing ordeal found the company losing its CEO and CFO as well as a pending acquisition of the Pringles potato-chip line.

Diamond Foods moved closer to leaving its past behind by naming a new CFO last week, and surpassing expectations on the bottom line is another good way to make that happen.

Shares of PVH (NYSE: PVH  ) climbed better than 8% after the branded apparel giant behind Tommy Hilfiger and Calvin Klein dressed up a blowout quarterly report.

Adjusted earnings at the company that used to be called Phillips-Van Heusen soared 34% to $1.91 a share. Wall Street was braced for flat earnings growth, and it's hard to blame them. PVH's own guidance was calling for profitability to clock in at just $1.31 a share. 

Surprisingly -- and not in a good way -- PVH actually stuck to its earlier guidance calling for a profit of $7 a share for the entire fiscal year ending in January. When a company delivers a blowout quarter like PVH just did, investors like to see the corporate outlook rise accordingly. It leaves the market wondering if the balance of the year will be weaker than originally projected. Clearly, the 8% pop in the stock last week proves that investors aren't overly concerned with that development, but it is something that bears watching.

Finally, we have Ulta Beauty (NASDAQ: ULTA  ) looking pretty. The chain of stores that sell beauty products and perform salon services proved that vanity still sells. Revenue popped 23% higher, fueled by brisk expansion and a healthy 6.7% uptick in comps. Profitability also grew by better than 20%, checking in at $0.65 a share.

Wall Street was only targeting $0.62 a share in net income, but is that really a surprise? Ulta has beaten analyst bottom-line forecasts for what is now 18 consecutive quarters.

Ulta was able to grow its earnings given a favorable product mix that favored its higher-margin prestige skincare and color cosmetics. The retailer has also tried to wean customers off coupons, allocating more of its marketing budget to performance-based online marketing strategies that target potential customers individually.

Growth should continue, and Ulta's on track to open 125 new stores this fiscal year.

Moving in the right direction
It's important to keep watching the companies that surpass expectations. Over time, it will be a lucrative experience for investors as the market rewards the overachievers. That's the kind of surprise that we look for in the Rule Breakers newsletter service. Want in? Check out a 30-day trial subscription.

What macro trend was Warren Buffett referring to when he said "this is the tapeworm that's eating at American competitiveness"? Find out in our free report. You'll also discover an idea to profit as companies work to eradicate this issue. Just click here for free access.

Netflix Doesn't Have to Worry About Microsoft's Xbox One

Microsoft (NASDAQ: MSFT  ) may have introduced its new video game console on Tuesday as the ultimate entertainment hub, but Netflix (NASDAQ: NFLX  ) doesn't have anything to be worried about. 

Speculation picked up last year when Netflix CEO Reed Hastings announced that he was leaving Microsoft's board of directors. Was Microsoft buying Netflix? Was the new Xbox going to take on Netflix as a streaming video platform?

Well, Mr. Softy never warmed up to the leading video service -- and now the new Xbox One console doesn't seem to pose much of a threat. A Netflix icon was even featured on the home page of the initial presentation! 

In this video, longtime Fool contributor Rick Munarriz explores why Netflix may have more to gain than lose here.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In our premium report on Microsoft, a Motley Fool analyst explains that while the opportunity is huge, so are the challenges. The report includes regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

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More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Copa Holdings: Panama Profits

There are always good operators in even the worst industries. Therefore, I am recommending a leading regional airline based in Panama, says Gavin Graham, contributing editor to Internet Wealth Builder.

Copa Holdings (CPA), operates a fleet of 83 modern aircraft, with an average age of 4.3 years, consisting of 57 Boeing 737-700s, and 737-800s, and 26 Embraer 190 jets.

From its base at Tocumen International Airport in Panama City, it offers the most destinations and international flights of any hub in Latin America, including eight destinations in the US as well as Toronto.

Tocumen's convenient location, excellent weather, and sea level altitude contribute to Copa's excellent on-time record and its ability to act as the centre of a major hub-and-spoke operation, allowing passengers to reach any destination within Central and South America with only one stop.

Copa has expanded rapidly in the last decade. After going public in 2005, it used the access to public markets to grow and modernize its fleet. Also in 2005, it purchased the second largest Colombian airline, and now operates an extensive schedule of internal and international flights in that country.

Copa carried 10.1 million passengers in 2012, a 17% increase on the previous year, and experienced a 24% increase in capacity as it added ten new Boeing 737 aircraft.

With its rapid growth and profitable track record, Copa has far outperformed the S&P 500, returning 170% over the five years to the end of 2012, compared to a 12% increase in the index.

With its new membership in the Star Alliance beginning in mid-2012, Copa should benefit from increased traffic from members of other airline loyalty schemes in the alliance, especially the merged United Continental. As well, it has added new US destinations, such as Las Vegas in 2012, and Boston in 2013.

With the widening of the Panama Canal in 2016 forecast to add substantially to trade and visitors to Panama, and with the boost to its capacity through adding seven new Boeing 737-800s in 2013, it is reasonable to expect Copa's traffic to continue rising over the next few years.

Assuming that the airline keeps its costs competitive, and maintains its conservative policy of fuel hedging to offset the risk of higher prices, Copa should be able to maintain its margins at their present levels, and remain a profitable and successful airline, benefiting from the rising demand for air travel from the growing Latin American middle-class.

With earnings of $11-$11.50 per share projected for 2013, Copa is selling at around 12-times forecast earnings. It pays around 30% of its earnings as a single annual dividend in June of each year, giving it a yield of 1.7%, although it paid a dividend early in December 2012, to beat the change in US dividend tax law.

Copa Holdings is a buy for investors, willing to put up with the volatility inherent in airlines, as a play on growing air traffic and rising incomes in Latin America and the Caribbean.

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The Future of the Global LNG Trade

Fueled by growing demand from Asia and the recent spate of natural gas discoveries around the world, the global liquefied natural gas (LNG) trade is gaining more importance by the day, with important implications for several countries' economies and energy security outlooks.

But according to a recent report by BP (NYSE: BP  ) , the global LNG trade experienced its first ever annual decline last year. Let's take a closer look at why it fell and what the future may hold.

An unusual decline in the global LNG trade
According to the recently released "BP Statistical Review of World Energy 2013" report, the global LNG trade fell 0.9% last year after a continuous 30-year expansion.

BG Group (LSE: BG  ) , the U.K.-based natural gas company, estimates that global trade in LNG last year totaled roughly 239 million tons, down approximately 3 million tons from the previous year's volumes, according to the Financial Times. This rare decline contrasts with strong expansion in 2009 and 2010, when the global LNG trade grew by 40 million and 19 million tons, respectively.

Interestingly, last year's drop came despite soaring demand from Japan, as that country continues to import massive quantities of gas to combat the sharp fall-off in domestic energy supplies in the wake of the 2011 Fukushima nuclear disaster. It also comes despite the entrance of new countries into the global LNG trade, such as exporters Peru and Yemen and importers such as India, Kuwait, and Malaysia.

So what explains last year's unusual decline? Much of it can be attributed to lower energy demand in Europe, as the region continues to struggle with anemic economic growth. According to BP, the European Union saw a 2.3% decrease in natural gas consumption growth, while the Former Soviet Union saw a 2.6% decline. In sharp contrast, consumption growth in the US came in at 4.1%, while China and Japan posted 9.9% and 10.3% increases, respectively.

What's next for the global LNG trade?
Going forward, however, the rare drop last year is likely to be an anomaly, with the number of countries participating in the global LNG trade set to grow sharply. This year, BG Group forecasts that the global LNG trade will grow by a modest 5.4 million tons, bolstered by exports from Angola -- where Chevron (NYSE: CVX  ) recently shipped its first cargo from the Angola LNG plant -- and new terminals in Australia, as well as an increase in imports from Singapore and Malaysia, and an offshore facility in Israel.

And over the next few years, the number of LNG importers -- currently less than 30 -- is expected to grow sharply, as countries such as Bahrain, Croatia, El Salvador, Jamaica, Lithuania, Pakistan, the Philippines, South Africa, and Uruguay join the ranks. Even Indonesia, once the largest LNG exporter in the world, is thinking about importing natural gas to meet growing domestic demand.

Meanwhile, the number of LNG exporters is also projected to rise. Already, there is much enthusiasm about LNG export potential from North America. In the U.S., for instance, the Department of Energy has already approved two LNG projects to export gas to countries that don't have a free-trade agreement with the U.S. -- Cheniere Energy's (NYSEMKT: LNG  ) Sabine Pass terminal in Louisiana, which was greenlighted in 2011, and the Freeport LNG project in Texas, a $10 billion facility whose general partner, Freeport LNG-GP, is 50% owned by ConocoPhillips (NYSE: COP  ) , which received permission last month.

Outside North America, some African countries may also have strong LNG export potential. In addition to Angola, longer-term facilities are in the works in east African countries, such as Mozambique and Tanzania. Russia, Australia, and Israel have also been identified as having significant gas export potential.

