Monday, December 31, 2012

FCC Drops Merger Penalty Flag on AT&T

The Federal Communications Commission Tuesday said in a media call that it plans to oppose AT&T's(T) $39 billion merger with T-Mobile, increasing the chances that 2011's largest merger will fail.

FCC chairman Julius Genachowski plans to ask for an administrative hearing on the deal that would add to headwinds for the merger. In August, the U.S. Department of Justice filed a lawsuit against AT&T and T-Mobile seeking to block the merger on antitrust concerns.

See if (T) is in our portfolio

Combining AT&T with T-Mobile would bring together the second and fourth largest wireless carriers, creating the biggest operator with a near 40% market share and leaving Verizon(VZ) as its closest competitor with an over 30% market share. More to the antitrust concerns, it would put Sprint(S) in a distant third at an over 15% share, with no clear fourth competitor. Sprint has filed a lawsuit against AT&T opposing the merger on competition grounds.Under the proposed order, the FCC will take the merger to a judicial hearing where AT&T will need to prove that its T-Mobile purchase is in the public's interest. The FCC does not have the ability to block the merger outright like the Department of Justice, but it can call for hearings or ask for divestitures to remedy any antitrust concerns.When opposing the merger on antitrust grounds in August, the Department of Justice said, "the proposed $39 billion transaction would substantially lessen competition for mobile wireless telecommunications services across the United States, resulting in higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers who rely on mobile wireless services in their everyday lives."Tuesday's news that the FCC will likely join in legal contest to the merger is not a surprise -- it just means that even if AT&T were to pass a DoJ challenge, it would then have the FCC to deal with.After the DoJ announced its antitrust lawsuit this summer, FCC chairman Julius Genachowski said in a statement, "competition is an essential component of the FCC's statutory public interest analysis, and although our process is not complete, the record before this agency also raises serious concerns about the impact of the proposed transaction on competition."

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As part of the proposed deal, AT&T agreed to give T-Mobile a breakup fee of $6 billion in cash and wireless spectrum if the acquisition fell through on antitrust concerns or other issues like financing. If triggered, the breakup fee would be the biggest ever, according to data compiled by Thomson Reuters

In October, AT&T wrote a letter to the FCC stating that the deal could preserve over 20,000 call-center jobs in the United States and return another 5,000 jobs from overseas. Throughout the merger process, AT&T has stated that the combination would put its service within reach of rural communities and bolster its 4G network coverage, making it better equipped to serve the data needs of consumers using smartphones like the Apple(AAPL) iPhone.

After the Department of Justice lawsuit was filed in August, AT&T said in a statement, "We are surprised and disappointed by today's action, particularly since we have met repeatedly with the Department of Justice and there was no indication from the DOJ that this action was being contemplated. We plan to ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed."Based on Tuesday's close at $28.08, AT&T shares are down 4% so far in 2011. Content on this page requires a newer version of Adobe Flash Player.Following Tuesday's news, Larry Solomon, an AT&T communications senior vice president, said in a press release: "At this time, we are reviewing all options." He added, "it is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the U.S. economy desperately needs both." The DoJ antitrust trial regarding the merger is slated to begin in mid-February 2012.In separate news, the FCC said on Tuesday in a draft order that it approved AT&T's $1.925 billion acquisition of wireless spectrum from Qualcomm(QCOM) in 2010, subject to unnamed conditions.--.

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March IPO Calendar Continues To Build

March is poised to have its busiest month since 2007 as eight companies set terms this week. There are 13 deals on the IPO calendar for the next two weeks. If all are completed, March could have 19 IPOs, topping the 17 IPOs completed in March of 2007.

BATS Global Markets, which operates the third largest securities exchange in the US, announced terms for its IPO on Monday. The Lenexa, KS-based company plans to raise $107 million by offering 6.3 million shares (100% insider) at a price range of $16.00 to $18.00. At the midpoint of the proposed range, BATS Global Markets would command a market value of $817 million. BATS Global Markets, which was founded in 2005 and booked $927 million in sales in 2011, plans to list on one of its own exchanges, the BZX, under the symbol BATS. Morgan Stanley, Citi and Credit Suisse are the lead underwriters on the deal.

Regional Management Corp., which provides an array of loan products to customers with limited access to traditional lenders, announced terms for its IPO on Monday. The Greenville, SC-based company plans to raise $76 million by offering 4.2 million shares (33% insider) at a price range of $17.00 to $19.00. At the midpoint of the proposed range, Regional Management would command a market value of $226 million. Regional Management, which was founded in 1987 and booked $105 million in sales in 2011, plans to list on the NYSE under the symbol RM. Jefferies, Stephens, JMP Securities, and BMO Capital Markets are the lead underwriters on the deal.

Enphase Energy, which delivers a semiconductor-based system that increases solar energy production, announced terms for its IPO on Monday. The Petaluma, CA-based company plans to raise $80 million by offering 7.3 million shares at a price range of $10.00 to $12.00. At the midpoint of the proposed range, Enphase Energy will command a fully diluted market value of $435 million. Since inception, Enphase has raised over $115 million in venture capital to help develop its unique, chip-based microinverter system, which includes a communications gateway and web-based software to monitor system performance. Backers include Third Point Ventures (the venture arm of Daniel Loeb's Third Point hedge fund), RockPort Capital, Madrone Partners (affiliated with the Walton family), Kleiner Perkins Caufield & Byers (KPCB), Applied Ventures and Bay Ventures, who will collectively own over 60% of the company following the IPO.

Enphase Energy, which was founded in 2006 by semiconductor and telecom equipment alums, booked $150 million in sales in 2011. The company plans to list on the NASDAQ under the symbol ENPH. Morgan Stanley, BofA Merrill Lynch and Deutsche Bank Securities are joint-bookrunning managers on the deal. Jefferies, Lazard and ThinkEquity are serving as co-managers.

Vocera Communications, which provides mobile communication solutions for hospitals and health care facilities, announced terms for its IPO on Tuesday. The San Jose, CA-based company plans to raise $75 million by offering 5.8 million shares (13% insider) at a price range of $12.00 to $14.00. At the midpoint of the proposed range, Vocera Communications would command a market value of $320 million. Vocera Communications, which was founded in 2000 and booked $80 million in sales in 2011, plans to list on the NYSE under the symbol VCRA. J.P. Morgan and Piper Jaffray are the joint bookrunners on the deal.

CafePress, which operates an e-commerce site where customers create, buy and sell personalized products, announced terms for its IPO on Wednesday. The San Mateo, CA-based company plans to raise $77 million by offering 4.5 million shares (44% insider) at a price range of $16.00 to $18.00. At the midpoint of the proposed range, CafePress would command a market value of $303 million. Venture capital firm Sequoia Capital is not selling and will own 17% of shares after the offering.

CafePress, which was founded in 1999 and booked $175 million in 2011 sales, plans to list on the NASDAQ under the symbol CPRS. J.P. Morgan and Jefferies are the joint bookrunners on the deal.

Millennial Media, which operates the leading independent mobile advertising platform, announced terms for its IPO on Thursday. The Baltimore, MD-based company plans to raise $102 million by offering 10.2 million shares (10% insider) at a price range of $9.00 to $11.00. At the midpoint of the proposed range, Millennial Media would command a market value of $818 million. Venture backers include Bessemer Venture Partners (18% post-IPO stake), Columbia Capital (18%), Charles River Ventures (14%) and New Enterprise Associates (15%); none are selling on the IPO.

Millennial Media, which was founded in 2006, booked $104 million in sales last year, more than double the $47 million booked in 2010. The company plans to list on the NYSE under the symbol MM. Morgan Stanley, Goldman, Sachs & Co. and Barclays Capital are the bookrunners on the deal.

Luca Technologies, which uses biotechnology to create and sustainably produce natural gas, announced terms for its IPO on Thursday. The Golden, CO-based company plans to raise $102 million by offering 8.5 million shares at a price range of $11.00 to $13.00. At the midpoint of the proposed range, Luca Technologies would command a market value of $352 million. Revenue in 2011 was $1 million, down 56% from 2010 and down 80% from 2008. Luca Technologies, which was founded in 2003, plans to list on the NASDAQ under the symbol LUCA. Citi, Piper Jaffray and Raymond James are the joint bookrunners on the deal.

Annie's, which is a leading organic food company that offers over 125 products, including a signature macaroni and cheese, announced terms for its IPO on Friday. The Berkeley, CA-based company plans to raise $75 million by offering 5 million shares (79% insider) at a price range of $14.00 to $16.00. At the midpoint of the proposed range, Annie's would command a market value of $263 million. Annie's, which was founded in 1989 and booked $135 million in sales in 2011, plans to list on the NYSE under the symbol BNNY. Credit Suisse and J.P. Morgan are the joint bookrunners on the deal.

The 6 IPOs that have been priced this month are all trading above their offer prices. Demandware (DWRE) is the best performer of this group, closing up 48% in its first day of trading yesterday. Yelp (YELP) trails closely, posting a 45% return since its March 2nd debut. The IPO market has shown strong returns so far this year. The FTSE Renaissance US IPO Index is up 19% year-to-date.

