Top 5 Blue Chip Stocks To Own For 2014

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is not just a collection of 30 market-defining blue chips. It's also packed with brilliant dividend stocks.

All 30 of the current components pay a dividend today, ranging from Bank of America' modest 0.3% yield (with a bullet, now that regulators have finally given the bank the option to raise payouts again) to AT&T and its massive 4.7% yield backed by monthly payments from more than 100 million wireless customers.

The average Dow stock sports a 2.6% dividend yield and has increased payouts by 8.7% annually over the last decade. As a testament to the Dow's dividend strength, that long-term growth includes the banking industry's blanket cuts after the 2008 meltdown. For another perspective on the Dow's dividend powers, consider that about half of the 2,800 stocks in the Russell 3000 index index don't pay dividends at all. The average yield on that wider market barometer is also 2.6%, but payouts grow at a far slower 6% annual rate.

Top 5 Blue Chip Stocks To Own For 2014: Visa Inc.(V)

Visa Inc., a payments technology company, engages in the operation of retail electronic payments network worldwide. It facilitates commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities. The company owns and operates VisaNet, a global processing platform that provides transaction processing services. It also offers a range of payments platforms, which enable credit, charge, deferred debit, debit, and prepaid payments, as well as cash access for consumers, businesses, and government entities. The company provides its payment platforms under the Visa, Visa Electron, PLUS, and Interlink brand names. In addition, it offers value-added services, including risk management, issuer processing, loyalty, dispute management, value-added information, and CyberSource-branded services. The company is headquartered in San Francisco, California.

Advisors' Opinion:

• [By Ed Carson]

  The holiday season was hit or miss for many retailers, but indicators are that consumers were using plastic. Visa shares have risen steadily for the past seven months, with a strong 6% gain so far in 2013. Even in America, consumers continue to shift more from cash and checks to credit and debit cards. Overseas, consumers are adopting plastic, while some are bypassing cards and going straight to mobile payments. Visa wants to make sure it's part of that mobile solution.

  Visa earnings growth has decelerated for the past two quarters from 30% to 24% to 21%. Revenue growth in the latest quarter picked up to 15%, matching the best gains of the past two years.

• [By Victor Mora]

  Visa strives to help consumers, companies, governments, and other entities by providing methods of easy transaction worldwide. The company recently reported earnings that made investors happy, and the stock is now trading near all-time high prices, with still more room to rise. Over the last four quarters, earnings and revenue figures have been increasing, which has pleased investors in the company. Relative to its strong peers and sector, Visa has been an average year-to-date performer. Look for Visa to continue to OUTPERFORM.

• [By Charles Sizemore]

  One of the “big picture” economic themes that I expect to play out over 2011 and beyond is the secular shift to a global cashless society.?Though the process is well on its way in the U.S. and Europe, roughly 40% of all transactions are still made with cash and paper checks according to Barron’s.

  This means that even in “boring” developed markets, there is ample room for growth in electronic payments. And there is no better company to benefit from this trend than credit card giant Visa (NYSE: V).

Top 5 Blue Chip Stocks To Own For 2014: International Business Machines Corporation(IBM)

International Business Machines Corporation (IBM) provides information technology (IT) products and services worldwide. Its Global Technology Services segment provides IT infrastructure and business process services, including strategic outsourcing, process, integrated technology, and maintenance services, as well as technology-based support services. The company?s Global Business Services segment offers consulting and systems integration, and application management services. Its Software segment offers middleware and operating systems software, such as WebSphere software to integrate and manage business processes; information management software for database and enterprise content management, information integration, data warehousing, business analytics and intelligence, performance management, and predictive analytics; Tivoli software for identity management, data security, storage management, and datacenter automation; Lotus software for collaboration, messaging, and so cial networking; rational software to support software development for IT and embedded systems; business intelligence software, which provides querying and forecasting tools; SPSS predictive analytics software to predict outcomes and act on that insight; and operating systems software. Its Systems and Technology segment provides computing and storage solutions, including servers, disk and tape storage systems and software, point-of-sale retail systems, and microelectronics. The company?s Global Financing segment provides lease and loan financing to end users and internal clients; commercial financing to dealers and remarketers of IT products; and remanufacturing and remarketing services. It serves financial services, public, industrial, distribution, communications, and general business sectors. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. IBM was founded in 1910 and is based in Armonk, New York.

Advisors' Opinion:

• [By Paul]

  IBM. Emerging markets are a big growth driver for this computer systems and software provider. Not only that, Resendes says, IBM has "a bullet-proof balance sheet that will allow it to weather the current storm and position it for superior growth and profitability in the long term." He thinks the stock, which recently traded at $93, is worth $120 a share: ''There are some obvious companies that offer much bigger discounts, but you have to incorporate the safety factor. You're getting a premium company here that's a good spot to be in within the tech space."

• [By Peter Hughes]

  International Business Machines (IBM) -- our aggressive pick for the year -- is one of the world's most dominant technology companies, with annual revenues of $105 billion and net income of $16 billion.

10 Best Small Cap Stocks To Watch For 2014: Colgate-Palmolive Company(CL)

Colgate-Palmolive Company, together with its subsidiaries, manufactures and markets consumer products worldwide. It offers oral care products, including toothpaste, toothbrushes, and mouth rinses, as well as dental floss and pharmaceutical products for dentists and other oral health professionals; personal care products, such as liquid hand soap, shower gels, bar soaps, deodorants, antiperspirants, shampoos, and conditioners; and home care products comprising laundry and dishwashing detergents, fabric conditioners, household cleaners, bleaches, dishwashing liquids, and oil soaps. The company offers its oral, personal, and home care products under the Colgate Total, Colgate Max Fresh, Colgate 360 Advisors' Opinion:

• [By ChuckCarlson]

  Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company has raised distributions for 48 years in a row. The 10 year annual dividend growth rate is 12.40%/year. The last dividend increase was 9.40% to 58 cents/share. Analysts are expecting that Colgate Palmolive will earn $5.52/share in 2012. I expect that the quarterly dividend will be raised to 64 cents/share in 2012. Yield: 2.60%

Top 5 Blue Chip Stocks To Own For 2014: Chevron Corporation(CVX)

Chevron Corporation, through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream. The Upstream segment involves in the exploration, development, and production of crude oil and natural gas; processing, liquefaction, transportation, and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage, and marketing of natural gas, as well as holds interest in a gas-to-liquids project. The Downstream segment engages in the refining of crude oil into petroleum products; marketing of crude oil and refined products primarily under the Chevron, Texaco, and Caltex brand names; transportation of crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car; and manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It a lso produces and markets coal and molybdenum; and holds interests in 13 power assets with a total operating capacity of approximately 3,100 megawatts, as well as involves in cash management and debt financing activities, insurance operations, real estate activities, energy services, and alternative fuels and technology business. Chevron Corporation has a joint venture agreement with China National Petroleum Corporation. The company was formerly known as ChevronTexaco Corp. and changed its name to Chevron Corporation in May 2005. Chevron Corporation was founded in 1879 and is based in San Ramon, California.

Advisors' Opinion:

• [By Victor Mora]

  Chevron provides essential energy products and services to growing companies and consumers worldwide. The stock has been on a bullish run for many years that has taken it to all-time high prices. Over the last four quarters, earnings and revenue figures have been mixed, however, investors in the company have been mostly happy with earnings reports. Relative to its peers and sector, Chevron has been a year-to-date performance leader. Look for Chevron to OUTPERFORM.

• [By Jonas Elmerraji]

  Surprisingly, one of the names that's correlating the highest with the S&P 500 right now is oil and gas supermajor Chevron (CVX). Just like the S&P, Chevron is trading in a very well-defined trend channel. The key difference is that the Chevron trade is further along; this stock is bouncing off of trendline support this week. That means it's time to be a buyer.

  Commodities and materials stocks are seeing some buoyancy this week, but Chevron's price action is different -- it's been more sustained over the course of 2013. This stock's proximity to trendline support right now makes it the best-in-breed oil name in my view. As geopolitical risks propel oil prices, the real story at CVX is the fact that support is just a few points away. That makes Chevron a great setup from a risk management perspective.

  Speaking of risk management, if you decide to jump into shares here, I'd recommend keeping a protective stopprotective stop just above the 200-day moving average.

• [By GuruFocus] Tom Gayner initiated holdings in Chevron Corp. His purchase prices were between $114.81 and $126.43, with an estimated average price of $120.86. The impact to his portfolio due to this purchase was 0.18%. His holdings were 43,000 shares as of 06/30/2013.
  
  New Purchase: Brookfield Property Partners LP (BPY)
  
  Tom Gayner initiated holdings in Brookfield Property Partners LP. His purchase prices were between $19.57 and $23.64, with an estimated average price of $21.67. The impact to his portfolio due to this purchase was 0.13%. His holdings were 175,122 shares as of 06/30/2013.
  
  New Purchase: ONEOK, Inc. (OKE)
  
  Tom Gayner initiated holdings in ONEOK, Inc.. His purchase prices were between $41.16 and $52.13, with an estimated average price of $46.98. The impact to his portfolio due to this purchase was 0.1%. His holdings were 70,000 shares as of 06/30/2013.
  