There are many different ways to play the energy sector, and The Motley Fool's analysts have uncovered an under-the-radar company that's dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations and is poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report: "The Only Energy Stock You'll Ever Need." Don't miss out on this limited-time offer and your opportunity to discover this company before the market does. Click here to access your report -- it's totally free.

A Fool Looks Back

Facebook (NASDAQ: FB  ) is giving Android users a treat with a new interface that will be available for select smartphones starting next week.

Facebook Home is the social-networking website operator's bold bet that smartphones should be about people -- not apps. The new experience starts at a phone's very welcome screen. Users downloading the interface will see Facebook serving up recent friend snapshots and notifications with intuitive navigation and some nifty tools to boot.

This is the right move for Facebook. There has been chatter for a few years that the company would put out its own phone, but that strategy never made sense. Anyone remember Kin? It lasted only a few weeks on the market. No one wants to be locked to a platform, and Facebook is addressing that reality with this neat interface that can be undone as easily as it was to put into play.

Facebook is now about to become an even bigger part of the mobile experience.

Briefly in the news
And now let's take a quick look at some of the other stories that shaped our week.

BlackBerry (NASDAQ: BBRY  ) has decided to shut down its BBM Music service. The platform gave BlackBerry owners a catalog of tunes that grew virally as more people signed up for the $5-a-month plan. Once again, a smartphone company missed the point in social music. Apple (NASDAQ: AAPL  ) CEO Tim Cook apologized for the company's poorly communicated warranty practices in China. Since China is Apple's largest market outside the U.S., it's more important to save sales than to save face. Zynga (NASDAQ: ZNGA  ) is ready to bet on a new revenue stream. Its partnership with an overseas partner for real-money wagering in the U.K. became a reality this week. Zynga-themed slots, poker, blackjack, and roulette will now help Zynga diversify from its meandering social- and casual-gaming business. The house always wins, but does that also apply to the FarmVille barn?

Now let's look ahead
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

Amarin Shares Sink on Secondary Offering

"More means less." Amarin (NASDAQ: AMRN  ) demonstrated this seemingly contradictory maxim today following its announcement of a new public offering. Shares promptly sank by 8%. With more shares on the market, the less each share is worth. Let's take a look at the details.

Adding up the ADSs
Amarin plans to sell 21.7 million American Depositary Shares, or ADSs, in a public offering. The underwriters of the sale will also have a 30-day option to purchase another 3.255 million shares. The shares will be offered at prevailing market prices.

There are currently 150.7 million or so outstanding shares of Amarin's stock. This new offering represents around 14% of outstanding shares, with the option available to underwriters making up another 2%. In one sense, a drop of only 8% with potential share dilution of twice as much doesn't sound too bad. 

As of the end of March, Amarin had cash and equivalents of a little more than $203 million. Why have another public offering now? The company wants to use the proceeds generated to fund its continued commercial launch of triglyceride-lowering drug Vascepa. At the current pace it's burning through cash, Amarin will need more in 2014. It's better to take care of business sooner rather than later.

Tale of two charts
Amarin's recent history is basically a tale of two charts. The company's decision to launch Vascepa on its own has taken a toll on its stock. However, the good news is that Vascepa sales have been climbing. 

AMRN data by YCharts.

Source: Company SEC filing. 

It should be noted that the June prescription number for Vascepa comes with a couple of caveats from the company. The last two days of the month aren't included in the total. Also, the figure is based on weekly compilations of data, which Amarin says tend to understate the number obtained later in the monthly compilation.

Why have share prices continued to fall at the same time that Vascepa sales have grown? In large part, the answer boils down to skepticism. 

Many are skeptical about Amarin's ability to successfully commercialize Vascepa to its full potential against larger competitors with fish-oil pills. GlaxoSmithKline (NYSE: GSK  ) markets Lovaza and has made nearly $3.8 billion from the drug over the last five years. AstraZeneca (NYSE: AZN  ) bought Omthera Pharmaceuticals in May, primarily to gain its fish-oil drug Epanova.

Some are skeptical about Amarin's prospects for obtaining approval to sell Vascepa for treating individuals who have triglyceride levels between 200 and 500 mg/dL. While the drug is approved for people with very high triglyceride levels, the market for this lower-yet-still-high triglyceride level range is 10 times larger.

There is also skepticism in the physician and payer community about the real health benefits of prescription fish-oil drugs. Several clinical studies have had less-than-stellar results.

To be fair, though, studies of Vascepa showed solid results in lowering triglyceride levels. Unlike Glaxo's Lovaza, it did so without raising cholesterol levels. And while analysts expect Lovaza sales to decline this year, Amarin continues to report higher sales for Vascepa.

AstraZeneca and Omthera only recently submitted a New Drug Application for Epanova in treating patients with very high triglyceride levels of 500 mg/dL and above. Meanwhile, Amarin moves ahead with marketing to that patient population while it awaits possible approval for a much-larger market. A decision by the Food and Drug Administration is scheduled for Dec. 20. 

Foolish take
I suspect that the company will continue to report increasing Vascepa sales numbers. There also appears to be a reasonable chance that the FDA will approve the drug for individuals with high (as opposed to very high) triglyceride levels later this year. Amarin's shares could very well be much higher by year end.

For now, though, I'd recommend a "more means less" strategy. Wait for a little more certainty about the market for Vascepa -- and take less profit.

Like many biotech and pharmaceutical stocks, Amarin carries considerable risk. Of course, it also brings the potential for significant rewards in exchange. It's good for investors to balance stocks like Amarin with others that have less risk, like solid dividend stocks. If you're on the lookout for high-yielding stocks, The Motley Fool has compiled a special free report outlining our nine top dependable dividend-paying stocks. It's called "Secure Your Future With 9 Rock-Solid Dividend Stocks." You can access your copy today at no cost! Just click here.

Top Gold Companies To Watch In Right Now

Photo Credit: Flickr/Damian Gadal

After spending $19 billion to buy a couple of oil and gas companies, Freeport-McMoRan (NYSE: FCX  ) is understandably exhausted. In fact, the company has so exhausted its financial resources that it's looking to cut back its spending and is even planning to make a return or two. It hasn't helped matters that the company's profits have been pinched by low commodity costs, which is forcing Freeport to take a break from its free-spending ways.

Freeport currently has about $20.5 billion in total debt, which it's planning to reduce to $12 billion over the next three years. To get there, the company decided that it needed to be a bit more aggressive, in light of the fact that two of the top commodities it produces, copper and gold, fell in price and reduced its earnings. The company's plan now is to cut about $1.9 billion in capital cost reductions and project deferrals, as well as look to sell some of its assets.

Top Gold Companies To Watch In Right Now: Agnico-Eagle Mines Limited(AEM)

Agnico-Eagle Mines Limited, through its subsidiaries, engages in the exploration, development, and production of mineral properties in Canada, Finland, and Mexico. The company primarily explores for gold, as well as silver, copper, zinc, and lead. Its flagship property includes the LaRonde mine located in the southern portion of the Abitibi volcanic belt, Canada. The company was founded in 1953 and is based in Toronto, Canada.

Advisors' Opinion:

• [By Vatalyst]

  With headquarters in Canada, Agnico-Eagle is a gold producer that has been around for a while with operations in Canada, Finland and Mexico and the United States that has paid a cash dividend for 29 consecutive years. AEM gained 25% over the year and reported 83.5% growth in quarterly earnings. It has a market capitalization of $11.4 billion and a trailing P/E ratio of 34x with expectations of earning $0.55 per share. AEM, like other operators like it, are likely a better bet than ETF trust options like SPDR Gold Shares (GLD).

Top Gold Companies To Watch In Right Now: CME Group Inc.(CME)

CME Group Inc. operates the CME, CBOT, NYMEX, and COMEX regulatory exchanges worldwide. The company provides a range of products available across various asset classes, including futures and options on interest rates, equity indexes, energy, agricultural commodities, metals, foreign exchange, weather, and real estate. It offers various products that provide a means of hedging, speculation, and asset allocation relating to the risks associated with interest rate sensitive instruments, equity ownership, changes in the value of foreign currency, credit risk, and changes in the prices of commodities. CME Group owns and operates clearing house, CME Clearing, which provides clearing and settlement services for exchange-traded contracts and counter derivatives transactions; and also engages in real estate operations. Its primary trade execution facilities consist of its CME Globex electronic trading platform and open outcry trading floors, as well as privately negotiated transact ions that are cleared and settled through its clearing house. In addition, the company offers market data services comprising live quotes, delayed quotes, market reports, and historical data services, as well as involves in index services business. CME Group?s customer base includes professional traders, financial institutions, institutional and individual investors, corporations, manufacturers, producers, and governments. It has strategic partnerships with BM&FBOVESPA S.A., Bursa Malaysia Derivatives, Singapore Exchange Limited, Green Exchange, Dubai Mercantile Exchange, Johannesburg Stock Exchange, and Bolsa Mexicana de Valores, S.A.B. de C.V., as well as joint venture agreement with Dow Jones & Company. The company was formerly known as Chicago Mercantile Exchange Holdings Inc. and changed its name to CME Group Inc. in July 2007. CME Group was founded in 1898 and is headquartered in Chicago, Illinois.