Cisco’s Chambers: Signs of Life

Cisco Systems (CSCO) CEO John Chambers was kind enough to talk with me for a few minutes this evening after his company reported fiscal Q4 revenue and profit per share that beat estimates, on a 4% rise in sales, and a fiscal Q1 view that was somewhat light relative to analysts’ growth expectations, projecting 2% to 4% year-over-year sales growth versus the average 3.7% projection.

Chambers noted that there are signs of hope for the beleaguered U.S. state and local governments, whose sales with sales rose by 17% in the quarter, year over year, better than the 7% growth seen in Q3, and a reversal of declines in prior quarters. “We need to see another 45 days or so to know whether this is really a turnaround” with respect to state and local spending, said Chambers. “These are just early trends we’re seeing.”

Cisco’s business with enterprise and commercial accounts was also surprisingly strong, with sales to its 29 largest global corporate accounts rising by double-digits, year over year. When I asked chambers if that was from an increase in Cisco’s share of their spending, or simply CEOs becoming less concerned about the global macroeconomic risk, he said it was a combination of both.

“What we’ve been good at is to call the turns in things,” Chambers said, meaning gauging when conditions in a market are about to change significantly, pointing out that Cisco preceded its competitors in calling out weakness in state and local government spending.

Regarding Cisco’s announcement that it raised its quarterly dividend by 75%, to 14 cents a share per quarter, giving it a roughly 3% dividend yield, I asked Chambers how the company had arrived at its intention to pay out at least 50% of its free cash flow annually in the form of dividends and buybacks.

Chambers said that was the minimum the company determined it could afford with or without being granted rights to repatriate overseas cash without a tax hit. Cisco, like most companies, has most of its $48.7 billion in cash and equivalents parked overseas. And so the consequent tax hit the company would suffer if it brought that cash to the U.S. has been a concern for Chambers for a long time now. I asked him what a theoretical maximum payout level might be with or without being granted repatriation permission. He declined to provide a figure, saying he didn’t want to presume too much about what can happen with market conditions in any given year or quarter.

“The good news is our cash generation is very good,” said Chambers, “and one of the things we’ve always been able to do is to look out for the best interests of shareholders.” Cisco had $10.4 billion in free cash flow last year.

2013 Is a Crucial Year for GM

This week, General Motors (NYSE: GM  ) revealed its 2014 model year truck lineup. It's a big moment for the auto manufacturer, which is still largely owned by the United States Treasury. The company hasn't been the top seller of trucks in the U.S. for a long time -- competitor Ford (NYSE: F  ) has been the sales leader for the past 35 years. So this marks a big chapter for the company, and the first major test of the new and improved GM. Let's take a look and see what early reports are saying about the new cornerstone of General Motors' platform.

Is bigger still better?
For a long time in the truck business, the name of the game has been "bigger is better." But as the financial crisis struck, and with gas prices remaining far higher than they were 10 years ago, we saw what happens when the famous mantra proves to be false.

For GM's new pickups, though, it looks like it's back to business as usual. The burly trucks are bigger and faster than ever before, with more towing ability and, supposedly, more efficiency.

Big step
It is the first major redesign of the Silverados and Sierras since 2006, long eclipsed by updates to Ford's best selling F-150. In 2011, the two trucks made up for nearly a quarter �of GM's sales, so this redesign is much more than a press release. The success of these trucks is also weighing heavily on the minds of the United States Treasury, which is looking for an exit, preferably a profitable one, to the remainder of its $50 billion bailout in the automaker during the depths of the financial crisis. This was an encouraging year for both GM and the government, as the company's shares rose 20%. �

The thing is, for these trucks to really become class-leading vehicles, they need to be as efficient as possible. Fuel consumption is still one of the biggest things on the minds of buyers -- not horsepower. I was a bit confused to see the release of the trucks touting jumps in power, size, and ability. GM executives did say the trucks will have improved fuel efficiency over the previous models, but is that really enough?

Blind curves ahead
MPG estimates were not provided at the event, and it appears we won't know until early next year. But from the look of things, it doesn't seem that we should expect any jaw-dropping numbers on the sticker. Analysts are saying the new trucks are expected to equal the Ford V8 Ecoboost engine's 22 �MPG.

In November, sales were down for the company, which management says was a result of aggressive promotions from competitors Ford, Chrysler, and Nissan. GM will probably finish the year with a few more vehicles in inventory �than it wanted to. Looking forward, however, things look bright, as one Citi analyst projects that sales will rise with more and more consumers replacing their aging vehicles. People have held on to their vehicles for longer than usual since the financial crisis.

Can GM become No. 1?
As I mentioned, Ford has held the top spot for best selling pickup with the F-150 for an impressive 35 years straight. GM is hoping its remodeled trucks can finally change that trend. On an overall basis, some expect GM's combined �pickup sales to surpass Ford in 2013 -- a sign of recovering strength for the company. Ford weathered the financial crisis in far better shape than GM.

While the jury will be out for some time to determine whether GM can reclaim the status of No. 1-selling full-size pickup, the company does have an advantage in that it is one of the few remaining auto manufacturers to offer a midsized pickup. Both Ford and Chrysler no longer offer a midsize option, which is a more efficient alternative for consumers who don't require the space.

As an investor in GM, expect continued performance in 2013. Depending on the success of the new trucks in the second quarter of next year, the U.S. may exit from its position, which will probably be a bonus for investors.

More on GM from The Motley Fool
It's true that decades of mismanagement of General Motors led to a painful bankruptcy in 2009, but�it emerged a leaner, stronger company. GM's turnaround, however, is still a work in progress. Investors around the world are wondering if GM has what it takes to reclaim its former glory. John Rosevear has put together a brand-new premium research report telling you what you need to know about GM and its turnaround. If you own or are thinking about owning GM, then you don't want to miss this report. Click here now to get started.

CenturyLink: Link Up To This High-Yielding Rural Telecom

We recently reviewed CenturyLink (CTL) versus Frontier Communications Corporation (FTR) and Windstream Corporation (WIN), two other leading rural telecommunications firms and we believe that CenturyLink offers the best risk-reward scenario of the three firms.

CenturyLink, Inc. CenturyLink is the leader in the rural-telecom services industry segment and the third-largest U.S. telecom company by market capitalization, with a market cap of $23.6B as well as the third-largest by total access lines. CTL provides local and long-distance, network access, private line (including special access), public access, broadband, data, managed hosting (including cloud hosting), colocation, wireless and video services. In the portion of the 37 states where CTL has local service area access lines, CTL is the incumbent local telephone company. CTL also operates 68 data centers throughout North America, South America, Europe, and Asia. CTL became a top-tier telecom provider through its acquisition of Embarq (legacy local telephone division of Sprint Nextel (S)), Qwest Communications International (The Former Baby Bell US West) and Savvis, a leader in global information technology solutions.

Frontier Communications Corporation Frontier is a communications company providing services predominantly to rural areas and small and medium-sized towns and cities in the U.S. Frontier offer voice, data, internet, and television services and products, some that are available á la carte, and others that are available as bundled or packaged solutions. On July 1, 2010, Frontier acquired the defined assets and liabilities of the local exchange business and related landline activities of Verizon Communications Inc. (VZ), including Internet access and long distance services and broadband video provided to designated customers in the Territories (which we refer to as the Acquired Business). This transaction was financed with approximately $5.2 billion of common stock (Verizon shareholders received 678.5 million shares of Frontier common stock) plus the assumption of approximately $3.5 billion principal amount of debt. We think Frontier should have heeded the lessons that FairPoint (FRP) and Idearc [Now Known as SuperMedia (SPMD)] learned with regards to not buying what Verizon is selling.

Windstream Corporation Windstream was created when VALOR Communications merged with Alltel Corporation's spun-off landline division. It provides advanced communications and technology solutions, including managed services and cloud computing, to businesses nationwide. In addition to business services, it offers broadband, voice and video services to consumers in primarily rural markets. WIN operates in 48 states and the District of Columbia, a local and long-haul fiber network spanning approximately 115,000 miles and 21 data centers offering managed services and cloud computing. WIN's notable recent acquisitions include Iowa Telecom in June 2010, which added 247,000 voice lines, 96,000 high-speed Internet customers and 25,000 video customers in Iowa and Minnesota. In February 2010, it acquired NuVox, which added a broad portfolio of Internet protocol ("IP") based services. In December 2010, it purchased Hosted Solutions Acquisition, LLC, an eastern United States data center operator offering cloud computing, managed hosting and managed services. WIN gained five state-of-the-art data centers and approximately 600 business customers. It also completed the acquisition of Q-Comm Corporation's wholly owned subsidiaries Kentucky Data Link, a regional transport services provider with 30,000 miles of fiber, and Norlight, a business services provider with approximately 5,500 customers. This transaction allows WIN to reach more business customers and to compete for more wireless backhaul contracts. KDL's fiber transport network enables WIN to carry more traffic on its own network rather than paying other carriers for this service. In 2011, WIN acquired PAETEC Holding Corporation, a leading national business services provider with approximately 36,700 miles of fiber and seven data centers; enhancing WIN's IP based services, cloud computing and managed services, advancing WIN's strategy to expanding its focus on business and fiber transport services.

