Friday, November 30, 2012

5 Things Every Investor Needs to Know About This Market

The third quarter is coming to an end, and after a rough summer, investors are looking for ways to end the year with a bang.

Last week, I discussed fresh picks for the autumn and I think those stocks will serve you well in the months ahead. But there is a lot going on in this market, and it’s important to understand exactly which factors are impacting stocks and what it means for you. This is why today I want to discuss current market conditions and what you need to know to navigate them.

The following are five tips I think every investor should know:

1. European Debt Clouds the Market

Last week, we saw the Dow tack on 500 points over the course of five days. Then, Monday, it fell more than 100 points. Much of the volatility can be attributed to concerns and optimism over Greece’s debt dilemma.

For months we’ve watched the saga unfold. Despite budget cuts and new policies, Greece has not been able to get a hold of its growing debt. The country’s impending default has raised concerns and sent markets reeling worldwide. Even with nations offering assistance to bailout Greece, it hasn’t been enough to pay off the country’s approximately $500 billion debt.

Greece hasn’t been the only European country in the news in recent months. Several — including Portugal, Spain and Germany — have had their own difficulties. Now that the European Central Bank is stepping in, further questions are arising. A debate over allowing the default vs. bailing out Greece’s troubled economy is raging. It is uncertain how each scenario will impact the European economy, and all the countries apart of it, in both the short term and long term.

So how does the European crisis impact us across the pond?

Well, we’ve already seen the weight it puts on the markets. A large part of the volatility they experienced this summer can be attributed to European economic news. The fact is U.S. businesses have close ties with European companies, as well as all across the globe. When one region is in trouble, the others feel the sting. Investors become understandably wary when global economic problems occur because it’s inevitable that the U.S. economy will experience some of the aftershocks.

But it’s important that investors remember that there are smart investments to make in the current market. I will discuss these a little later.

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2. Investors Don’t Like Weak U.S. Economic Reports

I’d be lying if I said European economic woes were the only ones filling investors’ minds. For months we’ve been hearing news that U.S. economic growth has slowed and weak reports have weighed on the markets.

Last week’s headlines didn’t exactly help brighten the outlook:

“Core PPI Remains Flat”

What PPI Measures: The price of goods at the wholesale level for August, and a first sign of inflation.

The Breakdown: The Bureau of Labor Statistics’ Producer Price Index remained flat in August, an outcome that economists expected. Energy prices fell by 1%, but food prices rose 1.1%, evening out the headline number. Core PPI, which excludes the price of food and oil (because they are volatile), rose 0.1%, which was a tenth less than expected. Apparel and footwear prices increased, but the following items decreased in price: new cars, computers and commercial finances. This is the first time in seven months that car prices have dipped.

The Bottom Line: Flat PPI is great news because investors who are frustrated with low interest rates will increasingly turn to stocks.

“Retail Sales Remain Flat”

Why Retails Sales Are Important: They are a good indicator of broad consumer spending patterns. Consumer spending is a major component of the U.S. economy.

The Breakdown: The Commerce Department reported that in August, retail sales were unchanged. Economists were hoping for a repeat of last month’s performance, so they forecast 0.2% growth. This month, flagging auto sales brought down the total figure; ex-autos, retail sales crept up 0.1%. Core retail sales, which exclude autos, gas and food, also were flat.

The Bottom Line: This month’s figures are disappointing — they suggest that consumer spending is sputtering. But, we shouldn’t hang our hats up yet. Considering how low consumer sentiment has been, retail sales are holding up well. However, some retail stocks are thriving nonetheless. Both Costco (NASDAQ:COST) and Limited (NYSE:LTD) posted better-than-average sales for the month of August. With other weekly reports pointing to strong retail growth in early September, I expect better numbers to come.

“Jobless Claims Rise More Than Expected”

Why We Care About Jobless Claims: They are an indicator of the direction of the job market. Increases in jobless claims show slowing job growth; decreases in claims signal accelerating job growth.

The Breakdown: The latest jobless claims ballooned from 417,000 to 428,000. Economists expected that jobless claims would drop to 411,000. Last week’s figure, originally 414,000, was revised up by 3,000.

The Bottom Line: Although this certainly isn’t good news, for once the stock market is too busy bargain-hunting to care — last Thursday, the Dow still closed up 186 points! A few weeks ago, numbers like these would have had a notable difference on the markets. I’m also relieved that last week’s numbers weren’t revised any higher — as fearsome as the storm was, Irene didn’t do much to upset job growth.

“CPI Rises More Than Expected”

What CPI Measures: The price level of a fixed market basket of goods and services purchased by consumers. CPI is the most popular inflation indicator, so this is a very important report that can move the market.

The Breakdown: In August, the Bureau of Labor Statistics’ Consumer Price Index rose by 0.4%, well above the 0.2% growth forecast by economists. Core CPI rose 0.2%, which was in line with the consensus estimate. The core figure was boosted by an increase in rental fees, auto prices and apparel prices. Economists now forecast that core CPI will grow 2.5% for the year, which is significantly higher than its cycle low of 0.6%.

The Bottom Line: Ouch! This is a bad headline that is at odds with the PPI report. This is one of the first signs that the Federal Reserve’s policy of keeping the federal funds rate at rock bottom could be encouraging inflation, but I doubt this will affect this week’s FOMC meeting too much because the committee is populated with doves.

“Industrial Production Rises More Than Expected”

What Industrial Production Measures: The index of Industrial Production measures the amount of output from the manufacturing, mining, electric and gas industries — three huge industries that literally power our economy.

What Capacity Utilization Measures: the rate at which potential output levels are being met or used. Displayed as a percentage, capacity utilization (use) levels give insight into the overall slack that is in the economy or a firm at a given point in time.

The Breakdown: The Federal Reserve reported that August industrial production rose 0.2%; economists expected it to remain flat. Capacity use rose a tenth to 77.4%, also beating out the consensus estimate of 77%. Manufacturing output rose 0.5%, following a 0.6% increase in July. Automobile manufacturing is up, and non-auto output is up 0.4%, following a 0.3% increase in July. Total output is growing at a much faster rate than during the last three months, where it grew a total of 0.2%.

The Bottom Line: This is very good news. It looks like manufacturing is finally getting back on its feet!

Remember, economic news is fleeting. Market behavior may sway on conflicting economic reports, but the lasting effects are temporary at best. I will say, however, that I am glad to see Industrial Production up. Pickup in the manufacturing sector is the predecessor to revitalization in other economic sectors.

3. Crank up the Volume, Welcome Everybody Back

The summer season is notorious for low trading volumes, which is why we see so much volatility during the summer months. Many investors extend their summer vacation to their trading activities. They pack up their portfolios and leave the market behind.

Come Labor Day this mood of the market changes — all those investors that closed up shop for summer open back up for business. With them comes a new wave of money that floods the market and pumps up trading volumes. This offers great opportunities for investors — especially those that stuck it out during the summer months.

Let’s take a look at the numbers. In July, during the peak of the summer season, the Dow’s trading volume hovered around the mid-to-high 3 billions. Since Sept. 1, volumes have held steady around the high 4 billion to low 5 billion range.

This number will continue to climb.

Companies are beginning to report third-quarter earnings. These reports will revitalize the market — building buying pressure and driving investors into making more trades. As the year comes to an end, investors will continue to act. They will want to pad their portfolios as much as possible to close out the year with a pocketful of profits.

With prices still low and the market on the verge of heating up, this is your chance to ensure you are on the track to big gains. The trick is knowing what type of positions will do well in the current market.

4. Large Dividend Stocks Are the Place to Be

I realize that many of you have probably been hesitant to buy new positions given the conditions I just detailed.

European debt and weak economic reports aside, there still are gems to gobble up out there.

Right now, the hottest stocks are large-cap dividend plays. This is because the volatility that ran rampant this summer has caused a flight to quality among investors. They want to load up on big, safe, dividend-paying companies — and in a hurry. In a typical year, we would expect the small caps to take off first, but the extreme volatility in stocks throughout the summer created massive demand for safety stocks.

Two of the reasons why the large caps are currently winning the market race are because of dividends and corporate buybacks. Smaller companies don’t tend to pay dividends. They put all their cash back into their rapidly expanding business. This is a smart strategy for small caps, but with the flight to safety that we just talked about, that makes big, solid, dividend-paying companies very attractive buys right now.

The second force working in the big blues’ favor is corporate buybacks. When companies buy back their stock, they automatically boost their earnings per share� for the upcoming quarter. Strong earnings excite analysts and investors and put the company in a better financial position.

I still expect relentless corporate stock buybacks by the end of the quarter (just like we had in late June at the end of the second quarter), as companies scramble to buy back their existing shares and boost their underlying earnings per share before the next earnings season begins mid-October.

Now is the time to load up on large, blue chip stocks. They will provide stability and great profits in the coming months.

5. Strike while the Iron is Hot and Buy, Buy, Buy

We’re in the midst of a perfect buying opportunity. Even with all the negative factors at play, the positive forces are taking over, and now is the time to jump in and build up your portfolio.

Investors are continuing to return to the market after their summer breaks. Trading volumes still haven’t returned to normal, and as a result there is a wealth of bargain-priced stocks waiting to be picked up. Last week’s 500-point jump in the Dow is a perfect example of investors essentially going on a shopping spree and grabbing up stocks at great prices. And this won’t be this last time.

Buying pressure is going to build ahead of next month’s earnings season. By taking advantage of the current lull in activity and prices you’ll be ahead of the game once earnings announcements begin to roll out and the next market breakout occurs. So, strike while the iron is hot now and buy, buy, buy!