  New Purchase: Blackstone Group LP (BX)
  
  Tom Gayner initiated holdings in Blackstone Group LP. His purchase prices were between $19.1 and $23.45, with an estimated average price of $21.2. The impact to his portfolio due to this purchase was 0.09%. His holdings were 116,900 shares as of 06/30/2013.
  
  New Purchase: BlackRock Inc (BLK)
  
  Tom Gayner initiated holdings in BlackRock Inc. His purchase prices were between $245.3 and $291.69, with an estimated average price of $267.9. The impact to his portfolio due to this purchase was 0.08%. His holdings were 9,100 shares as of 06/30/2013.
  
  New Purchase: KKR & Co LP (KKR)
  
  Tom Gayner initiated holdings in KKR & Co LP. His purchase prices were between $17.8 and $21.15, with an estimated average price of $19.85. The impact to his portfolio due to this purchase was 0.08%. His holdings were 115,000 shares as of 06/30/2013.
  
  New Purchase: Eni SpA (E)
  
  Tom Gayner initiated holdings in Eni SpA. His purchase prices were between $40.39 and $48.96, with an estimated average price of $45.85. The impact to his portfolio due to this purchase was 0.04%. His ! holdings were 30,000 shares as of 06/30/2013.
  
  New Purchase: Ross Stores, Inc. (ROST)
  
  Tom Gayner initiated holdings in Ross Stores, Inc.. His purchase prices were between $59.26 and $66.5, with an estimated average price of $64.05. The impact to his portfolio due to this purchase was 0.04%. His holdings were 18,000 shares as of 06/30/2013.
  
  New Purchase: Carlyle Group LP (CG)
  
  Tom Gayner initiated holdings in Carlyle Group LP. His purchase prices were between $24.19 and $32.87, with an estimated average price of $29.56. The impact to his portfolio due to this purchase was 0.02%. His holdings were 20,000 shares as of 06/30/2013.
  
  Sold Out: EOG Resources (EOG)
  
  Tom Gayner sold out his holdings in EOG Resources. His sale prices were between $113.44 and $137.9, with an estimated average price of $128.22.
  
  Sold Out: State Street Corp (STT)
  
  Tom Gayner sold out his holdings in State Street Corp. His sale prices were between $56.51 and $67.44, with an estimated average price of $62.2.
  
  Sold Out: Bunge Ltd (BG)
  
  Tom Gayner sold out his holdings in Bunge Ltd. His sale prices were between $66.4 and $73.51, with an estimated average price of $70.39.
  
  Added: UnitedHealth Group Inc (UNH)
  
  Tom Gayner added to his holdings in UnitedHealth Group Inc by 45.25%. His purchase prices were between $58.54 and $66.09, with an estimated average price of $62.22. The impact to his portfolio due to this purchase was 0.4%. His holdings were 569,800 shares as of 06/30/2013.
  
  Added: Liberty Media Corporation (LMCA)
  
  Tom Gayner added to his holdings in Liberty Media Corporation by 102.38%. His purchase prices were between $108.75 and $130.01, with an estimated average price of $119.32. The impact to his portfolio due to this purchase was 0.2%. His holdings were 85,000 shares as of 06/30/2013.
  
  Added: National Oilwell Varco, Inc. (NOV)
  
  Tom Gayner added to his holdings in National Oilwell Varco, Inc. by 40.44%. His purchase prices were bet! ween $64.! 14 and $71.57, with an estimated average price of $68.35. The impact to his portfolio due to this purchase was 0.14%. His holdings were 191,000 shares as of 06/30/2013.
  
  Added: Google, Inc. (GOOG)
  
  Tom Gayner added to his holdings in Google, Inc. by 86%. His purchase prices were between $765.914 and $915.89, with an estimated average price of $849.25. The impact to his portfolio due to this purchase was 0.13%. His ho
• [By Hawkinvest]

  Chevron Corporation (CVX) is a leading integrated energy company with exposure to oil, natural gas, refining, etc. This could be one of the most undervalued stocks in the market. Chevron pays a dividend that beats many other stock and bond yields, plus it has a below market price to earnings ratio of about 8 times earnings. The average stock in the S&P 500 Index currently trades for over 12 times earnings. If oil prices continue to rise, the already healthy profit estimates for Chevron might be too low. With oil prices showing strength this early in the season, Chevron could be poised to beat earnings in the coming months. However, the stock is trading at the upper end of the recent trading range. Recently, it has been possible to buy this stock at about $102 per share, so waiting for dips could pay off.

  Here are some key points for CVX:

  Current share price: $104.25

  The 52 week range is $85.63 to $110.01

  Earnings estimates for 2012: $12.66 per share

  Earnings estimates for 2013: $13.20 per share

  Annual dividend: $3.42 per share which yields 3.1%

Top 5 Blue Chip Stocks To Own For 2014: Philip Morris International Inc(PM)

Philip Morris International Inc., through its subsidiaries, engages in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States. Its international product brand line comprises Marlboro, Merit, Parliament, Virginia Slims, L&M, Chesterfield, Bond Street, Lark, Muratti, Next, Philip Morris, and Red & White. The company also offers its products under the A Mild, Dji Sam Soe, and A Hijau in Indonesia; Diana in Italy; Optima and Apollo-Soyuz in the Russian Federation; Morven Gold in Pakistan; Boston in Colombia; Belmont, Canadian Classics, and Number 7 in Canada; Best and Classic in Serbia; f6 in Germany; Delicados in Mexico; Assos in Greece; and Petra in the Czech Republic and Slovakia. It operates primarily in the European Union, Eastern Europe, the Middle East, Africa, Asia, Canada, and Latin America. The company is based in New York, New York.

Advisors' Opinion:

• [By Louis Navellier]

  Philip Morris International (NYSE:PM) is involved with the manufacture and sale of cigarettes and other tobacco products in over 180 countries across the globe. Year to date, PM stock is up 16%, compared to a loss of nearly 2% for the Dow Jones.

• [By Roberto Pedone]

  One stock that insiders are buying up a large amount of here is Philip Morris International (PM), which manufactures and sells cigarettes and other tobacco products in markets outside the U.S. Insiders are buying this stock into modest strength, since shares are up 5.5% so far in 2013.

  Philip Morris International has a market cap of $143 billion and an enterprise value of $168 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 17.25 and a forward price-to-earnings of 14.6. Its estimated growth rate for this year is 4.2%, and for next year it's pegged at 11.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $3.59 billion and its total debt is $25.50 billion. This stock currently sports a dividend yield of 3.8%.

  A director just bought 123,500 shares, or about $11.01 million worth of stock, at $89.15 per share.

  From a technical perspective, PM is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last two months and change, with shares dropping from its high of $95.38 to its recent low of $85.21 a share. During that move, shares of PM have been mostly making lower highs and lower lows, which is bearish technical price action.

  If you're bullish on PM, then I would look for long-biased trades as long as this stock is trending above some near-term support at $87.65 to $87 and then once it takes out its 200-day at $88.72 and its 50-day at $89.25 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 5.10 million shares. If we get that move soon, then PM will set up to re-test or possibly take out its next major overhead resistance levels at $91.40 to $92.26 a share. Any high-volume move above those levels will then put $94 to $95 into range for shares of PM.

   

• [By Michael Brush]

  Philip Morris International (PM) has a dividend yield of 3.7%.

  This company is the world's second-biggest cigarette seller, after China National Tobacco. Philip Morris International controls the rights outside the United States to such brands as Marlboro, Virginia Slims and Parliament. So it's positioned to sell more cigarettes as smokers in rapid-growth emerging markets earn more and trade up to premium brands.
  

   

  Insiders continue to buy the stock, suggesting room for further appreciation. And, of course, tobacco's addictive nature assures steady revenue. If you oppose smoking for moral, health or other reasons, this stock is not for you. As an ex-smoker, I'd understand.

Hot Growth Companies For 2014

Dividend stocks are everywhere, but many just downright stink. In some cases, the business model is in serious jeopardy, or the dividend itself isn't sustainable. In others, the dividend is so low, it's not even worth the paper your dividend check is printed on. A�solid dividend�strikes the right balance of growth, value, and sustainability.

Today, and one day each week for the rest of the year, we're going to look at one dividend-paying company that you can put in your portfolio for the long term without too much concern. This isn't to say that these stocks don't share the same macro risks that other companies have, but they are a step above your common grade of dividend stock. Check out�last week's selection.

This week, we'll turn out attention to the gambling sector to a company that has been anything but a gamble for investors, Las Vegas Sands (NYSE: LVS  ) , and discuss why it makes for an excellent dividend stock you can buy right now.