Since Windstream went public in February 2005, we ran a performance comparison of CenturyLink versus Frontier and Windstream for February 2005, to March 2002, on a monthly basis. It is obvious that CenturyLink's strongest competitor is Windstream as both generated positive total returns primarily from the high dividends paid out to shareholders. CenturyLink also eked out a nearly 15% cumulative price appreciation during this time period.

(Click charts to enlarge)

Source: Bloomberg Finance LP

Based on our analysis, we have determined that CenturyLink offers a better investment opportunity than Windstream (and both certainly offer a stronger investment opportunity relative to Frontier for the following reasons).

  • Though CTL's dividend yield is the lowest in the peer group, it is still over 7.6%. Moreover it is due to the fact that it has a lower dividend payout ratio relative to its peers. CTL paid out 87% of its $1.79B in free cash to the firm versus 98.6% for FTR and 97.3% for WIN. Also, FTR announced in February that it needed to cut quarterly dividends by 46.67%, from $.1875/share to $.10/share.

Source: Bloomberg Finance LP, All Amounts in $M except ratios

  • In 2013, barring any acquisitions by the companies, we will begin to see financial and operating comparability and clarity for the results of CTL and WIN as 2013 will be the first year that these companies will have had consecutive years without a middle of the year. FTR will see 2012 as the first year that it will have consecutive years without an acquisition in the middle of the year. We feel confident in this projection as all three RLECs have engaged in significant strategic acquisitions recently and will be more focused on integrating operations and conserving cash to sustain dividends, as well as in the case of CTL, pay down debt
  • Though CenturyLink's credit rating is only two notches higher than Frontier and Windstream, CenturyLink is still an investment-grade company and it pledged to pay down $1.5B-2B in long-term debt in order to preserve its investment grade credit rating in 2012. CTL raised $2.05B in the sale of unsecured debt in March to purchase outstanding Embarq Corporation and Qwest notes in a tender offer. $1.14B was tendered from the Embarq notes and $878M was tendered from the Qwest notes.


Source: Bloomberg Finance LP, All Amounts in $M except ratios

  • CTL has five key markets that we are attracted to; Denver, Phoenix, Seattle, Portland and Las Vegas. Denver (17.9%), Phoenix (33.1%) and Las Vegas (36.6%) have seen strong population growth. Portland and Seattle have also seen above-average population growth over the last 10 years.
  • CTL has a lower estimated revenue decline that FTR on a pro forma basis assuming all acquisitions are booked at the beginning of the year. Windstream only made a pro forma adjustment for the PAETEC acquisition in 2011 so we can't determine what WIN's organic pro forma growth is after adjusting for its 2010 acquisitions.
  • CenturyLink is also the only one of the three rural telecom companies offering wireless service. CenturyLink became an authorized Verizon Wireless agent last year and will offer Verizon Wireless equipment and service plans to its residential and small business customers.
  • In conclusion, we are intrigued by CenturyLink's and Windstream's efforts to transform each company's respective business away from the declining core rural telephone businesses. We like the high dividend yields each company pays as well, which effectively pays us to wait by retiring its old existing asset base and redeploying a portion of it towards higher value adding assets. We also like the efforts of the companies to transform its businesses toward higher-value offerings, most notably cloud computing services.

We like CenturyLink better than Windstream due to the following factors:

  • Authorized Wireless reseller agreement with Verizon Wireless
  • Higher Margin of safety with regards to paying out of Free Cash Flows
  • CTL's Investment-Grade Credit Rating
  • Presence in fast-growing metro markets as a result of the Qwest acquisition
  • CTL's total return exceeding WIN's since WIN's Initial Public Offering.

Disclosure: I am long CTL.

Is Heritage-Crystal Clean Making You Fast Cash?

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

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

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

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

To calculate the cash conversion cycle, add days inventory outstanding to days sales outstanding, then subtract days payable outstanding. Like golf, the lower your score here, the better. The CCC figure for Heritage-Crystal Clean for the trailing 12 months is 47.8.

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

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

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

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

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

On a 12-month basis, the trend at Heritage-Crystal Clean looks very good. At 47.8 days, it is 26.7 days better than the five-year average of 74.5 days. The biggest contributor to that improvement was DIO, which improved 40.6 days compared to the five-year average. That was partially offset by a 22.1-day increase in DPO.

Considering the numbers on a quarterly basis, the CCC trend at Heritage-Crystal Clean looks OK. At 49.0 days, it is little changed from the average of the past eight quarters. Investors will want to keep an eye on this for the future to make sure it doesn't stray too far in the wrong direction. With quarterly CCC doing worse than average and the latest 12-month CCC coming in better, Heritage-Crystal Clean gets a mixed review in this cash-conversion checkup.

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

Looking for alternatives to Heritage-Crystal Clean? It takes more than great companies to build a fortune for the future. Learn the basic financial habits of millionaires next door and get focused stock ideas in our free report, "3 Stocks That Will Help You Retire Rich." Click here for instant access to this free report.

  • Add Heritage-Crystal Clean to My Watchlist.

Sunday, December 30, 2012

Solar PV – The Smartest Investment For 2011? And You Get Free Electricity!

A 10% tax free, index linked income for 25 years, guaranteed by the Government that’s environmentally friendly and provides free electricity.

When you install a Solar Photovoltaic (PV) system at your property you can now earn around 10% per annum tax free guaranteed by the Government for the next 25 years. Solar PV is the amazing investment and environmentally friendly opportunity that was introduced by the UK Government in April 2010. This is when the ‘Feed in Tariff’ (FiT) was introduced to increase the rate you get paid for the microgeneration of electricity at your premises.

The FiT is index-linked for the next 25 years making it inflation proof. In the context of the Spending Review in October it is one of the few areas where there is real certainty to invest your money safely and wisely for the future with exceptional, tax free returns.

In setting out to stimulate consumer demand for microgeneration (the production of clean energy on a domestic scale), the Government have set the FiT very high for a limited period. This means that only households and commercial enterprises that complete their installation before March 2012 will qualify for the highest rate tariff.

As soon as you are installed you are locked into the index linked scheme and its benefits for the next 25 years. This includes the annual cash benefits of the FiT, free electricity and knowing that you are reducing your CO2 footprint.

So what are the catches? There aren’t any. Your installation needs to be carried out by an MCS qualified installer in order to claim your 10% tax free, indexed linked, 25 year income that’s guaranteed by the Government.

The roof needs to be southerly facing and shadow free for most of the day. The panels are mounted onto the roof using a hidden lightweight aluminium framework. The DC electricity produced by the panels during daylight hours is converted to AC by an inverter. This will usually be in the loft space or near your electricity supply.

Finally, a meter measures the amount of electricity that your system generates (in the same way that your current meter measures what you use and are charged for today). A typical installation will involve two installers and a qualified electrician working at your house over a couple of days. It is a straightforward job with most of the work taking place outside.

The highest rate FiT is 41.3p per kWh and applies to systems up to 4kW in size. This is typically four times the price paid for electricity from the grid and is paid regardless of how the electricity is used and even if you don’t use any of it.

On top of the FiT, you add the value of electricity that you have saved by using some of what you’ve generated. Finally there is an income called the Export tariff which is calculated as 50% of the electricity that you generate being fed back into the grid.

If any of this sounds complicated, it really isn’t; once your installation is completed, the Solar PV system is connected seamlessly to your present electricity supply and your new meter is ready to calculate how much electricity you have generated and what your annual revenue is.

And there are a range of investment options depending on what return you are looking for. From wholly owned systems through shared ownership and even free systems, where you rent your roof for free electricity, the options are many and varied.

For the latest free information about the various Solar PV opportunities available from Avonline please email solar@avonline.co.uk quoting Ref: AVLS1011 and I will send you details by return.

If you’d like to know more go to http://www.avonline-energy.co.uk

Kevin Allard is a Senior Project Manager with Avonline PLC. Avonline is an accredited MCS installer and have been established for 30 years.

Top Stocks For 12/20/2012-4

Whitney Holding Corp.�(NASDAQ:WTNY)�decreased 2.86% to close at $13.93. WTNY traded 1.99 million shares for the day and its 52 weeks range remained $ 7.04 - $15.29. Whitney Holding Corporation operates as the bank holding company for Whitney National Bank that provides community banking services to commercial, small business, and retail customers. Whitney Holding Corporation offers its services in Texas, southern Louisiana, coastal region of Mississippi, central and south Alabama, and the western panhandle and the Tampa Bay metropolitan area of Florida, as well as in Grand Cayman in the British West Indies. The company was founded in 1883 and is headquartered in New Orleans, Louisiana.

NASDAQ OMX Group, Inc.�(NASDAQ:NDAQ)�decreased 0.79% to close at $23.92. NDAQ traded 1.96 million shares for the day and its 52 weeks range remained $1.43. The NASDAQ OMX Group, Inc. provides trading, exchange technology, securities listing, and public company services worldwide. The NASDAQ OMX Group supports the operations of approximately 70 exchanges, clearing organizations, and central securities depositories. The company was formerly known as The Nasdaq Stock Market, Inc. and changed its name to The NASDAQ OMX Group, Inc. in February 2008. The NASDAQ OMX Group, Inc. was founded in 1971 and is based in New York, New York.