Rules for Recovery: Money for Nothing and Debt for Free

Welcome to 2011, a year that promises to be exciting as the global economy attempts to secure its 'recovery'. We strongly believe 2011 will be the 'make or break' year for this global recovery. The rules of the recovery have been laid out for us. Throw money at every corner of the financial system, buy as much debt as necessary and forcibly keep interest rates at record lows. All this so that hopefully, in time, jobs will be created -- along with wealth.

Government intervention and manipulation remain at all time highs. The monetary actions taken by the Federal Reserve and other central banks around the world are in play. The euro debt crisis dominated market fears in 2010 and will continue to do so into 2011. Our team is expecting things to worsen in Europe within the first quarter. This is good news for gold bugs.

The US is far from out of the woods, but our team is confident we can play by the Fed's rules, to benefit our own financial prosperity. Follow the golden rule and never fight the Fed because you will lose. The Fed has essentially rigged the system for the short-term and taking what it gives us is the only way to make money.

Commodities hit record highs in 2010, which we predicted (specifically silver) and have been bullish on for years. We expect more bailouts in Europe and with the Fed printing more money until June, a continued devalue of the US dollar is imminent. Don't get caught up in the weekly sentiment swings. They are tiring and we've seen them come and go for years. These swings are made to scare people in and out of the market so the pros can make a killing off the emotions of unsuspecting investors.

The simple facts and numbers don't lie. The debt bubble is gaining momentum; not just amongst countries which continue plunging into debt at record speeds, but amongst major corporations and citizens as well. The 'debt bubble' is something we expect to hear more about as 2011 rolls on.

The bond market has been fuelling the debt bubble to this point and is now finally coming under pressure. We are in the midst of a renaissance in corporate debt issuance to the likes of which no one has ever seen. Worried investors have poured into bonds at insane levels over the past 2 years, which ironically saw them miss out on record gains in the stock market.

There are many signs indicating the bond market is not a sound place to invest your money. Bond buyers are beginning to wake up to the reality that they deserve a much higher interest rate to compensate for the risk of future inflation and a weak US dollar. The Fed has succeeded in maintaining an illusion of demand for US Treasuries, keeping interest rates low, for longer than most expected. We'll be keeping a close eye on how this keeps up in 2011. The ensuing debt bubble of 2011 and beyond represents the desperateness of the Fed and central banks worldwide.

Didi Weinblatt, Vice President of mutual fund portfolios at USAA Investment Management (worth $45 billion) in San Antonio, stated, "Rates are so low that companies are having a contest of who's going to issue at the lowest."

Every blue chip company on the block is taking advantage of record low rates and the atmosphere is quite simply obscene. Countries around the world are now joining the party and no one seems worried. Insanity is back in a new form.

It started in the middle of 2010 with Johnson & Johnson (JNJ), who sold $1.1 billion of bonds at the lowest interest rates on record for 10-year and 30-year securities.

The deal which took place in August of 2010 represented the first offering by a non-financial AAA rated company in 15 months and it opened the floodgates. Johnson and Johnson sold $550 million of 2.95%, 10-year notes and another $550 million of 4.5%, 30-year bonds. Johnson and Johnson should have waited.

Walmart smashed the record in October after selling $5 billion of debt at the lowest coupon rates ever. The first part of the transaction consisted of $750 million of three year debt at 0.75%, which yielded 30 basis points.

Just for clarification, a rate of 30 basis points equals the current (first week of January 2011) 1 year Treasury Note! For all of our members that might not know, the current Treasury yield represents a rate at which the US government determines the investment is risk free. That is why Treasury Notes (which scared investors buy in times of uncertainty) are guaranteed by the US government. If you buy $10,000 worth of a 1 year US Treasury Bond, it will return you 0.30%. Companies are being given billions of dollars at less than a percent. If that isn't money for nothing, we don't know what is.

Wal-Mart's (WMT) October bond offering followed its $3 billion, three part debt sale in June of last year.

This is a trend that is quickly spreading across the country.

Bloomberg data shows that the Wal-Mart offering ties Kreditanstalt fuer Wiederaufbau, Novartis AG and Lloyds TSB Bank Plc, who all issued $5 billion offerings in 2010.

Bloomberg also reported that Kraft Foods Inc. (KFT) sold $9.5 billion of debt and Berkshire Hathaway Inc. (BRK.A) raised $8 billion in February. These were 2010's largest U.S. corporate bond offerings. Although the rates were not as favourable (or unfavourable depending on how you look at it) as Wal-Mart's, historically they were very low.

In November, Colgate-Palmolive (CL) sold $438 million of two-part senior unsecured 5 year notes for 1.375 %. Bank of America (BAC), Merrill Lynch, Citi (C) and Goldman Sachs (GS) all took part in the sale.

Coca-Cola (KO) couldn't resist the cheap money and tested the very limits of the rally in the US corporate bond market by selling debt at a record low rate of 0.75%. It now shares the title of lowest three year debt rate issuance ever with Wal-Mart. It was more 'conservative' however, and instead of issuing $5 billion, sold only $4.5 billion in a multi-part deal.

Back in July of 2010, McDonald's (MCD) issued $450 million of corporate bonds at a (then) shocking rate of 3.5%.

At the same time Byron Douglass, senior analyst at Credit Derivatives Research, made this statement, "Bond inflows are creating huge demand for corporate bonds. However, the aggressiveness on today's pricing seems a bit overdone."

Mr Douglass was 6 months early (and 3% points off) with his prediction.

Lon Erickson, managing director at Thornburg Investment Management stated, "The market is very open for these big name companies to sell big deals at very low rates. It is pretty cheap money. We will probably see more."

eBay (EBAY), Microsoft (MSFT) and IBM (IBM) also sold bonds at record low levels in 2010.

Beware. The chances of a debt bubble or crisis will become very real if not in 2011, then in 2012 for sure. At some point the appetite of debt buyers or bond buyers will begin to dissipate.

When potential buyers of debt will only lend at increasingly higher interest rates, then we will witness serious blowbacks.

The Fed has been driving this hysteria in the bond market and the period we find ourselves in of record low interest rates.

There is a culture and expectance of cheap debt emerging in all of our societies. The longer our central banks are forced to keep interest rates at record lows, the harder it will be for us to wean ourselves off of the 'low interest rate drug'. For all who have refinanced their mortgage in the past few years, or for every company that has taken a loan or issued debt to expand, be prepared for a changing environment. These low rates cannot last forever.

Take a look at Ireland, which saw yields on 10-year Irish government bonds jump from roughly 6% in November to almost 9.5% towards the end of the month.

What didn't make headlines is that U.S. government 10-year debt rose from 2.4% to 3.2% since the lows in October 2010.

We are expecting a Quantitative Easing 3, probably sometime between Q2 and Q3. And we all know what that will mean for gold, the US Dollar and commodities (our bread and butter).

Our team is hungrier and more inspired than ever to stay a step ahead of the markets, while increasing our research on featured companies poised to take advantage of this commodity super bull market. 2011 will be a fun year for investors who are willing to adapt to the environment the Fed has created. Don't fight the Fed.

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

Integrated Oil Companies as the Best Energy Investment - Phil Weiss


The economic recovery that will drive up oil prices is still at least a year away, says Argus Research senior analyst Philip Weiss in this exclusive interview with The Energy Report. Weiss says oil prices will soften to average $73 in Q4/10. He predicts prices will firm in 2011 as supply tightness pushes oil to at least the high $80s late next year. Weiss believes the Gulf of Mexico oil spill has had a negligible effect on the oil price so far and recommends holding tight on companies with significant exposure to the Gulf, like Anadarko (APC), Transocean (RIG) and BP. He generally favors the sector's big players but you will have to keep reading to find out which ones make Phil's cut.

The Energy Report: Last week German Chancellor Angela Merkel said the euro was in trouble and that the EU needed an orderly means of dealing with the insolvency of its members. Germany even banned naked short selling. Are Europe's debt issues affecting the drop in the oil price?

Philip Weiss: From a fundamentals standpoint, with the weakness in the European economy, they're certainly not expected to use more oil right now. The weakness in the euro, combined with strength in the dollar, is having some effect. However, we think other factors are weighing more heavily on oil prices. There are stories out of China about them trying to slow things down a little bit. China is viewed as one of the drivers of demand growth; slower growth could have a material demand impact. U.S. consumption, although it has improved, is still down from its highs of a couple of years ago. We could say that this is just a supply-and-demand story and that right now demand is down.

TER: Do you see a further decline in the oil price in the coming months?

PW: My view has been for a while, and I think I have been in the minority on this, that I expected oil prices to go down as the year went on. I thought the oil price would have a higher average in the first half of the year versus the second; the only news to me is that this is a little earlier than I had expected. I guess I am just not convinced that the recovery is as strong as some people think or hope. Our forecast for oil for the year is an average of $75, but if I look at how I'm modeling prices, I go from a little over an $80 average in the second quarter down to an average of about $73 in the fourth quarter. My average is in that mid-$70 range for the second half of the year.

TER: How far in advance do you do your modeling?

PW: As far as publishing it, we only do the current year plus one more. I model out a little bit longer than that. Right now, I am publishing estimates for 2010 and 2011.

TER: What are you using for 2011?

PW: For 2011 we're using an oil price average of $85. I have oil prices getting a little bit lower in the first quarter of next year and then progressively moving higher as the year goes on.

TER: What are some of the supply-and-demand fundamentals that make you believe the oil price is going to average above $80 next year?

PW: Right now we have a lot of excess supply and news about economic weakness, which is why I am forecasting a lower price for the second half of the year. But I am anticipating that going into the second part of next year, the economy starts to move onto firmer ground. As that economic outlook improves, the demand for oil should increase, and then the tightness between supply and demand should start to narrow a little.