Best Stocks To Buy: NEW GOLD INC.(NGD)

New Gold Inc. engages in the acquisition, exploration, extraction, processing, and reclamation of mineral properties. The company primarily explore for gold, silver, and copper deposits. Its operating properties include the Mesquite gold mine in the United States; the Cerro San Pedro gold-silver mine in Mexico; and the Peak gold-copper mine in Australia. The company also has development projects, including the New Afton gold, silver, and copper project in Canada; and a 30% interest in the El Morro copper-gold project in Chile. The company was formerly known as DRC Resources Corporation and changed its name to New Gold Inc. in June 2005. New Gold Inc. was founded in 1980 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• [By Vatalyst]

  New Gold Inc. is listed on the Toronto Stock Exchange, and the NYSE under the symbol NGD. New Gold has a portfolio of global assets in the United States, Mexico, Australia, Canada and Chile as an intermediary gold producer. NGD gained 159% this year. With market capitalization at $4.5 billion, NGD shows a trailing P/E ratio of 25.3x. New Gold has a 30% interest in El Morro copper-gold Project in Chile and is expected to earn $0.21 per share next year.

• [By Christopher Barker]

  This stock has set the gold standard for share price appreciation among gold miners, advancing more than 140% since I introduced Fools to the new face of New Gold back in January 2010. Looking out over the long-term horizon, New Gold has constructed a gorgeous development pipeline to complement its trio of producing gold mines, featuring: a low-risk 30% stake in Goldcorp's El Morro project in Chile, the New Afton copper and gold project in British Columbia (with production scheduled to begin mid-2012), and the recently acquired Blackwater project north of New Afton.

  Although I expect the Blackwater deposit to expand considerably with further exploration, the project's initial indicated gold resource of 1.8 million ounces already leaves New Gold in command of 14.7 million ounces of measured and indicated gold resource. Tossing in copious supplies of by-product metals -- most notably 83.5 million ounces of silver and 3.5 billion pounds of copper -- New Gold is positioned to enjoy consistently low production costs throughout its sustained growth trajectory.

Top Gold Companies To Watch In Right Now: Golden Star Resources Ltd(GSS)

Golden Star Resources Ltd., a gold mining and exploration company, through its subsidiaries, engages in the acquisition, exploration, development, and production of gold properties. It owns and operates the Bogoso/Prestea gold mining and processing operation that covers approximately 40 kilometers of strike along the southwest-trending Ashanti gold district in western Ghana; and the Wassa open-pit gold mine located to the east of Bogoso/Prestea in southwest Ghana. The company also has an 81% interest in the Prestea underground gold mine located in Ghana. In addition, it holds interests in various gold exploration projects in Ghana, Sierra Leone, Burkina Faso, Niger, and Cote d?Ivoire, as well as holds and manages exploration properties in Brazil in South America. The company was founded in 1984 and is based in Littleton, Colorado.

Advisors' Opinion:

• [By Curtis]

  Golden Star Resources, Ltd Com (AMEX:GSS): This equity had 10,766,183 shares sold short as of Aug 31st, as compared to 9,400,663 on Aug 15th, which represents a change of 1,365,520 shares, or 14.5%. Days to cover for this company is 3 and average daily trading volume is 3,419,976. About the equity: Golden Star Resources Ltd. is a mid-tier gold mining company. The Company’s operating mines are situated along the Ashanti Gold Belt in Ghana, West Africa.

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The Unappreciated Awesomeness at Cabela's

It takes money to make money. Most investors know that, but with business media so focused on the "how much," very few investors bother to ask, "How fast?"

When judging a company's prospects, how quickly it turns cash outflows into cash inflows can be just as important as how much profit it's booking in the accounting fantasy world we call "earnings." This is one of the first metrics I check when I'm hunting for the market's best stocks. Today, we'll see how it applies to Cabela's (NYSE: CAB  ) .

Let's break this down
In this series, we measure how swiftly a company turns cash into goods or services and back into cash. We'll use a quick, relatively foolproof tool known as the cash conversion cycle, or CCC for short.

Why does the CCC matter? The less time it takes a firm to convert outgoing cash into incoming cash, the more powerful and flexible its profit engine is. The less money tied up in inventory and accounts receivable, the more available to grow the company, pay investors, or both.

To calculate the cash conversion cycle, add days inventory outstanding to days sales outstanding, then subtract days payable outstanding. Like golf, the lower your score here, the better. The CCC figure for Cabela's for the trailing 12 months is 54.6.

For younger, fast-growth companies, the CCC can give you valuable insight into the sustainability of that growth. A company that's taking longer to make cash may need to tap financing to keep its momentum. For older, mature companies, the CCC can tell you how well the company is managed. Firms that begin to lose control of the CCC may be losing their clout with their suppliers (who might be demanding stricter payment terms) and customers (who might be demanding more generous terms). This can sometimes be an important signal of future distress -- one most investors are likely to miss.

In this series, I'm most interested in comparing a company's CCC to its prior performance. Here's where I believe all investors need to become trend-watchers. Sure, there may be legitimate reasons for an increase in the CCC, but all things being equal, I want to see this number stay steady or move downward over time.

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

Because of the seasonality in some businesses, the CCC for the TTM period may not be strictly comparable to the fiscal-year periods shown in the chart. Even the steadiest-looking businesses on an annual basis will experience some quarterly fluctuations in the CCC. To get an understanding of the usual ebb and flow at Cabela's, consult the quarterly-period chart below.

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

On a 12-month basis, the trend at Cabela's looks very good. At 54.6 days, it is 14.3 days better than the five-year average of 68.9 days. The biggest contributor to that improvement was DPO, which improved 7.7 days compared to the five-year average.

Considering the numbers on a quarterly basis, the CCC trend at Cabela's looks good. At 61.3 days, it is 16.5 days better than the average of the past eight quarters. With both 12-month and quarterly CCC running better than average, Cabela's gets high marks in this cash-conversion checkup.

Though the CCC can take a little work to calculate, it's definitely worth watching every quarter. You'll be better informed about potential problems, and you'll improve your odds of finding underappreciated home run stocks.

Selling to fickle consumers is a tough business for Cabela's or anyone else in the space. But some companies are better equipped to face the future than others. In a new report, we'll give you the rundown on three companies that are setting themselves up to dominate retail. Click here for instant access to this free report.

Add Cabela's to My Watchlist.

3 Stocks to Get on Your Watchlist

I follow quite a lot of companies, so the usefulness of a watchlist to me cannot be overstated. Without my watchlist, I'd be unable to keep up on my favorite sectors and see what's really moving the market. Even worse, I'd be lost when the time came to choose which stock I'm buying or shorting next.

Today is Watchlist Wednesday, so I'm discussing three companies that have crossed my radar in the past week -- and at what point I may consider taking action on these calls with my own money. Keep in mind that these aren't concrete buy or sell recommendations, nor do I guarantee I'll take action on the companies being discussed. What I can promise is that you can follow my real-life transactions through my profile and that I, like everyone else here at The Motley Fool, will continue to hold the integrity of our disclosure policy in the highest regard.

This week I thought it'd be fun to be a bit health-care-centric!

Merck (NYSE: MRK  )
Merck may be a gigantic, low-beta pharmaceutical company that you usually glance right over when scanning for income and value plays, but chances are you haven't kept up on two exciting developments that could help reignite its growth engine.

To begin with, the annual American Society of Clinical Oncology meeting in Chicago this past week shed light on a new class of immunotherapy drugs known as PD-1 inhibitors that suppress a protein suspected to be crucial to tumor growth. Heading into this meeting all eyes were on Bristol-Myers Squibb's (NYSE: BMY  ) Nivolumab -- and for good reason. In early-stage trials, the combination of Bristol's FDA-approved Yervoy and Nivolumab produced an overall response rate of 40% in advanced melanoma. The real surprise, though, came from Merck with its anti-PD-1 drug Lambrolizumab, which delivered an equally impressive overall response rate of 38% in advanced melanoma. There are still a lot of trials left to be run, but these ORRs are phenomenal. Having already received the designation of "breakthrough therapy" from the Food and Drug Administration, Lambrolizumab should be enough to get Merck investors excited.

However, Merck shareholders don't have to wait years before a potential blockbuster drug reaches the market. Investigational osteoporosis drug odanacatib is currently under safety and efficacy review by Merck with a new drug application expected to be filed by 2014. Odanacatib was so effective at reducing fracturing in late-stage trails that outside monitors stopped the trial early. With peak sales potential of $3 billion, according to Leerink Swann, Merck could be basking in a big sales boost sooner than later. To sum up, get Merck on your watchlist now!

Clovis Oncology (NASDAQ: CLVS  )
Welcome to fantasyland; population: Clovis shareholders! As my Foolish colleague and health care analyst David Williamson pointed out this week, shareholders enjoyed the best possible perk of biotech ownership Monday based on ASCO data -- a daily double. Clovis shares exploded higher as both its Rucaparib study of solid tumors, and CO-1686 for EGFR-mutant non-small-cell lung cancer, demonstrated strong early-stage results.