TFS Financial Corporation�(NASDAQ:TFSL)�decreased 0.11% to close at $9.16. TFSL traded 1.86 million shares for the day and its earnings per share remained $0.04. TFS Financial Corporation operates as the holding company for Third Federal Savings and Loan Association of Cleveland that provides retail consumer banking services in Ohio and Florida. The company was founded in 1938 and is headquartered in Cleveland, Ohio. TFS Financial Corporation is a subsidiary of Third Federal Savings and Loan Association of Cleveland, MHC.

Can China Turn Inward? Searching for Alpha, September 2009

Word that Chinese imports may be significantly muted by the economic turndown sent shock waves through the oil patch. While crude prices have dropped about 5% over the last few trading sessions, Chinese share prices are down by double that amount.

Perhaps the Middle Kingdom is looking at the situation in the wrong way. With more English-speaking folks in China than there are in the U.S., what could potentially be the largest middle class in the world is right in their backyard. Thanks to government reforms that began only ten years ago, this demographic owns an apartment or house, takes vacations, and is familiar with leading foreign brands.

If the growth of this emerging middle class continues, it could become a significant consumer. This would serve to reduce the current account deficit of the U.S., propelling our domestic economy out of the malaise in which it is currently entrenched.

This so-called "de-linking" theory--in which emerging market economies are able to a create consumer class that can augment the declining purchasing power of the U.S., is the foundation of the bull market case. For this scenario to play out, the economic stimulus offered by China must continue, even in the face of the 9.8% economic growth forecasted for that country in 2009. Indeed, Chinese PMI rose about 6% last month, indicating a further expansion in output. But without further policy accommodation, even this level of growth won't be enough to get the global economic engine humming again.

The Monthly Index Report for August 2009

Index

Aug-09

QTD

YTD

Description
S&P 500 Index*

3.4%

11.1%

13.0%

Large-cap stocks
DJIA*

3.5%

12.4%

8.2%

Large-cap stocks
Nasdaq Comp.*

1.5%

9.4%

27.4%

Large-cap tech stocks
Russell 1000 Growth

2.1%

9.3%

21.9%

Large-cap growth stocks
Russell 1000 Value

5.2%

13.8%

10.6%

Large-cap value stocks
Russell 2000 Growth

1.0%

8.8%

21.2%

Small-cap growth stocks
Russell 2000 Value

4.7%

16.8%

10.8%

Small-cap value stocks
EAFE

5.5%

15.1%

24.8%

Europe, Australasia & Far East Index
Lehman Aggregate

1.0%

2.7%

4.6%

U.S. Government Bonds
Lehman High Yield

1.9%

8.1%

41.0%

High Yield Corporate Bonds
Calyon Financial Barclay Index**

0.7%

-0.5%

-4.2%

Managed Futures
3-mo. Treasury Bill***

0.0%

0.0%

0.2%

All returns are estimates as of August 31, 2009. *Return numbers do not include dividends.

** Returns are estimates as of August 28, 2009.

Ben Warwick is CIO of Memphis-based Sovereign Wealth Management. He can be reached at ben@searchingforalpha.com.

Marvell Rising: FYQ1 Beats, Initiates Dividend, Increases Buyback Plan

Shares of chip maker Marvell Technology Group (MRVL) were briefly higher in late trading, but are now down 10 cents at $13.20 after the company said it will initiate a quarterly dividend of 6 cents per share, starting with a payment on July 11th to all shareholders of record as of June 21st.

Marvell also increased its share repurchase authorization by half a billion dollars, to $2.5 billion.

The company is due to report its fiscal Q1 report this afternoon.

Update: Marvell reported Q1 revenue of $796 million, and EPS of 23 cents, topping the consensus $768 million and 20 cents. The stock is now up 38 cents, almost 3%, at $13.68.

Walgreen Offers A Serious Buying Opportunity

In his new book Great by Choice, Jim Collins talks about the discipline that the companies which performed the best over the last thirty years had exhibited. He used comparisons between companies in various industries. In property casualty insurance, he compared Progressive (PGR) to Safeco. The watershed moment when the success of the two companies parted was in the late 1980s and early 1990s.

Prior to that time both companies ran underwriting profits each year. This meant that they paid out less than 100% of the premiums collected. Unfortunately for the shareholders of Safeco, the high interest rates of the 1980s and the favorably stock price increases of the 1980s and 1990s lured it into allowing investment returns to override underwriting discipline. When interest rates became historically low and stock market returns gravitated to the mean, Progressive's underwriting profit left Safeco in the dust.

What triggered our thoughts here was a blog I read at Barron's online last week. It said that a Credit Suisse analyst was recommending that investors swap out of Walgreen (WAG) and into Rite Aid (RAD). The reason for the negative view of Walgreen on the part of the analyst was his expectation of only a 25% likelihood that Walgreen would settle its dispute over pricing with Express scripts.

Walgreens would have lower revenue and profits in the near future if they lose the Express scripts revenue. Walgreens has already told analysts that it could cost them as much as $.21 of their 2012 earnings per share (EPS). We at Smead Capital Management believe that the weakness in Walgreens stock created by the uncertainty associated with the Express scripts negotiation and separation has created a wonderful buying opportunity.

Collins focused on the companies which overcame unforeseen economic and business problems and returned a tenfold increase in stock price. He calls them 10x companies. His work is done looking backward, while our work is done looking forward. Progressive didn't earn as much in the years when investment markets provided high returns, but they prospered in the 2000s, when investment returns were problematic at best. They gave up some income in the short run to be a 10x company in the long run.

Why would Walgreen walk away from billions in revenue from Express scripts? For the same reason Progressive did. At the pricing levels dictated by Express scripts, Walgreen would produce meager margins on that part of its business (3 to 5 percent of revenue) and drag down return on equity. WAG stock has already fallen from the mid $40s to the low $30s.

According to our calculations of intrinsic value based on multiple current earnings possibilities, Walgreen trades at a 33%-50% discount to its intrinsic value. Walgreens stock has risen from around $4.17 twenty years ago and pays an $0.80 dividend to those fortunate enough to have held on. It meets all eight of our proprietary criteria, and is a stellar corporate citizen.

Which brings me to the lunacy of recommending a sale of Walgreens in exchange for Rite Aid. Rite Aid is a small cap company with a deeply checkered past and porous balance sheet. Trading Walgreen at these prices for Rite Aid would be like swapping a new Lexus for an oversized, ten-year-old gas guzzler, box seats for the nosebleed section or Kate Middleton for a troubled Hollywood starlet. Rite Aid has accounting problems and a consistent history of shareholder unfriendliness. It might go up, but it should not be included in the same conversation. We believe that Walgreen is going to be "Great by Choice."

Disclosure: I am long WAG.

Disclaimer: The information contained in this missive represents SCM's opinions, and should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results. Some of the securities identified and described in this missive are a sample of issuers being currently recommended for suitable clients as of the date of this missive and do not represent all of the securities purchased or recommended for our clients. It should not be assumed that investing in these securities was or will be profitable. A list of all recommendations made by Smead Capital Management with in the past twelve month period is available upon request.

Why Is the Dow So Quiet Today?

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is eerily quiet today. The index is down a minuscule 0.12% as of 1:45 p.m. EST, with 18 stocks trading down and the other 12 going up. Few stocks are going anywhere fast: Only two winners and two losers moved more than 1%.

And there's really no narrative to tie it all together -- no progress on the fiscal cliff, no market-moving data on the U.S. economy. Days like these underscore the individual nature of stocks, even the 30 blue-chips that make up the Dow. What moves one paper might leave another untouched, and rarely does one event move the entire market at once.

Performance leader Alcoa (NYSE: AA  ) jumped 1.4%, following the lead of peers in the basic-materials sector. Strong manufacturing reports from China and Europe boosted the sector but failed to spark a general stock-market cornucopia.

The other big winner is networking giant Cisco Systems (NASDAQ: CSCO  ) , up 0.8% on another round of sectorwide good news. Cisco had no particular company-specific reason to rise, but ailing rival Alcatel-Lucent (NYSE: ALU  ) was just thrown a lifeline in the form of a $2.1 billion loan. If megabanks Goldman Sachs (NYSE: GS  ) and Credit Suisse (NYSE: CS  ) see a telecom spending turnaround coming in time to save Alcatel's bacon and make it repay its new debt, there's fresh hope for the struggling industry as a whole.

But again, the positive effects didn't leak far outside the networking equipment market. Tech giant Microsoft (NASDAQ: MSFT  ) is among the modest losers today, and IBM (NYSE: IBM  ) is up just 0.3%. So hold the party hats and streamers for the tech sector.

American Express (NYSE: AXP  ) snagged the "biggest loser" title with a 1.4% plunge. There's nothing too specific to report, but credit card issuers are down in general. Funny how the consumer-spending barometers can fall even as economic indicators lift infrastructure plays like Alcoa.

The Dow doesn't always tell a coherent story. Invest accordingly.

Materials industries are traditionally known for their high barriers to entry, and the aluminum industry is no exception. Representing 14.7% of 2011 global production in this highly consolidated industry, Alcoa is in prime position to take advantage of growth that some expect will lead to total industry revenue approaching $160 billion by 2017. Based on this prospective and several other company-specific factors, Alcoa is certainly worth a closer look. For a Foolish investment perspective on this global giant, simply click here to get started.