TER: How do you see the Gulf of Mexico oil spill affecting the oil price?

PW: In the short term, I don't think it has a lot of impact because so far there have not been stories coming out about a big impact on current production. I think the impact could depend on how long this continues and how long it takes for clean-up efforts—I am also talking about the investigation into what caused the spill. I expect we're going to come out of this with increased costs of doing business there, and then there's the moratorium on new drilling as well as how long it takes to implement any changes that may be made in terms of improving the safety of drilling going forward. I read a story today that Exxon Mobil (NYSE:XOM) had a project it was getting ready to do some work on, but it's being held up now. Those kinds of things have an impact; projects that were supposed to come on-line that could now be delayed. It's more of a longer-term potential concern than it is a short-term one. I would also note that the Gulf is the source of nearly 30% of current U.S. oil supply and more than 10% of U.S. natural gas supply.

TER: The oil spill is a crisis, and often in these types of situations opportunities arise. Do you see some investment opportunities as a result of the Gulf spill?

PW: Before this spill, I thought that there were more opportunities in the integrated oil company space than anywhere else. BP, Transocean Ltd. and Anadarko Petroleum have all been hit the most, and Halliburton Co. (NYSE:HAL) has been hit pretty hard, too. The rest of the sector has been hurt by the combination of the potential impact of this incident on the industry, as well as the fall in the oil price.

I believe that in some ways BP was the unfortunate victim here. If you looked at any one of these big companies, it could have happened to any of them. BP happened to be the one that was in charge of this well. While there have been some instances where others have said their practices are safer, better, etc., than those of BP, for the most part there has not been much finger pointing beyond that done by the various companies directly associated with the blown-out well. Of the companies that I've talked to, nobody had in place a plan to deal with a disaster like this. If they had, somebody would have come forth, because this is not just a company-specific issue, it's an industry issue.

TER: But in terms of investment opportunities, do you see some undervalued companies with projects in the Gulf or do you see more opportunities in onshore plays that provide more stability?

PW: One company that I think has excellent timing without necessarily trying to is Devon Energy (NYSE:DVN), because Devon sold its Gulf of Mexico properties to BP, and has already closed on the deal. They've sold out of their deep-water assets, and now they're focusing on onshore. I think if Devon put those deepwater assets on the market today, it is unlikely that it would get the same price that it did. I think that there is opportunity for Devon given that it's now just an onshore play.

I was at Occidental Petroleum Corp's (NYSE:OXY) analyst meeting yesterday, and Occidental has very little offshore exposure; none at all in the deep water. The news it had about its California shale positions and the potential production from those make Occidental an interesting play. ConocoPhillips (NYSE:COP) is another company I like right now. Although it has a couple of Gulf projects—I think it has three in all—it doesn't have a lot of exposure in the deep water either. Those are three companies that I like that are less associated with the deep water.

TER: What's your target price on Devon?

PW: It's $76.

TER: ConocoPhilips?

PW: $72.

TER: Occidental?

PW: Occidental is $95.

TER: Do you see any promising plays in the Bakken Shales or maybe the oil sands?

PW: I don't really cover companies with tremendous exposure to the Bakkens. Hess Corp. (NYSE: HES) and Marathon Oil Corp. (NYSE: MRO) have some acreage and production there, but it's not very material to their overall production base. In the oil sands, Devon has exposure. BP has some exposure there; Exxon has some exposure and so does Royal Dutch Shell Plc. (NYSE: RDS.A). Even Marathon has exposure to the oil sands. But those are parts of their business, not a dominant piece. My coverage is generally on the larger side, so I don't cover companies that are somewhat focused on the oil sands. Devon has the largest exposure to the oil sands of the companies that I cover.

TER: You have a hold recommendation on Anadarko Petroleum. It had a really strong third quarter; revenue was up 31%. That's a Gulf player. What's your thinking there?

PW: My hold on Anadarko is a little bit different than my typical hold because I have a tough time recommending that investors put a lot of new money into companies involved in the Macondo incident because we don't know the ultimate cost to any of these companies. I think we're just trying to guess what the damage is going to be. Although Anadarko had some protection through insurance, I don't think it's going to be nearly enough to cover its whole liability. I am concerned about where it sits relative to this incident. Therefore, I think the most prudent course to take on Anadarko is just to sit tight.

TER: What is Anadarko's exposure as it pertains to the spill?

PW: Anadarko has a 25% interest in Macondo and that means it has a responsibility to cover 25% of the cleanup cost. In Anadarko's first quarter conference call [see transcript], management said that if they had to come up with additional money to cover its liability, there are assets they could sell. They don't necessarily want to go to the securities market or the debt market to fund any liability, but they could sell an interest in some of their projects or sell some assets to cover their liability.

That's another unknown with Anadarko that makes me hesitant to recommend buying it at this point.

TER: What sort of opportunities do you see among the biggest of the big players—the Chevrons, the Exxons—those sorts of companies?

PW: I think there's opportunity in Exxon. I have a $90 target price on it. The stock has come down pretty sharply over the last few weeks. Traditionally, the stock has performed well when production is growing, and I expect Exxon to have higher production in 2010 than it did in 2009. A lot of the integrated oil companies in general have underperformed because of their exposure to refining, as the refining market has been so weak over the last year or two. But I do like Exxon because of its increasing production outlook.

Chevron Corp. (NYSE:CVX) is also a good opportunity. Chevron had great growth in 2009, but I expect less production growth in 2010. It has a good long-term growth profile; a lot of good projects out there. It has some exposure to the Gulf, but a lot of their other projects in areas like Australia relate to LNG (liquefied natural gas). Chevron probably has a little bit less exposure to the refining business than some of the other large integrateds because it has sold off some things. I have a $100 target on Chevron.

BP is kind of a similar story to Anadarko. Before the spill happened, BP was actually one of my top picks. But I downgraded it to "hold" about 10 days after the spill in the Gulf, and that's where it sits right now. There are too many uncertainties about what the ultimate outcome is going to be related to the spill.

TER: What about the next tier down in terms of market cap? Companies like Apache Corp. (NYSE:APA), Transocean?

PW: Transocean is pretty much the same story as BP and Anadarko; I downgraded Transocean at the same time that I downgraded BP because of the uncertainty around the Gulf incident. It was paid for its rig, as it has recovered the full insured value under its claim. The contracts are typically written so that service companies or rig companies like Transocean are insulated from environmental damage, but there has been governmental action taken against it because of Deepwater Horizon being a source of the spill. We don't know what its exposure is. There is too much uncertainty with Transocean, and it's not just because of the costs. It's also because these companies may have more trouble getting employees to work for them, and other companies to work with them.

I have a hold on Apache, though the price has come down a lot. It is looking more interesting; it is getting to a level where we have to think about whether or not to upgrade it. It is in the process of acquiring Mariner Energy Inc. (NYSE:ME), which provides its first exposure to deep water drilling in the Gulf. That does provide a little bit more risk for Apache. It's a really well-managed company; it has a really good cost structure, and it has some interesting projects in places like Canada, where it has a lot of shale exposure in the Horn River, in Egypt, and in Australia. Those are three areas where it has a lot of organic growth opportunities. Apache had a couple of projects come online in Australia in the first quarter that will help its oil production very nicely.

TER: Do you see more opportunity in natural gas than oil or vice-versa?

PW: I get asked that question a lot, and it's funny because when I look at my natural gas outlook?long term I love natural gas; I think it's a really good place to be. Short term, I see more pain for natural gas; we've probably had a lot more drilling than we should and a lot more production than we should. When you look at the pricing and cost structure, a lot of production doesn't seem to be economic. What's happening is we have companies hedging to protect their revenue stream. We have a lot of companies that have to drill because their leases are HBP leases—which means they are Held by Production—so that they have to drill against production in order to protect their leases. We have also had the willingness of a lot of banks and other investors to finance these companies so that they are able to essentially be in a deficit spending mode. The point was raised at Occidental Petroleum's meeting yesterday. Oxy has cut back a lot on its natural gas drilling because of pricing. And management was of the opinion that if prices got above even $5 or $6, then they could start to increase natural gas drilling activity. And the question was, "Well, if that's what you think and everybody else takes the same view, don't we end up right in the same spot?" And the answer is, "Well, yeah, we could, but we have to hope that you guys—meaning the investment banks, I don't work for an investment bank, I'm independent—were to stop funding some of this activity, that would help."

I think a lot of the companies that are natural gas focused are still priced too high for this environment. They foresee the scenario getting better sooner than I see it happening.

TER: You talked about how you liked natural gas in the long term. Is there a way to play this sector that would take advantage of your thesis?

PW: In the past I thought about using ETFs, kind of a pair trade with the USO (an oil ETF) and UNG (a natural gas ETF), but the concern that I have with those as a way to play this is that the ETFs are typically buying one-month futures contracts to make their investment, and when the month ends, they often end up taking a loss on the current month's contract and then buying the next month's contract at a higher price. I.e., the market is in what's called contango, as the price curve is upward sloping. As a result, these ETFs typically underperform the actual commodity. I no longer feel as comfortable using ETFs as a proxy for the market.

TER: Is there another way to play it other than ETFs?

PW: What I typically tell people is that instead of looking at one of the producers, look at one of the rig companies. Even though I have it as a "hold," I still tell them to look at a company like Helmerich & Payne (NYSE:HP). Based on everything that I know and what I hear from everybody that I've talked to, Helmerich & Payne FlexRigs are the best rigs out there for horizontal drilling. Horizontal drilling is a key to the success of these shale plays; it's really what made it economic. You can lower your drilling costs pretty dramatically by using HP's rigs. While HP charges premium day rates, using its rigs can reduce drilling times, and the efficiency gains typically can more than offset the impact of the higher day rate. HP is just starting to get a toehold in the international market, and it's got a really good position in the U.S. It's added more than 30 first-time FlexRig users to its customer base since the market bottomed. Generally, customers that work with HP stay with HP.