For Rucaparib, the effect was most notable in ovarian cancer, where there was an 89% clinical benefit to patients. In early studies of CO-1686, three of the four patients with the T790M resistance mutation demonstrated a partial response.

While certainly exciting, to believe that Clovis is worth anywhere near $2 billion is downright absurdity! This is a company whose most advanced drug, CO-101, failed to provide a statistical benefit in mid-stage metastatic pancreatic cancer trials in November and had to essentially start from scratch. Realistically, we're probably looking at two or three more years of losses and cash burn from Clovis before Rucaparib, assuming that all the stars align and the data continues to impress, has a shot of adding sales to Clovis' top line.

As of its most recent quarter, Clovis had nearly $130 million in cash, but I anticipate that it could burn through this entire amount over the next 18 months. This means that share dilution could be on the way unless Clovis finds a four-leaf clover in the form of an early-stage licensing partner. Following this week's run, I wouldn't be shocked to see a secondary offering filed later this week or early next week. Needless to say, this is prime short-sale material.

Regulus Therapeutics (NASDAQ: RGLS  )
Since presenting at the Deutsche Bank Healthcare Conference two weeks ago, shares of Regulus Therapeutics have been absolutely on fire. A mixture of ASCO and IPO fever have revived the love for newer issues, and having big name pharmaceutical companies gobbling up a majority of its IPO'd shares certainly helps its cause.

On paper, Regulus' microRNA technology and oligonucleotide database are intriguing and border on some very cool research possibilities. As an investment, however, where "cool" doesn't come into play, Regulus is a vampire company bound to suck the blood right out of investors if they dare invest at these levels.

The concern I have with Regulus is that its entire pipeline is purely based on preclinical studies with no interest in filing for an investigational new drug application until at least next year. This means that regardless of how many preclinical studies are under way, Regulus is going to be burning cash at an extraordinary rate for the foreseeable future.

Another head-scratcher is the company's preclinical hepatitis-C treatment known as miR-122. It's an intravenous treatment, partnered with GlaxoSmithKline, that's only now in preclinical trials. Perhaps someone should alert Regulus that it shouldn't waste its time as Gilead Sciences' (NASDAQ: GILD  ) oral Sofosbuvir cleaned up in all four of its late-stage hep-C trials with a favorable safety profile, and is currently under review by the FDA. With oral medications under development for years, what incentive do patients have to go back to an intravenous treatment?

It's questions like these that have me worried about Regulus' long-term viability as a publicly traded company. While I wouldn't write it off just yet, I also don't feel its recent run is anywhere near warranted and would suggest a possible short sale of the company.

Foolish roundup
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below, and consider following my cue by using these links to add these companies to your free, personalized watchlist to keep up on the latest news with each company:

Add Merck to My Watchlist. Add Clovis Oncology to My Watchlist. Add Regulus Therapeutics to My Watchlist.

Can Merck beat the patent cliff?
This titan of the pharmaceutical industry stumbled into 2013 and continues to battle patent expirations and pipeline problems. Is Merck still a solid dividend play, or should investors be looking elsewhere? In a new premium research report on Merck, The Fool tackles all of the company's moving parts, its major market opportunities, and reasons to both buy and sell. To find out more click here to claim your copy today.

The Coming Diabetes Wars

War is brewing in the multibillion-dollar diabetes market. In particular, a major skirmish will soon be fought over which insulin products will emerge as victors in a changing landscape. How are the battle lines taking shape? Here's a quick overview.

The current battle
If the situation remains as it stands now, the war would nearly already be over. The following chart shows how the top insulin analog products stack up.

Source: Company annual reports. 

Sanofi (NYSE: SNY  ) currently dominates the market with Lantus. The French drugmaker also markets Apidra, but hasn't experienced nearly as much success with the product.

NovoLog/NovoRapid, made by Novo Nordisk (NYSE: NVO  ) , comes in a distant second to Lantus. However, adding sales of Novo Nordisk's other insulin analogs, Levemir and NovoMix, to the NovoRapid amount brings the Danish pharmaceutical company relatively close to Sanofi in the insulin market. With human insulin drugs thrown in, Novo Nordisk has the larger market share of the two big players.

That leaves Eli Lilly (NYSE: LLY  ) . Lilly's Humalog stands as one of the company's most successful drugs with $2.4 billion in 2012 sales. However, Humalog trails both Lantus and NovoRapid in market share.

The battlefront could change in the not-too-distant future, though. Lilly's patent for Humalog expires this month. Lantus loses patent protection in the U.S., Europe, and Japan in 2014. Novo Nordisk faces a U.S. patent expiration for NovoRapid and Levemir in 2014 also. NovoRapid went off patent in Japan and Europe a few years ago. However, Novo Nordisk holds formula patents for both products, which provide coverage through 2017.

New combatants
All three leaders in the insulin market have newer products in various stages of development.Until recently, Novo Nordisk looked to be the most likely to get to market the fastest. The company submitted two insulin products for approval in the U.S. -- Tresiba and Ryzodeg. However, the Food and Drug Administration is requiring a further cardiovascular study before considering the products for approval. That could push Novo back to 2015 or 2016 for launching its insulin analogs.

Sanofi has a new insulin glargine formulation similar to Lantus in a late-stage clinical study.  Meanwhile, Lilly has teamed up with Boehringer Ingelheim to develop a biosimilar for Lantus. Earlier this year, Lilly took over full development of another collaboration with Boehringer for a novel basal insulin analog known as LY2605541. Both of Lilly's insulin products are in phase 3 studies.

Halozyme Therapeutics (NASDAQ: HALO  ) isn't quite as close to commercialization. The company has a mid-stage study under way that combines its rHuPH20 hyaluronidase enzyme with a mealtime insulin analog. Halozyme's enzyme helps the insulin to be absorbed more quickly than it would normally.

The biggest challenger to the status quo, though, could very well come from MannKind (NASDAQ: MNKD  ) . MannKind wraps up phase 3 studies for its inhalable insulin product, Afrezza, in a few months. Afrezza claims a few key potential advantages over rival insulin products.

For one, Afrezza could have lower glucose fasting levels than other insulin products on the market. It also holds the potential to reduce glucose fluctuations after mealtime, which in turn could decrease the likelihood of complications for patients. Last, and certainly not least, the convenience of taking insulin via inhaler rather than injection should be attractive to many diabetic patients.

Winners and losers
Novo Nordisk stands out as the most likely loser over the near term in the diabetes wars. The FDA's pushback on Tresiba and Ryzodeg hurts the company in its bid to overtake Lantus.

Sanofi seems destined to suffer from decreased sales of Lantus after it loses patent protection. While the company has another formulation waiting in the wings, Sanofi will also face competition from Lilly's biosimilar. Of course, Lilly will probably encounter its own problems after Humalog goes off patent. While there isn't a biosimilar for the drug available yet, it's just a matter of time.

Halozyme could be a winner over the long run. Since its product is only in phase 2, though, the most likely path for a quicker victory for Halozyme probably lies in licensing its insulin product to a larger player.

That leaves MannKind. The company first must achieve good results from its phase 3 clinical studies, then finally obtain FDA approval. I think MannKind will accomplish both of these objectives.

The larger challenges lie in finding a partner for commercializing Afrezza and actually succeeding in the marketplace. I suspect that at least one and possibly all of the "big three" insulin drugmakers are in discussions with MannKind. Other large pharmaceutical companies with non-insulin diabetes products are likely also prospective partners.

Commercial success could be the most difficult hurdle. Sanofi had a solid product with an established sales force and still didn't set the world on fire with Apidra. Other inhalable insulin products have also crashed and burned.

Despite these obstacles, I think that MannKind and its eventual partner, whoever that might be, could be the biggest winners of the coming diabetes wars. However, with a global market that is projected to reach $32 billion by 2018, this could be one war that has plenty of victors.

The future of MannKind?
Will MannKind's disruptive technology revolutionize the way diabetes is treated around the world -- or will the FDA put the kibosh on this product before it even hits the market? In a new premium research report on MannKind, these complex issues are made crystal clear, in addition to showing you why to buy or sell the stock today. To find out more click here to grab your copy today.

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More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

Salesforce.com to Acquire Cloud Marketing Firm for $2.5 Billion

Salesforce.com (NYSE: CRM  ) has made an offer to acquire cloud marketing firm ExactTarget (NYSE: ET  ) in a deal valued at approximately $2.5 billion, salesforce.com announced today.

The all-cash transaction calls for salesforce.com to pay $33.75 for each outstanding share of ExactTarget stock.

Salesforce.com, the leading customer relations managment (CRM) provider in the world, hopes to combine its software and cloud services with the marketing expertise of ExactTarget to create "a world-class marketing platform across email, social, mobile and the web." According to salesforce, Gartner research indicates CRM marketing grew 21% in 2012, faster than any other CRM category. "The addition of ExactTarget ... puts salesforce.com in the pole position to capture this [marketing] opportunity," salesforce.com CEO Mark Benioff was quoted as saying.