Saturday, December 29, 2012

5 Steps To Successful Joint Ventures

JV's are THE MOST preferred and fastest way to increase sales and cash flows.

It's no longer a secret!

Everyone knows a good JV is the master key to online success.

But... why many people are failing to use this master key? Why so many website owners are not able to make use of this powerful strategy?

Here are some reasons:-

1) Other marketers are NOT WAITING for your JV offer. Before sending your JV offer, make sure to address the question 'What's in it for the JV Partner?'. Unless you give a compelling reason, most partners are not looking forward to your offer. No, it won't work that way...like, you offer one of your products for free and your partner will gladly endorse it to her list. No, it won't.

It takes time to craft an irresistible offer. The offer should be beneficial to your potential partner and her customers/subscribers.

Take it from me... I told you it takes time... but it's definitely possible.

2) Many JV offers are passed onto the 'recycle bin' with even being read (I told you... they are NOT waiting)

Some leading marketers get about 200 JV proposals every week! May be more. Most of these JV offers doesn't catch the attention of the busy marketer.

Some are lost due to SPAM email filters.

Solution?

Follow-up is the key. If you consistently follow-up, your chances of getting the attention of your potential JV partner is very high. Usually a second email will get the response.

A mixed-mode follow-up is sure to get higher success rates. An initial email followed by another email reminder and a phone call should normally get you going.

3) Another strong de-motivating factor is NOT sending personalized JV offers. If your proposal does not 'speak' directly to your partner, it's chances of succeeding are very thin.

That's why I told you earlier, it takes time to create your JV proposal. You need to visit your partner's website, subscribe to their newsletter, study their online content and read their publications and articles before you attempt to draft your proposal.

Your JV proposal should address your potential partner directly, using their name. Mentioning a few things about their website, products, ezines or articles in your offer will surely catch their attention.

4) JV partners are not your affiliates. Differentiate your resellers with your strategic JV partner. To drastically raise the success rate of your proposal, offer a higher commission than your affiliates.

For example, if you are offering a 50% commission for your affiliates, your JV partner should be offered 60% or more.

5) Targeting a large corporation for your JV is a surefire way to failure. First, try and do several JV's with businesses similar or smaller than your own and build a track record. Then you can approach bigger businesses with a record of your successes.

Large businesses have large problems everyday to tackle. They have struggled hard to build their enterprise. They have their own range of products to sell and keep their customers happy.

However, if you have a compelling story to tell, along with factual proof of your claims, it will definitely bring you windfall profits.

I'm not discouraging you to keep away from these giants. I'm just telling you the right way to approach.

You see friend, I've revealed to you some key tips on Joint Ventures. Now, it's up to you. Follow these rules and create a compelling offer and I'm sure you will succeed in making highly profitable Joint Ventures.

Stocks for the Long Run: Target vs. the S&P 500

Investing isn't easy. Even Warren Buffett counsels that most investors should invest in a low-cost index like the S&P 500. That way, "you'll be buying into a wonderful industry, which in effect is all of American industry," he says.

But there are, of course, companies whose long-term fortunes differ substantially from the index. In this series, we look at how members of the S&P 500 have performed compared with the index itself.

Step on up, Target (NYSE: TGT  ) .

Target shares have simply crushed the S&P 500 over the last three decades:

Source: S&P Capital IQ.

Since 1980, shares returned an average of 16% a year, compared with 11.1% a year for the S&P (both include dividends). That difference adds up fast. One thousand dollars invested in the S&P in 1980 would be worth $29,400 today. In Target, it'd be worth $116,000.

Dividends accounted for a lot of those gains. Compounded since 1980, dividends have made up nearly half of Target's total returns. For the S&P, dividends account for 41.5% of total returns.

Now have a look at how Target's earnings compared with S&P 500 earnings:

Source: S&P Capital IQ.

Again, significant outperformance. Since 1995, Target's earnings per share have grown by an average of 16.4% a year, compared with 6% a year for the broader index. That's testament to the power of the company's brand, and -- for better or worse -- a decades-long insatiable boom in consumer spending.

What's it all meant for valuations? Target has traded for an average of 19.4 times earnings since 1980, compared with 21 times earnings the S&P 500 averaged during the period. It's far different today, however. Target currently trades for just over 13 times earnings.

Through it all, Target's shares have been clear outperformers over the last three decades. �

Of course, the important question is whether that will continue. That's where you come in. Our CAPS community currently ranks Target with a four-star rating (out of five). Do you disagree? Leave your thoughts in the comment section below, or add Target to My Watchlist.

Friday, December 28, 2012

JPMorgan: MF Global claimed transfer was legal

NEW YORK (CNNMoney) -- JPMorgan says it received "multiple clear oral assurances from senior MF Global officials" that a $175 million transfer from the firm to cover an overdraft did not include customer money.

The claim comes in testimony prepared for a Congressional hearing Wednesday on MF Global's collapse by Diane Genova, JPMorgan's deputy general counsel.

It has since emerged that the $175 million did in fact draw on customer funds, in violation of industry rules and contributing to a shortfall of some $1.6 billion. The FBI and federal regulators are now investigating, as questions swirl about who at MF Global knew that client money was being misused.

In prepared testimony, three former MF Global executives -- general counsel Laurie Ferber, Christine Serwinski, CFO of the firm's brokerage arm, and Henri Steenkamp, CFO of the parent company -- said they did not know at the time the JPMorgan transfer was made that it drew on customer funds.

The fourth, assistant treasurer Edith O'Brien, declined to testify, invoking her Fifth Amendment right against self-incrimination.

In a memo released by the House Financial Services Committee last week ahead of the hearing, investigators said O'Brien had written in an internal email that the transfer to JPMorgan (JPM, Fortune 500) came "Per JC's [Jon Corzine's] direct instructions."

Corzine, the firm's former CEO and an ex-governor and Democratic senator from New Jersey, was not on Wednesday's witness list. In testimony on Capitol Hill last year, he acknowledged ordering that the overdraft be resolved but denied specifying that customer funds be used for that purpose.

O'Brien, Corzine said, told him that the transfer had been executed legally.

MF Global was felled after its disclosure of billions of dollars worth of bets on risky European debt sparked a panic among investors. Recognizing that MF Global was in chaos in the week before it collapsed, JPMorgan pressed the firm multiple times to provide written assurances that the $175 million transfer did not violate the law.

"Mr. Corzine said he understood the request and would have someone within his organization review it," JPMorgan's Genova said.

The task of signing a letter certifying the legality of the transfer fell to O'Brien, but she declined to do so, according to last week's memo. Two days later, MF Global filed for bankruptcy following the disclosure of the missing money.

Futures brokers like MF Global can hold their own cash in customer accounts along with that of their clients, and money belonging to the firm may be transferred out freely.

In her prepared remarks, Genova said Ferber and MF Global deputy general counsel Dennis Klejna had assured JPMorgan that the $175 million consisted of MF Global money housed in a customer account.

As for why the letter certifying as much was never signed, JPMorgan believed that "given all that was happening at MF Global that day, they simply had numerous pressing matters to attend to," Genova said.

"We had no reason to doubt the clear oral assurances we had been given," she said. 

New York Appeals Court Gives SEC-Citigroup Deal New Life

SEC headquarters in Washington.

A federal appeals court said Thursday that a judge likely overstepped his authority when he blocked a $285 million settlement over toxic mortgage securities after concluding that it was bad policy for a regulatory agency to accept a deal that does not include an admission of liability.

The 2nd U.S. Circuit Court of Appeals in Manhattan suspended the effect of Judge Jed Rakoff's decision to turn down the settlement between Citigroup and the Securities and Exchange Commission until it can fully study the case. It said there was a “strong likelihood" that Citigroup and the SEC would succeed in overturning Rakoff's ruling.

In doing so, a three-judge appeals panel noted that Rakoff believed it disserved the public interest for the SEC to let Citigroup settle without admitting liability.

"It is not, however, the proper function of federal courts to dictate policy to executive administrative agencies," the 2nd Circuit ruling said. "While we are not certain we would go so far as to hold that under no circumstances may courts review an agency decision to settle, the scope of a court's authority to second-guess an agency's discretionary and policy-based decision to settle is at best minimal."

The appeals court said its preliminary review of facts involved in the settlement lead it to "see no basis to doubt" that the SEC properly considered numerous factors before reaching settlement including the value of the deal, the likelihood of reaching a better settlement, the risks of proceeding to trial and the public interest.

"In short, we conclude it is doubtful whether the court gave the obligatory deference to the SEC's views in deciding that the settlement was not in the public interest," the 2nd Circuit said.

Rakoff in November found the deal inadequate and ordered a prompt trial. Both the SEC and Citigroup appealed.

The settlement came after the SEC had accused Citigroup of betting against a complex mortgage investment in 2007. It said the firm made $160 million in the process while investors lost millions.

Rakoff criticized the deal because it did not require Citigroup to admit wrongdoing.

The appeals court said the appeal raised important questions, including the division of responsibilities between the executive and the judicial branches as well as the deference a federal court must give to policy decisions of an executive administrative agency when the public interest is at stake.