Hot Growth Companies For 2014: Thoratec Corporation(THOR)

Thoratec Corporation engages in the development, manufacture, and marketing of proprietary medical devices used for circulatory support. The company?s primary product lines include ventricular assist devices, such as HeartMate II, an implantable left ventricular assist device consisting of a rotary blood pump to provide intermediate and long-term mechanical circulatory support (MCS); and HeartMate XVE, an implantable and pulsatile left ventricular assist device for intermediate and longer-term MCS. Its ventricular assist devices also comprise Paracorporeal Ventricular Assist Device, an external pulsatile ventricular assist device, which provides left, right, and biventricular MCS approved for bridge-to-transplantation (BTT), including home discharge, and post-cardiotomy myocardial recovery; and Implantable Ventricular Assist Device, an implantable and pulsatile ventricular assist device designed to provide left, right, and biventricular MCS approved for BTT comprising hom e discharge, and post-cardiotomy myocardial recovery. The company also provides CentriMag, an extracorporeal full-flow acute surgical support platform that offers support up to 30 days for cardiac and respiratory failure. In addition, it offers PediMag and PediVAS extracorporeal full-flow acute surgical support platforms designed to provide acute surgical support to pediatric patients. The company sells its products through direct sales force in the United States, as well as through a network of distributors internationally. Thoratec Corporation was founded in 1976 and is headquartered in Pleasanton, California.

Advisors' Opinion:

• [By McWillams]

  Wall Street is expecting Thoratec’s (THOR: 30.70 0.00%) growth rate to accelerate to 15% next year with earnings growth of over 20%. That type of growth has Wall Street analysts bullish on the medical device stock. The stock has a consensus price target of $38 and some analysts think THOR could go to $50.

Hot Growth Companies For 2014: Nordstrom Inc.(JWN)

Nordstrom, Inc., a fashion specialty retailer, offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States. It offers a selection of brand name and private label merchandise. The company sells its products through various channels, including Nordstrom full-line stores, off-price Nordstrom Rack stores, Jeffrey? boutiques, treasure & bond, and Last Chance clearance stores; and its online store, nordstrom.com, as well as through catalog. Nordstrom also provides a private label card, two Nordstrom VISA credit cards, and a debit card for Nordstrom purchases. The company?s credit and debit cards feature a shopping-based loyalty program. As of September 30, 2011, it operated 222 stores, including 117 full-line stores, 101 Nordstrom Racks, 2 Jeffrey boutiques, 1 treasure & bond store, and 1 clearance store in 30 states. The company was founded in 1901 and is based in Seattle, Washington.

Advisors' Opinion:

• [By Kevin1977]

  Director of Nordstrom Inc., Felicia D Thornton, bought 1,140 shares on 9/09/2011 at an average price of $47.89. Nordstrom, Inc. is one of the nation's fashion specialty retailers, with stores located in a number of states, including full-line stores, Nordstrom Racks, Faconnable boutiques, and free-standing shoe stores. Nordstrom Inc. has a market cap of $10.44 billion; its shares were traded at around $47.89 with a P/E ratio of 15.7 and P/S ratio of 1.1. The dividend yield of Nordstrom Inc. stocks is 2% Nordstrom Inc. had an annual average earnings growth of 27.3% over the past 10 years. GuruFocus rated Nordstrom Inc. the business predictability rank of 3.5-star.
  
  On August 11, Nordstrom Inc. reported net earnings of $175 million, or $0.80 per diluted share, for the second quarter ended July 30, 2011. This represented an increase of 20 percent compared with net earnings of $146 million, or $0.66 per diluted share, for the same quarter last year.Second quarter same-store sales increased 7.3 percent compared with the same period in fiscal 2010. Net sales in the second quarter were $2.72 billion, an increase of 12.4 percent compared with net sales of $2.42 billion during the same period in fiscal 2010.
  
  Last week, Director Felicia D Thornton bought 1,140 shares of JWN stock.
  
  Executive Vice President Ken Worzel and Director Philip G Satre bought shares in August.

Top 5 Growth Stocks To Watch Right Now: CNO Financial Group Inc. (CNO)

CNO Financial Group, Inc., through its subsidiaries, engages in the development, marketing, and administration of health insurance, annuity, individual life insurance, and other insurance products for senior and middle-income markets in the United States. The company markets and distributes Medicare supplement insurance, interest-sensitive and traditional life insurance, fixed annuities, and long-term care insurance products; Medicare advantage plans through a distribution arrangement with Humana Inc.; and Medicare Part D prescription drug plans through a distribution and reinsurance arrangement with Coventry Health Care. It also markets and distributes supplemental health, including specified disease, accident, and hospital indemnity insurance products; and life insurance to middle-income consumers at home and the worksite through independent marketing organizations and insurance agencies. In addition, the company markets primarily graded benefit and simplified issue life insurance products directly to customers through television advertising, direct mail, Internet, and telemarketing. It sells its products through career agents, independent producers, direct marketing, and sales managers. CNO Financial Group, Inc. has strategic alliances with Coventry and Humana. The company was formerly known as Conseco, Inc. and changed its name to CNO Financial Group, Inc. in May 2010. CNO Financial Group, Inc. was founded in 1979 and is headquartered in Carmel, Indiana.

Hot Growth Companies For 2014: Intuitive Surgical Inc.(ISRG)

Intuitive Surgical, Inc. designs, manufactures, and markets da Vinci surgical systems for various surgical procedures, including urologic, gynecologic, cardiothoracic, general, and head and neck surgeries. Its da Vinci surgical system consists of a surgeon?s console or consoles, a patient-side cart, a 3-D vision system, and proprietary ?wristed? instruments. The company?s da Vinci surgical system translates the surgeon?s natural hand movements on instrument controls at the console into corresponding micro-movements of instruments positioned inside the patient through small puncture incisions, or ports. It also manufactures a range of EndoWrist instruments, which incorporate wrist joints for natural dexterity for various surgical procedures. Its EndoWrist instruments consist of forceps, scissors, electrocautery, scalpels, and other surgical tools. In addition, it sells various vision and accessory products for use in conjunction with the da Vinci Surgical System as surgical procedures are performed. The company?s accessory products include sterile drapes used to ensure a sterile field during surgery; vision products, such as replacement 3-D stereo endoscopes, camera heads, light guides, and other items. It markets its products through sales representatives in the United States, and through sales representatives and distributors in international markets. The company was founded in 1995 and is headquartered in Sunnyvale, California.

Advisors' Opinion:

• [By Holly LaFon] Intuitive Surgical is the maker of the da Vinci Surgical System, a breakthrough in robotic-assisted minimally invasive surgery. It provides technology and procedural innovation across cardiac, thoracic, urology, gynecologic, colorectal, pediatric and general surgical disciplines and allows patients to recover in record time.
  
  In the last year, this fast-growing company�� stock has surged 66% to $529.54. Its revenue over the last ten years has grown at a rate of 38%, and it grew 24.5% last year with 72.5% gross profit and 39.5% operating margin. The company expects fiscal 2012 revenue growth of 17-19%.
  
  The da Vinci System is new technology first introduced to market in July 2000 after the US FDA approved it for laparoscopic surgery. Its new S model was released in April 2009. Already there are more than 1,933 systems installed in over 1,560 hospitals worldwide.
  
  Apple Inc. (AAPL)
  
  Apple Inc. is the maker of popular consumer products such as the Mac, iPod, iPhone and iPad. Its stock has famously increased 569% over the past five years to hit a record of $600 per share last week. Apple has split its stock 2 for 1 three times in the past on June 15, 1987, June 21, 2000 and February 28, 2005. CEO Tim Cook said as recently as this morning that the company saw little reason to that a split would help the stock but if it was in the best interest of shareholder the company would have one. The company also announced this morning that it would initiate a $2.65 per share quarterly dividend and buy back up to $10 billion of its common stock.
  
  In the last ten years, Apple�� annual growth rate for revenue was 34.5%, EBITDA 112.4% and book value 36.3%. Free cash flow increased 11% in the last five years and 58% in the last year. The rapidly growing company still has a relatively low P/E ratio of 16.68.
  
  Google Inc. Cl A (GOOG)
  
  Google Inc. is the search engine company founded in 1998 that has expanded to offer dozens of advertising and web services. Since going public i! n 2004, its stock has increased 485% to $633.98 per share on Monday. It has never had a stock split or paid a dividend.
  
  Google has also grown rapidly. Its revenue per share over the last 10 years has increased at an annual rate of 52.3%, EBITDA at 51.9%, free cash flow at 64.8% and book value at 74.8%.Its P/E ratio is 20.
  
  The company is also launching its 7-inch Nexus table in May to compete with Apple�� iPad and Amazon�� Kind Fire and is in the process of the biggest revamp of its Internet search formula in company history.
  
  Google has an expressed long-term focus in its business, rather than quarter-to-quarter goals, as stated in its IPO letter which quotes Warren Buffett. The company�� higher stock price may help discourage frequent trading and encourage high-quality shareholders, as Buffett has mentioned in the past.
  
  Priceline.com (PCLN)
  
  Priceline.com Inc. is an online travel booking company that debuted on the Nasdaq in 1999. In the last five years its stock increased 1,248%. Priceline.com�� stock price cratered to under $10 after the dot-com bubble and driven it up to almost $1,000. In 2003 it announced a 1 for 6 reverse stock split.
  
  "This reverse stock split enhances our position by expanding investor interest, reducing transaction costs for trading our stock, making our results more comparable to peer companies with far fewer outstanding shares, and allowing priceline.com's earnings per share on a post-split basis to more precisely reflect the Company's operating results," said priceline.com President and CEO Jeffery H. Boyd.
  