The ExactTarget acquisition is expected to increase salesforce.com's revenue for its 2014 fiscal year by $100 million to $125 million, and reduce non-GAAP earnings by approximately $0.16 a share for the year, $0.05 a share in salesforce.com's current fiscal Q2. The expected impact on earnings are a result of transaction fees and other acquisition-related costs.

The deal, which is expected to close near the end of July 31, has been unanimously approved by the boards of directors of both companies and is subject to customary closing conditions including antitrust clearance.

link

Warning: Invest In 'Dividend Blacklist' Stocks At Your Own Risk

If you've paid close attention to the markets here lately, it may seem like many companies -- as well as investors -- have caught "dividend fever." And for good reason.

With interest rates near record lows and companies sitting on record amounts of cash, it's been prime season for dividends. Times are good, and companies are feeling generous.

Companies have been hiking their payouts at a steady pace in recent years and show no sign of letting up. In fact, FactSet Research analyzed the broad spectrum of publicly traded U.S. stocks and found that companies paid out nearly $1.1 trillion in dividends in 2012. That's roughly 20% higher than a year earlier.

The prospects for 2013 are looking even better. According to a recent report by Standard & Poor's, companies are on track for a record year for dividend payments. Companies boosted dividend payments by 12% in the first quarter alone and 15.5% in the second quarter -- a trend that should continue well into the future.

 

I spend a lot of time talking about the benefits of investing in solid dividend payers. And now may be one of the best times to invest in these kinds of companies. Many of these companies are flush with cash and primed for giant dividend increases.

But today, I'm here to tell you the picture is not always rosy.

As we all know, history repeats itself. Just five years ago, dozens of companies were forced to reduce -- or completely ditch -- their dividends as profits dried up and companies took a more defensive posture. So even as you scour the landscape for companies capable of solid dividend growth, you also need to steer clear of ones that are forced to buck the current trend and slash their payouts.

Here are four warning signs of a company with a vulnerable dividend:

1. An unsustainable payout ratio
Companies tend to dedicate 20% to 40% of their profits to their dividend. But when the payout ratio (dividend payments dividend by net income) rises above the 50% mark, you may want to investigate what's going on. Trouble often begins when profits begin to fall. It's a good exercise to look up the current payout ratio for all of your current holdings. If that figure has been rising fast toward 100%, the company may soon have to take the unpopular but necessary step of reducing or eliminating the dividend.

Keep in mind that some types of investment vehicles, such as master limited partnerships and real estate investment trusts are required to pay 90% or more of their profits to investors. So in these cases, a payout near 100% is neither uncommon nor undesirable.

2. Too much debt
In a move that reeks of recklessness, some companies may actually start to borrow money to support their rising dividend payments. Taking on debt increases the risk that a company will run into deep trouble if the economy slumps. The problems can be compounded if a portion of the debt is due in just the next year or two. Pretty soon, the company will be forced to choose between paying back its lenders and defending the dividend payments. And in this fight, the lenders will always win.

Take office machines supplier Pitney Bowes (NYSE: PBI) as an example. Earlier this year it was one of the top-yielding stocks in the S&P 500. But, the company was saddled with more debt than twice its cash levels. This mature company was unlikely to take on any more debt, and roughly 70% of its income was paid out to dividends in 2012. Not surprisingly, this company eventually had to chop its dividend in half in April.

3. Industry health
Defensive industries such as electric utilities or packaged food makers tend to generate steady financial results in any economic climate. As a result, they can pay steadily growing dividends year after year. But many companies toil in highly cyclical industries -- such as technology, construction, residential, or auto manufacturing -- that can go from bust to boom and back to bust in less than a decade. And when the inevitable cyclical downturn arrives, sales fall, cash flows dry up, and the dividend must be cut if the company's earnings can't keep up.

4. 'Too good too be true' yields
In most instances, if you see a stock sporting a dividend yield in excess of 10%, you should steer clear. Why's that? Because if a company was in a strong financial position and the investment community generally perceived future dividend payment streams to be safe, then they would rush to buy the stock. The resulting rising stock price would push the dividend yield lower. In effect, the market has natural forces that spot high-quality, high-yield stocks and then corrects the anomaly.

We already took note of Pitney Bowes' double-digit yield, and explained why the good times couldn't last, but other high-yielders are also lurking out there, waiting to lure in unwitting investors, only to punish them later.

A few examples may include NTELOS Holdings (Nasdaq: NTLS), Windstream Corp. (NYSE: WIN) and Prospect Capital (Nasdaq: PSEC), two of which have dividend yields in excess of 10%. These yields are too good to be true.

Trust me, I know it's not fun to think about what it would be like to spend part of your nest egg on an income stock -- only to see the dividend get cut and then have to deal with the ensuing panic.

That's exactly why I use these rules in every issue of High-Yield PRO, to seperate the quality high-yield stocks from the ones that belong on my "Dividend Blacklist" -- which shows readers the most troubled high-yielders on the market that should be avoided at all costs.

You owe it to yourself to examine your portfolio holdings for these warning signs before it's too late. But it would be even wiser to keep these points in mind before you ever buy a stock that pays a dividend.

P.S. -- These rules have helped my readers safely capture yields of up to 10.7% and gains as high as 245%. And starting right now, you can be on your way to similar results. I've just put together a brand-new report that will give you three of my favorite, safe, high-yield picks as a gift to help get you started on your very own High-Yield PRO portfolio today. To view this brief report, click here. 

Sprint Wants to Make a Lifer Out of You

With the combination of SoftBank, Sprint (NYSE: S  ) , and Clearwire now complete, the No. 3 domestic carrier is cementing its strategic position with consumers. The company has been aggressively pitching its unlimited data plans over the past few years as a key point of differentiation from its rivals. Sprint is now guaranteeing its new unlimited data plans for life, hoping you stick around for the long haul.

CEO Dan Hesse notes, " While other wireless providers are moving away from unlimited service, Sprint champions it." The unlimited guarantee extends through the life of the line of service. The rate isn't guaranteed, so Sprint could change pricing in the future.

Larger carriers AT&T and Verizon Wireless have already switched to tiered pricing for data plans, while smaller "Un-carrier" T-Mobile offers unlimited data but throttles data back to 2G speeds after a certain threshold. Truly unlimited data on the magenta carrier costs quite a bit extra.

Sprint's big bet on unlimited data isn't without downsides. Mobile data usage continues to skyrocket to unprecedented levels. Strategy Analytics estimates that worldwide smartphone data usage will jump from 5.3 exabytes last year to over 21.5 exabytes in 2017. For reference, 1 exabyte is over 1 billion gigabytes.

That precipitous rise will put a strain on global networks, and carriers will need to beef up capacity along the way. That's precisely why most carriers have tried to transition to tiered pricing -- in order to foot the bill for those costly infrastructure investments. Rising mobile data usage is also an opportunity for revenue upside for carriers with tiered pricing. By sticking with unlimited, Sprint's primary way of growing average revenue per user will be just simply raising rates.

Since the guarantee is valid for new and existing lines of service right now, it could still potentially shift away from unlimited data plans eventually and just leave grandfathered all-you-can-eat customers.

Want to get in on the smartphone phenomenon? Truth be told, one company sits at the crossroads of smartphone technology as we know it. It's not your typical household name, either. In fact, you've probably never even heard of it! But it stands to reap massive profits NO MATTER WHO ultimately wins the smartphone war. To find out what it is, click here to access The Motley Fool's latest free report: "One Stock You Must Buy Before the iPhone-Android War Escalates Any Further..."

These 3 Stocks Are Leading the Dow as QE3 Continues

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up after comments from the Fed told the market little it didn't already expect. As of 1:25 p.m. EDT the Dow is up 57 points, or 0.37%, to 15,444. The S&P 500 (SNPINDEX: ^GSPC  ) is up 0.27% to 1,674.

There was one U.S. economic releases today. The National Association of Realtors reported seasonally adjusted existing-home sales of 4.97 million. While slightly below analyst forecasts of 5 million, it is still the highest level since 2010.

US Existing Home Sales data by YCharts.

The big thing on investors' minds is what the Fed plans to do about QE3. Currently, the Federal Reserve is buying $45 billion of long-term Treasuries and $40 billion of mortgage-backed securities each month. The Fed has said it will continue the program indefinitely until inflation rises past its target of 2% or until unemployment drops below 6.5%. As unemployment continues to fall -- it was most recently measured at 7.5% -- investors are worried about how the Fed plans to end or taper the program.

Investors were hoping to gain more information from Fed Chairman Ben Bernanke's testimony before the congressional Joint Economic Committee this morning, but the scoop actually came much earlier and from a different source. New York Federal Reserve President William Dudley said in an interview on Bloomberg TV, "Three or four months from now I think you're going to have a much better sense of, is the economy healthy enough to overcome the fiscal drag or not."

That was much more enlightening than Bernanke's testimony. Bernanke didn't shed much light on the Fed's thinking. In his prepared remarks, he largely just reiterated what everyone already knows, saying, "A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further." In response to later questions Bernanke was noncommittal: "In the next few meetings, we could take a step down in our pace of purchase."