TER: Do you see yourself lifting the hold rating?

PW: It is kind of in the Apache camp right now where the price has fallen and we have to think about whether or not it's time to upgrade it. But I have not yet, so it is still a "hold."

Phil is a senior analyst covering the energy sector. Prior to joining Argus, Phil worked as a senior institutional writer for T. Rowe Price where he wrote commentary for several of the firm's investment strategies and white papers on investment-related topics. He also worked as a writer/analyst/co-portfolio manager for The Motley Fool's Cash King/Rule Maker Portfolio. While there, he primarily wrote company-focused reports and columns discussing accounting/financial/earnings manipulation. Phil started his career with Deloitte & Touche where he specialized in international tax research and planning, and subsequently worked for Fortune 500 firms in the healthcare and business-to-business industries. Phil has a Bachelor of Science degree from Rutgers University. He is a CFA charterholder, is a CPA in the state of New Jersey and is also a member of the Baltimore Society of Security Analysts.

Disclosure:
1) Brian Sylvester of The Energy Report conducted this interview. personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report or The Energy Report: Transocean and Royal Dutch Shell.
3) Philip Weiss: I personally and/or my family own shares of the following companies mentioned in this interview: BP, HP, RIG. I personally and/or my family are paid by the following companies: None.

Secure Your Wealth, Secure Your Future

If you win a lottery, got paid with a massive amount of cash bonus for a job well done or landed in to a really big time paying job but you do not know what to do with your money, you can seek the help of individuals who can help you invest and manage them. These individuals who can help you are called Wealth Managers. They are usually financial analysts, certified public accountants or some may even be businessmen who had a really good background on financial investments.

They are tasked to help you invest your money, help you with your asset management, banking and estate planning so that you do not only save up but you also earn from your existing wealth.

If you worked hard for your money or you have dreams that you are allotting it for, it would definitely hurt a lot if you just realize one day that your money is gone and you do not even know where and how you spent it.

But choosing the right manager to help you with your wealth is not as easy as just finding someone who is knowledgeable in business or any mathematical computation.

Remember that you are entrusting your wealth, your investment, the product of your hard work and the fulfillment of your dreams to your Investment Advisor. So he has to be someone really trustworthy.

Your Investment Advisor should also be knowledgeable in the business industry or to whatever it is that you would like to invest your wealth on. He should know the right computation for your business expenses and revenues. He has to make sure that you do not end up bankrupted. He should be knowledgeable in accounting and finance for this as well.

Your wealth manager should also be good in public relations. In investing your money especially on business, he would be the one to walk you through on how to go about getting everything started and he would be the one to make business deals for you. So if he is not at all good in public relations, there is a chance that you may not be able to get a good business to make your money grow bigger.

In choosing the right wealth managers, it is a good idea to consult businessmen and other people who had experience with an effective wealth manager already.

The money that you will be spending for your wealth manager is not a joke as well. Since they handle your wealth or your investments and help you become richer, it is also reasonable that they get paid a bigger amount. Most wealth managers are paid by a percentage of your total earnings from the wealth that they have handled for you. So they may also look like they are your business partners. However, you have to make sure that they do not end up earning a lot more than you do just because they tend to manage their earnings more than your wealth which is their responsibility.

Your wealth manager should know how to handle your wealth; you should know how to handle your wealth manager.

Paul Comstock Partners is a leading firm providing Wealth Managers and Investment Advisors to individuals, families, foundations, and institutions.
Visit our website for more information: www.PaulComstockPartners.com

Top Stocks To Buy For 2012-1-4-1

Gasco Energy, Inc. (AMEX:GSX) witnessed volume of 6.64 million shares during last trade however it holds an average trading capacity of 1.64 million shares. GSX last trade opened at $0.23 reached intraday low of $0.23 and went +13.00% up to close at $0.26.

GSX has a market capitalization $32.95 million and an enterprise value at $60.00 million. Trailing twelve months price to sales ratio of the stock was 1.82 while price to book ratio in most recent quarter was 0.81. In profitability ratios, net profit margin in past twelve months appeared at 31.14% whereas operating profit margin for the same period at 41.21%.

The company made a return on asset of 5.83% in past twelve months and return on equity of 28.48% for similar period. In the period of trailing 12 months it generated revenue amounted to $18.15 million gaining $0.16 revenue per share. Its year over year, quarterly growth of revenue was -33.10%.

According to preceding quarter balance sheet results, the company had $1.10 million cash in hand making cash per share at 0.01. The total of $28.14 million debt was there putting a total debt to equity ratio 69.54. Moreover its current ratio according to same quarter results was 0.45 and book value per share was 0.32.

Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated 23.60% where the stock current price exhibited equal from its 50 day moving average price of $0.26 and remained below from its 200 Day Moving Average price of $.40.

GSX holds 126.77 million outstanding shares with 122.43 million floating shares where insider possessed 3.38% and institutions kept 12.80%.

Navigating Through Organized Chaos

Still fresh in the minds of investors are the open wounds created by the incredible volatility that peaked just a little over a year ago, when the price of insurance sky-rocketed as measured by the Volatility Index (VIX). Even though equity markets troughed in March of 2009, earlier the VIX reached a climax over 80 in November 2008. With financial institutions falling like flies and toxic assets clogging up the lending pipelines, virtually all asset classes moved downwards in unison during the freefall of 2008 and early 2009. The traditional teeter-totter phenomenon of some asset classes rising simultaneously while others were falling did not hold. With the recent turmoil in Greece coupled with the “Flash Crash” (read making $$$ trading article) and spooky headline du jour, the markets have temporarily reverted back to organized chaos. What I mean by that is even though the market recently dove about +8% in 8 days, we saw the teeter-totter benefits of diversification kick in over the last month.

Seesaw Success

While the S&P fell about -4.5% over the studied period below, the alternate highlighted asset classes managed to grind out positive returns.

Click to enlarge:

While traditional volatility has returned after a meteoric bounce in 2009, there should be more investment opportunities to invest around. With the VIX hovering in the mid-30s after a brief stay above 40 a few weeks ago, I would not be surprised to see a reversion to a more normalized fear gauge in the 20s – although my game plan is not dependent on this occurring.

Click to enlarge:

VIX Chart Source: Yahoo! Finance

Thursday Wrap: Another Steep Sell-Off

Stocks sold off by 1.2% on the day as investors were surprised by a negative statement on the UK banking system, a negative jobs figure Thursday morningand continuing concerns over Greece. Breadth was very negative at almost 4:1 and volume was again very heavy on the day. The trend of conviction selling on down days and light volume on up days is an alarming trend and reason to remain cautious. The Bernanke reconfirmation vote cleared up a bit of the uncertainty, but Greek debt issues, Chinese liquidity concerns and Obama’s regulatory plan are likely to create continued risk aversion.

From Daily Futures:

U.S. Economy
The U.S. Labor Department said that jobless claims were down 8,000 last week to 470,000, more than expected.

The U.S. Census Bureau said that durable goods orders were up .3% in December, less than expected.

Ford (F) said that it earned $2.7 billion in 2009, the first annual profit since 2005.

Grains and Cotton
The USDA said that, as of last week, 2009-2010 export of:
Corn slipped from up 5% to up 4% from a year ago.
Soybeans improved from up 42% to up 43% from a year ago.
Wheat improved from down 28% to down 27% from a year ago.
Cotton improved from down 34% to down 33% from a year ago.Net sales of cotton totaled 487,000 bales last week, more than usual.

Livestock
The USDA said that net sales of beef totaled 13,700 tons last week, up from 9,800 tons the previous week.

Statistics Canada said that pork inventories were down 12% on January 1st from a year ago. Beef inventories were up 10% from a year ago.

Currencies
Germany’s Labor Office said that the unemployment rate increased from 8.1% to 8.2% in January with 3.43 million out of work.

Deutsche Turns Positive on Refiners

Deutsche Bank energy analyst Paul Sankey today raised his rating on numerous oil refining stocks, arguing that, noting that demand is improving, which is helping to reduce inventories, and that with low production investment of late, a continued rise in demand will force OPEC to boost production, which would improver refiners’ margins.

He raises Valery Energy (VLO) and Sunoco (SUN) to “Hold” from “Sell,” and raises Frontier Oil (FTO), Tesoro (TSO), CVR Energy (CVI), and Dalek (DK) from “Hold” to “Buy.”

Picking up on his thesis outlined in October, that the oil biz is entering a period of demand destruction, Sankey argues that niche refiners are the best bet, and that geography is the big factor in who wins and loses, with European names fairing worse than U.S. names.

Amgen Up Despite Q4 Sales, Profit Miss

Drug giant Amgen (AMGN) rebounded after hours from a 1% drop, rising 5 cents to $55.76 following the company’s announcement of Q4 sales and profit shy of estimates. Q4 sales of $3.8 billion missed analysts’ estimates for $3.85 billion, while and profit per share of $1.05 was well short of the average $1.13 estimate.

For this year, the company forecast sales of $15.1 billion to $15.5 billion and profit per share of $5.05 to $5.25, which at the midpoint is consistent with analysts’ estimates.

Amgen shares closed down 89 cents, or 1.6%, at $55.71 during the regular session.

Latin America Investment Leads the Way

The latest HSBC survey confirms recent Bloomberg findings and put investment in Brazil at the top of global rankings. Between them, Latin America and Brazil are world investment hotspots.