Robert Khuzami, director of the SEC's division of enforcement, said the SEC was pleased with the ruling. "As we have said consistently, we agree to settlements when the terms reflect what we reasonably believe we could obtain if we prevailed at trial, without the risk of delay and uncertainty that comes with litigation. Equally important, this settlement approach preserves resources that we can use to stop other frauds and protect other victims."

Citigroup said in a statement that it was pleased with the ruling.

The 2nd Circuit took particular exception to Rakoff's insistence that the liability issue be addressed, noting that the judge concluded that it was bad policy for the deal to be reached without Citigroup's admission of liability because defrauded investors cannot use the judgment to establish Citigroup's liability in civil lawsuits.

The appeals panel said Rakoff's reasoning prejudges that Citigroup had in fact misled investors and assumes that the SEC would succeed at trial in proving Citigroup's liability. It said the judge's conclusion overlooks the possibilities that Citigroup might not consent to settle if it must admit liability, that the SEC might lose at trial and that Citigroup perhaps did not mislead investors.

----------------

Copyright 2012 The Associated Press.

The Power Of Idea In Forex Trading

The idea we have in us may be positive or negative, whatever idea inherent in our understanding of an event informs to a large extent the resultant effect.

The free online encyclopedia, Wikipedia describe narrowly Idea as just whatever is before the mind. Of note is one of the earliest philosophers, Plato who considered the concept of Idea in the realm of metaphysics and its implication for epistemology. He asserted that there is a realm of forms or idea, which exists independently of anyone who may have thought of these Ideas. Material things are then imperfect and transient reflections or instantiations of the perfect and unchanging Ideas.

From this it follows that these Ideas are the principal reality in contrast to the individual object of sense experience which undergo constant change and flux. He held that Ideas are perfect, external and immutable.

How did we get into the modern world we are today, where inventions, environmental and societal events seems to affect every corner of our life. Life turns on Ideas, human choices simply reflect the Ideas that people hold. The Idea that each person believes deep within his or her heart and mind concerning happiness, freedom, love, wealth, death poverty, and a host of thousand other issues determine what every human beings life is about to him or her. To miss this insight is to miss everything.

As John Stuart Mill observed, Ideas are not always the mere signs and effect of social circumstances, they are themselves a power in history. This was echoed by the historian Christopher Dawson.

I do believe that it has been on the plane of Ideas that the process of winning and loosing in any fair competition began in ones Idea, and that nothing has had more practical consequence for good or evil than Idea.

Now, the primary purpose of the foreign exchange market is to assist international trade, by allowing businesses to convert one currency to another currency. Do you know that not having a business plan could wipe the potentials you have in going into any business, and how much more forex market where volatility drive the market to a spin off.

It is of note that, while not every business needs a formal plan, a start-up that requires significant capital to grow to turn a profit should be map out to get to this destination, it would take decades for a beginner and the uninformed to map out all this without the assistance of the experienced minds.

You do not need all of this with the system am introducing to you here at http://www.passiveearners.blogspot.com

Futures Higher As Unemployment Steadies, Greece Squeaks Past Deadline

With the Greek bond swap deemed a success, and U.S. unemployment figures showing a steady unemployment rate of 8.3%, market futures were in positive territory.

Futures on the Dow Jones Industrial Average were up 22 points to 12,866. Futures also were in the green on the Standard & Poor’s 500, up 3.1 points to 1,363.70.

Greece said 83% of its bondholders agreed to a debt swap that reduced bond values by half, forcing all but 5% of bondholders to agree to the terms. The result means the euro zone is ready to provide more bailout money.

In the United States, a total of 227,000 net jobs were created in February, mostly in the private sector. Construction jobs fell by 13,000, despite warm weather. Revisions to the prior month’s data raised the level of jobs created by 61,000. Dan Greenhaus, chief global strategist at BTIG in New York, notes that:

“The size of the labor force rose considerably for the second consecutive month. As employment has risen over the same time frame while unemployment has generally fallen, the effect on the unemployment rate has been relatively muted. That is to say, the unemployment rate is holding steady even as the labor force grows. That is a good outcome.”

U.S. crude prices are up slightly, approaching $107 per barrel, while gold fell about $6 per ounce to $1,692.50.

In stock news, Bank of America (BAC) shares were up nearly 1% in pre-market trading. The bank will avoid as much as $850 million in penalties as it makes deeper cuts in mortgages than other banks, according to a Wall Street Journal report. The details are part of a $25 billion government settlement with five large banks over alleged foreclosure abuses.

Shares of Ann Taylor (ANN) were up 2.7% in pre-market trading despite a decline in fourth-quarter gross margins and earnings. The women’s clothing retailer reported same-store sales rose 5.3%.

Stocks Tank Amid Tech Wreck

We�ve established in this space a certain skepticism for the mandatory reason-finding for each point the market moves up or down.

On Tuesday, however, with the major indices awash in red, it seemed pretty obvious, didn�t it: the growing uncertainty in the Middle East, lately of the Libyan variety, pushed oil prices up more than 6% and threw into the forefront what a world of triple-digit oil prices could mean.

And yes, it�s true that with the market having gotten in the habit of moving in fits and starts on a regular basis, a move of 6% of a major commodity is going to get some attention.

But what exactly do oil prices have to do with a loss of almost 3% in tech stocks?

Instead, we like the argument mostly suggested earlier by the blog Zero Hedgethat Tuesday�s massive selloff made it so apparent how the meltup in stock prices over the past month had a lot to do with short-covering. And as we�ve seen before, shorts more often than not aim their sights on tech stocks.

When the world finally produced an external shock to the system that created more than passing uncertainty to the U.S. financial market, the bid for stocks � that had been artificially created lately by outstanding short-covering bids � was nowhere to be found.

In addition, let�s acknowledge, as the Wall Street Journal�s Dave Kansasdid over the weekend, that tech stocks, and specifically semiconductor names, have done the leading in this five-month market rally.

On Tuesday, then, it may be a case of you win with tech speculation, you lose with tech speculation � note, for example the drop of more than 9% of a stock like graphic-chip maker Nvidia (NASDAQ:NVDA), which had spent the prior two months jumping about 80%.

Notice the 5% giveback in shares of daytrading favorite Sirius XM Radio (NASDAQ:SIRI), following its runup of about 30% in the past two months.

Semiconductor stocks as a whole, for what it�s worth, fell 4% after climbing 50% since late August. With the shorts having run for the hills throughout 2011, momentum had to face the music.

Oh, and this just in: a rough earnings report late Tuesday from Hewlett-Packard (NYSE:HPQ)�won’t do much for a reversal out of the gates on Wednesday.

Another Milestone for the Market

Yesterday was “Double Day” as the S&P 500 finally achieved twice the level of its intraday low of 666.79 on March 6, 2009. The only interruption to yesterday’s broad advance occurred when Israel’s foreign minister warned Iran that if they sent two warships through the Suez Canal, Israel would consider it a provocation.

The market dipped, but then recovered on the Fed’s new optimism as they raised their growth outlook for 2011 and pledged to continue with its quantitative easing effort to support the economy. The notes of the late January meeting show a different tone in that some of the governors raised the possibility of scaling back the bond purchases in order to avoid future inflation.

Daily Stock Market News

Dow: +62 points at 12,288
S&P 500: +8 points at 1,336
Nasdaq: +21 points at 2,826

Volume and Breadth

NYSE: 928 million shares traded; advancers ahead 3-to-1
Nasdaq: 585 million shares traded; advancers ahead 1.9-to-1

Futures and Related ETFs

March Crude Oil: +67 cents at $84.99 per barrel; Energy Select Sector SPDR (NYSE: XLE) +$1 at $75.95
April Gold: +$6.30 at $1,380.40 per ounce; PHLX Gold/Silver Sector Index (NASDAQ: XAU) +$1.61 at $211.40

What the Markets Are Saying

Monday’s pause gave way to a broad advance. Even though the volume is still lower than normal, breadth was on the side of the bulls, with a 3-to-1 advantage on the NYSE. And the Nasdaq blew into new high ground with barely any resistance.

And so the S&P 500 has doubled from its March 2009 low on a day that was as powerful as any this year. Though the gain for the index was just 0.63%, its ability to spring back from a new crisis shows the tenacity of buyers who will jump on any weakness as a buying opportunity. You just can’t ask for better than that.

Regarding yesterday’s discussion of the Moving Average Convergence/Divergence (MACD) indicator, there were several comments and questions regarding the Dow chart.

For starters, I referred to the light blue middle section of the MACD chart as a “line chart” and was properly corrected. It has lines to be sure, but its proper name is “histogram,” which is the visual representation of a distribution of data.� The histogram for MACD gives a visual measurement of the distance between the fast and slow moving averages.

The question most asked was, “What signals the action to buy or sell?” There is no precise answer to this except to say that when the moving average lines are far apart (histogram showing exceptionally high bars or low bars), followed by a relatively quick crossing of the fast line through the slow line, it is considered to be a strong signal.

Currently, since the slow and fast lines are running almost parallel and very close to each other, it is unlikely that MACD will give a strong signal.