Another opportunity for more information comes at 2 p.m. EDT today, when the Fed releases minutes from the May 1 FOMC meeting. We'll have to wait and see what those hold. They are unlikely to tell us anything new, as the Federal Reserve members have been quite outspoken lately. For the time being, though, QE3 continues. The next FOMC meeting will be held on June 18 and June 19, which is when any potential shift would happen.

Today's Dow leader
Today's Dow leader is Home Depot (NYSE: HD  ) , up 2.6%. As the housing market stays strong, Home Depot should continue to benefit from new construction and home improvement projects. Home Depot chairman and CEO Frank Blake said nearly as much: "In the first quarter, we saw less favorable weather compared to last year, but we continue to see benefit from a recovering housing market that drove a stronger-than-expected start to the year for our business." The company reported earnings earlier this week that beat analyst expectations on both revenue and earnings

Second for the Dow today is Pfizer (NYSE: PFE  ) , up 2.6%. In February Pfizer launched an IPO for 20% of Zoetis, its former animal-health division. Today Pfizer announced that on June 19 it would spin off to shareholders its remaining 80% stake in Zoetis. Instead of getting a normal spin-off, investors will be able to exchange Pfizer shares for Zoetis shares at a 7% discount. This means that investors who want to keep Pfizer stock and have no interest in Zoetis stock will be able to stick with the dividend-paying giant.

JPMorgan Chase (NYSE: JPM  ) takes third place in the blue-chip index today, up 2.2%. JPMorgan Chase stock was also up big yesterday after a motion to split the CEO and chairman roles failed to pass the shareholder vote at the company's annual meeting. Investors had been concerned that Jamie Dimon would leave the bank if he was forced to drop one of his roles. With Dimon now on board for certain, the major factors holding back the stock are gone -- yet JPMorgan Chase is not out of the woods yet. The company still has to deal with continuing fallout from the "London Whale" scandal, a new robosigning lawsuit, and continued regulatory pressure.

With big finance firms still trading at deep discounts to their historical norms, investors everywhere are wondering if this is the new normal or if finance stocks are a screaming buy today. The answer depends on the company, so to help figure out whether JPMorgan is a buy today, check out The Motley Fool's premium research report on the company. Click here now for instant access!

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More Expert Advice from The Motley Fool

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

The Best Is Yet to Come for Outerwall

The Motley Fool is on the road in Seattle! Recently, we visited Coinstar -- now officially renamed Outerwall  (NASDAQ: OUTR  ) -- to speak with CFO-turned-CEO Scott Di Valerio about the 22-year-old company's well-known coin-cashing machines, as well as its more recent acquisition of Redbox, and future initiatives to expand into other aspects of the automated retail market.

In this video segment, Scott explains how Coinstar's identity and focus has evolved over the years, and how its corporate culture and values support its belief that "The best is yet to come." The full version of the interview can be watched here.

A full transcript follows the video.

The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.

Eric Bleeker: I liked walking in the building here. You've got a history timeline of the company, and milestones, and you've got "The best is yet to come." It's a nice way of motivating people to do better. It's much better than "Maximize shareholder value," and then some smiling guy in a suit.

Scott Di Valerio: Right.

Bleeker: When you're looking at, "The best is yet to come," and getting people to think about that, when did the company culture change in that respect? Was it optimized along Coinstar from the start, and once you hit Redbox you said, "You know what? We're an automated retail company?"

How long has this thought process on becoming a larger place of the retail chain been in place?

Di Valerio: You know, companies always evolve. About four years ago, we set a strategy around the automated retail space, and really focusing the company in that area.

The company had done a number of acquisitions over the four years ago -- some which made good sense, like Redbox -- some that were kind of outside of the automated retail space, and stretched the company out where it wasn't really strong.

What we went about was a process of divesting those businesses, and then really getting innovation energy around, an engine around, bringing new automated retail solutions to the marketplace; not just for what retailers are doing today, but we're really trying to look out five and 10 years as to, "Where are retailers going, and how can we then help them in that regard?"

One of the things we're able to do in very small square footage is be a very high profitable part of the store for our retailers. In most cases, we're the most profitable square footage for our retailers. What we want to be able to do is continue that on, and bring great value to our retailers, but also do it in thinking on where they're going with their business over time.

That's what we'll stay focused on. That's why we think the best is yet to come. That's why we think we can continue to grow this company, and bring great employees into the company, and bring great returns for our employees and for our shareholders, by making it a fun place to work, an inclusive place to work, and one that really focuses on the right things, which is doing the right things for our customers, our retail partners, and for our employees.

Bleeker: Do you have any specific company values that everyone at the company knows?

I know with The Motley Fool, we have several. The last one's "Motley." Just do whatever your best trait is. Do you guys have something in place like that, that you espouse to keep people with that vision on, "The best is yet to come" and "We're looking forward to more?"

Di Valerio: We do. We have a set of great values at the company, that we established about three-and-a-half years ago. We also have turned the company around three commitments. All the employees have the same commitments as their teams do, as their bosses do, as the company does, so everybody knows the direction that we're going, and then how they fit into the company.

It's something we put in place this year which, if you think about it, everyone has to make up goals or commitments each year, and then a lot of times, you put them away until review time. Then there's also a lot of work that tends to have to go to match all of them up to see if we're going to achieve what our annual plan is, but what our strategic vision is, as well.

What we've done is we've made the company around three commitments, and all the employees have the same commitments so you know how you snap into the course that we're going. You match that up with the values that we have, as well as the work we're doing and continue to do, and build out around corporate social responsibility and sustainability, and those types of things that we've added into the company over the last couple of years.

The employees are pretty energized about where we're going, and pretty energized about how we're going about it. It's sometimes easier to get there if you don't really worry about the "how," and our employees are great about worrying about the "how" as well as the "what."

1 Thing Worth Watching at Comfort Systems USA

Facebook's Monster Quarter

Facebook's (NASDAQ: FB  )  second-quarter revenue and profits came in much higher than Wall Street analysts were expecting, and shares had their biggest one-day gain ever. Mobile advertising now makes up 41% of Facebook's ad revenue. In the lead story on Investor Beat, Motley Fool analysts Jason Moser and David Hanson examine Facebook's historic day, the "next big thing" from the social network, and what it all means for investors.

The mobile revolution is still in its infancy, but with so many different companies, it can be daunting to know how to profit in the space. Fortunately, The Motley Fool has released a free report on mobile named "The Next Trillion-Dollar Revolution" that tells you how. The report describes why this seismic shift will dwarf any other technology revolution seen before it, and also names the company at the forefront of the trend. You can access this report today by clicking here -- it's free.

5 Best Clean Energy Stocks To Buy Right Now

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some clean-energy-related stocks to your portfolio, the PowerShares WilderHill Clean Energy Portfolio ETF (NYSEMKT: PBW  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The PowerShares ETF's expense ratio -- its annual fee -- is 0.70%. The fund is fairly small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.

This ETF has performed�terribly, significantly underperforming the world market over the past three and five years. But the future counts more than the past, and it's been a rough few years for the entire solar energy industry, among others. And, as with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver. Indeed, stocks that have fallen sharply are sometimes great bargains.

5 Best Clean Energy Stocks To Buy Right Now: Mount Burgess Mining NL (MTB.AX)

Mount Burgess Mining NL engages in the exploration and development of mineral resource properties in Namibia and Botswana. The company explores for copper, zinc, lead, iron ore, rare earths, silver, and diamonds. It owns a 100% interest in the Kihabe-Nxuu base metals project located on the border of Botswana and Namibia; a 100% interest in the North Western Ngamiland diamond project located on the north western border of Botswana; a 85% interest in Tsumkwe rare earth element project located on the north-eastern border of Namibia; a 90% interest in the Tsumkwe diamond project located on the north-eastern border of Namibia; and a 90% interest in Makuri Vlei iron ore prospect situated on the north-eastern border of Namibia. The company is based in East Victoria Park, Australia.

5 Best Clean Energy Stocks To Buy Right Now: Weight Watchers International Inc(WTW)

Weight Watchers International, Inc. provides weight management services worldwide. It offers various services and products that are built upon its weight management plans comprising nutritional, exercise, and behavioral tools and approaches. The company, through its WeightWatchers.com offerings, provides two Internet subscription products, Weight Watchers Online and Weight Watchers eTools. Weight Watchers Online provides online content, functionality, resources, and interactive Web based weight management plans. Weight Watchers eTools is an Internet weight management tool for the Weight Watchers meetings members that helps to manage the day-to-day aspects of weight management plan online, discover various food options, stay informed, and keep track of their weight management efforts. Weight Watchers International also sells various products that complement its weight management plans, such as bars, snacks, cookbooks, food and restaurant guides with PointsPlus values, Weigh t Watchers magazines, and PointsPlus calculators primarily to its members and franchisees. In addition, it offers iPhone application, which provides subscribers with access to a suite of weight-loss tools, as well as helpful content; and iPad application, which provides subscribers with access to a set of recipe tools. The company was founded in 1961 and is headquartered in New York, New York.