According to those polled by HSBC Holdings plc last week, Latin America represents the best prospects for growth in investment over the next six months. In the survey, 30% of businesses ranked Latin America in top position for investment opportunities in the next semester. Latin America came ahead of China (25%) and Canada (15%), two other major trading regions for importers and exporters.

Latin America is favoured for its high economic growth – the region is set to grow 4.8% this year. Leading the Latin American boom are Brazil and Peru with Colombia and Chile also experiencing strong economic growth, which emphasises the area’s potential as a whole.

Of all the Latin American nations, Chile and Brazil represent the best bets for investment. Brazil is enjoying strong growth, record employment figures and the prospect of becoming the 5th largest economic power in the world within the next decade. Contrast this with many developed countries, currently facing high unemployment, burgeoning deficits and fears of a double-dip recession.

The HSBC survey also highlights the changing dynamics in world economics as emerging markets dominate the top-performing positions. Not only have emerging markets generally experienced a short recession, they are also leading the rest of the world to economic recovery.

With emerging markets set to represent almost half the global economy over the next few years, many multinationals are convinced that investment in these markets makes real business sense. Large companies are moving into emerging markets as part of their global strategy. And Brazilian investments tops the list for many – in the HSBC survey, 74% of companies said they currently trade with Brazil and a similar figure (76%) does business with China.

A particularly strong sector in Brazil is private equity with two-thirds of private equity deals in Latin America taking place here. The latest arrival is Blackstone, who now has a 40% share in the Brazilian P�tria. For the company, the creation of the Brazilian middle classes “has got very substantial momentum” and as a result, presence in Brazil is a must. Other private equity firms such as Carlyle Group and Warburg Pincus have also expressed strong interest in Brazil, proving P�tria’s point that “the competition is coming to Brazil”.

For Obelisk International, the Bloomberg and HSBC surveys underline the investment potential in Brazil. As more businesses come to appreciate this potential, more surveys will highlight the fact that Brazil is the place to be when it comes to investment. Over the next six months, Obelisk International expects to be joined by many more companies in Brazil.

About Obelisk International
Obelisk International is a private investment business specializing in Brazilian investments. Obelisk offers private investors the opportunity to invest into Obelisk businesses through projects sourced exclusively in Brazil.

Contact Obelisk International on 0034 952 820 319. Via email: info@obeliskinternational.com or visit our website: http://www.obeliskinternational.com.

Facebook Suffers Another Debacle

Facebook�s (NASDAQ:FB) first earnings report as a company may not be as disastrous as Zynga�s (NASDAQ:ZNGA). But it�s still a disaster. In after-hours trading, the stock is off by 10% to $24. And that’s after the shares had already been down by 8.5% during regular trading.

At first glance, the quarter looked OK. Revenues rose by 32% to $1.18 billion, and earnings came to 12 cents (excluding stock charges). This was somewhat better than the Wall Street consensus, which called for revenue of $1.15 billion and earnings of 12 cents a share.

It�s PainVille for Zynga

In terms of users, Facebook continues to show traction. The second-quarter saw the monthly average user count grow by 29% over the past year to 955 million. Daily active users were up by 32% to 552 million.

Adding to the excitement, Mark Zuckerberg showed up on the conference call. In his statement, he�made it clear that mobile was the No. 1 priority at Facebook. He pointed out that �sponsored� stories were at a run-rate of $1 million per day (as of June), with about half coming from mobile devices.

So, why are investors dumping the stock? It could be that they wanted to get some level of earnings guidance, at least for the next quarter. Another concern has been the continued escalation in costs. Consider that capital expenditures spiked by 213% to $413 during the quarter. According to CFO David Ebersman, the pace will continue into the second half of the year.

But there’s another issue: the lock-up expiration. This is when employees and investors have the right to sell shares. For Facebook, it occurs on Aug. 17, and it will involve 217.1 million shares. That could put more pressure on the stock within the next few weeks.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of the upcoming book�How to Create the Next Facebook: Seeing Your Startup Through, from Idea toIPO. �Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.

INF: Infrastructure CEF Is Crumbling

Earlier this year, I published a performance analysisof some closed-end fund IPOs issued in 2009/2010. In every case, the market performance was worse than the NAV performance.

The general pattern has continued this year. But there was a recent infrastructure closed-end IPO that has had one of the worst initial short term starts I have ever seen.

The Brookfield Global Listed Infrastructure Income Fund (ticker:INF) was issued on August 26 at a price of 20. The initial NAV was 19.06 reflecting the sales commission and marketing fees, so the initial premium was about 4.9%.

Usually, the underwriters try to support the IPO price for several months. In this case, the underwriters supported the price at the 20 level for a few weeks, but the net asset value started falling with the markets and the pain must have been too great to continue supporting the price. So on September 23, the price support was discontinued.

INF then started dropping rapidly. In the next week, it fell 23%. Today INF closed at 14.10, down a whopping 29.5% from the IPO price.

Here is a price chartof the INF performance since inception. Notice the straight line at 20 designating the underwriter price support, then the sharp dropoff in price.

The NAV performance of INF has certainly not been very good, but is not nearly as bad as the market price performance. The NAV at today’s close was 16.79, which is only down around 12% from the original NAV.

The current discount to NAV has widened to -16% which is now a larger discount than for other infrastructure CEFs such as MGU or UTF. At this discounted price level, it may be worthwhile to place INF on a trading watchlist. But it may face some headwinds over the next few months if some of the original IPO buyers decide to sell it for a tax loss.

I suspect the brokers who sold this IPO will be getting many phone calls from unhappy clients when they receive their third quarter and year end statements. INF is yet another example demonstrating why it almost never pays to buy a closed-end fund at the IPO price.

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

Has Gerdau Become the Perfect Stock?

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 Gerdau (NYSE: GGB  ) 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 Gerdau.

Factor

What We Want to See

Actual

Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 6.9% Fail
1-Year Revenue Growth > 12% 14% Pass
Margins Gross Margin > 35% 14.2% Fail
Net Margin > 15% 5.7% Fail
Balance Sheet Debt to Equity < 50% 50.8% Fail
Current Ratio > 1.3 2.68 Pass
Opportunities Return on Equity > 15% 8.7% Fail
Valuation Normalized P/E < 20 17.58 Pass
Dividends Current Yield > 2% 3.4% Pass
5-Year Dividend Growth > 10% (12.4%) Fail
Total Score 4 out of 10

Source: S&P Capital IQ. Total score = number of passes.

Since we looked at Gerdau last year, the steel producer has kept the same score. Slightly faster revenue growth over the past year offset a drop in the company's dividend.

Gerdau makes steel in Brazil, which many investors have looked to as a potential growth opportunity. With Brazil hosting the World Cup in 2014 and the Summer Olympics in 2016, Gerdau and peer Companhia Siderurgica Nacional (NYSE: SID  ) both looked like smart ways to play the need for huge infrastructure investment that accompanies both those events.

But at least this year, Gerdau's shares have suffered greatly. Despite higher sales, costs have risen at an even faster pace, crimping margins and hurting profits. Yet that's a problem that several other companies have faced, and worldwide, ArcelorMittal (NYSE: MT  ) , U.S. Steel (NYSE: X  ) , and Steel Dynamics (Nasdaq: STLD  ) have all seen substantial losses in their shares as well. Nucor (NYSE: NUE  ) is one of the only steel producers to buck that trend, perhaps because of its more cost-conscious use of locally placed mini-mills and other corporate initiatives.

What Gerdau needs is improvement in both the world economy and Brazil's in particular. After fighting back waves of huge capital inflows and resulting inflation, Brazil may be getting a handle on its once-overheating economy -- and in doing so, it sets the stage for Gerdau to make a run closer to perfection in the years ahead.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate the best investments from the rest.

Click here to add Gerdau to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Finding the perfect stock is only one piece of a successful investment strategy. Get the big picture by taking a look at our "13 Steps to Investing Foolishly."

Thursday, November 29, 2012

The Four Hottest Trends from the 2012 Consumer Electronics Show

The 2012 Consumer Electronics Show (CES) in Las Vegas, NV wraps up today (Friday) after setting the stage for this year's hottest tech trends.

The 3,100 companies in attendance have launched about 20,000 new products since the tradeshow opened on Jan. 10. They range from everyday items like new smartphones to crowd-wowing flying cameras.

Besides companies using the venue to introduce consumers to their hottest new products, this year's Consumer Electronics Show highlighted the materials and capabilities that will dominate the tech world in 2012 and for years to come. The prototypes and early models that debuted this year are the first versions of technology destined to change not only our consumer experiences, but eventually redesign our households and even our nation's military strategies.

Here are four of the most important trends from the 2012 Consumer Electronics Show setting the stage for the future of tech:

Shaping the Future of Tech1. Gorilla Glass: This game-changing material by Corning Inc. (NYSE: GLW) is lightweight, damage-resistant, and dominating new products that rely on thinner glass for optimal use.

"The Gorilla Glass breakthrough is important because we are moving to a touch-screen world," said Money Morning Defense and Technology Specialist Michael Robinson. "Thinner glass is integral to technology that will greatly enrich the user experience of smartphones, ultrabooks, TVs, and ATMs. The thinner the glass, not only the smaller the electronics, but the more responsive and accurate the screens become."

Robinson has detailed industry-defining innovations like Gorilla Glass in his Money Morning series, The Era of Radical Change.

While Gorilla Glass was showcased in smartphones and laptops at the Consumer Electronics Show, Robinson said the material's importance goes beyond these everyday items.