  On Monday it had climbed to $696.93 per share and its financial results have been strong and growing once again. Revenue in 2011 was $4.4 billion from $3 billion in 2010, earnings increased to $1.1 billion from $528 billion and free cash flow increased to $1.3 billion from $755 million. The company also has over $2.7 billion in cash, $164 in long-term liabilities and no debt.
  
  The stock has become expensive ! in the la! st several years and has a P/E of 30.3.
  
  NVR Inc. (NVR)
  
  NVR Inc. consists of two operating segments: homebuilding and mortgage banking. The homebuilding unit makes homes under the trade names Ryan Homes, NVHomes and Fox Ridge Homes, and NVR Mortgage primarily focuses on serving NVR homebuyers.
  
  NVR�� is older than most of the other companies on the over-$500 share-price list, having gone public in 1993. Since then its stock price has increased 7,219% to $741 per share on Monday. It has never split its stock.
  
  Seaboard Corp. (SEB)
  
  Seaboard is also an older company founded more than 90 years ago and has focused on grain and agriculturally derived products. In the last 10 years its stock has appreciated 543%, and on Monday one share costs $1,955. It has never split its stock.
  
  Seaboard is still a growing company. In the last ten years it increased revenue per share at an average rate of 12.5%, EBITDA at 9.8%, and book value at 18.2%. It also has a low P/E of 6.8, its lowest since about 2007.
  
  Berkshire Hathaway-A (BRK.A)
  
  Berkshire Hathaway is the multinational conglomerate founded by Warren Buffett and is the eighth largest company in the world. They are the highest priced shares on the New York Stock Exchange, partially due to never splitting their stock or paying a dividend. Rather, they reinvest corporate earnings to continue growth.
  
  In the last 10 years, Berkshire Hathaway stock has increased 67%. On Monday, one share of BRK.A cost $122,115.
  
  Berkshire management has grown book value at an annual rate of 20.3% for the last 44 years. Growth has been continuing in recent history. In the last 10 years, revenue per share increased at a rate of 11.4%, EBITDA at 7.5% and free cash flow at 3.3%. Its P/E is 17.1.
  
  These stocks are not necessarily expensive or not expensive based on how much one share costs but are subject to the same va
• [By Jim Lowell]

  Intuitive Surgical (ISRG: 329.49 0.00%) is an expensive stock and their stock price is currently well below the $400 level that it flirted with in April. However, the stock is a compelling growth story with revenues and earnings expected to climb 19% in 2011. The company faces little competitive pressure and 2011 is likely the year that consumers opt for procedures that they delayed in 2009-10. That could produce some blowout earnings results for ISRG in 2011.

Hot Growth Companies For 2014: MEDIFAST INC(MED)

Medifast, Inc., through its subsidiaries, engages in the production, distribution, and sale of weight management and disease management products, and other consumable health and diet products in the United States. The company?s product lines include weight and disease management, meal replacement, and vitamins. It also operates weight control centers that offer Medifast programs for weight loss and maintenance, customized patient counseling, and inbody composition analysis. The company markets its products under the Medifast and Essential brand names, including shakes, appetite suppression shakes, women?s health shakes, diabetics shakes, joint health shakes, coronary health shakes, calorie burn drinks, calorie burn flavor infusers, antioxidant shakes, antioxidant flavor infusers, bars, crunch bars, soups, chili, oatmeal, pudding, scrambled eggs, hot cocoa, cappuccino, chai latte, iced teas, fruit drinks, pretzels, puffs, brownie, pancakes, soy crisps, crackers, and omega 3 and digestive health products. Medifast Inc. sells its products through various channels of distribution comprising Web, call center, independent health advisors, medical professionals, weight loss clinics, and direct consumer marketing supported via the phone and the Web; Take Shape for Life, a physician led network of independent health coaches; and weight control centers. The company was founded in 1980 and is headquartered in Owings Mills, Maryland.

Advisors' Opinion:

• [By Mark]

  Revenues are expected to grow 27% next year and yet MEDIFAST (MED: 15.68 0.00%) trades at only 16x consensus 2011 earnings. The company continues to gain market share in the competitive weight management sector and provides investors with the double benefit of both a growth stock and a potential acquisition target.

• [By Holly LaFon] Medifast produces, distributes and sells weight and health management products with the brand names Medifast, Take Shape for Life, Hi-Energy Weight Control Centers and Woman�� Wellbeing.
  
  Its return on assets in the third quarter of 2011 was 19.6%, which has been increasing in the past several years. The average return on assets for the specialty retail industry is 10.48% for the trailing 12 months.
  
  
  
  The company�� total assets amounted to $94 million in 2010, which increased from $62.8 million in 2009. Net income also increased to $19.6 million in 2010 from $12 million in 2009.

CarMax - A Business Analysis

In a recent interview right here on GuruFocus, Tom Gayner of Markel (MKL) had a few things to say about CarMax (KMX). This prompted me to give the company a closer look. What follows is a business analysis. We will save considerations of stock analysis, such as price, for a later discussion.

I think that is a business that will continue to grow. I don't see any reason why you can't have a Carmax in a lot of towns way beyond what they're talking about right now. I think being the number one dealer, and having the number one market share in used car arena gives you great information on what transaction prices are. Then you work on the process to be as quick and as cost efficient in fixing the car and getting it sold, and have the confidence from customers when you offer warranties on the products. Those factors create a virtuous cycle. The more you do, the more you can do, the better the pricing is, the more the customers like you, the more your brand matters. The company will be around for a good long time. The management has done a very good job of creating the system and executing it.
CarMax was formed as a unit of Circuit City in 1993 and was spun off in 2002. Used-car sales account for about 80% of revenue. Competitors include, but certainly are not limited to, AutoNation (AN) and America's Car-Mart (CRMT) as well as private party sellers.

Five Forces Model Analysis

Threat of New Entrants: High fixed costs for inventory and access to channels of distribution are the largest barriers to entry for the industry. Economies of scale benefit the firm's competence but do not inhibit new entrants.

Intensity of Competition: From individual car owners to established car dealers, the industry is extremely competitive and customers are price-sensitive.

Bargaining Power of Suppliers: Suppliers have the potential capability to integrate forward in order to directly sell to customers.

Bargaining Power of Buyers: Customers are price sensitive, there are no switching c! osts, and options abound.

Threat of Substitutes: Alternatives exist but most people simply need a car.

Value Chain Analysis

Even though the used car industry is extremely competitive and price sensitive, CarMax does well because it has huge economies of scale. With large inventory, the company can spread its operating costs consistently across individual dealerships. CarMax adds value in five categories.

Acquiring Cars - Most of the cars are acquired through trade ins. This creates a high-quality inventory. CarMax offers a "while you wait" appraisal and gives you an offer that is valid for seven days. They also acquire cars through dealership relationships such as with auction houses.

Managing Inventory - This is the company's real competitive advantage. All inventory goes through a standardized internal inspection process. Cars are separated into "CarMax" and "Valumax" categories and sold through channels focusing on different categories of quality and price.

Operating Stores - Management policies guarantee a consistent customer experience across the company and inventory is shared nationwide.

Marketing and Selling - Website searching, "no haggle" price policy, and inspection guarantee are the key components of the companies value added strategy.

Services - The company differentiates itself from smaller dealers by offering financing, appraising, repairs, guarantees and warranties for every sale.

The process of inspecting and guaranteeing the quality of the cars CarMax re‐sells adds considerable value to the company's brand. This type of service is not likely to be found in other dealerships. The amount of resources that go into the value‐chain activity of managing and sorting CarMax's inventory is difficult to implement, and hard to imitate. While CARFAX Reports offer the same assurances of quality, they cannot offer the other benefits such as auto service and repairs, warranties and financing.

SWOT Analysis

Strengths - Hi! gh qualit! y vehicles, large inventory, no haggle prices, customer friendly salesWeaknesses - High PricesOpportunities - Nationwide expansion, improved customer service, backwards integration to the supplier levelThreats - Overhead costs rise with each new store, poor economy, competition
While a poor economy hurts sales, this cuts both ways. In a truly robust market consumers might choose to purchase new cars, while a moderately slow economy encourages customers to trade down to used cars.

The biggest threat to this company is the "Best Buy" (BBY) problem. CarMax's website and transparent appraisal process make it an excellent place to go kick the tires and make an informed purchasing decision. The problem is that many customers will be making that purchase online from a lower-cost provider. Although CarMax's customer-centric shopping environment and service offerings provide some differentiation, I'm not convinced that price-sensitive customers will be willing to pay for the value-added services that CarMax provides.

According to this report, CarMax cars cost on average $2,000 more than the same car from a private party. The loan services, 7-day money back guarantee, 30-day warranty and guaranteed services after purchase are nice. Will customers continue to pay up for them?

Conclusion

At 2.5% market share CarMax is more than twice as large as the next closest competitor in the used car sales industry. With only 107 stores, CarMax is an enticing regional to national growth story with years of growth still ahead of it. On the downside, CarMax is the Best Buy of used cars — the place you go for a product demo before you buy online for less.