Best Stocks To Buy Right Now: TigerLogic Corporation(TIGR)

TigerLogic Corporation engages in the design, development, sale, and support of software infrastructure, Internet search enhancement tools, and a social media content aggregation platform in North America, the United Kingdom, France, and Germany. The company offers Yolink, a search enhancement technology; and TigerLogic XDMS, an enterprise native XML database management server with data and document centric capabilities. It also provides multi-dimensional databases consisting of D3 data base management system that runs on various operating systems and allows application programmers to create new business solution software; mvEnterprise and mvBase, the multi-dimensional database solutions; and TigerLogic dashboard, which allows Pick UDM developers to create Web-based graphical displays of multi-value data. In addition, the company offers rapid application development tools that support the full life cycle of software application development and are used for rapid prototypin g, development, and deployment of graphical user interface client/server and Web applications. Further, it provides Postano, a real-time social media content aggregation platform, which allows users to collect content from various social media sources and display that content on Web pages hosted by the company or others. Additionally, the company offers technical support, consulting, continuing maintenance, customer support, professional, and training services. It serves independent software vendors and software developers, and corporate information technology departments. TigerLogic Corporation sells its products through OEMs, system integrators, specialized vertical application software developers, and consulting organizations, as well as directly to end user organizations and through its Web sites. The company was formerly known as Raining Data Corporation and changed its name to TigerLogic Corporation in April 2008. TigerLogic Corporation was founded in 1987 and is based in Irvine, California.

5 Best Clean Energy Stocks To Buy Right Now: National Security Group Inc.(NSEC)

The National Security Group, Inc., an insurance holding company, provides various property and casualty, and life insurance products and services in the United States. It operates in two segments, Property and Casualty Insurance, and Life Insurance. The Property and Casualty Insurance segment primarily provides personal lines coverage, including dwelling fire and windstorm, homeowners, mobile homeowners, ocean marine, and personal non-standard automobile lines of insurance in Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, Oklahoma, South Carolina, Tennessee, and West Virginia, and operates on a surplus lines basis in the states of Louisiana, Missouri, and Texas. The Life Insurance segment principally offers ordinary life, accident and health, supplemental hospital, and cancer insurance products in Alabama, Florida, Georgia, Mississippi, South Carolina, and Texas. The company markets its products through a field force of agents and career agents, as well as thr ough a network of independent agents and brokers. The National Security Group, Inc. was founded in 1947 and is based in Elba, Alabama.

5 Best Clean Energy Stocks To Buy Right Now: Commonwealth Bank of Australia (CBA.AX)

Commonwealth Bank of Australia (the Bank) is engaged in the provision of a range of banking and financial products and services to retail, small business, corporate and institutional clients. The Bank is a provider of integrated financial services, including retail, business and institutional banking, superannuation, life insurance, general insurance, funds management, broking services and finance company activities. Its operating segments include Retail Banking Services, Business and Private Banking, Institutional Banking and Markets, Wealth Management, New Zealand, Bankwest and Other. Its retail banking services include home loans, consumer finance, retail deposits and distribution. Its business and private banking include corporate financial services, regional and agribusiness banking, local business banking, private bank and equities and margin lending. The Bank and its subsidiaries ceased to be a substantial holder in Ten Network Holdings Limited, as of September 12, 2012.

Ruby Tuesday Misses on Both Revenue and Earnings

Ruby Tuesday (NYSE: RT  ) reported earnings on July 24. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended June 4 (Q4), Ruby Tuesday missed estimates on revenues and missed estimates on earnings per share.

Compared to the prior-year quarter, revenue contracted. Non-GAAP earnings per share contracted significantly. GAAP loss per share grew.

Gross margins dropped, operating margins grew, net margins shrank.

Revenue details
Ruby Tuesday notched revenue of $316.1 million. The six analysts polled by S&P Capital IQ expected revenue of $331.0 million on the same basis. GAAP reported sales were 13% lower than the prior-year quarter's $363.2 million.

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

EPS details
EPS came in at $0.12. The six earnings estimates compiled by S&P Capital IQ forecast $0.19 per share. Non-GAAP EPS of $0.12 for Q4 were 43% lower than the prior-year quarter's $0.21 per share. GAAP EPS were -$0.49 for Q4 compared to -$0.09 per share for the prior-year quarter.

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

Margin details
For the quarter, gross margin was 18.1%, 100 basis points worse than the prior-year quarter. Operating margin was 4.9%, 170 basis points better than the prior-year quarter. Net margin was -9.2%, 760 basis points worse than the prior-year quarter. (Margins calculated in GAAP terms.)

Looking ahead
Next quarter's average estimate for revenue is $323.0 million. On the bottom line, the average EPS estimate is $0.08.

Next year's average estimate for revenue is $1.27 billion. The average EPS estimate is $0.34.

Investor sentiment
The stock has a one-star rating (out of five) at Motley Fool CAPS, with 119 members out of 243 rating the stock outperform, and 124 members rating it underperform. Among 74 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 44 give Ruby Tuesday a green thumbs-up, and 30 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Ruby Tuesday is hold, with an average price target of $8.38.

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Add Ruby Tuesday to My Watchlist.

Crude Oil Supplies Drop for 4th Straight Week

U.S. crude oil supplies dropped 2.8 million barrels (0.8%) for the week ending July 19, according to an Energy Information Administration report (link opens a PDF) released today.

After dropping off 1.8% the previous week, this report puts crude oil supplies on a month-long shrinking trend. However, this week's milder draw is primarily due to the aftereffects of a larger downward trend, since refinery inputs fell 206,000 barrels per day (bbpd) and imports rose 327,000 bbpd. The latest crude supply number is 4.2% below year-ago levels.

Source: eia.gov. 

Gasoline inventories fell 0.6% after heading up 1.4% the week before. Demand for motor gasoline is up a seasonally adjusted 3.1% over the last four weeks, and supplies remain "above the upper limit of the average range."

After increasing $0.147 the previous week, pump prices bumped up $0.043 to a national average of $3.682 per gallon. Compared to the same time last year, consumers are paying an average $0.188 more per gallon.

Source: eia.gov. 

Distillates supplies fell 0.9% after a 3.2% gain the previous week. Distillates demand is up a seasonally adjusted 17.8% over the last four weeks, and supplies are edging closer to the lower limit of the average range for this time of year.

Source: eia.gov. 

-- Material from The Associated Press was used in this report.

link

Apple's Earnings Surprise Fails to Propel Stocks Higher

Blue-chip stocks are lower today after mixed earnings results from Apple (NASDAQ: AAPL  ) and Caterpillar (NYSE: CAT  ) competed with a report that new-home sales came in above expectations for the month of June. With roughly an hour left in the trading session, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is down by 41 points, or 0.26%.

Apple earnings
Investors have been eagerly awaiting the results of Apple's most recent quarter. Over the past 12 months, shares of the technology giant have floundered, down at one point by as much as 45% from the high of $705 per share set in September of last year.

The concern in this regard has been threefold. First, as smartphones become increasingly commoditized, Apple's famously rich gross margin has begun to show signs of vulnerability. As Bloomberg News recently reported, the average price of a smartphone has plunged to $375 from $450 at the beginning of last year.

The net result is that companies like Apple and Samsung are making far less on each unit they sell. In the first three months of 2012, for example, the iPhone maker's gross margin was a staggering 47.4%. Over the most recent three months, that figure has dropped to 36.9%.

Second, it's been three years since the company came out with an entirely new product line. The last line it introduced was the iPad, which debuted in April of 2010. Since then, it's been rumored that the company is working on wearable technology -- specifically an iWatch -- and refining its Apple TV offering, but the company has yet to confirm or deny any rumors. Click here for a take on the rumors by the Fool's resident Apple expert, Evan Niu.

And finally, albeit as a consequence of the previous two, Apple has struggled to find growth on both the top and bottom lines. In the most recent quarter, Apple's net income dropped on a year-over-year basis by 22%, while its revenue advanced by less than 1%.

Shares of Apple are nevertheless surging today, up by nearly 6% at the time of writing, thanks to better-than-expected sales of its flagship iPhone. As my colleague Tim Beyers noted, the company sold an impressive 31 million smartphones over the quarter -- a 20% improvement over the same period of last year.

To read more about Apple's earnings, check out Evan's take on how Apple is putting its money where its mouth is.

Caterpillar earnings
On the other end of the spectrum, shares of Caterpillar are dropping 2.7% today on the heels of its worse-than-expected earnings report. The industrial giant has struggled since infamous short-seller Jim Chanos announced to the world that he was taking a short position in the industrial heavyweight.

"I believe the commodities super-cycle built on the back of the Chinese construction boom is coming to an end," Chanos told an audience at CNBC's Delivering Alpha conference last week.

And, at least thus far, Chanos appears to be onto something. For the three months ended June 30, the company's earnings and revenue fell by 40% and 16%, respectively, compared to the same month of last year. In addition, as my fellow Fool Dan Dzombak observed, "The company also cut its forecast for 2013 EPS from $7 to $6.50 and lowered its revenue guidance from $56 billion-$58 billion to $57 billion-$61 billion."

New-home sales
Finally, shares of the nation's largest homebuilders are all tanking today despite an upbeat reading from the Department of Commerce on new-home sales last month. According to the government, sales in June equated to a seasonally adjusted annual rate of 497,000. That's 35% higher than in the same month last year and 8.3% up from May.