"We are moving to the Japanese model in which a wide range of products typically sold in stores now come to consumers through vending machines located everywhere," Robinson said. "You'll control them with a smartphone or with touch screens depending on consumer preference. I predict a flood of new vending machines will hit the U.S. in the next five years that will need tough glass to deal with thousands of consumer purchases a day."

2. Ultrabooks: With traditional laptop sales plummeting, and tablets last year's hottest CES export, companies have combined a computer's operating capacity and a tablet's size to create ultrabooks, the latest phase in personal computing.

Ultrabooks typically use flash memory instead of hard drives and ditch the disc drives to save space and weight. PC makers hope ultrabooks will be their answer to Apple Inc.'s (Nasdaq: AAPL) MacBook Air.

Popular models at the 2012 CES include Hewlett-Packard Co.'s (NYSE: HPQ) Envy 14 Spectre, a 14-inch ultrabook covered in black Gorilla Glass and weighing less than four pounds. It's slated to hit markets Feb. 8 at a price of $1,400.

Lenovo Group Ltd. (PINK: LNVGY) debuted its IdeaPad Yoga, which will be available in the second half of 2012 for about $1,200. Its screen bends backwards to use as a stand for easier video viewing.

Coming in at a more affordable price tag of $999 is Dell Inc.'s (Nasdaq: DELL) XPS 13. It's made of aluminum and can download e-mail while in sleep mode. Toshiba's Portege Z series rings in at $899. It boots up in as little as 13 seconds, is only 0.62 inches thick, and has an eight-hour battery life.

3. "Smart" TV: The future of TVs will be thinner, clearer - and smarter.

Not only will they be no thicker than a pane of glass and display amazingly sharp images more realistic than any flat-screens on the market today, but they'll actually obey voice and gesture commands.

An example is the Samsung Super OLED 55" TV, equipped with Samsung's Smart Interaction software. It allows users to interact with their TVs through gestures, voice control, and face recognition technology. The TVs can customize your viewing options by identifying the user's face and showing the applications most frequently used. It also means controlling channels and volume with a wave of your hand or a simple voice command.

"Speech recognition for TV also strikes me as a breakthrough," said Robinson. "I've predicted that speech recognition would become ubiquitous within five years. This moves us that much closer."

Apple - one of the most notable Consumer Electronics Show absentees - has already introduced Siri voice software in its products. As the technology catches on, remotes and manual operators will become simply back-ups to our own voice controls.

"Siri is a great voice bot that could be used to run your entire home theater or all the appliances in your home in the "House of the Future,'" Robinson said.

4. Eye-tracking technology: Forget using your hands to control computing. Swedish company Tobii Technology debuted its eye-tracking technology prototype at this year's CES.

The cutting edge system, called Gaze, uses a webcam to follow eye and head movements allowing hands-free navigation. It uses infrared sensors to make a 3D image of your eye, then tracks where your eyes move.

Tobii demonstrated the technology with an arcade game that involved smashing asteroids through eye movement, and text that scrolled down as the user read each line.

"Eye movement control is very important," said Robinson. "We are moving toward all sorts of interfaces, from your personal computer to your car dashboard, that can respond to eye movements."

Eye-tracking technology will not only change the world of consumer products; it could be a major factor in the future of global warfare.

"Just think: in less than a decade soldiers could fly drones around the world just by moving their eyes," said Robinson.

News and Related Story Links:
  • Money Morning: 3D Chips Will Deliver an Era of Radical Change
  • Money Morning: How the "New Cold War" with China Will Change America's Future
  • Money Morning:
    The "Miracle Material" That Will Change the World
  • The Wall Street Journal: Tech Charms: Flying Cameras, Musical Purses
  • CNNTech:
    Thin, metal Ultrabook laptops ready for takeoff
  • Consumer Reports:
    CES 2012: Samsung announces 55-inch OLED TV, adds voice control, face recognition to Smart TVs
  • Digital Trends:
    Death of the mouse: How eye-tracking technology could save the PC
  • Sun Times: Vending machines getting high-tech

Should You Get Out of National Presto Industries Before Next Quarter?

There's no foolproof way to know the future for National Presto Industries (NYSE: NPK  ) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result.

A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company's current health and future prospects. It's an important step in separating the pretenders from the market's best stocks. Alone, AR -- the amount of money owed the company -- and DSO -- the number of days' worth of sales owed to the company -- don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.

Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can also suggest a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)

Why might an upstanding firm like National Presto Industries do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.

Is National Presto Industries sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:

Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.

The standard way to calculate DSO uses average accounts receivable. I prefer to look at end-of-quarter receivables, but I've plotted both above.

Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. As another reality check, it's reasonable to consider what a normal DSO figure might look like in this space.

Company

LFQ Revenue

DSO

National Presto Industries $105 55
Boeing (NYSE: BA  ) $17,727 32
Rockwell Collins (NYSE: COL  ) $1,296 71
Alliant Techsystems $1,109 84

Source: S&P Capital IQ. DSO calculated from average AR. Data is current as of last fully reported fiscal quarter. LFQ = last fiscal quarter. Dollar figures in millions.

Differences in business models can generate variations in DSO, so don't consider this the final word -- just a way to add some context to the numbers. But let's get back to our original question: Will National Presto Industries miss its numbers in the next quarter or two?

Investors should watch the top line carefully during the next quarter or two. For the last fully reported fiscal quarter, National Presto Industries' year-over-year revenue shrank 7.6%, and its AR grew 6.2%. That's a yellow flag. End-of-quarter DSO increased 14.9% over the prior-year quarter. It was up 12.6% versus the prior quarter. That demands a good explanation. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.

What now?
I use this kind of analysis to figure out which investments I need to watch more closely as I hunt the market's best returns. However, some investors actively seek out companies on the wrong side of AR trends in order to sell them short, profiting when they eventually fall. Which way would you play this one? Let us know in the comments below, or keep up with the stocks mentioned in this article by tracking them in our free watchlist service, My Watchlist.

  • Add National Presto Industries to My Watchlist.
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Indications: U.S. stock futures hit by Europe

NEW YORK (MarketWatch) � U.S. stock futures fell sharply Monday as political uncertainty in Europe cast doubt on the region�s ability to combat its debt troubles and cereal-maker Kellogg Co. cut is 2012 outlook.

Citing weaker first-quarter sales growth in Europe and for certain U.S. products, Kellogg K � said it now anticipates full-year profit between $3.18 and $3.30 a share. Analysts surveyed by FactSet expected 2012 earnings of $3.48 a share. Shares of Kellogg fell 5% in pre-open trading.

Wal-Mart Stores Inc. WMT � shares were hit in pre-open trade after the New York Times during the weekend reported allegations that top executives at its Mexican subsidiary waged a large bribery campaign.

Futures for the Dow Jones Industrial Average �fell 125 points, or 1%, to 12,863.

S&P 500 Index futures �dropped 13.20 points, or 1%, to 1,362, while Nasdaq 100 futures �fell 21 points, or 0.8% to 2,653.25.

The Stoxx Europe 600 index XX:SXXP �tumbled 2.1% to 252.4, with peripheral markets particularly hard hit and yields for a range of 10-year government bonds, outside of Germany�s, rising.

Elections and politics

The first round of France�s presidential election on Sunday saw President Nicolas Sarkozy come in second to Socialist challenger Francois Hollande in a field of 10 candidates, forcing a runoff between the pair on May 6.

Click to Play Week Ahead: Apple and the Fed

Investors will have their eye on Apple, Netflix and Boeing earnings, as well as housing data and the Fed meeting. Laura Mandaro reports on Markets Hub. Photo: AP.

�The risk was always that the European crisis and associated weak economic activity would encourage more extreme politics. This is slowly happening and is something we need to watch going forward,� said Jim Reid, strategist at Deutsche Bank, in a note.

Also casting a shadow was news the Netherlands will face an early general election after budget talks aimed at trying to meet European Union rules and keep its triple-A credit rating fell apart on Saturday.

The right-wing Freedom Party reportedly walked out of three-party talks, saying EU budget demands were impossible to meet. Dutch Prime Minister Mark Rutte has reportedly resigned.

Data out of Europe showed business activity across the euro zone contracted at a faster-than-expected clip in April, according to data firm Markit.

From China, news that manufacturing activity continued to contract in April, though at a smaller pace, pulling down the Hang Seng Index HK:HSI HK:HSI

U.S. stock markets finished higher Friday, with the Dow Jones Industrial Average DJIA �and the S&P 500 indexes SPX �both breaking two-week losing streaks. The DJIA gained 65.16 points, or 0.5%, to 13,029.26, and was up 1.4% on a weekly basis.

A busy earnings week kicks off in earnest Tuesday with results from Apple Inc. AAPL �among others.

Within deal news on Monday, shares of San Diego-based biotechnology group Ardea Biosciences Inc. �surged 51% in pre-open trading after AstraZeneca PLC AZN �UK:AZN �agreed to buy the company for $32 a share, or $1.26 billion. Ardea shares closed Friday up 2.6% at $20.84, so the deal price is a premium of 54%.

Shares of Amylin Pharmaceuticals Inc. AMLN �rose 12% in pre-open. The group has reportedly hired two investment banks to help it find a buyer after it rejected a bid from Bristol-Myers Squibb Co. BMY , Bloomberg News reported on Monday.

In other markets, crude-oil futures for June delivery �fell $1.38, or 1.4%, to $102.39 a barrel.

Gold for June delivery �tumbled $15.70, or 1%, to $1,627.10 an ounce. Silver futures for May delivery �slid 86 cents, or 2.7%, to $30.80 an ounce.

The dollar rose across most currencies in light of political pressures across the euro zone. The ICE dollar index DXY �rose to 79.522, up from 79.140 reached in late North American trading Friday.

Monday, Merger Mania Continues

It’s another busy Monday for M&A activity.