CarMax is a great growth story and it benefits from a network effect. CarMax offers the largest selection of used cars in the country. As this model attracts new purchasers, more of them sell their old cars to the company, which enhances the selection further and leads to still more customers. Longer term I think the price gap between Car! Max and p! rivate parties will shrink as economies of scale take effect, thus strengthening the value added proposition.

CarMax has a compelling business model and should be able to grow by adding new stores.

Related links:Right hereTom Gayner

Top Business And Finance Degrees For 2013

Business has long been one of the most declared majors among college students. It's a degree that is general and flexible enough to allow for a variety of career paths. However, certain business specialties are more popular than others due to high demand in the work force and the promise of a lucrative salary. Here are the degree concentrations that incoming business students will be focusing on in the 2013-14 school year:

Entrepreneurship
Business majors who want to get to the top of the corporate ladder or build their own empires will find a degree in entrepreneurship appealing. With coursework that includes capital management, global business and product development, it is no surprise that many entrepreneurship grads go on to become chief executive officers.

Natural leaders, out-of-the-box thinkers, and those who are always looking for better ways to do things are drawn to this degree. Those who hold degrees in entrepreneurship are among the highest paid in the business world with an average median annual salary of $158,560.

Business Administration
Employers look for well-rounded job candidates, and graduates who hold a degree in business administration fit the bill. This business concentration allows students to study everything from business ethics and law to economics, operations management and business strategies.

Business administration graduates generally go on to hold the top positions in companies due to their ability to maximize profits and increase efficiency. Business administration professionals find careers in diverse industries with average salaries ranging from $62,900 to $137,020.

Finance/Accounting
Dollars and cents are the fuel that make every business run, and finance majors are equipped to make sense of the numbers. This in-demand major can lead to careers as financial consultants and advisors, and budget analysts. Students should expect a heavy course load that features classes in both general business topics and personal and corporate money management.

Graduates with a concentration in international finance are even more desirable. A global perspective is invaluable to companies that need help navigating the regulations, laws and tax codes that come with international trade. Job growth for accountants is expected to be up 16% by 2020, according to the U.S. Department of Labor's Bureau of Labor Statistics. Starting salaries average $57,400, and more experienced finance and accounting degree holders make an average of $99,300 annually.

Economics
Economic majors go on to be integral members of any business team, as their knowledge of government and international relations proves to be invaluable to employers. Studies in micro and macro economics, and topics like public policy, industrial organization, business regulations and antitrust round out an economic major's academic syllabus.

Economists are trained to predict the economic impacts of a corporation's decisions, which can ultimately save a company from fiscal disaster. They are compensated for their skills with an average salary of $83,590.

Marketing
Even the best business idea will fall flat without the right promotion; this is where marketing professionals come in. Marketing majors take classes in finance, public relations and statistics in order to get a grasp on how to develop advertising plans, maximize investments and guide a client's brand. They are well paid for their expertise with marketing managers making an average salary of $112,800.

Choosing marketing as a business school major can lead to diverse opportunities for employment as marketers are needed in nearly every type of business. Social media marketing, managing a company or brand's online presence, is a growing field that is ripe for recent and upcoming graduates.

The Bottom Line
Business majors are plentiful on college campuses, but savvy students who specialize in today's most in-demand concentrations will set themselves up for better job offers after graduation.

Foster, Enterprise Ink Service Agreement - Analyst Blog

A subsidiary of Foster Wheeler AG's (FWLT) Global Engineering and Construction Group has recently inked a Master Service Agreement with Enterprise Products Operating LLC, a subsidiary of Enterprise Products Partners L.P. Foster will be providing services for multiple projects that will be awarded in a release arrangement. The bookings will be recorded by Foster as and when it receives the orders.

The scope of the contract primarily involves supporting Enterprise Products Operating's North American capital project program. Enterprise is a leading U.S. midstream company. It primarily processes, transports and/or fractionates natural gas, natural gas liquids, crude oil and refined products.

Prior to this, Foster had received a contract from OJSC Gazpromneft Moscow Refinery, for its Combined Oil Refinery Unit (CORU) Project. Foster Wheeler had also received a contract for the process design package for Moscow refinery's crude and vacuum distillation units and the gas plant.

Foster Wheeler has more than 60 years of experience in designing steam generator products. Foster's Global E&C Group's (Engineering and Construction) operating revenue (FW scope) was $588 million in 1Q13, down 12.4% from $671 million in the prior-year period. The segment reported a 30% decline in new order bookings during the first quarter.

Foster Wheeler currently has a Zacks Rank #2 (Buy). Other companies that are also worth considering at the moment include Willdan Group Inc. (WLDN) and Orion Marine Group Inc. (ORN). Both have a Zacks Rank #1 (Strong Buy). In addition, Chicago Bridge & Iron (CBI) is also a good option at the moment with a Zacks Rank #2 (Buy).

Northera NDA Resubmitted By Chelsea - Analyst Blog

Chelsea Therapeutics International Ltd. (CHTP) recently resubmitted a new drug application (NDA) to the US Food and Drug Administration (FDA) for Northera (droxidopa). The company is looking to get Northera approved for the treatment of symptomatic neurogenic orthostatic hypotension (NOH) in patients with primary autonomic failure (Parkinson's disease, multiple system atrophy and pure autonomic failure), dopamine beta hydroxylase deficiency and non-diabetic autonomic neuropathy.

Results from 306 B, a large phase III study demonstrating improvement in dizziness / lightheadness, the main symptom of NOH and confirming findings from the previous 301 study, was included in the resubmitted NDA.

Chelsea Therapeutics had initially submitted an NDA for Northera in Sep 2011. However, the company received a complete response letter (CRL) in Mar 2012. In the CRL, the FDA recommended that Chelsea Therapeutics should conduct and submit data from an additional positive study supporting efficacy in the 301 study. The company was also asked to design a study which would demonstrate durability of effect over a 2- to 3-month period.

In the CRL, FDA also mentioned an additional bioequivalence study for the approval of Northera 300 mg capsules. Chelsea Therapeutics was considering making these capsules commercially available to complement the 100 mg and 200 mg capsules which were being utilized in the clinical program by Chelsea Therapeutics.

Taking note of this, Chelsea Therapeutics included a bioequivalence study for the 300 mg dose in the resubmitted NDA.

The resubmitted NDA will most likely come up for review before the FDA's Cardiovascular and Renal Drug Advisory Committee (CRDAC). There is also a possibility raised by the FDA about Northera gaining accelerated approval and hinted that short-term clinical benefit would be considered adequate replacements to predict long-term clinical benefits under the accelerated approval.

Northera was granted orphan drug designation in! 2007 and received fast track designation.

Chelsea Therapeutics currently carries a Zacks Rank #3 (Hold). A response from the FDA regarding Northera's approval status should be out early next year. At present, companies that look well-positioned include Alnylam Pharmaceuticals, Inc. (ALNY), Targacept, Inc. (TRGT) and Palatin Technologies Inc. (PTN). All these biopharma stocks carry a Zacks Rank #1 (Strong Buy).

Best Heal Care Stocks For 2014

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.

Best Heal Care Stocks For 2014: CEPHEID(CPHD)

Cepheid, a molecular diagnostics company, engages in developing, manufacturing, and marketing integrated systems for testing in the clinical market, as well as for application in legacy biothreat, industrial, and partner markets. Its systems enable molecular testing for organisms and genetic-based diseases by automation. The company offers GeneXpert system that integrates sample preparation in addition to DNA amplification and detection; and SmartCycler system, which integrates DNA amplification and detection to allow rapid analysis of a sample. The GeneXpert system is designed for reference laboratories, hospital central laboratories, and satellite testing locations, such as emergency departments and intensive care units within hospitals and doctors? offices. Cepheid also provides GeneXpert Infinity System for high volume testing. The company offers tests for the GeneXpert and the SmartCycler systems in the areas of healthcare associated infections, critical infectious d isease, genetics, women?s health, and oncology. These tests include U.S. Food and Drug Administration (FDA) cleared products, CE marked products, analyte specific reagents, and research use only tests in the clinical market. In the industrial market, it sells its SmartCycler system along with general use polymerase chain reaction reagents and reaction tubes. Cepheid sells its products its direct sales force and through third-party distributors worldwide. It has collaboration agreements with Novartis, Foundation for Innovative New Diagnostics, Life Technologies Corporation, and Northrop Grumman Corporation. The company was founded in 1996 and is headquartered in Sunnyvale, California.

Best Heal Care Stocks For 2014: Partner Communications Company Ltd.(PTNR)

Partner Communications Company Ltd. provides various telecommunications services in Israel. It offers cellular telephony services on GSM/GPRS and UMTS/HSDPA networks. The company also provides basic services, including domestic mobile calls, international dialing, roaming, voice mail, short message services, intelligent network services, content based on its cellular portal, data and fax transmission, and other services. In addition, it offers Internet services provider services that provides access to the Internet, as well as home WiFi networks; value added services, such as anti-virus and anti-spam filtering; and transmission services; and Web video on demand services, music tracks, and games. Further, the company provides voice over broadband and primary rate interface fixed-line telephone services; and data capacity services. Additionally, it offers content services comprising voice mail, text, and multimedia messaging, as well as downloadable wireless data application s, including ring tones, music, games, and other informational content; and sells handsets, phones, routers, and related equipment. The company markets its products through its sales centers, business sales representatives, traditional networks of specialized dealers, and non-traditional networks of retail chains and stores under the Orange brand name. Partner Communications Company Ltd. was founded in 1997 and is headquartered in Rosh Ha-ayin, Israel.