The reason homebuilders like D.R. Horton (NYSE: DHI  ) and Toll Brothers (NYSE: TOL  ) are taking it on the chin, in turn, has to do with the trend in prices. To wit, the median price of a new home fell in June by nearly 5% from $262,800 in May to $249,700. And just like Apple's experience with falling iPhone sales, if this trend continues it will put pressure on these companies' margins, and thus their bottom lines.

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7 Reasons to Still Believe in Netflix

Netflix (NASDAQ: NFLX  ) initially slumped after posting quarterly results last night, but things aren't all that bad for the leading video service.

Let's go against the herd and point out the things that went right for Netflix in its latest report.

1. Netflix didn't miss its subscriber guidance or even land in the middle
Netflix closed out the quarter with 37.56 million global streaming subscribers, and that's actually well above the midpoint of its April guidance calling for 36.7 million to 37.95 million.

Even for those lamenting that domestic subscribers came in a little soft, the 29.81 million domestic Web-tethered accounts is also above the midpoint of its earlier range of 29.4 million to 30.05 million accounts.

2. The defection rate of DVD subs is improving on a year-over-year basis
There's no saving Netflix's DVD rental business, though CEO Reed Hastings once again confirmed that the company has no plans to shut it down.

On that front, Netflix closed out the period with 470,000 fewers DVD renters than it had three months earlier. That's worse than the 240,000 mail-based subs that it lost during the first three months of the year, but Netflix lost a whopping 850,000 DVD accounts during last year's second quarter.

Don't be surprised by the large drop. The trend is working against the platform, but it's compounded this time of year as folks put Netflix on hold for the summer.

Even Outerwall (NASDAQ: OUTR  ) -- the only company posting year-over-year growth in the DVD renting business -- is expected to post a sharp sequential decline in its Redbox business when it reports on Thursday. There is seasonality here.

3. There's less red overseas
Yes, Netflix is still losing money in its international business, but contribution deficit of $66 million during the quarter is actually Netflix's best quarter in that regard since late 2011.

Expanding into the Netherlands and a commitment to step up investments in international content will lead to the red ink growing sequentially in the current quarter, but it will still be better than any single quarterly showing from last year.

4. There's more black closer to home
Profitability more than quadrupled to $0.49 a share, well ahead of the $0.40 a share that analysts were forecasting.

Put another way, the last time that Netflix scored more than the $29 million in quarterly net income that it posted now was back in 2011.

Despite the perpetual defections on the DVD end and costly overseas expansion into new territories, Netflix's domestic streaming business is saving the day. Since Netflix began breaking out the contribution profit on its domestic streaming business, margins have improved every single quarter -- going from 10.9% at the end of 2011 to 22.5% today.

5. Turbo's slow start isn't the end of the world here
One of Netflix's big bets to replace the Nickelodeon content that went away in May is a huge deal with DreamWorks Animation (NASDAQ: DWA  ) for original content. The first installment will be December's launch of Turbo F.A.S.T., a Netflix exclusive based on the computer animation studio's movie that opened this past weekend.

Yes, Turbo was a box office dud. Like the signature snail itself, it got off to a slow start.

However, Netflix content chief Ted Sarandos pointed out during the call that box office receipts are factored into its rate card. In other words, Netflix will get price breaks on future theatrical releases if they do disappoint at the multiplex.

6. Amazon, Hulu, and Netflix can co-exist
Content prices for serialized dramas are heading higher with Amazon.com (NASDAQ: AMZN  ) committing to original content earlier this year and Hulu's studio owners throwing new money at the venture after backing out of sale talks.

This may seem to be a tough time for Netflix, but keep in mind that it already has plenty of multiyear deals in place at earlier rates.

Netflix also wanted to emphasize how differentiated the different streaming platforms have become. Of the 200 most watched titles on Netflix, Hulu has just 32 and Amazon Prime Instant is at 68. When your nearest competitor -- Amazon -- has just a third of your most magnetic content, there will be room for TV buffs to subscribe to multiple cheap streaming services.

7. Two's company but three's a business model
Netflix boasted that it has ordered second seasons for all of its original shows except for Arrested Development, yet it's also open to a second season of the cult fave if it can work something out that's favorable to all parties.

However, twice during last night's video earnings call, Hastings made comments about "three, four, or five seasons" of House of Cards. Nothing appears to be in the works. It seems unlikely that David Fincher and Kevin Spacey would sign on for that long. However, it's an important reminder that we're still in the early innings here.

It's hard to fathom Netflix being as sticky as Time Warner's (NYSE: TWX  ) HBO when it comes to original programming. There's a reason why folks are paying twice as much for HBO, and that's on top of their chunky cable or satellite television bills. However, as some of Netflix's more successful shows do get extended seasons, it will be that much harder to let it go.

If you just like one show on HBO, you'll subscribe for three months, nixing the premium movie channel the rest of the year. If you like several shows -- on HBO or Netflix -- you'll stick around because it's just easier that way.

Nothing but Netflix
The market didn't seem to like Netflix's numbers, but there's plenty to like if you know where to look. 

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Can These 5 Pillars Save RadioShack's Bacon?

Another quarter has passed for RadioShack (NYSE: RSH  ) and things are still looking pretty bleak for the once high-flying electronics retailer. This past quarter revealed that while The Shack's heart is still beating, it's on life support, and I'm doubtful it will come off anytime soon.

Mmmmmm... bacon
The key to The Shack's success depends on "five pillars" that will guide the turnaround strategy. Let's take a look at these five pillars and dissect what they really mean:

Repositioning the brand: Sounds great, but the fact of the matter is, the more time that passes, the less relevant RadioShack's brand is, which makes it even more difficult to reposition.

Revamping product assortment: One of the biggest problems RadioShack faces is that consumers can get what they sell virtually anywhere; there's no real differentiation at this point. And this problem is only growing worse.

Reinvigorating stores: The stores are part of the problem indeed, but I'm not sure reinvigorating them is going to make much of a difference. For the most part it's a matter of convenience, not the experience.

Operational efficiency: This is a must. Margins all the way across have fallen off a cliff for these guys, and if they don't pull it together it's over, Johnny.

Financial flexibility: Anytime a company calls out their financial flexibility in the release as "total liquidity," red flags should go up. This means they are looking at everything they have; it's not necessarily a good thing. Total liquidity of $818 million doesn't matter much if sales aren't going anywhere. And when we look at how RadioShack's most recent sales stack up against some formidable competitors, it's a tough road ahead:

Company

TTM Revenue
(in millions)

TTM Net Income
(in millions)

RadioShack	$4,189	($206.8)
Best Buy	$48,191	($720.1)
Wal-Mart	$470,339	$17,041
Target	$73,140	$2,800

TTM = trailing 12 months.

Give me the "how"
Management is bringing in a team to try to help turn this boat around. AlixPartners, a global business advisory firm specializing in turnarounds, is in the mix now along with Peter J. Solomon Company, which is an investment banking firm. Both hires are signs that RadioShack is digging in to try to figure out how to deal with a difficult situation, and they may very well have some creative ideas. But former CFO Dorvin Lively isn't sticking around to find out. He's taken off for greener pastures, and an interim CFO (a director at AlixPartners) has been named in light of his departure.

The Foolish bottom line
I can't say I'm all that optimistic where RadioShack's future is concerned, but maybe there's some potential here. While sales have remained flat over the last five years, management's pillars are at least an effort to get things moving. For me, though, they speak more to the "what" as opposed to the "how." And it's the "how" that really matters, isn't it? If RadioShack turns this ship around, it will be epic. I for one, though, will not be holding my breath.

Click here to follow Jason on Twitter.

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Why MGIC Investment Shares Roared Higher

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of MGIC Investment (NYSE: MTG  ) , a mortgage insurance company to lenders and government-sponsored entities, jumped as much as 15% after handily topping Wall Street's earnings estimates in the second-quarter.

So what: For the quarter, revenue fell 18% to $263.9 million, but the company surprised Wall Street by reporting a profit of $0.04 per share. This easily reversed its year-ago loss of $1.36 per share and trumped the Street's forecast of a $0.15 per-share loss. Furthermore, new insurance written jumped 36% to $8 billion from the year-ago period while delinquent loans, excluding bulk loans, dropped to just 10.16% from 12.51% at this time last year.

Now what: The big catalyst for MGIC has been an improving housing market where low lending rates have spurred homebuyers to once again take the plunge. Years removed from the financial crisis, credit quality has also improved for many consumers, meaning a decline in the number of delinquent loans. However, with MGIC still only slowly removing itself from bad legacy loans and interest rates already beginning to rise, what benefits it sees from an uptick in new business underwritten now may be very short-lived. Let's not forget we're talking about a company that hasn't turned in an annual profit since 2006 and recently diluted its shareholders in a big way in order to raise cash and reduce its risk-to-capital ratio, which its own CEO, Curt Culver, suggested would get worse before it gets better. Despite today's surprise profit, this is a company I'd suggest staying far away from.

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