There are other MACD signals that some chartists use, but I find them arcane and difficult to apply on a continuous basis. However, one that has stood the test of time — especially for identifying major market tops and bottoms — is “divergences from MACD versus the main market trend.” When MACD is charted separately and diverges from the main index or stock being studied, a signal is generated.�

For an example, consider this chart showing the market low of March 6, 2009, for the Dow.�

Note the uptrend in the MACD slow line, which is a divergence from the Dow’s channel downtrend. Also look at the strong crossover of the signal line (green arrow) at the bottom of the market on March 11. A double MACD buy signal was given a full five months before the market confirmed a new bull market in mid-July using conventional trend analysis.

Tomorrow we’ll bring ourselves up to date on our other internal and sentiment indicators. For today, the bulls are running strong.

For one strong stock that traders should consider taking profits in, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.

Has Pharmacyclics 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 Pharmacyclics (NASDAQ: PCYC  ) 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 Pharmacyclics.

Factor

What We Want to See

Actual

Pass or Fail?

Growth

5-year annual revenue growth > 15%

344%

Pass

1-year revenue growth > 12%

2,828%

Pass

Margins

Gross margin > 35%

100%

Pass

Net margin > 15%

55.3%

Pass

Balance sheet

Debt to equity < 50%

0%

Pass

Current ratio > 1.3

11.52

Pass

Opportunities

Return on equity > 15%

66.5%

Pass

Valuation

Normalized P/E < 20

68.73

Fail

Dividends

Current yield > 2%

0%

Fail

5-year dividend growth > 10%

0%

Fail

Total score

7 out of 10

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

Since we looked at Pharmacyclics last year, the company has seen its score rise by three points, as revenue has soared and the company became profitable. The stock has also more than quadrupled in price over the past year.

Pharmacyclics is a tiny biotech company that has nevertheless attracted a huge amount of attention over the past year. The key to the company is its BTK-inhibitor ibrutinib, which has serious cancer-fighting potential and could challenge Celgene's (NASDAQ: CELG  ) Revlimid, which is a near-billion-dollar blockbuster treatment for multiple myeloma.

Late in 2011, the company got a big boost when Johnson & Johnson (NYSE: JNJ  ) subsidiary Jaansen Pharmaceuticals made a collaborative deal with Pharmacyclics that resulted in an upfront $150 million payment. As a result, Pharmacyclics reported excellent quarterly results that quarter and saw its stock price soar, despite not having any drugs even in phase 3 development at the time, let alone approved. Since then, the company has started a phase 3 trial program, but it'll still be a long time before Pharmacyclics can expect consistent revenue.

More recently, Pharmacyclics has been one of many small companies announcing successes. In two studies released at the American Society of Hematology's annual meeting, Pharmacyclics presented impressive results fighting chronic and small lymphocytic lymphoma. Although Ariad Pharmaceuticals (NASDAQ: ARIA  ) and Geron (NASDAQ: GERN  ) also presented positive data at the meeting, Pharmacyclics received some of the most optimistic comments from medical pros at the meeting.

For Pharmacyclics to improve, it needs to get its treatments through trials and into the FDA approval process. Once that's done, real revenue can start flowing in, finally giving all the investors that have bid up the company's shares something fundamental to measure their gains against.

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 out the best investments from the rest.

Johnson & Johnson is so big that its deal with Pharmacyclics won't move the needle very much. But the health-care conglomerate has a lot going for it. Find out whether J&J is a well-diversified giant that's perfect for your portfolio by checking out our brand-new research report on Johnson & Johnson. It'll give you the full story behind the stock, along with its key opportunities and risks. To claim your copy, simply click here now for instant access.

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

How Symantec Will Benefit From New Cloud Storage Software

Symantec (SYMC) -- which competes with McAfee (MFE), IBM (IBM) and VeriSign (VRSN) in the Security-as-a-Service (SaaS) segment -- recently introduced a new cloud storage platform that supports SaaS services built on its FileStore architecture. Launched in October 2009, FileStore is the latest scalable file server technology by Symantec that offers higher storage capacity along with more features compared to Symantec’s traditional Cluster File System.

We expect Syamtec’s Consulting & SaaS revenues to more than double over our forecast period and there could be additional upside to the $24 Trefis price estimate for Symantec’s stock if SaaS revenues were to grow more than we forecast as a result of Symantec’s new FileStore services.

Consulting & SaaS 4% of Symantec’s stock

Symantec, through its SaaS or Managed Services model, offers antivirus, backup and email security service over the internet. Customers can choose to pay only for the product license they require, which is valid for a particular time period, without paying for the whole security package. We estimate Consulting & Saas to constitute 4% of $24 Trefis price estimate for Symantec’s stock.

FileStore Helps Create Secure Private Clouds for Hardware Savings

FileStore helps companies create private clouds for storing their data. Clouds separate the software file system from the underlying hardware storage system used and allow companies to easily grow their storage capacity whenever necessary by adding low-cost storage hardware. As a result, companies can save money by avoiding unnecessary hardware investments.

Furthermore, Symantec makes it easy for customers to layer in more security features for their cloud using Symantec End Point Protection software.

Symantec End Point Protection is an antivirus/antispyware software used by companies to protect their notebooks and desktops. The software also offers firewall protection to prevent unauthorized Internet users from accessing private networks over the Internet.

Consulting & Saas revenues to increase to $1 Billion for Symantec

In the last quarter of 2009, Symantec acquired Softscan, the privately held SaaS security leader in the Nordic region, to strengthen its SaaS offerings. We expect Syamtec’s Consulting & SaaS revenues to increase from $434 million in 2009 to $1.1 billionby the end of Trefis forecast period.

You can modify our forecast above to see how Symantec’s stock could be impacted if its SaaS-based revenues were to grow faster than we forecast as a result of demand for FileStore and incremental sales of Symantec’s End Point Protection software.

Disclosure: No positions

REPLAY LINK December 18: Stocks to Watch and Trade Ideas

Event Details:

Date Presented: December 18, 2012

-->CLICK HERE FOR REPLAY<--Topics Covered:

1. Protect your portfolio from a potential fiscal cliff

2. Current State of the Market

3. Hot Stocks to Watch

Jill and OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits

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Thursday, December 27, 2012

Eurozone Meeting Places iShares MSCI EMU ETF Into Spotlight

The euro-zone has endured a rough economic year, as an ongoing debt crisis puts downward pressure on the 16 countries who have adopted the euro as their common currency. Back in May, it was announced that Greece would receive a bailout, and the world thought that this would put an end to the issue, but it has since resurfaced in a number of nations. Just weeks ago, it was announced that Ireland would be receiving a bailout from the IMF and EU, as they were unable to overcome their immense financial woes. Now it seems that both Portugal and Spain are next in line for turmoil, but this time the EU is looking to take action in order to stop the currency from sinking yet again and hopefully restore confidence to the battered region heading into 2011.

Late yesterday, European leaders started a two day meeting in Brussels to discuss how they can direct the euro-zone out of its debt crisis, and what actions need to be taken. The meeting was called just in time, as both Spain and Belgium were given credit warnings this week, and many fear that they will suffer the same fate as Greece and Ireland. Earlier in the week, violent demonstrations broke out in Greece due to the poor economic conditions that still hang over the nation as a whole. While this may seem bleak, German Chancellor Angela Merkel attempted to abate these fears by stating that ” nobody in Europe will be left alone, nobody in Europe will be left to fall…Europe only succeeds as one.”

Merkel also stated that the solution will not be found be simply issuing massive amounts of debt, but rather by a collaboration of all nations to work back to prosperity. Still, it is not expected that the numerous leaders will be able to reach a solid decision as to their next big move. “Backs will be against the wall. Choices will be forced upon countries, simply because there seems to be no alternatives. But a genuine cooperative solution strikes me as being very unlikely in the near future” said professor Irwin Collier of Berlin’s Free University. Investors can only hope that the heads of the euro-zone nations will formulate some sort of solid strategy to help guide these countries out of amassing debts.

With this meeting wrapping up, its effects should trickle down to equities today, which is why the iShares MSCI EMU Index Fund (EZU) will be today’s ETF to watch. This fund tracks an index that measures the performance of equity markets of the members of the European Union who have adopted the euro as their currency. From a country standpoint, this ETF focuses on France (31%), Germany (26%), and Spain (12%). EZU has lost over 5% this year, but at the same time it pays out a juicy dividend yield of 4.2%. Whether or not the major euro-zone leaders make a decision will weigh heavily on this ETF today, as it has already had a tumultuous year to say the least.

click to enlarge

Disclosure: No positions at time of writing.

Disclaimer: ETF Database is not an investment advisor, and any content published by ETF Database does not constitute individual investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. From time to time, issuers of exchange-traded products mentioned herein may place paid advertisements with ETF Database. All content on ETF Database is produced independently of any advertising relationships.

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Keynes vs. Hayek Smackdown: Battle Still Rages Between Long-Dead Economists

To many market watchers, the fight of the century wasn’t the “Thrilla in Manila” that pitted heavyweight champs Muhammad Ali and Joe Frazier against each other in 1975.

No, it was the battle royale that had Cambridge economist John Maynard Keynes opposing Austrian economics professor Friedrich August von Hayek over the course of the Great Depression in the 1930s and on into World War II.

Though both men have been gone for years, their ideas have taken on a life of their own and currently create animated debate between who got it right, the interventionist Keynes (left) or the laissez-faire Hayek.