Advisors' Opinion:

• [By Chris Stuart]

  Partner Communications(PTNR) is Israel's second-largest wireless operator, but is facing fierce competition in the industry. Recent regulatory changes in the cellular market are also a major headwind for the company. The government has implemented a massive 76% cut in interconnection fees (the charges by mobile-phone operators when connecting users between networks) and lower exit penalties. The company has warned that free cash flow will likely be significantly hurt over coming quarters.

  So what's there to like here? Israeli analysts at Bank Leumi believe the selloff has been overdone, saying "the market has overshot to the downside by pricing in an unreasonably pessimistic outcome to the changes in the industry."

  The stock currently pays a 7.3% dividend, but that could change, given the downward pressure on cash flow. Consider this a high-risk, high-reward investment. TheStreet Ratings has a $19 price target on Partner Communications.

Top Medical Stocks To Buy Right Now: Abbot Grp.(ABG.L)

African Barrick Gold plc primarily engages in the exploration and production of gold properties in Tanzania. It also explores for silver and copper. The company has four producing mines in northwest Tanzania, including Bulyanhulu, Buzwagi, Tulawaka, and North Mara; and seven principal exploration prospects in Tanzania at various stages of development. As of November 2010, it hold interest in 318 granted prospecting licenses, prospecting licenses reconnaissance, special mining licenses, and mining licenses covering approximately 4,881 square kilometers in Tanzania; and approximately 303 pending applications for prospecting licenses and prospecting licenses reconnaissance covering approximately 3,551 square kilometers in Tanzania. The company is headquartered in London, United Kingdom. African Barrick Gold plc is a subsidiary of Barrick Gold Corporation.

Best Heal Care Stocks For 2014: PFB Corporation (PFBOF)

PFB Corporation (PFB) is a Canada-based company. The Company, together with its subsidiaries, is engaged in the manufacturing of insulating building products made from expanded polystyrene (EPS) materials and marketing these products in North America. Its main brands include PlastiSpan EPS Product Solutions; Advantage ICFS, Insulspan SIPS, Riverbend Timber Framing and Precision Craft. Expandable polystyrene resin is manufactured at PFB�� polymer plant located in Crossfield, Alberta, for use in downstream EPS manufacturing operations. Plasti-Fab EPS Product Solutions supply the EPS foam core material used to manufacture Insulspan SIPS. Riverbend Timber Framing structures are typically sold with an accompanying Insulspan SIPS enclosure package. Advantage ICF Systems are insulating concrete forming systems that are employed to build insulated foundations and walls from concrete in both residential and commercial markets. On February 1, 2011, the Company acquired Precision Craft Group. Advisors' Opinion:

• [By Tom Konrad]

  PFB is a leading North American manufacturer of expanded polystyrene (EPS, aka "Styrofoam") building products such as insulated concrete forms and structural insulated panels.  The stock trades infrequently, and did not trade at all on December 28th, so I will be using the midpoint of the bid and ask for the purpose of measuring its return over the coming year.  At $5.53, PFB pays a 5.75% annual yield.
  
  The stock price has fallen significantly after the planned purchase of NOVA Chemicals' Performance Styrenics business as a move towards vertical integration with the acquisition of the EPS manufacturer.  This deal fell though, and many investors sold the stock, driving it down from the mid $7 range to the mid $5 range where it is today.   Already a good value, PFB stands to gain from continued recovery in the housing market or any increase in investor recognition.  However, since the stock is so illiquid, larger investors will probably want to substitute one of my upcoming alternative picks for PFB, while small investors should limit themselves to good-til-cancelled limit orders to avoid paying over the odds for their shares.

Best Heal Care Stocks For 2014: ClearOne Communications Inc.(CLRO)

ClearOne Communications, Inc., a communications solutions company, develops and sells conferencing, collaboration, and streaming multimedia systems for audio, video, and Web applications. It develops, manufactures, markets, and services a line of audio conferencing products for personal, tabletop, premium, and professional uses by businesses and organizations, such as enterprise, healthcare, education and distance learning, government, legal, and finance organizations. The company also offers various residential products under the NetStreams DigilinX brand and commercial products under the VIEW brand, which deliver the Internet protocol (IP) A/V experience by streaming high definition audio and video, and control over TCP/IP networks. Its audio and video, and control solutions support virtually various digital or analog sources, including high definition audio and video content sources, and an unlimited number of networked end points on existing IP networks and infrastruct ure. In addition, the company manufactures and sells media carts for audio and video conferencing. It serves end-users, including small and medium-sized businesses, educational institutions, government organizations, and individual consumers primarily through a network of independent distributors who in turn sell the products to dealers, systems integrators, and other value-added resellers, as well as through a network of residential electronics dealers. ClearOne Communications, Inc. was founded in 1983 and is headquartered in Salt Lake City, Utah.

Is Nokia a Risky Investment?

With shares of Nokia (NYSE:NOK) trading around $3.25, is NOK an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Nokia operates as a mobile communications company worldwide. It operates in three segments: Devices & Services, HERE, and Nokia Siemens Networks. The Devices & Services segment offers feature mobile phones and smartphones such as the Lumia consisting of Microsoft’s (NASDAQ:MSFT) Windows phone operating system; and spare parts. The HERE segment develops a range of location-based products and services for consumers, platform services, and local commerce services for its feature phones and smartphones, as well as for other device manufacturers, automobile manufacturers, application developers, Internet service providers, merchants, and advertisers. The Nokia Siemens Networks segment provides telecommunications infrastructure to the mobile broadband market. The mobile communications industry is growing at an explosive pace, if Nokia positions themselves well, they stand to see a significant rise in profits. Through its segments, Nokia is seems to be diverse and innovative enough to provide communications technology to growing businesses and economies worldwide.

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T = Technicals on the Stock Chart are Weak

Nokia stock has seen a consistent decline in its stock since late 2007. The stock has recently bounced off of lows but the overall long-term price trend seems to be pointing lower. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Nokia is trading around its key averages which signal neutral price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Nokia options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Nokia Options	52%	3%	1%

What does this mean? This means that investors or traders are buying a very minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
May Options	Steep	Average
June Options	Steep	Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very minimal amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Nokia’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Nokia look like and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	13.64%	-87.10%	-778.57%	-537.50%
Revenue Growth (Y-O-Y)	-23.40%	-20.68%	-23.13%	-29.56%
Earnings Reaction	-12.93%	-8.92%	-5%	6.49%

Nokia has seen decreasing earnings and revenue figures over the last four quarters. From these figures, the markets have been disappointed with Nokia’s recent earnings announcements.

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P = Poor Relative Performance Versus Peers and Sector

How has Nokia stock done relative to its peers, Ericsson (NASDAQ:ERIC), Research in Motion (NASDAQ:BBRY), Apple (NASDAQ:AAPL), and sector?

	Nokia	Ericsson	Research in Motion	Apple	Sector
Year-to-Date Return	-15.82%	19.70%	25.02%	-22.90%	6.53%

Nokia has been a relative underperformer, year-to-date.

Conclusion

Nokia provides mobile communication products to a large user base around the world. Its products were once considered innovative but have taken the backseat in recent times. The stock has not performed well as earnings and revenue figures are not meeting investor expectations. Relative to its peers and sector, Nokia stock has trailed, in year-to-date performance, by a significant margin. STAY AWAY from Nokia stock for now.

Will Halliburton See Rising Prices?

With shares of Halliburton (NYSE:HAL) trading around $46, is HAL an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Halliburton provides a range of services and products for the exploration, development, and production of oil and natural gas. The company operates in two segments: Completion and Production, and Drilling and Evaluation. The Completion and Production segment offers production enhancement services, including stimulation and sand control services, as well as cementing services comprising the bonding of wells, well casing, and casing equipment. The Drilling and Evaluation segment offers drill bits and services, as well as coring equipment and services. It also offers wireline and perforating services, testing services comprising acquisition, and analysis of reservoir information and optimization solutions.

On Monday morning, Halliburton delivered earnings and revenue figures that beat Wall Street's expectations. Not long ago, the company has agreed to plead guilty to destroying evidence related to the 2010 Deepwater Horizon spill on the Gulf Coast, according to the United States Department of Justice. Despite these struggles, consumers and business demand for energy continues to rise, companies like Halliburton are well-positioned to provide products and services well into the future.

T = Technicals on the Stock Chart are Strong

Halliburton stock has rising steady over the last several months. The stock is now trading near highs for the year, and seems poised to continue this path. Analyzing the price trend and its strength can be done using key simple moving averages.