Sanofi-Aventis (SNY) announced a $18.5Bn CASH offer for Genzyme (GENZ) ($69/share), Intel (INTC) buys Infineon's (IFNNY) wireless unit for $1.4Bn in CASH, and Dell (DELL) and HP (HPQ) are still in a bidding war over 3PAR (PAR) (and HPQ thinks their own shares are so cheap they are buying back $10Bn worth of them). The biggest winner in this weekend’s acquisition game is - ME! I live in northern N.J. and, with the merger of Continental (CAL) and United (UAUA) going through, Continental is forced to diffuse some of their concentration at Newark airport and that ends up giving Southwest (LUV) 18 slots, bringing some much-needed additional competition to Newark, which has been pretty much dominated by Continental for years. LUV is a great buy at $11.13 and a fun way to play is the Jan $10/11 bull call spread at .60, selling the Jan $10 puts for .55, which is net .05 on the $1 spread with a 1,900% upside and your worst-case scenario is you own LUV at net $10.05 - what’s not to LUV?

Speaking of diffused concentration, the Glenn Beck rally was a bit of a disappointment with just 87,000 people showing up (Fox had a permit for 300,000 and keeps using that number as if that’s how many came while Beck himself has been claiming between 300,000 and 650,000 were there and Michele Backmann (R-Minn) claims it was the biggest rally ever held in Washington, with no fewer than 1M people in attendance). This has now backfired on Beck, Palin and the Tea Party as a "show of strength" becomes a show of apathy (to the people who can count, anyway) - it probably would have been smarter to hold the rally next weekend but Fox wanted to time the rally for the start of Jon Stewart’s vacation, although it didn’t stop him from commenting in absentia (where I hear Jon has a lovely bungalow). For a more "fair and balanced" view of the rally, see the very nice coverage from Reason TV.

During an interview on "Fox News Sunday," which was filmed after Saturday’s rally, Beck claimed that Obama "is a guy who understands the world through liberation theology, which is oppressor-and-victim - People aren’t recognizing his version of Christianity," Beck added. Beck’s attacks represent a continuing attempt to characterize Obama as a radical, an approach that has prompted anxiety among some Republicans, who worry that Beck’s rhetoric could backfire. The White House has all but ignored his accusations, but some Democrats have pointed to the Fox News host to portray Republicans as extreme and out of touch. Beck made the remarks in answer to a question about his previous accusation that Obama was a "racist" who has "a deep-seated hatred for white people." He contended that that statement "was not accurate" and that he had "miscast" Obama’s religious beliefs as racism.

Fox (NWS) and the Republicans have been scoring big poll points by portraying Obama as a Muslim (not that there’s anything wrong with that) and the release of the PEW poll on the 18th caused the White House to finally go on the offensive, responding in a statement after the poll’s release, reiterating that Obama "is a committed Christian." Obama, asked on NBC about polls showing confusion over his religion, pointed to "a network of misinformation that in a new media era can get churned out there constantly."

So this is the shape of the political backdrop - one that will loom large for the next couple of months as we roll into the mid-term elections. Even after the November election, few expect a different dynamic. “We’re already in a gridlock situation, and nothing substantive is going to change,” saysBruce Bartlett, who was a Treasury economist in the first Bush administration. “Clearly, a weak economy in 2012 will be very good for whoever the Republican presidential candidate is. It’s hard to see how the Republicans lose by blocking stimulus.”

I discussed the Fed meeting in Wyoming in "Weekend Reading - What’s Next?" so I won’t go into that all again here, but let’s just say it sure wasn’t a rallying cry for the markets as our top economic dogs expect a very slow recovery - at best. Note from the chart below that the 10-year note rate (2.5%) is at the lowest level since the end of WWII so there’s really not much more the Fed will be able to do from a rate standpoint to stimulate the economy. Even during the Great Depression, rates were between 2.5 and 4%. As in WWII, it is in the government’s interest to drive down rates while they are borrowing money, isn’t it?

Speaking of manipulating the markets - ProPublica did a great job digging into the CDO scam that was run by Wall Street Banksters who, faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, hit on a solution that preserved their quarterly earnings and huge bonuses: They created fake demand.

As the housing boom began to slow in mid-2006, investors became skittish about the riskier parts of those investments. So the banks created — and ultimately provided most of the money for — new CDOs. Those new CDOs bought the hard-to-sell pieces of the original CDOs. The result was a daisy chain that solved one problem but created another: Each new CDO had its own risky pieces. Banks created yet other CDOs to buy those.

"All these banks for years were spawning trading partners," says a former executive from Financial Guaranty Insurance Company, a major insurer of the CDO market. "You don’t have a trading partner? Create one." Keeping the assembly line going had a wealth of short-term advantages for the banks. Fees rolled in. A typical CDO could net the bank that created it between $5 million and $10 million — about half of which usually ended up as employee bonuses. Indeed, Wall Street awarded record bonuses in 2006, a hefty chunk of which came from the CDO business.

To me, the most amazing thing about this is that it’s still NOT CLEAR whether or not this behavior is illegal. Not only COULD it happen again but it is still a viable strategy for banks to make money (if they can find another bunch of suckers, of course). The full implementation of FinReg is still years away (maybe decades, the way Congress is now gridlocked) and it’s not likely that investors will have their confidence restored any time soon while we still haven’t put the last scandal to bed.

A Grant Thornton survey shows business leaders are increasingly pessimistic about the economy, expecting the recession will continue until 2011 at the earliest, and don’t expect to hire more workers any time soon. Paul Krugman says Bernanke’s message is one of denial as the Chairman claims: "Just around the corner, there’s a rainbow in the sky," while failing to cite any reasons to believe so. The NY Times cites that "Widespread Fear Freezes Housing Market" and there is not a lot of chance that fear will abate without signs of economic stability.

Without housing, we are not likely to get a natural return to private hiring and that puts the job creation ball back in the Government’s court and that brings us back to gridlock, which brings us back to how critical this election is going to be if we are ever going to finally change the course from the disastrous policies that have taken this country so far down the road to ruin. The number of foreclosures is climbing again but HAMP, the government’s foreclosure relief program, in many cases simply stretches out borrowers’ slow bleed of resources and is now benefiting borrowers less than the lenders who created the mortgage mess. I was dumbfounded when we had our meeting with Treasury officials and they defended this program as a success when so clearly it was a classic case of putting lipstick on a pig.

As expected, the BOJ added 10,000,000,000,000 Yen to an exitsting 20,000,000,000,000 Yen lending facility while the Prime Minister promises a stimulus program to be unveiled tomorrow. Unfortunately, $30Tn Yen is "only" about $355Bn and that is just not enough to pop the Yen bubble as our "3am trade" once again makes a mint as the Yen rises from 85.9 to the dollar on Sunday night (pre announcement) to 84.6 this morning - a huge one-day move in a currency! Still, we are getting some dollar strength this morning and that should hold the markets down as we put pressure on commodities and the dollar keeps hugging its own breakout along the 50 dma at 83.

Overall, Asia had a good morning with the Nikkei up 1.76% and the Shanghai matching at 1.61%. The Hang Seng was a bit behind at 0.68% and the Bombay Sensex was flat at 0.19%, floating along the critical 18,000 line at 18,032. Europe is up 0.89% in the UK, up 0.65% in Germany but down 0.47% in France as the CAC is failing our 3,500 mark. The DAX is just below their own critical 6,000 line and the FTSE is 50 points below 5,250 so we need to see a lot more pep out of the EU markets if we are going to be able to get back over our own watch levels.

It’s going to be a low-volume week so we can’t take it seriously. Things should start popping after the holiday weekend, when we should get some real upside action if the world continues not to actually end for another 8 days - is that too much to ask?

Top Stocks For 2012-2-23-18

Dr Stock Pick HOT News & Alerts!

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FREE Daily Stock Alerts From DrStockPick.com

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Tuesday September 29, 2009

DrStockPick.com Stock Report!

CONMED Corporation (NASDAQ: CNMD), a medical technology company specializing in medical devices for surgical and patient monitoring markets, announced today that the Company will participate in the Fourth Annual JMP Securities Healthcare Focus Conference, on Tuesday, October 6, 2009 at 10:00 AM Eastern time. The event will be held in New York at the New York Palace Hotel.

Patient Access Solutions, Inc. (Pink Sheets:PASO), a leading provider of healthcare/financial processing solutions for the healthcare, homecare, nursing LTNC and dental industries, announced today that it has retained the firm of Michael T. Studer CPA P.C. of New York. Michael T. Studer CPA P.C. is registered with the Public Company Accounting Oversight Board to perform audits for fully-reporting publicly traded companies.

Orchid Cellmark Inc. (Nasdaq:ORCH), a leading international provider of identity DNA testing services, today announced that the company has been awarded, as sole supplier, a contract providing convicted offender DNA typing services for the State of Washington, Washington State Patrol (WSP). The award is for a two-year contract with the option for three one-year renewals.

Yucheng Technologies Limited (Nasdaq: YTEC), a leading provider of IT solutions to China’s banking industry, today announces that it will hold an earnings call to discuss the results of the three-month period ended September 30, 2009 on November 5, 2009 at 8:00AM EST / 9:00PM Beijing time.

China Precision Steel (Nasdaq: CPSL), a niche precision steel processing Company principally engaged in producing and selling high precision, cold-rolled steel products, announced today its financial results for the fourth quarter and 2009 fiscal year ended June 30, 2009.

EF Johnson Technologies, Inc. (Nasdaq: EFJI) announced today that its 3e Technologies International (3eTI) subsidiary has received a Task Order valued at $11 million with initial funding of $4.5 million from a U.S. Department of Defense (DoD) customer. This award is a Task Order under the $48M contract announced in October 2008. The Task Order calls for the Company to provide an Energy Management solution within its virtual perimeter monitoring system.