“Keynes was right about market failures, incomplete information and times when we get prices wrong. To forget this is to consign millions to unnecessary harm,” argued Jared Bernstein, executive director of the White House Task Force on the Middle Class and a member of President Obama’s economic team from 2009 to 2011. Obama’s policies put him squarely in the camp of the Keynesians.

Bernstein made his argument earlier this week at the annual New York conference of the Investment Management Consultants Association (IMCA), which drew 850 attendees at the Marriott Marquis on Times Square.

His worthy opponent, Russell Roberts, a professor of economics at George Mason University and a research fellow at Stanford University's Hoover Institution, countered that Obama’s interventionist stimulus planners have judged their success over the last few years using the false data of predictive models rather than actual facts.

“Macroeconomics isn’t a true science, like biology,” said Roberts, echoing Hayek’s own sentiments. “It’s fake science.”

To underscore the speakers’ points, IMCA screened "Fight of the Century,” a new economics hip-hop music video by John Papola and Russ Roberts of http://EconStories.tv, on the Marriott Marquis’ mainstage. According to the video makers, “Keynes and Hayek never agreed on the answers to these questions and they still don't.”

So who really won, Keynes or Hayek (left)?

While Keynes was convinced that government has a duty to boost spending and intervene in markets during economic slowdowns, Hayek was equally sure that only a laissez-faire stance and the market’s invisible hand could help pull a struggling economy out of the hole.

Maybe the victory was Hayek’s: he won a Nobel prize, after all, and Keynes didn’t.

“The continuous injection of additional amounts of money at points of the economic system where it creates a temporary demand which must cease when the increase of the quantity of money stops or slows down…draws labour and other resources into employments which can last only so long as the increase of the quantity of money continues at the same rate,” wrote Hayek in his 1974 Nobel lecture. “What this policy has produced is not so much a level of employment that could not have been brought about in other ways, as a distribution of employment which cannot be indefinitely maintained and which after some time can be maintained only by a rate of inflation which would rapidly lead to a disorganisation of all economic activity.”

But then again, Keynes won the ear of President Franklin D. Roosevelt, who followed the economist’s advice to let the government print money and create jobs until the depressed U.S. economy revived.

Writing for The Nation in May 1930, Keynes said: “The fact is—a fact not yet recognized by the great public—that we are now in the depths of a very severe international slump, a slump which will take its place in history amongst the most acute ever experienced. It will require not merely passive movements of bank rates to lift us out of a depression of this order, but a very active and determined policy.”

Keynes, who suffered heart trouble for years, died in 1946 at the age of 63 in Sussex, England. Hayek outlived him by 46 years, dying in Freiburg, Germany at the age of 92 in 1992.

Read Does Keynes Offer Solutions for Today? at AdvisorOne.com.

Is There a Google Conspiracy?

I'm not the only one that thinks Google (Nasdaq: GOOG  ) is trying to kill Firefox.

Last week, Big G was happy to present the findings of a research report done by security firm Accuvant. The study was done to measure browser security among the big three browsers: Google Chrome, Microsoft (Nasdaq: MSFT  ) Internet Explorer, and Mozilla Firefox. And the most secure browser is... insert drum roll here... Chrome!

Accuvant's report said Chrome and IE "implement state-of-the-art anti-exploitation technologies, but Mozilla Firefox lags behind," and Chrome's plugin security and sandboxing architectures are "implemented in a more thorough and comprehensive manner." The net result is that Chrome is "the browser that is most secured against attack."

The fine print will tell you that Google actually funded the study, so the results are unsurprisingly tilted in Chrome's favor. A separate security-testing firm, NSS Labs, has now come out and outright accused Google of conspiring to undermine Firefox. NSS Labs Chief Technology Officer Vikram Phatak said, "This is a vendor-funded paper, and in these cases, the vendor is going to drive the methodology."

NSS Labs isn't purely innocent either -- it has conducted Microsoft-sponsored tests on anti-malware blocking that conveniently ranked IE top dog. Phatak's response? "There's a reason why we don't do that anymore." Meanwhile, he explicitly details his allegations against the search giant:

This tells a story, that Google is looking to go it alone now, and examining their position vis-a-vis Mozilla. Google paid for this report, and it's part of a marketing campaign that's probably aimed at Firefox to cut off Firefox's revenues, cut it off from the SafeBrowsing service, and then put out a report that says Firefox is less secure than Chrome.

Google's SafeBrowsing -- which is used by Chrome, Firefox, and Apple (Nasdaq: AAPL  ) Safari -- is a service that lets applications to crosscheck URLs against Google's constantly updated lists of suspected sites with bad intentions. Chrome's blocking rate trumps those of Firefox and Safari, leading NSS to conclude that Google isn't allowing others full protection through SafeBrowsing.

NSS finds more evidence in the fact that this study was completed in July, but wasn't released until this month. It just so happens that this month also marked when Chrome finally overtook Firefox's global market share for the first time ever on its way to eventually becoming the browser king, and Mozilla's all-important Google contract is up in the air.

But who can blame Google? While Firefox has made important contributions over the past seven years, Google's best strategy to winning the browser wars is to selectively knock out its closest runner-up. I've already made my case why Mozilla's other search partners like Yahoo! (Nasdaq: YHOO  ) , Amazon.com (Nasdaq: AMZN  ) , or Yandex (Nasdaq: YNDX  ) are unlikely to cover the difference if Google steps out.

Pull the trigger, Google. You know you want to.

Want to know the best way to get the latest on the browser wars? Use our free watchlist feature to stay abreast and start by adding Google. Chrome and Android are two examples of how Google builds its Buffett-worthy moat with free products. With Android leading the mobile revolution, some winners are hard to see -- because they're buried inside the gadgets. Check out this 100% free report on 3 Hidden Winners of the iPhone, iPad, and Android Revolution. What do you have to lose?

Property Investments – Direct and Collective Investments

Investment Options

Access to property investments is well-established, with a range of direct investment opportunities and collective investments available for both retail and institutional Investors alike. In the first instance we should look to the range of property sub-sectors available for consideration, and further investigate both direct and collective access points for the sector in general.

The main property sub-sectors that may be available for smaller investors are:

Residential
Commercial
Student Accommodation
Care Homes
Hotels
Leisure / Tourism
Development
Agricultural
Forestry

Within each sub-sector lies a range of possible entry points for Investors; broadly categorised as either direct investments or collective investments. Collective investments being either regulated or unregulated fund arrangements, where Investors capital is pooled so as to acquire a basket of assets, or participate in a project with a large capital requirement. Direct investments on the other hand are simply straightforward acquisitions of property assets by the Investor. There are, for example, funds for residential, student accommodation commercial and most other sub-sectors, and likewise, there are options for Investors to directly acquire investment properties in each of these sectors via freehold or leasehold title.

Direct investments – Simply the acquisition of property assets by the Investor, direct property investments take many forms; from the acquisition of property for improvement and sale; through to acquisitions for leasing/rental to a tenant or operator. For the Investors with sufficient capital or finance, direct investments remove the majority of risks specific to collective investment schemes where Investors are reliant on the external management of a property portfolio. Direct investments do however carry asset-specific risks; property assets can incur significant financial liabilities including on-going maintenance, tax and round trip purchasing costs (the cost of buying and selling an asset).

Property investments, especially direct property investments, provide the Investor with a level of security that paper-based investments do not due simply to the fact that quality property assets retain capital value throughout the long-term, which in the case of well-chosen properties in good locations, is unlikely to fall and cause the Investor a capital loss. Provided the Investor is prepared and capable of tolerating the illiquidity associated with physical property assets, this asset class provides true diversification out of traditional financial assets such as stocks bonds and cash.

For the direct Investor, careful consideration should be given to the due diligence process during the asset identification and acquisition stage, as in most regions this will require specific professional input from legal practitioners, surveyors, valuation agents, and in the case of niche property investment projects with a specific strategy Investors must also consider the counterparty risk in that in many cases Investors might be reliant on the performance of a strategy manager to achieve the expected returns from investing in their strategy.

Collective investments – Property funds come in all shapes and sizes, and invariably involve a Fund Manager acquiring a basket of properties in line with the fund’s investment strategy, and managing those assets on behalf of Investors in the fund. There are funds, both regulated and unregulated, that invest in all of the major property sub-sectors. One can find opportunities to invest in residential real estate, student accommodation, care homes, commercial real estate, shopping centres and property developments. Some of these funds cater only to large Institutional Investors, whereas other offer lower entry levels for smaller Investors.

The structure of collective property investments varies from fund to fund. Some are highly regulated affairs, established and operated by major asset management groups, others are small, niche operations established to capitalise on current short term opportunities or niche sectors or markets. Collective funds may be listed on an exchange, allowing smaller Investors to trade in and out of the fund as and when they please. This removes the potential illiquidity associated with the property asset class, however this also detracts substantially form the returns generated from the underlying property assets as some capital is never invested in order to ensure that redemptions can be made from cash without liquidating part of the underlying portfolio.

Whether listed or unlisted, regulated or otherwise, collective investments in property assets offer access to the asset class for the smaller Investors, although in many cases the cash flow dynamics of securitised investments differ greatly from direct investments in property assets.

David Garner is Partner at DGC Asset Management, an alternative investments boutique specialising in distressed real estate and productive natural resource properties.