What are the key moving averages? They are the 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Halliburton is trading above its rising key averages, which signals neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Halliburton options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Halliburton Options	24.91%	3%	0%

What does this mean? This means that investors or traders are buying a very minimal amount of call and put options contracts, compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
August Options	Flat	Average
September Options	Flat	Average

As of today, there is average demand from call buyers or sellers, and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very minimal amount of call and put option contracts, and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates, and what that means for Halliburton’s stock.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. In addition, the last four quarterly earnings announcement reactions can help gauge investor sentiment on Halliburton’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Halliburton look like, and more importantly, how did the markets like these numbers?

	2013 Q2	2013 Q1	2012 Q4	2012 Q3
Earnings Growth (Y-O-Y)	-8.75%	24.72%	-26.87%	-12.16%
Revenue Growth (Y-O-Y)	1.15%	1.54%	3.20%	8.60%
Earnings Reaction	-1.64%	5.58%	5.05%	3.15%

Halliburton has seen mixed earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been mostly pleased with Halliburton’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Halliburton stock done relative to its peers, Schlumberger (NYSE:SLB), Apache (NYSE:APA), Baker Hughes (NYSE:BHI), and the overall sector?

	Halliburton	Schlumberger	Apache	Baker Hughes	Sector
Year-to-Date Return	32.80%	17.55%	4.83%	16.78%	14.22%

Halliburton has been a relative performance leader, year-to-date.

Conclusion

Halliburton provides essential oil and gas products and services worldwide. The company has been in the news recently, owing to the company’s latest earnings report, as well as a lawsuit involving the 2010 Deepwater Horizon spill. The stock has been steadily rising, and is now trading near highs for the year. Over the last four quarters, investors in the company have mostly been pleased, as earnings have been mixed, while revenue figures have been rising. Relative to its peers and sector, Halliburton has been a year-to-date performance leader. Look for Halliburton to OUTPERFORM.

Best Dividend Companies For 2014

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Waste Management (NYSE: WM  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line. Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit. Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt. Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors. Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context. Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Waste Management.

Best Dividend Companies For 2014: PCCW Ltd (8)

PCCW Limited is a Hong Kong-based holding company. Its subsidiary HKT provides telecommunications and related services, including local telephony, local data and broadband, international telecommunications, mobile, customer premises equipment sale, outsourcing, consulting and contact centers, primarily in Hong Kong, mainland China and elsewhere in the world. Media Business includes interactive pay- television (TV) services, Internet portal multimedia entertainment platform and the Company�� directories operations in Hong Kong and mainland China. Solutions Business offers Information and Communications Technologies services and solutions in Hong Kong and mainland China. Pacific Century Premium Developments Limited covers the Company�� property portfolio in Hong Kong and mainland China, including the Cyberport development in Hong Kong, and elsewhere in Asia. Other Businesses include the Company�� wireless broadband business in the United Kingdom and all corporate support functions.

Best Dividend Companies For 2014: Urastar Energy Inc(URS.V)

Urastar Gold Corp., a mining exploration and development company, focuses on gold exploration in the Sierra Madre gold belt targeting areas, Mexico. It holds interests in the Black Point project located approximately eight miles to the northeast of Eureka, Nevada, the United States; the El Antimonio property situated in northwest Sonora, Mexico; and the Jabali property located in the Sahuarita Sonora Mexico municipal region. The company was formerly known as Urastar Energy Inc. and changed its name to Urastar Gold Corp. in August 2011. Urastar Gold Corp. is based in Vancouver, Canada.

Top 10 Blue Chip Stocks To Invest In 2014: PSB Holdings Inc.(PSBH)

PSB Holdings, Inc. operates as the holding company for Putnam Bank that provides a range of banking services to individual and small business customers located primarily in eastern Connecticut. It accepts various deposit products that include checking, savings, money market deposit accounts, negotiable order of withdrawal accounts, and fixed-term certificates of deposit. The company?s loan portfolio comprises one- to four-family residential real estate mortgage loans, including home equity loans and lines of credit; commercial real estate loans comprising multi-family real estate loans; commercial loans; construction mortgage loans primarily secured by single-family properties; and consumer loans, such as loans on new and used automobiles, loans secured by deposit accounts, and unsecured personal loans. It operates seven full service branch offices and one loan origination center. The company was founded in 1862 and is headquartered in Putnam, Connecticut. PSB Holdings, I nc. is a subsidiary of Putnam Bancorp, MHC.

Small Saving schemes - Are they attractive in new Avatar?

Small savings schemes used to be a major attraction, with investors. But, small savings schemes returns used to be static.

With rising interest rates, other assets had adjusted their payouts � but that did not happen in the case of small savings. Due to this, small savings schemes lost out to Bank FDs, NCDs, Company FDs, FMPs and the like.

Now, that has been corrected to some extent. Is this going to excite people and make them go for these?

Unlikely, in most cases.  The changes are there, but small. Time deposit in post office have gone up from the 6.25 � 7.5% range to 7.7 � 8.3% range. NSC has gone from 8% - 8.4%, but the 5% bonus at maturity has been discontinued. Hence, there is not much change in the returns. Now, NSC has a tenure of five years, down from six years. 

There is also a 10 year NSC which has been introduced now, offering a 8.7% return. All these instruments are currently offering returns lower than what a bank FD offers and may not sit well with most people.  Those not in the tax bracket or in the 10% tax bracket and want government guarantees, may find these useful.  An NSC offering 8.4% translates to a measly 5.8% post tax, for someone in the highest tax slab. That�s not much, isn�t it? Especially, when inflation is hovering between 9-10%.

The other change now is that, the rates have been linked to the government securities of similar maturities, with a 25 basis point spread ( 50 basis point spread in case of the 10 year NSC ).  So, expect these rates to go up and down every year in line with the prevailing rates then.

The rate for Senior Citizen Savings Scheme ( SCSS ), has been kept at the same level of 9%. The spread has been kept at 1% compared to the prevailing government security rates, keeping in mind the fact that Senior Citizens may depend on this income, for their sustenance.

However, the interest rate for PPF has gone up to 8.6%. This makes it attractive as this is a post-tax return. The post -tax return comes to 11.3% ( assuming Sec 80C benefit is being availed ), which is fantastic. An instrument yielding north of 16% pre-tax returns only, can give you such returns. Hence, this becomes a very good longterm wealth creation tool, in your hand. 

Also, the investment limit per year has been enhanced to Rs.1 Lakh.  PPF comes under Sec 80C and helps you to save tax, in the year of investment where you can take advantage of the enhanced limits. All in all, PPF has become a very attractive long-term savings instrument. It always was a weapon of choice for meeting longterm goals, especially Retirement and Child Education. 

Now, that weapon has become far more potent!

Make the most of this new opportunity in PPF, that has come up.  Otherwise, the other optione mentioned earlier � Bank & Company FDs, NCDs, Bonds, FMPs � score over other small savings instruments.

Another one that could offer excellent return possibilities over the next 2 � 3 year period could be a debt MF scheme, especially with medium and long maturities. Choose wisely, depending on your horizon and risk return expectations.

The author is a Principal Financial Planner at Ladder7 Financial Advisories.

A systematic approach to investing

Wealth Creation is a long unending story which goes on to decades. The investors should carefully select the asset class i.e. Equity, Debt, Commodities etc. Historically, the data suggests that equity has returned better than any other asset class. Nevertheless, most of the retail investors don't have the expertise in selecting the right stocks and end up in making random investments.

Systematic approach does wonders.

First of all one should be able to come to an asset allocation plan based on his or her risk appetite, investment period, age, liquidity needs, quantum and few other personalised parameters.

SIP

No doubt Systematic Investment Plan (SIP) does wonders in creating assets especially for retail investors who can't commit large funds at a time and don't have expertise in finance domain. Till now, SIP is concentrated on Mutual Funds as Fund Managers offer to sell them units on a regular basis which also helps in taming the market volatility. At any point of time, investment in Mutual Fund works better than Direct Stock investment as the former helps in diversifying the risks and you get an opportunity to own small part of different shares across a large domain.

SIP in Equity

Now, the market is buzz with an SIP in Equity. A person confident with stock selection for a longer horizon can bring the discipline for investment in shares. The question arises ' do you buy more of your favourite stocks when the market nosedived or do you sell your equity holdings before the market plunged? It is very difficult to predict the market; so a systematic approach would be to invest in small amounts through SIPs.

How to go with it?

Similar to SIP in Mutual Funds, the investors also commit small amount every month/fortnight/week. Investors can also commit the fixed number of shares every month. So, on the trigger date, the broker would buy the number of stocks out of your committed amount every month or buys the fixed number of shares of said company. Generally, the minimum commitment amount is Rs 5,000 per month.

Which is better ' Fixed Amount or Fixed Number of Shares?

Let us suppose, you are interested in buying a stock A at the current market price of Rs. 950. Either you can commit Rs 5,000 each month where the broker would buy the shares at the prevailing market price on the predefined investment date else you can also ask your broker to buy five shares each month. The latter option won't help much in getting benefit from low stock prices. If the price of stock comes down, you won't be able to get benefit of low stock prices. However, in the former option, the benefit of average cost averaging plays which helps in buying more number of shares when the stock tumbles.

Is it good ' SIP in Shares?