Could Gold Lose 40%-50% in Value?

Goldbugs are scared to death and rightly so.

The “currency of last resort” that was supposed to be a bastion of safety has been falling in value right alongside global stocks (NYSE:AWCI) and the euro (NYSE:FXE).

Even commodities permabull Jim Rogers admitted to the Business Insider that gold could fall 40-50% if India (NYSE:INDY) ceased gold imports or if Europeans (NYSE:IEV) began liquidating their holdings. What’s going on with gold?

Gold’s Rocky Road

The early warning signs behind gold’s fall beneath key trading levels has been months in the making. The ETF Profit Strategy Newsletter via its weekly picks warned its readers on 4-4-12 about gold’s inconsistent performance:

“Could 2012 turn out to be the first time in 11 long years that gold has a loss? We know it’s a sacrilegious thing to say, especially to demi-gods like James Grant or Jim Rogers, but the way precious metals are acting lately it makes you wonder.” (That research note was posted for our readers when gold was still in positive territory.)

Over the past three months, gold (NYSE:IAU) has lost almost 10% in value and now has a negative year-to-date return. Silver (NYSE:SLV) has lost around 15% since the beginning of the year.

The ETFS Physical Precious Metals Basket Shares (NYSE:GLTR), which is a broader measure of the precious metals group and includes gold, silver, platinum, along with palladium in one package, is down over 12% over the past three months.

The Past is not (necessarily) the Future

Over the past decade or so, gold performed well despite the 9/11 attack, the bursting of the dotcom and housing bubbles, and the 2008-09 financial crisis. But past performance, as investors keep forgetting, is not prologue for the future.

It’s been a long time since gold has had a major correction and those corrections have tended to be infrequent. From 1999 to 2011, gold experienced three declines greater than 20%, but snapped back each time. But this time around might be different.

Huge budget deficits, bankrupt governments, and political instability aren’t necessarily a slam dunk for gold investors, as 2012 is already proving.

Interestingly, the Dollar Index (EURUSD=X) – also known as the Grande Fiat of Fiats – rose for its 12th consecutive day, which is its longest winning streak since 1973.

Troubled Waters

There are two worrisome factors for gold right now, let’s talk about the first: Gold’s immediate performance versus other assets has not been defensive.

The ETF Profit Strategy Newsletter via its Weekly ETF Picks identified this trend on 4-18-12:� “Gold has hardly behaved as the “perfect hedge” that gold bugs call it. Not only is gold under performing stocks year-to-date, but instead of increasing in value on trading days when stocks are down, it’s tended to drift lower.”

There are many examples of these correlations, but we highlighted just one:

“During the 4-4-12 market selloff, the Nasdaq-100 (NASDAQ:QQQ) and S&P 500 (NYSE:SPY) moved lower by 1.46% and 1.02% respectively. Instead of being a haven of safety, instead of zagging when stocks are zigging – the SPDR Gold Shares (NYSE:GLD) had the audacity to fall 1.68% while the iShares Silver Trust (NYSE:SLV) moxied up a 4.19% loss.”

Here’s another ominous sign for gold: It has now sliced through key levels outlined in our Weekly ETF Picks without any sort of major fight. As a result, we’re already focused on new support levels to see how gold reacts.

The Right Strategy and the Wrong One

It’s easy to be critical of investors that buy stocks (NYSE:DIA) and bonds (NYSE:AGG), because these assets aren’t tangible, as the gold bug will gladly explain. But interestingly, many gold bugs are infected with the same self-destructive behavior that plagues the rest; they have no exit strategy. No doubt, the vast majority of gold bugs will be riding their gold straight to the bottom, screaming that every new low is a buying opportunity. What kind of strategy is that?�

The ETF Profit Strategy Newsletter uses the right gold strategy by clearly identifying support/resistance indicators along with strict trading discipline. No major selloff or bear market happens without taking out key support levels.

Jazz is Rocking: Buy, Sell or Hold

Jazz Pharmaceuticals (Nasdaq: JAZZ) is rocking! The company blew away fourth-quarter estimates, posting an impressive $0.56 per share compared to a $0.17 per share number same time last year.� Revenue surged more than 40% to $53.4 million from $38.3 million.� More importantly, Jazz has ramped up its full year 2011 adjusted profit figures to between $2.70 and $2.90 per share.� What is driving this pharma company to these stellar returns?

A jump in sales for its Xyrem and Luvox CR products is behind the advance.� Xyrem is a daytime sleepiness drug for patients with narcolepsy and cataplexy.� Luvox CR treats obsessive compulsive and social anxiety disorders.

Headed by CEO, Bruce Cozadd, Jazz is a specialty pharmaceutical company that develops and commercializes products for neurology and psychiatry primarily in the United States. The company’s marketed products include Xyrem, a sodium oxybate oral solution for the treatment of excessive daytime sleepiness and cataplexy in patients with narcolepsy; and Luvox CR for obsessive compulsive disorder and social anxiety disorder. The company’s late-stage product candidate comprises JZP-6, which has completed two phase III pivotal clinical trials, for the treatment of fibromyalgia. Its other product candidates in clinical development consist of JZP-8, an intranasal formulation of clonazepam for the treatment of recurrent acute repetitive seizures in epilepsy patients who continue to have seizures while on stable anti-epileptic regimens; JZP-4, a controlled release formulation of an anticonvulsant for the treatment of epilepsy and bipolar disorder; and JZP-7, a transdermal gel formulation of ropinirole for the treatment of restless legs syndrome. In addition, the company is developing oral tablet forms for sodium oxybate.

Taking a close look at the technicals, the daily chart paints a near perfect uptrend from September, 2010.� Price is substantially above both the 50 and 200-day moving averages with very few pullbacks.� Trend traders must love this stock!

Wednesday, November 28, 2012

Nokia: A Play For Speculative Investors

Mobile phone manufacturer Nokia (NOK) sells a lot of cell phones, but so far has not been able to sell meaningful numbers of phones in the high value smartphone sector. Results for Nokia have been trending downward since revenue last peaked in 2007. For 2011, the company saw revenue decline by 9% to 38.7 billion euros($50.56B). Operating profit slid from a positive 2 billion euros ($2.61B) in 2010 to a loss of 1.1 billion euros ($1.43B) in 2011. In the face of these dismal results, Nokia has aggressively put some initiatives in action and new products into the market which the company hopes will turn around its fortunes. For investors, Nokia is a speculative gamble on the new directions, which could pay off handsomely.

Nokia will pursue two avenues to generate growth of unit and revenue sales. One track will be the introduction of a range of new mobile phone products at the lower end of the price spectrum. These phones will sell primarily in those international markets where the Nokia brand is well known and the right sets of features at the right price points could significantly boost sales. The sales growth from these products is not dependent on participation by U.S. consumers. Examples of the new, innovative products are dual SIM card phones which are popular in India, and inexpensive phones with qwerty keyboards for those markets where the primary use of a phone is to send text messages.

The other stream of revenue growth is a new push into smartphones to compete with the Apple (AAPL) iPhone and the Google (GOOG) Android smartphones from companies such as Samsung (SSNLF.PK) and HTC (HTCXF.PK). To become a player in the smartphone space, in February 2011, Nokia entered into an agreement with Microsoft (MSFT) to produce a line up of smartphones running the Windows 7 Phone operating system. The first models of the Lumia series of Windows smartphones was launched in late October 2011. The Lumia series smartphones are intended for sale in all of Nokia's markets around the world, with high expectations for strong sales results in Europe, China and the U.S. In the States, the LTE-capable Lumia 900 is currently being sold exclusively by AT&T (T). Both Nokia and Microsoft have a lot riding on the Lumia Windows 7 smartphones. The release of Windows 8 for phones, tablets and personal computers later in 2012 could be an additional positive push for the Lumia products.

The Lumia 900 has received overall positive reviews from the tech media. Check out the video review from CNET. The line up of new products from Nokia has gathered a lot of awards from review sites and electronics shows. The new products give Nokia a good chance to turn around the company's fortunes. These new products and Microsoft connection are one reason why Nokia is a better speculative investment pick than the similar competitor, Research in Motion (RIMM). One of RIM's major problems has been an inability to get the company's new smartphone models out to the market on a timely basis. As a result of its problems, the Research in Motion share price is down 75% in the last year. Nokia shares have fared a little better, down 40% over the last 12 months.

If the turnaround potential for Nokia discussed here has convinced you the stock is a good speculative investment, one more item should be considered. If Nokia decides to again pay an annual dividend, the distribution will be announced in early May. For the last three years the dividend has been 0.40 euros or about 52 cents at the current exchange rate. A repeat of the recent dividend rate would be a 10% yield at the current Nokia share price. The dividend declaration and record dates are very close together, putting the ex-dividend date about two days after the dividend announcement. Note the operating income loss experience in 2011 and the 20% decline in balance sheet cash over the course of last year may convince the company directors to reduce or eliminate the dividend this year. In either case, and investor looking to pick up shares may want to wait until after the ex-dividend date. If a distribution is paid, the share price will drop by the dividend amount anyway, so the shares will be that much cheaper. If there is no dividend, the share price will drop on disappointment sales from shareholders expecting a dividend.

The Nokia smartphones will not be a success unless the phones are a hit with consumers in the targeted markets. If you are considering an investment in Nokia, go visit the nearest AT&T store and ask some sales people how the public feels about the Lumia 900. If you get some positive feedback, that might be the final clue that it is time to pull the trigger on an investment in Nokia.

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