If you are comfortable in picking good stocks, it can do wonders in creating wealth for you. Direct investment requires active investment approach and you need to keep a tab of flow of news including company performance; hence, SIP in shares should not be done blindly on a predefined date without tracking it. However, if one chooses good stocks initially, say the market bellwethers in their domain and has good long-term growth potential, it can outperform the Nifty basket.

Costs involved

Buying shares at any point of time involves paying transaction costs which goes in the range of 0.5% to 1% depending upon the volume. Apart from this, you also pay Account Maintenance Charges (AMC) which ranges from Rs. 300 to Rs. 1,000. So, depending upon the investment amount, these costs can be averaged out. If one commits high investment amount every month, the initial transaction costs plus the AMC can be averaged out over a period of time.

Good to go with it

There is an appetite for equity investments in India. SIP empowers the investors to build portfolio over a longer period of time. The disciplined approach in SIP eliminates the risk of timing of market. So a systematic approach of investing in highest yielding asset i.e. Equity can do wonders in building assets for your future.

Happy Investing!

Top China Companies To Buy Right Now

Solar stocks were on fire this week, soaring double digits on a variety of positive news items. China continues to support a few specific players, major projects are now under way, and analysts are starting to buy into the solar industry.

FSLR Total Return Price data by YCharts

These factors have helped solar this week, so here's what investors need to know.

China continues to prop up solar
Suntech Power and LDK Solar (NYSE: LDK  ) have both defaulted on loans, but that doesn't appear to be a clear sign that China is willing to let its solar industry consolidate. These two companies along with countless others would be bankrupt in the U.S. or Europe but investments from state-owned entities and loans from state-owned banks have propped up the entire industry.

Top China Companies To Buy Right Now: ChinaCast Education Corporation(CAST)

ChinaCast Education Corporation, together with its subsidiaries, provides post-secondary education and e-learning services in China. The company operates in two segments, E-learning and Training Service Group and Traditional University Group. The E-learning and Training Service Group provides post secondary education distance learning services that enable universities and other higher learning institutions to provide nationwide real-time distance learning services. It also provides K-12 educational services, such as broadcast multimedia educational content services to primary, middle, and high schools; and vocational/career training services. The Traditional University Group segment operates private residential universities that offer four-year bachelor?s degree and three-year diploma programs in finance, economics, trade, tourism, advertising, IT, music, foreign languages, tourism, hospitality, computer engineering, law, and art. The company also provides logistic service s. ChinaCast Education Corporation was founded in 1999 and is headquartered in Central, Hong Kong.

Top China Companies To Buy Right Now: SmartHeat Inc.(HEAT)

SmartHeat Inc. manufactures, sells, and services plate heat exchangers (PHE) in the People?s Republic of China. It offers PHE units, which combine PHEs with various pumps, temperature sensors, and valves and automated control systems; heat meters for use in commercial and residential buildings; and spiral and tube heat exchangers. The company?s products are used in various applications that include energy conversion for heating, ventilation, and air conditioning; and industrial use in petroleum refining, petrochemicals, metallurgy, food and beverage, and chemical processing. SmartHeat sells PHE units under the brand name of Taiyu; and PHEs under the brand names of Taiyu and Sondex. It sells its products through sales force and a network of national distributors. The company is headquartered in Shenyang, the People?s Republic of China.

Hot Canadian Stocks To Own Right Now: Raptor Pharmaceutical Corp.(RPTP)

Raptor Pharmaceuticals Corp. operates as a biotechnology company in the United States. The company is dedicated to speeding the delivery of new treatment options to patients by working to improve existing therapeutics through the application of highly specialized drug targeting platforms and formulation expertise. Its clinical stage development products include DR Cysteamine, which is in phase IIb for the treatment of cystinosis; phase IIa for the non-alcoholic steatohepatitis; and phase II for the treatment of Huntington?s disease. Raptor?s clinical-stage products also include Convivia that is in Phase IIa stage for the potential management of acetaldehyde toxicity due to alcohol consumption; and Tezampanel and NGX 426, which completed phase I stage for the treatment of migraine and pain. Its preclinical product candidates comprise HepTide for the treatment of Hepatocellular Carcinoma and Hepatitis; WntTide for the treatment of breast cancer; NeuroTrans for the treatmen t of neurodegenerative diseases; and Tezampanel and NGX 426 for the treatment of Thrombosis and Spasticity Disorder. Raptor Pharmaceuticals Corp. is headquartered in Novato, California.

Advisors' Opinion:

• [By cnAnalyst]

  Raptor Pharmaceutical Corp. (NASDAQ:RPTP) is the 7th best-performing stock last month in this segment of the market. It was up 69.94% for the past month. Its price percentage change was 52.20% year-to-date.

Top China Companies To Buy Right Now: Vanceinfo Technologies Inc(VIT)

VanceInfo Technologies Inc., together with its subsidiaries, engages in the provision of information technology (IT) services. The company offers research and development services in various phases of development, including requirements analysis, concept generation, product realization, quality assurance and testing, and technology and information transfer; and develops software products, such as middlewares, Internet protocols, and other software. It provides enterprise solutions for packaged evaluation and selection, packaged implementation, customization, regional rollout, version upgrades, and business intelligence/data warehouse, as well as enhancement, maintenance, and product support; and designs, develops, and implements software solutions to meet various client requirements, and provides maintenance services for software systems. VanceInfo also offers customized and automated testing practices, which include functional testing, globalization and localization testi ng, automation testing, performance testing, remote testing, and test process consulting; and globalization and localization services that comprise software and content localization, localization engineering, localization testing, internationalization engineering, and internationalization testing. The company serves technology, telecommunications, financial services, manufacturing, and retail and distribution industries primarily in China, the United States, Europe, and Japan. VanceInfo Technologies Inc. was founded in 1995 and is headquartered in Beijing, the People?s Republic of China.

Wells Fargo Managing The Slowdown Quite Well

Like it's larger rival JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC) delivered a solid, better-than-expected second quarter on Friday morning. Clearly there is still pressure on the business, as loan growth is faint and yields are low, but lower credit costs are helping underpin earnings. Wells Fargo and JPMorgan seem virtually equally undervalued, and both offer investors a quality play on the banking sector. With JPMorgan's greater exposure to trading and investment banking, as well as further regulatory changes, Wells Fargo is arguably the better play for investors looking to benefit from an eventual improvement in loan growth and yields.

SEE: July 12: Earnings To Test The Market Rally

Q2 Comes In With A Solid Top Line And Good Credit
Wells Fargo delivered a fairly straightforward good quarter, as both revenue and credit costs were stronger than expected and the company once again beat the estimate for the period.

Operating revenue rose 1%, as net interest income rose 3% (sequentially) and offset a 1% decline in fee income that was smaller than expected. Looking at the components, Wells Fargo saw a 3% increase in average earning assets, but a 45-point year-on-year decline in net interest margin (NIM was close to flat sequentially, and slightly better than expected). Within the fees, mortgage banking was basically flat, while trust and credit card fees grew more than expected.
With expenses down slightly on a sequential basis, operating income rose 3% sequentially. It is worth noting, though, that the non-interest expense line was something of a disappointment. I would have expected expenses to decline more given that a lot of the compensation in mortgage banking is commission based, but this isn't the first time a major bank has found it hard to reach Wall Street's expense targets.

On the credit side, the non-performing asset and non-performing loan ratios continue to decline, each down a little more than 20bp sequentially. Net-charge-offs were also lower than expected (with the ratio declining about 13bp sequentially), and the loan loss provision was nearly cut in half. With both Wells Fargo and JPMorgan reporting strong credit trends in housing and cards, I think there's reason for optimism about credit performance at other banks like PNC Financial (NYSE: PNC) and U.S. Bancorp (NYSE:USB) at this point.

SEE: 5 Earnings Season Investing Tips

Core Business Still Sluggish
It's well worth noting, though, that Wells Fargo's loan growth is still sub-optimal. Wells Fargo did better than JPMorgan this quarter (and not as well as two smaller banks that have reported, Commerce Bancshares (Nasdaq:CBSH) and Bank of the Ozarks (Nasdaq:OZRK), and commercial lending was up nearly 2% on a sequential basis, but it's still very much a low-growth environment.

The mortgage business, which is a significant one for Wells Fargo, is also pretty mixed at this point. Given the company's market share, it isn't surprising that JPMorgan appears to be outgrowing them and it's well worth remembering that the bank did do better than expected. Even so, this doesn't look like an accelerating growth driver at this point.

The Bottom Line
Although they're very different businesses, JPMorgan and Wells Fargo look strangely similar from a valuation standpoint. I use a higher expected long-term ROE in my Wells Fargo model (14% now), but the resulting fair value of about $47.50 suggests similar appreciation potential as for JPMorgan (about 10%). Likewise, while I believe Wells Fargo's much higher return on tangible assets merits a much higher multiple to tangible book value (2.3x versus 1.6x), the resulting fair value of about $50.50 is, like JPMorgan's TBV-based target, about 18% higher than today's price. Incidentally, they're both also yielding 2.8% at present.

All things considered, I think Wells Fargo is still a stock worth considering today for long-term investors.

Disclosure: As of this writing, the author owns shares of JPMorgan.